Articles on this Page
- 04/23/13--12:45: _Thoughts from our b...
- 04/23/13--10:53: _Gun groups, defense...
- 04/23/13--20:38: _Super PACs invest i...
- 04/24/13--03:03: _New therapy proves ...
- 04/24/13--09:25: _Graham's campaign c...
- 04/24/13--14:42: _Pentagon claims $75...
- 04/24/13--09:12: _Cook County sparks ...
- 04/24/13--14:57: _Finnish finance min...
- 04/25/13--11:51: _Opening of Bush lib...
- 04/25/13--09:30: _Workplace deaths up...
- 04/25/13--09:32: _Lobbyists make it r...
- 04/26/13--07:55: _Real estate mogul b...
- 04/26/13--10:43: _EU continues to see...
- 04/26/13--12:54: _Center journalists ...
- 04/29/13--06:47: _OPINION: insurers h...
- 04/29/13--06:36: _New urgency targets...
- 04/29/13--13:45: _OSHA strengthens pr...
- 04/29/13--14:11: _Environmental nonpr...
- 04/30/13--03:03: _JPMorgan Chase’s re...
- 04/30/13--06:46: _California lawmaker...
- 04/23/13--12:45: Thoughts from our board chair, Bruce Finzen
- 04/23/13--10:53: Gun groups, defense contractors buck downward trend in lobbying
- 04/23/13--20:38: Super PACs invest in D.C. Council race
- 04/24/13--03:03: New therapy proves effective for juvenile sex offenders
- 04/24/13--09:25: Graham's campaign collects bundle from lobbyists
- 04/25/13--09:30: Workplace deaths up slightly in 2011
- 04/25/13--09:32: Lobbyists make it rain for Democrats
- The European Commissioner on Taxation Algirdas Šemeta and Irish Finance Minister Michael Noonan sent a letter to all EU Finance Ministers, setting out seven key areas for immediate action in improving the fight against tax fraud, evasion and avoidance. Member States were asked to agree on these actions at a conference in May. The letter credits the offshore leaks investigation with "sharpening the focus" on tax fraud, and says it will ask ICIJ to supply names and details of European citizens from its data.
- Finance ministers and central bankers at the G20 meeting in Washington said in a communiqué that automatic exchange of tax-relevant bank information should be adopted as the global standard for overcoming international tax evasion. Skeptical European leaders reportedly "became more enthusiastic" after the public outcry over ICIJ's offshore leaks revelations.
- Transparency advocates, such as Global Financial Integrity, are hailing the recent announcement by British Prime Minister David Cameron, who called for members of the G-8 and the European Union to abolish so-called phantom firms. Cameron has also endorsed public registries of company ownership to “break through the walls of corporate secrecy” that facilitate tax dodging, money laundering and corruption. Battling tax evasion and avoidance is said to be a priority for the G-8 summit that the British Prime Minister will host in June.
- 04/29/13--06:47: OPINION: insurers hiding political spending
- 04/29/13--06:36: New urgency targets mysterious kidney disease in Central America
- 04/29/13--13:45: OSHA strengthens protections for temp workers
- 04/29/13--14:11: Environmental nonprofit makes big ad buy thanking senators
- 04/30/13--06:46: California lawmakers latest to consider limits for cops in schools
Recently, the Center for Public Integrity reported about several young men who suffocated to death in an Illinois grain storage facility. Not only did the story highlight the lack of safety precautions at a job site, it revealed a terribly broken national system that repeatedly puts the lives of workers at risk.
Within weeks, the story prompted calls for action from concerned citizens, an announcement about potential criminal charges against the employer by the U.S. Department of Justice, and OSHA’s pledge to review the workplace conditions of America’s grain workers. This type of impact is the heart of the Center’s work. But, they can’t do this type of investigative reporting without your support. And right now, I am offering to match every dollar you give, doubling your impact.
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The Hard Labor project revealed young workers who put their lives at risk to keep corn flowing in a bin. These individuals — some as young as 14 — should not have had to worry about inadequate and unsafe working conditions and die from the failure of the systems meant to protect them.
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Gun groups, defense contractors, oil companies and the world’s largest social network increased their spending on lobbying last quarter, bucking an overall downward trend, newly filed congressional disclosures show.
As debate over gun control raged in the Senate, the National Rifle Association, the National Shooting Sports Foundation and Mayors Against Illegal Guns each spent more on federal-level lobbying during the year’s first three months than in any previous quarter.
Raytheon, United Technologies and General Dynamics also fired up their lobbying machines from January to March, easily surpassing their spending from the same period one year ago as budget sequestration forced them to face down deep cuts to their bottom lines.
Northrop Grumman, at $5.8 million, posted its third biggest lobbying quarter in company history.
And Facebook’s $2.45 million in first-quarter lobbying expenses obliterated its previous quarterly record — $1.4 million during the final three months of 2012 — as it pressed lawmakers and governmental agencies on a variety of issues, from online advertising and privacy concerns to taxation and supporting visas and permanent residency for highly skilled foreign workers.
But those are exceptions.
About three-fifths of the nation’s 100 top lobbying organizations spent less on lobbying during the year’s first quarter than during the first quarter of 2012, a Center for Public Integrity analysis of congressional disclosure reports and Center for Responsive Politics data indicates.
A slight majority of them also spent less on lobbying from January through March than they did from October through December — a period on Capitol Hill marked by an election and a congressional recess-induced lull, interrupted by an end-of-the-year flurry of fiscal cliff activity.
This decline mirrors a recent trend in U.S. politics in which traditional lobbying spending, which experienced unbridled growth last decade, has recessed of late. Overall, fewer lobbyists are registering with the federal government, and some companies and special interests are diverting funds to government influence activity that doesn't necessarily fit Congress' definition of what constitutes formal lobbying activity.
The U.S. Chamber of Commerce this quarter retained its perennial perch atop the list of top lobbying spenders, although its collective first-quarter output ($16.8 million, when including affiliates) is dramatically down from recent quarters.
The Chamber spent nearly $26.4 million during last year’s first quarter. During the final quarter of last year, in spent more than $40.6 million, in large part because it ranks among a small group of lobbies that opt to disclose state- and grassroots-level lobbying (and sometimes political organizing) costs alongside federally focused efforts.
Attribute the recent drop-off to 2013 not being an election year, Chamber spokeswoman Blair Latoff Holmes said, noting that the nation’s largest trade group still spent heavily on its policyagenda to “generate stronger, more robust economic growth and create jobs.”
That, according to its disclosures, included lobbying implementation of the Dodd-Frank Wall Street reform law as well as the oversight capabilities of the newly created Consumer Financial Protection Bureau.
Google’s lobbying expenditures had been on a torrid pace of late, as the omnipresent Internet company jumped from $1.5 million during the first quarter of 2011 to $5.4 million during the first quarter of 2012. But it throttled back this past quarter, spending less than $3.4 million on a range of topics that include federal regulation of online advertising and consumer privacy.
Among the dozens of other prominent lobbies that spent less during the first quarter than they did during the same period last year: AT&T ($7.1 million to $4.3 million), General Electric ($5.7 million to $5.2 million), the American Hospital Association ($4.5 million to $3.8 million), Verizon Communications ($4.6 million to $3.7 million), Dow Chemical ($3.3 million to $2.7 million), drug maker Pfizer ($3.6 million to $2.9 million) and the American Bankers Association ($2.7 million to $1.6 million).
While many defense contractors experienced lobbying growth early this year, Boeing and Lockheed Martin experienced slight spending declines during the first quarter compared to the same period last year.
Of those that spent more, the National Association of Realtors ($6.1 million to $8.5 million) led all others in overall first quarter spending. But like the U.S. Chamber of Commerce, the Realtors report their lobbying activity broadly, and their first quarter spending was significantly down from the final three months of 2012, when it burned through nearly $15.5 million.
Many oil-related companies and associations also reported first-quarter lobbying spikes, including ExxonMobil ($4.2 million to $4.8 million), Koch Industries ($2.3 million to $2.6 million), Chevron ($3.2 million to $3.7 million), the American Petroleum Institute ($1.8 million to $2.1 million) and Occidental Petroleum ($1.6 million to $2.1 million).
The American Medical Association, CTIA-The Wireless Association, AARP, Altria, America’s Health Insurance Plans and the National Association of Manufacturers also recorded mild to moderate increases.
While not among the nation’s biggest lobbying spenders, the National Rifle Association spent $810,000 during the first three months of the year to lobby the federal government — the most ever during a first quarter.
The money appeared to be well spent, as Senate Republicans, aided by a few Democrats, blocked passage of all major gun control legislation championed by President Barack Obama and most of his partisan brethren.
Meanwhile, Mayors Against Illegal Guns spent a quarter-million dollars from January through March — five times what it typically does.
The organization, led by New York City Mayor Michael Bloomberg and Boston Mayor Tom Menino, never spent beyond $60,000 during a single quarter to lobby the federal government.
It's tough to be a Republican in the District of Columbia, even when armed with a sizable campaign war chest and auxiliary support from super PACs during a low-turnout special election.
Despite his own fundraising prowess and support from two independent political action committees, Republican Patrick Mara failed to oust incumbent Democrat Anita Bonds in today's at-large D.C. Council race.
With 100 percent of precincts reporting, Mara ranked third in the race behind Bonds and Democratic challenger Elissa Silverman. Bonds carried 32.2 percent of the vote, while Silverman won 27.6 percent and Mara earned 22.8 percent.
Mara — a former lobbyist whom the Washington Post, D.C. Chamber of Commerce and Sierra Club's D.C. chapter all endorsed — was the election season's sole beneficiary of super PAC cash, indicating that these committees best known for raising and spending massive amounts of cash at the federal level aren't above local races.
D.C. Office of Campaign Finance spokesman Wesley Williams told the Center for Public Integrity that there are just two independent expenditure-only committees registered with the city government. Both were active on Mara's behalf.
The National Association of Realtors' super PAC spent $20,200 touting Mara, city records indicate. And a super PAC called the D.C. Action Fund spent more than $13,500.
The D.C. Action Fund is headed by Nicholas Jeffress, a former executive director of the District of Columbia Republican Committee. Brett McMahon, the president of the construction firm Miller & Long D.C., Inc., ranked as the group's top donor — giving $10,000 of the $35,000 it reported raising through mid-April.
One mailer from the D.C. Action Fund praised Mara for his opposition to taxes and support for education reform. It also stated that Mara would "fix our broken campaign and election system," while his opponents "won't change anything" in a city that has been plagued by ethics scandals.
At the federal level, super PACs have proliferated in the wake of the 2010 U.S. Supreme Court's Citizens United v. Federal Election Commission ruling, which overturned an existing ban on corporate spending for or against candidates. Super PACs may collect contributions of unlimited size from individuals, unions, corporations or other groups to produce political advertisements that are not coordinated with candidates.
Bonds' candidacy was endorsed by the D.C. Democratic Party, the American Federation of State, County and Municipal Employees labor union and several local political heavyweights, including Marion Barry, the former D.C. mayor who now represents the 8th Ward in the southeastern portion of the nation's capital.
Silverman, a former journalist, was endorsed by the Washington City Paper and the popular Greater Greater Washington blog.
Both Bonds and Silverman were outraised by Mara, as well as Democrat Matthew Frumin, a lawyer and Advisory Neighborhood Commission representative.
Bonds collected about $137,000 in direct contributions during the campaign, according to a Center for Public Integrity analysis of campaign finance reports filed with the D.C. government. Mara raised about $151,000, and Frumin raised about $157,000 — more than any other candidate.
Silverman raised just shy of $90,000.
Today's contest was the result of a vacancy created when council member Phil Mendelson was elevated to the position of Council Chairman last year, after the resignation of Kwame Brown.
Last June, Brown pleaded guilty to a felony bank fraud charge. In 2011, he faced criticism after a request for a "fully loaded" black SUV — paid for with D.C. government funds at the time of a projected $400 million budget shortfall — came to light.
Mara, too, advocated for publicly financed city elections, banning outside employment for council members and eliminating constituent service funds, which he said have been abused as "unchecked slush funds."
