Securities Attorney Briefing For 13 July 2016

Securities Attorney Tom Krebs


Brexit: EU referendum result ‘not legally binding’, say more than 1,000 lawyers

More than 1,000 lawyers have signed a letter addressed to Prime Minister David Cameron saying the EU referendum result is merely “advisory” and not legally binding. Arguing the vote for Brexit, which was opposed by world leaders such as Barack Obama and Christine Lagarde of the International Monetary Fund, is far from guaranteed, the group advised the Government to carefully consider whether to follow through with the British public’s vote to leave the European Union. Before Article 50 of the Lisbon Treaty – the route via which members states leave the EU – can be triggered, they say primary legislation will need to be enacted. The lawyers add that the Government should organise an independent investigation into the costs and benefits of withdrawal before making plans to exit the bloc. They say their letter will reach Mr Cameron this week and proposes a way forward which “reconciles the legal, constitutional and political issues” triggered by the Brexit vote. Philip Kolvin QC, who co-ordinated the creation of the letter, said: “Parliament is sovereign and the guardian of our democracy. “MPs are elected to exercise their best judgment on the basis of objective evidence, to safeguard the interests of the country and their constituents for this and future generations. “At this time of profound constitutional, political and possibly social and economic crisis, we look to them to fulfil the responsibility placed upon them.” David Lammy, the MP for Tottenham and former Higher Education and Skills Minister, told The Independent: “In our democracy parliament is sovereign – we do not have government by referenda or plebiscite. More:

Ireland, Home to U.S. ‘Inversions,’ Sees Huge Growth in G.D.P.

In the United States, politicians, lawmakers and officials have derided “inversion deals,” which allow an American company to move its headquarters overseas to cut its tax bills. In Ireland, they are celebrating them. The Irish government on Tuesday revised the country’s economic growth rate in 2015 to 26.3 percent from a preliminary estimate of 7.8 percent. While Ireland’s economy has been on the upswing since the country repaid its bailout, it wasn’t that the Celtic Tiger suddenly came roaring back in an unexpected way. Rather, it was the magic of those inversion deals and other sleights of finance. Under a typical inversion deal, a United States company takes over a foreign counterpart and, in the process, shifts its headquarters overseas. The takeover targets for such deals are typically based in countries with low corporate taxes — like Ireland, with its 12.5 percent rate. The combined company’s global profits are then reported in its new home base, regardless of where they are earned. In essence, Ireland’s G.D.P. is artificially inflated. Inversions have drawn the ire of the Obama administration, since they put a greater burden on American taxpayers. Last year, the medical device maker Medtronic bought its rival Covidien, reincorporating in Ireland. More recently, Johnson Controls of Milwaukee agreed to join up with Tyco of Cork, Ireland. (Tyco itself has hopped from locale to locale, having been in Bermuda, then Switzerland, before ending up in Ireland.) Inversions like that were one of the main drivers for the sharp rise in G.D.P., according to Ireland’s Central Statistics Office. The country’s economy was also bolstered by the import of new aircraft for international leasing activities, another financial gimmick. More:

Foreign Hackers Target Thousands of Gmail Users Every Month

For four years, Google has been notifying Gmail customers when they come under attack from hackers who may be working for foreign governments. The company has long remained vague about the the way it detects and identifies these hackers—“we can’t reveal the tip-off,” the company tells users—and about the number of notifications it routinely sends. Until now. When these warnings were introduced, they appeared as thin red bars tacked to the top of users’ inboxes. But just a few months ago, Google redesigned the notifications to be considerably more in-your-face: Now, they take up the entire screen, announcing themselves with an angry red flag. “Government-backed hackers may be trying to steal your password,” the alert reads, advising users to enable two-factor authentication. The new alert says that fewer than one in a thousand Gmail users are targeted by foreign hackers—but for a product with more than a billion active users, that could still be a really big number. (0.1 percent of 1 billion is 1 million.) More:

Denmark Is Big Victim Of Wall Street Tax Avoidance Deals

Danish version of this article was published by Børsen. Goldman Sachs, Citigroup, Merrill Lynch and other international banks have profited for years by arranging short-term loans of stock in Danish companies, a maneuver that has helped shareholders but deprived Denmark of substantial tax revenues. With the banks’ help, stock owners avoid paying Danish authorities the dividend taxesthey would otherwise owe on their holdings of companies like Maersk, Novo Nordisk, Danske Bank, Tryg and Carlsberg, among others. They do so by lending the shares to banks that temporarily transfer them to other investors with low or no tax obligations around the time when the dividend is paid. The terms are hedged and arranged months in advance. After dividend time, the borrowed shares are returned, and the tax savings are shared among the investors and banks that arranged the trades. The maneuver — known as dividend arbitrage, or “div-arb” — cost Denmark about 400 million Danish crowns ($60 million) in lost taxes last year alone, according to an estimate that we asked CEPOS, a Danish think tank, to provide for this article. For a country of 5.7 million, the lost revenue is significant: It equals roughly 1.1 percent of the budget deficit of the Danish government last year, or about 70 Danish crowns ($10) for each resident. The tax-avoidance trades are detailed in confidential documents that ProPublica examined in collaboration with the Danish business daily Børsen. The documents include trade logs, emails, chat messages and marketing materials that show how such trades happen in Denmark and various other countries. For the first time, the documents reveal who is engaged in this kind of tax avoidance, which has already drawn scrutiny from regulators and lawmakers in Germany as they try to prevent future losses to taxpayers. The documents make clear that the trades – which are also known as “yield enhancement” – are conducted for the purpose of avoiding dividend taxes. One client memo describes yield enhancement as a short-term loan of shares owned by a tax-liable shareholder to another investor with a lower rate of withholding or no tax at all. The tax-exempt investor gets the dividend tax-free or is able to claim a refund from tax authorities. The difference between what would have been owed and what was actually paid is then “split between the lender and the borrower,” the memo says. In another document, the trades are described simply as a method to “recapture” dividend taxes. More:



SEC: Citigroup Provided Incomplete Blue Sheet Data for 15 Years

The Securities and Exchange Commission today announced that Citigroup Global Markets has agreed to pay a $7 million penalty and admit wrongdoing to settle charges that a computer coding error caused the firm to provide the agency with incomplete “blue sheet” information about trades it executed. According to the SEC’s order instituting a settled administrative proceeding, the coding error occurred in the software that Citigroup used from May 1999 to April 2014 to process SEC requests for blue sheet data, including the time of trades, types of trades, volume traded, prices, and other customer identifying information.  During that 15-year period, Citigroup consequently omitted 26,810 securities transactions from its responses to more than 2,300 blue sheet requests.  After discovering the coding error, Citigroup failed to report the incident to the SEC or take any steps to produce the omitted data until nine months later.

