Category: Law and Lawyers

Zero Hedge, Bulgaria, and Me

Much to my surprise, my blog post last month about the popular US website Zero Hedge and its ties to Bulgaria has turned into a big story in Buglaria.

If you can read Bulgarian here’s some of the coverage:

Club.bg story on Zero Hedge and me

Frog News.bg story on Zero Hedge and me

English language Q&A with Frog News’ Diana Yonkova (Bulgarian version)

Here’s what happened: On December 23rd, I received word that a criminal complaint has been filed against me with the general prosecutor in Bulgaria.

The complaint was filed by Krassimir Ivandjiiski, who registered the Zero Hedge website in Bulgaria and manages the company that owns it.

Krassimir’s son, Daniel, runs Zero Hedge, which publishes a mix of finance, global news and pro-Russia commentary and is popular with right-wingers and people like Donald Trump Jr. and Nigel Farage.

Krassimir Ivandjiiski has accused me of various “crimes.” I should note that Mr. Ivandjiiski did not tell me what crimes I had allegedly committed, nor did he inform what country’s laws I may have violated. He also refused to provide me a copy of the complaint, but he did send me an English translation that I have posted here as a PDF.

According to Mr. Ivandjiiski it’s a crime to reveal public information such as Zero Hedge’s domain registration and corporate filings. He is also upset that I pointed out the blatantly anti-Semitic content he publishes on his Buglarian website, Strogo Sekretno (Top Secret).

Krassimir Ivandjiiski demanded that I take down my blog post by December 31st, which I have refused to do. I have hired a lawyer in Bulgaria, Nikolay Hadjigmenov to represent my interests. It would set a terrible precedent if I am charged with a crime for writing a story someone didn’t like.

I’ve set up a GoFundMe to defray the costs of representation, as I make no money from this site and assume the legal risks myself. So if you support this kind of work and value a free press, please consider making a donation.

Lanny Davis and Metabolife

My Rolling Stone piece on Michael Cohen’s attorney Lanny Davis, who also represents a high-level Russian Mafia associate, is up. You can read it here.

[Apologies for repeating this post a second time, but after I posted an earlier draft, I realized, as I often do, that this might be something worth publishing.]

I’ve been aware of Davis for a long time, ever since his days representing a sleazy San Diego firm called Metabolife.

Metabolife was founded in 1995 by a man named Michael Ellis, an ex-cop who had a felony record for a meth lab bust in the San Diego suburb of Rancho Santa Fe. While on probation, Ellis had a brilliant idea. He realized that, thanks to a loophole in the law, he could sell speed legally. Thus was born Metabolife.

Metabolife’s pills contained ephedra, the herbal form of the stimulant ephedrine, which is a key ingredient in methamphetamine. It was legal to sell ephedra at the time,  thanks to a law sponsored by Senator Orrin Hatch, the Utah Republican, who dabbled in the vitamin business as a young man.

Hatch’s law deregulated the dietary supplements industry. Dietary supplement makers no longer had to show their products were safe. Under the law, Metabolife had no duty to report even the deaths of its customers.

Sales took off. Revenues at privately-held Metabolife had soared to more than $360 million in four years, but the company had a problem: People who gobbled its pills sometimes wound up in the hospital — or worse. One user’s heart rate zoomed to 300 beats a minute. Some turned into psychotic speed freaks. A Government Accounting Office report found Metabolife’s pills caused 18 heart attacks, 26 strokes, 43 seizures and five deaths.

When Congress started to investigate whether Ellis“put sales above safety,”  Metabolife hired Lanny Davis, who was then with the DC powerhouse firm of Patton Boggs. (Interestingly, Cohen worked for the same firm, now known as Squire Patton Boggs, after Trump’s election.)

I wrote a story for The Associated Press in 2004 pointing all this out:

“Patton Boggs earned millions helping project reassurances to Congress and its customers that Metabolife products were safe,” I wrote. “In mid 2002, Patton Boggs lobbyist Lanny Davis wrote a senator whose subcommittee was investigating Metabolife that the company had received only 78 ‘unproven, anecdotal allegations’ of strokes, heart attacks, seizures and deaths.”

Prosecutors alleged company founder Michael Ellis lied about Metabolife’s safety record in a 1998 letter to the U.S. Food and Drug Administration, which Patton Boggs attorneys helped him draft. (One former and four current Patton Boggs attorneys were subpoenaed by a federal grand jury in San Diego. A judge ruled they had to testify.)

Here’s a snippet of the FDA letter:

Screen Shot 2018-08-23 at 5.18.49 PM

That wasn’t true. The FDA finally banned sales of ephedra in 2004, saying it was linked to 155 deaths, including 23-year-old Baltimore Orioles pitcher Steve Bechler. Ellis was eventually convicted of lying to the FDA; Metabolife pleaded guilty to tax evasion.

The conclusion is this: Davis and Patton Boggs helped Metabolife as it covered up a health crisis. Before I get a nasty letter from Mr. Davis, let me say that there’s no evidence that he did anything wrong or acted unprofessionally. But credibility matters, and after years of representing shady clients, Davis’ may find his credibility in short supply when he needs it most.

Devin Nunes v Fusion GPS

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Devin Nunes

What are the limits of a congressional committee’s power?

That is the question posed by the actions of Rep. Devin Nunes who is using — abusing, some say — his power as chairman of the House intelligence committee to investigate Fusion GPS, the company that produce the Steele dossier.

In its purported investigation of Russian meddling in the 2016 election, the committee has issued a single subpoena for financial records. That subpoena went to Fusion GPS’ bank and is now the subject of a lawsuit in U.S. District Court in Washington D.C.

You’ll recall that Chairman Nunes worked on the Trump campaign and purportedly recused himself from his committee’s Russia investigation. But he is unable to restrain himself when it comes to Fusion GPS. The subpoena to the firm went out with his signature on it.

Fusion GPS says the subpoena, which demands years of records, is little more than a transparent effort by Chairman Nunes to expose its clients — even those that had nothing to do with Russia — and destroy the secretive company’s business model.

It’s worth noting that Deutsche Bank, which has all sorts of shady dealings with Russia and continued lending to Trump even after he sued them, got a pass from Chairman Nunes’ committee.

In a more recent court filing a few days ago, lawyers for Fusion GPS make the claim that Chairman Nunes is actively working to undermine his own committee’s investigation:

There is evidence that the Committee is coordinating with the President, his personal lawyers, and the Senate Judiciary Committee to misdirect attention to Fusion and its associates in an effort to punish and discredit Fusion, due to their perceived role in exposing the ties between the Trump campaign and the Russians. This coordinated effort includes the subpoena to Fusion’s bank and the apparent leaks from the Committee, and it has been amplified in recent days by attacks on the FBI and Justice Department by members of Congress, the President, and his lawyers.

In its pleadings to the court, Fusion GPS cites the Supreme Court ruling in Watkins v. United States. This case involved John Watkins, a labor organizer, who in 1954 was subpoenaed to testify before Sen. Joe McCarthy’s House Committee on Un-American Activities. Watkins answered questions about his own activities in the Communist Party but he refused to answer questions about other people.  He was convicted of contempt of Congress, but appealed his conviction saying Congress had abused its powers.

The Supreme Court agreed, ruling 6-1, that Congress’ power to investigate was broad, but not unlimited.  “No inquiry is an end in itself; it must be related to, and in furtherance of, a legitimate task of the Congress,” the court ruled. “Investigations conducted solely for the personal aggrandizement of the investigators or to ‘punish’ those investigated are indefensible.”

Indefensible seems an apt work to describe Chairman Nunes’ investigation of Fusion GPS.

 

Mark Cuban files brief supporting … Ray Lucia?

mark-cuban-people-need-to-learn-that-no-email-is-safe

What was I thinking?

 

Update: A federal appeals court denied Ray Lucia’s appeal to have his lifetime ban overturned in August 2016.

Mark Cuban, the outspoken Dallas Mavericks owner, is a regular on Shark Tank, a show where he’s regularly pitched by entrepreneurs seeking to expand their businesses.

Cuban and the other investors say “I’m in” or “I’m out” depending on whether they like the pitch or not.

Cuban is obviously a savvy investor, but he’s an explosive guy. He’s known in the sports world for his outbursts at NBA officials and referees that have cost him more than $1 million in fines.

Today, I learned that Cuban has filed a friend of the court brief on behalf of Ray Lucia, a former San Diego investment adviser who was permanently banned from trading by federal securities regulators. This legal brief is the courtroom equivalent of an angry outburst at NBA official.

Cuban filed his brief this month in Lucia’s appellate lawsuit against the U.S. Securities and Exchange Commission before the D.C. Circuit Court of Appeals.  Lucia argued that his lifetime ban should be thrown out since his case was heard by an administrative law judge, instead of an appointed officer, as required by the U.S. Constitution.

His brief, filed Feb. 8, states, “As a first-hand witness to and victim of SEC overreach, Mr. Cuban has an interest in supporting petitioners’ appeal in this case, and in particular demonstrating that both statutory language and legislative history clearly show that Congress specifically intended that SEC hearings only be held before constitutional officers.”

Seems like weak stuff to me, but Mark Cuban is a vindictive fellow and he has an axe to grind.

The SEC accused Cuban of insider trading when he sold his stake in a Canadian Internet company to avoid a $750,000 loss. Cuban maintained his innocence, and was acquitted by a federal jury in Texas three years ago.

Cuban goes on to state, “When the laws are applied inconsistently or the process by which they are enforced is rigged to favor the government, capital formation is impeded because market participants do not have clear rules for understanding their investment risks.”

This is the point where I say “I’m out.” Ray Lucia wasn’t some bold entrepreneur chasing the next big thing. He was making millions fleecing retirees out of their nest eggs.

220px-ray_lucia

Ray Lucia addressing the crown at Sean Hannity’s Freedom Concert in 2010.

I started writing critically about Lucia in 2010 after his attorney  threatened to sue me for $300,00 . I figured that if someone would bother with a bozo like me something must be seriously wrong.  Turns out, I was right.

Back then, Lucia was at the height of his power. He had thousands of accounts and $300 million in assets under management. In the 12 months leading up to January 31, 2010, his family of companies reported $14.1 million in gross income, according to court records.

Lucia made money mainly by collecting commissions on those who fell for his “Buckets of Money” strategy. He pitched retirees at flashy seminars, often with the help of his buddy, actor Ben Stein. 

Elderly clients were convinced to invest in non-traded real estate investment trusts (REITs) that locked away their money for years. That’s not a great position for an elderly person who needs liquidity, but when REITs are generating $8.7 milllion in gross commissions for Lucia’s companies in 2010, you might overlook such details.

Lucia assured his clients they could retire in comfort because he had backtested his “Buckets of Money” strategy and it was based on “science, not art.”  The SEC called his bluff and today, Lucia says he is nearly bankrupt.

Someone, however, must be paying for Lucia’s legal team at Gibson, Dunn & Crutcher, one of the country’s top law firms. Is that you Mark?

Saudi Takedown Notice

I have received a letter from a law firm requesting that I takedown an affidavit filed in New York State Supreme Court that listed $1 billion worth of properties secretly owned by HRH Prince Abdul-Aziz bin Fahd, the youngest and favorite son of King Fahd, and his relative, Sheik Khalid N Al Assaf.

I downloaded the document while it was publicly available on the court’s website and posted it here after I read an article about it in Britain’s Independent newspaper. The affidavit has since been sealed and removed from the court’s website.

Attorney Howard Kaplan of Arkin Kaplan Rice LLP says the affidavit “contains or purports to contain obviously proprietary and sensitive business information. It is extremely detrimental to our clients’ interests to have this confidential information still available on and downloadable from your blog side. Moreover, the Hill affidavit itself is not only one-sided but, in many instances, demonstrably false.”

I am considering Kaplan’s request and would like to hear from any readers as to whether they believe there is any value in having this information remain publicly available.

Full disclosure: Kaplan’s partner, Stanley Arkin, and I met socially, but we have not communicated in years.

 

Saudi Takedown Letter

US: Brent Wilkes Is Still a Douchebag

In my last post on Cunningham briber Brent Wilkes, I noted that he has been playing poker and farting around while his team of court-appointed attorneys fights to keep him from serving a 12-year sentence for plying Duke with hookers, lavish trips to Hawaii in exchange for defense contracts.

