Saturday, December 31, 2016

Natural Weekends - Happy New Year!!

Natural Weekends - Cloudy End To A Dark Year

Oligopoly Control Of Food Production And Retailing Keep Prices Higher Than They Should Be

Leonard Lopate on WNYC had a interesting segment this week on what are called "slotting fees". I had never heard the term before but it refers to the fee a food maker would pay to get their product into a store, especially the large supermarket chains. For these large chains, food makers may pay anywhere from $50,000 to $75,000 just to get their product into about 500 stores for just a few weeks. And, once you have established your product in a store via the slotting fee, you will also pay a "placement" fee that allows you to stay on the shelves. These placements fees  are normally paid via free or discounted products rather than cash. So that 2-for-1 sale you may see in the aisle of your supermarket is quite possibly the result of the "placement" fee that the producer was required to pay the grocery chain. In addition, there are premiums for prominent placements in the grocery store such as the "end caps" (the displays at the end of each aisle) and the "waterfront property" surrounding each checkout aisle. Product placement near the checkout aisle can cost the producer anywhere from $3 to $5 PER INCH for each checkout area.

Now, some might call this bribery or at least a pay-to-play system, not much different from the payola scandal surrounding the music industry in the 1950s and 1960s. Back then, none of these fees existed in the grocery business. The practice began in the 1970s as a way for these large supermarket chains to make sure that the food producer had enough capital to actually be a reliable supplier as well as to help defray the grocery's marketing costs. Of course, with deregulation in the 1980s, the system really began to take off.

Initially, the large producers objected to these fees but soon learned to embrace them as they realized they provided a high barrier for smaller competition to enter their market. In addition, to the high cost of entry into the large grocery chains, smaller producers face another huge obstacle even after they have paid their placement fee to get on the shelf. An incredible system known as "category captains" allows the largest producer in a particular food category to lay out the display case for that product for all the other producers. An example given by one of the guests on Lopate's show was a small ice cream producer who had paid his placement fee but discovered that his product was always found behind the hinge in the ice cream display.

The whole system of slotting fees, placement fees, and category captains are now just vehicles for the larger producers to make it incredibly hard for any smaller competitor to enter the market. And, although you may go to a supermarket and think to yourself that there are so many choices, the reality is that most of the brands in any particular food group are owned by a small handful of companies. These oligopolies control so many of the products you see on your supermarket shelf. The condiment section where you buy mustard, ketchup, and mayo is dominated by Hunts and Heinz. General Mills, Post, Quaker, and Kellogg own around 85% of the cereal market. In the ice cream cabinet, Unilever and Nestle own 12 out of the top 15 brands.

The control of a huge market segment by just a handful of companies has been shown to actually increase prices as the firms really have no incentive to compete with other. It encourages price-fixing within the oligopoly in order to prevent a price war, simply because it is easier to get three or four companies to agree to price fix than getting one hundred to do so. In addition, their huge economies of scale allow them to temporarily reduce prices to drive a smaller, upstart competitor out of business, and then restore prices to their original level. In the food producing business, these additional slotting and placement fees as well as the category captains process make it even more difficult for smaller producers to actually compete.

In the late 1990s and early 2000s, the Senate looked into these fees and ordered the FTC to investigate. It created a bizarre scenario where some producers had to testify behind a screen and with disguised voices because of the fear of retaliation not only from the supermarket chains but possibly also from the market leaders in their food sectors. Needless to say, the FTC decided that the issue needed further study, probably under pressure from both the large supermarket chains and food producers, and nothing came of the investigation. Please listen to Lopate's whole segment on this system is it is a fascinating look into what is essentially bribery that drives much of American capitalism today.

As far as consumers are concerned, these cost of these fees to producers are probably passed along in the price of the product. So, not only are consumers getting shafted by higher prices because of oligopoly control they are also paying more to cover these slotting and placement fees. However, the supermarkets argue that they would have to raise the price of these goods if they were not collecting these fees. That may well be true as these supermarkets run on unusually small margins, usually only around 1% or 2%. That is why there are so few markets in low-income and low-density markets. On the other hand, it is not like these supermarket chains are going broke either. The US supermarket business is itself an oligopoly, largely controlled by five large chains - Albertsons, Ahold-Delaize, Kroger, SuperValu, and Publix. Together, under a variety of brand names, these companies control nearly 12,000 stores across the country. All of them, with the exception of Albertsons, make annual profits in the hundreds of millions. The reason that Albertsons is an outlier is that they are carrying nearly $12 billion in debt due to an ill-fated buying spree in the mid-2000s and the $9.4 billion purchase of Safeway in 2014. The interest costs alone on that debt exceed $200 million per year.

While it therefore might be debatable that supermarkets would need to raise prices without these fees, it is certainly without doubt that the system in place right now is perfectly designed to keep small producers out of the game. That lack of competition alone contributes more to higher prices than these slotting and placement fees. And the consumer pays for those higher prices. The oligopolies win and we lose. That pretty much sums up American capitalism in the early 21st century.

Friday, December 30, 2016

Uber Drivers Try Unique Lawsuit Challenging Their Contractor Status

Reader CDW passes along another challenge to Uber's assertion that its drivers are just contractors. A federal judge in eastern Pennsylvania is hearing a case where Uber drivers are claiming that they should be on the clock when they are logged into the Uber app, waiting for a ride. In addition, they are claiming this should entitle them to minimum wage and overtime pay. The judge has dismissed Uber's motion to dismiss the case. The core of the case revolves around the fact that the contractor has the direction and control over how and when his services are performed. The Uber drivers are saying that certain requirements that Uber demands of its drivers make that flexibility impossible and that they should therefore not be considered contractors. Among some of the requirements the drivers listed were a specific dress code when logged into the app, suspension or termination for refusing a ride, and certain vehicle requirements. A lawyer familiar with independent contractor law said that this case is breaking new ground and is "likely to motivate other lawsuits against Uber and against other on-demand services".

Now a skeptical guy like myself might note that this case is being heard in eastern Pennsylvania and would also note that Pittsburgh is one of two cities where Uber is testing its self-driving vehicles. The other city was San Francisco where Uber was testing the cars illegally and, after ignoring the DMV order to shut the test down, finally had the permits for their cars revoked. One might wonder whether the testing of autonomous vehicles in Pittsburgh was a warning shot across the bow to the drivers bringing this case, essentially reminding them to be happy with what they have now because Uber may not need them at all in the future.

Trump Misleads About Same 5,000 Jobs But It's A Lesson Democrats Should Learn

Donald Trump announced on Wednesday that Sprint would be creating 5,000 new jobs and he, of course, took credit for that. Said Trump, "I was just called by the head people at Sprint, and they are going to be bringing 5,000 jobs back to the United States. They have taken them from other countries. They are bringing them back to the United States." As usual with all things Trump, this was just another fiction.  As Kevin Drum points out, this is the fourth time that these same 5,000 new jobs have been announced and Trump has taken credit for them the last two times. Sprint originally announced these jobs all the way back in April. Then the jobs were announced again in October when Softbank created a large investment fund. Then, in November, Softbank CEO Masayoshi Son met with Trump at Trump Tower and announced the investment fund would create 50,000 new jobs in the US. These 5,000 jobs are part of that 50,000. And then on Wednesday Trump supposedly received a call from Softbank again simply to remind him about those same 5,000 jobs.

