Panama Papers May Inspire More Big Leaks, if Not Reform
WASHINGTON — In recent days, Sri Lanka, Zimbabwe and South Africa joined the growing list of countries hunting down tax evaders among citizens who own offshore accounts. The French bank BNP Paribas said it would shut its Cayman Islands branch. In Pakistan, a cricketer turned politician who had attacked the prime minister over his family’s offshore accounts admitted that he, too, had used a shell company. And the Group of 7 nations, meeting in Japan, agreed to crack down on illicit finance. It was the latest fallout from the Panama Papers, the largest leak of secret documents to journalists in history. In the eight weeks since the publication of the first articles by some 370 reporters in 76 countries, an effort organized by the International Consortium of Investigative Journalists, the impact of the revelations on the shadowy world of offshore finance has been striking — even as prospects for long-term reform remain uncertain. Investigations are underway in dozens of countries, including the United States. Proposed laws requiring disclosure of the true owners of offshore companies to tax collectors or to the public have new momentum. Cartoonists have had a field day, reflecting the widespread anger and disgust pressuring governments to act. “The reaction around the world has been pretty spectacular,” said Gabriel Zucman, an economist at the University of California, Berkeley, who has estimated that 8 percent of the world’s personal wealth is hidden in tax havens. “The demand for financial transparency and tax reform is really growing. It’s the first time there’s been public outrage at the global level on these issues.” More:
The Untold Story Behind Saudi Arabia’s 41-Year U.S. Debt Secret
Failure was not an option. It was July 1974. A steady predawn drizzle had given way to overcast skies when William Simon, newly appointed U.S. Treasury secretary, and his deputy, Gerry Parsky, stepped onto an 8 a.m. flight from Andrews Air Force Base. On board, the mood was tense. That year, the oil crisis had hit home. An embargo by OPEC’s Arab nations—payback for U.S. military aid to the Israelis during the Yom Kippur War—quadrupled oil prices. Inflation soared, the stock market crashed, and the U.S. economy was in a tailspin. Officially, Simon’s two-week trip was billed as a tour of economic diplomacy across Europe and the Middle East, full of the customary meet-and-greets and evening banquets. But the real mission, kept in strict confidence within President Richard Nixon’s inner circle, would take place during a four-day layover in the coastal city of Jeddah, Saudi Arabia. The goal: neutralize crude oil as an economic weapon and find a way to persuade a hostile kingdom to finance America’s widening deficit with its newfound petrodollar wealth. And according to Parsky, Nixon made clear there was simply no coming back empty-handed. Failure would not only jeopardize America’s financial health but could also give the Soviet Union an opening to make further inroads into the Arab world. It “wasn’t a question of whether it could be done or it couldn’t be done,” said Parsky, 73, one of the few officials with Simon during the Saudi talks. At first blush, Simon, who had just done a stint as Nixon’s energy czar, seemed ill-suited for such delicate diplomacy. Before being tapped by Nixon, the chain-smoking New Jersey native ran the vaunted Treasuries desk at Salomon Brothers. To career bureaucrats, the brash Wall Street bond trader—who once compared himself to Genghis Khan—had a temper and an outsize ego that was painfully out of step in Washington. Just a week before setting foot in Saudi Arabia, Simon publicly lambasted the Shah of Iran, a close regional ally at the time, calling him a “nut.”
South Korea: North Korea missile likely fails
North Korea launched a missile from its east coast early Tuesday local time but it appears to have failed, South Korea’s Yonhap News Agency reported. “North Korea attempted to launch an unidentified missile from the region near Wonsan at around 5:20 a.m., but it is presumed to have been unsuccessful,” South Korea’s Joint Chiefs of Staff said, according to the news agency. The South Korean military was studying the launch and said it was stepping up surveillance due to signs that North Korea was preparing for a ballistic missile launch. “We are tracking any missile-related signs and maintain a high state of readiness,” the South Korean Joint Chiefs of Staff said. Japan had also put its military on alert Monday for a possible ballistic missile firing. State broadcaster NHK reported that Japan ordered naval destroyers and Patriot anti-ballistic missile batteries to be ready to shoot down any projectile heading for the country, according to the South Korean news agency. North Korea conducted its fourth nuclear test in January. In April, North Korea attempted to fire a Musudan intermediate-range ballistic missile three times but they all failed, Yonhap News Agency reported. More:
MetLife Suit Raises Questions of Extent of Corporate Liability
When Christine Ramirez signed over that first check in April 2008, she had no idea that the decision would eventually upend her life. A broker offered a tempting deal. If she invested in a real estate fund called the Diversified Lending Group, which was managed by someone named Bruce Friedman, she would be eligible for a “guaranteed” return of 12 percent. She could use the proceeds to pay the premium on a new MetLife life insurance policy. Ms. Ramirez chose not to buy the insurance policy, but she did invest in Mr. Friedman’s fund, a total of $279,769 including her personal savings, a retirement account and proceeds from a line of credit on her home in Simi Valley, Calif. D.L.G. came crashing down months later, when the Securities and Exchange Commission sued Mr. Friedman, accusing him of misappropriating millions of dollars in investor funds. According to court documents, he operated a Ponzi scheme that defrauded hundreds of investors, including a sitting congressman, of more than $200 million. The money was gone. “I think I cried every day for a year,” said Ms. Ramirez, 75. “It wasn’t that I didn’t do my homework. I was told it was approved by MetLife and that it was guaranteed.” Now, Ms. Ramirez and some others who lost their money are suing MetLife, claiming that the insurer ignored or failed to notice signs that agents and brokers were peddling Mr. Friedman’s financing program to retirees and others. Litigation has been winding its way through the courts for years, and MetLife is fighting back. But last month, a Los Angeles Superior Court judge cleared Ms. Ramirez’s case to move to trial in July. Her lawyers represent 98 people in seven cases, and hers is the first of this group to move forward. She is being given preference because she is battling late-stage breast cancer. MetLife has settled some cases with its own customers who were duped by the D.L.G. offer, but the current batch of lawsuits involves people who did not buy its insurance. Ms. Ramirez was never a customer of MetLife. Instead, these people only put their money in the D.L.G. investment that was pitched to them by sales people, some who were affiliated with MetLife and some who were independent contractors approved to sell its products. As such, the legal fight raises questions about how far a large company’s liability should extend. “Big companies, like MetLife, are run by people, and when they fall below the standard of care or engage in improper conduct, our clients, who are also real people, get hurt – and that’s what happened here,” said Richard E. Donahoo, founder of Donahoo & Associates, one of the lawyers representing Ms. Ramirez. MetLife has argued in court documents that it “had no relationship with D.L.G.” and that it “did not sell, or materially assist in the sale” of the D.L.G. financing program. Neither was it legally obligated to supervise the broker who made the sale to Ms. Ramirez, MetLife said, because he was a contractor and licensed through another, unaffiliated broker-dealer, even though he was authorized to sell MetLife insurance products. The company has added that it did not “take or receive anything from” Ms. Ramirez, and so it is not liable for any damages. A MetLife spokesman, Christopher Stern, said the company does not comment on continuing litigation. Mr. Friedman was selling promissory notes that claimed to back real estate investments. Promissory notes are similar to bonds and not uncommon products for insurance agents to sell. But regulators havewarned about the potential for fraud and abuse. Agents presented the notes as “premium financing” for MetLife insurance products, the lawsuits say; in other words, the investment return would be able to fund the premium payments on a life insurance policy. MetLife does not generally allow premium financing, something these agents admitted in depositions.
