The Associated Press reports: The local Chinese official remembers the panic he felt in Room 109. He had refused to confess to bribery he says he didn’t commit, and his Communist Party interrogators were forcing his legs apart.
Zhou Wangyan heard his left thigh bone snap, with a loud “ka-cha.” The sound nearly drowned out his howls of pain.
“My leg is broken,” Zhou told the interrogators. According to Zhou, they ignored his pleas.
China’s government is under strong pressure to fight rampant corruption in its ranks, faced with the anger of an increasingly prosperous, well-educated and Internet-savvy public. However, the party’s methods for extracting confessions expose its 85 million members and their families to the risk of abuse. Experts estimate at least several thousand people are secretly detained every year for weeks or months under an internal system that is separate from state justice.
In a rare display of public defiance, Zhou and three other party members in Hunan described to The Associated Press the months of abuse they endured less than two years ago, in separate cases, while in detention. Zhou, land bureau director for the city of Liling, said he was deprived of sleep and food, nearly drowned, whipped with wires and forced to eat excrement. The others reported being turned into human punching bags, strung up by the wrists from high windows, or dragged along the floor, face down, by their feet. [Continue reading...]
Kelley Vlahos writes: Popular culture reveres the U.S. military as an institution of pride and strength, as keeper of the American moral center. But a recent series of scandals suggests that, instead, ethical corrosion may be eating away at its very core.
Sarah Palin was in top rhetorical form when she told an assembled crowd of thousands on the National Mall in 2010 that soldiers were “a force for good in this country, and that is nothing to apologize for … for these men and women, honor was never lost.” But behind the partisan politics in which Democrats and Republicans have used the military as props, padded its budgets, and publicly deferred to its leadership in myriad ways over 12 years of war, there lies a complicated breakdown in its culture, military experts tell TAC. Without reform, they believe institution is headed for more embarrassment and transgression.
“I’m not surprised at all—one [scandal] relates to the other,” charges Donald Vandergriff, a retired Army officer who often lectures on leadership and reform, including in the service academies. A West Point grad and former deputy director of Army ROTC at Georgetown University, he wrote The Path to Victory: America’s Army and the Revolution in Human Affairs, in 2002.
“The [military] system that’s evolved over the last 100 years does not test moral courage, it does not test strength of character, or the ability to tell the truth regardless of harm to one’s career,” Vandergriff added. “We don’t do things like that. We are looking at people who follow the process, fall in line, don’t cause waves, aren’t open to innovation, and these personality traits leave them open to scandal.” [Continue reading...]
Part One — How the Pentagon’s payroll quagmire traps America’s soldiers:
As Christmas 2011 approached, U.S. Army medic Shawn Aiken was once again locked in desperate battle with a formidable foe. Not insurgents in Iraq, or Taliban fighters in Afghanistan – enemies he had already encountered with distinguished bravery.
This time, he was up against the U.S. Defense Department.
Aiken, then 30 years old, was in his second month of physical and psychological reconstruction at Fort Bliss in El Paso, Texas, after two tours of combat duty had left him shattered. His war-related afflictions included traumatic brain injury, severe post-traumatic stress disorder (PTSD), abnormal eye movements due to nerve damage, chronic pain, and a hip injury.
But the problem that loomed largest that holiday season was different. Aiken had no money. The Defense Department was withholding big chunks of his pay. It had started that October, when he received $2,337.56, instead of his normal monthly take-home pay of about $3,300. He quickly raised the issue with staff. It only got worse. For all of December, his pay came to $117.99.
All Aiken knew was that the Defense Department was taking back money it claimed he owed. Beyond that, “they couldn’t even tell me what the debts were from,” he says.
At the time, Aiken was living off base with his fiancee, Monica, and her toddler daughter, while sharing custody of his two children with his ex-wife. As their money dwindled, the couple began hitting church-run food pantries. Aiken took out an Army Emergency Relief Loan to cover expenses of their December move into a new apartment. At Christmas, Operation Santa Claus provided the family with presents – one for each child, per the charity’s rules.
Eventually, they began pawning their possessions – jewelry, games, an iPhone, and even the medic bag Aiken used when saving lives in Afghanistan. The couple was desperate from “just not knowing where food’s going to come from,” he says. “They just hit one button and they take your whole paycheck away. And then you have to fight to get the money back.”
