McClatchy News Paper “Truth to Power” for the 21st Century
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posted by Rick | 9:11 PM
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posted by Rick | 8:40 PM
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As the mortgage industry swooned in late 2006 and 2007, Countrywide Financial Corp. Chief Executive Angelo Mozilo cashed in stock options valued at $138 million -- vastly expanding his wealth even as his shareholders watched their stock shrink in value.
Company executives say Mozilo did nothing wrong and that the transactions were made under trading plans that specified how many shares would be sold each month.
Similar trading plans have been used by hundreds of executives since they were greenlighted by federal regulators in 2000 as a means of fending off accusations of insider trading.
But most executives adopt a plan and stick with it, compensation and securities experts say. Mozilo didn't.
Instead, he shifted course twice in late 2006 and early 2007, according to regulatory filings, amid mounting signs of trouble in the housing and mortgage industries. Mozilo adopted a new trading plan, added a second and then revised it, allowing him to unload hundreds of thousands of additional shares before Countrywide stock went into a tailspin.
"There is clearly no legal prohibition of altering your plan," said David Priebe, a Bay Area attorney who has helped set up more than 50 of such plans for executives. "But the more that you modify or add to your plan over a short period of time, the more risk that someone will call it into question. I would not say that you cannot do it. I would say there is a risk if you do do it."
Mozilo, 68, and other company executives are already the targets of shareholder suits that claim they misled investors about Countrywide's financial condition. Hurt by rising loan defaults and the housing slump, the Calabasas-based company recently announced that it would lay off 12,000 of its 54,000 workers. Its stock closed Friday at $19.01, down from $45.03 on Feb. 2.
Sandy Samuels, Countrywide's chief legal officer, said Mozilo's stock sales were all "in accordance with company policy."
"The [trading] plans were put into place in consultation with Mr. Mozilo's financial advisor, without regard to any non-public or market information," Samuels said in a prepared statement.
Compensation experts who reviewed Mozilo's trading activity, however, said the changes he made could prove to be a liability as Mozilo and Countrywide defend themselves against shareholder suits.
They point to a sequence of events that began Oct. 27, when Mozilo adopted a stock trading plan that Samuels said called for selling 350,000 shares a month. That replaced a previous trading plan that had expired in May. The plan was filed three days after Countrywide reported that its earnings from mortgage banking had fallen 40% in the third quarter ended Sept. 30.
Soon, there would be more bad news.
In November, investment bank UBS reported that borrowers with sub-prime loans -- the kind made to people with weak credit -- were falling behind on their payments at a record pace.
On Dec. 6, wholesale lender Ownit Mortgage Solutions of Agoura Hills said it was shutting down because Wall Street had cut off funding for its sub-prime loans, throwing 800 people out of work.
Six days later, on Dec. 12, Mozilo filed a new stock trading plan, Samuels said. Mozilo and Countrywide declined to provide copies of this or his other trading plans, but the company confirmed that the Dec. 12 plan allowed Mozilo to sell an additional 115,000 shares each month.
"The plan was entered into on the advice of his financial advisor based on his personal financial holdings, which included new equity awards under the proposed new contract," Samuels said in a statement.
Meanwhile, the mortgage business continued to sour. On Jan. 12, Countrywide reported that foreclosures the previous month had soared 48% over the year-earlier period.
On Feb. 2, Mozilo revised the trading plan he had adopted less than two months earlier, doubling the number of additional shares Mozilo was authorized to sell under his second plan to 230,000 a month. Between the two plans now in effect, Mozilo could sell 580,000 shares each month.
Samuels said this revision was made in response to the new terms of Mozilo's employment agreement, struck Dec. 22.
"In consultation with his financial advisor and due to new equity awards under his new contract, Mr. Mozilo decided to increase the amount of shares to be sold under the [trading plans] to 580,000 a month," Samuels said.
The plan was filed the same day Countrywide shares closed at an all-time high of $45.03. Samuels said the plan was put into effect on that date because it was "the time when the most current information about Countrywide was available in the marketplace." Three days earlier, Countrywide had reported its 2006 earnings. The stock is now far from that peak, hitting a low of $16.62 on Sept. 12.
Although trading plans usually protect executives against allegations that they traded on inside information, experts say Mozilo may have weakened his defense by making changes in a relatively short period of time.
"This raises a slew of red flags," said Andrew Stoltmann, a Chicago-based securities lawyer. "Anytime you have revisions or modified plans. . . it is extremely suspicious."
Priebe said he advises his clients to set up the agreements several months before they're used and then try not to deviate from them for years.
Thom F. Carroll, a financial planner with the Baltimore wealth management firm Carroll, Frank & Plotkin, said revising such a plan puts an executive "on a slippery slope."
"There are circumstances where the plans could be amended, but you better have a good reason because it's defeating the basis of the rule," Carroll said. "If a guy is changing his plan around, I would think that would send up a red flag. I wouldn't allow my clients to do it."
Countrywide has already been named in several securities suits, including one brought by members of the company's 401(k) plan this month. They allege that Mozilo and other Countrywide executives "misleadingly concealed material adverse information" that caused members of the retirement plan to buy company shares at "artificially inflated" prices.
Countrywide has not yet filed responses to the suits but says it "does not believe the suits have merit and plans to aggressively defend against the allegations."
Mozilo declined to comment directly for this article.
The son of a butcher who grew up in the Bronx, Mozilo began working for a mortgage company at age 15, continuing there while he attended Fordham University and after graduation.
In 1969, he teamed up with a former boss, David Loeb, to launch Countrywide. Since then, Mozilo has been inducted into the National Assn. of Home Builders' Hall of Fame and has been listed as one of the 30 most respected CEOs in the world by Barron's magazine, according to the biography that Countrywide posts on its website.
