Tuesday, July 17, 2012 6:17:01 AM
'I'm Running for Office, for Pete's Sake'
Jul 16 2012
http://www.theatlantic.com/politics/archive/2012/07/im-running-for-office-for-petes-sake/259882/
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The Scariest Chart for the Romney Campaign on Bain Attacks
Searches for the firm on Google are shooting up -- especially in crucial swing states.
Jul 16 2012
[...]
The list of locations with the greatest interest has some red flags, too:
1.Massachusetts, United States
2.Virginia, United States
3.District of Columbia, United States
4.Ohio, United States
5.Pennsylvania, United States
6.Florida, United States
7.New York, United States
8.North Carolina, United States
9.Washington, United States
10.Arizona, United States
Of those 10, six are swing states.
http://www.theatlantic.com/politics/archive/2012/07/the-scariest-chart-for-the-romney-campaign-on-bain-attacks/259869/ [with comments]
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HSBC Probe Shows Bank Allowed Money Laundering
Jul 16, 2012
HSBC Holdings Plc (HSBA) did business with firms linked to terrorism, failed to guard against money- laundering violations in Mexico and bypassed U.S. sanctions against Iran, according to U.S. Senate investigators.
HSBC affiliates worldwide gave terrorists, drug cartels and criminals a portal into the U.S. financial system, the Permanent Subcommittee on Investigations said in a 335-page report yesterday detailing a decade of lax controls. Lawmakers plan to question senior executives from the London-based bank, Europe’s largest, at a hearing in Washington today.
[...]
http://www.bloomberg.com/news/2012-07-16/hsbc-aided-money-laundering-by-iran-drug-cartels-probe-shows.html [with comments]
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JPMorgan losses clip banks' efforts to fight derivatives reform
A man walks past JPMorgan Chase & Co's international headquarters on Park Avenue in New York July 13, 2012.
Credit: Reuters/Andrew Burton
By Karen Brettell
NEW YORK | Mon Jul 16, 2012 1:50pm EDT
NEW YORK (Reuters) - Banks are finding it harder to fight proposed reforms of the $300 trillion U.S. privately traded derivatives market because of outrage over JPMorgan's credit derivatives losses.
Lobbying efforts continue, nonetheless, as many important rules have not been hammered out.
The industry pushback against proposed regulations mandated under the Dodd-Frank legislation of 2010 was the latest move in the roller-coaster world of financial crisis and reform.
The Dodd-Frank reforms were launched in response to the financial crisis in the wake of the collapse of Lehman Brothers, only to spawn a new round of bills in Congress to override the ability of regulators to implement and enforce changes.
The pushback had been gaining momentum before JPMorgan Chase & Co said in May it lost at least $2 billion failed derivative trades.
But the furor over JPMorgan's losses has made passage of these bills less likely, said sources who are in regular contact with members of Congress.
On Friday, JPMorgan said its losses came to at least $5.8 billion, some of which may have been hidden purposely.
"We definitely saw people stepping back from public support of this kind of legislation after JPMorgan's derivatives losses," said Marcus Stanley, a policy director at Americans for Financial Reform, a coalition of more than 250 consumer, community, labor, small business and other pro-reform groups.
The proposed legislation seek to broaden exclusions from central clearing, reduce margin requirements and effectively kill regulatory proposals to enforce trade price transparency.
These reform measures are seen as key to reduce the risks of the markets, where trade opacity and interconnection of the contracts among large banks were blamed as key factors behind the financial crisis.
A small group of the world's largest banks profit greatly by dominating these markets. Income from privately traded derivatives generates about $55 billion a year, or 37 percent, of bank revenues, according to a report by advisory and consulting firm Deloitte last year.
Four years after the crisis, anger over the failures of banks including Lehman Brothers and the subsequent bailout of the financial sector had been subsiding. Intense lobbying efforts by banks seemed to be swinging lawmakers in favor of more lenient regulations.
But JPMorgan's losses were a stark reminder of the risk that banks and other large companies can use derivatives to build large, risky portfolios with few disclosures to investors. It has wounded the credibility of JPMorgan's chief executive, Jamie Dimon, who has been a staunch critic of much of the Dodd-Frank reform.
"When you get an event like that it informs public policy debate," said Gary Gensler, chairman of the Commodity Futures Trading Commission, the main U.S. derivatives regulator. "It may have changed the public discussion," he said on the sidelines of a conference in New York last month.
DECONSTRUCTING DODD FRANK
Lawmakers have sidelined bills that would have watered down some of the regulations that banks have been fighting most, while progress on other bills has slowed.
The bills sought to rewrite Dodd-Frank and override rules designed to open up the market to new players by reducing the role of large banks as intermediaries, hurting their profits.
The opacity of derivatives allows the dominant banks to charge higher fees on trades through wider bid/offer spreads. They also benefit from an effective oligopoly for trades that are not subject to central clearing.
In such trades investors are exposed to the credit risk of the bank they trade with, limiting them to working with banks that are "too big to fail." Banks want to keep that structure.
"They are trying to keep it in the existing framework, there has been a lot of lobbying efforts to keep that as close as possible," said Peter Tchir, founder of financial advisory firm TF Market Advisors.
Reforms including central clearing, electronic trading and more price transparency would significantly reduce earnings from derivatives and compress margins by as much as 35 percent over the next two to three years, Deloitte said.
On May 15, the House of Representatives Agriculture Committee postponed a planned hearing on three bills, including one that opponents say would allow banks to skirt regulations by trading through foreign affiliates, such as those based in London.
The committee chairman, Frank Lucas, a Republican from Oklahoma, sought more time "to ensure there are no unintended consequences of the legislation that would encourage recklessness in our financial institutions."
"I do think this has touched a nerve in the American public," said Michael Greenberger, a law professor at the University of Maryland and former director of trading and markets at the CFTC. "This shows it's not over and there could be other choppy waters out there."
Among bills pending, one in the House of Representatives seeks to override a proposed CFTC rule that would require prices be flashed to several dealers before trades are made, when the contracts are subject to central clearing.
Others propose to further expand the number of companies that are excluded from central clearing requirements.
Another bill -- this one before the Senate -- seeks to exempt "small banks" from central clearing, though in practice it could exclude banks with notional derivatives portfolios as large as $200 billion, said AFR's Stanley.
Although these bills are now less likely to pass, the industry has won some smaller battles.
On Tuesday the CFTC added an exemption for banks with up to $10 billion in assets from rules that would require central clearing. This will capture 98 percent of U.S. banks, and represent around 15 percent of bank assets, Stanley said.
Some banks had argued the exemption should apply to banks with as much as $50 billion in assets.
The CFTC further voted to exempt a number of large non-financial firms from clearing requirements. It also excluded some commodity forward contracts from regulations, leading Commissioner Bart Chilton, a Democrat, to oppose the rule, the first final CFTC derivatives rule he has voted against.
"Potentially it could be the new Enron loophole," he said. "There are attorneys out there hawking ways around Dodd-Frank."
RESISTANCE REMAINS
CFTC meeting records show ongoing lobbying on topics including the CFTC's reach over foreign bank branches and exemptions from clearing requirements, and many key rules, including those related to bank ownership of clearinghouses and other entities have not yet been made final.
The legislative maneuvering shows how much derivatives reform may change in the event of a victory by Mitt Romney, the presumptive Republican nominee, in the November presidential election. A win by Romney, who has said that he would repeal Dodd-Frank, would turn control of the CFTC over to Republicans.
Republican CFTC commissioners Scott O'Malia and Jill Sommers have opposed several CFTC rules, saying they exceed Dodd-Frank's intentions.
O'Malia has also issued three dissents over budgetary increases for the CFTC while its chairman, Gensler, has argued that large increases are necessary due to the added responsibilities of overseeing the derivatives markets.
U.S. Senate appropriators approved funding boosts for the CFTC and Securities Exchange Commission last month, setting up a likely battle with Republicans.
Still, rules passed at last week's CFTC meeting starts a clock that will cause many rules to take effect before the election, including public reporting of price and volume information for credit and interest rate derivatives index trades.
"Light will begin to shine on the markets for the first time," Gensler said.
(Editing by Leslie Adler)
Copyright 2012 Reuters
http://www.reuters.com/article/2012/07/16/us-jpmorgan-derivatives-reform-idUSBRE86F0V020120716 [with comment]
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Goldman Sachs and the $580 Million Black Hole
Janet and Jim Baker at home. They are fighting Goldman Sachs over its work in 2000 on the all-stock sale of their business, Dragon Systems, to a company that later collapsed, leaving them shut out.
Gretchen Ertl for The New York Times
In 1990, Jim and Janet Baker demonstrated the DragonDictate-30K speech recognition system.
Family Photo
The Belgian businessmen Pol Hauspie, left, and Jo Lernout, right, founded Lernout & Hauspie, the company that bought Dragon Systems but later collapsed in an accounting scandal.
Francois Lenoir/Reuters
Alan K. Cotler is the lawyer for Dragon's founders.
Gretchen Ertl for The New York Times
Miniature dragons adorn the Bakers' home. After the sale ordeal of their company, Dragon Systems, Mr. Baker recalls thinking, "Not only do we not have the technology any more, but we have no chance of getting it back."
Gretchen Ertl for The New York Times
Janet Baker, at front center, in a Dragon Systems photograph from the 1980s. She and her husband are widely credited with advancing speech technology far faster than anyone had thought possible at the time.
Family Photo
By LOREN FELDMAN
Published: July 14, 2012
THE business deal from hell began to crumble even before the Champagne corks were popped.
The deal, the $580 million sale of a highflying technology company, Dragon Systems, had just been approved by its board and congratulations were being exchanged. But even then, at that moment of celebration, there was a sense that something was amiss.
The chief executive of Dragon had received a congratulatory bottle from the investment bankers representing the acquiring company, a Belgian competitor called Lernout & Hauspie. But he hadn’t heard from Dragon’s own bankers at Goldman Sachs [ http://topics.nytimes.com/top/news/business/companies/goldman_sachs_group_inc/index.html ].
“I still have not received anything from Goldman,” the executive wrote in an e-mail to the other bank. “Do they know something I should know?”
More than a decade later, that question is still reverberating in a brutal legal battle between Goldman and the founders of Dragon Systems — along with a host of other questions that go to the heart of how financial giants like Goldman operate and what exactly they owe their clients.
James and Janet Baker spent nearly two decades building Dragon, a voice technology company, into a successful, multimillion-dollar enterprise. It was, they say, their “third child.” So in late 1999, when offers to buy Dragon began rolling in, the couple made what seemed a smart decision: they turned to Goldman Sachs for advice. And why not? Goldman, after all, was the leading dealmaker on Wall Street. The Bakers wanted the best.
This, of course, was before the scandals of the subprime mortgage era. It was before the bailouts, before Occupy Wall Street, before ordinary Americans began complaining about “banksters” and “muppets” and “the vampire squid.” In short, before Goldman Sachs became, for many, synonymous with Wall Street greed.
And yet, even today what happened next to the Bakers seems remarkable. With Goldman Sachs on the job, the corporate takeover of Dragon Systems in an all-stock deal went terribly wrong. Goldman collected millions of dollars in fees — and the Bakers lost everything when Lernout & Hauspie was revealed to be a spectacular fraud. L.& H. had been founded by Jo Lernout and Pol Hauspie, who had once been hailed as stars of the 1990s tech boom. Only later did the Bakers learn that Goldman Sachs itself had at one point considered investing in L.& H. but had walked away after some digging into the company.
This being Wall Street, a lot of money is now at stake. In federal court in Boston, the Bakers are demanding damages, including interest and legal fees, that could top $1 billion. That figure is nearly twice what Goldman paid to settle claims that it misled investors about subprime mortgage investments before the financial crisis of 2008.
This account is based on a trove of legal filings — e-mails, motions and roughly 30 depositions, more than 8,000 pages of sworn testimony in all — that open a rare window on Goldman Sachs and the mystique that surrounds it.
JAMES AND JANET BAKER, now in their 60s, are computer speech revolutionaries. Both Ph.D.’s, they became interested in voice-recognition technology in the 1970s, back when a personal assistant like Apple’s Siri would have seemed more science fiction than scientific fact.
They are widely credited with advancing speech technology far faster than anyone thought possible, primarily because of an epiphany Mr. Baker had while doing his doctorate research. He figured out that speech recognition could, in essence, be reduced to math. You didn’t have to teach a computer to recognize accents or dialects, Mr. Baker realized — you just had to calculate the mathematical probability of one sound following another. His algorithms proved remarkably accurate and eventually became the industry standard. (Want to know more? Ask Siri.)
The Bakers founded Dragon Systems in 1982 in an old Victorian house in West Newton, Mass. At that time, despite having two school-age children and a big mortgage, they were determined to take no venture capital and to finance the company’s growth with its own revenue — once they had a product. They figured they could last 18 months, maybe 24.
Their first product was a software program for a British-made PC called the Apricot that let users open files and run programs by voice command. Then came DragonDictate, a groundbreaking speech-to-text system for dictation that still required the speaker to pause. Between. Every. Word.
For years, the Bakers pressed on, convinced that they were on track to create a program that would recognize continuous speech.
To do that, however, they eventually decided that they needed more capital. While Mr. Baker worked on the technology, Ms. Baker brokered a deal with Seagate Technology, the disk drive manufacturer. Seagate bought 25 percent of Dragon for $20 million. Then, in 1997, Dragon introduced Dragon NaturallySpeaking, a program that recognized more words than could be found in a standard collegiate dictionary. It was available in six languages and could handle normal speech, even sentences with words that sound alike, such as, “Please write a letter right now to Mrs. Wright. Tell her that two is too many to buy.”
By this time, I.B.M. and others had piled into the voice technology market, too. As the Nasdaq market raced toward record highs, the Bakers considered taking Dragon public. But in 1999, several companies — including Sony and Intel — expressed interest in buying into Dragon. Finally, unsolicited buyout offers began to arrive. One came from Visteon, a subsidiary of Ford Motor. Another arrived from Lernout & Hauspie.
TO the uninitiated, the mystique of Goldman Sachs may be hard to fathom. Known for what might politely be called ruthless professionalism, Goldman, the thinking goes, is smarter and more plugged in than just about any other investment bank. In the late 1990s, under Henry M. Paulson Jr., who later became the Treasury secretary and orchestrated the Wall Street bailouts, Goldman was the alpha dog in the lucrative game of mergers and acquisitions.
So it was that in December 1999, the Bakers, in over their heads when it came to M.& A., signed a five-page engagement letter drafted by Goldman. In it, Goldman pledged to provide “financial advice and assistance in connection with this potential transaction, which may include performing valuation analyses, searching for a purchaser acceptable to you, coordinating visits of potential purchasers, and assisting you in negotiating the financial aspects of the transaction.”
To the Dragon deal, Goldman assigned four bankers, two in their 20s and one in his early 30s. That wasn’t unusual. Although Dragon Systems was worth everything to the Bakers, the company — with $70 million in revenue and 400 employees — was small beer on Wall Street. Dragon agreed to pay Goldman a flat fee of $5 million, less than some Goldman bankers were pulling down.
But who, if anyone, supervised these bankers — later called “the Goldman Four” in court documents — remains something of a mystery. One of the four, the most senior, testified later that their supervisor was Gene T. Sykes, a Goldman partner who at the time specialized in technology and who this year was promoted to head of M.& A. at the firm, one of the most powerful jobs on Wall Street. In a deposition, Mr. Sykes disavowed any involvement.
Most of the Goldman Four didn’t stay long at the bank. Richard Wayner, who was 32 when the Dragon deal was cut, struck out on his own in 2002 and eventually landed at the Keffi Group, an investment firm. T. Otey Smith, then 21, left Goldman in 2000 and now works for RLJ Equity Partners. Alexander Berzofsky, then 25, left Goldman at about the same time and is now a managing director at Warburg Pincus, the big private investment company. Chris Fine, then 42, was a Goldman information technology specialist who was enlisted on the deal and is still with Goldman. (None of the four agreed to be interviewed for this article.)
Before the engagement letter was signed in late 1999, Goldman sent Dragon a memo indicating that its first steps would include beginning to conduct due diligence — Wall Street-speak for kicking the tires — on L.& H. The memo included specific areas of concern, including L.& H.’s sources of revenue, its major customers, its license agreements and royalty agreements, its expected growth, its partnerships and its financial statements.
THAT December, Mr. Wayner of Goldman accompanied Ms. Baker and Dragon’s chief financial officer, Ellen Chamberlain, on a trip to Belgium to meet L.& H. executives. For the trip, another of the Goldman Four, Mr. Berzofsky, prepared a list of due diligence questions. Goldman also prepared a “merger analysis” that predicted the companies’ combined sales per share, earnings per share and total debt under three acquisition scenarios: all cash, all stock and half and half.
In its initial offer, L.& H. proposed paying $580 million, half in cash and half in stock. But the Bakers weren’t sure. News reports had questioned L.& H.’s revenue, particularly in fast-growing Asian markets, as well as some of the company’s licensing deals. Mr. Baker felt that L.& H. had inferior voice technology. But then, he reasoned, if L.& H. could generate so much revenue with lesser technology, imagine what it could do with Dragon.
By mid-February 2000, Ms. Chamberlain had sent an angry memo to Goldman. It urged the bank to move faster in its analysis of L.& H. Talks with the other companies had gone nowhere, and she expected Goldman to “drive” the due diligence process. Mr. Wayner testified later that the bank’s reaction to that memo was “to do as our client asked and to revisit all of our analyses.”
But on Feb. 29, Dragon received an odd memo from Goldman. It wasn’t addressed to anyone in particular at Dragon, and it wasn’t signed by anyone at Goldman. The Goldman Four testified later that they had no idea who had sent it. But the memo referred to many of the same due diligence issues that Ms. Chamberlain raised. The memo asserted, however, that Dragon’s accounting firm, Arthur Andersen, should do the work, not Goldman.
The memo shocked Ms. Chamberlain. She had come to Dragon from Seagate, where she had participated in similar deals. She believed that this sort of thing was generally done by investment bankers, not by accountants. But the moment passed. No one at Dragon or Goldman brought up the mystery memo again — at least not until the lawsuits began flying. (The Bakers also filed suit against other participants in the transaction.)
THE Dragon executives thought that Goldman was taking a hard look at L.& H. After all, Dragon was paying Goldman $5 million for its advice. If Goldman wasn’t conducting due diligence, what was it doing?
“They put items on and off the due diligence list,” Ms. Baker later testified. “We discussed the issues at — at basically every meeting that we were at, and we were meeting often in person or by phone, typically, several times a week in this time frame — sometimes multiple times a day, as we’ve seen. And so they knew what everybody was doing. And they were, they were directing it.”
One of the tasks was a conference call that Mr. Wayner arranged, at Ms. Baker’s request, between Dragon and Charles Elliott, a Goldman analyst in London. Dragon was wondering why L.& H.’s share price had been gyrating wildly. Mr. Wayner told Ms. Baker, he later testified, that Mr. Elliott was following L.& H.’s stock and was up to date on its fluctuations. And Mr. Elliott assured Ms. Baker that investors were worried about the market in general, rather than L.& H. in particular. He also said he expected the stock price of the combined companies to rise substantially once a merger was struck.
Years later, in his deposition, Mr. Elliott told a more complete story. He acknowledged that he actually had not been following L.& H.; that had been the responsibility of another Goldman analyst who had left the firm shortly after the Bakers retained Goldman. After the other analyst left, Mr. Elliott testified, Goldman terminated its coverage of L.& H. No one told the Bakers that Goldman was no longer covering the company they were about to bet their futures on.
Mr. Elliott also testified that he was unaware of press reports at the time that suggested L.& H. was claiming huge revenue gains in Asia. If he had been aware, he said, he would have been “very skeptical” of those gains, given the challenges that Asian languages present for speech recognition. He also acknowledged that it would not have been difficult for him to call up L.& H.’s customers and check the revenue claims.
As the Nasdaq composite index raced toward a record high that March, Dragon’s executives made fateful decisions. On March 8, the Bakers met with L.& H. executives and that company’s advisers from SG Cowen to try to reach a definitive agreement.
A few days before that meeting, Mr. Wayner of Goldman told Ms. Baker that he would be away on vacation and couldn’t make the session. He also said that he would be unable to call in and that it was pointless to send anybody else from Goldman because there wasn’t time to catch up on the deal. It was at this meeting that L.& H. proposed shifting the $580 million deal from half stock and half cash to all stock. The Bakers, with their high-priced investment bankers M.I.A., agreed.
Later, after L.& H. collapsed, Mr. Wayner testified that the bank “did not form a point of view” as to whether an all-stock deal would be risky or advisable for the Bakers. He said he could not remember if it had crossed his mind to warn the Bakers about potential issues with an all-stock deal.
Two weeks after the initial agreement was reached, Mr. Wayner told Ms. Baker that he would be leaving the next day for another vacation. He would not participate in a conference call with L.& H.’s accounting firm, KPMG, that was set up to discuss any open questions about accounting and due diligence. Mr. Berzofsky of Goldman did participate but later acknowledged that he did not raise any concerns. The Bakers say they believed that all issues had been addressed.
Mr. Wayner was still on vacation on March 27, when Dragon’s board met to take a final vote on the proposed acquisition. This time, Mr. Fine and Mr. Smith of Goldman attended the meeting, and Mr. Wayner called in from Argentina. No one from Goldman gave a presentation, but minutes from the meeting, taken by Dragon’s outside lawyers, indicate that the Goldman bankers expressed confidence that the combination of Dragon and L.& H. would produce a market leader. The board voted unanimously to accept the $580 million all-stock deal.
Years later, Mr. Wayner testified that lingering issues of due diligence had never been resolved to his satisfaction. He was asked if he had said as much that March day on the phone from his vacation.
“No, I don’t recall saying that,” he responded.
The deal closed on June 7. By Aug. 8, the merged companies were in crisis amid reports that L.& H. had cooked its books. Reporters for The Wall Street Journal did something the Goldman Four did not: they picked up the phone and called L.& H.’s supposed customers in Asia. They found that companies in South Korea and elsewhere that L.& H. had claimed were its customers weren’t doing any business with it at all. L.& H. had pulled sales figures out of thin air.
