Category: Justice

Reviewing Stories Over the Past Year, This One Wins the Award for Best “A Good Start”

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I did not notice this story when the Global Post published it in April, but when they republished the fact that Vietnam is executing corrupt bankers, I felt kind of jealous:

Editor’s note: This story was first published on April 3, 2014. GlobalPost is featuring it again as one of our must-reads of 2014.

BANGKOK — For the most part, American bankers whose rash pursuit of profit brought on the 2008 global financial collapse didn’t get indicted. They got bonuses.
Odds are that scandal would have played out differently in Vietnam, another nation struggling with misbehaving bankers.


The authoritarian Southeast Asian state doesn’t just send unscrupulous financiers to jail. Sometimes, it sends them to death row.

Amid a sweeping cleanup of its financial sector, Vietnam has sentenced three bankers to death in the past six months.

One duo now on death row embezzled roughly $25 million from the state-owned Vietnam Agribank. Their co-conspirators caught decade-plus prison sentences.

 I do not approve of capital punishment, but this whole “Decades-plus prison sentence” thing?  That I wholeheartedly approve.

Dudes! Haven’t You Heard of the Streisand Effect?!?!?!*

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A 22-year old geek figured out a way to find some cheap airfares, and he set up a website, Skiplagged, which applies the algorithm.

What’s more, his site is free to the public.

Well, Orbitz and United Airlines decided that they had to go medieval on his ass, and roll out the lawyers, and so his site is now getting mainstream coverage, fom places like Fortune Magazine:

United Airlines and Orbitz have teamed up to file suit against a 22-year-old entrepreneur whose airline ticketing startup, Skiplagged, operates according to a thrifty booking ploy known as ‘hidden city’ ticketing.

This means that passengers purchase tickets for indirect flights with the intention to disembark at their layover destinations. Say you want to fly from New York to Chicago, for instance: it could be cheaper to take an indirect flight to Los Angeles and then get off at the Chicago layover.

While hidden city ticketing only works when travelers purchase one-way tickets without any checked baggage, notes CNN, this often represents the cheapest option.

 Yeah, CNN covered it too.

I was unaware of this technique, but I have now bookmarked the site, and I imagine that some of you will too.

Orbitz, United Airlines Sue 22-Year…

*Wherein an attempt to suppress information has the unintended effect of publicizing that information. (Link)

More Weirdness in the Anthrax Mailings

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It’s been a while since I’ve written about the issues with the FBI’s investigation of the Anthrax mailings, and now it appears that the GAO report on this matter has attracted the interest of The New York Times:

A congressional inquiry into the F.B.I.’s scientific work on the anthrax mailings of 2001 has identified major gaps in genetic evidence that purportedly links the germs to Bruce E. Ivins, the Army microbiologist blamed for attacks that killed five people, sickened 17 others and shook the nation.

The Government Accountability Office study, requested in 2010 and made public on Friday, echoes earlier criticism from the National Academy of Sciences. In 2011, its expert panel found that the bureau’s analysis of the genetic evidence “did not definitively demonstrate” a firm link between the mailed anthrax spores and a sample taken from Dr. Ivins’s laboratory at Fort Detrick in Maryland, and more generally was “not as conclusive” as the bureau had asserted.

The G.A.O. had better access to F.B.I. records and deepened the genetic critique, finding that the bureau’s investigation “lacked several important characteristics” that could have strengthened its case. “A key scientific gap,” the 77-page report said, was the bureau’s failure to investigate whether samples of anthrax spores could naturally mutate enough to obscure their putative links to Dr. Ivins.

I think that it is more than likely that Dr. Ivins was involved in the anthrax mailing.

I know that the FBI was flailing wildly, and was looking for anyone that they could finger as the perp, and Ivins was the 2nd person that the FBI aggressively harassed, the first being Steven Hatfill, and it appears that in both cases, the FBI was hoping for a suicide to end their search.

Corporate Purchase of the Criminal Justice System: MPAA Edition

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It appears that Google is involved in a pissing contest with the Mississippi Attorney General .

It appears that the latter is doing a cut and paste of MPAA legal filing.

Thankfully, the Sony hack has revealed these machinations:

Tensions between Google and Mississippi Attorney General Jim Hood exploded into public view this week, as Google filed court papers seeking to halt a broad subpoena Hood sent to the company.

 The Hood subpoena, delivered in late October, didn’t come out of nowhere. Hood’s investigation got revved up after at least a year of intense lobbying by the Motion Picture Association of America (MPAA). E-mails that hackers acquired from Sony Pictures executives and then dumped publicly now show the inner workings of how that lobbying advanced—and just how extensive it was. Attorneys at Sony were on a short list of top Hollywood lawyers frequently updated about the MPAA’s “Attorney General Project,” along with those at Disney, Warner Brothers, 21st Century Fox, NBC Universal, and Paramount.

 The e-mails show a staggering level of access to, and influence over, elected officials. The MPAA’s single-minded obsession: altering search results and other products (such as “autocompleted” search queries) from Google, a company the movie studios began referring to as “Goliath” in around February 2014. The studios’ goal was to quickly get pirated content off the Web; unhappy about the state of Google’s voluntary compliance with their demands and frustrated in their efforts at passing new federal law such as SOPA and PIPA, the MPAA has turned instead to state law enforcement.

 The most controversial elements of SOPA/PIPA would have let content owners effectively shut down websites they said were infringing their copyrights or trademarks. This already happens—think of various peer-to-peer sites that no longer exist—but it usually involves drawn-out litigation. SOPA promised a faster-moving process that would have essentially made rights holders a website’s judge, jury, and executioner.

 To get the same results in a post-SOPA world, MPAA has hired some of the nation’s most well-connected lawyers. The project is spearheaded by Thomas Perrelli, a Jenner & Block partner and former Obama Administration lawyer. Perrelli has given attorneys general (AGs) across the country their talking points, suggesting realistic “asks” prior to key meetings with Google. Frustrated with a lack of results, Perrelli and top MPAA lawyers then authorized an “expanded Goliath strategy” in which they would push the AGs to move beyond mere letter writing. Instead, they would seek full-bore investigations against Google.