“Broker-dealers have a core responsibility to promptly provide the SEC with accurate and complete trading data for us to analyze during enforcement investigations,” said Robert A. Cohen, Co-Chief of the SEC Enforcement Division’s Market Abuse Unit.  “Citigroup did not live up to that responsibility for an inexcusably long period of time, and it must pay the largest penalty to date for blue sheet violations.”


Contested Sale of ExamWorks Could Put Lawyers in Line of Fire

Then they came for the lawyers. The roles played by investment banks in billion-dollar buyouts have lately come under fire in the Delaware courts. Now, a complaint arising from the recent $2.2 billion buyout of the ExamWorks Group focuses on a different kind of deal adviser. It contends that lawyers at Paul Hastings, a law firm based in Los Angeles, were in cahoots with management and the investment banks to sell the company at a below-market price, something ExamWorks vigorously denies. Could this be the case that extends liability to the lawyers in buyouts? ExamWorks is an independent medical examination company founded by Richard E. Perlman and James K. Price. Mr. Perlman and Mr. Price are experienced financiers, focusing on industries where they can roll up a number of small companies, take the larger enterprise public and then sell out, typically to a private equity firm. This is what happened at ExamWorks, although in this case, the plaintiff, the Daytona Beach Police and Fire Pension Fund, claims that the buyout was tainted by conflicts and a failure of Paul Hastings to run the process appropriately. The fund, a shareholder of ExamWorks, is suing the company’s directors, as well as the private equity firm leading the buyout, Leonard Green & Partners. Reading through the complaint, the initial problem is that management and directors are participating in the buyout. Under the terms of the deal, Mr. Perlman, Mr. Price and three other directors and officers will be paid about $76 million in the buyout, roll over $45 million worth of shares into 3.7 percent of the new company and then receive incentive grants to buy another 9.2 percent of the now private company. This is not uncommon in a private equity deal. More:


In Bill, Lawmakers Propose New Limits for Seizing Workers’ Pay Over Old Debts

For the first time in nearly 50 years, a new federal bill seeks to lower how much lenders and collectors can seize from debtors through the courts, revisiting caps set in 1968 by the landmark Consumer Credit Protection Act. The Wage and Garnishment Equity (WAGE) Act of 2016, sponsored by Rep. Elijah Cummings, D-Md., and Sen. Jeff Merkley, D-Ore., would substantially reform protections for debtors by exempting many lower-income workers from garnishment and reducing what collectors can take from the paychecks and bank accounts of others. As ProPublica has reported in a series of articles over the past three years, consumer debts such as medical or credit card bills result in millions of garnishments every year. But the scale of the seizures and their consequences for the poor have largely been ignored by lawmakers, in part because no one tracks how often they happen. In their press release announcing the legislation, Cummings and Merkley cited ProPublica and NPR’s reporting that 4 million workers had wages taken for consumer debts in 2013. The garnishments hit low-income workers most frequently: Nearly 5 percent of those earning between $25,000 and $40,000 per year had a portion of their wages diverted to pay down consumer debts in 2013. Under current federal law, even workers below the federal poverty line can have up to a quarter of their after-tax wages taken. But there is no limit on what collectors can take from bank accounts, so if a paycheck is deposited, all of the money in the account can be grabbed to pay down the debt. “Every day, some Americans are having every penny in their paychecks garnished,” Cummings told ProPublica. “Congress should not sit on the sidelines and watch our constituents be kept in a cycle of poverty.” The WAGE Act is “a long-overdue first step to correct the inadequate protections for working families,” said Carolyn Carter of the National Consumer Law Center. ProPublica asked several representatives of the debt collection industry for comment on the bill, but all declined. With no Republican sponsors as of yet, the bill’s fate is uncertain, particularly in a Congress often beset by partisan deadlock. More:


The Fake Factory That Pumped Out Real Money

The biodiesel factory, a three-story steel skeleton crammed with pipes and valves, squatted on a concrete slab between a railroad track and a field of storage tanks towering over the Houston Ship Channel. Jeffrey Kimes, an engineer for the Environmental Protection Agency, arrived there at 9 a.m. on a muggy Wednesday in August 2011. He’d come to visit Green Diesel, a company that appeared to be an important contributor to the EPA’s fledgling renewable fuels program, part of an effort to clean the air and lessen U.S. dependence on foreign fuel. In less than three years, Green Diesel had reported producing 50 million gallons of biodiesel. Yet Kimes didn’t know the company. He asked other producers, and they weren’t familiar with Green Diesel either. He thought he ought to see this business for himself. Kimes, who works out of Denver, was greeted at the Green Diesel facility by a man who said he was the plant manager. He was the only employee there, which was odd. “For a big plant like that, you’re going to need a handful of people at least to run it, maintain it, and monitor the process,” says Kimes, a 21-year EPA veteran. The two toured the grounds, climbing metal stairways and examining the equipment. The place was weirdly still and quiet. Some pipes weren’t connected to anything. Two-story-high biodiesel mixing canisters sat rusting, the fittings on their tops covered in garbage bags secured with duct tape. Kimes started asking questions. “They showed me a log, and from that you could see they hadn’t been producing fuel for a long period of time,” he says. An attorney for Green Diesel showed up. Kimes asked how he could reconcile the lack of production with what Green Diesel had been telling the EPA. The attorney said he didn’t know, he’d been hired only the day before. “It was obvious what was going on,” Kimes says. The next day, he appeared at Green Diesel’s office in Houston’s upscale Galleria neighborhood, 15 miles from the plant, hoping to collect production records and other information. Someone stuck him in a conference room. Soon he was on the phone with the lawyer from the day before, who told him not to speak with any more Green Diesel employees. Kimes went back to Denver and started calling Philip Rivkin, Green Diesel’s founder and chief executive. He wasn’t available. And he never would be. That fall, Rivkin left Houston to live in Spain with his wife, their teenage son, a $270,000 Lamborghini Murcielago Coupe, and a $3.4 million Canadair Challenger jet. A passport Rivkin obtained in Guatemala, where he moved after living for an undetermined period in Spain, shows him with dark hair, a double chin, a lazy eye, and an impassive look. It’s one of the few publicly available photographs of the man. Now serving a 10-year sentence at the federal prison in Bastrop, Texas, Rivkin declined through his lawyer, Jack Zimmermann, to be interviewed for this story. He remains a bit of a mystery. But he is, for now, the king of the latest government playground for con artists. Biodiesel scams are puny compared with Medicare and Social Security fraud. For sheer moxie, though, it’s hard to beat Phil Rivkin. More:

Republicans’ Own Gun Laws Are Creating a Security Nightmare for the G.O.P.

In the wake of a deadly sniper attack during a protest last week in Dallas, where open-carry laws reportedly made it difficult for police to tell the difference between potential suspects and marchers carrying legal firearms, there are rising concerns that similar open-carry laws in Ohio risk turning the Republican National Convention into a security nightmare. With a wide range of gun-wielding individuals and groups—from Second Amendment–loving conservatives to Trump supporters to white nationalists and even the New Black Panther Party—set to converge in Cleveland in less than a week’s time, the debate over whether to allow guns at packed events like the Republican convention has reached fever pitch. Ohio, like Texas, has open-carry laws that allow individuals to carry non-concealed weapons in public areas The New York Times reports. That includes the site of this year’s R.N.C., where thousands of convention attendees will join politicians and journalists as hundreds of Republican delegates from all 50 states gather to formally vote for Donald Trump as the party’s presidential nominee. Firearms will be banned within the Secret Service–protected Quicken Loans Arena, but guns will be permitted everywhere else at the site in accordance with Ohio state laws that prevent cities from imposing stricter gun-control laws, NPR reports. While canned goods and tennis balls are among the items banned by the R.N.C., the constitutionally protected right to keep and bear arms will not be abridged in the protest zones surrounding the convention floor. “The last thing in the world we need is anybody walking around here with AR-15s strapped to their back.” Cleveland has continuously insisted that it is prepared for the event, regardless of the many people planning on packing heat. And city law enforcement officials have updated their security plans in light of the tragedy in Dallas, the Times reports. Still, as the list of armed organizations planning to attend the Republican convention grows, so do fears that confrontations between opposing groups could turn deadly. And not everyone is leaving the policing to the police. Tim Selaty, the director of operations for the pro-Trump group Citizens for Trump, told the Times that his group has hired private security officers to protect their events, including a Monday rally for which long weapons like shotguns and sniper rifles are banned. Handguns, Selaty said, would still be allowed. “It’s every citizen’s right to be able to defend themselves and their family, and I believe that an open-carry society is a much politer society,” he said. Not everyone is thrilled at the prospect of gun-toting convention-goers flooding downtown Cleveland. “The last thing in the world we need is anybody walking around here with AR-15s strapped to their back,” the president of the Cleveland Police Patrolmen’s Association. More:


Dozens of lawsuits accuse Trump of not paying his bills, reports claim

Presumptive Republican presidential nominee Donald Trump has been sued at least 60 times by individuals and businesses who accuse him of failing to pay for work done at his various properties, according to two published reports. USA Today also reported, citing data from the Department of Labor, that two of Trump’s now-defunct businesses were cited 24 times beginning in 2005 for failing to pay overtime or minimum wage. The cases were settled when the companies — the Trump Plaza in Atlantic City and Trump Mortgage LLC — agreed to pay back wages. The paper also reported that more than 200 liens have been filed against Trump or his businesses by contractors and employees dating back to the 1980s. The claimants include curtain makers, chandelier shops, cabinet makers and even Trump’s lawyers who represented him in prior cases. Trump told USA Today that he only withheld payment from contractors if he wasn’t pleased with their work. “Let’s say that they do a job that’s not good, or a job that they didn’t finish, or a job that was way late. I’ll deduct from their contract, absolutely,” Trump said. “That’s what the country should be doing.” The USA Today report cited one case involving a 1990 project at the Trump Taj Mahal in Atlantic City, during which New Jersey regulators found that Trump had failed to pay at least 253 subcontractors in full or on time. More:


GOP platform includes Trump’s wall

CLEVELAND — Republicans crafting a party platform in Cleveland quietly voted Monday in favor of building a wall along the U.S.-Mexico border, ratifying one of presumptive presidential nominee Donald Trump’s most controversial proposals. The language added to the party’s platform does not say anything about who will pay for the wall. Trump has repeatedly promised he will make Mexico pay for it, though the Mexican president has said there is “no way” that will happen. The platform will express support for a “border wall” that must cover “the entirety of the Southern Border and must be sufficient to stop both vehicular and pedestrian traffic.” The measure, proposed by Trump supporter Kris Kobach, the secretary of state from Kansas, was approved unanimously in the subcommittee meeting on Monday. In the full committee hearing on Tuesday, the new language did not attract any opposition or amendments. That policy plank of the party’s platform was adopted without even passing debate about the wall or immigration reform. More:





Inside Charles Koch’s Plot To Hijack Universities Across America And Spread His Radical ‘Free-Market’ Propaganda

The public is starting to catch up with the reality that Charles Koch is not only a major spender on building his own ideological institutions. Over the past decade, Koch has funded colleges and universities to bend them in his direction, often funding “free-market” academic centers. Mostly through his personal foundation, Koch gave $108 million to 366 colleges and universities from 2005 to 2014 and still more since then: for example, $10 million for George Mason University’s School of Law, which will be renamed after late Supreme Court Justice Antonin Scalia; $2 million to Western Carolina University to establish a free-market center; and over $4.1 million approved for future payment to several schools according to the foundation’s 2014 990 tax form. Some of these grants come with strings attached. At Florida State University, the initial memorandum of understanding between the Charles Koch Foundation (CKF) and the school’s economics department gave the foundation control over hiring decisions and the curriculum.