Although the Goldman Four never tried to call those customers, it emerged during litigation that other bankers at Goldman had done precisely that — about two years earlier, when Goldman itself considered investing in L.& H. in a plan known internally as Project Sermon. In it, Goldman’s merchant banking division took a closer look at L.& H. — but, apparently, never shared what it knew, and was never asked. Goldman was considering putting $30 million into L.& H., a step that, at the time, might have seemed conceivable, given the hype surrounding L.& H.
“Whenever we invest, we always want to talk to customers,” Luca Velussi, a Goldman analyst who worked on Project Sermon, later testified. Based on what Project Sermon’s team leader, Ramez Sousou, termed “preliminary” due diligence, Goldman declined to invest in L.& H.
By Nov. 29, L.& H. had plunged into bankruptcy. Indictments and convictions followed. L.& H.’s stock price sank to zero — and the Bakers lost everything.
Dragon Systems, the Bakers’ “third child,” was put up for sale at a bankruptcy auction. Visteon acquired some of Dragon’s technology. ScanSoft bought the bulk of it and went on to become a $7 billion giant, with a licensing deal with Apple. (The Bakers believe that some of their technology made its way into Siri.) ScanSoft later acquired — and assumed the name of — Nuance, another voice technology company [ http://www.nuance.com/ ].
Indeed, Nuance had gone public about the same time L.& H. bought Dragon, and Goldman handled the initial offering — a fact that still angers the Bakers. They say they had no idea Goldman was simultaneously representing their company and a rival.
It wasn’t until after the bankruptcy auction, the Bakers now say, that the full force of what had happened hit them. The money was one thing. But what they really wanted was the opportunity to complete the work they had started decades earlier. As part of the deal with L.& H., they had expected to continue their research. Once L.& H. collapsed, they had held out hope that they might get their technology back — either through litigation or through the bankruptcy auction. They now knew that it wasn’t going to happen.
“The door is closed,” Mr. Baker remembers thinking. “Not only do we not have the technology any more, but we have no chance of getting it back.”
THE Bakers’ case against Goldman is simple. Their lawyer, Alan K. Cotler of Philadelphia [ http://www.reedsmith.com/alan_cotler/ ], captured it in a single sentence in a motion for summary judgment: “The Goldman Four were unsupervised, inexperienced, incompetent and lazy investment bankers who were put on a transaction that in the scheme of things was small potatoes for Goldman.”
Summarizing Goldman’s defense is more complicated. Based on the firm’s response to the complaint, its motion for summary judgment and testimony of the people it employed, most of that defense falls under one of three rubrics: The Bakers do not have standing to sue. Goldman had no obligation to do a financial analysis of L.& H. And Goldman’s bankers actually performed quite well. The firm released a statement that asserted, “Goldman Sachs was retained as a financial adviser by Dragon Systems, not its shareholders, and performed its assignment satisfactorily in all respects.”
Goldman’s lawyer, John D. Donovan of Ropes & Gray [ http://www.ropesgray.com/johndonovan/ ] in Boston, has argued that under the terms of the engagement letter, only Dragon Systems had the right to sue, and Dragon no longer exists. Goldman has even filed a countersuit against Ms. Baker, contending that by suing Goldman she had breached the contract. Even though Ms. Baker lost everything in a deal Goldman orchestrated, the firm says Ms. Baker should now pay its legal fees.
To support the argument that Goldman was not obligated to perform due diligence, the firm points to that mystery memo of Feb. 29, 2000 — the memo that no one at Goldman has acknowledged sending — as establishing that Dragon Systems needed to push its accounting firm to explain any red flags or resolve outstanding worries.
Goldman’s lawyers have argued in a motion that while Goldman “strongly urged” Dragon to engage an international accounting firm to do a “forensic accounting analysis on L.& H.,” Ms. Baker “prevented” Dragon from following Goldman’s advice because she did not want to incur the expense of the due diligence and did not want to delay the transaction. The Bakers call this argument “complete fiction,” and even the Goldman Four seem dubious. They testified that Ms. Baker did nothing to block the performance of due diligence.
Goldman also hired an independent investment banker, Ian Fisher, who filed an expert report arguing that Goldman was not obligated to conduct due diligence because Dragon did not order what is known as a fairness opinion, an analysis of the acquisition price.
The Bakers have hired their own expert, Donna Hitscherich, a former investment banker with JPMorgan Chase who lectures at Columbia Business School [ http://www4.gsb.columbia.edu/cbs-directory/detail/494794/Donna+Hitscherich ]. She wrote in her expert report that Goldman was obligated to perform due diligence with or without a fairness opinion.
If the case goes to trial in Boston, as scheduled, on Nov. 6, the final argument that Goldman can be expected to make is that the bankers, as Mr. Wayner testified, gave the Bakers “great advice.”
Mr. Berzofsky, too, testified in his deposition that the Goldman Four did a “great job.”
Even though Dragon lost everything?
“Yes,” Mr. Berzofsky said. He was given several opportunities to clarify. And then he was asked one more time — the fact that the Bakers and Dragon’s shareholders lost everything doesn’t affect your opinion?
“Correct,” Mr. Berzofsky responded. “We guided them to a completed transaction.”
© 2012 The New York Times Company
http://www.nytimes.com/2012/07/15/business/goldman-sachs-and-a-sale-gone-horribly-awry.html [ http://www.nytimes.com/2012/07/15/business/goldman-sachs-and-a-sale-gone-horribly-awry.html?pagewanted=all ]
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What Sheldon Adelson Wants
Editorial
Published: June 23, 2012
No American is dedicating as much of his money to defeat President Obama as Sheldon Adelson [ http://topics.nytimes.com/top/reference/timestopics/people/a/sheldon_g_adelson/index.html ], the casino magnate who also happens to have made more money in the last three years [ http://www.forbes.com/sites/stevenbertoni/2012/02/22/comeback-billionaire-how-sheldon-adelson-dominates-chinese-gambling-and-u-s-politics/ ] than any other American. He is the perfect illustration of the squalid state of political money, spending sums greater than any political donation in history to advance his personal, ideological and financial agenda, which is wildly at odds with the nation’s needs.
Mr. Adelson spent $20 million to prop up Newt Gingrich’s failed candidacy for the Republican nomination. Now, he has given $10 million to a Mitt Romney super PAC, and has pledged at least $10 million [ http://www.nytimes.com/2012/06/17/us/politics/sheldon-adelson-injects-more-cash-into-gop-groups.html ] to Crossroads GPS, the advocacy group founded by Karl Rove that is running attack ads against Mr. Obama and other Democrats. Another $10 million will probably go to a similar group founded by the Koch brothers, and $10 million more to Republican Congressional super PACs.
That’s $60 million we know of (other huge donations may be secret), and it may be only a down payment. Mr. Adelson has made it clear he will fully exploit the anything-goes world created by the federal courts to donate a “limitless [ http://www.forbes.com/sites/stevenbertoni/2012/06/13/exclusive-adelsons-pro-romney-donations-will-be-limitless-could-top-100m/ ]” portion of his $25 billion fortune to defeat the president and as many Democrats as he can take down.
One man cannot spend enough to ensure the election of an unpopular candidate, as Mr. Gingrich’s collapse showed, but he can buy enough ads to help push a candidate over the top in a close race like this year’s. Given that Mr. Romney was not his first choice, why is Mr. Adelson writing these huge checks?
The first answer is clearly his disgust for a two-state solution to the Israeli-Palestinian conflict, supported by President Obama and most Israelis. He considers a Palestinian state “a steppingstone [ http://www.thejewishweek.com/blogs/gary_rosenblatt/billionaire_adelson_defends_gingrich ] for the destruction of Israel and the Jewish people,” and has called the Palestinian prime minister a terrorist [ http://www.newyorker.com/reporting/2008/06/30/080630fa_fact_bruck ]. He is even further to the right than the main pro-Israeli lobbying group, the American Israel Public Affairs Committee, which he broke with in 2007 when it supported economic aid to the Palestinians.
Mr. Romney is only slightly better, saying the Israelis want a two-state solution but the Palestinians do not, accusing them of wanting to eliminate Israel. The eight-figure checks are not paying for a more enlightened answer.
Mr. Adelson’s other overriding interest is his own wallet. He rails against the president’s “socialist-style economy” and redistribution of wealth, but what he really fears is Mr. Obama’s proposal to raise taxes on companies like his that make a huge amount of money overseas. Ninety percent of the earnings [ http://www.hotelnewsnow.com/Articles.aspx/7851/LV-Sands-continues-quest-for-growth ] of his company, the Las Vegas Sands Corporation, come from hotel and casino properties in Singapore and Macau. (The latter is located, by the way, in China, a socialist country the last time we checked.)
Because of the lower tax rate in those countries (currently zero in Macau), the company now has a United States corporate tax rate of 9.8 percent [ http://www.marketwatch.com/story/las-vegas-sands-reports-all-time-industry-record-107-billion-adjusted-property-ebitda-quarter-2012-04-25 ], compared with the statutory rate of 35 percent. President Obama has repeatedly proposed ending the deductions and credits that allow corporations like Las Vegas Sands to shelter billions in income overseas, but has been blocked by Republicans.
Mr. Obama’s Justice Department is also investigating [ http://www.nytimes.com/2012/01/29/us/politics/the-man-behind-gingrichs-money.html?pagewanted=all ] whether Mr. Adelson’s Macau operations violated the Foreign Corrupt Practices Act, an inquiry that Mr. Adelson undoubtedly hopes will go away in a Romney administration. For such a man, at a time when there are no legal or moral limits to the purchase of influence, spending tens of millions is a pittance to elect Republicans who promise to keep his billions intact.
© 2012 The New York Times Company
http://www.nytimes.com/2012/06/24/opinion/sunday/what-sheldon-adelson-wants.html
===
His Man in Macau: Inside the Investigation Into Sheldon Adelson’s Empire
Sheldon Adelson watches a dance at the opening ceremony of the Sands' Cotai Central in Macau, April 11, 2012.
(AP Photo/Kin Cheung)
Chairman and CEO of Las Vegas Sands Corporation Sheldon Adelson, center, watches a lion dance at the opening ceremony of Sands' Cotai Central in Macau on April 11, 2012.
(Aaron Tam/AFP/Getty Images)
[ http://www.propublica.org/article/inside-the-investigation-of-leading-republican-money-man-sheldon-adelson (co-publication of this article, under headline "Inside the Investigation of Leading Republican Money Man Sheldon Adelson"; with comments)]
by Matt Isaacs Lowell Bergman, and Stephen Engelberg
July 16, 2012, 11:20 am ET
A decade ago gambling magnate and leading Republican donor Sheldon Adelson looked at a desolate spit of land in Macau and imagined a glittering strip of casinos, hotels and malls.
Where competitors saw obstacles, including Macau’s hostility to outsiders and historic links to Chinese organized crime, Adelson envisaged a chance to make billions.
Adelson pushed his chips to the center of the table, keeping his nerve even as his company teetered on the brink of bankruptcy in late 2008.
The Macau bet paid off, propelling Adelson into the ranks of the mega-rich and underwriting his role as the largest Republican donor in the 2012 campaign, providing tens of millions of dollars to Newt Gingrich, Mitt Romney and other GOP causes.
Now, some of the methods Adelson used in Macau to save his company and help build a personal fortune estimated at $25 billion have come under expanding scrutiny by federal and Nevada investigators, according to people familiar with both inquiries.
Internal email and company documents, disclosed here for the first time, show that Adelson instructed a top executive to pay about $700,000 in legal fees to Leonel Alves, a Macau legislator whose firm was serving as an outside counsel to Las Vegas Sands.
The company’s general counsel and an outside law firm warned that the arrangement could violate the Foreign Corrupt Practices Act. It is unknown whether Adelson was aware of these warnings. The Foreign Corrupt Practices Act bars American companies from paying foreign officials to “affect or influence any act or decision” for business gain.
Federal investigators are looking at whether the payments violate the statute because of Alves’ government and political roles in Macau, people familiar with the inquiry said. Investigators were also said to be separately examining whether the company made any other payments to officials. An email by Alves to a senior company official, disclosed by The Wall Street Journal [ http://online.wsj.com/article/SB10001424052702303506404577448372467723332.html ], quotes him as saying “someone high ranking in Beijing [ https://www.propublica.org/documents/item/399393-email-from-leonel-alves-to-steve-jacobs-sept-30#document/p1/a64250 ]” had offered to resolve two vexing issues — a lawsuit by a Taiwanese businessman and Las Vegas Sands’ request for permission to sell luxury apartments in Macau. Another email from Alves said the problems could be solved for a payment of $300 million [ https://www.propublica.org/documents/item/399392-email-from-leonel-alves-to-steve-jacobs-re#document/p1/a64251 ]. There is no evidence the offer was accepted. Both issues remain unresolved.
According to the documents, Alves met with local politicians and officials on behalf of Adelson’s company, Las Vegas Sands, to discuss several issues that complicated the company’s efforts to raise cash in 2008 and 2009.
Soon after Alves said he would apply what he termed “pressure [ https://www.propublica.org/documents/item/395658-email-and-translation-from-leonel-alberto-alves ]” on local planning officials, the company prevailed on a key request, gaining permission to sell off billions of dollars of its real estate holdings in Macau.
Las Vegas Sands denies any wrongdoing. But it has told investors that it is under criminal investigation for possible violations of the U.S. anti-bribery law. Adelson declined to respond to detailed questions, including whether he was aware of the concerns about the Foreign Corrupt Practices Act when he directed payment of the bill from Alves’ law firm.
The documents depict Adelson as a hands-on manager, overseeing details of the company’s foray into Macau, which is now the world’s gambling capital.
They show that Alves helped the company address a crucial issue: Adelson’s frayed relations with officials in Macau and mainland China.
Alves met with prominent Macau officials on Las Vegas Sands’ behalf, emails show. When Adelson made a three-day trip to Beijing, Alves accompanied him, billing [ https://www.propublica.org/documents/item/395653-invoice-from-leonel-alberto-alves-april-6-2009 ] more than $18,000 for his services.
Alves promoted himself to Adelson as someone “uniquely situated both as counsel and legislator to ‘help’ us in Macau,” according to an email written by a Las Vegas Sands executive [ http://www.propublica.org/article/emails-on-alves-employment-and-payment#email3 ].
The then-general counsel of Las Vegas Sands warned that large portions of the invoices submitted by Alves in 2009 were triple what had been initially agreed and far more than could be justified by the legal work performed.
“I understand that what they are seeking is approx $700k,” the general counsel wrote to the company’s Macau executives in an email in late 2009 [ https://www.propublica.org/documents/item/395659-email-regarding-alves-increased-fees ]. “If correct, that will require a lot of explaining given what our other firms are charging and given the FCPA,” the Foreign Corrupt Practices Act.
Adelson, described by Forbes Magazine as the largest foreign investor in China, ultimately ordered executives to pay Alves the full amount he had requested, according to an email that quotes his instructions [ http://www.propublica.org/article/emails-on-alves-employment-and-payment#email3 ].
Alves holds three public positions. He sits on the local legislature. He belongs to a 10-member council that advises Macau’s chief executive, the most powerful local administrator. And he’s a member of the Chinese People’s Political Consultative Conference, a group that advises China’s central government.
Alves did not respond to detailed questions from reporters about his activities on behalf of Las Vegas Sands, saying in an email that the work he had done — “legal services” — was unrelated to his government positions. “I would never use my public offices to benefit the company, nor have I been asked to,” Alves wrote.
Several Las Vegas Sands executives resigned or were fired after expressing concerns about Alves’ billings. These include Las Vegas Sands’ general counsel and two top executives at Sands China, its Macau subsidiary.
Alves briefly severed his relationship with the company in early 2010, according to internal documents, but was rehired months later as outside counsel, a role he still plays.
The internal Las Vegas Sands documents were obtained by reporters working for the University of California’s Investigative Reporting Program [ http://www.investigativereportingprogram.com/ ] as part of an ongoing collaboration with ProPublica [ http://www.propublica.org/article/inside-the-investigation-of-leading-republican-money-man-sheldon-adelson ] and FRONTLINE.
The documents include dozens of emails, billing invoices, memos and reports that circulated among top executives of Las Vegas Sands and its attorneys. The documents were provided by people who had authorized access to them. They offer important glimpses of the company’s dealings in Macau and China, but are not a complete archive.
One invoice, for example, notes that Alves billed $25,000 for “expenses” in Beijing [ https://www.propublica.org/documents/item/395655-invoice-from-leonel-alberto-alves-aug-18-2009 ] with no further explanation.
The documents shed new light on an issue separate from Alves’ work: the company’s difficulties in avoiding contact with Chinese organized crime figures as it built its casino business in Macau.
Nevada law bars licensed casino operators from associating with members of organized crime. State investigators are now assessing whether Las Vegas Sands complied with that rule in its Macau operations, people familiar with the inquiry said.
William Weidner, president of Las Vegas Sands from 1995 to 2009, said he understood from the beginning that opening casinos in Macau meant dealing with “junkets” — companies that arrange gambling trips for high rollers.
Gambling is illegal in mainland China, as is the transfer of large sums of money to Macau. The junkets solve those problems, providing billions of dollars in credit to gamblers. When necessary, they collect gambling debts, a critical function since China’s courts are not permitted to force losers to pay up.
Weidner said junkets are a natural result of China’s controls on the movement of money out of the country, channeling as much as $3 billion a month from the mainland to Macau.
“To Westerners, the junkets mean money laundering equated with organized crime or drugs,” he said. “In China where money is controlled, it’s part of doing business.”
Weidner resigned from the company after a bitter dispute with Adelson.
Nevada officials are now poring over records of transactions between junkets, Las Vegas Sands and other casinos licensed by the state, people familiar with the inquiry say. Among the junket companies under scrutiny is a concern that records show was financed by Cheung Chi Tai, a Hong Kong businessman.
Cheung was named in a 1992 U.S. Senate report as a leader of a Chinese organized crime gang, or triad. A casino in Macau owned by Las Vegas Sands granted tens of millions of dollars in credit to a junket backed by Cheung, documents show [ https://www.propublica.org/documents/item/398980-venetian-macau-junket-credit-agreement ].
Cheung did not respond to requests for comment.
Another document [ https://www.propublica.org/documents/item/398979-relationship-with-vml#document/p1/a64236 ] says that a Las Vegas Sands subsidiary did business with Charles Heung, a well-known Hong Kong film producer who was identified as an office holder in the Sun Yee On triad in the same 1992 Senate report. Heung, who has repeatedly denied any involvement in organized crime, did not return phone calls.
Allegations about the company’s dealings with Alves as well as its purported ties to organized crime are prominently mentioned in a 2010 lawsuit filed by Steven Jacobs, former CEO of Sands China.
In the suit, Jacobs contends he was fired after multiple disputes with Adelson, which included the continued employment of Alves and the company’s dealings with junkets.
Las Vegas Sands declined to respond to detailed questions about the emails, billing invoices or purported relationships with organized crime figures including Cheung and Heung. Nor would it comment on the federal or Nevada investigations.
Adelson told investors last year that the federal investigation was based on false allegations by disgruntled former employees attempting to blackmail his company.
“When the smoke clears, I am absolutely not 100 percent but 1,000 percent positive that there won’t be any fire below it,” he said, adding that what investigators will ultimately find “is a foundation of lies and fabrications.”
At least one prominent Republican has expressed concern about the source of Adelson’s campaign contributions. “Much of Mr. Adelson’s casino profits that go to him come from his casino in Macau,” Sen. John McCain noted in an interview last month with the PBS NewsHour [ http://www.pbs.org/newshour/bb/politics/jan-june12/mccain_06-14.html ].
“Maybe in a roundabout way, foreign money is coming into an American political campaign,” said McCain, an Arizona Republican.
The questions raised by McCain and others have not prevented Adelson, the self-made son of a Boston cabdriver, from emerging as a powerful political figure in both Israel and the United States. A longtime backer of Prime Minister Binyamin Netanyahu of Israel, Adelson created a free daily newspaper, now Israel’s largest, that supports the policies of Netanyahu’s Likud Party.
His family’s $25 million in contributions kept Newt Gingrich in the presidential race. He has been widely reported as donating $10 million to a super PAC supporting Mitt Romney. A “well-placed source” recently told Forbes Magazine that Adelson’s willingness to financially support Romney was “limitless.” A filing with the Federal Election Commission last night shows that Adelson and his wife, Miriam, gave $5 million [ http://reporting.sunlightfoundation.com/2012/adelsons-give-5-million-yg-action-fund/ ] to the “YG ['Young Guns'] Action Fund,” a super PAC linked to House Majority Leader Eric Cantor, a Virginia Republican.
* * *
Macau’s emergence in the 21st century as the biggest gambling center in the world, with $33.5 billion in annual revenue — four times that of Las Vegas — is a matter of history and geography.
A former Portuguese colony, the tiny peninsula was handed over to China in 1999. It has its own legislature, laws, court system and chief executive, all of which exist under the umbrella of Chinese control.
For generations, profits from Chinese gambling flowed primarily to a single local company. But after China took control, authorities agreed to let foreign companies get a piece of the action.
Las Vegas Sands was among more than a dozen companies to apply for a license. Its plans were among the most expansive, calling for an American-style complex of hotels, casinos, shopping malls and luxury apartments.
The first of four Las Vegas Sands casinos, the Sands Macau, opened its doors in 2004. It was immediately successful as well-heeled gamblers from the mainland flocked to the tables.
Over the next several years, the company pushed ahead with its multibillion-dollar construction projects on a strip of reclaimed land known as Cotai.
But in the summer of 2008, Las Vegas Sands faced a cash crunch. The global economic slowdown hit revenues at its casinos in Nevada. And gambling slowed in Macau after China’s central government abruptly cut down on the number of visas it granted for travel to the region. Suddenly, the company was struggling to make payments on billions of dollars in long-term debt.
Executives at Las Vegas Sands began looking at ways to raise cash in Macau. To do this, the company would need some help from local officials.
It wasn’t clear they would get it.
In China, relationships, or guanxi, can make or break an empire. Adelson’s relationships in Macau and China were frayed. George Koo, a member of the Las Vegas Sands board of directors, wrote in a confidential memo that Adelson’s behavior had offended political figures in both Macau and China.
Koo quoted a prominent Macau official as saying Adelson had “slapped the table in front of Edmund Ho,” Macau’s chief executive. “Supposedly, Ho has said that he will not see SGA anymore,” the memo said, using Adelson’s initials.
