Friday, June 30, 2006

TOUR DE FRANCE DOPING SCANDAL -- "But this year's Tour is threatened by another, darker presence not seen in nearly a decade — a sprawling doping scandal. Even before riders began to arrive for the start of the three-week race, Tour officials asked a Spanish team to withdraw, citing police raids in Spain that found banned performance-enhancing drugs and other items that were said to have implicated dozens of top riders and coaches."
APPLE OPTIONS ADMISSION -- "Apple Computer said yesterday that it had uncovered irregularities related to stock options awarded between 1997 and 2001, a move that raises questions about whether a grant made to Steven P. Jobs, one of the largest ever, was properly disclosed."
HOUSE CONDEMNS FIN DATA MONTIORING DISCLOSURE -- "Lawmakers expressed their sentiment through a resolution that was approved on a largely party-line 227-to-183 vote after days of harsh criticism by the Bush administration and Congressional Republicans aimed at The New York Times and other newspapers for publishing details of the program, which the government said was limited to following possible terrorist financial trails."

As might be expected from a competitor, WSJ criticizes NYT's decision to publish the story:
Just as dubious is the defense in a Times editorial this week that "The Swift story bears no resemblance to security breaches, like disclosure of troop locations, that would clearly compromise the immediate safety of specific individuals." In this asymmetric war against terrorists, intelligence and financial tracking are the equivalent of troop movements. They are America's main weapons.

The Times itself said as much in a typically hectoring September 24, 2001, editorial "Finances of Terror": "Much more is needed, including stricter regulations, the recruitment of specialized investigators and greater cooperation with foreign banking authorities." Isn't the latter precisely what the Swift operation is?
And then there is a call for calm: "Counterterrorism has become a source of continuing domestic and international political controversy. Much of it, like the role of the Iraq war in inspiring new terrorists, deserves analysis and debate. Increasingly, however, many of the political issues surrounding counterterrorism are formulaic, knee-jerk, disingenuous and purely partisan. The current debate about United States monitoring of transfers over the Swift international financial system strikes us as a case of over-reaction by both the Bush administration and its critics."
JEFFERSON PROBE RESULT IN DEM CHANGES? -- "Several House Democrats have proposed significant changes to their party’s caucus rules, with at least two of the changes prompted by internal caucus controversy over the recent ouster of a caucus member from the Ways and Means Committee."
GROCERY CHAIN ADMITS LABOR FRAUD -- "The Ralphs supermarket chain said Thursday it intends to plead guilty to charges that it illegally hired hundreds of workers under fake names during a 2003 grocery strike and lockout in Southern California."
HEALTHSOUTH CONVICTIONS -- "An Alabama jury yesterday convicted HealthSouth Corp. founder Richard M. Scrushy -- acquitted last year of federal accounting-fraud charges -- of paying half a million dollars in bribes to former governor Don Siegelman in exchange for a seat on a state health-care board." See also AP; NYT.
VET DATA RECOVERED -- "Federal officials yesterday announced the recovery of computer equipment stolen from an employee of the Department of Veterans Affairs. They said that sensitive personal information of 26.5 million veterans and military personnel apparently had not been accessed." See also NYT; USA Today.

That's a relief, but will data security reforms still proceed?

Thursday, June 29, 2006

YET ANOTHER ABRAMOFF CASE -- "An Interior Department official who has acknowledged receiving meals and tickets to sporting events from former lobbyist Jack Abramoff has been charged with filing a false financial disclosure report."
HEDGE FUND FOLLOW-UP -- In all the excitement surrounding the resignation of an S.E.C. investigator, we almost forgot about the actual issue:
Connecticut Attorney General Richard Blumenthal (D) urged Congress yesterday to heighten federal scrutiny of the secretive hedge fund industry or face the prospect of a patchwork group of state authorities stepping in to monitor the rapidly growing investment pools to prevent fraud.

