Securities Attorney Briefing 29 August 2016

Securities Attorney Tom Krebs


A Powerful Russian Weapon: The Spread of False Stories

STOCKHOLM — With a vigorous national debate underway on whether Sweden should enter a military partnership with NATO, officials in Stockholm suddenly encountered an unsettling problem: a flood of distorted and outright false information on social media, confusing public perceptions of the issue. The claims were alarming: If Sweden, a non-NATO member, signed the deal, the alliance would stockpile secret nuclear weapons on Swedish soil; NATO could attack Russia from Sweden without government approval; NATO soldiers, immune from prosecution, could rape Swedish women without fear of criminal charges. They were all false, but the disinformation had begun spilling into the traditional news media, and as the defense minister, Peter Hultqvist, traveled the country to promote the pact in speeches and town hall meetings, he was repeatedly grilled about the bogus stories. “People were not used to it, and they got scared, asking what can be believed, what should be believed?” said Marinette Nyh Radebo, Mr. Hultqvist’s spokeswoman. As often happens in such cases, Swedish officials were never able to pin down the source of the false reports. But they, numerous analysts and experts in American and European intelligence point to Russia as the prime suspect, noting that preventing NATO expansion is a centerpiece of the foreign policy of President Vladimir V. Putin, who invaded Georgia in 2008 largely to forestall that possibility. In Crimea, eastern Ukraine and now Syria, Mr. Putin has flaunted a modernized and more muscular military. But he lacks the economic strength and overall might to openly confront NATO, the European Union or the United States. Instead, he has invested heavily in a program of “weaponized” information, using a variety of means to sow doubt and division. The goal is to weaken cohesion among member states, stir discord in their domestic politics and blunt opposition to Russia. “Moscow views world affairs as a system of special operations, and very sincerely believes that it itself is an object of Western special operations,” said Gleb Pavlovsky, who helped establish the Kremlin’s information machine before 2008. “I am sure that there are a lot of centers, some linked to the state, that are involved in inventing these kinds of fake stories.”

For Dubai Government Workers, Today Was the Wrong Day to Turn Up Late

A bad day to turn up late: Dubai’s ruler encountered a lot of empty chairs on Sunday when he decided to do a surprise spot check on ordinarily busy government offices. A video showing Sheikh Mohammed bin Rashid Al Maktoum walking into the sparsely populated offices of the Land Department and Department of Economic Development at the start of the workday was widely shared on Twitter. Sunday was the first day of school. The 14-second video showed the 67-year-old sheikh, who is also the vice president and prime minister of the United Arab Emirates, walking into a room where his pictures adorned the wall and standing behind an empty desk. The video was posted on Twitter by Dubai’s media office, which noted that managers were no better than rank-and-file employees. Videos of the ruler also visiting the Dubai municipality and the city’s international airport were also shared on Twitter. “He certainly wanted to send a message,” said Mona Al-Marri, director-general of the government of Dubai’s media office. “Timeliness starts at the top and we won’t go after employees when their bosses aren’t there.’’ Dubai’s ruler was known for his surprise visits in the early days of transforming the city from a desert town into a thriving business center. Although none of the officials absent on Sunday were identified, the sheikh in the past hasn’t shied away from naming and shaming. Following Dubai’s credit crisis, some officials at property companies, including state-owned firms, faced legal action as he tried to root out corruption. Dubai now receives about 10 million tourists a year, and is well-known for the world’s tallest tower and man-made islands. Khalifa Saeed, who heads government protocol, shared several pictures and videos on Instagram showing Sheikh Mohammed touring the airport and casually greeting people waiting to get their passports stamped. Saeed commented that Sunday’s spot visits showed “senior officials” were absent. Spokespeople for the Dubai Municipality, Dubai Land Department and Dubai Department of Economic Development didn’t respond to requests for comment by Bloomberg.

From Bikinis to Burkinis, Regulating What Women Wear

PARIS — The policeman in the photo is nattily attired and appears to have a slight smirk as he writes out a ticket for the woman standing before him awkwardly in her offending swimwear; perhaps he enjoys making her feel uncomfortable. No, she is not wearing a burkini. The photo dates from 1957. The woman is wearing a bikini on the beach at Rimini on Italy’s Adriatic coast. At the time, Italy prohibited the revealing bathing suit; it was too immodest to be worn in public. In the midst of France’s fight over banning the burkini, the bikini is celebrating its 70th anniversary, and photographs chronicling its debut and early history in the 1940s, ’50s and ’60s are on display in one of Paris’s chic galleries, prompting parallels to the uproar over the burkini today. What is it about women’s swimwear and more generally women’s attire that over and over in history has attracted controversy and impelled societies to legislate or regulate women’s choices? Historians, sociologists and anthropologists have argued about it for decades, but the seemingly simplistic statement that women’s bodies are a battleground has some truth to it. Formally or informally, men (primarily) have been making rules about women’s attire for a very long time. “Can’t we decide what we want to wear in 2016?” wondered Sarah Fekih, 23, from Lyon, France, in a comment she wrote to The New York Times. “If one wishes to dress skimpily or to be almost nude or to be covered from head to toe, isn’t that a personal choice that can not be dictated by law?” Of course, the burkini debate is not only about feminism. It is foremost a debate about the visibility and presence of Islam in France, and it comes in the context of the most recent act of terror to traumatize the country, this one in Nice, on the Mediterranean coast. More:

World’s Biggest Pension Fund Loses $52 Billion in Stock Rout

The world’s biggest pension fund posted a $52 billion loss last quarter as stocks tumbled and the yen surged, wiping out all investment gains since it overhauled its strategy by boosting shares and cutting bonds. Japan’s Government Pension Investment Fund lost 3.9 percent, or 5.2 trillion yen ($52 billion), in the three months ended June 30, reducing assets to 129.7 trillion yen, it said in Tokyo on Friday. That erases a 4.1 trillion yen investing return for the previous six quarters starting October 2014, the month it decided to put half its assets into equities. The quarterly decline follows a 5.3 trillion yen loss in the fiscal year through March, the worst annual performance since the global financial crisis. After benefiting from a surge in Japanese equities and a weaker yen earlier in Prime Minister Shinzo Abe’s term, GPIF has posted losses as domestic stocks tumble and gains in the currency reduce the value of overseas assets. Still, for Sumitomo Mitsui Trust Bank Ltd., that’s no reason to veer from the current approach. “Since its investments are tied to market moves, it’s natural that this would happen and there’s no point looking at it with a short-term view,” said Ayako Sera, a Tokyo-based market strategist at the bank. “GPIF is so big that its losses look huge even though the fluctuations in its investments just mirror the market.” The fund’s Japanese shares sank 7.4 percent in the period as the benchmark Topix index lost 7.5 percent. More than 80 percent of GPIF’s local equity investments are passive. Overseas stocks lost 7.8 percent, while foreign debt fell 8 percent, as the yen surged 9.1 percent against the dollar. The only asset class to post a profit was domestic bonds, which rose in value as the Bank of Japan’s negative interest rates sent yields lower. More:


Why They Did It: Madoff and Enron’s Fastow Explain the Biggest Frauds in U.S. History

Why do business executives—people who already possess status and wealth—commit financial crimes?
Eugene Soltes offers some interesting theories in his new book, Why They Do It: Inside the Mind of the White-Collar Criminal, including the notion that many senior business people operate in a moral “gray zone.” An associate professor at Harvard Business School, Soltes posits that they step over the line—breaking accounting rules or making illegal insider trades—in part because they rely on intuition. And, it turns out, their instincts stink. More compelling than his analytical efforts, the author’s unusual research method ought to draw a large audience to his book. With an admirably naive eagerness, Soltes wrote letters to some four dozen convicted criminals, ranging from Ponzi scheme legend Bernard Madoff to Andrew Fastow, late of Enron Corp., to Dennis Kozlowski, once the chief executive of Tyco International Ltd. Lo and behold, many of them wrote back. Soltes thus had the opportunity to pepper his book with the first-person observations and self-justifications of a colorful Murderers’ Row of white-collar crime. Here are some examples: I’ll pay them all back. Promise. “It’s like a comedy of errors,” Madoff told Soltes. “To cover the losses, I decided to take in money from hedge funds. And in order for me to do that, I had to commit to a long-term strategy that I wouldn’t send the money back [to investors]. I kept taking in more money, figuring that once the market allows me to do the strategy, I will be able to fix it.”  That’s the classic explanation of supposedly well-intentioned Ponzi masters: Eventually the scam will miraculously produce profits and everyone will be made whole. Madoff, 78, has plenty of time for correspondence, as he’s serving a 150-year federal prison sentence. Oops, I forgot about right and wrong. “If I had the character I should have had, I would have said, ‘Time out,’…but I didn’t,” Fastow, the former Enron chief financial officer is quoted as saying. “The reality is, if at any point in my career I said, ‘Time out, this is [expletive]. I can’t do it,’ they would have just found another CFO. But that doesn’t excuse it. It would be like saying it’s OK to murder someone because if I didn’t do it someone else would have.” Fastow, 54, served six years for his role in setting up off-balance-sheet “special purpose entities” used to conceal Enron’s true financial condition. Blame my ego. “The board would give me anything I wanted,” Kozlowski told Soltes. “We believed our own press….With myself and others—even the board—you become consumed a little bit by your own arrogance, and you really think you can do anything.” Kozlowski, 69, was convicted in 2005 of crimes related to his receiving tens of millions of dollars in unauthorized bonuses. He served six-and-a-half years in prison. They set me up. “It is all part of the biggest theft caused by a U.S. government agency in U.S. history,” Robert Allen Stanford, 66, complained to the author. Stanford is serving a 110-year prison sentence after being convicted of charges related to his investment company operating as a Ponzi scheme. “I will win this war,” he added. “Make no mistake, Eugene, I am going to win.” (A federal appeals court turned him down in October.) Having read Soltes’s accounts of these and other white-collar characters, one answer comes into focus above all others to the author’s question of why they did it. They did it because they thought they could get away with it.