Accompanied by Alves, Koo met with the Macau chief executive over lunch. According to Koo’s memo, Ho expressed his regret that Adelson “has burned so many bridges with Beijing,” the memo said.
According to Koo’s account, a top Chinese official overseeing Macau named Liao Hui was so angry at Adelson that he refused to meet with him. It is not clear from the memo what caused the rupture, but Koo said Adelson turned to “the Israeli military to arrange a meeting with Liao” who initially agreed but then said he would only send his deputy. No meeting ever took place, the document says.
Weidner, who resigned as president of Las Vegas Sands in March 2009, said in an interview that Adelson was “out of his element” dealing with Chinese officials.
Weidner recalled struggling to explain Adelson’s style to the Chinese, once comparing his boss to a famous emperor who became angry with China’s scholars and buried them alive with their books. “I would tell them: ‘He is brilliant. Sometimes, like the emperor, he is brutal.’”
Leonel Alves seemed to be an ideal person to smooth relations.
A Macau native, born of a Portuguese father and a Chinese mother, the attorney had been a fixture in the local scene for decades, and was nimble in the face of shifting political tides.
In the years leading up to Portugal’s handover of its onetime colony to China in 1999, he was among a select group of local residents chosen to serve on the transition team.
Alves became a Chinese citizen and dedicated himself to learning China’s official dialect, Mandarin, to complement his fluency in Portuguese, English and Cantonese. His legal practice was already successful. He boasted to local reporters of his car collection, which included a Ferrari and a BMW M3.
Las Vegas Sands put Alves’ law firm on retainer in midsummer 2008, naming him as an outside counsel. Documents show his firm was to be paid $37,500 a month for 80 hours of work, with additional hours to be billed at a rate of more than $550 an hour.
Over the years, the Justice Department has made it clear that American companies can employ foreign officials. But companies have been told they must take great care and create safeguards to prevent such officials from using their position or political standing to gain commercial advantage.
T. Markus Funk, a partner at the Perkins Coie law firm and co-chair of the American Bar Association Global Anti-Corruption Initiatives Task Force, declined to discuss the specifics of the Las Vegas Sands inquiry. But he said companies generally avoid hiring sitting local officials as lobbyists or representatives because of the risk that they will improperly end up wielding their influence.
“It would be a huge red flag,” said Funk. “If you are paying someone because you think they are going to have a questionable backroom discussion, essentially a quid pro quo relationship, that’s a no-no. You can get yourself in big trouble pretty quickly.”
In response to written questions, Alves said in an email that his political career has never conflicted with “my profession as a lawyer.” He said his office had “been scrutinized by the Chinese and American authorities like few have in Macau, and no authority has ever had any suspicion.”
Alves noted that his multiple government posts did not “confer to me any executive and administrative power” or the ability to “influence” what he described as “the relevant authorities.”
U.S. companies sometimes ask the Justice Department in advance for an opinion on whether a particular hire constitutes a violation of the law. It is not known if Las Vegas Sands posed such a question about Alves. Funk, a former federal prosecutor, said that a company following “best practices” would look closely at both the size of the proposed payments and the procedures put in place to assure compliance.
“I’d want to make sure the individual is getting paid an appropriate scale,” Funk said. “I’d want to get some assurance he was familiar with the FCPA and had agreed to abide by its terms. I’d want a code of conduct in place and I’d want to see detailed billing statements.”
One of the first issues Alves addressed was Las Vegas Sands’ request for permission from local authorities to sell a mall and 300 luxury apartments it had built next to one of its casinos, the Four Seasons Macau.
The company’s original agreement with the government did not allow it to break up the property into separate pieces for sale. If Sands could amend the agreement, it would open the way to raise billions.
On Aug. 12, 2008, Alves wrote an email to Luis Melo [ https://www.propublica.org/documents/item/395658-email-and-translation-from-leonel-alberto-alves ], who was then Las Vegas Sands’ in-house counsel in Macau. He wrote that he was planning to meet with local officials to “monitor and apply pressure” to what he called the “revision process” of the “land concession contract.” It is not known whether the meeting took place or what, if anything, Alves said to other officials in the government.
In late September, the secretary of Macau’s Land, Public Works and Transport Bureau declared that Las Vegas Sands had to abide by its original contract with Macau, which did not permit the property to be sold separately.
“The terms in the concession contract are very clear and any move must be according to what is written in the contract,” he said, according to a report in The Macau Daily Times.
That statement came at a critical moment for Las Vegas Sands. With the collapse of Lehman Brothers in the United States, even the most solvent companies were finding it impossible to borrow. At the end of September, Adelson staked his company $475 million of his own money.
In October, planning officials handed Las Vegas Sands much of what it was seeking. They said they would allow the property to be divided into four parts: the casino, the apartment complex, the mall and a parking garage. Each could be sold separately. In their decision, Macau officials said they were trying to help Las Vegas Sands address its need for more capital.
The company portrayed the decision as a victory and said it “paves the way” for the sale of the 300 luxury apartments.
The company’s financial condition continued to worsen. It halted construction on its massive projects in Cotai. In November 2008, Adelson kicked in another $525 million of his own money. That month, the company told investors it was in danger of defaulting on $5.2 billion in loans. Such a default, auditors warned, could threaten the company’s survival.
Ultimately, Las Vegas Sands did not sell the apartment building or mall. (It continues to seek final permission to sell individual apartments.) The company moved to raise capital through another route: an initial public offering of stock on the Hong Kong exchange that, it was hoped, would bring in billions of dollars.
Once again, local law posed challenges to the company’s plans. And once again, Alves stepped forward to help.
* * *
One key to Las Vegas Sands’ survival in Macau was its ability to whisk customers from Hong Kong to the doors of its casinos. The long-established ferry route unloads its passengers in downtown Macau, about a three-mile drive from Adelson’s casinos in Cotai.
Las Vegas Sands had created its own ferry service, Cotai Waterjets, which dropped gamblers at a dock just a short shuttle ride from its casinos.
But the future of Cotai Waterjets was unclear. A competing ferry service had filed a complaint alleging the government had improperly awarded the concession to Las Vegas Sands without competitive bidding.
In February 2009, a Macau court agreed, voiding the contract.
Alves set to work. In the spring of 2009, he arranged what a billing invoice [ https://www.propublica.org/documents/item/398978-incvoice-from-leonel-alberto-alves-nov-13-2008#document/p1/a64077 ] from his firm describes as “meetings and contacts with the Macau Government.”
On Oct. 19, 2009, Alves met with Edmund Ho, Macau’s chief executive, and Fernando Chui Sai On, Ho’s soon-to-be successor. (Ho was the Macau official who had purportedly refused to meet with Adelson.)
It is not known what was discussed. Alves billed Las Vegas Sands for two hours of his time [ https://www.propublica.org/documents/item/395657-invoice-from-leonel-alberto-alves-oct-16-2009#document/p1/a63647 ], according to his invoice.
Also that day, Alves billed for more than an hour of phone calls [ https://www.propublica.org/documents/item/395657-invoice-from-leonel-alberto-alves-oct-16-2009#document/p1/a63648 ] with company executives, his invoices show.
Las Vegas Sands was explicit about what was at stake, telling Hong Kong investors in a public filing that loss of the ferry concession “could result in a significant loss of visitors to our Cotai Strip properties.” This would have a “material adverse effect on our business,” the company said.
Within days of Alves’ meeting with Ho, Las Vegas Sands won a stunning victory. Ho issued an administrative regulation that allowed ferry contracts to be awarded without competitive bidding. The court rulings against the company were moot. Las Vegas Sands retained control of its route and ultimately obtained several new ones.
Attempts to reach Ho were unsuccessful.
The initial public offering launched in late November 2009, raising $2.5 billion for Las Vegas Sands.
Alves remains a member of the Executive Council. He declined to discuss his interactions with Ho or the council.
* * *
Just as Sands was resolving several of its thornier legal issues, a dispute erupted among its executives over Alves that had far-reaching consequences.
It began on Oct. 20, 2009, shortly before the ferry decision was announced, with a seemingly routine event: Alves’ firm submitted bills for its recent work.
The firm said it was charging at triple [ https://www.propublica.org/documents/item/398981-luis-ricardo-emails#document/p1/a64243 ] the previously agreed rate to account for the work it had done on the public offering, scheduled for the following month. In an email, Las Vegas Sands’ in-house lawyer in Macau, Luis Melo, objected, noting the invoices were “not in accordance [ https://www.propublica.org/documents/item/398981-luis-ricardo-emails#document/p1/a64242 ]” with the letter which spelled out the financial terms of Alves’ retainer.
The issue reached the desk of J. Alberto Gonzalez-Pita, general counsel at Las Vegas Sands headquarters in Nevada. In an email, Gonzalez-Pita expressed concern about a sudden request for more money from an outside lawyer who was also a foreign official, saying such a payment would require “a lot of explaining [ https://www.propublica.org/documents/item/395659-email-regarding-alves-increased-fees ].”
With the bill still unpaid, Alves submitted his resignation effective in February 2010.
An internal email shows he continued to report privately to Adelson, delivering at least one message from the company’s chairman and CEO to Macau’s government.
Separately, he also pushed to return to Sands China.
In March, Alves submitted a new proposal, asking to be paid $125,000 a month with no obligation to provide billing details [ https://www.propublica.org/documents/item/398919-emails-on-alves-proposed-expenses-march-3-2010#document/p1/a64248 ], internal records show.
Gonzalez-Pita, the Las Vegas general counsel, rejected the idea. “It’s outrageous,” he wrote [ https://www.propublica.org/documents/item/398919-emails-on-alves-proposed-expenses-march-3-2010 ]. “Our corporate retainer with Paul Weiss is almost three times less per month,” he said, referring to the company’s outside counsel, New York-based Paul, Weiss, Rifkind, Wharton & Garrison.
Gonzalez-Pita elaborated a week later.
“I continue to believe this proposal to be inappropriate, unrealistic, extraordinarily expensive and way above market,” he wrote to Jacobs [ https://www.propublica.org/documents/item/396015-email-regarding-alves-proposed-expenses-march-9 ], the CEO of Sands China who had originally been recruited to handle the IPO. “Been a long time since I’ve seen a lawyer or a firm make as naked a power play as has LA,” Leonel Alves. “He sure has chutzpah.”
Jacobs decided against rehiring Alves. “Let’s talk about a replacement for outside counsel,” he wrote in a March 10, 2010, email [ http://www.propublica.org/article/emails-on-alves-employment-and-payment#email1 ] to Melo, Sands China’s general counsel in Macau.
“The transition will not be easy … and has a high probability of becoming messy … but it is the right thing to do for the business,” he wrote.
Jacobs told Alves that he would not be retained, emails show.
The same day, Jacobs informed colleagues that he had paid the disputed invoices after Alves submitted a more detailed account of the work he had done on the public offering. Jacobs wrote to Gonzalez-Pita that he had been “instructed by SGA and MAL to pay and close out the matter [ http://www.propublica.org/article/emails-on-alves-employment-and-payment#email3 ].”
The initials SGA and MAL are used within the company to refer to Sheldon G. Adelson and Michael A. Leven, the president of Las Vegas Sands.
“I am sorry that this was not communicated to you but I am glad that FCPA outside counsel did not highlight any substantial issue with the payment,” Jacobs wrote [ http://www.propublica.org/article/emails-on-alves-employment-and-payment#email3 ].
Gonzalez-Pita replied that Jacobs was mistaken and that the company’s outside lawyer had identified the payments as a possible violation of the U.S. anti-bribery law.
“Unfortunately,” Gonzalez-Pita wrote to Jacobs [ http://www.propublica.org/article/emails-on-alves-employment-and-payment#email4 ], “FCPA counsel did highlight a problem” with paying Alves anything more than his normal fees “plus a commercially reasonable premium.”
“While I can appreciate that you received instructions to make the payment,” Gonzalez-Pita wrote on March 12 [ http://www.propublica.org/article/emails-on-alves-employment-and-payment#email5 ]. “I wish you would have advised me so I could have intervened.”
Gonzalez-Pita resigned from the company in April 2010.
On July 23, Las Vegas Sands fired Jacobs. A month later, the company dismissed Melo and the rest of the legal team in Macau, according to the lawsuit Jacobs subsequently filed in Nevada.
In that action, Jacobs said he was dismissed for refusing Adelson’s “illegal demands,” including an order that he fire Melo and replace him with Alves. Las Vegas Sands said in court briefs that it fired Jacobs for disobeying orders and working on unauthorized deals.
The company rehired Alves as outside counsel in the fall of 2010, a position he still holds. It is not known how much he is being paid.
In April of this year, Sands China opened Cotai Central, the $4 billion project it had temporarily abandoned in 2008, when the company stood at the brink. Within six hours of the opening, Sands China reported, more than 84,000 people pushed through the new casino’s doors.
Matt Isaacs and Lowell Bergman reported on this story for the Investigative Reporting Program [ http://www.investigativereportingprogram.com/ ] of the University of California and FRONTLINE. Some of their work was underwritten by a grant from the Nathan Cummings Foundation. Engelberg is managing editor of ProPublica.
©2012 WGBH Educational Foundation
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Echoes of Clinton-Era Scandal in a Las Vegas Sands Email
CEO of Sand China Ltd., Steven Jacobs, attends a ceremony at the Hong Kong Stock Exchange (HKSE) on Nov. 30, 2009 to mark the first day of trading of Sands China's initial public offering (IPO).
(Ed Jones/AFP/Getty Images)
July 16, 2012, 11:21 am ET by Matt Isaacs and Lowell Bergman
On Feb. 25, 2010, the head of the Las Vegas Sands subsidiary in Macau sent a colleague an email asking for information on a Macau businessman named Ng Lap Seng.
The executive, Steven Jacobs, was trying to decide whether the company should continue retaining Leonel Alves, a local legislator and lawyer, as an outside counsel, internal documents show.
Jacobs identified Ng as “Leonel’s contact with Beijing” and said that Ng had “delivered msg. from SGA,” a reference to Sheldon G. Adelson, the company’s chairman and CEO. “Need background check,” Jacobs wrote.
The email did not describe the content of the message purportedly conveyed by Ng.
Ng’s past includes some notable items. More than a decade earlier, he had figured prominently in a U.S. political scandal, carrying hundreds of thousands dollars of cash into the United States and funneling it to Democratic candidates through a Chinese-American intermediary, a congressional investigation later found.
More than a dozen people eventually pleaded guilty to violations of federal campaign contribution laws in what was called “Donorgate.” The Clinton administration was deeply embarrassed when a photo surfaced of Ng with President Clinton. Ng was never charged in that case.
Ng, through a spokesman, declined to be interviewed for this article citing his commitments to what he described as his “congressional position with China.” He did not specifically describe the position to which he was referring.
Jacobs ultimately recommended that Las Vegas Sands cut its ties with Alves.
Adelson fired Jacobs, who sued the company in a Nevada court alleging, among other things, that he had been dismissed because he had opposed retaining Alves. The company has denied that allegation, maintaining that its dealings with Alves were proper. It has said Jacobs was fired for other reasons.
Ng was not mentioned in the original lawsuit filed by Jacobs. But in a recent filing, Jacobs asked for copies of an “investigative report” the company prepared on Ng and for any communications between Ng and Adelson.
©2012 WGBH Educational Foundation
http://www.pbs.org/wgbh/pages/frontline/criminal-justice/echoes-of-clinton-era-scandal-in-a-las-vegas-sands-email/ [no comments yet] [co-published at http://www.propublica.org/article/echoes-of-clinton-era-scandal-in-a-las-vegas-sands-email (with comments)]
===
In Praise of Sheldon Adelson
By Francis Wilkinson Jul 2, 2012 10:33 AM CT
Sheldon Adelson appears to be this year's handiest example of campaign finance run amok. By my count, the billionaire CEO of the Las Vegas Sands and his family have donated at least $40 million to Republican political groups while promising tens of millions more. Most of the money is going to much-reviled super-PACs such as Restore Our Future, the independent expenditure committee run by former Mitt Romney aides whose sole purpose is to elect their man president while pretending they barely know him.
Adelson has a list of political axes to grind, ranging from tax rates (he wants them lower) to U.S. policy toward Israel (he opposes a two-state solution with Palestine). He is not shy about his feelings: He wants a Republican in the White House, and he's spending tens of millions to get one.
Some of Adelson's Obama-hating billionaire colleagues and corporate allies, by contrast, are too demure to operate in the open. Instead, these fragile blossoms contribute anonymously to groups like Karl Rove's Crossroads GPS (which may be a recipient of Adelson largesse, as well) or to the U.S. Chamber of Commerce, which acts increasingly like a coordinated arm of the Republican Party.
So give Adelson his due: He is open about his motives and has let the public in on the deal. That's better for democracy than flooding the system with secret donations. The only people who know what those donors want in return are the candidates and their aides.
Francis Wilkinson is a member of the Bloomberg View editorial board.
Read more breaking commentary from Josh Barro and other Bloomberg View columnists and editors at the Ticker [ http://www.bloomberg.com/view/the-ticker/ ].
*
Related
Hardheaded Socialism Makes Canada Richer Than U.S.
By Stephen Marche
http://www.bloomberg.com/news/2012-07-15/hardheaded-socialism-makes-canada-richer-than-u-s-.html
The Secret Behind Romney’s Magical IRA
By William D. Cohan
http://www.bloomberg.com/news/2012-07-15/the-secret-behind-romney-s-magical-ira.html
Romney’s Bain Yielded Private Gains, Socialized Losses
By Anthony Luzzatto Gardner
http://www.bloomberg.com/news/2012-07-15/romney-s-bain-yielded-private-gains-socialized-losses.html [at (linked in) http://investorshub.advfn.com/boards/read_msg.aspx?message_id=77553470 and preceding and following]
Do Business Schools Incubate Criminals?
By Luigi Zingales
http://www.bloomberg.com/news/2012-07-16/do-business-schools-incubate-criminals-.html
*
©2012 BLOOMBERG L.P.
http://www.bloomberg.com/news/2012-07-02/in-praise-of-sheldon-adelson.html [with comments]
===
Dueling Houston donors take feud to presidential campaign
Video [embedded]
The most powerful political group in Texas has become a danger to the conservative cause! Learn more at http://www.StopTLR.com
http://www.youtube.com/watch?v=1tgbJt3pEkY
By Julie Bykowicz, Bloomberg News Service
Updated 06:52 a.m., Monday, July 16, 2012
Fliers distributed at the Texas Republican convention last month depict Democrat Steve Mostyn in a menacing sketch, asking why he's trying to "infiltrate" their party. A companion website, largely financed by rival Bob Perry, warns of Mostyn's "invisible hand" in state politics.
Mostyn associates are returning fire. One of his employees runs a website that features a mugshot-style photo of Perry, with the claim that he's the one taking over Texas politics.
It sounds like routine, political mudslinging. It isn't, and here's the odd part: They aren't candidates; they're wealthy donors who have given millions to state lawmakers.
Now, the Lone Star State feud is spilling into the presidential campaign as Mostyn, a Houston trial attorney, is helping Democrats try to match the millions that Perry, a Houston home builder, has given to super-political action committees running attack ads in swing states.
"If they get into a race, they define that race," says Bill Miller, who has been involved in Texas politics since 1985 and whose lobbying firm represents Perry in Austin. "They're cut from the same bolt of cloth. They give to whoever they want, when they want and in the amount they want. And they both do it for the same reason -- outcome."
Super-PAC Donations
Mostyn, 41, an East Texas native with a linebacker's build and a goatee, gave $1 million in May to Priorities USA Action, a super-PAC backing President Barack Obama. He'd been wooed by Democratic strategists Paul Begala and Bill Burton during a four-hour conversation aboard Mostyn's yacht in Fort Lauderdale, Florida.
Later this month, Mostyn will introduce the Priorities duo to other wealthy Texas Democrats, he said in an interview. They'll spend three days in a half-dozen meetings in San Antonio, Dallas, Houston and elsewhere, flitting to each location in Mostyn's Hawker 750 plane.
"There's a lot of money here, but nationally, we've been forgotten because we haven't been in play," Mostyn said. It has been 36 years since Texas went for a Democratic presidential candidate. His wife and fellow attorney Amber Mostyn gave $500,000 to House Majority PAC, which supports Democrats for Congress.
Obama Texas Fundraisers
Obama will attend fundraisers tomorrow in San Antonio and Austin, and Mostyn will be present for the one at the home of San Antonio trial lawyer Mikal Watts.
Perry, 79, has donated to a super-PAC devoted to electing presumptive Republican presidential nominee Mitt Romney, giving $4 million to Restore Our Future. He contributed another $2.5 million to American Crossroads, a super-PAC that works to elect Republicans in Congress in addition to helping Romney. Crossroads was formed with the help of Karl Rove, a former political adviser to President George W. Bush.
Born in a one-room house in central Texas, Perry founded and controls closely held Perry Homes, the largest home builder in the Houston area, according to the Houston Business Journal. The company earned $325 million in local revenue in 2011, the Business Journal reported. Perry declined through a spokesman to be interviewed.
Mostyn also comes from humble means and was the first in his family to finish college, receiving his law degree from the South Texas College of Law in 1996. Three years later he founded the Mostyn Law Firm, which now has 170 employees including 32 attorneys at five offices across the state. The firm has represented 20,000 clients and earned about $30 million in fees from settlements for residents whose homes were damaged by Hurricanes Ike, Rita and Dolly.
Key West Yacht
The Mostyns and their 5-year-old daughter and 11-year-old son primarily live in a modernist house in Houston that has an assessed value of about $6.6 million. They also have a home on Lake Lyndon B. Johnson in the Texas Hill Country and in Key West, where the yacht is normally docked.
Mostyn is as extroverted as Perry is introverted, said Miller and Democratic state Senator John Whitmire, who know both men. Mostyn was head of the Texas Trial Lawyers Association last year -- the youngest to lead the group -- and is a fixture in the state house, the back door to which leads to the trial lawyers' building.
"They're two strong-willed people with major resources who are squaring off," said Whitmire, who has accepted campaign contributions from both men. "That's what makes the world interesting and elections challenging."