In court papers filed ahead of a hearing granted by the 9th Circuit Court of Appeals, prosecutors say Wilkes has been doing more than that: Wilkes has been committing crimes by stealing more than $100,000 from the pension fund of his now defunct company to pay his living expenses.

Since Wilkes’s release from custody on January 5, 2009, Wilkes has engaged in additional fraudulent conduct: just as he once raided his children’s college funds to obtain operating cash, he has unabashedly raided the Wilkes’s Corporation’s employee benefit plan to obtain spending money for himself – while failing to reimburse the public for his taxpayer-funded attorneys.

Update: After a day-long hearing, Judge Larry Burns decided that Wilkes has to go to jail on Friday unless the 9th Circuit Court of Appeals saves his ass again.  (U-T San Diego)

US: Brent Wilkes Belongs in Jail

Brent "The Enigma" Wilkes Continues to Drain Taxpayers

Another Winning Hand for "The Enigma"

It’s been a long time since we heard from Brent “The Enigma” Wilkes. But the Enigma is back, baby!

Last week, the 9th U.S. Circuit Court of Appeals granted Wilkes a new hearing in his case in San Diego federal court.

Wilkes, you may recall, was the sleazy defense contractor at the center of the Randy “Duke” Cunningham bribery trial. Cunningham steered defense contracts to Wilkes, who used the money to live high on the hog. He was poker buddies with Kyle “Dusty” Foggo, once the No. 3 guy at the CIA.

In 2008, Wilkes was convicted of bribing Cunningham with prostitutes and other goodies and sentenced to 12 years prison. By all rights, he should be there. But Wilkes, the master manipulator, continues to game the system.

The 9th Circuit allowed Wilkes to go free on bond pending his appeal. While Cunningham, Foggo and others do time, Wilkes runs around playing poker at San Diego casinos (where he goes by the nickname “The Enigma”). Meanwhile, his taxpayer-funded attorneys bombard federal prosecutors with reams of paper on his behalf. What a fucking waste.

Now it looks like the legal maneuvering by Team Enigma will drag into a fourth year. Your taxpayer dollars bought Wilkes more time because The Enigma’s lawyers argued successfully that the judge presided over Wilkes jury trial failed to read the minds of the judges 9th Circuit Court of Appeals.

The trial judge, Larry Burns, declined to grant immunity to one of the government’s witnesses that Wilkes wanted to call for his defense. According to the 9th Circuit, this was a no-no because Burns failed to apply the 9th Circuit’s holding in a separate, unrelated case that was decided after Burns made his ruling. Wow. Just wow.

All of Wilkes other arguments were brushed aside, including one that I found particularly interesting: Why was Cunningham never called to testify. According to prosecutors, “one of the reasons the Government did not call Cunningham at trial was because prosecutors did not trust him to refrain from fabricating testimony that he believed would help the prosecution (and thus enhance his chances for a reduced sentence).”

 

Awlaki FBI FOIA Request

October 4, 2011

David M. Hardy
Section Chief, Record/Information Dissemination Section
Federal Bureau of Investigation
Attn: FOI/PA Request
170 Marcel Drive
Winchester, VA 22602-4843

Dear Mr. Hardy:

This letter constitutes a request (“Request”) pursuant to the Freedom of Information Act, 5 U.S.C. subsection 552.

I am requesting a copy of all records or information concerning ANWAR AL-AWLAKI (aka Anwar al-Aulaqi).

Mr. Awlaki was born in 1971 in Albuquerque, New Mexico. He was killed in Yemen on Sept. 30, 2011, according to a statement President Barack Obama made the same day. I trust the attached statement of the president will serve as the proof of death you require for this request.

Awlaki was a leader in al Qaida in the Arabian Peninsula (AQAP) and was one of the most wanted terrorists in the world. He was the subject of numerous investigations by the FBI for more than a decade.

If you deny all or any part of this request, please cite each specific exemption you think justifies your refusal to release the information and notify me of appeal procedures available under the law. I expect you to release all segregable portions of otherwise exempt material.

I look forward to your reply to this Request within twenty (20) business days as required by 5 U.S.C. 552(a)(6)(A)(i).

Thank you for your assistance.

Sincerely,

Seth Hettena

Not Funny, Your Honor

The Recorder:

A San Diego judge has been charged with willful misconduct for allegedly videotaping courtroom proceedings to promote herself for a role on a TV show starring a judge.

The Commission on Judicial Performance cited dozens of remarks Judge DeAnn Salcido made, both on film and off, that suggest she was channeling an off-color Judge Judy.

According to the CJP, Salcido had her bailiff’s husband videotape her on the bench presiding over various matters for about an hour back in 2009.

The notice of formal proceedings against her cites an e-mail message from the judge to an entertainment lawyer saying she had been “setting my more interesting defendants and those with substance abuse issues” for a certain day she suggested would be best for filming. …

Salcido repeatedly got participation from her courtroom audience — once having them say “woo woo woo” after accusing a defendant of being high on marijuana.

When one woman admitted to an alcohol and drug use problem, specifically a penchant for vodka, the judge got laughs from the gallery by referencing the Jamie Foxx song by saying, “Blame it on the a-a-a-a-alcohol.”

She told another defendant “they might like your smile in jail,” and on another occasion, told a man she placed on probation: “What that means is don’t come before the court on another case … ’cause you will definitely be screwed and we don’t offer Vaseline for that.” …

Salcido’s statement.

Notice of formal proceedings.

Carly Fiorina and the HP Pretexting Scandal

What's the pretext?

Did former chairman and chief executive Carly Fiorina play a role in the spying scandal that tarnished the once sterling reputation of Hewlett-Packard Corporation?

Revelations in 2006 that company investigators, using private and confidential information provided by HP, had posed as board members and journalists to obtain private phone records and e-mails created a public uproar. HP officials were hauled before Congress and California filed criminal charges against several company officials, including former Chairman Patricia Dunn.

There’s no evidence to suggest that Fiorina knew or condoned this practice, known as “pretexting” (aka lying). The HP board fired Fiorina more than a year before the scandal broke. Fiorina’s own phone records were obtained by HP investigators after she had left the company.

But that’s not the complete story. A look at the record shows that HP’s leak investigations began under Fiorina, who is now running as a Republican to unseat U.S. Senator Barbara Boxer, and employed the same security firm who worked for HP during Fiorina’s entire tenure as chairman. Furthermore, the board member Fiorina suspected as the source of the leak became the focus of the investigation.

In January 2005, Fiorina approached attorney Larry Sonsini, the board’s outside lawyer, for advice. Fiorina was extremely upset by a Wall Street Journal story that detailed sensitive internal board discussions about Fiorina’s performance.

Patricia Dunn, who succeeded Fiorina as chairman, testified under oath to Congress:

MS. DUNN: The first inquiry into leaks actually began under the administration of Carly Fiorina, who was Chairman and CEO until February of 2005. She asked Mr. Sonsini to talk with every director one-on-one about the functioning of the Board, and to seek the confession of whoever the person or persons were that were leaking this confidential information, as well as to reassert their commitment to confidentiality going forward. The reason why the Board, by the time I got involved, was so deeply concerned was because they knew that no one had come forward to admit their culpability.

After Fiorina’s ouster, seven of nine HP board members saw the case of the boardroom leak as “unfinished business” by a majority of board members, Patricia Dunn, who succeeded Fiorina as chairman testified to Congress.

Dunn enlisted the services of Security Outsourcing Solutions, a little-known private detective firm in Needham, Mass. SOS had done work for HP during Fiorina’s entire tenure as chairman. About half the company’s work came from HP.

The initial work done by SOS in the pretexting scandal, Dunn testified, “was authorized — by whom I do not know specifically — as an extension to a pre-existing work order under which he was performing various investigative assignments for Hewlett-Packard.” (emphasis added)

Did any of these assignments involved pretexting?

Fred Adler, head of IT security investigations at HP, testified that one of the company’s investigators involved in the pretexting scandal had complained to his manager on previous occasions about the practice.

In her 2006 book, Tough Choices, Fiorina doesn’t mention pretexting or whether she ordered spying on journalists and board members. She did write in Tough Choices that she remained deeply suspicious of another board member, George Keyworth, who was not the source for the Journal article.

A 20-year HP board veteran, Keyworth was a driving force behind the board’s divisive efforts to remove Fiorina, who had aggressively championed a bitterly contested $19 billion merger with Compaq in 2002 that led to a proxy fight, court battle, wrenching layoffs, some cost savings but little in the way of profits.

Keyworth subsequently became a target of the pretexting investigation in a move that likely reflected the lingering bitterness over Fiorina’s ouster.

Teddy Bear Collector Admits Stealing San Diego County Pension $

Paul Greenwood

Bow-tie wearing hedge fund founder Paul Greenwood has pleaded guilty to defrauding San Diego County’s pension and other big institutional investors of at least $331 million.

Greenwood and partner, Stephen Walsh, ran WG Trading, which collapsed with $78 million of San Diego County retirees’ money.

“You treated these investments as your own personal bank accounts?” U.S. District Judge Miriam Cedarbaum in Manhattan asked Greenwood during his plea hearing yesterday.
“Correct,” said Greenwood, who said he and Walsh often paid investors back using funds from other investors.
Greenwood used part of the money to acquire a collection of rare teddy bears and other stuffed animals.
The San Diego County Employees’ Retirement Association is suing to get its money back.

WSJ's Latest Lerach Attack

Even though he has been driven from the practice of law, Bill Lerach, whom I recently profiled for Voice of San Diego, remains one of the conservative movement’s leading bogeymen.

Until he was sentenced to prison, Lerach struck fear in the heart of corporate America by extracting costly settlements from the nation’s biggest companies. He recently completed his sentenced and retired to his La Jolla mansion.

Today’s editorial “A Bill Lerach Tax Cut” finds the Journal in a lather over a report that the U.S. Treasury Department planned to give lawyers a tax break over contingency fee lawsuits.

Such a tax break would effectively subsidize the up-front costs of litigation for the the “zillionaire likes of felons Dickie Scruggs, Mel Weiss, and Bill Lerach,” the Journal writes.

These include San Diego firms such as Robbins Geller Rudman & Dowd, Lerach’s old firm, and Robbins Umeda that file shareholder derivative lawsuits and securities class actions. Firms that do this work on contingency, which means they are paid out of a settlement at the conclusion of the case.

The report Wednesday in LegalNewsline.com cited unnamed sources at a meeting of the trial lawyer’s association in Vancouver, Canada.

The Treasury Department declined comment “on speculation about any potential administrative rulings.”

When George Steinbrenner ratted out Merrill Lynch, Teamsters

The obituaries for Yankees owner George Steinbrenner, who died this week at age 80, all refer to his 1974 conviction for illegal campaign contributions to the Nixon campaign and the pardon Steinbrenner received from Ronald Reagan.

Steinbrenner’s defense attorney was the legendary trial lawyer Edward Bennett Williams. Steinbrenner wasn’t impressed. “I paid him $100,000” Steinbrenner once reportedly said, “and all he did was a cop a plea.”

That’s true, but Williams did the best he could for a client who had dug a mighty deep hole for himself.  The issue wasn’t the illegal contributions, per se. The problem was Steinbrenner, the chief executive of American Shipbuilding, had funneled the contributions through his employees (disguised as “bonuses”) and then instructed them to lie to a grand jury. That’s suborning perjury and people go to jail for it.

According to The Man to See, Evan Thomas’ splendid 1991 biography of Williams, the attorney told prosecutors that Steinbrenner could implicate others in exchange for leniency.

“Steinbrenner could provide us with more than a dozen companies which had been involved in 610 [illegal corporate contribution] violations. … Williams indicated that Merrill Lynch had substantial difficulties in the campaign finance area. …  Williams indicted that Steinbrenner had heard that the Teamsters had given more than a million dollars, that the million dollars had been kept at the Hotel Pierre, and that someone from the Teamsters had stolen it back again,” prosecutor John Koetl wrote following a meeting with Williams on October 18, 1973.

Ultimately, on the obstruction of justice charge, the government allowed Steinbrenner to plead guilty to being an accessory after the fact, a misdemeanor and the sentencing judge let him off with a fine. The commissioner of baseball wasn’t so merciful; he suspended Steinbrenner for two years.

