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The
Corporate Reform Weekly
Vol
V, #12, March 20, 2006
In
Short
Lobbying
Reform
1. Lobbying reform faces an
uncertain path as House GOP rank-and-file balks at private travel ban
2. Senators introduce bill
to limit incumbent fundraising
Scandal
Zeroth.
Whistleblower
Sherron Watkins testifies of an “an elaborate accounting hoax” as Enron trial
continues
0.
Regulators
fine Bear Stearns $250 million for assisting in illegal fund trading
0.
Spitzer
accuses H&R Block of taking advantage of tax filers with bad investment
devices
Watchdog
Reports
0.
New
labor rights report calls Bush Administrations record “appalling”
0.
AFL-CIO
report finds Wal-Mart abuses government health-care assistance
This
Week’s Action Item
Tell
your members of Congress: You want real lobbying reform
Lobbying
Reform
1.
Lobbying reform faces an uncertain path as House GOP rank-and-file balks at
private travel ban
The road to
lobbying reform continues to be muddy and unclear. Last week, House GOP leaders
suggested that they would push for a temporary ban on privately-funded travel,
earmark reform, and other changes. After the temporary ban, GOP leaders say
they plan to establish a system of pre-approval.
"We need
to bring about bold, strong reform," said House Rules Committee Chairman
David Dreier (R-Calif.), who is in charge of drafting a bill.
But, reports
from Washington indicated that rank-and-file Republicans were unhappy with the
proposed new rules. Many of them rely on privately-funded travel to get back to
their districts, and many like being able to earmark pet projects for the
district. The battle pits House Speaker J. Dennis Hastert (R-Ill), who is in
favor of mild reforms, including more and more frequent lobbying disclose and a
limit on the contributions to “527” advocacy groups, against House Majority
Leader John A. Boehner (R-Ohio), who has been fairly outspoken against earmark
disclosure and a ban on privately-funded travel.
The debate
among Republicans seems to be split between those who are convinced that they
need to grab hold of the issue and enact mild reforms to neutralize bad
publicity, and those who like the benefits they receive and figure that the
public doesn’t care enough to cause problems.
In the Senate
meanwhile, a reform bill has been indefinitely shelved after the fracas over
port security shoved the issue to the background.
For more, see:
“Effort to Overhaul Lobbying Gets a Chilly Reception,” By Mary Curtius, Los
Angeles Times: http://www.latimes.com/news/nationworld/nation/la-na-lobby16mar16,1,235973.story?coll=la-headlines-nation
“GOP Seeks
Curbs On '527' Groups,” By Jeffrey H. Birnbaum and Jonathan Weisman, Washington
Post: http://www.washingtonpost.com/wp-dyn/content/article/2006/03/15/AR2006031502384.html
“Move to Curb
Gifts of Travel Creates Rift in House G.O.P.,” By SHERYL GAY STOLBERG, New York
Times; http://www.nytimes.com/2006/03/16/politics/16lobby.html
“Lobbyists
Foresee Business As Usual,” By Jeffrey H. Birnbaum:
http://www.washingtonpost.com/wp-dyn/content/article/2006/03/18/AR2006031801305.html
2.
Senators introduce bill to limit incumbent fundraising
Using the
debate over lobbying reform to highlight the corrupt campaign finance system,
Sens. Ron Wyden (D-Ore.) and Lindsey Graham (R-S.C.) have introduced a bill
that would prohibit incumbents from raising money until 18 months prior to
their next general election.
“Our proposal
aims to not just treat the symptoms of scandal and corruption; it aims to cure
the overall disease wrought by money in politics and lets senators return to
spending the majority of the people’s time on the people's business,” said
Wyden in a press release. “Today in the Senate, after an election is held the
first Tuesday in November, people sleep in on Wednesday, and then the
fundraising chase starts all over again on Thursday. Under this proposal
Senators will go from raising campaign money all six years of their six year
term down to eighteen months. Shorter campaigns will result in less
partisanship, less scandal, and more good government.”
“Unfortunately,
Senators find that too much of our time is diverted to fundraising,” said
Graham in a press release. “Our legislation allows every Senator to focus on
their job for the first four of their six year terms and puts off the money
chase till the end. Senators would spend more time legislating and conducting
oversight on how tax dollars are spent, and less time acting as perpetual
candidates. Everyone would be in the same boat and the rule would apply to all
Senators equally. It would make the Senate a much different place.”
Under the
proposal, the Senate rules would be changed to prohibit sitting Senators from
making any efforts, personally or through senate or campaign staff, to amass
funds or pledges of funds, for a Senate re-election campaign or leadership PAC
until the eighteen months immediately before a general election.
The
Wyden-Graham legislation has received statements of support from a number of
public interest groups, including U.S.PIRG, Common Cause, and Democracy 21.
In the last
election, Senate incumbent funding jumped by 49 percent as compared to the
previous three cycles, according to the nonpartisan Campaign Finance Institute.
On the other hand, challenger fundraising stayed put.
