Krebs Daily Briefing 28 JAN 2016

Thomas L. Krebs, Securities Litigation, Regulation and Compliance Attorney Lawyer (c)2014 Brandon L. Blankenship
Thomas L. Krebs


There’s only one country in the world as corrupt as North Korea

There are many reasons to be glad you don’t live in Somalia or North Korea. The former is one of the poorest, most war-ravaged nations on Earth. The latter is the most extreme example of a totalitarian communist system still surviving in the 21st century. But there’s another, related reason: The two countries are still the most corrupt on Earth, according to the 2015 Corruption Perceptions study just released by anti-graft nonprofit Transparency International. Every year, the group does a global survey of citizens and experts to get their views on how honest or crooked different institutions are in their country, from the police to lawmakers. Because bribery, kickbacks, nepotism and other forms of corruption are clandestine activities, measuring public opinion about local graft is one of the few ways researchers have of getting a handle on the scale of the problem. On a scale of zero to 100, with zero being the most corrupt and 100 the cleanest, North Korea and Somalia each scored eight. Afghanistan came next with 11, followed by Sudan with 12. North Korea and Somalia were also the worst-ranking countries from 2011 to 2014 (though they tied with Afghanistan in 2012 and 2013). It may not come as much of a surprise that Scandinavia and New Zealand are among the best in the list, with Denmark being judged the world’s least corrupt nation for the second year running, scoring 91. Yet the map also shows the correlation between poverty, conflict, and corruption. Of the world’s 10 most crooked nations, most have experienced wars recently, including Afghanistan, Iraq, Sudan and Libya. North Korea and Venezuela are notable exceptions, though both countries have all kinds of other internal strife.

5 Ex-Brokers Cleared in London Libor Trial

LONDON — In a major setback for British prosecutors, a jury on Wednesday acquitted five former brokers of charges that they helped a onetime trader at UBS and Citigroup manipulate an important benchmark interest rate known as Libor. The London jury is continuing to deliberate over one remaining count of conspiracy to defraud against a sixth broker, Darrell P. Read, who worked at the British financial firm ICAP, after it was unable to reach a verdict. The jury went home for the day on Wednesday and will return Thursday morning. The jury found Mr. Read not guilty on a separate conspiracy count on Wednesday. The acquittals, coming just a day after the jury began deliberating, are a blow to British authorities, who have been criticized for not being as aggressive as the United States Justice Department in pursuing financial crimes. The trial of the six began in October and is the second in Britain to focus on the Libor scandal. The two trials have followed a half-decade investigation that has led to billions of dollars in fines, cost one chief executive his job and damaged the reputations of some of the world’s biggest banks, including Barclays, the Royal Bank of Scotland, UBS and Deutsche Bank. The former brokers, who worked at the British financial firms ICAP, RP Martin and the Tullett Prebon Group, were accused of conspiring to manipulate the London interbank offered rate, or Libor. The brokers acquitted on Wednesday are Danny M. Wilkinson and Colin J. Goodman, formerly of ICAP; Terry J. Farr and James A. Gilmour, formerly of RP Martin; and Noel Cryan, formerly of Tullett Prebon. Prosecutors had accused the men of helping Tom Hayes, a former trader at UBS and Citigroup, and others profit by rigging Libor, which helps determine the borrowing costs for trillions of dollars in loans. At a separate trial, Mr. Hayes was convicted in August of conspiracy to defraud. In December, a British appeals court reduced his sentence to 11 years in prison from his original sentence of 14 years. More:

Pardon Plea by Adolf Eichmann, Nazi War Criminal, Is Made Public

JERUSALEM — After he was convicted and sentenced to death in Israel for his role in the annihilation of millions of Jews by Nazi Germany, Adolf Eichmann pleaded for his own life. “There is a need to draw a line between the leaders responsible and the people like me forced to serve as mere instruments in the hands of the leaders,” pleaded Eichmann — the Nazi war criminal who oversaw the lethal logistics of the Holocaust — in a letterdated May 29, 1962, the day that Israel’s Supreme Court rejected his appeal. Eichmann asked the Israeli president, Yitzhak Ben-Zvi, for a pardon, arguing, “I was not a responsible leader, and as such do not feel myself guilty.” The letter, handwritten by Eichmann in German, and other original documents from the case, were made public for the first time on Wednesday by Israel’s current president, Reuven Rivlin, during an event to commemorate International Holocaust Remembrance Day. The documents had been discovered by researchers only in the last few weeks, when they were digitizing files from the president’s archive. In the letter, Eichmann repeated the defense offered at his four-month trial in 1961: that he was a low-level functionary following orders and that he should not be held accountable for the crimes of his superiors. He wrote that the judges who convicted him were “not able to empathize with the time and situation in which I found myself during the war years.” “It is also incorrect that I never let myself be influenced by human emotions,” he added, noting: “Specifically after having witnessed the outrageous human atrocities, I immediately asked to be transferred. Also, during the police investigation I voluntarily revealed horrors that had been unknown until then, in order to help establish the indisputable truth.” In his request for clemency, Eichmann wrote that he had only been following orders. “I am not able to recognize the court’s ruling as just, and I ask, Your Honor Mr. President, to exercise your right to grant pardons, and order that the death penalty not be carried out,” he concluded, before signing his name in blue ink on lined paper.

Saudi Arabia Keeps Pumping Oil, Despite Financial and Political Risks

Call it the Saudi calculus. Oil prices were already plummeting 14 months ago when, at Saudi Arabia’s insistence, OPEC put the global petroleum industry on notice: The member countries would not try to prop up prices by cutting production. “We don’t want to panic,” Abdalla el-Badri, secretary general of the Organization of the Petroleum Exporting Countries, told reporters at the group’s November 2014 meeting in Vienna. “We want to see how the market behaves.” Since then, the market has behaved in a way few could have predicted — including Saudi Arabia, the world’s biggest oil exporter. The price of oil has collapsed under the weight of a growing international glut, made worse by slower growth in the global economy.And yet the Saudis keep pumping oil at virtually full capacity. And they have persuaded their Persian Gulf OPECallies — Kuwait, the United Arab Emirates and Qatar — to do the same, despite mounting pressure from other big OPEC members to curtail production. It is a risky strategy — one that is already straining Saudi finances and threatening the kingdom’s ability to continue providing generous social programs, like subsidized housing and cheap energy, that the royal family has long used to buy domestic tranquillity. Oil provides more than 70 percent of Saudi government revenue. And though the Saudis still have about $630 billion in financial reserves, they are spending them at a rate of $5 billion to $6 billion a month, according to Rachel Ziemba, an analyst at Roubini Global Economics in New York. But so far, Saudi Arabia is essentially betting that it can win an oil-price war of attrition — not only against its OPEC rivals like Iran, Iraq and Venezuela, but also against non-OPEC rivals like Russia and the many shale-oil producers in the United States that have contributed to the global glut.

