Year: 2015

Headline of the Day

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President Obama Declares the Threat to Crappy Sony Movies a National Emergency

—Marcy “Emptywheel” Wheeler

A response to Obama’s new executive order, which is vague enough to allow sanctions against pretty much anyone who publishes the data or provides privacy tools..

It is overarching, irresponsible, and fundamentally anti-democratic, which makes it a typical security policy of Obama and His Evil Minions™.

But it gets worse. The EO targets not just the hackers themselves, but also those who benefit from or materially support hacks. The targeting of those who are “responsible for or complicit in … the receipt or use for commercial or competitive advantage … by a commercial entity, outside the United States of trade secrets misappropriated through cyber-enabled means, … where the misappropriation of such trade secrets is reasonably likely to result in, or has materially contributed to, a significant threat to the national security, foreign policy, or economic health or financial stability of the United States” could be used to target journalism abroad. Does WikiLeaks’ publication of secret Trans-Pacific Partnership negotiations qualify? Does Guardian’s publication of contractors’ involvement in NSA hacking?

 And the EO creates a “material support” category similar to the one that, in the terrorism context, has been ripe for abuse. Its targets include those who have “provided … material, or technological support for, or goods or services in support of” such significant hacks. Does that include encryption providers? Does it include other privacy protections?

 Finally, I’m generally concerned about this EO because of the way National Emergencies have served as the justification for a lot of secret spying decisions. Just about every application to the FISC for some crazy interpretation of surveillance laws in the name of counterterrorism founds their justification neither in the September 17, 2001 Finding authorizing covert actions against al Qaeda nor the September 18, 2001 AUMF, but instead in President Bush’s declaration of a National Emergency on September 14, 2001. I’m not sure precisely why, but that’s what the Executive has long used to convince FISC that it should rubber stamp expansive interpretations of surveillance law. So I assume this declaration could be too.

 In other words, the sanctions regime may well be the least of this EO.

Just lovely.

The Governor of the State of Walmart Vetoes Pro Bigotry Bill

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I am, of course, referring to the decision of the Governor of Arkansas, Asa Hutchison, to veto their (almost the same as Indiana’s) so called religious freedom bill:

Facing a backlash from businesses and gay rights advocates, Gov. Asa Hutchinson of Arkansas on Wednesday called on state lawmakers to either recall or amend legislation billed as a religious freedom measure so that it mirrored a federal law approved in 1993.

 Mr. Hutchinson, a Republican, said he understood the divide in Arkansas and across the nation over the question of same-sex marriage and its impact on people’s religious beliefs. His own son, Seth, he said, had asked him to veto the bill, which critics say could allow individuals and businesses to discriminate against gay men and lesbians.

 To ensure that the state is “a place of tolerance,” Mr. Hutchinson said, he was considering using an executive order that would seek to balance the “competing constitutional obligations” if the legislature declined to make changes to the bill.

 “What is important from an Arkansas standpoint is one, we get the right balance,” he said, “and secondly, we make sure that we communicate we’re not going to be a state that fails to recognize the diversity of our workplace, our economy and our future.”

 “This is a bill that in ordinary times would not be controversial,” Mr. Hutchinson said. “But these are not ordinary times.”

 Two state legislative leaders — Senator Jonathan Dismang, president pro tem of the Senate, and Jeremy Gillam, speaker of the House — who appeared with Mr. Hutchinson at a news conference Wednesday, said they agreed that the bill should be changed, but that they could not guarantee that outcome.

 The legislation, which easily cleared the state House by lopsided margins, has created a political rift in the state, with Mark Stodola, the mayor of Little Rock, sending a letter to Mr. Hutchinson this week urging him to veto the bill, saying it would have “a negative impact on our state’s image.”

 Several businesses and tech companies, including the state’s largest private employer, Walmart, as well as the Little Rock Chamber of Commerce, the Arkansas Municipal League and other civic groups have spoken out against the legislation.

(emphasis mine)

It’s clear that the backlash in Indiana is a major factor, but I think that it was the objections by Walmart that was the main reason for this.

The Scandal is that this is Normal for Prosecutors and Courts

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In one of the more prominent cyber crime trials of the year, it has been revealed that
some of the government agents who infiltrated the Silk Road underground site stole from the Site:

After a jury in February found Ross Ulbricht guilty of narcotics and money laundering conspiracies among other charges, in conjunction with his role as the mastermind behind the Silk Road online drug marketplace, even most long-time Ulbricht supporters looked at the preponderance of evidence against him and assumed the case was resoundingly closed. Yesterday, the door to that conviction may have cracked open a tiny bit.

 The US Department of Justice has charged US Secret Service (USSS) special agent Shaun Bridges and Drug Enforcement Administration (DEA) agent Carl Mark Force IV with money laundering and wire fraud in conjunction with their roles leading the Silk Road investigation. (Force was also charged with theft of government property). The pair of federal officers stand accused of diverting $800,000 in bitcoin from Silk Road to their own personal wallet accounts.

 [Aside: Is it just me or aren’t Bridges and Force the two most perfect Hollywood cop names you could ever think of?]