SEAL Team 6 and a Man Left for Dead: A Grainy Picture of Valor

Britt Slabinski could hear the bullets ricochet off the rocks in the darkness. It was the first firefight for his six-man reconnaissance unit from SEAL Team 6, and it was outnumbered, outgunned and taking casualties on an Afghan mountaintop. A half-dozen feet or so to his right, John Chapman, an Air Force technical sergeant acting as the unit’s radioman, lay wounded in the snow. Mr. Slabinski, a senior chief petty officer, could see through his night-vision goggles an aiming laser from Sergeant Chapman’s rifle rising and falling with his breathing, a sign he was alive. Then another of the Americans was struck in a furious exchange of grenades and machine-gun fire, and the chief realized that his team had to get off the peak immediately. He looked back over at Sergeant Chapman. The laser was no longer moving, Chief Slabinski recalls, though he was not close enough to check the airman’s pulse. Chased by bullets that hit a second SEAL in the leg, the chief said, he crawled on top of the sergeant but could not detect any response, so he slid down the mountain face with the other men. When they reached temporary cover, one asked: “Where’s John? Where’s Chappy?” Chief Slabinski responded, “He’s dead.” Now, more than 14 years after that brutal fight, in which seven Americans ultimately died, the Air Force says that Chief Slabinski was wrong — and that Sergeant Chapman not only was alive, but also fought on alone for more than an hour after the SEALs had retreated. The Air Force secretary is pushing for a Medal of Honor, the military’s highest award, after new technology used in an examination of videos from aircraft flying overhead helped officials conclude that the sergeant had killed two fighters with Al Qaeda — one in hand-to-hand combat — before dying in an attempt to protect arriving reinforcements. The new account of Sergeant Chapman’s last act reopens old wounds for SEAL Team 6, the elite Navy unit that would later kill Osama bin Laden. The findings could rekindle tensions between Team 6 and other Special Operations organizations that lost men in the March 4, 2002, mission, which they felt the SEALs had planned and executed poorly, according to current and former military officials.

Health Insurers’ Pullback Threatens to Create Monopolies

Nearly a third of the nation’s counties look likely to have just a single insurer offering health plans on the Affordable Care Act’s exchanges next year, according to a new analysis, an industry pullback that poses a major challenge to the health law. The new study, by the Kaiser Family Foundation, suggests there could be just one option for coverage in 31% of counties in 2017, and there may be only two in another 31%. That would give exchange customers in large swaths of the U.S. far less choice than they had this year, when 7% of counties had one insurer and 29% had two. At least one county—Pinal in Arizona—is at risk of having no insurers offering marketplace plans next year, despite talks between regulators and insurers aimed at filling the void. The Kaiser study is the most comprehensive look at competition in the ACA marketplaces since several big insurers announced withdrawals from at least some of the exchanges. In many places, the retreats threaten to undermine the premise of the marketplaces, which were supposed to foster competition among insurers, holding down prices and expanding the offerings available to consumers buying their own health plans; the government subsidizes premiums for many of those individuals.  More:

A Fortress Against Fear

Don and Jonna Bradway recently cashed out of the stock market and invested in gold and silver. They have stockpiled food and ammunition in the event of a total economic collapse or some other calamity commonly known around here as “The End of the World As We Know It” or “SHTF” — the day something hits the fan. The Bradways fled California, a state they said is run by “leftists and non-Constitutionalists and anti-freedom people,” and settled on several wooded acres of north Idaho five years ago. They live among like-minded conservative neighbors, host Monday night Bible study around their fire pit, hike in the mountains and fish from their boat. They melt lead to make their own bullets for sport shooting and hunting — or to defend themselves against marauders in a world-ending cataclysm.  “I’m not paranoid, I’m really not,” said Bradway, 68, a cheerful Army veteran with a bushy handlebar mustache who favors Hawaiian shirts. “But we’re prepared. Anybody who knows us knows that Don and Jonna are prepared if and when it hits the fan.” The Bradways are among the vanguard moving to an area of the Pacific Northwest known as the American Redoubt, a term coined in 2011 by survivalist author and blogger James Wesley, Rawles (the comma is deliberate) to describe a settlement of the God-fearing in a lightly populated territory that includes Idaho, Montana, Wyoming, and the eastern parts of Washington and Oregon. Those migrating to the Redoubt are some of the most motivated members of what is known as the prepper movement, which advocates readiness and self-reliance in man-made or natural disasters that could create instability for years. It’s scenario-planning that is gaining adherents and becoming mainstream in what Redoubt preppers described as an era of fear and uncertainty. They are anxious about recent terrorist attacks from Paris to San Bernardino, Calif., to Orlando; pandemics such as Ebola in West Africa; potential nuclear attacks from increasingly provocative countries such as North Korea or Iran; and the growing political, economic and racial polarization in the United States that has deepened during the 2016 presidential election. More:

No Vacancies’ for Blacks: How Donald Trump Got His Start, and Was First Accused of Bias

She seemed like the model tenant. A 33-year-old nurse who was living at the Y.W.C.A. in Harlem, she had come to rent a one-bedroom at the still-unfinished Wilshire Apartments in the Jamaica Estates neighborhood of Queens. She filled out what the rental agent remembers as a “beautiful application.” She did not even want to look at the unit. There was just one hitch: Maxine Brown was black. Stanley Leibowitz, the rental agent, talked to his boss, Fred C. Trump. “I asked him what to do and he says, ‘Take the application and put it in a drawer and leave it there,’” Mr. Leibowitz, now 88, recalled in an interview. It was late 1963 — just months before President Lyndon B. Johnson signed the landmark Civil Rights Act  — and the tall, mustachioed Fred Trump was approaching the apex of his building career. He was about to complete the jewel in the crown of his middle-class housing empire: seven 23-story towers, called Trump Village, spread across nearly 40 acres in Coney Island. He was also grooming his heir. His son Donald, 17, would soon enroll at Fordham University in the Bronx, living at his parents’ home in Queens and spending much of his free time touring construction sites in his father’s Cadillac, driven by a black chauffeur. “His father was his idol,” Mr. Leibowitz recalled. “Anytime he would come into the building, Donald would be by his side.” Over the next decade, as Donald J. Trump assumed an increasingly prominent role in the business, the company’s practice of turning away potential black tenants was painstakingly documented by activists and organizations that viewed equal housing as the next frontier in the civil rights struggle. The Justice Department undertook its own investigation and, in 1973, sued Trump Management for discriminating against blacks. Both Fred Trump, the company’s chairman, and Donald Trump, its president, were named as defendants. It was front-page news, and for Donald, amounted to his debut in the public eye. “Absolutely ridiculous,” he was quoted as saying of the government’s allegations. Looking back, Mr. Trump’s response to the lawsuit can be seen as presaging his handling of subsequent challenges, in business and in politics. Rather than quietly trying to settle — as another New York developer had done a couple of years earlier — he turned the lawsuit into a protracted battle, complete with angry denials, character assassination, charges that the government was trying to force him to rent to “welfare recipients” and a $100 million countersuit accusing the Justice Department of defamation. When it was over, Mr. Trump declared victory, emphasizing that the consent decree he ultimately signed did not include an admission of guilt. But an investigation by The New York Times — drawing on decades-old files from the New York City Commission on Human Rights, internal Justice Department records, court documents and interviews with tenants, civil rights activists and prosecutors — uncovered a long history of racial bias at his family’s properties, in New York and beyond. That history has taken on fresh relevance with Mr. Trump arguing that black voters should support him over Hillary Clinton, whom he has called a bigot. While there is no evidence that Mr. Trump personally set the rental policies at his father’s properties, he was on hand while they were in place, working out of a cubicle in Trump Management’s Brooklyn offices as early as the summer of 1968. More:

Donald Trump has a massive Catholic problem

Much has been made of Donald Trump’s problems with a few voting groups — female voters, blacks and Hispanics, and young voters, in particular. And, to be sure, they are all problems. But relatively speaking, his biggest problem actually appears to be with a different group: Catholics. Yes, the man who once feuded with the pope (how soon we forget that actually happened) is cratering among Catholics.

Back in 2012, GOP nominee Mitt Romney lost the Catholic vote by just 2 points, 50 percent to 48 percent. And the GOP has actually won the Catholic vote as recently as 2004 and in 5 of the last  11 presidential elections. But Trump trails among Catholics by a huge margin. A new poll from the Public Religion Research Institute released this week shows him down 23 points, 55-32. A Washington Post-ABC News poll released earlier this month painted an even worse picture for Trump’s Catholic support. He was down by 27 points, 61-34. If you compare the difference between Romney’s margin among Catholics in 2012 and Trump’s margin among Catholics this year, the 25-point difference is tied for the biggest shift of any demographic group in the Post-ABC poll. More:

Down in the valley, up on the ridge

HEAD into Sneedville from the Clinch river, turn left at the courthouse and crawl up Newman’s Ridge. Do not be distracted by the driveways meandering into the woods, the views across the Appalachians or the shadows of the birds of prey; heed the warnings locals may have issued about the steepness and the switchbacks. If the pass seems challenging, consider how inaccessible it must have been in the moonshining days before motor cars. Halfway down, as Snake Hollow appears on your left, you reach a narrow gorge, between the ridge and Powell Mountain and hard on Tennessee’s north-eastern border. In parts sheer and wooded, it opens into an unexpected valley, where secluded pastures and fields of wild flowers hug Blackwater Creek—in which the water is not black but clear, running, like the valley, down into Virginia. This is the ancestral home of an obscure American people, the Melungeons. Some lived over the state line on Stone Mountain, in other craggy parts of western Virginia and North Carolina and in eastern Kentucky. But the ridge and this valley were their heartland. The story of the Melungeons is at once a footnote to the history of race in America and a timely parable of it. They bear witness to the horrors and legacy of segregation, but also to the overlooked complexity of the early colonial era. They suggest a once-and-future alternative to the country’s brutally rigid model of race relations, one that, for all the improvements, persists in the often siloed lives of black and white Americans today. Half-real and half-mythical, for generations the Melungeons were avatars for their neighbours’ neuroses; latterly they have morphed into receptacles for their ideals, becoming, in effect, ambassadors for integration where once they were targets of prejudice. The two big questions about them encapsulate their ambiguous status—on the boundaries of races and territories, and between suffering and hope, imagination and fact. Where did the Melungeons come from? And do they still exist? At a recent gathering of the Melungeon Heritage Association (MHA), in Vardy, a hamlet in the valley, and over in Big Stone Gap, Virginia, family trees and photographs of swarthy ancestors were compared. But the underlying preoccupation was the Melungeons’ origins—a subject comprised more of legend than of evidence. They are said to be the progeny of Phoenicians who fled the Roman sacking of Carthage, or of pre-Columbian Turkish explorers (making them America’s first Muslims). They descend from wayward conquistadors, from a doomed colony established on Roanoke Island by Sir Walter Raleigh, or from Moorish galley slaves abandoned there by Sir Francis Drake. They were sired by shipwrecked pirates or by Madoc, a 12th-century Welsh explorer. They are a lost tribe of Israel. More:

FDR’s Secretary’s Secret Hand in the New Deal

If Hillary Clinton becomes president in 2016, she will not be the first working woman to exercise power at high levels in the White House day-to-day over the course of a presidential term. Nor was it Madeleine Albright, or Valerie Jarrett, or any of the high-powered, highly-decorated women we so often associate with broken glass ceilings in the highest levels of government. A strong case could be made that the first woman to wield such power was Marguerite LeHand (better known as “Missy”) who began her day at about 9:25 each morning when, after having coffee and orange juice in her suite on the third floor of the White House and scanning several newspapers, she walked into President Franklin Roosevelt’s bedroom. There, with the president still in bed, wearing an old blue sweater or a navy cape to keep his shoulders warm as he finished his breakfast and read the Congressional Record, she and the president’s other secretaries went over the day’s schedule and other pressing matters before dispersing to their individual offices.  Missy LeHand, FDR’s longtime private secretary, was the only woman present at the morning conference every day, but she was by far the most influential person there, after the president himself. It was Missy who controlled access to FDR, selecting worthy allies and weeding out opportunists. It was Missy who would sit with the president in his study late into the night (FDR was said to do his “best intellectual work” between nine and midnight), jotting down his ideas, prodding him to make decisions or just simply sitting with him as he worked on his stamp collection or listened to music. And it was Missy who, through loyalty, savvy and charm, left a lasting impact on one of the most defining pieces of legislation in U.S. history—the New Deal. More:


