Waxman Attempts to Plug Truck-Sized Loophole for Theft

/40 Comments/in /by

Remember that truck-sized loophole for theft the Bush Administration created? The one that takes a rule that says contractors have to reveal contracting fraud, and adds a loophole for anyone doing business outside the US? Well, Waxman is on it:

On May 23, 2007, the Department of Justice (DOJ) requested that the Federal Acquisition Regulation be amended to “require contractors to establish and maintain internal controls to detect and prevent fraud in their contracts, and that they notify contracting officers without delay whenever they become aware of a contract overpayment or fraud, rather than wait for its discovery by the government.” DOJ believed such a rule was necessary because few government contractors voluntarily disclose suspected instances of fraud. DOJ proposed specific changes to the Federal Acquisition Regulation.

In response, on November 14, 2007, the Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council published a proposed rule on “Contractor Compliance Program and Integrity Reporting.” This rule requires contractors to have a code of ethics and business conduct, to establish and maintain specific internal controls to detect and prevent improper conduct in connection with the award or performance of government contracts or subcontracts, and to notify contracting officers without delay whenever they become aware of violations of Federal criminal law with regard to such contracts or subcontracts. The proposed changes to the Federal Acquisition Regulation closely track the DOJ proposal, with two primary substantive changes: the exemption for contracts to be performed overseas and a second exemption for contracts for commercial items.

On January 14, 2008, DOJ filed a comment on the proposed rule stating that “we do not agree with” the exemption for overseas contracts. According to DOJ, “[a]lthough these contracts may be performed outside the United States, the United States still is a party to these contracts and potentially a victim when overpayments are made or when fraud occurs in connection with the contracts. Under these circumstances, the government still maintains jurisdiction to prosecute the perpetrators of the fraud. Moreover, these types of contracts, which in many cases support our efforts to fight the global war on terror, need greater contractor vigilance because they are performed overseas where U.S. government resources and remedies are more limited.”

Read more →

Share this entry

Tom Reynolds Won’t Seek Re-Election

/18 Comments/in /by

The Albany Project reports that the guy who gave Christopher Ward carte blanche to (allegedly) steal from the NRCC, Tom Reynolds, has announced he will not run for re-election. I’m just guessing, mind you, but I predict this means that the investigation into the NRCC finance scandal is finding what is already readily apparent–that while Tom Reynolds was Chair, the NRCC organized itself in such a way to make it very easy for the Treasurer for all these committtees to either launder or steal money.

If I’m right, it also suggests just how incendiary the NRCC might become. After all, Reynolds was intimately involved in attempts to cover up Mark Foley’s pursuit of former male pages.

News reports indicate that a former Foley chief of staff, by all indications Fordham, tried to broker a deal with ABC News’ Brian Ross. According to Howard Kurtz’s column in the The Washington Post yesterday, Ross had asked to interview the Florida Republican after obtaining dozens of instant messages that Foley sent to teenage House pages. Foley’s former chief of staff told Ross on Friday that the congressman was quitting and that Ross could have that information exclusively if he agreed not to publish the raw, sexually explicit messages. [Washington Post, 10/2/06]

Some Questions About Reynolds’s Involvement:

1. Why did Congressman Reynolds authorize his own chief of staff to negotiate on behalf of disgraced Congressman Mark Foley? Did Reynolds know about the lewd IM conversations when he let Fordham advise Foley, and if so, when was he informed? Did Fordham share the IMs with Reynolds?

2. Instead of dispatching his chief-of-staff to keep ABC News from breaking the story, why didn’t Reynolds put the children first and go to authorities? Was Reynolds more worried about a political scandal than the safety of the children serving as Congressional pages?

3. What other assistance did Reynolds provide to help Foley avoid the scandal and the disgrace and possible criminal prosecution that would result?

4. Why is the NRCC refusing to return $100,000 from Foley, given that Reynolds knew of this disturbing behavior when the money was given in July of this year?

That was a scandal that contributed greatly to the GOP defeat. Yet Reynolds showed no remorse for his role in that scandal and stayed in the race.

Which raises the question–what about the NRCC scandal makes it worse then covering up the solicitation of minors?

Share this entry

“They’re Not Businesspeople … They Won’t Spend a Dime on Management”

/98 Comments/in /by

So says Republican campaign finance lawyer Cleta Mitchell of the NRCC. It’s her excuse for why the NRCC didn’t take very basic measures to ensure that Christopher Ward didn’t steal from the campaign committees he worked with.

