Thought Congress had averted a government shutdown by striking a 2011 budget deal back in April? That’s only partly true.
While lawmakers deadlock over long-term deficit reduction plans tied to the raising of the debt ceiling, one federal agency—the Federal Aviation Administration—has been in partial shutdown for nearly a week. The issue has largely been overshadowed by the debt debate, but as the New York Times notes, it’s another example of our current legislative dysfunction that’s had real consequences.
So what’s happened?
Last week, Congress adjourned on Friday without reaching an agreement to extend the operating authority of the FAA, meaning the agency currently doesn’t have the authority to collect taxes on ticket sales, which it uses to pay for some-4,000 employees’ salaries. The lost revenue amounts to about $200 million a week.
As a result, thousands of workers have been furloughed and may not get paid for days missed. And without FAA officials to oversee airport construction projects, the agency has issued stop-work orders to more than 150 projects across the country, putting thousands more private-sector construction workers temporarily out of work as well.
Can I still fly?
Yes, you can still fly. As we explained back in April when the government was at risk of closing its doors, when a shutdown occurs workers are either categorized as essential or non-essential. Air traffic controllers and plane safety inspectors, of course, have been deemed to be essential and are still on the job, and so far the shutdown doesn’t seem to have affected airline schedules.
Who’s benefitting from this?
Probably not you. Initial reports suggested that minus the ticket taxes, consumers could reap some savings on air travel—and some may have at first. But some airlines soon changed their minds and raised their prices so that tickets now cost about as much as if the tax were still there. In other words, money that would have gone to funding the FAA has gone straight into the pockets of some major U.S. airlines.
“This short-term additional revenue for airlines, which does not mean a fare increase for consumers, benefits all stakeholders—customers, employees and investors—by temporarily improving tiny industry margins to better cover costs and enable airlines to invest in their product and service,” a spokeswoman for the Air Transport Association, the trade group for large U.S. airlines, told NPR.
So why did Congress force the shutdown?
Several minor disputes have led to this impasse.
The first is an industry-backed provision by House Republicans that would make it harder for aviation and railroad workers to unionize, essentially by counting workers who didn’t vote in a union election as having voted against the union. President Obama has threatened to veto any FAA bill containing this measure, but it’s included in the House version of the bill anyway.
The second dispute is over a program—called the Essential Air Service Program—that provides subsidies to airlines that fly into tiny airports servicing more than 100 rural communities. House Republicans have tried to reduce those subsidies and phase them out in all states except for Alaska and Hawaii. The move has been opposed by some lawmakers whose states’ subsidies will be ended.
It’s worth noting that the Government Accountability Office has recommended that Congress reexamine whether funds for the Essential Air Service Program are being used efficiently. But it’s also unclear whether the lawmakers who’ve proposed cutting the program care much about it one way or the other. Rep. John Mica, a Florida Republican and chairman of the House Transportation committee, assured a conference of airport executives earlier this month that the House added the provision as a bargaining chip to win concessions on the unionization issue, reported Aviation Week. “It’s just a tool,” Mica told the executives.
The third dispute is over the number of flights that should be allowed at Washington’s Reagan National Airport—another sticking point for lawmakers who frequent the airport more than the general public. The Washington Post describes the dispute this way:
The number of flights that should be allowed at National has long been a source of friction between members of Congress from the Washington region, who are concerned about noise and the region’s two other major airports, and their colleagues from distant states, who want more direct flights home.
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Though these disputes are relatively minor, there’s also a bigger backstory we should mention, and it dates back to 2007. That’s the year that the FAA’s last long-term operating authority expired. Ever since, Congress has been unable to agree on new long-term legislation and has instead kept the agency operating through short-term extensions—20 of them, to be exact. They’re currently trying to work out the 21st short-term extension, even though Transportation Secretary Ray LaHood has for months said the agency needs the sort of long-term reauthorization given to other federal agencies.
Who’s to blame for this?
Well, Transportation Secretary LaHood has placed the blame squarely on Congress: “Because Congress didn’t do its work, FAA programs and thousands of public- and private-sector jobs are in jeopardy,” he told reporters earlier this week.
Democrats have insisted that Republicans drop the labor provision, which they view as an industry-backed assault on unions. Republicans have criticized Democrats for unwillingness to eliminate “wasteful programs” such as the rural airport subsidies.
Meanwhile, at the estimated cost of $30 million a day, the nearly weeklong stalemate has already wasted about as much than the $200-million subsidy program costs in a year.
When will it be resolved?
The House has passed a bill—with the controversial union measure included—but the Senate is delaying a vote because of the debt negotiations, the Associated Press reports.
