This was a bad week for the Russian oligarch Alisher Usmanov.

First, Usmanov had his $600 million yacht, the Dilbar, seized by German authorities. Now, Usmanov, a reputed gangster and early Facebook investor, will have to say goodbye to his luxurious English properties after the UK joined the Americans and the European Union in sanctioning him. He will also have to give up his years-long quest to own a British football club. Usmanov ended the week on the sanctions lists of the US, UK, and the European Union.

It was a different story his fellow oligarch Roman Abramovich, who shares Usmanov’s taste for megayachts and storied English football franchises. Abramovich has somehow managed to avoid any sanctions at all.

Abramovich describes himself “a successful Israeli-Russian entrepreneur and businessman.” Alexei Navalny, the jailed Russian opposition leader, puts him at the top of the list of 35 kleptocrats and human rights abusers primarily responsible for looting the Russian state and repressing human rights.

“It is a mystery to me why Roman Abramovich has not yet been sanctioned,” remarked British MP Chris Bryant, who has been bringing this issue up every chance he gets. Bryant told the House of Commons that Abramovich “is terrified of being sanctioned.” Rumors are swirling that Abramovich is selling the 15-bedroom mansion in London’s Kensington Palace Gardens he bought for £90m in 2009.

Bryant read earlier from a leaked Home Office document from 2019:

“As part of [Her Majesty’s Government]’s Russia strategy aimed at targeting illicit finance and malign activity, Abramovich remains of interest to HMG due to his links to the Russian state and his public association with corrupt activity and practices. An example of this is Abramovich admitting in court proceedings that he paid for political influence. Therefore, HMG is focused on ensuring individuals linked to illicit finance and malign activity are unable to base themselves in the UK and will use the relevant tools at its disposal (including immigration powers) to prevent this.”

UK Prime Minister Boris Johnson slipped up last month when he told Parliament that Abramovich “is already facing sanctions.” He later said he “misspoke.”

Abramovich earned his massive fortune by acquiring Russian state resources at bargain-basement prices during the vicious “aluminum wars” of the Yeltsin era. He and his partners acquired a majority stake in the oil giant SIbneft in 1995 for $100 million. Abramovich sold Sibneft a decade later to the state-owned gas giant Gazprom for $13 billion in cash. He also acquired a 50 percent stake in the aluminum giant Rusal, which he sold to Oleg Deripaska.

In court papers filed in London, Abramovich admitted agreeing to pay billions of dollars for political favors and protection fees to obtain his stakes in the former Soviet Union’s mineral wealth, the Times of London reported.

Abramovich insists he’s not, as he has been described, “Putin’s cashier.” Journalist Catherine Belton wrote in her indispensable book, Putin’s People, that Putin directed Abramovich to buy England’s Chelsea football club in 2003 for $240 million to build a beachhead into British society. That earned Belton a libel lawsuit from Abramovich. (The case was settled after the book’s publisher agreed to amend the text to include the oligarch’s denials and make clear that the claim that the oligarch bought Chelsea on Putin’s orders was not a statement of fact.) Abramovich announced this week that he will be selling Chelsea FC.

The UK has always been slow to take action against Russian oligarchs. But there’s no sense of urgency in the United States either to sanction such a tempting target.

President Biden, in his State of the Union address Tuesday, warned oligarchs that America was coming for their ill-gotten gains. “We are joining with our European allies to find and seize your yachts your luxury apartments your private jets,” Biden said.

Abramovich owns a fleet of yachts, including the $500 million Eclipse, one of the world’s biggest. The Eclipse has two helicopter pads, 24 guest cabins, two swimming pools, and a disco hall. It also features a German-built missile defense system, which has led to speculation that the yacht really belongs to Putin. But as I write this, the Eclipse is sailing the Caribbean unmolested.

Abramovich also owns a fleet of private plans. His Boeing 787 Dreamliner is in Dubai today.

Nothing is stopping Abramovich from flying to New York where he is combing three adjacent buildings to build the biggest single-family home in Manhattan. Or he can head to Colorado where he owns nearly $50 million worth of properties around Aspen. He has an 11-bedroom house on 200 acres of land in Snowmass purchased in 2008 for $36.375 million, according to property records. Abramovich also purchased a 5,492-square-foot ski-in, ski-out house on 1.8 acres of land in Snowmass Village for $11.8 million.

Wherever he goes, Abramovich smartly gives to charities to buy goodwill. If you stroll past the Jewish Community Center in Aspen, you’ll see Abramovich’s name proudly displayed on the front of the sandstone facade. Israel’s Channel 12 reported that, before Russia invaded Ukraine, the chairman of the Yad Vashem Holocaust Memorial Museum, the Ashkenazi chief rabbi of Israel, and representatives of several other major Israeli organizations and charities appealed to the US ambassador to Israel, urging Washington not to impose sanctions on Abramovich. In late February, Yad Vashem, Israel’s Holocaust authority, announced a donation from Abramovich, said to be in the eight figures. This may be why the sanctions on Abramovich have been slow in coming.

I understand why Israeli charities want to protect a major source of funds. But as the investors now holding worthless shares of Sberbank know all too well, corrupt money should never be trusted.

In 2017, while I was writing my book Trump/Russia, I put in a Freedom of Information request for the FBI file of a deceased Russian mobster. I foolishly thought I might be able to get a response in time to include it in my book.

Instead, it turned out to be the start of a four-year odyssey that drew to a close recently.

My FOIA request, which became a FOIA lawsuit, boiled down to a simple question: What was Donald Trump’s name doing in the file of a Russian gangster?

A few weeks ago, a federal judge declined my request to force the FBI to release 150 pages that might have shed some light on that.

The end result will do little to clarify the ongoing debate over Trump and Russia. The Russiagate deniers can continue to claim, correctly, there was no proof of any conspiracy, while those who believe that Trump successfully covered up his ties to Russia remain equally correct when they say we still don’t have all the answers.

Some of those answers may have been in the FBI file I was seeking. It belonged to Vyacheslav Kirillovich Ivankov, a top Russian mobster or vor y zakone (“thief who follows the code”), who arrived in America in 1992. He was arrested three years later and was sentenced to prison for conspiring to extort $3.5 million from two Russian emigres who ran an investment advisory in Manhattan. Ivankov served nine years. Upon release, he was deported to Russia where he was later assassinated.

While researching my book, I learned that during his time in New York, Ivankov kept popping up in Trump’s properties. First, sources told me that agents tracked him to Trump Tower. Next, he turned up at Trump’s new casino, the Taj Mahal.

Upon his arrest, FBI agents seized Ivankov’s phone book. According to author Robert I Friedman, who obtained a copy of Ivankov’s phone book, it included a working number for the Trump Organization’s Trump Tower Residence, and a Trump Organization office fax machine.

In response to my initial 2017 FOIA request, the FBI sent me 875 previously-released pages that confirmed that agents had tracked Ivankov to the Taj Mahal.

I wondered what other secrets might be buried in the file.

The FBI’s file on Ivankov ran to nearly 38,000 pages. Processing that large a file for public release would take years and cost more than $1,000 in duplication fees, so I agreed to reduce the scope of my request.

All I was interested in, I told the FBI, were the portions of the file that dealt with Donald Trump.

In January 2018, an FBI FOIA specialist told me over the phone that what I wanted could be found in a 528-page section of the file. There would be some privacy hurdles to clear first, she told me.

This was progress and it amounted to a confirmation of sorts that Trump’s name was in the file. How many other future U.S. presidents have appeared in the FBI file of a gangster?

But this bit of information, tantalizing as it was, meant little and only raised fresh questions.

Was Trump merely an innocent third-party mentioned in passing? Did Ivankov’s gambling at the Taj Mahal result in scrutiny of Trump? Or, as some have speculated, was Trump providing information to the FBI as a confidential source?

To answer those questions, I filed a FOIA lawsuit in federal court in Washington, DC. Mark Zaid and Bradley Moss, two well-known FOIA and whistleblower attorneys, took on my case pro bono.

The case was assigned to Judge Amy Berman Jackson, who was intimately familiar with Trump and Russia. Judge Jackson had presided over the trials of Paul Manafort and Roger Stone.

This was my first time filing a FOIA lawsuit and I was surprised to see the FBI, after months of no activity, switfly handed over 378 pages. But Trump’s name was not mentioned once anywhere on those pages.

That left the 150 pages the FBI wouldn’t let me see. The Freedom of Information Act allows the government to exempt information from disclosure on a variety of grounds. Some of these exemptions, such as the names of FBI agents involved in the case, were irrelevant.

There were a few exemptions, however, that could potentially be hiding Trump’s name. The most commonly cited exemption on about 90 of the pages withheld in full was one protecting confidential FBI sources. That was followed by names of people of “investigative interest” to the FBI, an exemption cited on 76 of the pages withheld.

Even though Trump was president, he hadn’t surrendered his privacy rights. To force the FBI to disclose any of that information, we needed to show that this information was already in the public domain.

There was a precedent for disclosing this information. An FBI memo released more than 20 years ago under a FOIA request by The Smoking Gun revealed that in 1981, Trump had offered to “fully cooperate” with the bureau over a casino he was trying to build in Atlantic City, New Jersey. “Trump stated in order to show that he was willing to fully cooperate with the FBI, he suggested that they use undercover Agents in the casino,” the memo states.

With that 1981 memo, we argued, the government had already revealed that Trump was willing to cooperate with the FBI to provide information on organized crime at his casino in Atlantic City, so there was no reason to hold back when Vyacheslav Ivankov showed up at the Taj Mahal 12 years later.

The FBI responded with what’s known as a “Glomar response.” What this means is the FBI was telling us it couldn’t confirm or deny whether Trump was a confidential FBI informant but, hypothetically, if he was, the FBI still couldn’t confirm it because “doing otherwise jeopardizes the FBI’s confidential source program.” The FBI couldn’t even tell us if Trump wasn’t a CI because that could potentially reveal who the real informant was.

Furthermore, the government claimed that we couldn’t show that the 1981 FBI memo had been officially released by the bureau’s Record/Information Dissemination Section (RIDS).

RIDS was unable to confirm whether the record was officially placed in the public domain via an authorized FBI records release. The FBI does not routinely release third party informant records to the public. Therefore, RIDS did not consider this record as an authorized official disclosure by the agency that would trigger a FOIA waiver. Second, even if the FBI were to consider the record submitted by plaintiff, which it is not, the record failed to impart informant status to Mr. Trump.

Franz Kafka would have smiled at that one.

And that, pretty much, was that. Judge Jackson was left with no issue of dispute to rule on. On August 20, the case was dismissed.

While the FBI was telling us how carefully it protects the private information of future U.S. presidents, Trump’s former deputy attorney general, Rod Rosenstein admitted that he had made the decision to release the intimate personal texts between FBI agent Peter Strzok and FBI attorney Lisa Page because it would not violate their rights to privacy. Trump used these texts to mock and deride Strzok and “his lover” Page, complete with fake orgasms.

It’s an old story: Where there’s an executive will, there’s a legal way. What the president wants to keep secret stays secret.

A former New York City Mob underboss says that investigators questioned him in recent years about Trump’s ties to a Russian Mobster who purchased five condos in Trump Tower in the 1980s.

Michael Franzese, who left the Mafia after a stint in prison and became a born-again Christian, made the disclosure in a YouTube video posted to his channel on February 8.

In the video, Franzese says he was questioned — although he wouldn’t say by whom — “during the Mueller investigation.” Franzese says investigators wanted to know about his former business partner, a convicted Russian Mobster named David Bogatin.

In the 1980s, Franzese was a capo in the Colombo crime family when he partnered with Bogatin in a massive gasoline tax scam that generated as much as $9 million in cash, per week, according to Franzese’s 1996 testimony before the Senate.

Franzese revealed in his YouTube video that he had been a silent partner with Bogatin when Bogatin purchased the Trump Tower condos for $5.3 million in 1984. Franzese said Bogatin paid for the condos in cash.

“As a result of that, I got questioned — I’m not gonna tell you by who — during the Mueller investigation because it came out that my friend David was the front guy buying them at that time,” Franzese said.

“They came to me and they tried to establish a Trump connection with Russia as a result of him selling those condos to me and David Bogatin,” he continued.

Franzese said the investigators wanted to know why Trump took cash for the apartments. He says he did not know the answer.

I emailed both Franseze and the Department of Justice to to see if I could find out more. If I get a response, I’ll update this post here.

In his YouTube video, Franzese claimed that Bogatin had a family member in the KGB. This is unlikely given that Bogatin was Jewish. Jews were usually targets of Soviet intelligence, not employees.

What is certain is that Bogatin had a brother, Jacob, who got indicted in 2002 in a massive stock fraud along with Russian Mob boss Semion Mogilevich.

Mogilevich remains a fugitive and, as a result, Jacob Bogatin, his co-defendant, was never brought to trial.

Last I checked, both Jacob and David Bogatin continue to live in the United States.

Franzese also doesn’t mention some other facts I uncovered while reporting my book: First, it was Trump who convinced Bogatin to invest in Trump Tower. And second, Trump insisted on attending the condo signing.

But if Franzese is telling the truth about the investigators who questioned him about Bogatin and the Trump Tower condos, it’s a sign that, nearly 40 years later, Trump’s shady dealings with Russian Mobsters still haunt him.

Earlier this week, the Senate intelligence committee released a pair of reports analyzing the social media output of the Internet Research Agency, the Russian outfit that masqueraded as Americans as it pumped out millions of social media posts aimed at dividing the United States and helping elect Trump,

The New York Times’ front-page coverage of these reports focused on how the IRA tried to influence the black vote, with critics calling that paternalistic. The lead author of one of the studies wrote that her report showed the need for a broad effort to combat disinformation.

After reading these reports, what struck me was something else. I was blown away by the sophistication of the IRA’s efforts, which, the reports showed, had a broader reach than previously understood.

To borrow a line from Washington Post columnist David Ignatius, let’s stop calling what the Russians did meddling. This was not merely the work of some amateurs in what’s often called the “St. Petersburg troll factory.” This outfit had the hallmarks of a professional intelligence operation.

(In my book, Trump/Russia, I’ve written about how the IRA tactics are a modern twist on an old spy game that dates back to the WWII Morale Operations Branch of the Office of Special Services, the predecessor to the CIA.)

Exhibit A is a startling and previously unreported tactic employed by the IRA: Recruiting human assets.

One of the IRA’s more popular Facebook pages was a fake Christian group called “Army of Jesus.” This site offered free counseling to people with sexual addiction.

As one of the Senate-commissioned reports notes, “Recruiting an asset by exploiting a personal vulnerability – usually a secret that would inspire shame or cause personal or financial harm if exposed – is a timeless espionage practice.” People did respond to these posts, although it’s not known how effective these and other campaigns were.

A revealing side note: the “Army of Jesus” Facebook site that offered free sexual addiction counseling originally started as a Kermit the Frog account, then switched to The Simpsons before turning to Jesus.

Other IRA outreach efforts included offering free self-defense classes. Meetup.com was used to organize black self-defense classes for the Fit Black/Black Fist IRA accounts.

The authors of the report “The Tactics & Tropes of the Internet Research Agency” deliver a strong warning about the future of source recruitment via the Internet:

This tactic will be increasingly common as platforms make it more difficult to grow pages and buy ads with fake personas. It will be extremely difficult to detect. The number of organic posts that reveal attempts to engage with Americans reinforces our conviction that influence operations are
unlikely to be managed without information sharing between the public and private sector.

NewKnowldge, “The Tactics & Tropes of the Internet Research Agency”

It also turns out that the IRA was involved in selling merchandise. Some of the merchandise was aimed at building audience, particularly in the accounts targeting the black community. The IRA also sold LGBT-positive sex toys (!)

In addition to a source of revenue, merchandise sales allowed the IRA to gather personal information: names, addresses, email address and phone numbers, as well as credit card information. Once again, this has an espionage application for source recruitment.