However, Mara noted there were some campaign finance reforms that he couldn't support — such as barring government contractors and lobbyists from contributing.
"In light of Citizens United, no local or state system can completely eliminate the influence of corporate money," he said in response to one survey. "A discussion that does not include that reality is naive."
How big a difference can new evidence-based treatment methods make in the cases of juvenile offenders with mental health problems?
In Cook County, Illinois, juvenile court leaders decided to find out. Specifically, they agreed to participate in a randomized controlled experiment to test the impact of Multisystemic Therapy (MST) – a prominent new treatment methodology – against the court’s usual services for youth accused or adjudicated for juvenile sex offenses.
The study, published in 2009, involved 127 youth accused of sex offenses and ordered by the court to attend sex offender treatment. Sixty-seven were assigned to MST, and 60 were assigned to Cook County probation department’s existing juvenile sex offender unit and required to take part in weekly sex offender treatment groups.
The offenders’ mean age was 14.6 years (range 11 to 18 years). Most youth (98 percent) were male, 54 percent Black, 44 percent White, with 31 percent reporting Hispanic ethnicity. Their offenses included aggravated criminal sexual assault (31 percent), criminal sexual abuse (24 percent), criminal sexual assault (18 percent), and aggravated criminal sexual abuse (15 percent). Evaluators found no differences between youth in the MST and comparison groups in terms of their sexual offense records or demographics.
Youth assigned to MST received treatment at home and in community settings such as school, scheduled for the family’s convenience. Caregivers as well as the juvenile offender were included in the treatment, which was delivered by clinicians specifically trained on the MST model. MST focuses on giving parents the skills and resources they need to deal with difficulties commonly experienced while raising adolescents, and giving the juveniles the skills and resources to deal with problems both inside and outside the family. For the sex offender group, the MST model was tailored to address youth and caregiver denial of the offense, minimize the youths’ access to potential victims, and promote normative, age-appropriate sexual experiences with peers.
The Treatment as Usual (TAU) group received services primarily from personnel from the juvenile sexual offender unit of Cook County’s juvenile probation department. They attended weekly sex offender treatment groups of 8 to 10, for 60-minute sessions led by probation officers who had completed a certification course for treating juvenile sexual offenders. The sessions addressed issues such as victim empathy, deviant arousal, and cognitive distortions, with the goals of helping youth accept responsibility for their offenses, break the sexual offense cycle, and devise strategies to reduce the risks for recidivism.
Researchers collected data on problem sexual behavior, delinquency, substance use, mental health symptoms, and out of home placement (e.g., foster care, detention, residential treatment) at baseline (within 72 hours of recruitment into the study) and at 6 and 12 months after recruitment. Sexual reoffending was not examined as an outcome because it is too rare to support statistical analysis—in fact only one incident of sexual recidivism was recorded for the entire study group during the 12-month period.
The study found that youth in the MST group proved far and away more successful than those receiving usual treatment. Juveniles in MST experienced significant reduction in problem sexual behavior (e.g., having unprotected sex, pressuring others into having sex), relative to the TAU group, as well as a significant reduction in delinquent behavior and substance use relative to the TAU group over the 12-month period. For instance, involvement in delinquent behavior declined from 75 percent to 30 percent for MST youth, versus a much smaller decline for youth in the TAU group (52 percent to 42 percent). Finally, MST youth proved far less likely than TAU youth to be removed from home in the year after treatment: 7 percent versus 18 percent.
“The findings suggest that family- and community-based interventions, especially those with an established evidence-base in treating adolescent antisocial behavior, hold considerable promise in meeting the clinical needs of juvenile sexual offenders,” the study concluded. “In addition, current results supporting MST bring into question the public health/safety effects of the increasingly severe legal consequences (e.g., lifetime public registration, prolonged residential treatment) placed on juveniles who sexually offend.”
Sarah Boslaugh is a staff writer for the Juvenile Justice Information Exchange.
South Carolina Republican Sen. Lindsey Graham raised more money from lobbyists ahead of the 2012 election than any other member of Congress save one — an impressive feat considering he wasn’t on the ballot.
Roughly 10 percent of Graham’s $2.2 million haul, about $223,000, came from lobbyists acting as “bundlers,” a higher percentage than any other member. Bundlers raise money from friends and associates and deliver the checks in a “bundle.”
Only New Jersey Democratic Sen. Robert Menendez, who did face opposition in 2012, received more bundled campaign cash from lobbyists — about $227,100 — less than 2 percent of his total contributions, according to a Center for Public Integrity analysis of Federal Election Commission filings.
Graham’s bundlers include organizations and lobbyists whose positions Graham has supported. Among them are an energy giant, the film industry’s main trade association and a former U.S. ambassador who represents clients that would benefit from the construction of the Keystone XL pipeline.
Tops on the list, however, were GOP presidential nominee Mitt Romney and his “victory fund,” which accepted more than $17 million from lobbyist-bundlers. Six individuals raised at least $1 million apiece for Romney’s unsuccessful efforts, as the Center for Public Integrity previously reported.
In all, a dozen candidates and political committees raised at least $100,000 from lobbyist-bundlers ahead of the 2012 election, including the leadership PAC of Senate Majority Leader Harry Reid, D-Nev.
Money well spent?
According to FEC filings, Graham’s No. 1 lobbyist-bundler during the past two years was SCANA Corp., a South Carolina-based energy company that ranked among Fortune’s 500 largest as recently as 2011.
The corporation was credited with bundling $84,650 for Graham and its political action committee gave him an additional $9,000. During the same period, SCANA Corp., with Graham’s help, was angling for permission to build new nuclear power generators.
In February 2012, the Nuclear Regulatory Commission approved the first nuclear reactor construction permits in more than three decades. A month later, when it awarded two of them to the South Carolina Electric & Gas Company, a SCANA Corp. subsidiary, Graham hailed the action.
“We worked for years to see these reactors approved, and I’m very pleased this long-sought goal has finally been achieved,” he said in a press release at the time.
Officials with SCANA Corp., which spent nearly $2 million on federal lobbying during the two-year period, declined to comment.
Kevin Bishop, Graham’s communication director, denies that campaign contributions influence the senator’s decision-making process.
“People who contribute to Sen. Graham support his policies, views and leadership on issues important to South Carolina and the United States,” Bishop wrote in an email to the Center for Public Integrity.
Graham has likewise supported the interests of many of lobbyist David Wilkins’ clients.
Wilkins, the former South Carolina House speaker who served as the U.S. ambassador to Canada under President George W. Bush, ranked as Graham’s second-largest lobbyist-bundler during the 2012 election cycle, credited with bringing in $61,500.
During the past two years, Wilkins’ clients included the Canadian Association of Petroleum Producers, Alberta Energy, the Canadian provinces of Alberta and Saskatchewan and Nexen Inc., an oil and gas company based in Alberta that was purchased in February by the Chinese.
All have interests in the proposed Keystone XL pipeline, which Graham backs.
Together, the entities spent a combined $2.4 million lobbying the U.S. government during the past two years, records show.
In 2010, Graham told a Canadian newspaper that he was “going to do everything I can to make sure that oil sands production is not impeded because of U.S. policy.”
A year later, he said that rejecting the proposal would be “one of the biggest energy policy blunders in our history."
Last year, he co-sponsored legislation that sought congressional authority to approve the Keystone XL pipeline.
While the Canadian companies may benefit from Graham’s support, only employees or agents who are U.S. citizens can legally make contributions to the senator’s campaign.
Meanwhile, the South Carolina State Ports Authority reported spending $140,000 on lobbying through Wilkins’ firm during the past two years. Graham has pushed for the harbor in Charleston, S.C., to receive federal funding for deepening shipping channels. Last year, it was among a handful of port projects expedited by President Barack Obama.
Wilkins, who has also personally donated $5,000 to Graham’s re-election campaign, says that bundling does not play a role in his lobbying strategy for clients.
“These contributions came from friends of mine and Sen. Graham’s,” he said, adding that he and Graham have been “good friends” for decades.
“None of these contributions came from my clients,” he continued, adding that he has “never asked” Graham “for a specific vote or to take a certain position.”
Graham, too, collected $18,000 from the Motion Picture Association of America, which is headed by his former Senate colleague Chris Dodd, a Democrat who represented Connecticut.
During the past two years, the industry trade group spent more than $4 million on federal lobbying, with the Stop Online Piracy Act (SOPA) and the Protect IP Act (PIPA) ranking among its top concerns. Graham was a co-sponsor of PIPA, and he continued to tout his support of “protecting intellectual property rights” after online activists help sink the legislation in January 2012.
Representatives of the MPAA, which is not affiliated with Wilkins, did not respond to requests for comment.
Party committees benefit
Unlike Romney and the Republican National Committee, Obama’s presidential campaign and the Democratic National Committee prohibited registered lobbyists from bundling contributions or personally donating.
But other Democratic Party organizations had no such ban, and they outperformed their GOP counterparts.
The Democratic Senatorial Campaign Committee collected nearly three times more cash from lobbyist-bundlers ($2.8 million) than the National Republican Senatorial Committee ($1 million).
Additionally, the Democratic Congressional Campaign Committee collected roughly $617,000 thanks to fundraising efforts by lobbyists, while the National Republican Congressional Committee raised $455,000.
Reporting of bundling by lobbyists was required by a 2007 law prompted by the scandal surrounding lobbyist Jack Abramoff, who pleaded guilty to corruption charges and ultimately served three-and-a-half years in federal prison.
Obama urged Congress in his State of the Union address last year to prohibit lobbyists from bundling campaign cash for federal candidates.
Monte Ward, the president of the American League of Lobbyists who is not a bundler himself, says such legislation “would have a hard time passing muster in the courts,” citing First Amendment concerns.
Craig Holman, a lobbyist for the consumer rights group Public Citizen, supports the idea, arguing that bundling is a way for special interests to “buy a seat at the table.”
However, Holman says it has been difficult to find Republican lawmakers willing to work on the issue.
For his part, Graham is prioritizing gun and immigration issues, according to spokesman Bishop, not campaign finance reform.
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The Pentagon allowed a private firm providing food and water to U.S. troops in Afghanistan to overbill taxpayers $757 million and awarded the company no-bid contract extensions worth more than $4 billion over three years, according to the Pentagon’s chief internal watchdog and congressional investigators.
The deal represented one of the largest U.S. military contracts in Afghanistan. But the Defense Logistics Agency, which was overseeing the contract, failed repeatedly to verify that the contractor’s invoices were accurate, an official in the Defense Department inspector general’s office said. "This has to be one of the prime poster childs for a government contract spun out of control," Rep. John Mica, R-Fla., said last week.
Mica and other members of the House Oversight and Governmental Reform Subcommittee on National Security expressed outrage at a hearing last week about the Pentagon’s handling of the deal, especially two contract extensions awarded amid a dispute between the government and the company over as much as $1 billion.
The criticism was bipartisan, and it also targeted the Swiss-based private contractor, Supreme Foodservice GmbH, which had previously supplied British troops in Afghanistan, Iraq and other hot spots.
The panel’s hearing, the first focused solely on the food contract, was convened to hear from agency and company officials about how a straightforward deal in 2005 to supply food and water to troops ballooned into a still-unresolved dispute with so much money at stake.
The company has denied wrongdoing. But several lawmakers at the hearing also accused it of trying to bill taxpayers improperly for a $58 million warehouse and charging $12 million to deliver food from that warehouse across the street to Camp Leatherneck in Helmand province.
“Despite all these concerns [over overbilling and undocumented costs], the government continued to contract with Supreme, and it even exercised options to extend the contract,” said Subcommittee Chairman Jason Chaffetz, R-Utah. “We have well-established contracting procedures. If we're not going to use them, why have them?”
“It took DLA six years to demand that Supreme reimburse the government for more than $750 million in what it believed were overpayments — that's an astounding amount of money,” said Rep. John Tierney of Massachusetts, the subcommittee’s ranking Democrat.