‘On Like Donkey Kong’: How a Dubious Super PAC Boosted a Questionable Penny Stock
A little more than a year ago, Hillary Clinton’s imminent entry into the race for the Democratic presidential nomination was setting off political and financial ripples around the country. One of the most unlikely was a spike in the stock price of an obscure Las Vegas company that once built tables for beer pong. The company, CrossClick Media, had been issuing press releases for months, saying it had won a contract to run call centers and other services for a super PAC called Voters for Hillary. Getting hired by the PAC was “a milestone” for CrossClick and would lead to growing revenue “predicated largely on Ms. Clinton becoming a Presidential candidate and the Company pursuing other clients for our services,” the firm’s chief executive had declared in December 2014. Excited posts about CrossClick’s bright future started filling Internet message boards popular with investors in so-called penny stocks, which, like CrossClick, trade for less than five dollars per share. “Soon the 1st lady announces her candidacy and it’s on like Donkey Kong,” read a comment posted March 28, 2015, on a site called InvestorsHub. “Hope you have some shares :)” Days after Clinton announced, a person with the same user name wrote, “We are in the midst of our biggest gain day yet. You’re close to changing your life, so hang tight! XCLK is the new hot riser!” CrossClick’s stock (listed as XCLK on the over-the-counter market) was indeed rising. By May 6 it had shot up about twelve-fold from where it had been hovering. Tens of millions of shares traded hands on some days, meaning anyone who sold at the peak could have made tens of thousands of dollars in profits. It appeared to be a big success. But a closer look at the company and the PAC suggests a different story. Operating in lightly regulated areas of Wall Street and politics, the two entities were closely entwined and their finances weren’t what they seemed. CrossClick’s shares have sunk back to being nearly worthless, and one of its executives recently described it as insolvent in court records. Meantime, federal campaign reports indicate that Voters for Hillary has spent no money supporting Clinton, or any other candidate for that matter. The great majority of the approximately $500,000 it raised before Clinton announced came in the form of loans, not donations, most of it from registered Republicans. A review of the PAC’s finances shows it flouted federal campaign finance rules and that some of its lenders or their spouses have faced allegations of securities fraud. The links between the company and the PAC show up in financial and political filings. The woman who effectively controls CrossClick is married to the head of the PAC. The PAC’s treasurer is the managing member of a firm that had been another major CrossClick shareholder of the company. It’s unknown who, if anyone, sold CrossClick’s stock at a profit during the spike in its price. Such trades are generally not public unless made by a senior officer or someone with 10 percent of all shares. CrossClick’s latest disclosures contain no such notice. The company has made no filings with the Securities and Exchange Commission since November, and its last annual report covered the period ending in December 2014. Kurt Kramarenko, the CEO, didn’t respond to messages left at numbers associated with him. More:
Billionaires Are Allowed to Pay for People to Sue Their Enemies
One of the weirder court cases in recent memory became even stranger this week when news broke that Hulk Hogan’s lawsuit against Gawker was being secretly funded by Peter Thiel. The Silicon Valley billionaire is best known for co-founding PayPal, funding Facebook and holding libertarian political views. But his long-running hatred for Gawker is no secret, either. The outsize influence of rich people and organizations has been top of mind recently, between Bernie Sanders’s critique of modern campaign funding and the controversy over whether Facebook suppresses conservative viewpoints. These are big, systemic questions. By contrast, Thiel’s vendetta against Gawker is uncomfortably personal. His beef with Gawker dates at least to 2007, when the website outed him as gay. Hogan’s lawsuit similarly accused Gawker of treating his private life as news—in this case by publishing a video of the former wrestler having sex with a friend’s wife. By quietly backing the lawsuit, which ended in a $140 million jury verdict, Thiel has left the impression that his real aim is to put Gawker out of business as vengeance.
