Category: regulation

The Eu Gets Real, Beotches

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The EU has routinely insisted that in accordance with EU rules, countries in crisis have to impoverish their ordinary citizens, cutting wages and the social safety net.

Well it looks like the EU will start going after money for the big guys now with Eurocrats going after Ireland’s tax deal with Apple, and Luxemburg’s and the Netherland’s deals with FIAT and Starbucks:

In a warning shot to companies shopping for tax deals around the globe, the European Commission publicly accused Ireland on Tuesday of giving illegal subsidies to Apple and cautioned that the country might need to collect back taxes from the company, which outside analysts said could reach into the billions of dollars.

These findings, which constitute a preliminary indictment of Apple’s past arrangements with Ireland, come as policy makers in the United States and Europe try to block some of the inventive maneuvers multinationals use to limit taxes in their home countries and reduce their worldwide payments as much as possible.

“The light bulb has gone off that trade wars by another name and conducted through the tax system are just as ruinous,” said Edward D. Kleinbard, a professor at the University of Southern California’s Gould School of Law and a former chief of staff to the Congressional Joint Committee on Taxation.

And from the European lowlands:

The European Union is to accuse US tech giant Apple of taking illegal aid from the Irish state through sweetheart tax deals over two decades, the Financial Times reported Monday.

A European Commission investigation into Apple’s tax affairs in Ireland, where it has enjoyed a rate of less than 2.0 percent, found that the company benefitted from illegal state aid, the FT reported citing sources close to the matter.

Ireland’s Department of Finance confirmed that the EU would be publishing a document on Monday but stressed that “the Commission has not formally decided that there is state aid” at play.

“Ireland is confident that there is no breach of state aid rules in this case and has already issued a formal response to the Commission earlier this month, addressing in detail the concerns and some misunderstandings contained in the opening decision,” the department added.

The European Union launched a probe in June into sweetheart tax deals negotiated by Apple, Starbucks and Fiat with three member states.

The investigation seeks to determine whether such arrangements offered by Ireland, Netherlands and Luxembourg give the companies an unfair competitive advantage and thus amount to illegal state aid.

Here’s a phrase that I did not expect to say, “Good job, European Union Bureaucrats.”

Follow this to its logical conclusion, please, and ban this sh%$.

Everyone but the corporations lose in this beggar thy neighbor strategy, and besides, Ireland really needs the money.

For the Past two Decades or so, not Having a Substantive Conflict of Interest Policy has been Goldman’s Business Model

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In looking at the recent ProPublica and This American Life coverage of the capture of the Federal Reserve regulators by the Vampire Squid (Goldman Sachs) it’s important to note that they miss a basic point, which is that, as
Justin Fox so ably points out in the Harvard Business Review, Goldman Sachs has been using conflicts of interest as a mechanism to generate much, if not most of their profits.

I recommend that you read the ProPublica story, and then listen to the This American Life podcast, but Mr. Fox does make a legitimate complaint about the coverage.

Specifically one of the big reveals is that a Goldman executive said that consumer protection laws do not apply to rich clients.

This is in fact true under US law:

In the first, Carmen Segarra, the former Fed bank examiner who made the tapes, tells of a Goldman Sachs executive saying in a meeting that “once clients were wealthy enough, certain consumer laws didn’t apply to them.”  Far from being a shocking admission, this is actually a pretty fair summary of American securities law. According to the Securities and Exchange Commission’s “accredited investor” guidelines, an individual with a net worth of more than $1 million or an income of more than $200,000 is exempt from many of the investor-protection rules that apply to people with less money. That’s why rich people can invest in hedge funds while, for the most part, regular folks can’t. Maybe there were some incriminating details behind the Goldman executive’s statement that alarmed Segarra and were left out of the story, but on the face of it there’s nothing to see here.

The theory here is that the very rich, by virtue of having a lot of money, are assumed to be knowledgeable investors, and so are more able to protect themselves.

Simply put, they are saying that they are not the general public, because they either have, or can hire, financial knowledge.

In highlighting this, they underplay the 2nd reveal of the story, and what is clearly the reason for Ms. Segarra’s unjustified termination, the fact that Goldman Sachs never had a meaningful conflict of interest policy:

The other smoking gun is that Segarra pushed for a tough Fed line on Goldman’s lack of a substantive conflict of interest policy, and was rebuffed by her boss. This is a big deal, and for much more than the legal/compliance reasons discussed in the piece. That’s because, for the past two decades or so, not having a substantive conflict of interest policy has been Goldman’s business model. Representing both sides in mergers, betting alongside and against clients, and exploiting its informational edge wherever possible is simply how the firm makes its money. Forcing it to sharply reduce these conflicts would be potentially devastating.