Of course, the real reason behind all this PR is that Softbank owns Sprint and wants to merge Sprint with T-Mobile. That merger was previously and correctly rejected on antitrust grounds. The telecom industry is already a pretty tight oligopoly with ATT, Verizon, Sprint, and T-Mobile and this merger would basically reduce the dominant firms to just three. This kind of oligopoly presents huge barriers to entry, less competition among the dominant firms, higher prices for consumers, and reduced productivity.

Now the fact that Trump is misleading us once again is something that most of us who live in the real world have come to expect. But these kind of announcements are politically shrewd. Most Americans do not follow the news out of Washington very closely and this kind of announcement will sound to them like Trump is creating even more jobs. And it is this relentless pounding away on message that has helped make the Republican party successful. It is also something that Democrats seem incapable of doing well. Obama and the Democrats should have been talking about how they saved the auto industry over Republican objections at least once every week since 2009. Because it is only through that kind of relentless messaging that Democrats can break through the noise of people's everyday life and the Republican/Fox/Drudge echo chamber. And with Republicans in total control, Democrats, now more than ever, need to learn how to become a real opposition party and relentlessly stay on message.

Thursday, December 29, 2016

Obama Hits Russia With Sanctions Over Hacking; NOW Comey Is On Board

President Obama leveled some serious sanctions on Russia today, expelling 35 Russian nationals and sanctioning Russian individuals and entities associated with the hacking of the 2016 election. In addition, the Department of Homeland Security (DHS) and the FBI released a report that detailed some of the hacking activities. That report focuses on two intrusions, one in the summer of 2015 and another in the spring of 2016.

It is interesting to note that the FBI is joint author of this report and it certainly implies that the agency was aware of these hacking activities months ago, certainly before the election. Which makes a skeptical guy like myself wonder why the FBI refused to sign on to the joint statement by the DHS and the Office of the Director of National Intelligence put out on October 7th that clearly stated that Russian was hacking the election. Apparently the reason the FBI refused to sign on was because James Comey felt an announcement like that would be interfering in the election. It's enough to make you want to puke. Now, after Comey has gotten Trump elected, he is allowing the agency to finally admit what it always knew about the Russian hacking.

Needless to say, Republicans continue to pretend that the hacking was not directed by Russia, or that it was perfectly OK even if Russia did it. Paul Ryan basically blamed it all on Obama's "ineffective foreign policy that has left America weaker in the eyes of the world". Republican Trent Franks of Arizona took it one step farther, saying, "There’s no suggestion that Russia hacked into our voting systems or anything like that. If Russia succeeded in giving the American people information that was accurate, then they merely did what the media should’ve done." Perhaps Franks doesn't realize that much of the hacked material released was misleading and that the hacking also involved a huge propaganda effort of fake news. He probably does but doesn't care. Meanwhile Trump simply believes that computers are too complex so we should just move on. Trump said, "We ought to get on with our lives. I think that computers have complicated lives very greatly. The whole age of [the] computer has made it where nobody knows exactly what’s going on." That's the kind of insightful analysis we expect from a "real" President.

I am all for a complete investigation of the Russian hacking. But James Comey's (lack of) responsibility in this election continues to be almost totally ignored. It is well past time for him to account for his actions.

Dems Will Miss Harry Reid; Schumer Is Poor Substitute

I've said it before and I'll say it again, I am really going to miss Harry Reid. He was a street fighter who was not afraid to get his hands dirty and fight the Republicans on their level. And that is what it will take to fend off the onslaught that Trump/Pence and the Republicans have planned for the next four years. It sure doesn't look like there is any Democrat in the Senate who is capable of filling his shoes. Kevin Drum points us to a story by Jason Zengerle at NY Magazine that is a nice profile of Reid and how his successor, Chuck Schumer, looks to be a poor substitute.

One of the most telling moments was when Reid went on the Senate floor in 2012 and accused Mitt Romney of not paying any taxes. Romney, like Trump, was trying to get through the elections campaign without releasing his taxes. The tactic forced Romney to release his taxes which showed that Reid was not correct but also showed that Romney's effective tax rate was just over 14%. According to Reid, "I tried to get everybody to do that. I didn’t want to do that. I didn’t have anything against him personally. He’s a fellow Mormon, nice guy. I went to everybody. But no one would do it. So I did it." It is a sad state of affairs that no Democratic Senator was willing to do what Reid did. And, As Kevin Drum points out, the story also vividly illustrates the so-called "hack gap". There would have been multiple Republican elected officials and press outlets that would have picked up this story and pounded away at it 24/7 for weeks. As Drum says, "Sean Hannity would have practically paid for the privilege. Rush Limbaugh would have happily spent an entire show on it. The Wall Street Journal edit page would have been all over it. Newt Gingrich would have pitched in. At least 20 or 30 members of the House would have been happy to do it. I bet Jim Inhofe would have given a speech in the well of the Senate in a heartbeat. Half a dozen Super PACs would have rushed to buy air time. But among liberals, zilch. No one would do something like this." And, of course, because so few Democrats were willing to stand up in 2012, Trump probably felt even more emboldened in his stance to not release his taxes this year. And now that the precedent has been set, the incentives and the chances of future candidates releasing there taxes are just not there. Of course, Trump and the Republicans are responsible for destroying this norm, but Democrats certainly bear a small part of the blame for not fighting Trump hard enough on the issue. Yes, even Hillary pointed out that Trump probably did not pay any taxes. But I never heard any Democrat go on record as saying that Trump refuses to release his taxes because it would show massive tax evasion. I can guarantee Republicans would have gone there if the situation was reversed.

Zengerle's article also highlights just how weak Reid's fellow Senate Democrats are. Schumer's initial moves are particularly disturbing. His embrace of Trump's campaign pledge on infrastructure may put Democrats in a real bind when the plan the administration actually puts forward turns out to basically be a privatization scheme under the guise of infrastructure spending. Despite the fact the Congressional GOP leadership seems opposed to any infrastructure spending, they will probably be slightly more interested in moving forward if it puts big money in the pockets of their corporate donors. Schumer has commented that, "We think it [the infrastructure package] should be large. He’s mentioned a trillion dollars. I told him [Trump] that sounded good to me." Those words may come back to haunt him and the Democrats.

On a broader level, Zengerle's piece also points out how Schumer is always playing it safe, a strategy that will be death for Democrats in this environment. According to one Senate aide, "Chuck will go to the ramparts on an issue when it’s polling at 60 percent, but as soon as it gets hairy, he’s gone. Chuck wants issues to have no negatives, but it’s the Trump era. He’s looking at polls ­showing 60 percent for the Carrier deal and thinking to himself, 'Maybe we should support that'."  Democrats are in serious trouble if this is the thinking of the minority leader. Rather than trying to signal the issues on which he can "work" with Trump, Schumer and the Democrats need to be laying down the markers for the upcoming onslaught on Obamacare, Medicare, and even Social Security. Right now, every Democrat should be making the case that repealing Obamacare will result not only in the loss of health insurance, but an increase in medical bankruptcies, and hundreds if not thousands of unnecessary deaths. Every Democrat should be talking about how every American pays into Medicare while they are working to receive their entitled benefits when they retire. To privatize Medicare is to steal from those "savings" that people have worked their whole life to put away for their health in old age. That privatizing Medicare will result in more poverty for the elderly and more unnecessary deaths. If those Senators in red states who are up for re-election in 2018 think that they can win by being Republican-lite, they are sadly mistaken. And, as Reid showed in Nevada, if you really want to succeed as a Democratic Senator, you need to make sure you help build a strong state party on the ground. That is surely another lesson for Democrats. If anything, the most recent election has shown that you only win when you fight hard, pound away at your message, and fight dirty when necessary. And it has also shown that total obstruction works against the party that holds the Presidency. Anything less will allow Trump and the Republicans to tout their bipartisan success.