 Even crazier, the two are accused of posing as hitmen on the darknet website and subsequently ensnaring Ulbricht in a murder-for-hire plot against one of his Silk Road employees, whose death they later faked while collecting $80,000 for their services. Later Bridges and Force allegedly extorted 770 bitcoins – then worth approximately $100,000 – and had sought even more, by threatening to reveal his role in the employee’s disappearance.

 ………

 Judging by a tweet from Ublricht counsel Joshua Dratel yesterday, this is not the first time the defense had heard of these accusations:

Major Silk Road govt corruption scandal revelation today that we’ve had to sit on for four months and were not permitted to use at trial.
— Joshua Dratel (@JDratel) March 30, 2015


 The question is, why was this information inadmissible at trial and what, if any impact, did that have on Ulbricht’s conviction? If the defense can prove to an appellate judge that the defense was wrongly handicapped by this decision – a fact that may be more likely given the new information brought to light by the DOJ indictment – then it could be enough to merit a new trial. In such an event, it’s certainly conceivable that some of the evidence collected by Bridges and Force could be thrown out as a result. A report by Wired suggests that the most crucial evidence related to Ulbricht’s conviction was collected by the New York division of the FBI and the Chicago Department of Homeland Security, meaning it still may be enough to put him away.

It turns out that these revelations will figure prominently in an appeal of his conviction:

………

Late yesterday, Ulbricht’s attorney Joshua Dratel posted a statement to Tumblr answering many of these questions and clarifying that the defense is in fact seeking a new trial. Dratel also notes that the defense was aware of the ongoing investigation against US Secret Service (USSS) special agent Shaun Bridges and Drug Enforcement Administration (DEA) agent Carl Mark Force IV during the Ulbricht trial, but was denied the ability to enter this information into evidence.

According to Dratel, the defense has already filed a post-trial motion seeking a new trial, to which the government’s response is due by this Friday, April 3 – with a subsequent defense response scheduled to be filed April 15. Dratel adds that should these motions fail to obtain a new trial, Ulbricht will appeal the existing verdict, citing the Bridges-Force indictment among its arguments.

………

Below is the full statement posted to Dratel’s Tumblr. (Note: Dratel’s original post was entirely devoid of paragraphing. Pando has added the below paragraphing to aid in readability. The content remains otherwise unchanged.)

The government’s considerable efforts at keeping this monumental scandal from being aired at Ross Ulbricht’s trial is itself scandalous. In addition to keeping any information about the investigation from the defense for nearly nine months, then revealing it only five weeks prior to trial, and then moving to keep sealed and secret the general underlying information so that Mr. Ulbricht could not use it in his defense at trial, and then stymying the defense at every turn during trial when the defense tried to introduce favorable evidence, the government had also refused to agree to the defense’s request to adjourn the trial until after the indictment was returned and made public – a modest adjournment of a couple of months, since it was apparent that the investigation was nearing a conclusion.

Throughout Mr. Ulbricht’s trial the government repeatedly used the secret nature of the grand jury investigation as an excuse to preclude valuable defense evidence that was not only produced in discovery, independent of the investigation of Mr. Force, but also which was only at best tenuously related to that investigation. In that manner the government deprived the jury of essential facts, and Mr. Ulbricht of due process. In addition, the government failed to disclose previously much of what is in the Complaint, including that two federal law enforcement agents involved in the Silk Road investigation were corrupt.

It is clear from this Complaint that fundamentally the government’s investigation of Mr. Ulbricht lacked any integrity, and was wholly and fatally compromised from the inside. Also, it is clear that Mr. Force and others within the government obtained access to the administrative platforms of the Silk Road site, where they were able to commandeer accounts and had the capacity to change PIN numbers and other aspects of the site – all without the government’s knowledge of what precisely they did with that access.

In light of the information provided in the Complaint, it is now apparent to all just how relevant some of the issues raised by the defense at trial were, including the payment by Dread Pirate Roberts to a law enforcement agent for information about the investigation, the ramping up of the investigation of Mr. Ulbricht in mid-2013, soon after that paid information began flowing, and the creation of certain evidence at trial, such as the 2013 journal that conveniently begins – again – in Spring 2013, after the corruption alleged in this Complaint ripened. As the evidence at trial – particularly from the government’s law enforcement witnesses – demonstrated, the Baltimore investigation and agents were inextricably involved in the evolution of the case and the evidence, as well as with alerting Mark Karpeles that he was under investigation, and meeting with his lawyers and exchanging information.

At Mr. Ulbricht’s trial, knowing full well the corruption alleged in the Complaint made public today, the government still aggressively precluded much of that evidence, and kept it from the jury (and had other similar evidence stricken from the record). Consequently, the government improperly used the ongoing grand jury process in San Francisco as both a sword and a shield to deny Mr. Ulbricht access to and use of important evidence, and a fair trial. In addition, the government not only precluded use of the information at trial, even if it emanated from independent sources, such as discovery, but the government also prevented the defense from conducting any independent investigation, including subpoenaing Mr. Force to testify at trial. The defense also filed numerous discovery requests, to which the government refused to respond.

