The Corporate Reform Weekly

Vol V, #21                                                                                                                                                                              May 22, 2006

 

 

In Short

Lobbying and Ethics Reform

1. House Ethics Committee opens three new probes

2. Cunningham bribery probe implicates two more members of Congress

3. California Clean Money Bill stalls

4. New movie on Tom DeLay released

Scandal

5. Jury begins deliberating in Enron trial

6. Alternative Halliburton Annual Report documents fraud and corruption

7. Regulators investigating how companies are accounting for stock options

8. HealthSouth pays $3 million to end Justice Department investigation

This Week’s Action Item

Support Clean money

 

 

 

Lobbying and Ethics Reform

 

1. House Ethics Committee opens three new probes

 

After lying dormant for 16 months despite widespread allegations of Congressional corruption, the House Ethics Committee last week announced it was opening three new probes – separate investigations into bribery allegations against Reps. Robert W. Ney (R-Ohio) and William Jefferson (D-La.), and a single investigation into whether other Congressional staffers and lawmakers are also implicated in the bribery ring that has already put Rep. Randy "Duke" Cunningham (R-Calif.) in jail. Specifically, the committee wants to know whether others have been "provided hotel rooms, limousines and other services in exchange for performing official acts."

 

Two weeks ago Neil G. Volz, the former chief of staff to Rep. Bob Ney (R-Ohio) turned lobbyist, pleaded guilty to conspiracy and fraud in trying to bribe his former boss with meals, entertainment and other gifts.

 

Also earlier this month, Vernon L. Jackson, the owner of high-tech firm iGate Inc., pleaded guilty to paying more than $400,000 in bribes to Rep. William J. Jefferson (D-La.). Jackson said that he had bribed Jefferson so that Jefferson would help promote Jackson’s company’s broadband technology in Nigeria, Ghana and Cameroon. Jefferson, who is the co-chair of the congressional Africa Trade and Investment Caucus, allegedly met with African officials in order to promote iGate.

 

The Justice Department is currently investigating both Ney and Jefferson. Prosecutors are also reportedly 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.

 

Watchdog groups, who have long been critical of the do-nothing House Ethics committee, were skeptical that the committee actually means business.

 

“We will be watching closely and hope to see these and additional thorough, credible and timely investigations,” said Common Cause President Chellie Pingree. “However, it is not reassuring that the committee has chosen to confine its investigation of the Abramoff matter – at least initially – to only one member, Rep. Bob Ney. I think we all know the scandal is much bigger than that.”   

“It seems clear now that the Ethics Committees could have begun investigations into Jack Abramoff’s dealings on Capitol Hill a long time ago, but instead, it chose to make excuses,” Pingree added. “I hope this is going to be a good faith effort by the Ethics Committee and not merely an attempt to find some political cover for more than a year of inaction.”

 

The committee is not investigating the overseas trips taken by Tom DeLay (R-Texas), who has announced that he will resign on June 9.

 

 

 

For more, see:

 

“Ethics Panel Starts 3 Probes: Ney, Jefferson And Cunningham Cases End Hiatus”

By Jonathan Weisman, Washington Post : http://www.chron.com/disp/story.mpl/nation/3871377.html

 

“House Ethics Panel, Justice Dept. to Run Parallel Probes,” By Jeffrey H. Birnbaum

Washington Post http://www.washingtonpost.com/wp-dyn/content/article/2006/05/18/AR2006051801933.html

 

“House Ethics Committee has much to prove,” Common Cause Press Release: http://www.commoncause.org/site/apps/nl/content2.asp?c=dkLNK1MQIwG&b=194883&ct=2481207

 

 

2. Cunningham bribery probe implicates two more members of Congress

 

Mitchell Wade, the defense contractor who showered more than $1 million in bribes on now jailed Rep. Randy “Duke” Cunningham, is reportedly cooperating with prosecutors and telling stories about how he also bribed two more members of Congress, Rep. Katherine Harris (R-Fla.) and Rep. Virgil H.Goode Jr., (R-Virginia).

