DEAR BUBBAS AND BUBBETTES,
Another interesting story here about how individuals in the Congress try to make sure that special benefits will be protected for their key constituents.
And, once again, it raises the enigmatic question of why so many overseas Americans have been so averse to our having our own direct representation in the Congress too.
While many of us have fought for this for the last several decades, (see attached) many others have been adamant in their opposition because, supposedly, this would impede our influence on those we elect indirectly via States back home. But as a mere 1% of any such constituency, and a very tempting target for any and all accusations with no effect way to defend ourselves, we are sitting ducks for this constant abuse.
Anyway, it becomes increasingly clear, as the attacks on overseas Americans become ever more virulent, and even presidential candidates denounce anyone with an overseas bank account, we are doomed to mistreatment until we start taking ourselves a lot more seriously. And that, brothers and sisters, still seems a Herculean task still today.
Enjoy and take care, Andy
| | TAX LOOPHOLES BLOCK EFFORTS TO CLOSE GAPING U.S. DEFICIT
By Jonathan Weisman, NYTimes, 20 July 2012.
WASHINGTON — As a member of the “Gang of Six,” Senator Mike Crapo of Idaho has emerged as something of a hero among advocates of bipartisanship, one of three conservative Republicans working with three Democrats to cut the deficit by closing loopholes that allow businesses and households to avoid paying taxes.
Yet earlier this year, the senator made sure that a $3 billion loophole — protecting “black liquor,” an alcoholic sludge used as fuel in timber mills and factories — remained open in the negotiations over the highway bill that President Obama signed this month. Many budget experts criticize the loophole as a tax dodge because it allows the sludge to qualify for an energy subsidy created to wean the country off imported oil for vehicles, which black liquor does not do.
On Capitol Hill, lawmakers casually point to closing loopholes as the answer to much that ails the country. Negotiations to avoid automatic military spending cuts in January, to enact sweeping deficit reduction and to lower corporate and personal income tax rates all hinge on closing unidentified loopholes.
But the back-room actions on black liquor point to just how difficult it will be to lower the budget deficit through painless changes in the tax code. Even for a self-proclaimed deficit hawk like Mr. Crapo, one man’s loophole can be another’s vital constituent interest.
An Idaho company “feared losing the write-offs could affect employment decisions,” said Lindsay Nothern, a spokesman for Mr. Crapo.
Mr. Nothern would not identify the company, but Matt Van Vleet, a spokesman for Clearwater Paper, a Spokane company with a large pulp mill in north-central Idaho, confirmed that his company had gone to Mr. Crapo seeking to keep the tax break open.
“We would have felt significant pain,” he said.
Federal tax receipts are reduced by more than $1 trillion a year by various tax deductions and credits, known as tax expenditures, often tied to a policy aim. Ending them would nearly eliminate the federal deficit, which is projected to be $1.2 trillion in the current fiscal year.
But the three largest are as popular as they are expensive: the mortgage interest deduction has cost about $75 billion a year recently, the employer deduction for health care has cost $120 billion a year, and the charitable-giving deduction has cost $38 billion a year, according to the bipartisan Joint Committee on Taxation.
Others are more hotly debated, like the exclusion or deferral of taxes on overseas corporate earnings. Legislation by Senator Debbie Stabenow, Democrat of Michigan, to end a tax deduction for the expense of moving business overseas fell to a Republican filibuster
in the Senate this week.
Still other tax breaks verge on the unpopular, criticized by aides of both parties. Offshore tax havens and other tax shelters cost the government about $150 billion a year, said Senator Kent Conrad of North Dakota, chairman of the Senate Budget Committee.
For tax aides in both parties, black liquor falls into the category of the hard to defend.
Mr. Nothern, the spokesman for Mr. Crapo, confirmed the senator’s role in the disappearance of the provision that would have eliminated the loophole, which happened sometime between its approval by the Senate Finance Committee and its arrival on the Senate floor this spring.
But he added that those actions bore no impact on the deficit negotiations that Mr. Crapo helped start. Mr. Nothern said in an e-mail: “Instead of discussing individual loophole closures to save a buck here or there (more than likely so the bucks can be immediately spent elsewhere), the Gang of Six and bipartisan partners remain talking about a much larger agreement — a simultaneous effort to agree on spending caps, tax reforms (including loophole adjustments and lowering of tax rates), plus reforms to Social Security
and related programs to keep them solvent.”
The company in question did not appear to be a political contributor to Mr. Crapo, but the forestry and forest products industry has given him $216,286 over his career, ranking 13th among industry givers, according to the Center for Responsive Politics.
Since the 1930s, the timber industry has used an alcoholic sludge produced as a byproduct of wood processing to power its mills and plants. In 2009, black liquor became something else — a tax haven. The timber industry labeled black liquor an alternative fuel under the provision Congress created to encourage ethanol production for cars and trucks. Congress never agreed, but the Internal Revenue Service did, backing the timber industry’s interpretation.
That year, black liquor cost the Treasury more than $4 billion.
Congress reversed track later in 2009, saying black liquor would not count as an alternative fuel after 2009, and lawmakers went further in the 2010 health bill, also barring the timber industry from claiming black liquor as a cellulosic biofuel, which receives even bigger tax advantages.
But the I.R.S. gave black liquor one last chance. It ruled that the health care provision did not prevent the timber industry from redefining black liquor produced in 2009 as a cellulosic fuel, worth $1.01 a gallon, even if a company had claimed it as a regular alternative fuel, worth 50 cents a gallon. In other words, companies were permitted to give back one credit already claimed for another worth double, a $2.8 billion bonus for the industry.
Senator Max Baucus of Montana, chairman of the Finance Committee, saw the money as a way to help pay for a transportation bill this year. But Mr. Crapo protested, saying at a hearing that changing the law would “cause very significant damage to a number of people and impact jobs around the country, not the least of which is a major facility in my state.”
Mr. Baucus, a Democrat, tried to assuage his colleague’s concern, whittling down the black liquor provision to save $1.6 billion. It still was not acceptable. Finance aides said a bipartisan vote on the committee was more important than a fight over black liquor. By March, the bill reached the Senate floor with the provision gone, and Mr. Crapo was the first Republican to back the Baucus measure.
In the demise of the provision, members of the Gang of Six, including Mr. Crapo, see a cautionary tale: Go big or don’t go at all. Little provisions can be picked off by members in ways that a comprehensive deficit reduction cannot, they say.
Senator Richard J. Durbin, Democrat of Illinois, who is participating in the deficit talks with Mr. Crapo, said: “We have to invite the American people to be part of a conversation about how to rationalize this tax code, reduce its complexity, try to bring rates down in a reasonable way and still reduce the deficit.”
He added: “I drink red wine. I’m not into black liquor.”
WHERE’S THE NETANYAHU SCANDAL IN THE NEW YORK TIMES?
DOES IT MATTER WHAT ISRAELIS DO?
by Saul Landau, CounterPunch Weekend Edition, July 20-22, 2012
Western leaders met in Paris last week to discuss possible intervention in Syria where almost 10,000 people have died over the last year of internal conflict. The West has never even considered holding such a meeting on Israel’s murderous behavior, however, despite a July 5 UN report that claimed that over the last five years Israeli forces have killed nearly 2,300 Palestinians and injured 7,700 in Gaza (statement from UNOCHA, the UN Office for the Coordination of Humanitarian Affairs.)
The UN agency said that 27 percent of the fatalities in Gaza were women and children in a report highlighting the effects of Israel’s blockade.
Six years ago Israel imposed its sea and air blockade of Gaza. Under the blockade, Gaza exports have dropped to less than 3 percent of 2006 levels.
UNOCHA said, “The continued ban on the transfer of goods from Gaza to its traditional markets in the West Bank and Israel, along with the severe restrictions on access to agricultural land and fishing waters, prevents sustainable growth and perpetuates the high levels of unemployment, food insecurity and aid dependency.”
Israel’s naval blockade has also undermined the livelihood of 35,000 fishermen, and Gaza farmers have lost around 75,000 tons of produce each year due to Israeli restrictions along Gaza’s land border, the UNOCHA report said.
Half of Gaza’s youth is unemployed and 44 percent of its people are food insecure.
Mark Regev, spokesman for Israeli Prime Minister Benjamin Netanyahu, said Thursday that because Gaza’s ruling party Hamas is a
“terrorist organization, the blockade was necessary.”
“All cargo going into Gaza must be checked because Gaza is controlled by Hamas, an internationally recognized terrorist organization,” Regev told Reuters in response to a petition by 50 aid groups, including six UN agencies, calling on Israel to lift the blockade.
The West abhors the Syrian – disobedient – government, allied to Iran, and adores Israel, no matter what it does to the Palestinians. The media does little to dramatize the obvious double standard criteria used to measure the worthiness of the two neighboring governments. Iran, the West’s post Cold War bad guy, found a friend in Syria and that alone has condemned the Syrian government. The fact that Saudi Arabia has armed and financed rebels entering Syria in the name of “democracy” should cause at least some news absorbers to feel a bit skeptical over the anti-Syria campaign.
It doesn’t seem to matter what Israelis do. For example, Arutz Sheva, the nationalist Israeli press, reported that
“declassified FBI documents from a 1985-2002 investigation implicate Prime Minister Binyamin Netanyahu in an initiative to illegally purchase United States nuclear technology for Israel’s nuclear program.
