Krebs Daily Report 26 JAN 2016

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


The Islamic State’s strategy to cause death and destruction in Europe

LONDON — Hopes for a year less defined by international terrorism threats were dashed Monday by the European law enforcement agency, which warned that there was “every reason” to expect future attacks in Europe. Rob Wainwright, head of the European Police Office (Europol), said at a meeting of interior ministers that the Islamic State had “developed a new combat-style capability to carry out a campaign of large-scale terrorist attacks on a global stage, with a particular focus in Europe.” Apart from “lone wolf” attacks, Europe increasingly faces the prospect of large-scale, organized, mass terror attacks, according to the agency. The meeting in Amsterdam was held amid heightened fears of terror attacks on European capitals similar to the ones in November in Paris. On Sunday, the Islamic State released a video that featured the Paris attackers and included footage showing some of them executing hostages. “Expect a mujahid to show up to kill you,” the alleged ringleader of the Nov. 13 Paris attacks, Abdelhamid Abaaoud, said in the video. Abaaoud was killed during a shootout with police in a Parisian suburb days after the attacks. The video included general threats against Europe but also showed several landmarks in London, including the Tower Bridge — raising concerns about possible plans by the Islamic State to strike in Britain. Abaaoud reportedly had visited Britain early last year. Despite having returned from Syria, he entered the country on a ferry without being detected by police. Abaaoud also took photos of British landmarks. British authorities estimate that about 800 British extremists have so far gone to Syria and Iraq. Nearly 400 are believed to have returned, according to the BBC. More:

The long history of Muslims and Christians killing people together

In 1683, a vast Ottoman army camped outside the gates of Vienna. For centuries thereafter, the siege and final decisive battle that took place would be cast as a defining moment in a clash of civilizations — that time the forces of Islam were halted at the ramparts of Christendom. Yet look just a little bit harder, and that tidy narrative falls apart. The Ottoman assault had been coordinated in league with French King Louis XIV. And perhaps more than half of the soldiers seeking to capture the Austrian capital were Christians themselves. There were Greeks, Armenians, Hungarians, Bulgarians, Romanians, Serbs, all fighting alongside Arabs, Turks, Kurds and others in the Ottoman ranks. One of the main figures leading the Turkish charge was Imre Thokoly, who was a Protestant born in what’s now Slovakia and who was an avowed Hungarian nationalist. Tens of thousands of Hungarian peasants who were angry at the rapacious behavior of the Catholic Church, and the imperial Habsburg dynasty in Vienna had rallied to Thokoly’s banner. It reflected, writes British academic Ian Almond in his 2009 book “Two Faiths, One Banner: When Muslims Marched With Christians Across Europe’s Battlegrounds,” how “little use terms such as ‘Muslim’ and ‘Christian’ are to describe the almost hopelessly complex web of shifting power-relations, feudal alliances, ethnic sympathies and historical grudges” that shaped much of European history. That sense of nuance fades over centuries, and certainly wasn’t apparent last year when another Hungarian nationalist — the country’s current Prime Minister Viktor Orbán — cited the legacy of the Ottoman conquest to justify keeping Syrian refugees from passing through Hungary’s borders. “I have to say that when it comes to living together with Muslim communities, we are the only ones who have experience because we had the possibility to go through that experience for 150 years,” Orbán told reporters last year, apparently referring to the period of dynastic warfare and mayhem that was sparked by the initial Ottoman invasion in the 16th century.

A Tale of the Pure at Heart

Uriel Goldman’s bushy eyebrows knit together in dismay when he sees a cockroach skittering across the tiled floor near the entrance of his cramped Guatemala City apartment. Despite the warm spring weather, he is dressed in a heavy calf-length coat, velvet wide-brimmed hat, and bulky shoes with stockings — all black. He maneuvers his broad frame into the next room to grab a broom, careful to avoid a gantlet of obstacles scattered around the awkward space: a mini-fridge, a folded-up mattress, a basket of laundry, a bag of groceries. He gently sweeps the bug out the door and into an equally cluttered stairwell. Goldman, who is in his mid-40s, sits down in a blue plastic chair and sighs. “It’s the seventh month,” he says, “that we are in this terrible situation.” Seven months of pretending that a run-down office building that once housed Guatemala’s immigration directorate is a suitable place for 14 families to live, sleeping six or more people to a room. Seven months of dealing with scores of restless kids who are tired of being cooped up indoors because their parents think the city’s Zona 9 neighborhood, thick with traffic and peppered with sporadic crime, is no place for children to play. But they’re here, Goldman says of his family and friends, because they have no other choice. Goldman is a member of and spokesman for Lev Tahor (“Pure Heart” in Hebrew), an ultra-Orthodox Jewish sect that has been bouncing around the Western Hemisphere for the better part of two decades. Before winding up in Guatemala City, Lev Tahor lived for several months in San Juan La Laguna, a small Mayan village about 100 miles west of the capital. In August 2014, however, village leaders ordered the group to leave. They cited irreconcilable differences: Locals had complained that Lev Tahor’s men refused to touch the hands of female shopkeepers and that sect members bathed nude in the lake. According to Goldman, authorities threatened to cut off electricity and water if Lev Tahor didn’t go. So it did, with followers’ earthly belongings strapped to the roof of one of Guatemala’s iconic Technicolor “chicken buses.” Goldman insists that persecution has prompted all of Lev Tahor’s peregrinations — from Israel, where the group formed, to the United States, then to Canada, San Juan La Laguna, and finally Guatemala City. “It’s political,” he says. “It’s because of our political religious ideas.” The sect’s principles are controversial. On a philosophical level, it believes Israel should not exist because only God can proclaim a Jewish state, and only after the Messiah’s return. Lev Tahor is also deeply conservative. Its women cover their bodies and hair at all times (they wear burqa-like shrouds beginning at age 3), and all followers, of which there are about 200, limit contact with the outside world. Children are home-schooled, and the group’s leadership arranges marriages. But there is a different, more nefarious version of this narrative, one in which Lev Tahor’s moves have not been escapes from discrimination, but flights from justice. The group’s critics, including former converts, estranged families of followers, religious scholars, and law enforcement officials, say Lev Tahor is dangerous. They describe sadistic behavior that goes on behind closed doors, including child abuse, brainwashing, drug use, and forced marriages of teenage girls to men as many as 20 years their senior. “It’s definitely a cult,” says David Ouellette of the Centre for Israel and Jewish Affairs, a Canadian advocacy group that fights anti-Semitism and promotes Jewish interests. “There’s no question about it.” More:

For Putin, For Stalin

Do you want to look like Joseph Stalin? There’s an app for that. The recently launched MSQRD lets users change their selfies to resemble, among other things, a bunny, a zombie, or a mass-murdering megalomaniacal dictator. Judging by the app’s popularity in Russia, it’s succeeded at capitalizing on the national mood. Stalin is back. Long gone are the years when Soviet leader Nikita Krushchev meticulously de-Stalinized Soviet life. In 2015, the Soviet dictator’s resurrected cult of personality reached new heights. In May, Communist Party officials in Lipetsk erected a new Stalin bust. In July, the tiny village of Khoroshevo opened a museum focused on his military exploits. And in December, Communist activists in the central Russian city of Penza opened a “Stalin Center,” the goal of which is to “popularize and implement the practices that were in use during Stalin times and are still relevant today.” None of this was mandated from above — but neither is any of it an accident. Over the last few years, President Vladimir Putin has presided over the rehabilitation of one of the 20th century’s greatest monsters. Bedeviled by the country’s economic decay and fearful of dissent, he has turned to the ghost of Stalin help to rally the Russian people and to prepare them for the sacrifices that lie ahead. The social compact that framed Putin’s first two presidential terms (as well as his four years as prime minister) began to crumble some time around the time of his third presidential inauguration in 2012. The unspoken deal between Putin and the Russian people had gone something like this: He would relieve them from the instability and economic crises of the 1990s, and in return, Russians would allow him to run the country as he saw fit. For many years, this was a successful endeavor. The Russian people lived increasingly comfortable lives while Putin consolidated power. But the protests of 2012 and 2013 that followed his fraudulent reelection made it clear that, while many Russians enjoyed their economic success, some were no longer happy to leave politics to Putin. More:


Surge of Americans tests limits of Cuba’s tourism industry

Cuba’s tourism industry is under unprecedented strain and struggling to meet demand with record numbers of visitors arriving a year after detente with the United States renewed interest in the Caribbean island. Its tropical weather, rich musical traditions, famed cigars and classic cars were for decades off limits to most Americans under Cold War-era sanctions, but those restrictions are fading.Once  a rare sight, Americans are now swarming Old Havana’s colonial squares and narrow streets along with Europeans and Canadians. Entrepreneurs and hustlers have responded by upping prices on taxi rides, meals, and trinkets. Cuban women who pose for pictures in colorful dresses and headwraps while chomping cigars are now charging $5 instead of $1. Cuba received a record 3.52 million visitors last year, up 17.4 percent from 2014. American visits rose 77 percent to 161,000, not counting hundreds of thousands of Cuban-Americans. Industry experts worry the island will be unable to absorb an even greater expected surge when scheduled U.S. commercial airline and ferry services are due to start this year. As it is, foreigners face extreme difficulties booking hotels and rental cars, and those who hoped to discover Cuba before the hordes arrive realize they are too late. “Cuba is over the top with tourists right now. I’ve seen so many Americans, it’s not even funny,” said Ana Fernandez, 44, of Nashville, Tennessee. Gisela Hoiman, 46, a schoolbook editor from Berlin, hoped to see Cuba “before it changes” but was disappointed to find long airport lines, ubiquitous hucksters and masses of tourists. She was stranded in Havana when she was unable to get a spot on the bus leaving for the eastern city of Santiago.”It was too much to handle, too many other tourists. We stood in line and were sent back and forth to different counters,” she said from an Old Havana cafe with her large backpack parked on the floor. “I don’t think Cuba is prepared.” The United States and Cuba agreed in December 2014 to end five decades of animosity and have since restored diplomatic ties, igniting international buzz about Cuba. The opening has benefited Cuba’s small private sector, which offers restaurants and rooms for rent in family homes. But the tourism infrastructure, with just 63,000 hotel rooms nationwide, is still largely a function of the state and has languished under decades of U.S. economic sanctions and underdevelopment. More:


JPMorgan to pay Ambac $995 million to settle RMBS-related claims

Insurer Ambac Financial Group Inc (AMBC.O) said JPMorgan Chase & Co (JPM.N) will pay the company $995 million in cash to settle disputes and litigation related to mortgage-related securities.

The agreement settles claims related to residential mortgage-backed securities (RMBS) transactions insured by Ambac. The settlement will have a positive impact on Ambac’s fourth-quarter operating results and its claims paying resources, Chief Executive Nader Tavakoli said in a statement.