Legal System
Like many Texas political players, Mostyn and Perry are driven by calls for changes in the legal system, said Craig McDonald of Texans for Public Justice, an Austin-based nonprofit that tracks campaign giving in the state.
Perry wants to curb the ability of people to sue companies -- including his own, while Mostyn, who earns his income as a plaintiff's attorney, wants to make it easier to go to court.
"Tort reform has really defined Texas politics for the better part of two decades," McDonald said.
In the national arena, Mostyn said he's trying to prevent federal politics from following Texas's move to the right, a model called "frightening." He also said he supports Obama's health care and education policies and doesn't want to see more Republican-nominated justices on the U.S. Supreme Court.
Perry supports Romney because "he is a proven business leader with a history of job creation who recognizes the federal government does not have unlimited power," said Anthony Holm, a Perry spokesman.
Feud Begins
The feud began in 2008, when Mostyn emerged as a major Democratic contributor. Within two years, he'd surpassed Perry as the top political giver in Texas -- a state that has no donation limits.
Mostyn, his wife and law firm in 2010 gave $9.7 million; ranked right behind them were Perry and his wife, Doylene, who gave $8.3 million, according to Texans for Public Justice.
Perry backed the re-election of Governor Rick Perry, who is not related. Mostyn supported former Democratic Houston Mayor Bill White in the gubernatorial race.
Their giving isn't limited to candidates; they've each funded a network of political action committees.
Some Mostyn-funded groups are Back to Basics, Texas Values in Action Coalition and Texans for Insurance Reform. Perry's preferred groups include the Texans for Lawsuit Reform, the Associated Republicans of Texas Campaign Fund and Hispanic Republicans of Texas.
'The Invisible Hand'
Perry is the single largest donor to Texans for Lawsuit Reform, having given $2.3 million to the group between 2001 and 2010, according to Texans for Public Justice.
In 2010, Texans for Lawsuit Reform posted a website called "The Invisible Hand of Steve Mostyn," which shows a spider web-like chart of Mostyn groups and the candidates they support.
The group also handed out fliers at the state Republican convention in June questioning why Mostyn is supporting Republican primary candidates.
"As he became more prominent in opposing pro-tort reform candidates, we believed the best message in countering his challenge was to say this man is the largest funder of Democrats in Texas and is a personal injury trial lawyer who has a self- interested agenda," said Sherry Sylvester, the group's spokeswoman.
Like-Minded
Mostyn shrugs off what he calls the campaign to "reveal" him, noting that he is backing Republicans who agree with his position on preserving the right to bring lawsuits.
"When you control the whole damned state, you've got to make somebody the boogeyman in order to keep raising money," he said. He doesn't dispute the Republicans' characterization of him as the donor-in-chief of the state Democratic Party. He questions its importance in a state where Republicans control the state legislature and have held the governor's office since 1995.
"Being captain of the JV team is really not that powerful of a position," he said.
Mark McCaig is a lawyer in Mostyn's Houston office. He also calls himself "a lifelong conservative Republican" and maintains a group called Texans for Individual Rights, which bills itself as a Republican group devoted to "exposing" the agenda of Perry-funded Texans for Lawsuit Reform.
Anti-Perry Website
Texans for Individual Rights' website "Stop TLR," lists Perry among the "men who control Austin politics."
McCraig said he started the campaign against his fellow partisan because "I think Bob Perry is interested in protecting Bob Perry's pocketbook."
That's the same accusation Mostyn's adversaries lodge against him. Their prime bit of evidence is a May 5, 2010 donation of $25,000 that Mostyn made to Republican state Representative Todd Hunter.
Hunter has voted against Mostyn's interests when it comes to tort reform and has received money from the Perry-funded Texans for Lawsuit Reform. What raised eyebrows was the timing of Mostyn's check.
Days after accepting the Democratic contribution, Hunter was selected as mediator in a lawsuit against the state's insurance fund filed by thousands of Gulf Coast Hurricane Ike victims. Under his supervision, the parties arrived at a settlement in which the Texas Windstorm Insurance Association paid $189 million to Galveston County residents whose homes were wiped out by Hurricane Ike. Mostyn led negotiations for the residents.
Mostyn said the campaign money was "totally unconnected to" Hunter's work as a mediator. They've known each other for years, and Mostyn asked Hunter if he'd take trial attorney money since he was taking campaign contributions from insurers, both Mostyn and Hunter said in interviews.
"Anybody who wants to give, great," Hunter said.
To contact the reporter on this story: Julie Bykowicz in Washington at jbykowicz@bloomberg.net
To contact the editor responsible for this story: Jeanne Cummings at jcummings21@bloomberg.net
©2012 BLOOMBERG L.P.
http://www.chron.com/news/politics/article/Dueling-Houston-donors-take-feud-to-presidential-3709730.php
===
The ‘Merit-Based Society’
By THOMAS B. EDSALL
July 15, 2012, 11:49 pm
Mitt Romney is an evangelist for capitalism.
“Free enterprise is still the greatest force for upward mobility, economic security, and the expansion of the middle class,” Romney declared last week [ http://www.mittromney.com/news/press/2012/07/mitt-romney-free-enterprise-greatest-force-economic-security ] at the N.A.A.C.P. convention in Houston. “As president, I will show the good things that can happen when we have more free enterprise – more business activity, more jobs, more opportunity, more paychecks, more savings accounts.”
In a speech in Washington in December, Romney described his ideal society [ http://www.mittromney.com/blogs/mitts-view/2011/12/mitt-romney-delivers-remarks-republican-jewish-coalition ]:
In a merit-based society, people achieve success and rewards through hard work, education, risk taking, and even a little luck. The founders considered this principle to be one endowed by our Creator, and called it the ‘pursuit of happiness.’ We call it opportunity, or we call it the freedom to choose our course in life. A merit-based, opportunity society gathers and creates a citizenry that pioneers, that invents, that builds and creates. And as these people exert the effort and take the risks inherent in invention and creation, they employ and lift the rest of us, creating prosperity for us all. The rewards they earn do not make the rest of us poorer, they make us better off.
Merit has been traditionally equated with intelligence, industriousness, educational attainment, creativity and competency. In a meritocracy, formal qualifications provide opportunity, position is no longer ascribed by birth, and rewards flow to those who excel.
The rise of meritocratic competition as the preeminent means of social stratification in America has been hailed as a welcome advance because it replaced a society dominated by an upper class dependent on inherited wealth and status. The transition to meritocracy has, however, had unintended consequences. In the business sector, particularly, other less benign qualities emerge as essential to meritocratic success: aggressiveness, ruthlessness, dominance-seeking, victimizing behavior, acquisitiveness and the disciplined pursuit of self-interest.
Over the past two decades, newly minted corporate titans have used political power to minimize taxation on their principal sources of income, winning preferential rates on capital gains and dividends — and have nearly eliminated taxation on the intergenerational transfer of wealth, brilliantly exploiting the term “death tax.”
One industry in particular — the financial sector — has used its power to gain an enormous advantage at public expense [ http://www.mcclatchydc.com/2008/09/15/52559/wall-street-crisis-is-culmination.html ] persuading the government to dismantle much of the federal regulatory structure. The Financial Crisis Inquiry Commission, a 10-member bipartisan panel appointed in 2009 by congressional leaders of both parties, reported in January 2011 [ http://www.gpo.gov/fdsys/pkg/GPO-FCIC/pdf/GPO-FCIC.pdf ] that “from 1997 to 2008, the financial sector expended $2.7 billion in reported federal lobbying expenses; individuals and political action committees in the sector made more that $1 billion in campaign contributions” to achieve what the commission described as “deregulation redux.”
Richard Freeman, an economist at Harvard, argued in an email to the Times that a merit based system can quickly convert into an entrenched hierarchy as a result of the accumulation of excessive wealth and income:
The greatest danger is that high inequality creates a society in which wealthy ‘crony capitalists’ dominate corporate and government policies and use their wealth to subvert market competition and to corrupt democracy in order to maintain their position atop the income hierarchy.
Campaign contributions are among the most important weapons deployed by new corporate elites. The finance industry, for example, has given more money [ http://www.opensecrets.org/pres12/indus.php?cycle=2012&id=N00000286 ], $19 million, to the Romney campaign than any other sector, quadrupling its nearest competitor, real estate, which contributed 4.8 million.
At an extreme, the predatory aspect of “meritocratic” corporate competition is illustrated by the scandals of Enron [ http://www.time.com/time/specials/packages/0,28757,2021097,00.html ] and WorldCom [ http://www.cbsnews.com/2100-201_162-513473.html ], by the insider trading convictions [ http://topics.nytimes.com/topics/reference/timestopics/subjects/i/insider_trading/index.html ] of Raj Rajaratnam and Rajat Gupta, and by the fraudulent schemes of Allen Stanford [ http://www.usatoday.com/money/industries/brokerage/story/2012-06-14/r-allen-stanford-sentenced/55597082/1 ] and Bernie Madoff [ http://topics.nytimes.com/top/reference/timestopics/people/m/bernard_l_madoff/index.html ].
At a more mundane level, the use of campaign contributions by those who have become wealthy in an “opportunity society” to protect predatory practices can be seen in recent donations by payday loan and auto-title lending companies, which are often located near military bases. Bloomberg Businessweek reported a surge in contributions [ http://www.businessweek.com/articles/2012-03-29/how-payday-lenders-quietly-donate-to-campaigns ] from these firms to Romney’s super PAC, Restore Our Future, from mid-January through the end of February 2012. The contributions followed Romney’s denunciation on January 4th of the Consumer Financial Protection Bureau — which is preparing to regulate the payday loan industry and other “non-bank” lenders — as “perhaps the most powerful and unaccountable bureaucracy in the history of our nation.” Businessweek wrote that from “January 13 to February 29, payday and auto-title lenders contributed $427,500 to Restore Our Future.”
One payday loan company, Advance America, gave the super PAC $25,000. On its web site, Advance America outlines the terms of its loans [ http://www.advanceamerica.net/apply-for-a-loan/faqs ] in different states. In Alabama, a $500 loan carries an $87.50 fee, which must be paid off at the next payday. This translates into an annual interest rate of 456.25 percent, according to the firm’s web site. In Texas, a $500 loan carries a $102.27 fee, or an annual interest rate of 533.30 percent.
In findings that parallel those of Harvard’s Richard Freeman, Martin Gilens, a political scientist at Princeton, conducted a study of the relative influence of voters [ http://www.russellsage.org/research/inequality-and-democratic-responsiveness ] at the top, middle and bottom of the income distribution over policy decisions made by elected officials.
Policy outcomes are more strongly related to the preferences of the well off than those of the poor or the middle class. But the extent of this “representational inequality” is staggering: when preferences of low or middle income Americans diverge from those of the affluent, there is virtually no relationship between policy outcomes and the desires of these less advantaged groups. In contrast, affluent Americans’ preferences exhibit a substantial relationship with policy outcomes whether their preferences are shared by lower income groups or not.
Campaign contributions, according to Gilens, are highly correlated with the leverage of the affluent over policy. “Most of the money donated to political candidates, parties, and interest organizations comes from Americans at the top of the economic ladder,” he writes. “The top-heavy pattern of political donations conforms to the top-heavy nature of representational inequality.”
Not only would Romney’s tax, regulatory and spending proposals [ http://campaignstops.blogs.nytimes.com/2012/05/26/political-dividends/ ] reinforce the leverage over public policy now exercised by the affluent, but he would leave untouched the post-Citizens United campaign finance regime that gives corporations, unions and billionaires unlimited opportunities to shape election outcomes.
Nor would Romney reform the Washington lobbying community that now amounts to a fourth branch of government, staffed by former Senators, Congressmen and executive branch officials, who work for clients equipped to pay fees of $200,000 or more a year.
The overwhelming majority of the $3.3 billion spent annually [ http://www.opensecrets.org/lobby/index.php ] on lobbying goes to preserve and expand the market-distorting corporate “rents” granted by Congress and the executive branch, ranging from agribusiness subsidies to an array of special breaks that allow companies like G.E. to pay little or no federal tax [ http://www.nytimes.com/2011/03/25/business/economy/25tax.html?pagewanted=all ].
Romney has no incentive to initiate reform — he is a major beneficiary of the system as it is.
The super PACs enabled by Citizens United and related lower-court decisions are overwhelmingly tilted in Romney’s favor [ http://www.opensecrets.org/outsidespending/summ.php?cycle=2012&type=p&disp=O ] and supportive of the Republican Party in general: Conservative super PACs have so far spent $125 million, while liberal groups have spent less than a third of that, $35.2 million.
Romney’s top ten lobbyist-bundlers, in turn, have raised a total of $2.6 million [ http://www.opensecrets.org/pres12/bundlers.php?id=N00000286 ] for his campaign so far. Their clients include Barclays, which is now in the middle of an interest rate fixing scandal [ http://dealbook.nytimes.com/2012/07/10/q-and-a-understanding-libor/ ], and Microsoft, which has been the defendant in anti-trust litigation in the United States [ http://www.justice.gov/atr/public/press_releases/1998/1764.htm ] and in Europe [ http://money.cnn.com/2009/12/16/technology/Microsoft_EU_antitrust.cnnw/index.htm ].
The other side of the coin? Take a look at Pennsylvania, where 130,000 people, including 89,000 children, were cut from the Medicaid rolls between August 2011 and January 2012, a development that exemplifies the weak influence the poor exercise over policy. These cuts in health care, which affected both the poor and the disabled, resulted from the efforts last year of Republican Governor Tom Corbett and his welfare secretary, Gary Alexander, to “crack down on waste, fraud, and abuse [ http://www.philly.com/philly/news/politics/20120712_Federal_agency_asking_about_the_sharp_drop_in_Pa__s_Medicaid_rolls.html ],” according to the Philadelphia Inquirer. Many of the cuts followed a controversial letter from the Pennsylvania Department of Public Welfare to Medicaid recipients last summer requiring additional paperwork within 15 days [ http://articles.philly.com/2012-04-03/news/31281777_1_medicaid-rolls-medicaid-recipients-corbett/2 ]. According to the Philadelphia Daily News, “It appeared that if the paperwork was not then received and processed in time, those enrolled were dropped — even if the delay was the fault of D.P.W.”
As reasonable as Romney’s endorsement of a “merit-based opportunity society” may appear on the surface, what he is really calling for is a society that rewards hard-hearted, relentless competitors and disregards the losers. It is precisely this aspect of his campaign that has made him vulnerable to Democratic attacks.
Romney remains viable (trailing Obama by only 2.4 percent [ http://www.realclearpolitics.com/epolls/2012/president/us/general_election_romney_vs_obama-1171.html ]) against a Democratic incumbent hobbled by a stagnant economy and 8.2 percent unemployment. A Republican candidate with a more nuanced understanding of the hardships of those left behind by the meritocratic elite would arguably win in a walk.
Romney, however, is the willing prisoner of a radically evolving Republican Party, a party perhaps best described by Thomas Mann and Norman Ornstein in their recent book, “It’s Even Worse Than It Looks: How the American Constitutional System Collided With the New Politics of Extremism”:
One of the two major parties, the Republican Party, has become an insurgent outlier —ideologically extreme; contemptuous of the inherited social and economic policy regime; scornful of compromise; unpersuaded by conventional understanding of facts, evidence, and science; and dismissive of the legitimacy of its political opposition. When one party moves this far from the center of American politics, it is extremely difficult to enact policies responsive to the country’s most pressing challenges.
Thomas B. Edsall, a professor of journalism at Columbia University, is the author of the book “The Age of Austerity: How Scarcity Will Remake American Politics [ http://www.amazon.com/The-Age-Austerity-Scarcity-ebook/dp/B0050DIX2E ],” which was published earlier this year.
© 2012 The New York Times Company
http://campaignstops.blogs.nytimes.com/2012/07/15/the-merit-based-society/ [with comments]
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Voter IDs on Trial
Editorial
Published: July 13, 2012
Representative Trey Martinez Fischer, the chairman of the Mexican-American Legislative Caucus in the Texas House of Representatives, flew to Washington this week to persuade a panel of federal judges to invalidate a requirement that voters must have an ID card. His trip was less arduous than the one some residents would have to endure to get a government-issued photo ID.
“In West Texas, some people would have a 200-mile round-trip drive” to the nearest state office to get a card, he testified, according to The Dallas Morning News [ http://trailblazersblog.dallasnews.com/2012/07/testimony-voter-id-law-rammed-through-will-suppress-minority-votes-says-rep-trey-martinez-fisher.html/ ]. More than a quarter of the state’s counties don’t even have an office to get a driver’s license or voter card. Lines at the San Antonio motor vehicles offices are often more than two hours long, he said.
Texas is one of 10 Republican-controlled states [ http://www.lawyerscommittee.org/page?id=0042 ] that have imposed a government ID requirement to vote, purportedly to reduce fraud but actually to dissuade poor and minority voters who tend to vote Democratic. (Seven other states have passed slightly less-restrictive rules.) In most cases the federal government can do little to resist this incursion on voting rights, because the Supreme Court upheld ID requirements in 2008 [ http://www.nytimes.com/2008/04/29/washington/29scotus.html ]. But Texas is different. It is covered by the Voting Rights Act of 1965, which allows the Justice Department to disapprove of any change in voting procedures in areas with a history of discrimination.
That’s exactly what the department did in March, saying the law imposes a huge disadvantage on Hispanic voters, who lack a government ID, like a driver’s license or gun permit, at a far higher rate than the general population. Texas sued, and a trial began Monday.
Those defending Texas’ law told the judges that “only” 168,000 eligible voters in Texas lack a government-issued ID, but federal officials said the number is actually closer to 1.4 million, mostly Hispanic and black voters. Texas, of course, was unable to demonstrate any level of voter fraud that would justify the law, pointing only to five prosecutions for voter impersonation.
The same effect is being seen in other states. In Pennsylvania, 758,000 registered voters lack ID cards [ http://www.pennlive.com/midstate/index.ssf/2012/07/voter_id_law_9_of_pennsylvania.html ] and could be turned away at the polls in November. The Associated Press recently reported [ http://www.csmonitor.com/USA/Latest-News-Wires/2012/0708/What-could-tighter-voter-ID-laws-mean-in-November ] that 1,200 legitimate ballots were tossed in the 2008 general election in Indiana and Georgia after officials said voters lacked the required IDs. The voters, who used temporary ballots when they were challenged at the polls, never knew their votes did not count.
Attorney General Eric Holder Jr. said Tuesday [ http://www.chron.com/news/houston-texas/article/Holder-calls-Texas-voter-ID-law-a-poll-tax-3697707.php ] that 25 percent of black citizens lack an ID card, compared with 8 percent of white citizens. These requirements, he said, are the modern equivalent of a poll tax. Of course, states aren’t allowed to charge for a card, but he is correct that using this tactic to erect barriers to participation harks back to Jim Crow efforts. And the stakes are no less high because Texas is expected to ask the Supreme Court to strike down Section 5 of the Voting Rights Act — the provision that allows the federal government to preapprove changes in voting procedure — if the three-judge panel rules against its voter-ID requirement.
People died to achieve that federal law, but 47 years later, the discrimination has not disappeared.
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Related News
Holder, at N.A.A.C.P. Event, Criticizes Voter ID Laws (July 10, 2012)
http://thecaucus.blogs.nytimes.com/2012/07/10/holder-at-n-a-a-c-p-event-criticizes-voter-id-laws/
Related in Opinion
More on United States Elections
http://topics.nytimes.com/top/opinion/united-states-politics/index.html
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© 2012 The New York Times Company
http://www.nytimes.com/2012/07/14/opinion/voter-ids-on-trial-in-texas.html [with comments]
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The Disenfranchising Games
The Strip | By Brian McFadden
July 15, 2012
© 2012 The New York Times Company
http://www.nytimes.com/slideshow/2012/07/08/opinion/sunday/the-strip.html?smid=pl-share#1
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Fire Department Cuts Force Firefighters To Watch And Wait
07/13/2012
http://www.huffingtonpost.com/2012/07/13/fire-department-cuts-a-thousand-cuts_n_1659671.html [with comments]
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Mitt Romney, John Boehner Stand Far Apart On China Currency Legislation
07/12/2012
http://www.huffingtonpost.com/2012/07/13/mitt-romney-john-boehner_n_1669884.html [with comments]
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U.S. wins WTO case over China bank card monopoly
Jul 16, 2012
Washington won a major victory in an election-year dispute against China on Monday when a WTO ruling found China had discriminated against U.S. bank card suppliers in favor of a state-owned enterprise that enjoys an illegal monopoly.
[...]
http://www.reuters.com/article/2012/07/16/us-usa-china-wto-idUSBRE86F0J020120716 [no comments yet]
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Ellison Challenges Bachmann: Put Up or Shut Up
07/14/2012
http://www.huffingtonpost.com/james-zogby/ellison-challenges-bachma_b_1673266.html [with comments]
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The Media Research Center's Brent Bozell Problem
07/12/2012
http://www.huffingtonpost.com/terry-krepel/brent-bozell_b_1658025.html [with comments]
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Report: DC officer allegedly made menacing comments about Michelle Obama
July 15, 2012
http://www.capitolcolumn.com/news/report-dc-officer-allegedly-made-menacing-comments-about-michelle-obama/ [with comment]
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Not first time Arizona governor stopped
"It's not like I'm a gangbanger who was going to run away," Castro tells Salon.
EXCLUSIVE: Ex-Ariz. Gov. Castro tells Salon he wasn't shocked when stopped recently: It's happened twice before
Jul 5, 2012
What started as a “ridiculous” Border Patrol incident [ http://www.azcentral.com/news/articles/2012/07/03/20120703agents-stir-outcry-by-detaining-former-arizona-governor-castro.html ] along Interstate 19 in southern Arizona may be spiraling into a full-scale public relations debacle for a border security gone awry. Nearly three weeks after former Arizona Gov. Raúl Castro triggered a checkpoint’s radiation security system on June 12, the story of the 96-year-old’s brief but disturbing detainment in the brutal Sonoran Desert heat for more than a half-hour has spread from a local newspaper commentary to national news.
But there’s more: This was the third time such an incident has happened to Castro, who was elected in 1974 as the first (and only) Mexican American governor of Arizona.
“I’ve worked on immigration matters all of my life, as an ambassador, a governor and on the border,” Castro told me in a phone interview from his home in Nogales, Ariz. “But this was really bad judgment.”