“Netanyahu was allegedly helped by Arnon Milchan, a Hollywood producer with ties to Israeli prime ministers and U.S. presidents.”
Grant Smith at antiwar.com had reported that
“Netanyahu worked inside a nuclear smuggling ring.”
Here’s an example of what is found in the report:
“On June 27, 2012, the FBI partially declassified and released seven additional pages from a 1985–2002 investigation into how a network of front companies connected to the Israeli Ministry of Defense illegally smuggled nuclear triggers out of the U.S. The newly released FBI files detail how Richard Kelly Smyth – who was convicted of running a U.S. front company – met with Benjamin Netanyahu in Israel during the smuggling operation. At that time, Netanyahu worked at the Israeli node of the smuggling network, Heli Trading Company. Netanyahu, who currently serves as Israel’s prime minister, recently issued a gag order that the smuggling network’s unindicted ringleader refrain from discussing ‘Project Pinto’.”
The Hebrew paper Ma’ariv continued the report on this incident.
“According to FBI documents released by the United States, Prime Minister Benjamin Netanyahu, was involved in smuggling in the 70s from the U.S. components of Israeli nuclear program, and assisted by the businessman Arnon Milchan, who according to previous publications was a former Mossad agent.
“The documents describe the findings of the investigation… performed between the years 1985 to 2002 on about how a network of front companies a U.S. security firm illegally smuggled equipment used for weapons seeds out of the U.S.”
We live in the Golden Age of Empire Judaism, said Prof. Marc Ellis. “Greater Israel” means Jewish settler expansion in a denial of Palestinians and their rights. It also means perpetual conflict, maybe war, in the region. Is this why our Congress pledges eternal love to Israel? Is this why the Israeli lobby pays and threatens our Congress?
When will Western powers meet to decide what to do about Israel so as to lessen the damage she causes to Palestinians, her neighbors and the region?
Israel has baffled the U.S. political apparatus. It gets away with imposing apartheid against Palestinians, stealing their land and stirring up war against its neighbors. One negative word from a U.S. pol on Israel brings heavy pressure, intimidation and money for opposing candidates – along with charges of anti-semitism.
How pathetic that a small group of right-wing Jews allied to right-wing Israeli parties, has buffaloed U.S. politicians and media.
One former Congressman described the Israeli lobby as the equivalent of a pit bull that bites the Congressman’s leg in the morning and holds on during lunch and the afternoon. The Congressman sleeps with the bull’s teeth in his leg and wakes with it the next morning. No wonder Members don’t want to antagonize this angry dog!
I don’t suggest Palestinians form an equivalent lobby, but rather that the media develop a little courage and report accurately on events in Israel and Palestine. Just spread reviews of the new film “5 Broken Camera,” in which a Palestinian West Bank farmer documents the encroachment by army-backed settlers that bulldozed his village’s olive trees to make room for Israeli apartment houses. Israel’s treatment of West Bank Palestinians is no better than its behavior toward residents of Gaza.
Saul Landau’s: WILL THE REAL TERRORIST PLEASE STAND UP screens at Washington DC’s Avalon Theater, 5612 Connecticut Ave 8 pm, august 14 and at the San Jose Peace an Justice Center on Aug 3, 7 PM 48 South 7th St., San Jose CA.
These Oldies but Goodies don't ever really go away. So this is just a 'true story' refresher course!
A man boarded an airplane and took his seat. As he settled in, he glanced up and there was the most beautiful woman he had ever seen boarding the plane. He soon realized she was heading straight towards his seat. As fate would have it, she took the seat right beside his. Eager to strike up a conversation he blurted out, "Business trip or pleasure?"
She turned, smiled and said, "Business. I'm going to the Annual Nymphomaniacs of America Convention in Boston."
He swallowed hard. Here was the most gorgeous woman he had ever seen sitting next to him, and she was going to a meeting of nymphomaniacs. Struggling to maintain his composure, he calmly asked, "What's your business role at this convention?"
"Lecturer," she responded. "I use information that I have learned from my personal experiences to debunk some of the popular myths about sexuality."
"Really?" he said. "And what kind of myths are there?" "
"Well", she explained, "One popular myth is that African-American men are the most well-endowed of all men, when in fact it is the Native American Indian who is most likely to possess that trait. Another popular myth is that Frenchmen are the best lovers, when actually it is men of Jewish descent who are the best. I have also discovered that the lover with absolutely the best stamina is the Southern Redneck."
Suddenly the woman became a little uncomfortable and blushed. "I'm sorry," she said, I shouldn't really be discussing all of this with you. I don't even know your name..."
"Tonto," the man said, Tonto Goldstein, but my friends call me Bubba."
In case you wondered how our noble little liberal democratic republican experiment really jumped the rails, reap this and laugh out loud. And it’s precisely the banster/pranksters from these incredible entities that keep getting selected to run the top positions in our government. Game, set and match!!
THE SCAM WALL STREET LEARNED FROM THE MAFIA
How America's biggest banks took part in a nationwide bid-rigging conspiracy - until they were caught on tape
By Matt Taibbi, Rolling Stone, 5 July 2012.
Illustration by Victor Juhasz
Someday, it will go down in history as the first trial of the modern American mafia. Of course, you won't hear the recent financial corruption case, United States of America v. Carollo, Goldberg and Grimm, called anything like that. If you heard about it at all, you're probably either in the municipal bond business or married to an antitrust lawyer. Even then, all you probably heard was that a threesome of bit players on Wall Street got convicted of obscure antitrust violations in one of the most inscrutable, jargon-packed legal snoozefests since the government's massive case against Microsoft in the Nineties – not exactly the thrilling courtroom drama offered by the famed trials of old-school mobsters like Al Capone or Anthony "Tony Ducks" Corallo.
But this just-completed trial in downtown New York against three faceless financial executives really was historic. Over 10 years in the making, the case allowed federal prosecutors to make public for the first time the astonishing inner workings of the reigning American crime syndicate, which now operates not out of Little Italy and Las Vegas, but out of Wall Street.
The defendants in the case – Dominick Carollo, Steven Goldberg and Peter Grimm – worked for GE Capital, the finance arm of General Electric. Along with virtually every major bank and finance company on Wall Street – not just GE, but J.P. Morgan Chase, Bank of America, UBS, Lehman Brothers, Bear Stearns, Wachovia and more – these three Wall Street wiseguys spent the past decade taking part in a breathtakingly broad scheme to skim billions of dollars from the coffers of cities and small towns across America.
The banks achieved this gigantic rip-off by secretly colluding to rig the public bids on municipal bonds, a business worth $3.7 trillion. By conspiring to lower the interest rates that towns earn on these investments, the banks systematically stole from schools, hospitals, libraries and nursing homes – from "virtually every state, district and territory in the United States," according to one settlement. And they did it so cleverly that the victims never even knew they were being cheated. No thumbs were broken, and nobody ended up in a landfill in New Jersey, but money disappeared, lots and lots of it, and its manner of disappearance had a familiar name: organized crime.
In fact, stripped of all the camouflaging financial verbiage, the crimes the defendants and their co-conspirators committed were virtually indistinguishable from the kind of thuggery practiced for decades by the Mafia, which has long made manipulation of public bids for things like garbage collection and construction contracts a cornerstone of its business. What's more, in the manner of old mob trials, Wall Street's secret machinations were revealed during the Carollo trial through crackling wiretap recordings and the lurid testimony of cooperating witnesses, who came into court with bowed heads, pointing fingers at their accomplices.
The new-age gangsters even invented an elaborate code to hide their crimes. Like Elizabethan highway robbers who spoke in thieves' cant, or Italian mobsters who talked about "getting a button man to clip the capo," on tape after tape these Wall Street crooks coughed up phrases like "pull a nickel out" or "get to the right level" or "you're hanging out there" – all code words used to manipulate the interest rates on municipal bonds. The only thing that made this trial different from a typical mob trial was the scale of the crime.
USA v. Carollo involved classic cartel activity: not just one corrupt bank, but many, all acting in careful concert against the public interest. In the years since the economic crash of 2008, we've seen numerous hints that such orchestrated corruption exists. The collapses of Bear Stearns and Lehman Brothers, for instance, both pointed to coordinated attacks by powerful banks and hedge funds determined to speed the demise of those firms. In the bankruptcy of Jefferson County, Alabama, we learned that Goldman Sachs accepted a $3 million bribe from J.P. Morgan Chase to permit Chase to serve as the sole provider of toxic swap deals to the rubes running metropolitan Birmingham – "an open-and-shut case of anti-competitive behavior," as one former regulator described it.
More recently, a major international investigation has been launched into the manipulation of Libor, the interbank lending index that is used to calculate global interest rates for products worth more than $3 trillion a year. If and when that case is presented to the public at trial – there are several major civil suits in the works here in the States – we may yet find out that the world's most powerful banks have, for years, been fixing the prices of almost every adjustable-rate vehicle on earth, from mortgages and credit cards to interest-rate swaps and even currencies.