Whatever the excuse, the NRCC is now complaining, again, that they’re victims and therefore it’s very mean that the FEC will fine them for overstating their cash on hand because they had a corrupt treasurer.

The FEC remains paralyzed for the moment, the result of a lingering confirmation fight between the White House and Senate Democrats. But after acknowledging that there was a $740,000 difference between the fundraising numbers the committee reported and its actual cash on hand — a partial result of the alleged embezzlement by Christopher J. Ward — NRCC Chairman Tom Cole (R-Okla.) and a top outside lawyer are already angling for lenient treatment from the commission.

“Our working relationship with the FEC has been good,” Cole said last week. “We were the victims here.”

But the Politico article lays out all the things the NRCC did not do to prevent Ward from embezzling the money.

But a series of FEC guidelines issued last spring suggest the NRCC’s after-the-fact cooperation might not be enough. Under those guidelines, NRCC officials also must demonstrate that they did what they could to prevent the acts of malfeasance they allege.

The FEC established these “safe harbor” policy guidelines in April 2007 amid a spate of embezzlement cases. Commissioners wanted to help these victims of internal malfeasance avoid paying additional fines — provided that the victims took reasonable steps to protect themselves in the first place.

The safe harbor recommendations call for campaign committees to establish certain basic internal auditing controls to prevent misappropriations by an employee. These include: two signatures on any check in excess of $1,000, a sign-off by two people on all wire transfers and separate individuals handling the intake of and accounting for campaign funds.

The guidelines also call on committees to act quickly in disclosing their internal fundraising information to the correct federal authorities.

The NRCC, of course, deliberately unified all its accounts into one (incidentally, so did the DCCC, also apparently in response to BCRA). And the NRCC also gave Ward the ability to sign off on any checks–including those over $10,000.

Read more →

Share this entry

NRCC Catalogs the Damage

/31 Comments/in /by

The NRCC says that the FBI investigation has reached a point where it can reveal how much, it claims, it was bilked out of by Christopher Ward. Before I get into the details, though, what do you suppose it means that the investigation now allows them to go public about the damage? I ask because the NRCC makes clear that the FBI has never entered the premises of the NRCC. Curious.

We refrained from making extensive public comments until now so as not to compromise the investigation being conducted by the FBI. We understand that the FBI’s investigation has now progressed to a point where such public comment would no longer interfere with the investigation. Accordingly, the NRCC is providing this update on the status of its own internal investigation.

[snip]

Contrary to media reports, the FBI has not been to the NRCC office during the course of this investigation nor have they operated out of the NRCC offices.

First, it appears that the NRCC has not done a real audit of its finances since BCRA went into effect.

It appears that after becoming treasurer in 2003, Ward submitted to the NRCC’s bank and to NRCC leadership bogus audit reports for 2002, 2003, 2004 and 2005. An additional bogus audit was submitted to the NRCC’s bank for 2006.

So remarkably, just as campaign finance put new restrictions on soft money contributions, the NRCC stopped auditing what happened with its money.

Also note how squeamish the NRCC is about naming their bank, Wachovia. Odd, not least because the damn thing is listed everywhere on FEC reports.

Read more →

Share this entry

Gold Standard Gate, an Update

/43 Comments/in /by

Golly, I just remembered that people besides Eliot Spitzer are facing political troubles–the WaPo has a story that slightly advances the NRCC story, including the CYA that the Republicans considered Christopher Ward, the treasurer at the center of the scandal, the "gold standard" in campaign finance compliance.

In the tiny world of people who keep the books for Washington’s multitude of political committees, Christopher J. Ward was considered the Republican "gold standard," in the words of a former co-worker — one of the few people with so much expertise in election law that everyone wanted Ward’s services.

From a legal standpoint, I’m most interested in the detail that Ward’s submission of one of the audits he forged to Wachovia caused the NRCC to be concerned.

Officials told The Post that the NRCC’s problems may be more extensive. Republican lawmakers and former committee staff members now allege that Ward fabricated audits and other financial documents for 2003 to 2006, some of which were turned over to a Wachovia Bank branch in McLean in October 2006, when the NRCC borrowed $8 million in last-minute money for congressional campaigns.

This act would get the NRCC into legal trouble for fraud. Quick quiz: Can you think of any other Republican who acquired a million-dollar loan through fraudulent representations? Given that the "Straight Talk for Lobbyists" is willing to make deliberate misrepresentations to get loans for his campaign, I can see no reason to assume the even more corrupt Republicans weren’t doing the same.