Regarding the government’s claim that the information was not relevant, the government notified the defense of the investigation of Mr. Force December 1, 2014. Two days later, the government provided its trial exhibits. Among those exhibits were several that referred to Mr. Force in his various internet personas, including “Nob” (his authorized undercover alias), as well as his rogue identities on Silk Road, including alpacino, french maid, and Death From Above (all of which were providing, or attempting to provide, Dread Pirate Roberts with confidential information about the government’s investigation of Silk Road). Thus, according to the government, even after it disclosed the fact of the investigation, it believed Mr. Force was indeed quite relevant. However, in the course of the ensuing litigation regarding whether the defense would be allowed to use the information about the investigation of Mr. Force at Mr. Ulbricht’s trial, by the time trial began the government either eliminated those exhibits or redacted them. During trial, the government successfully objected to the defense’s attempts to introduce the unredacted documents the government had initially designated as its exhibits.

While I will not claim that it is normal for investigators to be this larcenous, this sort of behavior by the prosecutors is normal.

It’s clear to my non-lawyer mind that the fact that a significant portion of the investigation of Ross Ulbricht (allegedly the Dread Pirate Roberts) was being conducted by corrupt agents is a material fact for the jury to evaluate, but the prosecutors managed to wave the secrecy magic wand, and to hide this information from the jury.

This is why you should never talk to a prosecutor of cop without a lawyer in the room.

New York City Wants to Treat Financial Advisers Like Cigarettes

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Basically, they are suggesting that financial advisers be labeled like cigarettes:

Last week, New York City Comptroller Scott Stringer unveiled a new plan to regulate financial advisers, the first of its kind, that tries to protect the average investor from advisers who don’t have to put their clients’ best interests first.

Currently, the regulations that apply to financial advisers have a carve out for broker-dealers who can give financial advice but don’t have to act as what is called a fiduciary. What that means in practice is that they can recommend investment products to their clients that serve to make them more money but aren’t necessarily the best or right option for their clients. A recent White House report estimates that this conflicted advice costs workers who invest their savings about $17 billion each year.

Stringer has proposed that New York State pass legislation that would require financial advisers to disclose whether or not they are fiduciaries and whether or not they have to put a client’s interests ahead of their own. Brokers, financial planners, and retirement advisors who don’t follow the fiduciary standard, which means put their clients’ interests first, would have to state at the outset: “I am not a fiduciary. Therefore, I am not required to act in your best interests, and am allowed to recommend investments that may earn higher fees for me or my firm, even if those investments may not have the best combination of fees, risks, and expected returns for you.”

“Like putting a warning label of a package of cigarettes, this would be a warning label for people who want to protect their life savings,” Stringer told ThinkProgress. “If you’re working for a company that’s about the company’s product and not about your client, we want you to own up to that.” The rule, he pointed out, wouldn’t say that these advisers can dole out advice to those who want it, but that they have to clarify the standard they follow.

………

States can’t have a stronger fiduciary standard than the federal regulations. But they do have the authority to regulate disclosure. Stringer’s proposal, while not as strong as the federal one, could have an impact. “The disclosure they’ve proposed is pretty stark, which improves the chances that it would be effective,” Roper said. “At least it’s not a bunch of legalese.” The average investor, usually someone seeking out advice for retirement planning, should be able to understand the warning label that Stringer has laid out.

That clear language could steer people away from investors who may not serve their needs. “This might make them think…maybe I should go ask someone else,” Hiltonsmith said. “It could actually change the market a little bit and drive people toward fiduciary advisers.”

Seeing as how the financial industry makes a lot of its money by exploiting these ambiguities, I can understand how they will oppose this tooth and nail.

OK, This is an Insanely Great Idea

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A company called Openbay has come up with a a device that plugs into your car’s diagnostic port, reads the codes, and gets quotes from local mechanics:

Car maintenance, and the costs associated with auto care, is a pain point and often a total mystery for many car owners. It is also one of the last industries where the consumer has traditionally had no power over negotiations, especially once a car is in an auto repair shop.

This morning at the New York International Auto Show, auto repair marketplace startup Openbay unveiled a new product called OpenbayConnect to give consumers more power in the process of getting work done on their cars. The new device, which Openbay founder and chief executive Rob Infantino says can be installed by anyone, automatically connects a car’s computer system to diagnose problems and find a local repair shop to fix the issue through the company’s automated service recommendation engine.

………

OpenbayConnect further automates this process by diagnosing the problem through a car’s computer system – something I was charged about $70 for at the Subaru dealership – and making the auto repair shops vie for a customer’s business by offering the best deal. The company will be shipping the product to early adopters throughout the spring, but has been testing the device with a few unnamed partners with access to large fleets of cars for a few months now. For a limited amount of time, the OpenbayConnect devices will be free and won’t cost users any data costs or activation fees. Eventually, the company will sell the connected diagnosis components through its partners.

………

One specific target of OpenbayConnect is auto service customers who don’t know very much about their vehicles, see a check engine light go on, and immediately call a auto shop or dealer. Often, that customer will pay just to have their computer system checked. Many times, the problem could be as simple as low tire pressure or a loose gas cap. The automated OpenbayConnect system can diagnose exactly what the problem is and whether it warrants more extensive service, all without having to get mechanics involved.