But USA v. Carollo marks the first time we actually got incontrovertible evidence that Wall Street has moved into this cartel-type brand of criminality. It also offered a disgusting glimpse into the enabling and grossly cynical role played by politicians, who took Super Bowl tickets and bribe-stuffed envelopes to look the other way while gangsters raided the public kitty. And though the punishments that were ultimately handed down in the trial – minor convictions of three bit players – felt deeply unsatisfying, it was still a watershed moment in the ongoing story of America's gradual awakening to the realities of financial corruption. In a post-crash era where Wall Street trials almost never make it into court, and even the harshest settlements end with the evidence buried by the government and the offending banks permitted to escape with no admission of wrongdoing, this case finally dragged the whole ugly truth of American finance out into the open – and it was a hell of a show.
1. THE SCAM
This was no trial scene from popular lore, no Inherit the Wind or State of California v. Orenthal James Simpson. No gallery packed with rapt spectators, no ceiling fans set whirring to beat back the tension and the heat, no defense counsel's resting a sympathetic hand on the defendant's shoulder as opening statements commence. No, the setting for USA v. Carollo reflected the bizarre alternate universe that exists on Wall Street. Like so many court cases involving big banks, the proceeding looked more like a roomful of expensive lawyers negotiating a major corporate merger than a public search for justice.
The trial began on April 16th in a federal court in Lower Manhattan. The courtroom, an aerie like setting 23 stories up, offered a panoramic view of the city and the East River. Though the gallery was usually full throughout the three-plus weeks of testimony, the spectators were not average citizens come to witness how they had been robbed blind by America's biggest banks. Instead, there were row after row of suits – other lawyers eager to observe a long-awaited case, one that could influence the outcome in a handful of civil suits pending across the country. In fact, the defendants themselves, whom the trial would reveal as easily replaceable cogs in a much larger machine of corruption, were barely visible from the gallery, obscured by the great chattering congress of prosecution and defense attorneys.
Only the presence of the mostly nonwhite and elderly jury, which resembled the front pew of a Harlem church, served as a reminder that the case had any connection to the real world. Even reporters from most of the major news outlets didn't bother to attend. The judge in the trial, the right honorable and amusingly cantankerous Harold Baer, acknowledged that the case was not likely to set the public's pulse racing. "It is unlikely, I think, that this will generate a lot of media publicity," Baer sighed to the jury in his preliminary instructions.
Once opening statements began, it was easy to see why the press might stay away. One of the main lines of defense for corrupt Wall Street institutions in recent years has been the extreme complexity of the infrastructure within which these crimes are committed. In order for prosecutors to win convictions, they have to drag ordinary Americans, people who watch and enjoy reality TV, up the steepest of learning curves, coaching them into game shape with regard to obscure financial vehicles like swaps and CDOs and, in this case, Guaranteed Investment Contracts.
So it was no surprise that both the prosecution and the defense began their opening remarks to the jury by apologizing for the hellishly dull maze of "convoluted" and "boring" and "tedious" financial transactions they were about to spend weeks hearing about. Only Wendy Waszmer, the feisty federal prosecutor with straight brown hair and an elfin build who presented the government's case, succeeded in cutting through the mountainous dung heap of acronyms and obfuscations and explaining what the case was about. "Even though some aspects of municipal bond finance are complex, the fraud here was simple," she told the jurors. "It was about lying and cheating cities and towns in a bidding process that was in place to protect them."
The "simple fraud" Waszmer described centered around public borrowing. Say your town wants to build a new elementary school. So it goes to Wall Street, which issues a bond in your town's name to raise $100 million, attracting cash from investors all over the globe. Once Wall Street raises all that money, it dumps it in a tax-exempt account, which your town then uses to pay builders, plumbers, the chalkboard company and whoever else winds up working on the project.
But here's the catch: Most towns, when they raise all that money, don't spend it all at once. Often it takes years to complete a construction project, and the last contractor isn't paid until long after the original bond is issued. While that unspent money is sitting in the town's account, local officials go looking for a financial company on Wall Street to invest it for them.
To do that, officials hire a middleman firm known as a broker to set up a public auction and invite banks to compete for the town's business. For the $100 million you borrowed on your elementary school bond, Bank A might offer you 5 percent interest. Bank B goes further and offers 5.25 percent. But Bank C, the winner of the auction, offers 5.5 percent.
In most cases, towns and cities, called issuers, are legally required to submit their bonds to a competitive auction of at least three banks, called providers. The scam Wall Street cooked up to beat this fair-market system was to devise phony auctions. Instead of submitting competitive bids and letting the highest rate win, providers like Chase, Bank of America and GE secretly divvied up the business of all the different cities and towns that came to Wall Street to borrow money. One company would be allowed to "win" the bid on an elementary school, the second would be handed a hospital, the third a hockey rink, and so on.
How did they rig the auctions? Simple: By bribing the auctioneers, those middlemen brokers hired to ensure the town got the best possible interest rate the market could offer. Instead of holding honest auctions in which none of the parties knew the size of one another's bids, the broker would tell the prearranged "winner" what the other two bids were, allowing the bank to lower its offer and come in with an interest rate just high enough to "beat" its supposed competitors. This simple but effective cheat – telling the winner what its rivals had bid – was called giving them a "last look." The winning bank would then reward the broker by providing it with kickbacks disguised as "fees" for swap deals that the brokers weren't even involved in.
The end result of this (at least) decade-long conspiracy was that towns and cities systematically lost, while banks and brokers won big. By shaving tiny fractions of a percent off their winning bids, the banks pocketed fantastic sums over the life of these multimillion-dollar bond deals. Lowering a bid by just one-100th of a percent, called a basis point, could cheat a town out of tens of thousands of dollars it would otherwise have earned on its bond deposits.
That doesn't sound like much. But when added to the other fractions of a percent stolen from basically every other town in America on every other bond issued by Wall Street in the past 10 to 15 years, it starts to turn into an enormous sum of money. In short, this was like the scam in Office Space, multiplied by a factor of about 10 gazillion: Banks stole pennies at a time from towns all over America, only they did it a few hundred bazillion times.
Given the complexities of bond investments, it's impossible to know exactly how much the total take was. But consider this: Four banks that took part in the scam (UBS, Bank of America, Chase and Wells Fargo) paid $673 million in restitution after agreeing to cooperate in the government's case. (Bank of America even entered the Justice Department's leniency program, which is tantamount to admitting that it committed felonies.) Since that settlement involves only four of the firms implicated in the scam (a list that includes Goldman, Transamerica and AIG, as well as banks in Scotland, France, Germany and the Netherlands), and since settlements in Wall Street cases tend to represent only a tiny fraction of the actual damages (Chase paid just $75 million for its role in the bribe-and-payola scandal that saddled Jefferson County, Alabama, with more than $3 billion in sewer debt), it's safe to assume that Wall Street skimmed untold billions in the bid-rigging scam. The UBS settlement alone, for instance, involved 100 different bond deals, worth a total of $16 billion, over four years.
Contracting corruption has been around since the construction of the Appian Way. The difference here is the almost unimaginable scope of the crime – and the fact that it's mobsters from Wall Street who are getting in on the action. Until recently, such activity has traditionally been the almost-exclusive domain of the Mafia. "When I think of bid rigging, I think of the convergence of organized crime and the government," says Eliot Spitzer, who prosecuted two bid-rigging cases in his career as a New York prosecutor, one involving garbage collection, the other a Garment District case involving the Gambino family. The Mafia moved into bid rigging, he says, because it observed over time that monopolizing public contracts offers a far more lucrative business model than leg-breaking. "Organized crime learned their lessons from John D. Rockefeller," Spitzer explains. "It's much more efficient to control a market and boost the price 10 percent than it is to run a loan-sharking business on the street, where you actually have to use a baseball bat and collect every week."
What Spitzer saw was gangsters moving in the direction of big business. When I ask him if he is surprised by the current bid-rigging case, which looks more like big business moving in the direction of gangsters, he laughs. "The urge to become a monopolist," he says, "is as old as capitalism."
2. THE TAPES
The defendants in the case – Dominick Carollo, Steven Goldberg and Peter Grimm – worked together at GE, which was competing for bond business against banks like Chase, Wells Fargo and Bank of America. Carollo was the boss of Goldberg and Grimm, who handled the grunt work, submitting bids. Between August 1999 and November 2006, the three executives participated in countless rigged bids by telephone, conspiring with middleman brokers like Chambers, Dunhill and Rubin. We know this because prior to the start of the Carollo trial, 12 other individuals, including several brokers from CDR, had already pleaded guilty in a wide-ranging federal investigation.
How did the government manage to make a case against so many Wall Street scam artists? Hubris. As was the case in Jefferson County, Alabama, where Chase executives blabbed criminal conspiracies on the telephone even though they knew they were being recorded by their own company, the trio of defendants in Carollo wantonly fixed bond auctions despite the fact that their own firm was taping the conversations. Defense counsel even made an issue of this at trial, implying to the jury that nobody would be dumb enough to commit a crime by phone when "there was a big sticker on the phones that said all calls are being recorded," as Grimm's counsel, Mark Racanelli, put it. In fact, Racanelli argued, the conversations on the tapes hardly suggested a secret conspiracy, because "no one was whispering."
But the reason no one was whispering isn't that their actions weren't illegal – it's because the bid rigging was so incredibly common the defendants simply forgot to be ashamed of it. "The tapes illustrate the cavalier attitude which the financial community brought toward this behavior," says Michael Hausfeld, a renowned class-action attorney whose firm is leading a major civil suit against Bank of America, Wells Fargo, Chase and others for this same bid-rigging scam. "It became the predominant mode of transacting business."
