Scott Bloch, Government (In)Justice, Oversight Failures, DSS and More

Update:  9-5-10   I never did get any kind of response from the DoD Hotline.  As I posted on a different item today, I would caution people, particularly from DSS about submitting complaints to the DSS IG or the DoD hotline.  I have been informed that hotline complaints regarding DSS (Defense Security Service) are being sent to Richard Lawhorn, second in command at DSS (or was unless his reassignment has occured), which gives him a chance to see who is complaining and also to derail the complaint.  Based on what I have been able to find out, this is a big concern, as if one of the people most likely culpable for the poor treatment of field employees is being given that kind of access to an allegedly protected hotline complaint process employees are supposed to be able to safely use to report fraud, waste and abuse, then the whole system is corrupted and is very much broken. 

I would recommend at this time that you consider contacting the DoD IG Reprisal office with your complaints of harassment, abuse, and retribution from unethical managers, (Title V Complaints).  You might also contact your Congressperson or Senator.  I am informed that there are Congressional Investigations going on related to DSS, and other agencies right now.  Your information would help assure something may get done right.   If you have complaints of criminal activities, the fraud, waste, theft, espionage  and such in addition, (Title 18 matters), I believe the Reprisal office may be able to help direct your information to the correct criminal law enforcement personnel. 

In the mean time, here is the email link to the Department of Defense Hotline, associated with the DoD IG.  If you are not actually an employee of the DoD and are complaining about things you’ve learned about, but that do not directly affect you or your loved ones, go for it. 

hotline@dodig.mil

Here is an example letter of complaint to the DoD Hotline.  I sent this today.  I encourage everyone else with “pieces of the puzzle” to do the same.  The more of us that do, the better chance we have of prevailing.  GFS

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Monday, July 26, 2010

DoD Hotline:

Below is an excellent article written by Julia Davis, of the LA Examiner, including the link to the original document.  This article rings very true with the person who sent it to me, (see his/her comments preceding the article). 

And it reads as a very true characterization for me of what has been going on in DoD and some other agencies, both with internal governmental problems reported by federal employees who uncovered them in the course of doing their jobs, and with reports of problems involving defense contractors, also uncovered while federal employees were doing their jobs.

There are a growing number of federal employees who have found fraud, waste, abuse, and criminal behaviors on the part of federal government agency management and/or defense contractor management, who have found that after reporting the problems and including that information in their reports, as required by law, they have been targeted for harassment and retribution of the most egregious types. 

Only the most tenacious continue to weather the beatings and try to advance their cases through their immediate chain of command, and then the only other available paths of recourse, hoping to have it finally taken seriously, criminally investigated, and then properly prosecuted.  All along the way, at each step in the process, these federal employees have been harassed, threatened, and have had to endure intense retribution.   Their belief, in the very government they have dedicated their careers and lives to as public servants, has been badly shaken.  Observing what has been going on and what has happened to these people through spotty news coverage, personal contacts and in some cases dogged research, many of us,  citizens and taxpayers, also have lost faith in our government and its ability to solve problems, and protect us from thugs and those who would take apart our very system of government and justice and every other system that holds this country together. 

These ethical federal employees also have found that the corruption has infiltrated the very criminal investigative agencies they must report to in order to get help.  They have found that there are many ties between wrongdoers across many agencies, and can attest to the fact there has been, (and still appears to be), purposeful communication between these wrongdoers, showing a coordinated effort to try to keep the fraud, waste, abuse and other crimes behind the veil of secrecy, and to try to destroy the federal employees who won’t stop investigating and pushing for lawful criminal investigation and prosecution of the culpable parties.   It is also clear there has been an organized effort to stop these investigations from proceeding, taking the work of these honest federal employees and leaving it and them, ground into the floor.  I have heard reports that these problems extend into the highest levels of government, including the Pentagon. 

The kinds of things Ms. Davis writes about in her list of “accomplishments” of Scott Bloch during his tenure at the OSC, are precisely what many, if not most, federal employees have experienced.  It appears to me that these tactics are very wide spread within government offices, and have been pretty much institutionalized within management ranks, and I know that in one case, were also being collaborated with a particular defense contractor, against a particular federal oversight employee.  This situation also involved revolving door activity which is in violation of federal law or policy.  (I believe there may have been some policy changes somewhat recently made by those that wished to minimize their revolving door activity restrictions.  This warrants a bit of research.)  After reading Ms. Davis’s article, I now know the history of these types of attacks on our civil service and justice systems.

I am aware that currently there are investigations into matters surrounding wrongdoing at DSS and another agency thanks to readers of my blog and sources from the Beltway.  I also have heard that this may involve criminal matters as well as investigation into DSS’s and the other agency’s harassment and retribution (abuse) of employees.  Please take action on these matters. 

It is not acceptable to have federal managers committing unethical acts in order to try to scuttle an employee’s efforts to secure justice every step of the way.  It is not acceptable to have those in the criminal investigative agencies and in the Justice Department sitting on cases and taking no action on them.  Shenanigans include having a criminal investigator in one agency claim on one case “No one will talk to me,” referring to the witnesses who waited for nearly 8 years for someone to contact them and hear their story and their evidence.  No one ever contacted them.  Clearly the investigator was lying and trying to stop the case from going forward.  It includes having multiple agencies try to close another case after many years of these agencies trying to cover up the crimes and stop the investigations, at every level and in every agency the case passed through.  In this particular case no one had even made the effort to obtain and see the substantial documentation and evidence which would have made the case extremely prosecutable despite the efforts of the wrongdoers to stop it.

 All of this is outrageous.  So far successful careers and lives are being destroyed, and the American taxpayers are paying for it and continuing to be negatively affected by it. 

Interestingly, I was aware independently of many of these problems that were taking place even before reading Ms. Davis’s discourse on Scott Bloch.  It is clear, based on what I have learned from multiples of federal employees and in reading news reports, that these types of tactics have been used in a variety of federal offices, and I have featured some of it in my blog postings.  It is difficult to do this due to the fear that exists in the federal employee ranks.  (Fear that is understandable considering the systematic terrorizing they are subjected to on a daily basis as they try to do their jobs.)  Despite this I’ve been able to put enough out there to let these employees know they are not as isolated and alone as they have been led to believe.  I know there are a lot of current, former and retired federal employees out there, and I believe that each of them holds pieces of a very large puzzle.  If all of those pieces can be retrieved and brought together maybe a true and complete picture and understanding may illuminated.  Then it will be possible to route all of this evil-doing and put our government and civil service back to some semblance of integrity and functionality. 

The U.S. Government is negligent in not taking action to stop these problems.  This type of malfeasance must be prosecuted and dealt with severely wherever it is found.  I am extremely offended that it is reported that in Scott Bloch’s case, “Prosecutors said they would not oppose probation without any imprisonment for Bloch.”  This is outrageous.

The problems caused by Bloch and others include crimes against not only loyal federal employees who were trying to ethically and lawfully do their jobs, but the American taxpayers and citizens themselves.  No wonder there is no trust in government, when this is the way the Justice Department and other agencies entrusted with protecting our country and its citizens choose to deal with very serious and endemic problems.  If Bloch and others were ordered to commit these unlawful and unethical acts, then follow the trail to the top.  Find out who was directing all of this and investigate and prosecute them as well, including everyone who cooperated and joined in all the way up the chain of command.

It is like U.S. Government oversight, criminal investigations, and justice agencies have been choosing to fight a raging wildfire with a squirt gun and saying “Oh well, we tried.  We just couldn’t stop it so it will all burn to the ground, but eventually it may grow back.  Be happy.”  This is not acceptable to most of us, not in the least.  We cannot allow our law enforcement agencies, government oversight and the Justice Department to just blink and “move on.” 

Sometimes you just can’t move forward and try to forget the unresolved past.  The corruption and sickness in the system will not heal itself.  In fact, like a cancer, it has been spreading.  It must be identified, and cut out, while reinforcing our laws and policies and reenergizing oversight to make sure it does not occur again. 

You may forward this email to anyone that is actively trying to do something responsible about the unacceptable abuse of federal employees.  I am continuing to invite federal employees and others to communicate on my blogs.  It is time to shine light into the swamp and rid it of its predators.  We have enough bloodied victims of this epidemic suffering now.  These issues are very critical.  You must take definitive action immediately.  Our country’s future depends on it. 

Sincerely

G. Florence Scott

 

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Scott Bloch and the OSC: Justice is still dragging its heels 

A reader sent this to me today.  His/her comments prefaced the article as follows and are very compelling.   You will find earlier reporting of Scott Bloch and his troubled rein at the Office of Special Council (OSC) in the historical portions of this blog.  Use the search under Scott Bloch and/or OSC.

I urge anyone who has knowledge of any information which may assist those who are fighting to bring to light the corruption and wrongdoing that had become an even more imbedded part of government culture the past decade to reenergize and stand up.  I hear rumors that there are some good people who are trying to bring about accountability for the miscreants.  Some high level investigations and probable criminal proceedings are in progress.  Speak up now.  If all of the whistleblowers created in the past decade all joined together, it would make truth and justice much more likely to obtain for everyone.   

GFS

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Reader’s Comment:

“If you would like to see what is really going on within the federal government agencies, read this article.  This clearly describes just what I have seen and experienced as to how corrupt our government has become.  We must take a solid stand before it gets worse, which I know is happening daily.  This reporter has done her research and she has published an accurate and complete report.   Our democracy as we have known it is in jeopardy and unless we join together to take a stand against corruption, it will soon be gone.  Please help spread the word. “

Anonymous Contributor

Office of Special Counsel (OSC) – the dark legacy

July 23, 1:47 PM LA Homeland Security Examiner Julia Davis

Whistleblowers and federal government workers rejoiced on April 27, 2010, when former head of the Office of Special Counsel (OSC), Scott J. Bloch, pleaded guilty to criminal contempt of Congress. The justice continues to be delayed, as Scott Bloch’s sentencing has been rescheduled for the second time and is now set for September 8, 2010. U.S. Magistrate Judge Deborah Robinson said that she wants prosecutors and Bloch’s attorney to clarify the applicable guidelines for Bloch’s sentence and fine. Robinson is also apparently planning to “adjust” the sentence based on Bloch’s guilty plea. She stated that the lawyers failed to clearly define the sentencing guidelines in this matter.