AIG to Return $25 Billion to Holders as Hancock Reshapes Insurer

American International Group Inc. plans to return $25 billion to shareholders over the next two years as Chief Executive Officer Peter Hancock divests assets and seeks to boost returns to protect his job amid criticism from activist investor Carl Icahn. Hancock will offer a 19.9 percent stake in the mortgage insurer United Guaranty Corp. to the public in a step toward a complete exit of that business, AIG said Tuesday in a statement ahead of the CEO’s presentation to Wall Street. The insurer also is reorganizing into “modular” business segments to create flexibility to sell or take public additional units if they underperform. Hancock’s vow on shareholder returns follows more than $9 billion of share buybacks in 2015. “The $25 billion capital return is eye-catching to say the least,” David Havens, a debt analyst at Imperial Capital, said in a message. “They are navigating a middle ground that preserves most of AIG as it is now, but offers the flexibility to spin off or sell units in the future.” Hancock’s company climbed 1.2 percent in early trading to $55.36 at 7:55 a.m. in New York. AIG, which offers both life insurance and property-casualty coverage, trades for about 70 percent of book value, while large P&C carriers such as Chubb Ltd. and Travelers Cos. are valued at more than the metric of assets minus liabilities. The CEO also announced the creation a “legacy” portfolio of assets that he will sell or wind down. Hancock designated Charlie Shamieh, who oversaw life, health and disability operations, as legacy CEO. AIG has been stung repeatedly by higher-than-expected costs from risks that the company assumed in the past, whether from environmental liabilities or workers’ compensation policies. The New York-based company was built into the world’s largest insurer by Maurice “Hank” Greenberg, and each of the five men who held the CEO post since his 2005 departure has grappled with the insurer’s complexity. Hancock announced $3.6 billion in expenses to fill a reserve shortfall after higher-than-expected claims costs, highlighting weaknesses even at units that Icahn envisions as the core of a scaled-back company. The fourth-quarter pretax cost to fill the gap includes $1.3 billion tied to policies from 2004 and earlier, with the remaining $2.3 billion covering the period of 2005 through 2014. Most of the expenses were tied to casualty coverage, where it can take many years before claims are fully paid. Insurers periodically review whether they have enough money set aside for such expenses, and the cost of strengthening reserves drains earnings. More:

Booming health care costs and growing deficits create budget headache for Republicans

Congressional Republicans have promised to include deep spending cuts in their upcoming budget proposals and new data showing rising federal health care costs and a looming deficit increase will likely add to conservatives hunger for big funding reductions. Federal health care costs are expected to jump to $936 billion in 2016, outpacing the $882 billion projected spending on Social Security, according to a report released Monday by the Congressional Budget Office. Those rising costs, paired with a huge dip in revenue from tax cuts enacted last month are expected to add up to a $544 billion budget deficit this year, according to Congress’ scorekeeper. Conservatives like House Speaker Paul D. Ryan have long called for reducing spending on Social Security, Medicare and Medicaid and the Wisconsin Republican has vowed to propose changes to these entitlement programs as part of a “bold agenda” to be unveiled this year. One of the first steps in that plan is to release a fiscal 2017 budget proposal next month. Republicans will likely use the latest data from CBO to justify proposing deep spending cuts to mandatory spending programs, but GOP leaders could face some tough questions when it comes to how much to provide for the 12 annual spending bills both Ryan and Senate Majority Leader Mitch McConnell (R-Ky.) want to move early this year. Republican leaders agreed late last year to a deal that allows for $30 billion in new discretionary spending in fiscal 2017, an agreement that continues to rankle conservatives, particularly in the House. But Republican budget leaders say they have no choice but to honor the deal struck with congressional Democrats and the White House. Senate Budget Committee Chairman Mike Enzi (R-Wyo.) said that while the new deficit projections make it very difficult for Republicans to make good on promises to release plans to cut the deficit and balance the budget, reneging on the spending deal is not on the table. “We can’t walk away from that commitment,” Enzi said last week. The annual budget resolutions are traditionally vision documents, they do not become law, that allow parties to outline partisan priorities for the year ahead. But Ryan has been under increasing pressure from his most conservative members to also advance legislation that would put this vision into practice. As Budget Committee chairman in recent years, Ryan famously authored proposals to balance the budget in 10 years by cutting entitlement programs while also cutting taxes. These plans helped elevate him to his role as the party’s thinker-in-chief and many conservatives, including members of the hard-line House Freedom Caucus, say they want him to take his new-found power as Speaker to try and make those lofty goals a reality.

Pentagon in open brawl over spending priorities

A brawl has broken out at the top rungs of the Pentagon over how to prepare the military for long-term threats, in a rare public fight that pits leaders of the military branches against Defense Secretary Ash Carter. Carter wants to use the Pentagon’s upcoming, approximately $580 billion budget request to solidify the Obama administration’s goals of investing in more advanced weapons such as next-generation fighters and submarines, and high-demand skills such as cyber warfare. But he is butting heads with the Navy’s leadership and facing open skepticism from the man in line to be Army secretary, who have disagreed with their boss in recent days over key aspects of the administration’s plans. One admiral even mocked critics of a warship program that Carter is trying to scale back. Carter is getting pushback from multiple quarters. Navy Secretary Ray Mabus favors more spending on a small, close-to-shore warship that has faced criticism for its lack of firepower and which Carter wants to curtail. At the same time, President Barack Obama’s choice for Army secretary, Eric Fanning, expressed qualms last week about the administration’s plans to free up money for other priorities by shrinking the number of soldiers. Fanning told the Senate Armed Services Committee that he worries about the impact of the administration’s proposal to shrink the active-duty Army by 40,000 soldiers, to 450,000. Those planned cuts are “preventing us from doing everything we want to do to the Army to … make it readier,” he said. “Two years ago when we targeted 450 [thousand], we didn’t have ISIL, we didn’t have Russia.” More:


Supreme Court won’t let N. Dakota enforce ‘fetal heartbeat’ abortion law

The Supreme Court on Monday ruled that North Dakota officials cannot enforce a controversial “fetal heartbeat” law that would have banned abortions as early as six weeks. The justices upheld a lower court’s ruling from July 2015, which struck down the measure. North Dakota’s sole abortion clinic filed the lawsuit challenging the measure shortly after the law was approved in 2013. North Dakota’s law – one of the strictest in the country – has been closely watched in the courts as many other GOP-led states look to tighten their abortion standards.Opponents of the law argued it violated the Supreme Court’s ruling in the landmark Roe v. Wade case in 1979, which allowed women the right to an abortion until “fetal viability.” That term, however, has been deeply disputed as a growing number of states create bans on abortions after certain timelines. The GOP-led House approved its own version of the bill, the Pain-Capable Child Protection Act, last year, which banned abortions after 20 weeks. The decision was praised by abortion rights groups, who called on the Supreme Court to again take their side in a high-stakes case involving a strict Texas abortion law later this spring. “We continue to look to the nation’s highest court to protect the rights, health, and dignity of millions of women and now strike down Texas’ clinic shutdown law, ” Nancy Northup, president and CEO of the Center for Reproductive Rights, wrote in a statement.