Other than that, the story features the now-requisite efforts on the part of Peter King to paint himself as a victim in this scandal, claiming he got bilked into keeping the PAC open through 2007 after he believed it had closed in 2006.

"We were told he was the guy that handled all the campaign committees, he was the best," said Rep. Peter T. King (N.Y.).

But King said in an interview that he has discovered that Ward paid himself $6,000 in consulting fees from King’s political action committee in 2007 — though King believed that he had shuttered the committee early last year. Upon learning of the NRCC investigation, King said he found that his PAC remained open all of last year. Ward paid himself the fees from King’s PAC, which received just three contributions and dispensed one check in 2007, FEC records show.

Read more →

Share this entry

Spitzer Resigns

/136 Comments/in /by

Not a big surprise. Here’s the bit I hope gets the most traction:

Over the course of my public life, I have insisted, I believe correctly, that people, regardless of their position or power, take responsibility for their conduct. I can and will ask no less of myself. For this reason, I am resigning from the office of governor.

I think it likely we’ll find, over time, that those investigating Spitzer felt obliged to pursue what otherwise would not have merited a continued investigation. I suspect we’ll learn that public people, like Spitzer, are going to be exposed to a lot more scrutiny–and otherwise unusual investigations–because of these new post-9/11 money laundering laws.

Still. Spitzer was a crusader about law and order. And, according to his own standards, that requires taking responsibility for his conduct. And that, at least, is how he’s pitching his resignation.

Update:  Via David Kurtz.

In response to press speculation, MICHAEL J. GARCIA, the United States Attorney for the Southern District of New York, said: "There is no agreement between this Office and Governor Eliot Spitzer, relating to his resignation or any other matter."

Does it sound to you like they still want to charge him? 

Share this entry

Republicans Uncork A Fine Whine Spitzer

/194 Comments/in /by

And just guess what is being served with the fine whine at Casa de GOP? Thats right, impeachment is on the table! Yep, the news of the foibles of Elliot Spitzer had been public less than 24 hours and the Republicans are seriously threatening impeachment.

State Republicans threatened on Tuesday to impeach New York Gov. Eliot Spitzer if he does not quit over a sex scandal that has raised questions over whether he could face criminal charges.

The threat added to pressure on Spitzer, a Democrat and former state chief prosecutor who made his name fighting white-collar crime on Wall Street, to step down after a report that he hired a high-priced prostitute.

Wow. That was fast. Those Republicans are serious about maintaining the integrity of government. So, what is it that has caused the righteous defenders of honesty, integrity and the rights of the public to throw down impeachment onto the table so quickly?

"If he does not resign within the next 24 to 48 hours, we will prepare articles of impeachment to remove him," said Assembly Republican Minority Leader James Tedisco.

"We need a leader in place that has the support of people on both sides of the aisle," Tedisco told Reuters.

The NYT story indicates that the basis for such an impeachment is found in their, and the Wall Street Journal’s, editorials:

"He betrayed the public and it is hard to see how he will recover from this mess and go on to lead the reformist agenda on which he was elected to office."

The Wall Street Journal said Spitzer had shown his lack of restraint in overly aggressive tactics as attorney general, making "extraordinary threats" to entire firms and to those who criticized his pursuit of high-profile Wall Street figures.

"The stupendously deluded belief that the sitting Governor of New York could purchase the services of prostitutes was merely the last act of a man unable to admit either the existence of, or need for, limits," it said in an editorial.

Almost all who read here have been wondering for a long time "just exactly what in the world does it take to get impeachment on the table"? Well, now we know. If you don’t have "support of people on both sides of the aisle", impeachment is on the table. If you "betray the public", impeachment is on the table. "Overly aggressive tactics as attorney general" place impeachment Read more →

Share this entry

Truck-Sized Loophole for Theft

/32 Comments/in /by

Howie’s right. The media ought to be paying more attention to Congressman Peter Welch’s call for an investigation into how a giant loophole got stuck into rules aiming to force companies to report contracting fraud.

House Democrats targeted a multibillion-dollar overseas contracting loophole Friday by vowing to investigate why — and how — it was slipped into plans to crack down on fraud in taxpayer-funded projects.

The inquiry will look at whether the exemption was added at the request of private firms, or their lobbyists, to escape having to report abuse in U.S. contracts performed abroad.

"Granting this safe harbor for overseas contractors flies in the face of reason," Rep. Peter Welch, D-Vt., wrote Friday asking the House Oversight and Government Reform Committee to investigate. The panel monitors government procurement policy.