How and when the government got hold of those tapes is still unclear; the prosecution is not commenting on the case, which remains an open investigation. But we do know that in November 2006, federal agents raided the offices of CDR, the broker firm that was working with Carollo, Goldberg and Grimm. Caught redhanded, many of the firm's top executives agreed to turn state's witness. One after another, these hangdog, pasty-faced men were led up to the stand by prosecutors and forced to recount how they'd been snatched up in the raid, separated and blitz-interviewed by FBI agents, and plunged into years of nut-crushing negotiations, which resulted in almost all of them pleading guilty. Prosecutors would eventually accumulate 570,000 recorded phone conversations, and to decipher them they worked these cooperating witnesses like sled dogs, driving them in for dozens of meetings and grilling them about the details of the scam.
The state's first witness, confusingly, was a CDR broker named Doug Goldberg (no relation to the defendant Steven Goldberg). Almost every executive involved in the trial was absurdly young; many were just out of college when the bid-rigging scam started in the late Nineties. Doug Goldberg graduated from USC in 1993, and his fellow CDR executive Evan Zarefsky still looks to be about 15 years old, suggesting a suit-and-tie version of Napoleon Dynamite. The extreme youth of some of the conspirators was an obvious subtext of the trial, underscoring the fact that far more senior executives from bigger banks like Chase and Bank of America had been permitted by the government to evade testifying.
Right off the bat, in fact, Doug Goldberg explained that while at CDR, he had routinely helped the cream of Wall Street rig bids on municipal bonds by letting them take a peek at other bids:
Q: Who were some of the providers you gave last looks to?
A: There was a whole host of them, but GE Capital, FSA, J.P. Morgan, Bank of America, Société Générale, Lehman Brothers, Bear. There were others.
Goldberg went on to testify that he repeatedly rigged auctions with the three defendants. Sometimes he gave them "last looks" so they could shave basis points off their winning bids; other times he asked them to intentionally submit losing offers – called cover bids – to allow other firms to win. He told the court he knew he was being recorded by GE. When asked how he knew that, he drew one of the trial's rare laughs by answering, "Either they told me or some of them, like Société Générale, you can hear the beeping."
Because of the recordings, he went on, he and the defendants used "guarded language."
"I might tell him, if I'm looking for an intentionally losing bid, 'I need a bid,' or something like that," he said.
Q: With whom specifically did you use this guarded type of language?
A: With Steve Goldberg and others.
Q: In your dealings with Steve Goldberg, what, if any, language or other signal did he use that you understood as a request for a last look?
A: He might ask me where I "saw the market," or he might ask me for, as I mentioned, an "indication of where the market is," an "idea of the market."
The broker went on to detail how he had worked with the GE executives to manipulate a number of auctions. In several cases, he was pushed to make deals with GE by his boss at CDR, Stewart Wolmark, who seemed smitten with GE's Steve Goldberg; jurors listening to the tapes couldn't miss the pair's nauseatingly tight, cash-fueled bromance. In December 2000, for instance, Wolmark helped Goldberg win a rigged bid for a bond in Onondaga County, New York. After the auction, he calls his buddy Steve:
WOLMARK: Hey, congratulations. You got another one.
GOLDBERG: Yeah. Yeah, thank you. Thank you.
WOLMARK: You're hot!
GOLDBERG: I'm hot? Hot with your help, sir.
Later on, Wolmark basically tells Goldberg he owes a service to his fellow gangster.
"I deserve the big lunch now," Wolmark chirps.
"Yeah," says Goldberg. "I owe you something, huh?"
A few months later, in March 2001, Wolmark and Goldberg do another deal, this time for a $219 million construction bond for the Port Authority of Allegheny County, Pennsylvania. Wolmark rings up his payola paramour and scolds him for not calling him during a recent trip to Vegas, where Goldberg doubtless spent a nice chunk of the money Wolmark had helped him steal from places like Onondaga County.
"Good time in Vegas, you can't even call me back?" Wolmark laments.
"I don't have time to sleep in Vegas," Goldberg says suggestively.
"There's sleeping," Stewart Wolmark chides, "and there's Stewart."
From there, the clothes just start flying off as the pair jump into a steamy negotiation over the monster Allegheny deal. "I'm all set with $200 million," Goldberg says. "Everything's ready to go."
Then Wolmark asks if GE is ready to pay CDR its bribe. "You got some swaps coming up?"
Goldberg assures him they do. Wolmark then passes the deal off to his own Goldberg, Doug, who handles the actual auction.
When prosecutors tried to explain these telephone auctions at trial, projecting the transcripts of the calls on a huge movie screen set up across the courtroom from the jury, you could see the sheer bewilderment on the jurors' faces. The men on the tapes seemed to be speaking a language from another planet – an insanely dry and boring planet, where there's no color and no adverbs, maybe, and babies are made by rubbing two calculators together. One of the jurors, an older white man, spent the first few days of the trial yawning repeatedly, fighting a heroic battle to stay awake in the face of all the mind-numbing jargon about Guaranteed Investment Contracts. "Who needs Lunesta," joked one lawyer who attended the proceedings, "when you can hear a lawyer talk about GICs right out of the gate?"
The language of the auctions was a kind of intellectual camouflage. If you didn't listen closely, you'd have thought the two Goldbergs were a couple of airmen exchanging weather balloon data, rather than two Wall Street executives plotting a crime to rip off the good citizens of Allegheny County. In that deal, Steve Goldberg of GE originally bid "503, 4" on the $219 million bond, only to be guided downward by Doug Goldberg of CDR. The broker explained in court:
Q: Can you explain what you understood Mr. Goldberg to say when he was saying 503, 4? What was he bidding?
A: That was the rate he was willing to bid on this investment agreement.
Q: How much was it?
A: 5.04 percent.
Q: What did you do as a response to his bid of 5.04 percent?
A: I brought his bid down to 5.00 percent.
In other words, even though GE was willing to pay an interest rate of 5.04 percent, Allegheny County ended up earning just 5.00 percent on its $219 million bond. How much money that amounted to is difficult to calculate, given the way the bond account diminished each year as the county used it to pay contractors; even Doug Goldberg couldn't put a number on the scam. But if the account was full at the start of the deal, GE may have cheated the county out of as much as $87,600 a year to start.
In any case, GE certainly chiseled the Pennsylvanians out of a sizable sum, because soon after, the company paid CDR a kickback of $57,400 in the form of "fees" on a swap deal. The whole deal pleased CDR's higher-ups. "I went to Stewart Wolmark and told him that not only did Steve Goldberg win but that I was able to reduce his rate down four basis points," said Doug Goldberg. "Stewart was very happy and excited."
Over and over again, jurors heard cooperating witnesses translate the damning audiotapes. In one lurid sequence, the bat-eared, bespectacled CDR broker Evan Zarefsky explained how he helped the GE defendant Peter Grimm win a bid for a bond put out by the Utah Housing Authority. The pair had apparently reamed Utah so many times that it had become a sort of inside joke between the two of them. From a call in August 2001:
GRIMM: Utah, let's see, how we look on that?
ZAREFSKY: Good old Utah!
Grimm complains about how much he'll have to pay to win the deal. "These levels are really shitty," he says.
From there, Grimm rattles off numbers, ultimately settling on a bid of 351 – 3.51 percent. Zarefsky, in almost motherly fashion, guides the manic Grimm downward, telling him, in code, that his bid is 10 basis points too high. "You actually got like a dime in there," Zarefsky says. "You want to come down a dime?"
So Grimm comes back with a bid of 3.41 percent, which turned out to be the winning bid. Utah lost out on 10 basis points, GE bilked the state out of untold sums, and CDR got another nice kickback.
This, basically, is how a lot of the calls went. The provider would tentatively offer a number, and the broker would guide him to a new bid. "You have a little bit of room there," he might say, or "That's gonna put you about a nickel short." Guiding the bidders to the lowest possible bid was called "figuring out the level" or being "in the market"; obtaining information about other bids was called "giving an indicative" or "seeing the market."
The brokers and providers used a dizzying array of methods for rigging deals. In some cases, the broker helped the "winner" by simply excluding other bidders, who may or may not have been in on the scam. In one hilarious sequence that sounds like something out of a wiretap of a Little Italy social club, CDR executive Dani Naeh tells GE's Steve Goldberg that he's not sure he can guarantee a win on a bid for a New Jersey hospital bond. There were too many triple-A-rated companies interested in the bond, Naeh explains, and he couldn't control their bids the way he could those of the lesser, double-A-rated companies he usually did business with. "It would be easier for us to contact other providers who were rated double-A and ask them to submit an intentionally losing bid," Naeh testified. He sounded exactly like a mobster, talking about "our guys" and "our friends."
In some of the calls, jurors could hear the entirety of the dirty deals negotiated, including the bribe paid back to the broker. In one deal involving a bond for the Port of Oakland, California, Steve Goldberg of GE starts to ask his pal Stewart Wolmark of CDR what kind of kickback the broker wants for rigging the deal. Such conversations about payoffs were so commonplace that Wolmark doesn't even have to wait for Goldberg to finish the question:
GOLDBERG: What are we building in here for the...
In his testimony, Wolmark explained that he was asking for a swap deal in return for rigging the bid. "He wanted to know what we were going to get paid on the back end," Wolmark explained.