Blumenthal, whose state is the headquarters for scores of hedge funds, told the Senate Judiciary Committee that last week's federal appeals court ruling striking down oversight of the funds by federal regulators left investors "in a regulatory void, without any disclosure or accountability."
REFORM AS CORRUPTION? -- George Will opines: "Campaign finance reform is what it pretends to combat: corruption. The Supreme Court should have said something like that when it struck down, as unconstitutional abridgments of free speech, Vermont's severe limits on contributions to and spending by campaigns."
REPORTER SHIELD? -- Theodore Olsen opines: "Journalists reporting on high-profile legal or political controversies cannot function effectively without offering some measure of confidentiality to their sources. Their ability to do so yields substantial benefits to the public in the form of stories that might otherwise never be written about corruption, misfeasance and abuse of power. A person with information about wrongdoing is often vulnerable to retaliation if exposed as an informant."

Speaking of which, WaPo editorial weighs in on the NYT decision to disclose the financial data monitoring program: "The decision on whether to publish information that government officials assert would damage national security is one of the gravest choices a newspaper can face. There may be times when editors get it wrong, either printing material that proves harmful or withholding information that should have come to light. But these are risks that the Constitution contemplated and that the Framers were persuaded were worth tolerating to ensure a free and vigorous press.
PROPANE PRICE PROBE (SAY THAT TEN TIMES FAST) -- "Federal regulators charged yesterday that BP manipulated the price of propane two years ago by cornering the market through its dominant position, pushing up heating costs for millions of households at the peak of winter demand." See also WaPo.
INFLUENCE CASINO -- "Anxiety is general in Washington and beyond as Mr. Abramoff delays going to prison to cooperate with federal prosecutors on the trail of corrupt politicians. Mr. Reed appears at less risk than Representative Bob Ney, the Ohio Republican whose favors for Abramoff tribal clients are the focus of criminal investigators. But Mr. Reed, who is trying to claim vindication in the Senate report, should know that there is a higher standard of behavior than simply not being indicted."
V.A. APPROVED USE OF DATA -- "The Veterans Affairs worker faulted for losing veterans' personal information had permission to access millions of Social Security numbers on a laptop from home, agency documents obtained by The Associated Press show."

Wednesday, June 28, 2006

HEDGE FUND HEARING -- Allegations of stock manipulation, retaliation, and political influence. Quite a barn-burner.

Update: "A former government attorney [Gary Aguirre] told Congress on Wednesday that he was fired for investigating a hedge fund too aggressively and said law enforcement is failing in its duty to protect investors in the growing hedge fund industry." See also Gary Aguirre's Testimony.
ELECTION FRAUD REPORT -- NYU'S Brennan Center released its report on the concerns about electronic voting: "The report concluded that the three major electronic voting systems in use have significant security and reliability vulnerabilities. But it added that most of these vulnerabilities can be overcome by auditing printed voting records to spot irregularities. And while 26 states require paper records of votes, fewer than half of those require regular audits."
CHINESE BANK FRAUD -- "The Chinese government disclosed $1.1 billion worth of fraud at one of the country's largest state-owned banks this week, underscoring the risks confronting foreign investors as they seek big stakes in China's precarious banking system."
MEXICO'S ECONOMY -- Robert J. Samuelson columnizes about the weak Mexican economy and its impact on immigration ahead of the upcoming presidential election there:

Economies advance through the adoption of better technologies and business methods. Production and efficiency improve. Prices go down or incomes go up. Either way, people can buy more -- more old stuff (say, food or housing); or more new stuff (say, Internet connections or iPods). In Mexico, this process is weak. To simplify slightly: Its economy consists of two vast sectors, each slow to adopt better technology and business practices.

One sector involves large, modern firms in semi-protected markets that limit the pressure to improve efficiency or lower prices. "Mexico's business sector is risk-averse. It's never had to operate in a true competitive environment," says Pamela Starr, an analyst for the Eurasia Group, a consulting firm. "It's operated with monopolies and oligopolies encouraged by the government."

....

The other part of the economy is usually called the "informal sector." It consists of thousands of small firms -- street vendors, stores, repair shops, tiny manufacturers -- that theoretically aren't legal, because they haven't registered with the government and often don't pay taxes or comply with regulations on wages and hiring and firing. Almost two-thirds of Mexico's workers may be employed in the informal sector, according to one rough estimate by the International Monetary Fund.
Samuelson does not consider the impact of a third sector of Mexico's economy -- the "grey sector" -- which has developed around corruption and illicit trade and finance. This sector has a corrosive effect on the other two sectors, and acts to undermine overall growth.
DOCTOR CHARITIES UNDER SCRUTINY -- This is an interestig new phenomenon, and sounds alot like the way Abramoff, DeLay, and others have used charities to collect money.
Around the country, doctors in private practice have set up tax-exempt charities into which drug companies and medical device makers are, with little fanfare, pouring donations — money that adds up to millions of dollars a year. And some medical experts see that as a big problem.