"By taking this action, the Bush administration is sending an unambiguous message: If you are a U.S. government contractor in Iraq, Afghanistan or elsewhere overseas, you have a green light to defraud our government and waste taxpayer dollars," Welch wrote to Democratic leaders of the committee.

Basically, under voluntary reporting requirements, government contractors have been reporting less and less of the fraud that they’re committing. Go figure. So DOJ decided to make reporting of fraud mandatory. But someone–it looks like someone in Bush’s Office of Management and Budget (and Fraud Support, apparently)–snuck in a waiver of mandatory requirements for contractors working outside of the United States.

Read more →

Share this entry

SIS has “filled in” the blanks

/100 Comments/in /by

fill-in-the-blanks.jpg

I gotta say, Steven McNevitt and his colleagues appear pretty skeptical that all of the OVP emails responsive to Fitzgerald’s subpoenas were actually recovered.

I noted yesterday that there had been two parallel attempts to recover the OVP email missing from the period when Libby and Cheney invented their cover story for having leaked Valerie Plame’s identity. Page 43-46 of the Additional Materials is the documentation from McDevitt’s attempt to reconstruct the emails. It consists of a plan developed on November 28, 2005 to reconstruct the emails, with updates from January 20, 2006 describing the results of that attempt.

The environment information gathering activities were successfully completed. As a result, it was determined that the Exchange server used to support the OVP mailboxes was [redacted] and the Journal Mailbox server that was used durring the target period was OVP_JOURNAL.

[snip]

Analysis of the files contained on the file server that were used to store .PST files during the target period was performed and no messages were found that filled the gap of missing messages for the target period.

[snip]

The server that contained the journal mailboxes for the target period was successfully restored, This was from a backup that was performed on 10/21/2003. The journal mailboxes were examined and no messages for the target period were present in the joumal mailbox.

[snip]

The Exchange server that contained the OVP mailboxes for the target period was restored from a backup that was performed on 10/21/2003. OA Human Resources produced a list of active OVP staff for the target period. This list was reviewed and confirmed by OVP.

The Exchange server that contained the OVP mailboxes was restored. This was from a backup that was performed on 10/21/2003. The email from the target period was extracted from each of the 70 OVP mailboxes and copied to a .PST file. [my emphasis]

In response to this report, on January 23, 2006 McDevitt writes a group of people who had worked on the restoration attempt and the larger missing email problem.

Someone needs to fill in some of the blanks.

Susan Crippen responds just two hours later.

SIS has "filled in" the blanks.

We know from the Committee report that a White House team wrote a document one day later–on January 24–claiming to have recovered 17,956 emails from the email backup tapes.

Read more →

Share this entry

Enron Accounting at the NRCC

/39 Comments/in /by

While I was buried in the White House’s amazing email fraud yesterday, the Politico posted an article further developing the NRCC accounting story. The Politico describes three roots to the accounting fraud. The NRCC no longer required executive committee approval for certain expenditures, it consolidated all its accounts, and it permitted people to work outside the NRCC.

Under Virginia Rep. Tom Davis and New York Rep. Thomas Reynolds, who chaired the committee from 1999 until the end of 2006, the NRCC waived rules requiring the executive committee — made up of elected leaders and rank-and-file Republican lawmakers — to sign off on expenditures exceeding $10,000, merged the various department budgets into a single account and rolled back a prohibition on committee staff earning an income from outside companies.

These changes gave committee staffers more freedom to spend money quickly and react to a shifting political landscape during heated campaign battles, and House Republicans were able to claim larger majorities after the 2000, 2002 and 2004 elections.

The article goes on to provide a few details that–along with an admittedly amateur review of the FEC filings involved I did–sheds further light on what’s going on.

In another decision that has become controversial, the NRCC began, during Davis’ chairmanship, to allow its staffers to earn outside income. Taking advantage of that change, Ward founded Political Compliance Services in 2001 with Susan Arceneaux, helping dozens of lawmakers and congressional candidates comply with Federal Election Commission laws. The two severed their ties earlier this year, a lawyer for Arceneaux said.

Ward wasn’t alone in seeking outside income. Don McGahn, the NRCC’s longtime counsel, was retained by numerous Republican campaigns and leadership PACs, helping those organizations comply with FEC disclosure requirements.

What appears to have happened after the changes is that Christoper Ward assumed the job of treasurer for the RNCC as well as a bunch of leadership PACs (and helped other start new ones). Read more →

Share this entry