Inform our investigations: Do you have information or expertise relevant to this story? Help us and journalists around the country by sharing your stories and experiences. This story appeared originally at ProPublica.
As tensions between Pakistan and the U.S. have hit new highs in recent months, the billions of dollars that the U.S. gives to Pakistan in aid have come under heightened scrutiny. After the Obama administration announced earlier this month that it would withhold $800 million in military aid and reimbursements, a White House spokesman told reporters, “We’re not prepared to continue providing that at the pace we’re providing it unless and until we see certain steps taken.”
A new report by the Government Accountability Office sheds a bit more light on why one existing check on military aid—meant to ensure that U.S. aid buys more cooperation—may not be working as planned. Under the Enhanced Partnership with Pakistan Act of 2009, also known as the Kerry-Lugar Act, the Secretary of State is required to certify that Pakistan is cooperating with the United States in order for it to receive certain military funding.
But the report found that “relatively little” of the $3 billion in aid that the State Department has requested for Pakistan for 2012 is actually affected by that certification. Most of it—88 percent, to be exact—isn’t affected at all, the GAO found. That includes streams of funding that still can make it to Pakistan’s security forces regardless of whether Pakistan has been deemed to be cooperative.
What’s more, it’s unclear on what basis the State Department decides whether Pakistan has cooperated. Back in March, Hillary Clinton signed off on a certification of Pakistan’s cooperation, stating that the government of Pakistan has “demonstrated a sustained commitment to and is making significant efforts towards combating terrorist groups.” As McClatchy Newspapers points out, the certification was signed even as U.S. officials planned a raid to kill Osama bin Laden within Pakistan’s borders and without its prior knowledge.
The GAO has said that it will examine the State Department’s basis for granting this certification, but its findings will remain classified.
Meanwhile, the House Foreign Affairs Committee is considering a bill this week to place more restrictions on U.S. aid to Pakistan and other Mideast countries. The proposal would tighten the certification requirements for military aid to Pakistan. It would also make civilian aid contingent on certification and require additional certification that civilian aid programs have been effective.
Projects to disperse civilian aid within Pakistan have been slow to receive funding and make progress due to concerns about corruption in the Pakistani government, news outlets have reported. But given how the current certification system works, it’s unclear whether requiring additional certifications would address these problems or change how much or how effectively U.S. aid is ultimately dispersed.
Lawmakers have debated for months whether to cut the money given to Pakistan or attach more conditions to it. The Obama administration has said that its recent move to suspend millions in military aid to Pakistan would not affect aid to civilians.
The embattled media conglomerate News Corporation and its independent directors have not only hired top criminal defense lawyers, they’ve also hired former Justice Department prosecutors well-versed in U.S. bribery law.
The new hires are a sign that the company is taking the Justice Department’s preliminary investigation—and the potential that the inquiry may turn specifically to bribery—rather seriously. (Read our story on why News Corp. may have good reason to worry.)
The company has hired Mark Mendelsohn, who until last year was the Justice Department’s top enforcer of the Foreign Corrupt Practices Act—and an aggressive one, at that. Here’s FCPA expert Richard Cassin, writing on the FCPA Blog about Mendelsohn’s enforcement record:
Mendelsohn’s view of the FCPA and American anti-corruption policy wasn’t complicated. He pushed enforcement against corporations of any size and from any country. … He also led the government’s charge against individual FCPA defendants—among them KBR’s Jack Stanley, entrepreneur Frederic Bourke, and the 22 shot-show defendants.
As the UK’s Guardian notes, a full investigation of possible FCPA violations would likely drag other News Corp. subsidiaries into the mess—a costly and time-consuming process, but one that Mendelsohn will be able to help the company navigate.
The company’s independent directors, meanwhile, have hired former federal prosecutor Mary Jo White, who in 2007 conducted a major internal investigation of Siemens when it faced bribery allegations. News Corp. has also hired former U.S. Attorney General Michael Mukasey, who in addition to having experience with internal investigations also has an unusual connection to the FCPA.
As we’ve noted, Mukasey was hired in March as a lobbyist for the Institute for Legal Reform, an affiliate of the U.S. Chamber of Commerce. His lobbying registration shows he’s working specifically to roll back aggressive enforcement of the Foreign Corrupt Practices Act.
The inquiry into News Corp. is still very early. So far the Justice Department has said that the FBI, in response to media reports and a request from lawmakers, is investigating whether News Corp. tried to hack into the voicemails of 9/11 victims and whether its payments to U.K. law enforcement violated the FCPA.