Zengerle's article shows just how few Democrats are willing to play the dirty game of politics. From Obama on down to Patty Murray, Democrats always relied on Reid to do the dirty work for them. And he did. Harry Reid took up the fight against Social Security privatization back in 2005 and united Democrats in that battle, a battle that they won. That should be a lesson to Chuck Schumer. We need another Harry Reid more than ever. I will miss him. And so will Democrats.

New York City Should Not Be Footing Bill To Protect Trump

Earlier this week, Trump Tower had to be evacuated because of a suspicious package. In the end, it turned out that the package contained children's toys and was not a threat. That would normally been the end of it all, but Mayor Bill de Blasio's press secretary took the opportunity to make a point about the cost that New York City was bearing to protect Trump and his family, asking Trump to help defray the cost of the operation. Now, I am totally opposed to asking citizens to pay extra for the police protection they are already entitled to, but I certainly do understand the de Blasio administration's frustration with the current set up to protect Trump and his family. The de Blasio administration had asked for $35 million from the federal government in order to offset the cost of protecting Trump Tower. In a classic middle finger to a blue state that provides more tax dollars to the feds than it receives, Congress allocated just $7 million. Even if you believe that de Blasio overstated the cost by 100%, the $7 million is still woefully short of the actual cost of protection. But rather than trying to twist Trump's arm to make up the difference, why doesn't be Blasio simply pull back to a normal police presence once the $7 million has been spent. Protecting the President-elect is surely a federal responsibility and it seems unreasonable that New York City should be footing the bill for the job. I'm pretty sure that if de Blasio really called their bluff and pulled back, the federal government would find some emergency money to cover protecting Trump pretty darn fast. This may be the one case where the GOP's strategy of pushing costs back down to state and local governments could actually be confronted and overcome.

Wednesday, December 28, 2016

General Flynn And Hillary's Emails - Compare And Contrast

I'm glad the mainstream media could spill so much ink obsessing about Clinton's emails and the potential leak of classified information, despite no evidence ever being presented that national security was compromised in any way. It stands in stark contrast to the minimal amount of press that Trump's National Security Adviser, General Michael Flynn, who has admitted sharing classified information with the British and Australians, has received. It has now been revealed that he was also investigated for sharing classified information with the Afghanis back in 2010. I think the general assumption that anything shared with the Afghanis and the Karzai government back then would eventually get back to the Taliban and al-Qaeda. According to the Washington Post article, "Although Flynn lacked authorization to share the classified material, he was not disciplined or reprimanded after the investigation concluded that he did not act 'knowingly' and that 'there was no actual or potential damage to national security as a result." This is in direct contradiction to Flynn's earlier assertions about this investigation when he said he had shared information with the British and Australians in Afghanistan. Flynn said, "I did it with the right permissions when you dig into that investigation. I’m proud of that one. Accuse me of sharing intelligence in combat with our closest allies, please." Some of the information that Flynn apparently shared with the Afghanis contained classified information about CIA activities in Afghanistan, something that clearly may have put CIA assets in serious danger.

Shockingly, this wasn't the first time that Flynn had been accused of the unauthorized sharing national security secrets with a foreign power. Just the year before, in 2009, Flynn had disclosed sensitive information about US intelligence on a Pakistani group that was believed to be attacking US forces in Afghanistan. Again, secrets shared with the Pakistani government had a way of ending up in the hands of Al-Qaeda and other terrorist groups supported by the Pakistani intelligence service, Inter-Services Intelligence (ISI).

Interestingly, James Clapper was the man who reprimanded Flynn over the 2009 incident in Pakistan. Clapper later recommended Flynn for the Director of National Intelligence but then forced Flynn out of that position in 2014 over concerns about Flynn's abusive management style. More interestingly, General James Mattis was responsible for the investigation of Flynn's leaks in Afghanistan in 2010. Mattis is Trump's nominee to become Secretary of Defense. Amazingly, Flynn managed to share sensitive national security secrets with multiple countries over the span of just two years without authorization. In addition, he was essentially fired from his last management position. Yet he was merely reprimanded, protected by his fellow generals, and allowed to fail up to his new position of National Security Adviser.

You may be thinking that the media will highlight this story with multiple front page articles a la Clinton's emails when Flynn comes up for Senate confirmation. And you would be wrong. Not only because the media wouldn't bother to do that but, more importantly, because the position of National Security Adviser does not require Senate approval.

During the campaign, Flynn said this, "If I, a guy who knows this business, if I did a tenth, a tenth of what she [Clinton] did, I would be in jail today." Flynn assuredly did well more than ten times the damage Clinton was accused of but never did. And rather than being in jail, he is the chief national security officer in the Trump administration.

Heads I Win, Tails You Lose - Rules Of The Kleptocracy

It's always a god idea to keep your eye on the news that comes out on a Friday before a holiday weekend because that is everyone's favorite time to release some "inconvenient" news. Last Friday's NY Times Business section has a nice foursome of stories about the wonderful ways of Wall Street.

Let's start off with Deutsche Bank (DB) which announced that they were going to settle their dispute over toxic mortgages with the Department of Justice (DOJ) for a mere $7.2 billion. The case involved the bank's misrepresentations about the quality of mortgages it sold before the financial crisis. The statement from DB pointed out that the settlement has not yet been approved by DOJ, so it is not final. Earlier stories had suggested the DOJ was looking to settle for over $14 billion, a total that was equivalent to the bank's current market value and that some believed may have forced the bank to be bailed out by the German government. The fact that DB was willing to settle for just half that amount will not make investors any less nervous about the precarious state of this major bank, although its shares have risen after the election of Donald Trump. It is rumored that DB is the only Wall Street bank that would continue to do business with Trump - (that may change now that he will be President) - and that he was into the bank for over $300 million. That loan is backed by Trump's person guarantee (whatever that is worth), but the bank is looking to restructure the loan and drop that guarantee. Now a skeptical person like myself may look at this statement from DB that notes that the DOJ has not signed off on the agreement and think that DB is sending a message to DOJ to settle for the $7 billion now or perhaps get far less when Trump becomes President. I'm pretty sure Trump's DOJ will be far less aggressive in going after Wall Street banks going forward but I'm positive they will be even less interested in going after a bank that manages to let Trump wriggle out of a $300 million personal guarantee.

At the same time DB was announcing its proposed settlement, Barclays was sued by the DOJ for their role in selling toxic mortgages after months of negotiations apparently could not result in a settlement. For Barclays, the case involves over $30 billion in mortgagees, subprime to AAA rated, that Barclays sold from 2005 and 2007. Over half of these loans defaulted and even the AAA tranches suffered heavy losses. Barclays had been advised repeatedly by outside vendors that provided due diligence on these mortgages that the loans were overstated and, in some cases, the properties backing those loans were even underwater. Those vendors used standard economic terms like "craptacular" and "the distinct aroma of default" in describing the mortgages. In 2007, a Barclays executive who is named in the DOJ lawsuit sent a distressed email to a colleague saying, "I just don’t think we’re able to hide as much as we were last year, jam things in, you know, bob and weave and hope for the best. And I think those days are behind us." In a statement put out by Barclays, the firm claimed, "We have an obligation to our shareholders, customers, clients and employees to defend ourselves against unreasonable allegations and demands. Barclays will vigorously defend the complaint and seek its dismissal at the earliest opportunity." Again, a skeptical person like myself might think that Barclays is really saying that they would rather take their chances with Trump's DOJ rather than settle today. That seems like a pretty good bet right now.

