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    A criminal record isn’t keeping one young moderate from operating new a super PAC.

    Jonathan Fauber, a 22-year-old Mechanicsburg, Pa. native, recently filed paperwork with the Federal Election Commission to form the PA Victory Fund, which he tells the Center for Public Integrity will seek to support “pragmatic, practical” candidates from either party in federal and state races in the Keystone State.

    But Fauber, who currently works as a bank teller at a Wells Fargo branch in Mechanicsburg, was banned from the Virginia Tech campus last year because of an incident in which a court found him guilty of trespassing.  

    The Virginia Tech Police Department initially arrested Fauber in August for “threaten[ing] bodily harm,” according to the department's crime log. Virginia Tech police declined to provide further information regarding the arrest when contacted Monday.

    Virginia court records indicate Fauber then faced a charge of extortion in writing— a low-level felony. But the charges were ultimately lowered to misdemeanor trespassing, for which Fauber was found guilty and ordered to complete community service, records show.

    Fauber, who deemed the affair “a misunderstanding with an ex-girlfriend," says he plans to appeal his ban from the Virginia Tech campus.  

    When asked if the incident could hinder his group’s fundraising efforts, Fauber responded, “Absolutely.”

    “It’s on Google,” he added. “It will be there forever.”

    Nonetheless, Fauber said he plans to solicit small-dollar donations, from friends and family at first, and encourage younger voters to get involved in the political process.

    “It’s not so much about big money, but being smart with the money you have,” Fauber said.

    While Fauber is a registered Republican, he said he felt a super PAC was the most effective way to express his voice because he does not want to be “tied down” to a specific party or candidate.

    “I try to model my philosophy after Jon Huntsman,” Fauber said, referring to the former Utah governor and 2012 Republican presidential candidate.

    Fauber said he has never donated to a political campaign before, but volunteered for GOP presidential candidates Mitt Romney and John McCain during the last two elections.

    Fauber is not the only twentysomething to form a super PAC in the wake of the 2010 SpeechNow.org v. Federal Election Commission decision, which gave rise to these high-powered political committees that may raise and spend unlimited amounts of money on politics as long as they do not coordinate with candidates.

    Last election cycle, Liberty for All, the super PAC of 21-year-old John Ramsey, a Stephen F. Austin State University student and Ron Paul devotee, spent more than $1.7 million in an effort to elect a select group of Republicans running for office, according to Center for Responsive Politics data. Mother Jonespreviously reported that Ramsey helped initially fund the group with $890,000 he inherited from his grandfather.

    Comedy Central star Stephen Colbert also inspired a number of students from college campuses all across the country to create spinoffs of his former super PAC, Americans for a Better Tomorrow, Tomorrow.



    Jonathan Fauber, leader of the PA Victory Fund super PACAdam Wollnerhttp://www.publicintegrity.org/authors/adam-wollnerhttp://www.publicintegrity.org/2013/06/10/12791/super-pac-leader-undeterred-criminal-conviction

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    Federal law prohibits companies from donating directly to political candidates, which is why individual employees must voluntarily fund corporate-sponsored political action committees — and their bosses can't force them to donate.

    Yet one enticement companies are using to attract PAC support is a program that will "match" employees’ donations with contributions to charities of their choosing.

    Take Coca-Cola Co., for instance. Employees who donate to the company's PAC can designate charitable organizations to receive a gift equal to their PAC contributions.

    In 2012, Coca-Cola gave $217,000 to charities in the name of employees who contributed to its corporate PAC, according to information disclosed online by the company. That's up from $148,000 in 2011.

    Among the most popular charities in 2012 were Children’s Healthcare of Atlanta (nearly $80,000); Special Olympics International (about $35,000); United Service Organization (roughly $30,000); and The Nature Conservancy (about $18,000).

    At a national conference for PAC professionals earlier this year, a Coca-Cola official even evangelized such programs to "improve your fundraising numbers."

    Coca-Cola spokeswoman Amanda Rosseter told the Center for Public Integrity that the PAC match program was started five years ago to "encourage employees to engage in the political process and at the same time provide support to civic and philanthropic organizations."

    The Federal Election Commission has held that corporate PAC matching programs are legal because they “do not provide any tangible benefit to the contributing employee.”

    Neither the employee nor the company receives a tax-deduction for such gifts.

    Coca-Cola's disclosure of its matching program finances is voluntary; the FEC does not require PACs to include such information as part of their mandatory reports to the agency.

    These programs, which have existed since the 1980s, are “relatively common” and “relatively uncontroversial,” said Larry Noble, the FEC’s former general counsel who now heads the nonprofit Americans for Campaign Reform.

    “People like the idea that the company [will] match their contribution to the PAC with a contribution to a charity,” Noble added.

    While other companies offer similar PAC match programs — aerospace giant Boeing and American Express are among them — Coca-Cola rival PepsiCo. Inc. does not, said Phil Swink, senior vice president of government affairs.

    In all, Coca-Cola’s PAC raised $429,000 in 2012 and donated about $500,000 to federal candidates and committees, records indicate.

    During the first four months of 2013, the PAC raised $148,000 and gave out $221,500 to politicians, according to its most recent FEC report.



    Michael Beckelhttp://www.publicintegrity.org/authors/michael-beckelhttp://www.publicintegrity.org/2013/06/11/12778/charitable-matches-used-entice-pac-giving

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    Politicians are practically Precambrian if they're not wooing potential donors with whiz-bang fundraising experiences, which these days might involve ski trips, skeet shoots, Star Wars send-ups or chichi dinners with Hollywood stars.

    But tonight, Sen. Bob Casey, D-Pa., is going old-school — boozing with some lobbyists.

    The scene for "Beer with Bob" is the rooftop 1001 G St. NW in Washington, D.C., a property that plays home to the Podesta Group, the nation's No. 3 firm last year in terms of lobbying income.

    "We'll have plenty of beer from PA, featuring Jack's Hard Cider and several other specialty brews, along with sandwiches from Taylor Gourmet and several other native PA treats," reads an invitation obtained by the Center for Public Integrity.

    Throughout his career, Casey has advocated for increased lobbying disclosure. During his 2006 campaign against former Sen. Rick Santorum, R-Pa., Casey had particularly harsh words for lobbyists, derided K Street as "a mess" and "place of corruption and influence peddling."

    Among tonight's scheduled attendees are Donald C. Auerbach, chief government affairs officer for the Investment Company Institute, and Daniele BaierleinIzzy Klein and Andy Lewin, all Podesta Group principals. 

    Also: Sean D'Arcy, a partner at law and lobbying firm Akin, Gump, Hauer, Strauss & Feld; Robert Getzoff, a Bank of New York Mellon lobbyist; Marshall Matz, principal attorney and lobbyist at Olsson Frank Weeda Terman Matz PC and Jason M. Rosenstock, director of government relations for ML Strategies.

    Admission for "young associates" is $100, while general tickets require a $250 contribution. Political action committee representatives, meanwhile, need to fork over a grand to Casey's re-election committee.

    Amy Pfaehler, the Casey campaign's national finance director, directed questions about the event to the senator's personal office, a representative of which could not immediately be reached for comment.

    To be sure, Casey isn't completely immune from campaign coffer kitsch.

    Next month, he's scheduled to host a fundraiser at a Beyoncé concert in D.C.




    A delivery man stacks cases of Guinness and Heineken beer in New York.Dave Levinthalhttp://www.publicintegrity.org/authors/dave-levinthalhttp://www.publicintegrity.org/2013/06/11/12795/bob-casey-bucks-fundraising-trend-beer-bash

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    When investigators examined the operations of a sprawling New York social service organization, what they uncovered was deeply troubling. Board members of the Ridgewood Bushwick Senior Citizens Council had almost no experience in nonprofit management. Several couldn’t name any of the group’s programs. Two of them could not identify the executive director, who in turn told investigators she was unaware of a fraudulent scheme carried out under her watch: Employees had squandered or stolen most of an $80,000 city grant.

    As a result of that July 2010 report by New York City’s Department of Investigation, both the city and state quickly pulled the plug, suspending the organization’s grants, which provide practically all of its funding. But just as quick, the Brooklyn-based group won back it’s government support on the condition that it enact corrective measures, and today, the council has active grants from the city and the state totaling more than $50 million. Maybe that’s because the organization provides critical services, such as senior care and affordable housing, as a city spokeswoman said when funding was restored. But the council may also be thriving because its founder, Vito Lopez, was for years one of New York’s most powerful politicians — a state legislator who spent much of his career channeling that power through Ridgewood Bushwick.

    Lopez personally directed at least $505,000 in state grants to the organization from 2007 through 2010, the only years for which data are available, and has reportedly had a hand in millions more. He helped elevate the group’s employees to political office. Other candidates, elected with Lopez’s help, have directed even more public money to Ridgewood Bushwick in return. The council’s former executive director, forced out in disgrace, was Lopez’s campaign treasurer; she later pleaded guilty to lying about a raise that hiked her salary to $782,000 for the fiscal year ending in June 2010. And Ridgewood Bushwick’s housing director is Lopez’s girlfriend.

    This may look bad. It’s not unusual. Vito Lopez is but one example of a surprisingly common phenomenon afflicting state legislatures. Since 2010, at least eight New York lawmakers or their related charities have been investigated, charged or convicted of pillaging public funds. Earlier this year, former state Sen. Shirley Huntley pleaded guilty in two separate cases, one in which she sent state grants to a nonprofit she had founded before pocketing the money, the other in which she helped her niece and a former aide steal funds she directed to another group that, yes, Huntley herself created.

    New York’s legislators outshine their peers in this department, but they’re not alone. Two former Florida state senators repeatedly directed state funds to a struggling group on whose board they sat, apparently not a violation of state law. A Pennsylvania charity had its state funding frozen after a state audit found it allegedly gave no-show jobs worth hundreds of thousands of dollars to a pastor and his aide at the direction of a state lawmaker. Illinois, Ohio and South Carolina all have seen similarly close ties between certain legislators and charities they helped fund.

    While several examples led to criminal charges of theft and fraud, others appear to be perfectly legal: public officials are simply tipping the scales in favor of groups they are associated with or have a family member working for.

    “The issue to me is what’s legal, and the fact that there’s a tremendous amount that’s legal,” said John Kaehny, executive director of Reinvent Albany, a group advocating government transparency. Kaehny said public officials in New York have used charities to conduct “widespread looting” of taxpayer funds with little repercussion.

    As for Lopez, he’s gotten into plenty of trouble in recent weeks — but not for anything related to Ridgewood Bushwick, despite reports of federal investigations back in 2010. Instead, in May, the New York Assembly forced Lopez to resign after the state’s ethics commission released a report exposing lurid details of several sexual harassment complaints against him. On June 11, the Legislative Ethics Commission said that Lopez's conduct had violated state law and fined him $330,000.

    Lopez and his attorney did not return calls seeking comment. James Cameron, who became CEO of Ridgewood Bushwick in 2011 after the city ordered the group to overhaul its leadership, said the organization is fully independent of Lopez. Any ties exist simply because it operates in the neighborhoods he has represented for decades.

    “He does not control, influence or dictate anything that happens in the organization,” Cameron said. “But it’s a large organization. If he’s talking to staff out there in the field I would have no way of knowing.” The former executive director, interviewed by city investigators three years ago, likewise distanced herself from her subordinates’ actions, saying she had no “crystal ball” to know if employees were dishonest. Ridgewood Bushwick and affiliates employ 2,100 people.

    Lopez is now running for a seat on the New York City Council and has received campaign contributions from at least 10 employees of the organization.

    Rick Cohen, who has written extensively on the links between politicians and charities for Nonprofit Quarterly, said that in state capitols across the country, lawmakers direct taxpayer money to their pet groups irrespective of whether they need or deserve scarce public dollars. “I’ve seen very little evidence in … states that do this,” he said, “that there’s an accountability regimen or the oversight that’s needed.”

    A lack of scrutiny

    Over the past few decades, state governments have increasingly outsourced many functions to community-based nonprofits in an attempt to provide more effective, flexible social services. But the result, some say, has been the creation of what is essentially another arm of government.

    “The function may be outsourced, but a lot of the funding is coming from government,” said Susan Lerner, executive director of Common Cause New York, a good government group. Ridgewood Bushwick, for instance, derived $13.4 million of its $15.5 million in outside funding in the fiscal year ending in June 2012 from government grants (affiliated groups pulled in some $42 million more, mostly in government health care contracts). When independent nonprofits spend that cash, rather than a government agency, Lerner said, public money does not receive the same level of oversight. “It has a tendency to fall into nepotism and favoritism and cronyism.”

    Separating favoritism from efficient use of funds has proven to be a daunting task for state governments. Some ethics experts say states should draw a clear line: that lawmakers cannot be involved in sending funds to any group with which they have a direct link, even as an unpaid board member.

    “Where there’s a real personal connection, financial or otherwise, I think it makes sense for the law to say that you can’t be involved in that,” said Peter Sturges, who served as executive director of the Massachusetts State Ethics Commission from 2000 to 2007. “You can’t be making decisions objectively.”

    But few states draw such a line. Most laws consider a situation a conflict only if an official derives a direct financial benefit; sending money to your pet project, regardless of merit, is fine as long as you don’t get a cut. In many states, lawmakers do not have to disclose if they hold an unpaid board position with a nonprofit in their community, or if family members or political staffers do (New York is among the few that do require this disclosure, though it does not extend to staff members of the lawmaker or grown children).

    Ethics oversight bodies have weighed in on the topic in several states, and in most cases, they have allowed the lawmakers to help fund nonprofits with which they are associated.

    In Texas, one lawmaker who worked for a nonprofit wanted to solicit contributions for the group (Texas, like most states, has a part-time legislature). The Ethics Commission said that solicitations “could be viewed as improper under certain circumstances” and advised the legislator to use “extreme caution,” but in January the body gave its approval.

    Two 2006 advisory opinions from Colorado’s Ethics Board allowed lawmakers to vote on or sponsor legislation that benefited nonprofits they were associated with, one as a paid director, the other as an unpaid board member.

    The general counsel for Florida’s House of Representatives has issued four relevant opinions since 2007, each time determining that soliciting funds or voting on a bill that could benefit the nonprofit did not raise a conflict of interest. In one case, the lawmaker was a paid employee of a nonprofit,while the other three had volunteered for the group, co-hosted events, or were otherwise associated with an organization or its founders.