 If the AGs felt short on resources—well, Hollywood studios could help with that. Money from Sony and other Big Six studios was available to draft the actual subpoenas, to research legal theories to prosecute Google, to spread negative press about the search giant, and to reach out to other state AGs that might join with Hood.

 ………

 One chain of e-mails among the MPAA and studio lawyers bears the subject line “STATE ATTORNEY GENERAL PROJECT” and focuses on how Google could be pressured into altering its search results, demoting or removing so-called “rogue sites” that host high levels of copyrighted context.

 Most notes on the project came from Vans Stevenson, the MPAA’s VP of state legislative affairs; higher-level updates were written by MPAA general counsel Steven Fabrizio or took the form of memos written by Perrelli. Most information about the AG project was shared with a group of more than 30 lawyers, including several from the MPAA and RIAA, as well as each of the six big studios, but some were kept to just general counsels and their immediate confidantes.

 “[Attorney] General Hood told me by e-mail today that his conversation ‘with Google’s General Counsel did not go well,’ and therefore he followed up with the letter that was sent yesterday,” Vans Stevenson informed the group in November 2013. “Hood also said he was organizing a meeting during the NAAG [National Association of Attorneys General] meeting next week in New Orleans with his outside counsel Mike Moore, former MS Attorney General. Also attending that meeting will be MPAA/RIAA outside counsel Tom Perrelli and others, ‘so we can discuss the next move,’ Hood wrote…. I will keep you advised of further developments.”

 The e-mail includes a letter from Hood to Google general counsel Kent Walker. It was published earlier this week by The New York Times, which reported that most of the letter was actually written by Perrelli’s law firm.

(emphasis mine)

Google counter-sued, which has the AG Hood calling for a timeout:

It appears that Mississippi Attorney General Jim Hood is making a strategic retreat in the wake of publicity about his investigation of Google.

On Friday morning, Google sued Hood, saying that a 79-page subpoena he had sent to the company was “punitive,” and violated Google’s First and Fourth Amendment rights. The company also pointed to recent press reports that showed Hollywood studios had lobbied heavily for the investigation.

Later that day, Hood sent a statement to The New York Times saying that he’s “calling a time out, so that cooler heads may prevail.” Hood says he wants to negotiate a “peaceful resolution to the issues affecting consumers” that he and other state AGs have pointed out in a series of letters.

Rather unsurprisingly, after the Mississippi AG told the press that he had received no funding from the MPAA, and challenged them to look, the press looked, and to no one’s surprise, they found MPAA money:

The saga of Mississippi Attorney General Jim Hood and his cozy ties to Hollywood continue to come out. He’s been claiming that, sure, he met with Hollywood’s top lawyer, Tom Perrelli, had him prep Hood for a meeting with Google, and even took a ~4,000 word angry letter that Perrelli wrote for him, signed it as his own and sent it to Google — but he did all that without knowing that Perrelli worked for Hollywood’s top lobbying arm, the MPAA. Uh huh.

And then in a press conference, he insisted that he was doing this out of his own interest in protecting the children — but also admitted that his office didn’t have any intellectual property experts and didn’t have a million dollars to do an investigation (approximately the amount the MPAA’s leaked emails show them discussing to fund this investigation) and that he needed to rely on such help from “victims” to make his case. It’s fairly rare, though, that “victims” of a crime run the actual law enforcement investigation and fund it as well.

Still, in that last post, we also mentioned how Hood implied that anyone suggesting he was “paid off” might be defaming him, and apparently also stated that he wasn’t getting any money from Hollywood, encouraging reporters to “check records.”

Okay then. Let’s… check the records. Here, for example, is the MPAA’s Political Action Committee apparently giving $2,500 to an operation called “The Friends of Jim Hood.”

And, you can also look at the public record of who donated to his campaign, which pretty clearly shows donations to his campaign from NBC Universal and 20th Century Fox.

And it goes on and on.

One big take away about all this is that the leaked emails reveal that the Hollywood studios long term goal is to break DNS:

Most anti-piracy tools take one of two paths: they either target the server that’s sharing the files (pulling videos off YouTube or taking down sites like The Pirate Bay) or they make it harder to find (delisting offshore sites that share infringing content). But leaked documents reveal a frightening line of attack that’s currently being considered by the MPAA: What if you simply erased any record that the site was there in the first place?

A bold challenge to the basic engineering of the internet

To do that, the MPAA’s lawyers would target the Domain Name System (DNS) that directs traffic across the internet. The tactic was first proposed as part of the Stop Online Piracy Act (SOPA) in 2011, but three years after the law failed in Congress, the MPAA has been looking for legal justification for the practice in existing law and working with ISPs like Comcast to examine how a system might work technically. If the system works, DNS-blocking could be the key to the MPAA’s long-standing goal of blocking sites from delivering content to the US. At the same time, it represents a bold challenge to the basic engineering of the internet, threatening to break the very backbone of the web and drawing the industry into an increasingly nasty fight with Google.

One final note, it appears that various legislators and Attorneys General are trying to restrict the practice of AGs getting secret funding from industry to prosecute cases.

Notice however how the New York Times story completely avoids mention that the MPAA was literally writing an AG’s legal documents:

In state legislatures and major professional associations, a bipartisan effort is emerging to change the way state attorneys general interact with lobbyists, campaign donors and other corporate representatives.

This month, during a closed-door meeting of the National Association of Attorneys General, officials voted to stop accepting corporate sponsorships. In Missouri, a bill has been introduced that would require the attorney general, as well as certain other state officials, to disclose within 48 hours any political contribution worth more than $500. And in Washington State, legislation is being drafted to bar attorneys general who leave office from lobbying their former colleagues for a year.

Perhaps most significant, a White House ethics lawyer in the administration of George W. Bush has asked the American Bar Association to change its national code of conduct to prohibit attorneys general from discussing continuing investigations or other official matters while participating in fund-raising events at resort destinations, as they often now do. Those measures could be adopted in individual states.

The actions follow a series of articles in The New York Times that examined how lawyers and lobbyists — from major corporations, energy companies and even plaintiffs’ law firms — have increasingly tried to influence state attorneys general.