Aiken’s injuries made that fight more difficult. He limped from office to office to press his case to an unyielding bureaucracy. With short-term and long-term memory loss, he struggled to keep appointments and remember key dates and events. His PTSD symptoms alienated some staff. “He would have an outburst … (and) they would treat him as if he was like a bad soldier,” says Monica. “They weren’t compassionate.”
They were also wrong. The money the military took back from Aiken resulted from accounting and other errors, and it should have been his to keep. Further, even after Aiken complained, the Defense Department didn’t return the bulk of the money to Aiken until after Reuters inquired about his case. [Continue reading...]
Part Two — Behind the Pentagon’s doctored ledgers, a running tally of epic waste:
Linda Woodford spent the last 15 years of her career inserting phony numbers in the U.S. Department of Defense’s accounts.
Every month until she retired in 2011, she says, the day came when the Navy would start dumping numbers on the Cleveland, Ohio, office of the Defense Finance and Accounting Service, the Pentagon’s main accounting agency. Using the data they received, Woodford and her fellow DFAS accountants there set about preparing monthly reports to square the Navy’s books with the U.S. Treasury’s – a balancing-the-checkbook maneuver required of all the military services and other Pentagon agencies.
And every month, they encountered the same problem. Numbers were missing. Numbers were clearly wrong. Numbers came with no explanation of how the money had been spent or which congressional appropriation it came from. “A lot of times there were issues of numbers being inaccurate,” Woodford says. “We didn’t have the detail … for a lot of it.”
The data flooded in just two days before deadline. As the clock ticked down, Woodford says, staff were able to resolve a lot of the false entries through hurried calls and emails to Navy personnel, but many mystery numbers remained. For those, Woodford and her colleagues were told by superiors to take “unsubstantiated change actions” – in other words, enter false numbers, commonly called “plugs,” to make the Navy’s totals match the Treasury’s.
Jeff Yokel, who spent 17 years in senior positions in DFAS’s Cleveland office before retiring in 2009, says supervisors were required to approve every “plug” – thousands a month. “If the amounts didn’t balance, Treasury would hit it back to you,” he says.
After the monthly reports were sent to Treasury, the accountants continued to seek accurate information to correct the entries. In some instances, they succeeded. In others, they didn’t, and the unresolved numbers stood on the books.
At the DFAS offices that handle accounting for the Army, Navy, Air Force and other defense agencies, fudging the accounts with false entries is standard operating procedure, Reuters has found. And plugging isn’t confined to DFAS (pronounced DEE-fass). Former military service officials say record-keeping at the operational level throughout the services is rife with made-up numbers to cover lost or missing information. [Continue reading...]
Ben Goldacre writes: In 2010, three researchers from Harvard and Toronto found all the trials looking at five major classes of drug — antidepressants, ulcer drugs and so on — and then measured two key features: were they positive, and were they funded by industry? They found over 500 trials in total: 85 percent of the industry-funded studies were positive, but only 50 percent of the government-funded trials were. That’s a very significant difference.
In 2007, researchers looked at every published trial that set out to explore the benefit of a statin. These are cholesterol-lowering drugs which reduce your risk of having a heart attack, and they are prescribed in very large quantities. This study found 192 trials in total, either comparing one statin against another, or comparing a statin against a different kind of treatment. Once the researchers controlled for other factors (we’ll delve into what this means later), they found that industry-funded trials were 20 times more likely to give results favoring the test drug. Again, that’s a very big difference.
We’ll do one more. In 2006, researchers looked into every trial of psychiatric drugs in four academic journals over a 10-year period, finding 542 trial outcomes in total. Industry sponsors got favorable outcomes for their own drug 78 percent of the time, while independently funded trials only gave a positive result in 48 percent of cases. If you were a competing drug put up against the sponsor’s drug in a trial, you were in for a pretty rough ride: You would only win a measly 28 percent of the time.
These are dismal, frightening results, but they come from individual studies. When there has been lots of research in a field, it’s always possible that someone — like me, for example — could cherry-pick the results and give a partial view. I could, in essence, be doing exactly what I accuse the pharmaceutical industry of doing by only telling you about the studies that support my case while hiding the rest from you.