In the call, Wolmark and Goldberg start haggling over the price of CDR's kickback. Wolmark tells Goldberg he only wants what's fair. "Listen, I'm not a chazzer," Wolmark says.
Fans of the movie Scarface will remember Tony Montana's inspired translation of this Yiddish term: "Thas a pig that don' fly straight."
Wolmark reassures Goldberg that as pigs go, he's a straight flier. "You see the kind of mensch I am," he says.
Negotiations ensue. Goldberg tells Wolmark that he can pay him more on the bribe – the swap deal – if Wolmark can help GE save money on the Port of Oakland deal. "I'd like to see if we can pull a nickel out of that swap," Wolmark says. Translation: He wants to boost CDR's take on the kickback by five basis points.
"If I could get to the right level," Goldberg answers, referring to the Port of Oakland deal. Translation: Goldberg will help Wolmark get his "nickel" on the swap deal if Wolmark can help GE "get to the right level" on the bid.
3. THE POLITICIANS
The Carollo case provides far more than a detailed look at the mechanics and pervasiveness of bid rigging; it offers a clear and unvarnished blueprint of the architecture of American financial and political corruption. In an attempt to discredit the CDR witnesses, defense counsel hounded them about other revelations that surfaced in the government's investigation, particularly those that involved bribery, illegal campaign contributions and pay-for-play schemes.
The defense's cross-examinations were surreal. It was certainly true that some of the government's cooperating witnesses had dubious résumés, so it may have made sense to highlight their generally duplicitous history of tax evasion or lying to investigators. But in their zeal, defense counsel went far beyond simply discrediting the witnesses, spending an inordinate amount of time eliciting even more details about the grotesque corruption scheme their own clients had taken part in. The result was a rare and somewhat confusing spectacle: high-octane lawyers from Wall Street working to rip the lid off Wall Street corruption in open court.
Defense counsel showed us, for instance, how CDR employees were routinely directed by their boss, David Rubin, to make political contributions to select candidates, only to be reimbursed by Rubin for those contributions later on. This kind of corporate skirting of campaign finance limits is something we've always suspected goes on, but we rarely get to see direct evidence of it.
More interesting, though, were the stories about political payoffs. In 2001, CDR hired a consultant named Ron White, a Philadelphia bond attorney who happened to be the chief fundraiser for then-mayor John Street. CDR gave White two tickets to the 2003 Super Bowl in San Diego plus a limo – a gift worth $10,000. As his "guest," White took Corey Kemp, the city treasurer for Philadelphia, who, 16 days later, awarded CDR a $150,000 contract to advise the city on swap deals. But that wasn't the end of the gravy train: CDR doled out those swap deals to selected banks, who in return kicked back $515,000 to CDR for steering city business their way.
So a mere $10,000 bribe to a politician – a couple of Super Bowl tickets and a limo – scored CDR a total of $665,000 of the public's money. If you want to know why Wall Street has been enjoying record profits, here's your answer: Corruption is a business model that brings in $66 for every dollar you invest.
Even more startling was the way that a notorious incident involving former New Mexico governor and presidential candidate Bill Richardson resurfaced during the trial. Barack Obama, you may recall, had nominated Richardson to be commerce secretary – only to have the move blow up in his face when tales of Richardson accepting bribes began to make the rounds. Federal prosecutors never brought a case against Richardson: In 2009, an inside source told the AP that the investigation had been "killed in Washington." Obama himself, after Richardson bowed out, praised the former governor as an "outstanding public servant."
Now, in the Carollo trial, defense counsel got Doug Goldberg, the CDR broker, to admit that his boss, Stewart Wolmark, had handed him an envelope containing a check for $25,000. The check was payable to none other than Moving America Forward – Bill Richardson's political action committee. Goldberg then went to a Richardson fundraiser and handed the politician the envelope. Richardson, pleased, told Goldberg, "Tell the big guy I'm going to hire you guys."
Goldberg admitted on the stand that he understood "the big guy" to mean Wolmark. After that came this amazing testimony:
Q: Soon after that, New Mexico hired CDR as its swap and GIC adviser on a $400 million deal, right?
Q: You learned later that that check in that envelope was a check for $25,000, right?
A: Yes. I learned it later.
Q: You also learned later that CDR gave another $75,000 to Gov. Richardson, right?
Q: CDR ended up making about a million dollars on this deal for those two checks?
Q: In fact, New Mexico not only hired CDR, they hired another firm to do the actual work that they needed done?
A: For the fixed-income stuff, yes.
What we get from this is that CDR paid Bill Richardson $100,000 in contributions and got $1.5 million in public money in return. And not just $1.5 million, but $1.5 million for work they didn't even do – the state still had to hire another firm to do the actual job. Nice non-work, if you can get it.
To grasp the full insanity of these revelations, one must step back and consider all this information together: the bribes, yes, but also the industry wide, anti-competitive bid-rigging scheme. It turns into a kind of unbroken Möbius strip of corruption – the banks pay middlemen to rig auctions, the middlemen bribe politicians to win business, then the politicians choose the middlemen to run the auctions, leading right back to the banks bribing the middlemen to rig the bids.
When we allow Wall Street to continually raid the public cookie jar, we're not just enriching a bunch of petty executives (Wolmark's income in 2008, two years after he was busted in the FBI raid, was $2,464,210.18) – we're effectively creating an alternate government, one in which money lifted from the taxpayer's pocket through mob-style schemes turns into a kind of permanent shadow tax, used to maintain the corruption and keep the thieves in place. And that cuts right to the heart of what this case is all about. Wall Street is tired of making money by competing for business and weathering the vagaries of the market. What it wants instead is something more like the deal the government has – regularly collecting guaranteed taxes. What's crazy is that in order to justify that dream of regular, monopolistic tribute, they've begun to see themselves as a type of shadow government, watching out for the rest of us. Amazingly enough, this even became a defense at trial.
4. THE DEFENSE
There were times, sitting in the courtroom, when I wondered, How did this case even go to trial? What defense attorney would look at the thousands of recorded phone calls, the parade of cooperating witnesses, the stacks of falsified documents, and conclude that airing all of this in court was a smart play? Listening to tape after damning tape played in open court while the defendants cringed in a corner seemed increasingly like a gratuitous ass-kicking, one that any smart defense lawyer would have made a deal to avoid.
But as the weeks passed, I started to get a feel for the defense strategy, which made a kind of demented sense. The lawyers for Carollo, Goldberg and Grimm didn't even bother trying to argue the facts of the case. Instead, in one cross-examination after another, they kept hitting the same theme. Despite the fact that the rigged bids resulted in lower returns, wasn't it true that the cities and towns still received, technically speaking, the highest bid? If a town received a 5.00 percent return on a $219 million bond instead of 5.04 percent, who's to say that wasn't a good price?
John Siffert, the gray-faced and unlikable attorney for Steve Goldberg, put it this way in his cross-examination of CDR executive Stewart Wolmark. Asking about the Allegheny deal, he boomed: "Isn't it fair to say that you believed that by lowering... Steve's bid to 5 percent, Steve's bid was still a fair price to pay?"
Wolmark's answer was both quick and sensible: "I don't determine the fair price," he replied. "The market does." GE was supposed to pay the highest price the market would pay. It wasn't a competitive auction, as required by law.
But Siffert had made his point, and his rhetoric got right to the heart of the defense, which was going to center around the definition of the word "fair." The men and women who run these corrupt banks and brokerages genuinely believe that their relentless lying and cheating, and even their anti-competitive cartelstyle scheming, are all legitimate market processes that lead to legitimate price discovery. In this lunatic worldview, the bidrigging scheme was a system that created fair returns for everyone. If a bunch of Pennsylvanians got a 5.00 percent return on their money instead of 5.04 percent, and GE and CDR just happened to split the extra .04 percent, that was a fair outcome, because that's what the parties negotiated. True, the Pennsylvanians had no idea about the extra .04 percent, and true, they had hired CDR precisely to make sure they got that extra 0.4 percent. But hey, it's not like they were complaining: Until someone told them they were being brazenly cheated, they were happy with their bond service. And besides, it's not like ordinary people understand this stuff anyway. So how is it the place of some busybody federal prosecutor to waltz in here and say what's a fair price?
Walter Timpone, who represented Carollo, tried to lay this outrageous load of balls on the jury using a faux-folksy analogy. "When your refrigerator breaks down, if you're not mechanically inclined, you're at the mercy of that repair person," he told the jury. "And if he repairs the refrigerator, makes it work well, charges you a fair price, you're likely to call on him again when the stove breaks." What he was essentially telling jurors was: This shit is complicated, so best just to leave it to the experts. Whether they're fixing a fridge or fixing a bond rate, they get to set the price, because we're all morons who are dependent on them to make our world work. Timpone, in his lawyerly way, was actually telling us an essential economic truth: You're at the mercy of that repair person.
This incredible defense, which the attorneys for all three defendants led with, perfectly expresses the awesome arrogance of the modern-day aristocrats who run our financial services sector. Corrupt or not, they built this financial infrastructure, and it's producing the prices they genuinely think are fair for us – and for them. And fair to them is the customer getting the absolute bare minimum, while they get instant millions for work they didn't do. Moreover – and this is the most important part – they believe they should get permanent protection from the ravages of the market, i.e., from one another's competition. Imagine Jack Nicholson on the witness stand, dressed in a repairman's uniform and tool belt. Who's gonna fix those refrigerators? You? You, Lieutenant Weinberg? You can't handle the truth!