These outside players have tried to shut down investigations, enlist the attorneys general as partners in litigation, or use their clout to try to block or strengthen regulations emerging from Washington, the investigation by The Times found.

While it may be a stretch to say that a lot of state Attorneys General are for sale, they certainly appear to be for rent.

Don’t Jump to Conclusions on the Sony Hack

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Bruce Schneier, perhaps the most prominent security pundit in the world, is dubious about the FBI’s claim that the DPRK is behind the Sony Hack, while Kurt Stammberger, the senior VP Norse, a cybersecurity firm, insists that all evidence points to an internal hack:

Cybersecurity experts are questioning the FBI’s claim that North Korea is responsible for the hack that crippled Sony Pictures. Kurt Stammberger, a senior vice president with cybersecurity firm Norse, told CBS News his company has data that doubts some of the FBI’s findings.

“Sony was not just hacked, this is a company that was essentially nuked from the inside,” said Stammberger.

While Norse is not involved in the Sony case, it has done its own investigation.

“We are very confident that this was not an attack master-minded by North Korea and that insiders were key to the implementation of one of the most devastating attacks in history,” said Stammberger.

He says Norse data is pointing towards a woman who calls herself “Lena” and claims to be connected with the so-called “Guardians of Peace” hacking group. Norse believes it’s identified this woman as someone who worked at Sony in Los Angeles for ten years until leaving the company this past May.

I’m inclined not to believe the official story from the FBI.

The sketchy accounts currently given by the FBI seem to indicate that they worked backward, starting with the guilt of North Korea, and then picking and choosing evidence on that basis.

Here is an Interesting Jurisdictional Conundrum

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The Department of Justice has subpoenaed some Microsoft emails, and the Redmond Borg has objected because the emails in question are on a server in Ireland:

The Irish government today supported Microsoft in its ongoing fight against US prosecutors – who appear to want access to server hard drives anywhere in the world.

Microsoft has garnered serious backing from the technology industry in its case against American investigators. The Feds believe they have the right to access emails stored on Microsoft’s servers in Ireland; Uncle Sam thinks it can lawfully tap up any US company for information, regardless of where that info is stored.

The Feds wants the messages to prosecute a drug case, and obtained a simple search warrant served against Microsoft in New York, rather than approaching the Irish government and its courts for help. If the US govt wins the case, which is being played out in the aforementioned state, it will effectively mean that Microsoft’s cloud data stored around the world can be read at will by US g-men.

Now the Irish government has filed an amicus curiae brief [PDF] supporting Microsoft’s position. If the US government wants information on servers overseas, it should go through existing treaties rather than just expecting to snatch the bytes with a US-issued search warrant.

This is not a big deal from a procedural standpoint: It really would not take much longer to make existing treaty mechanism, but it is from a business perspective, because, should the DoJ prevail, it will be yet another reason for foreign customers to flee American cloud providers.

The degree to which the US state security apparatus attempts to eschew treaty based in attempt to be bad-ass borders on the pathological.

The Tor Anonymity Network Just Got Hacked by Law Enforcement

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Paul Carr at Pando has been writing a lot about potential security issues with TOR, both issues with the ties between the founders and the US state security apparatus, and possible technical issues.

One of the ones that he has mentioned is the compromise of their exit nodes or their directory authorities.

It now appears that a large cluster of exit nodes has been seized by the authorities:

Earlier this week, we reported on an apparent threat by an unnamed agency to disable the Tor anonymity network.

According to founder Roger Dingledine:

The Tor Project has learned that there may be an attempt to incapacitate our network in the next few days through the seizure of specialized servers in the network called directory authorities.

This is not the current problem though,  it appears that some of the exit nodes have been seized by the authorities:

Today, Thomas White who operates “a large exit node cluster for the Tor network and [a] collection of mirrors,” reports that his servers have apparently been compromised.

Tonight there has been some unusual activity taking place and I have now lost control of all servers under the ISP and my account has been suspended. Having reviewed the last available information of the sensors, the chassis of the servers was opened and an unknown USB device was plugged in only 30-60 seconds before the connection was broken. From experience I know this trend of activity is similar to the protocol of sophisticated law enforcement who carry out a search and seizure of running servers.

White warns “Do NOT use my mirrors/services until I have reviewed the situation,” adding:

At this moment in time I am under no gagging orders or influence from external parties/agencies. If no update is provided within 48 hours you may draw your own conclusions.

Needless to say if you rely on TOR for some sort of crucial secure communications, I would suggest that you find some other method, or go dark, over the short term.

I know a guy with a carrier pigeon.

Another Statement of Obama’s that is “Inoperative”*

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Cliff Stone, who worked with the State Department finding places to send innocent Guantánamo detainees once they were cleared for released, has resigned in the slow pace of releases:

The State Department envoy who negotiates detainee transfers from the military prison at Guantánamo Bay, Cuba, is resigning, dealing another blow to President Obama’s efforts to close a facility that top administration officials say is a blight on the country’s international standing.

The resignation of Cliff Sloan, a close confidant of Secretary of State John Kerry, comes as officials at the State Department and the White House have increasingly expressed frustration with the Defense Department’s slow pace of transferring approved prisoners.

In an interview on Monday, Mr. Sloan denied that he was leaving because he was frustrated by foot-dragging at the Pentagon. He said he had always intended to stay a maximum of 18 months, noting that he was right on schedule.

“Frustration with the Defense Department’s slow pace of transferring approved prisoners,” my ass.

The military is not a democracy. Barack Obama is commander-in-chief.

If someone is dragging their feet, Obama can fire them.

What’s more, I would argue that he has a moral obligation to fire them.

Guantánamo is more than a moral cancer on America. It is a source of outrage in the Arab world, and is one of the most power recruiting tools that Jihadis have.

*Yes, I am invoking the memory of former Nixon Press Secretary Ron Ziegler.

It’s Been 6 Years, and Finally a Regulator Forces a CEO to Resign

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Rather unsurprisingly, the regulator in question, is New York Superintendent of Financial Services Benjamin Lawsky, who has had nothing to do with the Obama administration.