How David Petraeus avoided felony charges and possible prison time

Inside a secure conference room on the 6th floor of the Justice Department in early 2014, top federal law enforcement officials gathered to hear what criminal charges prosecutors were contemplating against David H. Petraeus, the storied wartime general and former CIA director whose public career had ended about 15 months earlier over an extramarital affair. Attorney General Eric H. Holder Jr. and FBI Director James B. Comey listened as prosecutors did a mock run through the government’s case, a preview of how they would present their evidence to Petraeus’ lawyers in order, they hoped, to force a guilty plea.

The presentation included felony charges: lying to the FBI and violating a section of the Espionage Act. A conviction on either carried potentially years in prison. They were also considering bringing the same charges against his mistress and biographer, Paula Broadwell. The government would never file those charges. Not everyone at Justice shared the prosecutors confidence, and lawyers for Petraeus and Broadwell separately pushed back hard, saying they would fight and beat the charges being considered by the Justice Department. Moreover, with its mix of sex and government secrets, a trial promised to be an uncomfortably tawdry affair, one some in government — as well as the defense — preferred to avoid. Petraeus, in the end, pleaded guilty early last year to a misdemeanor charge of mishandling classified material. No charges were ever brought against Broadwell. The Justice Department has never discussed how it reached its decision to accept a plea on the lesser charge. But six current and former U.S. officials, as well as others familiar with the case, provided the first detailed look at the internal debates and wrangling with Petraeus’ lawyers that took place before the retired four star general entered his guilty plea in federal court in Charlotte, N.C. All spoke on condition of anonymity to discuss private legal deliberations. As part of the agreement, Petraeus admitted that he improperly removed and retained highly sensitive information in eight personal notebooks that he gave to Broadwell. The Justice Department said the information, if disclosed, could have caused “exceptionally grave damage.” Officials said the notebooks contained code words for secret intelligence programs, the identities of covert officers, war strategy and deliberative discussions with the National Security Council. More:


How much damage is the Porter Ranch leak doing to the climate?

Stephen Conley has flown pollution-detecting airplanes over some of the largest oil and gas fields in the nation. But never before has the UC Davis scientist encountered as much methane in the air as in recent months over suburban Los Angeles. Over and over, Conley has flown his single-engine plane through the invisible plume billowing from an underground natural gas storage facility and into Porter Ranch to provide California air quality officials estimates of the planet-warming emissions from the leak. On the first flight, in November, methane levels above the community jumped to 50 parts per million, so high that Conley double-checked his instruments in disbelief. “This is probably 20 times bigger than anything else we’ve measured,” Conley said. In three months, one failed well at Southern California Gas Co.’s Aliso Canyon storage field has spewed more greenhouse gases than any other facility in California. At its height, the leak more than doubled the methane emissions of the entire Los Angeles Basin and surpassed what is released by all industrial activity in the state. Experts say the release of so much methane, a fast-acting greenhouse gas many times more powerful than carbon dioxide, means that the biggest environmental consequence of the leak will be its effect in boosting global warming. Long after the leak stops and the foul odors vanish, the pulse of methane will remain in the atmosphere and its damage to the climate will go on.


GOP senator’s aide joins Trump campaign

A top aide to Sen. Jeff Sessions (R-Ala.) is joining Republican presidential front-runner Donald Trump’s campaign, according to a new report. Stephen Miller, who served as Session’s communications director, will join Trump’s campaign Wednesday as a senior policy adviser, The Washington Post reports. Trump continues to dominate in the GOP presidential race a week out from the first ballots being cast in the Iowa caucuses. The businessman has boasted of relationship with Sessions, who hasn’t yet endorsed a candidate but appeared at a Trump rally in Mobile, Ala., in August. Sessions, whom Trump consulted on his immigration proposal, briefly wore one of the candidate’s “Make America Great Again” hats at the rally before making remarks. Miller will work alongside Trump’s chief policy adviser Sam Clovis to draft white papers and aid the candidate as he prepares for the Thursday night GOP debate, according to the Post.

2 Abortion Foes Behind Planned Parenthood Videos Are Indicted

HOUSTON — A grand jury here that was investigating allegations of misconduct against Planned Parenthood has instead indicted two anti-abortion activists who made videos of the organization.

In a statement, the Harris County district attorney, Devon Anderson, said Monday that the director of the Center for Medical Progress, David Daleiden, had been indicted on a felony charge of tampering with a governmental record and a misdemeanor count related to purchasing human organs. Another center employee, Sandra Merritt, was indicted on a charge of tampering with a governmental record. The Center for Medical Progress had covertly shot videos of Planned Parenthood officials discussing the sale of aborted fetuses for research. Mr. Daleiden, 26, had posed as a biotechnology representative to infiltrate Planned Parenthood affiliates and surreptitiously record his attempts to procure tissue for research. Ms. Anderson said in the statement that grand jurors had cleared Planned Parenthood of any wrongdoing. She did not specify in the statement what record or records were allegedly tampered with. “We were called upon to investigate allegations of criminal conduct by Planned Parenthood Gulf Coast,” Ms. Anderson said. “As I stated at the outset of this investigation, we must go where the evidence leads us. All the evidence uncovered in the course of this investigation was presented to the grand jury. I respect their decision on this difficult case.”