(emphasis mine)

Mr. Fox makes another interesting point, that any organization that is responsible for the stability and the viability of the banks, such as the Federal Reserve, have an inherent interest in ensuring that those organizations are profitable, because profitable banks are more stable than unprofitable.

Carmen Segarra, in pushing for Goldman having a conflict of interest policy, was attacking the attacking the viability of a bank.

This raises a larger question, whether we really want to have an organization for which has unethical behavior at the core of both its culture and profits to remain viable.

This was the question that no one has asked about Wall Street in general, and Goldman Sachs in particular.

It needs to be asked.

Finally!

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The FTC is suing brand name drug makers over their payments to generic drug manufacturers to delay their production:

For the first time since the U.S. Supreme Court ruled last year that so-called pay-to-delay deals may be subject to greater antitrust scrutiny, the U.S. Federal Trade Commission has filed a lawsuit charging drug makers with violating anti-trust laws and hurting consumers in their collective pocketbooks.

Specifically, the agency charged several drug makers – including AbbVie ; Abbott Laboratories , which spun off AbbVie, and Teva Pharmaceuticals – for striking deals that delayed the availability of the widely promoted AndroGel testosterone replacement therapy, a $1 billion seller.

“We believe the defendants’ anticompetitive conduct has forced consumers to overpay hundreds of millions of dollars for this medication,” FTC chairwoman Edith Ramirez told the media in a briefing, in which she noted the agency hopes to force the drug makers to disgorge “their ill-gotten gains.”

In these deals, a brand-name drug maker settles with a generic rival in exchange for ending patent litigation and launching a copycat medicine at a future date. The pharmaceutical industry contends the deals are not only legal, but actually allow drugs to reach consumers faster than if litigation continued.

Also known as reverse payment settlements, the deals emerged as an unintended consequence of the Hatch-Waxman Act that was designed to accelerate access to lower-cost generics. An FTC report in 2012 found there 40 potential pay-to-deals, up from 28 the year before.

The Supreme Court ruling, which reviewed a lawsuit brought by the FTC against Actavis, was a boost to the agency, because it supported the contention that pay-to-delay deals may violate antitrust laws and, effectively, allowed the FTC to pursue lawsuits against drug makers.

………

In its lawsuit, the FTC charges that AbbVie, Abbott and Bevins Healthcare filed “sham” patent litigation against potential generic rivals, including Teva, and then entered into an allegedly illegal patent settlement in order to thwart competition.

I’ve said it before (like the post just before this one):  Our current model of capitalism is a harmful and corrupt system that resembles nothing more than the book Lord of the Flies.

Not Enough Bullets………

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Disgraceful

Various regulators tell us that there is no t need to send the banksters to jail, because the fines are deterrence enough.

Guess what? Those same regulators end up never collecting those fines:

On a plane earlier this week, I watched The Wolf of Wall Street. The film’s outsized antics—public masturbation, the tossing of little people, lots and lots of Quaaludes—seemed too big for a seatback screen, or, for that matter, reality. As despicable as some of Jordan Belfort’s behavior was, I was able to occasionally laugh at Leonardo DiCaprio’s version of him knowing that, by now, more than 10 years after his real-life sentencing, Belfort has been sufficiently punished.

But in fact, that’s hardly the case: After pleading guilty to fraud and money laundering, Belfort was ordered in 2003 to pay out about $110 million to those he wronged. Since then, he’s only paid $11.8 million. He was also sentenced to four years in federal prison, but he only ended up serving just shy of two years.

………

Belfort’s relatively consequence-free story is only one of the more prominent ones in a parade of aggravating numbers reported on earlier this week by The Wall Street Journal. There’s still $97 billion out there in penalties that the Justice Department has failed to recover, and between September 2012 and September 2013, the department collected only 22 percent of penalties doled out. One particularly demoralizing figure was that the Commodity Futures Trading Commission had collected about a tenth of a percent of the $3.7 billion owed to wronged investors.

So how do convicted felons go about avoiding their payments? Take the case of Paul Bilzerian, who owed the Securities and Exchange Commission $62 million and paid only $3.7 million over the course of 25 years. (The Journal reported a few days ago that the SEC was officially giving up on getting any more money from him, after having spent $8.6 million to get the meager amount that they did obtain.)