This story appeared originally at ProPublica
Putting an end to one of the biggest lobbying fights of the year, the Federal Reserve has finalized rules capping the transaction fees that merchants pay to banks whenever a customer makes a purchase with a debit card. As it turns out, neither the banking industry nor the retail sector are too happy about the final result.
The finalized rule caps debit card fees at 21 to 24 cents per transaction for banks with more than $10 billion in assets. Yes, that’s about half of what current fees are, but it’s double the 12-cent cap that the Fed had originally proposed in December.
So, what’s happened in the months since?
We’ve been following the fight, but here’s a recap: Banks, fearing a loss of billions in fee revenue, pulled out the stops—launching ad campaigns and a Twitter campaign, writing letters to the Fed, threatening to sue, in one case actually suing, and donating to lawmakers who supported delaying the rules. They also warned that capping the fees would force banks to charge consumers for basic services to make up the difference. It’s not clear how much they spent on their campaign against the regulations, but commercial banks and credit unions have spent more than $17 million overall on lobbying so far this year, according to the Center for Responsive Politics.
After their efforts, the rules were loosened and their implementation delayed until October. But banks have warned that they still plan to increase consumer fees.
“Consumers will still see higher fees for basic banking services, and banks—particularly community banks—will still feel the revenue pressures that this rule will cause,” American Bankers Association president Frank Keating said in a statement. “We will continue to aggressively advocate for remedies that will mitigate any harm caused by this regulatory action.”
As for consumers, it’s not clear whether they’ll come out ahead. David Evans, a former Visa adviser who runs a consulting firm catering to the financial industry, has said that consumers have no reason to be happy—they’ll lose their bank perks and have no guarantee that retailers will pass on any portion of their savings.
But Georgetown University law professor Adam Levitin takes a different view. He’s made the argument that competitive forces make retailers more likely to pass on savings to consumers and that in issuing the final rule, “the Fed bent over backwards to help the banks on this. How they go from 12 cents to 21 cents is never explained in the rulemaking.”
This story appeared originally at ProPublica.
Medical journals have long had to wrestle with the possibility that financial bias influences the work they publish, but if the growing controversy over Medtronic’s Infuse spinal product is any indication, they may not be doing enough.
That’s according to the Spine Journal, which last week published an entire issue focusing on the clinical research and literature around Infuse, a blockbuster bone-growth protein sold by Medtronic. According to the journal, the doctors engaged in industry-funded studies of Infuse downplayed its risks, and some had staggering financial ties to Medtronic that weren’t adequately disclosed in their published research.
“Can the reader tell if the authors have a trivial relationship with the industry or do the authors receive millions of dollars each quarter from the sponsor?” asked an editorial in the Spine Journal. “Although you may wonder, you would not likely be enlightened.”
In our series Dollars for Docs, we’ve been tracking how money from the drug and device industry has pervaded the medical field and influenced the decisions that doctors make both in the clinical setting and in research.
According to Eugene Carragee, a professor of orthopedic surgery at Stanford and editor of the Spine Journal, readers “absolutely” need to be informed of the dollar amounts that doctors are receiving from industry. These days, all medical journals require their authors to make some type of disclosure about potential conflicts of interest, but some require more detail than others. They also vary in how much of the information they then disclose to the public. Carragee’s journal, for instance, requires dollar amounts to be reported within ranges and makes the information available to readers.
But his is the exception. Leading U.S. medical journals such as the New England Journal of Medicine [PDF], Annals of Internal Medicine, and Journal of the American Medical Association don’t require their authors to disclose ranges or specific amounts that they’re receiving from sponsors. The three journals use the same, standard disclosure form [PDF] first developed in 2009 by the International Committee of Medical Journal Editors.
The form does require authors to disclose what kind of ties they have to sponsors of the article and other drug and device companies. Authors are asked to check off whether they’ve received grants, royalties, consulting fees, writing fees, speaking fees, money for travel, or have stocks or other potential conflicts of interest. The form asks them to specify the companies that are paying them — but it doesn’t require that specific drugs or devices related to the payments be named.
Several current and former editors at these journals say the dollar amounts involved aren’t what matters — all readers need to know is that a financial tie exists.
Jeffrey Drazen, NEJM’s current editor, said it’s hard to judge how much money would be enough to bias a doctor: “No matter where I draw the line, there will be some who say it’s too much and some who say it’s too little.”
“The value of disclosure is overblown,” added Jerome Kassirer, a former NEJM editor and a distinguished professor at Tufts University School of Medicine.
He said readers often don’t know how to interpret disclosures, and that journals often don’t make them easy to find. NEJM, for instance, posts disclosures on its website but doesn’t always include them in the journal’s print version.