Prosecutors said they would not oppose probation without any imprisonment for Bloch. This should come as no surprise to anyone familiar with our courts. While the Department of Justice relentlessly pursues, prosecutes and imprisons inconvenient whistleblowers, high-ranking bureaucrats who violate their rights are usually coddled by the system. The crooked wheel of justice crushes those at the lower levels of the government and pushes up criminals in high places. This bad egg is being cooked over-easy, with obvious disregard for hundreds of whistleblowers whose careers have been destroyed due to the OSC’s failure to investigate their complaints.

The legacy of failure

Here is an abbreviated list of Scott Bloch’s dubious “accomplishments” as the former head of the OSC:

Knowingly and willfully ignoring whistleblower disclosures;

Dismissing and closing hundreds of whistleblowing complaints without investigation;

Deleting hundreds of files pertaining to whistleblowing disclosures and complaints of retaliation and reprisal;

Rolling back protections for federal employees against discrimination based on sexual orientation;

Staffing key OSC positions with cronies who shared his discriminatory views;

Engaging in retaliatory activities against OSC staffers who opposed his wrongdoing;

Assigning interns to issue closure letters in hundreds of whistleblower complaints without investigation;

Intimidating OSC employees from cooperating with government investigators;

Misusing prosecutorial power for political purposes;

Reducing the backlog of cases pending at the OSC by 56% percent by closing cases without an investigation and destroying electronic files;

During the fiscal year of 2008, the OSC filed 0 corrective action petitions with the Merit Systems Protection Board (MSPB);

During the fiscal year of 2008, the OSC obtained 0 stays from the Merit Systems Protection Board (MSPB);

Bloch reassigned his perceived critics within the OSC to field offices across the country – giving them 10 days to accept, or else they’d be fired;

Bloch imposed retaliatory transfers upon OSC staffers he perceived as having a “homosexual agenda”;

OSC under Bloch rarely recognized legitimate whistleblowers, typically only when the whistleblower has already prevailed elsewhere;

In an ironic twist that shocked his own staffers, in 2007 Bloch initiated a large-scale investigation against Karl Rove. He decided to probe the disappearance of an untold number of emails related to the firing of the New Mexico’s U.S. Attorney, David Iglesias. Bloch assembled a task force to create the impression that the OSC was investigating the White House, while Bloch himself was under investigation for mass-destruction of inconvenient documents. One year earlier, in December of 2006, Bloch hired private technicians with a firm called “Geeks On Call” to delete whistleblower complaints and related computer files by conducting the 7-level memory wipe of the computers at the OSC’s office. Bloch was also investigated by the FBI for obstruction of a Hatch Act inquiry for improperly mixing his political and official activities.

Bloch wasn’t charged with obstruction of justice, evidence tampering, destruction of official files, impeding an official federal investigation, civil right violations and violations of the Whistleblower Protection Act (WPA). Instead, he was charged only with criminal contempt. While this charge carried a possible prison sentence, Department of Justice prosecutors said they would not oppose probation for Bloch, who is currently working as (don’t fall down laughing) an employment attorney at the Tarone & McLaughlin law firm in Washington.

Bloch’s defense attorney, William Sullivan Jr., a Winston & Strawn partner in Washington, had the audacity to state in court papers that Bloch has “served with distinction” as the head of the OSC. Sullivan wrote, “This case marks an unfortunate aberration for Mr. Bloch,” submitting 35 pages of letters to Magistrate Judge Deborah Robinson, who is scheduled to preside over the sentencing. These letters include notes from Bloch’s wife, his friends and former co-workers.

“Glad this matter is behind us, and Mr. Bloch is looking forward to getting on with his life,” Sullivan said as he walked with Scott Bloch to the probation office. Bloch’s victims don’t have the same luxury, as whistleblowers have been continually oppressed with no recourse throughout OSC’s existence.

OSC’s dark history

The Office of Special Counsel (OSC) was created in the 1978 Civil Service Reform Act to protect whistleblowers from reprisal and hold responsible agency managers accountable. Under President Carter, OSC languished without permanent leadership or funding. When President Reagan came to power, he quickly appointed Alex Kozinski as the Special Counsel and gutted the OSC. Nearly 50% of the OSC personnel and 70% of attorneys and investigators at the OSC headquarters were fired or had resigned. This was unprecedented for any government agency.

Since that time, over 7,000 federal employees have filed complaints with the OSC. Out of those thousands of cases, OSC requested a hearing to restore jobs in only 2 instances.

The dog-gone mind behind the plan

To understand why the OSC never worked according to its stated purpose, one must go back in history. The Watergate investigation revealed a plan by the Nixon administration to replace the non-partisan civil service system with a politically loyal government workforce. Every government agency had a ghost “political hiring czar”, whose authority covertly trumped that of personnel offices.

A special manual was prepared by the former White House Personnel Office Chief Fred Malek. This encyclopedia-like guide was dubbed the Malek Manual and provided information on how to harass career employees out of the government by exploiting loopholes in civil service laws. Unpopular federal employees would be replaced by hand-picked applicants.

The Malek Manual emphasized a telling message: “You cannot achieve management, policy or program control unless you have established political control.” The manual went on to describe underhanded techniques designed to “skirt around the adverse action proceedings” (such as the EEOC and the MSPB), “to remove undesirable employees from their positions.” (The President and the Executive Branch, by Joel D. Aberbach. UCLA Center for American Politics and Public Policy Occasional Paper Series 9 1-9.)

A telling memorandum written by Fred Malek to President Nixon’s Chief of Staff stated in relevant part, “We garnered from reliable sources in the Equal Employment Opportunity Commission that the Commission was preparing to sue the University of Texas for discrimination in the hiring of faculty. This could be disastrous for Texas. When queried, Bill Brown, Chairman of the EEOC, agreed not to pursue it. I will continue to follow this situation closely.”

The sobriquet most often used to describe Fred Malek was “hatchet man”, because of his ruthlessness in ousting those deemed to be disloyal. Malek’s techniques included mandatory transfers and investigations against whistleblowers and outspoken critics of the establishment. For example, Malek reportedly ordered the FBI to conduct an investigation of then-veteran CBS correspondent and Nixon critic Daniel Schorr, who was placed on the “Enemy List”. Sadly, Daniel Schorr died today, on the day of Scott Bloch’s scheduled sentencing that has now been delayed.

Fred Malek was infamously ordered by Nixon to count the Jews in high-ranking government positions. Malek admittedly completed this blatantly anti-Semitic order and compiled a list of government employees whom he believed to be Jewish. Shortly thereafter, these senior officials were transferred to other locations and less prominent, dead-end positions.

In spite of his prior activities, after leaving the White House, Fred Malek became the Deputy Director of the Office of Management and Budget (OMB). In 1982 Fred Malek was nominated by President Ronald Reagan to head the U.S. Postal Service. The Senate Governmental Affairs Committee refused to act on his nomination because Senators reportedly felt that Malek had made conflicting statements under oath regarding his role in the “program”. Outraged committee didn’t hold back its disgust. Then-Senator John Danforth (R-Mo.) said, in relevant part, “… whether it was legal or illegal . . . it was wrong, just plain wrong… you admit that it was true, you admit that it was wrong . . . you regret it and you will never do it again. . . . Am I wrong or right?” Fred Malek responded, “You are absolutely right, senator.” Senator David Pryor (D-Ark.) asked, “Did it ever occur to you that what you were doing was wrong or immoral?” Malek replied, “Yes, sir, it did.”

Under questioning by Senator Carl Levin (D-Mich.), Malek admitted authoring a memo that suggested punishing politically incorrect people. Senator Levin described Malek’s role as “Unethical, immoral and improper”. Malek lost his bid for the head of the Postal Service and a few years later the same disclosures cost him his job as deputy chairman of the Republican National Committee.

Fred Malek, Then and Now

Another disgusting vignette of Malek’s character was revealed when police arrested five men after locating a blood-spattered car near the park entrance in Peoria, Illinois. After giving conflicting stories, the men finally admitted that they “caught a dog and were barbecuing it.” The perpetrators caught, skinned and gutted a dog and barbecued it on a spit. One of them was Fred Malek.

Fred Malek, a Dog and the SEC

Fred Malek’s legacy continued with the Securities and Exchange Commission (SEC) action against him in 2004. The SEC instituted administrative and cease-and-desist proceedings against Malek, his company, Thayer Capital Partners and their affiliates. The SEC charged that pension investments in Malek’s company were used to reward a political supporter, William DiBella, former majority leader of the Connecticut Senate. Malek’s company was ordered to pay a civil penalty of $150,000, and Fred Malek was personally made to pay a civil penalty of $100,000. Apparently, a leopard doesn’t change its Jew-counting, whistleblower-retaliating, critic-investigating, dog-barbequing, securities laws-violating spots.

Fred Malek’s career in government and politics didn’t end after his activities were exposed. He is the former President of Marriott Hotels and Northwest Airlines and former assistant to United States Presidents Richard Nixon and George H.W. Bush. Malek has formed seven institutional private equity funds, including three corporate acquisition funds with approximately $1.5 billion in committed capital and four funds that target hotel investments with over $500 million in committed capital. He recently served as a National Finance Committee co-chair of John McCain’s presidential campaign. In 2010, Sen. Dianne Feinstein (D-Ca.) called Malek “a man of high principle” who “has proved many times over the years his loyalty to the highest principles of freedom, human rights and international tolerance.”