Finally, the most frightening thing is that this work continues. IRA accounts remain active. Russia continues meddling in the recent U.S. midterm elections, as members of the Trump administration have conceded.

Make no mistake: The Trump administration could easily stop this activity if it wanted to. It could take steps that really make Russia nervous like sanctioning its debt or banning its banks from any activity in the United States. But Trump won’t do that.

The question is why not?

On his 600th day in office, following months of dire warnings from his own intelligence officials, President Trump finally did something to try and prevent Russian interference in the upcoming Midterm elections. But appearances can be deceiving, especially when it comes to Trump and Russia.

An executive order signed by Trump on September 12th declared a national emergency to deal with interference in U.S. elections, which it rightly describes as “an unusual and extraordinary threat to the national security and foreign policy of the United States.” But Trump’s executive order does little to stop it. It targets unspecified, large companies while giving the president full discretion to choose from a range of sanctions that have failed to deter Russian aggression in the past. Democrats in Congress blasted the order as toothless. Daleep Singh, a former assistant Treasury secretary in the Obama administration, testified before Congress that it represented more a press release than a change in policy.

The real purpose of the executive order, Trump’s critics maintain, isn’t to deter Russian election meddling. It’s to deter far tougher legislation in Congress. Two bipartisan bills pending before the Senate would inflict severe economic pain on Russia if it continues to meddle in American politics. One measure, dubbed the “sanctions bill from hell” by its co-sponsor, Senator Lindsey Graham, rattled nerves when it appeared in Moscow newspapers over the summer. Both Graham’s bill and the leading effort, introduced in January by Senators Chris Van Hollen and Marco Rubio, threaten to shut off the flow of U.S. dollars to the Kremlin.

[Read Van Hollen and Rubio’s DETER Act here. Graham’s “sanctions bill from hell” can be found here.]

It may come as a surprise to many Americans that some of the money paying for Russia’s bad behavior comes from the United States.  The Kremlin has borrowed billions of dollars from U.S. investors over the years through sales of Russian sovereign debt, which effectively are loans to Vladimir Putin’s government. Yes, you read that right: public pension funds from New York to California, along with asset managers, hedge funds, and U.S. banks are financing a regime that is deliberately trying to undermine American democracy and the U.S.-led Western alliance. A Moscow-based credit rating agency estimated last month that the United States holds 8 percent of Russia’s sovereign debt — or more than $12 billion, based on the latest figures from the Russian Central Bank.

Cutting off these financial flows is the kind of serious step missing from Trump’s executive order.  The administration’s reason for rejecting sanctions on Russian debt was outlined in a congressionally-mandated study by the Treasury Department earlier this year. The concern is over the “negative spillover effects” on global financial markets and businesses. In other words, the White House is worried that sanctioning Russian debt might do economic harm to America’s friends and allies — something that doesn’t seem to apply to the president’s trade war with Canada.  And Treasury’s warnings have proved overblown. Since April, when ruble debt was more popular outside Russia than ever before, foreign investors have been quietly dumping their holdings with none of the predicted upheaval.

The only economy that will be seriously harmed by sanctions on Russian bonds is Russia’s. It would put downward pressure on the ruble and drive up Russia’s borrowing costs, forcing Putin to scrap his ambitious spending plans for what is likely to be his last term in office. More importantly, it would put Russia in the same league as Iran and Venezuela, the only two other nations that have had their debt sanctioned by the United States, according to the Congressional Research Service.  Both Senate bills go a step further, and would also bar Americans from doing business with big Russian banks like Sberbank. Russian Prime Minister Dmitry Medvedev said such an action would be a declaration of “economic war” and promised to retaliate “economically, politically, or, if necessary, by other means.”

There’s no good reason for the White House to reject these penalties, serious as they are, or even tougher ones, because there’s an easy way for Russia to avoid them: Don’t interfere in U.S. elections.  Without a sure, strong response, the American electoral system remains as vulnerable as it was before Trump’s executive order. It’s clear that existing sanctions weren’t enough to stop Russia from wreaking havoc in the 2016 U.S. presidential election. Van Hollen and Rubio’s bill, the Defending Elections from Threats by Establishing Redlines, or Deter Act, would bring a cruise missile to the fight; the president is bringing a pop gun. “That’s why it is imperative that the Senate and House take action because, clearly, the administration abdicated its responsibility in this area,” Van Hollen told me. It remains to be seen whether Congress can do what the president cannot or whether Trump’s executive order will lay the matter to rest.

It’s important to remember what’s at stake.  Confidence in our elections, the foundation of American democracy, was dealt a serious blow in the 2016 presidential race. It was further weakened by Trump’s refusal to accept the findings of his own intelligence community on Russian interference.

Now, the president’s long-delayed response sends the signal that the United States can’t or won’t do what it takes to protect its sovereignty.  This abject failure of leadership raises troubling questions about where the president’s loyalties lie. It suggests once again that Trump is putting the interests of Russia above that of the country he was elected to lead.

This is a test post.

It’s been nearly fours years since my last post.

I’m going to give blogging a try again, this time as a personal finance blog.

We’ll see what happens.

Художник
Created by: OnlineMarketingDegree.com

It is utterly impossible, as this country has demonstrated again and again, for the rich to save as much as they have been trying to save, and save anything that is worth saving. They can save idle factories and useless railroad coaches; they can save empty office buildings and closed banks; they can save paper evidences of foreign loans; but as a class they can not save anything that is worth saving, above and beyond the amount that is made profitable by the increase of consumer buying. It is for the interests of the well to do – to protect them from the results of their own folly – that we should take from them a sufficient amount of their surplus to enable consumers to consume and business to operate at a profit. This is not “soaking the rich”; it is saving the rich. Incidentally, it is the only way to assure them the serenity and security which they do not have at the present moment

– 1933 Senate testimony of Mariner Eccles, later first chairman of Federal Reserve.

via the excellent London Banker

“When I finally caught up with Abraham Trahearne, he was drinking beer with an alcoholic bulldog named Fireball Roberts in a ramshackle joint just outside of Sonoma, California, drinking the heart right out of a fine spring afternoon”

~James Crumley, The Last Good Kiss

Remembering that I’ll be dead soon is the most important tool I’ve ever encountered to help me make the big choices in life. Because almost everything — all external expectations, all pride, all fear of embarrassment or failure – these things just fall away in the face of death, leaving only what is truly important. Remembering that you are going to die is the best way I know to avoid the trap of thinking you have something to lose. You are already naked. There is no reason not to follow your heart.

Text of Steve Jobs’ 2005 commencement address at Stanford University.

that I’ve taken up boxing.

 

I’ve been getting way into fitness lately. Here’s what I’ve learned so far in about 100 words:

икониLove this sentence in today’s Union-Tribune story on AEG saying the days of publicly-financed sports stadiums are at an end:

From his office in San Diego, Chargers special counsel Mark Fabiani said he doesn’t share that view.

For seven years starting in 2002, Fabiani said the Chargers would construct a new stadium without taxpayer support. Then for the past 16 months, he has maintained the opposite — that one couldn’t be built in downtown San Diego without a public subsidy.

Everyone loves an early inflation. The effects at the beginning of an inflation are all good. There is steepened money expansion, rising government spending, increased government budget deficits, booming stock markets, and spectacular general prosperity, all in the midst of temporarily stable prices. Everyone benefits, and no one pays. That is the early part of the cycle. In the later inflation, on the other hand, the effects are all bad. The government may steadily increase the money inflation in order to stave off the later effects, but the later effects patiently wait. In the terminal inflation, there is faltering prosperity, tightness of money, falling stock markets, rising taxes, still larger government deficits, and still roaring money expansion, now accompanied by soaring prices and ineffectiveness of all traditional remedies. Everyone pays and no one benefits. That is the full cycle of every inflation.

— Dying of Money: Lessons of the Great German and American Inflations, Jens O. Parsson, 1974

RIP Grace

Speed racer, bread enthusiast, tennis ball lover, yappy dog chaser, child protecter, kitchen floor cleaner, alarm system, beachgoer, thunderstorm hater, sweet gentle soul. Farewell.

“Mr. Chairman, I cannot help but get a feeling that a strategy of the witnesses is to try to burn through the time of each questioner,” Sen. Susan Collins said during last week’s Goldman Sachs hearing before the Senate.

Was this a reference to a story I wrote last year for The American Lawyer about, K. Lee Blalack II, a partner at O’Melveny & Myers who was reportedly retained by Goldman?

Click here to read a pdf of the article.

My story was about a group of lawyers who specialize in guiding firms and individuals who are in the crosshairs of the U.S. Senate’s Permanent Subcommittee on Investigations (PSI), perhaps the most powerful investigative committee on Capitol Hill.

Blalack is a former chief counsel to the subcommittee, a job once held by Bobby Kennedy and Roy Cohn, where he learned how effective a tactic delay can be:

So to avoid having his client get buried, how does Blalack prepare him or her for a day before the committee? He tells them that the congressional hearing room is not a forum for getting at the truth. Don’t get on a soapbox. A day in the klieg lights should end with minimal damage to reputation while not complicating a client’s position in other investigations or litigation. Blalack says a well-trained witness can minimize exposure by simply running out the clock: “Long, thoughtful pauses followed by rambling nonresponsive answers can easily devour half of a member’s allotted questioning time.”

Talking Points Memo said this quote explains Goldman’s entire strategy during the PSI hearing..

But I wonder if Collins had her tongue firmly pressed in her check. The woman from Maine has served on PSI for the past 13 years and is no stranger to the Kabuki-like drama of these hearings.

Her chief counsel? None other than K. Lee Blalack.

My review of Rough Justice, the new biography of Eliot Spitzer by journalist Peter Elkind is the review of the week at Time Out New York.

Here’s an excerpt:

We may never know what launched the federal investigation of Emperors Club VIP, the New York City call-girl ring. It wasn’t the sort of case that attracted the FBI, which normally wouldn’t have bothered to wiretap the sweaty, Russian-born pimp in his sixties who ran the operation with his much younger girlfriend. The bureau also wasn’t in the habit of busting johns. What is clear is that from day one, the real target of the investigation was Client No. 9, Eliot Spitzer.

Did someone drop a dime and tip off the feds? It sure seems that way. Rough Justice, journalist Peter Elkind’s revealing and sympathetic biography of the disgraced governor, is peppered with hints that the politician’s secret life wasn’t so secret. According to Elkind, even Mario Cuomo believed Spitzer was “unfit” to be governor for reasons that cryptically had something to do with the “relationship between a man and a woman.” Spitzer privately believes that the investigation was a political hit by one of the enemies he made during his crusade against Wall Street. His loyal wife, Silda, has come to believe this, too. In the end, it doesn’t matter. Spitzer, the man once known as the Sheriff of Wall Street, handed his enemies the ammunition they needed.

Donald Felsinger, chairman and CEO of Sempra Energy, isn’t at the top of the list of San Diego’s highest paid executives. But if you read the fine print, he should be.

Sempra listed Felsinger’s total pay at nearly $21 million in 2009, according to the company’s proxy filed today.

If “performance conditions” of his restricted stock grants “were to be satisfied at their highest level,” Felsinger’s pay could actually be more than $24 million for the year.

The biggest pay boost came in Felsinger’s retirement plan,which grew in 2009 by more than 50 percent ($12 million) to a total value of more than $35 million this year. From the Sempra proxy:

The 2009 substantial increase in Mr. Felsinger’s accumulated benefits under our pension plans results primarily from the spousal benefit provided by our Supplemental Retirement Plan and his recent marriage, and the inclusion of his more highly compensated recent years of service as Chief Executive Officer in calculating pension benefits.

He also has deferred compensation over the years in an interest-bearing account now worth $18.5 million.

If the company changes hands and Felsinger gets booted, he will walk away with an additional $40 million.

Not counted in Felsinger’s pay were grants of option on Sempra’s stock that can’t be exercised for 10 years. Felsinger was granted the right to buy 114,300 shares in 2019.

Stock options, of course, are supposed to motivate Mr. Felsinger to enhance shareholder value. Sempra’s 2009 option awards hardly give him a reason to do much of anything at all.

Sempra granted Felsinger options that were exercisable in 2019 at the Jan. 2, 2009 market price of $43.75.

This gives him zero incentive for him to make the company more attractive to investors.

All he has to do is maintain the status quo. Yesterday, Sempra announced shareholder-pleasing moves of buying back about $700 million in stock and boosting its dividend.

Sempra shareholders don’t have much of a say in Felsinger’s pay, but that may change.

A proposal granting shareholders an advisory vote on executive compensation. The same proposal narrowly failed last year with 49 percent of the vote.

My review of Michael Lewis’ new book, The Big Short, is up on bookforum.com

Here’s a snippet:

The cast of characters in Lewis’s highly readable chronicle of the collapse (and what led to it) includes a misanthropic former medical resident, a money manager who saw himself as Spider-Man, and a pair of men in their thirties who started with $110,00 in a Schwab account they managed from a backyard shed in Berkeley, California. “Each filled a hole,” Lewis writes. “Each supplied a missing insight, an attitude to risk which, if more prevalent, might have prevented the catastrophe.”

Earlier this week I asked whether President Obama could order a lethal attack on former San Diego imam Anwar Awlaki.

The Washington Post’s Dana Priest has anwered that question today with a resounding yes:

After the Sept. 11 attacks, Bush gave the CIA, and later the military, authority to kill U.S. citizens abroad if strong evidence existed that an American was involved in organizing or carrying out terrorist actions against the United States or U.S. interests, military and intelligence officials said.

The evidence has to meet a certain, defined threshold. The person, for instance, has to pose “a continuing and imminent threat to U.S. persons and interests,” said one former intelligence official.

The Obama administration has adopted the same stance. If a U.S. citizen joins al-Qaeda, “it doesn’t really change anything from the standpoint of whether we can target them,” a senior administration official said. “They are then part of the enemy.”

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 Awlaki, 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.

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.

Ever since Awlaki’s December 2007 release from prison, U.S. counterterrorism officials have been warning us that he’s been involved in terrorism:

• February 2008: “There is good reason to believe Anwar Awlaki 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 Washington Post.
• January 3, 2009: “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.
• January 20, 2009: The Senate Foreign Relations Committee reports “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.”

(See my Awlaki timeline for more)

A reason that Awlaki hasn’t been blasted to smithereens already is due to the fact that he is a U.S. citizen, born in New Mexico while his father, a former Yemeni government minister, was there on a diplomatic posting.

Slate’s Glenn Greenwald notes that being accused of being a terrorist is not the same thing as actually being a terrorist.

Lots of heat on Awlaki now, probably coming out the House Intelligence Committee:

The radical Yemeni-based cleric connected to two violent plots in the U.S. has “gone operational,” a senior U.S. official told Fox News.

The Nigerian accused of trying to blow up a Detroit-bound airliner had his suicide mission personally blessed in Yemen by Anwar al-Awlaki, the same Muslim imam suspected of radicalizing the Fort Hood shooting suspect, a U.S. intelligence source has told The Washington Times. 

“It appears that just like with Major Hasan, Awlaki played a role in this,” said Rep. Pete Hoekstra, R-Mich, ranking minority member of the House Intelligence Committee tells ABC News.

“And the mujahideen brothers in the Manufacturing Sector possessed a highly advanced device, with Allah’s grace, and it was tested and proved to be successful and practical, and it passed the inspection machines. Brother Omar has reached his target, with Allah’s grace, but, fate from Allah, a technical error happened and led to an incomplete detonation, and we will continue the path, Allah-permitting, until we reach what we want, and make faith all due to Allah.”