Major medical journals also rely on an honor system. There’s little — if any — checking to see if disclosures are accurate and complete.
“They can lie to us, and we don’t do lie detector tests,” said outgoing JAMA editor Catherine DeAngelis, who said her publication gets thousands of submissions a year and doesn’t have the time or money to hire another staff member to check up on conflict-of-interest disclosures. And if she had the money for one more staffer?
“Believe me,” she said, “it wouldn’t be for that.”
It’s not unheard of for significant conflicts to be either undeclared by researchers or omitted by journals. Reuters recently examined reports in the British Journal of Dermatology and found several instances in which researchers failed to report their financial conflicts.
And last year, a study led by Columbia University professor David Rothman found that fewer than half of journal articles authored by researchers with financial ties to orthopedic device-makers actually disclosed them. Rothman co-authored this week’s editorial in the Spine Journal.
Sometimes financial ties exist within the journals themselves, not just with their contributors.
As the Milwaukee Journal Sentinel has reported, Thomas Zdeblick, an orthopedic surgeon at the University of Wisconsin, conducted several positive studies on Infuse and other Medtronic products while he was editor of the Journal of Spinal Disorders & Techniques, which published some of his work. He also received more than $20 million in royalty payments for several Medtronic medical devices, including one that is used with Infuse. (Zdeblick told the New York Times that he did not have a “direct financial interest in the success of Infuse or Medtronic.”)
As we’ve noted, Medtronic last year adopted a new policy restricting the role of royalty-earning physicians in clinical trials, but it doesn’t appear that the policy would apply to studies like those flagged by the Spine Journal.
While the policy bars physicians from serving as clinical investigators for products on which they receive royalty payments, they may still serve as paid consultants or trainers for those products, write about them and participate in clinical studies involving other Medtronic products.
We’ve asked Medtronic to comment on the policy, but the company instead provided a prepared statement asserting that Infuse is safe, and pledging to “refine our policies as warranted.”
Charles Ornstein of ProPublica contributed reporting. This story appeared originally at ProPublica.
In the wake of Fukushima, story after story has been published about the cozy relationship between Japan’s nuclear industry and its regulators: Japanese nuclear regulators extended the use of reactors despite concerns about equipment upkeep and left key safety measures to the initiative of plant operators, as many have reported in the months since.
While nuclear regulators in the United States don’t have their Japanese counterparts’ explicit dual mission of both regulating the industry and promoting nuclear energy, an investigation by The Associated Press published today shows that in several critical ways, the two countries’ regulatory agencies may not be so different.
Officials at the U.S. Nuclear Regulatory Commission repeatedly weakened safety standards or decided not to enforce them in order to keep aging nuclear reactors in compliance, according to the AP:
Examples abound. When valves leaked, more leakage was allowed — up to 20 times the original limit. When rampant cracking caused radioactive leaks from steam generator tubing, an easier test of the tubes was devised, so plants could meet standards.
… Records show a recurring pattern: Reactor parts or systems fall out of compliance with the rules. Studies are conducted by the industry and government, and all agree that existing standards are “unnecessarily conservative.”
Regulations are loosened, and the reactors are back in compliance.
We’ve reported on a similar pattern in the area of fire safety. Last month, we published a story showing that regulators backed down in face of industry pressure on fire safety, then let the nuclear companies set the bar where they wanted.
Rather than enforce existing fire safety rules, the NRC—at the request of the nuclear industry—launched what NRC chairman Gregory Jaczko called an “industry-developed” approach to fire safety. From our earlier report:
Under a new fire program, nuclear companies could tailor fire protection at their plants based on an in-depth analysis of risk conducted by their own engineers.
To get companies to take part, the agency offered to ease up on enforcement. While the companies wrote new fire plans and the NRC reviewed them, the agency would exercise what it calls “enforcement discretion.” Inspectors would write up violations for the only most serious offenses — red on the agency’s four-color severity scale.
In April, we reported that the regulatory guides used by the NRC rely heavily on material written by the industry’s trade group, the Nuclear Energy Institute. (The NRC told us that the Nuclear Energy Institute isn’t the sole source of information the guides, and that the agency keeps safety as “the total focus of our effort.”)
More than half of the more than 100 nuclear reactors in the states have had their 40-year licenses extended for another 20 years, according to the AP.
NRC spokesman Eliot Brenner told the news agency that aging reactors are upgraded over time and that by the time a plant is due for relicensing, “most, if not all of the major components, will have been changed out.” Jaczko, the NRC chairman, has since criticized his agency’s approach to fire safety and called the lack of enforcement “unacceptable.”