There’s no question that Thiel is allowed to pay someone else’s legal bills, says Clay Calvert, the director of the Marion B. Brechner First Amendment Project at the University of Florida. Nonprofit organizations often work pro bono for individuals who want to take on institutions with ample financial resources, he notes. “He’s entitled to fund this, and the lawsuit was obviously not frivolous,” he said. “Hogan won in front of a jury.” Calvert says that ethical questions would arise if Thiel was surreptitiously pushing legal action against a competitor to gain a commercial advantage. So-called litigation finance, where investors help fund a lawsuit in exchange for a portion of the potential winnings, has also been controversial. But the problem of rich guys funding lawsuits to satisfy personal vendettas doesn’t lend itself well to policy solutions, Calvert argues. Amy Adler, a professor at New York University who follows First Amendment issues, says she’s torn by the Gawker case in general, and the revelation about Thiel specifically. She points to the decision by Hogan’s lawyers to change their approach so that Gawker couldn’t pay a settlement through an insurance policy. This increased the threat to Gawker’s existence, even while potentially lowering the financial upside for Hogan, whose real name is Terry Bollea. “It seems irrational unless your goal is to shut down a news organization, if you can call Gawker a news organization. That’s what worries me,” Adler said. She added that Thiel could have pursued a legal claim against Gawker if he felt personally wronged. More:
It Happened in Vegas: How Billy Walters Saw a Hot Hand Go Cold
Southeast of the Las Vegas Strip, on the deserted fairways of Stallion Mountain Golf Club, the signs were everywhere: Billy Walters was running out of luck. For three decades Walters, often considered the most successful sports gambler in the country, had fed on the heady exuberance of Sin City. Nowhere else was the boom wilder, the consumption more conspicuous. By the early 2000s, he’d built a business empire with interests ranging from gambling to real estate, from golf courses to car dealerships. Like Vegas itself, he was headed for a fall. Today, with Walters at the center of an insider-trading saga involving the golf champion Phil Mickelson, the story of how those businesses came together — and, at times, came apart — sketch out a crucial back story: Walters, king of the high rollers, had seen his hot hand go cold. Like many Nevadans, Walters was hit hard when the bottom fell out of Vegas in the mid-2000s. Documents filed in connection with several lawsuits over the past decade chronicle how the financial pressures were mounting at around the time he embarked on what authorities say was a scheme in which illegal stock tips helped him generate some $43 million in profits and avoided losses.
Mickelson was not accused or wrongdoing. Walters has categorically denied wrongdoing, except in a 1982 case in Kentucky in which he pleaded guilty to a bookmaking-related charge and paid a $2,000 fine.
“Mr. Walters and his counsel look forward to his day in court, where it will be shown that the prosecutors’ accusations are based on erroneous assumptions, speculative theories and false finger-pointing,” Walters’ attorney, Barry Berke, said in response to the insider trading charges. The third figure in the case, Thomas Davis, the former chairman of Dean Foods, has agreed to plead guilty and cooperate in the case against Walters. For details on Thomas Davis’s involvement in the case, click here.
Where More Women Are on Boards, Executive Pay Is Higher
Appointing more women to corporate boards has long been viewed as a good thing for a company’s performance and for society as a whole. But gender diversity among directors carries another benefit, 2015 proxy filings show: a bigger paycheck for the company’s chief executive. An analysis of C.E.O. pay at 100 large companies last year by Equilar, a compensation research firm in Redwood City, Calif., found that companies with greater gender diversity on their boards paid their chief executives about 15 percent more than the compensation dispensed by companies with less diverse boards. In dollars, this translated to approximately $2 million more in median pay last year among these companies. This data, which comes from a smaller set than Equilar’s broader study of pay at the top 200 companies, doesn’t necessarily prove cause and effect, of course. There could be other reasons for the disparity, too. The more diverse companies could be bigger or more profitable than average, for example. Still, it stumped me. For some reason, I had expected women directors to stand tougher on pay issues. But Nell Minow, a longtime expert on corporate governance, was unsurprised by the findings. “It’s very difficult for women to get on boards, and I think they are under even more pressure to go along and get along,” said Ms. Minow, a vice chairwoman at ValueEdge Advisors, a consulting firm that works with shareholder groups on compensation and other issues. “The culture of the boardroom is to vote yes. You want to stay on the board, don’t you?” Today, roughly one in five directors at a wide array of public companies is female, Equilar said. That’s up 31 percent over the last five years.
Verizon’s Biggest Advantage in the Yahoo Bidding War
Four years into C.E.O. Marissa Mayer’s tenure at Yahoo, the turnaround strategy she was expected to enact to save the $35 billion Internet giant isn’t going according to plan. Instead, Yahoo put itself up for sale earlier this year. It’s seeking bidders for its core Internet business, which consists of its mail services, search features, and its media properties, and buyers could pay anywhere between $2 billion and $8 billion for them. Telecom giant Verizon is considered to be the front-runner, though rival AT&T is also said to be bidding. Verizon may have a leg up thanks to Bank of America, a former Yahoo adviser, Reuters reports. Verizon is reportedly working with Bank of America and a number of other investment banks on its Yahoo bids, which could give Verizon some insight into the beleaguered Internet company, which has been tight-lipped about its finances. Last year when Yahoo explored spinning off its stake in Chinese e-commerce giant Alibaba, Bank of America was Yahoo’s lead adviser. Besides its “intimate knowledge” of Yahoo, Bank of America could also help finance a bid. Besides Bank of America, Verizon is also working with Allen & Company, LionTree LLC, and Guggenheim Partners. The second round of bids for Yahoo’s core Internet business are due on June 6, according to Reuters. Presumably, Bank of America would have some conflict-of-interest measures in place that would preclude it from simply handing Verizon a complete rundown of Yahoo’s finances. But adding the bank to its team adds intrigue to a high-profile—and long-brewing—corporate narrative. Other bidders include private-equity firm TPG, billionaire investor Dan Gilbert (who is rumored to have financial backing from Warren Buffett), and a group including Bain Capital and former Yahoo chief Ross Levinsohn, who left the company when Mayer took over a few years ago. While the company has a $35 billion market capitalization, little is known about Yahoo’s real value. Much of its market cap comes from its stake in Alibaba, the Chinese e-commerce giant, and may not actually reflect the value of Yahoo’s own services. A Yahoo “sale book” given to potential buyers and looked at by Recode reportedly obfuscated whether parts of Yahoo were making any money at all. Verizon could use all the intelligence on Yahoo’s finances it can get from Bank of America.