To guard against this risk, researchers invented the systematic review. In essence a systematic review is simple: Instead of just mooching through the research literature, consciously or unconsciously picking out papers here and there that support your pre-existing beliefs, you take a scientific, systematic approach to the very process of looking for scientific evidence, ensuring that your evidence is as complete and representative as possible of all the research that has ever been done.
Systematic reviews are very, very onerous. In 2003, by coincidence, two were published, both looking specifically at the question we’re interested in. They took all the studies ever published about whether industry funding is associated with pro-industry results. Each took a slightly different approach to finding research papers, and both found that industry-funded trials were, overall, about four times more likely to report positive results. A further review in 2007 looked at the new studies that had been published in the four years after these two earlier reviews: It found 20 more pieces of work, and all but two showed that industry-sponsored trials were more likely to report flattering results.
I am setting out this evidence at length because I want to be absolutely clear that there is no doubt on the issue. Industry-sponsored trials give favorable results, and that is not just my opinion or a hunch from the occasional passing study. This is a very well-documented problem, and it has been researched extensively without anybody stepping out to take effective action, as we shall see. [Continue reading...]
Noah Shachtman reports: Ever since WikiLeaks began releasing a series of documents about the surveillance system Trapwire, there’s been a panicked outcry over this supposedly all-seeing, revolutionary spy network. In fact, there are any number of companies that say they comb through video feeds or suspicious activity reports in largely the same way that Trapwire claims to do. What’s truly extraordinary about Trapwire was how it was marketed by the private intelligence firm Stratfor, whose internal e-mails WikiLeaks exposed.
The documents show Stratfor being less than straight with its clients, using temporary jobs in government to set up Trapwire contracts, and calling it all a “wet dream.” In their e-mails, executives at Stratfor may have been hyping up a surveillance technology. But what they really did was provide reconnaissance on the $25 billion world of intelligence-for-hire that’s ordinarily hidden from public view. In this case, the sunlight isn’t particularly flattering.
On Nov. 4, 2009, Fred Burton, the vice president of the private intelligence firm Stratfor, co-wrote an essay on emerging terrorist threats and the means to stop them. Particularly impressive, Burton wrote, was a new software tool called Trapwire, which works “with camera systems to help detect patterns of preoperational surveillance … to help cut through the fog of noise and activity and draw attention to potential threats.”
The essay was typical of the trend analyses, news summaries, and hot tips that Strator provides every day to its customers in government and in industry. For these services, Burton’s clients pay his firm handsomely; a single Stratfor enterprise license costs more than $20,000 (.pdf). These customers rely on Burton and his team to provide the latest word from flashpoints worldwide — and to explain what this torrent of information all means. They count on Stratfor to help make sense of the world.
What his customers reading that November 2009 essay may not have realized was that Burton was also marketing them a product. On Aug. 17 of that year, Stratfor and Trapwire signed a contract (.pdf) giving Burton’s company an 8 percent referral fee for any business they send Trapwire’s way. The essay was partially a sales pitch — a fact that Burton neglected to mention. [Continue reading...]
Simon Jenkins writes: On Monday the BBC Panorama programme substantiated an extraordinary allegation that suggested how far the war on terror has descended into legal abyss. The claim was that MI6 rolled the pitch for Tony Blair’s bizarre 2004 hug-in with Libya’s Colonel Gaddafi by apparently arranging for the CIA to kidnap Gaddafi’s opponent in exile, Abdel Hakim Belhaj. He was seized in Bangkok, where he and his wife were en route to Britain. It’s been suggested they were “rendered” via the British colony of Diego Garcia to Tajoura jail in Tripoli. Belhaj spent six years, and his wife four and a half months, at the tender mercies of Gaddafi’s security boss, Moussa Koussa. Belhaj’s pregnant wife was taped like a mummy on a stretcher, and he was systematically tortured. Koussa himself denies any involvement in torture.
With this gift came a covering letter from MI6′s Mark Allen, offering Koussa congratulations on the “safe arrival” of the “air cargo [Belhaj]. This was the least we could do for you and for Libya to demonstrate the remarkable relationship we have built over the years.” Within two weeks Gaddafi was welcoming a fawning Blair in his famous desert tent, and announcing that he would abjure terrorism and set aside his “planned” weapons of mass destruction. The plans were spurious, but the deal allowed Blair to walk tall in Washington at a time when the Iraq invasion was turning sour.
