FCC Wants to Give Corporations Their Own Internet

And now the rights of corporate ownership officially supercede those of individual citizens. this isn't new, but the courts and the bureaucracy are going ahead and getting the big govt sellout locked in so we won't be able to repeal these inane conflicts of interest for a very long time or without extreme difficulty. Fuck corporate rule! Corporations aren't people. They should be dismantled every 20 years with the remaining holdings distributed among their workers, who may then apply for a brand new corporate charter, starting over from scratch every 20 years. It would help to prohibit the ridiculous amount of control a few corporate CEOs  and their executive boards have over our joke of a political process. Lobbying needs to be redefined with stricter limits, as well. And when you are interviewing for jobs in the public and private sector, you need to choose which one you'll stay in for 7 years. No more of this revolving door between regulating agencies and the industries/companies they regulate. It's all a huge shitsoaked conflict of interest that has destroyed a whole generation of workers, at least, and cannot provide any kind of future for the next generations of US citizens. The oligarchy must be destroyed by any means possible. Corporate leadership is far from patriotic: they hold the bulk of their fortunes in tax haven banks overseas to keep from paying taxes, drastically undercutting the federal budget during a crucial period in a failing economy 6 years deep in a "small d" depression, AND these traitors get to dictate policy and handpick their own candidates to do their bidding while holding office? Bullshit! Hang them all high! They betray everything sacred about this country and her consitution, all to make themselves richer at the expense of the nation and her people.

EAT THE RICH! and pile their bones up so high they reach the moon.--jef

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The New Proposal Mocks Net Neutrality
by ALFREDO LOPEZ


When a federal court trashed its “net neutrality” compromise policy in January, the Federal Communications Commission assured us that the Internet we knew and depended on was safe. Most activists didn’t believe federal officials and this past week the FCC demonstrated how realistic our cynicism was.

The Commission announced last week that among its proposals on the Internet, due for full discussion on May 15, was one which would give access providers the right to sign special deals with content producers for connections that are faster and cleaner than the connections most websites use. It’s precisely the nightmare that court decision threatened.

In the predictable outcry and immediate debate over the FCC’s announcement, however, two major issues seemed to be lost.

To deliver this faster connection, the Internet giants will have to change the Net’s protocols, establishing a fast lane that completely destroys the technological basis of Internet neutrality. They will, effectively, be allowed to set up an alternate Internet.
At the same time, the announcements raise a question about the FCC’s role. To develop this proposal, it has obviously been talking to the very companies it is supposed to regulate and has written regulations based primarily on a concern about their ability to make lots of money.

Isn’t this the opposite of what federal regulation is supposed to do?

When the debate dust settles, it appears that not only may we lose the Internet as we know but we have no agency in government looking out for our interests.

The background has been covered on this website but, to recap:

Access (or service) providers offer connections to put you on the Internet and give you several speeds to choose from. They are mainly cable companies like Comcast and telecommunications companies like Verizon. Content providers use those connections to deliver what you want to see and read. Every website owner is a content provider, including biggies like Netflix.

Net Neutrality is the principle that service providers — like Verizon and Comcast — can’t discriminate in the delivery of content or provision of access based on user, content, site, platform, application, type of attached equipment, and modes of communication. If you go on-line, you can reach everything anyone else can. It was the law until this past January.

That was when a federal court struck down the provision finding that cable companies like Comcast weren’t subject to the neutrality rules that govern telephone companies and so net neutrality, based on the telecom industry’s practices, didn’t apply to high-speed providers. They are, after all, cable companies and anyone who subscribes to cable television with its multiple “programming packages” that give you a monthly dose of sticker shock knows there’s nothing “neutral” about cable.

In short, service provider companies can now charge content providers money to speed up their content delivery and the content providers can limit access to that faster content to people paying a higher price for it.

While the decision was based on cable company practice, it obviously benefits telecoms like Verizon who also offer high-speed service.

Apparently, the FCC wasn’t too unhappy either. Chairman Tom Wheeler (a former telecom industry lobbyist) reacted in stunningly triumphant terms, assuring us all that our access to the Internet will be completely protected. In fact, he said the ruling actually gives the FCC more regulatory power. This new proposal, carving out a slice of the Internet for rich corporations to operate more quickly and cleanly, was apparently what he meant.

In his defense of the current FCC plan, Wheeler explains that we would all still have access to everything on the Internet. The proposal, he explains, “will restore the concepts of net neutrality consistent with the court’s ruling in January.” But that January ruling threw Net Neutrality out the window and it’s clear that with this new proposal our access to certain content will be slower, more prone to start and stop “buffering” and less crisp than the faster connection unless we pay more for it.

It’s like the locksmith assuring us that our broken door lock will remain broken.

If that spasm of regulatory double-speak doesn’t provoke a groan, the argument by decision defenders will: they say that, while the companies will pay for the faster connection, no access provider will charge the consumer more for it.

But the content provider will. Obviously an outfit like Netflix is not going to offer this higher speed service that it is paying the access providers handsomely for to customers without charging them more for it. In fact, if past practice is any indication, even those of us who don’t or can’t pay for faster internet service we will all see our fees for watching this kind of on-line content rise, whether we’re watching it on the faster connection or not. Netflix pays Comcast more and charges the pass-along costs (with some profit mixed in): just the kind of hustle Net Neutrality was invented to prevent.

If the proposal is approved, as is expected, Net Neutrality will be buried. But the true threat to the Internet’s existence isn’t only the “pay for speed” proposal. To make this happen, providing companies will have to restructure their technology to allow for a faster “lane” on the Internet. There already are, of course, various speeds of “high-speed” service and that is maintained by the company’s determining which connecting server the customer is going to access. When you enter the Internet you are immediately connected to a server that handles outgoing and incoming traffic at a specific speed. If you pay for higher speeds, you get the higher-speed systems with their servers.

All of this, however, has up to now been handled at the user or customer level. The Internet itself remains the same. What the FCC is proposing is a new way of regulating speed. Now it is the content provider who is assigned a specific speed lane and any user who pays can access that high-speed content. To make this possible, the access provider will have to establish not a higher speed connection server but a completely separate connection to the Internet. This isn’t a faster lane on the highway; it’s a completely separate highway.

With that “alternate Internet” established, and with a small empire of developers continuously improving it, the power of providers to control all Internet content is now in place. They can start with Netflix, but they legally have power to channel any Internet content over that super-highway, leaving most content providers in the dust. That will certain include most websites your visit, including this one. As speed over the Internet improves with new technological development, guess where most of the development investment is going? As new streaming technology improves, content developers will have to pay to take advantage of it and most of us just don’t have that kind of money.

The impact is also international because the Internet has no national boundaries and the rules governing any U.S. based company apply to all its activities world-wide unless the government of a specific country objects. That objection will rarely happen because most governments won’t care or will take a pay-off (in the form of a tax payment or licensing fee) to shut up. In fact, governments all over the world can now treat this as another form of revenue.

This kind of corporate control over the Internet and our communications is frightening and control is what the corporations are seeking. It’s been the goal of every major company to control as much access as they can, growing their “user-base” and profits in the process. In fact, the prospect of a wide open internet has now attracted a couple of “data giants”: Google and Facebook. Each company is now developing technology to provide access to everyone on earth using signal bouncing balloons (in Google’s case) and drones and satellites (in Facebook’s). While both companies protest that their intentions are altruistic (providing Internet to all humans), the timing of their plans in light of this decision seem like the good old pursuit of profit.

Rhe main question isn’t whether these people will try to do this because that’s answered by their history: Of course they will. The question then is: What is the FCC doing about it?

This week, coalitions of Internet freedom activists were making plans to make their presentations before the FCC and to lobby Congress and to do letter-writing campaigns to just about any concerned person in government. All of this has proven to be important and useful work and it has ended in some successes in the past.

But why should any of us have to do this? Isn’t the very role of the FCC to protect and represent the public? While neo-con steroids that have been driving it for the last two decades, the FCC’s legal responsibilities remain the same: not to protect the interests of corporations but to protect our interests against corporations.

Clearly, with a proposal that represents corporate interests, the FCC isn’t doing any such thing. Some of us aren’t surprised; none of us should be.

Insider Trading by the Legislative and Executive Branches of Govt.

Energy Nominee Ernest Moniz Criticized for Backing Fracking & Nuclear Power; Ties to BP, GE, Saudis

Tuesday, March 26, 2013 by Democracy Now!

President Obama’s pick to become the nation’s next secretary of energy is drawing criticism for his deep ties to the fossil fuel, fracking and nuclear industries. MIT nuclear physicist Ernest Moniz has served on advisory boards for oil giant BP and General Electric, and was a trustee of the King Abdullah Petroleum Studies and Research Center, a Saudi Aramco-backed nonprofit organization.