Can Donald Trump Win? These Battleground Regions Will Decide
With Donald J. Trump pulling even or ahead of Hillary Clinton in a series of recent national polls, the once unthinkable has become at least plausible. But if he is to be elected the 45th president, he must compete on a political map that, for now, looks forbidding. In the Republican primaries, he proved a master of nationalizing the political debate, appealing to voters across regional lines with jeremiads about immigration and crime that captivated an almost uniformly white primary electorate. At the outset of the general election, Mr. Trump has dominated the day-to-day political combat on national television and social media. In the general election, however, his fate will be determined not by his Twitter followers or a relatively homogeneous Republican electorate, but by a set of interlocking and increasingly diverse regions, home to some 90 million Americans, that hold many of the 270 electoral votes he needs to win. Republicans enter the general election at a hefty disadvantage: Since the 1992 campaign, 18 states have voted consistently for Democrats in presidential elections, giving their party a firm foundation of 242 electoral votes to build upon. And in the four regions likely to decide the presidency — Florida, the upper Southeast, the Rust Belt and the interior West — Mr. Trump faces daunting obstacles, according to interviews last week with elected officials, political strategists and voters. Of course, months remain before voting begins, and this political year has defied many predictions. But if Mrs. Clinton clinches the Democratic nomination as expected, she may find an electoral bulwark in these coveted swing-state voters. More:
Not Even T.S.A.’s Pre-check Can Save You from Long Airport Lines
The Transportation Security Administration has become public enemy No. 1 in recent months thanks to maddeningly long security lines at major airports throughout the country. As wait times have ballooned, some travelers have turned to T.S.A.’s pre-check as an out, but it seems that the program—designed with the sole purpose of getting people through security faster—might not even help fliers circumvent long airport lines. The program’s detractors argue that it is simply a profit source for the T.S.A. that fails to expedite travel and address the spike in the number of travelers passing through airports. Between 2011 and 2016, airport-security-checkpoint traffic has surged by 15 percent, while the number of security screeners has fallen over that same period. Receiving as many as 10,000 applications per day for the pre-check program, the T.S.A. is facing a major backlog with applicants in some cases waiting months for approval, Fox News reports. Even travelers who have paid the $85 and undergone an F.B.I. background check, fingerprinting, and a face-to-face meeting, however, don’t have the option to use their pre-check status at all airports. A T.S.A. spokesperson told Fox News that the pre-check line isn’t always open if the demand isn’t there. “Ideally we would like to have more pre-check lines. Similar to a highway toll, the goal is to be open,” he said. But more lines mean more staff, which seems very unlikely due to T.S.A. budget cuts and a 10 percent drop in the number of full-time T.S.A. employees since 2013. At a House Homeland Security Committee hearing earlier this week, T.S.A. administrator Peter Neffenger said the department is too underfunded and understaffed to handle the 740 million people expected to go through airport security checkpoints in the U.S. this year. T.S.A. has faced withering criticism from Congress for airport inefficiencies and for habitually failing security tests conducted by the Department of Homeland Security, Vice reports. Earlier this week, Neffenger fired the T.S.A.’s head of security, Kelly Hoggan, who, despite routine security lapses, pocketed $90,000 in bonuses during his first 12 months in the top security position. More:
Dozens of Secret Service Agents Disciplined for Leaking Info About Congressman Investigating Them
On Thursday, the Secret Service apologized for yet another scandal, this time for leaking the private information of the congressman investigating them for their other scandals. NBC News reports that more than 40 agents received disciplinary punishments after they shared and leaked the Secret Service application of Representative Jason Chaffetz (Republican, Utah), the chairman of the House Oversight Committee. Chaffetz has been leading investigations into the agency’s numerous security failures over the past several years. Back in 2015, Chaffetz was investigating reports that two agents had drunkenly crashed into a White House barricade. That inquiry came on the heels of a string of embarrassments, including numerous gate-jumpers who had managed to make their way onto the White House lawn and into the building, and a prostitution scandal in Cartagena. Within months, however, news emerged that Chaffetz applied to the Secret Service in 2003, rejected because there were more qualified candidates, and a subsequent investigation by Homeland Security’s inspector general found that 41 Secret Service employees had accessed the application roughly 60 times. Chaffetz, who had not disclosed that he’d applied to the Secret Service before investigating them, explained to the Daily Beast that he had been rejected from the agency because he was “too old” by the time he applied, shortly after 9/11.
The Washington Post reported in September that the leak was in retaliation for Chaffetz’s investigation into their competency. “Some information that he might find embarrassing needs to get out,” wrote assistant director Edward Lowery, mentioning the file which was, at the time, being passed around the office. Punishments ranged from a mark in some agents’ personnel files to suspensions without pay. Privacy laws, ironically, prevent the agency from revealing whom it has disciplined. The agent who leaked the application to the press resigned. In a statement, Jeh Johnson, who runs the Department of Homeland Security, said he was “appalled” by the agents’ behavior.
The Seven Broken Guardrails of Democracy
A long time ago, more than 20 years in fact, the Wall Street Journal published a powerful, eloquent editorial, simply headlined: “No Guardrails.” In our time, the United States suffers every day of the week because there are now so many marginalized people among us who don’t understand the rules, who don’t think that rules of personal or civil conduct apply to them, who have no notion of self-control.
Twenty years later, that same newspaper is edging toward open advocacy in favor of Donald Trump, the least self-controlled major-party candidate for high office in the history of the republic. And as he forged his path to the nomination, he snapped through seven different guardrails, revealing how brittle the norms that safeguard the American republic had grown. Here’s the part of the 2016 story that will be hardest to explain after it’s all over: Trump did not deceive anyone. Unlike, say, Sarah Palin in 2008, Trump appeared before the electorate in his own clothes, speaking his own words. When he issued a promise, he instantly contradicted it. If you chose to accept the promise anyway, you did so with abundant notice of its worthlessness. For all the times Trump said believe me and trust me in his salesman patter, he communicated constantly and in every medium that there was only thing you could believe and trust: If you voted for Donald Trump, you’d get Donald Trump, in all his Trumpery and Trumpiness.
Politicians are in Your Business. Isn’t it Time You Got in Theirs?