The Times has another article about Goldman Sachs (GS) and its involvement in the massive money-laundering and embezzlement scheme that went on at the 1Malaysia Development Fund (1MDB). Goldman has not been directly implicated in the fraud but it raised billions of dollars for 1MDB, earning enormous fees. These transactions were apparently tracked and signed off on by Goldman's president at the time, Gary Cohn. 1MDB apparently funneled much of this money into the personal bank accounts of prominent Malaysians and those connected to the government. Malaysia has a history of corruption so it should not come as a great shock that its development fund would be misused. Now, Goldman purely provide the vehicles for supposedly sophisticated investors (one of the most misleading terms on Wall Street) to invest in the fund. But, considering that the president of Goldman was tracking and signing off on these deals, you would think that Goldman might have done some due diligence on these investments. Goldman, of course, claims it believed the money was going into legitimate Malaysian development and investment projects. And it is clear that at least one Goldman executive abetted the scheme. Tim Leissner, the Goldman banker for 1MDB, wrote a letter on Goldman stationery that allowed a close associate of Malaysia's prime minister to transfer $3 billion to a Swiss bank account, alleviating the concerns of that Swiss bank and it lawyers. Leissner was fired by Goldman when the existence of that letter was revealed. Now a skeptical person like myself would wonder whether Mr. Leissner would write a letter like that without getting some sort of approval, especially when he knew that the president of Goldman was tracking the 1MDB deal. Unsurprisingly, Gary Cohn has been chose by Donald Trump to be the director of the National Economic Council and his top legal adviser. A skeptical person like myself might think that this article will be the last we will hear about Goldman's involvement with 1MDB.

Finally, there is an article that describes the ultimate Wall Street world of "heads I win, tails you lose" - hedge fund fees. The story describes how hedge funds inflate their returns by leaving out the management fees when they tout those fabulous returns. And example of this is a hedge fund that announced returns of 20.5% in the four years the fund was doing business. When you are getting less than 1% interest on savings, that sounds like a pretty fantastic return. In fact, that is hardly spectacular, especially when you realize the S&P 500 gained around 67% in the same period (that S&P gain was, of course, driven by Donald Trump's presidential candidacy). But even that mediocre 20% return is misleading because it does not include the funds 1.5% management fee and 16% cut of any gains. When including those fees, the actual returns come to about 5.7%, which is not much better than earning that pitiful 1% every year for four years. So, about three-quarters of this hedge fund's gain went to its managers as opposed to its investors. More importantly, the managers only share in the gains, they have no share in the losses. Those losses are strictly borne by the sophisticated investors (there's that term again) who invest in the fund. In addition, this fund's fees are actually below the normal 2% fee and 20% of the gain. It's a nice racket if you can convince enough people to give you their money.

In the story about Goldman Sachs, there is this one paragraph, "The 1MDB case has become a signature campaign in the global effort by prosecutors to crack down on kleptocracy and the relative ease with which the superwealthy move their money beyond the oversight of government authorities." If US authorities are really looking to clamp down on kleptocracy, there is plenty of work to do right here in the USA. And with Trump himself and most of his cabinet as beneficiaries of our existing kelptocracy, it is going to take a brave and powerful prosecutor to do anything to stem the tide for the next four years. But maybe that kind of bravery and power won't be necessary. Larry Kudlow, Trump's potential head of the Council of Economic Advisers, (not to be confused with the National Economic Council), assures us that, once they have stolen enough money from us, "Wealthy folks have no need to steal or engage in corruption".

Tuesday, December 27, 2016

Trump's Closing Of His Foundation Is Just Like His Other Bankruptcies

It is really a shame that the media keeps on making it impossible for Trump and his family to continue to do good work through their foundations and charitable activities. After all, the brazen selling of access and self-dealing is almost exactly what Hillary Clinton did with the Clinton Foundation while she was Secretary of State, if you take away that fact that Clinton was never shown to be selling access and never engaged in self-dealing, despite what the mainstream media was determined to imply during the election. Because Trump is so concerned about making sure he has no conflicts of interest before he assumes the Presidency, he has decided to close the Trump Foundation. Trump put out a statement saying, "The Foundation has done enormous good works over the years in contributing millions of dollars to countless worthy groups ... However, to avoid even the appearance of any conflict with my role as President I have decided to continue to pursue my strong interest in philanthropy in other ways." He later tweeted, "I gave millions of dollars to DJT Foundation, raised or recieved millions more, ALL of which is given to charity, and media won’t report!" Besides his inability to spell correctly, the tweet is just another misleading statement from Trump. He hasn't contributed a dime to his foundation since 2008 and many of the contributions listed have turned out to be fictitious. Other donations went to Trump himself or were used to pay off Trump's own personal liabilities, both clear violations of law.

Unfortunately, the Trump Foundation can not shut down until New York Attorney General Eric Schneiderman finishes his investigation of the foundation. Perhaps he thought he could pull the same trick that Betsy Devos used with the PAC she ran that blatantly violated election law - just shut it down and refuse to pay any penalties because the entity no longer exists. Too bad for Trump that won't work with his foundation.

Trump may try to sugar-coat this closure by claiming he is just eliminating a conflict of interest. But the reality is that this is just another Trump failure. It is equivalent to his casino bankruptcies, Trump University, and various other Trump brands that have bitten the dust. The Trump Foundation was just another fraudulent scheme that had run its course.

Monday, December 26, 2016

Jeff Sessions Ignorantly Thinks Civil Forfeiture Is Just Fine

Following up on my prior post about the creative use of "booking fees" that police and municipalities and even banks use to profit from simply an arrest, regardless of whether the charges are dropped or the person arrested is actually acquitted of the crime, the Washington Post had an opinion piece on Friday that highlighted the incredible abuse of civil forfeiture. The story focuses on a family in Pennsylvania whose son was arrested for selling drugs at a location that was not their house. But that didn't stop the city of Philadelphia from trying to seize the $350,000 home that they owned outright. The family felt the full weight of the Kafka-esque process of civil forfeiture. The property can be seized on merely the suspicion that it was involved in a crime. The owners have the burden of proving that it was not. Prosecutors advised the family that they did not need a lawyer during the process, a pretty egregious oversight considering they were at risk of losing their house. Prosecutors also proposed "deals" that bear a resemblance to extortion by suggesting that the owners could sell the house and split the proceeds with the government. If the owners missed a hearing, forfeiture could be declared instantaneously in their absence. Thankfully, the Institute for Justice came to the family's defense and saved their house from forfeiture.

Civil forfeiture continues to be an abusive and seemingly unconstitutional process that has nevertheless been accepted as a valid practice by government and, incredibly, the courts. And the new administration is not likely to do anything to stop this practice and may even expand it. Jeff Session, the nominee for Attorney General, made his feelings about civil forfeiture clear during Senate Judiciary hearings in 2015. According to Sessions, "[T]aking and seizing and forfeiting, through a government judicial process, illegal gains from criminal enterprises is not wrong."  Sessions continued by saying that it should be as easy for "government to take money from a drug dealer than it is for a businessperson to defend themselves in a lawsuit" and government "should not have a burden of proof higher than in a normal civil case." Of course, there is no "judicial process". Property can be seized even if the owners have not been charged with a crime and based only on a suspicion, rather than any determination from a court. In a normal civil case, the burden of proof lies with the government; in forfeiture it lies with the defendant. Sessions continued to display his ignorance by adding his belief that "95 percent" of civil forfeiture case involve nothing more than people who have "done nothing in their lives but sell dope." That would be news to the family in Philadelphia who probably worked quite hard to get to a place where they owned their house outright. But ignorance is considered a requirement to become a Trump cabinet member.