He went after the astonishingly corrupt and incompetent mortgage servicer Ocwen, and uncovered self-dealing by the CEO that forced his resignation.

It would have been nice if William Erbey were breaking rocks somewhere, but it is a start:

Let’s say you run a company whose misdeeds are splashed across the front pages of the business section on an almost weekly basis. You might reasonably expect to be fired without delay. But then let’s also stipulate that you’re in the financial services industry. Recent history suggests you’ll be able to keep your job and your handsome bonus, and that even if law enforcement officials penalize the company for improprieties, somebody else—like your shareholders— will pay those fines, leaving you to continue your charmed life unscathed.

 William Erbey, the billionaire chairman of the mortgage servicing giant Ocwen, probably thought that would be his fate as well, but he didn’t anticipate the determination of New York Superintendent of Financial Services Benjamin Lawsky. On Monday, Lawsky announced Erbey would step down chairman of Ocwen and four related businesses, as part of the settlement of an investigation into the company’s sad enduring legacy of ripping off homeowners.

 It isn’t a prison sentence. But on the spectrum of accountability for financial industry executives, “forced to resign” beats “suffered no consequences while staying in power.”

 Lawsky has been chasing Ocwen for several years. A mortgage servicer handles day-to-day operations on loans, from collecting monthly payments to making decisions after a default. Ocwen has grown almost ten-fold since 2009 by purchasing the rights to service distressed loans from the likes of JPMorgan Chase, Bank of America, and Ally Bank. Big banks have engaged in a fire sale of their mortgage servicing rights, because of increased compliance standards for servicing, and because of new bank capital rules that make servicing loans costly. As a non-bank, Ocwen has more wherewithal to handle mortgage servicing, and this has made it the 4th-largest servicer in America. ………

 ………

 The federal Consumer Financial Protection Bureau found similar problems with Ocwen and reached an agreement on a $2.1 billion settlement. But most of the money went toward modifying loans that Ocwen serviced but didn’t own, allowing it to pay the fine with other people’s money.

 More recently, Lawsky uncovered more Ocwen secrets. He discovered that four other public companies chaired by Ocwen chairman William Erbey have close business relationships with the mortgage servicer (Erbey is also the largest individual shareholder for all the companies). One subsidiary hosts nearly all of Ocwen’s online auctions; another handles all Ocwen post-foreclosure real estate transactions. So Ocwen profits by funneling default-related business to closely associated companies, providing an incentive to push borrowers into default.

 Lawsky also found that Ocwen backdated letters to borrowers, making it impossible for them to challenge denials of their mortgage modifications within a specific time frame. He also investigated whether Ocwen stalled short sales, where homes get sold for less than the balance on the mortgage, in order to collect additional fees.

And here is the special sauce:

This time, Lawsky did not spare top executives. Erbey will resign both Ocwen and the four related companies by January 16, and subsequently hold “no directorial, management, oversight, consulting, or any other role at Ocwen or any related party.” Any other Ocwen employees also working for one of the other four companies will have to drop those responsibilities.

 Under the agreement, Ocwen will add two new independent board positions, and an Operations Monitor will work directly with the board on oversight functions, and determine whether other senior management will have to be fired. Ocwen cannot acquire other mortgage servicing rights without the consent of the Operations Monitor.

 Ocwen will also pay $150 million to New York homeowners harmed by the company. Instead of a “soft-dollar” promise of mortgage modifications that Ocwen can pass on to the owners of the loans they service, these are cash penalties—$100 million to the Department of Financial Services for housing counseling and community redevelopment programs, and $50 million to be split by Ocwen foreclosure victims, with $10,000 for each borrower on whom Ocwen completed foreclosure, and the rest handed out to those with active foreclosures in process. Ocwen will also have to re-evaluate borrowers in foreclosure after paying the penalty, “in light of their improved financial condition resulting from such payment.”

Ocwen cannot take a tax deduction on any of these payments, per the agreement. The company also agreed to provide all of its New York borrowers with their complete loan files upon request, along with assurances to detail reasons for any denials of mortgage relief. As the loan files represent evidence in private borrower misconduct litigation, it could expose Ocwen to further legal headaches.

Seriously, if there had been any appetite for even a cursory investigation of the banksters by Obama and His Evil Minions™, we would have seen a lot more of this.

Then again, if we did that, Obama would not be able to get his 6 figure speaking gigs from Wall Street execs when he leaves offices.

One has to have priorities.

Welcome to the Handmaiden’s Tale

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A judge in Minnesota just gave a free pass to employers who don’t want to cover contraceptives. I’m wondering when a Jehovah’s Witness gets to deny coverage for blood transfusions:

A federal judge in Minneapolis ruled Monday that the owner of Hastings Ford and Hastings Chrysler Center does not have to pay for health insurance coverage for certain contraceptives such as Plan B, ella emergency contraceptive and certain kinds of IUDs.

Douglas Erickson said in a lawsuit that contraceptives that prevent a fertilized egg from being implanted in a woman’s uterus violate his belief that life begins at conception. Erickson’s businesses have 63 full-time employees and about 15 part-timers.

The ruling by U.S. District Judge Paul Magnuson is the latest in a string of decisions involving family-owned businesses that have sued to become exempt from a portion of the federal Affordable Care Act because of their religious beliefs.

………

Planned Parenthood of Minnesota and North and South Dakota issued a statement Tuesday after the ruling became public.

“It’s unbelievable that we are still fighting for access to birth control in 2014, with some politicians who want to get rid of the birth control benefit completely,” the statement said. “We know firsthand that access to birth control is both a health care and economic concern for women.”

Here’s a hearty f%$# you to the Supreme Court over the Hobby Lobby decision.

Not Enough Bullets

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As former federal regulator Bill Black notes, the second circuit court decision effectively legalizes insider trading:

We know that insider trading is an activity in which cheaters prosper. We know that Wall Street and the City of London are dominated by a fraudulent culture and we know that firm culture is set by the officers that control the firm. We know that the Department of Justice (DOJ) has allowed that to occur by refusing to prosecute any of the thousands of senior bank officers who became wealthy by leading the three most destructive financial fraud epidemics (appraisals, “liar’s” loans, and fraudulent sales of these fraudulently originated mortgages to the secondary market) in history. No one is surprised that Wall Street’s elites have also engaged in widespread efforts to rig the stock markets so that they can shoot fish in the barrel through insider trading. Unlike the three fraud epidemics, one DOJ office, the Southern District of New York, has brought a series of criminal prosecutions against these officers.