Jaczko been the focus of recent criticism, particularly from Republicans, after a report by the agency’s inspector general found that he misled staffers when he ordered them to stop a technical review of a proposed nuclear waste repository at Yucca Mountain in Nevada. The report did not find that Jaczko had broken any laws.
Just months after fights to limits labor rights in Wisconsin and other states grabbed national attention, another messy labor dispute is getting headlines.
One of the nation’s largest manufacturers, Boeing, has been sued by the government for allegedly punishing union workers by shifting a proposed new plant to another state. Republicans and other critics have charged that the government is overstepping its authority and creating a dangerous precedent.
The dispute has taken over congressional hearings, prompted more than a dozen states to chime in on Boeing’s side, and has even become a talking point for Republican presidential candidates. Tim Pawlenty compared the case to “the Soviet Union circa 1970s or 1960s or ‘50s.”
Amid all the rhetoric, we’ve decided to step back and lay out the facts.
What the controversy’s about
The National Labor Relations Board has alleged that Boeing scrapped its plans for a new plant in Washington state to punish union workers there for going on strike. The company opened up a nonunion plant in South Carolina last Friday. If the claims are true, Boeing broke federal labor law.
The complaint was originally brought by the machinists union in 2010. The NLRB investigated and ultimately decided that the allegations were well-founded, and it sued. Cases like this often settle before going to a judge. That hasn’t happened here. And this week, Boeing and the NLRB faced off in court for the first time.
The administrative hearing this week is a hearing on the facts. If the decision is appealed, it will go to the NLRB’s board, which serves as a quasi-judicial body and acts independently of the agency’s general counsel. (As the agency explains it, the general counsel functions as a prosecutor, and the board functions as a court.)
Though the issue hasn’t yet come before the board, Boeing—and the Republicans—have worried that it will rule in favor of the union because it has a Democratic majority at the moment.
Why the law’s simple, but the facts in the case aren’t
Federal labor law—specifically, the National Labor Relations Act—protects workers from retaliation or threats of retaliation for exercising the right to form a union, bargain collectively, or go on strike.
“There’s nothing particularly extraordinary about this case as a matter of the legal principles at stake,” said Catherine Fisk, a University of California-Irvine law professor and former Justice Department attorney. Fisk has written extensively about labor law and the NLRB.
According to Fisk, the question is whether the labor board can prove that the dispute with the workers in Seattle was Boeing’s primary reason for moving its planned plant. Companies may legally shift work for reasons such as labor costs, but they may not do so out of retaliation against workers for past strikes or to prevent future strikes.
Why establishing motive is tricky
In an interview last year with the Seattle Times, Boeing executive Jim Albaugh said the following about the decision to relocate: “The overriding factor was not the business climate, and it was not the wages we’re paying people today. It was that we can’t afford to have a work stoppage every three years.”
NLRB’s general counsel took that statement—and others—to mean that Boeing was trying to avoid the union, which had a history of strikes dating back to the 1970s.
However, the company has argued that Albaugh’s quote was taken out of context and have noted that his full statement went on to say more: “We can’t afford to continue the rate of escalation of wages as we have in the past. You know, those are the overriding factors. And my bias was to stay here but we could not get those two issues done despite the best efforts of the Union and the best efforts of the company.”
The Seattle Times had this take on Albaugh’s statements about the work in Seattle:
He repeatedly made clear that those two things—first, no strikes; second, lowered escalation of wages in the future—remain deal breakers for placing future work here.
Here’s the NLRB’s complaint against Boeing, filed in April [PDF]. Boeing has argued that it did not make the decision to open the plant in South Carolina out of retaliation against unionized employees. The company has also argued that the workers in Seattle weren’t adversely affected by the opening of the South Carolina factory because no jobs in Seattle were lost.
What’s happening now
An administrative law judge will have to decide whether the NLRB’s lawsuit against Boeing has merit. That hearing began yesterday in Seattle.
Boeing kicked off the hearing by asking the judge to dismiss the case. Judge Clifford Anderson urged Boeing and the NLRB to work out a settlement, stressing that the case could take years if the decision keeps getting appealed: “I’ll be retired or dead,” he said.
How the process has become politicized
What was initially a dispute between one company and its workers has ballooned into a broader political fight. Republican politicians on both the state and congressional level have criticized the NLRB and rushed to Boeing’s defense, framing the NLRB’s action as an attack on what are known as right-to-work states, or states that bar employers or unions from making union membership a condition of employment. South Carolina is a right-to-work state.