    In one of these cases, a legislator wanted to solicit funds for a group the lawmaker volunteered for and sometimes partnered with on “joint community projects.” The general counsel said the lawmaker was free to solicit the funds, but highlighted state laws against using an official position for personal gain or to grant special privilege, saying, “it would be prudent to keep these in mind.” The opinion adds that while “the law grants latitude to members,” because they serve part-time, “what may be a legally tolerated conflict of interest may be viewed as inappropriate or corrupt” by the public.

    The counsel was sounding a common theme: the gulf between what is legally permissible but seemingly inappropriate.

    “I’m certainly aware of a growing trend nationally of public officials having ties with nonprofits and those nonprofits perhaps, not always, benefiting from the public official’s position of power,” said Carol Carson, executive director of Connecticut’s Office of State Ethics. She said state employees, including executive branch officials, often come to her office to ask whether they can be involved in awarding a grant to a group they are associated with. As long as the grant doesn’t directly benefit them financially, she tells them yes. “That might not pass muster with the court of public opinion,” she said, “but under the Code of Ethics, that would be allowable.”

    Trouble in Gotham

    “It’s become a routine headline in New York: Politician pinched in charity scandal,” said a September 2012 article by Andrew J. Hawkins in Crain’s New York Business. “The story changes little from case to case: An elected official funds a nonprofit and staffs it with cronies. Sometimes the group works on his campaigns — or does no work at all.”

    Assemblyman William Boyland  Jr. accounts for several of these tales just by himself. Boyland Jr. comes from a line of Brooklyn legislators: he gained his post through a special election in 2003 after his father resigned; his uncle held the seat previously. The district is covered with the family name — a street, a school, a housing project and more are all named for the elder Boylands.

    Boyland Jr.’s activities first came to light in March 2011, when federal prosecutors charged him with taking bribes, in the guise of consulting fees, from the executive of a nonprofit that operates hospitals in exchange for helping the organization, MediSys, secure millions in state funds. Boyland Jr. had worked for MediSys before taking office, and continued earning a salary after his election without reporting it as required, prosecutors said. The MediSys executive was eventually convicted of offering bribes to Boyland Jr. and two other lawmakers, but a jury acquitted Boyland Jr. in November 2011. One juror told The New York Times, “We could not say that because he got the money, he advocated for MediSys. … We couldn’t do that beyond a reasonable doubt.”

    Within a month, however, prosecutors charged Boyland Jr. in another, unrelated bribery case. The allegations include the solicitation in an Atlantic City hotel suite of more than $250,000 in bribes from undercover FBI agents posing as real estate investors. According to the indictment, in exchange for the cash, Boyland Jr. was to help with development deals in his district and secure state financing for the purchase and resale of a hospital building. Prosecutors had just filed the first set of charges against him, so Boyland Jr. needed cash to pay his lawyers, he allegedly told one of the agents.

    In May, prosecutors updated the new charges to include allegations that Boyland Jr., from 2007 through 2010, sent public funds to a nonprofit group while directing some of the money to be spent on political events and expenses for the lawmaker, including the printing of T-shirts that said “Team Boyland.” (The family reportedly had handed out these shirts for years.) Boyland Jr. is facing 21 criminal counts and has pleaded not guilty. The trial has yet to start.

    Boyland Jr. has ties to another, upstate New York charity, the Altamont Program, which also has operations in Brooklyn. The FBI and state authorities raided the upstate offices in December. The Albany Times Union said agents were looking into Boyland Jr.’s direction of $1.2 million in state grants to Altamont and a related group from 2004 to 2009, using a controversial legislative vehicle called “member items” that put state funds at the discretion of individual lawmakers. Boyland Jr.’s father went to work for the organization as a consultant after he resigned as a legislator in 2003. Boyland Jr.’s sister also reportedly worked for the group.

    Boyland Sr. says he worked for the group from 2008 to 2010. He was reportedly fired after the organization discovered that he had used a company credit card for personal expenses. In an interview, the elder Boyland did not deny using the card for the purchases, but said that in consulting work, it’s impossible to distinguish between business and personal expenses.

    A spokeswoman for Boyland Jr. referred questions to his lawyer, Nancy Ennis. She did not return phone calls and emails requesting comment.

    Many a similar scandal in New York, including Huntley’s and Lopez’s, has been fueled by those “member items” — part of a gentlemen’s agreement between legislative leaders and the governor that for years disbursed hundreds of millions of dollars to groups of lawmakers’ choosing with no oversight or trail of who got what. In 2007, Gov. Eliot Spitzer pushed a bill that required the legislature to disclose each member item. The same year, the Attorney General’s office reached an agreement with the legislature that required recipients to certify the funds were being used appropriately. But even with this level of oversight, watchdogs and some legislators ridiculed the practice as corrupt and wasteful.

    “It’s a system which invites abuse,” said Lerner, of Common Cause.

    In 2010, Gov. David Paterson vetoed thousands of member items in the budget, citing fiscal austerity, and Gov. Cuomo has continued to veto the requests, effectively ending the practice for now. But there are still funds from multi-year grants that have not yet been spent. And political insiders in New York say new tricks have taken the place of the “member item” abuses.

    “There are lots of ways to direct money,” said state Sen. Liz Krueger, who has co-sponsored a bill that would ban legislators from giving member items to groups that employ family members or staff and would apportion them equally to each district. Traditionally, the majority party controlled most of the funds and disbursed them as it pleased.

    Machine politics in Illinois

    Lawmakers in other states have their own ways to send money to charities, particularly in states with hefty budgets. In Illinois, legislators can direct funds without having to disclose they were the source, much as in New York. In 2009, for example, a paragraph tucked into an appropriations bill included a $98 million grant to the United Neighborhood Organization, a Latino community group that builds and operates charter schools in Chicago.

    Over the past several years, the group built close ties to the state’s most powerful politicians, pushing the boundaries of appropriate activity by tax-exempt charities, which are barred by federal law from working on political campaigns. After the organization’s CEO, Juan Rangel, co-chaired Rahm Emanuel’s successful campaign for Chicago mayor, Emanuel jokingly referred to the fact that the charity is not supposed to be directly involved in politics. The organization’s staff and lobbyists include former city officials, and some of them have left to enter politics. Rangel regularly endorses candidates. Contractors hired by UNO (often with public money) have contributed to those candidates. Rangel hosted a fundraiser for state House Speaker Michael Madigan in October, with the organization’s contractors giving more than $24,000 to Madigan, according to Chicago Sun-Times report.

    The close relationships paid off with that 2009 grant of $98 million. But in February, a report by the Sun-Times revealed that UNO had spent millions from the grant on insider contracts with relatives of the organization’s staff and political allies. Within days, Rangel said the organization had launched an internal review and had suspended some of the suspect contracts. He also said, however, that all of the contractors were qualified and that the work had been fulfilled. The organization’s vice president, whose brothers had won a contract, resigned. The state determined that the practices constituted apparent violations of the grant, and in March suspended what remained of the grant. In response, the group hired a full time compliance officer and Rangel stepped down from the board of directors (though he stayed on as CEO). In June, the state restored the flow of funding.  

    Officials at UNO did not respond to requests for comment.

    Steve Brown, a spokesman for Madigan, who sponsored the spending bill that included the grant to UNO, said the speaker is a supporter of the organization, but that the grant had nothing to do with the contributions from the Rangel fundraiser, which he described as modest in relation to Madigan’s overall fundraising.

    Rey López-Calderón, executive director of Common Cause Illinois, said some nonprofits have become modern-day political machines in Illinois, citing UNO as the prime example. Groups receive state grants with the help of politicians and in return, he said, their members contribute money and even time to the officials’ campaigns. “That kind of activity is rampant in Illinois.”

    Other nonprofits or their employees in Illinois have been questioned about the extent of  their ties to legislative patrons. In 2010, for example, a federal grand jury subpoenaed records related to dozens of state grants for nonprofits linked to at least one lawmaker. Thomas Homer, the state’s legislative inspector general, said there are no requirements that lawmakers disclose their ties to nonprofits unless they receive a salary from the group, and that there are no ethics rules that apply to the situation beyond general laws prohibiting bribery and kickbacks. He said his office refers complaints of schemes involving nonprofit groups to the FBI, and that there are several open cases, though their nature and number remain confidential.

    Behested payments

    In addition to state grants, lawmakers have found another source of funds they can direct to nonprofits: corporate contributions. It’s become common practice in many states and in Congress for corporate donors and lobbyists to contribute money to specific charities at the request of lawmakers, in what’s often called a behested payment. A few states have formal systems to regulate this, but in many cases it’s an uncharted field.

    The payments present a “win-win situation all around,” said Nola Werren, a client specialist at State and Federal Communications, which provides corporate clients with information about state lobbying laws. “The lawmaker gets this benevolent image for his constituents and shows that he cares,” while the corporation gets its name on the donation and the nonprofit gets the money. But the arrangement can also serve as a route around restrictions on gifts to lawmakers or campaign contributions, allowing corporations to curry favor with politicians, frequently without disclosure.

    California is one of the few states that does require disclosure, but that hasn’t discouraged the practice, said Phillip Ung, a spokesman for California Common Cause. Last year, 57 lawmakers reported such contributions, totaling $2.3 million.

    Ung pointed to state Sen. Roderick Wright, who has directed $166,500 in corporate contributions to the National Family Life and Education Center from 2010 through 2012. In the fiscal year ending in June 2011, the last year records for the organization are available, the payments comprised more than half of the group’s outside income. Wright has co-hosted several events where the group handed out prizes, school supplies and provided health screenings to families in his district.

    In an email, Ung praised the fact that the funds are helping the community but added, “there is the ethical question of why are these corporate interests giving at the behest of Mr. Wright and what do these behested payments earn them in political influence.”

    Among the contributors are AT&T, Time Warner Cable, Edison International and the Morongo Band of Mission Indians. Wright is the chairman of the Governmental Organization Committee, which oversees gambling by Indian tribes in the state, and sits on the Energy, Utilities and Communications Committee.

    Cine Ivery, Wright’s chief of staff, said the nonprofit helps mentor youths in the senator’s district, and that it couldn’t do the work without the corporate donations. The companies get nothing in return, she said. The organization did not return phone calls or emails.

    The practice is on the rise across the country, Werren said. Her company has gotten so many requests from clients about the rules covering such payments that it decided to canvass state laws. According to State and Federal Communications, only 14 states require lobbyists to disclose such gifts. California is the only state Werren knows of that requires lawmakers to disclose them, and only New York and Maryland prohibit behested payments.

    Changes slow to come

    Even as experts say the questionable ties between nonprofits and politicians are on the rise, many states have been slow to enact reforms that might prevent them. One step would be to ban, or restrict, discretionary spending directed by a single lawmaker.

    But there are many reasons why even advocates for reform say this could be a bad idea. “Legislators, if they’re good, know what their district needs. They know the good organizations,” said Sturges, the former Massachusetts regulator. “Why should they not be able to direct funds to the best organizations in their districts?”

    There’s no doubt that many charities provide critical services in poor communities as a result of grants shepherded by their representatives. Sen. Krueger of New York pointed out that some small community groups do not fit the pre-packaged conditions required by many state grant programs, but are worthy recipients nonetheless. And, both Krueger and Sturges said, there’s no indication that leaving such decisions to governors or other executive branch officials produces markedly better results.

    In lieu of prohibitions, many good-government groups are pushing for increased disclosure of all budgetary spending. They say that whatever discretionary funds do exist should have strict requirements tied to them that would dictate what types of projects can be funded and prevent staff, relatives or associates of public officials from being associated with any recipients of the funding.

    Kaehny, of Reinvent Albany, has called for more disclosure from the nonprofit world as well. In New York, for example, he said that an independent body should regulate charities, rather than the politically charged Attorney General’s office, and that all the data that is already public from tax forms and other documents should be added into a searchable database.

    Lawmakers have introduced bills that would require their colleagues to disclose positions with nonprofit organizations in Arizona and Florida, but neither bill has passed. In response to a series of scandals, Pennsylvania’s House and Senate adopted rules in 2007 and 2013 restricting members’ ability to form and fund nonprofits. But two bills that would have gone further, including one that would have ended “legislative initiative grants,” the state’s own version of member items, failed to pass the legislature. The bill that Sen. Krueger cosponsored in New York to reform member items has also failed to pass.As have repeated efforts to require disclosure of Illinois’ own version of the funding, called “member initiatives.”

    Cohen, of Nonprofit Quarterly, said that any changes face an uphill battle because most of those with the ability to enact them, from lawmakers to charities, benefit from the status quo. “There are a lot of players that have a stake in this,” he said, “and want to see it continue.”

    Former New York state senator Shirley Huntley, left, plead guilty to embezzlement charges. Assemblyman William Boyland  Jr., top right, is facing 21 criminal counts. New York Assemblyman Vito Lopez directed at least $505,000 in state grants to the Ridgewood Bushwick Senior Citizens Council.Nicholas Kusnetzhttp://www.publicintegrity.org/authors/nicholas-kusnetzhttp://www.publicintegrity.org/2013/06/12/12794/state-legislators-ties-nonprofit-groups-prove-fertile-ground-corruption

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    During Sen. Elizabeth Warren’s race last year against incumbent GOP Sen. Scott Brown, the League of Conservation Voters spent more than $1 million on “independent expenditures” that either advocated for Warren’s election or Brown’s defeat, including mass mailings and paid canvassers.

    The 501(c)(4) nonprofit’s treasury, as well as its related political action committee and super PAC, accounted for the spending, which helped push Warren to victory in a race that ranked among the League’s top electoral priorities. The League also bundled more than $100,000 in earmarked campaign contributions for Warren, federal records show.

    Now tonight in Washington, D.C., supporters of the League — one of the nation’s most politically active environmental nonprofits — will gather for a fundraising gala during which Warren, a Democrat, is scheduled to address the crowd.

    The event is the latest illustration of how politicians and special interest groups, which by law can’t coordinate election spending, nevertheless forge mutually beneficial ties.

    Sen. Al Franken, D-Minn., will also speak at the League’s fundraiser — notable since the nonprofit could play a role in helping propel him to a second term next year.

    League spokesman Jeff Gohringer said the two senators should be commended for being “two voices in Congress who are working hard on environmental priorities.”

    Lacey Rose, Warren’s press secretary, told the Center for Public Integrity not to “read into” the senator’s appearance “too much.”

    “Sen. Warren is a strong advocate for clean energy and environmental protection,” Rose said. “She supports the LCV’s mission to educate the public on global warming, energy and conservation, and was honored to be asked to speak at their event to share her passion for these important issues.”

    Warren ultimately raised an eye-popping $42.5 million from all donors ahead of her 7.5 percentage point-victory over Brown.