U.S. Supreme Court Could Redefine Insider Trading

The U.S. Supreme Court will be hearing a case that could have wide-ranging implications for traders on Wall Street and federal policymakers. According to David Miller, partner at Morgan Lewis and former prosecutor in the Southern District of New York, the court could decide Salman v. United States in a way that would make it much harder for prosecutors to obtain convictions in insider trading cases. Also, he said the Salman case could lead to Congress passing new legislation actually defining insider trading, something that currently does not exist. Should Salman prevail at the Supreme Court, Miller sees the entire legal and regulatory framework of insider trading come into question. Salman’s case relies on a precise issue: whether it is necessary to demonstrate that the initial tipster in an insider trading case need gain a personal benefit from passing information along to a tipee. Bassam Salman was convicted on Sept. 30, 2013, of insider trading on information passed along from his future brother-in-law, Maher Kara, then working at Citigroup’s (CGet Report) health care investment banking group, and was ultimately sentenced to serve three years in prison and pay $738,539.42 in restitution. At the 9th Circuit, the court overturned Salman’s conviction finding that “the government presented direct evidence that the disclosure [from Kara to Salman] was intended as a gift of market-sensitive information.”

Six Reasons Presidential Race May Look Different in a Few Weeks

One of the great things about campaigns is that, eventually, voters get to have their say. And they can be full of surprises. This is worth remembering because we are just a week away from the first votes being cast in Iowa in what already has been a bizarre presidential race. A clear picture of the race in both parties appears to be emerging: Donald Trump holds a commanding lead nationally in the Republican race, and is fighting neck-to-neck with Sen. Ted Cruz in Iowa; Democratic favorite Hillary Clinton is being challenged in both Iowa and New Hampshire by Sen. Bernie Sanders while holding a considerable national advantage. But remember that at this point in 2004, Howard Dean looked as if he might actually be the favorite for the Democratic presidential nomination; in 2008, the miraculous comeback of Sen. John McCain hadn’t even begun; and that same year, Barack Obama was only beginning his topsy-turvy journey from underdog to favorite to seriously embattled front-runner. In short, the race could look quite different in a couple of weeks. Here are six reasons things can change rapidly:

Plaintiffs’ lawyers wary of taking on Flint water scandal

The water scandal in Flint, Michigan has many of the ingredients for a mass, class-action lawsuit: danger signs that may have been ignored, many thousands of potential victims, the possibility of lifelong health problems, and the alleged systemic failure of people in charge. Even consumer activist Erin Brockovich, the main subject of a 2000 movie named after her, has drawn attention to Flint’s plight on her Facebook page and in public appearances. But big-name, national plaintiffs’ firms have yet to jump into the fray in Flint, which has a population of about 100,000. What’s holding them back, several lawyers said, is not the facts or the victims, but the prospective targets: The State of Michigan, the city of Flint, and officials at various levels of government. Special legal protections make it difficult to hold governments liable for damages, they said. Federal and state governments and employees engaged in their official duties are shielded from most private lawsuits by a legal doctrine known as sovereign immunity. The doctrine, enshrined in the laws of many countries, stems from the centuries-old principle that the government itself cannot commit a legal wrong, though exceptions have evolved. While cities in the U.S. are not technically considered to have sovereign status, they are similarly protected by state and federal laws. As of Friday, only a few lawsuits had been filed in the wake of the crisis that began when the city began in April 2014 to use river water, which was more corrosive than its previous supply source and caused lead to leach from aging pipes into the water that people drank and washed in. Those suits were filed against the state, city, and various state employees by a group of Michigan lawyers who are pushing relatively novel theories designed to circumvent immunity. The financially troubled city was governed by a state-appointed emergency manager at the time of the change to the river water. A spokeswoman for Michigan Attorney General Bill Schuette declined to comment on the lawsuits. The Flint City Attorney’s Office did not return calls seeking comment. The legal scene couldn’t be more different in Southern California, where several big, national law firms are behind some of more than 25 suits filed over a disastrous natural gas leak near Los Angeles that has forced thousands of residents from their homes since October. The targets of those suits are the utility Southern California Gas Co and its parent company Sempra Energy, the non-government operators of the leaking gas storage facility. A state court in Los Angeles is currently considering a motion to coordinate the cases. More:

Why D.C. Hates Ted Cruz

In the three years since he arrived in the U.S. Senate, Ted Cruz has become easily the most hated man in Washington—a fact he’s now using to his advantage as a presidential candidate. But why? Is it true, as Cruz would have it, that the dreaded GOP establishment pays lip service to shrinking the federal government and repealing Obamacare, but actually would prefer to preserve the status quo? Is it simply personal animosity? Or do Cruz’s Beltway critics have a point? Cruz hasn’t hesitated to take polarizing stances, even when doing so means taking on his Republican colleagues. Last October, for example, a criminal-justice reform bill came before the Senate Judiciary Committee. The bill, which would give judges more flexibility in sentencing and add rehabilitative services to prisons, is a product of the increasing bipartisan movement to reform the criminal-justice system, which is supported by such disparate actors as the Koch brothers and the ACLU. And it’s the baby of Senator Mike Lee, the Tea Party-supported Utahn, who’s emerged as one of the most passionate conservative advocates for reform. Lee is also Cruz’s best friend—maybe his only friend—in the Senate. In his memoir, Cruz writes that no one stood by him “more courageously or indispensably” than Lee during his 21-hour anti-Obamacare speech that preceded the 2013 government shutdown. The pair have a joint fundraising committee and have posed together with a tiger-skin rug. When Lee brought up his bill in the committee hearing, he wasn’t sure if he’d have Cruz’s support. But he certainly didn’t anticipate what came next. Cruz attacked the bill as dangerous and politically poisonous. More:

Five myths about Reconstruction

The United States is entering the sesquicentennial of Reconstruction, that period after the Civil War when African Americans briefly enjoyed full civil and political rights. African Americans — 200,000 of them — had fought in that war, which made it hard to deny them equal rights. Unlike with the 150th anniversary of the Civil War, however, few historic places tell us what happened during Reconstruction. They could: Every plantation home had a Reconstruction history, often fascinating, but these manors remain frozen in time around 1859. They tell a tale of elegance and power, and Reconstruction was the era when that power was challenged. Moreover, it is still true, as W.E.B. Du Bois put it in “Black Reconstruction” 80 years ago, that “one cannot study Reconstruction without first frankly facing the facts of universal lying.” Here are five common fallacies that Americans still tell themselves about this formative period.