According to Tierney, DLA realized nearly a year after it expanded the scope of the contract to include many more delivery points — through verbal arrangements with Supreme — that its rates for transportation and storage costs were unreasonable. But the agency spent the next five and a half years trying unsuccessfully to negotiate fair and reasonable rates.
The House subcommittee, which launched a probe of the contract last spring, found that the defense agency already had paid Supreme $1.38 billion for distributing food to additional locations when it determined it had overpaid the firm by $756.9 million. “Despite all of these problems, the agency failed to rebid the contract after the contract expired [in 2010] and decided to grant Supreme a no-bid extension of the contract that ended up lasting two more years,” Tierney said.
Matthew Beebe, DLA’s deputy director for acquisition, told the panel that his agency has recouped $283 million — over a third of the $757 million in overpayments — by withholding nearly $22 million a month from Supreme, which is still supplying food and water to U.S. troops and NATO forces. The withholding, which began on March 2012, followed unsuccessful negotiations and audits in 2008 and 2011 to determine “whether Supreme’s rates were fair and reasonable,” Beebe said.
The company claims it is owed $1 billion more than the $5.5 billion it already has been paid over the life of the contract. It claims the initial contract allowed prices to be adjusted as the work expanded, and has appealed the refund demands to special government board.
Michael Schuster, Supreme Foodservice’s managing director for logistics, told the panel the audits were flawed. As its work progressed, Supreme had “to change fundamentally the way it executes its responsibilities and to develop and operate a network of airplanes, helicopters, and trucks able to reach isolated regions of Afghanistan,” Schuster said.
He added that DLA’s original solicitation said that only “remnants” of the Taliban were still active in areas of Afghanistan where his company would be operating. But as its mission expanded from four locations to 120 in remote areas, “312 of our subcontractors” lost their lives while delivering food to troops, he said. “Supreme had to build this network in an active war zone,” Schuster said.
At the hearing, Daniel R. Blair, the Pentagon’s deputy inspector general for auditing, told lawmakers however that the contract was expanded improperly through orders that were not written down promptly. The DLA contracting officer “did not provide sufficient oversight,” by failing to set appropriate rates and promptly modify the written contract.
Beebe confirmed that DLA extended the contract for two more years in 2010, even though a 2008 review of the contract by the Defense Contract Audit Agency found possible double-billing by the company for the cost of delivering food to the forward operating bases. DLA officials did not seek competition because Supreme “was the only source able to provide the required support within the required timeframe,” he said.
Last summer, Beebe added, the agency issued a follow-on interim contract to Supreme that expires Dec. 12, 2013. That, too, was not competed, he said.
When questioned by Rep. Jackie Speier, D-Calif., about the warehouse the company built in southern Afghanistan, Schuster said it was necessary because of the surge in U.S. troop strength there in 2010 and 2011. Speier then raised the $12 million delivery cost for transporting food from the warehouse across the street. “So whether it costs you $12 million or not, it was a great way to soak the federal government, it sounds like?” she asked.
“No, it wasn't,” Schuster said.
Mica said he concluded that “we need to get out of Afghanistan sooner rather than later and put this whole wasteful episode behind us and, again, in a time of national deficits and the United States economic and national security being threatened by our fiscal situation.”
CHICAGO — In the late 1990s, Northwestern University scholar Linda Teplin launched a groundbreaking study to examine the mental health status of young people in Cook County’s juvenile lock up.
The study began a century after the county became the first jurisdiction in the world to create a separate court system for juveniles accused of delinquency.
The results, however, were not those expected of a mature juvenile justice system, they were not full of positive outcomes and they did not suggest the Cook County system as a model for others.
They were, instead, alarming. Among a random sample of 1,829 young people taken into custody in Cook County from 1995 to 1998, 66 percent of boys and 74 percent of girls were diagnosed with at least one mental health disorder, and most of these youth had two or more disorders. Half had a clinically significant substance abuse problem. Depression, anxiety, and attention deficit disorder were all widespread.
Yet Cook County’s mental health services for detained youth were paltry. Just 15 percent of youth tracked in the study received any mental health services inside the detention center, and just 8 percent received any mental health services in the community within six months of release from detention.
Teplin’s study, the largest of its kind ever undertaken, provided a wake-up call to leaders not just in Cook County but nationwide — part of a sea change in the juvenile justice field over the past decade toward growing awareness and action to address the mental health needs of court-involved youth.
“We’ve come into this, since her studies, with a much more sophisticated understanding of the needs of the kids,” says Benjamin Wolf, associate legal director at the American Civil Liberties Union in Chicago. “You are dealing with large numbers of kids with fairly substantial mental health needs.”
In the decade since Teplin’s results were first reported, Cook County has taken significant strides on mental health care for delinquent teens, and Illinois has begun to as well. But a close look at both efforts shows that progress has been uneven, and important gaps remain.
Easing Chaos and Building Services in Cook County
In 1999, the ACLU filed a lawsuit over dangerous and chaotic conditions in the Cook County Juvenile Temporary Detention Center (JTDC). Problems included overcrowding, fights among youth and lack of staff training. In addition, Wolf says, “There were virtually no mental health services. It was a dangerously inadequate place for many, many years.”
One problem, overcrowding, was already on the wane. As a pilot site in the Annie E. Casey Foundation’s Juvenile Detention Alternatives Initiative, Cook County created a range of community-based alternatives to detention and reduced the average population locked in its 498-bed detention facility from more than 700 youth in the mid-1990s to 543 in 1999. With crime rates continuing to decline, the population has kept falling ever since, averaging 287 youth per day in 2011.
In 2003, Cook County created a Juvenile Court Clinic to better serve youth with mental health needs. Until then, many youth languished in detention awaiting mental health assessments or placements to appropriate treatment programs. Formed through a partnership between the chief judge’s office and Northwestern University, this court clinic streamlines the process to assess youths’ mental health needs. The clinic assigns a “case coordinator” with expertise in mental health to each juvenile courtroom to screen requests for clinical information, interpret results and identify appropriate mental health providers.
“The timeliness and the erratic quality of the information and lack of consistent and effective communication between the court and clinicians was a big problem,” says Barbara Conn, clinic director. “Those [problems] have been eradicated as a result of the implementation of this model.”
George Timberlake, chair of the Illinois Juvenile Justice Commission, has high praise for the clinic. “Having a dedicated mental health clinic inside the court system is fantastic,” he says. “In many ways, they’re a model for the country.”
Transitional Administrator, High Need Focus
The Court Clinic, however, did not solve all of the problems facing mentally ill youth in Cook County’s detention center. In 2007, the chief judge of the Cook County Circuit Court appointed a transitional administrator, Earl Dunlap, to overhaul the facility.
Under Dunlap, the detention center has improved on a number of fronts. The drawdown in population has enabled staff to focus more heavily on those with the greatest needs, which, in turn, has helped to reduce the incidence of violence. Dunlap has raised hiring standards at the detention center and fired about 100 workers, many of them patronage employees.
Since 2007, the county has contracted with the Isaac Ray Center, a private care agency, to institute a comprehensive behavioral health program in the detention center. “When we first got here … [mental health services were] run by the county, and they were woefully under-serviced,” with about five psychologists for the entire facility and only part-time psychiatrists, says Ted Garlewski, Isaac Ray’s director of mental health services at the JTDC. “We came in with a contract to provide the whole package.”
Staff conduct mental health screens as soon as youth arrive, counselors are available for one-on-one sessions and psychiatrists prescribe medications as needed. Regular case reviews are performed, Garlewski says, and “if a kid is not supposed to be in confinement, we have the authority to take that kid out.”
Seven smaller living units have been created inside the detention center to house youth with the most acute mental health problems. Each has 45 beds and is staffed by four mental health professionals: a full-time psychologist, a master’s level mental health specialist, a clinical social worker, and either an advanced practice registered nurse or an adolescent psychiatrist.
Despite these improved mental health services, however, the physical conditions of the detention center remain problematic.
“I’ve been very impressed with the quality of many of the staff I’ve come across at the detention center,” says Betsy Clarke, president of the Juvenile Justice Initiative. “That said, the detention center itself, physically, is a horrible place. It has very little light; it’s very dark and prison-like. … There isn’t any green space. The physical design of the facility is just not conducive to behavioral health.”
Building a Bridge
Through the detention center’s “Bridge Program,” Cook County is also doing more to connect youth to mental health services in the community after release from detention, or while in a detention alternative program.
“This is innovative in the world of detention,” Garlewski says, adding that the probation department has been a key partner in that effort. “If a kid says he’s taking medication, but the probation officer sees a full bottle, or he hasn’t refilled that prescription, we know that’s not true. They’re our eyes and ears.”
The juvenile court clinic is also partnering more with probation. In the past, “The relationship was at best arms-length,” Conn says. “If a judge is concerned that a kid in the detention center might need medication or a psych evaluation, our clinical coordinators facilitate that happening.”
The probation department has also strengthened its mental health programming. The probation department used to routinely place mentally ill youth into psychiatric treatment facilities, says Michael Rohan, director of probation court services. It housed an average of 425 youth per day in those facilities in 1996, he says. “Today we have just three.”
Since 2002, the probation department has been funding a rigorous at-home treatment model, Multisystemic Therapy, which has proved effective in numerous clinical evaluation studies. Thus far, 971 youth with serious mental health needs have been served in Cook County’s MST program, many of whom would otherwise have been committed to a state correctional institution.
In addition, the department has begun offering a second evidence-based at-home treatment model, Functional Family Therapy. The treatment is provided by a team of 20 officers with counseling advanced degrees, specially trained the FFT model. Each officer treats up to six youth at a time who suffer with depression, anxiety and other mental health conditions, including many who have been traumatized and exposed to violence, “which unfortunately is a good portion of our kids,” Rohan says.
Together, the department serves about 200 youth in these two model treatment programs on any given day – 60 in MST, and roughly 140 in FFT – out of its total probation population of 4,500. Rohan concedes that the programs still serve a small sliver of Cook County’s probation caseload, but getting the programs funded even at current levels “has been a victory for us,” he says.
“The idea of trying to connect kids back to services in their community, as they need them, either as a function of a probation sentence or as a service from the detention center, that’s rare,” says Timberlake. “But it’s not nonexistent, and Cook [County] does a better job of that than anybody else. The rest of the state is doing a variable job.”
This is the first in a series of pieces about juvenile justice and mental health. Ed Finkel is a Chicago-based writer. Series editor Dick Mendel is based in Baltimore. For more from the Juvenile Justice Information Exchange, visit jie.org.
Finnish state-owned postal company Itella has offshore subsidiaries in both Cyprus and the BVI, documents obtained by the International Consortium of Investigative Journalists show.
The revelation comes at a time when the Finnish government promised to be at the frontline of the fight against tax evasion. Since 2011, Finland has explored the possibility of adopting a stricter set of criteria for tax havens, surpassing the standards applied by the Organization for Economic Cooperation and Development.
Itella, part of the National Mail Company, has had four subsidiaries in tax havens over the past five years; three in Cyprus and one in the British Virgin Islands.
In 2008, Itella bought the Russian logistics company NLC International Corporation, which was registered in the BVI with subsidiaries in Cyprus. Internal documents obtained by the ICIJ and MOT/Finnish Broadcasting Company, YLE, show that the transaction was made through the offshore firm Commonwealth Trust Limited.
The director of Itella Logistics in Russia, Vesa Vertanen, said in an interview with Finnish state television that Itella is going to dissolve the company in the BVI by the end of this year and move it to Cyprus.
Cyprus is a known tax haven favored by Russians who want to hold assets offshore.
Continue reading at ICIJ.org.
Today’s dedication of the George W. Bush Presidential Library and Museum will bring together all of America’s living ex-presidents for what will likely be a warm and celebratory event. Protocol for the unveiling of presidential portraits and presidential libraries general calls for an abundance of courtesy and good feelings, with politics to be left at the front door.
Like all presidential libraries, this one — built on the campus of Southern Methodist University in Dallas — largely reflects the president’s own view of his time in office. The library and museum also reflects the 43rd president’s unique demeanor — “straightforward, confident, unapologetic and willing to let history be the ultimate decider of his time in office,” according to the Washington Post.
