Saturday, June 24, 2006

BALLOT FRAUD CONCERNS --
Tennessee and 15 other states that aren't requiring voter-verifiable paper ballots are at "high risk" of compromised elections, according to a report released Thursday.

The list also includes the District of Columbia.

The report issued by Common Cause, a nonpartisan, nonprofit group, concluded that accurate election results require voters to be able to confirm their votes on a paper record and a "statistically meaningful and transparent audit process."
APPEALS COURT OVERRULES S.E.C. -- "A federal appeals court ruled yesterday that the Securities and Exchange Commission lacks the authority to regulate hedge funds, dealing a possibly fatal blow to the commission's efforts to oversee a rapidly growing industry that now has $1.1 trillion in assets." See also WaPo.

This seems to be a blow and the court appeared to set a high bar for the regulator to overcome in the future.
SAILORS' DATA EXPOSED -- "Navy officials discovered this week that personal information on nearly 28,000 sailors and family members was compromised when it appeared on a Web site, fueling more concerns about the security of sensitive information belonging to federal employees."
MORE ON FINANCIAL DATA SURVEILLANCE -- The Bush administration responds: "A secret program that allowed U.S. officials to examine hundreds of thousands of private banking records from around the world in search of terrorist ties has been 'absolutely essential' to protecting the country from further attacks, Vice President Cheney said yesterday."

Privacy fears surface: "For most Americans, the confidentiality of their bank accounts and other financial holdings is a right to be cherished. The idea that government agents might be secretly scrutinizing the records of individuals arouses discomfort in people who view their wealth, income and other financial information as nobody's business but their own."

More Cheney: "'What I find most disturbing about these stories is the fact that some of the news media take it upon themselves to disclose vital national security programs, thereby making it more difficult for us to prevent future attacks against the American people,' Mr. Cheney said, in impromptu remarks at a fund-raising luncheon for a Republican Congressional candidate in Chicago. "'That offends me.'"

WaPo ed board is cautiously approving: "The Treasury Department's just-disclosed program of searching records of overseas bank transfers may provoke outraged comparisons to the National Security Agency's warrantless surveillance and data-mining of telephone call records. At least if news reports and government statements concerning the revelations are correct, however, this program is far less troubling. As with all revelations concerning the secretive Bush administration, you have to worry about what you don't know. So far, however, it seems like exactly the sort of aggressive tactic the government should be taking in the war on terrorism."

NYT ed board is concerned about accountability: "When government agencies are involved in continuing investigations that might infringe on Americans' privacy, it is important that some outside entity is keeping track of what is going on. That principle is particularly true now, when the United States is trying to learn how to live in a perpetual war on terror."

Instapundit seems exasperated with the media's treatment of the issue and attempts to clarify some of key facts.

Overall, it seems that the discussion (including the initial NYT report and Cheney's defense) are long on rhetoric and pithy quotes, but short on facts. The important facts, however, are not the operational details of the program, but instead are the basics of the controlling law. For example, a discussion of United States v. Miller, 425 U.S. 435 (1976), and the Financial Privacy Act, 12 U.S.C. §§ 3401-3420, might do much to inform folks about what financial information is (and is not) private. Is it too much to hope that we can have a more informed debate?

Friday, June 23, 2006

SOCIAL ISOLATION STUDY -- "Americans are far more socially isolated today than they were two decades ago, and a sharply growing number of people say they have no one in whom they can confide, according to a comprehensive new evaluation of the decline of social ties in the United States."

As the story points out, there is a significant debate about the explanations for this trend, including everything from the influence of TV and the internet to workplace habits and regulations.

I wonder whether this isn't a signal about role of trust and integrity, as those norms/mores/values relate to the function of a civil society. Perhaps the decrease in confidants we surround ourselves with is a symptom of (and/or cause of) a larger problem in the social fabric. I wonder how this trend relates to the trends in confidence schemes and other crimes or acts of perceived dishonesty (both individual and institutional). Just a guess, but perhaps one might find a positive correlation -- afterall, burn me once, shame on you; burn me twice, shame on me.