 

According to court documents, Wade gave Goode $46,000 in campaign funds. Goode then allegedly helped to secure a $9 million facility for Wade’s company, MZM Inc., in Goode’s Virginia district.

 

Wade allegedly gave Harris, who sits on the Homeland Security Committee, $32,000 in campaign funds. Wade was reportedly seeking Harris’s help in creating a complex for MZM in Harris’s home state of Florida.

 

The House Ethics Committee is also investigating these charges.

 

Prosecutors are also continuing to investigate Wade’s unnamed co-conspirator, who is widely believed to be his former associate, Brent Wilkes. Wilkes, whose company ADCS Inc. got tens of millions of contracts to digitize Pentagon paper files, reportedly paid $600,000 to Cunningham. Wilkes reportedly through poker parties at Watergate with members of several Congress, as well as Kyle “Dusty” Foggo, the third-in-command at the CIA, who resigned recently.

 

For more, see: “Congress bribery probe could deepen: Records detail contractor's sway,”

By Michael Kranish, Boston Globe: http://www.boston.com/news/nation/washington/articles/2006/05/19/congress_bribery_probe_could_deepen/ 

 

3. California Clean Money Bill stalls

 

 

The California state Senate Elections Committee was expected to vote last week on a Clean Money bill, AB 583. But the bill was pulled at the last minute by the legislature so that its author could work more with the committee to strengthen its chances of passage. 

According to the California Clean Money Campaign, A.B. 583, which passed earlier this year in the state assembly, “provides realistic public funding to candidates who show a broad base of public support by raising a qualifying number of $5 contributions and signatures and who agree to forgo all other private funds.  It uses a new performance-based system to allow strong candidates to receive full funding regardless of party while keeping costs under control, part of the reason it has been endorsed by both the Green Party of California and the California Democratic Party.”

 

“Clean Money candidates would receive matching funds — for total funding up to as much as 6 times the base funding amount — to help counter attacks by independent expenditures and excess spending by privately funded candidates.”

 

“If passed, Clean Money in the form of A.B. 583 would level the playing field so that good people with new ideas could afford to run and win, making politicians accountable to all voters because voters pay for their campaigns, not big money special interests.  It is the sweeping reform that California needs.”

 

For more info on the California Clean Elections campaign, see: http://www.caclean.org/

 

 

4. New movie on Tom DeLay released

 

Filmmakers Mark Birnbaum & Jim Schermbeck have completed a new documentary about Rep. Tom DeLay entitled “The Big Buy: Tom DeLay's Stolen Congress”

 

The movie premiered last Friday in Houston, Texas, and activists around the country are currently organizing screenings. To learn more about how to organize a screening in your community, see: http://tomdelaymovie.com/screenings.php.

 

The filmmakers are also sponsoring “Clean Money Day” screenings on June 27. To find out more about “Clean Money Day” screenings, see:  http://tomdelaymovie.com/clean/

 

The film’s website offers the following description of the film:

 

“In a stunning 1994 interview, shortly after the now infamous Republican revolution, Tom DeLay sat down and laid out his vision for America: to destroy the Department of Education, HUD, OSHA, the NEH, the NEA, the Environmental Protection Agency and the Department of Energy. His self-stated goal was to "completely redesign government."”

 

“The Big Buy: Tom DeLay's Stolen Congress is the story of how he did just that. It's the story of one of the most blatant power grabs in American history, and how a District Attorney in Texas turned out to be the biggest threat to the national DeLay Machine. The film is a warning about how easy it is for American democracy to be hijacked by a combination of relentless ambition and corporate millions. It makes the case that DeLay built a "custom-made Congress" that is still providing votes for his agenda.”

 

“DeLay's utter contempt for government made him a favorite of corporations. Over the next decade, they funded DeLay's rise to power with millions while wining, dining, and bank rolling an extravagant lifestyle complete with corporate jets, expensive restaurants and stays at plush golf resorts.”

 

“But Travis county D.A. Ronnie Earle is on his heels, and DeLay's made a mistake. He blatantly funneled banned corporate money to candidates in the 2002 Texas elections. This was the critical first phase of a take-no-prisoners plan to ensure a more hard-Right Republican U.S. Congress. DeLay's actions led to controversial redistricting in Texas that disenfranchised voters, set-off the largest upheaval in modern Texas political history and sent five new hard-Right Republican congressmen to Washington.”