 Wall Street’s court of appeals (the Second Circuit) has just issued an opinion not simply overturning guilty verdicts but making it impossible to retry the elite Wall Street defendants that grew wealthy through trading on insider information. Indeed, the opinion reads like a roadmap (or a script) that every corrupt Wall Street elite can follow to create a cynical system of cutouts (ala SAC) that will allow the most senior elites to profit by trading on insider information as a matter of routine with total impunity. The Second Circuit decision makes any moderately sophisticated insider trading scheme that uses cutouts to protect the elite traders a perfect crime. It is a perfect crime because (1) it is guaranteed to make the elite traders who trades on the basis of what he knows is secret, insider information wealthy absent successful prosecutions and (2) using the Second Circuit’s decision as a fraud roadmap, an elite trader can arrange the scheme with total impunity from the criminal laws. The Second Circuit ruling appears to make the financial version of “don’t ask; don’t tell” a complete defense to insider trading prosecutions. The Second Circuit does not simply make it harder to prosecute – they make it impossible to prosecute sophisticated insider fraud schemes in which the elites use junior cutouts to create (totally implausible) deniability.

The New York Times article on the decision was entitled “Two Insider Trading Convictions Are Overturned in Blow to Prosecutors.” The title is partially correct. The real blows, however, were to investors, the already crippled integrity of Wall Street, and every honest trader on Wall Street who cannot possibly compete with his rivals who cheat through the “sure thing” of insider trading now that the Second Circuit has written an opinion explaining how to corrupt the entire system with impunity from the criminal laws.

………

The Second Circuit decision admits that the prosecutors presented evidence established a massive conspiracy designed to allow Wall Street elites to profit by engaging in insider trading, a conspiracy that greatly enriched the defendants that were convicted in the case under appeal.

“At trial, the Government presented evidence that a group of financial analysts exchanged information they obtained from company insiders, both directly and more often indirectly. Specifically, the Government alleged that these analysts received information from insiders at Dell and NVIDIA disclosing those companies’ earnings numbers before they were publicly released in Dell’s May 2008 and August 2008 earnings announcements and NVIDIA’s May 2008 earnings announcement. These analysts then passed the inside information to their portfolio managers, including Newman and Chiasson, who, in turn, executed trades in Dell and NVIDIA stock, earning approximately $4 million and $68 million, respectively, in profits for their respective funds.”

The Second Circuit was not distressed that senior Wall Street officials received information that was clearly insider information that they knew they should not have access to. The insider information they were provided was the crown jewels – two major corporations’ soon to be announced “numbers” – at least one of which was sure to be a major surprise to the markets. A senior trader that knows “the number” in advance, particularly when he knows that the number will be a surprise, can shoot fish in a small barrel with a large shotgun. The insider information allows the senior trader to reduce the risk of loss to trivial levels while increasing the probability of gain to near certainty. The trader makes a fortune by cheating, not through any unusual skill. The senior trader knows that no employee of any publicly traded corporation is permitted to release such secret and proprietary insider information to investors.

The Second Circuit was not distressed that the senior Wall Street officials did not react to being provided what was clearly insider information by demanding to know how their analysts got the information and instructing them that their actions violated the firms’ ethical standards and would lead to their termination if it were ever repeated. The firm’s ethics manuals banned the senior traders from trading on the basis of insider information. Instead, of serving as ethical leaders in training the analysts not to engage in such behavior and instead of following their firm’s ban on trading on the basis of insider information, the senior officers engaged in a cynical financial version of “don’t ask; don’t tell.” The analysts and the senior officials that traded on the inside information understood the wisdom of the old line “ask me no questions and I’ll tell you know lies.” The senior officers proceeded to profit by exploiting this advantage over honest investors while minimizing the risk of a successful prosecution not by being ethical, but by consciously maintaining (not remotely) “plausible deniability.”

………

But worse will soon come. The Second Circuit’s decision is a “how to” manual on how elites Wall Streeters can become wealthy through insider trading with impunity from the criminal laws. The Second Circuit opinion shows that using a “cutout” is the key to achieve the “sure thing” of enormous wealth through insider trading without financial or legal risk. The Second Circuit lays out the game plan. The little folks in the organization develop the contacts with insiders in publicly traded firms. The analysts function initially like any good intelligence agent recruiting an asset. These assets have insider information of their employers, the publicly traded corporations. The analyst develops a rapport with the employee or exploits an existing tie. The analyst shows the employee a very good time – a taste of how good his life can be if he plays ball. But the analyst doesn’t make any explicit promises or deals. (In the case decided by the Second Circuit others cutouts earlier in the insider trading chain made the corrupt payments to the employees.) The Wall Street senior officers who grow wealthy by trading the insider information will make sure that the analysts are well cared for – discretely and at a later date.

The analyst then has to do one thing and avoid doing a second. Both are simple. The analyst needs to signal to his superior that the information is reliable. The government complaint against SAC show one the innumerable means of sending that signal. The government’s appellate brief contains the text of an email in which an analyst explicitly conveyed the reliable track record of the leakers of the inside information to the senior traders so that they could be sure they had a “sure thing” by investing on the basis of the inside information.

The analyst needs not to explicitly tell the senior officer conducting the trade that the insider information was the product of a deal in which the employee who leaks the insider information was explicitly promised a quid pro quo to the leaker. Again, the government complaint against SAC and the government appellate brief in the case reversed by the Second Circuit show in detail how simple it is to design systems of not making these matters explicit. That is why the Second Circuit ruling imperils prosecutions in every case in which the insider trading scheme was done with even modest cleverness.