With his grants, Koch is installing libertarian-minded economics professors at hundreds of universities, so how do these professors coordinate their free-market agenda? In April, activist group UnKoch My Campus attended the latest conference of the Association of Private Enterprise Education (APEE), self-described as “an association of teachers and scholars from colleges and universities, public policy institutes, and industry with a common interest in studying and supporting the system of private enterprise.” Left out of this description are details about who these figures really are: Koch-funded academics, “experts” from Koch-funded think tanks and big business representatives. The Koch academic network has “nearly 5,000 scholars,” according to Ryan Stowers, Vice President of CKF. Hundreds flock to the APEE conference very year. More:


Wall Street shuns Trump’s Cleveland convention

NEW YORK — Wall Street executives are hitting the sell button on the GOP convention in Cleveland next week. Bankers typically use the quadrennial Republican Party gathering to schmooze clients, host parties and flaunt their connections to the nominee and other senior officials. In 2012, they flooded Tampa Bay to celebrate one of the industry’s favorite sons, Mitt Romney, getting the nomination. But with real estate mogul Donald Trump running on an anti-trade, populist platform — while sporting sky-high unpopularity ratings — many bankers and traders want nothing to do with the convention this year. Neither do most corporate CEOs. The prospect of Trump bashing trade deals and talking about building a wall with Mexico, coupled with the threat of potentially disruptive protests, is largely keeping the financial world away from Cleveland. “With Trump you have what is a fairly divisive campaign and you have the potential of unnecessarily offending a whole bunch of people if you show up there in a prominent way,” said Matt McDonald, a partner at consulting firm Hamilton Place Strategies which does business with some of the nation’s biggest banks. “On top of that a lot of the people that you might want to get in front of for one reason or another are not going to be there.” McDonald cited the long roster of senior Republican lawmakers skipping the convention as one major reason financial executives don’t feel the need to raise the flag in Cleveland. So far, no major Wall Street CEOs have said they plan to attend the convention. JPMorganChase, which played a sponsorship role in 2012, declined to do so this year. Goldman Sachs will also be largely absent, as will Morgan Stanley and Bank of America. Citigroup plans only a low-key presence. And unlike in 2012, when rank-and-file Wall Streeters were all over Tampa, many bankers and lobbyists who typically make the rounds will be taking a pass. “I’m just going to skip it because frankly I don’t see the point in going,” said a senior lobbyist for one of the largest banks in the nation. “Usually there is pressure to at least show up but with Trump you get a pass. No one is going to care if you don’t go.” More:
The Self-Driving Car Industry is Facing its First Real Test

 As the S.E.C. probes Tesla, Google’s self-driving car project lawyers up.  In the wake of the first-known death involving one of Tesla’s partially self-driving vehicles, the U.S. Securities and Exchange Commission has opened an investigation into Elon Musk’s electric car company, the Wall Street Journal reports. The S.E.C. will determine whether Tesla breached securities laws by neglecting to tell its investors sooner about the fatal crash, in which a 40-year-old man was killed when his Tesla Model S sedan, which had its semi-autonomous Autopilot system activated, collided with a tractor-trailer.

The National Highway Traffic Safety Administration is also investigating the crash, in an attempt to determine whether the accident was the fault of either driver, or if Tesla’s Autopilot technology was possibly to blame. Unlike the N.H.T.S.A.’s probe, however, the S.E.C. is investigating whether Tesla should have let its investors know about the accident soon. While Tesla did publish a blog post about the tragedy more than a month after it occurred, the company did not alert investors in a securities filing immediately after the crash. The Journal reports the S.E.C.’s investigation is still in its early days and might not lead to any consequences from federal regulators. While Tesla’s latest troubles stem from its financial practices, rather than the safety of its Autopilot software, the growing scrutiny surrounding autonomous vehicles points to a long regulatory battle ahead before self-driving technology becomes mainstream. So it comes as no surprise that Google’s own self-driving car project has reportedly lawyered uppreemptively, hiring its first general counsel. Autonomous vehicles are still in their early days of development and testing, and there’s still no precedent for dealing with fatalities. There’s not even an existing regulatory framework for self-driving cars: U.S. Transportation SecretaryAnthony Foxx says that the first-ever guidelines, which were supposed to be released this week, may not come until later this summer.


U.S. Beer Will Get Calorie Counts Under New Industry Guidelines

Under new beer-industry guidelines, U.S. drinkers will be able to see how many calories they’re consuming when they reach for that next brew. The largest sellers of beer in the country will begin listing calories, carbohydrates, protein and fat — along with alcohol by volume — on their labels, the Beer Institute trade group said in a statement Tuesday. The companies involved, which include Anheuser-Busch and MillerCoors, account for more than 81 percent of beer volume sold. “Beer is the most popular alcohol beverage in the United States,” Jim McGreevy, the Beer Institute’s chief executive officer, said in the statement. “Providing meaningful information will ultimately empower the consumer when making decisions regarding the beer beverage of their choice.” The change was set in motion after an Alcohol and Tobacco Tax Trade Bureau ruling in 2013 allowed brewers to add more information to their labels. Beer companies are joining much of the food and beverage industry in bringing more transparency to ingredients and nutrition. First Lady Michelle Obama has pushed to improve Americans’ diets, and the U.S. Food and Drug Administration is revamping packaged-food labeling to highlight the amount of added sugar. Under the new beer guidelines, brewers are expected to adopt the labels across their product lines by the end of 2020.