Judge orders Alabama Secretary of State to add amendment to November ballot

Alabamians will vote in November on a proposal aimed at protecting up to 600 local laws — from sales taxes to annexations to draft beer regulations — from being invalidated because of a legal dispute over legislative procedure. Secretary of State John Merrill and lawmakers had disagreed over whether the measure’s inclusion on the ballot. Merrill said the deadline for ballot additions had passed. Montgomery Circuit Judge William Shashy on Friday ordered Merrill to add it to the Nov.8 ballot. Merrill had argued that the deadline was 76 days before an election. Lawmakers said it was 74. The Chilton County Health Care Authority on Friday filed the emergency petition with the judge, arguing Merrill was using unfounded reasoning to keep it off the ballot. “As the Attorney General’s informal advice recognizes, the Secretary’s seventy-six day time frame is not a constitutional or statutory requirement for proposed constitutional amendments. Rather, it is a mere internal practice based upon the timeframe set for the submission of primary election candidates for inclusion on the ballot,” lawyers for the health care authority wrote.

Merrill said the measure was added Friday in compliance with the judge’s order. “We got it on there,” Merrill said Friday night. He said he disagreed wholeheartedly with the accusation that he was misapplying the law. Hundreds of local laws are potentially in jeopardy unless voters approve the proposed amendment in November, said Sen. Cam Ward, R-Alabaster. The concern came after a judge struck down a Jefferson County sales tax law, after finding the House of Representatives was misapplying a procedural vote required before state budgets are approved. While the ruling was directed at one particular law, Sonny Brasfield, of the Association of County Commissions ofAlabama, said they feared an “avalanche” of lawsuits to invalidate other laws. “The potential impact of this ruling is far-reaching, affecting funding for vital services such as schools, courts, sheriffs’ offices, economic development organizations, and other critical services statewide,” Ward said. The Budget Isolation Resolution in the Alabama Constitution requires a vote of “three-fifths of a quorum present.” However, the House for years has interpreted it as three-fifths of “members present and voting.” Lawmakers gave final approval on Friday, the 74th day before the Nov. 8 election. Lawmakers possibly could have finished work on the bill on the 76th day before the election, the deadline Merrill said was in place, if a conference committee had been appointed and stayed late to work Wednesday. The conference committee did not meet until the following day. Lawmakers at the time were hoping to persuade Merrill to add a lottery referendum to the ballot if it won final approval Friday. Ward earlier voiced frustration that his bill was being used as a political pawn during the negotiations on other issues. However, Ward said Friday that he was frustrated and feared the bill would completely die as the session appeared to break down.

DOJ: Gardendale school system would ‘cut the heart’ out of county desegregation efforts

The U.S. Department of Justice, along with the NAACP Legal Defense Fund and Jefferson County School system, on Friday laid out in writing their opposition to Gardendale splitting from the county and forming its own school system. “When all the chaff is stripped away, ‘local control’ is the goal and the outcome sought (by Gardendale),” according to the 37-page Jefferson County brief. “In other words, it is and always has been about what Gardendale wants and what they think they deserve, to the exclusion of those who are beyond the city limit sign.” In a community and state where the segregation of black and white students at schools sometimes triggered violent and bloody reactions during the 1960s Civil Rights Movement, the debate over desegregation has again resurfaced in the past week inside and outside the courtroom. U.W. Clemon, a former federal judge and attorney for private black plaintiffs in the 51-year-old Jefferson County school desegregation case, and attorneys with the NAACP Legal Defense Fund, filed a 40-page brief explaining their opposition to Gardendale forming its own school system. But in an interview with on Friday night Clemon also says desegregation should be re-addressed in other city systems that have already broken away from the Jefferson County system over the past two decades. That request is not part of Friday’s court filing. Clemon says the school systems in Hoover, Trussville and Leeds should have to take in more black students and teachers. “That’s the position of the private plaintiffs,” he said. Any split by Gardendale or other desegregation issues involving other schools will be decided by U.S. District Court Judge Madeline Haikala. She presides over the 1965 schools desegregation case Stout vs. Jefferson County Board of Education. Since a 1971 order in that case, federal judges have continued oversight – including approval of attendance zones – over county schools to make sure racial balances are maintained and no discrimination occurs. Cities splitting off from the Jefferson County system since the 1971 order have been required to remain under the desegregation order until their system has reached “unitary status” – achieving the goals of becoming a non-discriminatory, desegregated system. Gardendale, like six cities have done before it, wants to form its own school system. Residents voted in November 2013 to form a school system, named a school board, and hired a superintendent. So far, Haikala has not agreed to Gardendale’s split. The U.S. Department of Justice and NAACP Legal Defense Fund told Haikala in June they oppose the split, setting up a trial on the issue. Haikala gave the DOJ and others until Friday to file their reasons for opposing the Gardendale split. Gardendale residents and official have questioned why other school systems, including Hoover, Trussville and Leeds, were allowed to separate and form their own systems while Gardendale’s effort is being challenged. “Obviously, Hoover, Trussville and Leeds ‘did it’ at a time when the watchman on the wall for the black plaintiffs was on vacation,” Clemon said. “He is now returned to the wall, with a renewed vigor and determination.” “The trooper who does not ticket the first speeder is not thereby estopped from ticketing subsequent speeders,” Clemon said. Gardendale officials have also argued that the city has a right under state law to form its own schools system. Clemon said that 45 years ago, the Fifth Circuit Court of Appeals (which at the time included Alabama) stated in the Stout case that “where the formulation of splinter school districts, albeit validly created under state law, have the effect of thwarting the implementation of a unitary school system, the district court may not … recognize their creation.”