For more, see:
“ WYDEN, GRAHAM UNVEIL NEW SENATE CAMPAIGN FINANCE REFORM PROPOSAL,” Press
release: http://wyden.senate.gov/media/2006/03162006_campaign_finance_reform_proposal.html
Scandal
3.
Whistleblower Sherron Watkins testifies of an “an elaborate accounting hoax” as
Enron trial continues
Former Enron
accountant turned whistleblower and 2002 Time Magazine co-person of the
year Sherron Watkins took the witness stand last week in the trial of Ken Lay
and Jeff Skilling and told jurors that in August 2001, she confronted then-CEO
Lay about what she called “an elaborate accounting hoax,” that would cause the
company to “implode in a wave of accounting scandals.”
Watkins told
the jury: "This was not just aggressive accounting, it was fraudulent
accounting. I couldn't believe we had done it."
Watkins
testified that, when confronted, Lay “seemed surprised that these things
could be problematic" She said that he “winced” when she read him comments
she had received from an unnamed fellow Enron employee. One such comment:
"I wish we would get caught. We're such a crooked company."
Watkins
testified that after she met with Lay, he ordered an investigation into the
company’s off-the-books partnerships and had them dissolved. However, Watkins
said that the investigation was problematic – it was conducted by the company’s
auditors, who had approved the deals in the first place.
Watkins’
meeting with Lay was two months before October 2001, when Lay told
employees that the "underlying fundamentals of our business are very
strong." Prosecutors are trying to demonstrate that both Lay and Skilling
misrepresented the company’s financial situation to investors.
Last week also
brought the testimony of former pipeline worker Johnnie Nelson, who “lost
everything” when the company’s stock fell to nothing. Nelson told the jury:
"We're not talking about stamps and stationery, this is millions and
millions of dollars. . . . Mr. Lay was paid a lot of money to know the inner
workings of the company."
Also
testifying: former Enron analyst Vincent J. Kaminski, who said he repeatedly
warned top executives about the risky off-the-books partnerships that company
used to hide debt.
For more,
see: “Whistle-Blower Shifts Focus of Enron Trial,” By Carrie Johnson: http://www.washingtonpost.com/wp-dyn/content/article/2006/03/15/AR2006031502296.html
4.
Regulators fine Bear Stearns $250 million for assisting in illegal fund trading
Investment
bank Bear Stearns has agreed to pay $250 million to settle charges brought by
the Securities and Exchange Commission and the New York Stock Exchange that the
company helped certain privileged customers engage in illegal mutual fund
trading.
"For
years, Bear Stearns helped favored hedge fund customers evade the systems and
rules designed to protect long-term mutual fund investors from the harm of
market timing and late trading," said Linda Chatman Thomsen, director of
the SEC's enforcement division, in a statement. "As a result, market
timers profited while long term investors lost," she added.
Regulators
said that company employees falsified records in order to hide the fact Bear
Stearns was engaging in improper and deceptive market-timing and illegal late
trading between 1999 and 2003. Both of these practices allow favored clients to
benefit at the expense of ordinary investors.
Susan Merrill,
head of NYSE Regulation's enforcement unit, said the large fine was due to the
fact that "many long-term holders of mutual funds that were affected by
this conduct, which was an outright fraud. It's sending a message that our
member firms that commit fraud, fraud that has an impact on customers, will be
dealt with in the harshest way possible."
The company
will pay $90 million in fines and $160 million in profit and interest. All the
money will go to investors who were harmed.
For more, see:
“Bear Stearns to Pay Fine Over Mutual Fund Trades” ASSOCIATED PRESS: http://www.charlotte.com/mld/charlotte/business/industries/14113386.htm
5.
Spitzer accuses H&R Block of taking advantage of tax filers with bad
investment devices
With taxes due
in a month, New York Attorney General Eliot Spitzer has accused H&R Block,
the nation’s largest tax-preparation service, of pushing inappropriate
investment plans on hundreds of thousands of market-unwise customers who use
the company’s income tax-filing services.
What H&R
did was steer its customers, many of them low-income clients, into investment
accounts with low returns and high fees, which they did not properly
disclose. While H&R Block promised customers who opened an IRA
account with them “great rates” and “a better way to save,” the reality is that
in 85 percent of cases, the accounts charged more in fees than they returned in
interest.
"The
conduct described in today's complaint is particularly appalling because many
of those hardest hit were working families who struggle to save," Eliot
Spitzer, the New York attorney general, said in a statement. He noted that the
accounts were “virtually guaranteed to lose money.” Spitzer’s office is seeking
$250 million in fines and refunds.
Spitzer’s case
against H&R block follows charges lodged last month by California Attorney
General Bill Lockyear, who charged H&R Block with illegally marketing and
selling high-cost loans as "instant" tax refunds. Last year, the
company paid $62.5 million to settle four class-action lawsuits related to
refund-anticipation loans.
For more, see:
“Spitzer Sues H&R Block on I.R.A.'s”
By JULIE
CRESWELL and ERIC DASH, New York Times: http://www.nytimes.com/2006/03/16/business/16tax.html?_r=1&oref=slogin
Watchdog
Reports
6.