    Next year, Franken, who was narrowly elected to the U.S. Senate in 2008, will again face voters.

    The former comedian, who serves as the Senate’s Energy and Natural Resources Committee’s energy subcommittee chairman, is currently one among a handful of candidates promoted on the League's “Give Green” website.

    The site steers prospective donors toward pro-environment candidates.

    “Franken is a fierce advocate for combating climate change,” said spokeswoman Alexandra Fetissoff, adding that the senator “shares many of the same values and viewpoints on energy and the environment as members of the League of Conservation Voters.”

    At the end of the first-quarter of 2013, Franken’s campaign had $2 million in the bank, federal records show.

    The League has conducted its annual “Capital Dinner” fundraiser for more than 20 years, said Gohringer, who added the event is about both “celebrating our successes” and rallying for “the fights that lie ahead” in Congress.



    League of Conservation Voters logoMichael Beckelhttp://www.publicintegrity.org/authors/michael-beckelhttp://www.publicintegrity.org/2013/06/12/12805/elizabeth-warren-nonprofit-seek-green-together

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    Sam Ervin IV must have been feeling pretty good about his chances of winning a seat on the North Carolina Supreme Court last fall.

    He had name recognition — his grandfather was the legendary senator who led the Watergate investigation — and a poll released less than a week before Election Day showed him leading his opponent, incumbent Justice Paul Newby by 6 points, 38-32.

    But on the Friday before the election, "Justice for All NC" — an independent political committee  whose funding came  mostly from out of state — dropped a TV ad depicting a scowling Ervin and asking: "Sam Ervin. Can we trust him to be a fair judge?"

    Ervin lost the race by 4 points, 52 percent to 48 percent.

    “As far as I know,” says Ervin, “there had never been an attack ad in a North Carolina judicial race.”

    North Carolina’s supreme court election was arguably decided by groups like Justice for All — secretive nonprofits, unaffiliated with a candidate, whose money came from out of state.

    Independent groups accounted for at least $2.59 million in spending to influence North Carolinians’ supreme court vote with more than half the total ultimately coming from groups outside the state, according to a Center for Public Integrity analysis.

    And North Carolina is not alone.

    The Center for Public Integrity examined 10 high-profile state supreme court elections in 2012 and 2013 where outside spending was a factor. At least a third of the $11.7 million spent by independent groups — collected from campaign finance reports, tax records and documents filed with the Federal Communications Commission — originated outside the election states, mostly from Washington, D.C.-based organizations.

    Tracking all outside spending is nearly impossible thanks to lax state disclosure rules, as well as a loophole in the federal tax code that allows politically active nonprofits to run attacks ads without disclosing who funds them.

    Out-of-state influence likely helped decide races in North Carolina, Iowa and Mississippi.

    The influence of nonprofits and super PACs has changed the nature of state supreme court races, formerly shielded, at least in part, from the influence of money and partisan politics. Now, in many states, justices are involved in bare-knuckle partisan brawls similar to those that characterize non-judicial elections.

    In the 10 state races analyzed by the Center, national political groups were active directly or indirectly in seven. Seventy-five percent of the outside money could be traced to the long-running battle between trial lawyers and business interests.

    Trial lawyers helped carry the day in Florida, Louisiana and Oklahoma, while the U.S. Chamber of Commerce says it was successful in North Carolina, Michigan, Ohio and Mississippi.


    In North Carolina, supreme court campaigns are mostly funded by taxpayers to spare candidates from having to raise significant money and appear beholden to individuals, companies or interest groups that may face them in court. The outside money in last fall’s race overwhelmed the public finance system, rendering it largely irrelevant.

    Justice for All NC, which spent $1.7 million to influence the race, got 68 percent of its money, or $1.2 million, from the Washington, D.C.-based Republican State Leadership Committee. The group in 2010 spearheaded a Republican effort to elect GOP state legislators, who would determine the boundaries of congressional districts following the U.S. Census.

    The U.S. Chamber of Commerce’s Institute for Legal Reform gave $3.5 million to the RSLC in 2012, making it the largest single donor to the national Republican group last year. The Institute, a major foil of trial lawyers, lobbies for legislation that would mandate lower damage awards in civil trials.

    The anti-Ervin ad was just one part of what appeared to be a coordinated effort between a network of groups with ties to the D.C. area to defeat Ervin and keep Newby on the bench. Officials from RSLC did not return calls seeking comment.

    The D.C. money arrived early and stayed late.

    In August, the Washington, D.C.-based nonprofit Judicial Crisis Network gave $75,000 to pay for radio ads supporting Newby. The group doesn’t disclose its donors.

    Starting in October, another group, the N.C. Judicial Coalition, which received $1.5 million from Justice for All NC, blanketed the state with TV ads featuring a banjo player crooning about Newby’s tough stance on crime.

    The North Carolina arm of Americans for Prosperity, the northern Virginia-based group tied to billionaire industrialists Charles and David Koch, spent $225,000 on mailers in late October calling on Newby to “keep standing up for taxpayers.”

    The icing on the cake was the attack ad against Ervin just days before the election.

    Ervin too had help from outside groups, though they spent only $71,500 on his behalf.

    The ultimate provenance of much of this money is a mystery to the public. Those in the know aren’t talking and the disclosure rules in state campaign finance laws and federal tax codes mean they are not required to.

    “The average voter doesn’t need to trace every dollar to figure out whether to vote for a candidate,” says Judicial Crisis Network’s chief counsel, Carrie Severino.


    In Michigan, the Judicial Crisis Network spent more than $1 million on a last-minute attack ad against Democratic supreme court candidate Bridget Mary McCormack. The ad featured the mother of a slain soldier chastising McCormack for “volunteer[ing] to help free a terrorist.”

    McCormack wound up receiving the most votes in her race.

    Because of Michigan’s lax disclosure rules, the group did not have to report any of its spending to state election officials. Instead, a watchdog group, Michigan Campaign Finance Network, collected filings from local TV stations to calculate the group’s spending.

    Teri Johnson, the mother who appeared in the ad, says she was never told who paid for them.

    “I don’t know anything about the finances behind it,” she says.

    McCormack says her campaign did not know who was behind the Judicial Crisis Network attack, or why she had been targeted among a field of other liberal candidates.

    Severino says the nonprofit has a nationwide strategy to end judicial appointments, switch to judicial elections and then swarm those elections with ad campaigns supporting conservative jurists. As a “social welfare” nonprofit, the group is not required to report its donors.

    Regulatory filings show that the group has several ties to well-connected conservative political operatives.

    It shares office space in Washington, D.C., with Grover Norquist’s anti-tax group, Americans for Tax Reform.

    Gary Marx, the Judicial Crisis Network’s former executive director, is executive director of the Faith and Freedom Coalition, evangelical powerbroker Ralph Reed’s advocacy organization.

    Treasurer Neil Corkery holds the same title for the National Organization of Marriage, the largest anti-gay marriage group in the country. The group spent at least $148,000 in Iowa’s state supreme court race last year.

    Tax filings show that the Wellspring Committee, a social welfare organization run by Neil Corkery’s wife Ann, gave the Judicial Crisis Network $350,000 in 2010 and another $170,000 in 2011, making it by far the largest donor to the group.  Judicial Crisis Network’s total revenue in fiscal 2010, which ended on June 30, 2011, was $382,453. Wellspring also doesn’t name its donors.

    Neither Marx nor the Corkerys returned calls seeking comment.


    In Iowa, 57 percent of the money spent in a retention election for Justice David Wiggins came from groups backed primarily by out-of-state donors.

    Conservative groups, including Colorado-based Focus on the Family, the D.C.-based National Organization for Marriage and the Pennsylvania-based Patriot Voices run by former presidential candidate Rick Santorum, spent $225,000 trying to toss Wiggins from the bench. None of these groups disclose their donors.

    In 2010, conservatives successfully unseated three of Wiggins’ former colleagues after the high court voted unanimously in favor of gay marriage.

    Wiggins won, thanks in large part to $115,000 spent by another non-disclosing nonprofit, the gay-rights group Human Rights Campaign.  Spokesman Fred Sainz says his group was determined to counter the conservative money being spent trying to unseat Wiggins.

    “Our goal was to ensure that the campaign in Iowa had the resources that it needed to campaign effectively,” says Sainz, who said the HRC is funded largely by small-dollar donors.


    The fallout from the 2010 Iowa election spread to Florida last year, where conservatives unhappy with a high court ruling to invalidate a ballot initiative challenging the Affordable Care Act took steps to oust three justices. Two tea party groups, including Americans for Prosperity, spent small amounts in a campaign against the judges, and the Republican Party of Florida urged its members not to retain the justices.

    The initiative was opposed by a coalition of trial lawyers, unions and others who spent more than $3.2 million through a group called Defend Justice from Politics. The total was tops among outside groups that spent money on state supreme court elections last year. Former President Bill Clinton even recorded a robocall for the group.

    America Votes, a D.C.-based, union-backed group, contributed $300,000 to Defend Justice, making it the single biggest donor. Nine Florida law firms each gave $100,000 or more.

    “The one thing we learned from Iowa was that they were ill-prepared and non-funded and we were not going to allow that to happen in Florida,” says Neal Roth, a Miami attorney and former head of the state’s trial lawyer association. Voters retained the three justices — R. Fred Lewis, Barbara Pariente and Peggy Quince.

    The spending on the other side was a fraction of that raised in support of the judges. One group, Tallahassee-based Restore Justice, only raised $75,000. An official for Americans for Prosperity estimates they spent less than $100,000.

    Slade O’Brien, the Florida director of Americans for Prosperity, says he was looking to deter “judicial activism and legislating from the bench.” Despite the loss — the justices were retained with about two-thirds of the vote — O’Brien claims his group enjoyed a strong return on a modest investment.

    “Now there’s a level of scrutiny, they can’t just toil away in anonymity,” O’Brien says.

    Roth said the money raised by his group showed that out-of-state groups will find a stiff challenge in the Sunshine State.

    “Don’t come to Florida again, because it isn’t going to work,” he says.

    Trial lawyers also prevailed in Oklahoma, where their spending helped retain four justices, and in Louisiana, where the Republican candidate they supported won the seat.


    In Mississippi, out-of-state organizations helped tilt the field toward the winning candidate.

    Improve Mississippi, funded heavily by a state physicians’ political action committee, state business groups and the D.C.-based American Tort Reform Association, reported spending more than $350,000 in support of Josiah Coleman against Flip Phillips in a race that is technically non-partisan.

    Coleman’s other backer, the northern Virginia-based Law Enforcement Alliance of America, did not disclose its donors or spending.

    Coleman won with 58 percent of the vote, even though Phillips’ campaign raised more money than Coleman’s.

    The LEAA spent at least $188,000, according to records filed by Memphis television stations with the Federal Communications Commission. The ads portrayed Phillips as a greedy trial attorney. The total does not reflect amounts spent in smaller markets.

    One Memphis station, Fox Broadcasting-affiliate WHBQ,  refused to provide information about how much LEAA spent for ad time it bought in the two weeks leading up to the election.

    Founded in 1991 with support from the National Rifle Association, which has long been a partial financial backer, the LEAA frequently pays for attack ads against state-level candidates.

    Several observers in Mississippi, including former supreme court justices, believe that the U.S. Chamber of Commerce is supplying the money behind the LEAA’s attack ads.

    Mississippi had a reputation as one of the most plaintiff-friendly jurisdictions in the country when in 2000 the U.S. Chamber spent $1 million trying to influence the state supreme court elections.

    The out-of-state influence bothered many in the state, including then-Chief Justice Lenore Prather, whom the Chamber supported, according to published accounts during that election.

    She asked the Chamber to stop running its ads, a request that was ignored. State officials later sued the Chamber over its refusal to disclose who paid for the ads. A federal judge ordered the disclosure, but the ruling was overturned on appeal.

    In 2002, the Chamber issued what The Wall Street Journal dubbed a “call to arms” to Mississippi voters and referred to the state as a lawsuit “Mecca.” But unlike two years prior, no ads identified as being paid for by the chamber ran on state TV. Instead, the state was blanketed by ads paid for by the Law Enforcement Alliance of America.

    The LEAA also ran attacks ads in 2008 against then-state Supreme Court Justice Oliver Diaz, whom the U.S. Chamber had targeted in 2000.

    Diaz says he believes Chamber money was behind the push polls, mailers and radio and TV ads that the LEAA sponsored.

    “The ads that the U.S. Chamber ran against me in 2000 were extremely similar [to the ones] that the LEAA ran against me in 2008,” says Diaz, who also notes that the attacks in both races were launched right before the election.

    The LEAA was also active in Texas that year, running attack ads against the Democratic attorney general candidate. A state court there has ordered the LEAA to reveal the donors who funded those ads, a ruling that’s currently being appealed to the Texas Supreme Court.

    No one from the Chamber or the LEAA responded to requests for comment.

    In Montana, a mysterious outside group called the Montana Growth Network helped sway the course of that judicial race as well.


    Earlier this year in Wisconsin, pro-business groups spent nearly $700,000 in the state supreme court race, helping incumbent Justice Patience Roggensack cruise to victory over challenger Ed Fallone.

    State supreme court races were expensive affairs in recent years in Wisconsin, but this year’s contest was more subdued as liberal groups didn’t spend much to back Fallone.

    The state arm of Club for Growth, an anti-tax group, spent at least $287,000 on TV ads supporting Roggensack’s bid, according to FCC records. The group is not required to disclose its donors.

    The National Association of Realtors, based in Chicago, spent at least $206,000 supporting Roggensack via the organization’s state chapter.

    After the 2010 Citizens United U.S. Supreme Court decision, the Realtors association began charging its members a $1 fee to pay for ads and other political efforts in an initiative it called “My Realtor Party,” according to Bill Malkasian, president of political strategic planning.


    State supreme court candidates backed by deep-pocketed outside spending groups weren’t always successful.

    Partnership for Ohio’s Future, an affiliate of the Ohio Chamber of Commerce, spent more than $1.1 million in a losing effort to help Republican Justice Robert Cupp win re-election.

    The organization didn’t disclose its donors, but in past years the U.S. Chamber has been a major contributor, according to the watchdog group Ohio Public Action.

    Tax records show the local chamber gave the group $500,000 in 2012, and tobacco giant Reynolds American Inc. reported giving $100,000 to the group last year.