In 2011, Moniz was the chief author of an influential study for MIT on the future of natural gas. According to a new report by the Public Accountability Initiative, Moniz failed to disclose that he had taken a lucrative position at a pro-drilling firm called ICF International just days before a key natural gas "fracking" study was released. Reaction to his nomination has split the environmental community. Advocacy groups such as Public Citizen and Food & Water Watch are campaigning against Moniz’s nomination, but the Natural Resources Defense Council has praised his work on advancing clean energy based on efficiency and renewable power. We speak to Kevin Connor of the Public Accountability Initiative and ProPublica reporter Justin Elliott, who have both authored investigations into Moniz’s ties to industry.

The Party of Hate

(This article was written by a member of Reagan's cabinet.--jef)

Republicans Cross the Rubicon
 by PAUL CRAIG ROBERTS

Does anyone remember when National Public Radio was an independent voice?

During the 1980s NPR was continually on the case of the Reagan administration. NPR certainly had a Democratic slant, and a lot of its reporting about the Reagan administration was one-sided. Yet, NPR was an independent voice, and it frequently got things correct.

In the 21st century that voice has disappeared, which was the intention of the George W. Bush regime. Bush put a Republican woman in charge who made it clear to NPR producers and show hosts that the federal part of their funding was at risk.

Money often over-rules principle, and when corporations added their really big money NPR collapsed. Today the local stations still pretend to be funded by listeners, but if you have noticed, as I have, there are now a large number of corporate advertisements, disguised in the traditional terms “with support from . . .” If you are not listening to classical music, you are listening to corporate advertisements.

Today the entire “mainstream media” is closed to truth-tellers. The US media is Washington’s propaganda ministry. The US media has only one function–to lie for Washington.

What reminded me of NPR’s surrender was NPR’s August 31 report with its two regular talking voice political pundits discussing the Republican Convention and Romney’s speech. After witnessing the Republicans at their nominating convention at Tampa violate all their own rules and ride roughshod over the Ron Paul delegates, one expected some discussion of the Republican Party’s refusal to allow Ron Paul to be placed in nomination or his delegate account to be announced.

The operative question was obvious: How can the American people trust the Republicans with the awesome power of the executive branch when the Republican Party just finished demonstrating for all to see its Stalinist qualities by crushing the anti-war, anti-police state wing of its party?

The authoritarianism was gratuitous. Romney had a sufficient number of delegates to be nominated. It would have cost Romney nothing to follow the rules and allow Ron Paul to be placed in nomination and his delegate numbers to be reported. Instead, Romney wrote off the liberty contingent of the Republican Party. The Brownshirts demonstrated their power.

The last Republican who wrote off a chunk of his own party was Barry Goldwater, and he went down to crushing defeat. Makes one wonder if the Republicans are relying on those electronic voting machines programed with proprietary Republican software that leave no paper trail. The Democrats have acquiesced to Republican election theft. There have been numerous cases where exit polls indicate that voters chose a different candidate than the one chosen by the Republican programmed voting machines.

One would have thought that NPR and its pundits would have found the parallel with Goldwater worth comment, but the suppression of the Ron Paul delegates was already down the memory hole.

One would also have thought that NPR and its pundits would have found Clint Eastwood’s speech a fascinating topic of discussion. Eastwood had a Republican National Committee approved speech, but discarded it. Instead, Eastwood stood beside an empty chair and pretended to be talking to Obama, but it could just as well have been Romney in the chair. By pretending to be talking to Obama, Eastwood made his points without eliciting boos from the Republican audience.

Not many in the Republican audience caught on, but there were some stony faces when Eastwood said “I haven’t cried that hard since I found out that there are 23 million unemployed people in this country.” More stony Republican faces when Eastwood showed his opposition to the Iraq and Afghan wars and asks the chair, “why don’t you just bring them [the troops] home tomorrow morning?” Those who thought he was digging at Obama cheered; those who realized he was criticizing hardline Republican positions were displeased.

But NPR and the US media in general are uncomfortable with such real news as a political party being told off by one of its heroes and a political party sufficiently stupid to repeat Barry Goldwater’s mistake. The establishment might complain. The money might dry up or employees be fired for permitting such a story to be aired. The Democrats lost their independent financing when jobs offshoring destroyed the unions. There are no longer countervailing powers to Wall Street and the corporations, which have been endowed by the Republican US Supreme Court with First Amendment rights to purchase US elections and placed in charge of the US Treasury, the regulatory agencies and the Federal Reserve.

In Tampa the Republicans wrote off the Ron Paul vote, because they are enamored of power and its gratuitous demonstration. Can people so desirous of power and the thrill of its use be trusted to let go of power when they lose the next election? There are enough presidential executive orders and national security orders, even some signed by the Democrat Obama, that any president can assert them and refuse to face election.

Once Rome accepted Julius Caesar’s coup, the Roman Republic was gone. Those who tried to save the Roman Republic by assassinating Caesar failed, because the majority of the legions had gone over to the dictatorship, which promised them more money than the Republic had. Caesar’s name became the title for Rome’s dictators.

In the US, even your friendly local police have gone over to dictatorship. And they are armed with its tools. A friend, a competitive shooter for accuracy, told me that as he left his gun club on August 27, a local sheriff department entered in a military armored vehicle, something one would expect to see on a battlefield, followed by a large sheriff’s department truck full of military equipment. He says that the gun club allows local police to use the club’s facilities so that club members are not stopped and harassed about their firearms as they go to and from the club. He reports that the police will line up 30 abreast, with automatic weapons, not allowed to club members, and fire at one target, with 30 police emptying 30-round magazines at the same target.

He once asked our protectors if they were practicing for some competition. The answer was, “No, we are preparing to control the outcome when there is trouble.”

Control is the operative word. We have seen for a number of years now that the Republican Party is power-addicted. Remember when the Bush administration fired the US Attorneys who refused the order to indict only Democrats? Remember the Republican Party’s transparent frame-up of popular Alabama Democratic governor Don Siegelman? Evidence indicates that the Republican operative Karl Rove took advantage of a Republican federal judge, vulnerable according to news reports to corruption charges, and a compliant Republican US attorney in Alabama to railroad Governor Siegelman. The message to Democrats was: if you get elected in our Southern Territory, we will get you.

But never fear, we have “freedom and democracy.” George W. Bush told us so himself.

The weak, chicken-hearted Obama administration has not commuted Siegelman’s outrageous sentence. The inability of the Democrats to stand up for their own members and their own principles is the best indication we have that Republican tyranny will prevail.

It didn’t take Caesar George W. Bush 10 minutes to wipe out the prison sentence of vice president Dick Cheney’s chief aid for revealing the identity of a CIA operative, a felony under US law. But the Obama Justice (sic) Department supports Karl Rove’s destruction of one of its most popular governors.

It was the German left-wing’s weak opposition to the National Socialists that gave the world Hitler.

The Republican Party has become the Party of Hate. Decades of frustration have made Republicans mean. They object to everything that has happened since the Great Depression in the 1930s to make the US a more just and humane society.

The Republican Party wants power so that it can smash all vestiges of regulation and welfare and all those of whom Republicans disapprove: the poor, the minorities, liberals, the imagined “foreign enemies,” war protestors and others who challenge authority, those American weaklings who have compassion for the unfortunate, the US Constitution, that pinko-liberal-commie document that coddles criminals, illegal aliens, and terrorists, and all dissenters from the policy of enriching the one percent at the expense of the 99 percent.

Above all else, the Republicans want to turn Social Security and Medicare into profit centers for private corporations.
Would the world be surprised if Republicans donned brown shirts? America has declared itself to be “the indispensable nation,” justifying its hegemony over the world. Any country that does not submit to Washington is “a foe.” The neoconservative propaganda that America is the indispensable nation with a right to world hegemony sounds a lot like “Deutschland uber alles.”

A decade ago the Bush regime demonstrated that it could over-ride US statutory law, the US Constitution, and the constitutional separation of powers in order to concentrate unaccountable power in the office of the president.

The Democrats, when they gained control of Congress in the mid-term elections, did nothing about the unprecedented legal and constitutional crimes of George W. Bush. The Democratic Speaker of the US House of Representatives, who could easily have impeached George W. Bush for his obvious crimes against US law and the US Constitution, announced that “impeachment is off the table.” Money was more important to House Speaker Nancy Pelosi than the rule of law.

When a people have no political party that represents them, they are doomed to tyranny.

And to war.

Russia and China are in the way of Washington’s hegemony. Romney, the Republican presidential candidate, has declared Russia to be “our number one geopolitical foe” for opposing Washington’s plans to overthrow by violence the Syrian government. Why is overthrowing the Syrian government so advantageous to Washington that Romney in a fit of pique recklessly brought the United States into direct confrontation with Russia?

