Archive for Corruption

Just yesterday I was wondering what ever happened to “frivolous lawsuits” and the runaway juries Big Bidness and Republican lawmakers used to cite as reasons to push for tort reform. It seems Republicans couldn’t deliver. Big Bidness went to Plan B: circumventing the courts entirely. The New York Times brings us up to date:

Over the last 10 years, thousands of businesses across the country — from big corporations to storefront shops — have used arbitration to create an alternate system of justice. There, rules tend to favor businesses, and judges and juries have been replaced by arbitrators who commonly consider the companies their clients, The Times found.

The change has been swift and virtually unnoticed, even though it has meant that tens of millions of Americans have lost a fundamental right: their day in court.

“This amounts to the whole-scale privatization of the justice system,” said Myriam Gilles, a law professor at the Benjamin N. Cardozo School of Law. “Americans are actively being deprived of their rights.”

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“The high cost of being labeled a sissy”

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Absolutely fascinating article by Malcolm Gladwell in New Yorker on the etiology of school shootings. They have become a ritualized behavior independent of the pathologies of individual perpetrators, he believes.

School shootings are not simply the isolated acts of a string of copycat psychotics who hear voices in their heads. They are perhaps a kind of slow-motion riot in which perpetrators downstream participate because they’ve been given a kind of permission by those who came before them. Four decades ago, Stanford sociologist Mark Granovetter posited that riots develop in this way.

Citing sociologist Ralph Larkin, Gladwell asserts that Columbine’s Eric Harris (“a classic psychopath”) and Dylan Klebold “laid down the ‘cultural script’ for the next generation of shooters.” Gladwell introduces us to a foiled 2014 plot by a seventeen year-old Minnesotan from a loving family. He wasn’t
“someone who had been brutally abused by the world or someone who imagined that the world brutally abused him or someone who wanted to brutally abuse the world himself.” Unlike Harris, psychological testing revealed this kid “wasn’t violent or mentally ill,” but “simply a little off.” Plus, he thought Harris was “cool.” The account reads like a scene from Fargo.

Gladwell explains Granovetter’s theory:

In his view, a riot was not a collection of individuals, each of whom arrived independently at the decision to break windows. A riot was a social process, in which people did things in reaction to and in combination with those around them. Social processes are driven by our thresholds—which he defined as the number of people who need to be doing some activity before we agree to join them. In the elegant theoretical model Granovetter proposed, riots were started by people with a threshold of zero—instigators willing to throw a rock through a window at the slightest provocation. Then comes the person who will throw a rock if someone else goes first. He has a threshold of one. Next in is the person with the threshold of two. His qualms are overcome when he sees the instigator and the instigator’s accomplice. Next to him is someone with a threshold of three, who would never break windows and loot stores unless there were three people right in front of him who were already doing that—and so on up to the hundredth person, a righteous upstanding citizen who nonetheless could set his beliefs aside and grab a camera from the broken window of the electronics store if everyone around him was grabbing cameras from the electronics store.

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Another day, another boondoggle

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Stick a fork in it. Another of those public-private partnership deals is done. Investors are ready to bail:

Barely 10 years after paying the city $1.83 billion for the right to run the Chicago Skyway for 99 years, a Spanish-Australian group of investors has put the historic tollroad concession deal up for sale.

The Skyway concession company’s executives have informed Mayor Rahm Emanuel’s administration they’re trying to sell their interest in running and collecting tolls from the 7.8-mile-long road on Chicago’s South Side, city officials said Monday.

And right on schedule, too. I described how these go down in December:

US and state taxpayers are left paying off billions in debt to bondholders who have received amazing returns on their money, as much as 13 per cent, as virtually all – if not all – of these private P3 toll operators go bankrupt within 15 years of what is usually a five-plus decade contract.

A “staggering” number go bankrupt, Salzman continues.

Of course, no executive comes forward and says, “We’re planning to go bankrupt,” but an analysis of the data is shocking. There do not appear to be any American private toll firms still in operation under the same management 15 years after construction closed. The original toll firms seem consistently to have gone bankrupt or “zeroed their assets” and walked away, leaving taxpayers a highway now needing repair and having to pay off the bonds and absorb the loans and the depreciation.

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The best convention speech you’ll never hear

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Perhaps America does have a reckoning coming. If so, it will not be the fiery one predicted by conservative ministers and pundits in the wake of last week’s Supreme Court rulings on Obamacare and same-sex marriage. But perhaps a reckoning nonetheless.