Alabama website breach revealed personal data of some state retirees

A Mobile woman who was helping her parents with their state health insurance coverage saw names, dependent’s names, dates of birth and Social Security numbers of other insurance program members on the system’s website. Amanda Murdick said when she opened a portal for members on the website of the Public Education Employees’ Health Insurance Plan, personal identification information of hundreds of other retirees was accessible. That was late Friday afternoon. Murdick said she called the PEEHIP office in Montgomery after 5 p.m. on Friday but was not able to reach anyone. Murdick said she called the FBI office in Mobile on Monday and was advised to call the human resources department at PEEHIP. Murdick said she did so and was directed to a Teachers Retirement System counselor, who told her that the website was undergoing maintenance and that the agency was aware of problems. The counselor told Murdick she would report her concerns to the IT department. By Monday night, Murdick said, the problem was fixed. “I was just sick and disheartened,” Murdick said. “It was just a sitting duck for identity theft potential.” Murdick said she is freezing her parents’ credit as a precaution. Leura Canary, general counsel for the Retirement Systems of Alabama, said the RSA is still trying to find out exactly what happened.

“Appropriate persons at RSA have been notified,” Canary said. “We’re taking all remedial action as quickly as possible. “We’re still investigating the matter and we’ll make sure our members are protected.”

Canary said PEEHIP is required to report data breaches to the U.S. Department of Health and Human Services and to its members. The information that was accessible did not include any information about health claims. It included members’ and dependents’ names, program ID numbers, birth dates and retirement dates. Social Security numbers were handwritten by some of the entries. Murdick said she recently helped her mother resolve a stolen credit card number that led to a fraudulent $5,000 furniture purchase. “I hope nobody has gotten hurt,” Murdick said. “It seems like PEEHIP needs to do something to alert these people.”


Man pleads guilty to wire fraud in sale of Iraqi currency, laundering money in Alabama banks

An Illinois man pleaded guilty on Monday to committing wire fraud during his operation of a business that unlawfully sold Iraqi currency over the internet. Husam Usama Tayeh, 36, of Oak Lawn, Ill., pleaded guilty in federal court in the Middle District of Alabama. According to the U.S. Attorney’s Office for the Middle District of Alabama and Alabama Securities Commission, Tayeh contracted with a resident of Dothan, Ala. to launder the proceeds of his company, Dinar Corp., through Dothan banks. Tayeh couldn’t find banks in or around Chicago that would take his money, according to court documents. Dinar Corp. was registered in Nevada and headquartered in the suburbs of Chicago. Through the company, Tayeh operated a website where he offered to sell customers Iraqi dinars.  One of the ways he did this was through installment contracts. When a customer entered into an installment contract, Tayeh promised to place in reserve the quantity of dinars to be purchased by the customer. Tayeh assured customers that he would ship them the reserved dinars upon the customers making their final contract payments, according to the U.S. Attorney’s Office.  Tayeh then defrauded customers in that he never actually placed dinars in reserve and never had access to enough dinars to fulfill all orders should the orders all come due. A sentencing hearing has yet to be set. Tayeh faces a maximum sentence of 20 years in prison as well as a fine. “Tayeh used advanced technology to commit classic fraud—he duped people into spending their hard-earned money on his worthless wares,” United States Attorney George L. Beck Jr. said.  “Tayeh’s caused harm all over the country.  I am proud to say that we in Alabama put a stop to this far-reaching scheme.”

Bill Clinton to attend Baldwin County fundraiser

Bill Clinton will be attending a Baldwin County fundraiser for his wife’s presidential campaign on Wednesday. Baldwin County Commissioner Tucker Dorsey said a Daphne couple, Robert and Pat Eddington, will be hosting the event at their home. Pat Eddington is friends with Hillary Clinton, Dorsey said. Dorsey said the Eddingtons have supported the Clintons ever since the early 1990s. Hillary Clinton will be in Washington D.C. during her husband’s visit. Bill Clinton will fly back out Wednesday night.



Alabama ethics fails: Lawmakers get free trip to lavish hotel and spa

For more than a century the Grove Park Inn in Asheville, N.C., has been a favorite vacation place for the elite and well-heeled. William Howard Taft was the first of 10 presidents to stay there. Barack Obama was the latest. They say it even has a ghost — the Pink Lady — who haunts the hotel from time to time. Now you can add to that list 15 Alabama lawmakers on a special interest group’s dime. Last month the Alabama Lenders Association hosted four state senators and 11 state representatives there during that group’s annual summer conference, paying for their lodging, meals and other social activities. And here’s the kicker. According to the Alabama Ethics Commission, it’s all legal. Through a gaping hole in Alabama’s ethics law, special interest groups can pay the way for public officials to rest easy in the Blue Ridge Mountains, or wherever else they see fit to take them. But before we get into how special interest groups can exploit the law, let’s be clear on what sort of place we’re talking about in this instance. When it opened, the Grove Park Inn might have been the sort of place Jay Gatsby would have stayed were he a living breathing man, but it was F. Scott Fitzgerald who summered there while Zelda was committed in a mental hospital nearby. The hotel has preserved one of the writer’s rooms much the way he left it, but elsewhere on the premises there have been upgrades. There’s an 18-hole golf course on the grounds, four tennis courts, five restaurants and three bars. A steak will run you about $50, unless you get the lobster tail to go with it. That’s another $30. Cocktails at the Sunset Terrace run about $15. But the real attraction is the spa. A few years ago, Travel & Leisure magazine called its subterranean spa the 13th best in the world. Eighty minute treatments run from $190 to $490, depending on what day you go. I’ve only seen pictures, but they make Hugh Hefner’s Playboy mansion grotto look like a frog pond. This is how you vacation if you’re in the one percent, and also if you’re one of the lucky Alabama lawmakers and the spouses who get to go for free. Let’s start with the Alabama House Financial Services Committee members, since that committee hears the legislation first that affects the Alabama Lending Association’s members. That would be Representatives Jimmy Martin (R-Clanton), Mike Hill (R-Columbiana), Marcel Black (D-Tuscumbia) and Randall Shedd (R-Fairview). I should note here that since Hill went on this trip, he is no longer an Alabama House member. He resigned earlier this month when Alabama Gov. Robert Bentley appointed him to lead the Alabama Banking Department. That’s right, the guy Gov. Bentley hired to be the state’s top banking regulator just came back from an all-expenses junket paid for by an industry he will regulate. Rep. Steve Clouse (R-Ozark) was there. He’s running to replace Mike Hubbard as Alabama House speaker. Minority leader Craig Ford (D-Gadsden) was there, too, representing the other side of the aisle. Other Alabama House members included Richard Lindsey (D-Centre), David Standridge (R-Hayden), Kyle South (R-Fayette), April Weaver (R-Brierfield), Jim Carns (R-Vestavia Hills), Alan Baker (R-Brewton), Alan Boothe (R-Troy), Matt Fridy (R-Montevallo) and Johnny Mack Morrow (D-Red Bay). Alabama state senators went, too, including Clay Scofield (R-Arab), Jabo Waggoner (R-Vestavia Hills), Tom Whatley (R-Auburn) and Cam Ward (R-Alabaster). All but Ward serve on the Alabama Senate Banking Committee. More:

What Alabama could learn from California

Most Alabama conservatives shudder at the very mention of California because they have come to believe that the state is nothing more than a liberal wasteland over-run with illegal immigrants or that it is somehow emblematic of their perception that America is awash in moral decay. Yet, California’s economy has turned around completely under the leadership of, you guessed it, liberals. As comedian Bill Maher recently pointed out, “…the sky didn’t fall, the unemployment did, and growth shot up to over 4 percent, and a $26 million deficit became an $11 million surplus.” And, they did it by rejecting the failed premise of trickle-down economics. They did it by ensuring that the wealthy individuals and corporations actually paid their fair share of taxes rather than allowing them to avoid their tax liability by utilizing loop-holes in the tax code. They did it by trying new ideas, rather than doubling-down on the failed conservative approach that eschews change and resists progress. Another huge change for California was that in 2008 they passed the California Redistricting Act which set up an independent commission that drew district lines without partisan gerrymandering. In sharp contrast, Alabama’s districts are so heavily gerrymandered that it’s next to impossible for Democrats to get elected throughout the majority of the state. In the places that Democrats can get elected, those districts are ridiculously gerrymandered, as well, in the old tradition of “stacking and packing.” In Alabama, the maps look more like funky abstract art drawn by a drunk, but they nefariously reflect a determined approach to keeping one party overwhelmingly in power. This is why Alabama remains stagnant and politically monolithic. This is why there is little debate over seriously flawed bills and how we end up with horrid legislation. In California, they have worked hard to foster economic diversity in terms of the wide variety of industry that appears to be growing strongly throughout the state. The Republicans keep saying that regulations are killing business, but that doesn’t seem to be the case in California. While they are prospering, Alabama keeps lagging behind in innovation and job growth. While California welcomes cultural diversity, Alabama keeps jousting windmills by wasting taxpayer dollars to fight the federal government on same-sex marriage, abortion rights, contraception coverage, and faux “religious freedom” issues. Now, California is far from being some sort of magical fairyland utopia, but at least they can pave their roads, fund their schools, and they aren’t spending all their time trying to figure out how to cut more essential public services. They are not perpetually engaged in expensive legal efforts against the federal government while at the same time taking as much money from federal coffers as possible like we do here in Alabama. More:

Morning Money

WALL STREET SHORTS THE GOP CONVENTION — POLITICO’s Ben White: “Wall Street executives are hitting the sell button on the GOP convention in Cleveland next week. … Bankers typically use the quadrennial Republican Party gathering to schmooze clients, host parties and flaunt their connections to the nominee and other senior officials.

“In 2012, they flooded Tampa Bay to celebrate one of the industry’s favorite sons, Mitt Romney, getting the nomination. … But with real estate mogul Donald Trump running on an anti-trade, populist platform — while sporting sky-high unpopularity ratings — many bankers and traders want nothing to do with the convention this year. …

“‘With Trump you have what is a fairly divisive campaign and you have the potential of unnecessarily offending a whole bunch of people if you show up there in a prominent way,’ said Matt McDonald, a partner at consulting firm Hamilton Place Strategies which does business with some of the nation’s biggest banks. ‘On top of that a lot of the people that you might want to get in front of for one reason or another are not going to be there.’

FEW BIG NAMES — “So far, no major Wall Street CEOs have said they plan to attend the convention. JPMorganChase, which played a sponsorship role in 2012, declined to do so this year. Goldman Sachs will also be largely absent, as will Morgan Stanley and Bank of America. Citigroup plans only a low-key presence. … And unlike in 2012, when rank-and-file Wall Streeters were all over Tampa, many bankers and lobbyists who typically make the rounds will be taking a pass.

“‘I’m just going to skip it because frankly I don’t see the point in going,’ said a senior lobbyist for one of the largest banks in the nation. ‘Usually there is pressure to at least show up but with Trump you get a pass. No one is going to care if you don’t go.’

“At Goldman, typically one of the most politically engaged banks on Wall Street, there may be almost no one at all going to Cleveland. “I asked around and couldn’t find a single person who planned to be there,” said one Goldman executive who declined to be quoted by name.

“‘Most people who want to see someone from the Trump campaign can do it some other place at some other time. And the potential is there for Cleveland to be a complete shit show.’”

