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The
Corporate Reform Weekly
Vol
V, #20 May, 15, 2006
In
short
Congressional
Corruption
1.
Prosecutors investigate another Congressman for accepting bribes from defense
contractors
2.
Rep. Ney’s former top aide pleads guilty to trying to bribe Rep. Ney
Corporate
crime prosecution
3.
Chamber of Commerce to Justice Department: Rein in your prosecutors
4.
US News article suggests crackdown on corporate crime is fading
5.
Morgan Stanley pays $15 million to settle SEC investigation into e-mail hiding
Enron
trial
6.
Judge allows Enron trial jury to consider whether Skilling, Lay were
deliberately ignorant
Entertainment
7.
Coming to your television soon: a new docu-drama about corporate crime
This
Week’s Action Item
Tell
Congress: you’re still waiting for real lobbying and ethics reform
Congressional
Corruption
1.
Prosecutors investigate another Congressman for accepting bribes from defense
contractors
Almost six
months after former Rep. Randy “Duke” Cunningham (R-Calif.) pleaded guilty to
accepting $2.4 billion in bribes, prosecutors are investigating whether Rep.
Jerry Lewis (R-Calif.), another San Diego-area congressman, also accepted
bribes from defense contractors in order to steer business their way.
Prosecutors
say that as chairman of the House Appropriations Committee, Lewis has earmarked
hundreds of millions of dollars into federal contracts for companies
represented by Bill Lowery, a longtime friend and former Congressional
colleague turned lobbyist. Lowery, also from the San Diego area, served
alongside Lewis on the House Appropriations Committee from 1985 and 1993.
After leaving
Congress, Lowery helped found Copeland Lowery Jacquez Denton & White, a
Washington lobbying firm. One of the firm’s clients is defense contractor Brent
R. Wilkes, who has been described as "co-conspirator No. 1" in the
Cunningham corruption case.
Wilkes and his
companies have donated $60,000 in campaign contributions to Lewis over the
years, and have paid Lowery’s lobbying firm more than $160,000 in lobbying
fees.
According to
Taxpayers for Common Sense, Lewis earmarked more than $70 million in funds for
Environmental Systems Research Institute Inc., a San Diego area-based mapping
software company, which paid Lowery’s firm $320,000 in lobbying fees. As the
head of the Appropriations Committee, Lewis is in charge of $850 billion in
government funds.
Prosecutors
are also interested in Jeff Shockey, who left Lewis’s office in 1999 to work as
a lobbyist for Lowery, and then went back to work for Lewis last year,
receiving $600,000 in severance payments from Lowery.
For more, see:
“Lewis Surfaces in Probe of Cunningham,” By Peter Pae, Los Angeles
2.
Rep. Ney’s former top aide pleads guilty to trying to bribe Rep. Ney
Neil G.
Volz, the former chief of staff to Rep. Bob Ney (R-Ohio) turned lobbyist, last
week pleaded guilty to conspiracy and fraud in trying to bribe his former boss
with meals, entertainment and other gifts. Volz, who has agreed to cooperate in
a growing investigation of corruption surrounding lobbyist Jack Abramoff, could
face up to five years in prison and a fine of up to $250,000.
In court
documents, Volz said that while he worked for Ney, he accepted “a stream of
things of value” from Abramoff and other lobbyists. In return, he said that Ney
introduced a bill to help an Indian tribe in Texas looking to develop a
gambling enterprise.
In 2001,
Ney became the chairman of the House Administration committee, and Volz became
the panel’s staff director. In early 2002, Volz left to join Abramoff’s
lobbying firm where he admitted that his job was providing a stream of things
of value to other public officials.” One of those public officials is
identified as “Representative #1.” “Representative #1” is wide believed to be
Representative Ney.
For more, see:
“Ex-Aide in House to Cooperate in Abramoff Inquiry,” by David Stout of the New
York Times: http://www.nytimes.com/2006/05/08/washington/08cnd-inquire.html
White-collar
prosecution
3.
Chamber of Commerce to Justice Department: Rein in your prosecutors
The U.S.
Chamber of Commerce is leading an effort to pressure the US Department of
Justice to rein in its prosecutors on corporate crime. The Chamber claims
government prosecutors have grown too aggressive in the last few years.