Less spurious were other elements in the strange relationship. It was claimed Britain would not just deliver Belhaj but lift sanctions. Gaddafi would greet BP’s Lord Browne, accompanied by Allen, who switched with full ministerial approval from being an MI6 officer to a £200,000 special adviser to BP. When, three years later, the £15bn deal with BP seemed to falter, it’s claimed Allen pressed his old boss, Jack Straw, to release Libya’s Lockerbie bomber, Abdelbaset al-Megrahi. [Continue reading...]
The Guardian reports: Unemployment is rising and companies are going to the wall as the economic turmoil continues to inflict damage across the globe. But one organisation is thriving. Records recently filed at Companies House show Tony Blair Inc is going from strength to strength. They reveal that income channelled through a complex network of firms and partnerships controlled by Blair rose more than 40% last year to more than £12m. Of this, almost £10m was paid for “management services”. The money was transferred via a network of firms and financial vehicles.
Accountancy experts are questioning the arcane nature of the network’s finances, which makes it difficult to trace where its money is coming from, or where it is being spent.
Accounts for Windrush Ventures, an obscure company that operates under the trading name “the Office of Tony Blair”, suggest 2011 has been a successful year for the former prime minister. Windrush saw its turnover rise to just over £12m, up from £8.5m in 2010. Pre-tax profits rose from £729,000 to £1.1m.
The accounts reveal that the company received “remuneration of £9,837,000 in connection with management services” from a limited liability partnership ultimately controlled by Blair. In the previous year Windrush Ventures Limited received £5.2m in remuneration for providing management services. Exactly what sort of management services are provided, and how the company derives its income, are impossible to determine as the accounts do not go into detail. Blair is legitimately taking advantage of laws allowing him to limit what his companies and partnerships must disclose. “It is baffling; these accounts make remarkably little sense,” said accountancy expert Richard Murphy of Tax Research UK, a firm that scrutinises company finances. “This limited disclosure is not within the spirit of the law.”
The New York Times reports: With the United States facing the reality that its broad security partnership with Pakistan is over, American officials are seeking to salvage a more limited counterterrorism alliance that they acknowledge will complicate their ability to launch attacks against extremists and move supplies into Afghanistan.
The United States will be forced to restrict drone strikes, limit the number of its spies and soldiers on the ground and spend more to transport supplies through Pakistan to allied troops in Afghanistan, American and Pakistani officials said. United States aid to Pakistan will also be reduced sharply, they said.
“We’ve closed the chapter on the post-9/11 period,” said a senior United States official, who requested anonymity to avoid antagonizing Pakistani officials. “Pakistan has told us very clearly that they are re-evaluating the entire relationship.”
American officials say that the relationship will endure in some form, but that the contours will not be clear until Pakistan completes its wide-ranging review in the coming weeks.
The Obama administration got a taste of the new terms immediately after an American airstrike killed 26 Pakistani soldiers near the Afghan border last month. Pakistan closed the supply routes into Afghanistan, boycotted a conference in Germany on the future of Afghanistan and forced the United States to shut its drone operations at a base in southwestern Pakistan.
Mushahid Hussain Sayed, the secretary general of the Pakistan Muslim League-Q, an opposition political party, summed up the anger that he said many harbored: “We feel like the U.S. treats Pakistan like a rainy-day girlfriend.”
Whatever emerges will be a shadow of the sweeping strategic relationship that Richard C. Holbrooke, President Obama’s special envoy for Afghanistan and Pakistan, championed before his death a year ago. Officials from both countries filled more than a dozen committees to work on issues like health, the rule of law and economic development.
All of that has been abandoned and will most likely be replaced by a much narrower set of agreements on core priorities — countering terrorists, stabilizing Afghanistan and ensuring the safety of Pakistan’s arsenal of more than 100 nuclear weapons — that Pakistan will want spelled out in writing and agreed to in advance.
With American diplomats essentially waiting quietly and Central Intelligence Agency drone strikes on hold since Nov. 16 — the longest pause since 2008 — Pakistan’s government is drawing up what Prime Minister Yousaf Raza Gilani called “red lines” for a new relationship that protects his country’s sovereignty and territorial integrity.