FARRAGE WILL BE THERE! — POLITICO’s Tyler Pager: “Brexit leader Nigel Farage will attend the Republican National Convention next week and share lessons about the United Kingdom’s decision to leave the European Union, he told USA TODAY on Tuesday. ‘Having criticized President Obama for getting involved in British politics, I am not about to endorse anybody,’ Farage said. ‘But I do know a lot of people in the Republican Party, and I’ll be interested to hear what Donald Trump has to say in his big speech.’”

MORGAN STANLEY ON 2016 — Morgan Stanley analysts in a research report: “The US election is the latest political risk to markets, with the potential for serious fundamental consequences from campaign proposals. However, evidence points to a divided government & policy incrementalism, rather than sweeping near-term change … Policy incrementalism, not transformation, is the most likely election outcome.

“Using a mix of polling data, 3rd party models, betting market probabilities, and academic studies, we develop and rank likely election outcomes based on 3 key principles: 1) Republicans should maintain House control; 2) The electoral map is not being remade, and favors Democrats; 3) Policy transformation is hard. Currently, Clinton White House outcomes are heavily favored”

DRIVING THE DAY — Could it be Trump VP day? Newt Gingrich back in the frame following suspension of his contributor gig with Fox News … President Obama convenes a White House meeting on law enforcement and police shootings … Treasury Secretary Jack Lew is in London to meet with UK Chancellor of the Exchequer George Osborne. In the afternoon, Lew will meet with Bank of England Governor Mark Carney and later with business leaders. In the afternoon, Lew travels to Brussels for meetings with EU officials. In the evening, Lew travels to Berlin … House Ag has a hearing at 10:00 a.m. on “Examining the CFTC’s (Commodity Futures Trading Commission) Proposed Rule: Regulation Automated Trading” … House Financial Services has a hearing at 10:00 a.m. on “HUD Accountability” … House Financial Services has a markup at 2 p.m. on H.R.5729 , an Iran sanctions bill and other measures … Import Prices at 8:30 a.m. expected to rise 0.5 percent … Federal Reserve Beige at 2:00 p.m.

DOW HITS RECORD — WSJ’s Okane Otani and Christopher Whittall: “The Dow industrials charged to a record Tuesday, surpassing their May 2015 milestone and ending the longest stretch without a record since the period from October 2007 to March 2013. The Dow Jones Industrial Average rose 120.74 points, or 0.7 percent, to 18347.67 to climb past its previous closing record of 18312.39 set May 19, 2015. To get there, the Dow had to overcome two corrections — defined as a fall of at least 10 percent from a recent peak — since its last high.

“Those two downturns, last summer and early this year, came as investors worried about slowing global growth and the possibility of a U.S. recession. Investors have cast aside those concerns, after a jolt from the U.K.’s vote to leave the European Union, and have started to buy their way back into riskier sectors”

RISK ON! — FT’s Dave Shellock: “A steady improvement in risk appetite propelled US stocks to record highs for the second day in a row as bulls took heart from an easing of Brexit concerns, a more confident view of the global economy and the prospect of continued central bank accommodation. US, German and UK government bond prices continued to retreat, the yen fell to its lowest level against the dollar for more than two weeks and gold was heading for its lowest close since the start of the month. Sterling approached the $1.33 level against the dollar for the first time since July 4.”

GOP APPROVES DRAFT PLATFORM — POLITICO’s Kyle Cheney: “Republican delegates have approved a draft of the new GOP platform, signing off on a document that would embrace several of Trump’s economic proposals but preserves the party’s previous stance against same-sex marriage and on other socially conservative issues.

“The Convention Platform Committee’s plan … embraces presumptive … Trump’s skeptical view of foreign trade agreements, calling for a slowdown in any new multinational deals and eliminating the party’s once enthusiastic support for [TPP] .. The draft also backs the construction of a wall along the southern border with Mexico”

DONOR OFFERS $5M FOR TRUMP TAXES — POLITICO’s Louis Nelson: “An anonymous donor has promised to give $5 million to a veterans charity of … Trump’s choosing if the presumptive Republican presidential nominee releases his tax returns, political operative and Clinton backer David Brock plans to announce Wednesday. The Manhattan billionaire has long refused to release his tax returns …

“A release previewing a conference call with Brock scheduled for Wednesday says the $5 million challenge ‘represents an opportunity to fill in some of the unknowns about Trump including how much he has made off of potentially fraudulent ventures and how much he’s actually paid in taxes.’”

WARREN TO SPEAK ON FIRST NIGHT IN PHILLY — NYT’s Amy Chozick and Jonathan Martin: “In an apparent sign that Senator Elizabeth Warren will not be named Hillary Clinton’s running mate, Ms. Warren was invited by Mrs. Clinton’s campaign on Tuesday to deliver a prime-time address on the first night of the Democratic convention this month — a marquee speaking slot but one that is earlier than vice-presidential picks typically appear.

“Such nominees usually speak later in the convention week to build anticipation for the top of the ticket. Two Democrats briefed on the invitation to Mrs. Warren, however, cautioned that Mrs. Clinton had not yet made a decision about a running mate and that asking Ms. Warren to take the stage on the first night did not preclude her from being tapped as the vice-presidential nominee”

SOUTH CHINA SEA HEATS UP — Reuters: “An international tribunal’s ruling denying China’s claims in the South China Sea will ‘intensify conflict and even confrontation,’ Beijing’s ambassador to the United States said on Tuesday. The ambassador, Cui Tiankai, also told an international forum in Washington that Beijing remains committed to negotiations with other parties in disputes over the vital trade route.

“In a case that was seen as a test of China’s rising power and its economic and strategic rivalry with the United States, the Permanent Court of Arbitration in The Hague ruled China had breached the Philippines’ sovereign rights by endangering its ships and fishing and oil projects in the energy-rich region”

DON’T KILL DODD FRANK — Reuters BreakingViews’ Rob Cox: “The presumptive GOP nominee calls the banking reform act ‘a very negative force,’ and has taken a shine to Jeb Hensarling, the Texas Republican Chairman of the House Financial Services Committee, whose views are shaping the party platform on finance. But Trump’s assertion is more difficult to make against the realities of the banking industry.”