Poor tradecraft is, fortunately, a persistent problem for the jihadis as Michael Kenney notes in Organizational Learning and Islamic Militancy (May 2009), a study written for the U.S. Department of Justice. (.pdf)

“Indeed, mistakes and poor tradecraft are common in terrorist operations.  One of the most significant findings to emerge from this research regards Islamic terrorists’ propensity towards the poor tradecraft and operational errors.  In the cases examined in this study operatives committed a range of basic mistakes.  Militants forgot code words and aliases, resulting in miscommunication with their colleagues.  They foolishly tried to  run away from law enforcement officers or became visibly upset when questioned.  They received speeding tickets and other traffic citations when operating undercover in “enemy territory.  They provided incriminating hints of their looming attacks to people outside their conspiracies.  They took advanced aviation classes and expressed their desire to only learn how to steer, not land, large commercial aircraft.  They traveled together, not separately, when assembling for attacks.  They dressed and acted in ways that made them stand out more, not less.  They used matches instead of lighters to ignite bomb fuses.  They didn’t change their cell phones and SIM cards, even when under immense counter-terrorism pressure.  The list goes on.”

According to Kenney, what explains this is:

1. Experience in guerrilla warfare does not translate particularly well to urban terrorism
2. It is difficult to gain experience when the attack gets you killed.
3. The war on terror hampers training and planning.
4. Ideological or religious “certitude” that they don’t need to be careful because their fate is already determined by Allah

Hugo Chavez, Venezuela’s president, is treated in the American media as the political equivalent of Ronald McDonald.

If he’s mentioned, and he rarely is, it’s as a clownish boor. He attracted attention in 2006 when he called Bush a “devil” before the UN General Assembly.  Or in 2007 when Spanish King Juan Carlos told him to “shut up.”

But oil prices have tumbled and Chavez is no fool, as the Wall Street Journal shrewdly notes today on its back pages.

In the “Heard on the Street” column, John Lyons points out that fears that Chavez will nationalize Venezuela’s banks are overblown and Venezeula’s dollar-denominated bonds may rate a “buy.”

In fact, President Chavez has recently been loosening some terms for the international oil majors operating in the country in an apparent sign of the government’s need to keep attracting foreign capital.

(In my paper edition, the headline is “Venezuela’s Bank Nationalization Fears Are Overblown.”  The headline in the online edition is a more subdued “Banking on Venezuela.”)

Venezuela cannot afford to see the flow of dollars dry up. Oil accounts for 80 percent of Venezuela’s export revenue and there are signs that production is dropping.

The country’s need for foreign capital “perversely” might provide reassurance for international investors, the Journal notes.

Barclays Capital likes the 2027 bonds of the state-owned oil company, PDVSA, trading at 41.77 cents on the dollar and yielding 14.73 percent. The 2027 bonds are one of the emerging market’s most-traded bonds, Reuters reports; Credit Suisse likes the 2017 bonds, which are among the emerging market’s most traded debt securities.

The United States also relies on Venezuela. Mr. Chavez’s government supplies 11 percent of our imported oil and PDVSA owns five U.S. refineries.

If that oil suddenly stopped flowing, prices would shoot up. In the time it took to rebalance global supplies, the U.S. GDP would shrink by about $23 billion, according to a 2006 GAO study.

Chavez may say he doesn’t like the free market, but it’s U.S. petro-dollars that are keeping his “revolution” alive.

Leave it to a bunch of Somali pirates to underscore how what happens on the west coast of Africa directly affects people in the United States.

The Greek-owned supertanker hijacked by Somali pirates over the weekend was headed for a deepwater port known as LOOP.

Most crude oil from the Middle East comes via massive tankers too large for New Orleans to offload oil. The hijacked Maran Centaurus is a 300,000-ton vessel, holding 2 million barrels of oil. 

LOOP (Lousiana Offshore Oil Port) can handle ships more than twice as big.

About 1 million barrels of foreign crude — 10 percent of all U.S. imports — flow through LOOP every day.

Here’s how the oil flows from the Middle East to the Middle West:

1. Tankers connect to a buoy 18 miles off the coast of Louisiana.
2. An underwater pipeline moves oil a mile and a half to an offshore terminal.
3. Four 7,000 horsepower pumps send oil ashore.
4. At Fourchon, Louisiana, another massive pumping station sends the oil another 25 miles inland.
5. The oil arrives at a network of underground salt caverns that can hold 50 million barrels of oil.
6. From the caverns, the Locap pipeline channels oil 53 miles to St. James, Lousiana.
7. At St. James, there’s a link to Capline which moves oil to Patoka, Illinois.
8. The Chicap pipeline runs from Patoka to the Chicago suburbs.
9. From there or at several points along the way, it’s refined and trucked to you!

Anyone reading through the Goldstone Report, the fact-finding mission into during the Gaza conflict, will find themselves confronted with the painful realities of modern warfare.

For instance, doctors working in Gaza during the conflict noticed a “strikingly high percentage of patients with severed legs.”

The amputations mostly occurred at waist height in children, generally lower in adults, and were combined with skin-deep, third-degree burns, four to six fingers upward from the amputation. Where the amputation took place, the flesh was cauterized as a result of the heat. The patients with these amputations had no shrapnel wounds, but red flashes on the abdomen and chest. The excision of large pieces of flesh was not infrequent in these patients.

These wounds are believed to be the result of a new weapon that is intended to minimize collateral damage in urban conflicts. The bomb is made of special materials that limit the effects to a small diameter. Inside that circle, however, is sheer hell.

Most bombs have a metal casing that turns into shrapnel, but this bomb has a carbon-fiber casing that turns to dust on impact.  Packed inside is an “explosive fill,” a powder, really, made of an alloy of tungsten.

The physics involved are complex, but the presence of the tungsten makes for a much more powerful blast. During tests, instruments used to measure blast force were destroyed. The high-velocity, extremely hot tungsten particles can easily slice through skin, tissue and bone.

This new weapon goes by many names. They are also known as focused lethality munitions. The U.N. calls them dense inert metal explosives or DIME weapons.

Boeing Integrated Defense Systems, which builds the bombs in St. Joseph, Mo., refers to them as GBU-39s. One of these bombs dropped from an F-15E can be guided via satellite to a target as far as 40 miles.

Israel ordered (.pdf) 1,000 GBU-39s in September 2008. The Jewish state has denied using DIME wepaons during the conflict.

The U.N. fact-finding mission found no actual proof that DIME were dropped on Gaza during the Israeli military operation known as “Operation Cast Lead” from December 2008 to January 2009.

However, the mission’s ordnance expert believed that some weapons used during the conflict had a “DIME component.” Samples taken from the scene of the attacks in Gaza revealed the presence of tungsten.

U.S. forces have been using DIME weapons since at least October 2006:

The new bomb, the first of its kind in the Air Force inventory, gives aircrews the ability to destroy targets that would normally be “passed over” due to the proximity of friendly troops, civilians, structures or personal property.

The efforts to minimize collateral damage raise difficult (and so far unanswered) questions about the laws of warfare.

Tungsten alloy particles are so small they can’t be removed from the body. They are also highly carcinogenic (.pdf) At a U.N. press conference in Geneva, Col. Desmond Travers, one of the report’s authors, referred to a potential “time bomb” inside some of the Gaza victims.

This raises a thorny (and as yet unanswered) question: Should GBU-39s and other DIME weapons properly be classified as biological weapons which are illegal under the Geneva Convention?

Israel is a signatory to the Conventional Weapons Convention, which prohibits the use of any weapons that injures by fragments that cannot be detected by X-rays. The United States is also a signatory.

Boeing is set to make thousands of these weapons in the next few years. The defense giant apparently believes that the international community will not stand in its way.

Vedomosti, a gutsy Russian business newspaper, has come up with a rather ingenious way of studying local officials for possible signs of corruption.

It published 36 photos of Russian officials, including Prime Minister Vladimir Putin and President Dmitry Medvedev.

Vedomosti found the most expensive watch on the wrist of Vladimir Resin, the deputy mayor of Moscow responsible for the construction sector. In his official biography, he says his only hobby is labor.

That labor has been quite lucrative for Deputy Mayor Resin. He is shown above wearing a GreubelForsey Double Tourbillon 30° that costs either $360,000 (for the white gold edition) or $425,000 for the platinum edition.

But that’s not even the most expensive watch in his collection.

He was also photographed wearing a watch made by DeWitt, the La Pressy Grande Complication model. This is a watch that retails for more than $1 million.

Resin has overseen a building boom in Moscow that has been thoroughly corrupted. Earlier this year, the Russian interior ministry announced that a group of Moscow city officials took $250 million in bribes. Also this year, Ikea halted construction in Russia, citing pervasive corruption and demands for bribes, according to The New York Times.

Ramzan Kadyrov, the former warlord who switched sides to become president the Chechen region wears a Bovet watch worth around $300,000, the newspaper wrote. The governor of the industrial Samara region, Vladimir Artyakov, poses in a DeWitt watch worth $223,427.

President Dmitry Medvedev’s timepiece is a far more modest $32,200 Breguet. Putin has twice given away Blancpain watches worth $10,500.

Transparency International ranks Russia 147th out of 180 in its global corruption index.

My review of new books on the Fed, the fall of Lehman and the mortgage crisis is now up at BookForum, where the latest issue is devoted to the subject of work.

From The Economist.

I’ve been reading The Partnership: The Making of Goldman Sachs by Charles D. Ellis. Goldman has been in the news quite a bit lately so I decided to get a bit of background, and Ellis is an investment consultant so the book is as close to an official history as has yet been written.

The major players from Goldman are pretty well known — Henry Paulson, Bob Rubin, Joshua Bolten, but it’s pretty interesting where some of the lesser known ones others turn up.

Take former Goldman partner Thomas L. “Dusty” Rhodes, president of National Review, chairman of the conservative Club for Growth, and one of the strategists behind Proposition 209, a California initiative that ended affirmative action. He shows up briefly in The Partnership:

“SAMA — the Saudi Arabian Monetary Authority — had huge cash flows to invest in the late 1970s, and interest rates were not as important to SAMA as credit quality. Through the contacts of partner Thomas “Dusty” Rhodes, the utility group arrange two- to five-year private placements with SAMA for many of the highest grade U.S. utilities.”

I’ll be giving updates on other interesting Goldman alumni as I come across them in the book.

Ken Silverstein poses an interesting question on his blog at Harper’s: Who’s Buying Guns? He notes that stock of Smith & Wesson is way up and so are gun sales, spurred, annecdotally, by fears over the Obama administration.

Silverstein also suggests that the NRA has stoked these fears with an advertising campaign that notes Obama has indicated support for a 500 percent tax on guns. In 1999, when he was in the Illinois state senate, Obama did show support for such a tax but he hasn’t said much about it lately, according to factcheck.org.

Gun maker Remington notes in its 10-K (via) report that fear is good for business:

Management believes that despite the challenges in the banking industry, the resulting stock market drop, unstable fuel prices and the ensuing government bailout, we have experienced no significant adverse impact in our overall sales. We believe the overall market for our products picked up subsequent to the U.S. Presidential election and we believe this is attributable to consumer concerns that the new administration could ban and regulate certain guns and ammunition in a more restrictive manner.

The key word here is “certain” guns.  Remington isn’t publicly traded so it doesn’t break out details on its sales but Smith & Wesson is traded publicly and it reported this in its 10Q report of Oct. 31, 2008:

Sales of our M&P 15 rifles were $8,654,385 for the three months ended October 31, 2008, a $6,534,882, or 308.3%, increase over the three months ended October 31, 2007. M&P 15 sales were helped by a consumer promotion as well as what appears to have been speculation on the outcome of the presidential election. On the law enforcement side, 204 police and security agencies to date have either selected the M&P 15 or approved the M&P 15 for on-duty use. The backlog for tactical rifles was $5,988,418 at October 31, 2008. (emphasis added)

No other category of Smith & Wesson firearms was up as much as the tactical rifle category. Notably, sales of hunting rifles and shotguns fell. If hunters feared losing their guns under the Obama administration they would have bought more hunting rifles and shotguns from S&W, not less.

The ones who were doing the buying here were the hardcore gun lovers, who were worried that they wouldn’t be able to buy a military-style rifle like the M&P 15 once the Obama administration got in.

For the three months ending January 31, 2009, which covers gun sales after Obama was elected, Smith & Wesson reported that total firearms sales were up 11 percent to 219 million.

Once again, tactical rifles again led the way with a 108 percent increase in sales.  Hunting firearms, however were down again nearly 36 percent.

Gun sales are up, but it seems like hunters — the core of the NRA’s membership — are just fine with Obama. Those who fear our new president are the black helicopter types, the kind of folks who shelled out $22 million to buy an update on the old military-tested AR-15.

Chicago Sun-Times files Chapter 11:

The company has one significant creditor — the Internal Revenue Service. The IRS has said Sun-Times Media Group owes up to $608 million in back taxes and penalties from past business practices by its former controlling owner, Conrad Black, now imprisoned for theft from corporate coffers.

Unlike other newspaper owners that have filed for bankruptcy amid steep dropoffs in advertising, including Chicago-based Tribune Co., Sun-Times Media Group has no bank debt. But its IRS debt thwarted efforts to raise new capital.

And USA Today’s free newspaper giveaway strategy isn’t working out so well these days.

USA Today President and Publisher Craig Moon retired abruptly yesterday and said the nation’s biggest newspaper lost 100,000 subscribers from the slowdown in travel. A decline in hotel occupancy means fewer people are there to collect free newspapers.

USA Today gives away 1.3 million daily copies in hotels, which accounts for more than half the newspaper’s 2.3 million total circulation. These giveaway copies are booked as paid circulation. This is obviously a sham but it’s technically considered circulation under newspaper circulation rules.

Here’s the rule from the Audit Bureau of Circulations governing newspaper bulk circulation:

All copies purchased by hotels, restaurants, airlines and rental car agencies for free distribution to their guests and by sponsors for free distribution to hospital patients and nursing home residents, regardless of the number of copies, will be reported as Third-Party Sales when at least 25 percent of the basic price is paid, either in cash or by applicable barter.

“Congratulations on a fabulous quarter,” Christine Chen of Needham & Co. on Urban Outfitters Q4 2008

“Alright guys, thanks for taking my question and congratulations on getting the term financing on the CDO facility,” Matthew Howlett of Fix-Pitt Kelton on Newcastle Investment Corp. Q4 2008

“Hi, good evening. Congratulations on another great quarter here,” Brendan Strong of Barclays Capital on Genoptix Q4 2008

“Nice quarter guys, kind of back up at high altitude again, Bill,” Jay Meier of Felti & Co. on Entrust Q4 2008

“Yes, congratulation everyone on another fantastic quarter,” Jeffrey Klinefelter of Piper Jaffray on Guess Inc. Q2 2008

“Nice quarter guys, thanks for the color,” John Barnes of BB&T Capital Markets on FedEx Q2 2008

“Nice quarter, guys — really a nice job,” Vincent Colicchio of Noble Financial on Micros Systems Q2 2008

“Congratulations, Norm, a very nice quarter on you and your entire staff,” Frank Magdlen of The Robins Group on AAON Inc, Q2 2008

“Congratulations on a nice quarter, guys, and thanks for taking my questions,” Nat Kellogg, Next Generation Equity Research on Olympic Steel Inc. Q1 2008

“Hey, congrats on an awesome quarter guys,” Brett Levy of Jeffries & Co. on GrafTech International Q1 2008

“Hi guys, nice quarter!” Tim Nelson of Piper Jaffray on Zoll Medical Q4 2007

“Hi, good afternoon. Congratulations on a nice quarter and a nice year,” Quintin Lai of Robert W. Baird on Invitrogen Corp. Q4 2007

“Very nice quarter guys, very nice,” Rodney Ratliff of Stanford Group Co. on Equinix Q2 2007

“Nice quarter guys,” Adam Frisch of UBS on Accenture Q1 2007

“Congratulations on the great results,” Margaret Major of Goldman Sachs on Coach Q1 2007

“Nice quarter guys,” Matt Doland of Becker Capital on Lifecell Q4 2006

“Once again great quarter guys, congratulations,” Anthony Stoss of Craig-Hallum Capital Group on SRS Labs Q3 2006

“Congratulations on the exceptional numbers,” Alexei Yakovitksy of Deutsche Bank on Mobile TeleSystems Q3 2006

“Congratulations for the nice quarter and nice guidance,” Kaushik Roy of Susquehanna International Group on Brocade Q4 2005

“Nice quarter guys,” David Steinberg of Deutsche Banc on Sepcracor Q4 2005

“Well thanks very much and congratulations on a remarkable quarter,” Richard Jaffe of Steifel Nicholas on Coldwater Creek Q4 2005

“Hi thanks, first I would say congratulations to everybody, its (a) really terrific quarter,” John Morris of Harris Nesbitt Gerard on Abercrombie & Fitch Q4 2005.