I guess this is broader than just the crimes of fraud and corruption, but would include all manner of daily dishonesties -- from price gouging (airlines, gasoline, etc.) to excessive convenience fees and so on. All of it contributes to an atmosphere of perceived dishonesty, even though some acts of dishonesty are considered more consequential than others in a legal sense.
GOLF'S INTEGRITY -- Recalling Michelson's Meltdown last Sunday at Winged Foot, Daniel Henninger notes a favorable contrast with baseball:
It's just a game. But a game that defines the conditions of its experience with words like "fairway" and "rough" may have something useful to tell the wider world in a time when tradition seems old hat.
We might agree, for instance, that a sense of personal honor, at the most basic level, appears to be an eroding tradition. Enron, Abramoff, Bonds are words that define a new, at-the-edge world of business, politics and sport. Baseball almost surely will admit into Cooperstown several users of steroids because, as any lawyer will tell you, there was no formal rule against it at the time.

Golf, unlike most everything else, is by and large scandal-free. What are golf's secrets? Talk to people around the sport and you get a sense of the structural elements that keep it so intact. It has a lot to do with golf's genetic code, its DNA.

Start with cheating. As in any game it is not allowed. But in golf, a sport in which players keep their own scores, it is unthinkable. Tom Kite, they'll tell you, once called a penalty on himself when his ball moved and no one else saw it. The informal penalties for cheating are worse than disqualification. "Players caught cheating can be blacklisted for the rest of their lives," says Eddie Merrins. And some good ones have. If baseball were golf, the community would have ostracized the guys on steroids.
Perhaps there is a lesson here that extends beyond sport.
INSIDER TRADING AT PEQUOT CAPITAL? -- "One of the nation's most prominent hedge funds, Pequot Capital Management, is under investigation by the Securities and Exchange Commission for possible insider trading, according to government officials briefed on the case."

Apparently this was disclosed to Senate investigators looking into whether the lead SEC investigator was improperly fired.
INTERESTING CROSS-EXAMINATION -- "Vice President Dick Cheney said Thursday he might have to testify in the CIA leak trial of his former chief of staff."
AIRLINE PRICE FIXING? -- "British and American agencies are investigating major airlines that fly long-distance to and from Britain, alleging that they may have illegally fixed prices by coordinating the level of fuel charges that are passed along to passengers."
ABRAMOFF REPORT REAX -- NYT focuses on Reed: "A bipartisan Senate report released on Thursday documented more than $5.3 million in payments to Ralph Reed, the former director of the Christian Coalition and a leading Republican Party strategist, from an influence-peddling operation run by the corrupt lobbyist Jack Abramoff on behalf of Indian tribe casino."

WaPo has the Ney angle: "In the fall of 2004, Rep. Robert W. Ney (R-Ohio) told Senate investigators that he was unfamiliar with a Texas Indian tribe represented by lobbyist Jack Abramoff. Days later, evidence emerged that the congressman had held numerous discussions with Abramoff and the Indians about getting Congress to reopen their shuttered casino." See also TPM (disputing Ney claims that he did not lie).
TRACKING TERROR FINANCING -- "Under a secret Bush administration program initiated weeks after the Sept. 11 attacks, counterterrorism officials have gained access to financial records from a vast international database and examined banking transactions involving thousands of Americans and others in the United States, according to government and industry officials."

More:
The program, run out of the Central Intelligence Agency and overseen by the Treasury Department, "has provided us with a unique and powerful window into the operations of terrorist networks and is, without doubt, a legal and proper use of our authorities," Stuart Levey, an under secretary at the Treasury Department, said in an interview on Thursday.

The program is grounded in part on the president's emergency economic powers, Mr. Levey said, and multiple safeguards have been imposed to protect against any unwarranted searches of Americans' records.
On the legality of the program:
Treasury officials said Swift was exempt from American laws restricting government access to private financial records because the cooperative was considered a messaging service, not a bank or financial institution.

But at the outset of the operation, Treasury and Justice Department lawyers debated whether the program had to comply with such laws before concluding that it did not, people with knowledge of the debate said. Several outside banking experts, however, say that financial privacy laws are murky and sometimes contradictory and that the program raises difficult legal and public policy questions.
Honestly, this should not come as that big of a surprise, especially in the wake of disclosure of the electronic eavesdropping program. It might be a little unsettling, but the law here is murky and just based on this report, it seems the government is walking a tightrope -- wading into the murky arena of financial privacy, but putting some internal controls on the program. See also Instapundit (criticism of report as compromise to security).