New labor rights report calls Bush Administrations record “appalling”
“Serious
violations of labor rights in the United States are on the increase,” reports
the ICFTU (International Confederation of Free Trade Unions), which represents
155 million workers in 236 affiliated organizations in 154 countries and
territories. The group’s new report “details a catalogue of breaches of
international standards concerning freedom of association, the right to
collective bargaining and child labor, and shows a clear trend towards lower
standards under the Bush Administration.”
“The
credibility of the US, which takes a strong international stand on human rights
issues, is severely damaged by the lack of protection for working people,
especially the most vulnerable, within its own borders”, said Guy Ryder, ICFTU
General Secretary, said in a press release. “This only encourages other
governments to seek competitive advantage in global markets by violating
fundamental workers’ rights”.
Some of
the report’s findings include:
“Many
categories of workers in the USA are excluded from the Labor Relations Act that
provides for freedom of association and collective bargaining rights, such as
agricultural workers, domestic workers, supervisors, independent contractors
and government employees. More than 25 million private civilian workers and 6.9
million federal, state and local government employees do not have the right to
negotiate their wages, working hours and employment terms. For those workers
that do have the right to organize there is insufficient legal protection
against anti-union discrimination. Anti union campaigns are widely used by
employers in the case of organizing, and 82% of the employers hire union
busting consultants to stop workers from joining unions.”
“The
right to strike is only allowed for private sector workers, but even there this
right is severely restricted. There are legal limitations for workers to engage
in “concerted activity” such as intermittent strikes and secondary boycotts.
Moreover, the law allows for permanent replacement of striking workers, and
also allows for those replacement workers to vote in union decertification
elections.”
“Furthermore,
undocumented migrant workers are discriminated against when it comes to legal
entitlements in the case of unfair labor practices. A ruling by the Supreme
Court in 2002 stated that undocumented workers are not entitled to back pay as
a remedy for unfair labor practices and they are not entitled to reinstatement.
This ruling has therefore made it difficult to enforce trade union rights of
several million undocumented workers.”
“Although
the US has ratified the ILO Convention No.182 on the worst forms of child
labor, child labor remains a problem in the US, particularly in agriculture,
where fewer regulations apply and children are exposed to hazardous working
conditions. Many children work long hours in the fields and are exposed to
dangerous pesticides, sharp knives and heavy equipment. At the same time the
number of inspections for the enforcement of child labor laws has decreased
substantially. Furthermore the report notes that a number of new child labor
regulations have worsened safety conditions for young workers, especially by
lowering the minimum age for handling dangerous operations, such as operating
fryers and grills in fast food restaurants and loading of paper balers and
compactors.”
For full
details, see: http://www.icftu.org/displaydocument.asp?Language=EN&Index=991223566
7.
AFL-CIO report finds Wal-Mart abuses government health-care assistance
More workers
at Wal-Mart Stores Inc. than any other company in at least 19 states are
relying on government health-care assistance, according to a new AFL-CIO report
.
The report
portrays Wal-Mart, the country's largest employer with 1.39 million workers, as
a key factor in states' exploding Medicaid costs.
"That
Wal-Mart should play such a prominent role in the Medicaid crisis is
unjustifiable by any measure," the labor federation said in its report,
"The Wal-Mart Tax: Shifting Health Care Costs to Taxpayers."
Following up
on the success of getting Maryland to enact legislation that would require
employers with at least 10,000 workers to spend at least 8 percent of their
payroll on health benefits, the AFL-CIO is now working on similar legislation
in almost half of the nation’s states. However, only a handful of bills stand a
chance of passage this year.
For more, see:
http://www.aflcio.org/
This
Week’s Action Item
Tell
your members of Congress: You want real lobbying reform
Already, the
momentum for lobbying reform seems to be waning. That’s why your elected
officials in Washington need to hear from you. They need to know that you will
not tolerate anything less than real lobbying reform.
And by real
lobbying reform, we mean banning private money from federal elections and
replacing it with a system of public funding. Fortunately, Reps. Dave Obey
(D-WI) and Barney Frank (D-MA), have introduced legislation to do just
that.
The
“Grassroots Clean Campaign Act” is the only reform that will truly end the
corrupt special interest lobbying because it’s the only reform that makes
removes the need for members of Congress to make promises to corporate special
interests in order to get elected in the first place.
The
‘Grassroots Clean Campaign Act’ legislation has the following provisions:
-
“It establishes a
system of financing campaigns for House candidates in general elections based
on the returns from the previous two elections.”
- “It provides the vast majority of challengers
with more funds to mount their campaign than the current system.”
- “It empowers voters with the knowledge that their vote
affects the outcome of the current election and also affects the amount
distributed to nominees in future elections.”
- “It bans all independent expenditures so
that only the candidate is responsible for his/her message."
- “It provides for expedited consideration of a constitutional
amendment allowing these changes if the Supreme Court rejects the plan.”
Please tell
your member of Congress today to support the “Grassroots Clean Campaign Act.”
It is the only reform that will meaningful reduce the influence of corporate
special interests.
Contact your
senators: http://www.senate.gov/general/contact_information/senators_cfm.cfm
Contact your
congressional representative: http://www.house.gov/writerep/