 

“Texas grand juries have brought 41 indictments against eight corporations, DeLay's political action committee, a business lobby ally, three underlings and Tom Delay himself. But while Delay has given up his leadership post, his Texas takeover is still impacting all Americans daily. His Texas redistricting changed the face of the last Congress. The Central American Free Trade Agreement, the Energy Bill, Budgets and Budget Cuts that hurt college students, single parents and the working poor -- all passed in the last 14 months by less than the five votes DeLay won from his scheme in Texas. From now until the November elections- The Big Buy is destined to serve as a rallying cry for those who want to change "the house that Tom built" back into "the people's house."

 

 

 

 

Scandal

 

5. Jury begins deliberating in Enron trial

 

After 56 days and 15 weeks of trial, The fate of former Enron founder Kenneth Lay and former Enron CEO Jeffrey Skilling is in the hand of a jury of their peers.

 

Last week, Enron Task Force Director Sean Berkowitz made a strong closing statement.

 

"The final word goes to people like the investors. You get to decide what's right . . . You get the final word in this historic case. You get to decide whether they told truths or whether they told lies. Black and white," Berkowitz said.

 

"If what you heard in these past four months is business as usual in corporate America, ladies and gentlemen I would suggest we all take our money out of the stock market and never put a nickel back in," said Berkowitz.

 

He said Enron's "senior management had been lying to the public for years and the truth was coming out" in late 2001. This was when the Wall Street Journal started questioning Enron’s finances. "The Wall Street Journal published the truth and Enron could not handle the truth."

 

He said Lay and Skilling tried to cover up Enron’s crumbling finances. "These men lied,” Berkowitz told jurors. “They withheld the truth. They put themselves in front of their investors and I'm asking you to send them a message that it's not all right. You can't buy justice you have to earn," Berkowitz concluded.

 

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.

 

For more, see:

“Jury begins deliberations in Enron trial,” By MARY FLOOD, Houston Chronicle: http://www.chron.com/disp/story.mpl/specials/enron/3871265.html

 

“Jurors in Enron Trial Begin Deliberations,” By SIMON ROMERO and ALEXEI BARRIONUEVO, New York Times: http://www.nytimes.com/2006/05/18/business/businessspecial3/18enron.html

 

 

6. Alternative Halliburton Annual Report documents fraud and corruption

 

 CorpWatch, in association with Association Civil Labor in Peru, Environmental Rights Action Nigeria (members of the Friends of the Earth International network), Halliburton Watch and the Oil & Gas Accountability Project, has released an alternative annual report on Halliburton: "Hurricane Halliburton: Conflict, Climate Change and Catastrophe."

 

The report, released to coincide with Halliburton’s annual meeting last Wednesday, alleges:

 

* “how the company management in Iraq and Kuwait has cheated taxpayers out of millions of dollars through bribery and waste;”

 

* “how the company has increased its profits in Iraq by employing sweatshop Asian labor and refusing to pay injury claims;”

 

* “how senior management used worker's pensions to pay for management benefits, despite the fact that the soaring stock price has made the top managers tens of millions of dollars.”

 

The report also documents how that the company's biggest profit center, energy services, has been fraught with charges of bribery and political meddling in Iran and Nigeria. The report notes that:

 

* “Its hydraulic fracturing operations in the United States have had disastrous impacts on the environment, including community water supplies;”

 

* “Its lobbying efforts have prevented legally mandated regulatory oversight.”

 

"From Iraq to Peru, Halliburton 's sloppy work has contaminated water supplies for soldiers and communities alike. In Nigeria, the company is being investigated for bribery and in Washington DC, Pentagon auditors are examining the company for overbilling. The company needs to come clean about its books and clean up its mess," said Pratap Chatterjee, executive director of CorpWatch.