LEW TO EUROPE: DO BREXIT THE EASY WAY — POLITICO’s Joseph J. Schatz: “U.S. Treasury Secretary Jack Lew has a plea for European and British leaders this week: Do Brexit the easy way, not the hard way. Lew and other U.S. officials don’t seem overly concerned about the short-term economic risks of last month’s landmark British vote to leave the EU, including in the United States. …

“But in visits to Paris, London, Brussels and Berlin this week, Lew is urging his European counterparts to keep the Brits close — and vice versa — as they negotiate the parameters of the U.K.’s post-Brexit economic ties with the European Union. Anything else wouldn’t just be bad for Europe, he’s implying, it would be bad for the United States.”

FIRING BACK ON WARREN — CBA President and CEO Richard Hunt emails on the “no bankers” language in the Dem platform: “By Senator Warren’s logic, we should expect the Democratic Party to start calling for the exclusion of doctors at the Food and Drug Administration, scientists at the Environmental Protection Agency, and politicians in Congress …

“Conflict of interest allegations apply just as easily to each of these professionals as anyone in the financial services sector. The reality is we should be asking the finest professionals in every sector — those with merit, substance, and expertise — to be serving in government.”

ICYMI (AND WE DID) — Via the HFSC: “The House Financial Services Committee … released a staff report of its investigation into the U.S. Department of Justice’s decision not to prosecute HSBC or any of its executives or employees for serious violations of U.S. anti-money laundering laws and related offenses. …

“Senior DOJ leadership, including then-Attorney General Eric Holder, overruled an internal recommendation by DOJ’s Asset Forfeiture and Money Laundering Section to prosecute HSBC because of DOJ leadership’s concern that prosecuting the bank would have serious adverse consequences on the financial system.

Public Citizen react: “This explosive report, which Public Citizen is still reviewing, raises questions that are so serious it may deserve a full congressional investigation. Failure to prosecute any of the likely criminals eliminates the necessary deterrence to clear Wall Street of the ubiquitous thugs in the future.”

DEBT HORIZON GETS WORSE — CAP Action Fund’s Harry Stein: “The [CBO] budget outlook projects that the national debt will grow at a faster rate than the CBO projected in last year’s outlook, and some Republicans have already seized the news to attack programs that support low- and middle-income Americans. … But the higher debt projections in this year’s outlook are not surprising — they are the predictable consequence of tax cuts that Congress passed last year”


REACT — Per Peterson Foundation release: “CBO’s latest report confirms that America’s economic future is threatened by its fiscal outlook. Deficits have already begun to grow again, and they will once again reach more than $1 trillion per year by 2022. Even worse, our long-term fiscal path remains dangerously unsustainable, as our debt is projected to reach a staggering 141 percent of GDP over the next 30 years”


CLINTON DOMINATES THE AIRWAVES — NBC’s Mark Murray: “Hillary Clinton and her allies continue to outspend Donald Trump and his backers over the airwaves by a 15-to-1 margin, according to ad-spending data from SMG Delta. Team Clinton has spent $57 million on ads so far in the general election — $25 million coming from the campaign and another $32 million from pro-Clinton Super PACs.

“By comparison, Team Trump has aired $3.6 million in ads, with all of the spending from two outside groups, the National Rifle Association ($2.3 million) and Rebuilding America Now ($1.3 million). The Trump campaign has yet to spend a single cent on ads so far in the general election.”

JPM GIVES LOWER PAID EMPLOYEES A RAISE — FT’s Ben McLannahan in New York: “JPMorganChase has promised to lift basic hourly pay for 18,000 of its lowest paid US workers by at least a fifth by 2019. The bank’s move is in line with a nationwide movement known as ‘Fight for $15’, which calls for a raise to $15 an hour for the 42 per cent of the American workforce that earns less.

“The cities of San Francisco, Seattle and Los Angeles have enacted gradual increases of their minimum wages to that level, while in New York state, governor Andrew Cuomo is seeking legislative support to raise the wage there to $15 by July 2021 … ‘A pay increase is the right thing to do,’ wrote Jamie Dimon, chairman and chief executive of JPMorgan, in an opinion … ‘Wages for many Americans have gone nowhere for too long. Many employees who will receive this increase work as bank tellers and customer service representatives”

ADULTS: STOP PLAYING POKEMON GO — WSJ’s Sarah E. Needleman: “The hit mobile app ‘Pokémon Go’ is giving millions of people their first taste of futuristic augmented-reality technology. It is also raising questions about whether the game’s location and mapping features are luring players into danger. …

“The placements raise questions about whether players could get hurt searching unsafe areas — a dark alley or along a river, for example — particularly while staring at a smartphone screen. It is also a reminder of how fast-developing technologies like augmented reality can be handed to people with little precedent or guidance on how to use them in everyday life.”

POTUS Events

11:00 am || Recieves the Presidential Daily Briefing
2:45 pm || Hosts a “conversation on community policing and criminal justice;” Eisenhower Executive Office Building

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

Floor Action

The House meets at 10 a.m. to wrap up work on the Interior-EPA appropriations bill today with first votes around 1 p.m. The Senate gavels in at 9:30 a.m. with a procedural vote related to the opioid bill at 11 a.m. and a vote on the FAA extension—the last must-do business of the week—at 1:45 p.m.

AROUND THE HILL– Democratic Caucus Chairman Xavier Becerra, Vice Chairman Joe Crowley, DPCC Chairman Steve Israel and Rep. Robin Kelly hold a 10 a.m. press conference in the HVC-210 alcove following a Democratic caucus meeting.

Reps. Reid Ribble and Cynthia Lummis hold a 10:45 a.m. press conference on a 75-year plan to fix Social Security in the House triangle. House Speaker Paul Ryan and Rep. Mia Love will hold a Facebook Q&A at 11 a.m. Go to to participate.

Rep. Peter DeFazio holds a press conference on the financial transition tax at 1:15 p.m. in the House triangle.