It's ironic that Sessions used the example of business in civil suits as the reality is that businesses and their owners have far more rights than those who have been charged with civil forfeiture. In fact, they have far more rights that many Americans when it comes to ignoring the law with impunity and getting away with it - just take a look at Uber. The granting of constitutional protections in the form of corporate personhood that began in the late 1800s had led to a situations where corporations enjoy many, if not arguably more rights, than individuals while bearing none of the responsibilities that come with citizenship.  And it has added to the incredible erosion of our democracy.

Police And Banks Find New Ways To Steal From Us

The NY Times has a story today about the common practice that municipalities are using to "charge" people they arrest a "fee", regardless if those charges are dropped or if the defendant is found not guilty. The article specifically focuses on Ramsey County in Minnesota where a young man had the $46 in his pockets "confiscated" when he was arrested. The charges were later dismissed but the county kept a $25 "booking fee" and returned the remaining $21 on a debit card. Simply converting the debit card to cash, however, cost the man an additional $7.25. First, there was a maintenance charge of $1.50 per week which kicks in 36 hours after the card is issued. Then there was a $2.75 charge of using an ATM to withdraw a portion of the balance on the debit card. Finally there was a $1.50 charge to check the balance on the card and an additional $3 charge to transfer that balance to a bank account. So, an arrest that did not result in a subsequent charge cost the man $32.25, with that many going to the county and an unnamed bank. Such is the presumption of innocence these days in this country.

These kind of fees are not unusual in certain areas of the country. In Colorado, some towns get nearly one-third of their revenue from fees like this. Kentucky charges for the costs of incarceration regardless of whether the case is dropped or the defendant is found guilty. And similar methods added to the anger of residents in Ferguson, Missouri that fueled the riots over Michael Brown's shooting. These booking and incarceration fees are just another extension of the outrageous use of civil forfeiture, which is also abused by police across the country. Needless to say, these fees provide a healthy incentive for police to abuse their arrest powers and the pressure from municipal governments to ensure and increase this flow of revenue is also intense.

The young man in Ramsey County is fighting these charges all the way to the Supreme Court. As his lawyer says, "Revenue-starved local governments are increasingly turning toward fees like Ramsey County’s in order to bridge their budgetary gaps. But the unilateral decision of a single police officer cannot possibly justify summarily confiscating money. Providing a profit motive to make arrests, gives officers an incentive to make improper arrests." Unfortunately, lower courts have dismissed his claim that these fees did not violate his right to due process, saying that the fees involved were "relatively modest". As a dissenting judge pointed out, those modest fees add up to half a day's work under the current minimum wage and are close to what is allocated to feed a person for a full week under the food stamp program. For many Americans, those fees are hardly modest. According to the brief by Ramsey County, "Municipal services come at a cost." Indeed they do, and the process for paying those costs is called taxation, something that is an anathema to so many these days. And that taxation is done via consent of the governed, not by extorting innocent citizens who have little resources to defend themselves. As Kevin Drum says, "I've heard all the arguments about due process and civil vs. criminal and so forth, and not a single word of it strikes me as anything but an obvious sham. And yet courts—all the way to Supreme Court—and judicial agencies—all the way to the Department of Justice—accept them without blinking." It is simply a license to steal.

But it is not just the police and the municipalities who are stealing here. It is also the bank who has this sweetheart deal with Ramsey County that potentially allows it to collect over $7 for very debit card issued by the county. It would be nice to know the name of this bank and what kind of process the county went through in order to choose that bank as its debit card issuer. I'm sure there was something in it for both sides. These nickel and dime fees have been a staple among banks for decades and the prime example is the fraud at Wells Fargo which the bank was able to keep hidden for nearly a decade because the fraud usually involved smaller amounts of money and targeted poorer people who would be less capable of pursuing the bank.

There is really no difference between what is happening in Ramsey County and the petty extortion by police that is common in authoritarian countries and banana republics. Back in the day, when I was visiting Moscow, I heard stories of police stopping cars at random and essentially extorting money from the drivers to avoid a ticket, or worse, for the driver, regardless of whether there was a traffic violation or not. This is no different. In fact, you could say it's actually worse. The corruption in Moscow was widespread and the money probably flowed up the chain of command. It was certainly institutionalized. But it was not codified into law. In fact, I'm pretty sure that it was against the law in Russia. In Ramsey County and in America, this kind of theft from innocent people is not only institutionalized but has essentially been codified by the courts. Such is the state of democracy in America these days.

Astrophotography Adventure - Crater Gassendi

Earlier this month, there were actually a couple of clear nights in a row, so I took some photos of the same area of the Moon's terminator on consecutive nights. The idea was to capture a crater on the terminator the first night and then the same crater one night later in order to illustrate how quickly the view changes due to the angle of the sun. As it turned, Crater Gassendi turned out to be the perfect illustration. Here are a couple of photos on night one:

Gassendi is the crater whose outline you can make out on the top left, with a peak just visible in the middle and a smaller crater that interrupts its northern (or upper) wall. The crater with the visible central peak in the top center is Balliadus and the similar but slightly large crater on the middle right is Tycho. The US lunar lander Surveyor 7 landed just north of Tycho's northern rim back in 1968 and is still there. Here are a couple of closer images of Gassendi, still on night 1:


Now take a look at Gassendi, Balliadus, and Tycho the next night:

And a closer view of Gassendi:

It's a great example of how the higher angle of sunlight flattens the features and why viewing and photographing the terminator of the Moon provide a better illustration of its spectacular features.

Photos Details:

Scope: Starblast 4.5
Camera: iPhone 6 using NightCapPro with low ISO boost on
Magnification: 100x; 10mm eyepiece with 2x Barlow

Sunday, December 25, 2016

Natural weekends - Happy Holiday!

 As you can see above, it is a clear, cold, and frosty morning here on the creek. But everyone wants a white Christmas, so let's go back into the archives from last winter and pretend it is:

Saturday, December 24, 2016

Natural Weekends - Christmas Eve With Venus And Mars

Christmas Eve on the creek. Venus is the bright object in the center right; Mars is the fainter object up and to the left; and the faint star on the lower left is Fomalhaut.

Natural Weekends - Light And Clouds

Friday, December 23, 2016

America Has Become A Banana Republic, Heading Toward Kleptocracy

I am certainly not the first one to say it, but America these days looking more and more like a banana republic, if not an outright kleptocracy. Just take a look at the most recent posts I've put up in the last two days:
This is all that I could put together in the last two days. But there are plenty of other examples, such as the Trump family continually trying to sell access to the President. I'm sure you all have some of your own, so please go ahead and add them in comments.