“We believe that to be the current law,” Clemon said. More:

Incoming State School Superintendent’s Law License Suspended

MONTGOMERY—In his 2009 application to become Kentucky’s State School Superintendent, Michael Sentance claimed to be a “Highly accomplished Educator with more than 27 years experience and success.” Sentance received admission to the Massachusetts Bar in 1979, however, according to data provided by the Massachusetts Board of Bar Overseers of the Supreme Judicial Court dated August 26, 2016, his law license is under administrative suspension. The suspension appears to be for nonpayment of dues. SEE REPORT In his June 6, 2016, letter to the Alabama State Board of Education, Sentance writes about “moral imperative” and “best public school educators” who, in this State, requires being not only certified, but also keeping those certifications current. SEE PACKET  Winning as a dark horse candidate over credentialed educators with more actual experience, Sentance’s hiring is being shaded by an increasingly darkening cloud of suspicion. According to sources within the system speaking on background, Board of Education Vice Chair, Mary Scott Hunter, was the driving force behind Sentance’s hiring. In a letter to State’s Attorney General, Sen. Gerald Dial (R-Lineville) is seeking an investigation into alleged irregularities in the selection process. Dial and Sen. Quinton Ross (D-Montgomery) filed a joint resolution calling for a joint legislative committee to investigate confidentiality issues related to complaints lodged with the State Ethics Commission. At the center of the turmoil is an anonymous Ethics complaint, accusing Dr. Craig Pouncey of falsifying authorship of his Doctoral Dissertation, and using State personnel and resources to earn his doctorate. An anonymous letter with emails from 2009 containing thin allegations against Pouncey was sent to the Ethics Commission by Juliana T. Dean, General Counsel for ASDE, at the urging of Board member Mary Scott Hunter, according to sources inside ASDE and others close to the situation. Also implicated in Pouncey’s defeat is Paul Pinyan, ALFA’s chief, and his lobbyists, who were on hand during Sentance’s approval by the Board. “They were the only ones who applauded when he (Sentance) was chosen,” said an attendee, privately. According to individuals with background knowledge of the events leading to the vote, ALFA lobbyists persuaded board member Betty Peters to break her pledge to support Pouncey. Ultimately, BCA Chief Billy Canary is pulling the strings through his surrogate, Hunter, say insiders.

Carter returns to Finance during Troubling Times

 MONTGOMERY—Former Deputy State Finance Director, Clinton Carter, is returning to the Department of Finance. According to sources in Governor Robert Bentley’s inner circle, and those with close ties to Finance, Carter is being groomed to replace Acting Finances Director, Bill Newton. Reliable insiders claim Newton hand-picked his successor to insure access to the department, and those who are well-tended by cushy contracts, doled out under his watch. But there is doubt that Carter is that pliable. Newton accumulated around $1,000,000 from the DROP program, and is to retire in the near future. His tenure was almost cut short, due to several testy run-ins with Rebekah Caldwell Mason earlier in the year insiders say. These same sources claim Mason, then Gov. Bentley’s Senior Advisor and paramour, rather than seeking revenge made a common cause with Newton over the no-bid, $800 million prison debacle.

Carter is well respected on Goat Hill, but his new job comes with some troubling baggage, as lingering suspicions remain over Newton’s handling of the department; largely stemming from no-bid contracts with, the suppliers of the failed STAARS accounting system and contracts with other vendors, including the purchase of phones are seen as thorny issues ripe for investigation. For the last several years, Carter served as VP for Business and Financial Affairs at the University of North Alabama (UNA). His prior private sector experience as Director of Corporate Development, Mergers and Acquisitions for Huntsville-based Intergraph Corporation, and his time in investment banking and finance with Wachovia and Merrill Lynch, are seen as much needed skills at Finances. Carter and his wife Rebecca both are honored graduates of UNA.


Hidden Agenda. Part Two.

Earlier this week we asked if there is a hidden agenda to the state school board’s hiring of non-educator Mike Sentance of Boston to be our state school superintendent.  This concentrated on the actual education of students. However, there is another part of this picture that few have considered and that may an even larger part of why things have unfolded as they have. MONEY.  Up to $32 BILLION.

The state school superintendent is one of 15 voting members on the Teachers’ Retirement System board.  This is part of the Retirement Systems of Alabama and where the retirement funds for 88,000 retired educators are held. There is an on-going effort to make drastic changes to how these pension funds are managed.  There are some who would love to topple Dr. David Bronner who has run RSA for 40 years.  Those 88,000 retired educators are not in the anti-Bronner camp.  The Alabama Policy Institute and the Johnson Center at Troy University have lead the charge for change.