    Back in North Carolina, Newby was the final brick in the red wall Republican outside groups began building in 2010, when they took control of both chambers of the state legislature for the first time in more than 100 years.Sympathetic justices on the court would lock in new voting districts approved by the majority, and boost the chances that laws passed by the Republican lawmakers, and signed by the new Republican governor, would stand up to any challenges.

    Democrats and other groups, including the state’s NAACP chapter, have sued to undo the Republican-led redistricting effort, and tried unsuccessfully to block Newby from voting on the matter.

    Republican Gov. Pat. McCrory this year named Raleigh retail magnate Art Pope as the state’s budget director.

    Pope is a board member of the Koch-backed Americans for Prosperity. A nonprofit political group he founded and helps fund, Civitas Action Inc., used a $75,000 donation from the Judicial Crisis Network to buy radio ads to keep Newby on the bench.

    One of Pope’s top priorities: doing away with the state’s public financing of judicial races.

    Paul Abowd contributed to this report.



    A scene from an attack ad in the 2012 North Carolina Supreme Court race.Alan Sudermanhttp://www.publicintegrity.org/authors/alan-sudermanBen Wiederhttp://www.publicintegrity.org/authors/ben-wieder-0http://www.publicintegrity.org/2013/06/13/12793/dc-based-groups-bombarded-state-high-court-races-ads

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    The Obama administration promised four years ago that it would significantly shrink the number of private contractors working for U.S. intelligence agencies. But a key member of Congress said this week she remains unconvinced the administration has done enough to shift critical intelligence-related jobs back to government employees.

    The most recent public data from the intelligence community depict a one-year decline of 1 percent in the number of contractors holding security clearances, leaving private-sector workers still holding  about 22 percent of all those clearances.

    In the wake of new controversy about such work, stemming from the recent leak of secrets about U.S. surveillance tactics by a federal contract employee in Hawaii, officials this week cited the decline as a sign of the administration’s commitment to reduce the outsourcing of intelligence work, reversing a hasty expansion of the contractor population after the Sept. 11, 2001 terrorist attacks.

    But members of the Senate Intelligence Committee say that problems with outsourcing intelligence functions to private contractors have not been solved. The panel reported in March that after some early progress, some intelligence agencies have been hiring additional contractors. This has resulted in a contracting workforce that “continues to grow,” the committee said in a March 22 report on its activities.

    The battle over the administration’s commitment to thin contractor ranks is expected to intensify because of the unprecedented security breach claimed this month by Edward Snowden, who worked less than three months for national security consulting giant Booz Allen Hamilton. The company said it fired the 29-year-old Snowden on Monday for violations of its ethics policy.

    At the White House this week, spokesman Jay Carney responded to questions about the number of contractors and their access to classified material by saying these topics merit debate. But he did not say if President Obama will reassess the role of contractors. “I think that is an interesting question and perhaps worthy of debate as part of this conversation that we should be having,” Carney said Tuesday.

    Director of National Intelligence James R. Clapper’s office, reacting to questions by the Center for Public Integrity, said this week that the number of so-called core contractors, who assist in the collection and analysis of intelligence, has declined by 36 percent since 2007, when the collection of such personnel data began.

    But that statistic, which appears in an unreleased report, refers to a subset of the overall number of those contractors holding clearances, and partly to reductions that preceded Clapper’s arrival in August 2010, government sources said. The pace of reductions has since slowed and “in certain cases, the addition of new contractors outweighed those [positions] dropped and converted” to civilian jobs, one congressional source said, speaking on condition he not be named.

    Senate Intelligence Committee Chairman Dianne Feinstein, D-Calif., who vowed in 2010 to keep pushing “until contractors are not used for any inherently governmental purpose” in the intelligence community, said this week in a statement to the Center for Public Integrity that she plans to step up her efforts now. “I am working on legislation to reduce the numbers of contractors and their access to highly classified information,” she said Tuesday.

    Congress passed legislation in 2011 allowing intelligence officials to exceed authorized personnel ceilings if they hire federal employees to replace contract workers on a one-for-one basis. But it has not used legislation to force specific cuts in the contractor workforce.

    At a Sept. 13, 2011 joint hearing of the House and Senate Intelligence Committees, Feinstein disclosed what she described as a 2009 agreement by the Obama administration to shrink contractor numbers by 5 percent a year, largely by transferring to federal employees any "inherently governmental" work being done by contractors.

    The impetus for the  informal promise, which had not been publicized before then, was public outrage over the involvement of private contractors in some of the prisoner abuses at Abu Ghraib prison in in Iraq in 2003 and 2004. A congressional aide said this week that the agreement  originally involved the Central Intelligence Agency. But the 17 agencies that make up the nation’s intelligence community also agreed to reduce the number of contractors performing a range of critical tasks, the aide said.

    That 2009 agreement capped a year when Feinstein’s committee seized on the contracting issue and revealed in a report accompanying the annual intelligence authorization bill that in 2008, contractors comprised 29 percent of all intelligence community personnel but collected a whopping 49 percent of the personnel budget.

    The committee acknowledged agencies had made a 3 percent reduction in the total number of intelligence contractors in 2009, but insisted in its report on a 5 percent reduction in 2010.

    On July 20, 2010, Feinstein raised the outsourcing issue during Clapper’s confirmation hearing to be director of national intelligence.  She and her committee colleagues said they were disturbed by disclosures in the Washington Post that more than 300 firms carried out key functions of the intelligence community.

    The number of contractors had been “coming down slightly” during the tenure of his predecessors, she told Clapper.

    He agreed with her that time had come “for that pendulum to swing back as it has historically” to reduce the size of the contractor workforce as the wars in Iraq and Afghanistan were ending. Clapper, an Air Force lieutenant general who retired in 1995 and then worked briefly as a Booze Allen Hamilton executive for military intelligence programs, explained past growth by saying that with the “gusher” of funding after 9/11 to support the wars and global counterterrorism operations, “it is very difficult to hire government employees one year at a time.”

    “So the obvious outlet for that has been the growth of contractors,” Clapper said. But he added that he needed to see what impact past contractor cuts have had, telling Feinstein: “I’m just reluctant to commit to a fixed percentage" of annual reductions.

    By the time Clapper appeared at a joint hearing of the House and Senate intelligence committees on Sept. 13, 2011 – an event intended to assess the intelligence community a decade after 9/11 – Feinstein told him and then-CIA Director David Petraeus they were not doing enough on the contractor front.

    Clapper’s office had released figures for fiscal year 2010 showing that the number of so-called core contractors who give direct support to critical intelligence tasks had declined by only 1 percent.

    “We had an agreement in 2009 to reduce I.C. contractor numbers by 5 percent a year, but it's clear that progress has not been maintained and sufficient cuts are not being made,” Feinstein said.

    When asked this week to comment about the agreement, Michael Birmingham, a spokesman for Clapper, declined to discuss what he referred to as private discussions between the director of national intelligence and the Senate and House Intelligence Committees.

    But Birmingham gave a preview of the case Clapper is likely to make to Congress about the size of the contractor workforce. “Since Director Clapper has been the DNI, the number of core contract personnel has been reduced by 15 percent," he said. Details appear in a classified report given to Congress.

    A congressional source said a reduction in the rate of shrinkage “is to be expected, as the cuts get harder the more you make.” But Feinstein still believes that “further cuts are appropriate, that contractors should not be performing inherently governmental functions, and that contractors should not have access to large amounts of highly classified information, as Mr. Snowden appears to have had,” the aide added.

    Feinstein’s interest in limiting access to classified material is not surprising. “Clearly there’s going to be intense scrutiny of the security clearance [process] as a result of the Snowden case,” said Steven Aftergood, director of the Federation of American Scientists Project on Government Secrecy. Among key questions federal investigators and lawmakers will be asking, he said, are: “Was the scope of his access broader than justified? Was he vetted? Or was he fully vetted?”

    “People are asking, why does a kid who couldn't make it through a community college can make $200,000 grand a year and be exposed to some of our most significant secrets,” Senate Appropriations Committee chairwoman Barbara Mikulski (D-Md.) said at a hearing Tuesday. “So we'll have a lot of hearings...on this.”

    The latest annual report on security clearances showed the annual shifts vary by category. In fiscal year 2012, 15,482 fewer contractors held confidential, secret or top-secret clearances than in fiscal year 2011. But 4,428 more held top-secret clearances to handle the most sensitive information, like that leaked by Snowden.

    The total number of people with security clearances rose 1.1 percent in the one-year period, with 4.9 million government employees and contractors having confidential, secret or top-secret clearances as of last Oct. 1, the report said. Of that total, 1.4 million held top-secret clearances, with more than a third of that group comprised of contractors.

    The report also listed a significant jump in the number of contractors deemed eligible during the year for a top-secret clearance -- and a nearly corresponding drop in the number of government employees who were given similar status.

    The 133,493 contractors newly deemed eligible for access to top-secret information represented a 30.5 percent increase over the number of contractors in the same category the year before. The number of contractors eligible for confidential and secret clearances rose by nearly 12 percent. For government employees, however, the number eligible for top-secret clearance dropped by nearly 22 percent, while those eligible for confidential and secret clearances declined by 9 percent, the report showed.

    Birmingham, the spokesman for Clapper, discounted any notion that these trends portend substantial contractor growth in the last year, explaining that the figures only refer to government workers and contractors considered eligible for access to sensitive materials, but not yet awarded their clearances. Some outside experts said this data could reflect the high turnover seen often within the contractor workforce.

    Both Clapper’s office and the White House took pains this week to praise the vast majority of intelligence contractors as patriotic Americans who take an oath to protect the nation’s national security secrets.

    “Contractors are an integral part of our workforce and are critical to our national security efforts,” Clapper said in a message sent Monday to the Intelligence Community workforce. “No matter what color badge you wear, you prove every day how much you care about our nation.”

    In response to questions Tuesday, White House spokesman Carney said, “I would note that contractors have long been involved in both our defense and intelligence efforts, and that when it comes to security clearances, they are subject to the same system of checks and security clearance procedures as government employees.”

    Director of National Intelligence James Clapper testifies on Capitol Hill March 12 before the Senate Intelligence Committee hearing on worldwide threats. Richard H.P. Siahttp://www.publicintegrity.org/authors/richard-hp-siahttp://www.publicintegrity.org/2013/06/13/12822/security-lapse-provokes-new-criticism-huge-role-played-costly-intelligence

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    Dallas-area students who are tardy or accused of unexcused absences are allegedly being handcuffed at school, forced into court and saddled with fines of up to $500 — in violation of their constitutional and civil rights, according to a complaint three civil rights groups filed Wednesday with the U.S. Justice Department.

    The complaint was filed against four Texas school districts in the Dallas region and against Dallas County truancy courts, where children accused of excessive absences must appear before judges.

    The complaint, which asks federal officials to intervene, alleges that students’ rights are violated because they appear in court for prosecution on misdemeanor charges with no appointed counsel; are inappropriately restrained; and are not adequately advised of their rights. The rights of children and parents who speak limited English and of disabled children have also been violated, the rights groups allege.

    The Center contacted the independent school districts named in the complaint — Richardson, Mesquite, Dallas and Garland — and the truancy courts, but not all were available for comment. The districts that did respond said they were complying with the law, and using the truancy courts only as a last resort.

    Attorneys with Texas Appleseed, a nonprofit law group, the National Center for Youth Law and Disability Rights Texas filed the complaint on behalf of seven children.

    Texas courts, the complaint charges, pursued about 113,000 truancy cases against children ages 12-17 in 2012, allegedly more than twice the number of truancy cases prosecuted in the other 49 states combined. Dallas County prosecutes more truancy cases than any other county in Texas, with more than 36,000 cases filed in 2012.

    The courts collected in excess of $2.9 million in truancy fines in 2012. According to the complaint, that’s equivalent to about 75 percent of the Dallas Truancy Courts’ total operational costs per year.

    Deputy Director of Texas Appleseed Deborah Fowler told the Center for Public Integrity she observed truancy court proceedings over the course of a year and witnessed tactics she believed amounted to intimidation.   

    “The pressure on children during the plea process,” the complaint says, “is amplified by the truancy court’s threat of jail.” The complaint went to say that “families regularly reported that judges threatened to send children to jail, even children who were too young to be sent to jail.”

    “During one court proceeding,” the complaint alleges, “a judge told a student that he would be ‘happy to take two days out of [the student’s] life’ by sending him to jail and that the student would ‘never get [those days] back again.’ ”

    Richardson Independent School District published a statement saying that it complies with Texas Law in prosecuting truancy, and works proactively to educate students and parents about attendance expectations.

    Laura Jobe, an administrative officer for communication for Mesquite Independent School District, said it treats truancy courts as “a last resort.”  The district has no current plans to update their truancy policy or practices, but will be reviewing the concerns raised in the complaint.

    The Justice Department did not immediately respond to a request for comment.

    Dallas County Judge Clay Jenkins told the Dallas Morning News that that representatives of the three law centers spent days in court “harassing” families, and looking for disgruntled defendants.

    “People who are being held accountable for not complying with the law are generally not happy about it,” the Morning News quoted the judge saying.

    Attorneys with the law centers told the Center that schools in the Dallas area have developed a variety of stringent policies and anti-truancy rules that are often confusing and overly punitive.

    In some schools, turning in a doctor’s note three days late means a sickness is counted as an unexcused absence. Three absences can lead to a Class C misdemeanor ticket, which carries up to $500 fines and if not paid, the risk of jail time once a minor turns 17.

    One student named in the complaint, Brittany Brown, is a special-education student who claims to have received erroneous unexcused absences by her school. At her hearing, Brown appeared with no counsel, the complaint says, and her mother threatened with contempt of court.

    Another student named in the complaint only by her initials, J.D., allegedly missed school because of illness – she suffers from asthma — and was prosecuted for truancy for failing to turn in a doctor’s note within three days.

    Another student, K.W., has missed school because of her mother’s serious illness and was prosecuted for absences, the complaint says.

    Michael Harris, senior attorney for the National Center for Youth Law, said he wonders if courts have grown accustomed to the flow of cash.

    “Over and over again, they were really focused on extracting money from the students or the parents,” he told the Center. “We heard judges many times threaten students or parents with jail time if they did not pay these fines. It was really frightening. If they are under 17, then the judge really doesn't have the authority to put them in jail, but the kids don’t know that.”

    The complaint is filed with the U.S. Justice Department’s Civil Rights Division, Equal Education Opportunities Section.  The complaint asks that the Justice Department declare the practice of prosecuting truancy as a crime as unconstitutional.

    It also asks that schools be required to exhaust school-based and community-based intervention programs to deal with unexcused absences and turn to courts only as a last resort.