Along the way, Mozilo became one of the highest-paid executives in America, taking home $160 million in 2005 between pay and stock gains and $120 million in 2006, including pay and profit on exercised stock options, public filings show.
Nell Minow, editor of the Corporate Library -- which conducts extensive research on executive pay -- said that Mozilo's decision to adopt two trading plans in late 2006, and then to change the December plan in February 2007, stands in sharp contrast to what her organization typically sees.
"We are used to seeing these plans set up like the phases of the moon, where it is very, very predictable," Minow said. "We know exactly what is going to happen and when."
Samuels said there were good reasons for the changes Mozilo made.
"As we explained previously, he made the one amendment in accordance with the advice of his financial advisor for legitimate, financial planning reasons and at a time when the most current information about Countrywide was available in the marketplace," Samuels said in a statement to The Times.
Officials with the Securities and Exchange Commission declined to discuss Mozilo's revisions to his trading plan.
Executives are not required to publicly disclose trading plans. However, the plans sometimes become public when executives disclose them in court as a defense against accusations of insider trading.
In addition, executives often make references to trading plans in the documents they file after making stock sales.
Mozilo adopted his first trading plan in October 2003, according to securities filings. In the three years that followed, he adopted two new plans -- in April 2004and December 2004.
Hilton Foster, a retired SEC enforcement attorney who specialized in insider trading cases, said there was nothing unusual about those plans because there were significant periods between the adoption of new plans, and Countrywide's stock price was rising.
What sets off alarms is when insiders step up their stock purchases in advance of a run-up, Foster said, or accelerate their sales before the stock tanks.
Overall, between November 2006 and August 2007, Mozilo sold 4.9 million Countrywide shares, most of which he'd purchased by exercising stock options. That netted him $138 million in gains, according to regulatory filings.
He abruptly stopped trading in mid-August. In an interview that month with financial news cable channel CNBC, Mozilo said his trading plan prevented him from selling Countrywide shares for less than $28.
The last day the company's stock was at that level was Aug. 13 -- the final day that Mozilo reported a trade.
Times researcher Scott Wilson contributed to this report.
posted by Rick | 8:00 PM
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Twelve people have been killed after Kurdish separatists ordered them off a bus in south-east Turkey and opened fire, Turkish officials say.
Civilians and armed guards were said to be among the victims of the ambush, and just two passengers survived.
The attack, in Sirnak province near the Iraqi border, followed the killing of a Kurdistan Workers Party (PKK) leader.
On Friday Iraq and Turkey signed a security agreement aimed at curbing the activities of the banned PKK.
The Turkish government in Ankara says 4,000 PKK fighters are operating from the Iraqi side of the border.
Turkey has been considering crossing the border to pursue the group.
Sticking point
But on Friday Iraq denied Turkey permission to pursue armed separatists onto Iraqi territory.
Instead they signed a wide-ranging deal, pledging to prevent finance, logistical support and propaganda for the PKK.
Ankara has warned Baghdad to crack down on Kurdish rebels in Iraq or face a possible incursion by Turkish troops.
The PKK has been fighting for autonomy in south-eastern Turkey since 1984 and more than 30,000 people have been killed in the conflict.
The PKK has been labelled a terrorist organisation by Turkey, the US and the EU.
posted by Rick | 7:48 PM
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MANCHESTER, N.H. --Seven on-duty Army personnel participated in a campaign event for Senator John McCain earlier this month in Londonderry, New Hampshire, in an apparent violation of a Pentagon directive against partisan political activity, two military officials confirmed this week.
The September 14 rally at an American Legion hall was part of McCain's "No Surrender" tour of early-primary states, a martial pageant designed to draw attention to the Arizona Republican's continued support for the war in Iraq. Seven personnel from a Manchester, New Hampshire, recruiting station appeared in uniform and briefly addressed the crowd.
A Department of Defense directive signed in August 2004 by Deputy Secretary of Defense Paul Wolfowitz prohibits on-duty members of the armed forces from "speak[ing] before a partisan political gathering, including any gathering that promotes a partisan political party, candidate, or cause."
In addition, on-duty military personnel are forbidden from attending any political event in uniform except the national party conventions.
After introducing other dignitaries and before giving his defense of General David Petraeus and the Bush administration's strategy in Iraq, McCain handed a microphone to each of the seven soldiers — all wearing fatigues and berets — who introduced themselves by name, rank, and, in some cases, a description of their prior service elsewhere.
The Army personnel then stood alongside McCain in front of approximately 75 attendees. The campaign had advertised the midday event as a "barbecue," and served hot dogs, hamburgers, chips and soda.
"Thanks guys for being here," McCain said. We're honored by your presence and your service."
A Pentagon official did not dispute that the 2004 directive would apply in this instance.
"Department of Defense maintains a long-standing policy that DoD personnel acting in their official capacity may not be engaged in activities that associate DoD with any partisan political campaign or election, candidate, cause or issue," Lt. Col. Jonathan Withington wrote in a statement.
In a brief interview after the event, Seargeant First Class Chad Kozdra, the commanding officer at the recruiting station, said he had been approached days earlier about participating in the event by the McCain campaign. He said he supported McCain and had also done so in 2000.
"What they were told is that this was a support-the-troops barbeque," not a campaign appearance, said Paul Boyce, a U.S. Army public-affairs officer.
In April, an individual identifying himself as Kozdra wrote in a posting on the Myspace web site, "I believe that John McCain would make a good President not for his past military history but for his record in Congress."
"They weren't there to support a political campaign," said McCain spokeswoman Crystal Benton. "We don't believe anyone intended an infraction of DoD policy. Nor do we believe soldiers should be prevented from showing their support for fellow soldiers."
But a leading specialist in military law said they believed it was a clear violation.
"It was obviously a political event," said Eugene Fidell, president of the National Institute of Military Justice. "Military personnel should not be participating."