Bilzerian has systematically thwarted federal prosecutors by building a web of trusts, partnerships, and corporations established in sketchy tropical locales. He has passed on cash and assets to his sons. He delayed prosecutors for years with a bankruptcy filing. And he has transferred ownership of his 28,000 square-foot home to trusts that were owned by, at various times, his in-laws and his neighbor’s mom. “Do you think I’d be stupid enough to have a bank account?” Bilzerian told a Journal reporter.

So, someone gets caught selling a dime bag, they take everything through asset forfeiture, but this guy is living in the lap of luxury.

You know, these guys are economic terrorists.

Why can’t we drone them?

Ah Hell!

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Despite the International Whaling Commission ruling to the contrary, the Japanese are going back to hunting whales:

Japan announced Thursday that it will restart its scientific whaling program next year in response to a new resolution adopted by the International Whaling Commission placing stricter regulations on scientific whaling.

This new nonbinding resolution—proposed by New Zealand—adopts the criteria used by the UN’s International Court of Justice earlier this year when it ruled that Japan’s current whaling program was not scientific. (See “Japan Halts Whaling Program in Response to International Court Ruling.”)

The new guidelines establish criteria for the International Whaling Commission’s (IWC) scientific committee to consider when it reviews whaling plans submitted by member countries. The criteria include consideration of whether a program needs to lethally sample whales to obtain data, how many whales a scientific program will take, and whether the number to be taken is justified.

At this week’s IWC meeting, Japan’s representatives stated the country’s intention to revamp its scientific program based on “international law and scientific evidence.” They planned to submit their proposed program to the IWC’s scientific committee this fall, with the aim of conducting scientific whaling next year.

The Japanese have years worth of whale meat stockpiled, because Japanese tastes have changed, but they insist on whaling, because ……… Well, just because.

And people wonder why the hell that everyone else in Asia has never forgiven them for their war crimes in WWII.

I’m thinking that the Sea Shepherd Conservation Society should start mounting guns and torpedo tubes on their ships.

Kraptacular Kris Korbach Kaves Kravenly

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I don’t know who got pictures having sex with a billie goat, but the Kansas secretary of state has capitulated on the withdrawal of the Democratic candidate for Senate, and will send out absentee ballots without a Dem in that race:

In an apparent reversal, Kansas Secretary of State Kris Kobach’s office is instructing election officials in the state to send out overseas military ballots without Democratic Senate nominee Chad Taylor or any other Democratic Senate candidate listed.

Kobach spokeswoman Samantha Poetter confirmed to TPM that the ballots would be sent out by Saturday, the deadline under state and federal law.

“Our ballots are going out without Chad Taylor (or any Democratic candidate) for U.S. Senate,” Poetter said. “They’ve been ordered to send them out as soon as possible.”

TPM obtained a copy of the official order sent to local election officials.

“The list does NOT contain the name of a Democratic nominee for United States Senate,” the order said. “There are three candidates, Randall Batson, Libertarian, Greg Orman, independent, Pat Roberts, Republican.”

They will be going out with some sort of disclaimer about the courts possibly ordering a new ballot, but this I really don’t see this particularly likely.

Here is hoping that this entire mishugas will serve to turn off the voters, Korbach is up for reelection, and the race is close.

Yes, We Must Support all Disruptive Business Models, Regulations be Damned

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These are only a few of the allegations brought against Uber drivers in recent months, and today the company adds another black eye to its record: allegedly denying service to the blind.

According to the San Francisco Examiner, the National Federation of the Blind filed a lawsuit in a federal court against Uber yesterday, claiming that Uber drivers have refused service to blind people with service dogs on more than thirty occasions. In one instance, a driver allegedly shoved a woman’s guide dog into the trunk of his car and refused to stop the vehicle after the passenger realized what had happened. To add insult to injury, the lawsuit also states that some customers were charged cancellation fees after being refused a ride.

This behavior, along with being appallingly unfair, appears to be a pretty clear violation of the Americans with Disabilities Act, which bans discrimination against the blind by taxi companies, even if the car is operated by a private independent contractor.