………

The Second Circuit’s reasoning has the perverse effect that the more corrupt individuals engaged in the insider trading scheme the more likely the scheme is to be declared lawful as long as the traders use their corrupt colleagues as cutouts. Note that the Second Circuit reasoning does not simply make it harder to prosecute sophisticated insider trading schemes – it holds that the actions of the elite traders who know that they are achieving the “sure thing” of immense insider trading profits on the basis of deliberate leaks of that information are not unlawful and cannot be prosecuted. The Second Circuit has created the perfect crime and publicized how to shape the scheme to insure wealth and impunity through creating widespread chains designed to corrupt the markets, employees of the publicly traded corporations, and the Wall Street firms.

The tone of the opinion is particularly galling. The Second Circuit is not even mildly distressed by the result. It expresses disdain for the idea that Wall Street elites should not be able to enrich themselves with complete impunity from the laws through corrupt arrangements such as those proven at the trial. The opinion consciously deliberately creates a straw man argument designed to hide the fact that insider trading schemes of this make it impossible for honest competitors to prevail through skill and hard work.

I’m hoping that someone manages to take them down before the banksters destroy us all.

If This Isn’t Suborning Perjury, It’s Still a Violation of Legal Ethics

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One of the things that prosecutors are not supposed to do is to encourage a witness to lie. It’s called suborning perjury, and it is a crime.

On a marginally lower level of corruption and malfeasance is knowingly putting a witness on the stand who you know will lie.

In what is surprisingly unsurprising news, it turns out that the St. Louis prosecutors office called a witness to testify in the Michael Brown killing who they knew to be lying:

So, you are Prosecutor Bob McCulloch. You have a grand jury investigation with the entire world watching. One of your witnesses in support of the officer is revealed by the FBI to have made up her entire account. What do you do?

Apparently you present a discredited witness to the grand jury anyways. He played the FBI interview, which revealed that Witness 40’s car was not at the location, that 40 could not have exited in the manner described, that 40 did not even tell anyone her story until over two weeks after the shooting. They tore her apart, showing that she changed her story several times while sitting on the stand. For example, in her interview, 40 claimed to have made no contact to the police for two weeks, then later claimed that she did contact them several times before agreeing to be a witness. And that is not the only occasion they caught her changing her story, with other times her lack of knowledge of the crime scene, how her journal and testimony did not match, how the exit for the complex did not exist where she claimed all being revealed. That interview, found on pages 86-184 of Grand Jury Testimony Volume 15, completely discredits her as a witness.

Then, fully knowing this, Bob McCulloch brought her before the grand jury, and entered her hand written journals filled with racist language into the record. And this testimony, by a discredited witness, is the one cited by right-wing media outlets in their attempts to support former Ferguson officer Darren Wilson. Claims of Michael Brown charging like a bull? Her account, and only her account.

 Seriously, why does Bob McCulloch still have a law license?

Your Daily Update on Police Impunity

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Even Jon Stewart cannot handle this. No joke here.

The New York Daily News, a paper not generally considered a friend of the minority community, nor an adversary of the police department, is livid over the refusal of a Staten Island grand jury to indict officer Daniel Pantaleo for the killing of Eric Garner:

The grand jury’s vote to exonerate the police officer whose chokehold killed Eric Garner on Staten Island has glaring earmarks of a gross miscarriage of justice.

 The ruling is painfully far harder to understand than the Missouri grand jury’s decision not to indict for the death of Michael Brown in Ferguson.

 To a large degree, the evidence against Officer Daniel Pantaleo was widely scrutinized by the public in the form of a on-scene video posted to the Internet by the Daily News. The image of Pantaleo wrestling Garner to the ground with his arm around Garner’s neck was horrifying.

 Even granting that a cop has wide latitude in using force to make an arrest, Pantaleo’s sudden aggressiveness was unnecessary. The fact that it entailed a chokehold only reinforced the excessive quality of his actions.

 After the medical examiner found that a chokehold and chest compression led to Garner’s death, the connection between cause and effect seemed enough to many people not only to indict but to convict Pantaleo.

 Deep, intense skepticism about the grand jury’s ruling is fully warranted — while recognizing that no one other than the panel and Staten Island prosecutors have reviewed all the evidence and matched the facts against the law.

And then we have news on the shooting of 12-year old Tamir Rice.

It appears that, before he was hired as an officer by the Cleveland PD, Tim Loehmann was fired by the Independence, Ohio police department because he was mentally unfit:

Tim Loehmann, the Cleveland police officer who shot 12-year-old Tamir Rice to death last month, resigned from a smaller Ohio police force in 2012 after being found unfit for duty. Among other obviously disqualifying behavior, Loehmann was “distracted” and “weepy” during his firearm qualification session, according to just-released records from his brief tenure with the Independence police department.

“He could not follow simple directions, could not communicate clear thoughts nor recollections, and his handgun performance was dismal,” Independence Deputy Chief Jim Polak wrote in a letter on November 29, 2012, according to records obtained by the Northeast Ohio Media Group. “For these reasons, I am recommending he be released from the employment of the city of Independence. I do not believe time, nor training, will be able to change or correct these deficiencies.”

Polak also wrote that he believed there would certain situations during which Loehmann would “not react in the way instructed.”

………

The problems at Independence erupted on Nov. 28, 2012, the records say. Loehmann showed up “sleepy and upset” for a 6 a.m. state gun qualification session.

Tinnierello wrote that Loehmann “was distracted and was not following simple instructions” at the shooting range.

At one point, he went to the back of the range to reload his magazine and could not return to the line where he was supposed to shoot from, Tinnierello wrote. Loehmann appeared to be crying and was emotionally upset so Tinnierello said they would stop the exercise for the day.

Seriously?

This guy got hired by the Cleveland PD?

I would not hire him as a pastry chef!

Repeat after me:  Police cannot police themselves.

Allowing them to do so is an invitation to corruption and incompetence.

Only Took 3½ F%$#ing Years………

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In South Carolina, a former police chief was indicted on murder charges.

The alleged crime took place in 2011:

A white former police chief here was indicted on murder charges in the 2011 shooting death of an unarmed black man after an argument, a case that instantly drew comparisons to the Ferguson shooting and the chokehold death in New York.

 The indictment of Richard Combs, the former chief and sole officer in the small town of Eutawville (YOO’-tah-vihl), was released Thursday. He faces 30 years to life in prison if convicted in the death of Bernard Bailey.