Popping up now and again since his 1988 presidential campaign collapsed, Gary Hart is not remembered for his speeches. The former Colorado senator’s presidential aspirations, like so many others’, died in the glare of public scrutiny. In a Time magazine extract from his upcoming “The Republic of Conscience,” Hart gives the best convention speech we will never hear.

Hart has had a lot of time to watch what has happened to the republic he hoped to lead. Distanced from the Village bubble, he offers a blistering indictment of systemic corruption in Washington that is now so ubiquitous as to be invisible. The army of lobbyists. The rise of the consultant class. The revolving doors. Campaigns as a billion-dollar industry. Rentier capitalism. “[S]pecial interest stalls in the halls of Congress.” The abandonment of “the common good and the interests of the commonwealth.” All of it is an outcome, Hart believes, “our founders would not recognize and would deplore.” Hart writes:

On a more personal level, how can public service be promoted as an ideal to young people when this sewer corrupts our Republic? At this point in early twenty-first-century America, the greatest service our nation’s young people could provide is to lead an army of outraged young Americans armed with brooms on a crusade to sweep out the rascals and rid our capital of the money changers, rent seekers, revolving door dancers, and special interest deal makers and power brokers and send them back home to make an honest living, that is, if they still remember how to do so.

What angers truly patriotic Americans is that this entire Augean stable is legal. Even worse, recent Supreme Court decisions placing corporations under the First Amendment protection of free speech for political purposes compounds the tragedy of American democracy. For all practical political purposes, the government of the United States is for sale to the highest bidder.

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The business of business

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President Calvin Coolidge once said, “The chief business of the American people is business.” But in examining the debate over the Trans-Pacific Partnership, Trade Promotion Authority, etc., one can see the business of business is not America.

It was clear last week that the TPP and TPA (fast track) were not dead, but unlike Monty Python’s parrot, really just resting. Politico reports on maneuvers by House Speaker John Boehner and Republican leaders to revive fast track:

Under the emerging plan, the House would vote on a bill that would give Obama fast-track authority to negotiate a sweeping trade deal with Pacific Rim countries, sending it to the Senate for final approval. To alleviate Democratic concerns, the Senate then would amend a separate bill on trade preferences to include Trade Adjustment Assistance, a worker aid program that Republicans oppose but that House Democrats have blocked to gain leverage in the negotiations over fast-track.

Decoupling TAA and TPA might be a non-starter with many Democrats. But the political mechanics are not as interesting as the broader trajectory of dealings between government and business.

In any of these deals, no matter what the promised benefits, the general public always seems to come out holding the short end of the stick. You can smell it. Somebody is going to make a lot of money. It’s just never us. We get to do the paying.

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Round up the unusual suspects

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When the IRS’ chief of criminal investigation this week uttered the phrase “World Cup of fraud,” for a moment I thought he meant criminal indictments were finally being issued for Wall Street bankers over the criminal practices that precipitated (and followed) the 2008 financial crisis. How naive.

“If you touch our shores with your corrupt enterprise, whether that is through meetings or through using our world class financial system, you will be held accountable for that corruption,” FBI Director James Comey said of the charges leveled this week against officials of FIFA, international soccer’s governing body.

Not being a big team sports guy myself – as the Monkees’ Davy Jones said, “It’s ’cause I’m short, I know.” – I had to Google FIFA. This explainer from Vox helps:

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Super-deluxe, Extra-special, Inc.

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Avoiding responsibility is just what the corporate form was designed for, wasn’t it? That’s why corporations will always go to the mat to protect their special rights and privileges as super-citizens. Those include not to facing jail time for repeated criminal behavior. Petty crime? Three strikes and you’re out. Corporate crime? Nobody’s counting. Justice for corporate crime is a different ball game.

“Banks have been on a criminal wilding,” Katrina vanden Heuvel writes, “allegedly laundering money for drug dealers, systematically defrauding homeowners on their mortgages, routinely committing perjury in courts and much more.” Their companies pay fines, yet virtually no one in charge goes to jail. Isn’t that special?