Who should set standards for delivery of medical care? Physicians or lawmakers? While it’s not a trick question, it is a constant battle to ensure the practice of medicine remains evidence-based, and that standards for provision of that care are set by those in the profession, not bureaucrats or elected officials. There are hundreds of individual advocacy groups pushing for specific causes before Congress and the Legislature each year, more commonly known as “special interest groups.” Each special interest group has an agenda, some at odds with medicine. Often, special interest groups advancing non-widely accepted practices turn to regulatory and lawmaking bodies to bypass the need for an evidence-basis and in its place mandate by law or regulation a standard for diagnosis, treatment, etc., of X-disease or X-condition. Defeating mandated standards of care by non-physicians is one of the Medical Association’s chief objectives each year. These mandates are not only lacking an evidentiary basis, they also could subject patients to unnecessary treatments and expose physicians to a barrage of lawsuits. In the past few years, drug companies and special interest groups focused on specific diseases have increased their presence in State Legislatures across the country, proposing seemingly innocent-sounding, but self-serving, legislation. Often, these proposals manifest themselves in requirements for information disclosure to patients upon certain diagnoses being made by the physician. That physician would then be required to provide the patient with information that may be entirely unnecessary. For patient safety, hassle factor and liability reasons, the Medical Association opposes such legislation. “It’s just a piece of paper,” a lobbyist pushing a drug company bill once told me, befuddled. “I don’t see why your organization wouldn’t want to help prevent this disease by having your members hand out this critical information.” The “critical information” would have benefitted that company and could have placed physicians – both those handing out the information and those that didn’t – in a liability lurch. If state law says a physician is supposed to hand out a piece of paper to a patient with X-diagnosis and the physician doesn’t and the patient suffers, that doctor could find him or herself in a bind even though the standard set by lawmakers was not evidence based. The same could be true for a physician going against state-mandated standards in favor of evidence-based and specialty-established guidelines. If the patient suffers, the physician could be forced to defend against a lawsuit. It is critical that such mandated standards are nipped in the bud. Another approach taken by some special interest groups is to mandate the course of treatment. The potential outcome is the same – anytime non-physicians set standards of care there is significant risk to all involved, patient and physician alike.
Nonprofit Founder Claims Bob Riley Directed Donations to Hubbard-Owned Businesses
MONTGOMERY—How did then-Governor Bob Riley and Chairman of the ALGOP Mike Hubbard route almost a million dollars in republican campaigns contribution through a nonprofit and back to a Hubbard owned company? “Someone from the governor’s [Bob Riley’s] office would call and say you’re getting a check for $200,000 and you’re going to get a bill at the same time from [Mike] Hubbard’s deal and you need to pay that, that is what that money is for.” Those are the words of A. Eric Johnston a Birmingham-based attorney and anti-gambling advocate who explains the operational relationship between Bob Riley, Mike Hubbard and his 501c(4), Citizens for a better Alabama. According to Johnston, efforts by then-Governor Bob Riley allowed over a million dollars to flow through his nonprofit, Citizens for Better Alabama, into to the hands of Mike Hubbard. The picture Johnston paints appears to be a brazen orchestration of campaign funds by a sitting governor to benefit his most faithful ally, Mike Hubbard.
Citizens for Better Alabama (CBA) was a Birmingham-based, tax-exempt group that was the public face of opposition to Sweet Home Alabama, and to shut down legal casinos operated at VictoryLand and Country Crossings. According to archived versions of its website, the CBA – run by A. Eric Johnston – has “been an advocate for the family since 1991.” In the beginning according to Johnston CBA did not have a lot of money to fight gambling in Alabama. In a 2009, Johnston wrote a letter, denouncing the deceptive ads being run for the Sweet Home Alabama plan. In the letter he wrote, “The Citizens for a Better Alabama may not have the millions of dollars it would take to combat these deceptive ads on the airwaves, but we do have the truth on our side.”
Who are the Players for Day Five?
MONTGOMERY—Today begins the fifth day in the felony criminal trial against Speaker Mike Hubbard, who is charged with 23 counts of public corruption. The State, on Friday, released the names of twelve witnesses who will give testimony on a range of topics including Hubbard’s role in placing 23 words in the Medicaid portion of the 2014 State General Fund Budget that would have given his client, American Pharmacy Cooperative Inc. (APCI), a monopoly over the multi-million dollar program. Scheduled to give testimony are Bill Eley and Ferrell Patrick. Eley is an in-house lobbyist for APCI, with a long history as a Montgomery lobbyist. In his plea agreement to avoid jail time, former Rep. Greg Wren said, those who attended the meeting about the language were Hubbard, and “other legislators, legislative staff, members of the Speaker’s staff, and lobbyists affiliated with Pharm Co-op.” Eley is believed to be one of the “lobbyists” and Patrick is another. As a contract lobbyist for APCI, Patrick hired the firm owned by Dax Swatek, Tim Howe and John Ross to aide in the lobbying effort. Howe and Ross testified on at the first day of trial. Also set to testify about Hubbard’s relationship to APCI is veteran politico Bill O’Connor, who has worn many hats in his long career and include a stint as President of the Business Council of Alabama (BCA). O’Connor is believed to have suggested Hubbard be hired by APCI. Former Ethics Commission Director James (Jim) L. Sumner is scheduled to testify. He served as director from 1997 until he retired in 2014. There will be testimony given with regard to Hubbard asking for and receiving money in the form of investments in his business interest, Craftmaster Printers, from lobbyists or principals. Hubbard received $150,000 from Sterne Agee Group, Inc. Jon Sanderson, former Chief Operating Officer, Chief Financial Officer and Corporate Secretary at Sterne Agee Group, Inc., is on deck today, as is former State Senator Steve French, who works at the investment group.