Even if they just sold the device, so you could plug in and get the codes on your smart phone, this would be f%$#ing brilliant.

US Senator from New Jersey Indicted ……… Why am I not Surprised?

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This indictment has been telegraphed for months, but the balloon has finally gone up, and New Jersey Senator Robert Menendez has been indicted on corruption charges:

Senator Robert Menendez of New Jersey was indicted on bribery charges on Wednesday in what prosecutors said was a scheme to trade political favors for luxury vacations, golf outings, campaign donations and expensive flights.

The indictment, the first federal bribery charges against a sitting senator in a generation, puts Mr. Menendez’s political future in jeopardy. He faces a possible sentence of 15 years in prison for each of the eight bribery counts.

Mr. Menendez, a Democrat, angrily denied wrongdoing and vowed to fight the charges. “This is not how my career is going to end,” he said at a news conference in Newark, where supporters cheered him. “Today contradicts my public service career and my entire life.”

The federal investigation into Mr. Menendez, 61, was well known, and charges had been expected. But the accusations in the 68-page indictment are much broader and more severe than had been publicly known. The senator was also charged with conspiracy and making false statements.

The charges revolve around Mr. Menendez’s relationship with Dr. Salomon E. Melgen, a wealthy Florida eye surgeon and political benefactor. Dr. Melgen resisted entreaties by the Justice Department to testify against Mr. Menendez and was ultimately charged alongside him.

Prosecutors described Mr. Menendez’s offices on Capitol Hill as a hub of corrupt dealings, a place where the senator used his chief of staff to solicit gifts from Dr. Melgen, find out what he wanted in return and make sure it got done.

The indictment also reveals how the rise of super PACs, unleashed by the Supreme Court’s Citizens United decision and subsequent legal changes, have opened a new channel for the wealthy to trade campaign cash for official favors.

Through his company, Vitreo-Retinal Consultants, Mr. Melgen directed $700,000 in corporate contributions to Majority PAC, a super PAC intended to help Democrats retain control of the Senate. Mr. Melgen instructed the group to use those contributions to aid Mr. Menendez’s 2012 re-election campaign.

………

Mr. Menendez is the first senator to face federal bribery charges since another New Jersey Democrat, Harrison A. Williams Jr., was indicted in 1980 as part of the federal corruption investigation known as Abscam. In 2002, an ethics scandal deterred Senator Robert G. Torricelli, Democrat of New Jersey, from a re-election bid.

Honestly, if Menendez leaves the Senate, I will shed no tears.

His thing is primarily foreign policy, he is the ranking member of the Foreign Relations Committee, and he is almost as hawkish as McCain and Graham, which makes him a raving lunatic.

Goodluck Jonathan Defeated in Nigeria

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In a first for the west African nation, an incumbent President has been defeated in a bid for reelection.

This is a good thing, because it indicates the development of a more robust political culture, as well as indicating a relatively free and fair election.

On the other hand, the man who won, Muhammadu Buhari, was the military ruler of the nation in the mid-1980s following a coup:

Former military ruler Muhammadu Buhari has become the first opposition candidate to win a presidential election in Nigeria.

Incumbent Goodluck Jonathan telephoned Gen Buhari, 72, on Tuesday night to congratulate him and concede defeat.

Unofficial voting tallies put Gen Buhari more than two million votes ahead of his rival.

Observers have generally praised the election, though there have been allegations of fraud.

“I promised the country free and fair elections. I have kept my word,” Mr Jonathan said in a statement.

He said he had conveyed his “best wishes” to Mr Buhari, and urged “those who may feel aggrieved to follow due process… in seeking redress”.

A spokesman for Gen Buhari’s All Progressives Congress (APC) party praised Mr Jonathan, saying: “He will remain a hero for this move. The tension will go down dramatically.”

Gen Buhari’s supporters took to the streets in APC strongholds, including the northern cities of Kano and Kaduna, to sing and dance in celebration.

The concession by President Jonathan is a big deal.

It shortcuts the many challenges to the legitimacy of the elections which are legion in that part of a world, and it allows for a smooth transition.

Here’s hoping that this will allow for moves to reduce corruption in the infamously crooked government.

Remember the Attempted Coup in Turkey? Not So Much…

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In 2003, then Prime Minister, now President, of Turkey, Tayyip Erdogan had over 200 military officers arrested on the charge that they were plotting a coup.

Every single one of them have now been acquitted:

A Turkish court acquitted all 236 military officers in a retrial over an alleged 2003 plot to unseat then-prime minister Tayyip Erdogan, after the prosecutor said key evidence was inadmissible, a defense lawyer told Reuters.

In 2012 a court sentenced the officers to jail over the “Sledgehammer” conspiracy dating back to 2003, a year after now-President Erdogan’s AK Party came to power.

However, the constitutional court subsequently ruled that the mishandling of evidence central to the prosecution case — computer files containing alleged conspiratorial documents — had violated the defendants’ rights, and a retrial began in November last year.