During a campaign season taking place amid a contentious national debate over a controversial war, there have been other high-profile cases of those in uniform drawing attention for their political activities. In June, a Marine reservist received what an official described at the time as a "nonpunitive discharge" for participating in an antiwar demonstration.
Boyce said the Army has taken no disciplinary action against the seven personnel who appeared at McCain's event in Londonderry.
posted by Rick | 9:10 PM
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NEW YORK (Reuters) - Morgan Stanleywill pay $12.5 million to resolve charges that it failed to produce e-mails in arbitration cases and falsely claimed the e-mails were lost in the September 11, 2001, attacks.
The settlement, announced Thursday by the Financial Industry Regulatory Authority, which regulates brokerages, calls for the brokerage firm to pay a $3 million fine and $9.5 million into a fund to compensate several thousand investors who filed arbitration complaints.
It also resolves charges that Morgan Stanley failed to provide other documents to arbitration claimants.
The bank will hire an independent consultant to ensure it provides materials to retail brokerage clients in arbitrations. It did not admit wrongdoing.
Morgan Stanley has faced many legal and regulatory problems for withholding e-mails. Since 2002, it has agreed to pay more than $29 million to resolve three regulatory probes.
The problems stemmed in part from the destruction of the firm's New York City e-mail servers in the September 11 attacks. Morgan Stanley's brokerage business had its headquarters in the World Trade Center.
Millions of e-mails were presumed lost. But it was later revealed they had been backed up on other servers or on individual employee computers. Last December, the National Association of Securities Dealers, a FINRA predecessor, accused Morgan Stanley in a disciplinary complaint of falsely claiming it could not turn over e-mails.
"The failure to produce e-mails was a huge problem," Susan Merrill, FINRA's chief of enforcement, said in an interview. "We didn't find evidence that Morgan Stanley intended to hold back e-mails, but it was a case of one hand not knowing what the other was doing."
Jim Wiggins, a Morgan Stanley spokesman, said the company was pleased to settle and put the matter to rest.
MAIL PROBLEMS
Morgan Stanley agreed in February 2006 to pay $15 million to resolve U.S. Securities and Exchange Commission charges it failed to produce e-mails needed for probes into initial public offerings and analyst research.
In December 2002, regulators fined Morgan Stanley and four other firms $1.65 million each for destroying e-mails.
Sloppy document handling came back to haunt the brokerage in 2005, when a Florida state court jury ordered Morgan Stanley to pay $1.58 billion to billionaire Ronald Perelman over a failed 1998 merger. A key ruling by the trial judge, over supposedly missing e-mails that then reappeared, shifted the burden of proof against the firm.
A state appeals court threw out the award on other grounds. Perelman is appealing the reversal.
According to FINRA documents, Morgan Stanley falsely maintained to arbitration claimants and regulators until March 2005 that it had no e-mails predating October 2001.
But according to the documents, prior to March 2005, Morgan Stanley had not searched its restored e-mails. Until that date, it had destroyed millions of the e-mails by overwriting backup files or letting users delete them.
The settlement removes one more legal headache inherited by Chief Executive John Mack when he took over the firm in 2005.
That said, investor lawyers have argued that thousands of investors may not have received fair arbitration hearings because e-mails that could have helped them were reported destroyed.
"Morgan Stanley Dean Witter's attempt to use the terrorist attacks on 9/11 to conceal documents and avoid its discovery obligations to its customers is morally and ethically depraved," said Steven Caruso, president of the Public Investors Arbitration Bar Association.
Caruso added it was too soon to say whether investors will be able to or want to reopen closed cases.
FINRA, the industry's self-regulatory body, is "focused" on e-mail retention practices, which remain a problem at other brokerages, Merrill said.
(Additional reporting by Joe Giannone)
posted by Rick | 4:23 PM
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Saddam Hussein offered to step down and go into exile one month before the invasion of Iraq, it was claimed last night.
Fearing defeat, Saddam was prepared to go peacefully in return for £500million ($1billion).
The extraordinary offer was revealed yesterday in a transcript of talks in February 2003 between George Bush and the then Spanish Prime Minister Jose Maria Aznar at the President's Texas ranch.
The White House refused to comment on the report last night.
But, if verified, it is certain to raise questions in Washington and London over whether the costly four-year war could have been averted.
Only yesterday, the Bush administration asked Congress for another £100billion to finance the conflicts in Iraq and Afghanistan.
Read more...
Revealed ... Bush's guide to those funny foreign names
The total war bill for British taxpayers is expected to reach £7billion by next year.
More than 3,800 American service personnel have lost their lives in Iraq, along with 170 Britons and tens of thousands of Iraqi civilians.
However, according to the tapes, one month before he launched the invasion Mr Bush appeared convinced that Saddam was serious about going into exile.
"The Eqyptians are speaking to Saddam Hussein," said Mr Bush.
"It seems he's indicated he would be prepared to go into exile if he's allowed to take $1billion and all the information he wants about weapons of mass destruction."
Asked by the Spanish premier whether Saddam - who was executed in December last year - could really leave, the President replied: "Yes, that possibility exists. Or he might even be assassinated."
But he added that whatever happened: "We'll be in Baghdad by the end of March."
Mr Bush went on to refer optimistically to the rebuilding or Iraq.
The transcript - which was published yesterday in the Spanish newspaper El Pais - was said to have been recorded by a diplomat at the meeting in Crawford, Texas, on February 22, 2003.
Mr Bush was dismissive of the then French President Jacques Chirac, saying he "thinks he's Mr Arab".
Referring to his relationship with Downing Street, he said: "I don't mind being the bad cop if Blair is the good cop."
The President added: "Saddam won't change and he'll keep on playing games.
"The time has come to get rid of him. That's the way it is."