US Supreme Court: Shelby County cannot reclaim $2 million in Voting Rights Act legal fees

The Supreme Court won’t hear an appeal from lawyers representing Shelby County who tried to recover $2 million in attorney fees from the U.S. government in a case that nullified a key part of the Voting Rights Act. The justices on Monday let stand a lower court ruling that said the county’s civil rights lawsuit did not advance the law’s anti-discriminatory purposes and didn’t qualify for fee recovery. Shelby County had prevailed in 2013 when the Supreme Court voted 5-4 to eliminate the Justice Department’s ability to stop potentially discriminatory voting laws before they take effect. The county argued that winning the case allowed it to recover attorney fees. But a federal appeals court said Congress was not trying to encourage litigation “to neuter the act’s central tool.”


Did you know that Foley, Alabama has a secret tunnel under the city – watch the

and see why [old photographs

John Snook owner of Gulf Telephone Company made a tunnel from the Magnolia Inn and his company across the street.  There were also more mysterious uses and reasons for the tunnel involving a love story, communists and women sharp shooters. Check out the video below for the story behind the Foley Tunnel.


Hubbard’s Storm PAC Not Even a Drizzle

MONTGOMERY—The once, much vaunted Storming the State House PAC, a tool Speaker Mike Hubbard used as a carrot or a stick, had zero contributions according to its year-end FCPA filing. (See report here.) Hubbard, once referred to the PAC as his “incumbent protection” fund. He also promised the PAC would reward House members who supported him for his re-election as Speaker. It now appears Hubbard’s legal troubles are inhibiting his ability to raise funds for reward or punishment. According to the report, the Mary Sue McClurkin for Chairman Committee received $5000 from Storm PAC’s meager funds, for her bid to become Chair of the Alabama Republican Party. McClurkin was bested by Terry Lathan, despite Hubbard’s support. Rep. Steve French and Chris Hines were both given $2000 from Hubbard’s PAC. Newman and Associates, LLC., was paid $1000, and the accounting firm BNH Accounting LLC., received $200. Of the $12,862.46, cash-on-hand, Hubbard spent $8,731.89, leaving an ending balance of $4,130.57. The PAC’s inability to raise campaign cash may further indicate big money donors have finally abandoned Mike Hubbard.

Alabama AG blasts Supreme Court decision on life terms

MONTGOMERY, Ala. (AP) – Alabama Attorney General Luther Strange is criticizing a U.S. Supreme Court decision that will give convicted murderers a chance at freedom if they were juveniles when the crime was committed. The Supreme Court voted 6-3 Monday to retroactively apply a 2012 decision that struck down automatic life sentences without parole for teens convicted of murder. Alabama was one of seven states that had refused to apply the high court’s decision to inmates who can now be considered for parole or given a new sentence. Strange said in a statement that the ruling could apply to at least 70 convicted murderers and he’ll work to ensure that they serve out their sentences. Officials from the Southern Poverty Law Center advocacy group call the decision a milestone in criminal justice reform.


Investor behind Fort Worth amusement park runs afoul of Alabama regulators

 The Alabama Securities Commission in December ordered the head of the investor group backing proposed DreamVision amusement parks planned for Fort Worth and Muscle Shoals, Alabama, to stop illegally selling residential real estate investments. Bryan K. Robinson, through a company called Robinson Capital Investments Llc., allegedly sold securities in 2014, telling investors he would buy houses out of foreclosure and repair them for resale, according to the commission. The houses were never bought by Robinson, the commission said. According to a cease and desist order issued Dec. 14 , Robinson collected $500,000 from two investors on the promise he would buy 85 single-family houses. Separately, he promised another investor from outside of Alabama that their $100,000 investment would buy 35 to 50 houses out of foreclosure. Robinson promised the investors 11 percent interest and issued promissory notes secured by the real estate located in Madison County, Ala., the commission said. Further, neither Robinson or Robinson Capital Investments was registered to conduct business in the securities industry in Alabama, the document said. Nearly a year ago, Robinson was introduced by Rick Silanskas, CEO of Florida-based DreamVision Co., as president and founder of Provident Global Capital in Alabama and as its lead investor. The 5,000-acre Fort Worth park was to be called DreamVision Mountain/DreamScape. But nothing appears to have happened on the project since. City and business leaders say they have had not heard from DreamVision executives, and there is no real estate deal by DreamVision recorded in deed records. Moreover, the company’s website no longer has information regarding the planned parks. The Fort Worth park was to feature a massive “mountain” with man-made snow for snowboarding and bobsledding. Malcolm Clulow, creator of Ski Dubai, a 20-story indoor resort in Dubai, and considered the world’s top expert in indoor snowmaking, was said to be hired for the project and was introduced at the news conference. In a recent email response to an inquiry from the Star-Telegramabout the project, Acer Snowmec International responded, “You need to contact DreamVision, not us, for status of the project.” Robinson had 28 days to respond to the Alabama Securities Commission.


Alabama has third highest health insurance cost in the U. S.