An outspoken opponent to Arizona’s controversial SB 1070 “papers please” law, Castro recalled the other two times he had to fend off stumbling Border Patrol efforts.
[...]
http://www.salon.com/2012/07/05/not_the_1st_time_ariz_gov_stopped/ [with comments]
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(linked in):
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Jul 16 2012
http://www.theatlantic.com/politics/archive/2012/07/im-running-for-office-for-petes-sake/259882/
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The Scariest Chart for the Romney Campaign on Bain Attacks
Searches for the firm on Google are shooting up -- especially in crucial swing states.
Jul 16 2012
[...]
The list of locations with the greatest interest has some red flags, too:
1.Massachusetts, United States
2.Virginia, United States
3.District of Columbia, United States
4.Ohio, United States
5.Pennsylvania, United States
6.Florida, United States
7.New York, United States
8.North Carolina, United States
9.Washington, United States
10.Arizona, United States
Of those 10, six are swing states.
http://www.theatlantic.com/politics/archive/2012/07/the-scariest-chart-for-the-romney-campaign-on-bain-attacks/259869/ [with comments]
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HSBC Probe Shows Bank Allowed Money Laundering
Jul 16, 2012
HSBC Holdings Plc (HSBA) did business with firms linked to terrorism, failed to guard against money- laundering violations in Mexico and bypassed U.S. sanctions against Iran, according to U.S. Senate investigators.
HSBC affiliates worldwide gave terrorists, drug cartels and criminals a portal into the U.S. financial system, the Permanent Subcommittee on Investigations said in a 335-page report yesterday detailing a decade of lax controls. Lawmakers plan to question senior executives from the London-based bank, Europe’s largest, at a hearing in Washington today.
[...]
http://www.bloomberg.com/news/2012-07-16/hsbc-aided-money-laundering-by-iran-drug-cartels-probe-shows.html [with comments]
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JPMorgan losses clip banks' efforts to fight derivatives reform
A man walks past JPMorgan Chase & Co's international headquarters on Park Avenue in New York July 13, 2012.
Credit: Reuters/Andrew Burton
By Karen Brettell
NEW YORK | Mon Jul 16, 2012 1:50pm EDT
NEW YORK (Reuters) - Banks are finding it harder to fight proposed reforms of the $300 trillion U.S. privately traded derivatives market because of outrage over JPMorgan's credit derivatives losses.
Lobbying efforts continue, nonetheless, as many important rules have not been hammered out.
The industry pushback against proposed regulations mandated under the Dodd-Frank legislation of 2010 was the latest move in the roller-coaster world of financial crisis and reform.
The Dodd-Frank reforms were launched in response to the financial crisis in the wake of the collapse of Lehman Brothers, only to spawn a new round of bills in Congress to override the ability of regulators to implement and enforce changes.
The pushback had been gaining momentum before JPMorgan Chase & Co said in May it lost at least $2 billion failed derivative trades.
But the furor over JPMorgan's losses has made passage of these bills less likely, said sources who are in regular contact with members of Congress.
On Friday, JPMorgan said its losses came to at least $5.8 billion, some of which may have been hidden purposely.
"We definitely saw people stepping back from public support of this kind of legislation after JPMorgan's derivatives losses," said Marcus Stanley, a policy director at Americans for Financial Reform, a coalition of more than 250 consumer, community, labor, small business and other pro-reform groups.
The proposed legislation seek to broaden exclusions from central clearing, reduce margin requirements and effectively kill regulatory proposals to enforce trade price transparency.
These reform measures are seen as key to reduce the risks of the markets, where trade opacity and interconnection of the contracts among large banks were blamed as key factors behind the financial crisis.
A small group of the world's largest banks profit greatly by dominating these markets. Income from privately traded derivatives generates about $55 billion a year, or 37 percent, of bank revenues, according to a report by advisory and consulting firm Deloitte last year.
Four years after the crisis, anger over the failures of banks including Lehman Brothers and the subsequent bailout of the financial sector had been subsiding. Intense lobbying efforts by banks seemed to be swinging lawmakers in favor of more lenient regulations.
But JPMorgan's losses were a stark reminder of the risk that banks and other large companies can use derivatives to build large, risky portfolios with few disclosures to investors. It has wounded the credibility of JPMorgan's chief executive, Jamie Dimon, who has been a staunch critic of much of the Dodd-Frank reform.
"When you get an event like that it informs public policy debate," said Gary Gensler, chairman of the Commodity Futures Trading Commission, the main U.S. derivatives regulator. "It may have changed the public discussion," he said on the sidelines of a conference in New York last month.
DECONSTRUCTING DODD FRANK
Lawmakers have sidelined bills that would have watered down some of the regulations that banks have been fighting most, while progress on other bills has slowed.
The bills sought to rewrite Dodd-Frank and override rules designed to open up the market to new players by reducing the role of large banks as intermediaries, hurting their profits.
The opacity of derivatives allows the dominant banks to charge higher fees on trades through wider bid/offer spreads. They also benefit from an effective oligopoly for trades that are not subject to central clearing.
In such trades investors are exposed to the credit risk of the bank they trade with, limiting them to working with banks that are "too big to fail." Banks want to keep that structure.
"They are trying to keep it in the existing framework, there has been a lot of lobbying efforts to keep that as close as possible," said Peter Tchir, founder of financial advisory firm TF Market Advisors.
Reforms including central clearing, electronic trading and more price transparency would significantly reduce earnings from derivatives and compress margins by as much as 35 percent over the next two to three years, Deloitte said.
On May 15, the House of Representatives Agriculture Committee postponed a planned hearing on three bills, including one that opponents say would allow banks to skirt regulations by trading through foreign affiliates, such as those based in London.
The committee chairman, Frank Lucas, a Republican from Oklahoma, sought more time "to ensure there are no unintended consequences of the legislation that would encourage recklessness in our financial institutions."
"I do think this has touched a nerve in the American public," said Michael Greenberger, a law professor at the University of Maryland and former director of trading and markets at the CFTC. "This shows it's not over and there could be other choppy waters out there."
Among bills pending, one in the House of Representatives seeks to override a proposed CFTC rule that would require prices be flashed to several dealers before trades are made, when the contracts are subject to central clearing.
Others propose to further expand the number of companies that are excluded from central clearing requirements.
Another bill -- this one before the Senate -- seeks to exempt "small banks" from central clearing, though in practice it could exclude banks with notional derivatives portfolios as large as $200 billion, said AFR's Stanley.
Although these bills are now less likely to pass, the industry has won some smaller battles.
On Tuesday the CFTC added an exemption for banks with up to $10 billion in assets from rules that would require central clearing. This will capture 98 percent of U.S. banks, and represent around 15 percent of bank assets, Stanley said.
Some banks had argued the exemption should apply to banks with as much as $50 billion in assets.
The CFTC further voted to exempt a number of large non-financial firms from clearing requirements. It also excluded some commodity forward contracts from regulations, leading Commissioner Bart Chilton, a Democrat, to oppose the rule, the first final CFTC derivatives rule he has voted against.
"Potentially it could be the new Enron loophole," he said. "There are attorneys out there hawking ways around Dodd-Frank."
RESISTANCE REMAINS
CFTC meeting records show ongoing lobbying on topics including the CFTC's reach over foreign bank branches and exemptions from clearing requirements, and many key rules, including those related to bank ownership of clearinghouses and other entities have not yet been made final.
The legislative maneuvering shows how much derivatives reform may change in the event of a victory by Mitt Romney, the presumptive Republican nominee, in the November presidential election. A win by Romney, who has said that he would repeal Dodd-Frank, would turn control of the CFTC over to Republicans.
Republican CFTC commissioners Scott O'Malia and Jill Sommers have opposed several CFTC rules, saying they exceed Dodd-Frank's intentions.
O'Malia has also issued three dissents over budgetary increases for the CFTC while its chairman, Gensler, has argued that large increases are necessary due to the added responsibilities of overseeing the derivatives markets.
U.S. Senate appropriators approved funding boosts for the CFTC and Securities Exchange Commission last month, setting up a likely battle with Republicans.
Still, rules passed at last week's CFTC meeting starts a clock that will cause many rules to take effect before the election, including public reporting of price and volume information for credit and interest rate derivatives index trades.
"Light will begin to shine on the markets for the first time," Gensler said.
(Editing by Leslie Adler)
Copyright 2012 Reuters
http://www.reuters.com/article/2012/07/16/us-jpmorgan-derivatives-reform-idUSBRE86F0V020120716 [with comment]
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Goldman Sachs and the $580 Million Black Hole
Janet and Jim Baker at home. They are fighting Goldman Sachs over its work in 2000 on the all-stock sale of their business, Dragon Systems, to a company that later collapsed, leaving them shut out.
Gretchen Ertl for The New York Times
In 1990, Jim and Janet Baker demonstrated the DragonDictate-30K speech recognition system.
Family Photo
The Belgian businessmen Pol Hauspie, left, and Jo Lernout, right, founded Lernout & Hauspie, the company that bought Dragon Systems but later collapsed in an accounting scandal.
Francois Lenoir/Reuters
Alan K. Cotler is the lawyer for Dragon's founders.
Gretchen Ertl for The New York Times
Miniature dragons adorn the Bakers' home. After the sale ordeal of their company, Dragon Systems, Mr. Baker recalls thinking, "Not only do we not have the technology any more, but we have no chance of getting it back."
Gretchen Ertl for The New York Times
Janet Baker, at front center, in a Dragon Systems photograph from the 1980s. She and her husband are widely credited with advancing speech technology far faster than anyone had thought possible at the time.
Family Photo
By LOREN FELDMAN
Published: July 14, 2012
THE business deal from hell began to crumble even before the Champagne corks were popped.
The deal, the $580 million sale of a highflying technology company, Dragon Systems, had just been approved by its board and congratulations were being exchanged. But even then, at that moment of celebration, there was a sense that something was amiss.
The chief executive of Dragon had received a congratulatory bottle from the investment bankers representing the acquiring company, a Belgian competitor called Lernout & Hauspie. But he hadn’t heard from Dragon’s own bankers at Goldman Sachs [ http://topics.nytimes.com/top/news/business/companies/goldman_sachs_group_inc/index.html ].
“I still have not received anything from Goldman,” the executive wrote in an e-mail to the other bank. “Do they know something I should know?”
More than a decade later, that question is still reverberating in a brutal legal battle between Goldman and the founders of Dragon Systems — along with a host of other questions that go to the heart of how financial giants like Goldman operate and what exactly they owe their clients.
James and Janet Baker spent nearly two decades building Dragon, a voice technology company, into a successful, multimillion-dollar enterprise. It was, they say, their “third child.” So in late 1999, when offers to buy Dragon began rolling in, the couple made what seemed a smart decision: they turned to Goldman Sachs for advice. And why not? Goldman, after all, was the leading dealmaker on Wall Street. The Bakers wanted the best.
This, of course, was before the scandals of the subprime mortgage era. It was before the bailouts, before Occupy Wall Street, before ordinary Americans began complaining about “banksters” and “muppets” and “the vampire squid.” In short, before Goldman Sachs became, for many, synonymous with Wall Street greed.
And yet, even today what happened next to the Bakers seems remarkable. With Goldman Sachs on the job, the corporate takeover of Dragon Systems in an all-stock deal went terribly wrong. Goldman collected millions of dollars in fees — and the Bakers lost everything when Lernout & Hauspie was revealed to be a spectacular fraud. L.& H. had been founded by Jo Lernout and Pol Hauspie, who had once been hailed as stars of the 1990s tech boom. Only later did the Bakers learn that Goldman Sachs itself had at one point considered investing in L.& H. but had walked away after some digging into the company.
This being Wall Street, a lot of money is now at stake. In federal court in Boston, the Bakers are demanding damages, including interest and legal fees, that could top $1 billion. That figure is nearly twice what Goldman paid to settle claims that it misled investors about subprime mortgage investments before the financial crisis of 2008.
This account is based on a trove of legal filings — e-mails, motions and roughly 30 depositions, more than 8,000 pages of sworn testimony in all — that open a rare window on Goldman Sachs and the mystique that surrounds it.
JAMES AND JANET BAKER, now in their 60s, are computer speech revolutionaries. Both Ph.D.’s, they became interested in voice-recognition technology in the 1970s, back when a personal assistant like Apple’s Siri would have seemed more science fiction than scientific fact.
They are widely credited with advancing speech technology far faster than anyone thought possible, primarily because of an epiphany Mr. Baker had while doing his doctorate research. He figured out that speech recognition could, in essence, be reduced to math. You didn’t have to teach a computer to recognize accents or dialects, Mr. Baker realized — you just had to calculate the mathematical probability of one sound following another. His algorithms proved remarkably accurate and eventually became the industry standard. (Want to know more? Ask Siri.)
The Bakers founded Dragon Systems in 1982 in an old Victorian house in West Newton, Mass. At that time, despite having two school-age children and a big mortgage, they were determined to take no venture capital and to finance the company’s growth with its own revenue — once they had a product. They figured they could last 18 months, maybe 24.
Their first product was a software program for a British-made PC called the Apricot that let users open files and run programs by voice command. Then came DragonDictate, a groundbreaking speech-to-text system for dictation that still required the speaker to pause. Between. Every. Word.
For years, the Bakers pressed on, convinced that they were on track to create a program that would recognize continuous speech.
To do that, however, they eventually decided that they needed more capital. While Mr. Baker worked on the technology, Ms. Baker brokered a deal with Seagate Technology, the disk drive manufacturer. Seagate bought 25 percent of Dragon for $20 million. Then, in 1997, Dragon introduced Dragon NaturallySpeaking, a program that recognized more words than could be found in a standard collegiate dictionary. It was available in six languages and could handle normal speech, even sentences with words that sound alike, such as, “Please write a letter right now to Mrs. Wright. Tell her that two is too many to buy.”
By this time, I.B.M. and others had piled into the voice technology market, too. As the Nasdaq market raced toward record highs, the Bakers considered taking Dragon public. But in 1999, several companies — including Sony and Intel — expressed interest in buying into Dragon. Finally, unsolicited buyout offers began to arrive. One came from Visteon, a subsidiary of Ford Motor. Another arrived from Lernout & Hauspie.
TO the uninitiated, the mystique of Goldman Sachs may be hard to fathom. Known for what might politely be called ruthless professionalism, Goldman, the thinking goes, is smarter and more plugged in than just about any other investment bank. In the late 1990s, under Henry M. Paulson Jr., who later became the Treasury secretary and orchestrated the Wall Street bailouts, Goldman was the alpha dog in the lucrative game of mergers and acquisitions.
So it was that in December 1999, the Bakers, in over their heads when it came to M.& A., signed a five-page engagement letter drafted by Goldman. In it, Goldman pledged to provide “financial advice and assistance in connection with this potential transaction, which may include performing valuation analyses, searching for a purchaser acceptable to you, coordinating visits of potential purchasers, and assisting you in negotiating the financial aspects of the transaction.”
To the Dragon deal, Goldman assigned four bankers, two in their 20s and one in his early 30s. That wasn’t unusual. Although Dragon Systems was worth everything to the Bakers, the company — with $70 million in revenue and 400 employees — was small beer on Wall Street. Dragon agreed to pay Goldman a flat fee of $5 million, less than some Goldman bankers were pulling down.
But who, if anyone, supervised these bankers — later called “the Goldman Four” in court documents — remains something of a mystery. One of the four, the most senior, testified later that their supervisor was Gene T. Sykes, a Goldman partner who at the time specialized in technology and who this year was promoted to head of M.& A. at the firm, one of the most powerful jobs on Wall Street. In a deposition, Mr. Sykes disavowed any involvement.
Most of the Goldman Four didn’t stay long at the bank. Richard Wayner, who was 32 when the Dragon deal was cut, struck out on his own in 2002 and eventually landed at the Keffi Group, an investment firm. T. Otey Smith, then 21, left Goldman in 2000 and now works for RLJ Equity Partners. Alexander Berzofsky, then 25, left Goldman at about the same time and is now a managing director at Warburg Pincus, the big private investment company. Chris Fine, then 42, was a Goldman information technology specialist who was enlisted on the deal and is still with Goldman. (None of the four agreed to be interviewed for this article.)
Before the engagement letter was signed in late 1999, Goldman sent Dragon a memo indicating that its first steps would include beginning to conduct due diligence — Wall Street-speak for kicking the tires — on L.& H. The memo included specific areas of concern, including L.& H.’s sources of revenue, its major customers, its license agreements and royalty agreements, its expected growth, its partnerships and its financial statements.
THAT December, Mr. Wayner of Goldman accompanied Ms. Baker and Dragon’s chief financial officer, Ellen Chamberlain, on a trip to Belgium to meet L.& H. executives. For the trip, another of the Goldman Four, Mr. Berzofsky, prepared a list of due diligence questions. Goldman also prepared a “merger analysis” that predicted the companies’ combined sales per share, earnings per share and total debt under three acquisition scenarios: all cash, all stock and half and half.
In its initial offer, L.& H. proposed paying $580 million, half in cash and half in stock. But the Bakers weren’t sure. News reports had questioned L.& H.’s revenue, particularly in fast-growing Asian markets, as well as some of the company’s licensing deals. Mr. Baker felt that L.& H. had inferior voice technology. But then, he reasoned, if L.& H. could generate so much revenue with lesser technology, imagine what it could do with Dragon.
By mid-February 2000, Ms. Chamberlain had sent an angry memo to Goldman. It urged the bank to move faster in its analysis of L.& H. Talks with the other companies had gone nowhere, and she expected Goldman to “drive” the due diligence process. Mr. Wayner testified later that the bank’s reaction to that memo was “to do as our client asked and to revisit all of our analyses.”
But on Feb. 29, Dragon received an odd memo from Goldman. It wasn’t addressed to anyone in particular at Dragon, and it wasn’t signed by anyone at Goldman. The Goldman Four testified later that they had no idea who had sent it. But the memo referred to many of the same due diligence issues that Ms. Chamberlain raised. The memo asserted, however, that Dragon’s accounting firm, Arthur Andersen, should do the work, not Goldman.
The memo shocked Ms. Chamberlain. She had come to Dragon from Seagate, where she had participated in similar deals. She believed that this sort of thing was generally done by investment bankers, not by accountants. But the moment passed. No one at Dragon or Goldman brought up the mystery memo again — at least not until the lawsuits began flying. (The Bakers also filed suit against other participants in the transaction.)
THE Dragon executives thought that Goldman was taking a hard look at L.& H. After all, Dragon was paying Goldman $5 million for its advice. If Goldman wasn’t conducting due diligence, what was it doing?
“They put items on and off the due diligence list,” Ms. Baker later testified. “We discussed the issues at — at basically every meeting that we were at, and we were meeting often in person or by phone, typically, several times a week in this time frame — sometimes multiple times a day, as we’ve seen. And so they knew what everybody was doing. And they were, they were directing it.”
One of the tasks was a conference call that Mr. Wayner arranged, at Ms. Baker’s request, between Dragon and Charles Elliott, a Goldman analyst in London. Dragon was wondering why L.& H.’s share price had been gyrating wildly. Mr. Wayner told Ms. Baker, he later testified, that Mr. Elliott was following L.& H.’s stock and was up to date on its fluctuations. And Mr. Elliott assured Ms. Baker that investors were worried about the market in general, rather than L.& H. in particular. He also said he expected the stock price of the combined companies to rise substantially once a merger was struck.
Years later, in his deposition, Mr. Elliott told a more complete story. He acknowledged that he actually had not been following L.& H.; that had been the responsibility of another Goldman analyst who had left the firm shortly after the Bakers retained Goldman. After the other analyst left, Mr. Elliott testified, Goldman terminated its coverage of L.& H. No one told the Bakers that Goldman was no longer covering the company they were about to bet their futures on.
Mr. Elliott also testified that he was unaware of press reports at the time that suggested L.& H. was claiming huge revenue gains in Asia. If he had been aware, he said, he would have been “very skeptical” of those gains, given the challenges that Asian languages present for speech recognition. He also acknowledged that it would not have been difficult for him to call up L.& H.’s customers and check the revenue claims.
As the Nasdaq composite index raced toward a record high that March, Dragon’s executives made fateful decisions. On March 8, the Bakers met with L.& H. executives and that company’s advisers from SG Cowen to try to reach a definitive agreement.
A few days before that meeting, Mr. Wayner of Goldman told Ms. Baker that he would be away on vacation and couldn’t make the session. He also said that he would be unable to call in and that it was pointless to send anybody else from Goldman because there wasn’t time to catch up on the deal. It was at this meeting that L.& H. proposed shifting the $580 million deal from half stock and half cash to all stock. The Bakers, with their high-priced investment bankers M.I.A., agreed.
Later, after L.& H. collapsed, Mr. Wayner testified that the bank “did not form a point of view” as to whether an all-stock deal would be risky or advisable for the Bakers. He said he could not remember if it had crossed his mind to warn the Bakers about potential issues with an all-stock deal.
Two weeks after the initial agreement was reached, Mr. Wayner told Ms. Baker that he would be leaving the next day for another vacation. He would not participate in a conference call with L.& H.’s accounting firm, KPMG, that was set up to discuss any open questions about accounting and due diligence. Mr. Berzofsky of Goldman did participate but later acknowledged that he did not raise any concerns. The Bakers say they believed that all issues had been addressed.
Mr. Wayner was still on vacation on March 27, when Dragon’s board met to take a final vote on the proposed acquisition. This time, Mr. Fine and Mr. Smith of Goldman attended the meeting, and Mr. Wayner called in from Argentina. No one from Goldman gave a presentation, but minutes from the meeting, taken by Dragon’s outside lawyers, indicate that the Goldman bankers expressed confidence that the combination of Dragon and L.& H. would produce a market leader. The board voted unanimously to accept the $580 million all-stock deal.
Years later, Mr. Wayner testified that lingering issues of due diligence had never been resolved to his satisfaction. He was asked if he had said as much that March day on the phone from his vacation.
“No, I don’t recall saying that,” he responded.
The deal closed on June 7. By Aug. 8, the merged companies were in crisis amid reports that L.& H. had cooked its books. Reporters for The Wall Street Journal did something the Goldman Four did not: they picked up the phone and called L.& H.’s supposed customers in Asia. They found that companies in South Korea and elsewhere that L.& H. had claimed were its customers weren’t doing any business with it at all. L.& H. had pulled sales figures out of thin air.