But there are other views, of course. George W. Bush’s presidency — like most — was also marked by controversy, tragedy, bitter political rancor and failings large and small. As the Bush administration ended in Dec. 2008, the Center for Public Integrity took stock of what went wrong during those years in its Broken Government project. In a comprehensive assessment of systematic failures over the previous eight years, the Center found more than 125 examples of government breakdown.
Read the project: Broken Government
As investigators unravel what caused a Texas fertilizer plant explosion last week that killed 14, the U.S. Bureau of Labor Statistics reported today that 4,693 workers died on the job in 2011, three more than in 2010.
The fatal injury rate for 2011, the most recent year with complete data, was 3.5 deaths per 100,000 full-time equivalent workers. That is down slightly from 2010.
According to the BLS, 1,937 workers died in transportation incidents; 710 through “contact with objects and equipment”; 681 from “falls, slips [and] trips”; and 419 from “exposure to harmful substances or environments.”
“The Texas plant explosion is the kind of catastrophe that really grabs the public’s attention,” said Tom O’Connor, executive director of the National Council for Occupational Safety and Health, an umbrella organization for a network of nonprofit groups around the country. “But that’s about the same number of people who die every day in the U.S., in ways that are much quieter and hidden from public view.”
On average, 13 workers a day are killed on the job in the United States and many more are injured. On April 17, the same day the fertilizer plant blew up in West, Texas, a dozen contract workers were injured when a fire broke out at the ExxonMobil refinery in Beaumont, about 300 miles to the southeast; seven suffered severe burns.
This year, for the first time, the BLS fatality report has a separate category for contract workers, who may not be afforded the same protections as regular employees. Five hundred forty-two died in 2011, the bureau found, accounting for 12 percent of all fatal injuries. Texas had the highest number of contractor deaths – 56 – followed by Florida (51) and California (42).
“Looking through the BLS data, you see some really simple, easily preventable causes of death: people falling off roofs, people dying in trench cave-ins, people falling off ladders, people dying in confined spaces,” O’Connor said. “The total death toll is far greater than what we see from a handful of catastrophic incidents. It seems that the public just sort of accepts that as a risk of going to work.
“We believe people shouldn’t have to risk their lives to get a job.”
Stephanie Moulton, a 25-year-old social worker at a Massachusetts group home, died at the hands of a schizophrenic client on Jan. 20, 2011. She was among 468 workplace homicide victims that year, according to the BLS.
Moulton’s death motivated her mother, Kim Flynn of Peabody, Mass., to press for a state law that would require mental health facilities to provide “panic buttons” to workers. In a report this week, O’Connor’s group recommends that the Occupational Safety and Health Administration issue a sweeping injury and illness prevention standard that would require employers to identify and address hazards, including the potential for violence.
In Flynn’s view, both the owner of the home in which her daughter worked and OSHA – which proposed a $7,000 fine in the case – “dropped the ball.”
The BLS data release comes three days before Workers Memorial Day, a union-sponsored event honoring those who die on the job.
“Many job hazards are unregulated and uncontrolled,” says the AFL-CIO. “Some employers cut corners and violate the law, putting workers in serious danger and costing lives. Workers who report job hazards or job injuries are fired or disciplined. Employers contract out dangerous work to try to avoid responsibility.”
OSHA, records show, had not inspected the now-demolished Texas fertilizer plant since 1985. “OSHA is so understaffed and underfunded that federal inspectors can inspect each workplace on average of one each 131 years,” the AFL-CIO said in its 2012 “Death on the Job” report.
As they have in the past, Democrats in Congress introduced legislation this year to strengthen the Occupational Safety and Health Act of 1970, whose criminal and civil penalties for employer misconduct are considered lenient by critics.
Under the act, an employer whose willful disregard for the law leads to a worker death faces at most a misdemeanor charge, with a maximum sentence of six months in jail. Such cases are rarely prosecuted. The maximum fine for a “serious” violation, which could lead to death or serious injury, is $7,000.
Other laws, in contrast, are far stricter. Last month, the owner of a bio-diesel fuel company was sentenced to 188 months in prison – 15½ years – fined $175,000 and ordered to pay almost $55 million in restitution after pleading guilty to wire fraud, money laundering and making false statements to the Environmental Protection Agency in violation of the Clean Air Act.
“The fact remains that penalties for harming workers are often the cost of doing business for some employers, if they get inspected at all,” Rep. George Miller, D-Calif., said in a statement last week. “Congress needs to work together to increase these outdated penalties and give real teeth to the law so that workers and communities can remain safe while trying to make a living.”
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Federal lobbyists have this year collected nearly $1 million on behalf of national party organizations tasked with helping Democrats retain control of the U.S. Senate and regain control of the U.S. House of Representatives, according to a Center for Public Integrity analysis of campaign finance disclosures.
A dozen lobbyists bundled $882,000 for the Democratic Senatorial Campaign Committee during the first quarter, records show, while one organization bundled $18,500 for the Democratic Congressional Campaign Committee.
Top lobbyist bundlers for the DSCC this year include Democratic super lobbyist Tony Podesta of the Podesta Group ($145,000), as well as the political action committees of the firms Brownstein Hyatt Farber Schreck ($228,750); Akin Gump Strauss Hauer & Feld ($174,450) and Holland & Knight ($97,000).
The National Association of Realtors PAC was the sole lobbyist-bundler for the DCCC during the three-month period.
The amount lobbyist-bundlers raised for their GOP counterparts is unknown. That's because earlier this month, both the National Republican Senatorial Committee and the National Republican Congressional Committee opted to change the frequency of their filing disclosures with the Federal Election Commission.
Their next reports must be submitted by July 31 and will detail fundraising activity by lobbyists during the first six months of 2013.
During the past two years, the two Democratic party committees collected more money from lobbyists than their Republican equivalents, as a recent Center for Public Integrity analysis highlighted.
That comes despite frequent criticism of lobbyists and Washington special interests by President Barack Obama, who himself rejects donations or contribution bundles from lobbyists, as does the Democratic National Committee.
The Center's analysis found that the DSCC raised nearly three times as much money from lobbyist-bundlers than the NRSC ($2.8 million versus $1 million), while the DCCC also edged out the NRCC ($617,000 versus $455,000).
The analysis also found that Democratic Sen. Robert Menendez of New Jersey raised more money from lobbyist-bundlers than any other member of Congress during the 2011-2012 election cycle (about $227,000) and Rep. Howard "Buck" McKeon, R-Calif., the chairman of the Armed Services Committee, collected more money from lobbyist-bundlers than any other member of the House ($59,000).
Notably, Sen. Lindsey Graham, R-S.C., received nearly as much money from lobbyist-bundlers as Menendez during the past two years, and these contributions accounted for 10 percent of Graham's overall haul — a significantly larger portion than any other member of Congress.
The leadership PACs of Sens. Chuck Schumer, D-N.Y., and Harry Reid, D-Nev., ranked as the political groups with the next largest portion of receipts tied to the fundraising efforts of registered lobbyists.
After Graham, Schumer himself ranked as the lawmaker with the second largest portion of his total contributions coming from lobbyist-bundlers.
Reporting of bundling by lobbyists was required by a 2007 law prompted by the scandal surrounding lobbyist Jack Abramoff, who served three-and-a-half years in federal prison after pleading guilty to corruption charges.
STOCKHOLM — Bankrupt Swedish real estate tycoon Hans Thulin had as much as $17 million sheltered offshore at a time when the Swedish government was pursuing him in court for millions of dollars in unpaid debts, according to secret records obtained by the International Consortium of Investigative Journalists and reviewed by Fokus, Sweden’s leading newsmagazine.
Details of Thulin’s offshore holdings are big news in Sweden because he has been one of the Swedish state’s largest debtors — and because he’s well-remembered in his native country as a lavish collector of art and luxury cars and a symbol of the high-flying, easy-credit ’80s. It was the fall of his commercial property empire that helped signal the beginning of Sweden’s 1990 real estate meltdown.
A government-owned company that had taken over bad debts owed by Thulin sued him in 2007, seeking to force him to repay business loans he’d defaulted on. A trial court imposed a judgment of 150 million Swedish crowns against him in 2009.
By early 2013, the total debt and interest Thulin owed the government had grown to 179 million crowns ($28 million).
Our reporting on secret tax havens continues to ignite reaction from around the globe and appears to be having a major impact in Europe. The investigative series on offshore secrecy by The International Consortium of Investigative Journalists (ICIJ), the Center for Public Integrity’s international project, draws from a cache of 2.5 million secret records. The work has prompted governments to launch investigations, and politicians and journalists to debate the implications of the records and the reporting.
Among the latest developments:
The Center’s ICIJ investigative reporting on tax havens will continue throughout the year.
Center environment team at White House Correspondents' Association dinner
Three excellent Center for Public Integrity environmental reporters will be in black tie Saturday night for the gala awards dinner of the White House Correspondents Association. Jim Morris, Ronnie Greene and Chris Hamby will be picking up one of the Association’s three distinguished awards for their investigative series on Hard Labor — the many threats to America’s workers, and the fragile federal net that protects them.
Each year, some 4,500 American workers die on the job — that’s 13 workers per day on average — and 50,000 perish from occupational diseases. Millions more are hurt and sickened at workplaces, and many others are cheated of wages and abused. Under the banner Hard Labor, The Center for Public Integrity publishes stories exploring threats to workers — and the corporate and regulatory failings that endanger them.
This is the first time The Center for Public Integrity has won a WHCA award, and one of the very first ever digital winners. Here is what the Judges had to say about our selection:
"With deft story-telling and precise data, 'Hard Labor' compellingly shows the government has failed to keep its promise to protect workers from injury and death on the job. Drawing on years of data and on-the-ground reporting in eight states and Canada, the authors demonstrate how corporate corner-cutting, government inability or unwillingness to impose meaningful penalties, and bureaucratic pressure to make caseload quotas have stymied real regulation. They tell the workers' stories in a manner that evokes Studs Terkel, excellently weaving human interest with deep-data scrutiny and using numbers sparingly but with powerful effect. 'Hard Labor' clearly meets the … standard of 'excellence in news coverage of subjects and events of significant national or regional importance to the American people.'"
Congratulations to Jim, Ronnie and Chris and to all of the Center’s top notch investigative reporters and editors, who earn readers and recognition every day for their important work.
Until Next Week,
Center for Public Integrity reporters Jim Morris, Chris Hamby and Ronnie Greene will receive a prestigious White House Correspondents’ Association award Saturday night for a series of reports exposing workplace and environmental hazards afflicting blue collar workers nationwide.
Their series, Hard Labor, revealed how corporate irresponsibility and lax regulation contribute to thousands of worker deaths, injuries and illnesses in America each year. The series won the WHCA’s Edgar A. Poe Award for “excellence in news coverage of subjects and events of significant national or regional importance to the American people.”
The reporters will be honored at the black tie White House Correspondents' Association dinner Saturday evening. President Obama will be among the attendees.
Other winners in 2013 are Ryan Lizza of the New Yorker for “journalistic excellence in covering the presidency,” and Julie Pace of the Associated Press and Terry Moran of ABC for White House news coverage.
If you have private health insurance, it’s almost certain that a portion of the premiums you pay every month is used to support political agendas that are not in your best interests. But good luck finding out how much of that premium money your insurance company spends to influence public opinion and public policy.
While all companies are required to report their federal lobbying and Political Action Committee expenditures, that money is just a fraction of what they often spend in the political arena to protect their profits. Millions more — probably billions more — are spent secretly every year by corporations and their trade associations to shape policy discussions and actions. Corporate America is determined to preserve that secrecy.
Among my responsibilities when I worked at Cigna was the administration of the company’s PAC. The money we doled out to state and federal candidates every year was not huge, but a lot of thought went into determining who got checks. The lion’s share each year would usually go to Republican candidates, but influential Democrats also benefited. In 2012, Cigna’s PAC reported contributing a total of $213,000 to 73 Republicans and 41 Democrats.