Update: The Smoking Gun beat me to the punch on this one. Here’s a copy of the memo

Ray Lucia Defamation Threat

For more visit: A Professional’s View of Ray Lucia’s Non-Traded REITs

Investor and local radio talk show host Ray “Buckets of Money” Lucia has threatened to sue me for $300,000 for defamation over a blog post I wrote last month.

Robert K. Butterfield, a San Diego attorney, is outraged that I dared to besmirch the good name of Raymond J. Lucia, who dispenses financial wisdom on a daily radio show in several big media markets. This is after all the same man actor Ben Stein recently described in an opinion piece in The New York Times as a “stock guru.”

Attorney Butterfield insists that I must stop pointing out Lucia’s relationship to San Diego-based First Allied Securities, which recently agreed to pay nearly $2 million to settle U.S. Securities and Exchange Commission charges that it failed to supervise one of its employees.

He also demands that I never again repeat the blasphemy that fees for Lucia account run as high as 2 percent, paid quarterly in advance. (Lucia Defamation Threat Letter)

Your statement that Mr. Lucia’s company has never charged a management fee of 2% is completely false and another intentional malicious act. His company has never charged a management fee of over 1% even though they have the ability to charge up to 2% — but you did not bother to check this — did you?

Even though Lucia’s own SEC disclosure plainly states “The standard annual managed fees for RJL [Raymond J. Lucia] Adviser Directed accounts are 2 percent,” Attorney Butterfield has a point. Fees for one “wealth management” program pushed by Lucia actually run as high as 2.9 percent

That is an eye-popping number. It’s about half of the compound rate of return of the Dow Jones Industrial Average for the past 50 years. That fee is assessed on the entire value of whatever you invest with Lucia, even if he loses money. It makes me wonder whose wealth is really being “managed” here.

Continue reading

PSI Hearings on WaMu Next Week

I wrote this story in The American Lawyer (.pdf) last year on the U.S. Senate’s Permanent Subcommittee for Investigations, which is one of a handful of congressional committees that defense lawyers in D.C. actually take seriously.

Lawyers joke that PSI stands for “pretty scary investigations.” If you’re getting pulled before the PSI, a criminal indictment may not be far off.

As I reported, everyone knew the PSI would be investigating the financial crisis. The question was: Who was the target?

Next week, the PSI will hold hearings on Washington Mutual Bank.

Continue reading

The Golden State (for Workers' Comp)

From an excellent story in The New York Times: 

Retired N.F.L. players have flocked to California in recent years as word has spread about its workers’ compensation system. The state is believed to attract more football-related claims than all other states combined because of two quirks that suit them perfectly.

Most states require workers’ compensation claims to be filed within one to five years of the injury; California’s statute of limitations does not begin until the employer formally advises the injured worker of his or her right to workers’ compensation. N.F.L. teams have almost never brought up workers’ compensation — hoping to avoid even more claims, several lawyers said — so long-retired players can file for injuries sustained decades ago. Dozens of veterans from as far back as the 1960s and ’70s, including the star San Diego Chargers wide receiver Lance Alworth, who retired in 1972 and turns 70 in August, have California cases pending.

California’s other crucial wrinkle requires a professional athlete to have played only one game of his or her career within state borders to file a full claim for cumulative injuries. The law derives from California’s desire to protect outside workers who temporarily pass through the state, like truckers or flight attendants.

Leroy Thompson is an example of how the concept operates to athletes’ advantage. A reserve running back for four non-California teams from 1991 to 1996, Thompson qualified for California workers’ compensation because 4 of his 80 regular-season games were played there. In January, he accepted a $120,000 lump sum to settle his claim. His original 2008 filing asserted cumulative injuries to his “head, neck, back, spine, shoulder, hips, elbows, wrists, hands, legs, knees, ankles, feet” and other body parts.

Anwar al-Awlaki Timeline

April 1971: Anwar al-Awlaki born in Cruces, N.M. while father is on diplomatic posting.

1978: Leaves U.S. for Yemen.

Jan. 13, 1988: Issued U.S. passport.

Awlaki

June 5, 1990: Enters U.S. in Chicago with Yemeni passport with J-1 exchange visitor U.S. visa issued in Sana’a.

June 6, 1990: Applies for Social Security card. Claims he was born in Sana’a, Yemen.

June 8, 1990: SSN 521-77-7121 issued to Awlaki.

Aug. 21, 1991: Enters U.S. in Chicago.

1991: Attends Colorado State University on a scholarship from Yemen.

Jan. 29, 1992: Enters U.S. in New York City.

Nov. 18, 1993: Applies for a U.S. passport in Fort Collins, Colo.

1994: Graduates from Colorado State with bachelor’s in civil engineering.

1996: Named imam of Masjid al-Rabat in San Diego.

1996: Busted for soliciting a prostitute in San Diego.

Time uncertain: Arrested by San Diego police “for hanging around a school.” (9/11 Commission MFR FBI Agent #59)

1997: Busted again for soliciting a prostitute in San Diego.

1998 & 1999: Serves as vice president of Charitable Society for Social Welfare Inc., the U.S. branch of a Yemeni charity headed by Abdul Majeed al-Zindani. Federal prosecutors in a New York terrorism-financing case later describe the charity as “a front organization” that was “used to support al-Qaeda and Osama bin Laden.”

January 1999: Enrolls in San Diego State University master’s in educational leadership program. SDSU spokesman says the school does not have records showing Awlaki earned a degree.

June 1999: FBI investigates Awlaki after learning that he may have been contacted by Ziyad Khaleel, who bought a satellite phone bin Laden used in the 1990s.

1999-2000: During its investigation, FBI learns that Awlaki knows individuals from the Holy Land Foundation and others involved in raising money for the Palestinian terrorist group Hamas. Sources alleged that Aulaqi had other extremist connections. (9/11 Commission Report)

February 2000: Four calls between Awlaki and Omar al-Bayoumi, a Saudi who helped Al-Hamzi and Almihdhar find an apartment in San Diego. An FBI agent tells 9/11 Commission staff he is “98 percent sure” that the two hijackers were using al-Bayoumi’s phone at this time. (9/11 Commission MFR FBI Agent #63)

Early 2000: Visited by a subject of a Los Angeles FBI investigation closely associated with Blind Sheikh [Omar Abdel] Rahman. (Congressional Joint Inquiry on 9/11)

Early 2000: Several sources tell FBI that Alwaki “had closed-door meetings in San Diego” with Alhazmi, al-Midhar and another unidentified person “whom al-Bayoumi had asked to help the hijackers.” (Congressional Joint Inquiry)

Feb. 3, 2000: FBI electronic communication, background searches re: Awlaki. (9/11 Commission report)

March 2000: FBI closes its investigation, stating “the imam … does not meet the criterion for [further] investigation.” (Congressional Joint Inquiry on 9/11)

July-August 2000: Resigns from San Diego mosque.

Summer-Fall 2000: Travels abroad to “various countries.” (SD Union-Tribune 10/1/01)

January 2001: Moves to Virginia. Employed at Dar Al-Hijra Islamic Center in Falls Church, Va., largest mosque in the country.

January 2001: Enrolls in George Washington University’s Graduate School of Education and Human Development, pursing a Ph.D in human resource development.

Unknown: Meets Nidal Hasan, future Fort Hood shooter.

Early 2001: Named Muslim chaplain at GWU.

April 2001: Al-Hazmi and Hani Hanjour arrive in Falls Church and attend Dar Al-Hijra mosque. Awlaki denies having contact with the men in Virginia. (9/11 Commission report)

July 20, 2001: Delivers sermon at Friday Jummah Prayer in U.S. Capitol.

Before Sept. 11, 2001: Awlaki returns briefly to San Diego (9/11 Commission MFR) “Reportedly acted suspiciously by declining help with boxes he was transporting in a rental car (driven only 37 miles) and by refusing to provide any local address to the rental agent.” (9/11 Commission MFR FBI Agent #59)

August 2001: According to NY Times, Awlaki tells neighbor Lincoln Higgie, “I don’t think you’ll be seeing me. I won’t be coming back to San Diego again. Later on you’ll find out why.”

Sept. 17, 2001: In comments published on IslamOnline, Alawki suggested that Israelis may have been responsible for the 9/11 attacks and that the FBI “went into the roster of the airplanes and whoever has a Muslim or Arab name became the hijacker by default.”

Sept. 15-19, 2001: Interviewed four times by FBI. Awlaki says he did not recognize Hazmi’s name but identifies his picture. Admitted meeting with Hazmi several times, he claimed not to remember any specifics of what they discussed. Describes Hazmi as a soft-spoken Saudi student who used to appear at the mosque with a companion but who did not have a large circle of friends. Does not identify Almihdhar.

September-November 2001: Interviewed numerous times by reporters, including National Geographic, Ray Suarez and The Washington Post.

2001-2002: Awlaki observed allegedly taking Washington-area prostitutes into Virginia. Authorities contemplate charging him under the Mann Act, reserved for nabbing pimps who transport prostitutes across state lines.

March 2002: Awlaki leaves for U.K.

March 31, 2002: Lectures at Quran Expo in London

April 2002: Employment with Dar Al-Hijra mosque ends.

2002: Federal prosecutors in Colorado receive information from Ray Fournier, a federal diplomatic security agent in San Diego who was investigating Awlaki for passport fraud.

June 2002: Figures in Operation Green Quest, a terrorism-related money-laundering investigation.

Mid-2002: Radwan Abu-Issa, the subject of a Houston Joint Terrorism Task Force investigation, sends money to Awlaki, according to a document in a restricted government database. Awlaki’s name was placed on an early version of what is now the federal terror watch list.

June 17, 2002: Federal magistrate in Colorado signs warrant for Awlaki’s arrest for passport fraud.

October 2002: A federal diplomatic special agent in Colorado began investigating in preparation to take the case to a grand jury learns Awlaki corrected the place of birth on his Social Security application to New Mexico.

Oct. 8, 2002: FBI electronic communication, interview re: Awlaki. (9/11 Commission Report)

Oct. 9, 2002: Arrest warrant rescinded.

Oct. 10, 2002: Arrives in New York on a Saudi Airlines flight from Riyadh. Briefly detained by INS.

Oct. 11, 2002: Criminal case terminated.

Late 2002: Visits Fairfax, Virginia home of Ali al-Timimi, a radical cleric, and asked him about recruiting young Muslims for “violent jihad.” Al-Timimi, is now serving a life sentence for inciting followers to fight with the Taliban against Americans.

Late 2002: Departs U.S. for London.

June 2003: Delivers lecture at Muslim Association of Britain symposium in London

December 2003: Islamic Forum of Europe lecture: “Stop police terror.”

Dec. 18, 2003: British MP Louise Ellman tells House of Commons calls Muslim Association of Britain is a branch of the Muslim Brotherhood; says Awlaki “is reportedly wanted for questioning by the FBI in connection with the 9/11 al-Qaeda terrorist attacks on New York and Washington.”

Early 2004: Moves to Yemen.

2004: Lectures at Imam University in Sana’a, Yemen, a school headed by Abdul Majeed al-Zindani.

Mid-2006: Awlaki arrested in Yemen. Claims he was held at the request of the U.S. government.

Oct. 17, 2006: Yemeni secret police raid swept up eight foreigners living in Sana’a, under surveillance by the CIA and British intelligence, and at least 12 other men across Yemen. Yemeni authorities insist they dismantled an al-Qa’ida cell and disrupted a gun-running ring to neighbouring Somalia, although no evidence is found. Awlaki (identified as “Abu Atiq”) said to be key to the raid.

September 2007: FBI agents interview Awlaki in prison. Ask about contacts with 9/11 hijackers.

December 2007: Awlaki released after 18 months confinement in Yemen, almost all of it in solitary confinement.

Anwar Awlaki in 2008

February 2008: Registers http://www.anwar-alawlaki.com

February 2008: U.S. counterterrorism officials link Awlaki to terrorism, The Washington Post reports. “There is good reason to believe Anwar Aulaqi has been involved in very serious terrorist activities since leaving the United States, including plotting attacks against America and our allies,” an anonymous U.S. counterterrorism official tells the Post.

Unknown: Awlaki leaves Sana’a and moves to remote Shabwa region.

Dec. 17, 2008: Maj. Nidal Hasan contacts Awlaki via e-mail. “Do you remember me? I used to pray with you at the Virginia mosque.” Awlaki tells Al-Jazeera: “He was asking about killing American soldiers and officers. [He asked] whether this is a religiously legitimate act or not.”