The charities are typically set up to engage in medical research or education, and the doctors involved defend those efforts as legitimate charitable activities that benefit the public. But because they operate mainly under the radar, the tax-exempt organizations represent what some other doctors, as well as regulators and industry consultants, say is a growing conduit for industry money. The payments, they say, can bias the treatment decisions of physicians, may lead to suspect research findings and at times may even risk running afoul of anti-kickback laws.

Federal officials are starting to take notice of such tax-exempt charities, which critics say are becoming increasingly popular as other forms of industry support to physicians — like lucrative consulting agreements that involve little actual work — have come under scrutiny from regulators and others worried about the potential conflicts.
MORE FIN DATA PROGRAM FALLOUT -- After yesterday's stiff pushback by the administration, NYT responds:

The Swift story bears no resemblance to security breaches, like disclosure of troop locations, that would clearly compromise the immediate safety of specific individuals. Terrorist groups would have had to be fairly credulous not to suspect that they would be subject to scrutiny if they moved money around through international wire transfers. In fact, a United Nations group set up to monitor Al Qaeda and the Taliban after Sept. 11 recommended in 2002 that other countries should follow the United States' lead in monitoring suspicious transactions handled by Swift. The report is public and available on the United Nations Web site.
And a U.S. Senator called for a damage assessment: "Senator Pat Roberts, the chairman of the Senate intelligence committee, asked the director of national intelligence on Tuesday to assess any damage to American counterterrorism efforts caused by the disclosure of secret programs to monitor telephone calls and financial transactions."

Howard Kurtz chronicles the "piling on": "Even by modern standards of media-bashing, the volume of vitriol being heaped upon the editors on Manhattan's West 43rd Street is remarkable -- especially considering that the Los Angeles Times and Wall Street Journal also published accounts Friday of a secret administration program to monitor the financial transactions of terror suspects. So, in its later editions, did The Washington Post."

Meanwhile: "A human rights group in London said Tuesday that it had lodged complaints in 32 countries against a banking consortium in Brussels, contending that it violated European and Asian data protection rules by providing the United States with confidential information about international money transfers."
LIKE A VIRGIN ... MUSIC PIRATE -- "In a rare case of music retailer-turned-Internet pirate, the Virgin store chain in France said Tuesday that it had been found guilty of downloading and reselling a Madonna hit without permission."
JOURNALISM & CITIZENSHIP -- In the wake of the NYT disclosure of the financial data surveillance program, Armed Liberal has an interesting discussion of the tension between a journalist's professional duties and civic responsibilities. See also Instapundit. But the most interesting comment was this:

I think, in simple terms, that they have forgotten that they are citizens, and that they have an obligation to the polity that goes beyond writing the good story. I don't think they are alone; I think that many people and institutions in the country today have forgotten they are citizens, whether they are poor residents of New Orleans defrauding FEMA or corporate chieftains who are maximizing their bonuses at the expense of a healthy economy.

But that's another blog post.
Of course, that's the blog post that needs to be written. The point about journalism and citizenship is important, but the broader issue of citizenship is even more important because it has so much to do with the complex issues of the day. A deeply-felt individual notion of positive citizenship (whether it be duty to family, workplace, community, or country) is a significant deterrent to fraud and corruption of all stripes. Perhaps implicit here is the idea that publishing a story that directly endangers fellow citizens' lives, which is the hypothetical scenario Armed Liberal discusses, can be construed as a type of corruption of journalism.
IT'S HARD OUT THERE FOR A PIMP -- "Sen. Charles Grassley, chairman of the tax-writing Senate Finance Committee, wants the Internal Revenue Service to chase after pimps and sex traffickers with the same fervor it stalked gangster Al Capone for tax evasion."
AWKWARD WATCHDOG -- As you may recall Rep. Allan Mollohan (D-W. Va.) temporarily stepped down as ranking member on the House ethics committee after he came under his own ethics cloud, which has created an awkward situation for his successor:
Rep. Howard Berman (D-Calif.) reluctantly assumed the ranking member’s post at the House ethics committee two months ago, insisting that his reign as senior Democrat be temporary. But since Berman’s arrival, the ethics panel has started three new probes and created a voluntary approval process for member travel, with Berman displaying a warm rapport with Chairman Doc Hastings (R-Wash.) that Mollohan noticeably lacked.