RJ Eskow ticks off a lengthy series of criminal behavior by large banking firms: Citigroup, JPMorgan Chase, Barclays, Royal Bank of Scotland, UBS Financial Services. All repeat offenders:

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Big donor just wants to serve Man

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We’re not exactly envious of the state of Oklahoma where Charlie Pierce ends his regular peek into the Laboratories of Democracy. Let’s just say there’s some serious experimentin’ he’s missed going on in the Tarheel State. A major donor Republican donor earlier this week put a fountain pen to his temple and told North Carolina’s GOP legislators that if he doesn’t get the tax and spending cuts he wants, their $25,000 donation gets it:

Raleigh businessman Bob Luddy, who chairs the board of the conservative Civitas Institute think tank and is an influential financial supporter of conservative candidates, emailed a sharp critique of the House budget to House Republicans, who are in the majority.

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Why aren’t these con men in jail?

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“The lack of prosecutions, quite frankly, does not indicate a lack of evidence,” Richard Bowen told Bloomberg’s “Market Makers” last week. The former Citigroup Chief Underwriter for Consumer Lending has testified before the Financial Crisis Inquiry Commission but contends that evidence he provided never made it to the Department of Justice for further investigation and prosecution.

A lengthy article on Bowen in New Economic Perspectives outlines some of what the whistle blower might have provided. Furthermore, that the FCIC, DOJ, and the SEC might not (or might not want to) understand how the accounting control fraud “recipe” at the heart of the financial crisis actually worked. Once you explain how the “sure thing” at the heart of the recipe works, writes William Black, “jurors understand quickly that the officers were acting in a manner that makes no sense for honest bankers but is optimal for officers leading frauds.”

Matt Taibbi (citing Yves Smith at Naked Capitalism) looks at corruption in the Private Equity business, and the seeming indifference of Andrew Bowden, the SEC’s Director of Compliance Inspections and Examinations. A study “found that over half of the companies they looked at were guilty of ripping off their clients” using hidden fees. Bowden mentioned the discovery in a speech within the last year. Since then … crickets:

By this month, Bowden had achieved a complete 180, telling a conference of PE professionals that their business was just “the greatest.”

This is Bowden on March 5th, on a panel for PE and Venture Capital issues at Stanford. Check out how he pooh-poohs the fact that his SEC has seen “some misconduct,” before he goes on to grovel before his audience:

Is a slightly less worshipful attitude too much to ask from people charged with oversight? Taibbi asks.

Apparently, yes.

(Cross-posted from Hullabaloo.)

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Rigging the rigging

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It is one of Sen. Elizabeth Warren’s signature lines: “The game is rigged.” Lina Khan at Washington Monthly fleshes out just how much. Forget the social safety net. Khan looks at how binding arbitration clauses in consumer contracts snip away what’s left of the legal safety net protecting consumers. Warren may have birthed the Consumer Financial Protection Bureau to give Average Joe a fighting chance, but binding arbitration still leaves the Man with all the power:

Last week the Consumer Financial Protection Bureau issued a report documenting the prevalence and effects of arbitration clauses in consumer financial products. CFPB’s report captures the effects of arbitration clauses in financial products and services, based on data from the American Arbitration Association, which handles the vast majority of consumer financial arbitration cases. A few main takeaways from the study [edited for length – TS]:

•Arbitration tends to work out better for companies than it does for individual consumers: in cases initiated by consumers, arbitrators awarded them some relief in around 20 percent of cases. By contrast, arbitrators provided companies some type of relief in 93 percent of cases that they filed.

•Even the degree of relief varies notably: within the slice of arbitration outcomes that CFPB could assess, consumers won an average of 12 cents for every dollar they claimed. By contrast, companies on average won 91 cents for every dollar they claimed. In total, consumers received less than $400,000 from arbitrators in 2010 and 2011. Companies won $2 million over that same period
•Notably, CFPB found evidence undercutting a favorite pro-mandatory arbitration trope: that nixing arbitration clauses would burden companies with greater litigation costs, which they would be forced to pass on to consumers in the form of higher prices for their goods. CFPB found that the banks that had to drop arbitration clauses from their contracts as part of an antitrust settlement in 2009 did not subsequently raise prices for consumers.

The CFPB is expected to propose rules “limiting mandatory arbitration clauses in these take-it-or-leave-it contracts,” Khan reports. Over 90 percent of consumers in contracts with a binding arbitration clause were unaware they could not sue “or had no idea.” On average, $27,000 of consumer money is at stake in these disputes. But paired with class action bans, these contracts leave financial organizations holding all the high cards in the game and “de facto privatizes” a legal process funded with tax dollars that, at least in theory, level the playing field.

The sharks are running the fish hatchery.

(Cross-posted from Hullabaloo.)

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