“We
don't have to violate people's constitutional rights, and we don't have to set
up cooked deals so it makes it easier for the government to extort a settlement
or a guilty plea,'' said Chamber of Commerce president Thomas Donohue told the
Wall Street Journal
The
effort is also supported by the Securities Industry Association and the Bond
Market Association. “Whenever you have a big scandal, the pendulum is likely to
shift in
one direction,'' George Kramer, the deputy general counsel of the securities
association told the Wall Street Journal. ``If prosecutors lose sight of trying
to really obtain justice in the interest of trying to get a quick hit and nail
somebody, then the pendulum has swung too far.''
For more,
see: “Prosecutors
Should Be Curbed, Say U.S. Business Organizations,” By Robert Schmidt: http://www.bloomberg.com/apps/news?pid=10000087&sid=atMD4edON.2A&refer=top_world_news
4.
US News article suggests crackdown on corporate crime is fading
Contrary to
the Chamber of Commerce’s claims of government prosecutors being overly
aggressive on corporate crime (see item # 3), an article in US News and World
Report suggests that the opposite may actually be the case.
According to
the article:
“The
hang-'em-high days of cracking down on white-collar crime may already be over.
As the trial of the two former CEOs of Enron captures headlines, companies and
executives are quietly winning policy changes and court rulings to water down
investor protection and weaken fraud investigations, prosecution, and
punishment.”
The article
goes on to note that:
“The pullback
is evident at every level--from investigations to prosecutions to sentencing.
And there's even a drive to weaken some new investor protection rules that
force executives to give up conflicts of interest and do tougher audits.”
“Investigations
may suffer if the Bush administration sticks with its 2007 budget, which calls
for a reduction in the number of SEC investigators. Also, new legal barriers
could hamper the longtime cooperation among different agencies' investigators.
Several judges have dismissed charges against defendants because of concerns
that overlapping investigations might result in a kind of double jeopardy. The
judge in HealthSouth Corp. CEO Richard Scrushy's trial, for example, tossed out
some of his charges last spring, saying the coordination between the SEC and
the Department of Justice created an unfair "perjury trap" for
Scrushy. Civil regulators can fine suspects who don't cooperate. But those who
do talk risk providing incriminating evidence that will send them to jail on
criminal charges. (Scrushy was eventually fully acquitted.) A federal judge in
an Oregon accounting fraud case made a similar ruling in January.”
For the
full article, see:
“The Crackdown
Cracks: Getting tough on corporate crime is so yesterday. The pendulum is
swinging back, hitting everyone from gumshoes to judges,” By Kim Clark, US News
and World Report: http://www.usnews.com/usnews/biztech/articles/060424/24eecrime.htm
5.
Morgan Stanley pays $15 million to settle SEC investigation into e-mail hiding
Morgan
Stanley last week agreed to pay $15 million to end a Securities and Exchange
Commission investigation into whether the investment bank purposely hid
e-mails, books, and records relevant to an SEC investigation of how the company
allocated hot IPOs and rewarded research analysts between 2000 and 2004.
Antonia
Chion, associate director of the SEC's enforcement division, said that the
settlement “should serve as a reminder and a warning to firms that they need to
comply with their production obligations.” When the SEC issues subpoenas, she
said, firms “need to search their documents, preserve them and produce them.”
When
Morgan Stanley paid $125 million in 2003 as part of a 10-firm $1.4 billion
settlement with federal and state regulators over allegations that Wall Street
banks improperly recommended stocks with companies they hoped to generate
banking business with, investigators expressed frustration with the amount of
e-mails that Morgan Stanley shared with regulators, as compared to the amount
of e-mails that some competitors shared.
For more
see: “Morgan
Stanley agrees to $15M fine,”
By Greg Farrell, USA TODAY: http://www.usatoday.com/money/industries/brokerage/2006-05-11-morgan-usat_x.htm
Enron
trial
6.
Judge allows Enron trial jury to consider whether Skilling, Lay were
deliberately ignorant
Last week,
Week 15 in the trial of Enron founder and former Enron CEO Jeff Skilling, the
defense rested its case, but asked US District Judge Sim Lake to prevent the
jury from considering whether Skilling or Lay could be found guilty if either
made a deliberate decision to remain ignorant about criminal activity at Enron.
The Judge denied that request, telling jurors that they could consider whether
the two defends are guilty of what is known as "deliberate
indifference" or "willful blindness."