“Hi guys, great quarter,” Adam Holt of JP Morgan on Citrix Q3 2005

“I’m not sure any one said nice quarter yet, guys but maybe that is becoming a little bit routine to you,” John Roberts of Buckingham Research on Corning Q3 2005

Thanks to Seeking Alpha’s transcript search engine.

The ticketing marketplace for rock concerts shows a real lack of sophistication, meaning this: the true market value of some tickets for some concerts is much higher than what the act wants to be perceived as charging.

For example, there are some people who would be willing to pay $1,000 and up to be in the best seats for various shows, but MOST acts in the rock / pop world don’t want to come off as greedy pricks asking that much, even though the market says its value is that high. The acts know this, the venue knows this, the promoters know this, the ticketing company knows this and the scalpers really know this.

So…The venue, the promoter, the ticketing agency and often the artist camp (artist, management and agent) take tickets from the pool of available seats and feed them directly to the re-seller (which from this point on will be referred to by their true name: SCALPER).

I am not saying every one of the above entities all do this, nor am I saying they do it for all shows but this is a very common practice that happens more often than not. There is money to be made and they feel they should participate in it. There are a number of scams they employ to pull this off which is beyond the scope of this note.

More here

Meredith Whitney became one of the most feared analysts on Wall Street in 2007 when she advised her clients at Oppenheimer & Co. to sell Citigroup. Last night, Charlie Rose asked her what she thinks lies ahead:

CHARLIE ROSE:  Listen, you saw this early certainly in terms of the banks, and you got a lot of credit for that.  Have we not seen the worst?  Is the worst still to come, or have we passed some point of beginning to understand and just waiting for the plan to get us back on track?

MEREDITH WHITNEY:  I really believe the longer we wait, the longer we head down this path — well, the math is the worst is ahead of us.  And…

CHARLIE ROSE:  So the end of 2009 or beyond?

MEREDITH WHITNEY:  At least the end of 2009.  Look, you have credit continuing being pulled from the system, and until it stabilizes, there is nowhere to go but down.  And from an unemployment perspective, no one is pricing in low, mid teens unemployment in any of their assumptions.  So it
is just a question of not if the banks need to raise capital, it’s when, and, you know, let’s get some capital back in the system by looking at who can provide it, like the local banks.  We will go back to a time that was and not try to preserve a system that is and — or was more recently and will never be again.

From Bloomberg:

March 4 (Bloomberg) — Reader’s Digest Association Inc., the closely held magazine publisher, hired law firm Kirkland & Ellis LLP to explore restructuring options including a possible bankruptcy filing, a person familiar with the situation said.

Some words of advice from Penelope Trunk for anyone considering enrolling in graduate school until this recession goes away: Stay away. Far, far away.

Bill Gross of PIMCO, the world’s biggest bond fund tackles that one:

Question: How bad could this get?

Answer: No one knows for sure, but common sense would provide a good guess. If the government cannot substitute credit to the same extent that it is disappearing from the private system, then the U.S. and global economies will retreat. If the economy is viewed as a bathtub filled with water (credit) at two different times with two different levels, then draining it back down to the lower first level might reduce economic activity proportionately. Liquidate debt (credit) to 2003 totals and you just might reduce economic activity (GDP) to 2003 numbers as well. Whoops! That would mean a 10%+ contraction in the economy with unemployment approaching the teens. Keep that bathtub full!

Question: What can be done?

Answer: Keeping the tub sufficiently full means advancing policies in content and magnitude never contemplated since the days of FDR. The U.S. and global financial systems require credit creation and foreclosure prevention, not bank nationalization as currently contemplated by some. Trillions will be required in the U.S. alone and it is critical that there be a high degree of policy coordination among all nations, which avoids protectionist measures reflective of failed policies in the 1930s. To date, PIMCO’s Mohamed El-Erian’s imperative of “shock and awe” has been more like “don’t bother us, we’re working on it.” Get moving. Risk being bold – Washington.

The short-sellers are smelling blood at Gannett, which was No. 16 on the list of their favorite stocks (as of Feb. 25). More than 30 percent of oustanding shares were being shorted.

Shares of the nation’s largest newspaper chain fell below $3 today, meaning the company can be had for $666M. Driving the stock lower was  news that S&P had joined Moody’s in junking Gannett’s debt.

Revenues are plunging and Gannett is being squeezed for the cash it needs to pay the bank. At the end of 2008, Gannett had approximately $3.8 billion in long-term debt. The company had approximately $1.2 billion of additional borrowing capacity to repay debt maturing in 2009 and beyond.

All this debt financed the purchase of newspapers that are worth much less than the company paid for them. In 2008, Gannett took a goodwill charge (writedown of assets) of $8.3 billion (!), almost all of it in its publishing division.

Now I am become debt, the destroyer of newspapers.

From the 2008 letter to shareholders:

Derivatives contracts, in contrast, often go unsettled for years, or even decades, with counterparties building up huge claims against each other. “Paper” assets and liabilities – often hard to quantify – become important parts of financial statements though these items will not be validated for many years. Additionally, a frightening web of mutual dependence develops among huge financial institutions. Receivables and payables by  the billions become concentrated in the hands of a few large dealers who are apt to be highly-leveraged in other ways as well. Participants seeking to dodge troubles face the same problem as someone seeking to avoid venereal disease: It’s not just whom you sleep with, but also whom they are sleeping with.

Sleeping around, to continue our metaphor, can actually be useful for large derivatives dealers because it assures them government aid if trouble hits. In other words, only companies having problems that can infect the entire neighborhood – I won’t mention names – are certain to become a concern of the state (an outcome, I’m sad to say, that is proper). From this irritating reality comes The First Law of Corporate Survival for ambitious CEOs who pile on leverage and run large and unfathomable derivatives books: Modest incompetence simply won’t do; it’s mindboggling screw-ups that are required.

Harvard’s Benjamin Edelman has issued a fascinating study Who Buys Online Adult Entertainment?

Internet porn was a $2.8 billion market in 2006, but who buys the cow when you can you have the milk for free?

Hypocrites, that’s who.

Subscriptions are slightly more prevalent in states that have enacted conservative legislation on sexuality. In the 27 states where “defense of marriage” amendments have been adopted (making same-sex marriage, and/or civil unions unconstitutional), subscriptions to this adult entertainment service are weakly more prevalent than in other states ( p=0.096). In such states, there were 0.2 more subscribers to this adult web site per thousand broadband households, 11 percent more than in other states….

As shown in Table 4, subscriptions are also more prevalent in states where surveys indicate conservative positions on religion, gender roles, and sexuality. In states where more people agree that “Even today miracles are performed by the power of God” and “I never doubt the existence of God,” there are more subscriptions to this service. Subscriptions are also more prevalent in states where more people agree that “I have old-fashioned values about family and marriage” and “AIDS might be God’s punishment for immoral sexual behavior.”

The state that subscribes the most to Internet porn? Utah

Mark Sunshine:

It is amazing that Geithner’s proposal to “stress test” banks is making news as new policy. After all, regulators were supposed to be doing this all along. After the last banking crisis in the 1980s banking regulators got the authority to anticipate capital shortfalls as well as operational deficiencies. When problems are identified regulators are supposed to mandate corrective action well before a bank is in real trouble. “Prompt corrective action” (or “PCA”) is the regulatory jargon to describe the regulatory authority that has existed for years but apparently not used recently. Geithner’s announcement that regulators are going to “stress test” banks is a nice politically correct way of saying that enforcement of safety and soundness rules is back in style and self regulation is out.

Luo Ping, a director-general at the China Banking Regulatory Commission, in the Financial Times:

“Except for US Treasuries, what can you hold?” he asked. “Gold? You don’t hold Japanese government bonds or UK bonds. US Treasuries are the safe haven. For everyone, including China, it is the only option.”

Mr Luo, whose English tends toward the colloquial, added: “We hate you guys. Once you start issuing $1 trillion-$2 trillion . . .we know the dollar is going to depreciate, so we hate you guys but there is nothing much we can do.”

Via Bloomberg:

China entered into an oil-for-loans accord with Brazil yesterday — its third such deal in three days — tapping the nation’s $1.95 trillion foreign-exchange reserves at a time when credit is scarce. In all, the world’s second-largest oil user will get about 600,000 barrels a day, equal to 17 percent of its imports last year, in return for providing $39 billion of loans….

• China agreed on Feb. 17 to provide Russia with $25 billion of loans in return for 300,000 barrels a day of oil for 20 years.
• Venezuela’s Petroleos de Venezuela, known as PDVSA, will provide 200,000 barrels a day to the Asian country to pay down a $4 billion loan from China Development Bank. Venezuela’s oil is “at the service of China,” President Hugo Chavez said Feb. 18.
• Chinese President Hu Jintao visited Saudi Arabia Feb. 10-12. A deal between China Petroleum & Chemical Corp., Asia’s biggest oil processor, and Saudi Aramco is expected.
• Chinalco, the Aluminum Corporation of China, plans to invest $30 billion into Australian mining giant Rio Tinto to back up its initial $11 billion stake made in 2007. Rio Tinto is three times the size of Chinalco.
• China Minmetals placed and the $2.6 billion bid for troubled Australian mining company OZ Minerals. “If China wasn’t there, I don’t know where we would be … what’s the alternative?” said OZ Minerals chief executive Andrew Michelmore.
• In Feburary 2007, Chinalco bought Peru’s Mount Tomorocho, the world’s most productive copper mine.

The history of the future is being written here.

Orders for new aircraft are down, so the private jet industry has decided to launch a PR offensive to counter all the bad press it’s been getting over auto executives who flew private planes to beg for billions of dollars in government handouts. The message: “No plane, no gain.”

Lo and behold, two financial columnists expressed strikingly similar views on the subject this week.

Here’s Ben Stein’s take:

Then, once the attendees get to the meetings, they have to get up very early each day, hear speeches from experts in their fields, take notes, have seminars about their notes, hear more speeches, and meet new people to do more business. Then, exhausted from a very long day, they are offered the chance to play golf — and my experience is that most of them are far too tired to do so.

Waking up early, meeting people, attending seminars, hearing speeches and taking notes! How do they manage it all? Tired is the head that wears the crown.

Members of Congress, who love to catch a ride home on a contributor’s private plane, are helping out too. Just a few months after scolding auto executives for flying to Washington, Congress approved tax breaks to help those executives buy more planes.

Meanwhile, tongue firmly in cheek, JetBlue is welcoming bigwigs.

We understand it’s not easy being a high flyer these days. The CFO is picking apart your expense reports. Congress is mad about your bonus. And you can’t even hop on a private jet to the Cayman Islands without freaking out the shareholders. But even this economic cloud has a silver lining… actually more of a bluish lining. Because now you get to try JetBlue.

Welcome aboard. Um, do you mind switching seats?

I’ve written before about the woes at Lee Enterprises, the nation’s fourth biggest newspaper chain, which has been teetering on the edge of bankruptcy.

Editor & Publisher reports today that not everyone has lost faith in Lee:

The California State Teachers Retirement System (CalSTRS) is not only jumping into LEE, it owns more than a 5% stake. Its approximately 2.01 shares are 5.16% of shares outstanding. A Lee spokesman confirms CalSTRS seems to be a new holder, and the SEC shows no similar filing going back more than a year.

I’ve been pretty down on Lee, but this gave me some second thoughts. CalSTRS is the second largest pension fund in the United States, with $129 billion in assets at the beginning of the year.

There’s  still an enormous amount of pessimism on Lee Enterprises. The shares are trading around 25 cents and a quarter of the float (shares available) are being shorted. So what does CalSTRS know that the street doesn’t?

ProPublica has just posted a Q&A I did with David Swensen, Yale’s chief investment officer and one of the world’s most highly regarded investors.

Meet Sir Allen Stanford. Sir Allen is a Texas billionaire and a knighted citizen of Antigua.

Sir Allen has been charged with running an $8 billion fraud.

Current whereabouts unknown.

Cake decoration by Ryan Hettena, age 3.

On Feb. 10, shortly after Timothy Geithner announced that the government would perform “stress tests” of major American banks, the U.S. treasury secretary was asked what amounts to a trillion-dollar question. Well, at least at half-a-trillion.

“Do you think that are largest banks are insolvent?” Sen. Jim Bunning, R-Ky. asked Geithner later that day. “What will you do if your stress test of major banks reveal that they are insolvent?”

The New York Times’ Dealbook blog published the results of an two-year, independent bank stress test:

CreditSights ran the numbers, and found that according to its “severe” case situation, all the major banks and brokerages — Citigroup, Bank of America, Wells Fargo, JPMorgan Chase, Goldman Sachs and Morgan Stanley — might require further capital injections from the government….

The future losses for some banks are staggering by CreditSights’ estimates: Wells Fargo, $119 billion; BofA, $99 billion; JPMorgan, $124 billion; Citi, $101 billion; Goldman Sachs: $47 billion; Morgan Stanley, $34 billion.

To put these numbers in context, consider the market capitalization of these companies: Wells Fargo, $67 billion; BofA, $36 billion; JPMorgan, $92 billion; Citi, $19 billion; Goldman Sachs $44 billion; Morgan Stanley $25 billion.

In other words, the owners of the banks (shareholders) have not invested enough capital to cover the potential losses in assets in most cases.

Guess what that means! If the worst comes to pass, America’s biggest banks are effectively nationalized! Only the government can cover losses of that magnitude.

The sooner we wake up to this fact, the sooner we can move forward.

Andrew G Haldane, Executive Director for Financial Stability, Bank of England: 

Back in August 2007, the Chief Financial Officer of Goldman Sachs, David Viniar, commented to the Financial Times: “We are seeing things that were 25-standard deviation moves, several days in a row.”

To provide some context, assuming a normal distribution, a 7.26-sigma daily loss would be expected to occur once every 13.7 billion or so years.  That is roughly the estimated age of the universe.   A 25-sigma event would be expected to occur once every 6 x 10124 lives of the universe. That is quite a lot of human histories.

When I tried to calculate the probability of a 25-sigma event occurring on several successive days, the lights visibly dimmed over London and, in a scene reminiscent of that Little Britain sketch, the computer said “No.”

Fortunately, there is a simpler explanation – the model was wrong.

Testifying before Congress today, DNI Dennis Blair said “the primary near-term security concern of the United States is the global economic crisis and its geopolitical implications.”

Time is probably our greatest threat.  The longer it takes for the recovery to begin, the greater the likelihood of serious damage to US strategic interests…. Although two-thirds of countries in the world have sufficient financial or other means to limit the impact for the moment, much of Latin America, former Soviet Union states and sub-Saharan Africa lack sufficient cash reserves, access to international aid or credit, or other coping mechanism.  Statistical modeling shows that economic crises increase the risk of regime-threatening instability if they persist over a one to two year period.

Congressional Budget Office on the stimulus bill:

In contrast to its positive near-term macroeconomic effects, the legislation would reduce output slightly in the long run, CBO estimates, as would other similar proposals. The principal channel for this effect is that the legislation would result in an increase in government debt. To the extent that people hold their wealth as government bonds rather than in a form that can be used to finance private investment, the increased debt would tend to reduce the stock of productive private capital. In economic parlance, the debt would “crowd out” private investment. (Crowding out is unlikely to occur in the short run under current conditions, because must firms are lowering investment in response to reduced demand, which stimulus can offset in part.) CBO’s basic assumption is that, in the long run, each dollar of additional debt crowds out about a third of a dollar’s worth of private domestic capital (with the remainder of the rise in debt offset by increases in private saving and inflows of foreign capital).