Mollohan continues to weather the federal probe of his earmarks and real-estate investments that prompted him to step down from the panel, a complex inquiry that could remain active well into next year. Still, whether Berman will or should extend his stay at ethics — as a potential chairman, if Democrats take the House — remains an open question.
NEW FED DATA SECURITY POLICY -- "The Bush administration is giving federal civilian agencies 45 days to implement new measures to protect the security of personal information that agencies hold on millions of employees and citizens."
THE KPMG DECISION -- By far the biggest news of the day (yesterday and today) is Judge Kaplan's 88-page opus ruling that the government's tactic of forcing firms (like KPMG) to cut off their employee-defendant's legal fees is unconstitutional. As Judge Kaplan explained, "Those who commit crimes - regardless of whether they wear white or blue collars - must be brought to justice. The government, however, has let its zeal get in the way of its judgment. It has violated the Constitution it is sworn to defend."

Needless to say, the decision has rippled across the white collar bar: "A federal judge ruled yesterday that a tactic used by prosecutors to crack down on corporate misconduct violated the constitutional rights of employees, a decision that may change the way the government pursues white-collar cases." See also WaPo.

WCCC Prof Blog has the highlights and is already drawing comparisons to Learned Hand.

To make a long story short, though, Judge Kaplan reasoned that under the Thompson Memo, which sets forth the DOJ's policy on prosecution of corporate entities, prosecutors were pressuring KPMG, which was facing a possible indictment of its own, to cut of their employee-defendant's legal fees, even though corporations routinely advance such fees. Such pressure probably would be proper if the pressure was narrowly tailoring, for example if the government was considering charging KPMG with obstruction or a similar allegation in which the payment of the fees might play a part. But otherwise, that pressure to cut off employees impinges on employees' abilities to defend themselves. Therefore, Judge Kaplan is going to allow the individual defendants to file claims for fees from KPMG.

In terms of analysis, WCCC Prof Blog favorably notes that Judge Kaplan recognized that white collar cases can be costly to individual defendants. And/but, as a consequence, director and officer insurers are probably taking note, and may impose their own restrictions on the advancement of fees to employee-defendants.

WSJ Law Blog has winners and losers and a hodge podge of views.

Tuesday, June 27, 2006

BUFFETT'S GENEROSITY --
Warren Buffett and Bill Gates stood side by side today as the new face of philanthropy, promising a charitable foundation unlike any the world has seen and one that will test the limits of what a single group can do against global problems of health, poverty and education.

Buffett's decision to sign over nearly $31 billion of his company's stock to the Bill & Melinda Gates Foundation creates a Microsoft of the charity world, a colossus that by law and under Buffett's conditions will have to give away $3 billion a year by 2009.


The relative virtues of philanthropy: "On the other hand, larger and well-run philanthropic foundations can be wonderful things: They are at least as sophisticated as government programs but are untrammeled by the oversight and second-guessing that necessarily come with taxpayers' money. This frees them to concentrate their resources on a few big challenges without regard to political considerations and to make long-term commitments that governments have trouble sustaining."

And the challenge: "Spending an extra $1.5 billion a year sounds like a problem any institution would love to have, but think about it. The Gates Foundation, already the biggest philanthropy in the country by far, has to double its annual spending. That means finding productive ways to disburse an extra $4 million a day, including Saturdays and Sundays -- and Bill and Melinda won't be allowed to just take the money out into the back yard and burn it. Buffett will be watching, and he joked to Gates that 'I won't grade you more often than daily' on how the money is being used."