'That is
clearly the biggest issue," Skilling's lawyer Daniel Petrocelli told
reporters. In court papers, he said that: ''The critical issues for the jury to
decide in this case are whether the transactions and statements at issue were
fraudulent and whether defendants intended them to be so -- not whether
defendants purposefully blinded themselves."
Next week,
jurors will hear final arguments from both sides. Over the course of 15 weeks
and 53 days, 50 witnesses have testified. But experts seem to agree that the
case will ultimately come down to whether or not jurors believe the testimonies
of Skilling and Lay.
Both Skilling
and Lay testified in their own defense, arguing essentially that Enron’s
collapse was more of a classic run on the bank caused by a panicky investment
climate than a deliberate fraud. They blamed CFO Andrew Fastow for any fraud
that might have occurred, but insisted that they were focused on the big
picture and certainly didn’t direct or know about any fraud until much later.
Skilling
testified that he never signed paperwork approving Fastow’s deals and he was
more focused on building new businesses. Lay said that he was “very much of a
decentralized person” and a “delegator,” who didn’t even have time to read his
e-mails and relied on others to do so.
Prosecutors
say that both Skilling and Lay knew that the company was a house of cards built
on phony financial information, yet continued to publicly say that the company
was in excellent financial health and its stock was a “good buy” – even as they
were privately unloading their shares. Prosecutors say Skilling earned $150
million and Lay earned $220 million from 1999 to 2001.
For more, see:
“Enron jury to consider 'deliberate ignorance'”
By Bloomberg
News: http://www.boston.com/business/technology/articles/2006/05/11/enron_jury_to_consider_deliberate_ignorance/
“Enron verdict
hinges on Lay, Skilling testimony, experts say,”
By MARY FLOOD,
Houston Chronicle: http://www.chron.com/disp/story.mpl/front/3849813.html
Entertainment
7.
Coming to your television soon: a new docu-drama about corporate crime
Alex Gibney,
the writer director of documentary "Enron: The Smartest Guys in the
Room" has signed a deal to develop a new crime drama about corporate crime
for CBS.
The project
will reportedly follow a low-level government official who is investigating a
corporate giant. Gibney reportedly has been inspired by following not just
Enron, but also crimes at Tyco and Worldcom and other corporate scandals
"I felt
that the wild thing about these stories was that truth was stranger than
fiction," he said. "At the same time, there's a territory in there
you cannot explore in nonfiction that is left to explore in fiction that is
exciting to do."
For more, see:
“"Enron" director uncovers crime at CBS Paramount,” By Andrew
Wallenstein, Reuters:
This
Week’s Action Item
Tell
Congress: you’re still waiting for real lobbying and ethics reform
Last week,
prosecutors opened in inquiry into whether Rep. Jerry Lewis (R-Calif.) accepted
bribes to steer federal dollars to selected defense contractors. And the former
chief of staff to Rep Bob Ney (R-Ohio) pleaded guilty to conspiracy and fraud
in trying to bribe his former boss with meals, entertainment and other gifts.
More
indictments may be coming soon, and it means that Congress may be forced to
revisit the issue of lobbying reform very soon. Two weeks ago the House passed
a sham reform bill that does very little of what’s needed.
We need to let
our elected officials in Washington know that we still want real reform, and
that includes real campaign finance reform.
Public
Campaign is urging people to contact their elected officials in support of the
Clean Money, Clean Elections" Act in the House (H.R. 3099)
Here’s what
Public Campaign has to say:
“At the center
of the political scandals in Washington is the private money lobbyists and
their clients use to curry favor with politicians. The pay-to-play culture
won't be cleaned up by lobbying and ethics reform alone. Until Congress bites
the hands feeding their campaign treasuries, pay-to-play politics will continue
to dominate Washington.”
“Too many in
Washington see politics as a way enrich themselves and reward their big money
donors, all at our expense. Congress must get serious about public financing.”
“So far, the
Tierney-Grijalva "Clean Money, Clean Elections" Act in the House
(H.R. 3099) is the best proposal on the table in Washington.”
“Comprehensive
public financing of elections was just adopted by Connecticut in the wake of
major scandals in that state, and has been in place for three elections in
Maine and Arizona. Other states and cities have adopted full public financing
as well.”
“Why not
Congress?”
To sign the
petition: http://ga3.org/campaign/cleanupcongressnow/
We also
encourage you to check out http://www.just6dollars.org/,
a new “grassroots organization building a movement of citizens who support
Public Funding of all federal elections: the House, Senate, and Presidency.”