Alabama has the third highest cost of health insurance in the United States trailing New York and South Carolina. The findings were based on a new analysis published by Elyssa Kirkham of GOBankingRates on Jan. 22, 2015. The comparison of health insurance costs between states was based on a single, nonsmoking, 40-year-old male with an income of $40,000. One of the causes of high health insurance rates in Alabama is the refusal of the government of Alabama in the person of Governor Robert Bentley to accept any federal money for Medicaid assistance. This decision cost the state $117 million that Alabama tax payers must pay. The decision to opt out of Obamacare is a major reason Alabama has a $250 million budget deficit. The most important reason for the high health insurance costs in Alabama is that Blue Cross and Blue Shield of Alabama have a virtual monopoly. Blue Cross and Blue Shield of Alabama provide health insurance coverage for all state employees. The rates that state employees pay for health coverage are much lower than the employees of private firms pay. Self employed people pay even higher rates. The cost of health insurance is just not the monthly rates a person pays. The deductibles are actually higher for the cheapest health insurance plan in Alabama as provided by Blue Cross and Blue Shield of Alabama than the annual payments. The calendar year deductible for the Blue Saver Bronze plan is $6,850 per person or $13,700 maximum for a family. The annual premium for an individual is in excess of $5,580 and can be $1,500 per month for families. The average income in Alabama was $42,830 in 2014 according to the U. S. Census. The per capita income in Alabama was $23,606 because more than one-half of the state does not work due to being retired, disabled, or being too young. An average person that works in Alabama pays as much as 29 percent of their income for health insurance and deductibles. Health insurance rates continue to rise in Alabama because Blue Cross and Blue Shield of Alabama is very careful to meet all the obligations to the Affordable Care Act that allow rate increases.

In the future the house of cards that health insurance is in Alabama will collapse. The number of people working will not be large enough to pay the cost of health insurance for state employees, the costs of Medicaid, and the costs for Medicare. Working people in Alabama should expect all of the senior executives at Blue Cross and Blue Shield of Alabama to give themselves another $1 million raise this year.



Feehery: The rise of the misinformed voter and Donald Trump

I was meeting with some D.C. press secretaries about a complicated legislative issue when it became clear to me that everything has changed since I left Capitol Hill in 2005. We were talking about strategies to get our messages out back home. I asked about placing op-eds and letters to the editor in the local newspapers and talking to the reporters who cover the delegation about our issue.  There are no papers back home and there are no reporters who cover our delegation, the press people responded. Where do people get their information about Washington, I asked? Fox News, they replied. I like Fox News. I watch it all the time and I especially like solid journalists like Brett Baier. But it is awfully hard to get fully informed about complicated issues by watching television. And therein lies the problem.  Newspaper advertising revenue hit around $17 billion in 2013, which was below the revenue number of $20 billion (adjusted for inflation) in 1950. Major cities like Denver, Detroit, Seattle, San Diego and New Orleans have no real daily newspapers. Both of Chicago’s newspapers are struggling. Major newspaper chains like McClatchy are facing huge financial pressures and laying off journalists left and right. Even the mighty New York Times faces intense financial pressures, and The Washington Post had to be bailed out the by Jeff Bezos, the Amazon entrepreneur. As print journalism goes the way of the dinosaur, voters who care go to the blogs for their information. But those blogs usually have a political point of view, cater to a specific audience, and care little about fairly reporting the news. If you are able to find a local newspaper, it’s unlikely that it will cover anything that happens to Washington with anything resembling detail. And that has led to the rise of the misinformed voter. The misinformed voter is not uninformed. An uninformed voter acknowledges that he or she don’t know the facts and doesn’t express a strong opinion one way or another. The misinformed voter has the facts wrong, and when faced with contradictory evidence, doubles down on his or her own opinion. Brendan Nyhan and Jason Reifler, political scientists at Dartmouth University, did a study of conservative voters in 2010, which showed that there was a “backfire” effect when the voters they studied were confronted to facts that disproved their own understanding of events. “The backfire effects that we found seem to provide further support for the growing literature showing that citizens engage in ‘motivated reasoning,’” they stated. “While our experiments focused on assessing the effectiveness of corrections, the results show that direct factual contradictions can actually strengthen ideologically grounded factual beliefs – an empirical finding with important theoretical implications.” Daniel Patrick Moynihan, a former New York senator, was seemingly incorrect when he said, “You are entitled to your own opinion, but not your own facts.” Indeed, it seems many voters in the GOP primary believe strongly that their own opinions are their own facts. And that brings us to Donald Trump. Trump’s rise in the presidential election is a mystery to many Republicans. Byron York’s story about the New Yorker’s high polls numbers in New Hampshire concluded: “I don’t understand it.” Yet another of those Republicans who doesn’t know any Trump supporters told me as I got ready to leave the first-in-the-nation primary, “It doesn’t make logical sense.” Nothing in this election makes logical sense. Not the polls. Not the rise of Trump on the right or Bernie Sanders on the left. Not the issue-less campaign that values entertainment more than facts, celebrity more than experience. But maybe logic has nothing to do it. Trump’s rivals have attacked the tycoon, calling him a jerk for making fun of a handicapped journalist, a bully and a racist for his plans to ban all Muslims. They have attacked his policy proposals for being unworkable. But none of this seems to matter. His polls numbers have gone up, not down. Maybe that’s because to Trump’s supporters, the facts don’t matter. They have their opinions and by God they are going to defend them. James Madison once said, “Knowledge will forever govern ignorance; and a people who mean to be their own governors must arm themselves with the power which knowledge gives.” That proposition is being put to the test in this election cycle.