Although the Goldman Four never tried to call those customers, it emerged during litigation that other bankers at Goldman had done precisely that — about two years earlier, when Goldman itself considered investing in L.& H. in a plan known internally as Project Sermon. In it, Goldman’s merchant banking division took a closer look at L.& H. — but, apparently, never shared what it knew, and was never asked. Goldman was considering putting $30 million into L.& H., a step that, at the time, might have seemed conceivable, given the hype surrounding L.& H.
“Whenever we invest, we always want to talk to customers,” Luca Velussi, a Goldman analyst who worked on Project Sermon, later testified. Based on what Project Sermon’s team leader, Ramez Sousou, termed “preliminary” due diligence, Goldman declined to invest in L.& H.
By Nov. 29, L.& H. had plunged into bankruptcy. Indictments and convictions followed. L.& H.’s stock price sank to zero — and the Bakers lost everything.
Dragon Systems, the Bakers’ “third child,” was put up for sale at a bankruptcy auction. Visteon acquired some of Dragon’s technology. ScanSoft bought the bulk of it and went on to become a $7 billion giant, with a licensing deal with Apple. (The Bakers believe that some of their technology made its way into Siri.) ScanSoft later acquired — and assumed the name of — Nuance, another voice technology company [ http://www.nuance.com/ ].
Indeed, Nuance had gone public about the same time L.& H. bought Dragon, and Goldman handled the initial offering — a fact that still angers the Bakers. They say they had no idea Goldman was simultaneously representing their company and a rival.
It wasn’t until after the bankruptcy auction, the Bakers now say, that the full force of what had happened hit them. The money was one thing. But what they really wanted was the opportunity to complete the work they had started decades earlier. As part of the deal with L.& H., they had expected to continue their research. Once L.& H. collapsed, they had held out hope that they might get their technology back — either through litigation or through the bankruptcy auction. They now knew that it wasn’t going to happen.
“The door is closed,” Mr. Baker remembers thinking. “Not only do we not have the technology any more, but we have no chance of getting it back.”
THE Bakers’ case against Goldman is simple. Their lawyer, Alan K. Cotler of Philadelphia [ http://www.reedsmith.com/alan_cotler/ ], captured it in a single sentence in a motion for summary judgment: “The Goldman Four were unsupervised, inexperienced, incompetent and lazy investment bankers who were put on a transaction that in the scheme of things was small potatoes for Goldman.”
Summarizing Goldman’s defense is more complicated. Based on the firm’s response to the complaint, its motion for summary judgment and testimony of the people it employed, most of that defense falls under one of three rubrics: The Bakers do not have standing to sue. Goldman had no obligation to do a financial analysis of L.& H. And Goldman’s bankers actually performed quite well. The firm released a statement that asserted, “Goldman Sachs was retained as a financial adviser by Dragon Systems, not its shareholders, and performed its assignment satisfactorily in all respects.”
Goldman’s lawyer, John D. Donovan of Ropes & Gray [ http://www.ropesgray.com/johndonovan/ ] in Boston, has argued that under the terms of the engagement letter, only Dragon Systems had the right to sue, and Dragon no longer exists. Goldman has even filed a countersuit against Ms. Baker, contending that by suing Goldman she had breached the contract. Even though Ms. Baker lost everything in a deal Goldman orchestrated, the firm says Ms. Baker should now pay its legal fees.
To support the argument that Goldman was not obligated to perform due diligence, the firm points to that mystery memo of Feb. 29, 2000 — the memo that no one at Goldman has acknowledged sending — as establishing that Dragon Systems needed to push its accounting firm to explain any red flags or resolve outstanding worries.
Goldman’s lawyers have argued in a motion that while Goldman “strongly urged” Dragon to engage an international accounting firm to do a “forensic accounting analysis on L.& H.,” Ms. Baker “prevented” Dragon from following Goldman’s advice because she did not want to incur the expense of the due diligence and did not want to delay the transaction. The Bakers call this argument “complete fiction,” and even the Goldman Four seem dubious. They testified that Ms. Baker did nothing to block the performance of due diligence.
Goldman also hired an independent investment banker, Ian Fisher, who filed an expert report arguing that Goldman was not obligated to conduct due diligence because Dragon did not order what is known as a fairness opinion, an analysis of the acquisition price.
The Bakers have hired their own expert, Donna Hitscherich, a former investment banker with JPMorgan Chase who lectures at Columbia Business School [ http://www4.gsb.columbia.edu/cbs-directory/detail/494794/Donna+Hitscherich ]. She wrote in her expert report that Goldman was obligated to perform due diligence with or without a fairness opinion.
If the case goes to trial in Boston, as scheduled, on Nov. 6, the final argument that Goldman can be expected to make is that the bankers, as Mr. Wayner testified, gave the Bakers “great advice.”
Mr. Berzofsky, too, testified in his deposition that the Goldman Four did a “great job.”
Even though Dragon lost everything?
“Yes,” Mr. Berzofsky said. He was given several opportunities to clarify. And then he was asked one more time — the fact that the Bakers and Dragon’s shareholders lost everything doesn’t affect your opinion?
“Correct,” Mr. Berzofsky responded. “We guided them to a completed transaction.”
© 2012 The New York Times Company
http://www.nytimes.com/2012/07/15/business/goldman-sachs-and-a-sale-gone-horribly-awry.html [ http://www.nytimes.com/2012/07/15/business/goldman-sachs-and-a-sale-gone-horribly-awry.html?pagewanted=all ]
===
What Sheldon Adelson Wants
Editorial
Published: June 23, 2012
No American is dedicating as much of his money to defeat President Obama as Sheldon Adelson [ http://topics.nytimes.com/top/reference/timestopics/people/a/sheldon_g_adelson/index.html ], the casino magnate who also happens to have made more money in the last three years [ http://www.forbes.com/sites/stevenbertoni/2012/02/22/comeback-billionaire-how-sheldon-adelson-dominates-chinese-gambling-and-u-s-politics/ ] than any other American. He is the perfect illustration of the squalid state of political money, spending sums greater than any political donation in history to advance his personal, ideological and financial agenda, which is wildly at odds with the nation’s needs.
Mr. Adelson spent $20 million to prop up Newt Gingrich’s failed candidacy for the Republican nomination. Now, he has given $10 million to a Mitt Romney super PAC, and has pledged at least $10 million [ http://www.nytimes.com/2012/06/17/us/politics/sheldon-adelson-injects-more-cash-into-gop-groups.html ] to Crossroads GPS, the advocacy group founded by Karl Rove that is running attack ads against Mr. Obama and other Democrats. Another $10 million will probably go to a similar group founded by the Koch brothers, and $10 million more to Republican Congressional super PACs.
That’s $60 million we know of (other huge donations may be secret), and it may be only a down payment. Mr. Adelson has made it clear he will fully exploit the anything-goes world created by the federal courts to donate a “limitless [ http://www.forbes.com/sites/stevenbertoni/2012/06/13/exclusive-adelsons-pro-romney-donations-will-be-limitless-could-top-100m/ ]” portion of his $25 billion fortune to defeat the president and as many Democrats as he can take down.
One man cannot spend enough to ensure the election of an unpopular candidate, as Mr. Gingrich’s collapse showed, but he can buy enough ads to help push a candidate over the top in a close race like this year’s. Given that Mr. Romney was not his first choice, why is Mr. Adelson writing these huge checks?
The first answer is clearly his disgust for a two-state solution to the Israeli-Palestinian conflict, supported by President Obama and most Israelis. He considers a Palestinian state “a steppingstone [ http://www.thejewishweek.com/blogs/gary_rosenblatt/billionaire_adelson_defends_gingrich ] for the destruction of Israel and the Jewish people,” and has called the Palestinian prime minister a terrorist [ http://www.newyorker.com/reporting/2008/06/30/080630fa_fact_bruck ]. He is even further to the right than the main pro-Israeli lobbying group, the American Israel Public Affairs Committee, which he broke with in 2007 when it supported economic aid to the Palestinians.
Mr. Romney is only slightly better, saying the Israelis want a two-state solution but the Palestinians do not, accusing them of wanting to eliminate Israel. The eight-figure checks are not paying for a more enlightened answer.
Mr. Adelson’s other overriding interest is his own wallet. He rails against the president’s “socialist-style economy” and redistribution of wealth, but what he really fears is Mr. Obama’s proposal to raise taxes on companies like his that make a huge amount of money overseas. Ninety percent of the earnings [ http://www.hotelnewsnow.com/Articles.aspx/7851/LV-Sands-continues-quest-for-growth ] of his company, the Las Vegas Sands Corporation, come from hotel and casino properties in Singapore and Macau. (The latter is located, by the way, in China, a socialist country the last time we checked.)
Because of the lower tax rate in those countries (currently zero in Macau), the company now has a United States corporate tax rate of 9.8 percent [ http://www.marketwatch.com/story/las-vegas-sands-reports-all-time-industry-record-107-billion-adjusted-property-ebitda-quarter-2012-04-25 ], compared with the statutory rate of 35 percent. President Obama has repeatedly proposed ending the deductions and credits that allow corporations like Las Vegas Sands to shelter billions in income overseas, but has been blocked by Republicans.
Mr. Obama’s Justice Department is also investigating [ http://www.nytimes.com/2012/01/29/us/politics/the-man-behind-gingrichs-money.html?pagewanted=all ] whether Mr. Adelson’s Macau operations violated the Foreign Corrupt Practices Act, an inquiry that Mr. Adelson undoubtedly hopes will go away in a Romney administration. For such a man, at a time when there are no legal or moral limits to the purchase of influence, spending tens of millions is a pittance to elect Republicans who promise to keep his billions intact.
© 2012 The New York Times Company
http://www.nytimes.com/2012/06/24/opinion/sunday/what-sheldon-adelson-wants.html
===
His Man in Macau: Inside the Investigation Into Sheldon Adelson’s Empire
Sheldon Adelson watches a dance at the opening ceremony of the Sands' Cotai Central in Macau, April 11, 2012.
(AP Photo/Kin Cheung)
Chairman and CEO of Las Vegas Sands Corporation Sheldon Adelson, center, watches a lion dance at the opening ceremony of Sands' Cotai Central in Macau on April 11, 2012.
(Aaron Tam/AFP/Getty Images)
[ http://www.propublica.org/article/inside-the-investigation-of-leading-republican-money-man-sheldon-adelson (co-publication of this article, under headline "Inside the Investigation of Leading Republican Money Man Sheldon Adelson"; with comments)]
by Matt Isaacs Lowell Bergman, and Stephen Engelberg
July 16, 2012, 11:20 am ET
A decade ago gambling magnate and leading Republican donor Sheldon Adelson looked at a desolate spit of land in Macau and imagined a glittering strip of casinos, hotels and malls.
Where competitors saw obstacles, including Macau’s hostility to outsiders and historic links to Chinese organized crime, Adelson envisaged a chance to make billions.
Adelson pushed his chips to the center of the table, keeping his nerve even as his company teetered on the brink of bankruptcy in late 2008.
The Macau bet paid off, propelling Adelson into the ranks of the mega-rich and underwriting his role as the largest Republican donor in the 2012 campaign, providing tens of millions of dollars to Newt Gingrich, Mitt Romney and other GOP causes.
Now, some of the methods Adelson used in Macau to save his company and help build a personal fortune estimated at $25 billion have come under expanding scrutiny by federal and Nevada investigators, according to people familiar with both inquiries.
Internal email and company documents, disclosed here for the first time, show that Adelson instructed a top executive to pay about $700,000 in legal fees to Leonel Alves, a Macau legislator whose firm was serving as an outside counsel to Las Vegas Sands.
The company’s general counsel and an outside law firm warned that the arrangement could violate the Foreign Corrupt Practices Act. It is unknown whether Adelson was aware of these warnings. The Foreign Corrupt Practices Act bars American companies from paying foreign officials to “affect or influence any act or decision” for business gain.
Federal investigators are looking at whether the payments violate the statute because of Alves’ government and political roles in Macau, people familiar with the inquiry said. Investigators were also said to be separately examining whether the company made any other payments to officials. An email by Alves to a senior company official, disclosed by The Wall Street Journal [ http://online.wsj.com/article/SB10001424052702303506404577448372467723332.html ], quotes him as saying “someone high ranking in Beijing [ https://www.propublica.org/documents/item/399393-email-from-leonel-alves-to-steve-jacobs-sept-30#document/p1/a64250 ]” had offered to resolve two vexing issues — a lawsuit by a Taiwanese businessman and Las Vegas Sands’ request for permission to sell luxury apartments in Macau. Another email from Alves said the problems could be solved for a payment of $300 million [ https://www.propublica.org/documents/item/399392-email-from-leonel-alves-to-steve-jacobs-re#document/p1/a64251 ]. There is no evidence the offer was accepted. Both issues remain unresolved.
According to the documents, Alves met with local politicians and officials on behalf of Adelson’s company, Las Vegas Sands, to discuss several issues that complicated the company’s efforts to raise cash in 2008 and 2009.
Soon after Alves said he would apply what he termed “pressure [ https://www.propublica.org/documents/item/395658-email-and-translation-from-leonel-alberto-alves ]” on local planning officials, the company prevailed on a key request, gaining permission to sell off billions of dollars of its real estate holdings in Macau.
Las Vegas Sands denies any wrongdoing. But it has told investors that it is under criminal investigation for possible violations of the U.S. anti-bribery law. Adelson declined to respond to detailed questions, including whether he was aware of the concerns about the Foreign Corrupt Practices Act when he directed payment of the bill from Alves’ law firm.
The documents depict Adelson as a hands-on manager, overseeing details of the company’s foray into Macau, which is now the world’s gambling capital.
They show that Alves helped the company address a crucial issue: Adelson’s frayed relations with officials in Macau and mainland China.
Alves met with prominent Macau officials on Las Vegas Sands’ behalf, emails show. When Adelson made a three-day trip to Beijing, Alves accompanied him, billing [ https://www.propublica.org/documents/item/395653-invoice-from-leonel-alberto-alves-april-6-2009 ] more than $18,000 for his services.
Alves promoted himself to Adelson as someone “uniquely situated both as counsel and legislator to ‘help’ us in Macau,” according to an email written by a Las Vegas Sands executive [ http://www.propublica.org/article/emails-on-alves-employment-and-payment#email3 ].
The then-general counsel of Las Vegas Sands warned that large portions of the invoices submitted by Alves in 2009 were triple what had been initially agreed and far more than could be justified by the legal work performed.
“I understand that what they are seeking is approx $700k,” the general counsel wrote to the company’s Macau executives in an email in late 2009 [ https://www.propublica.org/documents/item/395659-email-regarding-alves-increased-fees ]. “If correct, that will require a lot of explaining given what our other firms are charging and given the FCPA,” the Foreign Corrupt Practices Act.
Adelson, described by Forbes Magazine as the largest foreign investor in China, ultimately ordered executives to pay Alves the full amount he had requested, according to an email that quotes his instructions [ http://www.propublica.org/article/emails-on-alves-employment-and-payment#email3 ].
Alves holds three public positions. He sits on the local legislature. He belongs to a 10-member council that advises Macau’s chief executive, the most powerful local administrator. And he’s a member of the Chinese People’s Political Consultative Conference, a group that advises China’s central government.
Alves did not respond to detailed questions from reporters about his activities on behalf of Las Vegas Sands, saying in an email that the work he had done — “legal services” — was unrelated to his government positions. “I would never use my public offices to benefit the company, nor have I been asked to,” Alves wrote.
Several Las Vegas Sands executives resigned or were fired after expressing concerns about Alves’ billings. These include Las Vegas Sands’ general counsel and two top executives at Sands China, its Macau subsidiary.
Alves briefly severed his relationship with the company in early 2010, according to internal documents, but was rehired months later as outside counsel, a role he still plays.
The internal Las Vegas Sands documents were obtained by reporters working for the University of California’s Investigative Reporting Program [ http://www.investigativereportingprogram.com/ ] as part of an ongoing collaboration with ProPublica [ http://www.propublica.org/article/inside-the-investigation-of-leading-republican-money-man-sheldon-adelson ] and FRONTLINE.
The documents include dozens of emails, billing invoices, memos and reports that circulated among top executives of Las Vegas Sands and its attorneys. The documents were provided by people who had authorized access to them. They offer important glimpses of the company’s dealings in Macau and China, but are not a complete archive.
One invoice, for example, notes that Alves billed $25,000 for “expenses” in Beijing [ https://www.propublica.org/documents/item/395655-invoice-from-leonel-alberto-alves-aug-18-2009 ] with no further explanation.
The documents shed new light on an issue separate from Alves’ work: the company’s difficulties in avoiding contact with Chinese organized crime figures as it built its casino business in Macau.
Nevada law bars licensed casino operators from associating with members of organized crime. State investigators are now assessing whether Las Vegas Sands complied with that rule in its Macau operations, people familiar with the inquiry said.
William Weidner, president of Las Vegas Sands from 1995 to 2009, said he understood from the beginning that opening casinos in Macau meant dealing with “junkets” — companies that arrange gambling trips for high rollers.
Gambling is illegal in mainland China, as is the transfer of large sums of money to Macau. The junkets solve those problems, providing billions of dollars in credit to gamblers. When necessary, they collect gambling debts, a critical function since China’s courts are not permitted to force losers to pay up.
Weidner said junkets are a natural result of China’s controls on the movement of money out of the country, channeling as much as $3 billion a month from the mainland to Macau.
“To Westerners, the junkets mean money laundering equated with organized crime or drugs,” he said. “In China where money is controlled, it’s part of doing business.”
Weidner resigned from the company after a bitter dispute with Adelson.
Nevada officials are now poring over records of transactions between junkets, Las Vegas Sands and other casinos licensed by the state, people familiar with the inquiry say. Among the junket companies under scrutiny is a concern that records show was financed by Cheung Chi Tai, a Hong Kong businessman.
Cheung was named in a 1992 U.S. Senate report as a leader of a Chinese organized crime gang, or triad. A casino in Macau owned by Las Vegas Sands granted tens of millions of dollars in credit to a junket backed by Cheung, documents show [ https://www.propublica.org/documents/item/398980-venetian-macau-junket-credit-agreement ].
Cheung did not respond to requests for comment.
Another document [ https://www.propublica.org/documents/item/398979-relationship-with-vml#document/p1/a64236 ] says that a Las Vegas Sands subsidiary did business with Charles Heung, a well-known Hong Kong film producer who was identified as an office holder in the Sun Yee On triad in the same 1992 Senate report. Heung, who has repeatedly denied any involvement in organized crime, did not return phone calls.
Allegations about the company’s dealings with Alves as well as its purported ties to organized crime are prominently mentioned in a 2010 lawsuit filed by Steven Jacobs, former CEO of Sands China.
In the suit, Jacobs contends he was fired after multiple disputes with Adelson, which included the continued employment of Alves and the company’s dealings with junkets.
Las Vegas Sands declined to respond to detailed questions about the emails, billing invoices or purported relationships with organized crime figures including Cheung and Heung. Nor would it comment on the federal or Nevada investigations.
Adelson told investors last year that the federal investigation was based on false allegations by disgruntled former employees attempting to blackmail his company.
“When the smoke clears, I am absolutely not 100 percent but 1,000 percent positive that there won’t be any fire below it,” he said, adding that what investigators will ultimately find “is a foundation of lies and fabrications.”
At least one prominent Republican has expressed concern about the source of Adelson’s campaign contributions. “Much of Mr. Adelson’s casino profits that go to him come from his casino in Macau,” Sen. John McCain noted in an interview last month with the PBS NewsHour [ http://www.pbs.org/newshour/bb/politics/jan-june12/mccain_06-14.html ].
“Maybe in a roundabout way, foreign money is coming into an American political campaign,” said McCain, an Arizona Republican.
The questions raised by McCain and others have not prevented Adelson, the self-made son of a Boston cabdriver, from emerging as a powerful political figure in both Israel and the United States. A longtime backer of Prime Minister Binyamin Netanyahu of Israel, Adelson created a free daily newspaper, now Israel’s largest, that supports the policies of Netanyahu’s Likud Party.
His family’s $25 million in contributions kept Newt Gingrich in the presidential race. He has been widely reported as donating $10 million to a super PAC supporting Mitt Romney. A “well-placed source” recently told Forbes Magazine that Adelson’s willingness to financially support Romney was “limitless.” A filing with the Federal Election Commission last night shows that Adelson and his wife, Miriam, gave $5 million [ http://reporting.sunlightfoundation.com/2012/adelsons-give-5-million-yg-action-fund/ ] to the “YG ['Young Guns'] Action Fund,” a super PAC linked to House Majority Leader Eric Cantor, a Virginia Republican.
* * *
Macau’s emergence in the 21st century as the biggest gambling center in the world, with $33.5 billion in annual revenue — four times that of Las Vegas — is a matter of history and geography.
A former Portuguese colony, the tiny peninsula was handed over to China in 1999. It has its own legislature, laws, court system and chief executive, all of which exist under the umbrella of Chinese control.
For generations, profits from Chinese gambling flowed primarily to a single local company. But after China took control, authorities agreed to let foreign companies get a piece of the action.
Las Vegas Sands was among more than a dozen companies to apply for a license. Its plans were among the most expansive, calling for an American-style complex of hotels, casinos, shopping malls and luxury apartments.
The first of four Las Vegas Sands casinos, the Sands Macau, opened its doors in 2004. It was immediately successful as well-heeled gamblers from the mainland flocked to the tables.
Over the next several years, the company pushed ahead with its multibillion-dollar construction projects on a strip of reclaimed land known as Cotai.
But in the summer of 2008, Las Vegas Sands faced a cash crunch. The global economic slowdown hit revenues at its casinos in Nevada. And gambling slowed in Macau after China’s central government abruptly cut down on the number of visas it granted for travel to the region. Suddenly, the company was struggling to make payments on billions of dollars in long-term debt.
Executives at Las Vegas Sands began looking at ways to raise cash in Macau. To do this, the company would need some help from local officials.
It wasn’t clear they would get it.
In China, relationships, or guanxi, can make or break an empire. Adelson’s relationships in Macau and China were frayed. George Koo, a member of the Las Vegas Sands board of directors, wrote in a confidential memo that Adelson’s behavior had offended political figures in both Macau and China.