………

But the Federation also claims that it tried to resolve the issue with Uber without filing a lawsuit, but the company rejected its negotiation proposal. Furthermore, the lawsuit alleges that Uber told customers that its independent drivers were out of the company’s control, and the best advice it could give was to mention the animal before the driver arrives. That may not be the soundest advice, considering that if drivers are willing to reject disabled riders in person, then they’re probably even more likely to do so over the phone or through the app.

………

But if what the lawsuit alleges is true, and Uber refused to negotiate with victims of discrimination while doing little to stop this discrimination from happening in the first place, then it sounds like Uber’s back to its old tricks — stonewalling and shirking responsibility whenever its drivers breaks the law.

This is not a bug, it’s a feature.

Discrimination, price gouging, sketch driver background checks, it’s all a part of Uber’s Ayn Rand driven ethos.

If you get cheated, discriminated, hurt, or dead, it’s your fault, because you aren’t being selfish enough.

Republicans Aren’t Even Trying to Appear Non Corrupt Anymore

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Last night, Democratic Senate Candidate Chad Taylor withdrew from the race for US Senate:

Kansas voters have lost a chance to vote for a Democratic senator this fall — and Republicans could pay the price.

 Chad Taylor’s stunning decision Wednesday to withdraw from the U.S. Senate race forced partisans and analysts to recalculate the potential outcome of the Kansas contest.

 The consensus: Longtime incumbent Sen. Pat Roberts is in serious trouble, and the GOP’s chances of controlling the Senate could suffer as a result.

 “It’s extraordinary. It’s stunning. It’s shocking,” said Stu Rothenberg, a nationally known political analyst. Roberts “is still going to be the favorite, but the fact that those of us in Washington who look at races actually have Kansas on our radar is a significant development.”

 After surviving a brutal GOP primary in August, Roberts — and other Republicans — were counting on a four-way election to split his opposition, giving the veteran a chance to win in November with less than a majority of votes.

 The likelihood of that outcome tumbled dramatically Wednesday when Taylor quit.

 A recent poll found remaining independent candidate Greg Orman leading Roberts by 10 points in a one-on-one matchup. The Olathe businessman enjoyed the same margin in a different mid-August poll.

Chad Taylor was in 3rd place, and Dems in Kansas are focused on the governor’s race, so it makes sense to do this.

Senator Roberts nearly lost the primary to a doctor whose hobby was posting gunshot victims’ X-Rays on Facebook, and so his going from 2 opponents to one is a very big deal, as the poll numbers show.

In going from a 3 person to a 2 person race, Pat Roberts gains just 1% against Greg Orman, while he picked up 10% and Taylor was still behind in the polling, so from a tactical perspective (Orman would likely caucus with the Dems) it makes sense for everyone involved.

Of course, this story is not complete.  After contacting the Secretary of State’s office, and getting explicit instruction on withdrawing from the race, but Republican Secretary of State Kris Kobach is trying to invoke the heretofore not used in a Senate race no backsie rule:

Chad Taylor doesn’t want to be in the race for U.S. Senate, but he’s going to remain on the ballot at least for now.

 Taylor, the Democratic nominee for Senate and district attorney of Shawnee County, submitted a formal letter to the Secretary of State’s Office to withdraw his candidacy on Wednesday, the deadline to drop out of the race.

 Political analysts said his withdrawal would give a boost to independent candidate Greg Orman against U.S. Sen. Pat Roberts in November. But Secretary of State Kris Kobach announced Thursday afternoon that Taylor must remain on the ballot.

 A few hours later, Taylor announced plans to challenge that decision, saying that Assistant Secretary of State Brad Bryant had assured him he met all the requirements to withdraw.

 “I specifically asked Mr. Bryant if the letter contained all the information necessary to remove my name from the ballot. Mr. Bryant said, ‘Yes,’ affirming to me, and my campaign manager, that the letter was sufficient to withdraw my name from the ballot,” Taylor said in a statement

Kris Kobach has been at the forefront of the Republican efforts to keep Blacks and Hispanics to vote, and he’s on Senator Roberts’ steering committee, but it appears that the words “ethics” and “recusal” are not in his vocabulary.

This ratf%$# makes Katherine Harris look like a responsible public servant.

But having a completely corrupt partisan in charge of the election is not enough for the national Republican party, so they have brought in national political operatives to run the Roberts campaign:

National Republicans on Thursday moved to take control of the campaign of Senator Pat Roberts of Kansas by sending a longtime party strategist to the state to advise him, a day after his hopes for re-election and those of his party for taking control of the Senate were threatened by the attempted withdrawal of the Democrat in the race.