Arrogance and hubris lead to wars. Do Americans really want a person as president who is so reckless as to gratuitously declare a large nuclear-armed country to be our number one enemy? The American and Israeli trained Georgian army did not last an hour when the former Soviet republic foolishly, on Washington’s encouragement, provoked the Russian bear.

Meanwhile the Obama regime, concerned with China’s rapid economic rise, has indicated that it thinks China is the number one enemy. The Obama regime has forgot that China, when a primitive, backward country, fought the US to a stalemate in Korea more than a half century ago.

The Obama regime has announced that the US Navy is being repositioned to the Eastern Pacific, that the US regards the South China Sea as America’s national interest, and that new naval, air, and troop bases are being established in the Philippines, South Korea, Vietnam, Thailand, Australia, New Zealand, and elsewhere in the region. The purpose of these bases is to block China’s access to energy and raw materials, which is what Washington did to Japan in the 1930s.

Are Americans aware that the hubris and idiocy of their political leaders have now saddled Americans with the burden of two number one enemies, both well equipped with armies and nuclear weapons? Only Iran can be happy about this as it moves Iran off the front burner.

Washington is putting its forward military bases in place, and the propaganda war is being cranked up. The subservient British press was quick to fall in line with Washington. A British reader of my column reports that the Guardian/Observer and New Statesman are at Putin’s throat: “Every day this week we’ve had Russia/Putin hate stories. Headlines such as ‘medieval dictatorship’ as we saw in last Sunday’s Observer [August 26] are common. In this week’s New Statesman we have a front page picture of Putin with the headline ‘Putin’s reign of terror.’ They’ve got Putin with a crown on his head and dressed as a Tsar-like figure. It’s a relentless information battlefield assault on Russia.”

Another line of Washington’s attack on Russia is Washington’s covert backing of Chechnya terrorist groups in the Caucasus and funding of front groups in Russia for protest and terrorist organizations. Allegations of corruption and stolen elections come primarily from Washington-funded groups operating in Russia. See http://www.globalresearch.ca/al-qaeda-blitzkrieg-wests-terror-battalions-eye-russia-next/ and http://landdestroyer.blogspot.com/2012/08/bombshell-us-neo-cons-state-department.html Through these methods, Washington hopes to destabilize the Russian government and to isolate it internationally in order to remove a barrier to Washington’s hegemony.

Two of Romney’s right-wing neoconservative advisors said that Romney as president would “confront Moscow on its poor record on democracy, human rights, and the rule of law.” The western media will not comment on the irony of these propagandistic allegations against Russia issuing from the US, the country that has destroyed habeas corpus and due process protections of the accused, tortured detainees in violation of the Geneva Conventions and its own statutory law, kidnaps, tortures, and assassinates foreign nationals as well as its own citizens, supports terrorism against Libya, Syria, Iran, and Russia, runs roughshod over international law, never submitting to law itself but using law as a weapon against governments that it has demonized, while it carries on military operations against seven Muslim countries without a declaration of war.

The Nuremberg Trials of Germans after World War II established that naked aggression is a war crime. Naked aggression, renamed by Washington, “preemptive war,” has become the operative principle of US foreign policy.

As Putin remarked, Washington is guilty of the crimes of which it accuses others, but Washington permits all things to “the indispensable nation.”

Amerika uber alles!

Contaminated Inquiry: Prof with Money Ties to Industry Led Fracking Study

Friday, July 27, 2012 by Common Dreams

Report: UTexas Study Spun the Facts and Misled the Public

 

A recent University of Texas study, which claims to prove that the natural gas extraction process known as fracking does not cause environmental damage or water contamination, was led by a gas industry insider who currently holds up to $1.6 million in stock at a large fracking company. The information was revealed in a new exposé released by the Public Accountability Initiative (PAI).

 Logo from PAI study: Contaminated Inquiry: How a University of Texas Fracking Study Led by a Gas Industry Insider Spun the Facts and Misled the Public The 400-page pro-fracking review in question was led by author Charles Groat of the University of Texas. Neither Groat nor the University openly reported that Groat himself is on the board of a fracking company, Plains Exploration and Production Company.

As a board member, Groat receives 10,000 shares of restricted stock a year. His holdings as of July 19th were worth $1.6 million. He also receives an annual fee, which was $58,500 in 2011, according to filings.

Groat did not reveal his position with the company when the report was released and told reporters that the university had turned down all industry funds for the study.

Groat's report, Fact-based Regulation for Environmental Protection in Shale Gas Development, said that it separated "fact from fiction" and gave policy makers a way forward in a major natural gas boom. The study was reported widely by major news outlets.

On the contrary, the PAI maintains that Groat's study contains unfounded facts and misinformation, misleading selective language, and includes inaccurate claims of peer review.

Groat's research covered fracking operations in Texas, Louisiana, and the Marcellus Shale area. His company, Plains Exploration, is currently fracking in shale formations in Texas.

Following the PAI exposé, titled Contaminated Inquiry: How a University of Texas Fracking Study Led by a Gas Industry Insider Spun the Facts and Misled the Public, the university says it will assemble a group of independent experts to review the integrity of Groat's study.

PAI's exposé is the second in a series of studies revealing rampant and widespread industry ties to pro-fracking reports.

The Fed Audit

Sen. Bernie Sanders, D-VT - July 21, 2011

The first top-to-bottom audit of the Federal Reserve uncovered eye-popping new details about how the U.S. provided a whopping $16 trillion in secret loans to bail out American and foreign banks and businesses during the worst economic crisis since the Great Depression. An amendment by Sen. Bernie Sanders to the Wall Street reform law passed one year ago this week directed the Government Accountability Office to conduct the study. "As a result of this audit, we now know that the Federal Reserve provided more than $16 trillion in total financial assistance to some of the largest financial institutions and corporations in the United States and throughout the world," said Sanders. "This is a clear case of socialism for the rich and rugged, you're-on-your-own individualism for everyone else."

Among the investigation's key findings is that the Fed unilaterally provided trillions of dollars in financial assistance to foreign banks and corporations from South Korea to Scotland, according to the GAO report. "No agency of the United States government should be allowed to bailout a foreign bank or corporation without the direct approval of Congress and the president," Sanders said.

The non-partisan, investigative arm of Congress also determined that the Fed lacks a comprehensive system to deal with conflicts of interest, despite the serious potential for abuse.  In fact, according to the report, the Fed provided conflict of interest waivers to employees and private contractors so they could keep investments in the same financial institutions and corporations that were given emergency loans.

For example, the CEO of JP Morgan Chase served on the New York Fed's board of directors at the same time that his bank received more than $390 billion in financial assistance from the Fed.  Moreover, JP Morgan Chase served as one of the clearing banks for the Fed's emergency lending programs.

In another disturbing finding, the GAO said that on Sept. 19, 2008, William Dudley, who is now the New York Fed president, was granted a waiver to let him keep investments in AIG and General Electric at the same time AIG and GE were given bailout funds.  One reason the Fed did not make Dudley sell his holdings, according to the audit, was that it might have created the appearance of a conflict of interest.

To Sanders, the conclusion is simple. "No one who works for a firm receiving direct financial assistance from the Fed should be allowed to sit on the Fed's board of directors or be employed by the Fed," he said.

The investigation also revealed that the Fed outsourced most of its emergency lending programs to private contractors, many of which also were recipients of extremely low-interest and then-secret loans.

The Fed outsourced virtually all of the operations of their emergency lending programs to private contractors like JP Morgan Chase, Morgan Stanley, and Wells Fargo.  The same firms also received trillions of dollars in Fed loans at near-zero interest rates. Altogether some two-thirds of the contracts that the Fed awarded to manage its emergency lending programs were no-bid contracts. Morgan Stanley was given the largest no-bid contract worth $108.4 million to help manage the Fed bailout of AIG.

A more detailed GAO investigation into potential conflicts of interest at the Fed is due on Oct. 18, but Sanders said one thing already is abundantly clear. "The Federal Reserve must be reformed to serve the needs of working families, not just CEOs on Wall Street."

To read the GAO report, click here.

How Banks Cheat

Artful Liars

by CHRISTOPHER BRAUCHLI

I think a lie with a purpose is wan iv the’ worst kind an’ the mos’ profitable.
– Finley Peter Dunne On Lying

There was something refreshing about Bernie Madoff.  He robbed Peters to pay Pauls and it worked well until there were more Pauls than Peters. It was straightforward and simple.  And that is the difference between him and Barclays, JPMorgan Chase, Goldman Sachs and the many other large financial institutions that cheat those with whom they deal. Bernie was not subtle.  No Congressional hearings or hearings in the British parliament were required in order to understand what happened.