Koo quoted a prominent Macau official as saying Adelson had “slapped the table in front of Edmund Ho,” Macau’s chief executive. “Supposedly, Ho has said that he will not see SGA anymore,” the memo said, using Adelson’s initials.
Accompanied by Alves, Koo met with the Macau chief executive over lunch. According to Koo’s memo, Ho expressed his regret that Adelson “has burned so many bridges with Beijing,” the memo said.
According to Koo’s account, a top Chinese official overseeing Macau named Liao Hui was so angry at Adelson that he refused to meet with him. It is not clear from the memo what caused the rupture, but Koo said Adelson turned to “the Israeli military to arrange a meeting with Liao” who initially agreed but then said he would only send his deputy. No meeting ever took place, the document says.
Weidner, who resigned as president of Las Vegas Sands in March 2009, said in an interview that Adelson was “out of his element” dealing with Chinese officials.
Weidner recalled struggling to explain Adelson’s style to the Chinese, once comparing his boss to a famous emperor who became angry with China’s scholars and buried them alive with their books. “I would tell them: ‘He is brilliant. Sometimes, like the emperor, he is brutal.’”
Leonel Alves seemed to be an ideal person to smooth relations.
A Macau native, born of a Portuguese father and a Chinese mother, the attorney had been a fixture in the local scene for decades, and was nimble in the face of shifting political tides.
In the years leading up to Portugal’s handover of its onetime colony to China in 1999, he was among a select group of local residents chosen to serve on the transition team.
Alves became a Chinese citizen and dedicated himself to learning China’s official dialect, Mandarin, to complement his fluency in Portuguese, English and Cantonese. His legal practice was already successful. He boasted to local reporters of his car collection, which included a Ferrari and a BMW M3.
Las Vegas Sands put Alves’ law firm on retainer in midsummer 2008, naming him as an outside counsel. Documents show his firm was to be paid $37,500 a month for 80 hours of work, with additional hours to be billed at a rate of more than $550 an hour.
Over the years, the Justice Department has made it clear that American companies can employ foreign officials. But companies have been told they must take great care and create safeguards to prevent such officials from using their position or political standing to gain commercial advantage.
T. Markus Funk, a partner at the Perkins Coie law firm and co-chair of the American Bar Association Global Anti-Corruption Initiatives Task Force, declined to discuss the specifics of the Las Vegas Sands inquiry. But he said companies generally avoid hiring sitting local officials as lobbyists or representatives because of the risk that they will improperly end up wielding their influence.
“It would be a huge red flag,” said Funk. “If you are paying someone because you think they are going to have a questionable backroom discussion, essentially a quid pro quo relationship, that’s a no-no. You can get yourself in big trouble pretty quickly.”
In response to written questions, Alves said in an email that his political career has never conflicted with “my profession as a lawyer.” He said his office had “been scrutinized by the Chinese and American authorities like few have in Macau, and no authority has ever had any suspicion.”
Alves noted that his multiple government posts did not “confer to me any executive and administrative power” or the ability to “influence” what he described as “the relevant authorities.”
U.S. companies sometimes ask the Justice Department in advance for an opinion on whether a particular hire constitutes a violation of the law. It is not known if Las Vegas Sands posed such a question about Alves. Funk, a former federal prosecutor, said that a company following “best practices” would look closely at both the size of the proposed payments and the procedures put in place to assure compliance.
“I’d want to make sure the individual is getting paid an appropriate scale,” Funk said. “I’d want to get some assurance he was familiar with the FCPA and had agreed to abide by its terms. I’d want a code of conduct in place and I’d want to see detailed billing statements.”
One of the first issues Alves addressed was Las Vegas Sands’ request for permission from local authorities to sell a mall and 300 luxury apartments it had built next to one of its casinos, the Four Seasons Macau.
The company’s original agreement with the government did not allow it to break up the property into separate pieces for sale. If Sands could amend the agreement, it would open the way to raise billions.
On Aug. 12, 2008, Alves wrote an email to Luis Melo [ https://www.propublica.org/documents/item/395658-email-and-translation-from-leonel-alberto-alves ], who was then Las Vegas Sands’ in-house counsel in Macau. He wrote that he was planning to meet with local officials to “monitor and apply pressure” to what he called the “revision process” of the “land concession contract.” It is not known whether the meeting took place or what, if anything, Alves said to other officials in the government.
In late September, the secretary of Macau’s Land, Public Works and Transport Bureau declared that Las Vegas Sands had to abide by its original contract with Macau, which did not permit the property to be sold separately.
“The terms in the concession contract are very clear and any move must be according to what is written in the contract,” he said, according to a report in The Macau Daily Times.
That statement came at a critical moment for Las Vegas Sands. With the collapse of Lehman Brothers in the United States, even the most solvent companies were finding it impossible to borrow. At the end of September, Adelson staked his company $475 million of his own money.
In October, planning officials handed Las Vegas Sands much of what it was seeking. They said they would allow the property to be divided into four parts: the casino, the apartment complex, the mall and a parking garage. Each could be sold separately. In their decision, Macau officials said they were trying to help Las Vegas Sands address its need for more capital.
The company portrayed the decision as a victory and said it “paves the way” for the sale of the 300 luxury apartments.
The company’s financial condition continued to worsen. It halted construction on its massive projects in Cotai. In November 2008, Adelson kicked in another $525 million of his own money. That month, the company told investors it was in danger of defaulting on $5.2 billion in loans. Such a default, auditors warned, could threaten the company’s survival.
Ultimately, Las Vegas Sands did not sell the apartment building or mall. (It continues to seek final permission to sell individual apartments.) The company moved to raise capital through another route: an initial public offering of stock on the Hong Kong exchange that, it was hoped, would bring in billions of dollars.
Once again, local law posed challenges to the company’s plans. And once again, Alves stepped forward to help.
* * *
One key to Las Vegas Sands’ survival in Macau was its ability to whisk customers from Hong Kong to the doors of its casinos. The long-established ferry route unloads its passengers in downtown Macau, about a three-mile drive from Adelson’s casinos in Cotai.
Las Vegas Sands had created its own ferry service, Cotai Waterjets, which dropped gamblers at a dock just a short shuttle ride from its casinos.
But the future of Cotai Waterjets was unclear. A competing ferry service had filed a complaint alleging the government had improperly awarded the concession to Las Vegas Sands without competitive bidding.
In February 2009, a Macau court agreed, voiding the contract.
Alves set to work. In the spring of 2009, he arranged what a billing invoice [ https://www.propublica.org/documents/item/398978-incvoice-from-leonel-alberto-alves-nov-13-2008#document/p1/a64077 ] from his firm describes as “meetings and contacts with the Macau Government.”
On Oct. 19, 2009, Alves met with Edmund Ho, Macau’s chief executive, and Fernando Chui Sai On, Ho’s soon-to-be successor. (Ho was the Macau official who had purportedly refused to meet with Adelson.)
It is not known what was discussed. Alves billed Las Vegas Sands for two hours of his time [ https://www.propublica.org/documents/item/395657-invoice-from-leonel-alberto-alves-oct-16-2009#document/p1/a63647 ], according to his invoice.
Also that day, Alves billed for more than an hour of phone calls [ https://www.propublica.org/documents/item/395657-invoice-from-leonel-alberto-alves-oct-16-2009#document/p1/a63648 ] with company executives, his invoices show.
Las Vegas Sands was explicit about what was at stake, telling Hong Kong investors in a public filing that loss of the ferry concession “could result in a significant loss of visitors to our Cotai Strip properties.” This would have a “material adverse effect on our business,” the company said.
Within days of Alves’ meeting with Ho, Las Vegas Sands won a stunning victory. Ho issued an administrative regulation that allowed ferry contracts to be awarded without competitive bidding. The court rulings against the company were moot. Las Vegas Sands retained control of its route and ultimately obtained several new ones.
Attempts to reach Ho were unsuccessful.
The initial public offering launched in late November 2009, raising $2.5 billion for Las Vegas Sands.
Alves remains a member of the Executive Council. He declined to discuss his interactions with Ho or the council.
* * *
Just as Sands was resolving several of its thornier legal issues, a dispute erupted among its executives over Alves that had far-reaching consequences.
It began on Oct. 20, 2009, shortly before the ferry decision was announced, with a seemingly routine event: Alves’ firm submitted bills for its recent work.
The firm said it was charging at triple [ https://www.propublica.org/documents/item/398981-luis-ricardo-emails#document/p1/a64243 ] the previously agreed rate to account for the work it had done on the public offering, scheduled for the following month. In an email, Las Vegas Sands’ in-house lawyer in Macau, Luis Melo, objected, noting the invoices were “not in accordance [ https://www.propublica.org/documents/item/398981-luis-ricardo-emails#document/p1/a64242 ]” with the letter which spelled out the financial terms of Alves’ retainer.
The issue reached the desk of J. Alberto Gonzalez-Pita, general counsel at Las Vegas Sands headquarters in Nevada. In an email, Gonzalez-Pita expressed concern about a sudden request for more money from an outside lawyer who was also a foreign official, saying such a payment would require “a lot of explaining [ https://www.propublica.org/documents/item/395659-email-regarding-alves-increased-fees ].”
With the bill still unpaid, Alves submitted his resignation effective in February 2010.
An internal email shows he continued to report privately to Adelson, delivering at least one message from the company’s chairman and CEO to Macau’s government.
Separately, he also pushed to return to Sands China.
In March, Alves submitted a new proposal, asking to be paid $125,000 a month with no obligation to provide billing details [ https://www.propublica.org/documents/item/398919-emails-on-alves-proposed-expenses-march-3-2010#document/p1/a64248 ], internal records show.
Gonzalez-Pita, the Las Vegas general counsel, rejected the idea. “It’s outrageous,” he wrote [ https://www.propublica.org/documents/item/398919-emails-on-alves-proposed-expenses-march-3-2010 ]. “Our corporate retainer with Paul Weiss is almost three times less per month,” he said, referring to the company’s outside counsel, New York-based Paul, Weiss, Rifkind, Wharton & Garrison.
Gonzalez-Pita elaborated a week later.
“I continue to believe this proposal to be inappropriate, unrealistic, extraordinarily expensive and way above market,” he wrote to Jacobs [ https://www.propublica.org/documents/item/396015-email-regarding-alves-proposed-expenses-march-9 ], the CEO of Sands China who had originally been recruited to handle the IPO. “Been a long time since I’ve seen a lawyer or a firm make as naked a power play as has LA,” Leonel Alves. “He sure has chutzpah.”
Jacobs decided against rehiring Alves. “Let’s talk about a replacement for outside counsel,” he wrote in a March 10, 2010, email [ http://www.propublica.org/article/emails-on-alves-employment-and-payment#email1 ] to Melo, Sands China’s general counsel in Macau.
“The transition will not be easy … and has a high probability of becoming messy … but it is the right thing to do for the business,” he wrote.
Jacobs told Alves that he would not be retained, emails show.
The same day, Jacobs informed colleagues that he had paid the disputed invoices after Alves submitted a more detailed account of the work he had done on the public offering. Jacobs wrote to Gonzalez-Pita that he had been “instructed by SGA and MAL to pay and close out the matter [ http://www.propublica.org/article/emails-on-alves-employment-and-payment#email3 ].”
The initials SGA and MAL are used within the company to refer to Sheldon G. Adelson and Michael A. Leven, the president of Las Vegas Sands.
“I am sorry that this was not communicated to you but I am glad that FCPA outside counsel did not highlight any substantial issue with the payment,” Jacobs wrote [ http://www.propublica.org/article/emails-on-alves-employment-and-payment#email3 ].
Gonzalez-Pita replied that Jacobs was mistaken and that the company’s outside lawyer had identified the payments as a possible violation of the U.S. anti-bribery law.
“Unfortunately,” Gonzalez-Pita wrote to Jacobs [ http://www.propublica.org/article/emails-on-alves-employment-and-payment#email4 ], “FCPA counsel did highlight a problem” with paying Alves anything more than his normal fees “plus a commercially reasonable premium.”
“While I can appreciate that you received instructions to make the payment,” Gonzalez-Pita wrote on March 12 [ http://www.propublica.org/article/emails-on-alves-employment-and-payment#email5 ]. “I wish you would have advised me so I could have intervened.”
Gonzalez-Pita resigned from the company in April 2010.
On July 23, Las Vegas Sands fired Jacobs. A month later, the company dismissed Melo and the rest of the legal team in Macau, according to the lawsuit Jacobs subsequently filed in Nevada.
In that action, Jacobs said he was dismissed for refusing Adelson’s “illegal demands,” including an order that he fire Melo and replace him with Alves. Las Vegas Sands said in court briefs that it fired Jacobs for disobeying orders and working on unauthorized deals.
The company rehired Alves as outside counsel in the fall of 2010, a position he still holds. It is not known how much he is being paid.
In April of this year, Sands China opened Cotai Central, the $4 billion project it had temporarily abandoned in 2008, when the company stood at the brink. Within six hours of the opening, Sands China reported, more than 84,000 people pushed through the new casino’s doors.
Matt Isaacs and Lowell Bergman reported on this story for the Investigative Reporting Program [ http://www.investigativereportingprogram.com/ ] of the University of California and FRONTLINE. Some of their work was underwritten by a grant from the Nathan Cummings Foundation. Engelberg is managing editor of ProPublica.
©2012 WGBH Educational Foundation
http://www.pbs.org/wgbh/pages/frontline/criminal-justice/his-man-in-macau-inside-the-investigation-into-sheldon-adelsons-empire/ [no comments yet]
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Echoes of Clinton-Era Scandal in a Las Vegas Sands Email
CEO of Sand China Ltd., Steven Jacobs, attends a ceremony at the Hong Kong Stock Exchange (HKSE) on Nov. 30, 2009 to mark the first day of trading of Sands China's initial public offering (IPO).
(Ed Jones/AFP/Getty Images)
July 16, 2012, 11:21 am ET by Matt Isaacs and Lowell Bergman
On Feb. 25, 2010, the head of the Las Vegas Sands subsidiary in Macau sent a colleague an email asking for information on a Macau businessman named Ng Lap Seng.
The executive, Steven Jacobs, was trying to decide whether the company should continue retaining Leonel Alves, a local legislator and lawyer, as an outside counsel, internal documents show.
Jacobs identified Ng as “Leonel’s contact with Beijing” and said that Ng had “delivered msg. from SGA,” a reference to Sheldon G. Adelson, the company’s chairman and CEO. “Need background check,” Jacobs wrote.
The email did not describe the content of the message purportedly conveyed by Ng.
Ng’s past includes some notable items. More than a decade earlier, he had figured prominently in a U.S. political scandal, carrying hundreds of thousands dollars of cash into the United States and funneling it to Democratic candidates through a Chinese-American intermediary, a congressional investigation later found.
More than a dozen people eventually pleaded guilty to violations of federal campaign contribution laws in what was called “Donorgate.” The Clinton administration was deeply embarrassed when a photo surfaced of Ng with President Clinton. Ng was never charged in that case.
Ng, through a spokesman, declined to be interviewed for this article citing his commitments to what he described as his “congressional position with China.” He did not specifically describe the position to which he was referring.
Jacobs ultimately recommended that Las Vegas Sands cut its ties with Alves.
Adelson fired Jacobs, who sued the company in a Nevada court alleging, among other things, that he had been dismissed because he had opposed retaining Alves. The company has denied that allegation, maintaining that its dealings with Alves were proper. It has said Jacobs was fired for other reasons.
Ng was not mentioned in the original lawsuit filed by Jacobs. But in a recent filing, Jacobs asked for copies of an “investigative report” the company prepared on Ng and for any communications between Ng and Adelson.
©2012 WGBH Educational Foundation
http://www.pbs.org/wgbh/pages/frontline/criminal-justice/echoes-of-clinton-era-scandal-in-a-las-vegas-sands-email/ [no comments yet] [co-published at http://www.propublica.org/article/echoes-of-clinton-era-scandal-in-a-las-vegas-sands-email (with comments)]
===
In Praise of Sheldon Adelson
By Francis Wilkinson Jul 2, 2012 10:33 AM CT
Sheldon Adelson appears to be this year's handiest example of campaign finance run amok. By my count, the billionaire CEO of the Las Vegas Sands and his family have donated at least $40 million to Republican political groups while promising tens of millions more. Most of the money is going to much-reviled super-PACs such as Restore Our Future, the independent expenditure committee run by former Mitt Romney aides whose sole purpose is to elect their man president while pretending they barely know him.
Adelson has a list of political axes to grind, ranging from tax rates (he wants them lower) to U.S. policy toward Israel (he opposes a two-state solution with Palestine). He is not shy about his feelings: He wants a Republican in the White House, and he's spending tens of millions to get one.
Some of Adelson's Obama-hating billionaire colleagues and corporate allies, by contrast, are too demure to operate in the open. Instead, these fragile blossoms contribute anonymously to groups like Karl Rove's Crossroads GPS (which may be a recipient of Adelson largesse, as well) or to the U.S. Chamber of Commerce, which acts increasingly like a coordinated arm of the Republican Party.
So give Adelson his due: He is open about his motives and has let the public in on the deal. That's better for democracy than flooding the system with secret donations. The only people who know what those donors want in return are the candidates and their aides.
Francis Wilkinson is a member of the Bloomberg View editorial board.
Read more breaking commentary from Josh Barro and other Bloomberg View columnists and editors at the Ticker [ http://www.bloomberg.com/view/the-ticker/ ].
*
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*
©2012 BLOOMBERG L.P.
http://www.bloomberg.com/news/2012-07-02/in-praise-of-sheldon-adelson.html [with comments]
===
Dueling Houston donors take feud to presidential campaign
Video [embedded]
Published on Apr 16, 2012 by stoptlr
The most powerful political group in Texas has become a danger to the conservative cause! Learn more at http://www.StopTLR.com
http://www.youtube.com/watch?v=1tgbJt3pEkY
By Julie Bykowicz, Bloomberg News Service
Updated 06:52 a.m., Monday, July 16, 2012
Fliers distributed at the Texas Republican convention last month depict Democrat Steve Mostyn in a menacing sketch, asking why he's trying to "infiltrate" their party. A companion website, largely financed by rival Bob Perry, warns of Mostyn's "invisible hand" in state politics.
Mostyn associates are returning fire. One of his employees runs a website that features a mugshot-style photo of Perry, with the claim that he's the one taking over Texas politics.
It sounds like routine, political mudslinging. It isn't, and here's the odd part: They aren't candidates; they're wealthy donors who have given millions to state lawmakers.
Now, the Lone Star State feud is spilling into the presidential campaign as Mostyn, a Houston trial attorney, is helping Democrats try to match the millions that Perry, a Houston home builder, has given to super-political action committees running attack ads in swing states.
"If they get into a race, they define that race," says Bill Miller, who has been involved in Texas politics since 1985 and whose lobbying firm represents Perry in Austin. "They're cut from the same bolt of cloth. They give to whoever they want, when they want and in the amount they want. And they both do it for the same reason -- outcome."
Super-PAC Donations
Mostyn, 41, an East Texas native with a linebacker's build and a goatee, gave $1 million in May to Priorities USA Action, a super-PAC backing President Barack Obama. He'd been wooed by Democratic strategists Paul Begala and Bill Burton during a four-hour conversation aboard Mostyn's yacht in Fort Lauderdale, Florida.
Later this month, Mostyn will introduce the Priorities duo to other wealthy Texas Democrats, he said in an interview. They'll spend three days in a half-dozen meetings in San Antonio, Dallas, Houston and elsewhere, flitting to each location in Mostyn's Hawker 750 plane.
"There's a lot of money here, but nationally, we've been forgotten because we haven't been in play," Mostyn said. It has been 36 years since Texas went for a Democratic presidential candidate. His wife and fellow attorney Amber Mostyn gave $500,000 to House Majority PAC, which supports Democrats for Congress.
Obama Texas Fundraisers
Obama will attend fundraisers tomorrow in San Antonio and Austin, and Mostyn will be present for the one at the home of San Antonio trial lawyer Mikal Watts.
Perry, 79, has donated to a super-PAC devoted to electing presumptive Republican presidential nominee Mitt Romney, giving $4 million to Restore Our Future. He contributed another $2.5 million to American Crossroads, a super-PAC that works to elect Republicans in Congress in addition to helping Romney. Crossroads was formed with the help of Karl Rove, a former political adviser to President George W. Bush.
Born in a one-room house in central Texas, Perry founded and controls closely held Perry Homes, the largest home builder in the Houston area, according to the Houston Business Journal. The company earned $325 million in local revenue in 2011, the Business Journal reported. Perry declined through a spokesman to be interviewed.
Mostyn also comes from humble means and was the first in his family to finish college, receiving his law degree from the South Texas College of Law in 1996. Three years later he founded the Mostyn Law Firm, which now has 170 employees including 32 attorneys at five offices across the state. The firm has represented 20,000 clients and earned about $30 million in fees from settlements for residents whose homes were damaged by Hurricanes Ike, Rita and Dolly.
Key West Yacht
The Mostyns and their 5-year-old daughter and 11-year-old son primarily live in a modernist house in Houston that has an assessed value of about $6.6 million. They also have a home on Lake Lyndon B. Johnson in the Texas Hill Country and in Key West, where the yacht is normally docked.
Mostyn is as extroverted as Perry is introverted, said Miller and Democratic state Senator John Whitmire, who know both men. Mostyn was head of the Texas Trial Lawyers Association last year -- the youngest to lead the group -- and is a fixture in the state house, the back door to which leads to the trial lawyers' building.
"They're two strong-willed people with major resources who are squaring off," said Whitmire, who has accepted campaign contributions from both men. "That's what makes the world interesting and elections challenging."
Legal System
Like many Texas political players, Mostyn and Perry are driven by calls for changes in the legal system, said Craig McDonald of Texans for Public Justice, an Austin-based nonprofit that tracks campaign giving in the state.
Perry wants to curb the ability of people to sue companies -- including his own, while Mostyn, who earns his income as a plaintiff's attorney, wants to make it easier to go to court.
"Tort reform has really defined Texas politics for the better part of two decades," McDonald said.