 Combs’ lawyer accused prosecutors of taking advantage of national outrage toward police and the justice system to get the indictment.

 “He’s trying to make it racial because his timing is perfect,” attorney John O’Leary said. “He’s got all the national issues going on, so they want to drag him in and say, look what a great community we are here, because we’re going to put a police officer who was doing his job in jail for 30 years. That’s wrong. That’s completely wrong.”

 Prosecutor David Pascoe said he had always planned to seek a murder charge if a judge threw out the former chief’s “stand your ground” self-defense claim, which happened last month.

 Combs, 38, had previously been charged with misconduct in office for the shooting. He had faced up to 10 years in prison.

 The indictment is one of three this year for white officers in the shootings of unarmed black men in South Carolina, which has a dark and painful past of civil rights violence.

 The shooting happened in May 2011. Bailey’s daughter received a traffic ticket from the chief for a broken taillight and called her father to the scene. Bailey and Combs argued, but eventually went their separate ways. The police chief got an arrest warrant for Bailey for obstruction. A few days later, Bailey went to Town Hall to argue about his daughter’s ticket. When he showed up, the chief tried to arrest Bailey, a 6-foot-6 former prison guard.

 Prosecutors said Bailey marched back to his truck, and Combs tried to get inside to turn off the ignition. The two briefly fought, and Combs shot Bailey, 54, twice in the chest.

 Combs said he was tangled in Bailey’s steering wheel and feared for his life if Bailey drove away. Last month, a judge threw out his self-defense claim and ruled Combs should have let Bailey leave.

Seriously? 3½ years to indict this guy?

Still, this prosecutor did his job, as opposed to the St. Louis and Staten Island prosecutors, and in South Carolina of all places.

But it should not take 3½ years.

Here Are Some Great Suggestions to Fix Our Criminal Justice System

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Ian Welsh makes a number of cogent suggestions, including eliminating forfeiture laws, drug criminalization, RICO laws, etc., but there is one suggestion that stands out and shines like the sun:

If you really want to make the system work, make all private lawyers for criminal charges illegal, and use only public defenders, chosen by lot. I guarantee that the pay and competence of public defenders would soar and their case load would drop as soon as rich people realized that they could be the one being defended by an overworked and underpaid lawyer.

This is f%$#ing brilliant.

Read the rest.

Why the F%$# Do They Do This?

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It’s now been twice that the FEC ruling allowing for anonymously funded election ads has been ruled illegal:

A U.S. judge again tossed out a Federal Election Commission rule that allowed nonprofit groups running “issue ads” to keep their donors secret, in a setback for groups such as the U.S. Chamber of Commerce and Crossroads GPS.

U.S. District Judge Amy Berman Jackson in Washington said today that the rule is “arbitrary, capricious and contrary to law.” Jackson arrived at her decision a second time, after a Washington-based appeals court asked her to reconsider a 2012 order requiring disclosure of donor names.

At issue were FEC regulations adopted in 2007 that let organizations and nonprofit groups keep secret the names of donors who pay for issue ads during an election campaign. In her previous ruling, Jackson said the regulations clashed with requirements of the 2002 campaign-finance law known as McCain-Feingold, a finding she reiterated today.

Congress passed the disclosure rules “to ensure that members of the public would be aware of who was trying to influence their votes just before an election,” Jackson wrote. The FEC’s rule “thwarts that objective by creating an easily exploited loophole that allows the true sponsors of advertisements to hide behind dubious and misleading names,” she said.

………

The rules at issue today apply only to what are known as “electioneering communications,” or ads that run before an election and mention a federal candidate without urging a vote for or against the person. So-called independent expenditures, which advocate support for or opposition to a candidate, aren’t affected by the decision.

Seriously.

The Supreme Court specifically allowed for disclosure requirements in their Citizens United ruling, and we the law explicitly calls for disclosure, and we are still litigating this?

Would the federal courts please finish cock punching Karl Rove?

An Update on Ferguson

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First, when they say that a prosecutor can indict a ham sandwich, they ain’t kidding. For example, “According to the Bureau of Justice Statistics, U.S. attorneys prosecuted 162,000 federal cases in 2010, the most recent year for which we have data. Grand juries declined to return an indictment in 11 of them.”

Even with pre-indictment plea bargains, a grand jury no-billing is a very rare thing.

I was wrong about the DA not releasing the evidence from the grand jury proceedings, and it makes it even clearer that the fix was in.

During his testimony, Darren Wilson was allowed to blythly state the clearly racist trope that “Michael Brown looked like a demon:

St. Louis Public Radio published the full transcript of Wilson’s testimony Monday. The St. Louis County Prosecutor’s office released evidence from the grand jury proceedings after it was announced that no charges would be filed against Wilson.

 ………

 Wilson explained to jurors that in order to keep shielding his face from Brown’s punches, the only option available for him to defend himself was to pull out his gun. The officer struggled with Brown before he was able to fire the weapon, shattering glass from the police cruiser’s door panel.

 After that first shot went off, Wilson testified that Brown stepped back and “looked up at me and had the most intense aggressive face. The only way I can describe it, it looks like a demon, that’s how angry he looked.”

It appears that this is a variant of the “Magic Negro” trope that I was previously unaware of.

Then there was the evidence from “Witness #40”, in the form of a journal entry, which exactly verified Officer Wilson’s testimony, and dropped the N-word repeatedly.

The prosecution allowed this into evidence without any vetting or challenge from Prosecutor Robert McCulloch.

Also note that the ER report on Officer Wilson noted was in no distress when examined by doctors, that Wilson and Brown were the same size, and the medical examiner took no pictures because his camera battery was dead.

One final note: the behavior of prosecutor McCulloch was sufficiently odd, that both CNN and the New York Times noted that he behaved more like defense counsel than he did a prosecutor.

Furthermore, at the press conference announcing the grand jury decision, he appeared to have deliberately gone out of his way to sabotage any potential effort by the Department of Justice or a civil action by by publicly labeling witnesses who claimed that the shootings were not justified to be liars.

