The Center for Public Integrity

For the EPA, 'Reform' Means Giving Industry What It Wants

First came the smoke. The explosion hit 20 minutes later—so massive it killed 15, injured 260, damaged or destroyed 150 buildings, shattered glass a mile out and set trees ablaze. Under stadium lights, the West, Texas, high school football field, home of the Trojans, was transformed into a makeshift triage center.

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Thousands of Immigrants With 'Protected Status' Face Possible Deportation

Juan Cortez of Maryland owns his own trucking business — he’s almost paid off the $50,000 loan he took to start it — and he holds county contracts to plow snow every winter just outside Washington, D.C. After nearly a quarter of a century here, the Salvadoran immigrant is also the proud owner of a home, and he pays tens of thousands of dollars in annual taxes. He has a daughter in college and a son in high school who’s in the ROTC, the Reserve Officer Training Corps.

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Surge of Women Run for Office in First Major Races Since Trump's Win

The most women candidates in at least a decade are on Tuesday’s ballot in Virginia and New Jersey — what may be the first glimpse of new political activism in the Trump era.

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Millions Consumed Potentially Unsafe Water in the Past 10 Years

This report is part of a project on drinking water contamination in the United States produced by the Carnegie-Knight News21 program.

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Trump Appointee Is a Saudi Government Lobbyist

One of President Donald Trump’s newest appointees is a registered agent of Saudi Arabia earning hundreds of thousands of dollars to lobby on the kingdom’s behalf, according to U.S. Department of Justice records reviewed by the Center for Public Integrity.

Key advisory body

The commission is essentially a part-time advisory body responsible for making final recommendations to the president of candidates for the prestigious White House fellowships, which President Lyndon B. Johnson created in 1964.

The candidates are usually accomplished professionals with sterling resumes. Fellows are typically given jobs in the White House and federal agencies. Past White House fellows include Transportation Secretary Elaine Chao, former Secretary of State Colin Powell, Rep. Joe Barton, R-Texas and CNN chief medical correspondent Sanjay Gupta.

Hohlt said he is one of 19 commissioners who met over a weekend this month to interview the fellowship candidates — the commission’s only formal duty annually.

Hohlt stresses he has never lobbied the Trump administration on behalf of Saudi Arabia, which has aggressively courted Trump since he became president in January.

“That is not my role,” Hohlt said.

What role, then, does he play?

According to Hohlt’s disclosures with the Department of Justice, he registered to lobby for Saudi Arabia’s foreign ministry in October and “provides them with advice on legislative and public affairs strategies.” He disclosed no direct contacts with government officials on the Saudis’ behalf as of April 30, the date covered by the latest Department of Justice report.

Hohlt said he was largely brought in to offer advice on overarching strategy and how the legislative process works.

He did directly contact some congressional offices in late May and June regarding an arms sale, he said, and those contacts will be disclosed in his next disclosure report, as required.

Hohlt added that he’s working for the Saudis without a formal contract. If the Saudis asked him to lobby for something the Trump administration opposed, “I’d say I’m not going to work on it,” Hohlt said.

For example, he said, the administration was in favor of the arms deal.

Trump strikes deals with Saudis

Trump’s first foreign trip as president came in May, when he visited Saudi Arabia.

While there, Trump touted the “tremendous” deals he said he struck with the Saudis, including an expanded arms agreement valued at $100 billion. During elaborate ceremonies, the Saudis heaped plaudits. Saudi Foreign Minister Adel al-Jubeir praised Trump and praised his “vision,” “strength” and “decisiveness.”

Hohlt said he disclosed his Saudi lobbying job to Trump officials during the vetting process before his appointment.

White House spokeswoman Kelly Love said she had “nothing to add” in response to questions from the Center for Public Integrity about Trump’s appointment of Hohlt, including whether the Trump administration was aware Hohlt worked as a lobbyist for Saudi Arabia’s foreign ministry.

Love referred the question of whether the administration was aware of Hohlt’s representation of the Saudis to the White House fellows office, which did not respond to a request for comment.

Upon taking office, Trump issued an executive order on ethics that included, among other things, a lifetime ban on executive branch appointees engaging in work that would require registration under the Foreign Agents Registration Act, among other restrictions on lobbyists.

The law, known as FARA, is the same law that mandates disclosure of Hohlt’s work for Saudi Arabia.

Trump’s executive order doesn’t apply to part-time appointees such as Hohlt. Nonetheless, some government ethics experts still say the appointment presents a jarring contrast with the president’s statements.