“…the first message was asking for an edict regarding the [possibility] of a Muslim soldier killing his colleagues who serve with him in the American army. In other messages, Nidal was clarifying his position regarding the killing of Israeli civilians. He was in support of this, and in his messages he mentioned the religious justifications for targeting the Jews with missiles. Then there were some messages in which he asked for a way through which he could transfer some funds to us [and by this] participate in charitable activities.”

December 2008: San Diego JTTF opens investigation into intercepted e-mails between Awlaki and Maj. Nidal Hasan. (FBI statement)

Jan. 1, 2009: Awlaki speaks via satellite link at London Muslim Centre. Event organized by Noor Pro Media.

January 2009: In blog post, Awlaki asks: “Today the world turns upside down when one Muslim performs a martyrdom operation. Can you imagine what would happen if that is done by seven hundred Muslims on the same day?!”

January 20, 2009: Al Qaida forces in Yemen unite under the umbrella of Al Qaida in the Arabian Pensinsula (AQAP).

February 2009: Awlaki blog post, “I pray that Allah destroys America and all its allies and the day that happens, and I assure you it will and sooner than you think, I will be very pleased.”

Early 2009: E-mail contacts continue between Awlaki and Hassan. FBI San Diego forwards two messages to Washington Field Office. Later e-mail described as “more serious” not shared.

March 15, 2009: AQAP claims credit for attacks that kills four South Korean tourists and their guide in in the city of Shibam in Hadramut; days later, a convoy of Korean officials sent to investigate is attacked.

July 2009: Awlaki praises insurgent attack on Yemeni troops in Marib.

Aug. 4: Umar Farouk Abdulmutallab, Nigerian suspected of trying to blow up Northwest Airlines Flight 253, attends Sana’a Institute for the Arabic Language, according to the Yemeni Foreign Ministry.

August: The U.S. National Security Agency intercepts al-Qaida conversations about an unidentified “Nigerian.”

Aug. 27: AQAP claims credit for an attack that narrowly missed Prince Mohammed bin Nayef, a senior member of Saudi Arabia’s ruling family and head of the kingdom’s counterterrorism operations. Suicide bomber detonated PETN bomb hidden in his underwear.

Sept. 21: Abdulmutallab leaves Sana’a Institute.

Fall: NSA intercepts “voice-to-voice communication” between Abdulmutallab and Awlaki indicating that Aulaqi “was in some way involved in facilitating this guy’s transportation or trip through Yemen.”

October: Abdulmutallab travels to Shabwa province. The 23-year-old engineering graduate probably met with al-Qaeda operatives in a house built by Awlaki.

October: CIA rebuffs Yemeni government request for help locating Awlaki for possible capture operation, according to The Washington Post’s David Ignatius. CIA concluded that it could not assist because the agency lacked specific evidence that he threatened the lives of Americans. A Yemeni request forU.S. Special Forces’ help on the ground in pursuing Awlaki also refused.

Fall: Awlaki tells Yemeni journalist that he met Abdulmutallab:

  • “Umar Farouk is one of my students; I had communications with him,” Awlaki says
  • Yemeni Foreign Minister Rashad Alimi states Abdulmutallab met Awlaki at a remote meeting place in Shabwa province.
  • Abdulmutallab tells FBI that Alwaki personally blessed attack.

November: U.S. official tells David Ignatius Awlaki “didn’t go operational until November. It wasn’t a case of missed intelligence, not at all. The Yemenis didn’t even think he had assumed an operational role.” This official also notes that “there was an American policy decision not to put boots on the ground,” limiting any military action.

Nov. 5, 2009: Hasan allegedly kills 13 at Fort Hood.

Nov. 7, 2009: Post on Awlaki’s website praises Hasan as a “hero.”

After the Fort Hood shooting, FBI, CIA, NSA, NCTC conduct interagency “scrub” of Awlaki’s contacts to determine who poses a threat. (Michael Leiter, testimony 1/20/09 before Senate Commerce, Science and Transportation Committee.)

Dec. 7, 2009: Abdulmutallab leaves Yemen for Ethiopia.

Dec. 14, 2009: Secretary of State Hillary Clinton designates Al Qaeda in the Arabian Peninsula aka Al Qaeda in Yemen as a terrorist organization. Two AQAP leaders, Nasir al-Wahishi and Said Ali al-Shihri, also designated as terrorists

Dec. 23, 2009: Al-Jazeera broadcasts interview with Awlaki.

Dec. 24, 2009: Awlaki falsely reported as killed in Yemeni airstrike.

  • On orders from President Barack Obama, ABC News reports, the U.S. military launched cruise missiles against two suspected al-Qaida sites: a suspected training camp north of Sanaa and a location where officials said “an imminent attack against a U.S. asset was being planned.”
  • Yemen Embassy states Yemeni air forces targeted “scores of Yemeni and foreign al-Qaida operatives” at a remote location southeast of Sanaa. Awlaki “presumed to be at the site” along with Nasir al-Whaishi, senior leader of Al Qaida in the Arabian Pensinsula (AQAP) and his deputy, (former Guantanamo detainee) Said al-Shiri.
  • Official Yemen state news agency, SABA, reports attack targeted an al-Qaida hideout in the Rafdh area of the al-Said district in Shabwa province.

Dec. 25, 2009: Rep. Pete Hoekstra, senior Republican on House Intelligence Committee, suggests there may be a link between Awlaki and Umar Farouk Abdulmutallab.

Dec. 29, 2009: Alwaki became “operational” sometime over past year, senior U.S. official tells Fox News.

“Late” 2009: Awlaki’s name added to separate lists of maintained “High Value Targets” and “High Value Individuals” maintained by U.S. Joint Special Operations Command’s list and the Central Intelligence Agency

Jan. 3, 2010: “Mr. Awlaki is a problem. He’s clearly a part of Al Qaida in Arabian Peninsula. He’s not just a cleric. He is in fact trying to instigate terrorism,” said John Brennan, deputy national security advisor for counterterrorism and homeland security.

Jan. 14: Ali Mohamed Al Anisi, the director of Yemen’s National Security Agency and a senior presidential adviser, said talks were under way with members of Mr. Awlaki’s tribe in an effort to convince the cleric to turn himself in.

Jan. 19: Awlaki tells Yemeni journalist he has no intention of surrendering and denies Yemeni government claims that negotiations were underway aiming at a surrender.

Jan. 20: Senate Foreign Relations Committee report: “Although Awlaki has not yet been accused of a crime, U.S. intelligence and military officials consider him to be a direct threat to U.S. interests.”

Jan. 25: ABC News reports, “White House lawyers are mulling the legality of proposed attempts to kill an American citizen, Anwar Awlaki … according to two people briefed by U.S. intelligence officials.”

Jan. 27: The Washington Post:

  • “U.S. military teams and intelligence agencies are deeply involved in secret joint operations with Yemeni troops who in the past six weeks have killed scores of people….”
  • “As part of the operations, Obama approved a Dec. 24 strike against a compound where a U.S. citizen, Anwar al-Aulaqi, was thought to be meeting with other regional al-Qaeda leaders. Although he was not the focus of the strike and was not killed, he has since been added to a shortlist of U.S. citizens specifically targeted for killing or capture by the JSOC, military officials said.”
  • “Both the CIA and the JSOC maintain lists of individuals, called “High Value Targets” and “High Value Individuals,” whom they seek to kill or capture. The JSOC list includes three Americans, including Aulaqi, whose name was added late last year. As of several months ago, the CIA list included three U.S. citizens, and an intelligence official said that Aulaqi’s name has now been added.”

Jan. 31: LA Times: “While Awlaki has not yet been placed on the CIA list, the officials said it is all but certain that he will be added because of the threat he poses. … Awlaki is already on the military’s list, which is maintained by the U.S. Joint Special Operations Command.”

Feb. 2: Awlaki tells Al-Jazeera that he did not order the Christmas Day airliner bombing, but expresses support.

Feb. 3: Director of National Intelligence Dennis Blair says intelligence community may assassinate U.S. citizens involved in terrorism. “We take direct actions against terrorists in the intelligence community,” he said. “If we think that direct action will involve killing an American, we get specific permission to do that.”

Feb. 5: CBS News: “The suspect in a failed Christmas Day airliner bombing attempt told federal investigators that radical Yemeni cleric Anwar al-Awlaki directed him to carry out the attack, CBS News has learned”

March 19: Awlaki calls on American Muslims to take up Jihad against the United States.

March 26: CIA Director Leon Panetta tells WSJ Awlaki is “clearly” someone the agency is seeking. “There isn’t any question that he’s one of the individuals that we’re focusing on.”

May 23: Al-Qaeda in the Arabian Peninsula released a 45-minute interview with Awlaki, who justifies killing American civilians.

June 3: DOJ reveals that Awlaki had been in e-mail contact with 29-year-0ld Barry Walter Bujol in Texas. Awlaki provided Bujol with a document entitled “42 Ways of Supporting Jihad.” Bujol asked Awlaki for advice on how to provide money to the “mujahideen” overseas.

SD's Bill Lerach

Fresh out of prison, San Diego’s Bill Lerach did a Q&A with me at Voice of San Diego.

Lerach ran the West Coast arm of Milberg Weiss and was once the foremost class-action securities lawyer in America.

He talks about the law, his conviction in a scheme to pay kickbacks to plaintiffs, and who he would like to sue now.

Plus, here’s my review of the revealing new book about Lerach, Circle of Greed.

Coughlin Stoia Still Dominates (For Now)

A new report out today shows that San Diego’s Coughlin Stoia, the law firm of attorney Bill Lerach, continues to dominate the field of class-action securities lawsuits even with its former superstar out of the picture.

Coughlin Stoia originated a quarter of all cases settled in 2009, according to this report by Cornerstone Research.

coughlin.png

Class-action securities settlements last year totaled $3.829 billion.

The median settlement was $8 million. The study found that the presence of a “highly active” firm like Coughlin Stoia didn’t increase the chances of winning a big settlement.

Coughlin Stoia, formerly the West Coast offices of Milberg Weiss, was renamed after Lerach pleaded guilty to conspiring to conceal kickbacks to plaintiffs.

A separate Cornerstone Research study suggested that the glory days of big class-action settlements — like Coughlin Stoia’s $7.2 billion judgment against Enron Corp. — may be over.

These cases are no longer a race to the courthouse. New class-action filings in 2009 were marked by a much longer lag between the filing date and the end of the period covering the alleged fraud.

Coughlin Stoia was involved in a majority of the cases with long filing lags. Historically, cases with a longer filing lags are more likely to be dismissed.

Cornerstone concludes:

“The recent surge in filing lags potentially suggests that the pool of current litigation opportunities is shrinking and that plaintiff law firms are revisiting cases involving more distant price drops that were previously viewed as being lower in priority because, among other reasons, they are more likely to be dismissed.”

Brent Wilkes, Master of Delay

The appeal of Brent Wilkes, who was convicted in 2007 of bribing former Rep. Randy “Duke” Cunningham, has been delayed again.

The former defense contractor remains free on $2 million bail.

The 9th U.S. Circuit Court of Appeals said earlier this month that it won’t hear the appeal until the U.S. Supreme Court issues its rulings in the appeals of former Enron CEO Jeff Skilling and former Rep. Bruce Weyrauch.

Those cases involve the crime of depriving the public of the right to “honest services,” the same law federal prosecutors in San Diego used against Wilkes.

Wilkes’s briefing papers now are due before the 9th Circuit about a month after the Supreme Court issues its rulings in Skilling and Weyrauch. The earlier deadline was today.

With more arguing back and forth and the average wait of a year for a ruling from the court, it will be a long time before Wilkes sees the inside of prison again.

It’s a pretty sweet deal for Wilkes, who is being represented by the federal public defender’s office in San Diego.

Cunningham is due to be released in 2013, according to the U.S. Bureau of Prisons website.

Amazingly, it’s looking increasingly likely that Duke may finish serving his sentence before Wilkes starts serving his.

Did You Know…

Disneyland is part of the U.S.-Mexico border?

According to federal codes and regulations, it is.

Customs and Border Patrol agents searching for aliens can board any plane, vehicle, railway car, or conveyance a “reasonable distance” from the border.