Thursday, June 22, 2006

RESUME FRAUD INDICTMENT -- An applicant for a position as a police officer with the V.A. Department has been indicted on four counts related to his embellishment of his prior military service. "If one is going to pad a resume, however, it might be a good idea to avoid embellishing your record when it involves a different branch of the same government where you once served." Good tip.
MURTHA TOO? -- A can of Congressional corruption worms has definitely been opended. Let's see, there's DeLay, Jefferson, Mollohan, Hastert, Ney, Cunningham, Lewis (ed.- who have we missed?).

Now, there are allegations about sweetheart deals for relatives and friends of Rep. John Murtha (D-Pa.):

Last June, the Los Angeles Times reported how the ranking member on the defense appropriations subcommittee has a brother, Robert Murtha, whose lobbying firm represents 10 companies that received more than $20 million from last year's defense spending bill. "Clients of the lobbying firm KSA Consulting -- whose top officials also include former congressional aide Carmen V. Scialabba, who worked for Rep. Murtha as a congressional aide for 27 years -- received a total of $20.8 million from the bill," the L.A. Times reported.

In early 2004, according to Roll Call, Mr. Murtha "reportedly leaned on U.S. Navy officials to sign a contract to transfer the Hunters Point Shipyard to the city of San Francisco." Laurence Pelosi, nephew of House Minority Leader Nancy Pelosi, at the time was an executive of the company which owned the rights to the land. The same article also reported how Mr. Murtha has been behind millions of dollars worth of earmarks in defense appropriations bills that went to companies owned by the children of fellow Pennsylvania Democrat, Rep. Paul Kanjorski. Meanwhile, the Center for Responsive Politics, a nonpartisan campaign-finance watchdog group, lists Mr. Murtha as the top recipient of defense industry dollars in the current 2006 election cycle.

As Rep. Joe Wilson, South Carolina Republican, has said, "If there is a potential pattern where Congressman Murtha has helped other Democrats secure appropriations that also benefited relatives of those members, I believe this would be something that merits further review by the ethics committee."
Who's next?
MURTHA TOO? -- A can of Congressional corruption worms has definitely been opended. Let's see, there's DeLay, Jefferson, Mollohan, Hastert, Ney, Cunningham, Lewis (ed.- who have we missed?).

Now, there are allegations about sweetheart deals for relatives and friends of Rep. John Murtha (D-Pa.):

Last June, the Los Angeles Times reported how the ranking member on the defense appropriations subcommittee has a brother, Robert Murtha, whose lobbying firm represents 10 companies that received more than $20 million from last year's defense spending bill. "Clients of the lobbying firm KSA Consulting -- whose top officials also include former congressional aide Carmen V. Scialabba, who worked for Rep. Murtha as a congressional aide for 27 years -- received a total of $20.8 million from the bill," the L.A. Times reported.

In early 2004, according to Roll Call, Mr. Murtha "reportedly leaned on U.S. Navy officials to sign a contract to transfer the Hunters Point Shipyard to the city of San Francisco." Laurence Pelosi, nephew of House Minority Leader Nancy Pelosi, at the time was an executive of the company which owned the rights to the land. The same article also reported how Mr. Murtha has been behind millions of dollars worth of earmarks in defense appropriations bills that went to companies owned by the children of fellow Pennsylvania Democrat, Rep. Paul Kanjorski. Meanwhile, the Center for Responsive Politics, a nonpartisan campaign-finance watchdog group, lists Mr. Murtha as the top recipient of defense industry dollars in the current 2006 election cycle.