Said an American official: “Both countries recognize the benefits of partnering against common threats, but those must be balanced against national interests as well. The balancing is a continuous process.”
First, officials said, will likely be a series of step-by-step agreements on military cooperation, intelligence sharing and counterterrorism operations, including revamped “kill boxes,” the term for flight zones over Pakistan’s largely ungoverned borderlands where C.I.A. drones will be allowed to hunt a shrinking number of Al Qaeda leaders and other militants.
The C.I.A. has conducted 64 missile attacks in Pakistan using drones this year, compared with 117 last year and 53 in 2009, according to The Long War Journal, a Web site that tracks the strikes.
In one of the most visible signs of rising anti-American sentiment in this country, tens of thousands of protesters took to the streets of Lahore and Peshawar this month. And on Sunday in Karachi, Pakistan’s biggest city, at least 100,000 people rallied to support Imran Khan, a cricket celebrity and rising opposition politician who is outspoken in his criticism of the drone strikes and ties with the United States.
The supposed threat posed by Imran Khan is nothing more than the danger that Pakistan might get a government that was more loyal to the will of the Pakistani people than its paymasters in Washington. Khan’s promise, if his party was to gain power, is to purge the country of corruption. Those who regard him as a threat must presumably see corruption as their friend.
Naomi Wolf writes: US citizens of all political persuasions are still reeling from images of unparallelled police brutality in a coordinated crackdown against peaceful OWS protesters in cities across the nation this past week. An elderly woman was pepper-sprayed in the face; the scene of unresisting, supine students at UC Davis being pepper-sprayed by phalanxes of riot police went viral online; images proliferated of young women – targeted seemingly for their gender – screaming, dragged by the hair by police in riot gear; and the pictures of a young man, stunned and bleeding profusely from the head, emerged in the record of the middle-of-the-night clearing of Zuccotti Park.
But just when Americans thought we had the picture – was this crazy police and mayoral overkill, on a municipal level, in many different cities? – the picture darkened. The National Union of Journalists and the Committee to Protect Journalists issued a Freedom of Information Act request to investigate possible federal involvement with law enforcement practices that appeared to target journalists. The New York Times reported that “New York cops have arrested, punched, whacked, shoved to the ground and tossed a barrier at reporters and photographers” covering protests. Reporters were asked by NYPD to raise their hands to prove they had credentials: when many dutifully did so, they were taken, upon threat of arrest, away from the story they were covering, and penned far from the site in which the news was unfolding. Other reporters wearing press passes were arrested and roughed up by cops, after being – falsely – informed by police that “It is illegal to take pictures on the sidewalk.”
In New York, a state supreme court justice and a New York City council member were beaten up; in Berkeley, California, one of our greatest national poets, Robert Hass, was beaten with batons. The picture darkened still further when Wonkette and Washingtonsblog.com reported that the Mayor of Oakland acknowledged that the Department of Homeland Security had participated in an 18-city mayor conference call advising mayors on “how to suppress” Occupy protests.
To Europeans, the enormity of this breach may not be obvious at first. Our system of government prohibits the creation of a federalised police force, and forbids federal or militarised involvement in municipal peacekeeping.
I noticed that rightwing pundits and politicians on the TV shows on which I was appearing were all on-message against OWS. Journalist Chris Hayes reported on a leaked memo that revealed lobbyists vying for an $850,000 contract to smear Occupy. Message coordination of this kind is impossible without a full-court press at the top. This was clearly not simply a case of a freaked-out mayors’, city-by-city municipal overreaction against mess in the parks and cranky campers. As the puzzle pieces fit together, they began to show coordination against OWS at the highest national levels.
George Monbiot writes: In the documentary series which finished on Friday evening, the heiress Tamara Ecclestone set out to prove that she isn’t “a pointless, quite spoilt, really stupid, vacuous, empty human being”. This endeavour was not wholly successful. Channel 5 showed her supervising the refurbishment of her £45m home in London, in which she commissioned a £1m bathtub carved from Mexican crystal, an underground swimming pool complex, her own nightclub, a lift for her Ferrari, a bowling alley with crystal-studded balls and a spa and massage parlour for her five dogs, to save her the trouble of taking them to Harrods to have their hair sprayed and their nails painted. But there was something the series didn’t tell us: how much of this you helped to pay for.