Should we be surprised that our leaders and government officials are not interested in pushing forth effective whistleblower protection measures? Malek did not respond to this reporter’s request for comments.

The Ink Commission, later created to explore the Watergate Committee’s public record of the abuses, participated in studies and issued recommendations that became the foundation for the Civil Service Reform Act of 1978.

In spite of the exposure, the ugly Malek Manual continued its destructive influence in government service.

Alex Kozinski and the Malek Manual

The next attack on the OSC and the merit system came from within the Office of Special Counsel itself. It was waged by President Reagan’s appointee, the former head of the OSC, Special Counsel Alex Kozinski, who kept a copy of the Malek Manual on his desk. Kozinski reportedly used its techniques (such as transfers, investigations and harassment) to purge the professional civil service experts from the OSC staff. They were replaced with obedient minions who viewed whistleblowers as crazy, disloyal troublemakers.

While serving as the head of the OSC, Alex Kozinski taught courses to federal managers on how to fire whistleblowers without getting caught by OSC investigators. For example, Alex Kozinski tutored Secretary Watt on how to purge a whistleblowing coal mine inspector from the Department of Interior. He used the OSC Investigations Manual as a handout in these morbid lectures. Senior Supervisors still serving in various government agencies quite possibly received such training on how to get rid of “inconvenient” employees and whistleblowers. These techniques are still being implemented within federal agencies today, with virtual impunity.

Alex Kozinski’s abuses were the major catalyst for passage of the Whistleblower Protection Act (WPA) of 1989, and he was forced to resign.

A few years later, 43 Senators voted against his confirmation for a seat on the Ninth Circuit Court of Appeals, after Senator Levin’s intensive investigation of Kozinski’s tenure as the OSC’s Special Counsel. In spite of the controversy surrounding his dubious OSC performance, Kozinski became the Chief Judge of the U.S. 9th Circuit Court of Appeals.

Curiously enough, OSC fiasco was not the last time Alex Kozinski would bring shame to the public office. In June of 2008, Los Angeles Times reported that Kozinski was caught operating a website that featured photos of naked women on all fours, painted to look like cows. Judge Kozinski’s website reportedly contained suggestive images of bestiality, pictured women shaving their pubic hair, themes of masturbation, public sex, contortionist sex, defecation and urination.

Ironically, the 9th Circuit Court of Appeals Judge Alex Kozinski was set to preside over an obscenity trial (the Issacs trial in U.S. District Court in Los Angeles), from which Kozinski later recused himself.

Porn trial in L.A. is halted – Judge grants a stay after conceding he maintained his own website with sexually explicit images.

With respect to his publicly accessible website, the panel of judges declared that Kozinski was “careless” and “judicially imprudent”. He was reprimanded but not disciplined. In spite of his OSC abuses, reprehensible anti-whistleblower stance and an obscene behavior, Alex Kozinski still sits as the Chief Judge on the 9th Circuit Court of Appeals.

As the head of the OSC, Bloch continued Kozinski’s legacy of shame and disgrace, by destroying careers of countless whistleblowers he was appointed to protect.

Office of Special Counsel’s War On Whistleblowers

United States Office of Special Counsel

Watchdog groups and ethics advocates are appalled at the lackadaisical approach towards Bloch’s crimes. The proposed sentence of probation is not commensurate with the scope and longstanding impact of Bloch’s abuse of office and serious violations against federal whistleblowers.

Uncertain future

The OSC has operated without permanent leadership since 2008, leaving federal employees in the dark ages and without recourse. Legal professionals are now advising federal employees against coming forward. “When people call me and ask about blowing the whistle, I always tell them, ‘Don’t do it, because your life will be destroyed,'” says William Weaver, a professor of political science at the University of Texas-El Paso and a senior adviser to the National Security Whistleblowers Coalition. “You’ll lose your career; you’re probably going to lose your family if you have one; you’re probably going to lose all your friends because they’re associated through work; you’ll wind up squandering your life savings on attorneys; and you’ll come out the other end of this process working at McDonald’s.”

Yes, that is the way things are. But that is not the way they ought to be.

Link to original: 

http://www.examiner.com/examiner/x-35807-LA-Homeland-Security-Examiner~y2010m7d23-Office-of-Special-Counsel-OSC–the-dark-legacy

Boeings Challenges with the Israeli Missile Defense System

Interesting how things get around…

 

Last July (2009), Arab News in Saudi Arabia reported that:

 

A joint US-Israeli missile defense system meant to shield Israel from Iranian attack hit a snag when a series of tests were aborted because of malfunctions, defense officials said Thursday.

 

The project, said to be called “ The Arrow,” a joint project between Israel Aerospace Industries Ltd. And Chicago-based  Boeing Company failed it’s tests, though the parties involved were said to play down the glitches and stated they expected in such a complicated multilayered missile-defense system, that those difficulties would not “affect the long-term development of the system.”

 

Arab news stated that a Pentagon Official who spoke “on condition of anonymity because they were not authorized to disclose details of the tests” said that “the mission was an interception test and also exercised the Arrow system’s interoperability with other elements of the US ballistic missile defense system.”   They further stated that the tests took place off the coast of California, and it was “the communication glitches between the missile and the radar which led US defense officials to abort the test before an intercepting missile could be fired.” 

 

The quote the Pentagon as further saying, “the target missile was dropped from a C-17 aircraft.  It said the radar system detected the target, but not all test conditions to launch the Arrow Interceptor were met, and it was not launched.” 

 

This is all a part of  a system Israel is developing to protect it from all forms of attack, Arab news reports, “ranging from short-range rocket fire from Lebanon and Gaza to long-range missiles from Iran.”

China Paid Lobbyists To Facilitate Taking American Jobs Away From Americans

 

Lobbyists Paid Off by China vs. 30,000 US Workers: Which Side Will Obama Choose?

Link:  http://www.truthout.org/081309G?n

 

Monday 10 August 2009

by: Mike Elk  |  Visit article original @ Campaign for America’s Future
A Chinese rubber company worker inspects tires at a factory. China is flooding the US market with tire imports. (Photo: Mark Ralston / Agence France-Presse / Getty Images)

    As the International Trade Commission considers comments on its recommendation to impose tariffs on Chinese tire imports, President Obama stands at a crossroads in the fight to rebuild the American economy.

    President Obama has made a commitment in the past to uphold previously signed trade agreements. China, however, is violating these agreements by flooding the market with a massive 300 percent increase in tire imports in an attempt to wipe out American tire manufacturers. In 2004, China sent 14 million tires to the U.S. valued at $453 million. By last year, that had increased to 46 million tires valued at $1.7 billion.

    The Chinese are shipping cheaply made tires in an effort that isn’t just killing American manufacturing, but also killing people. So far, two people have died as a result of the low quality of some of these Chinese import tires. The U.S. Government has launched a massive of recall of the tire in question, but so far the Chinese manufacturer has refused to cooperate fully with the recall.

    So far over 8,000 people have lost their jobs, and over 20,000 more jobs are at risk if the Chinese are allowed to continue with this strategy of not obeying trade laws.

    Next month Obama will be challenged to uphold his campaign pledge to enforce current trade laws when a decision on illegal Chinese tire imports came to his desk. Last month, a majority of the U.S. International Trade Commission (ITC) found that tariff relief was needed to urgently reduce tire imports because of market disruption. According to the United Steelworkers, between 2004 and the end of this year, more than 8,100 workers in the tire industry have lost or will lose their jobs and another 20,000 jobs are threatened.

    Speaking last week, USW President Leo Gerard said that this will “prove to be a test of enforcement of trade laws that China agreed to.” A ruling to enforce current U.S. trade laws would mark a clear break with Bush era economic policy. During the Bush Administration the United State International Trade Commission ruled four separate times that China had violated trade law and recommended measures to stop the flow. However, each time Bush refused to obey these recommendations.

    If President Obama follows the commission recommendations, it would send a stern message to China that the Obama administration, unlike the Bush administration, intends to enforce U.S. trade law. He is expected to decide on September 17, one week before the G-20 summit in Pittsburgh. If Obama chooses to enforce tariffs on illegal Chinese competition, that would send a message throughout the world that U.S. intends to enforce trade law.

    Unfortunately, corporate lobbyists paid for by the Chinese Chamber of Commerce, like former Bush official and Ohio U.S. Senate candidate Robert Portman, are running an aggressive misinformation campaign in attempt to thwart U.S. trade law. These groups have been claiming that limiting tire imports would cost Americans jobs and raise the costs of tires for consumers. However, the United States Commission on Trade found that the total benefits exceed the costs by $884 million.

    Chinese importers, in conjunction with the Chinese Chamber of Commerce, have ironically formed a lobbying front group ironically named American Coalition for Free Trade in Tires. The coalition is run by Jochum, Shore & Trossevin, a Washington D.C. lobby firm run by former Bush trade officials who are cashing in on their years of U.S. government service to advise foreign competitors. The law firm has used its ties to power to advise Chinese manufacturers on how to get around loopholes in the law. As a result, eight members of Congress wrote a letter this past June calling on the Government Accountability Office to investigate.

    Congressman Michael Michaud of Maine said ” “Many of these individuals appear to be repaying the investment that the American taxpayers made in them with their hard-earned tax dollars by using the knowledge, expertise and contacts they gained while on the federal payroll in ways that are adverse to the interests of our workers and our producers.”