When juxtaposed with the fact that he appeared to have deliberately delayed the public release of the grand jury decision until a time calculated to maximize the possibility of civil unrest.

It might have been as a distraction from his document dump.

It might have been a way to dog-whistle his willingness to appease the racist sentiments of white voters in the county.

It might have been a fit of pique over having to convene a grand jury when he clearly did not want to do so.

In any case, I believe that a close investigation of the Saint Louis County Prosecutor’s office would reveal a pattern of ethically questionable actions, but it is clear that, with Eric Holder heading out the door and Barack Obama once again trying not to remind people that he is black, there will be no meaningful investigation of the prosecutor’s office.

Needless to say, I am appalled, though I am not surprised.

Welcome to Serfdom

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The latest case of non-compete agreement abuse, how about a $15-an-hour janitor?

Back in the spring, Benny Almeida was unemployed for a spell. So he took the first job offer that came his way — $15 an hour to work as a water-damage cleanup helper in Bellevue.

“At that point what savings I had was gone,” the 26-year-old says.

But three months into his work for ServiceMaster of Seattle, Almeida got a better offer. A rival firm he had also applied to called to say it now had a job opening — paying $18 an hour.

………

Sounds like your typical American free-enterprise story. Except Almeida either forgot or didn’t understand that he was part of the latest corporate fad in squeezing blue-collar workers: noncompete clauses even for low-wage jobs.

To get the $15-an-hour job last spring, Almeida was required to sign a “restriction on competition” clause that said if he leaves, he can’t work for two years for any firm doing similar work in ServiceMaster’s “geographic area” — which the company’s lawyer told me means King, Snohomish, Island, Yakima and Kittitas counties.

ServiceMaster of Seattle, a franchise in a $3.4 billion national corporation, now is trying to force Almeida to forfeit his $18-an-hour job at Superior Cleaning of Woodinville.

The noncompete clause would mean Almeida also couldn’t work in any water- or fire-damage job, janitorial, office cleaning, window washing, floor or carpet cleaning or other job ServiceMaster does.

“ServiceMaster of Seattle hereby demands that you immediately cease all employ with Superior Cleaning,” reads a “notice of violation” letter the company’s law firm wrote to Almeida (who lives with his aunt in Lynnwood).

I’m waiting for McDonald’s to claim that, “Do you want fries with that?” is a trade secret.

Seriously, where is Madam la Guillotine when you need her?

Well, Here is a Shocker

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When the Department of Justice investigated CIA torture, they never interviewed its victims:

As the US government prepares to defend its record on torture before a United Nations panel, five Libyan men once held without charge by the CIA say the main criminal investigation into allegations of detainee abuse never even interviewed them.

 The Libyans’ accusation reopens controversy over the 2012 pre-election decision by the prosecutor in the case not to bring charges against anyone involved in CIA abuse – an episode the US State Department has held up as an example of its diligence in complying with international torture obligations.

On Wednesday, a United Nations committee in Geneva is scheduled to hear a US delegation outline recent measures Washington has taken to combat torture. It will be the first update the US has provided to the committee since 2006, when the CIA still operated its off-the-books “black site” prisons. Human rights campaigners who have seen the Obama administration repeatedly decline to deliver justice for US torture victims consider it a belated chance at ending what they consider to be impunity.

 ………

That high-profile inquiry, conducted by assistant US attorney John Durham, wrapped in 2012 without bringing criminal charges against anyone involved in the deaths of two detainees in CIA custody. That decision, heralding the end of federal investigations for post-9/11 detainee abuse, was preceded by Durham’s 2011 announcement that he would not proceed past a “preliminary review” for 99 out of 101 cases of suspected CIA torture.

The State Department, in a 2013 written submission to the UN committee, referred to Durham’s team as “experienced professionals” that found the “admissible evidence would not be sufficient to obtain and sustain a conviction beyond a reasonable doubt.”

But the Libyans say that neither Durham nor his staff “ever sought or requested our testimony”.

What a surprise.  Obama and Holder’s “investigation” was a sham.

This is a feature, not a bug, just like his refusal to prosecute financial fraud of Wall Street.

Worst ……… Constitutional ……… Law ……… Professor ……… Ever

Rush Limbaugh is a Whiny Bitch, Part MMMMMMCMLXIX

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Yeah, he’s threatening to sue the DCCC over their use of his quotes in the last campaign:

Rush Limbaugh is hopping mad at the Democratic Party — but this time he’s threatening to do more than just talk about it on the radio.

The conservative pundit is threatening to sue the Democratic Congressional Campaign Committee for a series of fundraising e-mails that suggested Limbaugh was condoning campus rape in comments he made on his widely syndicated program on Sept. 15.

In a letter to the Washington-based organization intended for delivery Monday morning, Limbaugh’s lawyer demanded a retraction and a public apology for the fundraising e-mails. The letter indicated Limbaugh will sue for defamation and business “interference” if his demand isn’t met.

DCCC representatives were not available Monday; the organization’s offices are closed for the Veterans Day holiday.

The legal threat is the result of DCCC fundraising appeals sent out in the wake of Limbaugh’s on-air comments about a new policy at Ohio State University that instructs students to get verbal consent before having sex. The DCCC highlighted one particular sentence from his commentary — “How many of you guys . . . have learned that ‘no’ means ‘yes’ if you know how to spot it?” — saying it was tantamount to condoning sexual assault.

………

The legal threat is the result of DCCC fundraising appeals sent out in the wake of Limbaugh’s on-air comments about a new policy at Ohio State University that instructs students to get verbal consent before having sex. The DCCC highlighted one particular sentence from his commentary — “How many of you guys . . . have learned that ‘no’ means ‘yes’ if you know how to spot it?” — saying it was tantamount to condoning sexual assault.

Yeah, well I listened to what he said, and even if he weren’t a public figure, this would be laughed out of court, because, in the United States, the truth is always a defense against accusations of libel and slander.

As a public figure, there is no evidence of malice or a reckless disregard for the truth in this.

Also, considering how the DCCC did no November 4, why the f%$# would Limbaugh, who is Republican to his core want to force the Democratic party to change its strategy?

Seriously Rush, take one for the team, and man up.