As Rep. Joe Wilson, South Carolina Republican, has said, "If there is a potential pattern where Congressman Murtha has helped other Democrats secure appropriations that also benefited relatives of those members, I believe this would be something that merits further review by the ethics committee."
Who's next?
ABRAMOFF REPORT RELEASED -- The Senate Indian Affairs committee, chaired by Sen. McCain (R-AZ), released its report chronicling the Abramoff affair. It includes an exploration of "gimme five," the CAF, the CREA, and other scams. It is long, and it appears pretty scathing. Ultimately, the report concludes that no new laws are needed, but tribes should clean up their election systems, change their political giving behavior, and implement certain contracting best practices. See also TPMMuckraker (discussing report's treatment of Georgia lieutenant gubernatorial candidate Ralph Reed and Rep. Bob Ney (R-Ohio)).
MORE ON MOLLOHAN -- Representative Alan Mollohan (D-W.Va.) helped funnel at least $179 million in U.S. government contracts over the last six years to companies that gave to the West Virginia Democrat's family-run charity, tax records and other documents show.
POLITICAL SYMBIOSIS -- The Abramoff affair has piqued the interest of reformists and journalists, in addition to prosecutors, looking for the next whale of a scandal. Consequently, the Congressional sacandals have continued to expand. It appears that a symbiotic relationship is developing between reformists, journalists, and prosecutors, with dirty politicians on the losing end. That new system seems to be taking primacy over the former system in which politicians, operators, and lobbyists maintained a symbiotic relationship, with the public on the losing end. Just consider:
House Speaker J. Dennis Hastert (R-Ill.) made a $2 million profit last year on the sale of land 5 1/2 miles from a highway project that he helped to finance with targeted federal funds.

A Republican House member from California, meanwhile, received nearly double what he paid for a four-acre parcel near an Air Force base after securing $8 million for a planned freeway interchange 16 miles away. And another California GOP congressman obtained funding in last year's highway bill for street improvements near a planned residential and commercial development that he co-owns.

In all three cases, Hastert and Reps. Ken Calvert and Gary Miller say that they were securing funds their home districts wanted badly, and that in no way did the earmarks have any impact on the land values of their investments. But for watchdog groups, the cases have opened a fresh avenue for investigation and a new wrinkle in the ongoing controversy over earmarks -- home-district projects funded through narrowly written legislative language.

For more than a year, the congressional corruption scandal triggered by former lobbyist Jack Abramoff has focused attention on earmarks secured by lawmakers on lobbyists' and government contractors' behalf. Now watchdog groups are combing through lawmakers' land holdings and legislative activities, searching for earmarks that may have boosted the value of those investments.
VA OFFERS CREDIT MONITORING -- "The Department of Veteran Affairs said yesterday that it will offer free credit monitoring for a year to the millions of veterans and military personnel whose personal information was stolen last month. The department said the plan will safeguard the credit records of those affected and provide them with peace of mind."
STOLEN LAPTOP MORE THAN SIMPLE THEFT -- The recent rash of stolen laptops should give us pause:
Social Security numbers and the birthdates of 13,000 District workers and retirees were among the data contained on a laptop stolen last week from the Southeast Washington house of an employee of ING U.S. Financial Services.

And Wednesday, Equifax reported that an employee's laptop was stolen on a London train, compromising the personal records of about 2,500 of the company's Atlanta-based employees.

"By the time you add up a million here and 900,000 there and 4 million over there, you've covered most of the credit-holding and wage-earning population of the U.S.," said Marcus J. Ranum, a firewall designer, in an e-mail. "I'm sure my math is suspect, but I estimate that there are about 156 Americans whose personal information has not yet been compromised."

The thefts are being reported in large part because many states have passed laws requiring that they disclose potential data breaches.
CHINESE EDUCATION FRAUD -- Graduates of Shengda College rioted when they received their diplomas, which referred to Shengda -- and not the more prestigious Zhengzhou University -- despite promises otherwise.

"The protest, still simmering on Shengda's now tightly guarded campus, reflects the reality that the country's exploding population of college students must grapple with petty fraud, substandard instruction and an intensely competitive job market. Students, a traditional bellwether of political volatility in China, have become a fresh source of unrest in a society already angered by land grabs, unpaid wages and environmental abuse."
PRISON GUARD CORRUPTION -- "A federal agent was killed and a prison officer wounded Wednesday in a shootout with a guard at a federal prison here. The guard, who was about to be arrested in connection with a sex ring, also died in the gun battle."

The indictment charged "six guards on charges of conspiracy to commit acts of bribery, witness tampering, mail fraud and interstate transportation in aid of racketeering." It alleged:
[T]hat starting in 2003, five of the six guards — Mr. Hill, Alfred Barnes, Gregory Dixon, Alan Moore and E. Lavon Spence — traded contraband for sex with at least 10 inmates. At other times, it said, they sold contraband to inmates or used it to bribe them to keep silent.