A man named Diamond runs Barclays and a man named Dimon runs JPMorgan Chase. The similarity in names is not all they have in common. Each man has presided over an institution that has dealt less than fairly, in the case of JPMorgan, with its customers,  and in the case of Barclays, with consumers everywhere.  JPMorgan did it by ripping off its customers and Barclays did it by manipulating the LIBOR rate.  (It is now reported that four other major European banks are being investigated for similar behavior.)

Barclays manipulated the LIBOR rate from 2005-2009.  The LIBOR rate is the rate banks charge each other for inter-bank loans.   

According to Ezra Klein from 2005 to 2007 Barclay’s placed bets that LIBOR rates would increase.  Barclays would then report artificially high rates to the authority gathering the rates from the banks to establish the LIBOR rate thus improving the chance that the LIBOR rate would go up and the bets the firm made would pay off.    Investors on the other side of the bet were losers and borrowers whose interest rates on loans were set to LIBOR were paying artificially high rates. Beginning in 2008 when the solvency of financial institutions was being questioned, instead of reporting artificially high rates Barclays reported artificially low rates leading regulators to believe the bank was healthier than it was thus reducing the likelihood that its stability would be questioned.  (When rates were low consumers benefitted since mortgages, credit card loans and other financial transactions are tied to those rates.)   When the LIBOR manipulation came to light, Mr. Diamond sent a memo to staff saying he was “disappointed because many of these things happened on my watch.” 

On July 2 he said that although disappointed he would not resign his position.  On July 3 he resigned.  Chancellor of the Exchequer, George Osborne, said the episode was “evidence of systematic greed at the expense of financial integrity and stability” and said the bank was in flagrant breach of its duty “to observe proper standards of market conduct. . . .”  Any reader who tries to understand my attempt to describe the LIBOR manipulation and its effects will certainly appreciate the simplicity of Mr. Madoff’s scheme.

JPMorgan Chase is one of the largest mutual fund managers in the country.  In addition to selling its own funds, it is in a position to sell other funds to its customers.  According to a story in the New York Times its sales personnel were encouraged to sell customers its proprietary funds rather than those of competitors, even when the competitors’ funds had historically performed better than the bank’s funds. One former employee said he was “selling JPMorgan funds that often had weak performance records, and  I was doing it for no other reason than to enrich the firm.  I couldn’t call myself objective.”  Some people might have been surprised at those disclosures thinking that the bank would have reformed its ways after 2011.  That was the year the bank was ordered to pay $373 million to American Century Investments because it failed to honor its agreement with American Century to promote American Century products when it acquired that firm’s retirement-plan services unit.  The arbitrators who heard the case said JPMorgan employees were rewarded for pushing JPMorgan’s own products.

Goldman Sachs is another venerable institution that benefits itself at the expense of its customers.  In March 2012 Chancellor Leo Strine of the Court of Chancery in Delaware issued a lengthy ruling in the case of in re El Paso Shareholder Litigation.   He criticized Goldman for its blatant conflict of interest when trying to acquire El Paso Corp describing it as “disturbing behavior.” Jonathan Weil who writes for Bloomberg,  made the observation about Goldman’s conduct in that transaction that  Goldman had “every incentive to maximize its own investment and fleece El Paso shareholders.”   

At roughly the same time Chancellor Strine’s opinion was making the news a former Goldman employee published an op-ed piece in the New York Times in which he said, among other things, that the firm’s clients were “sidelined in the way the firm operates and thinks about making money. . . . It is purely about how we can make the most possible money off them {clients.}.”

Readers should understand that the foregoing does not purport to be a complete list of banks that have devised schemes to enrich themselves at the expense of their customers. It is only a small sampling.  As I said at the outset, the nice thing about Bernie was how straightforward his malfeasance was.   Everyone can understand it.  The banks are no more honest than he-just more artful.

Shocking Conflict of Interest: Private Water Companies Partner With Fracking Lobby

Selling water to drillers, two of the nation's biggest private water utilities may soon profit from treating the wastewater.

By Sarah Pavlus, American Independent News Network
Posted on April 19, 2012

Two of the country's largest private water utility companies are participants in a massive lobbying effort to expand controversial shale gas drilling -- a heavy industrial activity that promises to enrich the water companies but may also put drinking water resources at risk.

The situation -- which some watchdogs describe as a troubling conflict of interest -- underscores the complex issues raised by the nationwide push to privatize infrastructure and services like water, prisons, and roads.

The water companies -- American Water and Aqua America -- are leading drinking water suppliers in Pennsylvania, where drilling is booming. They also sell water to gas companies -- which use a drilling technique that requires massive amounts of water -- and have expressed interest in treating drilling wastewater, a potentially lucrative opportunity.

These investor-owned, publicly traded water utility companies are also dues-paying "associate members" of the gas industry's powerful Marcellus Shale Coalition, a fact confirmed by coalition spokesman Travis Windle, who says associate members pay $15,000 annually in dues. "Our associate members are really the backbone of the industry," adds Windle.

Both water companies serve millions of people across the country -- Aqua America operates in 11 states and American Water in more than 30.

The coalition, which is led by major gas producers, contends that "responsible development of natural gas" will bolster the region's economy while providing an important source of domestic energy. It has reported over $2 million in Pennsylvania lobbying expenditures since 2010.

Aqua America joined the coalition in 2010 and Pennsylvania American Water -- a subsidiary of American Water -- joined in 2011, according to the coalition's quarterly magazine, which publishes a full member list in each issue.

Shale gas drillers use a combination of horizontal drilling and hydraulic fracturing, or "fracking," to extract gas from the Marcellus formation in Pennsylvania. The controversial technique forces millions of gallons of water -- mixed with sand and chemicals -- into the ground to crack the shale rock and release gas. In addition to the potential risks posed by actual fracturing, the process produces large amounts of toxic wastewater that can be difficult to dispose of safely.

The Environmental Protection Agency is currently conducting a congressionally-mandated study "to investigate the potential adverse impact that hydraulic fracturing may have on water quality and public health." Pennsylvania is home to three of the seven sites selected for the nationwide study.

Separately, the EPA is testing the water of some Pennsylvania residents who say that nearby gas drilling contaminated their wells. According to the EPA, early test results indicate the water is safe to drink, however, some environmentalists disagree with that analysis.

In the meantime, the water companies are selling water to the drillers while calling for fracking to be done in an environmentally responsible manner. In a presentation to investors last month, American Water stated that it is "realizing additional revenues from water sales to drilling companies while remaining vigilant in protecting our water sources." In the presentation, the company noted it is "currently selling water to gas drillers at 34 distribution points in Pennsylvania," and that it "sold 250.4 million gallons of water to gas drillers from January through December of 2011, producing $1.6 million in revenues."

(Some public water utilities sell to drillers too, but no public utilities are part of the Marcellus Shale Coalition.)

American Water spokesman Terry Maenza says the company's support for environmental protection is unchanged by its role in the shale coalition and that it is also a member of numerous environmental groups.

"By the nature of our business, we will continue to be stewards of the environment, ensuring water source protection," says Maenza.

The company isn't currently in the drilling wastewater treatment business, according to Maenza, though during a quarterly earnings call last year, American Water CEO Jeff Sterba told investors, "We are very definitely looking and working in the wastewater treatment area." Maenza declined to comment on any specific initiatives. Aqua America executive Karl Kyriss says his company's involvement in the coalition helps protect water resources.

"By participating, we can have some direct input into the group that is looking to support development of the Marcellus Shale," says Kyriss. "But we are very much committed that it be done in an environmentally sensitive and protected manner. And we think we can do that better from the inside than just sort of watching what happens."

Aqua America is aggressively positioning itself to take advantage of what CEO Nick DeBenedictis has described to investors as a "water-energy nexus that could have a positive impact on the future of our company." In recent years, the company has made sizeable acquisitions in Texas and Ohio -- states that, like Pennsylvania, are home to large shale gas plays -- and is also building a pipeline in Pennsylvania to supply water to drillers.

DeBenedictis believes the pipeline will ease the wear and tear on roads and the environment currently caused by trucks carrying water to wells. Recently, however, that pipeline has come under fire from local anti-drilling activists because the project will displace dozens of residents from a mobile home park.

Like American Water, Aqua America is not currently in the drilling wastewater treatment business, but may expand into that market in the future.

Some environmental advocates see potential conflicts between the interests of the private water industry and the interests of drinking water consumers.

"If American Water and Aqua America wanted to ensure that their water supplies were protected, they would support a national ban on hydraulic fracturing for shale gas," argues Mary Grant, a researcher at Food and Water Watch, which has reported on Aqua America's ties to the coalition. "But, instead of acting on the precautionary principle, they are paying thousands of dollars a year to an industry coalition that advocates for shale gas development, despite the risks to water quality."