Attacks such as these prompted Tom Krebs, a securities attorney in Birmingham and a former director of the Alabama Securities Commission to speak out“The Alabama Legislature seemingly is bound and determined to hand over Alabama’s pension funds of $32 billion to the same Wall Street firms that brought us the financial crisis of 2008. The Alabama legislators are screaming “Change RSA” in an attempt to gain access to bribes, kickbacks, influence peddling, campaign contributions and pork barrel politics. Their activities conjure visions of Ali Baba and the 40 thieves, right out of the ancient Arabian folktale about greed and corruption. Perhaps we should now call them the Ali Baba legislature.

Bribes, kickbacks and other corruption have become entangled with state pension fund fights in other states. It has been done in Rhode Island, California, Kentucky and Illinois. Why would you think it would not happen here in Alabama? Hasn’t Mike Hubbard shown us how corrupt our legislators can be? It will surely happen here in Alabama, if it hasn’t happened already.” These are strong words from Krebs.  But when someone has served as Senior Counsel to the U.S. House of Representatives as he has, you have to pay attention. So now we hire someone from Massachusetts to vote on Alabama pensions.  We all have our long, closely held friends we turn to for advice.  People we went to high school or college with, people we once worked with, people we’ve gone to church with in our communities forever and a day.  People who are trusted to hold a confidence. How many of these folks does Michael Sentence have in Alabama?  Who taught for him when he was a principal?  Who was a new local school superintendent when he was and with whom he shared problems?  Who was in the classroom next to him the first year he taught school? Not a soul. All he has are those he is beholden to for his new job.  The same people who have created such an outcry from the public and the education community by hiring him.  The same folks who refused to listen to advise from professional educators about the qualities a new superintendent needed.  The very people who wrote up a list of qualifications and then ignored them. They have just shown they don’t care much for teachers and principals and superintendents by ignoring them.  Which only leads us to wonder how much they care about former teachers and principals and superintendents when issues come before the Teacher’s Retirement System?

Alabama Senate Pro Tem’s lottery gambit puts hundreds of local laws at risk

Alabama Secretary State John Merrill and state Sen. Pro Tem Del Marsh are in a game of chicken, or poker if we must use a gambling metaphor.Marsh insists it’s not too late to get a lottery on the ballot for the Nov. 8 general election. Merrill, at least as of Thursday morning, says the deadline passed Wednesday night. What’s riding on the winner? Potentially $7 million to $8 million, the cost of a special election lottery referendum. That alone was a lot, but then Marsh upped the stakes, putting hundreds of Alabama local laws at risk if Merrill doesn’t take action. To understand how Marsh’s gambit works, you have to understand a little bit about how the Alabama Legislature passes local bills and how those bills can now be challenged in court. It’s common procedure in the Alabama House for only lawmakers whose districts are affected by local legislation to vote on that legislation. Not only that, but sometimes those lawmakers are the only ones who vote on a procedural motion called a budget isolation resolution or, as they call it in the Legislature, a BIR. The thing is, the Alabama Constitution says a quorum must be present in the chambers when a BIR vote happens and three-fifths of that quorum must vote in favor of a BIR before any bill, local bills included, can come to the floor for an up or down vote. The Alabama House hasn’t been doing that. It hasn’t been doing it a lot. Instead, local delegations alone — sometimes only a handful of the House’s 105 members — have been voting on the BIRs, not three-fifths of half of the lawmakers as the Alabama Constitution requires. Earlier this year, a Jefferson County circuit judge found that the Legislature had run afoul of this constitutional requirement when it passed a bill to divert a county sales tax to a slew of county projects and a slush fund for the county’s lawmakers. That decision is being appealed to the Alabama Supreme Court. But here’s the thing. If it’s upheld, it could nullify not only that law but also hundreds of other laws passed by the same method. At a minimum, 635 local bills are at risk, including school taxes, annexations, bond issues — all sorts of stuff. To fix this, state Sen. Cam Ward, R-Alabaster, proposed an amendment to the Alabama Constitution that would retroactively fix all those votes on local bills. The bill made its way through the Legislature’s obstacle course until, Wednesday, it had one last hurdle to cross — a vote in the state Senate. But before it could come up for a vote, Marsh recessed and sent everybody home for the night. It would have taken a few more minutes to get it passed, but the pro tem decided not to. “I was adamantly opposed to leaving last night,” Ward said Thursday afternoon. “I pleaded with them not to go. We had the votes. We could have passed it.”

Instead, the Senate passed the amendment Thursday. So why did Marsh pull the plug on Wednesday?

I asked Ward if he thought Marsh was using this as leverage to keep the lottery alive. “That’s the thing that kept me up last night,” Ward said. Alabama Attorney General Luther Strange has said that it is up to the secretary of state to set the deadline for getting constitutional amendments on the November ballot. Merrill has said from the outset that the drop-dead deadline was Wednesday night. After the Legislature missed that deadline for the lottery, Marsh argued that Merrill could push it back as late as Friday.

In the wee hours of Friday morning, the House passed the lottery bill. It now goes back to the Senate for approval or a conference committee. If the two houses can work out their differences early enough today, then Marsh has put Merrill in a heck of a pickle: He can reverse course and put both constitutional amendments on the general election ballot Nov. 8, or he can spend $7 million to $8 million on a special election (money, Merrill says the state doesn’t have to spend) or he can punt further, until the next statewide election, in which time the Alabama Supreme Court might be forced to nullify hundreds of local bills, throwing the state into chaos. It’s a heck of a gambit. Marsh has gone all-in, and if he loses it could cost Alabama a lot. And if he wins, somebody please keep him away from the casinos.

Why Did We Stop Teaching Political History?