In court a fortnight ago, her father, the Formula One boss Bernie Ecclestone, revealed that the fact his family’s offshore trust, Bambino Holdings, was controlled by his ex-wife rather than himself could have saved him “in excess of £2bn” in tax. The name suggests that the trust could have something to do with supporting his daughter’s attempt to follow the teachings of St Francis of Assisi.
Ecclestone has also been adept at making use of the corporate welfare state: the transfer by the government of wealth and power from the rest of us to the 1%. After the mogul made a donation to Labour’s election fund, Tony Blair demanded that F1 be exempted from the European Union’s ban on tobacco sponsorship. The government built a new dual carriageway to the F1 racetrack at Silverstone.
In other countries his business has received massive state subsidies. Russia, for example, has recently agreed to build a circuit for Ecclestone to race his cars, and then charge itself $280m for the privilege of letting him use it. Working in India in 2004, I came across the leaked minutes of a cabinet meeting in which the consultancy McKinsey insisted that the desperately poor state of Andhra Pradesh – where millions die of preventable diseases – cough up between £50m and £75m a year to support F1. The minutes also revealed that the state’s chief minister had lobbied the prime minister of India to exempt Ecclestone’s business from the national ban on tobacco advertising.
Socialism for the rich, capitalism for the poor: that is how our economies work. Those at the bottom are subject to the rigours of the free market. Those at the top are as pampered and protected as Tamara Ecclestone’s dogs.
MSNBC reports: A well-known Washington lobbying firm with links to the financial industry has proposed an $850,000 plan to take on Occupy Wall Street and politicians who might express sympathy for the protests, according to a memo obtained by the MSNBC program “Up w/ Chris Hayes.”
The proposal was written on the letterhead of the lobbying firm Clark Lytle Geduldig & Cranford and addressed to one of CLGC’s clients, the American Bankers Association.
CLGC’s memo [PDF] proposes that the ABA pay CLGC $850,000 to conduct “opposition research” on Occupy Wall Street in order to construct “negative narratives” about the protests and allied politicians. The memo also asserts that Democratic victories in 2012 would be detrimental for Wall Street and targets specific races in which it says Wall Street would benefit by electing Republicans instead.
According to the memo, if Democrats embrace OWS, “This would mean more than just short-term political discomfort for Wall Street. … It has the potential to have very long-lasting political, policy and financial impacts on the companies in the center of the bullseye.”
Here’s an extract from the memo:
Zaid Jilani reports: In one of the greatest signs yet that the 99 Percenters are having an impact, Rep. Ted Deutch (D-FL), a member of the House Judiciary Committee, today introduced an amendment that would ban corporate money in politics and end corporate personhood once and for all.
Deutch’s amendment, called the Outlawing Corporate Cash Undermining the Public Interest in our Elections and Democracy (OCCUPIED) [PDF] Amendment, would overturn the Citizens United decision, re-establishing the right of Congress and the states to regulate campaign finance laws, and to effectively outlaw the ability of for-profit corporations to contribute to campaign spending.
“No matter how long protesters camp out across America, big banks will continue to pour money into shadow groups promoting candidates more likely to slash Medicaid for poor children than help families facing foreclosure,” said Deutch in a statement provided to ThinkProgress. “No matter how strongly Ohio families fight for basic fairness for workers, the Koch Brothers will continue to pour millions into campaigns aimed at protecting the wealthiest 1%. No matter how fed up seniors in South Florida are with an agenda that puts oil subsidies ahead of Social Security and Medicare, corporations will continue to fund massive publicity campaigns and malicious attack ads against the public interest. Americans of all stripes agree that for far too long, corporations have occupied Washington and drowned out the voices of the people. I introduced the OCCUPIED Amendment because the days of corporate control of our democracy. It is time to return the nation’s capital and our democracy to the people.”
Matt Taibbi writes: Last week, a federal judge in Mississippi sentenced a mother of two named Anita McLemore to three years in federal prison for lying on a government application in order to obtain food stamps.