Days before the invasion began on March 22, 2003, the United Arab Emirates proposed to a summit of Arab leaders that Saddam and his henchmen should go into exile.
It was the first time the plan had been officially voiced but it was drowned out in the drumbeat of war.
A spokesman for Mr Aznar's foundation had no comment on its authenticity.
Bomb attacks killed 57 people in Iraq yesterday.
posted by Rick | 3:58 PM
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Q If I can change topics, there's a -- about the history of the Iraq war here. There's a transcript in the Spanish newspaper, El Pa s, that was said to be from a meeting between the President and the Spanish Prime Minister back in February 2003, in which, according to the tapes of this transcript of the conversations, Saddam Hussein offered to step down and go into exile one month before the invasion, and the President seemed to think that that was a realistic possibility at that time. Do you believe that this is an accurate transcript?
MS. PERINO: Well, without commenting on the details or talking about a private conversation between two world leaders and whether or not that happened, if you think back to that time, there were a lot of rumors. There were a lot of people floating ideas around about what may or may not happen. Unfortunately, Saddam Hussein decided to defy the international community. All diplomatic measures ran their course. And what we are focused on now is making sure that Iraq can be a government that can sustain and defend itself and make sure it's an ally in the war on terror for that region.
Q And one more thing on this. The President is quoted in this transcript saying, "No matter what happens, we'll be in Baghdad by the end of March." Three days after that meeting, Ari Fleischer was at a podium in this room, saying, "The President has not come to the conclusion that the inspections have reached a dead end." I'm wondering if you can --
MS. PERINO: I wasn't there for the private meeting that the President had with President Aznar. I don't know what Ari said. I do know where we are now, which is in a position of trying to make sure that the Iraqis have what they need in order to be a democratic force in the Middle East region.
posted by Rick | 3:30 PM
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"My personal concern about some of these security contracts is that I worry that sometimes the salaries they are able to pay in fact lures some of our soldiers out of the service to go to work for them," he said.
Gates said he was seeking legal advice on whether a "non-compete" clause could be put into security contracts that limits this problem.
posted by Rick | 3:05 PM
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posted by Rick | 12:44 AM
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WASHINGTON — Ohio and Florida, which provided the decisive electoral votes for President Bush's two razor-thin national election triumphs, have enacted laws that election experts say will help Republicans impede Democratic-leaning minorities from voting in 2008.
Backers of the new laws say they're aimed at curbing vote fraud. But the statutes also could facilitate a controversial Republican tactic known as ``vote caging,'' which the GOP attempted in Ohio and Florida in 2004 before public disclosures foiled the efforts, said Joseph Rich, a former Justice Department voting rights chief in the Bush administration who's now with the Lawyers Committee for Civil Rights.
Caging, used in the past to target poor minorities in heavily Democratic precincts, entails sending mass mailings to certain voters and then using the undelivered letters to compile lists of voters for eligibility challenges.
As the high-stakes ground war escalates heading into next year's elections, Republicans have led the charge for an array of revisions to state voting rights laws, especially in key battleground states. Republican political appointees in the Justice Department's Civil Rights Division have endorsed some of these measures.
Over the last three years, the Republican-controlled state legislatures in Indiana, Georgia, Missouri, Pennsylvania and Wisconsin have passed laws requiring every voter to produce a photo identification card — measures that civil rights groups contend were aimed at suppressing minority voting.
The Supreme Court agreed Tuesday to consider a constitutional challenge to Indiana's ID law on grounds that it unfairly affects poor and elderly voters. Gubernatorial vetoes or court rulings have nullified legislation in the other four states. A federal judge in Georgia, however, recently upheld a new photo ID law that imposes fewer obstacles to obtaining one.
In Ohio, which swung the 2004 election to Bush, new Democratic Secretary of State Jennifer Brunner said in a phone interview that an election law passed last year and signed by former Republican Gov. Bob Taft effectively ``institutionalized'' vote caging.
The law requires that the state's 88 county election boards send non-forwardable, pre-election notices to all 7.8 million registered Ohio voters at least 60 days before the election. Undelivered letters are public record, she said, meaning that effectively, ``now the counties are paying for'' the data needed to compile challenge lists.
In addition, Brunner said, the law toughened voter ID requirements and ``took away rights of some voters to be heard about whether or not their registration was valid.''
In the past, Ohio voters were entitled to an official notice and a hearing before an election board could declare them ineligible, but the new law says that the board can make that decision without notice. A disqualified voter who shows up at the polls must demonstrate that he's fixed any eligibility problem or opt for filing a provisional ballot that may not count.
Brunner said the new law has left her feeling ``like being in a sword fight with one hand behind your back.'' She said she's sought, ``while working within the framework of preventing fraud,'' to make it ``as easy as possible for people who are eligible to participate.''
``We feel the eyes of the nation are on us, no matter what we do,'' Brunner said.
A 2005 Florida law, approved by the Justice Department under the Voting Rights Act, stripped the state's 10.5 million registered voters of the right to contest challenges at the polls. Now a challenger need only swear to a "good faith belief" that a voter is ineligible to force the voter to file a provisional ballot.
At the same time, the law reduces from three days to 48 hours the deadline for challenged voters to produce evidence that they're eligible to vote in their precincts.
Another Florida law imposed a $250 penalty on voter registration workers for every registration application they fail to turn over to county registrars within 10 days. After the League of Women Voters sued and a judge blocked its implementation, the legislature cut the fine to $50 per infraction.
Sterling Ivey, a spokesman for Florida Republican Secretary of State Kurt Browning, said there has been no sign of a large caging operation.
"We don't see a significant number of challenges of voters in Florida,'' he said.
But former voting rights chief Rich said Ohio's and Florida's new laws ``make one wonder whether there will be new efforts to have massive challenges in the future.''
A federal court injunction has barred the Republican National Committee for 25 years from engaging in racially targeted vote caging, but it doesn't extend to state parties.