“At the end of the retrial, the judges ruled to annul the previous court decision in favor of acquittal for all defendants,” lawyer Celal Ulgen told Reuters.

The alleged plot was said to include plans to bomb mosques and trigger a conflict with Greece by shooting down one of Turkey’s own warplanes, paving the way for a military takeover.

Turkish officials suggested evidence in the case had been manipulated by supporters of an Islamic cleric who had been using his influence in the police and judiciary to help Erdogan break the army’s power.

When the court is saying that the evidence is “Mishandled”, I think that this is a polite way of saying that prosecutors made sh%$ up.

Erdogan certainly had reason to be concerned in 2003, there is a long history of coups in Turkey, but these charges appear to be trumped up.

Seriously, bombing mosques and shooting down their own airplanes?

Now that Erdogan appears to be taking an increasingly anti-democratic stance toward governance, it is significant that the court still acquitted these officers.

The power of the army is still broken, which is a good thing, but Turkey does seem to be headed down a troubling path.

Amazon is Evil, Part XXIII

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It turns out that the company which makes minimum wage workers spend nearly an hour unpaid waiting to be searched while leaving their warehouses, is now making those workers sign 18 month non-compete agreements:

Amazon is the country’s largest and most sophisticated online retailer, but it still runs largely on manual labor. Scattered around the country are massive warehouses staffed by workers who spend their days picking objects off shelves and putting them in boxes. During the holiday season, the company calls on a huge reserve army of temporary laborers.

The work is repetitive and physically demanding and can pay several dollars above minimum wage, yet Amazon is requiring these workers — even seasonal ones — to sign strict and far-reaching noncompete agreements. The Amazon contract, obtained by The Verge, requires employees to promise that they will not work at any company where they “directly or indirectly” support any good or service that competes with those they helped support at Amazon, for a year and a half after their brief stints at Amazon end. Of course, the company’s warehouses are the beating heart of Amazon’s online shopping empire, the extraordinary breadth of which has earned it the title of “the Everything Store,” so Amazon appears to be requiring temp workers to foreswear a sizable portion of the global economy in exchange for a several-months-long hourly warehouse gig.

The company has even required its permanent warehouse workers who get laid off to reaffirm their non-compete contracts as a condition of receiving severance pay. When Amazon shut down a massive warehouse in Coffeyville, Kansas, earlier this year, hundreds of employees lost work. One laid-off warehouse worker, who earned just over $12 an hour unloading inbound freight at the Coffeyville facility, showed The Verge a clause in her severance agreement that admonished her to “fully comply” with the noncompetition agreement. This worker wished to remain anonymous because of a non-disclosure agreement she signed with Amazon.

………

Starr, who reviewed the Amazon agreement, said that while attorneys may differ in their interpretations on which services count as having been “supported” by a warehouse employee, the 18-month duration seems “incredibly long,” especially for a temporary job. In the case of a stint lasting three months, the restrictions would stretch six times longer than the actual length of employment, Starr noted in an email. “A restriction like this could only be credible if the type of information the individual learned in a short time could be very damaging to the firms.”

Yet Garden, the Seattle University law professor, notes that such a contract being legally enforceable may in fact be entirely beside the point in a low-wage workplace. “One way to look at this is as a kind of invidious approach to having workers sign a contract that is very likely to be unenforceable,” Garden says. “Knowing that people who have been working for 10 and 11 dollars an hour are not going to be able to hire a lawyer to fight for them later on.“

(emphasis mine)

And this last bit is what these non-competes are all about: preying on the weakest and least knowledgeable of their employees in order to maintain a state of serfdom.

It makes Walmart look like Ralph Nader.

Here’s hoping that there is a lawyer out there who can find a way to use the RICO law against the motherf%$#ers.

OK, This Idea Makes Sense

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It is clear that Elizabeth Warren is not interested in running for President.

It is clear that Elizabeth Warren does not want to run for President.

However, with Harry Reid retiring, the recent moves by liberal organizations to promote Elizabeth Warren as the next Democratic Senate leader seems a good idea.

Unfortunately, Warren appears to have eschewed this idea:

Senate Minority Leader Harry Reid’s (D-Nev.) announcement Friday that he will not seek reelection next year has progressive groups licking their chops at the prospect of seeing Sen. Elizabeth Warren (D-Mass.) as the Democratic leader.

New York Sen. Charles Schumer, currently Democrats’ No. 3 in the Senate, is the heavy favorite to succeed Reid, but progressive groups have other ideas.

Democracy for America (DFA) is urging Warren to run for president, but says that if she passes, they’d back her or someone from her wing of the party as the next Democratic leader in the Senate.“There are real concerns about whether Chuck Schumer should be the frontrunner for leadership in the Senate among progressives,” DFA spokesman Neil Sroka told The Hill. “The Wall Street wing of the party, that Chuck has been close to, is dying, and the Warren wing is rising. So if Sen. Warren chooses not to run for president … she should run for leader of the Senate. She’d make a great leader.”

The Progressive Change Campaign Committee echoed that sentiment, predicting the race for Democratic leader won’t be a coronation for the establishment members of the party believed to be next in line.