Federal officials would not say what kind of contraband was involved, but the indictment suggested it could have included alcohol, drugs, food or anything else not available at the prison commissary.

To further keep the inmates from telling anyone, the guards also monitored their phone calls and threatened to have them sent to other prisons farther from their families, according to the indictment.

The sixth guard, Vincent Johnson, is said to have conveyed messages between inmates and one of the other five guards, and showed inmates the Bureau of Prisons computer system, presumably as a threat that they could be tracked once they were released.
This is probably much more common than we care to admit.
SCANDAL LEADS TO TAPPING -- "Italy's justice system is famous for grinding slowly. But recently, whenever scandal arises, the newspapers quickly fill up with tapped phone conversations of some of the nation's most important people, in the most embarrassing situations."
FORESHADOWING WHAT'S AHEAD -- This nugget from the NYT write-up of the Safavian verdict:
Defense lawyers for other subjects of the Abramoff investigation said they were chilled by the verdict against Mr. Safavian, suggesting that it might embolden the Justice Department to bring charges against much more prominent public officials who were close to Mr. Abramoff.

"Safavian was a little fish," said a lawyer for a former government official who has also become entangled in the investigations of Mr. Abramoff. The lawyer, who was granted anonymity to speak because he did not want to bring unnecessary attention to his client, added, "I think this makes it easier for the prosecutors to ask permission at the Justice Department to go for the bigger fish."

Assistant Attorney General Alice S. Fisher, the head of the Justice Department's criminal division, said in a statement that "the message of this verdict is clear: in answering questions posed by Congress and by federal agencies, public officials have the same obligation as does the public for which they serve — to tell the truth."

Among the other lawmakers under close scrutiny by the Justice Department is Representative Bob Ney, an Ohio Republican who joined Mr. Abramoff and Mr. Safavian on the 2002 trip, traveling by private jet to Scotland, where they golfed at the fabled course at St. Andrews.
See also TPMMuckraker.

Wednesday, June 21, 2006

WHO'S YOUR (SUGAR)DADDY? -- "Media conglomerate Time Warner said Tuesday it was looking into whether company funds were used by its chief financial officer for gifts he allegedly gave an accused prostitution ringleader."
FLOOR SPECIALISTS SUBJECT OF REVIEW -- "The New York Stock Exchange, which has already sued 23 specialists for illegal floor trading, is investigating improper activities by other market makers between 1999 and 2003."
REMEMBER FANNIE MAE? -- Dan Gainor wonders why so little coverage on television, and thinks it might be because "this was a Democratic scandal."
Since last year's study period ended on Feb. 1, 2005, CBS has reported on the Fannie Mae scandal just twice -- both the same day of the $400-million settlement. NBC has mentioned it just once and ABC has been completely out to lunch. CNN has mentioned it just six times -- a decline in its coverage.

None of the stories discussed the roughly $30 billion in lost value to stockholders since this scandal has hit the news. None of them mentioned this was a Democratic scandal.
Gainor's problem here is that Enron is a false analogy. That entity imploded, Fannie Mae has not. Enron's two top executives were just convicted by a Houston jury following a long criminal fraud trial, while Fannie Mae has settled and no executives have been indicted (yet). In other words, it is difficult to compare the coverage of a scandal that is more fully developed with more plot points and opportunities for pictures of angry ex-employees (Enron) to the coverage of an early-stage scnadal when the only real plot point (so far) has been the release of a scathing report and the announcement of a $400 million settlement (Fannie Mae), which doesn't exactly have the same television appeal.

Of course, Gainor points to the $40 billion loss associated with Fannie Mae to argue that it is a big scandal. He's right about that -- it is a big scandal. Is it as big as Enron by that same measure? I don't know, and Gainor doesn't say.

Contra Instapundit.
MILITARY DECORATION FRAUD --
The FBI is cracking down on phony war heroes, who often buy medals on the Internet and wear them at public events.

This year, federal agents have launched a dozen investigations against people allegedly masquerading as decorated veterans. At that pace, the FBI would open about twice as many cases as it did last year.