    Speaking last week at a factory in Indiana, President Obama said that rebuilding American manufacturing was the key to build a vibrant economy. As President Obama has said previously many times we can’t go back to an economy, where 45 percent of our profits come from the financial sector. As Dave Johnson pointed out last week we in his piece “Manufacture or Borrow (Until We Can’t)”:

    “When it comes down to it you can’t have a healthy service sector unless you are manufacturing items to sell and trade because you can’t pay for the restaurant bill or insurance or hotel room or lawyer or even the doctor if you don’t make something to sell and trade. And mostly you can’t keep buying the things made elsewhere. You can only borrow for so long.”

    President Obama has announced bold new initiatives to invest billions of dollars into new green energy initiatives. However, if we don’t have to even enforce the current trade laws that we have, American manufacturing will be wiped out by low-wage Chinese manufacturing. As I highlighted previously, companies such as GE have already begun to move so-called green jobs to China already.

    The fight over whether to enforce trade laws against illegal Chinese tire imports will set a precedent that the U.S. will enforce previous trade agreements. President Obama has a choice of whether he will side with American workers or corporate lobbyists paid off by China.

Bank Secrecy is Alive and Well!

In the Age of Stealth Wealth – Bank Secrecy is Alive and Well!

Written by Shelley Stark author of: ‘Hidden Treuhand: How Corporations and Individuals Hide Assets and Money’ 

“Bank Secrecy Bites the Dust in Europe”- Newsweek. “Switzerland, Luxembourg, Austria Loosen Secrecy Rules” – Bloomberg. “Tax Havens Give in to EU Pressure” – Spiegel ONLINE.

Has banking secrecy finally come to an end? This is what newspapers are unanimously saying. Is it true or should these headlines be punctuated with a question mark? Well, once again Switzerland, Austria, Luxembourg, Liechtenstein, and Belgium too are in the spotlight for their bank secrecy rules. There have been strong words emanating from the international community in the past and they produced little, or we would not be entertaining headlines such as these today. 

Changes to bank secrecy have come along way since the day of the anonymous savings book (‘Sparbuch’ in the German language). On January 1st 1994 some provisions concerning banking secrecy were partly amended in response to concerns of money laundering, but these provisions were largely undertaken on a voluntary basis by each bank. Up until this time, one could simply show up at the bank with $10 or $10 million dollars, and put it in anonymous savings account.  It was anonymous because you didn’t have to show any identification. The bank account was identified by a secret password, which the owner of the account assigned to the savings book and was subsequently registered in the bank. To get the money, you would have to show up at the bank with the savings book and give the secret password. This means in reality, to make a pay-off as seen in spy-thrillers, nobody needed to run around with suitcases of money. One could simply make a pay-off by handing over the savings book with the password and the recipient could visit his money at leisure. The new account holder could change the password to afford more security, but as longs as he had the savings book and the password, the money was safe and the old owner could not obtain these funds. Of course, this also meant if the savings book was lost or the password forgotten, then no one could access the money. The password account is much like its Swiss cousin the numbered account. The concept of the number and the password account originated when Hitler sought to stem the flow of money seeking a safe haven in Switzerland and in Austria. The capital exodus began due to inflation, but later due to Nazi persecution of Jewish citizens, it was feared that Hitler would try to force the Swiss to reveal Jewish accounts. By giving out numbers, the Swiss bank could claim not to know whom the account belonged to. In Austria, the practice became passwords. 

In 1995, Austria became a member of the European Union. Many of the earlier voluntary duties became law so that by November 1^st 2000 the ability to open anonymous accounts was finally ended and no payments or withdrawals could be made to existing accounts unless the bank identified the identity of the savings account holder and money laundering was finally rendered a criminal offence. Tax evasion on the other hand, the concealing of income and not falsifying any documents, is merely a civil offense, not unlike a traffic violation. In addition, as of January 1^st 2000 any cash transaction over €15,000 with a customer that didn’t have an ongoing relationship with the bank or was wired to the bank from offshore, needed to register their identity with the bank. These changes were brought about as the result of a European Council Directive to prevent the financial system from being used to launder money.  As a result of these amendments to the banking law, the European Commission withdrew its complaints against the Republic of Austria.                                           

The story regarding Switzerland and Liechtenstein is slightly rockier. German federal investigators paid €5 million to a former bank employee of the Liechtenstein Große Treuhand bank (LGT). The employee, Heinrich Kieber, is alleged to have removed the secret bank data from the LGT bank, thus kicking off a row over tax evasion in the EU. Before the dust settled, U.S. investigators charged Switzerland’s UBS bank for deliberately encouraging American citizens to engage in tax fraud activities. The Swiss have always attracted a certain limelight regarding chocolate, cheese, cuckoo clocks, and banking secrecy – a financial business model that attracts an estimated $1.84 trillion in assets of which about €450 billion belong to private customers. In Switzerland, the hoopla began when the bank was found to have offered tax evasion tactics to Americans that were invented by auditors at KPMG, who only managed to avoid criminal prosecution when they paid up $456 million in fines and penalties. The UBS bank was ordered to pay $780 million, and then they did the unthinkable, they handed over the names of 300 customers after the U.S. government produced strong evidence of tax evasion. The U.S. authorities are still seeking the names of an estimated 52,000 Americans with secretive UBS accounts.

According to mainstream press, these events are what have sparked the U.S., British, and German push for an ‘end’ of banking secrecy and prompted bankers from Switzerland, Austria, Luxembourg, and Liechtenstein to hoist their skirts and run for cover. Baa-humbug!

Firstly, tax evasion is not a criminal offense in any of these countries currently being hounded for their bank secrecy laws and for the most part bank secrecy is federal and constitutional law in these countries.

Basically the international community has pushed these European tax havens to accept Article 26 of the OECD Model Tax Convention on Income and Capital. Article 26 creates an obligation to exchange information, but the contracting state is not at liberty to engage on a “fishing expedition”. The contracting country must firstly show evidence of tax evasion, can only request information that is relevant to the tax affairs of a given taxpayer, must demonstrate the foreseeable relevance of the requested information, and prove to have pursued all domestic means to access such information. As of yet, it is unclear just how much tax evasion evidence even need be presented.

Austria, Belgium, Luxembourg, and Switzerland were opposed to the current version of Article 26, last updated on July 17, 2008, but since March 2009 each of these countries has notified the OECD that they are withdrawing their reservation to Article 26. They now believe that bank secrecy is not incompatible with the requirements of Article 26. And with little wonder, because the particulars of Article 26 are easily circumvented with a legal phenomenon called ‘Hidden Treuhand’.

Hidden Treuhand is a customary practice in Austria, Switzerland, Luxembourg, Liechtenstein, and even Germany. Due to globalization, it has transcended its national borders to impact industry, commerce, and banking worldwide. It is key to creating shell companies, foundations, and bank accounts where the real owner identity is hidden and cannot be exposed by any legal means. A Hidden Treuhand creates conditions where a lawyer conducts the duties required of him on behalf and in the interest of the client, but all business actions appear to be in the name of the lawyer. The real beneficial owner remains unknown. This construct can be liberally applied to stock in corporations, foundations, real estate, patent and copyrights, financial instruments such as derivatives and bonds, and of course, cash.

In 2000, some aspects of banking secrecy came to an end, but the Hidden Treuhand is frequently used to close the gap that those transparency laws were supposed to fill. In essence, the Hidden Treuhand is somewhat like a hidden trust, but legally it and the environment in which it functions, can achieve far more than is presently realized. Hidden Treuhand hides the beneficial owner of any asset and that includes bank accounts. Hidden Treuhand, when combined with banking secrecy, hides profits beyond the reach of tax investigations and governments. It’s like missile shield for money – nothing gets past this protective barrier.

Article 26 of the OECD MODEL TAX CONVENTION ON INCOME AND CAPITAL concerns the exchange of information between Contracting States. Hidden Treuhand is the creation of customary practice, but it is not regulated and there are no laws in existence that could be equated as regulatory. The following Hidden Treuhand provisions are quoted from law books referring to customary practice and illustrate how each of the OECD provisions is rendered mute. Compare the inherent capabilities of Hidden Treuhand with text of Article 26 where it states that none of the following provisions shall be construed so as to impose the obligation to:

OECD: to carry out administrative measures at variance with the laws and administrative practice of that or of the other Contracting State;

Hidden Treuhand: “What makes a Treuhand contract so special and unique under Austrian Law is that there is no special law regulating Treuhand contracts…there is no regulation of Treuhand contracts under Austrian Civil Law, and there are not any laws that could be equated as regulatory.” 

OECD: to supply information which is not obtainable under the laws or in the normal course of the administration of that or of the other Contracting State;

Hidden Treuhand: “It is not to be expressed that any direct legal relationship or connection exists between the businessmen and the lawyer. In fact, the lawyer would be guilty of misconduct should the lawyer reveal that a legal relationship (power of attorney) exists between himself and the client”.  

OECD: to supply information which would disclose any trade, business, industrial commercial or professional secret or trade process, or information the disclosure of which would be contrary to public policy (ordre public).

Hidden Treuhand: “When using a Hidden Treuhand, trustees are referred to as a Straw Man. A trustee functions like a Straw Man and acts in the name of the client who remains undeclared in the background. The relationship between the businessman and the lawyer is secret, which often includes even knowledge of a ‘power of attorney’ existing between the lawyer and the businessman”

When it comes to Hidden Treuhand, lawyers exploit attorney client privilege and claim it their legal duty to deny information and to keep all matters pertaining to their client confidential. No one, no court or authority, no government, can force an attorney to reveal any secrets concerning his client. And what of banking or bank accounts?  

The EU and international money laundering laws have striven to eliminate any criminal elements from the banking system, but Hidden Treuhand works within the law and in the banking system. Hidden Treuhand bank accounts are not made public because only the trustee is entitled to use the account, and there is no legal relationship between the client and the bank account. A lawyer lets the bank know that an account is a trust account, but does not have to disclose the name of the beneficiary. A Treuhand account means a banking relationship exists between the bank and the trustee and the bank is not entitled to know whom the lawyer represents anymore than anyone else.