American political history, it would seem, is everywhere. Hardly a day passes without some columnist comparing Donald J. Trump to Huey Long, Father Coughlin or George Wallace. “All the Way,” a play about Lyndon B. Johnson, won a slew of awards and was turned into an HBO film. But the public’s love for political stories belies a crisis in the profession. American political history as a field of study has cratered. Fewer scholars build careers on studying the political process, in part because few universities make space for them. Fewer courses are available, and fewer students are exposed to it. What was once a central part of the historical profession, a vital part of this country’s continuing democratic discussion, is disappearing. This wasn’t always the case. Political history — a specialization in elections and elected officials, policy and policy making, parties and party politics — was once a dominant, if not the dominant, pursuit of American historians. Many of them, in turn, made vital contributions to the political process itself, whether it was Arthur Schlesinger Jr.’s role in the Kennedy White House or C. Vann Woodward’s “The Strange Career of Jim Crow,” which the Rev. Dr. Martin Luther King Jr. called the “bible of the civil rights movement.” But somewhere along the way, such work fell out of favor with history departments. According to the American Historical Association’s listing of academic departments, three-quarters of colleges and universities now lack full-time researchers and teachers in the subject. There appears to be little effort to fill the void. A search of the leading website advertising academic jobs in history, H-Net, yielded just 15 advertisements in the last 10 years specifically seeking a tenure-track, junior historian specializing in American political history. That’s right: just 15 new jobs in the last decade. As a result, the study of America’s political past is being marginalized. Many college catalogs list precious few specialized courses on the subject, and survey courses often give scant attention to political topics. The pipelines for new Ph.D.s in the subject, and therefore new faculty, are drying up, and in many graduate programs one can earn a doctorate in American history with little exposure to politics. How did it come to this? The trend began in the 1960s.  More:


The Night That Obama and Hillary Founded ISIS

It was late one night in the White House when Obama first came up with the idea for ISIS. He hadn’t been sleeping well. Michelle told him to take some deep breaths, have some hot milk, and rewatch Princess Bride, but he’d made it all the way to the Billy Crystal scene, and he was out of milk, and Michelle had started snoring. The snoring was loud and nasty and kind of wet-sounding, like a broken boat was giving birth to another boat. He had to get out of there. First, he headed down to the Oval Office and tried to sleep on the couch, but it wasn’t long enough for his legs, and it smelled like generals’ butts. For a long time, he just wandered around the West Wing alone. He was sad and tired and had the nervous feeling that he was doing something he shouldn’t. He peeked into people’s desk drawers and found pictures of cats and dogs and babies. He was thinking about stealing a Kind bar off one of his interns’ desks, when suddenly a word appeared to him: ISIS. He grabbed a Post-It note and wrote it down. What was it? What did it mean? It wasn’t until months later, at Coachella, that the idea started to take shape. Obama loved electronic music — the beats, the lights, the DJs, the wonderful fans — and every year, for just one day, the Secret Service allowed him to go to the music festival. They would hang back, and he would wear sunglasses, a flower crown, a neon tank top, and a tight European-style bathing suit and just dance. The people who did recognize him were too drunk and high to convince anyone of what they’d seen. (“Hey, bro, it’s the president!” “Yeah, bro!”) The president would block it all out and surrender to the thumping, sick beat. He had done a tiny bit of molly with a French Canadian woman named Bonjour when the word “ISIS” came back to him. Ever since he was a little boy, he had wanted to start an international terrorist organization of his own. He’d just never had the right idea. People had been starting terrorist groups for years, and he knew that if he wanted to break into the market, he needed some big new shtick. Wait. Of course. He went into his wallet and dug out the crumpled Post-It note. Yes. He would be the first American president to start an international terrorist organization, and it would be called ISIS. Bonjour was naked now, trying to bend a glow stick around one of her breasts. He gave her his flower crown, got in an Uber, and drove straight back to Washington. By the time he got home, he had a plan.  At first it was difficult to get people to believe he wasn’t kidding. “I want to be the founder of a new terrorist group,” he’d tell them. They’d laugh and say something like, “Hey, Mr. President, please don’t ever say that again publicly!” Obama felt like one of the characters trying to start a luxury denim business on the HBO show How to Make It in America. Then, finally, he decided the only person who could really help him was Hillary. They were down in the kitchen one night eating Popsicles and staring into each other’s eyes when he asked if he could tell her a secret. Hillary laughed and said, “Is it about how you’re really a terrorist?” He looked at her and said, “Yes, actually.” She stopped eating her Popsicle. “Donald Trump was right about you?” He nodded. “About everything.” He explained that he had actually been born in Kenya in 1919, and that he was 97 years old. He’d made an American birth certificate out of simple graph paper and aged it with tea bags. (“Honestly, it took me, like, 20 minutes.”) He explained that his parents told him from an early age that he should grow up to become the president of the United States so that he could eventually destroy the country from the inside. “Isn’t that the plot of the first season of Homeland?” Hillary asked. Obama nodded. “Kind of. Also a little bit of The Americans.”   More:

Morning Money

MM will return next week.

POTUS Events

No public schedule posted.

Floor Action

The House will not return until Sept. 6, according to the calendar. The House will then be in session until Sept. 30, and adjourn until Nov. 14, after the elections.

The Senate is running on a similar summer schedule, with its recess formally running from July 18 through Sept. 5. Senators are scheduled to be in session during the fall a bit longer than the House, with the Senate’s target pre-election adjournment date set for Oct. 7. The chamber will also return Nov. 14 after the elections.

For the entire year, the House is scheduled to be in session for 111 days.