    The complaint asks that federal officials require that school districts direct teachers and administrators to consider reasonable explanations for class tardiness and absences, and modify polices to ensure that disability-related absences are properly excused. 

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    In the wake of tornadoes ravaging Oklahoma, a storm shelter company is heading to Washington, D.C., in search of financial assistance — and has hired a prominent lobbyist to help.

    Del City, Okla.-based OZ SafeRooms hired firm McDermott, Will & Emery to press the federal government on “storm shelter tax relief legislation,” according to documents filed this week with the U.S. Senate.

    To date, there's no bill pending in Congress this year that calls for residential tax breaks on storm shelters, although Sen. Jim Inhofe, R-Okla., introduced such legislation — it died in committee — in 2011. Federal tax breaks would ostensibly make OZ SafeRooms's products more affordable to homeowners.

    OZ SafeRooms has little Washington experience, as the company has never lobbied the federal government before and does not sponsor a federal political action committee, according to federal records.

    The storm shelter company will, however, be represented by one of the larger lobby shops in Washington.

    McDermott, Will & Emery earned nearly $1.4 million in lobbying income through the first three months of this year, according to the Center for Responsive Politics. The firm has wide range of clients, including the pharmaceutical company Allergan, the Brewers Association and the Coalition for Rational and Fair Taxation.

    Teddy Eynon, a partner at McDermott, Will & Emery, will personally lobby for OZ SafeRooms on Capitol Hill.

    Prior to working at McDermott and several other lobbying outfits around Washington, Eynon served as deputy chief of staff to former Rep. John Shadegg, R-Ariz., from 1999 to 2002, and as counsel to former Rep. Elton Gallegly, R-Calif., from 1997 to 1998.

    A spokesman for OZ SafeRooms declined to comment on the company’s lobbying activity. Eynon did not return several requests for comment.

    But OZ SafeRooms is outspoken about the durability of its storm shelters, with the company’s website displaying several photos of its poured concrete structures that it says survived a “direct hit in Moore, Oklahoma, with no damage.” It describes its shelters as "the world's safest tornado protection."

    Two separate tornadoes cut through the Oklahoma municipalities of Moore and El Reno in late May, claiming dozens of lives and injuring hundreds of others. The El Reno tornado is believed to be the widest twister ever observed at about 2.6 miles across.

    Inhofe's 2011 storm shelter bill called for individuals to receive a federal tax deduction of up to $2,500 for the purchase, construction and installation of storm shelters.

    Inhofe's unsuccessful bill followed a series of tornadoes in his home state during September 2011, and it's unclear as to whether he plans to reintroduce it. A representative for Inhofe could not be reached for comment.

    Following the latest tornado in Oklahoma, the mayor of Moore, Okla., called for a new ordinance requiring all new homes to have reinforced storm shelters, which the Associated Press reports can cost around $4,000 to build.



    Tornado approaches an Iowa town.Adam Wollnerhttp://www.publicintegrity.org/authors/adam-wollnerhttp://www.publicintegrity.org/2013/06/13/12824/tornado-shelter-firm-lobbies-federal-tax-relief

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    Is justice for sale at the state level? That is a legitimate question in the many states that now elect their supreme court justices. (Only 12 states do not elect their justices.)

    A new study by The Center for Public Integrity shows that outside spending groups —including nonprofits that do not disclose their donors and state-level super PACs— are funneling more and more money into state supreme court races. And they’re having an impact. Out-of-state influence likely helped decide recent races in North Carolina, Iowa and Mississippi.

    The Center examined 10 high-profile state supreme court elections in 2012 and 2013 in which outside spending was a factor. At least a third of the $11.7 million spent by independent groups originated outside the election states, mostly from Washington, D.C.-based organizations, according to our analysis of campaign finance reports, tax records and documents filed with the Federal Communications Commission.

    Tracking all outside spending is nearly impossible thanks to lax state disclosure rules, as well as a loophole in the federal tax code that allows politically active nonprofits to run attacks ads without disclosing who funds them. 

    The Center chose 10 states for this investigation based on their notoriety and the high level of spending by outside groups. Besides North Carolina, Iowa and Mississippi, our research focused on Florida, Louisiana, Michigan, Montana, Ohio, Oklahoma and Wisconsin.

    The influence of nonprofits and super PACs has changed the nature of state supreme court  races, formerly shielded, at least in part, from the broad influence of money and partisan politics. Now, in many states, justices are involved in bare-knuckle partisan brawls similar to those that characterize non-judicial elections. In such contests, money makes a big difference. 

    In the 10 state races analyzed by the Center, national political groups were active directly or indirectly in seven. Seventy-five percent of the outside money could be traced to the long-running battle between trial lawyers and business interests. Trial lawyers helped carry the day in Florida, Louisiana and Oklahoma, while the U.S. Chamber of Commerce says it was successful in North Carolina, Michigan, Ohio and Mississippi.

    In the months ahead, The Center for Public Integrity will be expanding its coverage of spending in governor’s races by all outside groups. And the Center will be looking at financial disclosures of state supreme court justices and federal appeals court judges. Stay tuned. Until next week.


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    At least five and perhaps as many as eight of the nine members of the U.S. Supreme Court are millionaires according to recently released financial disclosures, and only two hold any consumer debt.

    Assets on the forms are reported in a range making it impossible to say precisely how much each justice is worth, but suffice to say, none of them are hurting financially.

    Ruth Bader Ginsburg boasts the highest potential net worth at $18.1 million with Stephen Breyer a close second at $17.1 million. Both were appointed by former President Bill Clinton.

    However, Ginsburg’s actual net worth may be as low as $4.4 million and Breyer’s as low as $5 million. Federal officials are also exempt from disclosing the value of their homes, making an accurate calculation even more difficult.

    After collecting nearly $2 million in book advances, Justice Sonia Sotomayor's assets rose to between $1.7 and $10.3 million, ranking her No. 3 in terms of highest potential net worth. Sotomayor is an appointee of President Barack Obama.

    Chief Justice John Roberts, an appointee of former President George W. Bush, possesses one of the court’s most complex financial portfolios. His net worth is valued between $2.8 million and $6.6 million, ranking him No. 4.

    As for the rest:

    • Antonin Scalia, appointed by former President Ronald Reagan, reported a net worth between $1.9 and $4.2 million, ranking him No. 5.
    • Obama appointee Elena Kagan's assets total between $815,000 and $2.1 million, according to the Center’s analysis, putting her at No. 6.
    • Clarence Thomas, an appointee of President George H.W. Bush reported between $1.8 million and $715,000, ranking him seventh.
    • Samuel Alito has not yet filed his 2012 report and sought an extension, but in 2011 the George W. Bush appointee reported between $380,000 and $1.1 million in wealth putting him at No. 8 for maximum potential wealth.
    • Anthony Kennedy, appointed by Reagan, reported assets of between $330,000 and $700,000, placing him at No. 9.

    Salaries plus perks

    Justices make good money, though with their backgrounds they could easily earn much more in the private sector. Roberts, as chief justice, earns $223,500 per year, while the eight associate justices make $213,900.

    But there are perks. Judges rake in tens of thousands of dollars from speaking fees, professorships and book deals.

    Most of Ginsburg’s assets are held in mutual funds and retirement accounts. In 2012, Ginsburg earned nearly $26,000 for taking part in two separate university-sponsored events, including a two-week Wake Forest School of Law summer seminar held in Venice, Italy, and in Vienna, Austria.

    The bulk of Breyer’s holdings are in mutual funds, retirement accounts and bonds. But one of Breyer’s two largest reported assets is a $1 million to $5 million stake in Pearson, the publishing company that owns the Penguin Group and The Financial Times. The justice collected between $15,000 and $50,000 last year in dividends thanks to his stock holdings in that company.

    Breyer enjoyed a windfall last summer when he sold his stock in Amgen, Inc., the pharmaceutical company that was party in a case that came before the Supreme Court in its most recent term. In late September, just a month after he realized between $15,000 and $50,000 in gains by selling his Amgen holdings, the court docket noted that Breyer was no longer recused from proceedings related to the case.

    Investing in China

    Also notable is Breyer’s holdings in Tai Shan Fund which invests in tech companies in China, Hong Kong and Taiwan and is part of a Boston-based capital management firm led by investor Thomas Clafflin, according to a Bloomberg report.

    Roberts has invested heavily in technology and telecommunications companies — some of which have had business before the high court. He also owns a mix of bonds, retirement accounts, mutual funds and shared ownership of a cottage in County Limerick, Ireland.

    The top justice owns up to a total of $750,000 in shares of Time Warner, Microsoft and Texas Instruments and up to $200,000 in T-Mobile and Sirius XM Radio stock, according to his report.
    Roberts recused himself from a patent dispute involving Microsoft, which the software giant lost in a unanimous 8-0 decision in 2011.

    As the Center for Public Integrity reported last week, Justice Sonia Sotomayor’s disclosure is notable for the nearly $2 million she received in book advances and promotion for her memoir, My Beloved World, published by Knopf Doubleday.

    One of Sotomayor’s most valuable assets is her former New York City residence, now a rental property valued between $1 million and $5 million, though she carries a mortgage on the property. Unlike most of her colleagues on the bench, Sotomayor reported a handful of liabilities in her disclosure, including between $250,000 and $500,000 for the rental. Her debts for four credit cards were each less than $15,000.

    Scalia reported a debt of less than $15,000 for a loan on a life insurance policy.

    Scalia also reported receiving between $5,000 and $15,000 in rent for a property he owns in Charlottesville, Va. His report also shows that he has investments in gold-related securities totaling between $80,000 and $215,000.

    Scalia reported earning $26,500 in 2012 for teaching at five different universities, including John Marshall Law School and the University of Southern California. Scalia also reported receiving nearly $64,000 in book royalties. Last year, the justice co-authored Reading Law: The Interpretation of Legal Texts with legal scholar Bryan Gardner.

    Well-traveled justices

    Scalia traveled frequently in 2012. In the “Reimbursement” section of his financial disclosure, he reports 28 trips to various schools and organizations to deliver speeches and lectures.

    In most cases, the justice was provided or reimbursed for transportation, food and lodging. (Federal officials are not required to report how much they were reimbursed, either in exact amounts or in dollar ranges.) In September and October, Scalia gave speeches and lectures at five events hosted by the Federalist Society, a conservative nonprofit that advocates reform of the legal system.

    Scalia reported giving a speech at an Aug. 25 event hosted by “Friends of Abe,” a low-profile conservative group organized by actor Gary Sinise and whose members reportedly include singer Pat Boone and actor Jon Voight.

    Scalia also reported receiving one gift in 2012. According to his disclosure report, the justice accepted a $1,000 shotgun from the National Wild Turkey Federation.

    The bulk of Kagan’s assets were invested in mutual funds and retirement accounts, including some from the University of Chicago, where she was a law professor in the 1990s.

    Thomas reported investments in gold- and silver-related securities valued at somewhere between $60,000 and $200,000, according to his report.

    Though Kennedy was the high court’s least wealthy justice for the third consecutive year, his report indicates that 2012 was a year of jet setting for the moderate judge. Between January and November of last year, Kennedy traveled to Las Vegas, Palm Springs, Aspen, Maui, London and Paris for various speaking and teaching arrangements.

    The justices of the U.S. Supreme Court at the Supreme Court in Washington. Seated from left are Associate Justices Clarence Thomas, and Antonin Scalia, Chief Justice John Roberts, Associate Justices Anthony M. Kennedy and Ruth Bader Ginsburg. Standing, from left are Associate Justices Sonia Sotomayor, Stephen Breyer, Samuel Alito Jr., and Elena Kagan.Reity O'Brienhttp://www.publicintegrity.org/authors/reity-obrienChris Younghttp://www.publicintegrity.org/authors/chris-younghttp://www.publicintegrity.org/2013/06/14/12827/majority-supreme-court-members-millionaires

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    President Barack Obama’s new picks to represent American interests in Denmark, Germany and Spain are all major Democratic fundraisers.

    Rufus Gifford — who served as Obama’s 2012 campaign finance director and chairman of the president’s 2013 inaugural committee — has been selected to be the new ambassador to Denmark, the White House announced in a press release late Friday afternoon.

    Obama also intends to nominate John B. Emerson, an executive at the investment firm The Capital Group Companies, and John Costos, a vice president at Home Box Office, to serve as the U.S. ambassadors to Germany and Spain, respectively.

    Emerson raised at least $500,000 for Obama’s 2012 re-election efforts, according to a Center for Public Integrity review of information released by the campaign.

    So, too, did Costos, along with his partner Michael Smith — whom the Obamas selected in 2008 to redecorate the White House and who currently serves on the Committee for the Preservation of the White House.

    The actual amounts raised by the men could be much higher as the Obama campaign only voluntarily released information about their bundlers using broad ranges, the highest of which was “more than $500,000.”

    Gifford, Emerson and Costos are among the first individuals to be nominated for ambassadorships since Obama’s re-election that are not career diplomats.

    Like Costos, Gifford is openly gay. His former partner, Jeremy Bernard, currently works as the White House social secretary.

    Their nominations come as gay rights activists have expressed frustration with the president for being slow to implement campaign promises that would guarantee more equal treatment.

    First Lady Michelle Obama was heckled by a lesbian member of GetEQUAL at a Democratic National Committee fundraiser earlier this month.

    The U.S. Supreme Court is also set to soon rule on two high-profile gay rights cases.

    Obama also announced support for two career diplomats to be ambassadors to Brazil and Ethiopia, as well as Ken Hackett, the former head of Catholic Relief Services, to serve as the ambassador to Vatican City.

    All ambassador-nominees must be confirmed by the U.S. Senate.



    President Barack Obama calls out to people outside a campaign office in Chicago, Tuesday, Nov. 6, 2012, after a visit with volunteers on the morning of the 2012 election. (AP Photo/Carolyn Kaster)Michael Beckelhttp://www.publicintegrity.org/authors/michael-beckelhttp://www.publicintegrity.org/2013/06/14/12835/obama-campaign-fundraisers-picked-plum-ambassadorships

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    When Bernard Madoff built his $65 billion house of cards; when food distributors passed off horsemeat as beef lasagna in Europe; and when Apple, Google and other American companies set up structures to channel their profits through Ireland — they all used tax havens. 

    They bought secrecy, minimal or zero taxes and legal insulation, the distinctive products that tax havens market and that allow companies to operate in a fiscal and regulatory vacuum. Using the offshore economy is akin to acquiring your own island where the rules that most citizens follow don’t apply. 