That’s pocket change compared to the $3.09 million Cigna says it spent lobbying lawmakers last year in both Washington and state capitals. And it’s also a fraction of what CIGNA probably spent through its trade associations and other groups to influence how you think about health care policy issues and how lawmakers vote on them.
We don’t know how big the total is because there are no laws or regulations requiring corporations to report those expenditures. But there is a growing movement among shareholder groups to force companies to disclose this kind of spending because it may dwarf what they invest in lobbying and direct contributions to candidates.
That undoubtedly was the case during the health care reform debate. The trade group America’s Health Insurance Plans, for which Cigna is a leading dues-paying member, funneled more than $100 million in 2009 and 2010 to the U.S. Chamber of Commerce to finance the Chamber’s advertising and PR campaign aimed at defeating reform. This “backchannel spending,” which the National Journal uncovered by poring over IRS tax filings, enabled insurers to state publicly that they were backing reform while spending millions in policyholder premiums as part of an industry-wide stealth campaign to kill it.
Most of the $100 million came from “special assessments” contributed by Cigna and other AHIP member companies over and above their regular membership dues. We’ll never know how much of that $100 million came from Cigna, though, because corporations are not obligated to disclose such spending, and they have rebuffed calls that they do so voluntarily.
Among those pressuring companies to be more forthcoming is Rob McGarrah of the AFL-CIO’s Office of Investment. The union owns shares of stock in many companies, including Cigna, and is asking them to provide shareholders and the public with a more complete accounting of spending to influence public policy.
McGarrah was unsuccessful in persuading Cigna to disclose “special assessments” on behalf of AHIP and other groups, so the AFL-CIO submitted a shareholder resolution that would compel the company to report indirect funding of lobbying through trade associations and tax-exempt organizations, such as the American Legislative Exchange Council, which drafts “model legislation” to protect business interests.
At Cigna’s annual meeting of shareholders last Wednesday, Cigna shareholder Tom Swann spoke on behalf of the AFL-CIO’s resolution.
“Transparency and accountability in corporate spending to influence public policy are in the best interests of Cigna shareholders,” Swann argued.
But as expected, the resolution failed; Cigna had encouraged shareholders to vote against it — as the Chamber of Commerce is urging all companies facing such resolutions to do.
In its 2012 Political Contributions and Lobbying Activity Report, Cigna stated that the total dues it paid to AHIP was $837,377, including “any special assessments” it might have paid last year. But the company has refused to say how much of that was in the form of special assessments, and it has not disclosed how much it paid AHIP during the height of the health care reform debate in 2009 and 2010 when the trade organization was sending millions to the Chamber of Commerce. Cigna CEO David Cordani acknowledged that the company contributed special assessments to AHIP to pay for the Chamber’s advertising, but he would not say how much.
Although the resolution failed this year, the AFL-CIO and other like-minded investors are not throwing in the towel, and the Chamber is well aware of that. This coming Thursday, the Chamber’s Center for Capital Markets Competitiveness and its “Workforce Freedom Initiative” is inviting corporate executives to a meeting “to discuss the economic value of union-backed shareholder activism to investors and employers.”
You can rest assured that plenty of money in special assessments will go to the Chamber in the months and years ahead not only to influence public policy but to beat back attempts to get corporations to be more transparent and accountable. That’s just the way things work.
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SAN SALVADOR, El Salvador — Bringing new urgency to a mysterious kidney disease afflicting the region’s agricultural laborers, Central America’s health ministries signed a declaration Friday citing the ailment as a top public health priority and committing to a series of steps to combat its reach.
Over the last two years, the Center for Public Integrity has examined how a rare type of chronic kidney disease (CKD) is killing thousands of agricultural workers along Central America’s Pacific Coast, as well as in Sri Lanka and India. Scientists have yet to definitively uncover the cause of the malady, although emerging evidence points to toxic heavy metals contained in pesticides as a potential culprit.
Following years of official inaction in the U.S. and beyond, Friday’s San Salvador declaration — for the first time — formally recognized the disease and its unique characteristics.
“This disease fundamentally affects socially vulnerable groups of agricultural communities along the Pacific Coast of Central America, predominates among young men, and has been associated with conditions including toxic environmental and occupational risk factors, dehydration, and habits that are damaging to renal health,” said the declaration adopted by the Council of Health Ministers of Central America.
The ministers pledged potentially meaningful new steps, including more detailed statistical tracking of CKD, the development of national and regional plans to investigate and treat the disease, and promotion of stronger regulation of agrochemicals.
The declaration represented a major victory for El Salvador and its health minister, Dr. Maria Isabel Rodriguez. Ninety years old and barely five feet tall, peering from behind enormous eyeglasses, Rodriguez has been a driving force behind catapulting the ailment from obscurity to formal recognition as a leading regional threat.
“This is a disease of poor people,” Rodriguez said. “This is a disease of people who work in the fields and have very bad living conditions.”
The outcome signaled a turnaround by the U.S. Centers for Disease Control and Prevention, which in 2011 helped beat back an effort by El Salvador to declare the malady a top priority for the Americas. The CDC now says it has devoted “several hundred thousand” dollars to support research of the disease, created a multidisciplinary internal task force on chronic kidney disease in Central America, and pledged to help fund a national survey by El Salvador to measure the prevalence of chronic ailments including CKD.
“We have that commitment to provide the support to follow and strengthen their investigations in the ministries of health,” said Dr. Nelson Arboleda, the CDC’s director for Central American Region.
The San Salvador conference also marked a threshold in international cooperation in combating the mysterious disease. Following years in which researchers battling parallel epidemics in Central America, Sri Lanka and India failed to compare results, Sri Lanka sent an official delegation to El Salvador and urged Central America to consider its research findings and policy responses as a model for future action.
“We are having enough clinical, biochemical and histopathological evidence to say this is the same disease,” said Channa Jayasumana, Sri Lanka’s delegate in El Salvador.
The disease has felled thousands. In Sri Lanka, more than 8,000 patients are receiving treatment for CKD of unknown cause, an official report found, a figure representing just a fraction of those affected by a disease that remains latent until its advanced stages. More than 16,000 men died of kidney failure in Central America from 2005 to 2009, with annual deaths increasing more than threefold since 1990, according to an analysis of World Health Organization data. In El Salvador, CKD has become the leading cause of hospital deaths among adult men.
The Debate over Pesticides
Although the declaration reflected broad agreement to take action, the two-day conference that preceded its signing was dominated by a forceful debate. The central question: whether there was adequate evidence to declare the disease is linked to agrochemicals and respond by restricting their use.
At the conference, El Salvador presented findings from an ongoing official study, conducted jointly with the Pan American Health Organization, suggesting that pesticides and fertilizers containing heavy metals may be to blame. Environmental tests of soil and water samples in a village heavily affected by CKD, Ciudad Romero, found the presence of high levels of cadmium and arsenic, heavy metals toxic to the kidneys. Among a sample of 42 residents of Ciudad Romero who suffer from CKD, all reported applying pesticides without any protective equipment.
A national sample of 46 CKD patients found that 96% reported using pesticides, and medical tests of these patients revealed additional symptoms such as impaired reflexes and damage to arteries in the lower limbs that suggest toxic poisoning.
El Salvador’s findings echo those in Sri Lanka. An official study there, conducted by the Sri Lankan health ministry in partnership with the World Health Organization, documented elevated levels of cadmium and arsenic contained in agrochemicals and within environmental samples from the endemic region — and found the same heavy metals in samples of urine, hair and nails of patients. Sri Lanka also found residues of several pesticides in the urine of many of the affected patients.
Since publication of its report, the Sri Lankan government has imposed a ban on four common pesticides from use in the endemic region. Rodriguez, El Salvador’s health minister, said she also hopes to ban pesticides that are potentially linked to the epidemic.
Yet other researchers questioned the weight of evidence pointing to pesticides. El Salvador found arsenic above permitted levels in one location in Ciudad Romero and cadmium above permitted levels in another location in the same village — hardly proof of widespread contamination, critics say. The nation also has yet to complete toxicology tests that will determine whether the heavy metals came from pesticides, or whether heavy metals and pesticide residues appeared in blood, urine, or tissue samples of CKD patients.
Basic questions about the pesticide hypothesis remain unanswered in both El Salvador and Sri Lanka’s reports, including evidence of how the agrochemicals are entering victims’ bodies or what products are at fault. Despite the dramatic parallel findings from the recently released reports, no peer-reviewed studies in more than a decade of research have established a definitive link to agrochemicals.
“There is still no direct causal connection,” said Dr. Ramon Trabanino, a Salvadorean nephrologist who published two of the first studies demonstrating the presence of the disease. “I think all of this is political. They want something to blame.”
The controversy came to head in the final portion of the scientific conference. The argument pitted skeptics of the evidence against conference organizers who argued that the Sri Lankan and Salvadorean results were clear enough to create a moral obligation to take precautionary action. The debate was concluded by Rodriguez, who delivered a forceful defense of El Salvador’s findings.
“What has been presented here is scientific fact, and I will defend it with my nails,” she said, holding up bright red-painted fingernails and reducing the room to laughter.
Chemicals in the Spotlight
Two chemicals in particular have come into investigators’ crosshairs in both El Salvador and Sri Lanka: 2,4-D and glyphosate. 2,4-D is a common herbicide used to control weeds, and glyphosate is the active ingredient in the world’s most popular herbicide, Roundup. Both are used worldwide, including in countless areas not affected by this distinctive form of chronic kidney disease.
The El Salvador sample of CKD patients from Ciudad Romero — the community shown to be contaminated by heavy metals — found that 100 percent and 75 percent of the patients, respectively, reported using 2,4-D and glyphosate. In Sri Lanka, both are used heavily and were found in urine samples of some sick patients.
Glyphosate was developed by Monsanto, but the patent has expired so numerous companies now sell glyphosate products. Monsanto said it currently sells glyphosate products in Sri Lanka but did not confirm whether it sells such products in Central America.
Dr. Daniel Goldstein, a Senior Science Fellow at Monsanto, said “glyphosate does not cause renal failure.” He said he was aware of the official findings from Sri Lanka, and that glyphosate contains phosphorus, an element whose molecular similarity to arsenic can result in small amounts of arsenic byproduct in quantities not threatening to human health. But the “plausibility of relationship is virtually nil” between glyphosate and the Sri Lankan kidney disease epidemic, Goldstein said.
Dow Chemicals, which developed 2,4-D, did not respond to requests for comment. Like glyphosate, the patent on production has expired and other companies also produce pesticides containing 2,4-D.
According to the Environmental Protection Agency, excessive quantities of glyphosate and 2,4-D in drinking water can cause damage to the kidneys. But little research has been conducted into other types of exposures, and particularly on long-term health effects on humans.
“I'm appalled at how little [research] there is on humans,” said Dr. Stephanie Seneff, a Senior Research Scientist at the Massachusetts Institute of Technology. Seneff published a study last week raising concerns about a variety of potential health effects from long-term exposure to glyphosate.
Scientists from the Salvadorean and Sri Lankan research teams also suspect that toxic additives to pesticides, or dangerous combinations of chemicals, may pose health risks additional to those presented by the products themselves.
In an interview in San Salvador, Rodriguez reacted with surprise to Monsanto’s position that glyphosate does not threaten the kidneys.
“Ah, Monsanto!” she said, a look of consternation crossing her face. “They are the ones that will be fighting us.”
Anna Barry-Jester contributed to this report.
Support for this report was provided by the Stabile Center for Investigative Journalism at Columbia University.
Federal regulators today announced new measures to protect 2.5 million temporary workers in America amid evidence such laborers are hurt more often than regular employees.
In December, the Center for Public Integrity and WBEZ/Chicago Public Media highlighted the case of temporary worker Carlos Centeno, who was badly burned in a Chicago-area factory in November 2011 and died three weeks later. Occupational Safety and Health Administration records obtained by the Center concluded that Centeno’s bosses refused to call 911 as his skin peeled and he screamed for help.
OSHA said today it had sent a memo to regional administrators “directing field inspectors to assess whether employers who use temporary workers are complying with their responsibilities” under the law.