“Her lifetime of fighting for the little guy against Wall Street power … shows she can think big, wage tough fights against powerful interests, and win key votes in the Senate,” the PCCC said in a statement. “She’s the definition of a leader. … There will likely not be a coronation to replace Harry Reid as Senate Democratic Leader, and Elizabeth Warren is right up there with others as someone who would be taken very seriously.”

Warren’s office on Friday morning said she would not run for the leader’s spot.

(emphasis mine)

I really do hope that it is someone other than Chuck Schumer though, he is basically Wall Street’s rent boy.

Indiana is in for a Lot of Well Deserved Hurt

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First, notwithstanding claims that the Indiana law is just the same as the federal Religious Freedom Restoration Act and other state’s laws that require a compelling state interest to interfere with religious observance, the Indiana law is far more extreme:

No one, I think, would ever have denied that Maurice Bessinger was a man of faith.

And he wasn’t particularly a “still, small voice” man either; he wanted everybody in earshot to know that slavery had been God’s will, that desegregation was Satan’s work, and the federal government was the Antichrist. God wanted only whites to eat at Bessinger’s six Piggie Park barbecue joints; so His servant Maurice took that fight all the way to the U.S. Supreme Court, which in 1968 decided that his religious freedom argument was “patently frivolous.”

………

That’s a good background against which to measure the uproar about the Indiana Religious Freedom Restoration Act, which was signed into law by Governor Mike Pence last week. I don’t question the religious sincerity of anyone involved in drafting and passing this law. But sincere and faithful people, when they feel the imprimatur of both the law and the Lord, can do very ugly things.

There’s a factual dispute about the new Indiana law. It is called a “Religious Freedom Restoration Act,” like the federal Religious Freedom Restoration Act, passed in 1993.* Thus a number of its defenders have claimed it is really the same law. Here, for example, is the Weekly Standard’s John McCormack: “Is there any difference between Indiana’s law and the federal law? Nothing significant.” I am not sure what McCormack was thinking; but even my old employer, The Washington Post, seems to believe that if a law has a similar title as another law, they must be identical. “Indiana is actually soon to be just one of 20 states with a version of the Religious Freedom Restoration Act, or RFRA,” the Post’s Hunter Schwarz wrote, linking to this map created by the National Conference of State Legislatures.

The problem with this statement is that, well, it’s false. That becomes clear when you read and compare those tedious state statutes. If you do that, you will find that the Indiana statute has two features the federal RFRA—and most state RFRAs—do not. First, the Indiana law explicitly allows any for-profit business to assert a right to “the free exercise of religion.” The federal RFRA doesn’t contain such language, and neither does any of the state RFRAs except South Carolina’s; in fact, Louisiana and Pennsylvania, explicitly exclude for-profit businesses from the protection of their RFRAs.

The new Indiana statute also contains this odd language: “A person whose exercise of religion has been substantially burdened, or is likely to be substantially burdened, by a violation of this chapter may assert the violation or impending violation as a claim or defense in a judicial or administrative proceeding, regardless of whether the state or any other governmental entity is a party to the proceeding.” (My italics.) Neither the federal RFRA, nor 18 of the 19 state statutes cited by the Post, says anything like this; only the Texas RFRA, passed in 1999, contains similar language.

 ………

So, let’s review the evidence: by the Weekly Standard’s definition, there’s “nothing significant” about this law that differs from the federal one, and other state ones—except that it has been carefully written to make clear that 1) businesses can use it against 2) civil-rights suits brought by individuals.

Of all the state “religious freedom” laws I have read, this new statute hints most strongly that it is there to be used as a means of excluding gays and same-sex couples from accessing employment, housing, and public accommodations on the same terms as other people. True, there is no actual language that says, All businesses wishing to discriminate in employment, housing, and public accommodations on the basis of sexual orientation, please check this “religious objection” box. But, as Henry David Thoreau once wrote, “Some circumstantial evidence is very strong, as when you find a trout in the milk.”

So—is the fuss over the Indiana law overblown?

No.

The statute shows every sign of having been carefully designed to put new obstacles in the path of equality; and it has been publicly sold with deceptive claims that it is “nothing new.”

Being required to serve those we dislike is a painful price to pay for the privilege of running a business; but the pain exclusion inflicts on its victims, and on society, are far worse than the discomfort the faithful may suffer at having to open their businesses to all.

As the story of Maurice Bessinger shows us, even dressed in liturgical garments, hateful discrimination is still a pig.

The response has been outrage and boycotts:

Pence has been suggesting that there might be some tweaks made, but so far no one is buying this.

Here is hoping that the anti-gay bigots get their clocks cleaned over this.

This is a Very Good Idea

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For many years, the Department of Defense’s spending has been so byzantine that it has been impossible to conduct a meaningful audit of their spending.

a bipartisan group of Senators has put forward a bill that would strip the Pentagon of authority if this situation continues:

A bipartisan group of senators has introduced legislation that would impose penalties on the Defense Department if the agency fails meet a legally mandated goal of being fully auditable by September 2017.