    The International Consortium of Investigative Journalists publishes today a database that, for the first time in history, will help begin to strip away this secrecy across 10 offshore jurisdictions. 

    The Offshore Leaks Database allows users to search through more than 100,000 secret companies, trusts and funds created in offshore locales such as the British Virgin Islands, Cayman Islands, Cook Islands and Singapore. The Offshore Leaks web app, developed by La Nación newspaper in Costa Rica for ICIJ, displays graphic visualizations of offshore entities and the networks around them, including, when possible, the company’s true owners.

    Attacking Apathy

    The data are part of a cache of 2.5 million leaked offshore files ICIJ analyzed with 112 journalists in 58 countries. Since April, stories based on the data — the largest stockpile of inside information about the offshore system ever obtained by a media organization — have been published by more than 40 media organizations worldwide, including The Guardian in the U.K., Le Monde in France, Süddeutsche Zeitung and Norddeutscher Rundfunk in Germany, The Washington Post and the Canadian Broadcasting Corporation (CBC).

    ICIJ’s investigation — called Offshore Leaks by the Twittersphere and the public —has shaken the political and economic establishments from South Korea to Canada, sparking investigations, resignations and a renewed sense of urgency among world leaders that this is the time to rein in offshore abuses . 
    EU Commissioner Algirdas Semeta said the ICIJ’s investigation has transformed tax politics and amplified political will to tackle the problem of tax evasion – knocking down what the EUobserver called “a wall of apathy” in Europe that had thwarted previous attempts to attack offshore secrecy.

    “I personally think Offshore Leaks could be identified as the most significant trigger behind these developments  ...  It has created visibility of the issue and it has triggered political recognition of the amplitude of the problem,” he told EU Observer. 

    Semeta said the need for tax transparency overrides the principle of data privacy.
    During a visit to the White House in May, British Prime Minister David Cameron made a strong pitch for tackling what he called “the scourge of tax evasion,” one of the central themes of next week’s “G8” meeting, in Northern Ireland, of leaders of eight of the world’s wealthiest countries. “We need to know who really owns a company, who profits from it, whether taxes are paid,” said Cameron, who is under pressure from the international community to address the role of Britain’s crown dependencies and territories in the offshore economy. 

    Anti-corruption advocates are pushing Cameron to persuade the other G8 leaders to support proposals that would require owners of shell companies to register their holdings in public registries. 
    ICIJ’s Offshore Leaks Database reveals the names behind more than 100,000 secret companies and trusts created by two offshore services firms: Singapore-based Portcullis TrustNet and BVI-based Commonwealth Trust Limited (CTL). TrustNet and CTL’s clients are spread over more than 170 countries and territories. 

    The Offshore Leaks web app allows readers to explore the relationships between clients, offshore entities and the lawyers, accountants, banks and other intermediaries who help keep these arrangements secret.
    While the database opens up a world that has never been revealed on such a massive scale, the ICIJ Offshore Leaks Database is not a “data dump” — it is a careful release of basic corporate information. ICIJ won’t release personal data en masse; the Offshore Leaks Database doesn’t include records of bank accounts and financial transactions, emails and other correspondence, passports and telephone numbers. The selected and limited information is being published in the public interest.

    Pressure for Change

    ICIJ’s reporting to date has revealed the offshore dealings of politicians, oligarchs, rogue nations and even religious leaders. While many of the arrangements are perfectly legal, extensive reporting by ICIJ and others show that the anonymity granted by the offshore economy facilitates money laundering, tax evasion, fraud and other crimes. 

    Even when it’s legal, transparency advocates argue that the use of an alternative, parallel economy undermines democracy because it benefits a few at the expense of the majority.

    After 17 months of reporting, ICIJ reporters and partners are still digging into this massive trove of financial information. The Offshore Leaks Database gives ICIJ an opportunity to reach journalists and regular citizens in every corner of the world, particularly in countries most affected by corruption and backroom deals. ICIJ believes many of the best stories may come from its readers when they explore the database. 
    As it fields tips from the public, ICIJ will continue to work on in-depth, cross-border investigations with its network of reporters and media partners. At the same time, ICIJ will continue to reject demands from governments that it turn over all of the files in its offshore trove. ICIJ is an independent network of investigative reporters — not an arm of government. 

    Some of the same governments that at one time requested ICIJ and its partners to hand over the full cache of files later announced that they have been working on a gigantic leak of offshore documents similar to those obtained by ICIJ. U.S., U.K. and Australian tax authorities said they will share the data with other governments. 

    The release of the Offshore Leaks Database happens at a time of economic turmoil. Many countries are still fighting the effects of the 2008 financial crisis, putting leaders around the world are under unprecedented domestic and international pressure to make sure tax revenue is not lost to offshore havens.

    Within days of ICIJ’s April release of dozens of stories based on the secret offshore files, French president Francois Hollande called for the “eradication” of tax havens. Europe’s largest economic powers — the U.K., France, Spain, Italy and Germany — announced that they will start exchanging bank information. 

    The surprise was even bigger when tiny Luxembourg, long known as one of the world’s most secretive tax havens, said it will share information with tax authorities about European and U.S. citizens with bank accounts in the country. Another “onshore” European tax haven, Austria, saw the country’s most powerful banker, Herbert Stepic, resign in May in the wake of an Offshore Leaks story that revealed he used companies in Hong Kong and the British Virgin Islands to conduct property deals he did not report to his employer, Raiffeisen Bank International AG.

    Meanwhile, U.K. Prime Minister Cameron is trying to clean up his own backyard: the 10 crown dependencies and overseas territories that serve as tax havens. He has summoned their top ministers to London this weekend to try to convince them to share tax information widely with governments around the world. In a letter to the territories, Cameron told them that the time has come to “knock down the walls of company secrecy."

    Semeta, the EU tax commissioner, said the change in EU politics — after years of stalling — is due to “a perfect storm” of events, including ICIJ’s Offshore Leaks. 

    “Secrecy is no longer acceptable. We need to get rid of it,” Pascal Saint-Amans, tax policy director for the Organization of Economic Cooperation and Development, told The Toronto Star. “If the rules make it possible, then we'll change the rules.”

    Marina Walker Guevarahttp://www.publicintegrity.org/authors/marina-walker-guevarahttp://www.publicintegrity.org/2013/06/14/12833/icij-releases-offshore-leaks-database-revealing-names-behind-secret-companies

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    George Soros may be one of the nation’s top liberal political benefactors, but his company’s charitable program encourages employees to donate to any cause they would like — even if it potentially conflicts with his political ideology.

    Soros Fund Management, a hedge fund firm founded by Soros in 1969, will match any donation an employee makes to a nonprofit organization, a common practice among large companies.

    And while Soros strongly supports myriad progressive causes, including abortion rights and same-sex marriage, the Soros Fund Charitable Foundation contributed more than $255,000 to 35 different Christian organizations and churches, which typically lean right, in 2012, according to Internal Revenue Service records reviewed by the Center for Public Integrity.

    For instance, 12 affiliates of the U.S. Catholic Church, which has heavily criticized President Barack Obama’s stances on contraception and abortion, together received nearly $50,000 last year from the foundation. They include the Archdiocese of New York, the Diocese of Bridgeport, Conn., and various schools and churches throughout Connecticut, New York and New Jersey.

    The foundation, a 501(c)(3) nonprofit of which Soros is one of several directors, also donated $2,700 to the Campus Crusade for Christ, which shortened its name to “Cru” two years ago. Among its many religious affirmations, Cru states “that God has called us to help build … spiritual movements everywhere, so everyone knows someone who truly follows Jesus Christ.”

    Cru spokeswoman Alison Geist said the organization does not take a prospective donor’s ideology into account when raising funds.

    “We gratefully accept financial contributions from all who desire to spread the good news of Jesus Christ around the world,” Geist wrote in an email to the Center for Public Integrity.

    Other faith-based organizations also received money from the company’s foundation. The foundation contributed more than $825,000 to 15 separate Jewish synagogues, schools and organizations around the country and an additional $63,000 to two Islamic-affiliated groups. Dozens of mainstream charities such as the United Way and Habitat for Humanity, as well as several colleges, likewise received funding.

    The Soros Fund Charitable Foundation also made contributions last year to a pair of politically active organizations known for their liberal advocacy. It gave $120,000 to Human Rights Campaign Foundation and $15,000 to the Planned Parenthood Federation of America.

    Planned Parenthood spokeswoman Deni Robey said in an email that it is the organization’s policy “to accept gifts and grants for specific programs and purposes, provided that their intent is consistent with Planned Parenthood’s mission, policies, beliefs and current priorities.”

    In 2012, Planned Parenthood’s super PAC and 501(c)(4) nonprofit arms spent a combined $11.9 million backing Democrats running for office, while its political action committee donated $1.7 million to Democratic candidates and groups, according to the nonpartisan Center for Responsive Politics.

    Additionally, Democrats received $1.1 million in contributions last cycle from pro-gay rights Human Rights Campaign's PAC, which only spent around $58,000 on independent expenditures through its 501(c)(4) arm.

    The Soros Fund Charitable Foundation’s single largest 2012 contribution went to the Trustees of Deerfield Academy, a boarding school in northwestern Massachusetts, which received $514,500.

    Overall, the Soros Fund Charitable Foundation made $8.6 million in contributions to dozens of public health, education and faith-based nonprofit groups, among others, during calendar year 2012 and approved another $1.1 million for future payment, IRS documents show. The foundation finished 2012 with more than $167 million in assets, which have steadily grown over the last 15 years.

    Most of the private foundation’s original funds came from the sale of stock holdings initially provided by Soros Fund Management. Last year’s sole source of revenue was nearly $9 million in investment income.

    Michael Vachon, a spokesman for Soros Fund Management, said the charitable fund was originally created to promote philanthropy among the company’s employees, and that Soros does not personally determine where the funds are directed.

    “It shows the diversity of our employees,” Vachon said.

    Soros, 82, made his most notable splash in national politics during the 2004 election, contributing a total of $23.7 million to liberal-leaning 527 committees dedicated to defeating then-President George W. Bush.

    Soros was less active throughout the 2012 election, but, along with his family, still ranked among the cycle’s top 20 donors to super PACs, contributing $5.1 million to those aligned with Democrats.

    That included $1 million apiece from the elderly patriarch to the pro-Obama Priorities USA Action and American Bridge 21st Century. His family members also donated a combined $1.1 million to a super PAC his son, Jonathan, founded to push for campaign finance reform.

    Soros is also a chairman, director, trustee or board member for 16 other nonprofit organizations.

    This includes his chairmanship of the Open Society Foundations, which provides funding for the Center for Public Integrity. (For a list of the Center's donors, visit this page on the Center's website.)



    Billionaire investor George Soros speaks during a panel discussion at the Nicolas Berggruen Conference in Berlin, Germany, Oct. 30, 2012.Adam Wollnerhttp://www.publicintegrity.org/authors/adam-wollnerhttp://www.publicintegrity.org/2013/06/17/12814/soros-charitable-foundation-sometimes-leans-right

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    Folks, there is reason to be hopeful that our lawmakers can put aside their ideological differences every now and then and do what makes sense for constituents. 

    In fact, last week some of the people we have elected to represent us — at least at the state level — even showed a willingness to put careers at risk by doing what they believe is the right thing.

    One of the most contentious issues during state legislative sessions this year has been whether to expand the Medicaid program for low-income individuals and families, as Congress intended when it enacted health care reform three years ago.

    The state-level debate was made necessary when the Supreme Court ruled last year that Congress can’t force the states to expand their Medicaid programs, even if the feds will always cover no less than 90 percent of the cost. Medicaid is jointly funded by the states and the federal government.

    All of the states in which Democrats control both the governor’s office and legislature were quick to notify the Obama administration that they would take the federal money and expand their Medicaid programs to include families with incomes up to 138 percent of the federal poverty level. But that has not been the case in many of the states where Republicans enjoy a majority in one or both legislative chambers or have a Republican governor.

    To date, 20 of those states have said “no thanks” — at least for now. The debate is still going on in seven others. But 23 states and the District of Columbia, including a number of red or purple states, have agreed to move forward with expansion next January.

    Advocates of both health care reform and bipartisanship had reason to cheer last Thursday when lawmakers in conservative Arizona passed and sent to GOP Gov. Jan Brewer a Medicaid expansion bill she had endorsed. It would not have passed had several Republicans in both the House and Senate not joined Democrats in supporting the bill during a special session of the legislature.  

    The other good news Thursday came from Michigan, when after nine hours of debate, the GOP-controlled House approved, on a bipartisan vote of 76-31, a bill supported by Democratic Gov. Rick Snyder to expand Medicaid there. 

    I learned about it within minutes of the vote, thanks to Twitter. “Medicaid expansion passed!” tweeted Democratic Rep. Rashida Tlaib. “So proud of both my Democratic and Republican colleagues today.”

    One legislator, Democrat Brandon Dillon, went so far as to say that Thursday was the first day he’d been proud to be a state rep.

    And this from Republican House Speaker Jase Bolger: “This is a great example of cooperation in Lansing leading to the resolution of a difficult issue in a way that keeps the focus on the people of Michigan and what they need.”

    It clearly took time for Republicans in both Arizona and Michigan to come around to supporting any part of the federal reform law they have criticized from the beginning.

    While many Democrats hold the belief that “health care is a human right,” Republicans had to be persuaded that expansion makes sense from an economic point of view.

    Crain’s Detroit Business quoted Republican Mike Shirkey as saying he was a “hard no” initially because of his general opposition to “Obamacare” but that he came around to support the expansion bill after weighing the pros and cons.

    “There are perfectly good, legitimate, philosophical reasons to oppose, but a sincere effort to analyze the other sound, definable and measureable reasons to support outweighed those,” he said.

    Among those measurable reasons: when more poor people have coverage, hospitals will have less “uncompensated care,” a misnomer because hospitals charge paying customers — and their insurers — substantially more just to cover the cost of care they provide to people who don’t have the means to pay.

    Another compelling reason why many Republican lawmakers ultimately supported expansion is that if they didn’t, the federal taxes paid by state residents toward expansion would go to places that did enlarge their Medicaid programs.

    As the Arizona bill was on its way to Brewer, she said in a statement that “it will extend cost-effective care to Arizona’s working poor using the very tax dollars our citizens already pay to the federal government.”

    It may take a while, maybe even a few years, but I’m betting that lawmakers in the states that are saying “no thanks” now — even “hell no” — will eventually come around, despite what surely will be continued opposition from the Tea Party wing of the GOP. They will figure out at some point that it makes no sense for their fellow Floridians or Texans, for example, to be paying with their taxes for the coverage of folks in Arizona and Michigan.