The cases are sometimes difficult to prosecute because the phony heroes have to be caught wearing the medal. And because the crime — unauthorized wearing of military medals and decorations — is a misdemeanor, the penalty is small. Of the 58 cases that were opened by the FBI in the past six years, 20 are pending. Of the other 38, almost 60% ended in convictions.
BEIJING CORRUPTION PROBE -- "The head of a major property developer in China's capital is being questioned by authorities amid a widening investigation into alleged corruption involving a recently dismissed vice mayor, a company official said Tuesday."
DISASTER RELIEF FRAUD -- From the AP:

The House passed legislation imposing sentences of up to 30 years for fraud related to disaster relief.

The legislation, approved by a voice vote, was brought to the House floor a week after Congressional investigators concluded that the Federal Emergency Management Agency was defrauded of up to $1.4 billion as it rushed to provide relief last year after Hurricanes Katrina and Rita.
It would be nice to know a little more about the bill. For example, the bill number, its sponsors, the key provisions, prospects in the Senate. You know, some basic reporting. Sheesh.

Update: Here's the bill. The legislation appears to target not only individual beneficiaries of disaster assistance, but also government contractors and sub-contractors providing products or services related to a disaster.
THE MORNING AFTER -- WaPo: "A federal jury found former White House aide David H. Safavian guilty yesterday of lying and obstructing justice, making him the highest-ranking government official to be convicted in the spreading scandal involving disgraced former lobbyist Jack Abramoff."

NYT: "A former White House aide was convicted on Tuesday of lying to government investigators about his ties to the disgraced lobbyist Jack Abramoff, in the first trial to result from the influence-peddling inquiry centered on Mr. Abramoff."

WCCC Prof Blog: "Obviously, for Safavian the ramifications of this conviction are clear - he will likely be serving jail time. With sentencing set for October 12th, it gives him and the government time to reconsider their relationship. The question will be whether Safavian joins the "Abramoff Club," and becomes a new cooperating witness for the government. One also has to wonder whether this conviction will be a message to those who are under investigation to work something out with the government."

The conviction is probably most worrisome for Rep. Ney, who may be the next target.

And Abbe Lowell, Ambramoff's attorney, takes the opportunity to propose lobbying reform.
NURSES REVOLT -- "Nurses filed class-action lawsuits yesterday against hospitals in Chicago, Memphis, San Antonio and Albany, asserting that the hospitals had violated federal antitrust laws by conspiring to hold down nurses' wages."
MUCH ADO ABOUT NOTHING? -- So says Holman Jenkins in WSJ about the backdating scandal.

Tuesday, June 20, 2006

OVERLOOKED, BUT IMPORTANT -- Jeffrey Birnbaum wonders hopefully whether we will see The End of Legalized Bribery.
MARK CUBAN GETS BEHIND FRAUD SITE --
Tech billionaire Mark Cuban may soon go from making the news to breaking it. The high-profile owner of the NBA's Dallas Mavericks is throwing his financial clout behind a new Web site aimed at ferreting out corporate fraud. This time, though, he may be out of bounds.

The reason: Cuban has said he'll buy and sell stocks based on scoops the site uncovers, even before they're published. “There are a million ugly stories in the financial underground,” Cuban told BusinessWeek.com in an e-mail. “We plan on finding and sharing and profiting from them.” He declined to comment further.

The fledgling Web publication will have an experienced journalist at the helm. St. Louis Post-Dispatch business reporter Christopher Carey is leaving the newspaper after 17 years to become the editor of the site, called Sharesleuth.com. Carey was a finalist in 2005 for the Gerald Loeb Award, business journalism's highest honor, and he recently completed a prestigious fellowship at the University of Michigan.
As the story suggests, some are raising questions about the propriety of Cuban's idea. See also Ideoblog (citing Securities Litigation Watch).

Update: Because the site is worth keeping an eye on, Share Sleuth has been added to the list of links.
HASS TAX FRAUD INDICTMENT -- "Last year, President Bush praised privately held Haas Automation as an American manufacturing success story. Yesterday, reports the New York Times, federal prosecutors in Los Angeles charged Gene Haas, the machine-tool builder’s CEO, with orchestrating a tax fraud that cost the government nearly $20 million."
SAFAVIAN GUILTY -- On four of five counts related to the Abramoff corruption probe. See also TPMMuckraker; WaPo.
POSSIBLE ELECTORAL FALLOUT FROM FLETCHER SCANDALS --
But 15 indictments later, [Kentucky Gov. Ernie] Fletcher's administration — including his self-titled Disciples, accused of being the ringleaders of the patronage scheme — is still feeling the sting as his approval ratings drop below 30 percent.