“According to leading banks, designating an account as a Treuhand account alters nothing. The true account beneficiary remains a secret because only the trustee is authorized to use the account and there is no legal relationship between the client and the ‘special account’. The clients’ identity is not exposed when making bank transactions because it is the trustee’s responsibility to make money transfers from this ‘special lawyer trust account’ (Anderkonto)”.

As result of the crackdown against tax havens, more clients will have to resort to Hidden Treuhand and lawyers services. Already Liechtenstein has sold its Treuhand services to a separate company, quite possible even to itself via Hidden Treuhand. Their business model will no doubt resemble the Austrian one where the registration of foundations and Hidden Treuhand is separate from bank institutions. If foreign tax authorities manage the first hurdle and can provide strong evidence of tax evasion and seek further information regarding bank accounts they will firstly have to petition the cooperation of the Ministry of Finance. The ministry will ask the banks, but to what end? The bank cannot tell them what they do not know.  

So much for the grandiose announcement heralding the end of bank secrecy and tax havens!

Many large-cap US corporations have headquarters or subsidiaries based in tax havens. For example: McDonalds recently moved to Switzerland. Moreover, it is possible for a hedge fund to own an offshore bank. For example: the highly secretive hedge fund Cerberus owns Bawag, an Austrian bank, as well as a majority shareholder stake in Chrysler and GMAC. If questioned, would Bawag reveal information regarding any accounts held by a stakeholder of Cerberus?

Just how big is the offshore banking industry? The OECD estimates that assets held by the offshore banking industry might be as high as $11.5 trillion. Little wonder U.S. banks are having trouble lending money and no big surprise the European legal community claims to have no objection to Article 26.

Bank secrecy is alive and well! No question mark necessary. It just got a bit more expensive and devious. It is high time someone made the announcement: we have officially entered the ‘Age of Stealth Wealth’!

To learn more about Hidden Treuhand and what role it is playing in the financial crisis, bank secrecy, bailouts, globalization, the privatization of Iraq, and your financial security, please read: Hidden Treuhand: How Corporations and Individuals Hide Assets and Money

Available direct from publisher and Amazon and Barnes and Noble

Boeing Unsure of Timeline of 787 Fix and Flight

Boeing doesn’t know yet how long 787 fix will take
By Dominic Gates
Seattle Times aerospace reporter
When might the 787 Dreamliner fly and what’s the cost to fix it and get it in the air?
That was the big question dominating an early-morning earnings teleconference Wednesday between Boeing CEO Jim McNerney and Wall Street analysts, who expressed concern about the new jet program’s profitability.
McNerney said Boeing is still assessing how long it will take to fix the structural flaw that has grounded the jet. The company won’t have a new schedule or an estimate of the added costs until “later this quarter,” he said.
That extends the time frame for providing answers. A month ago, Boeing said it hoped to have a new schedule for first flight and delivery within “several weeks.”
“We are working through this matter as quickly as we can but will not sacrifice quality for expediency on such an important effort,” McNerney said.
The focus on the 787 meant that Boeing’s buoyant quarterly earnings got scant attention during the conference call.
Its second-quarter profit rose 17 percent to just shy of $1 billion on revenue of $17 billion.
Boeing has about $5 billion in cash on hand, and profit margins were healthy at about 10 percent in both the defense and commercial-airplane divisions. In the midst of a steep and broad economic downturn, it maintained its financial forecast for the year.
And despite more than 70 jet-order deferrals in the last three months, and the announced cut in 777 output next year, McNerney said he expects to hold 737 production steady in Renton.
But the good news was overshadowed by worries over the 787. McNerney offered what reassurance he could.
He said Boeing has identified and analyzed the structural problem at the wing-to-body join, duplicated it on a computer model and selected a preferred solution.
The hangup, he said, is that it’s difficult to implement the fix — especially on those planes already built — because of the inaccessibility of the place inside the wing where the modification has to be made.
In addition, he said, Boeing engineers are using “an abundance of caution” to ensure other stress issues are not created by the modification.
A Seattle Times story published Wednesday before the earnings release cited two engineers who identified the problem as delamination of the composite-plastic material at a stress point at the end of the long rods, called stringers, used to stiffen each wing.
The engineers estimated that the fix could delay first flight four to six months even if the fix works, potentially pushing first flight into 2010.
When asked directly about that prediction during the conference call, McNerney stuck to his answer that no new schedule is yet available.
The engineers cited in the Times story described the Boeing fix as a redesign at the wing-to-body join that involves only a handful of additional parts at the end of each stringer, but is nevertheless complex to implement.
McNerney emphasized that the problem is limited to the join and that the whole wing doesn’t need a redesign.
“There is nothing we have learned to lead us to believe that this is anything but a local issue, which can be addressed with a local fix,” McNerney said.
Boeing also punted on the financial impact of the new 787 delay, saying the answer cannot be known until the new plan is determined.
On the earnings call, Barclays Capital analyst Joe Campbell asked Chief Financial Officer James Bell the question in plain English:
“Are you sure that you’re not losing money on this thing?”
The concern is that Boeing, despite the huge order book for 850 Dreamliners, may not be able to make enough money on each plane to recover over time all the added costs piling up: the extra research and development needed to solve the current problems, the late penalties that will have to be paid to customers and suppliers, and the cost of holding all the expensive inventory for months longer without any income.
Bell disclosed that Boeing has in its inventory almost $8 billion worth of 787 structures work — completed and partially built airplanes — for which it can receive no income until the jets are delivered to customers. He said this 787 work-in-progress inventory is growing at a rate of $800 million per quarter.
In response to Campbell, Bell conceded that the new 787 delay “puts pressure on the profitability of this program.”
“We’ve always been concerned with the cumulative impact of the schedule delays and the pressure it puts on cost,” Bell said.
“We also have been concerned with the delays to our customers and how that converts to penalties or the settlements we have to work through with them.”
But Bell said Boeing expects to create efficiencies over the expected long production run of the 787 that will reduce costs and increase profit per plane to cover all the extra expenses.
“We still believe the program to be profitable,” Bell said.
In an interview later, Campbell said that in rough numbers, using the figures released Wednesday, Boeing will have spent up to $13 billion on inventory buildup by the time it starts delivering the 787s. It has maybe an additional $8 billion to $10 billion sunk into research and development, and it’s on the hook for a few billion dollars more in customer and supplier penalties.
Campbell estimates that the overrun on costs attributable to the delays up until now is around $6 billion.
But that doesn’t include the additional costs being incurred due to the wing-to-body flaw.
Dominic Gates: 206-464-2963 or dgates@seattletimes.com

More Boeing Layoffs; most in Defense

Boeing hands out layoff notices, most of them in defense

Link to Seattle Post Intelligencer:  http://blog.seattlepi.com/aerospace/archives/173941.asp

Chicago-based The Boeing Co. on Friday plans to issue about 600 layoff notices to warn employees about job cuts effective Sept. 18.

The 600 notices include about 100 in Puget Sound area. Just 80 of the notices are in Boeing’s commercial airplanes division and most of those are in Puget Sound.

The numbers indicate that Boeing’s defense unit will be harder hit.

The layoffs are part of Boeing’s plan to eliminate 10,000 positions this year. Earlier this week, Boeing indicated that it would lay off 1,000 people in its defense unit. It’s still not clear whether those 1,000 are in addition to, or part of, the 10,000 previously announced cuts.

Boeing is in a legal “quiet period” in advance of its earnings announcement next Wednesday.

Previously:

• Pentagon budget cuts means Boeing to cut 1,000 defense jobs (memo)
• Boeing layoff round: 250 company-wide, 150 in Puget Sound

 

Posted by Andrea James at July 17, 2009 5:00 a.m.

Boeing and Lockheed Team Up on New Bomber

Here is another one someone sent me this evening.  I hear from many who are quite jaded about the integrity of defense contractors lately.   I suppose understanding what “capturing the best of industry” means, requires taking into account other stories posted here from the news media.  It appears to me that means they will team up to squelch competition and their competitors, and they will continue to buy up small companies, any that have a product or process that is new, original, and works, so the big two can continue to control the industry and reap the big bucks for any contracts that are awarded.  I believe they see themselves as middle-man contract administrators.

 -GFS

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G. Florence-

Capture the best of industry… legally?

 —————————————————————————————————————DarkGovernment

Boeing’s And Lockheed’s Bomber For 2018

 

August 24th, 2008 Posted in Technology

 2018 Bomber

 

The Boeing Company and Lockheed Martin have teamed to perform studies and system development efforts including collaborative research and development in pursuit of the anticipated U.S. Air Force 2018 Bomber program.

 

This collaborative effort for a long-range strike program (Possibly the B-3) will include work in advanced sensors and future electronic warfare solutions including advancements in network enabled battle management, command and control, and virtual warfare simulation and experimentation.

 

Boeing and Lockheed Martin are working closely at all levels to capture the best of industry to develop and provide an effective and affordable solution for the warfighter. The work performed by the Boeing/Lockheed Martin team is designed to help the Air Force establish capability-based roadmaps for technology maturation and date certain timelines for the 2018 Bomber program.

 http://www.darkgovernment.com/news/boeings-and-lockheeds-bomber-for-2018/

Local and Regional Newspapers: The Struggle to Continue to Exist

It seems like newspapers everywhere have been struggling to prevail lately, and some are stopping the presses and closing their doors.    Times like these create opportunity and motivation sometimes to cross some lines that should not be crossed.  Here are a couple of stories of interest, one from Washington State describing the struggles of these news organizations and what one state is doing to try to bail them out, and one from Washington, District of Columbia  describing the ethical and legal morass one paper (The Washington Post),  found itself in by crossing that line.   –GFS

 

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Newspapers in WA get tax break during bad times 

By RACHEL LA CORTE – 1 day ago

 

OLYMPIA, Wash. (AP) — As newspapers across the country struggle through a brutal economic climate, papers in Washington State are getting a tax break.