………

The National Republican Senatorial Committee is sending Chris LaCivita, who has served as a political troubleshooter in past Republican campaigns, to counsel Mr. Roberts and help oversee his campaign. The committee will also seek to hire a local lawyer in any legal challenge against Mr. Taylor, who had tried to drop off the ballot on the last day candidates were allowed to do so.

Just when I think that Republican politics can’t get any more repulsive, they exceed my own low expectations.

The More We Know About Pot, the Better it Looks

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Note that I do not know the extent of the statistics, but the fact that states with legal marijuana have a 25% lower opioid overdose rate bears further investigation:

States that allow legal use of medical marijuana have lower rates of fatal overdoses from prescription medications.

A new study published in JAMA Internal Medicine found the 13 states where medical marijuana is legal had 24.8 percent fewer annual opioid overdose mortality rates.

The results indicate alternative treatments may be safer for patients suffering from chronic pain, researchers said.

About 60 percent of all deaths from opioid overdoses happen in patients who have legitimate prescriptions, and the number of patients who are prescribed opioids for non-cancer pain has nearly doubled over the last decade.

Deaths were nearly 20 percent lower in the first year after a state legalized medical marijuana and 33.7 percent lower five years later.

Clearly, the answer to this is to tighten restrictions on opioids, and we need to ditch all those medical marijuana programs.

Our drug policies are wasteful, destructive, and stupid.

The Talibaptists in the UK Challenge the Doctor

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Seriously?  They filed complaints about Dr. Who?

Seriously?

The controversial “lesbian-lizard” kiss in Saturday’s Doctor Who episode will not be investigated by the media regulator, which said it “did not discriminate between scenes involving opposite sex and same-sex couples”.

Six people complained to Ofcom after Saturday’s series opener, Peter Capaldi’s first full episode as the Doctor, in which lizard woman Madame Vastra kissed her human wife, Jenny Flint.

The pair, played by Neve McIntosh and Catrin Stewart, shared a kiss as they were forced to hold their breath as they hid from killer droids, prompting complaints from some viewers that it was “gratuitous” and “unnecessary”.

A spokeman for Ofcom said: “Ofcom can confirm it received six complaints about a kiss broadcast in an episode of Doctor Who on Saturday 23 August.

“Having assessed the complaints, we can confirm that they do not raise issues warranting further investigation. Our rules do not discriminate between scenes involving opposite sex and same sex couples.”

What a bunch of f%$#ing wankers.

This is a Big Deal

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Standard Charter bank has just agreed to pay a $300 million fine for money laundering, which really is pocket change, but they have also had their dollar clearing rights suspended which is a very big deal:

British banking giant Standard Chartered is a repeat offender, at least in the eyes of New York’s top financial regulator, which fined the bank $300 million and suspended its ability to convert currency for violating a money laundering settlement.

 On Tuesday, the New York Department of Financial Service said Standard Chartered had not flagged a series of wire transfers from clients and locales at high risk for money laundering, running afoul of a 2012 agreement the bank inked with the regulator. Back then, the bank shelled out a total of $667 million to state and federal authorities for allegedly processing $250 billion in transactions for Iranian banks in violation of U.S. sanctions.

The suspension of dollar clearing privileges means that they can no longer transfer dollars into and out of the United States on their own, but have to use an intermediary who still has dollar clearing privileges, which adds cost and complexity, which serves to blow a huge hole in their business, since most transaction settle in dollars.

Benjamin Lawsky, head of the NY Department of Financial Service is arguably the most aggressive, and most effective, financial regulator in the US right now.

Yves Smith at Naked Capitalism believe that these actions have the potential to uncover the systemic rot in our banking system, but I am not as optimistic as she it.
In any case, more of this.

I Sure Picked the Wrong Week to Stop Sniffing Glue, Constitutional Right to Bribe Edition

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Yes, once again, the ‘Phants are looking at a 1st amendment challenge to anti-pay to play regulations:

Wall Street is one of the biggest sources of funding for presidential campaigns, and many of the Republican Party’s potential 2016 contenders are governors, from Chris Christie of New Jersey and Rick Perry of Texas to Bobby Jindal of Louisiana and Scott Walker of Wisconsin. And so, last week, the GOP filed a federal lawsuit aimed at overturning the pay-to-play law that bars those governors from raising campaign money from Wall Street executives who manage their states’ pension funds.