Suspended Alabama chief justice sues state judicial panel
Suspended Alabama Chief Justice Roy Moore filed a federal lawsuit Friday against the state agency that leveled ethics charges against him, claiming the state law that led to his removal from the bench is unconstitutional. The suit against the Alabama Judicial Inquiry Commission asks a court to order Moore’s immediate reinstatement as head of Alabama’s court system. The lawsuit challenges the constitutionality of a provision in state law that mandates the automatic suspension of state judges once ethics charges are filed. Given the power to suspend judges, the suit claims, the commission “can wield its significant power over Alabama’s elected judges — including the chief justice of the Alabama Supreme Court — based upon trivialities, viewpoint-based objections, differences in legal interpretation, political motivations or, even worse, to protect itself from investigation of violations of its own rules.” “We are asking the federal court to strike down the automatic removal provision in the Alabama State Constitution and we are asking that Chief Justice Moore be immediately reinstated,” said Mat Staver, an attorney for Moore.
An attorney for the Judicial Inquiry Commission did not immediately respond to an email seeking comment on the lawsuit, filed in federal court in Montgomery. Staver said Moore would soon file other documents seeking dismissal of the ethics charges. The commission is a state agency that investigates complaints against judges. It filed a complaint earlier this month accusing Moore of willfully failing to respect the authority of federal court decisions that cleared the way for gay marriage. The Alabama Court of the Judiciary, composed of judges and lawyers, will hear the case. Moore, a conservative Christian Republican, opposes same-sex marriage on the basis of faith and the law. In January, he issued an administrative order to state probate judges that said state laws against gay marriage remained in place months after the U.S. Supreme Court effectively legalized gay marriage nationwide. Moore was previously removed as chief justice in 2003 over his refusal to follow a federal judge’s order requiring the removal of a Ten Commandments monument that Moore placed in the rotunda of the state’s main judicial building. Voters overwhelmingly returned Moore to the post in 2012.
Minimum wage hike may force Wesley’s Boobie Trap to replace dancers with robots
Matt Mitchell is the creator of The Ostrich, Walker County’s least trusted news source, and was the 3rd round draft pick of the Denver Nuggets. Roughly half of what he writes is untrue.
After talks of raising the minimum wage have stirred across the country, Wesley’s Boobie Trap CEO David Sellers warned that a drastic increase to $15 an hour could force him to fire his staff and replace them with exotic-dancing robots. “The Trap,” as it is known by loyal patrons, is a popular bar in Sayre, a small community on the outskirts of Jefferson County. “It’s cheaper to build a dancing robot than it is to hire another Jasmine or Tiffany at $15 an hour,” explained Sellers. “Our dancers average about 3 hours of work a night. That’s about….hold on….carry the one…well, it’s a lot of money. I promise you that.”
Sellers admits he’s never actually built a robot before, but he has enrolled in a welding class at nearby Bevill State Community College. Until he completes his first fully functional robot, dancers will likely be replaced by those large inflatables that violently swing their arms. “The car lots don’t use those inflatables at night,” said Sellers. “So there ain’t no reason why they can’t make a little extra money.” Sellers’ statements about the robotic replacements spread quickly to The Trap’s human dancers, who were not amused by the CEO’s threats. “Sure, we both take dollar bills, but can a dancing vending machine do THIS? Or how about THIS?” shouted a visibly angry Crystal as she did things we cannot describe without testing the limits of your employer’s web filter. To prove his regular customers wouldn’t notice the difference between a typical human and robot dancer, Sellers pushed one of his prototypes onto the stage during a busy Saturday night. Comprised mostly of lawnmower scraps, the Tiffany 5000 twirled in front of customers for roughly 20 seconds before bursting into flames. Only one customer, known simply as “Lester,” sustained an injury after he reportedly approached the blazing Tiffany 5000 to request a private dance. While his prototype was a complete loss, Sellers deemed the trial run a huge success. Surveys obtained from customers that night ranked Tiffany 5000 as the 2nd most entertaining dancer, surpassed only by Lester, who performed the stop, drop, and roll flawlessly. “This is a game changer,” admitted Sellers. “I lost an entire robot tonight, but I’ll just build another one tomorrow. If one of these girls loses a foot, they’re out of commission for days. And when they do come back to work they’re falling off the stage every other dance.” Despite Sellers’ enthusiasm, some employees remain highly skeptical. Eileen, The Trap’s most tenured one-legged dancer, said she thinks this robot talk is just a passing fad. She believes the Average Joe comes to Wesley’s to escape the modern, industrial world and enjoy a simpler time when men displayed their approval for women by banging wooden blocks on the table.
“When I started to work here, there was no such thing as a minimum wage,” stated Eileen. “Then Obama was elected and the government decided everyone should make at least a nickel an hour. Next thing you know, I’m being replaced by a mannequin on roller skates.” The mannequin dancers lasted less than a week after one accidently rolled into the parking lot and across highway 78, where it was immediately run over by a coal truck. “The customers were devastated,” recalled Eileen. “Lester still won’t talk about it.”
At press time, Lester was still in the hospital receiving treatment for multiple burns and a broken heart. He is expected to return to The Trap tonight, against medical advice.
TRUMP NOT SO RICH? — POLITICO’s Ben White: “Donald Trump claims a net worth of more than $10 billion and income of $557 million. But he appears to get there only by over-valuing properties and ignoring his expenses … POLITICO spoke with more than a dozen financial experts and Trump’s fellow multi-millionaires about the presumptive Republican nominee’s financial statement. … Their conclusion: the real estate magnate’s bottom line — what he actually puts in his own pocket — could be much lower than he suggests.
“Some financial analysts said this, and a very low tax rate, is why Trump won’t release his tax returns. … ‘I know Donald, I’ve known him a long time and it gets under his skin if you start writing about the reasons he won’t disclose his returns,’ said one prominent hedge fund manager who declined to be identified by name so as not to draw Trump’s ire. ‘You would see that he doesn’t have the money that he claims to have and he’s not paying much of anything in taxes.’”