 

 

For full report, see: “Hurricane Halliburton: Conflict, Climate Change & Catastrophe”: http://www.corpwatch.org/article.php?id=13552

 

Also check out Halliburton Watch: http://www.halliburtonwatch.org/

 

 

7. Regulators investigating how companies are accounting for stock options

 

A year after FASB finally mandated that companies list stock options as an expense, the Securities Exchange Commission and New York Attorney General Eliot Spitzer are investigating how 12 companies have been awarding stock options to their executives. Regulators say that companies may be backdating option grants.

 

Backdating the grants would be illegal. But it benefits executives, because the earlier the grant date, the lower the stock price at the grant date. When executives sell their options, they get the difference between the current price and the grant date price, so they stand to benefit if options are backdated.

 

Companies under investigation are: Caremark Rx Inc., SafeNet Inc., Vitesse Semiconductor Corp., Affiliated Computer Services Inc., UnitedHealth Group Inc., Nyfix Inc., Comverse Technology Inc., American Tower Corp., Brooks Automation Inc., Jabil Circuit Co., RSA Security Inc., Mercury Interactive Corp.

 

For more, see: “SEC and U.S. Attorney Expand Probe of Stock Options,” http://quote.bloomberg.com/apps/news?pid=10000103&sid=a1Dhau_dXqBU&refer=news_index

 

8. HealthSouth pays $3 million to end Justice Department investigation 

HealthSouth has agreed to pay $3 million to the Justice Department to end a probe into the company’s $2.7 billion accounting fraud. As part of the settlement, HealthSouth will accept responsibility for its executive crimes and enact strict controls and promise to follow the law for three years.

 

Prosecutors said they went easy on HealthSouth as to not bankrupt the rehabilitation services provider.

 

"Prosecution would likely have pushed this company into bankruptcy," Alice H. Martin, United States attorney in Birmingham, said in a statement. "By taking this nonprosecution approach, jobs of thousands have been saved, and the company has an opportunity to rebuild shareholder value."

 

Last year, the company paid $500 million to end an SEC investigation. It also paid $350 million to settle a Medicare fraud suit. Additionally, 15 executives, including five chief financial officers, have pleaded guilty or been convicted of participating in fraud. However, its CEO, Richard Scrushy was found innocent by a Birmingham jury last year.

 

For more, see: “ HealthSouth to Pay $3 Million in U.S. Accounting Fraud Case,”

By Bloomberg: http://www.bloomberg.com/apps/news?pid=10000087&sid=aAFAhN6r0fWc&refer=top_world_news

 

 

This Week’s Action Item

 

Support Clean money

 

California is considering a clean elections bill that guarantees public money for candidates who demonstrate support and forgo private donations.

 

If you live in California, be sure to check out http://www.caclean.org/ and let your state reps know you support clean elections. If you live in another state that hasn’t yet passed clean elections legislation, be sure to let your state reps know how important it is.

 

We also encourage you to check out the new national clean elections campaign, Just $6: http://www.just6dollars.org/

 

 

 

 

 

Help spread the word about The People's Business

 

We encourage you to tell everyone you know about the Citizen Works book, The People's Business and to distribute promotional flyers locally. Flyers are available online, or if you would like to have some flyers mailed to you, please e-mail news@citizenworks.org.

 

The People's Business, which is available in stores everywhere, examines the very nature of corporate power, presenting a range of strategies to curtail it, explaining how ordinary people can restore citizen control. Bringing together the recommendations of the Citizen Works Corporate Reform Commission—a coalition of leading authors, activists, scholars, and professionals—The People's Business is a vital, clearheaded plan for strengthening individual rights, transforming corporations into engines of public prosperity, and creating a sustainable, life-respecting society where the people have the power.

 

Bolstered with relevant history and examples, The People's Business is a lively book that will appeal both to deeply-committed long-time activists looking for a coherent approach in the struggle for corporate accountability as well as thoughtful citizens everywhere who may be looking for immediate measures that serve as effective means of corporate reform.

 

It is our hope that The People's Business will serve as an important tool in educating people about what they can do to challenge corporate power. But it will only be an important tool if people actually read it. That's why we need your help in spreading the word!

 

Why not pick up your copy at a bookstore today if you haven't already?