………

With the $3 trillion public pension system controlled by elected officials now generating billions of dollars worth of annual management fees for Wall Street, Securities and Exchange Commission regulators originally passed the rule to make sure retirees’ money wasn’t being handed out based on politicians’ desire to pay back their campaign donors.

………

In the complaint aiming to overturn that rule, the GOP plaintiffs argue that the SEC does not have the campaign finance expertise to properly enforce the rule. The complaint further argues that the rule itself creates an “impermissible choice” between “exercising a First Amendment right and retaining the ability to engage in professional activities.” The existing rule could limit governors’ ability to raise money from Wall Street in any presidential race.

In an interview with Bloomberg Businessweek, a spokesman for one of the Republican plaintiffs suggested that in order to compete for campaign resources, his party’s elected officials need to be able to raise money from the Wall Street managers who receive contracts from those officials.

“We see (the current SEC rule) as something that has been a great detriment to our ability to help out candidates,” said Jason Weingarten of the Republican Party of New York — the state whose pay-to-play pension scandal in 2010 originally prompted the SEC rule.

Because bribery is protected speech, I guess.

No, this is not The Onion, but I wish it were.

This is F%$#ed Up and SH%$

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Private equity companies are worried about regulations on insane levels of leverage, so they are lobbying organizations that don’t even regulate them:

The private equity industry’s lobbying group met officials from the Office of the Comptroller of the Currency and the Federal Reserve last week to address concerns over a crackdown on junk-rated loans, people familiar with the matter said on Monday.

 The private meeting – the first between the Private Equity Growth Capital Council (PEGCC) and the U.S. regulators over the issue – underscores many buyout firms’ reliance on leveraged loans for outsized returns in their debt-fueled acquisitions of companies.

 It also highlights the willingness of the OCC and the Fed to engage with parties they do not regulate. Private equity firms are typically regulated by the U.S. Securities and Exchange Commission.

Seriously. What has got them worried? Has the SEC, the Stay Puft Marshmallow Man, been too hard on them?

I get it. You are pillaging barbarians, and your weapon is other people’s money.

You need insane levels of leverage so that you can make your money by shutting down factories, moving production overseas, charging excessive fees to “manage” your acquisitions, etc.

Clearly, you need assurances that no one will ever prevent you from doing this, because anything that might get in the way of your f%$#ing the rest of us would be an affront to  the gods of the market.

Not enough bullets.

Thank You Richard Nixon (Not a Joke)

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One of the things that Richard Nixon did that he doesn’t get credit for is getting lead out of paint and gasoline.

Kevin Drum has written a lot about how falling crime rates 20 years after environmental lead was removed from paint and gasoline crime fell, and now we see lead exposure correlates to teen pregnancy as well:

Jessica Wolpaw Reyes has a new paper out that investigates the link between childhood lead exposure—mostly via tailpipe emissions of leaded gasoline—and violent crime. Unsurprisingly, since her previous research has shown a strong link, she finds a strong link again. But she also finds something else: a strong link between lead and teen pregnancy.

This is not a brand new finding. Rick Nevin’s very first paper about lead and crime was actually about both crime and teen pregnancy, and he found strong correlations for both at the national level. Reyes, however, goes a step further. It turns out that different states adopted unleaded gasoline at different rates, which allows Reyes to conduct a natural experiment. If lead exposure really does cause higher rates of teen pregnancy, then you’d expect states with the lowest levels of leaded gasoline to also have the lowest levels of teen pregnancy 15 years later. And guess what? They do. The chart on the right shows the correlation between gasoline lead exposure and later rates of teen pregnancy, and it’s very strong. Stronger even than the correlation with violent crime.

It’s not surprising.

One of the effects of lead on the developing brain is reduced impulse control, and it seems obvious to me that lack of impulse control would increase the likelihood of high risk sexual behaviors.

Pass the Popcorn

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The judge reviewing the collusion among Silicon Valley firms to suppress high tech wages has just ruled the settlement to be inadequate:

The judge overseeing the landmark Silicon Valley wage theft antitrust lawsuit has struck down the $324 million settlement reached between most of the class action plaintiffs and the defendants — Apple, Google, Intel and Adobe.