Most of his former backers, including his mentor, Senator Mitch McConnell, have distanced themselves from him, and Democrats point to the case as another example of Republican corruption and overreach. Mr. Fletcher was indicted on three misdemeanor charges; while on vacation in Florida in early June, he had his lawyer enter a plea of not guilty.
THE NEXT LOBBYING SCANDAL? -- "As Eric Lipton reported in The Times this week, at least 90 top Homeland Security officials have gone through that famous revolving door between the government and the lobbying industry. That's more than two-thirds of the most senior executives from the department's infancy. It is hard to believe that the people running an agency that performs so badly could be so much in demand."

This pattern leads somewhere. Just not clear where it leads or when we'll get there, but one would be safe in assuming that it is nowhere good and it will be sooner rather than later.
SO MUCH FOR PRIVACY -- "Numerous federal and local law enforcement agencies have bypassed subpoenas and warrants designed to protect civil liberties and gathered Americans' personal telephone records from private-sector data brokers."
JAPANESE CENTRAL BANKER APOLOGIZES -- "Japan's central bank chief apologized to the nation Tuesday and said he would take a pay cut for an investment scandal that has set off calls for his resignation. He also said the bank has set up a committee to review rules for its officials' assets."

More:
Fukui has come under fire since stating last week that he had invested 10 million yen ($86,000) seven years ago in a fund managed by Yoshiaki Murakami, who was arrested June 5 on suspicion of insider trading.

While Fukui has broken no law, the incident has raised questions about the ethic standards for Japan's financial officials _ and comes at delicate time when the central bank is about to start raising interest rates amid signs of a long-awaited economic recovery here.
RUMSFELD INTERVIEWED IN TANKER SCANDAL -- The DOD OIG asked the defense secretary some questions about an air tanker procurement scandal:
The Air Force in 2004 canceled its plan to lease the tankers from the Boeing Co., amid allegations of improper collusion with the company. Former Air Force procurement officer Darleen A. Druyun and one of the interlocutors at Boeing were sent to prison; subsequent investigations showed that Druyun manipulated other large Air Force contracts to benefit military contractors.

After a Senate investigation unearthed evidence that the tanker purchase was viewed inside the Pentagon as a politically tinged bailout for Boeing, Air Force Secretary James G. Roche and his top acquisitions deputy resigned from government. Boeing's chief executive was replaced, and last month the firm agreed to pay $615 million to settle all liability for the tanker scandal and an unrelated impropriety. It was the largest penalty paid by a defense contractor.

But the scandal never tarnished Rumsfeld, and in the previously undisclosed interview, conducted with principal Deputy General Counsel Daniel J. Dell'Orto at his side, the defense secretary makes clear that he does wars, not defense procurement. As a result, he could not recollect details of what subordinates told him about the tanker lease or what he said to them.
TURNING TO ETHICS COMMITTEE -- "Police union officials said on Monday that they will ask the House ethics committee to consider opening an investigation into" Georgia Rep. Cynthia McKinney's (D) "March 29 run-in with a Capitol Police officer." (sub. req.). See also National Journal (sub. req.).

Monday, June 19, 2006

THUMB ON THE SCALES? -- Because private arbitration of brokerage cases has become so ubiquitous, some have begun to ask whether the system is fair:
In theory, private arbitration panels are supposed to offer a fast and fair system in which customers can resolve complaints with their brokers. Last year, according to NASD, the average turnaround time for a case was 14.3 months, down from 15.4 months in 2004. In 1995, the average was 10.5 months.