Lloyd Blankfein writing in the FT on the lessons of the crisis:

The first is that risk management should not be entirely predicated on historical data. In the past several months, we have heard the phrase “multiple standard deviation events” more than a few times. If events that were calculated to occur once in 20 years in fact occurred much more regularly, it does not take a mathematician to figure out that risk management assumptions did not reflect the distribution of the actual outcomes. Our industry must do more to enhance and improve scenario analysis and stress testing.

Absolutely right. Ever since we went off the gold standard, financial crises occur once a decade. But Wall Street’s risk models, despite all their complexity, appear to be blind to this simple fact. As Blankfein says, it doesn’t take a mathematician to understand that. It takes common sense.

Andrew Lahde, a young hedge fund manager, had a great deal of common sense. He made one of the most successful hedge fund bets of all time in 2007, delivering a near 870% return by shorting subprime.

He famously walked away last year after writing this scathing letter in which he advocates hemp and blasts the “idiots whose parents paid for prep school, Yale, and then the Harvard MBA.” The kind of people, in other words, who work for Lloyd Blankfein.

Before he left, Lahde wrote in 2008 that he was shorting commercial real estate even though prices remained high. As he explained in this letter to shareholders, Lahde realized that the commercial real estate market was doomed even as the risk models were telling everyone else to stay the course.

The losses will materialize. Admittedly I don’t have a clue how severe the losses will be. I don’t have a model that can correctly predict all the variables. Luckily no one else on the planet has such a model either. I gave up on the ability of models to correctly predict the value of securitizations a few years ago. I do know one thing though. It is safe to assume a market is dead when deal volume falls to zero, as was the case with CMBS issuance during January 2008. (emphasis added)

Blankfein at least has the good sense to admit he misjudged it all. After ticking off the numerous failures of risk management by Goldman Sachs and others, Blankfein argues against a regulation of risk that protects us from the 100-year storm. “Taking risk completely out of the system,” he says, “will be at the cost of economic growth.

Is he serious? We are entering a deflationary spiral today because of a failure of risk management that is simply breathtaking. And this is at least the second “100-year storm” to hit the United States in the past 100 years.

If Wall Street can’t design a financial system that can weather such storms, the government must.

From Asia Times’ Inner Workings:

White House economic advisor Larry Summers, a former Treasury Secretary and President of Harvard University, had  brief career at one of the world’s biggest hedge funds, D.E. Shaw & Co.

According to sources who attended meetings with him, Summers traveled to Asia during July 2007 with a pitchbook recommending the AAA-rated tranches of collateralized debt obligations to Asian sovereign funds and financial institutions, in his capacity as a Managing Director of the hedge fund D.E. Shaw.

In July 2007 the AAA-rated tranches of mortgage-backed securities backed by subprime collateral were trading at around 90 cents on the dollar. Now they are trading at less than 40 cents on the dollar. They are  the “toxic assets” that the US government now is proposing to buy from banks to unclog their balance sheets.

According to my sources, Summers enthusiastically urged Asian investors including sovereign funds to purchase such instruments just weeks after the collapse of a Bear, Stearns hedge fund whose failure triggered the collapse of the whole structured market. I do not know precisely what was in Summers’ pitchbook, but if I were a member of a Congressional committee responsible for the oversight of economic policy, I would very much want to know what was in it.

Bill Gross of PIMCO, the world’s biggest bond fund:

“The levered global economy long ago morphed from a banking-dominated regime to one that hid behind securitized lending and structures resembling a ‘shadow banking’ system. SIVs, hedge funds, CDOs and increasingly levered mortgage and investment banks fueled asset appreciation in all investment markets, which in turn propelled real economic growth and employment to unsustainable levels. But, with U.S. housing prices as its trigger, the delevering process did a Wile E. Coyote and headed over the cliff in mid-year 2007, dragging down almost all asset prices except government bonds….

Those who argue strongly for a recapitalization of the banking system, however, may be missing the distinction between the banking system as we once knew it, and the “shadow banking” system that superseded it.”

From The Economist:

For a clickable map, go here.

Via Zero Hedge

For a clickable map go here.

This quote caught my attention from a BBC interview with a member of the English Collective of Prostitutes:

“We have women in our network working in the sex industry say ‘I prefer this job that I am doing as a sex worker.  I feel that I am exploiting people less, I am less ruthless than in my previous job as a financial adviser to some big city bank.'”

From London Banker:

When I was a young central banker, we often spent our lunchtimes debating how best to rob our employer. Tempted by the thought of great mounds of gold ingots far beneath us in the third sub-basement, nestling deep in bedrock, we would speculate on the viability of various plans for plundering our nation’s store of wealth. The presence of sufficient security forces to defend a medium size city and enough steel around the vault for a battle cruiser only spurred our youthful imaginations. After some months of fantasy gold robbery, I began to assert to my colleagues that stealing the gold would be foolish as it would be impossible to get away with enough gold in city traffic to make the attempt worthwhile, and selling it in any sizeable amount would lead to instant detection. I argued instead in favour of stealing the wheelie bins of cash conveniently lining the hallway to the loading ramp. Cash would be faster and easier to steal and more liquid to spend than gold.

I see now that I was a central banker of very little brain – and lacking ambition. The way to rob a central bank efficiently is to be a bank executive so skilled in financial engineering that I take my bank to the edge of extinction. I can then swap all my unpriceable, illiquid, engineered credit instruments for good central bank cash and Treasuries. That’s larceny without risk, making the central bank a complicit partner in the looting of its vaults, and earning gratitude and bonuses instead of audits and indictments.

My piece in the latest issue of BookForum on machine intelligence is now up.

The Economist: According to the Tanzania Albino Society, at least 35 albinos were murdered in Tanzania last year to supply witch doctors with limbs, organs and hair for their potions.

Investigators say the body parts of a single murdered albino sell for over $1,000, with the skin and flesh dried out and set into amulets and the bones ground down into a powder. Artisanal miners in the gold and diamond fields directly south of Lake Victoria are the main buyers. Some sprinkle albino powder on the walls of their narrow pits, hoping for glitter. Uneducated and desperate to strike riches, they are taken in by witch doctors’ stories of the wealth-giving properties of the potions.

From National Geographic: “In all of history, only 161,000 tons of gold have been mined, barely enough to fill two Olympic-size swimming pools.”

Like many of his Inca ancestors, Juan Apaza is possessed by gold. Descending into an icy tunnel 17,000 feet up in the Peruvian Andes, the 44-year-old miner stuffs a wad of coca leaves into his mouth to brace himself for the inevitable hunger and fatigue. For 30 days each month Apaza toils, without pay, deep inside this mine dug down under a glacier above the world’s highest town, La Rinconada. For 30 days he faces the dangers that have killed many of his fellow miners—explosives, toxic gases, tunnel collapses—to extract the gold that the world demands. Apaza does all this, without pay, so that he can make it to today, the 31st day, when he and his fellow miners are given a single shift, four hours or maybe a little more, to haul out and keep as much rock as their weary shoulders can bear. Under the ancient lottery system that still prevails in the high Andes, known as the cachorreo, this is what passes for a paycheck: a sack of rocks that may contain a small fortune in gold or, far more often, very little at all….

Even at showcase mines, such as Newmont Mining Corporation’s Batu Hijau operation in eastern Indonesia, where $600 million has been spent to mitigate the environmental impact, there is no avoiding the brutal calculus of gold mining. Extracting a single ounce of gold there—the amount in a typical wedding ring—requires the removal of more than 250 tons of rock and ore.

London Banker:

For a while now I have been on the fence on the inflation/deflation issue – whether the massive monetisation of bad debts by central banks and governments will lead to rapidly escalating inflation as currencies are debased or, alternatively, lead to deflation as bad debts and illiquidity undermine all commercial and financial activity in the economy. I’m now coming down on the side of deflation for a very simple reason: there is no longer any incentive to save or invest, and so debt and investment cannot increase much beyond current bloated levels….

I think it took me so long to feel confident about predicting deflation because the floating currency system under dollar hegemony and Bretton Woods II distorts the workings of both inflation and deflation. Despite the US being the epicentre of all the failed debts, failed securitisations, failed credit derivatives, failed rating agencies, failed banking businesses, failed corporate governance, failed accounting standards, failed capital adequacy models, and failed regulatory forbearance, the US dollar has recently strengthened as deflation globalised. The US exported inflation in the boom years, and now exports deflation in the bust years.

Michael Kranish, Boston Globe: “The Frank-versus-Shelby argument is a microcosm of the complex politics and competing interests at stake as Congress prepares to vote on the auto loans. It emphasizes what has become a geographic – not just partisan – divide: lawmakers from states with foreign-owned auto plants tend to oppose the measure, while those from the Upper Midwest and strong union states tend to back it.”

You could almost hear it in the Senate hearing room today as the heads of the nation’s big automakers pleaded their case again for a government bailout: the air hissing out of the leaking auto bubble.

The Big Three are in big trouble for many reasons, but one of the most important ones is that automakers have been producing too many cars for too long. The U.S. economy can support at most 16 million new cars sold every year. But total sales averaged sales of closer to 17 million units from 1999 to 2006. The Big Three account for more than half those sales.

How did this happen? Rather than make fewer cars, the Big Three offered bigger and bigger discounts and cheap money for consumers to borrow. Remember those days of “zero percent financing?” or “employee pricing?” In 2007, the average incentive was worth over $6,000, about 25 percent of the average vehicle price.

Why not just make fewer cars?  Under deals they signed with their unions more than 20 years ago, the car companies are required to pay laid off autoworkers up to 95 percent of their wages and benefits. The so-called “jobs bank” and related programs made it very expensive for the automakers to trim production.

As a result, American automakers produced more cars and trucks than Americans want, creating an “auto bubble” of excess supply that’s exploding like a Firestone tire:

It’s not just GM, Ford and Chrysler that can’t sell cars. No one can sell cars right now. This is hurting all carmakers, but the Big Three are especially vulnerable because they are burning through cash to meet all their fixed cost obligations, like pensions, health care and, yes, the jobs bank.

Yesterday, the UAW agreed to suspend the jobs bank program, calling it a distraction. But there’s still a whole lot of extra cars in the system. One economist estimated that the entire auto industry would have to shut down production for nearly a year, just to get rid of an estimated at 10 million extra units.

That’s not exactly what the Big Three have in mind.

There’s new information out about Clarion Fund. This is the group that released more than 20 million copies of a controversial anti-terror DVD called “Obsession” in battleground political states a few weeks before the election. (Background here and here.)

Clarion, which has released very little information about itself, just sent me its long-delayed 2007 tax return, IRS Form 990.

As a 501(c) organization, Clarion is not supposed to influence U.S. elections, but the 990 reveals that two of the fund’s unpaid directors in 2007 had strong GOP ties:

• Peter Feaman, a Florida trial lawyer. He’s also the author of Wake Up America! about the dangers of fundamentalist Islam. Feaman has been active in GOP political circles. He has run for the Florida house and serves as the Republican state committeeman for Palm Beach County. He was a delegate to the 2008 GOP convention.
• Nina Cunningham, founder of Quidlibet, a legal research consulting firm in Illinois. She has given more than $33,000 to GOP candidates and causes in the past three election cycles, according to the Center for Responsive Politics. She is the Illinois State chair of the Republican Jewish Committee’s women’s committee.

The other two directors were previous identified:

• Robert “Raphael” Shore, producer of Obsession and the follow-up film, The Third Jihad, and Richard Green, Clarion’s executive director and the organization’s only paid employee.

According to the 990, Clarion listed total revenue of nearly $2 million in 2007, about half of which came from direct public support. The contributors are not identified.

The fund’s biggest expense as $610,000 for film promotion and distribution. But Obsession earned Clarion more than $800,000 so the fund actually booked a small profit.

The fund’s distribution costs were much higher in 2008, but we won’t know the details for some time.

My piece on hedge funds is up now.

You’ve probably heard about hedge funds. Hedge funds are private pools of money, on the orders of billions of dollars. They are usually secretive. Ten thousand hedge funds are registered in the Cayman Islands. Why are they registered in the Caymans? So they can be secretive and avoid taxes.

Journalists tend to be naturally suspicious of secrecy, but there are good hedge funds. Ones that have a very narrow strategy they pursue. That don’t borrow huge amounts of money, that don’t speculate and drive up the price of oil or drive down the price of Ford, and that generally don’t concentrate on investments that almost nobody understands.

But the bad ones can be really bad. Because they move so much (borrowed) money in and out of the markets, they are blamed for the extreme market gyrations we’ve seen in the past few weeks. They will speculate on anything. The spectacular collapse of Long-Term Capital Management in 1998 had much to do with its bets on volatility itself.

So why do people invest in hedge funds? Well, not everybody does. Minimum investment is $5 million or so. And 20 percent of all profits goes to the fund managers, some of whom earned $1 billion in a single year.

Even with those huge hurdles, hedge funds managed $2 trillion when things were going well. And they did extremely well for their investors.

Those who did invest in hedge funds were sometimes drawn in by the promise of absolute return. That hedge funds will use sophisticated trading techniques and will always make money. No matter what. Long-Term Capital Management was run by a Nobel Prize winner who convinced people that the fund’s mathematical models guaranteed returns. Until they didn’t.

Long-Term Capital Management lost $4.5 billion in nine months in 1998.  The Federal Reserve decided to intervene because it feared the fund’s collapse could trigger a full-blown panic.

Today, 10 years later, there are many more hedge funds.  They have been wildly successful over the past seven years, helped once again by Alan Greenspan’s cherished beliefs in cheap money and unfettered markets. And success is a very bad teacher, as Bill Gates says. Because it seduces smart people into thinking they can’t lose.

Bloomberg reports that hedge fund assets will fall to $1 trillion by mid-2009. Some hedge funds lost quite a bit of money. Quite a few investors cashed out and fled to safety. And if Citigroup is right, we should remain seated because the turbulence is going to with us for some time.

So, I’ll be learning and writing more about hedge funds in the coming weeks. As always, I welcome comments, thoughts, criticisms, and musings, anonymous or not.

It’s election time and once again Californians have to consider a whole host of ballot propositions on issues about which most of us know nothing.

As usual, the ones that have gotten the most attention are two hot-button social issues. A yes vote on Proposition 4 would require doctors to notify parents of pregnant minors seeking abortions. And Proposition 8 places the question of gay marriage before voters yet again.

There are 10 other state propositions that would issue billions of dollars in bonds in our nearly bankrupt state, improve life for farm animals, change sentencing rules for judges, force utilities to generate power from renewable energy, and so on.

In the past eight years, Californians have had more than 100 state propositions to consider ranging from Indian gaming compacts to chiropractor licensing. And that’s not counting the dozens of county and city initiatives. I, for one, am sick of it.

I used to spend considerable effort going through the phone-book sized voter guide. This time, I saved myself a lot of time. When I cast my absentee ballot a few weeks ago, I went down the line and filled in the “no” bubble for every single state proposition on the ballot.

Why? Because a no vote on a proposition changes nothing and puts the issue back where it belongs:  in the California Legislature. It’s the legislature’s job to consider these issues, understand the implications pro and con, hold hearings, hear from lobbyists and their constituents, talk to their colleagues and make an informed decision.

California’s initiative process is completely broken. Time and again, the initiatives passed by voters turn out to be ambiguous and too complex with many exceeding 10,000 words. The courts often throw them out. If they don’t, we’re stuck with them: California is the only state that doesn’t allow its legislature to amend initiatives after passage.

Nearly a century ago, California voters overwhelmingly approved the initiative system as a way to wrest control of the political process from  special interests like the Southern Pacific Railroad. It was supposed to empower ordinary citizens, but today it only serves the special interests. According to the Center for Governmental Studies, a Los Angeles think tank, the year we last saw an initiative qualify on the effort of volunteers was 1982.