Apparently in this country you become ineligible to eat if you have a record of criminal drug offenses. States have the option of opting out of that federal ban, but Mississippi is not one of those states. Since McLemore had four drug convictions in her past, she was ineligible to receive food stamps, so she lied about her past in order to feed her two children.
The total “cost” of her fraud was $4,367. She has paid the money back. But paying the money back was not enough for federal Judge Henry Wingate.
Wingate had the option of sentencing McLemore according to federal guidelines, which would have left her with a term of two months to eight months, followed by probation. Not good enough! Wingate was so outraged by McLemore’s fraud that he decided to serve her up the deluxe vacation, using another federal statute that permitted him to give her up to five years.
He ultimately gave her three years, saying, “The defendant’s criminal record is simply abominable …. She has been the beneficiary of government generosity in state court.”
Compare this court decision to the fraud settlements on Wall Street. Like McLemore, fraud defendants like Citigroup, Goldman Sachs, and Deutsche Bank have “been the beneficiary of government generosity.” Goldman got $12.9 billion just through the AIG bailout. Citigroup got $45 billion, plus hundreds of billions in government guarantees.
All of these companies have been repeatedly dragged into court for fraud, and not one individual defendant has ever been forced to give back anything like a significant portion of his ill-gotten gains. The closest we’ve come is in a fraud case involving Citi, in which a pair of executives, Gary Crittenden and Arthur Tildesley, were fined the token amounts of $100,000 and $80,000, respectively, for lying to shareholders about the extent of Citi’s debt.
Neither man was forced to admit to intentional fraud. Both got to keep their jobs.
Anita McLemore, meanwhile, lied to feed her children, gave back every penny of her “fraud” when she got caught, and is now going to do three years in prison. Explain that, Eric Holder!
Michael Powell writes: The Bank of America lawyer laid down a patented rhetorical move heard in courts across America. Your Honor, this Orange County, N.Y., homeowner — a New York City police officer — didn’t make enough money to qualify for a mortgage modification. He didn’t send us the right documents.
He didn’t, he didn’t, he didn’t, and so we should be allowed to foreclose.
Justice Catherine M. Bartlett of New York State Supreme Court cut off the lawyer. You, she said, are telling me lies.
“Bank of America got a bailout, and this is an outrage, how this man has been treated,” she said. “Hard-working, middle-class Americans are trying to make it, trying to refinance with your bank.”
Either bank officials show up in person, the justice said, or I’m going to order them “here in handcuffs.”
Rage has acquired a cleansing power. Patience as a virtue is a hard sell at the burnt end of a four-year economic collapse. Zuccotti Park shakes, rattles and rolls; television yakkers chat about inequality; and the federal judge Jed Rakoff all but heckled the Securities and Exchange Commission last week for going easy on Citigroup misbehavior.
Then there is Eric T. Schneiderman, New York’s attorney general, caught in Month 5 of a face-off with the White House. President Obama dearly wants to seal a deal in which the nation’s largest banks toss over a few bales of cash — $20 billion to help with foreclosure relief — and the state attorneys general agree not to pursue sprawling and explosive legal cases against the banks.
Mr. Schneiderman and Attorney General Beau Biden of Delaware, joined by a few others, say no. Banks, they say, should disgorge more documents, testify more precisely and prove more completely that they own millions of mortgage notes. These rebel attorneys general want the banks to hand over more than $200 billion, which would enable the government to write down tens of millions of mortgages.
But in the end, their argument is elemental: Wouldn’t the nation benefit from knowing the truth about the behavior of banks and bankers?
Jeffrey Sachs writes: Twice before in American history, powerful corporate interests dominated Washington and brought America to a state of unacceptable inequality, instability and corruption. Both times a social and political movement arose to restore democracy and shared prosperity.
The first age of inequality was the Gilded Age at the end of the 19th century, an era quite like today, when both political parties served the interests of the corporate robber barons. The progressive movement arose after the financial crisis of 1893. In the following decades Theodore Roosevelt and Woodrow Wilson came to power, and the movement pushed through a remarkable era of reform: trust busting, federal income taxation, fair labor standards, the direct election of senators and women’s suffrage.
