Saturday, January 10, 2009

Corruption and the Fiscal Stimulus; "Today I have a sense of deja vu" ... by gimleteye

"Today I have a sense of deja vu" US Attorney R. Alexander Acosta told reporters during the press conference detailing charges against GOP powerhouse Mary McCarty, a county commissioner in Palm Beach who will join former county commissioners in prison, Warren Newell and Tony Masilotti. In a post earlier this week on the conviction and sentencing of Miami Dade GOP powerhouse campaign contributors, the de Cespedes brothers, I expanded on information brought to light by The Miami Herald; Carlos de Cespedes was one of the signers of the 1998 letter by a group of powerful Hispanic business leaders, assembled under the banner of Mesa Rodonda. The 1998 letter was meant to be a rallying cry in Miami against corruption and listed, among its signers, names that are well-known to the continual pressure by special interests against government regulation.

The intervening decade between 1998 and 2008, marked by the biggest asset bubble in modern US history, predicts exactly what will happen if a trillion dollar fiscal stimulus plan is filtered to the states without adequate controls.

As the most severe economic crisis since the Depression unfolds, it is clear that our nation has been through one of the most excessive periods of corporate greed in US history, driven by individuals hiding behind the power of corporations. Some are going or have gone to jail: but only a very, very few.

The point here is not to be shaking fists or insults. The Obama administration has to factor adequate accounting and controls based on what happened in light of the trillions of taxpayer dollars that are going to be raining down from the US Treasury to the states and local jurisdictions, like Florida's fast growing counties where corruption is endemic.

Yesterday the New York Times, above the fold front page story dug at the heart of the issue, in: "Nationwide Inquiry on Bids for Municipal Bonds." (New York Times, January 9, 2009) The Times gets to the point quickly, "The possibility of a vast web of collusion would be sobering in any case, but the issue is of particular concern now, as Congress and the incoming Obama administration prepare a big fiscal stimulus package that may spawn infrastructure projects carried out and financed at the state and local level. States and cities issue bonds to raise money to pay for things like schools and road construction, and are supposed to follow strict rules on how the proceeds are handled for investors to receive a tax exemption on the interest."

The packaging of infrastructure projects into bondable financial events, through which commissions and fees can be scraped into personal wealth and political power, has a long history. While still in the governor's office, Jeb Bush tried to tie in a division of Enron, Azurix, into the business of "privatizing" Florida's water management infrastructure. Only the collapse of Enron prevented that from moving forward, although it is rumored that the idea is alive and well in Tallahassee. On leaving office, Bush became a "consultant" to one of the top municipal bond firms in the nation, Lehman Brothers, now destroyed in the financial crisis; a company that was manovering with the legislature to privatize the operations of the state lottery system.

The Palm Beach Post story today outlines likely charges against Kevin McCarty, formerly a high official with the South Florida Water Management District in addition to being a bond trader: "Kevin McCarty, a Delray Beach bond trader and former South Florida water manager, also is expected to plead guilty and could face as much as three years in prison. His attorney, Richard Lubin, could not be reached Friday. The McCartys' prosecutions may not be the last of the repercussions for Palm Beach County's latest political scandal, part of a string that already has sent four politicians to federal prison since 2006. In Delray Beach, past and current city leaders called for an internal investigation of the city's financial practices in light of the prosecutors' allegations. They included accusations that Kevin McCarty, with help from city staff and consultants, successfully pressured the city to award bond work to his firm at the time, Bear Stearns. At the county commission, Chairman Jeff Koons said he wants his colleagues to review their system for awarding lucrative bond deals to underwriting firms. County Clerk and Comptroller Sharon Bock called on state legislators to reform the system, which allows local governments to pick firms without any objective standards or competitive bids."

Many of the financial firms in the municipal bond business have already received huge influxes of taxpayer dollars. According to the Congressional oversight committee reviewing the disbursement of federal money, auditing standards and controls-- to monitor where the money is going-- are virtually absent.

We don't need to have any more "deja vu's" with political corruption and the influence of money. What we need is a first rate civil service and audit controls to make sure that there is no influence peddling-- which the municipal bond business has surely done in Florida, and especially with respect to water infrastructure.


Anonymous said...

Latest case alleges more corruption in S. Florida government,0,5053590.story
South Florida

Latest case alleges more corruption in South Florida government
Federal investigation is only the latest to target officials
By Sally Kestin and Peter Franceschina
South Florida Sun-Sentinel
January 11, 2009

A shaving kit stuffed with cash, a political payoff delivered in gaming chips at a Nassau casino, free flights to the Bahamas and discounted stays at luxury resorts.

Federal prosecutors exposed the dirty world of public corruption in Palm Beach County with charges against five prominent politicians in just three years.

The most recent, County Commissioner Mary McCarty, resigned Thursday, saying she would plead guilty to a count of fraud.