That, ultimately, is what this case was about. Capitalism is a system for determining objective value. What these Wall Street criminals have created is an opposite system of value by fiat. Prices are not objectively determined by collisions of price information from all over the market, but instead are collectively negotiated in secret, then dictated from above.
"One of the biggest lies in capitalism," says Eliot Spitzer, "is that companies like competition. They don't. Nobody likes competition."
To the great credit of the jurors in the Carollo case, they didn't buy Wall Street's ludicrous defense. On May 11th, nearly a month after the trial began, they handed down convictions to all three defendants. Carollo, Goldberg and Grimm, who will be sentenced in October, face as many as five years in jail.
There are some who think that the government is limited in how many corruption cases it can bring against Wall Street, because juries can't understand the complexity of the financial schemes involved. But in USA v. Carollo, that turned out not to be true. "This verdict is proof of that," says Hausfeld, the antitrust attorney. "Juries can and do understand this material."
In the end, though, the conviction of a few bit players seems like far too puny a punishment, given that the bid rigging exposed in Carollo involved an entrenched system that affected major bond issues in every state in the nation. You find yourself thinking, America's biggest banks ripped off the entire country, virtually every day, for more than a decade!
A truly commensurate penalty would be something like televised stonings of the top 10 executives of every guilty bank, or maybe the forcible resettlement of every banker and broker in Lower Manhattan to some uninhabited Andean wasteland... anything to address the systemic nature of the crime.
No such luck. Instead of anything resembling real censure, a few young executives got spanked, while the offending banks got off with slap-on-the-wrist fines and were allowed to retain their pre-eminent positions in the municipal bond market. Last year, the two leading recipients of public bond business, clocking in with more than $35 billion in bond issues apiece, were Chase and Bank of America – who combined had just paid more than $365 million in fines for their role in the mass bid rigging. Get busted for welfare fraud even once in America, and good luck getting so much as a food stamp ever again. Get caught rigging interest rates in 50 states, and the government goes right on handing you billions of dollars in public contracts.
Over the years, many in the public have become numb to news of financial corruption, partly because too many of these stories involve banker-on-banker crime. The notorious Abacus deal involving Goldman Sachs, for instance, involved a hedge-fund billionaire ripping off a couple of European banks – who cares? But the bid-rigging scandal laid bare in USA v. Carollo is a totally different animal. This is the world's biggest banks stealing money that would otherwise have gone toward textbooks and medicine and housing for ordinary Americans, and turning the cash into sports cars and bonuses for the already rich. It's the equivalent of robbing a charity or a church fund to pay for lap dances.
Who ultimately loses in these deals? Well, to take just one example, the New Jersey Health Care Facilities Finance Authority, the agency that issues bonds for the state's hospitals, had their interest rates rigged by the Carollo defendants on $17 million in bonds. Since then, more than a dozen New Jersey hospitals have closed, mostly in poor neighborhoods.
As Carollo showed us, in open court, this is what Wall Street learned from the Mafia: how to reach into the penny jars of dying hospitals and schools and transform their desperation and civic panic into fat year-end bonuses and the occasional "big lunch." Unlike the Mafia, though, they were smart enough to do their dirt without anyone noticing for a very long time, which is what defense counsel in this case were talking about when they argued that towns and cities "were not harmed" by the rigged bids. No harm, to them, means no visible harm, i.e., that what taxpayers didn't know couldn't hurt them.
This is logical thinking, to the sociopath – like saying it's not infidelity if your wife never finds out. But we did find out, and the scale of betrayal unveiled in Carollo was epic. It was like finding out your husband didn't just cheat, but had a frequent-flier account with every brothel in North America for the past 10 years. At least now we know how bad it was. The trick is to find a way to make th
DEAR BUBBAS AND BUBBETTES,
Once again that charming little question: how can you credibly have a functioning and accountable liberal democratic republican government when so much of what is going on is secret, and so few have the right to know what these “secrets” are really all about??
Well, of course, you have the wonderful fall back option: “Just trust me!!”.
Any thoughts on this???
Enjoy and take care, Andy
THE NATIONAL SECURITY COMPLEX AND YOU
By Tom Engelhardt, TomDispatch, 19 July 2012.
When my daughter was little and I read to her regularly, one illustrated book was a favorite of ours. In a series of scenes, it described frustrating incidents in the life of a young girl, each ending with the line -- which my tiny daughter would boom out with remarkable force -- “that makes me mad!” It was the book’s title and a repetitively cathartic moment in our reading lives. And it came to mind recently as, in my daily reading, I stumbled across repetitively mind-boggling numbers from the everyday life of our National Security Complex.
For our present national security moment, however, I might amend the book’s punch line slightly to: That makes no sense!
Now, think of something you learned about the Complex that fried your brain, try the line yourself... and we’ll get started.
Are you, for instance, worried about the safety of America’s “secrets”? Then you should breathe a sigh of relief and consider this headline from a recent article on the inside pages of my hometown paper: “Cost to Protect U.S. Secrets Doubles to Over $11 Billion.”
A government outfit few of us knew existed, the Information Security Oversight Office or ISOO, just released its “Report on Cost Estimates for Security Classification Activities for Fiscal Year 2011” (no price tag given, however, on producing the report or maintaining ISOO). Unclassified portions, written in classic bureaucratese, offer this precise figure for protecting our secrets, vetting our secrets' protectors (no leakers please), and ensuring the safety of the whole shebang: $11.37 billion in 2011.
That’s up (and get used to the word “up”) by 12% from 2010, and double the 2002 figure of $5.8 billion. For those willing to step back into what once seemed like a highly classified past but was clearly an age of innocence, it’s more than quadruple the 1995 figure of $2.7 billion.
And let me emphasize that we’re only talking about the unclassified part of what it costs for secrets protection in the National Security Complex. The bills from six agencies, monsters in the intelligence world -- the Central Intelligence Agency, the Defense Intelligence Agency, the National Security Agency, the National Reconnaissance Office, the National Geospatial-Intelligence Agency, and the Office of the Director of National Intelligence -- are classified. The New York Times estimates that the real cost lies in the range of $13 billion, but who knows?
To put things in perspective, the transmission letter from Director John P. Fitzpatrick that came with the report makes it utterly clear why your taxpayer dollars, all $13 billion of them, are being spent this way: “Sustaining and increasing investment in classification and security measures is both necessary to maintaining the classification system and fundamental to the principles of transparency, participation, and collaboration.” It’s all to ensure transparency. George Orwell take that! Pow!
Now let’s try the line again, this time with more gusto: That makes no sense!
On the other hand, maybe it helps to think of this as the Complex’s version of inflation. Security protection, it turns out, only goes in one direction. And no wonder, since every year there’s so much more precious material written by people in an expanding Complex to protect from the prying eyes of spies, terrorists, and, well, you.
The official figure for documents classified by the U.S. government last year is -- hold your hats on this one -- 92,064,862. And as WikiLeaks managed to release hundreds of thousands of them online a couple of years ago, that's meant a bonanza of even more money for yet more rigorous protection.
You have to feel at least some dollop of pity for protection bureaucrats like Fitzgerald. While back in 1995 the U.S. government classified a mere 5,685,462 documents -- in those days, we were practically a secret-less nation -- today, of those 92 million sequestered documents, 26,058,678 were given a “top secret” classification. There are today almost five times as many “top secret” documents as total classified documents back then.
Here’s another kind of inflation (disguised as deflation): in 1996, the government declassified 196 million pages of documents. In 2011, that figure was 26.7 million. In other words, these days what becomes secret remains ever more inflatedly secret. That’s what qualifies as "transparency, participation, and collaboration" inside the Complex and in an administration that came into office proclaiming “sunshine” policies. (All of the above info thanks to another of those ISOO reports.) And keep in mind that the National Security Complex is proud of such figures!
So, today, the “people’s” government (your government) produces 92 million documents that no one except the nearly one million people with some kind of security clearance, including hundreds of thousands of private contractors, have access to. Don’t think of this as “overclassification,” which is a problem. Think of it as a way of life, and one that has ever less to do with you.
Now, honestly, don’t you feel that urge welling up? Go ahead. Don’t hold back: That makes no sense!
How about another form of security-protection inflation: polygraph tests within the Complex. A recent McClatchy investigation of the National Reconnaissance Office (NRO), which oversees U.S. spy satellites, found that lie-detector tests of employees and others had “spiked” in the last decade and had also grown far more intrusive, “pushing ethical and possibly legal limits.” In a program designed to catch spies and terrorists, the NRO’s polygraphers were, in fact, being given cash bonuses for “personal confessions” of “intimate details of the private lives of thousands of job applicants and employees... including drug use... suicide attempts, depression, and sexual deviancy.” The agency, which has 3,000 employees, conducted 8,000 polygraph tests last year.
McClatchy adds: “In 2002, the National Academies, the nonprofit institute that includes the National Academy of Sciences, concluded that the federal government shouldn’t use polygraph screening because it was too unreliable. Yet since then, in the Defense Department alone, the number of national-security polygraph tests has increased fivefold, to almost 46,000 annually.”
Now, think about those 46,000 lie-detector tests and can’t you just sense it creeping up on you? Go ahead. Don’t be shy! That makes no sense!