Last week, Rep. Darrell Issa, chairman of the House Oversight committee, announced his panel would investigate whether the NLRB was overreaching and trying to force workers into unions. Several House Democrats said the investigation was an attempt to influence a legal proceeding, but Issa said such hearings “are not inherently improper by virtue of exploring a pending administrative matter.”
South Carolina politicians—from the state’s attorney general to its governor to its congressional representatives—have also sought to influence the court. The state’s governor, Nikki Haley, is slated to testify tomorrow at Issa’s hearing. “There’s no secret that I don’t like the unions,” she has said. Haley has vowed to keep up the political pressure in order to stop the lawsuit.
Sen. Lindsay Graham of South Carolina has threatened to block the Obama administration’s Commerce Secretary nominee until President Obama supports Boeing: “Tell the country we think Boeing’s a good, ethical company and they’ve done nothing wrong,” Graham said this week. (Obama’s pick for Commerce Secretary happens to be a former Boeing board member.) Graham’s colleague, Sen. Jim DeMint, also filed a public records request last week for any communications the agency had with the union and Obama administration officials. DeMint had previously called the labor board “a bunch of thugs.”
And South Carolina’s attorney general—joined by the attorneys general of 15 other states—filed an amicus brief [PDF] last week alleging that the NLRB’s action against Boeing could harm job growth in the United States.
Even Republican presidential contenders have weighed in on the issue. As The Hill notes, Mitt Romney, Newt Gingrich, and Tim Pawlenty have all criticized the labor board.
The White House meanwhile, has mostly stayed quiet about the matter. A White House official told Fox News that the case is “an independent agency’s enforcement action,” and “the White House does not get involved in particular enforcement matters.”
But the White House did tell the NLRB to back off in March when the agency issued a statement criticizing House Republicans’ proposed cuts to the NLRB budget. An official from the Office of Management and Budget ordered the labor board to remove the statement from its website. “Administration positions on proposed legislation are provided by the White House,” an OMB spokeswoman told Huffington Post.
This article appeared originally at ProPublica.
Providers of civil legal services to the poor are having to furlough their staff, triage their clients, and turn away more people in need as a result of the congressional budget compromise reached last month. Legal services may include defending low-income individuals dealing with predatory lending, domestic violence, landlord-tenant disputes or foreclosure. As we’ve noted, legal experts have particularly urged to Congress to adequately fund legal services  in order to alleviate the crisis of flawed foreclosures.
But far from seeing any budget increases, the umbrella nonprofit group Legal Services Corporation had its funding cut by $15.8 million—about 4 percent of its most recent budget—as a result of last month’s budget compromise. It was spared a $75 million cut first proposed by House Republicans.
The modest reduction isn’t the only reason that the 136 legal aid programs across the country funded through LSC are in a tight spot. In addition to less funding from the federal government, they have limited support from cash-strapped states, dwindling revenue from trust accounts and a growing population of people eligible and in need of their help.
“You do reach a point where you can no longer absorb” the cuts, Edwina Frances Martin, a spokeswoman for Legal Services NYC, told me. Martin said her organization gets about 14 percent of its budget from Legal Services Corporation and lost about $720,000 in the final federal budget. It’s planning cutbacks large and small—cutting the budget for food at trainings, leaving some empty positions unfilled and implementing furloughs in some field offices.
Elsewhere in the country, Idaho Legal Aid Services is starting to shutter its offices several days every month, the Associated Press reported. The organization lost about 60 percent of its funding in the final federal budget.
In Virginia, chapters of the Virginia Legal Aid Society are starting to lay off attorneys.
In Maine, Pine Tree Legal Assistance—the group whose volunteer attorney Thomas Cox deposed a GMAC employee last year and set off a nationwide furor over flawed foreclosure practices at the nation’s biggest banks—estimates that the cuts will affect its ability to serve about 125 families this year.
In New Jersey, the group that coordinates civil legal services across the state said that programs are providing less full representation for clients and instead are opting to offer more limited help—such as legal advice—to more people. (Read the Legal Services of New Jersey’s report from last month.)
The reasons for this are manifold. Like other states, New Jersey has lost some federal funding through Legal Services Corporation, but that’s only its third-biggest revenue stream. Its biggest dilemma is a drop in revenue from lawyers’ trust accounts, which collect interest on payouts to clients and donate that interest to legal aid. That revenue has dropped from $40 million to $8 million annually, Legal Services of New Jersey said.