“Inspectors will use a newly created code in their information system to denote when temporary workers are exposed to safety and health violations,” the agency said in a press release. “Additionally, they will assess whether temporary workers received required training in a language and vocabulary they could understand.”
As the Center/WBEZ story noted, recent research indicates temporary workers are more prone to injury than permanent ones due to often-subpar safety training and the feeling among some employers that temps are expendable. Last year, for example, researchers who studied nearly 4,000 amputations among workers in Illinois found that five of the 10 employers with the highest number of incidents were temporary staffing agencies.
The new OSHA memo, written by enforcement director Thomas Galassi, says the agency has received “a series of reports of temporary workers suffering fatal injuries during the first days on a job. In some cases, the employer failed to provide safety training or, if some instruction was given, it inadequately addressed the hazard, and this failure contributed to their death.”
Centeno was employed by a staffing agency at the time he was burned. A co-worker wound up driving him to a clinic after a delay of at least 38 minutes. Centeno didn’t make it to a hospital burn center until an hour after that.
OSHA recommended that the host employer, Raani Corp., which makes personal-care products, be criminally prosecuted for the accident. The agency has proposed a $473,000 civil fine against Raani, which is appealing. In court filings in a lawsuit brought by Centeno’s family, the company denies fault.
Centeno, a 50-year-old immigrant from Mexico, was among 4,693 workers who suffered fatal, work-related injuries in 2011. Three more workers died in 2011 than in 2010, according to the U.S. Bureau of Labor Statistics. Worker deaths in 2010 also rose when compared to the previous year: 4,690 died in 2010, while 4,551 died in 2009.
Environmentalists are spoofing AT&T's "It's not complicated" advertising campaign in a new series of big-dollar messages thanking Democratic senators for their votes in March against budget amendments that they believed would have weakened the Clean Air Act.
"What's better: More industrial carbon pollution that leads to more asthma attacks or less industrial carbon pollution that leads to less asthma attacks?" a man in a blue suit asks to four children sitting around a small table in a new ad unveiled today by the Environmental Defense Fund.
Predictably, the children say "less," as they detail their own asthma ailments.
Telecommunications giant AT&T has repeatedly shown a businessman quizzing children about the benefits of being bigger and faster in recent ads.
The five new ads released by the Environmental Defense Fund specifically single out Sens. Kay Hagan, D-N.C.; Tim Kaine, D-Va.; Claire McCaskill, D-Mo.; Jeanne Shaheen, D-N.H.; and Mark Warner, D-Va. as worthy of thanks.
Environmental Defense Fund spokeswoman Sharyn Stein told the Center for Public Integrity that the media buy would be "six figures."
The Environmental Defense Fund is organized as a charitable nonprofit under section 501(c)(3) of the U.S. tax code. Campaign finance attorney Joe Birkenstock of the Washington, D.C.-based firm Caplin & Drysdale says that such nonprofits face "no restrictions for running pure issue advocacy."
Charitable organizations are restricted from expressly advocating for or against federal candidates, but thanks to the U.S. Supreme Court's Citizens United v. Federal Election Commission decision in 2010, "social welfare" nonprofit groups organized under section 501(c)(4) of the tax code may overtly support or criticize candidates.
Hagan, Shaheen and Warner will next face voters in November 2014. Kaine and McCaskill were both re-elected last fall.
According to its most recent annual report, the Environmental Defense Fund raised about $116 million during its 2012 fiscal year — with foundation grants accounting for about 26 percent of that sum.
Like other nonprofits, the Environmental Defense Fund is not legally required to disclose the names of its donors. But all nonprofits must report the grants they make to fellow nonprofits.
According to the Foundation Center, which monitors foundation giving, groups that supported the Environmental Defense Fund in 2012 include the Kresge Foundation ($540,000), the Bernard F. and Alva B. Gimbel Foundation ($120,000) and the F. M. Kirby Foundation ($100,000).
The Kresge Foundation earmarked its contribution for wetlands work in Louisiana, while the Kirby Foundation gave to support "science-based policy solutions to protect the Adirondacks from acid deposition" and the Gimbel Foundation contributed for "general support."
In the summer of 2009, Jennifer Sharkey was moving in select company. As a Manhattan-based vice president at JPMorgan Chase & Co.’s Private Wealth Management group, she juggled relationships with 75 “high net worth” clients with assets totaling more than half a billion dollars.
Things changed for her, she claims, after she raised doubts about a “suspect” foreign client who had millions stashed in various accounts at the bank.
The client was making questionable cash transfers and concealing who actually owned certain accounts, according to a lawsuit Sharkey is pursuing in federal court in Manhattan. She also found evidence, her suit claims, that the client had falsified financial statements for one of his companies and that he’d been involved in the “unexplained disappearance” of millions of dollars in merchandise in another venture.
After she warned high-level bank officials that the client might be involved in fraud and money laundering, her suit claims, JPMorgan moved to silence her — pressuring her to stop raising questions about the client, assigning her other clients to junior colleagues and, finally, firing her.
“I was just doing my job,” Sharkey said in an interview with the International Consortium of Investigative Journalists (ICIJ). But for the bank, she said, “it was more important to keep this client than to do the right thing.”
JPMorgan denies it retaliated against Sharkey for pushing the bank to exit its relationship with the client — and it denies that the customer was either a foreign client or engaged in suspect activities. The bank says it goes to great lengths to identify and block money laundering, terrorism financing and other illicit transactions.
Over the years, JPMorgan Chase and its corporate forebears have been accused of serving as conduits for money controlled by drug smugglers, mobsters and political despots and acting as magnets for “flight capital” from rich tax dodgers from Latin America and other regions. The bank also played a part, lawsuits alleged, in massive tax haven-enabled frauds in the Enron and Madoff scandals.
An examination of JPMorgan’s record in policing suspect cash and offshore deals offers a case study of how big banks deal with dirty money and transnational corruption — and a window onto the decades-long history of the banking industry’s fraught relationship with the offshore world.
When people think about secret accounts and money laundering, they often imagine the Cayman Islands or some other sultry paradise. But the enablers of cross-border corruption aren’t located only in flyspeck island havens, white-collar crime experts say.
Criminals and connivers rely on easy access to banks in the U.S., the UK and other rich nations to hide their assets from investigators and tax collectors and shift money in and out of offshore hideaways.
Without this access, their shell games wouldn’t be possible.
In 2003, New York prosecutors claimed that an unlicensed money-transfer firm in Manhattan directed $9 billion in wire transactions through three dozen accounts at JPMorgan, moving money around the world for drug dealers and other dodgy characters.
In 2011, the bank paid nearly $90 million to settle regulators’ claims that it had violated economic sanctions against Iran, Cuba and other countries under U.S. embargoes.
In January, a consent order from JPMorgan’s main federal regulator, the Office of the Comptroller of the Currency, cited the bank for “critical deficiencies” in its anti-money-laundering controls, including inadequate procedures for monitoring transactions at foreign branches.
In the 2003 case, the bank acknowledged it had been “too slow and not forceful enough” in vetting the money-transfer firm, but said it was working to tighten its money laundering safeguards. In the 2011 case, the bank said the sanction violations were isolated incidents. In the wake of the comptroller’s case, the bank told the New York Times that it has been “working hard to fully remediate the issues identified.”
Mark Kornblau, a JPMorgan spokesman, declined to answer detailed questions for this story.
In a brief written statement, he told ICIJ that complying with anti-money-laundering rules “is a top priority for us. We have already made progress addressing the issues cited in the consent orders, which contain no allegations of intentional misconduct by the firm or any of its employees.”
JPMorgan isn’t alone when it comes to taking heat for failing to do enough to stop the flow of suspect cash. Last year U.S. authorities reached settlements with HSBC, Citigroup and UK-headquartered Standard Chartered Bank over alleged money-laundering compliance failures.
HSBC agreed in December to pay more than $1.9 billion to settle an investigation into evidence it shifted cash for rogue nations, terrorists and Mexican drug lords.
U.S. Senator Carl Levin of Michigan said a “pervasively polluted” culture at HSBC allowed billions in suspect dollars to flow through the bank. Senate investigators said HSBC ignored warnings from Mexican and U.S. authorities that the gush of money flowing into the bank from Mexico was so large it could only be sustained by the proceeds from narcotics trafficking.
HSBC said in a statement last year that it was “profoundly sorry” for its “past mistakes.”
How well major banks screen customers and cash flows is important because, in a digitally connected world, dirty money no longer travels as stacks of bills stuffed into suitcases. It moves by the click of a computer key. This makes big banks crucial gatekeepers in the financial system, giving them the power to cut off the flow of corrupt cash or allow it to roam free.
The offshore system can’t be reformed, money laundering experts say, without cooperation and compliance from the banking system’s biggest players.
Dennis Lormel, former chief of the FBI’s financial crimes program, says compliance watchdogs working on the payroll of big banks strive to do the right thing, but they’re often locked in losing battles with bankers who are more concerned about booking deposits and doing deals than making sure the money coming in is clean.
“The business culture usually wins,” Lormel says. “The business people take the risks and the compliance people are left to clean up the mess.”
JPMorgan and other major banks have increased their risks and rewards in the offshore world by weaving a web of branches and subsidiaries across places that have been tagged as havens for financial secrecy and criminal activity.
Secret records obtained by ICIJ reveal how many of the world’s top banks – including UBS and Clariden in Switzerland, ING and ABN Amro in the Netherlands and Deutsche Bank in Germany– have worked to set up their customers with secrecy-cloaked companies in the British Virgin Islands, the Cook Islands and other offshore locales.
The banks deny wrongdoing.
A 2008 U.S. government report found JPMorgan had 50 subsidiaries in Bermuda, the Bahamas and other places labeled as tax havens or secrecy jurisdictions, tied for 11th highest among the 100 largest U.S. companies.
Since then the bank has expanded its reach in some offshore centers. Its tally of subsidiaries in the Cayman Islands grew from seven in 2007 to 20 at the end of 2012, securities filings show. Over that span its subsidiaries in Mauritius — a tiny isle off Africa’s eastern coast that’s been called “a Cayman Islands to India” — grew from eight to 14.
While the bank helps move money around the world via its tax haven subsidiaries, JPMorgan’s international private banking network attracts large deposits to the U.S. from rich customers in Latin America and other regions. Much of this money isn’t reported to tax authorities in the depositors’ home countries, according to a study last year by James S. Henry, former chief economist at McKinsey & Company and a board member of Tax Justice Network, an advocacy group that favors tighter regulation of the offshore system.
The study estimates JPMorgan’s private banking operations boosted their assets under management from $187 billion in 2005 to $284 billion in late 2010 — ranking it among an elite group of giant private banking institutions whose mission, the report claims, is to “entice the elites of rich and poor countries alike to shelter their wealth tax-free offshore.”
JPMorgan Chase is an amalgam of America’s two most storied banks. Historian Ron Chernow called the Morgan banking dynasty perhaps “the most formidable financial combine in history.” Chase Manhattan traced its roots to 1799 and claimed Aaron Burr, the nation’s third vice president, as its founder.
Before the mega-merger that brought the Morgan and Chase empires together at the turn of this century, both played roles in the emergence of tax havens — and in the controversies that grew out of the offshore system’s rise.
Chase and Morgan were early players, in the 1960s, in the growth of the Bahamas as an overseas financial center. Chase was one of the banks of choice for Philippine President Ferdinand Marcos and the Shah of Iran, strongmen who looted their countries’ treasuries during their decades in power. Relations between Chase officials and the Shah were so close in the 1960s and ’70s, Henry says, that Chase Chairman David Rockefeller was essentially “the Shah’s private banker.”
Chase played a cameo role in an offshore money-laundering thread of the Watergate scandal, serving as a conduit for an illegal $55,000 contribution that American Airlines laundered through a foreign source and funneled into President Nixon’s re-election campaign. Federal authorities fined the airline, but apparently took no action against Chase.
In 1973, a mobster turned informer told a congressional committee that Chase and other firms helped him cook up bogus covers for illegal transactions in stolen and counterfeit securities that had been laundered through Switzerland and Belgium and then brought back to the U.S. The witness testified Chase bankers accepted the “flimsiest of proof” as to his identity when they signed off on documents that made his transactions possible.