The bill – sponsored by Republican Sens. Ted Cruz (Texas) and Rand Paul (Ky.) and Democrats Joe Manchin (W.Va.) and Ron Wyden (Oregon) – calls for increased oversight every year the department fails to meet the target and would eventually strip the Pentagon’s ability to reprogram and transfer funds between its accounts.

“One of best ways to find the most accurate information about our military’s spending and priorities is to shed light on the Department of Defense budget without jeopardizing our national security secrets,” Manchin, a member of the Senate Armed Services Committee, said in a statement.

“It is simply unacceptable that the Department of Defense is the only major federal agency that has not completed a financial audit. Our bill will help to solve that problem,” he added.

Since 1997, the Government Accountability Office (GAO) has been required to audit the federal government’s consolidated financial statements, but the watchdog agency has repeatedly said its reviews of the Pentagon are not based on accurate data.

In 2010, it was determined that nearly $6 billion spent to improve the agency’s financial information was unsuccessful and GAO could not predict when the DOD would be able to provide these financial statements.

Considering that the volume of inefficiency, incompetence, and malfeasance in the Pentagon dwarfs that of the rest of the government, it’s a step in the right direction.

The defense budget, and particularly the portion dealing with procurement, is a complete mess.

Clearly, Regulatory Capture is a Myth

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What a regulator fellating the industry looks like

Matt Taibbi weighs in on comments made by Andrew Bowden, the SEC’s Director of the agency’s Office of Compliance Inspections and Examinations, at a Stanford Conference of private equity.

Bowdon’s comments are best described as obsequious, and unfortunately for him, it was caught on video:

This is courtesy of Yves Smith over at Naked Capitalism, who’s been following the strange story of SEC Examination chief Andrew Bowden’s evolving position on financial corruption for a while.
That story blew up recently in a remarkable public appearance by Bowden, in which the would-be enforcement official cravenly compliments the industry he supposedly polices and then — get this — jokingly puts forward his own son as a candidate for a job in private equity. On video. You won’t see a more brazen example of regulatory capture anywhere.

Some brief backstory. Just a little under a year ago, Bowden, the SEC’s Director of Compliance Inspections and Examinations, gave a speech that was remarkably, unusually critical of the Private Equity field. Bowden had conducted a study of the Private Equity business and found that over half of the companies they looked at were guilty of ripping off their clients:

By far, the most common observation our examiners have made when examining private equity firms has to do with the adviser’s collection of fees and allocation of expenses. When we have examined how fees and expenses are handled by advisers to private equity funds, we have identified what we believe are violations of law or material weaknesses in controls over 50 percent of the time.

To fully explain what Bowden is talking about here would require a much longer article, but the basics go something like this.

Private Equity reptiles like Mitt Romney make their living borrowing huge sums of money, millions and billions, from investors called “limited partners.” They then take that borrowed money and acquire companies with that cash, sometimes with the company’s consent, sometimes without it.

The ostensible object of the exercise (at least, this is the way folks in the Private Equity business would describe it) is to make money for the limited partners by acquiring flawed firms, turning them around, and channeling the profits from the reborn target firm back to the investors.

However, from another point of view, the more immediate object of the exercise is to make money for the Private Equity firm. This can be achieved in virtually countless ways once these takeover parasite-pirates have latched on to their target. But the most reliable way of making cash is to soak the acquired company for huge masses of fees, both legit and not.

………

Anyway, last year, Andrew Bowden at the SEC found that over half of the PE/LBO firms he looked at were doing something wrong with fees.

………

The scam here, as Yves Smith points out, is that the investors think that the Private Equity firm is paying for these managers, while in fact they’re being paid for by the acquired company. As Smith says, this scheme essentially robs the investors:

From an economic perspective, every dollar that comes out of a portfolio company this way is effectively stolen from the limited partner investors, since they would otherwise have the first claim on the portfolio companies’ cash flows.

All of which is a complicated way of saying the following: Takeover Artist Jerks use hidden fees to rip investors off.

Last May, Bowden, a senior SEC official, described this problem as almost epidemic. The SEC looked at 150 companies and over half were guilty of something.

A year later? They’re not so worried.

It raised some eyebrows over the course of last summer and fall when the SEC did not follow up on Bowden’s remarks.

Even some Private Equity trade publications began to wonder aloud where the beef was, noting that “there hasn’t been much additional commentary” from the SEC since Bowden’s aggressive speech last May.

Bowden himself seemed to walk back some of his comments in an interview last September. “Anecdotally,” he said, “I would say there have been some changes in the behavior on the part of funds and investors and that’s all for the good.”

Anecdotally? It is a very odd thing to hear a regulator in the middle of a granular, industry-wide examination say that he’s heard that things are getting better. Regulation by rumor is not your typical enforcement MO.

By this month, Bowden had achieved a complete 180, telling a conference of PE professionals that their business was just “the greatest.”

This is Bowden on March 5th, on a panel for PE and Venture Capital issues at Stanford. Check out how he pooh-poohs the fact that his SEC has seen “some misconduct,” before he goes on to grovel before his audience:

………

Not the usual posture you’d expect from an enforcement official. He likes the Private Equity business! They make a lot of money! They help people! And that thing about half of those businesses committing fee abuses, that’s just “some misconduct” we found last year. No big deal!