The second gilded age was the Roaring Twenties. The pro-business administrations of Harding, Coolidge and Hoover once again opened up the floodgates of corruption and financial excess, this time culminating in the Great Depression. And once again the pendulum swung. F.D.R.’s New Deal marked the start of several decades of reduced income inequality, strong trade unions, steep top tax rates and strict financial regulation. After 1981, Reagan began to dismantle each of these core features of the New Deal.
Following our recent financial calamity, a third progressive era is likely to be in the making. This one should aim for three things. The first is a revival of crucial public services, especially education, training, public investment and environmental protection. The second is the end of a climate of impunity that encouraged nearly every Wall Street firm to commit financial fraud. The third is to re-establish the supremacy of people votes over dollar votes in Washington.
None of this will be easy. Vested interests are deeply entrenched, even as Wall Street titans are jailed and their firms pay megafines for fraud. The progressive era took 20 years to correct abuses of the Gilded Age. The New Deal struggled for a decade to overcome the Great Depression, and the expansion of economic justice lasted through the 1960s. The new wave of reform is but a few months old.
The young people in Zuccotti Park and more than 1,000 cities have started America on a path to renewal. The movement, still in its first days, will have to expand in several strategic ways. Activists are needed among shareholders, consumers and students to hold corporations and politicians to account. Shareholders, for example, should pressure companies to get out of politics. Consumers should take their money and purchasing power away from companies that confuse business and political power. The whole range of other actions — shareholder and consumer activism, policy formulation, and running of candidates — will not happen in the park.
The new movement also needs to build a public policy platform. The American people have it absolutely right on the three main points of a new agenda. To put it simply: tax the rich, end the wars and restore honest and effective government for all.
Finally, the new progressive era will need a fresh and gutsy generation of candidates to seek election victories not through wealthy campaign financiers but through free social media. A new generation of politicians will prove that they can win on YouTube, Twitter, Facebook and blog sites, rather than with corporate-financed TV ads. By lowering the cost of political campaigning, the free social media can liberate Washington from the current state of endemic corruption. And the candidates that turn down large campaign checks, political action committees, Super PACs and bundlers will be well positioned to call out their opponents who are on the corporate take.
Those who think that the cold weather will end the protests should think again. A new generation of leaders is just getting started. The new progressive age has begun.
Matt Taibbi writes: Federal judge Jed Rakoff, a former prosecutor with the U.S. Attorney’s office here in New York, is fast becoming a sort of legal hero of our time. He showed that again yesterday when he shat all over the SEC’s latest dirty settlement with serial fraud offender Citigroup, refusing to let the captured regulatory agency sweep yet another case of high-level criminal malfeasance under the rug.
The SEC had brought an action against Citigroup for misleading investors about the way a certain package of mortgage-backed assets had been chosen. The case is very similar to the notorious Abacus case involving Goldman Sachs, in which Goldman allowed short-selling billionaire John Paulson (who was betting against the package) to pick the assets, then told a pair of European banks that the “designed to fail” package they were buying had been put together independently.
This case was similar, but worse. Here, Citi similarly told investors a package of mortgages had been chosen independently, when in fact Citi itself had chosen the stuff and was betting against the whole pile.
This whole transaction actually combined a number of Goldman-style misdeeds, since the bank both lied to investors and also bet against its own product and its own customers. In the deal, Citi made a $160 million profit, while its customers lost $700 million.
Goldman, in the Abacus case, got fined $550 million. In this worse case, the SEC was trying to settle with Citi for just $285 million. Judge Rakoff balked at the settlement and particularly balked at the SEC’s decision to allow Citi off without any admission of wrongdoing. He also mocked the SEC’s decision to describe the crime as “negligence” instead of intentional fraud, taking the entirely rational position that there’s no way a bank making $160 million ripping off its customers can conceivably be described as an accident.
“Why should the court impose a judgment in a case in which the SEC alleges a serious securities fraud but the defendant neither admits nor denies wrongdoing?” And this: “How can a securities fraud of this nature and magnitude be the result simply of negligence?”
Rakoff of course is right – the settlement is nuts. If you take Citi’s $160 million profit on the deal into consideration, what we’re talking about then is a $125 million fine for causing $700 million in damages. That, and no admission of wrongdoing.
Just imagine a mugger who steals $70 from some lady’s wallet being sentenced to walk free after paying back twelve bucks. Magritte himself could not devise a more surreal take on criminal justice.