The corruption is likely far more widespread than one county, former prosecutors and lawyers said.

"It's certainly not believable to assume that the entirety of the state's corruption is concentrated in Palm Beach," said Kendall Coffey, a Miami lawyer and the former U.S. attorney for South Florida.

In Broward County, former Sheriff Ken Jenne recently spent 10 months in federal prison for taking $151,625 in improper payments and services from sheriff's contractors.

Former Hollywood Commissioner Keith Wasserstrom is appealing his conviction on state charges for failing to disclose his financial ties to a sludge company that won an $18 million contract with the city.

In Deerfield Beach, suspended Mayor Al Capellini and former Commissioner Steve Gonot are facing state charges. Capellini is accused of voting on projects when he also was a paid consultant. Gonot allegedly stole $5,135 in campaign contributions. Both have said they are innocent.

"This is going on everywhere," said Marcos Jimenez, who also served as South Florida's U.S. attorney and now practices law in Miami. "I think, unfortunately, some public officials find the temptation too strong."

Former Palm Beach County Commissioner Tony Masilotti, who collected a payoff in gambling chips at the Atlantis Paradise Island resort, profited almost $10 million in secret land deals while in office. Masilotti, now serving five years in prison, and some of his relatives and friends also accepted $100,000 worth of free charter flights to the Bahamas and elsewhere.

Former West Palm Beach Commissioner Ray Liberti, who received the cash-filled shaving kit, took $66,000 and an expensive watch in return for pressuring the owners of a nightclub and massage parlor to sell their businesses.

McCarty helped her husband's companies get county bond business and accepted free and discounted stays in resorts, from a developer doing business with the county, according to federal prosecutors.

"A possibility is that folks [in Palm Beach County] thought they were in a smaller city, rather than Miami, and can do certain things and fly under the radar screen," Jimenez said. "That obviously did not pan out for them."

The corruption in Palm Beach County occurred during a development boom with millions at stake.

"No question that we had an atmosphere of tons of money, tons of projects," said Sid Dinerstein, chairman of the county's Republican Party. "We are talking about hotels and condos where every little decision influences millions of dollars."

Development also has occurred at a frantic pace in Broward, but with one key difference. In Palm Beach County, investigators turned up the scrutiny on elected officials after the arrests of four politicians, creating a public corruption task force in 2007.

"Quite clearly, the focus has been on us; and any time the feds dedicate resources and manpower to a particular problem, those people have to produce results," said John Tierney, a retired West Palm Beach defense attorney who specialized in federal white-collar fraud cases.

Tierney described the federal prosecutors working with the FBI as zealous.

Former U.S. Attorney Coffey said they have overcome an obstacle that often stymies corruption investigations: a reticence by witnesses who fear they will lose business opportunities by testifying.

"People who step forward in Palm Beach know their cases will be prosecuted very aggressively," Coffey said. "Crooked politicians are getting hammered."

And the weapon is an increasingly used federal law prohibiting honest services fraud. Many corruption statutes require proof that political favors were explicitly sold. Under honest services fraud, politicians can be charged for accepting benefits that merely allowed their judgment to be compromised.

Coffey and others said they expect to see more corruption charges against elected officials throughout South Florida.

"The way democracy works today, regrettably, is that the people who peddle money and influence are able to manipulate government figures," Tierney said. "It's a sad state of affairs."

Sally Kestin can be reached at skestin or 954-356-4510. Peter Franceschina can be reached at or 954-459-2255.
Copyright © 2009, South Florida Sun-Sentinel

Anonymous said...

Here we go:,0,5792618.story

From the Los Angeles Times
Schwarzenegger's effort to expedite highway projects angers environmentalists

Stripping environmental protections could fast-track the work, give California a $1.2-billion boost and create 22,000 jobs, the governor says.
By Eric Bailey and Evan Halper

January 11, 2009

Reporting from Sacramento — Efforts to bridge California's budget abyss collapsed last week as talks hit a formidable roadblock -- Gov. Arnold Schwarzenegger's demand that long-standing environmental protections be stripped from 10 big highway projects.

The governor's aides say his plan would give the financially strained state a $1.2-billion economic boost and create 22,000 jobs over the next three years. Environmentalists say the governor is backpedaling from the heavily publicized push to curb global warming that landed him on magazine covers delicately balancing a globe on a beefy finger.

Schwarzenegger is proposing that the California Department of Transportation forge ahead with some construction projects that are tied up in court over environmental issues. One is a $165-million carpool-lane expansion on U.S. 50 in Sacramento that a judge has delayed because of the amount of greenhouse gas emissions it could generate, among other concerns.

Protections would also be lifted on a freeway-widening project through an ecologically sensitive area of coastal San Diego County and on a controversial plan to drill a tunnel into the Berkeley Hills. And Schwarzenegger wants to empower a panel of his appointees to waive environmental rules on other projects.