 In her 32-page order striking down the settlement terms, issued just moments ago, US District Judge Lucy Koch writes:

“This Court has lived with this case for nearly three years, and during that time, the Court has reviewed a significant number of documents in adjudicating not only the substantive motions, but also the voluminous sealing requests. Having done so, the Court cannot conclude that the instant settlement falls within the range of reasonableness. As this Court stated in its summary judgment order, there is ample evidence of an overarching conspiracy between the seven Defendants…”

This is stunning news, and it means that we still may get a trial after all, and learn more about the Techtopus wage theft conspiracy.

 Judge Koh bases her rejection by comparing the $324 million sum to the earlier settlement in 2013 with three other defendants in the wage-theft lawsuit: Intuit, LucasFilm and Pixar. Judging by that metric, Judge Koh argues that the settlement figure should have been at least $380 million. She also cites the “strength” of the plaintiffs’ case against the Big Tech defendants, and rejects the plaintiffs’ attorneys’ argument about the difficulties in winning an antitrust wage theft lawsuit of this scope.

This should get interesting for a number of reasons:

  • The documents make it pretty clear that the plaintiffs’ claims are airtight. (They also prove that Steve Jobs was a sociopathic @sshole, but that has been common knowledge for decades within the tech sector)
  • If the case proceeds, discovery should create even more damning information.
  • The blatant illegality of the behavior is such that the insurance carriers for the tech firms may end up suing them, claiming that the behavior is covered under the “deliberate acts” exclusions that almost all liability insurance policies contain.

This should be entertaining.

This is a Classic Case of Regulatory Capture

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After the public outrage over the NYPD choking a man to death for allegedly selling single cigarettes, the Civilian Complaint Review Board wants to have fewer investigations:

With New York in an uproar over the death of Eric Garner after police put him in a chokehold, the new chairman of the group that handles public grievances about the NYPD floated the idea yesterday that his agency should stop listening to people who complain about police stops.

“I’m not sure stop-and-frisk is still appropriate for this agency,” Richard Emery, the head of the Civilian Complaint Review Board said at his first board meeting. “So many other people are working on it.”
NYCLU Associate Legal Director Chris Dunn—who last month accused the board, then in its sixth month without a chairman, of being “on life support”—strongly disagreed.

“There’s no way this agency can walk away from stop-and-frisk,” Dunn said. “There are more interactions around stop-and-frisk than any other interaction in the police department….I’m just telling you: When you as the incoming chair of the CCRB say something like ‘We should get out of the business of stop-and-frisk,’ that is sending the wrong signal.

This isn’t the first time the CCRB has appeared to try to back away from stop-and-frisk issues. In May, Dunn confronted board members about a leaked memo that seemed to suggest that frisks conducted when cops issue a summons can’t be subject to review by the board.

Any civilian police review board must have not just an adversarial role with the police department, but it must have an adversarial mindset, because no organization can be trusted to police itself.

If the Police do not hate a civilian review board, then that civilian review board is simply not doing its job.

The sentiments expressed by Richard Emery are literally those of a petty bureaucrat in a police state.

Federal Reserve and FCIC Reject TBTF Banks’ “Living Will”

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To (mis)quote Bette Davis, “Fasten your seat belts. It’s going to be a bumpy ride,” because the regulators are claiming that the big banks contingency plans are worthless and leave the taxpayers on the hook:

Congress’s overhaul of the financial system aims to reshape large banks so that if they get into trouble they can descend into an orderly bankruptcy that does not set off a wider panic.

 But on Tuesday, two regulators, the Federal Reserve and the Federal Deposit Insurance Corporation, sharply criticized the plans that the banks have prepared for winding themselves down in a controlled fashion. The F.D.I.C. said that it had determined that the so-called living wills were “not credible.”

 The agencies have sent letters to 11 banks, including JPMorgan Chase and Goldman Sachs, pointing out perceived shortcomings in the resolution plans that they submitted in 2013. The agencies demanded that the banks make improvements in living wills they submit for 2015.

 “Despite the thousands of pages of material these firms submitted, the plans provide no credible or clear path through bankruptcy that doesn’t require unrealistic assumptions and direct or indirect public support,” Thomas M. Hoenig, the vice chairman of the F.D.I.C., said in a statement.

I am so not surprised by this.

The banksters aren’t providing meaningful “Living Wills” because it is in their interest not to do so.

Having a meaningful bankruptcy wind down plan means that, if something goes wrong, their stock options becomes worthless, and they probably lose their jobs, but if Uncle Sam is forced to bail them out, there is a pretty good chance that they get to keep their jobs and their hefty pay packages.

After all, that is what happened last time around.