It got worse, though:

Bowden: And so my view on the small ones is, I still think this is one of…I tell my son, I have a teenaged son, I tell him, “Cole, you want to be in private equity. That’s where to go, that’s a great business, that’s a really good business. That’ll be good for you.”

So for me personally, as we share our opinions…

Questioner [interrupting] I’d love to hire your son, by the way. That’s a deal.

Bowden’s comments certainly raised a few eyebrows. The LA Times wrote quite critically about them, as did a few other outlets.

There are some people who will say it’s easy to overreact to something like this. If you listen to the tape, Bowden makes his comments in a joking manner, and everyone laughs. It’s not like he brought his son onstage and had him hand out resumes after the speech.

But no government regulator with his or her head screwed on correctly would ever go near a joke like that in public. Even if it’s not what it very much appears to be, it sounds incredibly bad.

And, worse, it reveals an attitude that’s absolutely poisonous among regulators, this fawning worship of people on Wall Street who maybe break a few rules, but that’s okay, because they make tons of money! Can you imagine Elliott Ness giving a speech gushing over what nice cars Al Capone drives? It’s revolting.

It’s not necessary for regulators to hate the greedy bottom-liners who go around toying with peoples’ jobs and livelihoods using borrowed money.

It’s not even necessary for regulators to hate those same rich takeover artists for paying half the taxes of most ordinary people, because our bought-off government refuses to close the loophole that allows Mitt Romney to call the money he makes “carried interest” instead of income.

We don’t need regulators to be out to get anyone. But is a healthy indifference too much to ask? Do we really need for even the regulators to slobber over these people?

Even if what he said was a joke, the fact that he could make this statement in a room full of potential targets for his investigations, it is a slam dunk for regulatory capture.

I don’t know if Andrew Bowden is particularly good at his job.

At this point, I don’t care.

His head needs to be metaphorically put on the end of a pike as a warning to others.

Fire him now.

Godwin’s Law* Notwithstanding, How can this Not Evoke Nazi Germany

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It turns out that for a number of years, the Nashville District Attorney’s office has been demanding sterilizations as a part of a plea bargain:

The district attorney in Nashville, Tennessee, recently ordered prosecutors to stop making sterilization part of a plea bargain. “The bottom line is the government can’t be ordering a forced sterilization,” Davidson County District Attorney Glenn Funk told the Associated Press in a story published Saturday.

Funk said a better alternative is to order people to stay away from children.

The most recent example of a court-ordered sterilization requirement in Tennessee came in the case of Jasmine Randers, 36, who suffers from depression and paranoia. The Nashville Tennessean reported Randers’ 4-day-old daughter died during a bus trip to Nashville from West Memphis, Arkansas, where she gave birth at Crittenden Regional Hospital. At the time, Randers was on the lam from a treatment center in Minnesota, one of 20 hospitalizations for her mental illness, the Tennessean reported earlier this month.

Though no cause of death was established, Randers was charged with aggravated child neglect. She had boarded the bus without any bottles of formula because they were too heavy to carry, the Tennessean said.

Assistant Public Defender Mary Kathryn Harcombe told the Tennessean that Assistant District Attorney Brian Holmgren would not even discuss a plea deal unless Randers agreed to have her tubes tied. Harcombe went over his head to Funk.

“I have let my office know that that is not an appropriate condition of a plea,” Funk said. “It is now policy that sterilization will never be a condition of deal-making in the district attorney’s office.”

Randers currently is committed to a mental health facility in western Tennessee.

David LaBahn, president of the national organization the Association of Prosecuting Attorneys, said his organization urges prosecutors to look for alternatives to prison, and in child abuse cases, birth control often is a condition for probation.

But the concept of forced sterilization evokes a time in U.S. history when the mentally ill often were subjected to the procedure.

“The history of sterilization in this country is that it is applied to the most despised people — criminals and the people we’re most afraid of, the mentally ill — and the one thing that these two groups usually share is that they are the most poor. That is what we’ve done in the past, and that’s a good reason not to do it now,” Georgia State University law Professor Paul Lombardo told the AP.

The AP cited cases in which sterilization was made a condition for eliminating or reducing prison time in West Virginia and Virginia. In California, Gov. Jerry Brown last year signed legislation preventing state prisons from forcing female inmates to undergo the procedure after an audit found some of the 150 sterilizations performed were done without inmate consent.

As is shown from the picture in this article, Ms. Randers is black.

Anyone want to guess what proportion of the other defendants so coerced were black?

This is so wrong on so many levels.

H/t Atrios.

*Godwin’s Law: “As an online discussion grows longer, the probability of a comparison involving Nazis or Hitler approaches One.”

Back from Elmira

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Natalie was most impressed with Elmira College.

She spent the night in a dorm and hung with some current students.

The area around there is lovely as well.

After the tour, we went to Corning, and saw the glass museum.

That being said, the trip was a little bit over 4 hours each way, and I did most of the driving.

At this point, I need an air pump to inflate my butt cheeks.

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