Asked whether they might employ vote caging in 2008, Executive Director Jason Mauk of the Ohio Republican Party and spokeswoman Erin VanSickle of the Florida Republican Party said they couldn't discuss election strategy.
Chandler Davidson, a Rice University sociology professor who has studied voter suppression, said the new laws are questionable because ``there has been virtually no evidence presented that there has been wide-scale voter fraud in the United States.''
Pointing to a Yale University study showing that mail is less likely to reach residents of low-income neighborhoods, he said mass mailings of non-forwardable mail will ``discriminate in a pretty straightforward way'' against poor people and minorities.
A study to be released Thursday by the liberal-leaning group Project Vote noted that Minnesota — with bipartisan support — altered its election law in 2005.
The law prohibits political parties from bringing in challengers from out of state and from using non-forwardable mail to compile challenge lists.
``The fundamental question,'' said Democratic Secretary of State Mark Ritchie, ``is do you want to make sure everyone can vote, or do you want to make sure some people can vote and other people have a harder time voting?''
posted by Rick | 3:36 PM
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WASHINGTON — Rep. Henry Waxman, D-Cal., charged Tuesday that Secretary of State Condoleezza Rice and her aides are trying to impede congressional probes into corruption in Iraq and the activities of controversial private military contractor Blackwater USA.
Waxman, chairman of the House oversight committee, complained in a letter to Rice that the State Department this week barred its officials from talking to Congress about corruption in Iraqi Prime Minister Nouri al Maliki's government unless those discussions are kept secret.
The department also retroactively classified a study drafted by the U.S. Embassy in Baghdad that reportedly details extensive corruption in al-Maliki's government, Waxman said.
"Your position seems to be that positive information about the Maliki government may be disseminated publicly, but any criticism of the government must be treated as a national security secret," Waxman told Rice.
"You are wrong to interfere with the committee's inquiry," he wrote.
State Department spokesman Tom Casey disputed Waxman's version of events.
"There seems to be misunderstanding as to the facts in this matter. The information requested by the committee has been or is in the process of being provided," Casey said.
On another Waxman complaint, that Rice has refused to testify before the panel, Casey said the department has offered to make three other senior officials available.
Waxman's committee is also investigating the role of private military contractors in Iraq, including Moyock, N.C.-based Blackwater USA.
Blackwater, which has received roughly $700 million in State Department contracts to protect U.S. government civilians in Iraq, is under fresh scrutiny following a September 16 incident in which Blackwater security guards protecting a State Department convoy allegedly shot and killed 11 Iraqi civilians. Blackwater says its employees were returning fire from insurgents, a version of events disputed by the Iraqi government.
Waxman's panel has requested that Erik Prince, chairman of the Prince Group LLC, Blackwater's corporate parent, appear before it next Tuesday.
But in a letter to Blackwater dated September 20-the same day as the panel's request-a State Department contract officer ordered Blackwater not to disclose information about the contract.
"I hereby direct Blackwater to make no disclosure of documents or information generated under" the State Department contract "unless such disclosure has been authorized in writing," wrote the contract officer, Kiazan Moneypenny.
She also wrote that State Department and Blackwater officials discussed the matter by phone on September 19 and 20, and that, as a result, "the department's position on this matter has been further reinforced."
Moneypenny did not respond to a message left on her office voicemail and officials in the department's Bureau of Administration, which oversees contracts, referred questions to State Department spokesmen.
Casey said "Blackwater has been informed by the State Department that it has no objection to it providing information to the committee."
In a related letter to Waxman, an attorney for Blackwater said it might be "difficult, if not impossible" for the company to comply with State's orders without advance limitations on the kind of questions that will be asked at the hearing.
"We also write today to ask that the committee and its members refrain from asking questions during the hearing that might reveal sensitive operational and technical information that could be utilized by our country's implacable enemies in Iraq," wrote attorney Stephen M. Ryan of McDermott, Will & Emery.
The standoff underscores the unusual role being played in Iraq by private military contractors such as Blackwater, who are not directly answerable to congressional overseers and who operate under murky rules of accountability for their actions in Iraq.
In the State Department's September 20 letter to Blackwater, Moneypenny cited regulations declaring that contract documents are "the exclusive property of the U.S. Government."
"Based on my grade school civics class, I think the legislative branch is part of the U.S. government," said Peter Singer of the Brookings Institution, who has written extensively about private military contractors.
In the past, the State Department withheld documents about private contractors on the grounds that the private company owned the information, according to Singer.
Rice last week announced that she has ordered a full review of State Department-funded security escorts in Iraq.
In a report to be released this week by Brookings, a left-of-center think tank, Singer writes that the actions of private military contractors in Iraq are often at odds with U.S. goals there.
Contractor actions often inflame Iraqi public opinion, weaken U.S. efforts in the "war of ideas" in the Middle East, and undermine efforts to build up Iraqi institutions, the report says.
"The use of private military contractors appears to have harmed, rather than helped the counterinsurgency efforts of the U.S. mission in Iraq," Singer concludes.
Joseph Neff of the Raleigh News & Observer contributed.
posted by Rick | 9:23 PM
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WASHINGTON, Sept. 25 — The Interior Department’s program to collect billions of dollars annually from oil and gas companies that drill on federal lands is troubled by mismanagement, ethical lapses and fears of retaliation against whistle-blowers, the department’s chief independent investigator has concluded.
The report, a result of a yearlong investigation, grew out of complaints by four auditors at the agency, who said that senior administration officials had blocked them from recovering money from oil companies that underpaid the government.
The report stopped short of accusing top agency officials of wrongdoing, concluding that the whistle-blowers were sometimes unaware of other efforts under way to recover the missing money and that they sometimes simply disagreed with top management.