THE CASE AGAINST TRUMP’S NUMBERS — “The case against Trump’s accounting of his wealth: His businesses apparently generate a lot of revenue but may not put much cash in his pocket; He assigns himself a net worth that is impossible to verify and may be based in part on fantasy; And he is selling assets and increasing debt in ways that suggest a man scrambling for ready cash. In response to a list of questions for this story, Trump campaign spokesperson Hope Hicks emailed: “The report speaks for itself.” If it does, the report does not speak clearly.
The financial disclosure form showed Trump adding fresh debt of at least $50 million, though a campaign press release said Trump was using increased revenue to reduce his debt, which now stands at at least $315 million and possibly over $500 million. The disclosure also suggests that Trump sold fund assets to raise as much as $7 million in cash and individual securities to raise up to $9 million more. …
WHAT’S THE REAL NUMBER? — “There is no dispute that Trump owns many valuable properties that contribute to a high net worth. But there is a great deal of dispute about how high that worth actually is. The financial disclosure form lists assets worth at least $1.5 billion but the ranges included are far too wide to determine anything close to a precise figure. …
“‘Trump has a tendency to value his brand at a very high amount but these are usually intangible valuations just pulled out of thin air,’ said Steve Stanganelli, a certified financial planner at Clear View Wealth Advisors. ‘And he appears to be reporting gross revenue. There is a huge difference between that and net income. What really matters is what you put in the bank.’” http://politico.pro/1sIgFuj
BANKS LIKE TPP MOVE — From a senior financial services exec: “The Administration has made substantial progress resolving the concerns of the financial industry on the data localization provisions in TPP. We’re waiting to see the actual text, and certainly not everything we wanted, but they’ve moved very far on this and it should allow the industry to bring their support to the business community efforts to secure passage. There will be some on the Hill who want the industry to hold out for more or move the goal posts, but we’ll play it straight and provide our support.”
TRUMP HOTEL BOOKINGS DROP — Via Priceonomics: “Focusing on Trump Hotels’ most-booked locations, we compared bookings this year to the previous year … The results? Bookings at Trump Hotels are down big time: they have decreased 59 percent compared to the same period last year on Hipmunk. It seems that customers willing to spend $500 a night on a Trump Hotel room may not be fans of Trump the political candidate” http://bit.ly/1sXJ0xB
CHAMBER TO FOCUS ON SENATE — WSJ’s Kristina Peterson: “The country’s biggest business lobby will launch an initiative Tuesday to deploy influential Republicans to raise funds for tight Senate races, hoping to keep the GOP from losing control of the chamber in November. … The U.S. Chamber of Commerce’s ‘Save the Senate’ effort is being led by both Republicans who back the party’s presumptive presidential nominee, Donald Trump, and those who have balked at doing so, in a shared quest to retain the Senate majority” http://on.wsj.com/1WVXDx8
GOOD TUESDAY MORNING — Welcome back! Hope everyone got a breather over the long weekend. MM and the family spent some very nice relaxing time in a Jersey Shore town that thankfully has weak cell coverage and in a house with no cable TV. Bliss. Email me on firstname.lastname@example.org and follow me on Twitter @morningmoneyben.
MM TV — For early readers/risers, MM will be on CNBC’s “Squawk Box” at 6:00 a.m. talking 2016.
DRIVING THE DAY — Personal income and spending 8:30 a.m. expected to rise 0.4 percent and 0.7 percent … Case-Shiller Home Prices at 9:00 a.m. expected to rise 0.7 percent … Consumer confidence at 10:00 a.m. expected to rise to 96.0 from 94.2.
COMING FRIDAY: MAY JOBS REPORT — Payrolls expected to show slower growth of 160K on Friday, dragged down by the Verizon strike. Jobless rate expected to stay at 5.0 percent with earnings up 0.2 percent …
IRAQI ARMY MOVES ON FALLUJA — Reuters: “The Iraqi army stormed to the southern edge of Falluja under U.S. air support on Monday and captured a police station inside the city limits, launching a direct assault to retake one of the main strongholds of Islamic State militants. … A Reuters TV crew about a mile (about 1.5 km) from the city’s edge said explosions and gunfire were ripping through Naimiya, a largely rural district of Falluja on its southern outskirts. …
“The battle for Falluja is shaping up to be one of the biggest ever fought against Islamic State, in the city where U.S. forces waged the heaviest battles of their 2003-2011 occupation against the Sunni Muslim militant group’s precursors. Falluja is Islamic State’s closest bastion to Baghdad, and believed to be the base from which the group has plotted an escalating campaign of suicide bombings” http://reut.rs/24huFqW
WORLD WORRIES ABOUT U.S. ON TRADE — Mohamed A. El-Erian on Bloomberg View this a.m.: “For some time, tighter monetary policy by the U.S. Federal Reserve was perceived as the largest external economic threat to emerging countries, especially by those countries themselves. … Judging from discussions with officials from those nations, as well as private-sector participants, this may no longer be the case.
“Another concern — the anti-globalization and anti-trade rhetoric of the U.S. presidential election — has pushed worries about the Fed to the No. 2 slot … The resulting threat for emerging countries would go well beyond a decline in international trade that would hurt them in two ways: By shrinking the international markets for the goods and services they export and earn income from, and by reducing the price of their exports” http://bloom.bg/22vewib
ICYMI: GDP UP A BIT — Second estimate showed Q1 GDP rising 0.8 percent, a slight bump from the initial 0.5 percent reading. Hamilton Place Strategies has the details: http://bit.ly/1sHETVD
ECONOMIC SCARS EXPLAIN 2016 — WSJ’s Gerald Seib: “The search for an explanation of this year’s bizarre political climate leads to a basic conclusion: The recession that started in 2007 and the financial crisis of 2008 and 2009 scared and scarred the electorate more deeply and more permanently than has been recognized before. Yes, the economic statistics say there’s been a recovery — a relatively nice one at that.