A new law that gives newspaper printers and publishers a 40 percent cut in Washington’s main business tax took effect this week, providing some much-needed relief to the business after a year in which The Seattle Post-Intelligencer printed its final edition and other papers suffered drastic cutbacks.

“It’s not a bailout, because it’s not enough money,” said House Majority Leader Lynn Kessler, the Democrat who sponsored the measure. “But it is our way of saying to the newspapers that we do believe you’re incredibly important to our state and our democracy.”

The Society of Professional Journalists and the National Conference of State Legislatures was not aware of any other state that has granted a similar tax break to the newspaper industry.

In Michigan, a bill that was introduced in May would exempt newspapers from paying that state’s main business tax, but the bill has not yet had a hearing. And several states, including Mississippi, Idaho and Colorado, have existing sales-tax exemptions for newspapers.

The Washington tax cut, which will cost the state about $1.3 million a year, was approved despite uneasiness in the industry about newspapers relying on the government they cover for help.

But there was also recognition that these are historic times for the industry.

Newspapers across the country have resorted to layoffs, pay cuts, furloughs and other cost cutting moves to deal with a wounded business model and a recession-fueled drop in advertising.

The Post-Intelligencer was converted to an Internet-only publication with a much-reduced staff, and The Seattle Times — the only mainstream daily left in the state’s largest city — has had severe financial troubles of its own and has cut 500 positions in the past year.

Gov. Chris Gregoire called the decision to stop printing the 146-year-old P-I a “huge historical loss.”

Gregoire said that while the tax break won’t cure all that ails newspapers, she felt the state needed to do something.

“The industry has to right itself, and government can’t and won’t be a part of it righting itself,” she said. “But I don’t want government to be part of the reason that this industry can’t make it.”

In May, the company that publishes The Columbian filed for Chapter 11 bankruptcy protection in an effort to resolve credit issues involving a building project.

Publisher Frank Blethen said things have improved slightly for his newspaper since earlier this year, when he testified in support of the tax break and said that “we’re hanging on by our fingertips.”

“We’re probably hanging on by our fingers now,” Blethen said. “The tangible result is with all the pressure on budgets and all the red ink right now, anything that helps dampen that means that there’s going to be fewer reporters laid off, and less content reduction. It’s not big enough to take a lot of pressure off, but it helps.”

The News Tribune of Tacoma publisher Dave Zeeck said that the approximate $100,000 a year in savings his newspaper will see is the equivalent of keeping two reporters on staff for a year.

“We are doing everything we can to preserve news content, and this certainly helps,” he said, noting that they are still paying about $150,000 in state business and occupation taxes even after the cut.

Washington state’s tax cut is to the state’s business and occupation tax, which is based on gross revenues instead of profit. Washington is one of just a handful of states that does not have a state income tax. The law provides newspapers the same discounted rate given to the aerospace industry, including Boeing Co., and the timber industry.

But media watchers are quick to point out that those other industries have a different relationship with the government than newspapers.

“It makes me a little nervous,” said Dave Aeikens, president of the Society for Professional Journalists. “There needs to be a clear separation between the government and the watchdog role of the press. If it looks like there’s any type of tie, then the public’s not going to trust the press.”

Publishers say that line is not in jeopardy.

“We’re very good at separating our opinions from our news coverage,” said Michael Shepard, publisher of the Yakima Herald-Republic. “We’ve been doing that for hundreds of years. It wasn’t our reporters and editors who were asking for this relief.”

Rufus Woods, publisher and editor of the family-owned Wenatchee World, said he didn’t personally push for the tax cut because he didn’t think it was enough to make a difference, and that with the state’s current financial troubles, “I didn’t think it was a good year to do it.”

“I don’t think it’s up to the government to make us survive,” he said. “We need to figure out how to make that happen. We’re like any other business. We need to find new ways to do things.”

 

 

 

Some Choice Words for “The Select Few”

Link:  http://www.truthout.org/071209A

Sunday 12 July 2009

by: Bill Moyers and Michael Winship, t r u t h o u t | Perspective

 

    If you want to know what really matters in Washington, don’t go to Capitol Hill for one of those hearings, or pay attention to those staged White House “town meetings.” They’re just for show. What really happens – the serious business of Washington – happens in the shadows, out of sight, off the record. Only occasionally – and usually only because someone high up stumbles – do we get a glimpse of just how pervasive the corruption has become.

    Case in point: Katharine Weymouth, the publisher of The Washington Post – one of the most powerful people in DC – invited top officials from the White House, the Cabinet and Congress to her home for an intimate, off-the-record dinner to discuss health care reform with some of her reporters and editors covering the story.

    But CEOs and lobbyists from the health care industry were invited, too, provided they forked over $25,000 a head – or up to a quarter of a million if they want to sponsor a whole series of these cozy get-togethers. And what is the inducement offered? Nothing less, the invitation read, than “an exclusive opportunity to participate in the health-care reform debate among the select few who will get it done.”

    The invitation reminds the CEO’s and lobbyists that they will be buying access to “those powerful few in business and policy making who are forwarding, legislating and reporting on the issues …

    “Spirited? Yes. Confrontational? No.” The invitation promises this private, intimate and off-the-record dinner is an extension “of The Washington Post brand of journalistic inquiry into the issues, a unique opportunity for stakeholders to hear and be heard.”

    Let that sink in. In this case, the “stakeholders” in health care reform do not include the rabble – the folks across the country who actually need quality health care but can’t afford it. If any of them showed up at the kitchen door on the night of this little soiree, the bouncer would drop kick them beyond the Beltway.

    No, before you can cross the threshold to reach “the select few who will actually get it done,” you must first cross the palm of some outstretched hand. The Washington Post dinner was canceled after a copy of the invite was leaked to the web site Politico.com, by a health care lobbyist, of all people. The paper said it was a misunderstanding – the document was a draft that had been mailed out prematurely by its marketing department. There’s noblesse oblige for you – blame it on the hired help.

    In any case, it was enough to give us a glimpse into how things really work in Washington – a clear insight into why there is such a great disconnect between democracy and government today, between Washington and the rest of the country.

    According to one poll after another, a majority of Americans not only want a public option in health care, they also think that growing inequality is bad for the country, that corporations have too much power over policy, that money in politics is the root of all evil, that working families and poor communities need and deserve public support if the market system fails to generate shared prosperity.

    But, when the insiders in Washington have finished tearing worthy intentions apart and devouring flesh from bone, none of these reforms happen. “Oh,” they say, “it’s all about compromise. All in the nature of the give-and-take-negotiating of a representative democracy.”

    That, people, is bull – the basic nutrient of Washington’s high and mighty.

    It’s not about compromise. It’s not about what the public wants. It’s about money – the golden ticket to “the select few who actually get it done.”

    When Congress passed the Helping Families Save Their Homes Act, “the select few” made sure it no longer contained the cramdown provision that would have allowed judges to readjust mortgages. The one provision that would have helped homeowners the most was removed in favor of an industry that pours hundreds of millions into political campaigns.

    So, too, with a bill designed to protect us from terrorist attacks on chemical plants. With “the select few” dictating marching orders, hundreds of factories are being exempted from measures that would make them spend money to prevent the release of toxic clouds that could kill hundreds of thousands.

    Everyone knows the credit ratings agencies were co-conspirators with Wall Street in the shameful wilding that brought on the financial meltdown. But when the Obama administration came up with new reforms to prevent another crisis, the credit ratings agencies were given a pass. They’d been excused by “the select few who actually get it done.”

    And by the time an energy bill emerged from the House of Representatives the other day, “the select few who actually get it done” had given away billions of dollars worth of emission permits and offsets. As The New York Times reported, while the legislation worked its way to the House floor, “It grew fat with compromises, carve-outs, concessions and out-and-out gifts,” expanding from 648 pages to 1,400 as it spread its largesse among big oil and gas, utility companies and agribusiness.

    This week, the public interest groups Common Cause and the Center for Responsive Politics reported that, “According to lobby disclosure reports, 34 energy companies registered in the first quarter of 2009 to lobby Congress around the American Clean Energy and Security Act of 2009. This group of companies spent a total of $23.7 million – or $260,000 a day – lobbying members of Congress in January, February and March.

    “Many of these same companies also made large contributions to the members of the Senate Environment and Public Works Committee, which has jurisdiction over the legislation and held a hearing this week on the proposed ‘cap and trade’ system energy companies are fighting. Data shows oil and gas companies, mining companies and electric utilities combined have given more than $2 million just to the 19 members of the Senate Environment and Public Works Committee since 2007, the start of the last full election cycle.”

    It’s happening to health care as well. Even the pro-business magazine The Economist says America has the worst system in the developed world, controlled by executives who are not held to account and investors whose primary goal is raising share price and increasing profit – while wasting $450 billion dollars in redundant administrative costs and leaving nearly 50 million uninsured.

    Enter “the select few who actually get it done.” Three out of four of the big health care firms lobbying on Capitol Hill have former members of Congress or government staff members on the payroll – more than 350 of them – and they’re all fighting hard to prevent a public option, at a rate in excess of $1.4 million a day.

    Health care policy has become insider heaven. Even Nancy-Ann DeParle, the White House health reform director, served on the boards of several major health care corporations.

    President Obama has pushed hard for a public option but many fear he’s wavering, and just this week his chief of staff Rahm Emanuel – the insider di tutti insiders – indicated that a public plan just might be negotiable, ready for reengineering, no doubt, by “the select few who actually get it done.”