"We are concerned that these relationships encourage investor owned water utilities to endorse shale gas development despite its risk to public water supplies," Grant says. Eric Goldstein, a senior attorney for the Natural Resources Defense Council, adds, "Sometimes the interests of private ownership are inconsistent with the concept of preserving our water resources in the public trust for future generations. And the potential clashing of those interests is why these questions have been raised about whether for-profit companies ought to be running public water supplies."  

White House refuses to reveal ties with Monsanto the devil

RT 23 February, 2012

Despite requests made under the Freedom of Information Act (FOIA) for correspondence out of the White House, the Obama administration is refusing to comply with calls to disclose discussions with Monsanto the devil-linked lobbyists.

The US-based non-profit group Public Employees for Environmental Responsibility (PEER) is demanding that the White House comply with a FOIA request for information that might link the Obama administration with lobbyists tied to the Monsanto the devil corporation. Monsanto the devil, an agricultural biotech company that rakes in billions each year, has become the enemy of independent farmers in recent years after the corporation has sued hundreds of small-time growers and, in many cases, purchased farms that are unable to compete in a court of law. As Monsanto the devil’s profits grow and the group comes close to monopolizing the market for American agriculture, the company has at the same time thrived due its use of controversial genetically-engineered seeds.

Three-hundred thousands organic farmers across America are currently trying to take Monsanto the devil to court to keep the corporation from continuing its war on independent growers. As a case is composed, the PEER group suspects that the White House’s refusal to comply with the FOIA request could be because Monsanto the devil the devil has some powerful friends on Pennsylvania Avenue.

Particularly, PEER is trying to pry correspondence that came into the inbox of a White House policy analyst from a lobbyist with the Biotechnology Industry Organization (BIO), which represents  Monsanto the devil  and other manufacturers of genetically-engineered seeds. The White House says that disclosing the full details of the email could give competing companies an advantage as lobbying secrets are unearthed for the world, but PEER thinks the truth is much worse than that.

"We suspect the reason an industry lobbyist so cavalierly shared strategy is that the White House is part of that strategy," PEER staff counsel Kathryn Douglass tells the Truthout website. "The White House's legal posture is as credible as claiming Coca Cola's secret formula was 'inadvertently' left in a duffel bag at the bus station."

Michael Taylor, a former attorney for the US Department of Agriculture and lobbyist for Monsanto the devil, was recently appointed to a federal role as the deputy commissioner for foods at the United States Food and Drug Administration (FDA). Since then, the FDA shot down requests from consumer protection groups to label genetically modified products as such. With a White House-Monsanto the devil  connection already established with the appointment of Taylor, PEER and others are interested in what other ties could exist between the two.

The inquiry from PEER stems from an earlier email obtained in which biotech lobbyist Adrianne Massey confronts a White House official with regards to if and how the administration is dealing with a lawsuit PEER had filed. In that instance, PEER had fought and won to keep genetically-engineered crops from being planted in wildlife refuges. PEER is now suing the White House for the rest of that correspondence and other related emails.

Hand In Hand: Lobbyists and Supercommittee

09.07.11 - 9:19 AM

 

Nearly 100 registered lobbyists used to work for members of the budget supercommittee and now represent defense companies, Wall Street banks,  health care companies and others with a vested interest in the panel’s outcome. Three Democrats and three Republicans on the panel, which starts work this week, also employ former industry lobbyists on their staffs.

Matt Taibbi on SEC covering up Wall Street crimes

vidlink

Telecommunications Companies in the US May Be Spying on You Every Day

It's Not Just News Corp: There is reason to believe that the media we've entrusted to investigate abuses of privacy are part of the cover up.
By Eliot Cohen, Buzzflash at TruthOut
Posted on August 20, 2011


When Guardian reporter, Nick Davies, broke the story that Rupert Murdoch's News of the World had been hacking British citizens' voicemail messages, including those of a murdered teenager, there was a public outcry. Unfortunately, this is the tip of a glacial iceberg that has the potential to bring down a lot more than the News of the World.

Last year, without due public debate and input, the Federal Communications Commission (FCC) and Justice Department approved a merger between Comcast and NBC Universal that gave the Internet cable giant control over the programming of NBC news. At the same time, pursuant to the 2008 Foreign Intelligence Surveillance Amendments Act, Comcast as well as all other telecommunication companies are required to cooperate with the Federal government in providing the facility for government to search through all electronic communications sent down their pipes.

So presently, the government, with the help of Comcast and other telecommunication companies, can hack everyone's phone and email conversations. Here also lies a new 21st century media model: a telecom company that owns and operates the infrastructure for the digital transmission of news and information; simultaneously owns the newsroom; and uses it infrastructure to assist the government in mass, warrantless surveillance of all American citizens.

The News of the World spied on a relatively few number of individuals for the purpose of getting a story. Comcast routinely spies on millions of people on behalf of government. The official purpose of such spying is to uncover terrorist plots; however, racial profiling can be used to conduct searches; mass sweeps are warrantless; and adequate judicial oversight of screening criteria and procedures is lacking. Worse still, in this brave new world, the media entrusted to keep an eye on government abuses of power is now part of this overreaching power structure.

Further, given the symbiotic relationship between media and government, there is nothing to stop Comcast from examining the email messages and phone conversations of rival news organizations, political opponents, and other persons and organizations of interest in an effort to "adjust" its news coverage and massage its bottom line. In fact, Comcast has maintained that it has a broad right to monitor its customers' email messages and Internet activities. It has an established history of having spied on its customers as well as preventing them from sharing files. Further, it is presently lobbying Congress to do away with net neutrality, the principle that assures that everyone, not just giant media companies, has an equal voice on the Internet. And, in 2008, Chris Albrecht, presently CEO of Starz TV, reported that Comcast's senior VP told him that Comcast was experimenting with installing cameras into its cable boxes thereby allowing it to see into people's living rooms and identify viewers.

Meanwhile, the Justice Department now has good reason to look the other way should Comcast engage in such eavesdropping activities since it is beholden to Comcast as Comcast is to government. As for the FCC, shortly after voting to approve the Comcast/NBC Universal merger, Commissioner Meredith Attwell Baker took a job working for Comcast as a lobbyist. This latter fact may be more disturbing than the fact that British Prime Minister Cameron employed former News of the World Editor Andy Coulson as his communications chief. Yet, the British Prime Minister had his head on the proverbial chopping block for so doing, while the curious revolving door at the FCC received virtually no press whatsoever. Small wonder, of course, that Comcast/NBC didn't cover the story.

Recently the progressive political talk show host, Cenk Uygur, was fired from MSNBC because he was not towing the establishment line. According to Uygur, MSNBC head Phil Griffin told him, "I was just in Washington and people in Washington tell me that they're concerned about your tone ... I'd love to be an outsider, outsiders are cool, but we're not outsiders; we're insiders; we are the establishment."

The meanings of the terms "insider" and "outsider" in this context are subject to interpretation, but there is one thing that is clear. The head of MSNBC thinks that the newsroom must work cooperatively with government. To be on the inside as opposed to the outside means to be a partner, not an adversary. In contrast, to be an outsider is not to be "in" with government. Outsiders are therefore able to maintain distance and avoid conflict of interest. Insiders have a conflict of interest in covering the news while outsiders don't. As the Fourth Estate, the press cannot be an insider and still do its job.

As an insider, Comcast has a conflict of interest in covering the activities of government. This conflict also includes its interest in maintaining access to government spokespersons, the loosening of media ownership rules by the FCC, tax incentives, and the awarding of military defense contracts (all of which impair corporate media's ability to objectively report government malfeasance).

Comcast/MSNBC is now also poised to hire Al Sharpton as Uygur's replacement. Sharpton was in fact a lobbyist for the Comcast/MSNBC merger, so the inbreeding and disintegration of an independent media couldn't be more obvious than in the case of Comcast.

But the idea of a giant telecom corporation such as Comcast, which simultaneously privately owns and controls the digital information highway and is also a major news provider, is a brand new idea. Couple this with the fact that this information gatekeeper is legally mandated to assist government in conducting mass, warrantless surveillance of all American citizens and the possibilities for violating citizens' civil liberty are incredibly high. Want to know if the corporate media/government is targeting progressive "outsiders"? Don't ask Comcast because this "insider" is doing the tracking

Presently, the corporate media landscape is one in which giant companies motivated by an insatiable thirst for money and power attempt to establish dominance. In this dog-eat-dog corporate world of mergers and acquisitions, both successful and failed, things rarely happen by accident.

It is therefore curious that the investigation into the News of the World's illicit eavesdropping activities, which had begun back in 2005, came to a head in 2011 just before Murdoch was about to seal a deal to purchase British Sky Broadcasting (BSkyB). This company is the UK's largest pay-per view satellite company and a major broadband Internet provider.