“But mentally, many Americans have never recovered, and perhaps never will. The experience has altered their attitudes about the political and economic systems and their leaders, and left them willing to consider risky alternatives. … What’s new here isn’t that the recession was traumatic, of course, but a dawning realization that its psychological aftereffects have been so deep and long-lasting” http://on.wsj.com/20QCXoZ
CLINTON TO GET AN OBAMA BOOST? — Bloomberg: “Hillary Clinton and Donald Trump are running neck-and-neck in the polls, but Clinton’s chances look much stronger based another set of numbers: President Barack Obama’s approval ratings. A president’s popularity, combined with strong U.S. economic data, historically have proven better predictors than horse-race polls this far from the general election.
“‘Elections are a choice but a lot of that choice is about whether or not people want to stay the course,’ said Christopher Wlezien, a University of Texas political science professor … . ‘The referendum choice is going to be based a lot on what people think of the president and how the economy is doing.’ That’s good news for Clinton, who served as Obama’s secretary of state and has clung tightly to his record “ http://bloom.bg/1THBc9h
TRUMP’S GLOBAL BUSINESS RAISES ISSUES — WP’s Kevin Sullivan: “If elected, Trump would be the first U.S. president to preside over a global business empire, one that includes seven resorts, hotels and other projects in foreign countries, 11 more under construction and plans for many more.
“Among them are properties in nations where the United States has important economic and national security concerns — such as Turkey, Indonesia, the United Arab Emirates and Azerbaijan — that could put Trump’s personal business interests on a collision course with the duty of a president to act solely in the best interest of the United States” http://wapo.st/1so2cnD
TRUMP MOVES TRADEMARKS TO DELAWARE — Via Bloomberg’s Lynnley Browning: “As Trump prepared for the Republican primaries, he quietly transferred dozens of his most prized assets, the ‘Trump’ trademarks that adorn everything from hotels to ties to his U.S. golf courses, into a new Delaware-based company — a move that offers him a chance to cut his income-tax bills. … By shifting more than 110 registered or pending trademarks to Delaware, Trump consolidated them in a state that doesn’t tax income from royalties on intellectual property”
U.S. ACCUSED OF UNDERMINING WTO — FT’s Shawn Donnan: “The US has been accused of being a bully and undermining the World Trade Organisation’s dispute system after vetoing the reappointment of a South Korean judge. The EU and legal scholars have warned that the veto threatens the impartiality of the global trade court. US opposition comes at a time when many believe Washington has been losing faith in the WTO and is preparing for a big fight with China over how and when economies can deploy anti-dumping defences against cheap imports.
“The US told fellow WTO members last week that it could not support the reappointment of Seung Wha Chang, a respected South Korean expert in international trade law whose four-year term on the seven-member resident appellate body ends on Tuesday. Washington cited the body’s decisions in three cases involving the US and one other as examples of what it said was a pattern of WTO panels overreaching and issuing ‘abstract’ decisions.” http://on.ft.com/1Y08oye
CHINA LOVES TRUMP! — The Daily Beast’s Tim Mak: “If … Trump wins the Republican nomination, his victory will be celebrated not only in Mar-a-Lago, but also in Beijing. The Chinese Communist Party’s media conduits are swooning over the vulgar, politically-incorrect frontrunner, telegraphing that if Trump were to rise to a position of real power, it would be a boon for the country’s regional ambitions.
“Chinese-language press and state media — especially foreign policy columnists — have written extensively and favorably about Trump’s geopolitical views. Many pro-Beijing writers have looked past his threats of a trade war with China, viewing his willingness to undercut America’s existing alliances in Asia as an incredible strategic opportunity” http://thebea.st/1sHGnzg
ALSO FOR YOUR RADAR —
FISCAL CONFIDENCE AT 49 — Via the Peter G. Peterson Foundation: “As the election season continues, the nation’s fiscal health remains a top concern for voters, according to the Peter G. Peterson Foundation’s May Fiscal Confidence Index … The Fiscal Confidence Index, modeled after the Consumer Confidence Index, is 49 (100 is neutral), indicating the nation’s fiscal health remains a top issue for voters” http://bit.ly/22vdSBf
EX-ZURICH INSURANCE CEO COMMITS SUICIDE — By John Letzing: “Martin Senn, the former chief executive of Zurich Insurance Group AG who stepped aside in December, has killed himself, the company said — the second suicide by a onetime top manager at the company in the past few years. Mr. Senn’s death at age 59 follows the suicide of former Zurich Insurance Chief Financial Officer Pierre Wauthier in 2013. An internal probe at the insurer, conducted under the supervision of Switzerland’s financial regulator, later cleared company leaders of placing an inappropriate amount of stress on Mr. Wauthier. …
“Mr. Senn’s exit from Zurich Insurance capped a difficult period for the company. At the time, Mr. Senn cited Zurich Insurance’s difficulties in revamping its largest business and its failure to seal an ambitious acquisition of U.K.-based RSA Insurance Group PLC. Last February, the company reported a larger-than-expected loss for the fourth quarter and said about 15 percent of its employees would be affected by cost-cutting efforts” http://on.wsj.com/1Wu91As
VERIZON STRIKE ENDS — NYT’s Noam Scheiber: “Verizon reached a series of tentative agreements with unions representing nearly 40,000 striking workers over the holiday weekend, retreating on some of the major points of contention, including pension cuts and greater flexibility to outsource work. … But after a six-and-a-half week strike, the company also gained some important tools for paring down its work force in the coming years. …
“The agreements reached on Sunday and Monday between Verizon and two major unions will most likely bring to an end the work stoppage, which began on April 13. The striking members in both unions, the Communications Workers of America and the International Brotherhood of Electrical Workers, must now vote on the agreements. That is likely to happen in the next two or three weeks, and they are widely expected to approve them. They will return to their jobs beginning on Wednesday as part of a short-term ‘back-to-work agreement.’” http://nyti.ms/1TTBaic
Tuesday, May 31, 2016
10:00 am || Receives the Presidential Daily Briefing
11:15 am || Receives Hurricane Preparedness Briefing; FEMA Headquarters, Washington, D.C.
4:10 pm || Honors the 2016 NCAA Champion Villanova Wildcats men’s basketball team; East Room
All times Eastern
Live stream of White House briefing at 1:00 pm
House and Senate in District Work Periods.