NY Times Provides Infantile Analysis Of Trump's Electoral College Victory

Earlier this week, the NY Times had a piece that, in the print edition, was titled "How To Explain Split Between Popular Vote And Electoral College". The piece explored three possibilities. First it looked at a regional bias noting that Clinton won an overwhelming victory in California but that was offset by Trump's margins in what the Times calls "Appalaciafornia", the states of  West Virginia, Kentucky, Tennessee, Arkansas, Alabama, Oklahoma, Kansas, Nebraska, Wyoming, Montana, Idaho, North Dakota and South Dakota. Clinton won the remainder of the country by a two point margin. The authors cite an argument in favor of the Electoral College as the fact that it doesn't reward regionalism in the sense that racking up huge victories in particular areas of the country just means you end up with a lot of "wasted" votes. They say that Clinton's big win in California is offset by Trump's huge win in Appalachiafornia". From this they some reach the conclusion that regionalism isn't a factor in explaining the large difference between the results of the popular vote and the Electoral College. To my mind, however, the fact that you win Wyoming by 60% doesn't really offset the fact that you lost California by 20%. The number of votes between the two can't be compared.

Next the article takes on what's called the "small state bias" - that small states have disproportionate power in the Electoral College. They summarily dismiss this argument by saying Clinton won a lot of small states and Trump won a number of big states. Ergo, no problem. This kind of argument seems a little basic to me but it is hard to argue with.

Finally they take on the argument that the battleground states we demographically more inclined toward Trump. To quote, "Most of the traditional battleground states are much whiter, less educated and particularly less Hispanic than the rest of the country. But the demographics alone don’t quite do justice to Mr. Trump’s victory in the Electoral College. In the end, he won the battleground states by just a one-point margin — but claimed three-fourths of their Electoral College votes. He won four of the five closest states, winning 75 of 79 votes at stake." Their conclusion from this: "Mr. Trump had some very good luck." Thanks for that incisive analysis.

From here the article veers into the more bizarre, discussing how the accidents of history could have changed the outcome of this election. If Congress had agreed to Michigan's claim on what is now the city of Toledo way back in 1837, Clinton would have won Michigan. If the Florida Panhandle had just been allowed to join Alabama like it always wanted to, Clinton would have won Florida. The arguments here are infantile. Their conclusion: "The point is that the main bias of the Electoral College isn’t against big states or regionalism; it’s just toward the big battleground states. If they break overwhelmingly one way, that’s who wins. This is not exactly a high-minded Hamiltonian argument. There aren’t many justifications for letting a few close states decide a close national election. But that’s basically what the system does, and there’s nothing about those states that ensures they provide a representative outcome."

It is incredible that an article this silly and irrelevant could be written. There is no discussion of the concept of "one man, one vote". There is no mention that this is the second time in 15 years that the popular vote and the Electoral College have diverged so badly that the President did not in the popular vote, after only happening a couple of times in the prior 200 years. Thankfully, they do at least note that this by far and away the biggest divergence in history. But to examine this issue and not even discuss the divergence between urban and rural areas, both within state and across the country, and its impact on this election just shows willful blindness. As urban centers continue to grow and rural areas continue to lose population, we will continue to see situations where the popular vote winner does not win the presidency. The effect of that continually happening will only further erode faith in democracy. We are truly done for if this is the best level of analysis we can get from a major newspaper.

World War I As A Lesson For Recognizing The Dangers Today

The assassination of the Russian Ambassador in Turkey prompted Josh Marshall over at TPM to think of the assassination of Archduke Ferdinand in Sarajevo which is widely recognized as the event that set off World War I. The history of that war which I grew up with was that the European powers blundered into war due to the various alliances that the major and minor powers had with each other. It was a war that the Europeans did not want but somehow did not manage to avoid. That was a comforting and instructive thought in the emerging nuclear age and the precariousness of the Cold War. The lesson was that better diplomacy and more open lines of communication could prevent an unintended conflict from spiraling into nuclear Armageddon. And that lesson seemed to be born out with the resolution of the Cuban missile crisis.

Unfortunately, that history is entirely incorrect. In fact, there was clear evidence back in the post World War II era which has been bolstered by more recent research that the European powers fully anticipated a coming war and that Germany was intent on instigating it. According to Marshall, "[The German government and general staff believed that a European war would eventually come, that such a war was essential to its territorial ambitions and - most importantly - that time was not on Germany's side. The Germans believed they were better prepared for war in 1914 that the Entente powers of Britain, France, and Russia. But over time they believed their position would weaken." This was largely due to the serious decline in Germany's biggest ally, Austria-Hungary.

Marshall draws the lesson that there is "immense danger when one power believes it is running out of time to secure the advantages it believes it can secure...". And, although Marshall does not draw this specific comparison, I believe that is the situation that faces us with the current makeup and attitude of the Republican party. This is a party that sees the rapidly changing demographic shifts taking place in our country and, because of that, believes its power will only be diminishing over the near term. We can see it in the fundamentally undemocratic actions of Republicans in North Carolina who did everything in their power to suppress votes, restrict the powers of the incoming Democratic governor in a post-election special session, and have now reneged on a deal with the city of Charlotte over LBGTQ rights. (After this disgrace, we should force companies to continue the boycott of the state for a period of time even after they change the law.) We see it the increasingly undemocratic actions of the national party, from government shutdowns to the refusal to give Merrick Garland a hearing.

Republicans know they will never have more power than in the next two to four years. With the 2020 census and mandatory redistricting, their power will become even more fragile and even more extreme gerrymandering will be required to keep their majority. Under these conditions, we can only expect the worst.  World War I resulted in about 17 million deaths and 20 million wounded. The next four years will thankfully not be as bad as that. But make no mistake, they will still be terrible.

Thursday, December 22, 2016

More FBI Agents Going Rogue; Agency Is Out Of Control

The FBI has become, or perhaps always was, a total disaster. A major insider trading case brought by US Attorney Preet Bharara has basically been tossed out of court because an FBI agent was leaking like sieve to reporters about the case. You may remember that golfer Phil Mickelson was implicated but never charged in an insider trading scheme run by gambler William Walters. Mickelson was apparently the recipient of one of Walters' tips in order to help the golfer pay off a gambling debt. Walters is now on trial for insider trading for using illegal tips to profit to the tune of over $40 million. But the judge has instructed the defense to file a motion to dismiss the case because a rogue FBI agent was admittedly "a significant source of confidential information" to reporters for the New York Times and the Wall Street Journal which used that material for articles published in 2014.

It is already notoriously difficult for prosecutors to win insider trading cases under current law and current court rulings. All along the chain, prosecutors must prove that the individuals involved knew the tip was improperly obtained and that the person who passed on the tip must receive something of value for it. What this essentially means is that the only persons perhaps legally liable are the original tipper and tippee. Everyone else who profits downstream can claim ignorance and escape justice. And it make even actions against original insiders more difficult. As hard as these cases are to prosecute, then, it really doesn't help when rogue FBI agents submarine the case. The agent apparently leaked the information to the press because he believed that the case was stalled and hoped that the news media might "rattle the cage" and see what fell out. What fell was the whole case in its entirety.

The FBI seems to have no control over their agents at all these days. Rogue elements in the NY field office were responsible for leaking to the press that Hillary Clinton was going to be indicted, in a blatant attempt to influence the election. The name of this agent is, for now, being withheld for "medical reasons" which seems outrageous in its own right. I think, as citizens, we have aright to know who is sinking prosecutions brought on our behalf. So right now we have no idea whether this agent might also be part of that New York cabal.

For the readers who are golf fans, you might want to read up on Mickelson's unsavory relationships with gamblers and his clear connections to multiple criminal defendants. Somehow he has avoided being charged in any of these cases. I wonder if that has to do with his celebrity and presumed wealth.