With so much money, there is a real opportunity for progress on important issues, but there should also be a real concern about waste, fraud, and abuse. As sophisticated a foundation it is, with such a large influx from Buffet, the Bill & Melinda Gates Foundation will certainly need to enhance its internal controls, as well as grantee oversight, to ensure all the money goes where it should.
MORE DETAILS ABOUT KATRINA FRAUDS -- "Among the many superlatives associated with Hurricane Katrina can now be added this one: it produced one of the most extraordinary displays of scams, schemes and stupefying bureaucratic bungles in modern history, costing taxpayers up to $2 billion."

The schemes are amazing. Someone should write a book about this.
UNTANGLING MILITARY DEATH BENEFITS --
For military widows, many of them young, stay-at-home mothers, the shock of losing a husband is often followed by the confounding task of untangling a collection of benefits from assorted bureaucracies.

While the process runs smoothly for many widows, for others it is characterized by lost files, long delays, an avalanche of paperwork, misinformation and gaps in the patchwork of laws governing survivor benefits.

Sometimes it is simply the Pentagon's massive bureaucracy that poses the problem. In other cases, laws exclude widows whose husbands died too early in the war or were killed in training rather than in combat. The result is that scores of families — it is impossible to know how many — lose out on money and benefits that they expected to receive or believed they were owed, say widows, advocates and legislators.
Does it seem like the Pentagon spends billions on equipment (maybe not body armor), but pinches pennies when it comes to soldiers and their families?
CHURCHILL TO BE FIRED FOR ACADEMIC FRAUD -- "The interim chancellor at the University of Colorado said on Monday that Prof. Ward L. Churchill, whose comments about the victims of Sept. 11 prompted a national debate about the limits of free speech, should be fired for academic misconduct."

More:
Mr. DiStefano said two committees had found evidence of serious misconduct in the professor's record, including plagiarism, misrepresentation of facts and fabrication of scholarly work.

Professor Churchill's lawyer, David Lane, said that the professor's ultimate dismissal was now inevitable, and that retribution for politically unpopular speech was the real reason. A lawsuit against the university alleging violations of the professor's First Amendment rights is also inevitable, Mr. Lane said.
RELAXED ENFORCEMENT AT F.D.A.? --
A 15-month inquiry by a top House Democrat has found that enforcement of the nation's food and drug laws declined sharply during the first five years of the Bush administration.

For instance, the investigation found, the number of warning letters that the Food and Drug Administration issued to drug companies, medical device makers and others dropped 54 percent, to 535 in 2005 from 1,154 in 2000.

The seizure of mislabeled, defective or dangerous products dipped 44 percent, according to the inquiry, pursued by Representative Henry A. Waxman of California, the senior Democrat on the House Government Reform Committee.

The research found no evidence that such declines could be attributed to increased compliance with regulations. Investigators at the F.D.A. continued to uncover about the same number of problems at drug and device companies as before, Mr. Waxman's inquiry found, but top officials of the agency increasingly overruled the investigators' enforcement recommendations.

The biggest decline in enforcement actions was found at the agency's device center, where they decreased 65 percent in the five-year period despite a wave of problems with devices including implantable defibrillators and pacemakers.
See also House Government Reform Committee Minority.
PRESIDENTIAL SIGNING STATEMENTS -- "The Senate Judiciary Committee is opening hearings this week into what has become the White House's favorite tool for overriding Congress in the name of wartime national security - signing statements."

This is just one issue in the growing debate about the scope of executive power, and by extension, the balance of power between the three branches.
FIN DATA PROGRAM STORY -- Administration officials have shifted their response tosquarely criticize the NYT decision to report on the program, perhaps following Instapundit's lead, especially after NYT exec editor Keller's less-than-stellar defense.

Leading the charge was President Bush: "President Bush offered an impassioned defense of his secret international banking surveillance program yesterday, calling it a legal and effective tool for hunting down terrorists and denouncing the media's disclosure of it as a "disgraceful" act that does "great harm" to the nation." See also LA Times.

NYT carried Keller's defense:
The executive editor of The Times, Bill Keller, said in an e-mail statement on Monday evening that the decision to publish had been "a hard call." But Mr. Keller noted that since the Sept. 11, 2001, terrorist attacks, the Bush administration has "embarked on a number of broad, secret programs aimed at combating terrorism, often without seeking new legal authority or submitting to the usual oversight."