Bill would remove Mike Hubbard from speaker’s role

The Shroud Award always gives me grief. At the end of the legislative session, the Alabama House awards the distinction to its “deadest bill,” complete with a little suit in a coffin to be kept by the bill’s sponsor. The previous year’s winner bestows the honor to the next, always with a roast of the sponsor that involves more creativity and good cheer than the rest of the of the session combined. It’s meant to be fun and made in jest, but I grieve because many of those bills have been worth mourning. In 2013, it went to Rep. Patricia Todd’s attempt to legalize medical marijuana. In 2011, the deadest bill would have legalized homebrewing beer. (The next year, it came back to life, passing both houses. Praise Jesus and pass me a pint.) In 2010, a bill to make “Stars Fell on Alabama” the state song died a quick death, and Julia Tutwiler’s sing-song tune “Alabama” will live stuck in my head until I die. In 2009, it was a bill to remove the sales tax from food. The year before that it was standards for school lunchroom nutrition. And so on, and so on. The graveyards in Montgomery are filled with laws that died too soon. And I have a pretty good guess which bill the reaper will come for this year. This week, state Rep. Allen Treadaway said he will file a bill when the session starts that would require lawmakers indicted for felonies to step aside from any leadership roles until their cases have been disposed of. The law would apply to the president pro tems of the Alabama House and Senate, the majority and minority leaders, any chairs of standing committees … And the Speaker of the Alabama House. That last one is significant because, let’s face it, Alabama House Speaker Mike Hubbard is the reason we’re having this conversation. Indicted on 23 felony ethics charges, Hubbard has refused to step aside. When prosecutors unsealed the indictment two years ago, lawmakers flocked to Hubbard’s defense, even standing beside him in a press conference in Auburn. After the 2014 election, the House members re-elected him for Speaker, with only Alvin Holmes voting against. But since then, as court documents have revealed details of the charges, some have changed their minds. Emails Hubbard wrote to former Gov. Bob Riley and others have exposed the speaker as someone who mixed his personal business with his public duties and tried to use both to make money. Rep. Phil Williams has mounted a campaign to unseat Hubbard, and the Alabama Republican Party’s executive committee passed a resolution asking Hubbard to step back from his leadership role until his trial is over. And yet, he stays. More:

Morning Money

SHELBY TARGETS FOUR BANKS IN PRIMARY AD — Senate Bank Committee Chairman Richard Shelby launched a new ad touting his vote against Wall Street bailouts as evidence of his anti-establishment credentials.

“When the Wall Street banks came with their handout, Shelby said ‘no way,’” says the ad’s narrator. The ad, entitled “bailouts,” shows b-roll footage of signs for PNC Bank, Bank of America, Morgan Stanley and Wells Fargo. “He refused to put hard-working, Alabama taxpayers on the hook,” says the narrator. “Shelby’s my kind of conservative.”

Shelby voted against the Troubled Asset Relief Program in October 2008. The state’s primary is “Super” Tuesday, March 1, and Shelby’s toughest challenger appears to be Jonathan McConnell, a former Marine and founder of a security company.

BITCOIN NOT A TYPICAL SECURITY — In a report out today from Coin Center, a crypto-currency advocacy group backed by bitcoin businesses, says larger, more decentralized cryptocurrencies like bitcoin “do not easily fit the definition of a security and also do not present the sort of consumer risk best addressed through securities regulation,” the report said. “We do find, however, that some smaller, questionably marketed or designed cryptocurrencies may indeed fit that definition,” says the report. Read it here:

REPUBLICANS QUESTION IEX STOCK EXCHANGE APPLICATION — Rep Sean Duffy (R-Wis.) has thrown cold water on the IEX Group’s exchange application. In a Jan. 21 letter to the Securities and Exchange Commission, Duffy said the IEX application could disrupt SEC regulation “NMS” and “thereby create an uneven playing field for market participants.” (NMS, which stands for national market systems, was adopted in 2005 to deal with the growth in electronic trading.) Duffy’s note follows a WSJ op-ed by former SEC Republican Commissioner Paul Atkins, who recommended the SEC overhaul Reg. NMS rather than applying Band-Aid fixes for individual companies like IEX. Read Duffy’s letter here:

POLL: TRUMP, SANDERS DOMINANT IN NEW HAMPSHIRE — By POLITICO’s Eliza Collins. Bernie Sanders and Donald Trump hold commanding leads in New Hampshire, according to two Franklin Pierce University/Boston Herald polls out Monday.

GOOD TUESDAY MORNING — Ben White dodged this weekend’s white out with some suspiciously well-timed days off. In the meantime please email tips to

DRIVING THE DAY — The government is shut down again … AIG gives its “strategy update” at 8 a.m … .Case-Schiller home prices out at 9 a.m … .Conference Board Consumer Confidence out at 10 a.m.; median forecast is 96.2, down from 96.5 …

HOW WILL AIG REPEL ICAHN? — Today’s the day when AIG CEO Peter Hancock will reveal how the insurance giant plans to deal with pressure from investors like Icahn who are pressing for a breakup. Plans floated so far include a public offering of mortgage insurance operations and the sales of some assets. Will that be enough? Isaac Boltansky of Compass Point LLC says no: “Our sense is that the AIG announcement is unlikely to satiate Mr Icahn as it is likely to fall short of his calls for the company to pursue ‘tax-free separations of both its life and mortgage insurance subsidiaries to create three independent public companies’” in the hope of escaping its current designation as a systemically important financial institution.


SEC EXPECTED TO GIVE UNUSUAL REFUND FOR INSIDER-TRADING PENALTY — WSJ’s Aruna Viswanatha. The Securities and Exchange Commission is expected to refund a $21.5 million settlement that hedge fund Level Global entered into in 2013 to resolve allegations that it profited from trades on corporate secrets about Dell Inc. and other technology firms. Experts said that the refund may be unprecedented.

JOHNSON CONTROLS-TYCO MERGER CONTINUES INVERSION TREND. POLITICO’s Toby Eckert. News that Johnson Controls and Tyco will merge in an inversion deal comes as some top congressional Republicans are pushing international tax reform as a way to stem the controversial practice.

It also adds to the U.S. tax exodus. By the WSJ’s Liz Hoffman and Richard Rubin. Johnson Controls Inc. is set to become the latest American company to move abroad in search of tax savings — and to do so on the coattails of the dismantled Tyco empire.

POTUS Events

10:00 am || Recieves the Presidential Daily Briefing
11:15 am ||Meets with Senate Democratic Leader Reid and House Democratic Leader Pelosi

All Times Eastern
Live stream of White House briefing at 12:30 pm

Floor Action

House declares snow week.  Will reconvene February 1. The Senate will return Wednesday for votes at 5:30 pm.