In another case, the infamous “Pizza Connection” heroin ring used Chase to channel cash overseas, according to an account in The Money Launderers, a book by former U.S. Treasury enforcement official Robert E. Powis. In July 1980, a bagman for the ring entered Chase Manhattan’s headquarters with four leather bags stuffed with $550,000 in fives, tens and twenties. The bank accepted the money, counted it, then transferred it to a Swiss account, according to Powis.
In June 1985, the Treasury Department fined Chase and other New York banks for ignoring one of the government’s basic safeguards against financial chicanery — the federal Bank Secrecy Act’s requirement that banks report any transactions involving $10,000 or more in cash. Chase paid a then-record fine of $360,000, based on 1,442 unreported transactions totaling $853 million.
“Some clerical people did not file reports here and there,” a Chase spokesman told The Washington Post at the time. “There was nothing willful about this thing.”
Along with handling money involved in drug smuggling and other underworld activities, big U.S. banks have also attracted deposits from Third World elites who want to hide their wealth from tax collectors. For decades, anti-corruption advocates say, U.S. banks have encouraged this process by dispatching armies of private bankers to solicit flight capital from developing nations.
In the 1980s, Antonio Gebauer was J.P. Morgan & Co.’s top man South of the Border, lauded by a Morgan spokesman as “the most highly esteemed banker in Latin America.” Gebauer specialized in putting together multi-million-dollar loan deals across the region. He also oversaw covert New York bank accounts for a handful of wealthy Brazilians, among them a great-grandson of the founder of Brazilian Republic.
Brazilian authorities later questioned whether the money was unreported capital. Gebauer’s attorney said the accounts had been set up under “the unusual and Byzantine relationships that often exist between bankers and flight capitalists.”
The secret deposits might have remained secret if Gebauer hadn’t been caught embezzling more than $4 million from his clients’ accounts. In 1987, a U.S. judge sentenced him to 3½ years in prison, calling him “a fallen angel of the banking world.”
U.S. media touched on the flight capital issue briefly, and the government of Brazil filed a treaty request asking U.S. authorities to subpoena account details from Morgan officials.
The bank won a court decision blocking Brazil’s push to get more information. And Gebauer’s guilty pleas allowed the House of Morgan to avoid a messy trial that have might revealed “the seamier side” of its Latin American operations, according to Henry’s 2003 book on the dark side of global finance, Blood Bankers.
The issue of dark money didn’t go away after J.P. Morgan & Co. and Chase Manhattan Corp. merged in late 2000, creating JPMorgan Chase & Co.
In March 2001, a U.S. Senate investigation revealed Chase Manhattan had been among big firms that had provided correspondent accounts to offshore banks involved in criminal activity. Investigators found that Antigua-licensed American International Bank moved $116 million through its account at Chase even as it was engaging in frauds in the U.S. and working hand-in-hand with convicted felons.
After the Sept. 11, 2001, terrorist attacks, tracking illicit cash became a bigger concern for U.S. authorities. Lormel, the former FBI official, says JPMorgan representatives were among the compliance specialists from various banks who pitched in after Sept. 11 and helped efforts to track terrorists.
“Whatever we wanted, within the limits of the law, the bankers were incredibly helpful,” he recalls.
JPMorgan’s post-9/11 record wasn’t spotless, however.
In January 2003, federal authorities raided a business in Brooklyn called Carnival French Ice Cream, a convenience store with a limited supply of food and sundries and two soft-serve ice cream machines. During their search, investigators found paperwork that led them to conclude that, over a six-year period, the store’s proprietor had laundered millions of dollars through a JPMorgan account on its way to Yemen, China and other places.
Some of the money, investigators believed, went to a Yemeni cleric who later pleaded guilty to charges that he had conspired to aid terrorists.
In February 2003, a month after the ice-cream shop raid, investigators for then-Manhattan District Attorney Robert Morgenthau raided an unlicensed money transfer firm, Beacon Hill Services Corp., that maintained dozens of accounts with JPMorgan.
Morgenthau said Beacon Hill was able to wire $9 billion through these accounts because the JPMorgan’s compliance unit “fell down on the job,” ignoring “numerous red flags for money laundering.” A sizeable chunk of the money, he said, came from drug dealers and tax dodgers, and some ended up in the Middle East, possibly in the hands of terrorists.
No criminal charges were filed against JPMorgan in the case.
In the wake of these cases, industry officials argued it wasn’t fair to expect banks to catch every questionable transaction amid trillions of dollars in daily cash flows.
JPMorgan’s general counsel told The Wall Street Journal: “Think if you’re running a railroad, and we say to you, ‘We want you to monitor everyone who takes your train and see if their trip is legitimate.’ ”
Questions about how well JPMorgan monitors its customers persisted over the past decade, coming up in lawsuits and investigations relating to the Enron and Madoff affairs and other scandals.
Investors, insurers and federal authorities accused JPMorgan and Enron Corp. of using “special purpose vehicles” based in tax havens in the UK’s Channel Islands as part of a scheme to create disguised loans that allowed Enron to hide its debts and book sham profits. The bank, which denied wrongdoing, shelled out more than $3 billion to settle claims related to Enron’s fall.
After the Madoff case broke in 2008, a court-appointed trustee, Irving Picard, invoked Enron in attacking JPMorgan’s role in the largest Ponzi scheme in history. JPMorgan turned a blind eye to Madoff’s activities, Picard claims, despite its promises to do better after it had been caught “propping up” Enron’s frauds.
JPMorgan, Picard asserted, was “at the very center” Madoff’s Ponzi scheme. As his primary bank for more than two decades, it “provided the infrastructure for Madoff’s deception” and was “uniquely situated to see the likely fraud,” the trustee alleged in a lawsuit in federal court.
The bank held as much as $5.5 billion in Madoff-connected cash and, according to court filings by Picard, earned an estimated half-billion dollars from fees and other revenues generated by Madoff’s billions.
Any concerns within the bank about Madoff “were suppressed as the drive for fees and profits became a substitute for common sense, ethics and legal obligations,” Picard’s lawsuit said.
The suit said the bank ignored a key indicator of money laundering or other financial crimes: frequent wire activity with offshore banking centers and financial secrecy havens. Within Madoff’s main account at JPMorgan, dollar amounts of wire activity with high- and medium-risk jurisdictions increased 83 percent between 2004 and 2008.
In June 2007, a JPMorgan risk officer raised questions about whether Madoff might be running a Ponzi scheme. Other than asking a junior employee to do a Google search, JPMorgan officials did nothing to dig deeper into Madoff’s business model, Picard charged. Madoff’s main JPMorgan account was still operating without restrictions when he was arrested at the end of 2008.
The bank calls Picard’s allegations “blustering” and “preposterous.”
“The trustee’s damages claims demand the absurd inference that JPMorgan deliberately joined with Bernard Madoff in a doomed-to-fail Ponzi scheme so that it could earn conventional banking fees,” the bank said in a court filing.
A judge threw out many of Picard’s claims against JPMorgan, ruling that it’s up to individual victims rather than the trustee to sue the bank. That decision is on appeal. Other claims are still alive in bankruptcy court.
Last month, the New York Times reported that U.S. prosecutors have opened a new front in the case, investigating whether JPMorgan violated federal law by failing to fully inform authorities about suspicions about Madoff.
A bank spokesman told the Times the JPMorgan employees made “good faith” efforts “to comply with all anti-money-laundering and regulatory obligations.”
As the fallout from Madoff’s fraud and the 2008 financial crisis was spreading across Wall Street, JPMorgan was dealing with another scandal 5,000 miles away.
An Argentine newsmagazine, Crítica de la Argentina, had run an exposé listing the names and deposit balances of some 200 citizens with JPMorgan accounts in the U.S. — including executives associated with the country’s largest media company.
The headline: EL MORGANGATE.
The issue of flight capital flowing from Latin America to the United States had once again come to the surface. And, once again, JPMorgan was in the middle of the affair, in a case with striking parallels to the Tony Gebauer scandal two decades before.
Hernan Arbizu was a New York-based JPMorgan vice president in charge of some $200 million in accounts belonging to Argentines. Like Gebauer, he was accused of pilfering money from his clients. And as in the Gebauer case, exposure of his wrongdoing was accompanied by questions about his employer’s relationships with wealthy, tax-shy Latin Americans.
Arbizu claims he and other private bankers helped customers launder money and evade taxes in their home countries. “I became a fraudster from the minute I started working in private banking, because if you think about it, I was committing fraud against Argentina as a whole through our activities here,” he told Bloomberg News in 2009.
JPMorgan sued Arbizu in federal court in New York, accusing him of stealing money from client accounts and violating confidentiality agreements by expropriating JPMorgan documents. The bank eventually won a default judgment against him totaling nearly $3.6 million.
U.S. criminal charges pending against Arbizu may never be prosecuted. He remains out of reach in Argentina, protected from extradition by a government that has used his testimony in various legal actions.
JPMorgan declined to answer questions about Arbizu.
In 2010, anti-money laundering specialists at JPMorgan became concerned about a series of multi-million-dollar wire transfers involving a San Antonio, Texas, businessman. When bank officials confronted the businessman, court affidavits say, he told them he was acting as a front for his brother-in-law, the former treasurer of the Mexican border state of Coahuila.
The bank alerted the U.S. Drug Enforcement Administration, helping spark official investigations of the ex-treasurer, who now stands accused in Mexico of embezzling millions of dollars from his state’s treasury.
In 2010 and 2011, anti-money laundering experts at the bank joined the U.S. Department of Homeland Security in the agency’s fight against human trafficking.
Homeland Security and JPMorgan officials developed a detailed M.O. for the banking habits of businesses involved in human smuggling for prostitution and other forms of forced labor, according to John Byrne, executive vice president of the Association of Certified Anti-Money Laundering Specialists. One of the red flags: businesses that booked lots of round-number credit card payments — say, $200 — after midnight.
Byrnes’ group honored JPMorgan and Homeland Security with its Private-Public Service Award. The collaboration, Byrnes says, was an example of good-faith effort by JPMorgan and other banks to fight corruption and money laundering.
Byrnes acknowledges big banks have made mistakes, but he believes these problems don’t add up to a picture of an industry that puts profits above compliance.
The banking industry, he says, “works very, very hard to keep illicit funds out of institutions. The commitment comes from the top — from senior management.”
Around the time JPMorgan was helping Homeland Security and the DEA zero in on human smugglers and the former Mexican official, it was under fire from another U.S. agency.
The Department of the Treasury was investigating evidence that JPMorgan had ignored legal bans on doing business with Cuba, Sudan, Liberia and Iran.
After the department subpoenaed information about one suspect transaction, the bank claimed, repeatedly, that it didn’t have key documents that in fact it did have, the agency said. Only after the agency provided a detailed list it had obtained from another financial institution, the agency said, did JPMorgan cough up the documents.
Treasury officials found that the bank committed multiple violations of U.S. economic embargoes between March 2005 and March 2011. Among the violations: 1,711 transfers totaling $178.5 million to Cuban citizens and the transfer of 32,000 ounces of gold bullion, worth more than $20 million, to a bank in Iran.
The agency charged that bank managers and supervisors knew about the law-breaking and but did nothing to fix the problem.
After the $88.3 million penalty in the case was announced in August 2011, a JPMorgan spokesman said the matter involved “rare incidents” that were “unrelated and isolated from each other. The firm screens hundreds of millions of transaction and customer records per day and annual error rates are a tiny fraction of a percent.”
That settlement hasn’t wiped the slate clean for the bank when it comes to problems over its handling of suspect transactions and clients. Other investigations and lawsuits are still in the works.
In federal court in Minnesota, JPMorgan faces claims that it allowed corporate financier Thomas Petters to run a $3.7 billion Ponzi scheme that raised money through investment funds based in the Caymans.
Petters moved more than $83 million in Ponzi cash through his JPMorgan accounts between 2002 and 2007, a court-appointed trustee, Douglas Kelley, claims in a lawsuit. JPMorgan accepted his deposits, loaned him huge sums and worked with him on his $426 million purchase of Polaroid Corp., the suit says, even though it knew or should have known that he had a shady business plan — and a shady backstory.