    Michigan Gov. Rick Snyder prepares to deliver his State of the State address to a joint session of the House and Senate in Lansing.Wendell Potterhttp://www.publicintegrity.org/authors/wendell-potterhttp://www.publicintegrity.org/2013/06/17/12836/opinion-outbreak-bipartisanship

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    A new super PAC called "Empower Central Valley" has registered with the Federal Election Commission, listing its address in California's 10th Congressional District, which is represented by sophomore Rep. Jeff Denham, a Republican.

    Last year, the district was one of the top targets for partisans on both sides of the aisle. On top of the $4.4 million spent by the candidates themselves, outside groups spent more than $8 million on the race, according to the Center for Responsive Politics.

    Just two other House contests in California saw more non-candidate spending during the 2012 election cycle.

    The Democratic Congressional Campaign Committee alone pumped nearly $2.7 million into the district in 2012 on advertisements critical of Denham or supportive of Democratic candidate Jose Hernandez. Meanwhile, the GOP-aligned American Action Network spent about $2.5 million on such messages, according to the Center for Responsive Politics.

    Empower Central Valley's objectives are not yet clear. The group lists its treasurer as Nancy Watkins, a Florida-based Republican accountant who did not immediately respond to requests for comment from the Center for Public Integrity. Its mailing address is listed as a box at a UPS store in Tracy, Calif., in San Joaquin County, and it does not have a website.

    Watkins has served as the treasurer for dozens of GOP candidates and groups across the country, including Rep. Michele Bachmann's failed presidential bid in 2012. Earlier this month, she signed on as treasurer for a super PAC that's backing Republican Gabriel Gomez in Massachusetts' special U.S. Senate election.

    While Republicans have a slight edge in California's 10th Congressional District, President Barack Obama beat out Republican Mitt Romney there by 3.5 percentage points in 2012, according to the nonpartisan Cook Political Report, which currently ranks the district among the top six dozen competitive House districts in the country.



    California state flagMichael Beckelhttp://www.publicintegrity.org/authors/michael-beckelhttp://www.publicintegrity.org/2013/06/17/12838/new-super-pac-forms-contested-calif-district

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    In a rare criminal prosecution under the Clean Air Act, the U.S. Department of Justice scored a double victory this year, winning convictions against a western New York coke manufacturing plant and its former environmental manager.

    Next up: sentencing for the company and its manager in July — and hope, in the town of Tonawanda, just upstate from Buffalo, that the prosecution will help end decades of concern over the toxins tainting the community.

    The federal case focused on Tonawanda Coke Corp. and environmental manager Mark L. Kamholz, of West Seneca, N.Y.

    For years, residents had complained that elevated levels of benzene, a carcinogen, emanated from the plant. Homeowners began taking evidence with their own hands, testing the air with special buckets and pressing authorities to take action. Their contention: The plant had for years underreported its emissions. The community’s struggle for clean air was explored as part of a 2011 series, Poisoned Places, by the Center for Public Integrity and NPR.

    In March, a federal jury confirmed the community’s long-standing fears.

    Charged in a 19-count indictment, the company and executive were convicted of 14 and 15 felonies, respectively. Each was convicted of five counts of violating the Clean Air Act by emitting coke oven gas from an unpermitted emission source, along with other convictions for operating the plant without required pollution control devices called baffles. Other violations involved the Resource Conservation and Recovery Act.

    They were acquitted of four Clean Air Act counts. Kamholz, but not the company, was convicted of obstruction of justice for instructing an employee to conceal emissions during an inspection.

    “Citizens of this community are entitled to breathe clean air and drink clean water,” U.S. Attorney William J. Hochul Jr. said in a prepared statement after the verdict. “From the evidence of this case, where literally hundreds of tons of coke oven gas containing benzene was released into the atmosphere and significant quantities of hazardous waste containing benzene were left out in the open, it would be hard to imagine a more callous disregard for the health and well being of the citizens of this community.”

    Tonawanda Coke and Kamholz are scheduled to be sentenced July 15 in federal court in Buffalo, though the defense is asking for a delay. While the convictions could yield prison time and millions in fines, the plant itself still produces worry for the working-class western New York town, where many living near the facility suffer from health problems.

    For Joyce Hogenkamp, watching lawyers present evidence in the downtown Buffalo courthouse made her think of her late mother.

    Growing up on Hackett Drive about two miles from the plant, Hogenkamp remembers how her mother always slept with the window open, out of a fear of closed spaces, even though winds from the southwest blew in smoke from the coke plant that smelled like burning tires. She, like many in the community, eventually became sick.

    When the trial recessed one day, “I cried the entire drive home that day,” Hogenkamp said.

    Jackie James-Creedon, who founded a local group that used buckets and hand-held vacuums to test the air near the plant, watched nearly every day of the four-week trial. For years, she and her neighbors pressed state regulators to act. It took five years before New York regulators formally blamed Tonawanda Coke for the town’s air pollution; it took another four years for the criminal trial to begin.

    Still, James-Creedon said she had been “concerned” that the jury wouldn’t see the evidence as she did.

    “I literally was shaking, just with anticipation,” James-Creedon said.

    Uncommon Criminal Case

    Yet Tonawanda’s case proved to be nearly unique: A rare criminal prosecution of the federal Clean Air Act.

    Prosecutors say the complexity of Clean Air Act cases makes them difficult to prove — one reason prosecutions are so rare, the Center for Public Integrity reported in Poisoned Places. Since 1990, fewer than 800 Clean Air Act cases had led to fines or prison time — the fewest of any of the three major environmental laws designed to protect air, water and land, the Center found.

    Instead of criminal prosecution, the federal government is far more likely to pursue civil cases, which typically result in corporate fines and agreements to curtail emissions. Companies would surely prefer to settle cases with civil fines — than face criminal prosecution.

    "Usually it doesn't get to this point," said Richard Lippes, an environmental attorney representing about 400 personal injury cases against Tonawanda Coke. “Usually once a company’s hands are found in the cookie jar, they’ve got to put the cookies back and maybe have to beg for more cookies.”

    The EPA says that fewer criminal cases were initiated in part because of personnel cuts, and as part of a strategy to focus on the worst polluters. According to agency data, the EPA initiated 320 criminal investigations overall in 2012 and charged 231 defendants — both down from 2011. Of all Clean Air Act cases the agency has opened since January 2012, 41.5 percent involved asbestos — still the most common, but down from previous years. Cases involving false statements, tampering with equipment or permit violations were 23.6 percent of all cases opened, the agency said.

    “The criminal enforcement program identifies and investigates cases with significant environmental, human health, and deterrence impacts while balancing its overall case load across all pollution statutes,” the EPA said in a statement.

    The EPA closed 28 criminal cases involving the Clean Air Act in fiscal year 2012 and so far in 2013, the Center found, yet few involved air pollution from industrial plants. Instead, more than 60 percent involved asbestos disposal violations. About 10 percent covered violations of ozone rules, two prosecutions targeted scammers who sold biofuel credits for fuel they didn’t produce, and two cases targeted vehicle inspectors who accepted payoffs to falsely pass cars that didn’t meet pollution standards.

    Four cases concerned industrial polluters like Tonawanda Coke that reported false information to the EPA as part of Clean Air Act-mandated permits.

    Prosecutions don’t always lead to prison time. Belvan Corporation, which operates a natural gas processing plant in Crockett County, Texas, and three of its executives pleaded guilty in 2012 to a Clean Air Act violation for failing to correct malfunctioning equipment that diverted acid gas into the plant’s flare system, releasing hydrogen sulfide, sulphur dioxide and other pollutants. The company waited years to report the emissions, “and thus placed people in imminent danger of death and serious bodily injury,” the EPA said.

    The company was fined $500,000. The executives paid $50,000, $22,000 and $15,000 fines — and were ordered to spend eight hours completing an environmental awareness training program.

    In the Tonawanda Coke case, jurors took five and a half hours to reach a verdict. At trial, prosecutors said the plant released coke oven gas, containing benzene, through an unreported pressure relief valve. The company skirted other anti-pollution laws through its “practice of mixing its coal tar sludge, a listed hazardous waste that is toxic for benzene, on the ground in violation of hazardous waste regulations,” according to prosecutors.

    Just before a 2009 EPA inspection, Kamholz told a fellow employee “to conceal the fact that the unreported pressure relief valve, during normal operations, emitted coke oven gas directly into the air, in violation of the TCC’s operating permit,” the DOJ said.

    Attorneys for Kamholz and Tonawanda Coke did not respond to interview requests. In court papers, the lawyers are asking the judge to dismiss most of the convictions.

    In theory, the convictions could bring significant sentences: Tonawanda Coke faces a $200 million maximum fine, and Kamholz could be sentenced to prison for as long as 75 years. But few expect maximum sentences to be handed out.

    A fine of $8 million to $10 million, and a year or two of jail time might be more realistic, said Erin Heaney, the executive director of the Clean Air Coalition of Western New York.

    Assessing the damage

    In Tonawanda, state officials are still trying to measure the damage to the air, water and soil — and to people’s bodies — in an effort that will continue long after sentencing.

    According to a draft health outcomes review published in February by the New York Department of Health, residents living near the plant have been more likely to suffer lung and bladder cancer; men showed more cases of esophageal cancer, while women were more likely to have uterine cancer than the rest of the state. The study cautioned, however, that it couldn’t prove what caused the illnesses.

    When residents started using homemade air tests using buckets and vacuums almost 10 years ago, they found levels of benzene 500 times above state health guidelines. State tests later found benzene levels between 10 and 75 times above the guidelines, plus high levels of formaldehyde, carbon tetrachloride and other toxins. Federal officials then forced the company to install monitoring equipment that pinpointed benzene emissions at 91 tons per year — about 30 times more than its previous reports to air regulators had indicated.

    Investigators later found the plant didn’t have required pollution control devices. For years, the omission went unnoticed by state officials. The plant also opened an emergency valve every 20 to 30 minutes that released untreated gas laced with chemicals.

    Now, residents say money is needed to continue the monitoring long-term, and help people pay for health services. Activists are concerned that, under the EPA’s rules, there’s no guarantee fines remain in the community. In theory, Heaney said, they could simply be deposited in the U.S. Treasury.

    Hoping to prevent this, residents have launched a frantic campaign to gather victim impact statements. The hope, James-Creedon said, is that U.S. District Judge William Skretny will order fine money allocated for community improvement projects. The Clean Air Coalition is holding a series of community meetings to let the public brainstorm and ultimately vote on which projects residents prefer.

    Still, the uncertainty has James-Creedon nervous. “We’re not sure we’re even going to see one penny of that money,” she said.

    And, Tonawanda Coke must comply with numerous EPA violations that began with the initial investigation — and manage pollution levels if production, which dipped during the economic downturn, begins to rebound.

    “It’s a relatively obsolete plant,” said community attorney Lippes, “so bringing themselves into compliance may not be that easy.”

    Editor's Note: This story has been updated to clarify that Clean Air Act asbestos statistics involve cases since 2012.



    A view of the Tonawanda Coke plant in Tonawanda, NY. The New York Department of Environmental Conservation has confirmed that the factory was emitting benzene and other carcinogens at many times the state's limit.Sam Pearsonhttp://www.publicintegrity.org/authors/sam-pearsonhttp://www.publicintegrity.org/2013/06/18/12839/clean-air-case-yields-rare-criminal-convictions-new-york

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    A government initiative aimed at saving money by eliminating paper checks is hurting some recipients of federal benefits while earning the bank that operates the program millions in fees charged to consumers.

    The U.S. Treasury Department has been urging people who collect Social Security and other benefits to switch to direct deposit rather than rely on mailed checks, to save millions of dollars a year in administrative costs.

    But beneficiaries without bank accounts — and even some who do have accounts — are being pressured into using prepaid debit cards offered by Comerica Bank, an effort that is shifting costs to elderly people, veterans and other vulnerable consumers.

    The Treasury Department launched the program in 2008, teaming up with the Dallas-based bank to issue the “Direct Express” debit cards in a deal that lacked the open competition or transparency of most federal contracts.

    The exclusive agreement — whose financial details are not public — was then renegotiated to make it more lucrative for the bank while Treasury took over responsibilities that were originally Comerica’s.

    Now millions of poor people who rely on Social Security and Supplemental Security Income are using debit cards that may be ill-suited to their needs and can cost them more than paper checks or direct deposit to a bank account.

     Meanwhile, Treasury is saving money and Comerica is booking profits.

    “To stand in the way of the purpose of the programs is appalling, and that’s really what they’re doing,” says Rebecca Vallas, a Philadelphia attorney who represents federal benefits recipients.

    The Senate Special Committee on Aging is holding a hearing Wednesday on the Treasury program and Treasury’s inspector general, its independent, internal watchdog, is looking into the Comerica deal.

    Paper or plastic?

    It costs the U.S. government $1.05 to print and mail a check, compared with 9 cents for an electronic transfer, according to testimony last year by Richard Gregg, Treasury’s fiscal assistant secretary, who is set to testify at Wednesday’s hearing.

    Congress in 1996 ordered Treasury to eliminate paper checks from the federal payments system within three years. That mandate, however, gave the department broad leeway to waive the requirement where it didn’t make sense or would impose hardship.

    In 2010, more than 85 percent of all federal payments were electronic, and Treasury officials decided to make a final push to eliminate the remaining checks by March of this year. By then most people on Social Security or SSI were having their payments deposited directly into their bank accounts. Others received benefits on debit payment cards offered by private companies — a choice that can lead to heavy fees.

    People who choose to keep receiving paper checks are generally elderly or poor or both, and don’t have bank accounts or access to bank branches. Some mistrust banks because of abuses and failures they observed during the Great Depression or the recent financial crisis. Others may not understand how electronic payments work.

    Treasury didn’t have a good option for them, so it sought a low-cost payment card, eventually selecting Comerica to provide Direct Express.

    Government prepaid cards are a fast-growing industry. At least $100 billion was distributed in 2011 on cards for 158 federal, state and local governments’ payment programs, according to a Federal Reserve study published last July. The cards are similar to those issued with checking accounts, but don’t always offer the same consumer protections.

    Comerica has issued 9 million government payments cards, including more than 4 million Direct Express cards, making it the second-biggest issuer, according to recent investor presentations. Other top issuers of cards used by states and other governments to deliver payments to consumers include Bank of America, J.P. Morgan Chase, U.S. Bancorp and Citigroup.