The Fourth Amendment to the U.S. Constitution typically requires a warrant for such searches, but an exception is written into federal law. (See here.)

To find out how far that is is you have to look at US Code of Federal Regulations. 

Turns out a “reasonable distance” is within 100 “air miles” from any external boundary of the United States.

That includes Huntington Beach, Newport Beach, Irvine, Costa Mesa and half of Catalina Island.

Laura Duffy, Salon Owner

I wonder how many U.S. attorney nominees are part owners of a hair salon.

Main Justice reports that Laura Duffy, President Obama’s nominee for U.S. Attorney in San Diego, reported receiving a $23,637.50 distribution in 2009-2010 from Gila Rut, an Aveda salon in Chula Vista. Duffy has a 45 percent ownership stake in Gila Rut in Chula Vista.

She also reported earning $35,400 from nine speaking engagements at the Aveda Business College Seminar.

Partying With SD's Coughlin Stoia

“Paying Plaintiffs to Sue,” Forbes:

Conferences, at least, bear the patina of educational merit and an opportunity to curry favor with the officials who help pick legal counsel. Coughlin Stoia Geller Rudman & Robbins hired Bill Clinton (who reportedly charges $150,000 and up) to appear at a seaside event at San Diego’s Hotel del Coronado last September.

This forum on “The Future of Corporate Reform” had pension officials enjoying an oceanside clambake, closing day at Del Mar racetrack, a ride on an America’s Cup-winning vessel, balloon rides and a four-course French banquet. Coughlin Stoia’s conference partner: the Corporate Library, a for-profit governance watchdog. Coughlin Stoia insists clients hire it for its winning record. The Corporate Library characterizes the conference as “an intensive, engaging and informative event that combined many hours of speeches, panels and dialogue with opportunities for informal conversation.”

More on the Future of Corporate Reform

More on Coughlin Stoia here and here.

Toyota sudden acceleration lawsuit in SD

Toyota would be crazy if it ever let this lawsuit filed by relatives of CHP Officer Mark Saylor get anywhere near a San Diego jury.

Saylor and three family members were killed last year when a Lexus ES 350 accelerated out of control in Santee, east of San Diego.

This horrific 911 call recorded the family’s final minutes as they sped into an intersection on northbound SR-125. The final words heard from the vehicle were “hold on” and “pray.”

The 272-horsepower Lexus was moving at between 112 and 150 (!) miles per hour when it crashed and burst into flames, likely due to overheated brakes, according to the crash report.

Bob Baker Lexus of El Cajon better have good lawyers too.

The crash vehicle was a loaner from Bob Baker. Investigators found that the dealership installed the wrong floor mats, causing the accelerator to become stuck.

Another customer who had borrowed the crash vehicle four days earlier told Sheriff’s investigators that the accelerator had gotten stuck under the floor mat, a fact he reported to the Bob Baker receptionist.

The crash report also noted that electronic or computer-generated malfunction “should not be ruled out.”

The lawsuit was filed Tuesday in San Diego Superior Court by Jim Gomez and Tim Pestotnik, a pair of local attorneys. Pestotnik declined to tell the Wall Street Journal whether settlement talks with Toyota had already occurred.

San Diego a mecca for gay prosecutors?

Human Rights Campaign, a gay rights group, praised President Obama today for nominating Laura E. Duffy, an out lesbian, for U.S. Attorney for San Diego.

If confirmed by the Senate, Duffy would be the second openly gay person to serve as a U.S. attorney, DC Agenda reported last week. The Senate confirmed Jenny Durkan last year as U.S. attorney for the Western District of Washington.

San Diego’s District Attorney Bonnie Dumanis made national headlines in 2002 when she became the first openly gay district attorney elected in the United States. Her sexuality hasn’t been much of an issue.

Duffy, who has earned high marks for her prosecution of the Arellano-Felix drug cartel, would have been  disqualified during the Bush administration. The DOJ’s Inspector General found that two former aides to Attorney General Alberto Gonzales had used sexual orientation as a litmus test in personnel decisions.

Coughlin Stoia's Money Machine

A move is underway to clamp down on the massive fees earned by plaintiffs lawyers suing behalf of public pension funds.

Florida recently capped the fees its lawyers can earn at $50 million per case. Alabama, Iowa, Mississippi, and Oklahoma have introduced bills that would force states to disclose their contracts for legal services. Several states have already enacted similar measures.

This movement could be bad for business at San Diego’s Coughlin Stoia Geller Rudman & Robbins LLP, a politically-connected firm that has extracted huge settlements in class-action corporate lawsuits.

As I noted last week, Coughlin Stoia is cozy with Phil Angelides, the former California treasurer who is now leading a congressional inquiry into the causes of the financial crisis.

Byron Georgiou, of counsel to Coughlin Stoia, is a member of the Angelides commission.

For an excellent example of how the firm operates, there are few better examples than Coughlin Stoia’s 2006 lawsuit against UnitedHealth Group on behalf of CalPERS, the giant California pension fund.

The firm — known then as Lerach Coughlin — sued UnitedHealth over the company’s practice of backdating stock options granted to its executives.

A month after filing suit, Coughlin Stoia and its attorneys contributed $107,000 to Angelides’ gubernatorial campaign. Angelides was an influential member of the CalPERS board.

CalPERS became lead plaintiff in the lawsuit and Coughlin Stoia became lead counsel.

CalPERS’ general counsel, Peter Mixon, and Lerach Coughlin negotiated the firm’s compensation a year later.

The deal anticipated a billion-dollar settlement. Lawyers on the case were to receive 11 percent of the first $250 million recovered; 12 percent of the next $250 million; and 13 percent of anything exceeding $750 million.

Sure enough, UnitedHealth Group settled in 2008 for $925 million — the largest settlement ever in a stock options backdating case.

Under its fee arrangement, CalPERS’ attorneys were entitled $110 million, most of which would have gone to Lerach Coughlin.

Judge James S. Rosenbaum wouldn’t allow it. He  cut Lerach Coughlin’s golden egg nearly in half to $65 million.

In his ruling, Judge Rosebaum said that while Lerach Coughlin may have been pursuing in its own interests, CalPERS was not. The judge found no signs that the pension had used its enormous leverage to shop around for another law firm. Nor had it tried to negotiate a lower fee before filing the complaint.

Another problem was that the firm’s lead attorney, William Lerach, hadn’t bothered to tell the judge that he was under federal investigation. Lerach is serving two years in prison for paying kickbacks to his clients.

In fact, Lerach’s firm told Judge Rosenbaum in 2006 that the government “has notified Mr. Lerach that it does not intend to take any action against him.” 

“Had the truth been timely and fully disclosed to the Court, in all likelihood the Court would never have appointed his firm as lead counsel,” Judge Rosenbaum wrote.

It could also be said that had the truth been fully disclosed, Lerach Coughlin/Coughlin Stoia wouldn’t have been able to bill $900 an hour for the services of prisoner Bill Lerach.

How Ex-SD Imam Will Be Marked For Death

The LATimes follows up today with an excellent story on how the bullseye will be planted on Anwar Awlaki, the former San Diego imam who U.S. counterterrorism officials believe has joined al Qaida’s forces in Yemen.

First, ABC News and then The Washington Post reported last week that the Obama administration is considering whether to order a Predator strike on Awlaki, a case that’s complicated by the fact that he’s a U.S. citizen.

The LATimes’ Greg Miller provides more detail on the process of how the CIA marks suspected terrorists for death in its “targeted killing” program:

  • Memos proposing new targets are drafted by analysts in the CIA’s Counter-Terrorism Center.
  • CTC analysts typically submit several new names each month to high-level officials, including the CIA General Counsel, Stephen W. Preston, and sometimes Director Leon E. Panetta.
  • The list is scrutinized every six months; some names are scrubbed if the intelligence grows stale.
  • The program is overseen by the National Security Council.
  • The CIA does not need White House approval when adding names to the target list, unless the individual is a U.S. citizen.

Miller’s story contradicts a Jan. 27 story by Dana Priest at The Washington Post on a key point:

Miller: “No U.S. citizen has ever been on the CIA’s target list, which mainly names Al Qaeda leaders, including Osama bin Laden, according to current and former U.S. officials. But that is expected to change as CIA analysts compile a case against a Muslim cleric who was born in New Mexico but now resides in Yemen.”

Priest: “As of several months ago, the CIA list included three U.S. citizens, and an intelligence official said that Aulaqi’s name has now been added.”

Also are targeting decisions based on whether on an individual is “deemed to be a continuing threat to U.S. persons or interests,” as Miller reported. That appears to be a slightly lower threshold that what Priest describes as an individual who presents “a continuing and imminent threat to U.S. persons and interests.”

Semantics, perhaps, but we are talking about executing a U.S. citizen without due process.

The Embarrassing Case of Jesus Navarro (Updated)

(Note: I updated this post after a reader pointed out that the Border Patrol didn’t let Navarro go in 2007. What actually happened is even worse)

Now that a Mexican smuggler suspected in the murder of a U.S. Border Patrol agent is on his way to San Diego, maybe we can finally get some answers as to how and why the case went so horribly wrong.

The U.S. government’s bungling allowed the suspect, Jesus Albino Navarro-Montes, to get out of a Mexican jail. That part is well known, but what hasn’t gotten much attention is that U.S. officials let Navarro slip away not once, but twice.

Not long before the death of Border Patrol Agent Luis Aguilar, Navarro was caught by the Border Patrol with a half-ton of pot.

But he got away.

How?

According to a federal complaint, Navarro and his female passenger stole a Border Patrol vehicle and drove it back to Mexico.

This would laughable if the results weren’t so tragic.

A few months later, Navarro was allegedly behind the wheel of a Hummer H2 on Jan. 19, 2008 that illegally crossed the border near Yuma, Arizon.

Agent Aguilar, 32, was run over while trying to throw down a spike strip. The Hummer got away, but Navarro was arrested on January 28, 2008.

On June 18, 2008, he was released from jail by a Mexican judge.

Why?

The U.S. government never sought Navarro’s extradition. It never presented an arrest warrant. Without any evidence of a crime, Navarro had to be released.

“Although we had asked the U.S. government a couple of times before his release to help us deal with the matter so we could hold Mr. Navarro, we got nothing whatsoever,” embassy spokesman Ricardo Alday told a reporter for The Washington Times. “The U.S. response never came.”

Congress Brian Bilbray, a San Diego-area Republican, asked Attorney General Michael B. Mukasey and the White House for an explanation.

He got the brush off.

Disclosure would “inevitably compromise highly sensitive law enforcement investigative information,” Deputy Assistant Attorney General Keith B. Nelson wrote in a letter to Bilbray.

Navarro was re-captured near Zihuatanejo on Feb. 11, 2009 by Mexico’s Agencia Federal de Investigacion in an operation coordinated with the FBI and U.S. Marshal’s Service.

After Navarro’s re-arrest, authorities in San Diego unsealed a criminal complaint that showed that Border Patrol agents had captured Navarro on Sept. 23, 2007 following a chase east of San Diego.

(Click here to read the complaint and accompanying statement of facts.)

Border Patrol agents used a spike strip to successfully slow him down. Navarro ditched his pickup in the desert and fled on foot with an unidentified female passenger.

Border Patrol agents caught the pair and put them in their vehicle.

According to the statement of facts, “The female passenger was able to take control of the Border Patrol vehicle, and both the female passenger and NAVARRO-Montes absconded to Mexico in the Border Patrol.”

The agents were stuck in the desert with a Toyota pickup with three blown out tires and 979.7 pounds of marijuana inside.

Report: US Mulls Killing Former SD Imam

Can the president target an American citizen in a lethal attack?

White House lawyers are struggling with that question in the case of Anwar Awlaki, a former San Diego imam and SDSU graduate student, according to an ABC News report. 

The Senate Foreign Relations Committee noted last week that U.S. intelligence and military officials consider Anwar Awlaki, a former San Diego imam and U.S. citizen, to be “a direct threat to U.S. interests” although he has not yet been accused of a crime.

Awlaki corresponded with alleged Fort Hood shooter Maj. Nidal Hasan before the attack that killed 12 soldiers, and investigators believe he also met with accused “underwear bomber” Umar Farouk Abdulmutallab.

  • For more see my Awlaki timeline.

ABC’s Matthew Cole, Richard Esposito and Brian Ross are reporting:

According to the people who were briefed on the issue, American officials fear the possibility of criminal prosecution without approval in advance from the White House for a targeted strike against Awlaki.