Who are these special interests? People with money. Two-thirds of all contributions now come in amounts of $1 million or more. In 2006, Hollywood producer Steven Bing spent more than $48 million to finance Proposition 87, an alternative energy measure, but lost to an even costlier effort financed by oil companies.

An industry has sprung up to cater to these people. It costs about $3 million to qualify a measure for the ballot by paying people to sit outside supermarkets and hassle you for your signature. But the big money is in advertising. Two years ago, a total of $330 million was spent on all the measures in the general election, including $154 million on Bing’s Prop 87.

This is madness. Money has corrupted the initiative process, subverted its noble intent of empowering citizens, and turned propositions into tools for wealthy, special interests who can’t get what they want from our hapless legislature.

It’s time for average citizens to stop pretending that we are lawmakers. Stop encouraging the special interests. Take back the process by voting no on ALL propositions this November and every November and help to fix California’s broken political system.

Voting no on all state propositions isn’t liberal or conservative, Democratic or Republican. It’s a vote against the special interests and the money that ruined the process. It’s a vote in favor of good government. So, as Nancy Reagan liked to say, just say no.

Many people seem to having trouble with all the terms in the fiscal crisis. Here is a handy guide I have prepared. Hope this helps.

“Typical investor”

You go to the grocery store and buy an orange, take it home, and eat it when it ripens.

“Short seller”

You go to the grocery store. You borrow 100 oranges and immediately sell them to someone else. You wait for the price of oranges to go down. You buy 100 cheaper oranges, return them to the bank and pocket the difference in price. Everybody hates you.

“Hedge fund”

You take your rich uncle’s money, borrow more, and secretly buy lots of oranges on the cheap. Then you then drive up the price of oranges. At the same time, you short oranges. Either way, you keep 20 percent of profits. Everybody envies you.

“Pension fund”

You take a bowling league’s meager savings and try to copy what the hedge funds were doing. Everybody pities you.

“Warren Buffet”

Owns the orange groves. Always makes money.

“Alan Greenspan”

The aging greeter who encourages you to buy more oranges than you can afford.

“Subprime mortgages”

Rotting oranges infested with worms.

“Mortgage-backed securities”

You buy a huge amount of oranges — including the diseased ones — chop them up and sell the whole thing off in baskets of varying sizes and quality. Nobody knows what they are buying.

“Credit-rating agency”

Clerk who says the worm-infested oranges in the basket are really very sweet and delicious.

“Credit default swap”

Insurance in case the bad oranges spoils the bunch. Sold at checkout counter.

“Special Investment Vehicle (SIV)”

The store stashes the rotten oranges in the freezer and forgets about them.

“Investment Bank”

Cashier who pockets a few cents every time oranges are bought and sold. Stuck with lots of unsold fruit baskets.

“Treasury secretary”

Ex-cashier promoted to management.

“Federal bailout”

The government buys all the worm-infested oranges and makes you eat them.

but to do what little I can to bring to your attention today’s parting words from Andrew Lahde, a hedge fund manager whose fund returned 866 percent betting against the subprime crisis. He quit today but not before taking out the whole Wall Street establishment with him and sharing his thoughts on corruption and yes, hemp. Enjoy.

October 17, 2008

“Today I write not to gloat. Given the pain that nearly everyone is experiencing, that would be entirely inappropriate. Nor am I writing to make further predictions, as most of my forecasts in previous letters have unfolded or are in the process of unfolding. Instead, I am writing to say goodbye.

Recently, on the front page of Section C of the Wall Street Journal, a hedge fund manager who was also closing up shop (a $300 million fund), was quoted as saying, “What I have learned about the hedge fund business is that I hate it.” I could not agree more with that statement. I was in this game for the money. The low hanging fruit, i.e. idiots whose parents paid for prep school, Yale, and then the Harvard MBA, was there for the taking. These people who were (often) truly not worthy of the education they received (or supposedly received) rose to the top of companies such as AIG, Bear Stearns and Lehman Brothers and all levels of our government. All of this behavior supporting the Aristocracy, only ended up making it easier for me to find people stupid enough to take the other side of my trades. God bless America.

There are far too many people for me to sincerely thank for my success. However, I do not want to sound like a Hollywood actor accepting an award. The money was reward enough. Furthermore, the endless list those deserving thanks know who they are.

I will no longer manage money for other people or institutions. I have enough of my own wealth to manage. Some people, who think they have arrived at a reasonable estimate of my net worth, might be surprised that I would call it quits with such a small war chest. That is fine; I am content with my rewards. Moreover, I will let others try to amass nine, ten or eleven figure net worths. Meanwhile, their lives suck. Appointments back to back, booked solid for the next three months, they look forward to their two week vacation in January during which they will likely be glued to their Blackberries or other such devices. What is the point? They will all be forgotten in fifty years anyway. Steve Balmer, Steven Cohen, and Larry Ellison will all be forgotten. I do not understand the legacy thing. Nearly everyone will be forgotten. Give up on leaving your mark. Throw the Blackberry away and enjoy life.

So this is it. With all due respect, I am dropping out. Please do not expect any type of reply to emails or voicemails within normal time frames or at all. Andy Springer and his company will be handling the dissolution of the fund. And don’t worry about my employees, they were always employed by Mr. Springer’s company and only one (who has been well-rewarded) will lose his job.

I have no interest in any deals in which anyone would like me to participate. I truly do not have a strong opinion about any market right now, other than to say that things will continue to get worse for some time, probably years. I am content sitting on the sidelines and waiting. After all, sitting and waiting is how we made money from the subprime debacle. I now have time to repair my health, which was destroyed by the stress I layered onto myself over the past two years, as well as my entire life — where I had to compete for spaces in universities and graduate schools, jobs and assets under management — with those who had all the advantages (rich parents) that I did not. May meritocracy be part of a new form of government, which needs to be established.

On the issue of the U.S. Government, I would like to make a modest proposal. First, I point out the obvious flaws, whereby legislation was repeatedly brought forth to Congress over the past eight years, which would have reigned in the predatory lending practices of now mostly defunct institutions. These institutions regularly filled the coffers of both parties in return for voting down all of this legislation designed to protect the common citizen. This is an outrage, yet no one seems to know or care about it. Since Thomas Jefferson and Adam Smith passed, I would argue that there has been a dearth of worthy philosophers in this country, at least ones focused on improving government. Capitalism worked for two hundred years, but times change, and systems become corrupt. George Soros, a man of staggering wealth, has stated that he would like to be remembered as a philosopher. My suggestion is that this great man start and sponsor a forum for great minds to come together to create a new system of government that truly represents the common man’s interest, while at the same time creating rewards great enough to attract the best and brightest minds to serve in government roles without having to rely on corruption to further their interests or lifestyles. This forum could be similar to the one used to create the operating system, Linux, which competes with Microsoft’s near monopoly. I believe there is an answer, but for now the system is clearly broken.

Lastly, while I still have an audience, I would like to bring attention to an alternative food and energy source. You won’t see it included in BP’s, “Feel good. We are working on sustainable solutions,” television commercials, nor is it mentioned in ADM’s similar commercials. But hemp has been used for at least 5,000 years for cloth and food, as well as just about everything that is produced from petroleum products. Hemp is not marijuana and vice versa. Hemp is the male plant and it grows like a weed, hence the slang term. The original American flag was made of hemp fiber and our Constitution was printed on paper made of hemp. It was used as recently as World War II by the U.S. Government, and then promptly made illegal after the war was won. At a time when rhetoric is flying about becoming more self-sufficient in terms of energy, why is it illegal to grow this plant in this country? Ah, the female. The evil female plant — marijuana. It gets you high, it makes you laugh, it does not produce a hangover. Unlike alcohol, it does not result in bar fights or wife beating. So, why is this innocuous plant illegal? Is it a gateway drug? No, that would be alcohol, which is so heavily advertised in this country. My only conclusion as to why it is illegal, is that Corporate America, which owns Congress, would rather sell you Paxil, Zoloft, Xanax and other additive drugs, than allow you to grow a plant in your home without some of the profits going into their coffers. This policy is ludicrous. It has surely contributed to our dependency on foreign energy sources. Our policies have other countries literally laughing at our stupidity, most notably Canada, as well as several European nations (both Eastern and Western). You would not know this by paying attention to U.S. media sources though, as they tend not to elaborate on who is laughing at the United States this week. Please people, let’s stop the rhetoric and start thinking about how we can truly become self-sufficient.

With that I say good-bye and good luck.

All the best,
Andrew Lahde”

Here are the headlines today: Fiscal armageddon. The worst crisis since the Great Depression. Entire economy in danger, Bush warns Americans. $700 billion rescue package in peril.

Over and over, we’re told our financial system is in an unprecedented crisis. But how did we get here all of a sudden? What went wrong? Can’t someone answer these questions in plain English?

I’m not an “expert” or even a financial journalist, but the experts are too busy writing about Sarah Palin, politics and God knows what to answer such a simple question from a rube like me. But I wanted to know. So if no one ever reads this, at least I’ll have some idea how I came to be standing in the bread line.

According to the Treasury Department, the root cause of this mess are “illiquid mortgage assets” that have lost value as the housing market collapsed and are now clogging up the financial markets and stopping the flow of credit.

So what, you might say. Fuck those greedy Wall Street assholes. Let the whole thing crash. Well, hold on, there, Mr. Outrage. Credit is the grease that allows the U.S. economy to run.

Let’s say you, Mr. Outrage, order pizza from Domino’s on your VISA card. It takes a while for Domino’s to get your money from VISA, and in the meantime, the company needs money to pay employees and order pepperoni, mozzarella and tomatoes.

Just like you, Domino’s doesn’t want to go to the bank every week and fill out forms and pledge collateral. So it borrows in what’s known as the commercial paper market. Commercial paper is essentially a system of short-term IOUs issued by banks and big companies like Domino’s. It’s grown into an enormous market, more than $2 trillion.

Right now, the commercial paper market is shriveling up like a vampire in the sun. It shrank by $100 billion in the past two weeks. If the commercial paper market keeps shrinking and Domino’s can’t find short-term cash, it might not be able to pay its employees. Like it or not, you rely on American companies every day. So, when you hear people say the economy will come to a halt, this is what they’re talking about.

Commercial paper used to be considered very safe and boring. The system worked just fine. But Wall Street can’t leave a good thing alone. It came up with a different kind of commercial paper. This kind wasn’t sold by Domino’s or other companies that actually made something. It was issued by banks, hedge funds, and investment banks. Lehman Brothers used to be one of the biggest issuers of commercial papers. And a lot of it turned out to be crap.

This crap was backed by credit-card debt, student loans and residential mortgages. Wall Street took your mortgage or loan and repackaged it with thousands of other people’s debts. Some of these mortgages were “subprime,” which is another word for junk.

It wasn’t sold as junk though. Through the magic of financial “engineering,” it was transformed into high grade AAA investments. How this happened is incredibly complicated and may involve things like tranches, CDOs, Gaussian copula models and credit-default swaps (which is how insurance giant AIG got into trouble). Suffice it say that only Wall Street can turn shit into gold.

Money market funds, which were also supposed to be as safe as cash, bought up a lot of this crappy paper. It was thought to be so safe that federal regulators allowed companies to keep it off the books. So that’s another problem: we don’t know who is holding this stuff. Or how much of it. And the stuff is so complicated that no one really knows how much it’s worth.

But the paper was only as safe as the mortgages it was based upon. And a home loan is only good if the homeowner is paying it off. As we know, a lot of people bought homes they couldn’t afford. So the banks foreclosed on those homes. Millions of homes. And this crappy paper, these “cash equivalents” started to have that not-so-fresh feeling.

Suddenly, nothing looked safe anymore. Reserve Primary, the money market fund that invented money market funds, “broke the buck” because it had a lot of suddenly worthless IOUs from bankrupt Lehman Brothers. That means that the $1 you invested in the fund was worth less than $1.

When $1 is worth less than a $1 you hoard your cash. You don’t buy crappy paper. You don’t lend to companies that may be holding a ton of it. The credit markets freeze up.

That’s what’s happening and that’s why everyone is freaking out.

For a few years, director John Waters and I were once neighbors.

Waters lives in the Tuscany-Canterbury section of Baltimore. In this leafy enclave of Tudor-style homes inhabited by white yuppies, it’s easy to forget that you’re in a crime-plagued, drug-infested mess of a city that gave rise to HBO’s The Wire.  My alma mater, The Johns Hopkins University, is a short walk away.

My Phi Kappa Psi fraternity house was also in Tuscany-Canterbury, but I never saw Waters in the neighborhood. In fact, one of my regrets in life is I never went trick-or-treating at the Waters home, which was just a few doors down.

Still, I felt a certain kinship. He made films with dog-poop eating drag queens and my frat brothers and I behaved pretty much like you would expect a fraternity to behave. We were both neighborhood outcasts.

The neighborhood finally had its revenge on Phi Psi last year. Neighbors got the city council to  ban the fraternity from the house on a zoning technicality. Then, last month, the neighborhood association amended its rules so that the private Calvert School next door could raze the building and build more facilities for the elementary students whose parents pay $19,000 a year to send them there.

That was too much for Waters. He wrote a letter to the Tuscany-Canterbury neighbohood association saying that the project would be “construction noise hell. In the letter, Waters also threatened to drive to Calvert Headmaster Andrew Martire’s house and honk his car horn each morning at 6:30 a.m. in revenge for the noise in the neighborhood. “I’ve done it before and I’ll do it again,” Waters wrote.

Thanks John, for being a good neighbor.

Rep. Duncan Hunter, R-Border Fence, (left) came up with a solution to the Darfur refugee crisis.

According to The Washington Post:

Hunter’s staff contacted the embassy in N’Djamena, Chad, last week to see whether Hunter could distribute food at a camp. Hunter also wanted to put together an outing to hunt wildebeest and distribute the meat to the Darfur refugees.

That’s the Duncan we know and love!

It was left to the State Department to inform the congressman that Chad is a DESERT, big game hunting is prohibited and there are no wildebeest there, outside of game reserves.

From The L Magazine

UPDATE: A friend writes, “You ARE awsome. And I admire you for not being ashamed to show skin on your blog. Very healthy color; clearly you’re getting your Omega-3. But I hope you can get the other two tats removed—I would have stopped at one. Nevertheless, you’ve insipred me, and I’m running out to get my own shoulder-length “Nollige Is Good” right now.”

07/01/2008 Survey of 1,000 Likely Voters by Rasmussen Reports

“Okay, how do you rate the way that Congress is doing its job?”

2% Excellent
7% Good
36% Fair
52% Poor
2% Not sure

Congratulations, Congress! Single digit (9 percent) approval ratings! A new low!

That’s how they roll in India!

Big debate on C-SPAN right now over a bill by Henry Waxman that would prevent future administrations from deleting 5 million e-mails as the Bush administration did. Rep. Paul Hodes says the bill will lift the Bush administration “veil of secrecy.” Chronology here.

Republican arguments seem weak. The computer that powers Dan “I lost to Gray Davis” Lungren has booted up the “high gas prices” software.

Of course I agree that all e-mails should be preserved, even if it costs $155 million as the Congressional Budget Office says. These are, above all, historical records, and erasing history diminishes us all.

But because the preservation of history is somehow a partisan issue these days, it bears noting that Clinton folks did much the same. A federal judge found the EPA in contempt because the hard drives of Administrator Carol Browner and other top folks at the EPA hard drive got wiped clean.

Back and forth we go.

Isn’t anybody bothered by the fact that Congress is exempt from the Freedom of Information Act?  And has always been exempt?

Update: Bill passed the House 229-193

In testimony for yesterday’s House Judiciary hearing, John Yoo said copies of the  2002 “Bybee” memo were given to the Justice Department’s Criminal Division for review.

I’d be curious to hear what the career professionals in the DOJ’s criminal division had to say about this memo.It’s hard to believe they would approve of an interpretation of a law that it would make it virtually impossible under any circumstance to prosecute violators. (Background on Bybee memo here.)