Petters had a record of convictions for forgery, larceny and fraud and his chief fundraiser in the Ponzi scheme had done time in prison for cocaine dealing and offshore money laundering.
In court records, JPMorgan says Kelley’s charges are “long on innuendo” and full of “largely irrelevant allegations.” It says it engaged in legitimate, arm’s-length transactions with Petters and that Kelley is trying to overcome the facts and the law “by talismanically invoking the term ‘Ponzi scheme.’ ”
Kelley, a former federal prosecutor, said in an interview that his court filings in various lawsuits relating to Petters’ frauds are “filled with specific facts” that show that JPMorgan and other banks that did business with Petters “turned their heads aside and didn’t ask questions they ought to be asking just because they were making money hand over fist.”
“If you’re a banker and start to see a number of these red flags crop up,” Kelley said, “you have a duty to ask questions — and you have a duty not to accept answers that are not facially candid.”
As the national debate grows louder over deploying police in schools, the largest state in the union — California — is considering a bill that would require schools to set “clear guidelines” defining the role of school police and limit their involvement in disciplinary matters.
The Golden State joins Texas and Connecticut — home of the December Newtown school shootings — in considering legislation that would set limits on how schools involve police officers in discipline. Colorado adopted limits last year.
The proposals come amid burgeoning concern nationally over harsh school punishment policies, and police involvement in seemingly routine discipline. Police presence on campuses nationwide has grown steadily since two teens went on a killing spree at Columbine High School outside Denver in 1999. But a growing group of juvenile-justice researchers and judges argue that putting students into conflict with officers over minor infractions — and needlessly placing kids in the justice system — increases risks students will drop out and get into more serious trouble.
Since last December, lawmakers in various states and school administrators have rushed to fortify security in reaction to a young adult’s shooting rampage, which killed 20 first graders and six educators in Newtown, Conn. President Obama and California’s own senator, Democrat Barbara Boxer, have urged appropriating money to schools that want to increase security.
California State Assembly member Reginald Jones-Sawyer, a Democrat from Los Angeles, introduced the state school police bill, Assembly Bill 549, to “get out in front,” he said, of the drive to put more security personnel in schools. A first hearing on the bill is set for May 1 before the Assembly Education Committee.
California lawmakers are considering restricting other discipline practices critics say have become counterproductive, including suspensions that remove pupils from school for days at a time, often causing them to fall behind in classwork and leaving them unsupervised at home. The Assembly education panel recently approved a bill on April 17 that would restrict out-of-school student suspensions and expulsions for “willful defiance,” the basis of almost half of all suspensions in 2011-2012, new state data shows.
The Jones-Sawyer bill faces opposition from the Association of California School Administrators. Laura Preston, the group’s legislative advocate, told the Center that the proposal takes too much control away from local districts and schools because it limits what they can do with school safety dollars.
In an April 29 letter, the group argued that the bill’s requirements to put police guidelines in school safety plans added up to an imposition “without regard” for “the additional time needed to do this work.” Preston suggested “a conversation” about improving school police training could be an alternative to Jones-Sawyer’s bill.
Jones-Sawyer’s bill does have support from the California Federation of Teachers, the union representing many Los Angeles teachers. That support helps it over one major political hurdle. The California Teachers Association, an even larger union, has no position yet.
“This is not anti-police. I do believe there is a role for public safety on campuses,” Jones-Sawyer said of his bill. “But before we get the guns and guards out, let’s get some mental health [care] in there for students.”
“There should be guidelines for when you don’t need police involved in discipline,” he said.
Last year, the Center for Public Integrity documented the ticketing of about 10,000 mostly black and Latino students a year, including middle-school-age children, in lower-income neighborhoods in the Los Angeles Unified School District. L.A. Unified is the nation’s second biggest school district, and with more than 300 officers and additional security guards it has the country’s largest district-controlled school police agency. At one point, school police were issuing about 1,000 tickets, or court citations, a month in 2011.
New York City police in schools, by comparison, issued 1,666 tickets to students during the entire 2011-2012 school year, according to records obtained by the American Civil Liberties Union. The ACLU is suing New York City police for alleged abusive treatment of students, which the department denies.
Arguing that citations had spiraled out of control, community activists and juvenile-court judges have in recent months pressured L.A. Unified and police to seek other ways of handling some seemingly minor allegations — allegations like vandalism or possession of a marker to commit vandalism, trespassing, marijuana and tobacco possession, daytime-curfew violations and many charges of disturbing the peace or public fighting.
Fresh data just obtained by the Center shows that L.A. Unified’s tickets have fallen sharply, driven mostly by a drop in daytime-curfew and tardiness violations. Between January and March, only about 60 students were ticketed for minor cases of tardiness, or skipping school. The truant or tardy students were referred directly to counseling under a new agreement.
For other alleged legal violations, L.A school police issued 316 tickets this past January; 454 in February and 282 in March.
In January of last year, by comparison, officers issued more than 650 tickets.
Despite the decline, the new data also shows that certain L.A. Unified middle schools in lower-income areas continue to remain hot spots for ticketing pupils who are almost all black or Latino. The most frequent allegation for younger students is disturbing the peace — a charge that often stems from student fights, shouting matches or allegations of threats to fight.
Out of 1,590 tickets issued from last November through March, half went to children 14 and younger.
In fact, if ages are considered separately, fewer 16 and 17-year-olds were cited than students who were either 13 or 14 or 15-years old. Black students represent 10 percent of the district’s enrollment, but were more than 37 percent of those ticketed for disturbing the peace. And 56 percent of black students cited for this infraction were between 11 and 14 years old. L.A. Unified officials did not respond to a request for comment on the Center’s new findings or Jones-Sawyer’s proposal. Last December, the district said it was continuing “to work with our internal and external stakeholders to identify and evaluate non-penal alternatives to various minor violations.”
Jones-Sawyer, 56, attended L.A. Unified schools and remembers kids who scuffled being taken into the office of a vice principal, who put an arm around their shoulders and talked through problems. “We have to find out why kids are angry,” the assemblyman said. Reprimands were not in the form of police citations back then, he said.
He acknowledged educators’ complaints that California’s school counselor ranks have been decimated by budget cuts, leaving schools less able to deal with kids’ conflicts. Compared to a national average of 457 students for every counselor, California’s ratio of 814 students for every counselor in 2008-2009 was rock bottom among the states, according to data gathered by the American School Counselor Association.
Nonetheless, critics of involving officers in discipline matters say peer counseling, intermediate steps prior to police involvement and other cost-effective alternatives exist and are practiced in other states, and in schools in Oakland and San Francisco now as well.
Jones-Sawyer’s bill says schools “shall consider existing strategies and model approaches to minimize the involvement of law enforcement in pupil conduct and minor offenses that do not rise to the level of a serious and immediate threat to physical safety.”
In addition to requiring that schools’ mandatory safety plans define police roles, the bill would also require schools to “prioritize” federal and state public-safety funding on mental-health aid and other supportive behavioral-intervention programs — not just police. Schools would also have to publicly develop “memorandum of understanding” about officers’ duties.
“I think this bill is a huge shift in how we are talking about school safety,” said Zoe Rawson, a lawyer with the Labor/Community Strategy Center, a community group listed as a non-legislative “sponsor” of Jones-Sawyer’s bill. The Strategy Center has represented students who received tickets and is negotiating with L.A. Unified and school police on standards that limit police involvement on district campuses.
The legislation gives “leverage” to local communities to set standards, Rawson said. “Right now, there is nothing required around police having frequent contact with young people.”
Any district in California with a school police force, or school resource officers, would be affected by Jones-Sawyer’s bill. Oakland’s district has its own school police, as does the Central Valley’s Kern Union High School District, which has more than two dozen high school campuses in Kern County.
After the Newtown massacre, the Obama Administration proposed allocating $150 million in federal funds for schools to hire police or counselors or install bullet-proof glass or other security technology. The recommendations are in the 2014 Obama budget proposal now winding its way through the budget process.
Boxer, a California Democrat, introduced a bill to bring back federal funding cut in recent years for school police and offer grants to needy schools from a pool of at least $40 million a year. The measure was folded into the gun bill that stalled in the Senate on April 17, but Boxer is expected to revive it.
Various states are also considering how to fund more school police through property taxes or by tapping other state coffers.
Los Angeles County Presiding Juvenile Court Judge Michael Nash is so concerned about the rush to put police in schools that he wrote — as president of a national judges’ group — to Vice President Biden, who was chairing a post-Newton gun-violence task force.
Penned by Nash as president of the National Council of Juvenile and Family Court Judges, the January letter warns that “the influx of police in schools” in recent years is already “one of the main contributors” to minors sent unnecessarily into the criminal justice system.
Nash told the Center he supports Jones-Sawyer’s bill.
“I like this bill,” he said. “I have been asserting that, in considering school safety and enlisting personnel to maintain safety, we have to be clear in differentiating between security and discipline.”
Colorado— the state that was shaken by the 1999 Columbine High School massacre — enacted reforms last year that require police to “de-escalate” student fights and for schools to ease up on referrals of students to law enforcement due to “zero tolerance” policies. Denver public school discipline data shows a 71 percent increase in referrals of students to police between 2000 and 2004, with only 7 percent of referrals for serious offenses like carrying a weapon, according to analysis by the nonprofit Advancement Project.
Texas legislators are considering a bill that requires schools with police to adopt “graduated sanctions” and other means rather than having officers send children to court for disruption and disorderly conduct. The bill, which has bipartisan support, also requires school staff to submit sworn statements and prove steps were taken to counsel students before police referral to court. The state Senate has already approved the bill, which is now before its House of Representatives.
In Connecticut, where legislators are trying to balance new calls for security with concerns about over-policing, the legislature’s joint Committee of the Judiciary on April 19 voted overwhelmingly, 40-4, to approve a proposal requiring school boards to draft memorandum of understanding with police to limit their use in disciplinary responses. The proposal says agreements should spell out the need for “a graduated response model” to discipline problems. The bill is now before the state’s House of Representatives and, if approved, will go to the state Senate.
A Senate bill in Florida that would have required that schools refrain from referring students to law enforcement for “petty acts of misconduct” or misdemeanors — without written explanations — died when it failed to get out of legislative committees this spring.
In March, the U.S. Justice Department’s civil rights office reached a court-sanctioned agreement stemming from a federal investigation into alleged excessive involvement of police in discipline meted out in Meridian, Miss.
The agreement with the district of 6,100 students in Meridian essentially regulates school police on the district’s campuses. The district is required to train school police officers in “bias-free” policing and stop involving police in minor behavioral disputes in the majority-black district. Civil rights investigators said police in Meridian told them they were ferrying students to jail on allegations of defiance and disrespect at schools.
L.A. Unified, last summer, started referring most tickets not to court but directly to the Los Angeles County Probation Department. Because of a budget crisis, the county had to close its lower-level juvenile courts, where parents and students were usually summoned to answer to citations school police issued that carried hundreds of dollars in fines.
Judges and civil-rights advocates saw the closure as an opportunity to keep most students out of court, and instead first divert students, through probation officers, to community-based counseling or other family treatment.
Between November and March, the big three infractions students were cited for were allegations of possessing or using less than an ounce of marijuana — 514 tickets — and disturbing the peace, for which 496 students were cited. Tobacco or smoking “paraphernalia” was next with 252 tickets.
Rawson said it is a positive step that most ticketed students at L.A. Unified are no longer sent directly into court.
But as a lawyer who has represented students, she’s concerned that black and Latino students in lower-income neighborhood schools are “over-policed” compared to students in more affluent areas. L.A. Unified’s school police chief, Steven Zipperman, told the Center last year that officers are generally evenly distributed to schools — mostly high schools — but that schools of all grade levels can request that officers to dispatched to intervene in a problem.
Conflict with police officers, Rawson said, can leave students with a sense that their citation is a first step toward future clashes with law enforcement. The youngest student cited between March and December was a 9-year-old accused of vandalism.
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