    That’s how it works. And it works that way because we let it. The game goes on and the insiders keep dealing themselves winning hands. Nothing will change – nothing – until the moneylenders are tossed out of the temple, the ATM’s are wrested from the marble halls, and we tear down the sign they’ve placed on government – the one that reads, “For Sale.”

 

Bill Moyers is managing editor and Michael Winship is senior writer of the weekly public affairs program, Bill Moyers Journal, which airs Friday nights on PBS. Check local airtimes or comment at The Moyers Blog at www.pbs.org/moyers.

FBI Finds Possible Link of Serial-Killings and Long-Haul Truckers

From Truthout.org:

This is very disturbing.  Anyone doubt why women traveling alone should be armed and well-trained? 

If  you are not currently able to protect yourself and you wish to arm yourself, you should contact the nearest gun range or weapons retailer and find out where you may take basic gun safety and self-defense with a weapon classes.  You will receive expert training in the class and in most cases, structured range time to learn how to physically fire and manage the weapons.  Some class locations allow you to try out a variety of firearms so you may decide on which type and model you wish to purchase.   It is not necessary in many cases to own a firearm before taking the initial class, nor is it required to purchase a gun at the class.  Look in the yellow pages, or online for locations of ranges, arms collectors groups,  and retail gun shops. 

-GFS

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FBI Database Links Long-Haul Truckers, Serial Killings

by: Scott Glover  |  Visit article original @ The Los Angeles Times

 The growing database includes more than 500 female victims, most of whom were killed and their bodies dumped at truck stops, motels and other spots along popular trucking routes crisscrossing the US.

    The FBI suspects that serial killers working as long-haul truckers are responsible for the slayings of hundreds of prostitutes, hitchhikers and stranded motorists whose bodies have been dumped near highways over the last three decades.

    Federal authorities first made the connection about five years ago while helping police link a trucker to a string of unsolved killings along Interstate 40 in Oklahoma and several other states. After that, the FBI launched the Highway Serial Killings Initiative to track suspicious slayings and suspect truckers.

    A computer database maintained by the FBI has grown to include information on more than 500 female crime victims, most of whom were killed and their bodies discarded at truck stops, motels and other locations along popular trucking routes crisscrossing the U.S.

    The database also has information on scores of truckers who’ve been charged with killings or rapes committed near highways or who are suspects in such crimes, officials said. Authorities said they do not have statistics on whether driving trucks ranks high on the list of occupations of known serial killers.

    But the pattern in roadside body dumps and other evidence has prompted many investigators to speculate that the mobility, lack of supervision and access to potential victims that come with the job make it a good cover for someone inclined to kill.

Red dots on map (supplied by the FBI) show locations of hundreds of bodies and human remains discovered along highways over three decades. (Map: FBI)

    “You’ve got a mobile crime scene,” one investigator said. “You can pick a girl up on the East Coast, kill her two states away and then dump her three states after that.”

    Although some local police agencies have been briefed on the program, the FBI had not publicized its existence outside law enforcement until earlier this year, when officials agreed to show The Times the inner workings of the operation and share details of some of their cases.

    Housed in a nondescript brick building on the outskirts of Washington, D.C., FBI analysts pore over reports and computer entries looking for patterns in slayings from California to Connecticut.

    Since the program began, more than two dozen killings have been solved, authorities said.

    Michael Harrigan, who oversees the Highway Serial Killings Initiative, said the program helps local police “connect the dots” to slayings outside their jurisdictions. He said most of the victims led high-risk lifestyles that left them particularly vulnerable.

    “We don’t want to scare the public and make it seem like every time you stop for gas you should look over your shoulder,” Harrigan said. “Many of these victims made poor choices, but that doesn’t mean they deserved to die.”

    Though most of the entries in the database pertain to unsolved slayings, cases that authorities consider “cleared,” or solved, remain in it so that investigators may potentially link additional crimes to a known perpetrator. There are also entries on sexual assaults and missing-person cases linked to highway locations. FBI officials declined to provide The Times with a more detailed breakdown of the database’s contents.

    The program’s success depends largely on local police departments’ voluntarily providing data on seemingly random killings, sexual assaults and other violent crimes to the FBI, where it is stored in a massive computer database. FBI analysts can query the computer to spot patterns that might otherwise go unnoticed.

    This was exactly the kind of help Terri Turner was looking for when she turned to the FBI in early 2004. Turner, a senior criminal intelligence analyst with the Oklahoma Bureau of Investigation, was working on a string of seven slayings along I-40 in which the victims were truck-stop prostitutes who had been killed and left at roadside locations.

    Turner’s inquiry was given to an analyst with the FBI’s Violent Criminal Apprehension Program, which maintains the agency’s crime database. The analyst found that the database contained more than 250 cases of roadside female crime victims, many of them bearing enough similarities to suggest patterns in the violence. Subsequent searches and Internet research bumped the number to 350. As a result, bureau officials created a separate computer database to track such crimes and assigned an analyst to work full time on the serial killer program.

    Later that year, Turner’s suspected killer was identified as John Robert Williams, a 28-year-old trucker.

    Williams and his girlfriend had kidnapped a woman from a casino in Mississippi, killed her and dumped her body along a rural county road, authorities said. Concerned that they’d been seen leaving the casino with the victim, Williams’ girlfriend panicked and called police, telling them that she and Williams had found the body. Their story quickly unraveled, and the pair were arrested for murder.

    During subsequent interrogations, police said Williams confessed to more than a dozen slayings – including many of the cases Turner had been investigating. He had detailed knowledge of how the crimes had been committed, such as whether the women were killed by manual strangulation or with the use of a ligature, according to authorities. He explained how some had been sexually assaulted, in some cases after they were dead, they said.

    Williams knew, for example, that one victim, Buffie Rae Brawley, had the word “Ebony” tattooed on her right thigh, investigators said. And he knew that the truck-stop prostitute had deep lacerations on her head, which he said she suffered when he struck her with a “tire thumper,” a trucker’s tool used to bounce off truck tires to gauge their pressure.

    Police said Williams told them that Brawley solicited him for sex at a truck stop in Indianapolis.

    “The second she tapped on my window, she was a dead woman,” one investigator quoted the trucker as saying.

    Williams has since recanted his confession, and there is no DNA linking him to any of the slayings. But Sgt. Larry Hallmark of the Grapevine, Texas, Police Department said he and other investigators do not believe that Williams’ confession was bogus.

    “He actually bragged that we wouldn’t find any DNA because he didn’t have sex with them in the traditional sense,” said Hallmark, who interviewed Williams several times and has submitted a potential death penalty case to the district attorney in his county outside Dallas.

    Hallmark said investigators from other jurisdictions “are kind of waiting in line” to see what happens with his case.

    The investigator of Brawley’s death is among them.

    “We’re about 10th in line,” said Capt. Clarke Fine of Hendricks County, Ind. “I figure if Texas fries him, we’re good.”

    Spotting Patterns

    For the most part, the FBI analysts assigned to the serial killer program have spent their time combing through crime data that is months or even years old for patterns that might link slayings to one another or to a suspect. But occasionally, they have spotted patterns as they were actually occurring. That was the case two years ago when authorities noticed that dead prostitutes who had been shot with a .22-caliber gun were being found along highways in Georgia and Tennessee.

    The body of one victim, Sara Hulbert, was found behind a truck stop in Nashville.

    Sgt. Pat Postiglione, a veteran homicide investigator with the Nashville Police Department, was assigned the case. He called the FBI and learned that Hulbert’s killing fit a pattern of recent slayings and might have been the work of serial killer, something he’d already suspected.

    With little to go on, he and another detective began reviewing videotape taken at the Truck Stops of America site in downtown Nashville where the victim had been found. It was mind-numbing stuff: big rigs pulling in and out of one of the busiest truck stops in the state, like planes taking off and landing at LAX.

    The only thing that caught Postiglione’s eye was a yellow 18-wheeler that seemed to come and go within about 30 minutes. The interval seemed short compared with that of other truckers, who spent at least an hour – or even several – as they fueled up, ate and maybe slept for a while.

    As leads go, it was pretty thin. But then the detective got lucky. As Postiglione approached the truck stop the morning after watching the tape, he said, he saw what he thought was the yellow rig heading toward a nearby area of East Nashville known for prostitution.

    Postiglione said he followed as the driver slowly wheeled his truck down streets lined with warehouses, budget motels and liquor stores. After a few minutes, the driver returned to the truck stop and parked, he said.

    His curiosity piqued, Postiglione approached the driver’s door and knocked. After a few seconds, a disheveled-looking man emerged from the cab, the detective said.

    His name was Bruce Mendenhall. He was of average height and build with a sort of pinched face. His shirt was unbuttoned and he wore no shoes. As Postiglione sized him up, he said he noticed a speck of blood on the man’s thumb and what he thought were several corresponding drops on the driver’s door of the truck.

    Though there could have been many reasonable explanations for the blood, Postiglione said, he was suspicious.

    “Something – I don’t know if it was instinct or whatever – was telling me, ‘Don’t let this guy leave before I look in his truck,’ ” the detective recalled.

    According to Postiglione, Mendenhall calmly agreed to submit to a DNA swab and signed a consent form granting the detective permission to search the truck.

    The officer said he stepped up into the cavernous cab, large enough to stand up in and walk around. He took a couple of steps into the sleeper compartment and sat down on the bed. To his left, behind the driver’s seat, was a plastic bag. In it was some women’s clothing covered in blood, he said. Also recovered from the cab were a cellphone and an ATM card belonging to a young woman who had gone missing in Indianapolis just 12hours earlier, authorities said. She has not been heard from since and is presumed dead.

    By the time crime-scene technicians were finished with the cab, authorities have said, they had found blood or DNA linking Mendenhall to at least seven victims. He has since been charged with four slayings, officials said. Mendenhall has pleaded not guilty and is awaiting trial in Nashville.