The former imam at the Masjid al-Rabat al-Islami in San Diego was said to be in the Predator’s sights after the Fort Hood attack, but the strike wasn’t authorized because of questions over the citizenship of the New Mexico-born Awlaki.

President Reagan signed an an executive order in 1981 that forbid anyone employed by or acting on behalf of the U.S. government from engaging in or conspiring to engaging in assassination. That order remains in effect today.

However, we can kill those who are trying to kill us. After the Sept. 11 attacks, Congress gave the president the authority to use “all necessary and appropriate force” to prevent future acts of terrorism against the United States. The specifics are said to be set out in a secret presidential “finding” signed by President Bush after the attacks.

In 2002, a CIA drone attack in Yemen killed a carload of suspected terrorists, including the target of the operation, the top al-Qaida leader in the country. U.S. officials weren’t troubled that the strike killed Yemeni-American Kamal Derwish, a U.S. citizen. “No constitutional questions are raised here,” said National Security Adviser Condoleezza Rice.

Putting the bullseye on Awlaki and pulling the trigger would break new legal ground and raise fresh questions about the limits of presidential power.

At the very least, the U.S. government should make plainly clear what Awlaki has done to earn the wrath of a Hellfire missile. Meeting, corresponding and, odious as it may be, enouraging jihadists, doesn’t cut it.

The Arrest of El Teo

In The Politics of Heroin, Alfred McCoy notes that we capture a drug lord only when he is no longer a drug lord.

So it is with news of the arrest of El Teo, a vicious Tijuana drug baron who is accused of having the bodies of his enemies beheaded or dissolved in caustic soda.

McCoy reminds us that a man like El Teo, or rather, the man authorities accuse him of being, can only be arrested when the drug traffic shifts, stripping him of the power, profits and protection he needs to stay in business. In other words, the arrest of El Teo was only possible because he was already irrelevant.

While the bloodbath in Tijuana attracts the attention, the Sinaloa carter and its leader, Joaquin El Chapo (“Shorty”) Guzman, quietly prospers, as The Economist noted this week:

Sinaloa, by contrast, has stuck to drugs and money laundering and is smarter and more sophisticated. It prefers anonymity to the ostentation of others (Mr Beltrán was undone by inviting a famous accordionist to play at a Christmas party). It eschews jobless teenagers, its rivals’ rank and file, in favour of graduates, infiltration and intelligence. Although all the gangs have penetrated local governments, only Sinaloa and the Beltráns have been discovered to have bribed senior officials. Officials complain that Sinaloa operatives receive warning of pending raids. Sceptics wonder whether success against other gangs comes from tip-offs from Sinaloa.

Forbes reckons that Guzman, who bribed his way out of prison in 2001, is now the 701st richest man in the world.

FBI Finger-Pointing over Anwar Awlaki

Intelligence sharing is a bit like a game of hot potato: If you get stuck with it, you’ll get burned.

FBI officials in San Diego recently caught just such a hot potato when they intercepted e-mails between Maj. Nidal Hasan, the accused Fort Hood shooter, and a radical former San Diego imam named Anwar al-Awlaki.

These intercepts are among the government’s biggest secrets. Yet, at the same time, it would be surprising if Hasan and Nidal didn’t know that their communications were likely to be intercepted.

Awlaki had been an FBI counter-terrorism target for years. As an imam in San Diego in 2000, Awlaki served as a “spiritual advisor” to three 9/11 hijackers.

The FBI has asked him numerous times about his contacts with the hijackers, including when agents visited him in 2007 in a Yemeni prison. The intercepts were made about a year after he got out of prison. Today, he is said to be hiding in Yemen.

As for Hasan, he was a psychiatrist in the military. His contacts with Awlaki were viewed as consistent with some research he was conducting as a psychiatric resident at the U.S. Army’s Walter Reed Medical Center. A 2007 slideshow he gave at Walter Reed was titled “The Koranic World View As It Relates to Muslims in the U.S. Military.”

As many as 20 e-mails between Hasan and Awlaki were intercepted by the San Diego Joint Terrorism Task Force (JTTF) between December 2008 and May 2009. The communications were deemed “consistent with research being conducted by Major Hasan in his position as a psychiatrist at the Walter Reed Medical Center,” the FBI says.

After the shooting that killed 13 people, a blog post on Aulaki’s website praised Hasan as a “hero.”

The communications between Awlaki and Hasan were never shared with the Defense Department, even though a member of the Defense Criminal Investigative Service was on the multi-agency San Diego JTTF.

CIA Director William Webster is conducting a review to find out what happened. According to The Washington Post, Webster will have the authority to make recommendations about possible changes to the Foreign Intelligence Surveillance Act, which governs the highly sensitive communications intercepts at issue.

Awlaki is particularly troublesome for investigators because he is a U.S. citizen, born in New Mexico in 1971. As a result of that circumstance, the Foreign Intelligence Surveillance Act required the JTTF to apply for a court order of surveillance at the secret FISA court or a certification from the U.S. attorney general. Investigators were required to present evidence that Awlaki was “an agent of a foreign power, or an officer or employee of a foreign power.”

Al-Qaida qualifies as a foreign power, and Charles Allen, a former CIA official and US Undersecretary of Homeland Security for Intelligence and Analysis, declared last year that Awlaki was part of al-Qaida’s reach into the U.S. homeland.

So, they got a warrant. Great. What good is such intelligence if you don’t use it?

In Hasan’s case, an investigator and a supervisor concluded that Hasan was not involved in terrorist activities or planning.

Further dissemination of the information “was neither sought nor authorized.” In plain English, the JTTF FBI supervisor wouldn’t let the folks from the Defense Department on his task force tell their commanders about the e-mails.

Officials in San Diego told Voice of San Diego’s Kelly Thornton that their counterparts in Washington are to blame:

One federal source described the probe this way: “Webster is going to investigate the Fort Hood guy and al-Aulaqi and whether the FBI screwed up. They’re saying San Diego failed to communicate the e-mails — but San Diego pestered the shit out of them, sending e-mails multiple times. The Washington field office didn’t do anything on it.”

The Washington Post reported Dec. 1 that members of Congress have identified “at least two troubling e-mails” that were intercepted by the San Diego FBI but not shared with Washington.

In a tit-for-tat battle, Thornton’s anonymous San Diego sources responded by saying that everything was fully communicated to Washington, which had “computer access” to everything San Diego had.

The Voice of San Diego, however, leaves out crucial background found in reports by the 9/11 Commission and Congressional Joint Inquiry on 9/11:

In June 1999, the FBI in San Diego investigated Awlaki after learning that he may have been contacted by a man who bought a satellite phone bin Laden used in the 1990s.

During its investigation, FBI learned that Awlaki knew individuals from the Holy Land Foundation and others involved in raising money for the Palestinian terrorist group Hamas. Sources alleged that Awlaki had other extremist connections.

In early 2000, Awlaki was visited by a subject of a Los Angeles FBI investigation closely associated with Blind Sheikh [Omar Abdel] Rahman.

Around the time Awlaki was holding closed door meetings in San Diego with two of the hijackers, the FBI closed its investigation, stating “the imam … does not meet the criterion for [further] investigation.”

It wouldn’t be the first time that the FBI in San Diego misjudged Awlaki. Then again, no one bothered to tell the FBI in San Diego about two of the 9/11 hijackers whom the CIA had tracked from Bangkok to Los Angeles in 2000 until it was too late.

The Spy Who Conned Me

Must read Sunday Times (of London) story on Kevin R. Halligen, a British security consultant who conned the Washington defense and security establishment.

Halligen was indicted earlier this month in Washington on fraud charges. Apparently, everything about Halligen was a con. He passed himself off as a former British secret agent. Even his 2007 wedding to a Washington lawyer was a scam; according to the Times, the “priest” was really the caterer.

One of the guests was Andre Hollis, a lobbyist who became chief executive of Halligen’s Washington company. “It was like a global intelligence debutante ball,” he said. “And nobody knew it was fake.”

Not even the best man, Colonel John Garrett, a defence lobbyist for the blue-chip Washington law firm Patton Boggs, was let in on the secret. Nor was the most powerful guest in the room, Noel Koch, a security expert who has now become a deputy undersecretary in the defence department.

He said: “We found out later that it was not a real wedding. The priest was an actor.”

Halligen’s firm, Oakley International Group was paid $2.1 million to secure the release of two executives of Trafigura, a Dutch oil trading firm.

The executives were held in an Ivory Coast jail after a ship chartered by Trafigura dumped tons of toxic sludge in the Ivorian port of Abidjan that was blamed in 17 deaths and thousands of injuries.

Instead of freeing the Trafigura executives, the money went toward the purchase of Halligen’s mansion in Great Falls, Va.

Update: Halligen was arrested at a hotel in Oxford, England where he had been staying for months under the name Richard Hall. He is being held without bail and is awaiting extradition to the US.

Are Embedded Journalists Lawful Targets?

Browsing the Internets, I came across an article by Douglas W. Moore in the July issue of Army Lawyer that tackles the difficult question of whether embedded journalists can be considered lawful enemy targets.

To help clarify when an embedded journalist’s activities will result in a loss of protections, this paper recommends three criteria to aid in this evaluation: (1) the integration of war correspondents into military information operations, (2) the eroding distinction between PAO [Public Affairs Office] and war correspondents, and (3) the loss of reporter objectivity on the battlefield.

The Geneva Conventions declare that journalists covering armed conflicts should be treated as civilians, whether they are accredited by the military or not, assuming “they take no action adversely affecting their status as civilians.”

According to Army Lawyer, embedded journalists run the risk of losing protections because they are increasingly becoming part of military “information operations” or IO.

Overall, IO seeks to use war correspondent news coverage to support positive public relations, build public support, and support successful information operations against the enemy….

Under “operational security” or OPSEC rules, the military controls what embedded reporters can or can’t report. It uses them for “psychological operations” (PSYOP) targeting foreign audiences, particularly during combat operations. Finally, public affairs officers use embedded press to reach targets back home.

The integrated nature of the embedded press system, combined with this military function, dramatically increases the likelihood that a journalist’s activities will be defined as directly supporting combat operations.

The full article is available here (.pdf).

Imam Aulaqi and Yemen's image problem (Updated)

Anwar al-Aulaqi’s website and his statement praising the suspected Fort Hood shooter as a “hero” has vanished from the Internet. (For those who are interested, the statement in its entirety can be found at the end of this post.)

The words of the former San Diego imam — now said to be living hiding in Yemen — have received wide distribution. The timing of his Nov. 8 statement of support for Maj. Nidal Hasan, however, has escaped notice.

While Aulaqi’s name and his links to Maj. Hasan were being leaked to the Western press, U.S. military officials were quietly holding two days of talks on terrorism and other issues with their counterparts in Yemen, according to Saba, Yemen’s official state news agency.

Brig. Gen. Jefforey A. Smith, recently named deputy director for politico-military affairs in the Middle East (J5) for the U.S. Joint Chiefs of Staff, signed a joint cooperation agreement today, confirming U.S. support for Yemen’s shaky government.

Update: The US embassy declined to comment on whether an agreement had been signed, but tells AFP that talks involving Smith had taken place and said they focused on counterterrorism efforts against groups operating in Yemen. (The AFP misidentified Smith.)

This week’s talks in Sana’a have attracted no attention in the United States. But Yemen’s Chief of the General Staff Ahmed al-Ashwal said the talks were of great concern to the government of President Ali Abdullah Salih, which is battling al-Qaida in the east and tribal rebels in the north backed by Iran.

The Economist reported this week:

Yemen’s increasing lawlessness outside shrinking zones of state control around the main cities is one reason why, earlier this year, al-Qaeda’s Saudi branch announced it was moving across the border and merging forces with its brethren in Yemen. The joint operation, calling itself “al-Qaeda in the Arabian Peninsula”, known in intelligence circles as AQAP, has carried out sporadic attacks inside Yemen, where tacit agreements with the government appear to have broken down. But its main target still appears to be Saudi Arabia.

The most recent State Department report on terrorism described Yemen’s efforts as “mixed.” While it took action against al-Qaida, Yemen, despite pressure from the U.S., continued a surrender program for terrorists it could not apprehend and released all returned Guantanamo detainees.