Or talking about security inflation, what about the “explosion of cell phone surveillance” recently reported by the New York Times -- a staggering 1.3 million demands in 2011 “for subscriber information... from law enforcement agencies seeking text messages, caller locations and other information in the course of investigations”?
From the Complex to local police departments, such requests are increasing by 12%-16% annually. One of the companies getting the requests, AT&T, says that the numbers have tripled since 2007. And lest you think that 1.3 million is a mind-blowingly definitive figure, the Times adds that it’s only partial, and that the real one is “much higher.” In addition, some of those 1.3 million demands, sometimes not accompanied by court orders, are for multiple (or even masses of) customers, and so could be several times higher in terms of individuals surveilled. In other words, while those in the National Security Complex -- and following their example, state and local law enforcement -- are working hard to make themselves ever more opaque to us, we are meant to be ever more “transparent” to them.
These are only examples of a larger trend. Everywhere you see evidence of such numbers inflation in the Complex. And there’s another trend involved as well. Let’s call it by its name: paranoia. In the years since the 9/11 attacks, the Complex has made itself, if nothing else, utterly secure, and paranoia has been its closest companion. Thanks to its embrace of a paranoid worldview, it’s no longer the sort of place that experiences job cuts, nor is lack of infrastructure investment an issue, nor budget slashing a reality, nor prosecution for illegal acts a possibility.
A superstructure of “security” has been endlessly expanded based largely on the fear that terrorists will do you harm. As it happens, you’re no less in danger from avalanches (34 dead in the U.S. since November) or tunneling at the beach (12 dead between 1990 and 2006), not to speak of real perils like job loss, foreclosure, having your college debts follow you to the grave, and so many other things. But it matters little. The promise of safety from terror has worked. It’s been a money-maker, a stimulus-program creator, a job generator -- for the Complex.
Back in 1964, Richard Hofstadter wrote a Harper’s Magazine essay entitled “The Paranoid Style in American Politics.” Then, however, paranoia as he described it, while distinctly all-American, remained largely a phenomenon of American politics -- and often of the political fringe. Now, it turns out to be a guiding principle in the way we are governed.
Yes, we’re in a world filled with dangers. (Paranoia invariably has some basis, however twisted, in reality.) And significant among them is undoubtedly the danger the national security state represents to our lives, which are increasingly designed to be open books to its functionaries. Whether you like it or not, want it or not, care or not, you are ever more likely to be on file somewhere; you are ever more liable to be polygraphed until you “confess”; your cell phone, email, and texts are no longer your property; and one of the 30,000 employees of the Complex assigned to monitor American phone conversations and other communications may be checking you out. So it goes in twenty-first-century America.
Maybe if you haven’t said it yet, you’re finally feeling the urge. Go on then, give it a try. That makes no sense!
There’s just one catch. The direction your government has taken -- call it “transparency” or anything else you want -- may boggle the mind. It may seem as idiotically wrong-headed as having 17 significant agencies and outfits in a single government on a budget of $80 billion-plus a year call the product of their work “intelligence.” It may not make sense to you, but it does make sense to the National Security Complex. For its “community,” the coupling of security with redundancy -- with too much, too many, and always more -- means you’re speaking the language of the gods, you’re hearing the music of the angels.
So much of what the Complex does may seem like overkill and its operations may often look laughable and inane. Unfortunately, the joke’s on you. In our country, the bureaucrats of the Complex increasingly have the power to make just about any absurdity they want the way of our world not just in practice, but often in court, too. And if you really think that makes no sense, then maybe you better put some thought into what’s to be done about it.
I can't work out how this works but its very clever.
Subject: Click on his nose. Several times!
This is an alcohol test: If you pass it, you can keep drinking, if not, it's time to stop. Follow the simple instructions below:
1. Click on the man's nose
2. A new window will open - click on the man's nose again
3. For each time you click on his nose, you can drink another glass of wine!!!
THE UNITED STATES IS THE ONLY COUNTRY IN THE WESTERN HEMISPHERE THAT STILL PRACTICES CAPITAL PUNISHMENT. WHY THIS REMAINS SO STUBBORNLY IMPORTANT AND NECESSARY HAS NEVER BEEN CLEARLY EXPLAINED.
17 July 2012 DEATH ROW: UNITED NATIONS EXPERT URGES UNITED STATES AUTHORITIES TO STOP EXECUTION OF TWO PERSONS WITH PSYCHOSOCIAL DISABILITIES
The United Nations Special Rapporteur on arbitrary executions, Christof Heyns, urged the United States Government and those of Georgia and Texas “to demonstrate leadership and prevent the execution of two individuals with psychosocial disabilities,” due to be put to death tomorrow, Wednesday 18 July, in the states of Georgia and Texas.
“It is a violation of death penalty safeguards to impose capital punishment on individuals suffering from psychosocial disabilities,” warned Mr. Heyns. “It is also contrary to the United States Supreme Court ruling Atkins v Virginia
which held that such executions are unconstitutional.”
Warren Hill and Yokamon Laneal Hearn were both convicted of murder in separate incidents. The convictions have been the subject of a number of legal appeals based on the defendants’ mental health; however, their death sentences were upheld despite claims that the defendants had psychosocial disabilities, and the existence of a federal ban on such executions. On Monday, the Georgia Board of Pardons and Paroles rejected clemency for Mr. Hill.
The United Nations independent expert called on the state authorities “to demonstrate the moral and legal leadership expected of the strong democracy that the United States is by commuting the death sentences of Hill and Hearn, and show the importance it gives to the fundamental right to life.” Mr. Heyns underscored that there is also a risk that “other Governments would follow the same approach in justifying the imposition of the death penalty for people suffering from psychosocial disabilities rather than applying a more humane punitive measure.”
In respect of Mr. Hill’s case, the expert is particularly disturbed that Georgia is now the only state in the United States that requires proof of what it calls ‘mental retardation beyond a reasonable doubt,’ rather than a preponderance of the evidence as in other jurisdictions, although Georgia was the first state in the United States to recognize that such defendants should not be executed.
“This higher standard of proof, making it very difficult to demonstrate that one actually suffers from a psychosocial disability may, I fear, mean that Mr. Hill, scheduled for execution tomorrow, would be a fatality in violation of international as well as domestic law,” he stressed.
Regarding Mr. Hearn’s scheduled execution in Texas, the human rights expert noted that “there is evidence to suggest that he also suffers from psychosocial disabilities. This includes an expert opinion that he is affected by structural brain dysfunction likely to have been caused by his mother’s alcohol abuse during pregnancy.”
Information received by the Special Rapporteur raises issues of a lack of a proper investigation including mitigating factors, arbitrariness and non-compliance with fair trial safeguards that potentially constitute violations of international standards applicable to the death penalty. Christof Heyns, from South Africa, was appointed by the Human Rights Council as Special Rapporteur on extrajudicial, summary or arbitrary executions in August 2010. He is Professor of Human Rights Law at the University of Pretoria and Co-director of the Institute for International and Comparative Law in Africa. He is independent from any government and serves in his individual capacity. Learn more, log on to: http://www2.ohchr.org/english/issues/executions/index.htm UN Human Rights, Country Page – USA: http://www.ohchr.org/EN/Countries/ENACARegion/Pages/USIndex.aspx For additional information and media requests, please contact: Irina Tabirta (Tel: +41 22 917 9125 / email: email@example.com) or write to: firstname.lastname@example.org.
For media inquiries
related to other UN independent experts:
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|File Type: || pdf| STATE STILL SHORT ON FOREIGN SERVICE WORKERS, GAO FINDS
By Eric Katz, GovtExec.com, July 16, 2012
The State Department must update its hiring plans in light of persistent Foreign Service staffing gaps, according to a Government Accountability Office report released Monday. (see attached).
The report found that 28 percent of mid-level positions either were vacant or filled by officers working in positions above their grade. In an investigation conducted in 2008, GAO found the same percentage of vacant or “upstretched” positions.
State has made multiple efforts in the last decade to increase its Foreign Service personnel, but efforts in the early 2000s were thwarted by the need for workers in Iraq and Afghanistan, and more recent plans were halted by budget cuts. “These gaps will continue to affect diplomatic readiness as positions remain unfilled, or are staffed by Foreign Service employees whose experience does not match the position requirements,”
GAO wrote in its report.
State increased the size of the Foreign Service by 17 percent in fiscal 2009 and 2010, but these were largely entry-level hires who will not reach the understaffed mid-level positions for two to three years. The vacancies, GAO found, can lead to diminished reporting, lost institutional knowledge and more work for supervisors.
GAO recommended a revision to State’s five year workforce plan to address the problem. “Since State has not developed a specific strategy for addressing mid-level gaps,”
the auditors wrote, “it can neither fully assess the success of its efforts to close these gaps nor determine the optimal course of action for enhancing diplomatic readiness.”