But it offered a sharp description of failures at the Minerals Management Service, the agency within the Interior Department responsible for collecting about $10 billion a year in royalties on oil and gas. Many of the issues, including the complaints by whistle-blowers, were initially reported last year by The New York Times.
Prepared by the Interior Department’s inspector general, Earl E. Devaney, the report said that investigators found a “profound failure” in the agency’s technology for monitoring oil and gas payments.
It suggested that the agency was too cozy with oil companies and that internal critics had good reason to fear punishment.
“It demonstrates a Band-Aid approach to holding together one of the federal government’s largest revenue-producing operations,” Mr. Devaney concluded.
In one case, senior officials decided that it would impose a “hardship” on oil companies to demand that they calculate the back interest they owed after having been caught underpaying. The agency itself was years behind in billing the companies, because its computers could not perform the calculations.
When asked about this matter by investigators, the agency’s associate director, Lucy Querques Denett, responded, “How do you define hardship, just because they have a lot of money?”
The report was the latest result of a long series of investigations into the troubled federal program for collecting oil and gas royalties. Last year, Mr. Devaney told a Congressional hearing that “short of a crime, anything goes at the highest levels of the Department of the Interior.”
The new report did not try to estimate the amount of money that might have been lost. Early in 2006, officials conceded that the government might lose about $10 billion in revenue over the next decade because of a legal mistake in oil and gas leases that had been ignored for six years.
At issue in the new report were the assertions by the four auditors at the agency, who said that senior officials had blocked them from recovering money from more than two dozen companies that underpaid royalties.
The rebel auditors took the unusual step of filing their own lawsuits against the oil companies under the False Claims Act, a law that allows private citizens to sue companies that have cheated the government and to receive part of any money recovered.
The first of those cases, brought against Anadarko Petroleum by a former auditor named Bobby L. Maxwell, went to trial in Denver early this year. Mr. Maxwell lost his job within a week after his lawsuit became public, in what Interior officials said was a reorganization.
In January, a jury in Denver ruled that Mr. Maxwell was correct and that Anadarko had cheated the government of $7.5 million. But the judge in the case reversed the jury on technical grounds, ruling that Mr. Maxwell was not entitled to invoke the False Claims Act.
In their report, the investigators confirmed Mr. Maxwell’s assertions that senior officials in Washington had ordered him to drop the case. The report said the senior officials had disagreed about the case’s merits. Mr. Maxwell’s supervisor in Denver supported his view; lawyers in Washington opposed him.
The decision from Washington appeared to perplex the official in charge of reviewing the quality of audit work, who said in a draft report that investigators had found that the guidance decision, made by “a senior-level M.R.M. official” did not contain “documentation to support the management decision.” That comment was excised from the official’s final report, the investigators noted.
Interior officials said the report had not accused the department of any specific ethical or legal violations. They said that the inspector general had agreed that the whistle-blowers were unaware of separate efforts to act on some of their concerns.
Randall Luthi, director of the Minerals Management Service, said the inspector general’s report indicated that the lawsuits the auditors had filed were the result either of “the auditors’ lack of knowledge, or the fact that they simply disagreed with management guidance and decisions.”
He said the inspector general also found that the whistle-blowers had not properly reported their suspicions to the “appropriate authorities” before filing suit.
Democrats in Congress argued that the new report showed that the Interior Department remained mired in problems.
“What the inspector general is saying is that this is a dysfunctional place, on issue after issue,” said Senator Ron Wyden of Oregon. Representative Nick J. Rahall II of West Virginia, chairman of the House Natural Resources Committee, said the royalty program was “severely flawed from top to bottom.”
Particularly striking were complaints by two auditors in Oklahoma City, Randall Little and Lanis Morris, who said that senior officials had refused to demand $1.5 million in back interest from oil companies caught underpaying, saying that requiring the companies to calculate their own bills would be a hardship. But the officials said the Interior Department could not get its own systems to do the calculations.
Mr. Little told investigators that the oil companies were getting a “free ride” and that “the taxpayers ought to be outraged.” After the auditors filed their lawsuits, Interior officials removed Mr. Little and Mr. Morris from their jobs at the Minerals Management Service and sent them to work below an entry-level technician at the Bureau of Land Management.
The inspector general did not accuse Interior Department officials of retaliation, and senior officials said Tuesday that the men had to be transferred temporarily because their lawsuits posed a conflict of interest with their regular work.
But the inspector general sharply criticized senior officials for letting the men languish for months without information about their jobs, calling their treatment “inexcusable.” He said he had also begun an investigation into the Interior Department’s payments of more than $100 million to Accenture, a consulting firm, for a flawed information management system.
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In her new book, The Shock Doctrine: The Rise of Disaster Capitalism, Naomi Klein uses the war in Iraq to pull back the curtain on free market myths and expose the forces that are really driving our economy. She details how the crony capitalists running the Bush administration saw post-invasion Iraq as the perfect proving ground for all their pet free-market policies. The fantasy was that a privitazied and corporatized Iraq would become a free-market utopia that would spread the gospel of the market throughout the Middle East.
Klein's writings on Iraq helped inspire John Cusack to create a stinging new satiric film called War, Inc. The pair recently sat down for a HuffPost video - a lively and insightful conversation about The Shock Doctrine, Iraq, the burgeoning new economy that has sprung up around the war on terror, and Baghdad's Green Zone, which Klein calls "a heavily armed Carnival Cruise ship parked in a sea of despair."