But from start to finish, the securities industry itself oversees the arbitration process. Brokerage firms require clients to file grievances with private arbitrators, not in state or federal court. Arbitration is the only forum that investors can use to resolve disputes — opening the door to the possibility of lax enforcement or, at worst, outright compromises of the system.
Arbitration is big in other industries as well, and is a more common feature in even basic commercial relationships. At what point does all of this private "justice," in which the party with bargaining power can dictate the terms of dispute resolution, undermine the most basic notion of law, equal justice under law?
JEFFERSON RAID HEARING -- WCCC Prof Blog has the summary.
ACADEMIC FRAUD RESULTS IN CRIMINAL CASE -- It's probably not a good idea to use your cellphone to photograph MCAT test questions.
HASTERT LAND DEAL QUESTIONED -- "The complex structure of a real estate transaction in Kendall County last December left House Speaker Dennis Hastert with a seven-figure profit and in prime position to reap further benefits as the exurban region west of Chicago continues its prairie-fire growth boosted by a Hastert-backed federally funded proposed highway."
HERE WE GO AGAIN -- "A laptop containing personal data -- including Social Security numbers -- of 13,000 District workers and retirees was stolen Monday from the Southeast Washington home of an employee of ING U.S. Financial Services, the company said yesterday." At what point does this sort of negligence create liability?

More, including tips on how to respond: "In the past 15 months, corporations, universities and other organizations alerted more than 85 million U.S. consumers that their personal or financial data might have been exposed through electronic breaches, disgruntled employees or just plain incompetence. While consumer data leaks don't automatically result in financial losses or identity theft, experts say your chances of becoming a victim depend on how well you know your rights and how quickly you spring into action."
CHINESE BANK FRAUD --
On Oct. 2, 2001, three junior Bank of China managers from the southern Chinese province of Guangdong boarded a private jet in Vancouver for a flight to Las Vegas. One of the bankers, Xu Chaofan, was in a generous mood. He tipped the flight operator more than $1,200, according to evidence that Bank of China later presented in a Hong Kong court. The bank testified that Xu then lost $2,368,400 on the tables at the Caesar's Palace and Paris casinos.

For a man on a modest salary, this should have been a heavy financial blow. At the time, Xu and his colleagues, Yu Zhendong and Xu Guojun, were earning about $925 a month.

However, court records in Hong Kong and the United States suggest that this was but a minor setback for the three bankers. They are accused of conspiring to embezzle at least $485 million from Bank of China's branch at Kaiping, a small city in the booming Pearl River Delta, before fleeing overseas. Yu has been convicted in the United States and repatriated to China, where he is serving a 12-year prison sentence
MORE ON BACKDATING --
What began as a creative solution among a handful of technology firms to address recruitment issues soon became common practice in Silicon Valley. It appears the practice also became a way to enrich chief executives and other top managers.

The result is a nationwide scandal with major accounting, corporate governance, tax and disclosure ramifications. Dozens, perhaps hundreds, of companies are caught up in a giant civil and criminal law enforcement sweep by the Justice Department, the I.R.S. and the Securities and Exchange Commission.

It is no coincidence that stock option abuses are once again taking center stage in an unfolding scandal. The easy money that options can rain down on recipients motivated many of the numbers games that companies played with their quarterly earnings during the stock market boom, leading to numerous accounting fraud prosecutions at Enron, WorldCom and others.

In the latest scandal, companies seem to have handed out stock options that were already "in the money" on the date of grant, undermining the idea of using options as a pay-for-performance tool. The practice appears to have been widespread from the early 1990's to 2002, and possibly beyond.
ANATOMY OF AN EARMARK --
Over the past decade Vibration & Sound Solutions Ltd., a small Alexandria defense contractor, has received a steady flow of federal contracts to work on "Project M" -- $37 million in all from annual "earmarks" by congressional supporters such as Rep. James P. Moran Jr. (D-Va.).

Project M, a technology involving magnetic levitation, was conceived as a way to keep submarine machinery quieter, was later marketed as a way to keep Navy SEALs safer in their boats and, in the end, was examined as a possible way to protect Marines from roadside bombs.

All the applications have one thing in common: The Pentagon hasn't wanted them.
At what point does largesse cross the line? Presumably, there is one viable application of the technology -- continued campaign contributions.
TURN OVER A ROCK SEE WHAT YOU FIND -- "The Internal Revenue Service has begun a wide-ranging investigation of nonprofit hospitals to determine whether they are flouting standards for tax-exempt status, whether they deny care to people without insurance and whether they provide significant amounts of charity care."