    Postiglione said the timeline the FBI put together showed that the intervals between killings were getting shorter and shorter.

    “He was spiraling out of control,” the detective said.

    Other Targets

    Not all the victims attributed to alleged serial killer truck drivers have been prostitutes whose work made them easy targets. About a month after Mendenhall’s arrest, another long-haul trucker, Adam Leroy Lane, parked his rig in a suburban Boston neighborhood and slipped through an unlocked door into the home of Kevin and Jeannie McDonough.

    The McDonoughs were lying in bed when they heard a whimper from the adjacent bedroom where their 15-year-old daughter, Shea, had been sleeping. They went to see what was wrong and found a masked figure holding a knife to their daughter’s throat. Kevin McDonough, a slight but muscular utility contractor, grabbed the intruder, applied a chokehold and wrestled him to the floor. His wife grabbed the knife.

    When police arrived, they discovered that Lane was armed with three knives, a length of wire and a martial arts throwing star. In the cab of his truck was a DVD titled “Hunting Humans,” about a serial killer.

    A Massachusetts state trooper who earlier that year had attended an FBI presentation in Reno about the serial killer program sent an e-mail to the bureau.

    “I just want to make sure this guy is on your radar,” the trooper wrote.

    That message ultimately led to Lane’s being connected to slayings in two other states, for which he is awaiting trial. He pleaded guilty to the Massachusetts charges and was sentenced to 50 years in state prison.

    J. Patrick Barnes, a New Jersey prosecutor who charged Lane with one of the murders, said the FBI was instrumental in helping solve his case.

    “We’re so busy looking at cases in our own towns, our own counties and our own regions that we sometimes miss what’s going on around us,” Barnes said.

    “You can’t connect the dots if you don’t know what the dots are.”

    Access to a Database

    Hanging in a cubicle in the FBI office near Quantico, Va., is a map of the United States. It’s covered in red dots representing some of the 500-plus cases in the Highway Serial Killings Initiative database. For all the crimes they represent, FBI supervisory agent John Molnar said he thinks the number of such offenses has been “grossly underreported.”

    Molnar said he hopes that will change in the wake of a decision last year to make the database available to law enforcement officials online, allowing police with a password to submit case information and make their own queries.

    Though many of the dots on the map now appear connected to one another by similarities – such as the killers’ modes of operation – the vast majority are not connected to any known suspect.

    They are potential serial slayings waiting to be solved, the FBI says.

    One involves the 2005 discovery of a decomposing human leg by ATV riders roaring through the woods near Interstate 55 in central Illinois. Painted toenails suggested that the leg, and another discovered nearby, belonged to a woman. But with little else to go on, the case went cold.

    Three years later, an FBI analyst used a partial tattoo on one of the legs to help state police link the remains to Lindsay Harris, a 21-year-old call girl who had vanished from the Las Vegas Strip – some 1,400 miles away – about two weeks before the limbs were found.

    She was the third Las Vegas sex worker whose dismembered remains were found along a highway from 2003 to 2005, prompting authorities to speculate that a trucker or someone else who frequents the highways was responsible for the slayings.

    A fourth young woman who disappeared from the Strip and is presumed dead is also thought be part of the pattern. Her remains have not been recovered.

    Mike Jennings, the Illinois State Police special agent who worked with the FBI to identify Harris’ remains, said he plans to retire in a couple of years and that the case of the fourth woman will weigh heavily on his mind if it remains unsolved.

    “My gut feeling,” Jeninngs said, “is that it’s a trucker.”

 

Spitzer and Molinski on AIG and the Bailout

Here is another set of articles  from Truthout with links to the originals.

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Opinion

The Real AIG Scandal

Tuesday 17 March 2009

by: Eliot Spitzer  |  Visit article original @ Slate Magazine

Former US Treasury Secretary Henry Paulson (pictured), then-New York Fed official Timothy Geithner, Goldman Sachs CEO Lloyd Blankfein and Fed Chairman Ben Bernanke made the initial decision to bail out AIG. (Photo: Elizabeth Dalziel / AP)

    It’s not the bonuses. It’s that AIG’s counterparties are getting paid back in full.

    Everybody is rushing to condemn AIG’s bonuses, but this simple scandal is obscuring the real disgrace at the insurance giant: Why are AIG’s counterparties getting paid back in full, to the tune of tens of billions of taxpayer dollars?

    For the answer to this question, we need to go back to the very first decision to bail out AIG, made, we are told, by then-Treasury Secretary Henry Paulson, then-New York Fed official Timothy Geithner, Goldman Sachs CEO Lloyd Blankfein, and Fed Chairman Ben Bernanke last fall. Post-Lehman’s collapse, they feared a systemic failure could be triggered by AIG’s inability to pay the counterparties to all the sophisticated instruments AIG had sold. And who were AIG’s trading partners? No shock here: Goldman, Bank of America, Merrill Lynch, UBS, JPMorgan Chase, Morgan Stanley, Deutsche Bank, Barclays, and on it goes. So now we know for sure what we already surmised: The AIG bailout has been a way to hide an enormous second round of cash to the same group that had received TARP money already.

Also see below:     
Hedge Funds May Be Getting a Bailout via AIG’s Payments    •

    It all appears, once again, to be the same insiders protecting themselves against sharing the pain and risk of their own bad adventure. The payments to AIG’s counterparties are justified with an appeal to the sanctity of contract. If AIG’s contracts turned out to be shaky, the theory goes, then the whole edifice of the financial system would collapse.

    But wait a moment, aren’t we in the midst of reopening contracts all over the place to share the burden of this crisis? From raising taxes – income taxes to sales taxes – to properly reopening labor contracts, we are all being asked to pitch in and carry our share of the burden. Workers around the country are being asked to take pay cuts and accept shorter work weeks so that colleagues won’t be laid off. Why can’t Wall Street royalty shoulder some of the burden? Why did Goldman have to get back 100 cents on the dollar? Didn’t we already give Goldman a $25 billion capital infusion, and aren’t they sitting on more than $100 billion in cash? Haven’t we been told recently that they are beginning to come back to fiscal stability? If that is so, couldn’t they have accepted a discount, and couldn’t they have agreed to certain conditions before the AIG dollars – that is, our dollars – flowed?

    The appearance that this was all an inside job is overwhelming. AIG was nothing more than a conduit for huge capital flows to the same old suspects, with no reason or explanation.

    So here are several questions that should be answered, in public, under oath, to clear the air:

·  What was the precise conversation among Bernanke, Geithner, Paulson, and Blankfein that preceded the initial $80 billion grant?

·  Was it already known who the counterparties were and what the exposure was for each of the counterparties?

·  What did Goldman, and all the other counterparties, know about AIG’s financial condition at the time they executed the swaps or other contracts? Had they done adequate due diligence to see whether they were buying real protection? And why shouldn’t they bear a percentage of the risk of failure of their own counterparty?

·  What is the deeper relationship between Goldman and AIG? Didn’t they almost merge a few years ago but did not because Goldman couldn’t get its arms around the black box that is AIG? If that is true, why should Goldman get bailed out? After all, they should have known as well as anybody that a big part of AIG’s business model was not to pay on insurance it had issued.

·  Why weren’t the counterparties immediately and fully disclosed?

    Failure to answer these questions will feed the populist rage that is metastasizing very quickly. And it will raise basic questions about the competence of those who are supposedly guiding this economic policy.

    ——–

    Eliot Spitzer is the former governor of the state of New York.

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Hedge Funds May Be Getting a Bailout via AIG’s Payments

Wednesday 18 March 2009

by: Dow Jones  |  Visit article original @ Dow Jones

    New York – The fact that some payments made by American International Group Inc. (AIG) to hedge funds are coming from government bailout money raises a question: Are hedge funds receiving a de facto bailout?

    If the answer is yes, it would signify the first taxpayer money yet to reach hedge funds since the financial crisis began back in late 2007. Hedge funds – investment pools made up primarily of high net worth individuals, pension funds and university endowments – have suffered like most during the crisis, but have pointed out with pride that as of yet their industry hasn’t requested any government handouts.

    Officially, of course, any payments made by AIG to hedge funds wouldn’t change that fact. It was AIG that requested the bailout, not the hedge funds. The insurance giant is now simply meeting its contractual obligations.

    In some cases, AIG has already paid out fairly hefty amounts to hedge funds with U.S. taxpayer funds. AIG said in a press release Sunday that it paid $200 million each in “public aid” to Citadel Investment Group and Paloma Securities. These payments were made to settle short-term trades last year in which the hedge funds loaned AIG cash in exchange for bonds.

    Also, as reported Wednesday in The Wall Street Journal, AIG reportedly may be paying out many different hedge funds for bets in which the hedge funds waged that the housing market would crater against AIG’s bets that it would remain robust.

    It isn’t clear how much in total that hedge funds stand to gain through the AIG payments, but the payments call into question the government’s decision, whether out of haste or for any other reason, to allow the AIG bailout money to be dispersed to any counterparties, including hedge funds.

    “Taxpayer money is being paid to hedge funds by a Treasury that could have limited the payments to domestic banks but decided not to risk letting anyone big fail,” said John Coffee, a professor of securities law at Columbia University. “In short, everyone of importance is being protected.”

    Not all observers see a problem.

    While Edward Altman, a professor of finance at New York University’s Stern School of Business, questions the use of taxpayer funds to pay huge bonuses to AIG executives (another controversy surrounding the AIG bailout), he doesn’t see a problem with the hedge-fund payments.

    “The ‘bailout’ funds are doing exactly what they were intended to…pay off [ AIG’s] bills on a timely basis so as not to cause any further harm to the system,” he said. “Otherwise, what’s the purpose of the bailout? It should have been clear that this involves [payments to] hedge funds.”

    ——–

    By Dan Molinski, Dow Jones Newswires; 201-938-2245.