In the national arena, Mostyn said he's trying to prevent federal politics from following Texas's move to the right, a model called "frightening." He also said he supports Obama's health care and education policies and doesn't want to see more Republican-nominated justices on the U.S. Supreme Court.
Perry supports Romney because "he is a proven business leader with a history of job creation who recognizes the federal government does not have unlimited power," said Anthony Holm, a Perry spokesman.
Feud Begins
The feud began in 2008, when Mostyn emerged as a major Democratic contributor. Within two years, he'd surpassed Perry as the top political giver in Texas -- a state that has no donation limits.
Mostyn, his wife and law firm in 2010 gave $9.7 million; ranked right behind them were Perry and his wife, Doylene, who gave $8.3 million, according to Texans for Public Justice.
Perry backed the re-election of Governor Rick Perry, who is not related. Mostyn supported former Democratic Houston Mayor Bill White in the gubernatorial race.
Their giving isn't limited to candidates; they've each funded a network of political action committees.
Some Mostyn-funded groups are Back to Basics, Texas Values in Action Coalition and Texans for Insurance Reform. Perry's preferred groups include the Texans for Lawsuit Reform, the Associated Republicans of Texas Campaign Fund and Hispanic Republicans of Texas.
'The Invisible Hand'
Perry is the single largest donor to Texans for Lawsuit Reform, having given $2.3 million to the group between 2001 and 2010, according to Texans for Public Justice.
In 2010, Texans for Lawsuit Reform posted a website called "The Invisible Hand of Steve Mostyn," which shows a spider web-like chart of Mostyn groups and the candidates they support.
The group also handed out fliers at the state Republican convention in June questioning why Mostyn is supporting Republican primary candidates.
"As he became more prominent in opposing pro-tort reform candidates, we believed the best message in countering his challenge was to say this man is the largest funder of Democrats in Texas and is a personal injury trial lawyer who has a self- interested agenda," said Sherry Sylvester, the group's spokeswoman.
Like-Minded
Mostyn shrugs off what he calls the campaign to "reveal" him, noting that he is backing Republicans who agree with his position on preserving the right to bring lawsuits.
"When you control the whole damned state, you've got to make somebody the boogeyman in order to keep raising money," he said. He doesn't dispute the Republicans' characterization of him as the donor-in-chief of the state Democratic Party. He questions its importance in a state where Republicans control the state legislature and have held the governor's office since 1995.
"Being captain of the JV team is really not that powerful of a position," he said.
Mark McCaig is a lawyer in Mostyn's Houston office. He also calls himself "a lifelong conservative Republican" and maintains a group called Texans for Individual Rights, which bills itself as a Republican group devoted to "exposing" the agenda of Perry-funded Texans for Lawsuit Reform.
Anti-Perry Website
Texans for Individual Rights' website "Stop TLR," lists Perry among the "men who control Austin politics."
McCraig said he started the campaign against his fellow partisan because "I think Bob Perry is interested in protecting Bob Perry's pocketbook."
That's the same accusation Mostyn's adversaries lodge against him. Their prime bit of evidence is a May 5, 2010 donation of $25,000 that Mostyn made to Republican state Representative Todd Hunter.
Hunter has voted against Mostyn's interests when it comes to tort reform and has received money from the Perry-funded Texans for Lawsuit Reform. What raised eyebrows was the timing of Mostyn's check.
Days after accepting the Democratic contribution, Hunter was selected as mediator in a lawsuit against the state's insurance fund filed by thousands of Gulf Coast Hurricane Ike victims. Under his supervision, the parties arrived at a settlement in which the Texas Windstorm Insurance Association paid $189 million to Galveston County residents whose homes were wiped out by Hurricane Ike. Mostyn led negotiations for the residents.
Mostyn said the campaign money was "totally unconnected to" Hunter's work as a mediator. They've known each other for years, and Mostyn asked Hunter if he'd take trial attorney money since he was taking campaign contributions from insurers, both Mostyn and Hunter said in interviews.
"Anybody who wants to give, great," Hunter said.
To contact the reporter on this story: Julie Bykowicz in Washington at jbykowicz@bloomberg.net
To contact the editor responsible for this story: Jeanne Cummings at jcummings21@bloomberg.net
©2012 BLOOMBERG L.P.
http://www.chron.com/news/politics/article/Dueling-Houston-donors-take-feud-to-presidential-3709730.php
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The ‘Merit-Based Society’
By THOMAS B. EDSALL
July 15, 2012, 11:49 pm
Mitt Romney is an evangelist for capitalism.
“Free enterprise is still the greatest force for upward mobility, economic security, and the expansion of the middle class,” Romney declared last week [ http://www.mittromney.com/news/press/2012/07/mitt-romney-free-enterprise-greatest-force-economic-security ] at the N.A.A.C.P. convention in Houston. “As president, I will show the good things that can happen when we have more free enterprise – more business activity, more jobs, more opportunity, more paychecks, more savings accounts.”
In a speech in Washington in December, Romney described his ideal society [ http://www.mittromney.com/blogs/mitts-view/2011/12/mitt-romney-delivers-remarks-republican-jewish-coalition ]:
In a merit-based society, people achieve success and rewards through hard work, education, risk taking, and even a little luck. The founders considered this principle to be one endowed by our Creator, and called it the ‘pursuit of happiness.’ We call it opportunity, or we call it the freedom to choose our course in life. A merit-based, opportunity society gathers and creates a citizenry that pioneers, that invents, that builds and creates. And as these people exert the effort and take the risks inherent in invention and creation, they employ and lift the rest of us, creating prosperity for us all. The rewards they earn do not make the rest of us poorer, they make us better off.
Merit has been traditionally equated with intelligence, industriousness, educational attainment, creativity and competency. In a meritocracy, formal qualifications provide opportunity, position is no longer ascribed by birth, and rewards flow to those who excel.
The rise of meritocratic competition as the preeminent means of social stratification in America has been hailed as a welcome advance because it replaced a society dominated by an upper class dependent on inherited wealth and status. The transition to meritocracy has, however, had unintended consequences. In the business sector, particularly, other less benign qualities emerge as essential to meritocratic success: aggressiveness, ruthlessness, dominance-seeking, victimizing behavior, acquisitiveness and the disciplined pursuit of self-interest.
Over the past two decades, newly minted corporate titans have used political power to minimize taxation on their principal sources of income, winning preferential rates on capital gains and dividends — and have nearly eliminated taxation on the intergenerational transfer of wealth, brilliantly exploiting the term “death tax.”
One industry in particular — the financial sector — has used its power to gain an enormous advantage at public expense [ http://www.mcclatchydc.com/2008/09/15/52559/wall-street-crisis-is-culmination.html ] persuading the government to dismantle much of the federal regulatory structure. The Financial Crisis Inquiry Commission, a 10-member bipartisan panel appointed in 2009 by congressional leaders of both parties, reported in January 2011 [ http://www.gpo.gov/fdsys/pkg/GPO-FCIC/pdf/GPO-FCIC.pdf ] that “from 1997 to 2008, the financial sector expended $2.7 billion in reported federal lobbying expenses; individuals and political action committees in the sector made more that $1 billion in campaign contributions” to achieve what the commission described as “deregulation redux.”
Richard Freeman, an economist at Harvard, argued in an email to the Times that a merit based system can quickly convert into an entrenched hierarchy as a result of the accumulation of excessive wealth and income:
The greatest danger is that high inequality creates a society in which wealthy ‘crony capitalists’ dominate corporate and government policies and use their wealth to subvert market competition and to corrupt democracy in order to maintain their position atop the income hierarchy.
Campaign contributions are among the most important weapons deployed by new corporate elites. The finance industry, for example, has given more money [ http://www.opensecrets.org/pres12/indus.php?cycle=2012&id=N00000286 ], $19 million, to the Romney campaign than any other sector, quadrupling its nearest competitor, real estate, which contributed 4.8 million.
At an extreme, the predatory aspect of “meritocratic” corporate competition is illustrated by the scandals of Enron [ http://www.time.com/time/specials/packages/0,28757,2021097,00.html ] and WorldCom [ http://www.cbsnews.com/2100-201_162-513473.html ], by the insider trading convictions [ http://topics.nytimes.com/topics/reference/timestopics/subjects/i/insider_trading/index.html ] of Raj Rajaratnam and Rajat Gupta, and by the fraudulent schemes of Allen Stanford [ http://www.usatoday.com/money/industries/brokerage/story/2012-06-14/r-allen-stanford-sentenced/55597082/1 ] and Bernie Madoff [ http://topics.nytimes.com/top/reference/timestopics/people/m/bernard_l_madoff/index.html ].
At a more mundane level, the use of campaign contributions by those who have become wealthy in an “opportunity society” to protect predatory practices can be seen in recent donations by payday loan and auto-title lending companies, which are often located near military bases. Bloomberg Businessweek reported a surge in contributions [ http://www.businessweek.com/articles/2012-03-29/how-payday-lenders-quietly-donate-to-campaigns ] from these firms to Romney’s super PAC, Restore Our Future, from mid-January through the end of February 2012. The contributions followed Romney’s denunciation on January 4th of the Consumer Financial Protection Bureau — which is preparing to regulate the payday loan industry and other “non-bank” lenders — as “perhaps the most powerful and unaccountable bureaucracy in the history of our nation.” Businessweek wrote that from “January 13 to February 29, payday and auto-title lenders contributed $427,500 to Restore Our Future.”
One payday loan company, Advance America, gave the super PAC $25,000. On its web site, Advance America outlines the terms of its loans [ http://www.advanceamerica.net/apply-for-a-loan/faqs ] in different states. In Alabama, a $500 loan carries an $87.50 fee, which must be paid off at the next payday. This translates into an annual interest rate of 456.25 percent, according to the firm’s web site. In Texas, a $500 loan carries a $102.27 fee, or an annual interest rate of 533.30 percent.
In findings that parallel those of Harvard’s Richard Freeman, Martin Gilens, a political scientist at Princeton, conducted a study of the relative influence of voters [ http://www.russellsage.org/research/inequality-and-democratic-responsiveness ] at the top, middle and bottom of the income distribution over policy decisions made by elected officials.
Policy outcomes are more strongly related to the preferences of the well off than those of the poor or the middle class. But the extent of this “representational inequality” is staggering: when preferences of low or middle income Americans diverge from those of the affluent, there is virtually no relationship between policy outcomes and the desires of these less advantaged groups. In contrast, affluent Americans’ preferences exhibit a substantial relationship with policy outcomes whether their preferences are shared by lower income groups or not.
Campaign contributions, according to Gilens, are highly correlated with the leverage of the affluent over policy. “Most of the money donated to political candidates, parties, and interest organizations comes from Americans at the top of the economic ladder,” he writes. “The top-heavy pattern of political donations conforms to the top-heavy nature of representational inequality.”
Not only would Romney’s tax, regulatory and spending proposals [ http://campaignstops.blogs.nytimes.com/2012/05/26/political-dividends/ ] reinforce the leverage over public policy now exercised by the affluent, but he would leave untouched the post-Citizens United campaign finance regime that gives corporations, unions and billionaires unlimited opportunities to shape election outcomes.
Nor would Romney reform the Washington lobbying community that now amounts to a fourth branch of government, staffed by former Senators, Congressmen and executive branch officials, who work for clients equipped to pay fees of $200,000 or more a year.
The overwhelming majority of the $3.3 billion spent annually [ http://www.opensecrets.org/lobby/index.php ] on lobbying goes to preserve and expand the market-distorting corporate “rents” granted by Congress and the executive branch, ranging from agribusiness subsidies to an array of special breaks that allow companies like G.E. to pay little or no federal tax [ http://www.nytimes.com/2011/03/25/business/economy/25tax.html?pagewanted=all ].
Romney has no incentive to initiate reform — he is a major beneficiary of the system as it is.
The super PACs enabled by Citizens United and related lower-court decisions are overwhelmingly tilted in Romney’s favor [ http://www.opensecrets.org/outsidespending/summ.php?cycle=2012&type=p&disp=O ] and supportive of the Republican Party in general: Conservative super PACs have so far spent $125 million, while liberal groups have spent less than a third of that, $35.2 million.
Romney’s top ten lobbyist-bundlers, in turn, have raised a total of $2.6 million [ http://www.opensecrets.org/pres12/bundlers.php?id=N00000286 ] for his campaign so far. Their clients include Barclays, which is now in the middle of an interest rate fixing scandal [ http://dealbook.nytimes.com/2012/07/10/q-and-a-understanding-libor/ ], and Microsoft, which has been the defendant in anti-trust litigation in the United States [ http://www.justice.gov/atr/public/press_releases/1998/1764.htm ] and in Europe [ http://money.cnn.com/2009/12/16/technology/Microsoft_EU_antitrust.cnnw/index.htm ].
The other side of the coin? Take a look at Pennsylvania, where 130,000 people, including 89,000 children, were cut from the Medicaid rolls between August 2011 and January 2012, a development that exemplifies the weak influence the poor exercise over policy. These cuts in health care, which affected both the poor and the disabled, resulted from the efforts last year of Republican Governor Tom Corbett and his welfare secretary, Gary Alexander, to “crack down on waste, fraud, and abuse [ http://www.philly.com/philly/news/politics/20120712_Federal_agency_asking_about_the_sharp_drop_in_Pa__s_Medicaid_rolls.html ],” according to the Philadelphia Inquirer. Many of the cuts followed a controversial letter from the Pennsylvania Department of Public Welfare to Medicaid recipients last summer requiring additional paperwork within 15 days [ http://articles.philly.com/2012-04-03/news/31281777_1_medicaid-rolls-medicaid-recipients-corbett/2 ]. According to the Philadelphia Daily News, “It appeared that if the paperwork was not then received and processed in time, those enrolled were dropped — even if the delay was the fault of D.P.W.”
As reasonable as Romney’s endorsement of a “merit-based opportunity society” may appear on the surface, what he is really calling for is a society that rewards hard-hearted, relentless competitors and disregards the losers. It is precisely this aspect of his campaign that has made him vulnerable to Democratic attacks.
Romney remains viable (trailing Obama by only 2.4 percent [ http://www.realclearpolitics.com/epolls/2012/president/us/general_election_romney_vs_obama-1171.html ]) against a Democratic incumbent hobbled by a stagnant economy and 8.2 percent unemployment. A Republican candidate with a more nuanced understanding of the hardships of those left behind by the meritocratic elite would arguably win in a walk.
Romney, however, is the willing prisoner of a radically evolving Republican Party, a party perhaps best described by Thomas Mann and Norman Ornstein in their recent book, “It’s Even Worse Than It Looks: How the American Constitutional System Collided With the New Politics of Extremism”:
One of the two major parties, the Republican Party, has become an insurgent outlier —ideologically extreme; contemptuous of the inherited social and economic policy regime; scornful of compromise; unpersuaded by conventional understanding of facts, evidence, and science; and dismissive of the legitimacy of its political opposition. When one party moves this far from the center of American politics, it is extremely difficult to enact policies responsive to the country’s most pressing challenges.
Thomas B. Edsall, a professor of journalism at Columbia University, is the author of the book “The Age of Austerity: How Scarcity Will Remake American Politics [ http://www.amazon.com/The-Age-Austerity-Scarcity-ebook/dp/B0050DIX2E ],” which was published earlier this year.
© 2012 The New York Times Company
http://campaignstops.blogs.nytimes.com/2012/07/15/the-merit-based-society/ [with comments]
===
Voter IDs on Trial
Editorial
Published: July 13, 2012
Representative Trey Martinez Fischer, the chairman of the Mexican-American Legislative Caucus in the Texas House of Representatives, flew to Washington this week to persuade a panel of federal judges to invalidate a requirement that voters must have an ID card. His trip was less arduous than the one some residents would have to endure to get a government-issued photo ID.
“In West Texas, some people would have a 200-mile round-trip drive” to the nearest state office to get a card, he testified, according to The Dallas Morning News [ http://trailblazersblog.dallasnews.com/2012/07/testimony-voter-id-law-rammed-through-will-suppress-minority-votes-says-rep-trey-martinez-fisher.html/ ]. More than a quarter of the state’s counties don’t even have an office to get a driver’s license or voter card. Lines at the San Antonio motor vehicles offices are often more than two hours long, he said.
Texas is one of 10 Republican-controlled states [ http://www.lawyerscommittee.org/page?id=0042 ] that have imposed a government ID requirement to vote, purportedly to reduce fraud but actually to dissuade poor and minority voters who tend to vote Democratic. (Seven other states have passed slightly less-restrictive rules.) In most cases the federal government can do little to resist this incursion on voting rights, because the Supreme Court upheld ID requirements in 2008 [ http://www.nytimes.com/2008/04/29/washington/29scotus.html ]. But Texas is different. It is covered by the Voting Rights Act of 1965, which allows the Justice Department to disapprove of any change in voting procedures in areas with a history of discrimination.
That’s exactly what the department did in March, saying the law imposes a huge disadvantage on Hispanic voters, who lack a government ID, like a driver’s license or gun permit, at a far higher rate than the general population. Texas sued, and a trial began Monday.
Those defending Texas’ law told the judges that “only” 168,000 eligible voters in Texas lack a government-issued ID, but federal officials said the number is actually closer to 1.4 million, mostly Hispanic and black voters. Texas, of course, was unable to demonstrate any level of voter fraud that would justify the law, pointing only to five prosecutions for voter impersonation.
The same effect is being seen in other states. In Pennsylvania, 758,000 registered voters lack ID cards [ http://www.pennlive.com/midstate/index.ssf/2012/07/voter_id_law_9_of_pennsylvania.html ] and could be turned away at the polls in November. The Associated Press recently reported [ http://www.csmonitor.com/USA/Latest-News-Wires/2012/0708/What-could-tighter-voter-ID-laws-mean-in-November ] that 1,200 legitimate ballots were tossed in the 2008 general election in Indiana and Georgia after officials said voters lacked the required IDs. The voters, who used temporary ballots when they were challenged at the polls, never knew their votes did not count.
Attorney General Eric Holder Jr. said Tuesday [ http://www.chron.com/news/houston-texas/article/Holder-calls-Texas-voter-ID-law-a-poll-tax-3697707.php ] that 25 percent of black citizens lack an ID card, compared with 8 percent of white citizens. These requirements, he said, are the modern equivalent of a poll tax. Of course, states aren’t allowed to charge for a card, but he is correct that using this tactic to erect barriers to participation harks back to Jim Crow efforts. And the stakes are no less high because Texas is expected to ask the Supreme Court to strike down Section 5 of the Voting Rights Act — the provision that allows the federal government to preapprove changes in voting procedure — if the three-judge panel rules against its voter-ID requirement.
People died to achieve that federal law, but 47 years later, the discrimination has not disappeared.
*
Related News
Holder, at N.A.A.C.P. Event, Criticizes Voter ID Laws (July 10, 2012)
http://thecaucus.blogs.nytimes.com/2012/07/10/holder-at-n-a-a-c-p-event-criticizes-voter-id-laws/
Related in Opinion
More on United States Elections
http://topics.nytimes.com/top/opinion/united-states-politics/index.html
*
© 2012 The New York Times Company
http://www.nytimes.com/2012/07/14/opinion/voter-ids-on-trial-in-texas.html [with comments]
===
The Disenfranchising Games
The Strip | By Brian McFadden
July 15, 2012
© 2012 The New York Times Company
http://www.nytimes.com/slideshow/2012/07/08/opinion/sunday/the-strip.html?smid=pl-share#1
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Fire Department Cuts Force Firefighters To Watch And Wait
07/13/2012
http://www.huffingtonpost.com/2012/07/13/fire-department-cuts-a-thousand-cuts_n_1659671.html [with comments]
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Mitt Romney, John Boehner Stand Far Apart On China Currency Legislation
07/12/2012
http://www.huffingtonpost.com/2012/07/13/mitt-romney-john-boehner_n_1669884.html [with comments]
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U.S. wins WTO case over China bank card monopoly
Jul 16, 2012
Washington won a major victory in an election-year dispute against China on Monday when a WTO ruling found China had discriminated against U.S. bank card suppliers in favor of a state-owned enterprise that enjoys an illegal monopoly.
[...]
http://www.reuters.com/article/2012/07/16/us-usa-china-wto-idUSBRE86F0J020120716 [no comments yet]
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Ellison Challenges Bachmann: Put Up or Shut Up
07/14/2012
http://www.huffingtonpost.com/james-zogby/ellison-challenges-bachma_b_1673266.html [with comments]
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The Media Research Center's Brent Bozell Problem
07/12/2012
http://www.huffingtonpost.com/terry-krepel/brent-bozell_b_1658025.html [with comments]
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Report: DC officer allegedly made menacing comments about Michelle Obama
July 15, 2012
http://www.capitolcolumn.com/news/report-dc-officer-allegedly-made-menacing-comments-about-michelle-obama/ [with comment]
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Not first time Arizona governor stopped
"It's not like I'm a gangbanger who was going to run away," Castro tells Salon.
EXCLUSIVE: Ex-Ariz. Gov. Castro tells Salon he wasn't shocked when stopped recently: It's happened twice before
Jul 5, 2012
What started as a “ridiculous” Border Patrol incident [ http://www.azcentral.com/news/articles/2012/07/03/20120703agents-stir-outcry-by-detaining-former-arizona-governor-castro.html ] along Interstate 19 in southern Arizona may be spiraling into a full-scale public relations debacle for a border security gone awry. Nearly three weeks after former Arizona Gov. Raúl Castro triggered a checkpoint’s radiation security system on June 12, the story of the 96-year-old’s brief but disturbing detainment in the brutal Sonoran Desert heat for more than a half-hour has spread from a local newspaper commentary to national news.
But there’s more: This was the third time such an incident has happened to Castro, who was elected in 1974 as the first (and only) Mexican American governor of Arizona.
“I’ve worked on immigration matters all of my life, as an ambassador, a governor and on the border,” Castro told me in a phone interview from his home in Nogales, Ariz. “But this was really bad judgment.”
An outspoken opponent to Arizona’s controversial SB 1070 “papers please” law, Castro recalled the other two times he had to fend off stumbling Border Patrol efforts.
[...]
http://www.salon.com/2012/07/05/not_the_1st_time_ariz_gov_stopped/ [with comments]
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Greensburg, KS - 5/4/07
"Eternal vigilance is the price of Liberty."
from John Philpot Curran, Speech
upon the Right of Election, 1790
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