In New York, another stream of funding is also being lost. On top of its federal cut on general funding, Legal Services NYC is no longer going to be getting federal stimulus dollars specifically allocated by the state for foreclosure prevention, as the New York Times reported on Friday. As we reported last week, the organization’s foreclosure prevention efforts helped two homeowners in the Bronx discover and contest clauses hidden in the fine print of their mortgage modification agreements that would limit their ability to sue or fight foreclosure.
At least in New York, legal services providers do have friends in high places. The state’s chief judge, Jonathan Lippman, has for months crusaded for more state dollars to go to civil legal services and has pledged to make it happen.
“As chief judge, I see this as one of the great challenges facing our justice system today,” Lippman said in comments last week. “No issue is more fundamental to our constitutional mandate of providing equal justice under the law than ensuring adequate legal representation.”
Related: Read our report on how the budget slashed housing counseling funds as well.
First, a sex scandal, followed by a messy cover-up and an even messier fessing-up. The sequence has become all but routine in Washington.
But the criminal case against two-time Democratic presidential candidate John Edwards is anything but run-of-the-mill. While campaign finance experts may not agree on whether the charges are merited, they seem to uniformly acknowledge that the charges against Edwards are unprecedented. Here’s a quick look at why, drawing from the prosecution’s indictment, the defense’s expert witnesses and what’s been reported.
What are the charges against Edwards, exactly?
The government lays out its case in a federal grand jury indictment, which you can read in its entirety. Essentially, Edwards is charged with violating campaign-finance law for accepting large sums of money from two wealthy supporters. The money went to concealing Edwards’ mistress, Rielle Hunter, from his wife and from the American electorate, the government alleges.
At issue here is whether the nearly $1 million in funds from longtime Edwards supporters Rachel “Bunny” Mellon and now-deceased Fred Baron were in fact campaign contributions. If they were, as the government alleges, the donations would violate both disclosure laws and contribution limits. The government also has to prove that Edwards knew about the payments.
Edwards pleaded not guilty. He said he has personal regrets but never broke the law.
So what constitutes a campaign contribution?
By law, a campaign contribution is “any gift, subscription, loan, advance, or deposit of money or anything of value made by any person for the purpose of influencing any election for Federal office.”
The indictment explains it this way:
Anything of value provided for the purpose of influencing the presidential election, including (a) contributions to a candidate and his/her campaign; (b) expenditures made in cooperation, consultation, or concert, with, or at the request of suggestion of, a candidate or his/her campaign; and (c) payments for personal expenses of a candidate unless they would have been made irrespective of the candidacy.
Ah, so the question is whether the money was meant to influence the campaign, right?
Yes, and we’ll see what the court decides. But it almost goes without saying that a sex scandal and lovechild splashed in the headlines would have hurt—if not derailed—Edwards’ campaign.
Edwards’ legal team has reportedly countered that the money was merely intended to hide the affair from Edwards’ cancer-stricken wife, Elizabeth, and it had nothing to do with his protecting his campaign.
Prosecutors evidently aren’t buying that the payments were just to protect Edwards’ marriage. In the first paragraph of the 19-page indictment, prosecutors argued that Edwards’ “public image as a devoted family man” was a centerpiece of his candidacy, and that cultivating and publicizing that image was part of the campaign’s communication strategy for electoral success.
Also worth noting: Edwards once told ABC News that he had spoken with Elizabeth about his infidelity in 2006, and yet the hush-money was paid out in 2007 and 2008.
The government’s case also leans on a 2000 advisory opinion from the Federal Election Commission in which a donor tried to give $10,000 in funds to candidates on the condition that the money was to “be used solely for personal expenses,” and not for campaign purposes, according to the News & Observer. The donor’s reasoning was that he wanted to “express deep appreciation” to the candidate for giving up private sector opportunities to pursue public service. The FEC said no, ruling that personal donations are only permissible if they would have been made “irrespective of the candidacy.”
Is there specific evidence tying the donations to Edwards’ candidacy?
In the indictment, prosecutors point to a note between donor Rachel Mellon and Edwards’ aide Andrew Young. Around that time, Edwards and Young had been discussing individuals who could support Edwards’ mistress, who was pregnant with his child, according to the indictment. Young apparently gave Mellon a call. Here’s what she told Young, emphasis ours:
The timing of your telephone call on Friday was “witchy.” I was sitting alone in a grim mood—furious that the press attacked Senator Edwards on the price of a haircut. But it inspired me—from now on, all haircuts, etc., that are necessary and important for his campaign—please send the bills to me. … It is a way to help our friend without government restrictions.