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Durbin said: What does that mean? Does that mean we are supporting the invasion of Iran? That we are supporting military tactics against Iran? Shouldn’t we be extra careful in the language of these resolutions when we find that the authorization for force for Iraq has dragged us into a war now in its fifth year, a war longer than World War II with bloody and deadly consequences for the United States and innocent Iraqis.
posted by Rick | 7:11 PM
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In May 2006, Fairness & Accuracy In Reporting (FAIR) released a study demonstrating how New York Times columnist Thomas Friedman continually “boiled down the intricacies of the Iraq situation into a make-or-break deadline” lasting “six months.” Atrios soon adopted the “Friedman Unit” to describe perpetual “six monthers.” But on The Colbert Report last night, Friedman himself refused to call for another Friedman, saying “I’m afraid we’ve run out of six months. It’s really time to set a deadline.” Watch it:
posted by Rick | 1:46 PM
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Webb: We are about to vote on something that may fundamentally change the way that the United States views the Iranian military, and we haven’t had one hearing. This is not the way to make foreign policy. It’s not the way to declare war, although this cleverly worded sense of the Congress could be interpreted that way.
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By Gregg Zoroya, USA TODAY
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Scientists trying to understand traumatic brain injury from bomb blasts are finding the wound more insidious than they once thought.
They find that even when there are no outward signs of injury from the blast, cells deep within the brain can be altered, their metabolism changed, causing them to die, says Geoff Ling, an advance-research scientist with the Pentagon.
The new findings are the result of blast experiments in recent years on animals, followed by microscopic examination of brain tissue. The findings could mean that the number of brain-injured soldiers and Marines — many of whom appear unhurt after exposure to a blast — may be far greater than reported, says Ibolja Cernak, a scientist with the Johns Hopkins University Applied Physics Laboratory.
TROOPS AT RISK: USA TODAY'S full coverage on IEDs in Iraq
This cellular death leads to symptoms that may not surface for months or years, Cernak says. The symptoms can include memory deficit, headaches, vertigo, anxiety and apathy or lethargy. "These soldiers could have hidden injuries with long-term consequences," he says.
Physicians and scientists are calling TBI the "signature wound" of the Iraq war because of its increasing prevalence among troops.
In the animal studies, scientists say they have found a fundamentally different wound than the "brain concussion" historically associated with undetected brain injuries. A concussion, essentially a bruise on the brain, is a wound that can heal over time, doctors say.
The newly discovered brain damage at the cellular level can be permanent — especially after repeated exposures to blasts — and lead to lasting neurological deterioration, Ling and Cernak say.
Military and civilian scientists worry whether a generation of servicemembers could emerge from the Iraq and Afghanistan wars with some form of brain damage steadily more severe.
Hidden injuries
Army Sgt. Gary Boggs may be such a case. When he was wounded by a roadside bomb in Iraq in 2003, doctors believed his worst injury was a blinded left eye, along with shrapnel wounds to his left arm and ruptured eardrums.
No one spoke of brain damage during his hospital treatment and convalescence. Boggs said he never considered the possibility until he took a medical retirement from the Army and started a job this year as a financial adviser. Boggs couldn't keep up with a job-study program, forgetting paragraphs he had just read.
"It was really getting hard for me," says Boggs, 32, of Melbourne Beach, Fla. "I finally swallowed my pride and asked for help from the VA (Department of Veterans Affairs). I said, 'I think something is wrong with me.' "
He was diagnosed with mild traumatic brain injury and receives medication to focus his thoughts.
Brain injury experts such as Cernak fear Boggs may be at the front of a new wave of TBI victims.
Cernak's research on blast-related brain injury dates back to the study of wounded soldiers in her native homeland of the former Yugoslavia during the Balkans conflict of the 1990s.
It was in the Balkans where Cernak first discovered that soldiers exposed to blasts who suffered no apparent head wounds displayed brain damage symptoms over a period of months or more than a year.
"You can give her credit for being a pioneer," Ling says.
Can't be detected with imaging tests
When the war in Iraq began, clinicians treating the wounded began noticing similar symptoms. Some screenings at military bases showed that 10% to 20% of returning troops may have suffered such head wounds.
"We've had patients who have been in a blast, who we tested. They looked OK. And they came back later, and they were not OK," says Maria Mouratidis, head of brain injury treatment at the National Naval Medical Center in Bethesda, Md.
To make matters worse, whatever damage occurred was so microscopic that it could not be found with imaging tests.
"This is a new beast," says Alisa Gean, a San Francisco-based traumatic brain injury specialist who treated soldiers this year at an Army hospital in Germany.
The microscopic damage changes brain cell metabolism, Cernak says, creating a cascading effect that leads to the premature aging and death of neurons that cannot be replaced.
In a presentation before a committee of the National Academy of Sciences last month, Cernak said the damage was caused by the blast pressure wave, an invisible surge of compressed air traveling near the speed of sound. Kinetic energy from this pressure wave ripples through the body, injuring brain cells, Cernak said.
All of this occurs in less than a second after the blast, she said. Moreover, she said, body armor is no protection against this blast wave.
Ling says other factors can contribute to TBI, not just pressure. "Pressure is our leading candidate for no other reason than it is the one we've studied the most," he says. "We are playing catch-up."
Concerned about the potential number of wounded, Congress this year authorized $150 million for brain injury research in an emergency spending bill passed in May for the Iraq and Afghanistan wars.
Repeated exposure to blame?
Roadside bombs, also called improvised explosive devices (IEDs), are the cause of most cases of brain injury and account for almost 80% of all wounds to U.S. troops. Many troops caught near these explosions can suffer symptoms such as perforated eardrums, ringing in the ears, blurred vision, memory lapses and headaches.
Soldiers often shake off the effects and return to combat.
Iraq and Afghanistan veterans treated by the Department of Veterans Affairs say they have been exposed to anywhere from six to 25 bomb blasts during their combat experiences, says Barbara Sigford, VA director of physical medicine. Ling and other scientists say repeated blast exposure can aggravate any brain damage.
Pentagon medical policy analysts have grappled with the idea of pulling troops out of combat after being exposed to multiple blasts.