He added, "I think it would be arrogant for us to pre-empt the work of Congress and the courts by deciding these programs are perfectly legal and abuse-proof, based entirely on the word of the government."
And FishbowlDC provided a little insight as to who was (or was not) involved in attempting to stop NYT from running the story:
[DC Examiner reporter Bill] Sammon: One last thing. How hard did you push to convince the press not to publish this --

[WH Press Secretary Tony] Snow: I was not directly involved. The Department of the Treasury, since it has been operating the SWIFT program, did the work, and they're the ones who made the contacts, primarily to The New York Times, but to others, as well.
HEDGE FUND DECISION IMPACT -- "Hedge fund lawyers are advising their clients to not withdraw their registrations after Friday’s ruling from the D.C. Circuit that the SEC can’t require them to register with the agency, reports the New York Times. Some are waiting to see if the SEC will appeal the ruling; others say that hedge fund advisers that have already registered will stay registered, as the fact that they’ve registered could be used as a marketing tool." See also NYT.
ATL MAYOR APPEALS TAX CONVICTION -- "After his sentencing two weeks ago by a federal judge to 30 months in prison for three tax counts, former Atlanta Mayor Bill Campbell — who was acquitted by a jury of more severe corruption charges — called the sentence an 'abomination.'" See also WCCC Prof Blog.
WHAT HAPPENS TO LESSER-KNOWN PLAYERS? --
A former finance employee at Enron was sentenced to two years probation for filing false income tax returns.

Lawrence Lawyer, a 38-year-old Houston resident, faced up to three years in prison for failing to report $79,469 he received over a four-year period beginning in 1997 from then-Enron executive Michael Kopper, a lieutenant of ex-Enron CFO Andrew Fastow.

In handing out the sentence, District Court Judge Kenneth Hoyt said if it weren't for the "storm" caused by the Enron scandal, Lawyer's case may not have even made it to the courtroom.
See also WCCC Prof Blog.

Monday, June 26, 2006

TROUBLE REGULATING NEW MEDICARE PART D -- "Rarely has the government relied so heavily on private contractors to deliver public benefits. More than 29 million people receive drug benefits subsidized by Medicare. Federal officials are struggling to find the right mix of regulation and gentle persuasion, giving insurers a large degree of discretion about how to achieve objectives set by Congress and the White House."
V.A. CREDIT MONITORING BLOCKED -- "A federal judge temporarily has barred the government from publicizing its free credit monitoring offer to veterans whose personal data was stolen and wants to see if they might get a better federal offer."
MEXICAN DEMOCRACY -- Mexicans are preparing to go to the polls, but will the election be clean?
The death of one-party rule in Mexico promised a new era of cleaner elections.

But two studies suggest that the first presidential contest since Vicente Fox ended the Institutional Revolutionary Party's seven-decade hold on power in 2000 may be tainted by many of the same coercive tactics that marred previous balloting.
For example: "Eleven people, including four police officers, were murdered over the weekend in southern Mexico, officials said Sunday. Drug and gang-related violence have been rising in advance of Mexico's presidential election July 2."

This is an issue not only in Mexico, but in many other fragile democracies. The concern is that such political systems can be hollowed out by corruption so that they have the pomp and circumstance of true democracies, but lack the substantive traits of democratic government. That situation is corrosive and results in a rotting of social institutions, which creates a haven for the range of illicit actors, including traffickers and terrorists. For this reason, corruption in foreign governments can become a national security concern here at home. Accordingly, U.S. public diplomacy should include public integrity/anti-corruption efforts.
WHISTLEBLOWERS BREATHE EASIER? -- "In a breakthrough for advocates of whistle-blower rights, the Senate has approved an amendment that would tighten up protections for federal employees who expose waste, fraud, abuse and threats to public safety."
DEAR MR. SECRETARY-DESIGNEE -- C. Fred Bergsten urges Secretary Paulson's to act boldly to correct the current accounts deficit: "The United States has to attract about $8 billion of foreign capital every working day to finance its current account deficit -- which has risen steadily for 15 years and is approaching $1 trillion annually -- as well as its own foreign investments. Any substantial reduction of that inflow, let alone a conversion into other currencies of the $12 trillion now floating around the world, could send the dollar into a tailspin. Inflation could double, to at least 5 or 6 percent. Interest rates would rise sharply and could hit double digits. Equity and housing markets would tank. The economy would fall into recession, and unemployment would rise sharply. These effects would be magnified if energy prices rose further, recalling the stagflation of the 1970s and risking a 'hard landing' for the U.S. and world economies."
HOW GRASSO CASHED IN -- NYT has a long story unwinding the former NYSE chief's compensation scheme:
IN the spring of 2003, the chairman of the New York Stock Exchange, Richard A. Grasso, had his eyes on a very rich prize. Although Mr. Grasso's annual compensation at the time was about $12 million, on a par with the salaries of Wall Street titans whose companies the exchange helped regulate, he had accumulated $140 million in pension savings that he wanted to cash in — while still staying on the job.