According to Yoo:

We also sent drafts of the opinion to the deputy attorney general’s office and to the criminal division for their views and comments. (emphasis added)       

So where were the career prosecutors in the criminal division? Were they cowed into silence by their boss at the time, Michael Chertoff? Did they even see the memo? If they did, didn’t t this memo violate every professional instinct?Until someone breaks the silence, we’ll never know.

It’s not a good sign when they put the newspaper building on the auction block

Ken Silverstein, who writes the Washington Babylon blog at Harper’s magazine, has run a blistering series of columns exposing how Bob Woodward and David Broder of the Washington Post “buckracked” huge fees for speaking before groups:

So to summarize: Broder and Woodward have both given speeches to big corporate trade groups–some with major lobbying interests–often as part of events held at spas and resorts. Broder even headlined a political fundraiser for a group of realtors. Woodward appears to give the bulk of his speaking fees to his personal foundation, but that “charity” gives away a tiny fraction of its assets–skirting IRS regulations–and much of the money goes to one of the most elite private schools in Washington, which Woodward’s own kids attended. Neither Woodward nor Broder replied to requests for comment, an odd strategy for journalists.

You want to read a courageous journalist? Read Ken Silverstein. (Full disclosure: Ken is a friend.) He is taking on one the heroes of our profession — Bob Woodward — and holding him up to the lens for close inspection. And that is of course what Woodward has done throughout his career. But what Ken points out is that career has turned Woodward, the ultimate outside, into an insider.

You’re corrupted if you take money from corporate groups, but not if you give the money to charity? Even if it’s your own personal charity, and you get a tax break, and most of the contributions go to elite causes of direct interest to the donor? This looks to be the same sort of double-dealing and hypocrisy that Bob Woodward–at least the old Bob Woodward–would have been all over as a reporter, if a political figure were involved.

Media criticism is an area where many journalists fear to tread. I do it myself on a smaller scale in San Diego, where I write a column of media criticism for the Voice of San Diego, but I do so with some trepidation. I’m never really sure what the consequences will be to my career. But I’m just playing in the sand while Ken swims in the ocean.

Best of all was [Washington Post Congressional reporter] reporter Jonathan Weisman, who during an online chat was asked: “Harper’s is reporting that your colleagues David Broder and Bob Woodward earn five figure honoraria for speaking before business groups. When are you gonna start getting some of that action?”

“I’ve been thinking the same thing!” replied Weisman. “I gotta get me an agent!”

Yeah, and while you’re at it, you get a moral core and a sense of professional ethics, too.

That’s just blistering criticism. And it’s long overdue.

Buckracking is widely (and justifiably) condemned by some of many journalists, including the “high priest” himself, David Broder. But it’s difficult to cover a profession when you have the same paymasters:

Perform a Google search and you’ll find that Jeff Birnbaum, the Post’s lobbying reporter, has spoken to a number of groups, including ones that lobby.

How have things gotten so bad? Easy: Nobody has done what Ken is doing.

It’s not easy to take on your own profession, but if journalism isn’t covered with the same intensity and focus that journalists cover everyone else, there won’t be much of a profession worth having.

The NY Times has a big story today about the CIA’s interrogation of Abu Zubaydah. Reporter Scott Shane seems to take whatever his intelligence sources tell him at face value and CIA interrogator Duece Martinez comes out looking like the hero who broke the al-Qaida terrorist mastermind:

In the Hollywood cliché of Fox’s “24,” a torturer shouts questions at a bound terrorist while inflicting excruciating pain. The C.I.A. program worked differently. A paramilitary team put on the pressure, using cold temperatures, sleeplessness, pain and fear to force a prisoner to talk. When the prisoner signaled assent, the tormenters stepped aside. After a break that could be a day or even longer, Mr. Martinez or another interrogator took up the questioning.

More…

If officers believed the prisoner was holding out, paramilitary officers who had undergone a crash course in the new techniques, but who generally knew little about Al Qaeda, would move in to manhandle the prisoner. Aware that they were on tenuous legal ground, agency officials at headquarters insisted on approving each new step — a night without sleep, a session of waterboarding, even a “belly slap” — in an exchange of encrypted messages. A doctor or medic was always on hand.

Sounds pretty harmless, right? Then why did the CIA destroy its videotape of Abu Zubaydah’s interrogation? And why no mention of this in the Times story?And why no mention either of what Abu Zubaydah said during a 2007 Gitmo hearing about his “torture:”

Q. In your previous statement, you mentioned specific treatments. Can you describe a little bit more about what those treatments were?A. REDACTEDQ. I understandA. And they not give me a chance all this REDACTEDQ. So I understand, you said things during this treatment you said things to make them stop and then those statements were actually untrue, is that correct?A. Yes

And what about Ron Suskind’s claims in the One Percent Doctrine that Abu Zubaydah was mentally unstable?

Ultimately, we tortured an insane man and ran screaming at every word he uttered.

The Washington Post has written about a debate between the FBI and the CIA over Abu Zubaydah’s value.The Times ran an editor’s note explaining its decision to name Zubaydah’s CIA interrogator (although I wonder whether Deuce is his real name), but the bigger issue is whether Shane and the NY Times are carrying the agency’s water here.Martinez is already being hailed as “the hero you’ve never heard of.”The NY Times did the agency a great service by blurring the program’s harsh edges. Is Shane serving the CIA or his readers?

After years of disclosures by government investigations, media accounts, and reports from human rights organizations, there is no longer any doubt as to whether the current administration has committed war crimes.Gioca il casino online in linea nel partypoker contro la gente reale tutto l’intorno dal pianeta e vinca i soldi reali!

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Partypoker offre a tutto il giocatore una probabilita’ grande ottenere i soldi per libero. The only question that remains to be answered is whether those who ordered the use of torture will be held to account.

Maj. Gen. Antonio Taguba, ret.

Full text

President Bush has said he will try to “forgive” his former Press Secretary Scott McClellan for writing What Happened. A better course of action would be for the president to read it.

According to McClellan, the Bush administration, instead of getting down to the business of governing, got caught up in playing the Washington game of the “permanent campaign.” Every major policy — including war — became a product that needed to be sold to the American people. Instead of candor, the secrecy-obsessed White House marshaled facts to suit its goals.

It was the campaign to sell Iraq war that destroyed McClellan’s credibilty as press secretary. He made the mistake of relaying assurances from Scooter Libby and Karl Rove that they nothing to do with the illegal leak of CIA agent Valerie Plame’s identity. In the case of Libby, McClellan was asked to lie by none other than Vice President Cheney.

Bitter though he may be, McClellan still likes and admires President Bush. The same can’t be said for Secretary of State Condi Rice, who emerges in the pages of What Happened as Bush’s toady. In McClellan’s view, Rice avoids accountability for her ruinous stint as national security adviser through her servility to the president and talent for public relations. Having the ear of the king is the path to power in the Bush White House.

The overall tone the book strikes, however, is one not of partisan rancor, but of sadness. The Bush White House is an opportunity lost, a time of short-sighted leadership where the best intentions are sacrified for short-term gains. It may be an old Washington story but through the eyes of this 30-year-old ex-press secretary, it’s a revealing one.

What Happened suffers from a fatal flaw, however. McClellan’s perspective was extremely limited. He was simply the mouthpiece. If this is the press secretary’s experience. I can’t wait to hear what the strategists really said and did.

Shortly after we are introduced to Maurice Conchis, the magician behind The Magus, he declares the novel dead as an art form. But then author John Fowles then proceeds to show just how lively a book can be. The writing borders on pretension. Fowles uses words that couldn’t be found in my dictionary, but I found the narrative irresistible. I felt in league with narrator Nicholas Urfe — we both knew we were being toyed with and we sought an explanation that wasn’t forthcoming, but the drama Conchis and Fowles created for us were so delicious that we want it to go on forever. And that I suppose is the point.

Who said writing isn’t dangerous? Writing a short story can be a federal crime. 

Karen Fletcher, a 56-year-old woman from Donora, Pennsylvania, pleaded guilty in the first text-based case of obscenity prosecution in more than 30 years. 

Fletcher ran a members-only website called “Red Rose,” and charged 29 subscribers $10 a month to read stories describing the rape and torture of young children.  

In an affidavit, Fletcher said she had been sexually abused as a child and her writing was cathartic. She said she didn’t know if the stories were based on her experiences or whether they were fictitious.  

“I have always been afraid of monsters. The monsters in my life had always been real; for too long they were always there with unlimited access to me, and I was helpless to do anything about it,” she wrote. “In my stories, I have created new monsters. [They] rise above the horror of the real life monsters. Somehow, making these monsters so much worse makes me feel better, and makes my life seem more bearable. I may still be afraid of the monsters, but at least in the stories, they prey on someone else, not me.” 

A federal grand jury indicted Fletcher in 2006. A few days ago, she pleaded guilty a few days ago to six counts of distributing obscenity online. 

I haven’t read her writing, and I don’t intend to. Some of her stories involve 2-year-olds; I have a 2-year-old son. U.S. Attorney Mary Beth Buchanan called it “some of the most disturbing, disgusting and vile material I’ve ever viewed.” I’ll take her word for it.

What interests me is that Fletcher only used words, not pictures. The U.S. Supreme Court has held that text can be obscene, but there has not been a successful obscenity prosecution in the United States in the past 25 years that did not involve drawings or photos.

The Supreme Court has also defined the qualities of an obscene work:

1. the work appeals to prurient interest in sex;
2. it portrays sexual acts in a patently offensive way; 
3. it has no serious literary, artistic, social or political value. 

Before the Court imposed its obscenity standard in the 1960s, works by James Joyce, D.H. Lawrence and others that are now regarded as works of literature were banned as obscene.

While I refuse to read what Fletcher appears to have written, I defend her right to write and share it. Here’s why:

There has long been a religious, puritan strain in this country that has chafed at the notion of a free and unregulated market of ideas, however vile. I think this is what Supreme Court Justice William Douglas was getting at when he wrote in a 1966 ruling that overturned the obscenity ban on Fanny Hill: 

Every time an obscenity case is to be argued here, my office is flooded with letters and postal cards urging me to protect the community or the Nation by striking down the publication. The messages are often identical even down to commas and semicolons. The inference is irresistible that they were all copied from a school or church blackboard. Dozens of postal cards often are mailed from the same precinct. The drives are incessant, and the pressures are great. Happily, we do not bow to them. I mention them only to emphasize the lack of popular understanding of our constitutional system. Publications and utterances were made immune from majoritarian control by the First Amendment, applicable to the States by reason of the Fourteenth. No exceptions were made, not even for obscenity. 

Hey, good to see you!

How’s it going? It’s been a while. Really? Six months? Wow, time flies doesn’t it.

Me? I’ve been busy. Working on some things. Check back with me. Might have more for you soon.So how are things with you?

Democrats:Hillary Clinton: Maya Angelou, 50 Cent, Barbra Streisand, Pauly Shore, Madonna, Earvin “Magic” Johnson.

Barack Obama: Oprah, Usher, George Clooney, Matt Damon.

John Edwards: Kevin Bacon, Tim Robbins, Jean Smart, Madeline Stowe, Bonnie Raitt, Jackson Browne, Harry Belafonte.

Chris Dodd: Paul Simon

Bill Richardson: Martin Sheen, Carlos Alazraqui (the voice of the Taco Bell Chihuahua)

Dennis Kucinich: Sean Penn, Robin Wright Penn, Willie Nelson, Esai Morales, Ed Begley Jr., Hector Elizondo, James Cromwell, Alexandra Paul, Paul Haggis, Frances Fisher, Ani DiFranco, Larry Flynt.

Joe Biden: ?

Mike Gravel: ?

Republicans:

Rudy Giuliani: Robert Duvall, Ron Silver, Adam Sandler, Kelsey Grammar.

John McCain: Curt Schilling.

Mitt Romney: ?

Mike Huckabee: Chuck Norris, Ted Nugent, Rick “Nature Boy” Flair.

Fred Thompson: Fred Thompson

Ron Paul: John Mayer (love the video).

Tom Tancredo: ?

Duncan Hunter: Chuck Yeager.

Please e-mail me with suggestions and links.

From Cogitamus: “Kevin Bacon is now campaigning for John Edwards in Iowa.  Bacon’s extensive connections to every single person in Iowa just might give Edwards the edge he’s looking for next month.”

I spent a bit of time reading over Hizzoner Larry Burns’ order on the subpoenas that weren’t and I now realize that I dodged a bullet.

It turns out that Burns never considered the First Amendment arguments made by The Associated Press and NBC’s Lisa Myers.

He didn’t need to because the jury that convicted Brent Wilkes of supplying Randy “Duke” Cunningham with hookers and cash wasn’t influenced by grand jury leaks. And Burns couldn’t go Matlock on us and investigate the leaks himself. That was the Justice Department’s job, “slipshod” as the judge felt it was.

Good thing too because Burns give a sneak peek at how he might have ruled by citing the case of two San Francisco Chronicle reporters who were leaked grand jury testimony of Barry Bonds and other elite athletes.

The court notes, however, that the very same arguments were recently considered by the United States District Court for Northern California and rejected (emphasis added)

Yikes! I could have wound up in jail!

Good thing I never wrote about how Burns was rushing the Wilkes case along at breakneck speed to avoid postponing an upcoming border bust trial. And I guess it was a good idea to avoid examining the whispers of Burns as “a prosecutor in a robe.”

Ohmigod! I did not just say that! I take that back. Judge Burns is a most wise and benevolent jurist, a very fair judge, and a very nice man.

O yes my precious, very nice.

I called Hizzoner Larry Burns’ chambers to learn what happened in the case of the subpoena that wasn’t.

Attorneys for convicted Cunningham briber Brent Wilkes, were chomping at the bit to serve me with my subpoena. Burns had been leaning toward issuing the subpoenas, and, on Friday, Burns told Wilkes’ attorneys to go ahead and serve them.

Only problem with this was Burns was still mulling over the request for subpoenas.

On Monday, when the judge finished his research and issued his order denying the request for subpoenas that had been issued, Burns had a change of heart. There would be no subpoenas. Oops!

So I’m left with a worthless piece of paper, a nice souvenir I’m going to hang on the wall.

Justice isn’t only blind, it’s confusing and silly. Today, Hizzoner Larry Burns decided not to issue the subpoena I received two days ago. I already told you I had no idea what was going on. Now I have gone beyond confusion into a new, uncharted state of unknowingness. It’s a Zen thing.

Turns out that the judge did sign the subpoenas late last night, and a nice guy who works as an investigator with the Federal Defenders just knocked on my door and handed me this subpoena.

I don’t know what’s going on anymore. There was some miscommunication yesterday and I was led to believe that the subpoenas were being issued yesterday.

That turned out to be wrong.

As of 3 p.m. Friday, Wilkes’ defense attorney, Shereen Charlick, still didn’t have the subpoenas in hand (and she wasn’t happy about it either). Judge Larry Burns still hadn’t signed off on them, although Charlick has been led to believe he will.

Maybe he signed them in the waning hours of Friday afternoon. If he didn’t, we’re all scrambling to meet a Monday deadline for motions explaining why we shouldn’t have to answer to a hypothetical subpoena that hasn’t been issued.

I’m new to all this. Is this how things usually go?

Word is that Judge Burns has now gone ahead and signed off on the subpoenas. Wilkes’ court-appointed lawyer, Shereen Charlick, has them in hand and is going to start faxing them out right quick.

No subpoenas have been issued yet, but the AP isn’t waiting. The news agency has already filed a motion to supress them.

But as Michael Corleone said: “they keep pulling me…BACK…IN!”

So defense attorney Mark Geragos wants Judge Larry Burns to subpoena me to testify at a December 11th hearing about the sources for my book, Feasting on the Spoils.