Goldman Sachs Banker With Ties To Malaysian Scandal Goes On Leave

A Goldman Sachs executive who has been involved in mega-deals between the firm and Malaysia’s troubled investment fund 1MDB has reportedly gone on leave. Tim Leissner, who was chairman of Goldman’s GS 0.16% Southeast Asian operations, has reportedly moved from the Singapore office back to Los Angeles, and attempts to reach him via email resulted in an automatic reply saying he had gone “on personal leave”, reported Bloomberg. Leissner spent around a decade of his career in the region, and was an apparent key player in the bank’s relationships with key officials in Malaysia, according to The Financial Times. Goldman was the top foreign advisor in the country, working on $18.8 billion of Malaysian mergers and acquisitions over the past five years, said Bloomberg. It was during his tenure that Goldman arranged three bond sales in 2012 and 2013 with 1MDB totaling $6.5 billion, making about $593 million for the bank, sources told Bloomberg. Since then, fees from their work in the country have slumped, according to The FT. 1MDB has subsequently been involved in heavy debts and a much-publicized corruption scandal that allegedly involves the transferring of around $700 million from the fund to Malaysia Prime Minister Najib Razak’s personal bank accounts. Razak also stands as the chairman of 1MDB. On Tuesday, the country’s attorney-general cleared Razak of any wrongdoing, saying that transfers of $681 million to Razak’s account had been traced back to Saudi royals. On Wednesday, Malaysia’s anti-graft agency said they would ask for a review of the attorney-general’s decision, with sources telling Malaysiakini that the agency had recommended three charges against the Prime Minister to the attorney-general.

When Ted Cruz Wanted to Be Part of the Establishment

Five years ago, as Ted Cruz plotted his path to the U.S. Senate, the anti-establishment crusader sought a private audience with and the backing of one of the faces of the modern GOP establishment: George W. Bush. In a never-before-reported meeting in Bush’s Dallas office, Cruz began to outline his 2012 campaign playbook for the former president, according to people familiar with the conversation. Cruz explained how he would consolidate conservatives yearning for a political outsider, how he would outflank the front-runner on the right, how he would proudly carry the mantle of the ascendant tea party to victory over entrenched elites. It was impressive foreshadowing. But Bush cut Cruz off before he could finish. “I guess you don’t want my support,” Bush interrupted. “Ted, what the hell do you think I am?” If the idea of a private meeting between Bush and Cruz seems strange now, it was not so odd at the time. While Cruz is running for president in 2016 as the consummate outsider, he launched his political career as a Bush administration insider, and his relationship with the GOP establishment is far deeper and more complex than he lets on. On the trail today, Cruz bashes the “Washington cartel,” jokes of being so hated in the U.S. Capitol that he needs a “food-taster,” and says at nearly every stop, “If you see a candidate Washington embraces, run and hide.” But 16 years ago, as a young domestic policy adviser for Bush’s 2000 campaign, Cruz himself had sought Washington’s embrace. He’d uprooted his life, taken an 80 percent pay cut and moved to Austin, Texas, with visions of a big, important White House job to follow. Almost from his arrival at Bush’s headquarters, colleagues say Cruz flashed many of the same assets and liabilities still on his political balance sheet: acumen and ambition, combative and conservative instincts, elbows as sharp as his smarts, a knack for self-promotion and rubbing colleagues the wrong way. When Bush won, however, Cruz would not get the White House post he had dreamed of; instead, he found himself in the bureaucratic backwater of the Federal Trade Commission. “Through mistakes of my own, I put the fault nowhere other than myself, I burned some bridges on that campaign,” Cruz told Politico in an interview. “I chalk it up to youth and immaturity.”

Zika Virus ‘Spreading Explosively’ in Americas, W.H.O. Says

Officials from the World Health Organization said on Thursday that the Zika virus is “spreading explosively” in the Americas and announced that they would convene an emergency meeting on Monday to decide whether to declare a public health emergency. “The level of alarm is extremely high,” said Margaret Chan, the director general of the W.H.O., in a speech in Geneva.


FBI blockades Oregon wildlife refuge, urges remaining occupiers to leave

Federal agents sealed off an Oregon wildlife refuge occupied by armed protesters Wednesday, hours after authorities arrested several members of that group and killed one of the most prominent occupiers. The frenzy of activity at Malheur National Wildlife Refuge in Harney County marked a sudden escalation in the ongoing standoff that has simmered for more than three weeks, ever since a small group of men and women took control of a remote facility in southeastern Oregon. Officials set up checkpoints and roadblocks around the refuge, saying that people who tried to travel inside would be arrested and calling for the armed people remaining there to leave. But they suggested Wednesday that the situation at the refuge would not continue indefinitely and placed blame for the fatal encounter a day earlier on those occupying the refuge. “They had ample opportunity to leave the refuge peacefully,” FBI Special Agent in Charge Greg Bretzing said at a news conference late Wednesday morning. “And as the FBI and our partners have clearly demonstrated, actions are not without consequences.” He described the arrests a day earlier as authorities taking “the first steps to bring this occupation to a conclusion,” and said authorities were still working to “empty the refuge of those who continue to illegally occupy” the land. Anyone who wanted to leave could do so, but only after traveling through a checkpoint where they would be identified, Bretzing said. Local and federal law enforcement officials had called for the occupation on a remote swath of eastern Oregon land, previously best known for its bird-watching, to end peacefully, and the FBI has called its response “deliberate and measured.” However, there have been criticisms of how long it has stretched on, with Gov. Kate Brown (D) writing a letter urging federal officials to bring a “swift resolution” to the situation, as well as others questioning whether occupiers would have been treated with patience if they were black. A senior U.S. law enforcement official defended the response, saying the FBI did not want a repeat of bloody sieges in Waco, Tex., and Ruby Ridge, Idaho. The official said it did not matter who was inside — there was no need to act more hastily because the occupation involved abandoned buildings in an isolated area, no hostages and no one being directly threatened. “Why would we do that?” the official said Wednesday. “This was a very, very good outcome.” There had been no visible law enforcement presence around the refuge as the situation stretched on for days and weeks, and occupiers came and went as they pleased, though they said they remained on guard. The group’s leaders had felt comfortable enough to move freely, leaving the refuge’s headquarters to attend meetings with residents and law enforcement officials. More:


Wounded Warrior Project Spends Lavishly on Itself, Insiders Say

 JACKSONVILLE, Fla. — In early 2014, after 10 years of rapid growth, the charity Wounded Warrior Project flew its roughly 500 employees to Colorado Springs for an “all hands” meeting at the five-star Broadmoor hotel. They were celebrating their biggest year yet: $225 million raised and a work force that had nearly doubled in just a year. On the opening night, before three days of strategy sessions and team-building field trips, the staff gathered in the hotel courtyard. Suddenly, a spotlight focused on a 10-story bell tower where the chief executive, Steven Nardizzi, stepped off the edge and rappelled down toward the cheering crowd. That evening is emblematic of the polished and well-financed image cultivated by the Wounded Warrior Project, the country’s largest and fastest-growing veterans charity. Since its inception in 2003 as a basement operation handing out backpacks to wounded war veterans, the charity has evolved into a fund-raising giant, taking in more than $372 million in 2015 alone — largely through small donations from people over 65. Today, the charity has 22 locations offering programs to help veterans readjust to society, attend school, find work and participate in athletic endeavors. It contributes millions to smaller veterans groups. And it has become a brand name, its logo emblazoned on sneakers, paper towel packs, peanut butter cups and television commercials that run dozens of times per day.

But in its swift rise, it has also embraced aggressive styles of fund-raising, marketing and personnel management that have caused many current and former employees to question whether it has drifted from its original mission. It has spent millions a year on travel, dinners, hotels and conferences that often seemed more lavish than appropriate, more than four dozen current and former employees said in interviews. Former workers recounted buying business-class seats and regularly jetting around the country for minor meetings, or staying in $500-per-night hotel rooms. More:


Sanders says Obama not trying to ‘tip scales’ for Clinton

Bernie Sanders said Wednesday he doesn’t believe President Obama is trying to tip the scales in favor of Hillary Clinton in the Democratic race for the White House. Obama praised his former secretary of State this week in an interview with Politico, saying she would be more ready to be president on her first day in office than anyone who had not previously served as vice president. Two days after the interview, Sanders was at the White House meeting with Obama. “There was some discussion the other day about a Politico interview where he was tipping the scales towards Secretary Clinton. I don’t believe that at all,” the Vermont senator told reporters after a 45-minute Oval Office meeting. The senator noted that Obama campaigned for him during his race for Senate in 2006. “In 2008, I did my best to see that he would be elected president, campaigned hard for him, as I did in 2012,” he said. Sanders said he did not ask for Obama’s endorsement during the meeting. “I think he and the vice president have tried to be fair and even-handed in the process and I expect they will continue to be that way,” he said. The president heaped praise on his former top diplomat in an interview with Politico published Monday, calling Clinton the candidate who is best prepared to serve as commander in chief.  “She can govern, and she can start here, day one, more experienced than any non-vice president has ever been who aspires to this office,” he said. Obama also lauded Sanders for firing up the Democratic base with his focus on income inequality. But he said the senator has the benefit of “just letting loose” because he entered the race as a long-shot candidate.  Obama’s comments were widely interpreted as a tacit endorsement of Clinton. He referred to Sanders as a “bright, shiny object” and suggested the more experienced Clinton is best equipped to protect his legacy. Clinton and Sanders have both been praising Obama on the campaign trail as they hope to attract his supporters — particularly ahead of the Feb. 27 South Carolina primary, where African-Americans will be an important voting bloc.


Fed Raises Concerns on Growth and Keeps Interest Rates Steady

WASHINGTON — The Federal Reserve said Wednesday that domestic economic growth slowed in the final months of 2015 and pointed to increased concern about the weakness of the global economy. In a statement published after a two-day meeting of its policy-making committee, the Fed, as expected, left its benchmark interest rate unchanged and said it still expected to increase that rate “gradually” in the coming months as economic conditions improve. But the statement suggested that the Fed’s confidence in the economic outlook has deteriorated since December, when the central bank raised its benchmark rate for the first time since the financial crisis. The Fed noted the strength of some economic measuring sticks, including continued job growth, more spending by businesses and consumers, and the revival of the housing market. It removed language, however, describing the chances of faster and slower growth as “balanced.” Instead, it said “economic growth slowed late last year,” and it suggested there was now more risk to the downside. “The committee is closely monitoring global economic and financial developments and is assessing their implications for the labor market and inflation, and for the balance of risks to the outlook,” it said. The decision to hold rates steady, in a range between 0.25 percent and 0.5 percent, was unanimous among the 10 voting members of the Federal Open Market Committee. The Fed said all members were able to attend the meeting in person despite the weekend snowstorm in Washington. Many analysts still expect the Fed to raise rates at its next meeting, in March, but a growing number argue that the Fed’s concerns may push back the next rate increase to the summer months, or later.