So what would have happened if Murdoch's parent company, News Corp, got hold of BSkyB? It would have made News Corp the primary pay-per-view satellite company in Britain. It would also have made News Corp an even more formidable pay-per-view and broadband competitor to Comcast.

It is worth noting in this regard that Comcast also has a longstanding history of interest in the UK media market, including having made in 2007 a bid to purchase Virgin Media, which owns and operates UK's only national cable network. Add to this that, in 2010, BSkyB acquired Virgin Media TV, which included VMTV's entire channel portfolio, airtime advertising, and long-term rights to use of its cable TV network for Sky's own basic subscription channels. And add to this that Virgin Media has just introduced the world's fastest cable broadband for the UK, which could only have made the potential acquisition of BSkyB by Murdoch an even greater threat to Comcast.

So, the Murdoch scandal, which nixed the deal for him, was good for Comcast, bad for News Corp. Did Comcast help to stir the pot?

A likely first response to this question is that it was simply the luck of the draw, nothing more. But the point is that, we cannot put such probative questions past doubt when it comes to companies like Comcast and News Corp. These companies do not care about justice; they care about maximizing their bottom lines; and justice and maximization of profit are not necessarily the same.

Comcast is now the rising star among these behemoth monsters. The Comcast/NBC Universal merger has given this company incredible power to control both conduit and content of news and information in the digital age. Its close ties to government have eviscerated the purpose of the media as Fourth Estate. And its power to spy on all of us under the banner of "national security" has made it a formidable threat to the free world.

The corporate media has kept these facts well hidden. Meanwhile, the Murdoch scandal is all over the news, and Comcast is none too happy to cover it.

News Corp surely deserves the bad press it is presently receiving; but there is also underway an insidious assault on our basic civil liberties that isn't even being investigated. Sadly, the media entrusted to launch the investigation is part of the cover up.

Is the SEC Covering Up Wall Street Crimes?

Wednesday, August 17, 2011 by Rolling Stone
A whistleblower claims that over the past two decades, the agency has destroyed records of thousands of investigations, whitewashing the files of some of the nation's worst financial criminals.
by Matt Taibbi

Imagine a world in which a man who is repeatedly investigated for a string of serious crimes, but never prosecuted, has his slate wiped clean every time the cops fail to make a case. No more Lifetime channel specials where the murderer is unveiled after police stumble upon past intrigues in some old file – "Hey, chief, didja know this guy had two wives die falling down the stairs?" No more burglary sprees cracked when some sharp cop sees the same name pop up in one too many witness statements. This is a different world, one far friendlier to lawbreakers, where even the suspicion of wrongdoing gets wiped from the record.

That, it now appears, is exactly how the Securities and Exchange Commission has been treating the Wall Street criminals who cratered the global economy a few years back. For the past two decades, according to a whistle-blower at the SEC who recently came forward to Congress, the agency has been systematically destroying records of its preliminary investigations once they are closed. By whitewashing the files of some of the nation's worst financial criminals, the SEC has kept an entire generation of federal investigators in the dark about past inquiries into insider trading, fraud and market manipulation against companies like Goldman Sachs, Deutsche Bank and AIG. With a few strokes of the keyboard, the evidence gathered during thousands of investigations – "18,000 ... including Madoff," as one high-ranking SEC official put it during a panicked meeting about the destruction – has apparently disappeared forever into the wormhole of history.

Under a deal the SEC worked out with the National Archives and Records Administration, all of the agency's records – "including case files relating to preliminary investigations" – are supposed to be maintained for at least 25 years. But the SEC, using history-altering practices that for once actually deserve the overused and usually hysterical term "Orwellian," devised an elaborate and possibly illegal system under which staffers were directed to dispose of the documents from any preliminary inquiry that did not receive approval from senior staff to become a full-blown, formal investigation. Amazingly, the wholesale destruction of the cases – known as MUIs, or "Matters Under Inquiry" – was not something done on the sly, in secret. The enforcement division of the SEC even spelled out the procedure in writing, on the commission's internal website. "After you have closed a MUI that has not become an investigation," the site advised staffers, "you should dispose of any documents obtained in connection with the MUI."

Many of the destroyed files involved companies and individuals who would later play prominent roles in the economic meltdown of 2008. Two MUIs involving con artist Bernie Madoff vanished. So did a 2002 inquiry into financial fraud at Lehman Brothers, as well as a 2005 case of insider trading at the same soon-to-be-bankrupt bank. A 2009 preliminary investigation of insider trading by Goldman Sachs was deleted, along with records for at least three cases involving the infamous hedge fund SAC Capital.

The widespread destruction of records was brought to the attention of Congress in July, when an SEC attorney named Darcy Flynn decided to blow the whistle. According to Flynn, who was responsible for helping to manage the commission's records, the SEC has been destroying records of preliminary investigations since at least 1993. After he alerted NARA to the problem, Flynn reports, senior staff at the SEC scrambled to hide the commission's improprieties.

As a federally protected whistle-blower, Flynn is not permitted to speak to the press. But in evidence he presented to the SEC's inspector general and three congressional committees earlier this summer, the 13-year veteran of the agency paints a startling picture of a federal police force that has effectively been conquered by the financial criminals it is charged with investigating. In at least one case, according to Flynn, investigators at the SEC found their desire to bring a case against an influential bank thwarted by senior officials in the enforcement division – whose director turned around and accepted a lucrative job from the very same bank they had been prevented from investigating. In another case, the agency farmed out its inquiry to a private law firm – one hired by the company under investigation. The outside firm, unsurprisingly, concluded that no further investigation of its client was necessary. To complete the bureaucratic laundering process, Flynn says, the SEC dropped the case and destroyed the files.

Much has been made in recent months of the government's glaring failure to police Wall Street; to date, federal and state prosecutors have yet to put a single senior Wall Street executive behind bars for any of the many well-documented crimes related to the financial crisis. Indeed, Flynn's accusations dovetail with a recent series of damaging critiques of the SEC made by reporters, watchdog groups and members of Congress, all of which seem to indicate that top federal regulators spend more time lunching, schmoozing and job-interviewing with Wall Street crooks than they do catching them. As one former SEC staffer describes it, the agency is now filled with so many Wall Street hotshots from oft-investigated banks that it has been "infected with the Goldman mindset from within."

The destruction of records by the SEC, as outlined by Flynn, is something far more than an administrative accident or bureaucratic fuck-up. It's a symptom of the agency's terminal brain damage. Somewhere along the line, those at the SEC responsible for policing America's banks fell and hit their head on a big pile of Wall Street's money – a blow from which the agency has never recovered. "From what I've seen, it looks as if the SEC might have sanctioned some level of case-related document destruction," says Sen. Chuck Grassley, the ranking Republican on the Senate Judiciary Committee, whose staff has interviewed Flynn. "It doesn't make sense that an agency responsible for investigations would want to get rid of potential evidence. If these charges are true, the agency needs to explain why it destroyed documents, how many documents it destroyed over what time frame and to what extent its actions were consistent with the law."

How did officials at the SEC wind up with a faithful veteran employee – a conservative, mid-level attorney described as a highly reluctant whistle-blower – spilling the agency's most sordid secrets to Congress? In a way, they asked for it.

On May 18th of this year, SEC enforcement director Robert Khuzami sent out a mass e-mail to the agency's staff with the subject line "Lawyers Behaving Badly." In it, Khuzami asked his subordinates to report any experiences they might have had where "the behavior of counsel representing clients in... investigations has been questionable."

Khuzami was asking staffers to recount any stories of outside counsel behaving unethically. But Flynn apparently thought his boss was looking for examples of lawyers "behaving badly" anywhere, including within the SEC. And he had a story to share he'd kept a lid on for years. "Mr. Khuzami may have gotten something more than he expected," Flynn's lawyer, a former SEC whistle-blower named Gary Aguirre, later explained to Congress.

Flynn responded to Khuzami with a letter laying out one such example of misbehaving lawyers within the SEC. It involved a case from very early in Flynn's career, back in 2000, when he was working with a group of investigators who thought they had a "slam-dunk" case against Deutsche Bank, the German financial giant. A few years earlier, Rolf Breuer, the bank's CEO, had given an interview to Der Spiegel in which he denied that Deutsche was involved in übernahmegespräche – takeover talks – to acquire a rival American firm, Bankers Trust. But the statement was apparently untrue – and it sent the stock of Bankers Trust tumbling, potentially lowering the price for the merger. Flynn and his fellow SEC investigators, suspecting that investors of Bankers Trust had been defrauded, opened a MUI on the case.