All of which makes the timing of Aulaqi’s statement even more interesting:

Nidal Hassan Did The Right Thing

Nidal Hassan is a hero.

He is a man of conscience who could not bear living the contradiction of being a Muslim and serving in an army that is fighting against his own people. This is a contradiction that many Muslims brush aside and just pretend that it doesn’t exist. Any decent Muslim cannot live, understanding properly his duties towards his Creator and his fellow Muslims, and yet serve as a US soldier. The US is leading the war against terrorism which in reality is a war against Islam. Its army is directly invading two Muslim countries and indirectly occupying the rest through its stooges.

Nidal opened fire on soldiers who were on their way to be deployed to Iraq and Afghanistan. How can there be any dispute about the virtue of what he has done? In fact the only way a Muslim could Islamically justify serving as a soldier in the US army is if his intention is to follow the footsteps of men like Nidal.

The heroic act of brother Nidal also shows the dilemma of the Muslim American community. Increasingly they are being cornered into taking stances that would either make them betray Islam or betray their nation. Many amongst them are choosing the former. The Muslim organizations in America came out in a pitiful chorus condemning Nidal’s operation.

The fact that fighting against the US army is an Islamic duty today cannot be disputed. No scholar with a grain of Islamic knowledge can defy the clear cut proofs that Muslims today have the right — rather the duty — to fight against American tyranny. Nidal has killed soldiers who were about to be deployed to Iraq and Afghanistan in order to kill Muslims. The American Muslims who condemned his actions have committed treason against the Muslim Ummah and have fallen into hypocrisy.

Allah(swt) says: Give tidings to the hypocrites that there is for them a painful punishment – Those who take disbelievers as allies instead of the believers. Do they seek with them honor [through power]? But indeed, honor belongs to Allah entirely. (al-Nisa 136-137)

The inconsistency of being a Muslim today and living in America and the West in general reveals the wisdom behind the opinions that call for migration from the West. It is becoming more and more difficult to hold on to Islam in an environment that is becoming more hostile towards Muslims.

May Allah grant our brother Nidal patience, perseverance and steadfastness and we ask Allah to accept from him his great heroic act. Ameen.

Brent Wilkes: Justice Delayed

Remember Brent Wilkes? The formerly high-flying San Diego defense contractor was sentenced to 12 years in prison for bribing former Congressman Randy “Duke” Cunningham, but it will be a long time before Wilkes is behind bars.

Wilkes has been free since January on $2 million bail while he appeals his conviction.

The 9th U.S. Circuit Court of Appeals recently delayed the appeal for the third time this year after Wilkes’ court-appointed attorneys argued that they needed more time.

All the paperwork in the case is now due April 9, 2010. Unless there’s another delay.

According to the court, it takes on average 4-5 months for the 9th Circuit to hear oral arguments, and then three months to a year for the court to decide, so Wilkes likely won’t have a decision before 2011.

By then, Wilkes’ former consultant and fellow convicted Cunningham briber, Mitch Wade, will be nearing the end of his sentence, as will Wilkes lifelong best friend, Kyle “Dusty” Foggo, the CIA’s former executive director.

Cunningham has a 2013 release date.

How defense giant SAIC made $3.5b in 5 years

In the Hall of Fame of missed business opportunities, a special place is reserved for Emmit McHenry.

In 1995, McHenry sold his small company called Network Solutions for $4.7 million to the secretive and powerful San Diego defense giant SAIC.

Five years later, McHenry’s business sold again for $3.5 billion.

Network Solutions (known today as VeriSign) administers a database of 90 million domain names that includes all the dot-coms on the Internet (including this one). This database told your computer where to find the page you are now reading. Without it, there would be no Internet as we know it. No Google. No Amazon.

If you haven’t heard the full story of SAIC and Network Solutions it’s because the full story hasn’t really been told before. SAIC hasn’t exactly tooted its own horn on the whole the Network Solutions saga. Many were outraged that the government had granted the employee-owned company what amounted to a license to print money.

In this 2-part piece by my friend Bruce Bigelow at Xconomy, a local San Diego business website that I have done some work for in the past, got SAIC founder Robert Beyster to tell the story.

In SAIC’s hands, McHenry’s small company turned out to be “unbelievably profitable,” says  Robert Beyster, the scientist who founded and ran SAIC until his ouster from the company in 2004. In fact, thanks to Network Solutions, SAIC may have been making too much money:

X: Why did SAIC decide to do the partial IPO in 1997? Did that turn out to be a smart thing to do? SAIC sold 3.3 million common shares, or a 21 percent-stake in Network Solutions, raising more than $59 million. SAIC retained almost 12 million shares of the stock, which carried preferential rights that basically preserved 96 percent control of the company.

JRB: The value of NSI was becoming so great that we wanted to take some of the profits we had made off the table in case of difficulties later on. (emphasis added)

There were — and still are — many people who think this never should have been allowed. The Internet had its origins in a network created by a research unit at the Pentagon and thus belonged to no one. The National Science Foundation oversaw the domain name registration database, a job that it contracted out to Network Solutions.

If McHenry didn’t realize what he had, SAIC sure did. A few months after SAIC acquired the company, the government amended the terms of Network Solutions’ contract. The amendment allowed SAIC to charge $100 to register a domain name (subsequently lowered). Equally important, the contract amendment allowed SAIC to keep 70 percent of the revenue, and gave the company a monopoly over the business.

This monopoly began to rub people the wrong way, and a spate of lawsuits were filed. So SAIC turned to its friends in Washington, says Mitch Daniels, who engineered the Network Solutions deal:

MD: We spent significant amounts of time and money at NSI educating the public, Congress, and senior government officials about aspects of the business that were really important: the Internet, domain names, Internet security, major policy questions involved with domain names, and keeping the “A” server and the other domain names servers running and secure. From 1995 until 2000, we brought at least one-half of the entire United States Senate and House members as well as senior White House and cabinet-level officials to tour our facilities in Herndon, VA.

Even if McHenry had hung on to the company, he would have been unable to marshal the kind of firepower that SAIC had in Washington. After a court held that Network Solutions was assessing an illegal tax, Congress in 1998 slipped language into an appropriations bill that retroactively made this “fee” legal. (See Thomas v. Network Solutions.) One of SAIC’s lobbyists in 1998, incidentally, was the ethically challenged former San Diego congressman Bill Lowery.

Last month, SAIC moved its headquarters to McLean, Va. At last report, it had annual revenues of more than $10 billion.

As for McHenry, he’s moved on and tries not to dwell on what could have been.

CIA Lawyers and the "Legal Principles" memo

This month’s issue of The American Lawyer includes a piece I wrote on the CIA’s Office of General Counsel. Click here to read it (.pdf).

An interesting legal issue that I didn’t mention in the piece involves a document released to the ACLU in August titled “Legal Principles Applicable to CIA Detention and Interrogation of Captured al-Qa’ida Personnel.”(.pdf)

It was written by unnamed CIA attorneys with help from John Yoo, the attorney in the Justice Department’s Office of Legal Counsel. The OLC provides authoritative legal advice to the Executive Branch, and Yoo authored a whole bunch of controversial opinions dealing with torture and wiretapping and who knows what else that were later rescinded.

The “Legal Principles” was drafted in the spring of 2003. Why it was drafted isn’t clear. A few months earlier, Yoo had given the CIA specific advice on the interrogation of Abu Zubaydah, (.pdf) whom President Bush called one of the top three leaders in al-Qaida.

The key difference between the classified Yoo memo and the CIA’s “Legal Principles” is that the latter broadened the application of “enhanced” interrogation, including the waterboard, to apply to anyone connected with the terrorist group.

The “Legal Principles” memo also set no limits on the number of times that the waterboard could be applied, and it added new techniques such as diapering to the list of approved interrogation techniques previously authorized.

Thus the document provided the legal cover needed for aggressive interrogation of all al-Qaida personnel, not just one.

Or did it?

Whether or not the Justice Department formally approved the “Legal Principles” and with it, the expansion of the CIA’s interrogation program, is now a matter of dispute.

The Office of Legal Counsel at the Justice Department said the undated and unsigned bullet points do not constitute a formal opinion, and that this position was made clear to the CIA.

According to the CIA’s Office of General Counsel, the “Legal Principles” memo “embodies DoJ agreement” that the Justice Department’s opinion “extends beyond” the interrogation of a single detainee.  The agency also cited a  National Security Council meeting in July 2003, during which Attorney General John Ashcroft approved use of multiple applications of the waterboard on other detainees.

Even with Ashcroft’s verbal assent, it became clear that the CIA was legally on shaky ground without a formal opinion.

In a review of the interrogation program, CIA Inspector General John Helgerson apparently recommended that CIA lawyers seek a formal opinion from the Justice Department confirming the conclusions outlined in the bullet points.

In March 2004, CIA General Counsel wrote Jack Goldsmith, head of the Justice Department’s Office of Legal Counsel, and asked him to “reaffirm” these “Legal Principles.” Goldsmith declined to do so.

The debate over the “Legal Principles” memo isn’t merely academic. The question of who authorized what is a critical one, especially as a federal prosecutor is reviewing the interrogation program to see whether crimes may have been committed.

As human rights lawyer John Sifton asked, “Without formal authorization, how can anyone involved in the subsequent authorization assert that their actions were legally authorized?”

The “Legal Principles” memo may be the most overlooked document in the whole torture debate.

The Strange Case of Mohdar Abdullah

Did the U.S. government consider designating San Diego college student Mohdar Abdullah (left) as an enemy combatant after the 9/11 attacks?

The suggestion appears in one of several 9/11 Commission memoranda that were recently released by the National Archives and that make it clear that U.S. authorities viewed Abdullah as a major threat. An enemy combatant designation would have allowed President Bush to order Abdullah detained indefinitely in Guantanamo or military brig.

Ten days after the attacks, Abdullah was arrested as a material witness to the 9/11 attacks and shipped off to New York. Prosecutors there considered charging him along with Zacarias Moussaoui, who is serving life in prison for conspiring to kill Americans in the 9/11 attacks but ultimately decided not to.

Commission documents show that Abdullah presented a dilemma for the government, which believed that he knew much more about the attacks than he would admit, but lacked sufficient evidence to support a terrorism charge. Abdullah was charged with visa fraud and deported to Yemen in 2004.

“If anyone in San Diego had prior knowledge of the 9/11 attacks it would be Abdullah,” one unnamed FBI agent told the Commission.

Abdullah had befriended the two hijackers when they lived in San Diego in 2000 and admitted helping the two men obtain state identification, contacting flight schools on their behalf and translating for them. Abdullah knew the pair had extremist leanings and sympathized with them, according to the 9/11 Commission’s final report. After Hazmi after he left San Diego, he remained in contact with Hazmi.

For three weeks before the attacks, Abdullah had been acting strangely. Several witnesses described him as nervous, paranoid and anxious. He stopped using the phone and didn’t show up at work or school.

On the morning of Sept. 10 at the Texaco station where Abdullah worked, an FBI source reporting hearing Abdullah saying something like, “It’s finally going to happen.” That night, Abdullah wanted to marry a young woman he had met a few months earlier, according to FBI Special Agent Daniel Gonzales.

Much later, Abdullah’s fellow inmates told the FBI that he had bragged to them of advance knowledge of the attacks, but authorities couldn’t substantiate the reports.

Abdullah denied foreknowledge of the attacks.

Gonzales described Abdullah as “a ‘slick’ and charismatic ‘liar.’” The unnamed San Diego FBI agent described Abdullah as a “goofball” and didn’t think he was a willing facilitator for the hijackers.

In their efforts to deport Abdullah, U.S. authorities were “running against the clock,” Justice Department officials told 9/11 Commission staffers in 2004.

Exactly what this means is unclear. The full explanation remains classified, but there’s no doubt that authorities didn’t want to let Abdullah go.

“The fear was a worst-case scenario where the opportunity to deport disappears, criminal charges do not materialize, and Abdullah succeeds in his habeas petition and is walking the streets,” Jonathan Cohn of the Justice Department told Commission staffers.

Sheikh Khalid bin Mahfouz

Writing anything about Sheikh Khalid bin Mahfouz used to be a bit of a risk. The billionaire Saudi banker issued a sheaf of libel writs to obscure writers and forced them to retract their stories and apologize. But the Saudi’s days of using British courts to clear his name are now buried in Jeddah along with 60-year-old Sheikh Khalid himself.