Sen. Daniel Akaka, D-Hawaii, chairman of the Subcommittee on Oversight of Government Management, the Federal Workforce and the District of Columbia, requested the GAO investigation. “State must continue to develop effective workforce strategies and address staffing gaps to effectively respond to quickly evolving diplomatic challenges,”
The State Department already has taken steps to address the issue -- including relying more heavily on civil service workers and hiring retirees -- but has accepted GAO’s recommendation to seek a more cohesive plan. WHAT GAO FOUND
The Department of State (State) faces persistent experience gaps in overseas Foreign Service positions, particularly at the midlevels, and these gaps have not diminished since 2008. In fiscal years 2009 and 2010, State increased the size of the Foreign Service by 17 percent. However, these new hires will not have the experience to reach midlevels until fiscal years 2014 and 2015. GAO found that 28 percent of overseas Foreign Service positions were either vacant or filled by upstretch candidates—officers serving in positions above their grade—as of October 2011, a percentage that has not changed since 2008. Midlevel positions represent the largest share of these gaps. According to State officials, the gaps have not diminished because State increased the total number of overseas positions in response to increased needs and emerging priorities. State officials noted the department takes special measures to fill high-priority positions, including those in Afghanistan, Iraq, and Pakistan.
State has taken steps to increase its reliance on Civil Service employees and retirees, as well as expand mentoring, to help address midlevel experience gaps overseas; however, State lacks a strategy to guide these efforts. State is currently implementing a pilot program to expand overseas assignments for Civil Service employees. Efforts to expand the limited number of these assignments must overcome some key challenges, such as addressing new gaps when Civil Service employees leave their headquarters positions and identifying qualified Civil Service applicants to fill overseas vacancies. State also hires retirees on a limited basis for both full-time and short-term positions. For example, State used limited congressional authority to offer dual compensation waivers to hire 57 retirees in 2011. As a step toward mitigating experience gaps overseas, State began a pilot program offering workshops that include mentoring for first-time supervisors. State acknowledges the need to close midlevel Foreign Service gaps, but it has not developed a strategy to help ensure that the department is taking full advantage of available human capital flexibilities and evaluating the success of its efforts to address these gaps. Why GAO Did This Study
In 2009, GAO reported on challenges that State faced in filling its increasing overseas staffing needs with sufficiently experienced personnel and noted that persistent Foreign Service staffing and experience gaps put diplomatic readiness at risk. State is currently undertaking a new hiring plan, known as “Diplomacy 3.0,” to increase the size of the Foreign Service by 25 percent to close staffing gaps and respond to new diplomatic priorities. However, fiscal constraints are likely to delay the plan’s full implementation well beyond its intended target for completion in 2013. In addition, State’s first Quadrennial Diplomacy and Development Review highlighted the need to find ways to close overseas gaps. GAO was asked to assess (1) the extent to which State’s overseas midlevel experience gaps in the Foreign Service have changed since 2008 and (2) State’s efforts to address these gaps. GAO analyzed State’s personnel data; reviewed key planning documents, including the Five Year Workforce Plan; and interviewed State officials in Washington, D.C., and at selected posts. What GAO Recommends
GAO recommends that State update its Five Year Workforce Plan to include a strategy to address midlevel Foreign Service gaps and a plan to evaluate the success of this strategy. State reviewed a draft of this report and agreed with GAO’s recommendation.
For more information, contact Michael Courts at (202) 512-8980 firstname.lastname@example.org
. Recommendation for Executive Action Recommendation
: To help guide State’s efforts to address midlevel gaps in the Foreign Service, the Secretary of State should direct the Bureau of Human Resources to update its Five Year Workforce Plan to include a strategy to address these gaps and a plan to evaluate the success of this strategy. Agency Affected
: Department of State
DEAR OVERSEAS AMERICAN FRIENDS,
Unless and until overseas Americans get their own direct representation in the U.S. Congress, voting from abroad is essentially a Potemkin Village endeavour.
Why should any Member of Congress care about overseas American issues when only about 1% of any single constituency lives outside the United States, and saying anything positive about this 1% could highly annoy a big chunk of the other 99% living back home who have long swallowed the Kool-Aid whose main existential ingredient is that living abroad is solely to avoid U.S. taxation?
Enjoy and take care, Andy
ROMNEY FOREIGN TRIP HIGHLIGHTS SIGNIFICANCE OF OVERSEAS U.S. VOTERS
By Tom Curry, NBC News national affairs writer, 18 July 2012.
Although the presidential campaign rhetoric in recent days has been dominated by “sending jobs overseas,” more than 5 million Americans do live and work overseas and some of them vote and contribute to candidates. Highlighting their importance, Mitt Romney will be appearing at fundraising events when he visits London and Jerusalem at the end of July.
As with candidate Barack Obama’s speech in Berlin during the 2008 campaign, Romney’s foreign tour is a reminder that Americans living abroad are no longer forgotten citizens in election years. They’re a source not only of votes, but of campaign funds: one of Romney’s London events is a dinner with a minimum contribution of $25,000 and his event in Jerusalem asks $50,000 per couple (unless you've raised $100,000 for the Republican's campaign).
Susan Dzieduszycka-Suinatat, president of the Overseas Vote Foundation said,
“Too many Americans abroad still think they need to be maintaining a U.S. residence or mailing address to vote -- that is totally untrue. Some think their ballots aren't counted -- another myth!”
If it’s a close election this November, the outcome might come down to a few thousand votes in swing states such as Florida, Virginia and Ohio. And some of those last few thousand swing-state voters may be residing not in Miami, Charlottesville or Cincinnati, but in Tel Aviv, Shanghai and Berlin. The votes of Americans overseas are counted in the state in which they last resided: the Virginian residing in China has his or her vote counted in Virginia.
According to the federal Election Assistance Commission, in the 2008 election those three states had almost 150,000 overseas votes counted:
26,300 in Ohio
28,000 in Virginia
95,000 in Florida
Matt Brooks, the executive director of the Republican Jewish Coalition -- who just returned from a voter-mobilization trip to Israel with Ari Fleischer, former press secretary for President George W. Bush -- said about 150,000 Americans living in Israel are eligible to vote.
“We wanted to go over there to help raise awareness of the critical issues facing Israel and facing the Jewish community in the 2012 election and encourage those folks who are eligible to register and to vote in November,” Brooks said.
“We believe this is going to be a very close election and if we’re able to mobilize a significant number of U.S. citizens living abroad who are eligible to vote, especially in the battleground states -- Florida was decided in 2000 by a little over 500 votes -- we’re going to leave no stone unturned,” Brooks said.
He contended that
“President Obama has a problem with the Jewish vote and the Jewish community” partly due to his “failed policies” in the Middle East.
David Harris, the president of the National Jewish Democratic Council, the Democrats’ counterpart to the RJC, said,
“We hope to travel there or get Democratic surrogates -- including elected officials -- to Israel,” to make the case for Obama to American voters there.
Of the RJC, Harris said,
“We have a much easier sale than they do,” since Jewish voters have long preferred Democratic candidates by about a three-to-one ratio.
Another group working on facilitating voting by Americans living in Israel is iVoteIsrael, formed last year.
National Director Elie Pieprz said,
“By creating a streamlined process, sort of a voting concierge, iVoteIsrael seeks to overcome the largest obstacle to voter participation,” which is overseas residents receiving their ballots too late from their state or county elections official in the United States, or sending them back too late for the vote to be counted.
“The goal of the campaign is to maximize the absentee vote from Israel,” Pieprz said. “We are not endorsing any candidate or party, and our message is targeted at both sides of the aisle.”
But the Federal Voting Assistance Program, the agency in charge of helping overseas Americans vote, recently stirred a furor by changing the form used to register to vote or request a ballot.
On the revised federal post card application, the would-be voter is asked to check whether they “intend” or “do not intend” to return to the United States.
Roland Crim, a spokesman on voting issues for American Citizens Abroad, said in a statement that if overseas Americans declared an intent not to return they would
“risk having state election officials improperly disqualify their votes in federal elections.” He said, “The language of the new form acted as a form of voting repellent, particularly for voters uncertain as to what the future might portend.”
“No voter should be asked to check that box,” Dzieduszycka-Suinatat said, partly because state and local election officials might not send the ballot to the voter if they think he’s never coming back to the United States.
According to Defense Department Spokesperson Cmdr. Leslie Hull-Ryde, the FVAP, which is part of the Defense Department, changed the language on the 2011 form
"to assist voters in complying with voter eligibility laws in most states."
She said 40 states and the District of Columbia have statutory language regarding the intent of an absent voter to return to the state or district.
Now on the FVAP website, both the older post card application -- which does not ask about intent to return to the United States -- and the 2011 revised form are available. Voters
“can use either form depending on their needs and comfort level,” Hull-Ryde said.
Apart from that controversy, Dzieduszycka-Suinatat said voting for overseas Americans is often smooth since they can receive their ballots online. (Go to the Overseas Vote Foundation website.)
And she said,
“FedEx teams with [the Overseas Vote Foundation] every election year to offer at-your-doorstep pick up for ballots to be sent back to U.S. election offices in a matter of a day or two at very reduced rates, special for U.S. voters overseas.”
She added that this year U.S. citizens residing abroad have another incentive to vote: their unhappiness with a 2010 law called Foreign Account Tax Compliance Act, which imposes fines for those who do not report information on their foreign bank accounts (if their aggregate value exceeds $50,000) to the Internal Revenue Service. The minimum penalty for failing to submit the information is $10,000; the maximum penalty is $50,000.
“It makes all kinds of sense to find people who are hiding money overseas to keep it from being taxed,” she said. “But what happened is that in their net, they ended up persecuting the average Joe who lives overseas.”
“It’s almost as if the U.S. doesn’t appreciate the fact that we’re out here representing the country, building trade.” She said, “without representation, overseas Americans can be somewhat persecuted.”