Here’s what the subpoena would look like (Click for larger image):

Here’s his explanation for why:

Seth Hettena is a journalist, who authored “Feasting on the Spoils: The Life and Times of Randy Cunningham, History’s Most Corrupt Congressman.” Mr. Hettena called defense counsel and inquired regarding the investigation into Mr. Wilkes and his alleged role in wrongdoing with former Congressman Cunningham. Mr. Hettena claimed to have a draft(s) indictment prior to its issuance and revealed portions of the proposed charges to defense counsel. Mr. Hettena had to have received the draft(s) of or any substance of a proposed indictment(s) from someone on the prosecution team.

Just finished up an excellent interview on The Monitor on KPFT, a Pacifica station in Houston, Texas. Check it out here.

Brent Wilkes’ testimony yesterday wasn’t all about Duke. He also spent a bit of time talking about his dealings with other members of Congress.

In Washington, Wilkes said, you’re always better off if you have consensus. If you want something done in Congress, you need to go out and build support. Members of the Appropriations Committee, like Cunningham, were key for earmarks, but they had hundreds of colleagues. “They listen to them,” Wilkes said.

Between 1992-2005, Wilkes said he received probably in excess of 1,000 letters from members of Congress. “We never tried to keep what we were doing on Capitol Hill a secret from anybody,” he said.

On the witness stand, Wilkes identified letters written on his behalf by Ron Dellums, John McCain and Lynn Schenk, a former San Diego representative. Other documents introduced by prosecutors show he flew Majority Leader Tom DeLay and Speaker Denny Hastert on his private plane.

One member in particular with whom Wilkes dealt often was Congressman Jerry Lewis. Like Cunningham, Lewis a member of the powerful Appropriations Committee. Lewis chaired the Defense Appropriations subcommittee from 1999-2005.

Wilkes said he was introduced to Lewis in the early 1990s by former Rep. Bill Lowery, who showed him how Washington works. Wilkes was then trying to sell software to the military. “He explained to me that the way to meet the demand I had determined there was … was to get an earmark,” Wilkes testified.

Lowery helped him set up a series of meetings with appropriators at the Hyatt Hotel — Wilkes rattled their names off on the witness stand — that resulted in a $14 million earmark. (Wilkes neglected to mention that Lowery’s way often involved the blurring of lines; Wilkes, Lowery, and Lewis all went scuba-diving in Belize in 1993.)

When he was having trouble getting paid for his work in Panama in 1999, Wilkes contacted Lewis’ staffer Jeff Shockey, who dashed off a letter. And a $25 million earmark for a program Wilkes’ company handled was funded in full, Wilkes said, because “the chairman” — Lewis — was a big believer in the program and had been supporting it for years.

I’ve been busy with freelance assignments of late, but a Q&A I did with Freakonomics, the bestselling economics book by Stephen Dubner and Steven Levitt, is posted online today at the website of The New York Times, which bought the blog last month. I highly recommend the book, as it is a novel way of looking discovering hidden relationships through economics (it’s the reason why the old swimming pool at my house is buried under a few tons of dirt). The online discussion takes a look at Congress through the framework of corruption, along some of the interesting history of congressional graft.

I’ll be appearing this weekend on CSPAN’s Book TV. My taped appearance at Borders in San Diego last month will air at 7 p.m. PST on Saturday, September 8th. It was a pretty interesting reading. Two of Cunningham’s former commanding officers at Top Gun showed up and one them had quite a bit to say. I even had a heckler!

The Congress has thankfully cut off funding for the DP-2, a plane that never flew and cost taxpayers $63 million.

The DP-2 program was a bad idea that refused to go away. It has been funded for nearly 20 years exclusively by earmarks from congressman and presidential aspirant Duncan Hunter. DuPont Aerospace, the company that developed the plane, was based in El Cajon, California in the heart of Hunter’s district.

It was only a matter of time before someone got killed trying to fly this thing. The DP-2 suffered four mishaps in the past four years. In November 2004, a test pilot struck the ceiling of the cockpit as the cabin floor cracked and the aircraft filled with hot exhaust. He exited through the cabin window because the door had been jammed shut.

Tony DuPont dreamed up the concept of a jet that could hover and fly backwards in the 1960s. In the 1980s, he convinced Hunter that the DP-2 could ferry small teams of special operations forces in and out of remote war zones.

Government officials rejected the concept, but Hunter insisted on seeing it through. Report after report came out detailing the deep misgivings that unbiased government engineers had with the project. And year after year, Hunter continued earmarking money for the DP-2. He requested another $6 million this year.

Finally, in June, the House Committee on Science and Technology convened an unusual hearing to find out what the government was getting for its money. The hearing got little attention in the press, but here are some highlights:

John Eney, a Navy aerospace engineer, recalled how disturbed he was during a 1999 visit to duPont’s test platform at a small commercial airport in El Cajon, California:

“That platform was permanently located on the public airport property, less than 30 feet from the chain-link fence on the boundary between the airport property and a public thoroughfare including sidewalks, office and automobile parking in the city of El Cajon. The risk to off-airport property and pedestrian traffic was immense and of little apparent concern to duPont Aerospace.”

Also disturbing to Eney were duPont’s plans to use an ejection seat commandeered by “suspect means” from an F-14:

“That ‘free gift’ F-14 ejection seat was simply plopped into the DP-2 cockpit area with over a foot or more of the seat head box protruding well above the top of the enclosed cabin structure. This was unexplained by duPont management when challenged.”

Several witnesses said that while the DP-2 might be a good idea worth exploring, duPont Aerospace was not the company to do it. Tony duPont is the company’s president, his brother, Rex, is vice president and his wife, Carol, is director of administration. Tony did not like hearing he was wrong, as a former duPont engineer testified:

“The general rule of thumb was, Tony gets his way.”

Whatever merits the DP-2 concept had were doomed by mismanagement, poor morale, bad engineering judgments. DuPont even billed the government $1,700 for polo shirts with the company’s logo, $2,000 for an annual picnic and $3,000 for a family vacation on a cruise ship.

Duncan Hunter appeared blind to the problem:

Although the Pentagon may not have a firm requirement for something and may not have requested funds for it, my job is to listen to our warfighters, to set a vision, and to help the warfighter get the best tools possible to do his or her job. I am willing to take some risks to get there.

If that really was Hunter’s motivation, if the DP-2 was indeed critically important to our armed forces, he should have been the first to recognize that Tony duPont was not the man for the job. He should have worked to ensure that the plane was built by a company with the wherewithal to get the job done.

Sadly, Hunter’s motive seems to have been to help out a friend and keep jobs in his district, and that does not augur well of the leadership abilities of a man who is seeking your vote for president.

Following up on yesterday’s post, I decided to look at anonymous postings from the U.S. Senate on Wikipedia. Here’s what senators and/or their staff have contributed to the general body of Internet knowledge:

• Things You Didn’t Know About Sen. Robert Byrd, D-WVa.: “Robert is 180 years old.”
• Things You Didn’t Know About Sen. Ken Salazar, D-Colo.: “Salazar has also earned the nickname ‘Shifty Eyes’ Salazar due to his constant and rapid screening of the Senate chamber.”
• Things You Didn’t Know About Cow Tipping: “In Arkansas, however, anything is possible. DUDE you GOTTA tip em with a pickup truck. Yeeeeaaahhhh…city boy.”
• Things You Didn’t Want to Know About a Dirty Sanchez: “When performed as a masturbatory act, the practice is also refered to as a ‘Bauer‘ – and involves the participant smearing their own feces under their nose.” (Note: this computer was later used to edit out an unflattering reference from former Senate Majority Leader Bill Frist’s page)
• Things You Didn’t Know about Zak Baig: “Zak, also known as Zackaroo, currently works for U.S. Senator David Vitter as his projects director.”
• More Things You Didn’t Know About Zak Baig: “Zak is Kyle Ruckert‘s hero. Kyle wishes he could be more like Zak.” (Ruckert is Vitter’s chief of staff)
• Still More Things You Didn’t Know About Zak Baig: “Zak‘s arch enemy is Kyle Ruckert. This is attributable to the fact that Kyle is better than Zak at everything, including fantasy football, life, and spelling (ref: ‘arch enemey’ used as 2 words).”

I’ve been having some fun with Wiki Scanner, a Web-based program that allows you to uncover anonymous posters on the online encyclopedia, Wikipedia. Wiki Scanner is the brainchild of Virgil Griffith, a grad student with a devilishly clever imagination.

Turns out that some of these anonymous postings — 3,733 of them — came from users logged on to computers at the U.S. House of Representatives. All the posts come from a single IP address, but it’s apparently used by many people.

Here’s what the people of the House has been up to (see here for yourself):

• Score Settling. Edited Rep. Eric Cantor’s entry to read: “He is a bad person and member of the House Ways and Means Committee” and “Cantor is also Chief Deputy Majority Whip and smells of cow dung.”
• Trivia about Masturbation. “According to one biography, Allen Ginsberg came up with the idea for his celebrated poem “Howl” while masturbating with a broom.”
• Expressing opinions about monster-themed cereals: “It [Boo Berry] is by far the most delicious of all the monster themed cereals.”
• Posting at least six entries to the Wikipedia entry on Dimples
• Calling a whole long list of people gay.
• Vandalizing the entry for basketball player Ray Jackson: “JOHN SANTORE: SUCKS?”
• Giving a shout out to a friend who shares the name of a dead British poet: “Thomas Dermody is an awesome intern who was born in Stockton, CA. He went to school at Cal Berkeley. He is now going to GWU to earn his masters degree in environmental policy planning. If you don’t know him yet, you’re missing out.”
• Oh, and removing unflattering references from a long list of Republican members of Congress.

So far, only Timothy Hill, a spokesman for Rep. David Davis of Tennessee, has admitted editing entries about his boss and his brother, who’s also a congressman. So who’s the Boo Berry lover?

I’ll be live on the KPBS-FM show “These Days” with host Tom Fudge on Tuesday, August 21 from 9 a.m. to 9:30 a.m. PDT talking about my book and the proceedings in the Brent Wilkes case that I’ve been blogging about. You can listen in via the Internet on the station’s Website.

The frozen, northernmost reaches of the United States are home to the Inupiat people, more commonly known as Ekimos. They subsist on fishing and the hunting of seals, walrus and whales. They also run a successful defense contracting firm providing services to the U.S. intelligence community. To that, they owe a debt to Sen. Ted Stevens of Alaska.

TKC Communications LLC of Anchorage, Alaska, does work for the Department of Justice, the FBI’s Terrorist Screening Center, the Foreign Terrorist Tracking Center, the Counterintelligence Field Activity, and the National Security Agency, according to its Website. The company also contracts with all four branches of the military, including for work in Iraq, as well as the Department of Homeland Security and the Department of State (which is sometimes a wink-wink way of saying the CIA).

TKC Communications is one of more than 150 Alaskan native-owned companies doing government work. Others include Alutiiq Management Services LLC which is renovating State Department offices in Sao Paulo, Brazil. Ahtna Technical Services Inc. is hiring cooks for a federal jail in Texas.

Government contractors like these companies because they are a quick, easy and legal method of awarding contracts of any value, and in 2004, the Alaskan native companies received more than $1 billion worth of government work, according to a Government Accountability Office report. Profits from these ventures are returned in the form of shares to the Inupiat.

Their special status allows them to receive contracts without any competition, so-called “sole source” contracts. There have been numerous problems with some of these sole-source contracts, which is how I came across this subject. TKC Communications’ $100 million, 10-year contract to provide office space for CIFA in Arlington, Va., not only cost too much but also may have violated the law. But that’s more the fault of the boobs at CIFA, who when told the contracts might violate the law, refused to halt them.

The Alaskan Native Claims Settlement Act of 1971 created the Alaskan native companies as a way of settling the Inupiat’s aboriginal land claims. The act divided nearly $1 billion and 44 million acres amongst Alaskan native peoples, and allowed construction of the Alaskan pipeline. The bill was introduced by Ted Stevens, then in his first term, and was subsequently ratified by the Inupiat. Stevens, now one of the Senate’s old bulls, had his home searched earlier this week in a widening criminal bribery probe.

In 2003, shortly before his 80th birthday, Stevens told a gathering of Alaskan natives:

“I have long been concerned about what will happen when I can no longer deliver the funds you need. I want to ensure, to the best of my ability, that we have built programs for the Native community that are sustainable well into the future. I have been working toward that end. “

That’s a worthy goal. Stevens may or may not be corrupt. He may be out-of-touch likening the Internet to “a series of tubes.” But he deserves our praise for giving the Inupiat a seat at the rich government contracting feast. There is no way that a group of walrus-hunters could have gotten there without help from the man who represents them. Compare that to Duke Cunningham, who gave favors away to people like Mitch Wade who couldn’t even vote for him.

Instead of ruining their Native lands by plopping a casino-resort in the middle of it (casinos aren’t allowed in Alaska), the Inupiat are creating a business venture and acquiring the skills that come with to the benefit of future generations. There’s the old saw about teaching a man to fish vs. giving him one. I suspect the Inupiat know all about that.

To the CIFA trough, comes John Murtha. The Hill reports that the chairman of the supremely powerful Defense Appropriations Subcommittee, is continuing in the proud tradition of his former colleague, Randy “Duke” Cunningham.

A decorated Marine colonel, the first Vietnam veteran elected to Congress, Murtha is one of the House’s great porkers. He passed on a $50,000 bribe during the FBI’s undercover ABSCAM investigation, but signaled that he might warm to the offer somewhere down the road.

Earmark foe Rep. Jeff Flake, R-Ariz., calls our attention to a murky, $3 million earmark Murtha is shepherding through the 2008 intelligence funding bill. It’s for something called “Joint Intelligence Training & Education with Advanced Distributed Learning Technologies Phase II.”

A Murtha flak described the JITEADLTP2 as a continuation of “efforts to enhance the training capabilities of the Joint Counterintelligence Training Academy (JCITA). With the massive hiring over the past few years within U.S. intelligence agencies, this program will provide advanced training for military and civilian personnel on human intelligence practices (in effect getting years of experience in a year of training).”

Fifty-one words; nothing said.

The Joint Counterintelligence Training Academy is off Route 100 in Elkridge, Maryland. Since October 1999, it has offered introductory and advanced training to civilian spooks and military intelligence personnel in classes like Counterintelligence Fundamentals, Research and Technology Protection and Joint Terrorism Task Force Seminar. People who attend generally have good things to say.

JCITA is an arm of CIFA. You’ll recall that CIFA is a new intelligence agency that Cunningham attatched himself to, ramora-like, to suck out appropriations for a defense contractor who was bribing him with a mansion, boats, antiques, etc.

Enter Murtha. The real beneficiary of his earmark isn’t JCITA of course, but a favorite defense contractor in his district, the Concurrent Technology Corporation (CTC) in Johnstown, Pennsylvania. Murtha created CTC in 1987 with the help of earmarks years ago, and the company and its employees are among biggest campaign contributors.

CTC was the recipient of the $1 million “mystery” earmark for the Center for Instrumented Critical Infrastructure, which may or may not even exist.

Murtha’s JCITA earmark involves “advanced distributed learning,” which is DoD gibberish for learning over the Internet. So the congressman is earmarking $3 million to teach counterintelligence classes over a network.

We could all have a good laugh if this were $550,000 to the Skirball Cultural Center in LA for development and construction of Noah’s Ark, but look at what’s going on here: Murtha’s friend is getting a contract to teach our spies how to detect enemy spies and terrorists over the Internet. Putting earmarks in the intelligence bill isn’t just wasteful. It’s dangerous.

I’ll be appearing today (Monday) on the Dan Gresham Show on 1340 AM radio station KOLE in southeast Texas.

On Tuesday, I’m speaking at Borders in San Diego’s Mission Valley at 7 p.m. The event is being filmed for future broadcast on C-SPAN.

Hi! I’m guest blogging today at Voice of San Diego, an Internet newspaper that is doing some terrific work and winning all kinds of awards. You can follow the discussion at Cafe San Diego.