Schwarzenegger has infuriated the Sierra Club and other groups with such proposals and with a letter he sent to President-elect Barack Obama last week asking that federal environmental reviews be waived on the highway projects.

"This is a stunning turnaround by the governor, and I am baffled by it," said Tom Adams, board president of the California League of Conservation Voters.

Schwarzenegger says that the projects can be completed without environmental ruin and that with the incoming Obama administration proposing to pump huge sums into public-works projects, California needs to be ready to jump.

"What is important here is not to have projects ready in three years from now, which can happen with the environmental approvals and other kind of red tape that you go through," Schwarzenegger said in a conference call with reporters Thursday. "So I think it is important to see what projects you have ready to go now."

Administration officials note that the state has waived environmental rules in the past, including for the reconstruction of two bridges on the 5 Freeway shattered by the Northridge earthquake -- a move that allowed rebuilding to be done in 66 days. It is appropriate to fast-track projects now, they say, because of the state's economic emergency.

Schwarzenegger is proposing to largely exempt the 10 highway projects from the California Environmental Quality Act, a 1970 law requiring review of big projects and efforts to offset any deleterious effects on the surroundings.

Under Schwarzenegger's plan, environmentalists would not be alone in losing influence over how projects are constructed. The power of the governor's own resource protection agencies to intervene would also be weakened: A panel of administration appointees would be able to waive state regulations.

Among the projects at issue is a $102-million carpool lane on Interstate 805 in San Diego County. It still lacks a state Coastal Commission permit and must be reviewed to determine if endangered species would be harmed.

Adams noted that several of the projects propose work on California 99 in the San Joaquin Valley, which environmentalists say has some of the worst air pollution in the nation. To Adams, it's a simple equation: More traffic equals more pollution.

The most contentious projects are tangled in litigation, including the delayed Sacramento carpool lane project and a $420-million effort to bore a tunnel through the Berkeley Hills to ease heavy Bay Area traffic on California 24. A judge is expected to rule in the spring on a lawsuit over possible effects of noise and pollution from the tunnel project on two nearby schools.

But if lawmakers eventually relent and agree to the governor's wishes, state legislation would trump those legal decisions and the projects could move ahead.

The Democrats who dominate the Legislature have so far demurred.

They are offering instead a fast-tracking process for the projects that conservationists find more acceptable. Administration officials say that will not get construction moving quickly enough.

The standoff, which comes as the state is on the verge of running out of cash, has pitted two of the governor's core constituencies -- backers in big business and allies in the movement to protect the oceans and air -- against each other. Schwarzenegger has insisted he can balance the two and make California a model economy that is both green and prosperous.

Environmentalists say he has lost that balance.

"The governor has a green streak, but it's in conflict with his desire to pour more concrete and build more highways," said Sierra Club California director Bill Magavern. "We don't buy the idea that to stimulate the economy, we need to weaken standards that protect the public health and environment."

Magavern and others contend that the state has plenty of more ecologically friendly construction projects that should go to the front of the line. They point to a report last month by California's nonpartisan Legislative Analyst's Office, which suggested that the transportation projects spotlighted by Schwarzenegger face formidable odds even if the state's environmental rules are waived.

The report noted that eight of them still face lengthy federal environmental reviews and design preparations that would delay construction. A better alternative, the report said, would be pressing ahead with 122 less contentious projects around the state involving rehabilitation of battered pavement, bridges and highway drainage.

Environmentalists have a list of scores of other "green" projects -- mostly improvements to public bus and rail transit systems -- that are ready to go but lack funding.

"Nobody is opposed to getting good jobs on the ground now, but we can do that without circumventing environmental protections," said Kathryn Phillips, a policy advocate for the nonprofit group Environmental Defense.

Waiving those protections could set a dangerous precedent, Adams and other environmentalists said.

For years, Republican lawmakers have been trying to relax the state's environmental rules in budget negotiations, in which they hold enough votes to block the spending plan. If the governor wins exemptions for the 10 projects, GOP lawmakers will almost certainly push for more, said Adams.

"They want to hijack the budget process to enforce minority rule on the environment," he said.

Republican lawmakers say they're trying to add a dose of common sense to a process that too often adds unnecessary delays to road-building and other work.

As for Schwarzenegger, administration officials say he is merely trying to get shovels in the ground to stimulate the economy. They say he has no intention of dismantling the state's environmental laws.

"For anyone to challenge this governor's environmental credentials is beyond me," said Caltrans Director Will Kempton.

"What the governor is talking about is not doing away with environmental controls. . . . We think we have an economic emergency. We think that emergency requires we look for ways to create jobs," he said.

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Anonymous said...

How exactly to raise funds for a charity.