The regulators should get tough with the banks:

If the banks do not make satisfactory changes, the regulators could take action, including requiring banks to sell units to shrink and simplify their corporate structures if they failed to comply with other orders, officials of the agencies said.

The regulators should give a reasonable amount of time (I would suggest 4 weeks, so that Congress won’t be back in session), and if they do not see a complete and meaningful plan, they should start breaking them up.

BTW, the big problem here is what Warren Buffet calls, “Financial weapons of mass destruction,” derivatives:

In suggesting areas the banks need to focus on, the regulators highlighted derivatives, which played a central and destabilizing role in the 2008 crisis. Derivatives can complicate bank resolutions because they may require collapsing banks to make payments to derivatives holders before other clients and creditors.

Unfortunately, derivatives allows financial institution to increase their leverage while technically staying properly capitalized.

They aren’t properly capitalized, of course, which is why the US government had to bail out AIG so that it could pay their insurance claims at 100 cents on the dollar.

It’s going to happen again, and no one is going to jail, again.

It sucks.

The right thing to do is for the Federal Reserve and the FDIC to break up the banks, as it always has been, but the banks own Washington, so it ain’t going to happen.

H/t Naked Capitalism.

Another Reason to Vote Against Andrew Cuomo

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As I have noted before, Zephyr Teachout is challenging Andrew Cuomo in the Democratic Party primary for governor of New York.

What I did not know was that her running mate, Tim Wu, aka the father of net neutrality:

Tim Wu, an academic known for his work on net neutrality, is campaigning to become the Democratic nominee for the lieutenant governor of New York.

 He’s an unlikely politician. Cerebral, soft spoken, and willing to speak freely, conversation with Wu is a far cry from the stilted, shrill dialogue that makes up most of our modern political discourse.

 As next month’s primary election approaches, Wu faces a lawsuit aimed at unseating his candidacy, along with the candidacy of his running mate Zephyr Teachout.

 Robert Duffy, the current lieutenant governor of the state, is not seeking another term, pitting Wu against a fellow non-incumbent for the nomination. Teachout hopes to become the Democratic nominee for governor.

This is all kinds of awesome.

A Bad Ruling for McDonalds, a Great Ruing for the Rest of Us

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The National Labor Relation’s board has ruled that the McDonalds corporation bears some of the responsibility for its franchisees working conditions:

The general counsel of the National Labor Relations Board ruled on Tuesday that McDonald’s could be held jointly liable for labor and wage violations by its franchise operators — a decision that, if upheld, would disrupt longtime practices in the fast-food industry and ease the way for unionizing nationwide.

Business groups called the decision outrageous. Some legal experts described it as a far-reaching move that could signal the labor board’s willingness to hold many other companies to the same standard of “joint employer,” making businesses that use subcontractors or temp agencies at least partly liable in cases of overtime, wage or union-organizing violations.

The ruling comes after the labor board’s legal team investigated myriad complaints that fast-food workers brought in the last 20 months, accusing McDonald’s and its franchisees of unfair labor practices.

Richard F. Griffin Jr., the labor board’s general counsel, said he found merit in 43 of the 181 claims, accusing McDonald’s restaurants of illegally firing, threatening or otherwise penalizing workers for their pro-labor activities.

………

The fast-food workers who filed cases asserted that McDonald’s was a joint employer on the grounds that it orders its franchise owners to strictly follow its rules on food, cleanliness and employment practices and that McDonald’s often owns the restaurants that franchisees use.

I am not sure how wide the application of this ruling will be.

McDonald’s exerts far more control over the operation of its franchisees than most other companies operating in this manner. Not only, as noted above, does McDonald’s have physical ownership of many of the restaurants that its franchisees operate, but:

In the current cases, the fast-food workers, backed by the Service Employees International Union, said that McDonald’s had significant control over its franchisees’ employment practices, noting that it supplies many with software telling them how many employees to use at any given hour. The workers pointed to an instance in which McDonald’s even told a franchise owner that it was paying its employees too much. The average fast-food wage is about $8.90 an hour.

While it is conceivable that a company might want to prevent its franchisees from underpaying its workers to preserve the reputation of the brand, there is no such justification for warnings about overpaying its worker.

This is pretty much a prima facie case that McDonald’s is an active co manager of those restaurants.

It appears to me that this level of direction is rare among the various franchise businesses, and I think that, as a result of this decision, it will become ever rarer, so this will likely only have minor impact.