A Matter Under Inquiry is just a preliminary sort of look-see – a way for the SEC to check out the multitude of tips it gets about suspicious trades, shady stock scams and false disclosures, and to determine which of the accusations merit a formal investigation. At the MUI stage, an SEC investigator can conduct interviews or ask a bank to send in information voluntarily. Bumping a MUI up to a formal investigation is critical, because it enables investigators to pull out the full law-enforcement ass-kicking measures – subpoenas, depositions, everything short of hot pokers and waterboarding. In the Deutsche case, Flynn and other SEC investigators got past the MUI stage and used their powers to collect sworn testimony and documents indicating that plenty of übernahmegespräche indeed had been going on when Breuer spoke to Der Spiegel. Based on the evidence, they sent an "Action Memorandum" to senior SEC staff, formally recommending that the agency press forward and file suit against Deutsche.

Breuer responded to the threat as big banks like Deutsche often do: He hired a former SEC enforcement director to lobby the agency to back off. The ex-insider, Gary Lynch, launched a creative and inspired defense, producing a linguistic expert who argued that übernahmegespräche only means "advanced stage of discussions." Nevertheless, the request to proceed with the case was approved by several levels of the SEC's staff. All that was needed to move forward was a thumbs-up from the director of enforcement at the time, Richard Walker.

But then a curious thing happened. On July 10th, 2001, Flynn and the other investigators were informed that Walker was mysteriously recusing himself from the Deutsche case. Two weeks later, on July 23rd, the enforcement division sent a letter to Deutsche that read, "Inquiry in the above-captioned matter has been terminated." The bank was in the clear; the SEC was dropping its fraud investigation. In contradiction to the agency's usual practice, it provided no explanation for its decision to close the case.

On October 1st of that year, the mystery was solved: Dick Walker was named general counsel of Deutsche. Less than 10 weeks after the SEC shut down its investigation of the bank, the agency's director of enforcement was handed a cushy, high-priced job at Deutsche.

Deutsche's influence in the case didn't stop there. A few years later, in 2004, Walker hired none other than Robert Khuzami, a young federal prosecutor, to join him at Deutsche. The two would remain at the bank until February 2009, when Khuzami joined the SEC as Flynn's new boss in the enforcement division. When Flynn sent his letter to Khuzami complaining about misbehavior by Walker, he was calling out Khuzami's own mentor.

The circular nature of the case illustrates the revolving-door dynamic that has become pervasive at the SEC. A recent study by the Project on Government Oversight found that over the past five years, former SEC personnel filed 789 notices disclosing their intent to represent outside companies before the agency – sometimes within days of their having left the SEC. More than half of the disclosures came from the agency's enforcement division, who went to bat for the financial industry four times more often than ex-staffers from other wings of the SEC.

Even a cursory glance at a list of the agency's most recent enforcement directors makes it clear that the SEC's top policemen almost always wind up jumping straight to jobs representing the banks they were supposed to regulate. Lynch, who represented Deutsche in the Flynn case, served as the agency's enforcement chief from 1985 to 1989, before moving to the firm of Davis Polk, which boasts many top Wall Street clients. He was succeeded by William McLucas, who left the SEC in 1998 to work for WilmerHale, a Wall Street defense firm so notorious for snatching up top agency veterans that it is sometimes referred to as "SEC West." McLucas was followed by Dick Walker, who defected to Deutsche in 2001, and he was in turn followed by Stephen Cutler, who now serves as general counsel for JP Morgan Chase. Next came Linda Chatman Thomsen, who stepped down to join Davis Polk, only to be succeeded in 2009 by Khuzami, Walker's former protégé at Deutsche Bank.

This merry-go-round of current and former enforcement directors has repeatedly led to accusations of improprieties. In 2008, in a case cited by the SEC inspector general, Thomsen went out of her way to pass along valuable information to Cutler, the former enforcement director who had gone to work for JP Morgan. According to the inspector general, Thomsen signaled Cutler that the SEC was unlikely to take action that would hamper JP Morgan's move to buy up Bear Stearns. In another case, the inspector general found, an assistant director of enforcement was instrumental in slowing down an investigation into the $7 billion Ponzi scheme allegedly run by Texas con artist R. Allen Stanford – and then left the SEC to work for Stanford, despite explicitly being denied permission to do so by the agency's ethics office. "Every lawyer in Texas and beyond is going to get rich on this case, OK?" the official later explained. "I hated being on the sidelines."

Small wonder, then, that SEC staffers often have trouble getting their bosses to approve full-blown investigations against even the most blatant financial criminals. For a fledgling MUI to become a formal investigation, it has to make the treacherous leap from the lower rungs of career-level staffers like Flynn all the way up to the revolving-door level at the top, where senior management is composed largely of high-priced appointees from the private sector who have strong social and professional ties to the very banks they are charged with regulating. And if senior management didn't approve an investigation, the documents often wound up being destroyed – as Flynn would later discover.

After the Deutsche fiasco over Bankers Trust, Flynn continued to work at the SEC for four more years. He briefly left the agency to dabble in real estate, then returned in 2008 to serve as an attorney in the enforcement division. In January 2010, he accepted new responsibilities that included helping to manage the disposition of records for the division – and it was then he first became aware of the agency's possibly unlawful destruction of MUI records.

Flynn discovered a directive on the enforcement division's internal website ordering staff to destroy "any records obtained in connection" with closed MUIs. The directive appeared to violate federal law, which gives responsibility for maintaining and destroying all records to the National Archives and Records Administration. Over a decade earlier, in fact, the SEC had struck a deal with NARA stipulating that investigative records were to be maintained for 25 years – and that if any files were to be destroyed after that, the shredding was to be done by NARA, not the SEC.

But Flynn soon learned that the records for thousands of preliminary investigations no longer existed. In his letter to Congress, Flynn estimates that the practice of destroying MUIs had begun as early as 1993, and has resulted in at least 9,000 case files being destroyed. For all the thousands of tips that had come in to the SEC, and the thousands of interviews that had been conducted by the agency's staff, all that remained were a few perfunctory lines for each case. The mountains of evidence gathered were no longer in existence.

To read through the list of dead and buried cases that Flynn submitted to Congress is like looking through an infrared camera at a haunted house of the financial crisis, with the ghosts of missed prosecutions flashing back and forth across the screen. A snippet of the list:

PARTY MUI # OPENED/CLOSED ISSUE

Goldman Sachs MLA-01909 6/99 - 4/00 Market Manipulation

Deutsche Bank MHO-09356 11/01 - 7/02 Insider Trading

Deutsche Bank MHO-09432 2/02 - 8/02 Market Manipulation

Lehman Brothers MNY-07013 3/02 - 7/02 Financial Fraud

Goldman Sachs MNY-08198 11/09 - 12/09 Insider Trading

One MUI – case MNY-08145 – involved allegations of insider trading at AIG on September 15th, 2008, right in the middle of the insurance giant's collapse. In that case, an AIG employee named Jacqueline Millan reported irregularities in the trading of AIG stock to her superiors, only to find herself fired. Incredibly, instead of looking into the matter itself, the SEC agreed to accept "an internal investigation by outside counsel or AIG." The last note in the file indicates that "the staff plans to speak with the outside attorneys on Monday, August 24th [2009], when they will share their findings with us." The fact that the SEC trusted AIG's lawyers to investigate the matter shows the basic bassackwardness of the agency's approach to these crash-era investigations. The SEC formally closed the case on October 1st, 2009.

The episode with AIG highlights yet another obstacle that MUIs experience on the road to becoming formal investigations. During the past decade, the SEC routinely began allowing financial firms to investigate themselves. Imagine the LAPD politely asking a gang of Crips and their lawyers to issue a report on whether or not a drive-by shooting by the Crips should be brought before a grand jury – that's basically how the SEC now handles many preliminary investigations against Wall Street targets.

The evolution toward this self-policing model began in 2001, when a shipping and food-service conglomerate called Seaboard aggressively investigated an isolated case of accounting fraud at one of its subsidiaries. Seaboard fired the guilty parties and made sweeping changes to its internal practices – and the SEC was so impressed that it instituted a new policy of giving "credit" to companies that police themselves. In practice, that means the agency simply steps aside and allows companies to slap themselves on the wrists. In the case against Seaboard, for instance, the SEC rewarded the firm by issuing no fines against it.

According to Lynn Turner, a former chief accountant at the SEC, the Seaboard case also prompted the SEC to begin permitting companies to hire their own counsel to conduct their own inquiries. At first, he says, the process worked fairly well. But then President Bush appointed the notoriously industry-friendly Christopher Cox to head up the SEC, and the "outside investigations" turned into whitewash jobs. "The investigations nowadays are probably not worth the money you spend on them," Turner says.

Harry Markopolos, a certified fraud examiner best known for sounding a famously unheeded warning about Bernie Madoff way back in 2000, says the SEC's practice of asking suspects to investigate themselves is absurd. In a serious investigation, he says, "the last person you want to trust is the person being accused or their lawyer." The practice helped Madoff escape for years. "The SEC took Bernie's word for everything," Markopolos says.