And despite Trump’s order, he has issued ethics waivers to lobbyists who have taken full-time positions with the administration, including, for example, Michael Catanzaro, a former energy company lobbyist who is now a special assistant to the president and adviser on energy policy. The waiver allows Catanzaro to participate in matters on which he lobbied.

Trump donor

Hohlt is a Trump donor. He contributed $2,700, to Trump’s campaign in August and $5,000 to Trump’s transition in September, the maximum amounts permitted. Those contributions came before he registered to represent Saudi Arabia’s foreign ministry in October.

Nonetheless, “Appointing someone who is registered under FARA as doing work for Saudi Arabia does seem odd at a time when he’s made a very big deal about not having people leave the government and then do work where they have to register under FARA,” said Larry Noble, the general counsel of the Campaign Legal Center, a nonpartisan campaign reform organization.

Kathleen Clark, a law professor at Washington University in Saint Louis, said, “There is truth to the slogan that personnel is policy. And so he’s appointing this lobbyist for Saudi Arabia to a commission that then recommends people for important positions.”

Hohlt also lobbies for numerous corporate clients. This year, he’s been registered to lobby on behalf of oil giant Chevron, the Motion Picture Association of America and a division of tobacco giant Altria, among others.

Asked about any potential conflict of interest, Hohlt pointed to the extremely part-time nature of his fellowship commission appointment.

“I guess I’m an old-fashioned lobbyist,” Hohlt said. “I know how to separate lobbying and not lobbying.”

This article was co-published by NBC News and Public Radio International.

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Here's What You Need Know About America's Biggest Greenhouse Gas Polluter

Up close, the biggest emitter of greenhouse gases in the U.S. isn't as big as you'd expect it to be. From most angles, you can't even see it until you're right on top of it.

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What's in Gorsuch's Wallet, Trump's U.S. Supreme Court Pick

President Donald Trump named his pick for the U.S. Supreme Court Tuesday night, tapping Judge Neil M. Gorsuch of the 10th U.S. Circuit Court of Appeals in Denver.

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31 Numbers That Perfectly Capture the Insanity of the 2016 Election

304: Number of Electoral College Votes won by Republican President-elect Donald Trump

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How a Trumped-Up Fundraiser With the First Family Imploded

A pay-to-play soiree offering the ultra-wealthy access to newly inaugurated President Donald Trump is unraveling — after the Center for Public Integrity on Monday revealed that Trump’s adult sons are registered directors of the new, Texas-based nonprofit organizing the event.

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10 Shady Groups That Crept into Our Election

The bromide says all politics are local. But if examined closely, state politics are looking quite national these days.

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Is Donald Trump a Russian Agent? A Nonpartisan Guide to National Security and Foreign Policy Issues in the Presidential Election

According to Hillary Clinton and her supporters, Donald Trump is crazy friendly with Russian president Vladimir Putin, a bad man who hates America and threatens its interests, and therefore Trump cannot be trusted even with U.S. intelligence secrets, much less the presidency. He is so thin-skinned and impetuous that he could drop nuclear bombs on someone who criticized him, so insulting to nearly everyone outside his family that the country would become dangerously isolated during his presidency, unable to address challenges like ISIS that we cannot take on alone. Trump’s incendiary rhetoric about Muslims is a potent recruiting tool for jihadists. And he is so unconcerned about the welfare of others that he wouldn’t blink at severing defense ties with allies who don’t send us a lot more cash, provoking them to create or expand their own arsenals of nuclear arms—which is actually okay with him. His campaign slogan might as well be, let global chaos reign.

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Meet the Billionaire Environmentalist Funding a Major Ad Push Against Donald Trump

A billionaire environmentalist is spending big money in California to skewer presumptive Republican nominee Donald Trump—the latest volley in a barrage of anti-Trump advertising that has saturated TV airwaves.

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Rich People Have Access to High-Speed Internet; Many Poor People Still Don't

Ever since Curtis Brown Jr. got his first Star Wars toy as a toddler, he has been fascinated by action figures. So much so that he has built a business customizing action figures for clients worldwide. But what could be a lucrative career has turned into an exercise in futility that traps Brown and his family in poverty.

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Workers Threw Out U.S. Nuclear Secrets With Common Rubbish for 20 Years

In June 2014, a worker at the Y-12 National Security Complex in Tennessee was surprised to find U.S. nuclear secrets inside a trash bag marked for disposal along with standard rubbish. Taking a closer look, the worker found 19 more documents in the bag that were either marked classified or were later determined to contain information that should have been labeled secret.