Mellon had by that time already contributed the most she could legally contribute to his campaign, but proceeded to write $725,000 in personal checks that ultimately went to Hunter’s living and medical expenses, the indictment alleged. The memo lines of the checks indicated they were for furniture items—“chairs,” “antique Charleston table,” “book case.” (Mellon’s legal team told the New York Times that the money was a personal gift, and she didn’t know how Edwards used it.)
Edwards also accepted more than $200,000 from Baron, his former campaign finance chairman, which went to Hunter’s travel and accommodations. (Some of the facts here are contradictory: After news of the Edwards-Hunter affair broke, Baron said he sent money to keep Hunter out of the media but he did so without Edwards’ knowledge. Along with denying paternity of Hunter’s child, Edwards said publicly in 2008 that “had no knowledge of any money being paid.” However, AP reported yesterday that prosecutors have notes between Edwards and a campaign writer that show Edwards acknowledging he knew about Baron’s payments—though he said he didn’t ask for them.)
Neither Mellon nor Baron are named in the indictment, but are listed as Person C and Person D, respectively.
So, why are legal experts skeptical of the government’s case?
First, nobody can recall a similar case. And the lack of a clearly applicable legal precedent makes it risky.
Plus, the standard of proof for a criminal case is higher than for a civil case. U.C. Irvine law professor and campaign finance expert Richard Hasen, who wrote a good piece for Slate on the Edwards ordeal, wrote on his election law blog on Monday: “The law is murky and the facts are murky, and it is going to be very hard to prove in a criminal prosecution beyond a reasonable doubt that Edwards willfully violated clear law.”
Both sides have sought experts to bolster their interpretations of the law. Politico reported that the prosecution has been seeking out former FEC commissioners to testify and has had at least one decline because the case “seems somewhat of a stretch.”
The Edwards legal team has retained two expert witnesses. One, former FEC chairman Scott Thomas, said it was his view that the payments “would not be considered to be either campaign contributions or campaign expenditures” according to campaign finance law, and that the government’s understanding of the law was incorrect. “A criminal prosecution of a candidate on these facts,” Thomas wrote, “would be outside anything I would expect after decades of experience with the campaign finance laws.”
What’s at stake for Edwards—and for the Justice Department?
If found guilty of the government’s charges, the already-disgraced Edwards would lose his law license and could face a maximum of five years in prison and a maximum $250,000 fine on each of the indictment’s six counts.
For the government, the case could mean a step toward redemption—or yet another high-profile failure—for the same Justice Department unit that in 2008 botched the politically charged prosecution of the late Alaska Sen. Ted Stevens.
This story appeared originally at ProPublica
There are growing indications that federal investigators at the Securities and Exchange Commission will opt to publicly scold the failed firm Lehman Brothers instead of filing fraud charges against former executives. The 2008 bankruptcy of Lehman Brothers, readers may remember, was the largest in U.S. history and sent shock waves through the global financial system spiraling into crisis.
In March, the Wall Street Journal had reported that charges were becoming less likely. Bloomberg came out with a more detailed story Friday that noted the possibility of a public rebuke instead. Securities law professor James Cox of Duke University told Bloomberg that the public rebuke “is about the least harmful sanction anybody could get.” Here’s more from Bloomberg:
Instead, the enforcement staff may recommend that the agency take the rare step of publishing a so-called report of investigation, also known as a 21(a) report. The commission would have to vote on whether to issue a report and it’s still possible that the SEC may decide to bring legal claims in court, the people said. The 21(a) reports, which lay out allegations of misconduct without imposing penalties, have only been issued six times in the past decade, according to the SEC’s website.
The apparent lack of charges comes despite an extensive post-mortem on Lehman Brothers last year that turned up a number of balance sheet manipulations that the firm used to hide risk. According to the report, Lehman used an accounting gimmick known as “Repo 105” to create “a materially misleading picture of the firm’s financial condition” even while company’s executives continually assured investors that its balance sheet was in good shape. (Here’s more on how Repo 105 worked.)
A Lehman Brothers spokeswoman declined to comment to Bloomberg about the possibility of a public rebuke. We contacted what’s left of Lehman to request comment but did not receive a response.
If indeed the SEC decides to publish the findings of its investigation without taking further action against executives, it would hardly be the first time that the agency has declined to bring charges. As we noted in our bank investigations cheat sheet, a number of probes by banking regulators have petered out over the last few years and no criminal charges have been brought against former execs at the nation’s biggest banks.
Meanwhile, Goldman Sachs—which has settled one civil suit and could face more as it continues to receive subpoenas—may be going on the offensive in an attempt to head off potential charges. The Journal reports today that the investment bank plans to publicly counter a stinging Senate subcommittee report that was referred to the Justice Department. The bank has said the report’s conclusions were wrong.
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