Comey Must Answer For His Actions

Every new detail that emerges about James Comey's actions on the eve of the election make him look worse and worse, if that is still possible. I believe that is at least the third time I have written that statement. Yesterday's unsealing of the warrant that the FBI received to search Huma Abedin's emails has been attacked by various legal scholars as not providing any basis that criminal activity had taken place and that the warrant, in fact, never should have been issued.

The highly redacted warrant states that "Because it has been determined by relevant original classification authorities that many emails were exchanged between [redacted] using [redacted] and/or [redacted] accounts, and Clinton that contained classified information, there is also probable cause to believe that the correspondence between them located on the Subject Laptop contains classified information which was produced by and is owned by the U.S. Government. The Subject Laptop was never authorized for the storage or transmission of classified or national defense information."

Law professor Ken Katkin summarized the warrant this way, saying, "The warrant application seems to reflect a belief that any email sent by Hillary Clinton from a private email server is probably evidence of a crime." Other legal minds pointed out that the FBI had already concluded that Clinton had never intentionally disclosed classified information and therefore could not recommend prosecution. The fact that these emails may have included classified information, which was purely speculation at the point the warrant was written, would not necessarily change that original conclusion about Clinton's intent. The fact that the laptop was not authorized to store classified material was not a problem for Clinton, it was a problem for Abedin as this was her computer.

Clinton lawyer David Kendall said the warrant showed the FBI "had no basis to conclude whether these e-mails were even pertinent to that closed investigation, were significant, or whether they had, in fact, already been reviewed prior to the closing of the investigation. What does become unassailably clear, however, is that as the sole basis for this warrant, the FBI put forward the same evidence the Bureau concluded in July was not sufficient to bring a case ― the affidavit offered no additional evidence to support any different conclusion."

Legal scholars can agree or disagree whether there was enough probable cause to allow the warrant and we all know that law enforcement is usually give wide, probably overly wide, latitude by judges in these cases. But there is no doubt that the rationale for the warrant was weak. And it doesn't address another issue that was brought up at the time of Comey's letter and that is whether the discovery of these emails during an investigation into Weiner violated Abedin's Fourth Amendment rights. The fact that the FBI "stumbled across" these emails during Weiner's investigation when the warrants for that investigation were solely focused on Weiner's sexting shows that their search had broadened beyond the scope of that warrant. Although there is an exception for evidence that is in "plain view" during a search, the fact that they discovered a bunch of emails from Weiner's wife would not be out of the ordinary and, on its face, gives no indication that a crime has been committed. To the use the mere existence of those emails as a basis for getting a new warrant to search them does not absolve the FBI from possibly violating Abedin's constitutional rights through the initial Weiner search. That is, of course, unless you assume that any email that Abedin and Clinton exchange with each other indicates a crime. As law professor Orin Kerr said just days after the Comey letter, "The Fourth Amendment plain view standard doesn’t allow a seizure of emails based on a mere we-hope-to-later-determine standard. The government can’t seize the emails just because the Clinton investigation is extra important and any possible evidence is worth considering. Rather, the Fourth Amendment requires the initial look at the emails to generate 'immediate' probable cause that they are evidence of a crime first, before their seizure is permitted and used to get a second warrant."

The warrant indicates that the FBI had already examined the metadata of the Abedin emails and determined that there was correspondence between Clinton and Abedin which is hardly surprising. But, if it was later determined that the discovery of the emails violated Abedin's constitutional rights as described above, the emails would be useless in any legal case because they were the result of an illegal search. In addition, the metadata would also indicate the time frame of the correspondence. If that matched with the time frame of emails already investigated, it would also indicate that those emails had probably already been examined. To think otherwise would be to essentially be going on a fishing expedition.

But the warrant also makes clear that, besides the analysis of the metadata, no real examination of the emails had taken place, which is what makes Comey's letter so egregious. Comey described the Abedin emails as "pertinent to the [Clinton] investigation". In fact, Comey had no idea at the time whether the emails were pertinent or not since they had not been examined. He could have phrased it much more equivocally by saying "they may or may not be pertinent", but he chose not to do so. In addition, Comey's letter publicly characterized the information that the FBI then used to get a warrant. It would be pretty bold for any magistrate to deny the FBI's warrant after Comey went public with the information and characterized the emails as "pertinent". His statement was, of course, prejudicial to Clinton, but it also prejudiced the granting of the warrant.

The Russian hacking in this election was serious and a grave threat to our security and it needs to be investigated thoroughly. But, once again, Democrats have allowed their eye to be taken off the ball when it comes to Comey. There are tons of unanswered questions when it comes to the FBI during the election campaign and Democrats seem unable or unwilling to pursue the answers. I'm not sure why Democrats have not sent a letter to Comey with questions that need answering already. He will certainly be testifying at some point about the Russian hacking and Democrats should hijack at least part of those hearings to focus on the FBI's actions during this election. There remain questions about how long the FBI knew about Abedin's emails before any action was taken. There have been rumors that the FBI knew of the existence of these emails for two or three weeks before Comey's letter.

Based on those rumors, here's a theory about what really happened that prompted Comey's letter. During the investigation of Weiner's texting, the existence of Abedin's email became known. That information was passed along to the team assigned to investigate Clinton. Either out of caution of effecting the election or a real belief that these emails would turn up nothing new and would certainly not change the results of the investigation, that team did nothing. The rogue element within the New York FBI also had knowledge of the existence of these emails and, prompted by James Kallstrom and Rudy Giuliani, they essentially blackmailed Comey by saying they will go public if he doesn't. This prompted Comey's letter and was also probably responsible for its poor wording. It's quite possible that the rogue element mischaracterized the nature of the emails to Comey. That rogue element then feeds the media frenzy by leaking that Hillary will be indicted.

Kevin Drum points to a panel by the Institute for the Study of Citizens and Politics that showed Comey's letter moved the electorate by four percentage points in Trump's favor. Hillary lost voters to Trump and, more importantly, third parties, while Trump gained support. After Comey's second letter, the electorate hardly moved at all, despite his letter once again clearing Clinton. Both campaigns have declared that Comey's letter was the critical inflection point in the election. So here are the questions I have that Comey must answer:
  • How long did the FBI know about the existence of Abedin's emails before your letter?
  • What was the FBI doing in that interim period?
  • Has there been any investigation of the leaks out of the NY field office?
  • Has anyone been disciplined for those leaks?
  • Was the NY field office involved in the investigation of Weiner's sexting?
  • Did the NY field office know of the existence of Abedin's emails?
  • Who briefed you on Abedin's emails?
  • Why did you consider Abedin's emails "pertinent" when you had no knowledge of what was in them?
  • If new emails with classified information had been found in those emails, would that have changed anything in your inappropriate July statement absolving Clinton?
  • When the FBI discovers an important company or institution has been hacked, do they usually just call that company's or institution's IT help desk?
  • Does the FBI provide any formal notification via a letter to or a face-to-face meeting with senior executives when they discover a hack?
  • If not, why not?
  • How do you explain spending thousands of man hours on the Clinton email investigation while only making a few perfunctory phone calls to the DNC to inform them they had been hacked?
  • Did you contact the RNC and, if so, how?
  • Did you realize that your letter was prejudicing the warrant you were about to ask for?
  • Why did you inappropriately comment on the resolution of the email case in your July statement?
  • Did you have any concerns that the Abedin's emails had been obtained illegally? If not, why not?
The answers to all these questions will probably spur even more questions. And I would only be too happy for readers to add more of their own. Democrats should not let the focus on Russian hacking get in the way of demanding answers from Comey. Some pundits have said that it is better that Comey keep his job, because his replacement will be worse. That is probably true. Others believe that he will be more vigilant about the investigating the corruption that is certain to come in the Trump administration. That, I believe, is wishful thinking and blinds us to the fact that Comey is already seriously compromised, especially if he is so easily manipulated by rogue elements within his own agency. Relying on Comey to be a bulwark against Trump administration abuses will be as big a mistake as relying on Comey to obey the rules and not influence an election. Which is why he must answer these outstanding questions.