However, the science is too preliminary for such a dramatic change in policy, says Army Col. Tony Carter, one of those analysts.
"If (soldiers) could have damage and they were otherwise functionally OK, but the damage could show up much later, then essentially what we would be saying is, 'Anybody exposed to blast leaves theater,' " Carter says.
"That would be very, very difficult to do. You don't know (how many blast exposures are too many). Half a dozen? One? I mean, what's the tipping point?"
posted by Rick | 9:37 PM
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Outrage Over Crib Design Flaw That Allegedly Led to 3 Child Deaths
By LIZ MARLANTES and GREG McCOWN, and VIJA UDENANS
Sept. 23, 2007 —
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It is the second largest crib recall in the nation's history: A million cribs with a design flaw so serious, the Consumer Products Safety Commission said children should not be allowed to sleep in them for another night.
But, for the past two-and-a-half years, the CPSC allowed children to sleep in those same Simplicity cribs even though it knew that incorrectly installed drop rails had led to three infant deaths.
Chad and Nicola Johns' son Liam was just 9 months old when he died in a Simplicity-manufactured crib, back in April 2005. His mother went into his room in the morning, and found him hanging in a gap between the drop rail and the mattress. He was pronounced dead at the hospital.
"That was the worst day ever," said Nicola. "There's nothing that can describe how we were feeling that day."
The Johns sued Simplicity. But, while the CPSC investigated the matter, they didn't inspect the crib, and the investigator's report failed to identify the crib's manufacturer or model.
For two-and-a-half years, no recall was ordered.
Last week's recall came shortly after the Chicago Tribune told the CPSC and Simplicity that it was preparing to publish an investigative report on the cribs.
"The CPSC didn't even pick up the crib until after I told them about it," said Tribune reporter Maurice Possley. "A kid died in April of '05, and a kid dies in November of 2006, and you're the parents of a kid who dies in February of '07, and you know that something could have been done about it? Boy, I'd be really, really angry."
Experts say the problem isn't a lack of will, but a lack of resources at the CPSC, whose budget has been systematically starved.
"They have too many complaints to investigate, and I think they simply do not have the resources and staffing to deal seriously and competently with every serious complaint made," said Charles Kelly, the attorney representing the Johns.
The CPSC flatly denied the recall had anything to do with the Chicago Tribune report.
In a statement provided to ABC News, a CPSC spokesperson said, "In the last 18 months, we have conducted two recalls with this company," and "we are now appreciating the scope of the issue and the complexity of additional failures."
She added, "The safety of children is our highest priority, and we are working every day to reduce the risk of injury and death to one of the most vulnerable and treasured populations."
Likewise, Simplicity president Ken Waldman said in a statement to ABC News, "Simplicity makes safe products, and we are constantly seeking ways to make them safer. Working in conjunction with the CPSC, we decided that this voluntary recall was the appropriate step to take at this time."
For the Johns, who have a new baby boy, the recall is welcome news. But, feelings of anger and helplessness remain.
"Nobody was listening to what we had to say," said Nicola. "We were trying, but nobody would listen. And two other children had to die because of it."
They hope, at least now, no other families will suffer a similar loss.
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Jay Price and Yaseen Taha | McClatchy Newspapers
last updated: September 20, 2007 06:58:17 PM
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SULAIMANIYAH, Iraq — U.S. troops arrested an Iranian man during an early morning raid on a hotel in this northern Iraqi city Thursday and accused him of helping to smuggle a deadly type of roadside bomb into Iraq.
But the Kurdistan Regional Government in a statement called the arrest "illegitimate," said the man was a member of a trade delegation that had been invited to Sulaimaniyah by the local government and demanded that he be released.
"Actions like these serve no one," the statement said.
The United States has detained several Iranians in Iraq in the past year and accused them of training Iraqi insurgents and providing weapons to them. In January it took five Iranians into custody in Irbil, the Kurdish regional capital, and accused them of being members of the Iranian military. They're still being held. Eight other Iranians who were detained last month in Baghdad were quickly released, however.
The U.S. statement didn't identify the man except to allege that he is an officer in the Iranian Revolutionary Guard Corp's elite Quds force. The statement said intelligence indicated that the man had trained foreign fighters in Iraq and provided them with roadside bombs known as explosively formed penetrators, or EFPs. EFPs fire a molten jet of metal through vehicles' armor and are much feared by U.S. troops.
The Kurdish Regional Government said the man was Aghai Farhadi, a member of an economic and commercial delegation from the Iranian governorate of Karmanshah, which borders Iraq's Sulaimaniyah and Diyala provinces.
Hassan Baqi, the head of the Sulaimaniyah chamber of commerce, said Farhadi had been in Sulaimaniyah for a week for discussions on opening a border crossing near Panjween,68 miles east of Sulaimaniyah, and other trade-related issues.
It was unknown what evidence, if any, American troops recovered when they seized the man at the Sulaimaniyah Palace Hotel. Saifudean Ahmed, Sulaimaniyah's security director, said 20 U.S. soldiers took part in the arrest. Witnesses said helicopters hovered over the scene for two hours.
Kurdish officials were quick to distance themselves from the detention.
"We had no prior knowledge of the detention of a member of the Iranian commercial delegation," Sulaimaniyah police chief Gen. Zarkar Alia said in a statement. "We heard of the incident from unofficial sources. The operation was carried out without coordination with us, the security forces or the authorities in Sulaimaniyah."
Sulaimaniyah is one of the main cities in Iraqi Kurdistan, which has its own tensions with Iran. The Iranian military has been bombarding mountain villages on the Iraqi side of the border, allegedly to combat Kurdish separatist guerrillas who the Iranians say have taken refuge there.
Kurdish and Iraqi officials have demanded that Iran stop the bombardment, saying Iran should fight Kurdish rebels in Iran.
posted by Rick | 8:39 PM
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