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He was one of the world’s wealthiest men and, at one time, he was the most powerful banker in the Middle East — King Fahd’s personal banker, it was said. Sheikh Khalid inherited his vast wealth from his father, an illiterate money-changer from Yemen who founded what became Saudi Arabia’s leading bank, the National Commercial Bank.

An intensely private man, Sheikh Khalid spent considerable sums in London’s plantiff-friendly courts to prove what he was not. He was not a financier of terrorism. He was not Osama bin Laden’s brother-in-law. No, he was not an investor in George W. Bush’s Harken Energy. The allegations continued to dog him nonetheless.

That he was involved in the BCCI scandal, however, is beyond doubt. Sheikh Khalid was a director and major investor in the Bank of Commerce and Credit International. He did deny that he knew anything about what the bank of Manuel Noriega, terrorist Abu Nidal, the Medellin cartel, and the CIA was really up to.

Prosecutors in New York thought otherwise. A state grand jury indicted him in 1992 on criminal charges of conspiring to steal $300 million from BCCI depositors. The Federal Reserve accused Sheikh Khalid of misleading American regulators and closed the New York branch of the National Commercial Bank.

The charges were a deep embarrassment to the royal family. There were rumors that the House of Saud had borrowed huge sums from National Commercial Bank, perhaps as much as $3 billion, according to False Profits, a book on the BCCI scandal. King Fahd summoned U.S. Ambassador Charles Freeman “to express his surprise and dismay that a local prosecutor in New York City had indicted Sheik Khalid,” The New York Times reported. The king also made an extraordinary request: Would the United States issue a statement supporting the Saudi banking system? The ambassador refused.

To make the charges go away, Sheikh Khalid paid $225 million, including a $37 million fine (which he insisted was not a fine.)  While under investigation, Sheikh Khalid and his family had bought Irish passports. A helpful Citibank vice president supplied a reference, describing the sheikh as “the most important and respected client with Citicorp Private Bank in the UK and Channel Islands and one of the most valued clients of the bank globally.”

With the charges behind him, Sheikh Khalid reemerged as chairman and sole owner of his family’s bank. According to Forbes magazine, however, Sheikh Khalid oversaw a “dramatic” increase in the bank’s nonperforming loans, some of which were made to Sheikh Khalid himself. In 1999, the Saudi government acquired control of National Commercial Bank.

Sheikh Khalid remained in the public eye, however. He was a favorite of conspiracy theorists because of his connections, however indirect, to both the Bush family and the Sept. 11, 2001 attacks.

In the 1970s, his U.S. legal representative was James R. Bath, a dealmaker who served in the Texas Air National Guard with George W. Bush. Bath introduced Sheikh Khalid, Bath, and former U.S. Treasury Secretary John Connally bought Main Bank of Houston.

Sheikh Khalid spent the last decade in seclusion, using his emissaries to stamp out reports that linked him to terrorism. Much was made of the Muwafaq Foundation, a charity Sheik endowed in 1991. A trustee of the foundation, Yassin al-Qadi, was listed by the U.S. government as a financier of terrorism. Sheikh Khalid, once again, insisted he knew nothing about what others had done with his money.

Texas was no hospitable for Sheikh Khalid, and his foreign base shifted to London.  According to news reports, a lawsuit in London revealed that Sheikh Khalid had acquired a London mansion in 1996 without his family’s knowledge. Sheikh Khalid planned to stay in the 97-room apartment in Mayfair with his young male friend, Khalid Ganzal.

Sheikh Khalid exemplified the conflicted realities U.S-Saudi relationship, a mutual dependence of powerful interests built on murky deals. He was not a royal but he was part of the inner sanctum of wealth and power in Saudi Arabia, and one pathway to the royals went through him. Even as he battled criminal charges, Sheikh Khalid continued to serve  powerful interests in the United States, remaining a consultant to Boeing Co., which sought an extremely lucrative contract from Saudi Arabia.

If there was wheeling and dealing to be done with the House of Saud, Sheikh Khalid was your man.

Couple of stories out

My piece on another hedge fund blowup at San Diego County’s $7.9b pension fund ran in the Voice of San Diego.

And The American Lawyer is out with my story about the heightened pace of congressional investigations.

Does LIBOR cost the US $1 trillion each year?

I’ve been reading a bit about LIBOR, which is one of the most important and powerful numbers in the world.

It’s also highly suspect.

LIBOR or the London Inter Bank Offer Rate, is the primary benchmark for short-term interest rates around the world. It is the rate at which banks are supposed to borrow from each other.

It is difficult to understate its power. It is used to settle $10 trillion worth of lending transactions, including corporate loans, adjustable-rate mortgages, private student loans and so on. Half of all adjustable-rate mortgages in the United States are set to LIBOR.

LIBOR is also used to settle contracts in what is arguably the biggest market of all, the interest-rate swap market. Notionally, the value of those trades is about $300 trillion.

These swaps sound esoteric, and they are, but they are the vitally important lubricant to our banking system, which as you might have heard isn’t working so well these days. Interest-rate swaps are the oil in the credit engine, serving as a hedge against changes in interest rates. Without them, banks would be less likely to borrow at a floating rate (Libor/Federal Funds) and lend fixed-rate mortgages.

The problem is that LIBOR is not a market rate of interest. It is compiled by the British Banking Association in conjunction with Reuters and released to the market shortly after 11.00am London time each day. It is essentially a poll of the rates charged by 16 U.S. and non-U.S. banks. According to the London Review of Books:

The calculation of Libor is co-ordinated by just two people, who work in an unremarkable open-plan office in London’s Docklands. I watched the process, which seemed utterly routine, a couple of years ago. Just after 11 a.m. on every weekday that’s not a bank holiday, traders at leading banks send in their estimates of the interest rates at which their banks could borrow money. They do this electronically, but sometimes the co-ordinators make a phone call to a bank that hasn’t sent in its estimates, and if the latter seem implausible – typos, for example, are fairly common – they’re checked, also with a quick call: ‘Hi there, is the Kiwi chap [provider of the estimates for borrowing New Zealand dollars] about? . . . Bit of a spread on the two month. Everyone else is coming in a good bit under that.’

Bankers have quietly begun to question whether this is really the best way to do things. The Bank of England reported that some lenders raised concerns in November 2007 that banks were manipulating LIBOR. So did the Bank for International Settlements, which is sort of the central bank central bankers.

“The LIBOR numbers that banks reported to the BBA were a lie,” said Tim Bond, head of global asset allocation at Barclays Capital in London. “They had been all along. The BBA has been trying to investigate them and that’s why banks have started to report the right numbers.” (Bloomberg)

Why would banks lie?

“The most obvious explanation for Libor being set so low is the prevailing fear of being perceived as a weak hand in this fragile market environment,” wrote Scott Peng, head of U.S. rates strategy at Citigroup in New York. (Bloomberg)

In other words, banks are desperate from cash, but they are hiding this fact to prevent a panic.

The BBA did a review of how it calculates LIBOR, but critics like First Capital’s Mark Sunshine, a commercial lender, says that nothing really changed. LIBOR remains flawed:

Numbers can help to put some prospective on this issue. Assuming that LIBOR is off by 0.01% (i.e., 1 basis point), United States consumers and businesses will either pay too much or too little interest by approximately $100 million per day (or approximately $35 billion per year). However, when the question of LIBOR accuracy was raised it appeared that LIBOR was off by more than 0.25%. That means that interest rates were being mischarged by approximately $2.5 billion per day or almost $1 trillion per year.

The Wall Street Journal reported that the British Banking Authority is hesitant to change how LIBOR is calculated because it is worried about astronomical levels of legal liability. Admitting that British banks were colluding to set LIBOR much as OPEC colludes to set oil prices, would trigger a flood of global lawsuits resulting from fraudulent behavior and misrepresentations.

Sunshine concludes:

LIBOR and the BBA remind me of a saying that I have often heard from Eastern European business people, “Everything the Communists told us about communism was a complete and utter lie. Unfortunately, everything they told us about Capitalism turned out to be true.”

Sweet Deal!

OK, I know Mitch Wade got a good deal at his sentencing but this is going too far:

Update: I just got off the phone with the Bureau of Prisons. What this means is that Mitch is in bureaucratic limbo. He’s been given a date to get himself to prison, but as of now (Jan. 23), he’s still a free man. In short, he’s en route.

Who paid for Cunningham's bribes? You did.

That’s the true meaning of today’s sentencing of defense contractor Mitchell Wade, who supplied former Rep. Randy “Duke” Cunningham with $1.8 million in bribes.

Judge Ricardo Urbina sentenced Wade to 30 months in prison and, unbelievably, imposed a fine of only $250,000. If I’m reading the prosecution’s court filings correctly, that means the judge is allowing Wade to keep most of the wealth his corruption bought.

Prosecutors had asked for a much higher “significant” fine. In court filings, the government said the $250,000 fine Wade’s attorneys were seeking was “far too low” a penalty, noting that it’s only  $16,000 more than the mandatory minimum penalty.

“Wade, whose company earned $150 million from Defense Department from 2002-2005, is still a wealthy man. He has the capacity to pay more, and he should pay more,” Assistant U.S. Attorney Howard Sklamberg wrote in a court filing.

Judge Urbina had the tricky task of balancing what prosecutors called Wade’s “mammoth acts of corruption” with the extraordinary assistance he provided the government in its investigation of Cunningham and others. The judge rewarded Wade for his cooperation with reduced prison time.

By failing to impose a significant fine and seize the ill-gotten gains, the judge is  assuring Wade can pay his $2 million legal team at WilmerHale and still profit from his corruption.

And here I thought the criminal justice system was supposed to discourage crime.

Mitch Wade's Sentence: 30 months

Mitch Wade, the defense contractor who bribed former Rep. Randy “Duke” Cunningham and then helped to swiftly put the congressman behind bars, was sentenced to 30 months in prison today in return for the extraordinary assistance he provided the government. With time off for good behavior, Wade will serve about two years.

Prosecutors had sought four years in prison and a “significant fine” for the $1.8 million in cash, a yacht, a used Rolls-Royce, antiques and the purchase of the congressman’s Del Mar home for an inflated price. Wade’s attorneys had asked for a year of home detention.

Equally significant, Judge Ricardo Urbina ordered Wade to pay a $250,000 fine. That essentially allows Wade to keep much of the money he made bribing Cunningham, who used his positions on the powerful Defense appropriations subcommittee and the House intelligence committee to steer lucrative contracts to Wade’s firm, MZM Inc. Over three years, MZM was awarded more than $150 million in government contracts. In the end, taxpayers are stuck with the bill for Cunningham’s bribes.

Wade also made $78,000 in illegal campaign contributions to Reps. Harris and Goode. (Wade was fined $1 million by the Federal Election Commission, the second-largest fine in its history.) And he provided job offers and other goodies in the Defense Department to ensure favorable treatment for his company.

When his corruption was exposed by Copley News Service reporter Marcus Stern, Wade quickly became the government’s main informant. He was debriefed 23 times and provided a searchable, electronic database of 150,000 documents. It was Wade who handed over the most infamous evidence of Cunningham’s corruption — the “bribe menu.” Wade also testified at the bribery trial of his former boss, Poway defense contractor Brent Wilkes, the man who introduced him to Cunningham.

According to a sentencing memo filed by Wade’s attorneys says he also aided the government in its investigation of “at least five other members of Congress” under investigation for “corruption similar to that of Mr. Cunningham.”  Sources with knowledge of the investigation say these five include Sen. Dan Inouye (D-Hawaii), Rep. Allan Mollahan (D-W.Va.), Rep. Jerry Lewis (R-Calif.), outgoing Rep. Virgil Goode (R-Va.), and former Rep. Katherine Harris (R-Fla).

The extent of his cooperation is reflected in Wade’s sentence, the lowest of any of the major figures caught in the Cunningham scandal. The former congressman is serving 100 months. Wilkes was convicted at trial and sentenced to 12 years. Thomas Kontogiannis was sentenced to eight years for laundering the congressman’s bribes.

Judge Urbina specifically commended Wade’s $2 million legal team at WilmerHale for their work on the case.

The Cleaner

Say you’re a billionaire. Journalists are printing flat-out lies about you, linking you to terrorism, organized crime. Your bank’s compliance department is calling. So what do you do? You call this guy.