Conspiracy Between Pharma, Doctors, And Govt Fuels WV Opioid Crisis

The Charleston (West Virginia) Gazette-Mail has a fascinating two part series on the opioid epidemic that has swept through the state in recent years. The report shows that in six years, pharmaceutical companies flooded the state with over 780 million hydrocodone and oxycodone pills. That comes to 130 million pills per year. The town of Kermit, West Virginia, has a population of 932 but a single pharmacy in that town received over 4.5 million pills per year over a two year period. In the town of Oceana, a pharmacy received 600 times more oxycodone pills as another pharmacy literally just down the street. The population of the entire state of West Virginia is about 1.83 million and the number of pills delivered to the state amount to over 430 for every single individual in the state.

The three big prescription drug wholesalers, the oligopoly of McKesson Corporation, Cardinal Health, and AmerisourceBergen Drug Company, accounted for over half of the pills delivered to the state. Of course, these companies obviously had willing accomplices in the pharmacies and doctors in West Virginia. And the drug wholesalers use that fact to absolve themselves from any responsibility for the resulting opioid epidemic in the state. According to McKesson General Counsel John Saia, "The two roles that interface directly with the patient — the doctors who write the prescriptions and the pharmacists who fill them — are in a better position to identify and prevent the abuse and diversion of potentially addictive controlled substance." Of course, the drug wholesalers made billions from these sales and their salespeople and CEOs were handsomely rewarded. Even more damning is the fact that the potency of the pills provide by these companies increased as time went on, as the people they had managed to get addicted required more and more potent doses to get their high. The company had to see the pattern of addiction they were feeding. By law, they were required to report suspicious orders to the state Board of Pharmacy, but the drug companies simply ignored that requirement. When the West Virginia Attorney General finally filed lawsuits forcing the companies to report these obviously excessive orders, the Board of Pharmacy simply did nothing with them, allowing the pills to keep flooding into the state.

The drug companies had plenty of willing and greedy accomplices in the pharmacies and doctors in the state, as well as from the state regulators that were supposed to monitor them. According to the article, the Board of Pharmacy gave "spotless inspection reviews to small-town pharmacies in the southern counties that ordered more pills than could possibly be taken by people who really needed medicine for pain." Of course, every one of the prescriptions that were filled at these pharmacies were written by a doctor.

Many of you are too young to remember the days when the CIA was accused of running drugs into the United States in order to fund its illegal wars in Central America under Ronald Reagan. Although it has never been "proved", there is substantial evidence that supports that claim. A controversial series in the San Jose Mercury News further alleged that the CIA was complicit in the introduction of crack cocaine in the United States as part of the operation to support those wars in Central America. For many Americans, these allegation seemed beyond belief. They seem much more believable now when you see the drug companies, pharmacists, doctors, and the state bureaucracy all complicit in creating a addiction epidemic in West Virginia. The cost of that addiction and the deaths from overdosing is incalculable. But none of the powers involved cared one whit about the people of West Virginia. Every one involved in what is essentially a massive criminal enterprise was only interested in lining their own pocket. And you can be sure that there are plenty of other states where a similar pattern of abuse has occurred.

West Virginia Senator Joe Manchin's response to these events was to say, "We need to declare a war on drugs." Yes, that has worked so well for the last 40 years. Rather than sticking all those poor souls who have become addicted due to a conspiracy among the government and the medical establishment in jail, we really ought to be looking to prosecute the people responsible for getting them addicted in the first place. We really ought to be declaring "war on the drug companies and their accomplices" like Mylan, headed by Manchin's daughter, that exploits its monopoly position to price gouge people who desperately need the life-saving drug it provides. It is hard to imagine how many people are in jail today for marijuana infractions and then look at the fact that virtually everyone involved in this massive crime not only walks around freely today but are also handsomely rewarded for their crime. Please read both parts of the Gazette-Mail's report. You will be shocked and disgusted.

Michigan Steals Millions From Its Workers In Unemployment Insurance Scam

Steven Attewell over at Lawyers, Guns, and Money details the state of Michigan's theft of millions of dollars from unemployed workers in the state. The theft was deceptively simple. After Michigan's governor Rick Snyder's tax cuts for corporations and the wealthy blew a hole in the state budget in 2011, Snyder paid a technology firm $47 million to develop the MIDAS program, an acronym for Michigan Integrated Data Automated System. The MIDAS system took over the investigation of unemployment claims in the state and, remarkably, the state's Unemployment Insurance Contingent Fund started to grow from $3 million in 2011 to $155 million this year. The beauty of the Contingent Fund, as opposed to the actual Unemployment Insurance Trust Fund, is that the money can be used for other purposes, such as helping to balance the budget after devastating tax cuts. The reason Michigan was able to build this remarkable next egg in the Contingent Fund was because very little was actually being paid out of the Trust Fund. The MIDAS program was accusing 93% of cases investigated as fraudulent, a number that beggars credulity. In essence the state was making sure that it paid out as little as possible and used the MIDAS system to deny worker the unemployment insurance they were due. Already, over 2,500 workers have received over $5 million dollars in back compensation. There are an additional 22,000 cases outstanding and another 30,000 cases that still require investigation. This is criminal theft on a massive scale. Of course, so far, no charges have been brought and there is no indication that any local, state, or federal prosecutor is looking into the case. Attewell kindly provides the number of the US Attorney's office in Detroit if you would like to encourage them to take some action.

Attewell goes on to describe the pathetic state of Unemployment Insurance across the country. Basically, average unemployment compensation is just barely above the poverty level for a family of two across this country and, in high-rent areas such as major cities, it is not nearly enough to survive on. States across the country "abuse their UI systems in any number of ways: restricting eligibility such that a minority of workers can actually get access to benefits, keeping benefit levels as low as possible, but especially deliberately underfunding their Reserve Funds." The idea is to keep costs down in order to attract business by having a lower payroll tax which is what funds unemployment insurance. Of course, underfunding turns out to be a real problem when a downturn hits because costs go up while revenue decreases and the states are required to run balanced budgets. In 2014, 23 states were still underfunded to the tune of $28 billion due to the financial crisis that began in 2008.

Attewell has three ideas for fixing the problems with unemployment insurance. First is to nationalize "by simply eliminating the offset of Federal Unemployment Tax by state UI taxes, by eliminating the wage cap on unemployment taxes (currently, we pay UI taxes only on the first $7,000 in wages)." Next is to universalize. Right now, because of part-time workers and "contractors", only about 48% of workers are actually covered. Lastly, implement a mandatory minimum payment to unemployed workers that is indexed to inflation.

Please read the whole article as it is eye-opening. Sadly, it is highly doubtful that any of Attewell's excellent suggestions will be implemented by the incoming Trump administration and Republican Congress. Rather, I think we can expect more state theft along the lines of what happened in Michigan.