New York City’s Pension System in Danger of ‘Operational Failure,’ Report Says

 New York City’s pension system, which encompasses $160 billion in retirement funds, is rife with problems that leave it vulnerable to an “operational failure,” according to an independent report commissioned by the city comptroller’s office. The report found that the city’s retirement system, the fourth largest in the country, needs additional resources, is understaffed and lacks many basic tools required to gain insight into the complicated risk embedded in its investments. Some managers rely on fax machines to send and receive vital information. In some cases, the system, known as the Bureau of Asset Management, does not even have the internal controls necessary to ensure individuals cannot circumvent compliance, the report concluded. “Operational risk is very high and an operational failure is likely,” the 398-page report, by Funston Advisory Services of Michigan, said. Funston did not find any specific examples of mismanagement that had resulted directly in a loss of money. Still, the consultant raised a number of troubling issues that could cost the retirement system money, like the inability to properly identify portfolio risk. When Scott M. Stringer, the New York City comptroller who has statutory oversight of the pension funds, took office in early 2014, he said it was apparent then that aspects of the retirement system were “hanging by a thread.” He ordered an independent review of the Bureau of Asset Management, and in April 2015, Funston was chosen to conduct the review. Its report cost New York City $1.4 million, Mr. Stringer said. On Monday, the comptroller presented the report to the trustees of the city’s five funds, which oversee retirement money for roughly 715,000 current and former police officers, firefighters, teachers and others. The comptroller hopes the findings will help spur change. “Others have tried it but we are going to do it,” Mr. Stringer said. “There is no reason why New York City can’t lead the nation on fundamental best-practice reform.” More:

How a High-Flying Lawyer Botched His Big Case Against GM

When Robert Kleven switched on the news for his drive to work two weeks ago, he had no idea he was about to sink a high-profile lawsuit against General Motors Co. and embarrass one of the best-known plaintiffs’ lawyers in the U.S. The news anchor described a long-awaited trial starting in federal court in Manhattan that day, the first over a deadly defect in millions of GM ignition switches. The plaintiff was a 49-year-old postman named Robert Scheuer. Kleven, a real estate agent in Tulsa, Oklahoma, knew that name. Two years earlier, he said in an interview, Scheuer had pulled a fast one on him. Scheuer had altered a government check stub to make it look like he had hundreds of thousands of dollars in the bank, Kleven said. On the strength of that stub, Kleven had let Scheuer and his wife, Lisa, move in to a new house in suburban Tulsa before they had paid for it. He had to evict them and their two daughters, he said, when he learned that Robert Scheuer had added a “441” to the $430.72 stub to turn it into a deposit of $441,430.72. So Kleven called GM. “I didn’t want them getting away with another scam,” the 43-year-old agent with Concept Builders Inc. said. The couple went on to testify under oath that injuries Robert sustained in a May 2014 wreck in their Saturn Ion had led to the eviction from their “dream house.” GM accused them of perjury. The Scheuers dropped their lawsuit less than halfway through the trial, without getting a penny from GM. It was a lucky break for the automaker, which has already spent more than $2 billion to resolve investigations and a securities lawsuit over the flawed ignition switches, as well as death and injury claims. It was a stunning blow to plaintiffs’ attorney Robert Hilliard, who has signed settlements with GM in more than 1,300 ignition switch cases and is one of three lead lawyers appointed to manage the hundreds of cases that remain. On Monday, Lance Cooper, a rival lawyer with clients in the mass litigation now under way, asked U.S. District Judge Jesse Furman to remove the three as lead attorneys; the three called the request unfounded. On Wednesday, Cooper asked Furman to take back his approval of a fund for Hilliard’s settlements. And it was a far cry from Hilliard’s plan to make the Scheuers the public face of GM’s victims by portraying them as a hardworking Oklahoma family brought down by corporate greed. GM had known about its defective ignition switches, which could suddenly cut off the engine, disabling power steering and brakes and preventing air bags from deploying. Instead, Robert and Lisa Scheuer have hired criminal defense attorneys, respectively Priya Chaudhry and Charles Clayman. The lawyers declined to comment on the allegations against their clients.

The admiral in charge of Navy intelligence has not been allowed to see military secrets for years

For more than two years, the Navy’s intelligence chief has been stuck with a major handicap: He’s not allowed to know any secrets. Vice Adm. Ted “Twig” Branch has been barred from reading, seeing or hearing classified information since November 2013, when the Navy learned from the Justice Department that his name had surfaced in a giant corruption investigation involving a foreign defense contractor and scores of Navy personnel. Worried that Branch was on the verge of being indicted, Navy leaders suspended his access to classified materials. They did the same to one of his deputies, Rear Adm. Bruce F. Loveless, the Navy’s director of intelligence operations. More than 800 days later, neither Branch nor Loveless has been charged. But neither has been cleared, either. Their access to classified information remains blocked. Although the Navy transferred Loveless to a slightly less sensitive post, it kept Branch in charge of its intelligence division. That has resulted in an awkward arrangement, akin to sending a warship into battle with its skipper stuck onshore. Branch can’t meet with other senior U.S. intelligence leaders to discuss sensitive operations, or hear updates from his staff about secret missions or projects. It can be a chore just to set foot in colleagues’ offices; in keeping with regulations, they must conduct a sweep beforehand to make sure any classified documents are locked up. Some critics have questioned how smart it is for the Navy to retain an intelligence chief with such limitations, for so long, especially at a time when the Pentagon is confronted by crises in the Middle East, the South China Sea, the Korean Peninsula and other hotspots. “I have never heard of anything as asinine, bizarre or stupid in all my years,” Norman Polmar, a naval analyst and historian, said in an interview. More:

Exclusive: Chief of U.S. Commandos Warns Loose Lips Could Risk American Lives

The general overseeing U.S. special operations forces has written a memo to Defense Secretary Ash Carter demanding the Pentagon stop talking about what his elite troops are up to in Iraq or elsewhere, saying the commandos require a veil of secrecy to do their job, Foreign Policy has learned. Gen. Joseph Votel, the chief of U.S. Special Operations Command (SOCOM) who has been nominated to take over U.S. Central Command, issued the complaint in a Dec. 8 memo — days after Carter and White House officials announced that a force of about 200 special operations forces (SOF) would be deployed to Iraq to target Islamic State militants. “I am concerned with increased public exposure of SOF activities and operations, and I assess that it is time to get our forces back into the shadows,” Votel wrote, according to an excerpt newly provided to FP by a defense official. Votel added that discussing operations makes it more difficult for commandos to conduct those missions, and he “requested the department support him with an approach to avoid public discussion of SOF activities,” the official said, paraphrasing the brief memo. It was unclear precisely what public comments Votel was referring to in his memo, which was also addressed to Joint Chiefs Chairman Gen. Joseph Dunford. Still, it’s not the first time that commanders and top officials have expressed frustration about the disclosure of sensitive information about the elite forces. In the immediate aftermath of the 2011 raid that killed Osama bin Laden, senior officials — including then-Defense Secretary Robert Gates — privately lambasted their White House counterparts for publicizing key details about the raid. More recently, some senior officers have privately complained and congressional critics have suggested the administration is hyping the deployments of special operations forces for political gain, either to push back against accusations of not doing enough to combat foes like the Islamic State or to help Obama burnish his legacy as a bold wartime commander willing to chase down America’s enemies anywhere in the world. The new memo came amid a renewed effort by the White House to defend its strategy in Iraq and Syria in the face of sharp criticism in Congress, with officials frequently citing the deployment of commandos to take on the Islamic State. More:

In 73 seconds, everything changed for Challenger

It was a bright, clear morning, and a frigid one by Florida standards: Icicles glistened on the launch tower as the space shuttle Challenger counted down to liftoff from Kennedy Space Center on Jan. 28, 1986. Late the night before, a group of engineers had recommended against launching, uncertain how the cold might affect seals in its the shuttle’s twin solid rocket boosters. Managers overruled them, and their concerns never reached top officials or the astronauts. School children across the country followed along on TV to see the launch of NASA’s Teacher in Space, Christa McAuliffe, whose participation distinguished this shuttle mission from the 24 before it. “Any teacher or classroom student of that era, they were watching,” recalls June Scobee Rodgers, widow of Challenger commander Dick Scobee. “Those of us who wanted to fly who were not astronauts, she was representing us, and we were all flying with her.” Thirty years ago this Thursday, Challenger blasted off at 11:38 a.m. Story continues below:


When the RSA bought a skyscraper, smashed the mob, and launched an empire

Alabama’s pension system bought a 3.8 million-square-foot skyscraper in New York City in 1993 for a fraction of its worth and needed an honest man to run it. So they turned to an undercover detective who was working under a fake name in concert with a legendary New York City district attorney to take bribes from mobsters. The ensuing investigation helped lead to the downfall of two of the nation’s largest crime families, the end of a multi-million dollar garbage collection racket, and helped launched an unlikely second act for a New York cop. This time under his real name. As for the Retirement Systems of Alabama, the building was a windfall investment. Purchased for about $202 million, the 53-story floor is now worth an eye-popping $1.5 billion. It rents at $58 per square foot and leases to some of the biggest names in fashion and business. Millions of dollars of proceeds from the skyscraper flood into the RSA coffers annually. Perhaps more importantly, the building’s success gave them a seat at the table for bigger business deals to come. It cleared the path for future RSA investments in resorts, office buildings, golf courses, a media conglomerate, and other businesses that now color the Alabama landscape. Today, the RSA has more than $38 billion in assets and its CEO David Bronner is one of the most powerful businessman involved with state government. “It’s definitely the best investment the Retirement Systems of Alabama in its history has ever made,” said Marc Reynolds, a longtime RSA deputy director who was fired from the RSA in 2012. “It was like someone going to the dog track and winning big money and you’re hooked and you think it can do it every time.” Talk about fake it until you make it. That’s exactly what Harry Bridgwood did at 55 Water Street. A New York City undercover detective, Bridgwood’s corporate experience was limited. He co-owned a sporting goods store with two other police officers, shared a franchise for a Tropicana juice delivery route, and never graduated from college, according to a New York Times story. But what he lacked in his business background, he made up with his courage and believability, according to former New York City District Attorney Robert Morgenthau. Morgenthau, a celebrated World War 2 veteran, said that Bridgwood had the right character to do the job. “Nobody suspected him,” said Morgenthau, now 96.  “He played the role of a corrupt owner’s agent really well.” The idea was that Bridgwood, wearing a wire and using the fake name “Paul Vassil,” would coordinate bribes and rig bids with V. Ponte & Sons. Morgenthau has deep Alabama ties and had previously collaborated in the past with Bronner, who signed off on the project. In 1992, Bronner and the RSA led a bankruptcy takeover of the 53-story building after its former owners defaulted on $548 million worth of loans on the building. The RSA was the largest single holder of the loans, with $100 million worth, and put together a deal to buy out the other loan holders for 29 cents on the dollar. At the time, the building was in desperate need of repair and beholden to a number of criminal forces. None was bigger than the garbage collection firm that had the contract at the building for more than two decades. At their height, the Gambino and Genovese crime families that controlled the garbage cartel overcharged their clients up to $500 million a year, prosecutors alleged. This wasn’t the only scam either. In an interview with, Bronner recalled a tiny flower garden in the building that cost them $50,000 to water the garden of the year. There was also a ghost payroll scheme where 15 union members were charging the building for the work of two non-union immigrants. More:

‘The Consummate Southern Lawyer’: Hunstville’s legal community remembers Buck Watson

HUNTSVILLE, Ala. (WHNT) – Huntsville’s legal community lost a giant this week. Buck Watson passed away. His former law partner of over 20 years, Al Jimmerson, says Watson worked everything — from high-profile criminal defenses to environmental cases to civil rights suits. In that time, he learned, “Buck was always larger than life.” Even with such stature, he gladly humbled himself before the law and his clients. “Buck was a master at talking with his clients,” says Jimmerson, “Understanding what the problem was, knowing enough law to be able to apply that law to the situation, and being able to tell the clients how we could go about helping them. And he was also very frank if they had bad news coming.” We can say the same about him. He consistently took the time to break down complex legal concepts to help viewers understand. The night Roy Moore put down a stay on same-sex marriages in spite of a federal court ruling, Watson picked up the phone well north of nine o’clock and walked us through the legal ramifications. He was happy to take the time. Jimmerson continues, “Buck was equally at ease with supreme court justices, with people that were running for President of the United States and for people that were down and out and just wandered into our office when we were on the north side of the square. He would sit with them, talk to them, and do everything he could to help them out.” For those reasons and more, Jimmerson says, “He will really be missed.” Buck Watson’s funeral will be held on Friday at First United Methodist church in Huntsville, not far from where he practiced law. While we spoke with Jimmerson, Watson’s legacy touched all corners of the region’s legal community. Retired federal judge Charles Lynwood Smith, Jr. had this to say about him:  “Buck Watson was steadfast in his loyalty to friends. He was a man who always looked you straight in the eye, gave you a hearty pat on the shoulder, and a strong handshake. He loved conversations about Alabama history and politics. And he always had an enjoyable story to tell — regardless of whether it was about his DeKalb County roots, playing college and professional football, coaching high school football, or deciding to go back to school and study law. He was a fine lawyer. When he took a case, he thought about it from every angle. He loved challenging cases, even those that other attorneys would pass because they were controversial. He made positive contributions to the State and this community in so many ways, over so many years, that his death leaves a hole that will be difficult to fill. Most of all, however, I will miss his company, and his laughter, very much.” Watson’s obituary reads:

Lawmaker plans to oppose Alabama Historic Tax Credit

Birmingham’s real estate community will be closely watching the upcoming Alabama legislative session to see if lawmakers will extend the historic renovation tax credit, which has been a catalyst for millions of dollars worth of downtown development projects. But despite that success, the effort to extend the credit – which is set to sunset after 2016 – won’t be a slam dunk. Sen. Trip Pittman, R-Daphne, who is chair of the Finance and Taxation General Fund, has been outspoken in his opposition to all incentives, including the Historic Rehabilitation Tax Credit. He plans to oppose it again this year. “I think any kind of incentive should be finite,” Pittman said. He said he plans to oppose an extension even coming up in the legislature, and said if it does come up, he will vote against it. “It has worked in some cases, but it’s time for it to go away,” he said. “This is a matter of letting the benefits of an incentive program work themselves out. The ideal situation would be to let things happen without incentives. When people start to rely on incentives, it can distort the market.” As we’ll outline in this week’s Cover Story, the program has seen numerous success stories since it was implemented in 2013. A coalition of government and economic leaders plan to show the viability of extending the program through an impact study aimed at making a case for an extension. The $60 million cap for the program has already been fully allocated to projects around the state, many of them in Birmingham. Proponents say failure to extend the credit could bring much of downtown Birmingham’s development to a screeching halt.

Sen. Richard Shelby touts record, experience in campaign for sixth term

If you have watched any television of late, the odds are good you have seen a political ad for Alabama’s senior U.S. Senator, Richard Shelby. Shelby has served 30 years in the United States Senate. At 81 years old, he is seeking what would be his sixth term. This time, Shelby faces four republican challengers in Alabama’s primary March first. His challengers are working to convince voters it’s time for Shelby to retire and that he’s been in Washington too long. They are also pushing for term limits. Shelby touts that seniority and experience like a badge of honor. “I’ve got the record,” Shelby told ABC 33/40. “I’ve got experience. I’ve got the courage and resolve. You know my record and I’ll make a difference in troubled times in the next six years big time.” Shelby’s experience has gained him powerful leadership roles. He is Chairman of the Banking, Housing, and Urban Affairs Committee. He’s also on the Senate Appropriations Committee and the Committee on Rules and Administration. “When somebody is out there advocating term limits, one, they’re not serious about their job,” said Shelby. “If they are, they aren’t going to be there long. They probably won’t even be recognized if they were there for two terms. They would have no power. They probably wouldn’t be involved. They probably wouldn’t know much about the issues.” Yet four Republicans believe they can do the job better. “I don’t know any of them,” said Shelby. “If I’ve ever met any of them, I don’t recall. Everybody’s got a right to run.” For the election, Shelby has more than $19 million in his campaign war chest, according to “I don’t know what we’ll need but that money has been collected over the years,” said Shelby. “I haven’t had a big big race in a number of years and I don’t know if this will be a big big race.” His challengers have far less money to get their message out. We cannot confirm their latest fundraising numbers until the next Federal Elections Commission reports are released in February, but we did ask each campaign for its latest total. Jonathan McConnell’s campaign says he has raised $600,000. Marcus Bowman says he raised less than $5,000. John Martin says he raised $600. Shadrack McGill has not returned messages from ABC 33/40 at this time. And for those who believe Shelby has made Washington his new home instead of Alabama, he says, “My home is Alabama. My home is Tuscaloosa. I’m fifth generation Alabamian. I made sure I didn’t move to Washington. I was sent to Washington. I vote in Alabama. My family is in Alabama. When my days are over, I’ll be in Alabama. I won’t be somebody looking for a lobbying job. I will be here at home where I belong.” ABC 33/40 also asked Senator Shelby about the national debt, the fight against ISIS, gun control and the presidential election. You can watch our full interview in this article. You can also watch the full interviews with his challengers here.

Governor names Bill Veitch district attorney in Jeffco’s Bessemer Cutoff

Gov. Robert Bentley today appointed Bill Veitch to the position of District Attorney in the Jefferson County Bessemer Division. Veitch, now chief assistant district attorney, replaces Arthur Green Jr., whose retirement was effective Tuesday afternoon. Green was first appointed to the position in 2001 and served three six-year terms. Veitch will serve the remainder of Green’s term. He has served as Green’s chief assistant district since 2001. He has been with the District Attorney’s Office since 1999. Prior to that, he had a private practice for 20 years and served as a Birmingham police officer from 1973 through 1979. He had already announced plans to run for the office. He is the only Republican candidate in the race. Those who qualified as Democrats for the March 1 primary are Minnie L. Tunstall, Lonnie A. Washington Sr. and Lynneice Olive-Washington. In Bentley’s appointment letter to Veitch, he wrote, “Honesty and integrity are two virtues that I prioritize from my administration to exemplify, and I know that you will do the same while in service to our great state. I encourage you to be a good steward of the taxpayers’ money and work to maintain the trust that I, and the people of Alabama, have in you.”  Veitch describes himself as a compassionate advocate for victims and their families, and says he is an invested community leader with a proven track record of service. “I am very grateful for the opportunity to serve the citizens of the Bessemer Division of Jefferson County as their district attorney,” Veitch told “I grew up here, I go to church here and I intend to do the very best I can to protect the people of the Cutoff and earn their trust. We are in this together.” He was sworn in at 1 p.m. by Alabama Supreme Court Justice Mike Bolin. “I’ve always said the two most important elected officials in your county are the sheriff and the district attorney,” Bolin said. “The sheriff and police chiefs go out and protect you in times of need. There’s nobody else to call when someone breaks into your house or harms your child. They come to your rescue.” More:

Alabama House Republicans to release agenda on Thursday

The Alabama House Republican Caucus will announce its 2016 legislative agenda on Thursday. House Speaker Mike Hubbard of Auburn, Majority Leader Micky Hammon of Decatur and Rep. Donnie Chesteen of Geneva will release the agenda at a State House news conference at 2 p.m. The session begins on Tuesday. Republicans hold 70 of the 103 seats in the House of Representatives. (Two seats are vacant).


Somebody say something

In this season of motion picture accolades, Alabama’s “best actor” award goes to Chief Justice Roy Moore, starring in a continuing saga of abuse of power. However, Moore’s “performance” is facilitated by the neglect manifest in the failure of other entities to address his professional lunacy. The Cast. The cast includes present and former justices of the Alabama Supreme Court. As Chief Justice, Moore is the administrative head of Alabama’s court system, but he, like each of the Associate Justices of the Supreme Court, has but one vote in the cases they decide. His individual, personal view of the law is not binding on any other Alabama judge or lawyer. Since the justices are independently elected to office, Moore is not their “supervisor.” Associate Justices have an affirmative professional duty to reject (1) Moore’s extrajudicial positions on a legal issue pending before the Court, (2) his continued affiliation with a Foundation (chaired by his wife, Kayla) that is a litigant in the Supreme Court on an issue upon which Moore has publicly expressed an opinion, and (3) his directive to probate judges to repudiate a U.S. Supreme Court ruling. How? By exercising their power under Section 12-5-20 of the Code of Alabama, which grants them “the power and authority to review, countermand, overrule, modify or amend any administrative decision by either the Chief Justice or the Administrative Director of Court.” Thus, the justices may lawfully rescind Moore’s administrative directive to probate judges to refuse to issue marriage licenses to same-sex couples. Surely they must understand the Supremacy Clause in the U.S. Constitution. Surely they must place the integrity and reputation of the court above political fealty to a colleague. And yet, the justices are silent. More:


Morning Money

COMING SOON: CONGRESS LOOKS TO REWRITE LIQUIDITY RULE — The House is expected to pass a bill as soon as next week that would soften rules that critics say discourage some banks from holding municipal debt issued by state and local governments to help pay for infrastructure.

Senate Democrats are preparing to draft similar changes to the regulations, which require banks to hold high-quality liquid assets that can be turned into cash during a crisis. The rules from the Federal Reserve, Federal Deposit Insurance Corp. and Comptroller of the Currency don’t allow municipal bonds to count toward the so-called liquidity buffer. The Fed is the only agency that has offered to reconsider the restrictions.

A strong bipartisan vote in the House next week, following a 56-1 committee vote in November, would make the effort begin to feel like a “slam dunk,” one lobbyist told M.M. The authors of the House bill are Reps. Luke Messer and Carolyn Maloney.

A spokesman for Sen. Chuck Schumer of New York, expected to be the next Democratic leader, told M.M. he supports the House proposal and that “either he or another Senate Democrat will introduce companion legislation to get it done in the Senate.”

A spokeswoman for Sen. Mark Warner told M.M. the Virginia Democrat is considering legislation similar to the House bill and that his version would “balance financial stability concerns while preserving robust access by states and municipalities to capital markets.”

SANDERS TAUNTS CLINTON OVER FUNDRAISER — POLITICO’s Gabriel Debenedetti in Iowa: “Bernie Sanders threw one of his most direct rhetorical punches yet at Hillary Clinton over her financial-industry ties on Wednesday night, telling a packed crowd, ‘My opponent is not in Iowa tonight. She is raising money from a Philadelphia investment firm.’ … [S]he left the state on Wednesday for a campaign cash event hosted by Franklin Square Capital Partners and featuring a concert by Jon Bon Jovi.”

METLIFE WARNED TREASURY, REGULATORS ABOUT BREAKUP — Insurance giant MetLife warned U.S. officials more than a year ago that it would attempt to split itself up if labeled a “systemically important financial institution” by the Financial Stability Oversight Council – a prediction that became reality earlier this month when the company announced plans to spin off some U.S. operations. During a Nov. 3, 2014 private hearing in which the company contested the designation, which was finalized the following month, MetLife chief executive Steven Kandarian told Treasury Secretary Jack Lew, Fed Chair Janet Yellen and other top regulators, “I don’t want people to say later on, ‘Geez, we had no idea that you were thinking of this.’” Read the full transcript, which MetLife filed in federal court yesterday as part of its lawsuit against the council:

BROKERS ESCAPE LIBOR CHARGES — WSJ’s David Enrich: “A jury Wednesday acquitted six former brokers of trying to rig a widely used benchmark interest rate, a major blow to a yearslong international investigation into the manipulation of that rate, known as Libor. … Despite the wide roster of institutions that have admitted wrongdoing, only a handful of individuals — primarily midlevel traders and brokers — have been criminally charged. No senior managers or executives have faced prosecution.”

HAPPY THURSDAY — Ben is back. Send tips his way:

DRIVING THE DAY — The Financial Stability Oversight Council meets in a closed, afternoon session to discuss international market developments, an upcoming annual report and asset management … Fox News hosts GOP debates (without Donald Trump) at 7 p.m. and 9 p.m. … Trump’s alternative event in Iowa starts at 9 p.m.

MARCH RATE INCREASE UNCERTAIN AFTER MEETING — WSJ’s Jon Hilsenrath and Ben Leubsdorf: “Federal Reserve officials expressed renewed worry about financial-market turbulence and slow economic growth abroad, leaving doubts about whether the central bank will raise interest rates as early as March. … The plan to raise rates was built on officials’ expectations the economy would continue strengthening, but the [policy statement released yesterday] suggested they now aren’t so sure: ‘The [Fed] is closely monitoring global economic and financial developments and is assessing their implications for the labor market and inflation, and for the balance of risks to the outlook.’”