    Comerica offered to issue the Direct Express cards at no cost to Treasury, spend millions to market them and charge consumers lower fees than most privately issued prepaid cards.

    Comerica offered one free ATM withdrawal per month.

    Treasury pressure

    In January 2011, the government began an all-out push to move the 10.4 million people who were still receiving paper checks to electronic payments, an effort that could eventually save $119 million per year.

    Treasury resorted to tactics that advocates for the elderly and disabled say were too pushy and sometimes misleading. Notices papered the walls of Social Security offices and advertisements looped on the offices’ closed circuit televisions, urging people to go electronic, according to Vallas.

    A large countdown clock dominated the government’s main webpage for people seeking information about the change, indicating down to the second how long people had before their benefits “may be delivered on Direct Express.”

    Government fliers and websites said anyone who failed to use the card or arrange direct deposit would be on the wrong side of the law. “Switching to an electronic payment is not optional — it’s the law,” said David Lebryk, commissioner of Commissioner of the Bureau of the Fiscal Service, in a January press release titled “Time is Running Out.”

    In January and February, Treasury mailed thousands of the cards to poor, elderly and disabled people who had not requested them, hoping they would activate them anyway.

    A Treasury official, speaking on condition of anonymity to discuss the program candidly, said the department tried to send cards to people living in low-income neighborhoods, because they are less likely to have bank accounts.

    People who received cards without requesting them had already received two written notices urging them to pick an electronic payment method. The high-pressure appeals were necessary, Treasury officials say, to get the attention of Americans who cling to paper checks despite decades of opportunities to embrace direct deposit.

    Customer service employees were trained to get people to accept Direct Express, regardless of whether it was the best option for them, according to interviews with call center employees who spoke on condition of anonymity and a Center for Public Integrity review of transcripts and recordings of calls to Treasury’s call center.

    Operators provided inaccurate information on seven of 10 calls placed in February by a former call center worker who conducted a personal investigation because he was unhappy with how the call center was operated. The worker spoke on condition of anonymity because he had agreed not to discuss it as a condition of employment.

    On at least five calls, operators denied that certain groups were allowed to keep receiving paper checks. Several said people who failed to switch to electronic payments would be mailed a card automatically after the March 1 deadline. One told the caller that using direct deposit to a bank account “would incur more fees” than enrolling in Direct Express.

    A February memo instructed the call center workers not to offer waivers to callers, allowing them to continue to receive paper checks, “unless they specifically ask for one.” When callers insist they qualify and want to obtain a waiver, operators should transfer the call to a group that would provide that information “ONLY AS A LAST RESORT,” says the memo.

    The aggressive campaign worked. By the agency’s self-imposed deadline of March 1, 2013, it had cut the number of paper checks to 3.5 million, saving the government about $79 million per year. If the remaining holdouts went electronic, the government could save another $40 million per year.

    Juliet Carter was one of the people who were persuaded to enroll in Direct Express. The 57-year-old former cook, who was living on government disability benefits after being hit by a car five years ago, was spooked by the notices that accompanied her checks urging her to sign up for Direct Express or risk being “out of compliance with the law.”

    She phoned the number listed on the flyers and switched to the card. Within months, identity thieves had redirected her benefits to a different account and stolen six months of her income. She was evicted from her apartment and has spent the past few months renting rooms in houses or staying with her sister.

    “I’ve learned I can’t trust those cards,” said Carter. She says she prefers a paper check because “it comes direct from Social Security to the mailbox to me, and I feel safer.”

    Treasury says the cards are far less susceptible to fraud than paper checks.

    In a prepared statement, Treasury spokeswoman Suzanne Elio said, “Electronic payment provides federal beneficiaries a safer, more secure, and convenient method of receiving their benefits as compared to paper check payments, which are considerably more vulnerable to fraud.”

    The agency “took great care” in implementing the electronic payment system and sought to provide “strong consumer protections” for people without bank accounts, Elio said.

    Social Security and SSI are meant to provide people with secure and accessible income, says Vallas. “They don’t exist for the sake of administrative efficiency or meeting arbitrary number targets.”

    Fees mount

    Direct Express’ fees are lower than those on most payment cards. Still, they can eat into the benefits of people like Juliet Carter who are living on fixed incomes, often far from banks or ATMs that participate in the Direct Express network.

    To get a month’s worth of cash can require three or four ATM transactions because of limits on how much money can be withdrawn at a time. At ATMs participating in Direct Express, customers get one free withdrawal a month before Comerica charges a 90 cent fee. ATMs outside the network can tack on fees of $2 or more.

    Direct Express may be a good option for people who don’t have a bank account, as Treasury argues, but almost certainly increases costs for those who do have accounts. Users pay Comerica for most ATM withdrawals, online bill payments and money transfers — services that many banks provide for free.

    Yet Treasury and Comerica have pushed the card with such vigor that as of June 2012, more than a million people with bank accounts had nonetheless signed up for Direct Express, according to Gregg’s congressional testimony last year.

    Comerica spokesman Wayne Mielke declined to comment for this story. Comerica’s contract with Treasury bars it from discussing the program without Treasury’s permission.

    Fees benefit bank

    Both Treasury and Comerica have strong incentives to push the Direct Express card. For Treasury, each conversion saves money and moves the government closer to its aim of eliminating checks.

    Comerica receives $5 from Treasury for each card it issues, according to several people with direct knowledge of the contract. Treasury redacted this information from copies of the contract provided in response to a Freedom of Information Act request.

    Treasury had made direct payments to Comerica totaling more than $22 million as of August 2012, including the $5 fee and other charges, according to data disclosed in response to the FOIA request. The bank stands to collect millions more through ATM withdrawal fees, payments from Visa and MasterCard and the interest earned on money that people haven’t yet withdrawn, which Comerica keeps.

    Comerica initially was chosen because it offered to issue cards and provide customer support at no cost to the federal government. After it had won the deal, Comerica reversed course, saying that it was having trouble making money off Direct Express, in part because of the high cost of providing telephone support for people who sometimes call to check their balances multiple times a day, according to two people with knowledge of the matter. The people spoke on condition of anonymity because they were not authorized to discuss it.

    Without reopening bidding, Treasury agreed in March 2011 to give Comerica $5 per card, paying retroactively for enrollments since December 2010. Comerica received millions more to beef up its call centers and prepare for additional users. The exclusive contract runs until January 2015.

    Treasury’s inspector general wants to k now if the Department acted improperly when it added the $5 per-card fee and other payments. The original contract specified that the government would not guarantee “ANY MINIMUM VOLUME OF BUSINESS, OR LEVEL OF COMPENSATION TO [Comerica] AND SHALL NOT ADJUST THE COMPENSATION ON THE BASIS THAT VOLUME LEVEL DID NOT MEET [Comerica’s] EXPECTATIONS.” (Emphasis in original.)

    A spokesman for the inspector general declined to comment. The office does not discuss ongoing audits.

    Treasury officials declined to speak on the record about the contract.

    Comerica’s contract also required it to enroll people in the program and provide customer service including helping prevent fraud. However, Treasury took over these responsibilities, setting up a parallel call center at the Federal Reserve Bank of Dallas, about a mile from Comerica’s headquarters. Treasury didn’t reduce Comerica’s compensation.

    Between October 2011 and the end of August 2012, the Social Security inspector general received more than 18,000 reports of unauthorized changes or suspected attempts to make unauthorized changes to payments. Treasury says it put new procedures in place in January 2012 to reduce fraud. Yet early this year, the Social Security inspector general’s office said it was still receiving more than 50 such reports a day.

    Juliet Carter says Comerica failed to root out the fraud and reissue her lost payments despite several requests. At one point, she says, a Comerica representative threatened to investigate her for fraud if she continued to pursue the matter.

    Comerica declined to comment on her case. Mielke, the bank’s spokesman, said it does not comment on individual cases, to protect customers’ privacy.

    Carter got rid of her Direct Express card, and switched back to paper checks last year. The repeated notices from Treasury continued to scare her, however, and earlier this year she signed up to get her payments on a Rush Card, a private payment card that carries higher fees than Direct Express.

    Vallas, her lawyer, helped her apply for a waiver this spring to go back on paper checks.

    Within months of switching her disability benefits from paper checks to a debit card, identity thieves had redirected Juliet Carter's benefits to a different account and stolen six months of her income.Daniel Wagnerhttp://www.publicintegrity.org/authors/daniel-wagnerhttp://www.publicintegrity.org/2013/06/19/12857/benefit-payment-change-hurts-poor

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    Leaders of the G8 major economies have agreed new measures to tackle the lack of transparency associated with offshore tax havens.

    They include sharing access to information on their residents’ tax affairs and forcing shell companies — often used to exploit investment loopholes — to identify their real owners.

    The BBC reports the measures are designed to combat illegal evasion of taxes, as well as legal tax avoidance by large corporations that make use of loopholes and tax havens.

    The move, in part, follows a massive reporting project by the International Consortium of Investigative Journalists — dubbed Offshore Leaks — on the role of offshore tax havens in the global economy.

    EU Commissioner Algirdas Semeta said the Offshore Leaks investigation by ICIJ and its partners had transformed tax politics and amplified political will to tackle the problem of tax evasion.

    "I personally think Offshore Leaks could be identified as the most significant trigger behind these developments ... It has created visibility of the issue and it has triggered political recognition of the amplitude of the problem", he told EU Observer.

    The BBC reported the G8 leaders agreed that multinationals should tell all tax authorities about what taxes they pay and where.

    "Countries should change rules that let companies shift their profits across borders to avoid taxes," the communique said.

    It follows separate revelations about the ways in which several major firms — including Google, Apple, Starbucks and Amazon — have minimized their tax bills.

    Illegal activities, including tax evasion and money laundering, will be tackled by the automated sharing of tax information.

    The BBC reported that ahead of the summit, the Organization for Economic Co-operation and Development (OECD), proposed to share tax information by building on an existing system set up by the US and five major European economies, but on a global scale.

    "This international tax tool is going to be a real feature of ensuring that we get proper tax payment and proper tax justice in our world," said the British Prime Minister, David Cameron, who claimed that it meant "those who want to evade taxes have nowhere to hide".

    The OECD includes all of the G8 members except Russia.

    Among the information to be shared will be who actually ultimately benefits from the shadowy shell companies, special purpose companies and trust arrangements often employed by tax evaders and money launderers.

    Earlier in the day, the British Chancellor George Osborne unveiled plans for a UK central register of companies and their true owners. But the G8 communique did not contain a firm pledge from other G8 countries to create similar company registries and to make them public, as transparency advocates had sought.

    On Saturday, ICIJ published the Offshore Leaks Database which partially opens up for the first time the company registries of 10 offshore jurisdictions. The data, which include information on more than 100,000 offshore companies, is part of a leak of 2.5 million secret files to ICIJ.

    Last week the UK also unveiled a deal with its crown dependencies and overseas territories — including the Channel Islands, Gibraltar and Anguilla — to start sharing more information on which foreign companies bank their profits there.

    Speaking during the summit, Mr Osborne said more progress had been made on reforming the global tax system in the past 24 hours than the "past 24 years".

    However those campaigning again tax evasion said the G8 had not gone far enough.

    Porter McConnell, manager of the Financial Transparency Coalition, said: ”People in rich and poor nations alike are looking to their leaders to resist vested interests and pursue policies that tackle corruption and rampant tax dodging. Today G8 leaders have taken some significant steps in an effort to make the rules of the global economy fair for everyone.

    "But it is troubling that there is no G8-wide agreement on the introduction of beneficial owner registries, let alone that they be made public. Over the past several months, crimes that rely on financial secrecy, such as tax evasion, money laundering and trafficking, have become front-page news. Illicit finance is one of the most pressing issues of our time:  it’s robbing citizens of developing countries and G8 countries alike.”

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    On the court, the San Antonio Spurs and Miami Heat are both powerhouses hungry for a National Basketball Association championship.

    But in the political arena, it's a blowout in favor of the Spurs.

    Ahead of the 2012 elections, Spurs owner Peter Holt and his wife, Julianna, donated four times as much money to federal politicians and political groups as Miami Heat owner Micky Arison and his wife, Madeleine, according to a Center for Public Integrity review of data maintained by the Center for Responsive Politics.

    The Holts combined to contribute more than $500,000 during the 2012 election cycle. That includes $250,000 given to Restore Our Future, the super PAC that backed GOP presidential candidate Mitt Romney, and a $100,000 donation to the Texas Conservatives Fund, the super PAC that supported Texas Lt. Gov. David Dewhurst’s failed U.S. Senate bid.

    The Holts also donated more than $90,000 to the National Republican Senatorial Committee over the two-year period, and they made more modest contributions to a dozen other federal candidates.

    The Arisons, meanwhile, combined to give about $125,000 to federal candidates and committees. But they didn't donate to super PACs, which proliferated in the aftermath of the U.S. Supreme Court’s Citizens United v. Federal Election Commission decision in 2010.

    Super PACs have no limits on the amount of money they may raise or spend to support candidates. They may not, however, coordinate their spending with the candidates they hope to elect, nor may they directly contribute money to candidates' campaigns.

    The Arisons split their contributionsalmost evenly between Republicans and Democrats. But the Holts overwhelmingly favored the GOP, with only 2 percent of their political contributions supporting Democrats ahead of the 2012 elections.

    Both Holts donated $2,500 to Sylvia Romo who unsuccessfully challenged incumbent Rep. Lloyd Doggett, D-Texas. They each gave Joaquin Castro $1,250 during his successful U.S. House bid. And Peter Holt gave $2,500 to Rep. Henry Cuellar, who is now in his fifth term.

    By contrast, the political candidates and groups most favored by the Arisons included the National Republican Congressional Committee ($15,000); Rep. John Mica, R-Fla., who is now in his 11th term ($10,000); the leadership PAC of House Majority Leader Eric Cantor, R-Va. ($7,000); and the leadership PAC of Sen. Bill Nelson, D-Fla. ($5,800).

    Micky Arison also contributed $10,000 to the political action committee of the Cruise Lines International Association during the 2012 election cycle. In addition to his basketball exploits, he serves as the chief executive officer of cruise operator Carnival Corp.

    The Spurs and Heat tip off Thursday in a championship-deciding Game 7.



    San Antonio Spurs owner Peter Holt reacts after Game 3 of the NBA Finals against the Miami Heat.Michael Beckelhttp://www.publicintegrity.org/authors/michael-beckelhttp://www.publicintegrity.org/2013/06/19/12863/spurs-owner-brings-heat-political-money-game

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