Now Henry M. Paulson Jr., the chairman of Goldman Sachs and a member of the exchange's compensation committee, was grilling Mr. Grasso about the propriety of drawing down such an enormous amount and suggested that he seek legal advice. So Mr. Grasso said he would call Martin Lipton, a veteran Manhattan lawyer and the Big Board's chief counsel on governance matters. Would it be legal, Mr. Grasso subsequently asked Mr. Lipton, to just withdraw the $140 million if the exchange's board approved it? Mr. Grasso told Mr. Lipton that he worried that a less accommodating board might not support such a move, according to an account of the conversation that Mr. Lipton recently provided to New York State prosecutors. (Mr. Grasso has denied voicing that concern.) Mr. Lipton said he told Mr. Grasso not to worry; as long as directors used their best judgment, Mr. Grasso's request was appropriate.
As we now know, it was Paulson (current Treasury Secretary nominee) who would later push Grasso out.
WHAT'S WRONG WITH OPTIONS TIMING, YOU ASK? -- "Stock options are supposed to align the interests of executives with those of shareholders, not give the former an unfair advantage at the latter's expense. A difference of a few dollars in the share price can add up to millions in profit given the large size of many grants to executives. Option timing undermines the whole point of a stock option, which is to give executives the incentive to put in the extra effort to ensure that the corporation performs better. Then when the stock rises, shareholders and executives alike benefit."
LOBBYING REFORM FADES AS HASTERT, LEWIS PROBED -- "When Rep. Tom DeLay (R-Tex.) announced his resignation as majority leader in January -- soon after lobbyist Jack Abramoff pleaded guilty to corruption charges -- House Republicans panicked. Dozens of GOP lawmakers, fearing a political backlash, flooded the office of House Speaker J. Dennis Hastert (R-Ill.) with urgent pleas for lobbying reform."

Which prompts a WaPo editorial: "Never underestimate the congressional impulse to do nothing -- especially when doing something could make life less pleasant for lawmakers."

And NYT: "Dennis Hastert, the speaker of the House, promised credible reform back when the stench of illegal quid pro quo dealings between lobbyists and ethically challenged lawmakers seized public attention. But nothing close to true self-policing is emerging from Congress."

Amid all of this there's fresh reporting on the probe of Appropriations chairman Jerry Lewis:
When defense contractor Nicholas Karangelen launched a political action committee directed by the stepdaughter of the chairman of the House Appropriations Committee, he added another dimension to a tight circle of Capitol Hill relationships that is under federal investigation.

The relationships revolve around Rep. Jerry Lewis, R-Redlands, who leads the Appropriations Committee and has extraordinarily close ties to lobbyists Letitia White and Bill Lowery.
See also TPMMuckraker; Harper's Washington Babylon.
FIN DATA DISCLOSURE BLOWBACK -- "The chairman of the House Homeland Security Committee urged the Bush administration yesterday to seek criminal charges against newspapers that reported on a secret financial-monitoring program used to trace terrorists." See also Instapundit ("Bill Keller isn't very bright, or else he thinks you aren't."); Austin Bay; Jim Dunnigan.
CHARITY CORRUPTION -- "Newly released documents in the Jack Abramoff investigation shed light on how the lobbyist secretly routed his clients' funds through tax-exempt organizations with the acquiescence of those in charge, including prominent conservative activist Grover Norquist." See also this week's National Journal (charitable organizations' role in Washington).