OIL BAILOUTS ON THE HORIZON — FT’s Jack Farchy and Shawn Donnan: “Officials from the International Monetary Fund and the World Bank are heading to Azerbaijan to discuss a possible $4bn emergency loan package in what risks becoming the first of a series of bailouts stemming from the tumbling oil price. … The fund and the bank have also been monitoring developments in other oil-producing countries such as Brazil, which is now mired in its worst recession in more than a century, and Ecuador. The oil-driven crisis in Venezuela has even raised the possibility of repaired relations between the fund and Caracas, a city IMF staff last visited more than a decade ago.”

RESEARCH QUESTIONS IMPACT OF ‘FLASH CRASH’ TRADER — Bloomberg’s John Detrixhe and Suzi Ring: “Navinder Singh Sarao, dubbed the Hound of Hounslow by newspapers after his arrest for allegedly manipulating markets, has a few academics on his side as he goes back to court next week. Sarao may not have had a material, or even any, impact on the bout of equity market volatility in May 2010 that later became known as the flash crash, according to a draft research report by University of California, Santa Cruz and Stanford University professors dated Jan. 25.”

SENATE REPUBLICANS COME TO TERMS WITH TRUMP, CRUZ — POLITICO’s Burgess Everett and Seung Min Kim: “Collectively, the Senate Republican Conference is undergoing the five stages of grief as it grapples with the growing possibility of Donald Trump or Ted Cruz at the top of their ticket — a predicament that many of them believe would result in sweeping losses for their party in November. Not a single senator has endorsed either candidate, and the universe of potential Cruz or Trump supporters in the chamber can be counted, at this point, on one hand.”

ICYMI: SOMMERS TO HEAD PRIVATE EQUITY GROUP — From POLITICO Influence: “Former Speaker John Boehner’s chief of staff, Mike Sommers, is the new president and CEO of the Private Equity Growth Capital Council. He succeeds Steve Judge, who left in August. The group’s membership includes industry titans Blackstone, Carlyle and Apollo, and among its hot issues is the carried-interest loophole. … The announcement … quoted PEGCC Chairman Ken Mehlman, the former RNC chairman now at KKR; Speaker Paul Ryan; and House Minority Whip Steny Hoyer.”

EARLY LOOK: SHIRTLESS BUFFETT, MUSK GRAPPLE ON BLOOMBERG BUSINESSWEEK COVER — Noah Buhayar has an analysis of the showdown between Elon Musk’s solar company SolarCity and Warren Buffett’s utility NV Energy. The print edition, with a cover illustration of Buffett putting Musk in a headlock, hits newsstands tomorrow. The online version is up this morning.

LIVE FROM BRUSSELS: SAFE HARBOR, EU BAILOUTS AND A BELGIAN ALE: Do you have access to in-depth reporting about big decisions shaping the EU? POLITICO Pro, POLITICO’s premium subscription service, teamed up with POLITICO Europe to bring you Pro’s Europe Brief. Europe Brief draws on POLITICO resources in both Brussels and D.C. to provide you with the updates and analysis you need to stay a step ahead of of all things happening across the pond. Try it for free! Download a complimentary issue of Europe Brief today.

POTUS Events

10:00 AM The President and the Vice President receive the Presidential Daily Briefing

Oval Office Closed Press

12:45 PM The Vice President delivers remarks at the House Democratic Issues Conference

Hyatt Regency Baltimore Inner Harbor, Baltimore, MD Open to pre-credentialed media

2:35 PM The President participates in an Ambassador Credentialing Ceremony

Oval Office Closed Press

5:50 PM The President departs the White House

South Lawn Open Press Final Gather 5:35PM – North Doors of the Palm Room

9:15 PM The President arrives at the White House

South Lawn Open Press Final Gather 9:00PM – North Doors of the Palm Room


Floor Action

The House is out; The Senate is in at 9:45 a.m. and will vote at noon and 1:45 p.m. on amendments to the energy bill the chamber is working on. But wait, the suspense doesn’t end there: “Additional votes are possible during Thursday’s session,” says the whip’s office.


It’s Easy to Get Tax Help through IRS Social Media

There are many ways to get help from the IRS with social media. If you have a smartphone, we have a free app with many uses. If you like YouTube, we have lots of videos to help you file. If you’re on Twitter, follow the IRS for the latest tax news and information. Here are some easy ways to get what you need from the IRS through social media:

  • IRS2Go.  Use this free mobile app to check your refund status, pay your tax, watch IRS YouTube videos and get IRS Tax Tips via email. You can download the app free from the Google Play Store for Android devices, or from the Apple App Store for Apple devices. IRS2Go is available in both English and Spanish.
  • YouTube.  The IRS offers dozens of video tax tips on a variety of topics. You can view them in English, Spanish or American Sign Language.
  • Twitter.  Get tax-related announcements and tips from @IRSnews. @IRStaxpros tweets news and guidance for tax professionals. Tweets from @IRSenEspanol have news and information in Spanish. The Taxpayer Advocate Service sends tweets from @YourVoiceAtIRS. @RecruitmentIRS provides updates for job seekers.
  • Tumblr.  Follow the IRS on Tumblr to access IRS tax tips, videos and podcasts. You can access Tumblr from your smartphone, tablet or computer.
  • Facebook.  The IRS Facebook pages provide news and information for taxpayers and tax return preparers. You can also connect with the Taxpayer Advocate Service.
  • Subscribe to IRS Tax Tips.  Get free tax filing tips via e-mail in English or Spanish.  For the latest word on taxes from the IRS, check out our e-news subscriptions.

Protecting your privacy is our top priority. The IRS uses social media to share public information, not to answer personal tax or account questions. You should never post your Social Security number or any other personal information on social media sites.

Each and every taxpayer has a set of fundamental rights they should be aware of when dealing with the IRS. These are your Taxpayer Bill of Rights. Explore your rights and our obligations to protect them on