At the SEC, having realized that the agency was destroying documents, Flynn became concerned that he was overseeing an illegal policy. So in the summer of last year, he reached out to NARA, asking them for guidance on the issue.

That request sparked a worried response from Paul Wester, NARA's director of modern records. On July 29th, 2010, Wester sent a letter to Barry Walters, who oversees document requests for the SEC. "We recently learned from Darcy Flynn... that for the past 17 years the SEC has been destroying closed Matters Under Inquiry files," Wester wrote. "If you confirm that federal records have been destroyed improperly, please ensure that no further such disposals take place and provide us with a written report within 30 days."

Wester copied the letter to Adam Storch, a former Goldman Sachs executive who less than a year earlier had been appointed as managing executive of the SEC's enforcement division. Storch's appointment was not without controversy. "I'm not sure what's scarier," Daniel Indiviglio of The Atlantic observed, "that this guy worked at an investment bank that many believe has questionable ethics and too cozy a Washington connection, or that he's just 29." In any case, Storch reacted to the NARA letter the way the SEC often does – by circling the wagons and straining to find a way to blow off the problem without admitting anything.

Last August, as the clock wound down on NARA's 30-day deadline, Storch and two top SEC lawyers held a meeting with Flynn to discuss how to respond. Flynn's notes from the meeting, which he passed along to Congress, show the SEC staff wondering aloud if admitting the truth to NARA might be a bad idea, given the fact that there might be criminal liability.

"We could say that we do not believe there has been disposal inconsistent with the schedule," Flynn quotes Ken Hall, an assistant chief counsel for the SEC, as saying.

"There are implications to admit what was destroyed," Storch chimed in. It would be "not wise for me to take on the exposure voluntarily. If this leads to something, what rings in my ear is that Barry [Walters, the SEC documents officer] said: This is serious, could lead to criminal liability."

When the subject of how many files were destroyed came up, Storch answered: "18,000 MUIs destroyed, including Madoff."

Four days later, the SEC responded to NARA with a hilariously convoluted nondenial denial. "The Division is not aware of any specific instances of the destruction of records from any other MUI," the letter states. "But we cannot say with certainty that no such documents have been destroyed over the past 17 years." The letter goes on to add that "the Division has taken steps... to ensure that no MUI records are destroyed while we review this issue."

Translation: Hey, maybe records were destroyed, maybe they weren't. But if we did destroy records, we promise not to do it again – for now.

The SEC's unwillingness to admit the extent of the wrong doing left Flynn in a precarious position. The agency has a remarkably bad record when it comes to dealing with whistle-blowers. Back in 2005, when Flynn's attorney, Gary Aguirre, tried to pursue an insider-trading case against Pequot Capital that involved John Mack, the future CEO of Morgan Stanley, he was fired by phone while on vacation. Two Senate committees later determined that Aguirre, who has since opened a private practice representing whistle-blowers, was dismissed improperly as part of a "process of reprisal" by the SEC. Two whistle-blowers in the Stanford case, Julie Preuitt and Joel Sauer, also experienced retaliation – including reprimands and demotions – after raising concerns about superficial investigations. "There's no mechanism to raise these issues at the SEC," says another former whistle-blower. Contacting the agency's inspector general, he adds, is considered "the nuclear option" – a move "well-known to be a career-killer."

In Flynn's case, both he and Aguirre tried to keep the matter in-house, appealing to SEC chairman Mary Schapiro with a promise not to go outside the agency if she would grant Flynn protection against reprisal. When no such offer was forthcoming, Flynn went to the agency's inspector general before sending a detailed letter about the wrongdoing to three congressional committees.

One of the offices Flynn contacted was that of Sen. Grassley, who was in the midst of his own battle with the SEC. Frustrated with the agency's failure to punish major players on Wall Street, the Iowa Republican had begun an investigation into how the SEC follows up on outside complaints. Specifically, he wrote a letter to FINRA, another regulatory agency, to ask how many complaints it had referred to the SEC about SAC Capital, the hedge fund run by reptilian billionaire short-seller Stevie Cohen.

SAC has long been accused of a variety of improprieties, from insider trading to harassment. But no charge in recent Wall Street history is crazier than an episode involving a SAC executive named Ping Jiang, who was accused in 2006 of enacting a torturous hazing program. According to a civil lawsuit that was later dropped, Jiang allegedly forced a new trader named Andrew Tong to take female hormones, come to work wearing a dress and lipstick, have "foreign objects" inserted in his rectum, and allow Jiang to urinate in his mouth. (I'm not making this up.)

Grassley learned that over the past decade, FINRA had referred 19 complaints about suspicious trades at SAC to federal regulators. Curious to see how many of those referrals had been looked into, Grassley wrote the SEC on May 24th, asking for evidence that the agency had properly investigated the cases.

Two weeks later, on June 9th, Khuzami sent Grassley a surprisingly brusque answer: "We generally do not comment on the status of investigations or related referrals, and, in turn, are not providing information concerning the specific FINRA referrals you identified." Translation: We're not giving you the records, so blow us.

Grassley later found out from FINRA that it had actually referred 65 cases about SAC to the SEC, making the lack of serious investigations even more inexplicable. Angered by Khuzami's response, he sent the SEC another letter on June 15th demanding an explanation, but no answer has been forthcoming.

In the interim, Grassley's office was contacted by Flynn, who explained that among the missing MUIs he had uncovered were at least three involving SAC – one in 2006, one in 2007 and one in 2010, involving charges of insider trading and currency manipulation. All three cases were closed by the SEC, and the records apparently destroyed.

On August 17th, Grassley sent a letter to the SEC about the Flynn allegations, demanding to know if it was indeed true that the SEC had destroyed records. He also asked if the agency's failure to produce evidence of investigations into SAC Capital were related to the missing MUIs.

The SEC's inspector general is investigating the destroyed MUIs and plans to issue a report. NARA is also seeking answers. "We've asked the SEC to look into the matter and we're awaiting their response," says Laurence Brewer, a records officer for NARA. For its part, the SEC is trying to explain away the illegality of its actions through a semantic trick. John Nester, the agency's spokesman, acknowledges that "documents related to MUIs" have been destroyed. "I don't have any reason to believe that it hasn't always been the policy," he says. But Nester suggests that such documents do not "meet the federal definition of a record," and therefore don't have to be preserved under federal law.

But even if SEC officials manage to dodge criminal charges, it won't change what happened: The nation's top financial police destroyed more than a decade's worth of intelligence they had gathered on some of Wall Street's most egregious offenders. "The SEC not keeping the MUIs – you can see why this would be bad," says Markopolos, the fraud examiner famous for breaking the Madoff case. "The reason you would want to keep them is to build a pattern. That way, if you get five MUIs over a period of 20 years on something similar involving the same company, you should be able to connect five dots and say, 'You know, I've had five MUIs – they're probably doing something. Let's go tear the place apart.'" Destroy the MUIs, and Wall Street banks can commit the exact same crime over and over, without anyone ever knowing.

Regulation isn't a panacea. The SEC could have placed federal agents on every corner of lower Manhattan throughout the past decade, and it might not have put a dent in the massive wave of corruption and fraud that left the economy in flames three years ago. And even if SEC staffers from top to bottom had been fully committed to rooting out financial corruption, the agency would still have been seriously hampered by a lack of resources that often forces it to abandon promising cases due to a shortage of manpower. "It's always a triage," is how one SEC veteran puts it. "And it's worse now."

But we're equally in the dark about another hypothetical. Forget about what might have been if the SEC had followed up in earnest on all of those lost MUIs. What if even a handful of them had turned into real cases? How many investors might have been saved from crushing losses if Lehman Brothers had been forced to reveal its shady accounting way back in 2002? Might the need for taxpayer bailouts have been lessened had fraud cases against Citigroup and Bank of America been pursued in 2005 and 2007? And would the U.S. government have doubled down on its bailout of AIG if it had known that some of the firm's executives were suspected of insider trading in September 2008?

It goes without saying that no ordinary law-enforcement agency would willingly destroy its own evidence. In fact, when it comes to garden-variety crooks, more and more police agencies are catching criminals with the aid of large and well-maintained databases. "Street-level law enforcement is increasingly data-driven," says Bill Laufer, a criminology professor at the University of Pennsylvania. "For a host of reasons, though, we are starved for good data on both white-collar and corporate crime. So the idea that we would take the little data we do have and shred it, without a legal requirement to do so, calls for a very creative explanation."

We'll never know what the impact of those destroyed cases might have been; we'll never know if those cases were closed for good reasons or bad. We'll never know exactly who got away with what, because federal regulators have weighted down a huge sack of Wall Street's dirty laundry and dumped it in a lake, never to be seen again.