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ALEC and the Far Right are Seven States Away From Convening A Dangerous and Unpredictable Federal Constitutional Convention

It’s only a short phrase buried in the U.S. Constitution, but it enables an unprecedented avenue to change the law of the land: If two-thirds of the states demand it, Congress “shall call a convention” for proposing constitutional amendments.

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Right-Wing Wall St. Financiers Launch Big Money Attack on Clinton

Hedge fund managers and investors, together worth billions of dollars, are bankrolling a little-known super PAC that on Tuesday unleashed attack ads against Democratic presidential frontrunner Hillary Clinton.

Who’s behind it?

Running the operations is Brian O. Walsh, president of Future45. In 2010, Walsh directed a $26 million campaignat “dark money” nonprofit American Action Network — an effort that succeeded in helping Republicans gain control of the House. Walsh left the American Action Network in January.

Weiser, former chairman of the Michigan Republican Party, is chairman of Future45.

Officials at Future45 did not immediately return requests for comment.

Money in

The group is backed by three known donors, according to federal records: Kenneth Griffin, president of Citadel;William C. Powers, an investor; and Paul Singer, founder of hedge fund Elliot Management.

Singer has personally endorsed Republican Marco Rubio for president.

Meanwhile, Griffin — a big-time donor to candidates and committees in state and federal races — donated $100,000 in June to Right to Rise USA, a super PAC supporting Republican Jeb Bush for president. Powers, while not as politically active as the others, did donate $100,000 to Right to Rise USA in April.

The family of Joe Ricketts, founder of TD Ameritrade, is also supporting Future45’s effort, according to the Wall Street Journal. The Ricketts family has donated to several super PACs supporting presidential candidates, including more than $5 million to Unintimidated PAC, the group that supported Wisconsin Gov. Scott Walker’s now-defunct presidential bid.

Future45 formed in March. It raised $600,000 through June 30, according to the Federal Election Commission. But it’s likely added significant money to its war chest: federal rules don’t require it to again disclose its finances until January. And being a super PAC allows Future45, unlike presidential campaign committees themselves, to collect contributions in unlimited amounts.

While the nonprofit 45Committee isn’t required to reveal its donors, it cannot spend the majority of its money on politics. Other politically active nonprofit groups have, however, pushed boundaries for how political they may get.

Money out

Future45 spent about $115,000 on the ad production and placement for its first ad that criticized Clinton’s foreign policy chops in Libya.

The latest ad — this time focused on Syria — will run nationally on television and is part of a “six-figure digital ad campaign reaching independents in Colorado, Iowa, Nevada and New Hampshire,” according to a press release issued Tuesday by the super PAC.

Future45’s first anti-Clinton ad aired on television 25 times during October in New Hampshire, Iowa and Massachusetts markets, as well as on national cable networks, according to data collected by media monitoring firm Kantar Media/CMAG.

Both ads are the group’s only known expenditures. A full accounting of the group’s 2015 expenditures will be revealed when Future45 files disclosure documents with the FEC in January.

Why to watch this group

Future45 and the 45Committee are likely to invest heavily in the 2016 presidential race, and they’ve attracted donors who are no strangers to making seven-figure donations.

This isn’t their first time working in concert either.

Since 2014, Griffin, Singer, Powers and Ricketts (with his wife Marlene) have cumulatively contributed $12.8 million to the super PAC End Spending Action Fund, according to FEC filings. Ricketts founded the Ending Spending super PAC and its sister nonprofit with the same name in 2010.

Those associated with Future45 also attended an October fundraiser held by Singer.

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What Are the Only 3 States That Score Higher Than a D+ in the Corruption Index?

In November 2014, Arkansas voters approved a ballot measure that, among other reforms, barred the state’s elected officials from accepting lobbyists’ gifts. But that hasn’t stopped influence peddlers from continuing toprovide meals to lawmakers at the luxurious Capital Hotel or in top Little Rock eateries like the Brave New Restaurant; the prohibition does not apply to “food or drink available at a planned activity to which a specific governmental body is invited,” so lobbyists can buy meals so long as they invite an entire legislative committee.

The top of the pack includes bastions of progressive government, including California (ranked 2nd with a C-), and states notorious for corrupt pasts (Connecticut, 3rd with a C-, and Rhode Island, 5th with a D+). In those New England states, scandals led to significant reforms and relatively robust ethics laws, even if dubious dealings linger in the halls of government. The bottom includes many western states that champion limited government, like NevadaSouth Dakota and Wyoming, but also others, such as MaineDelaware and dead-last Michigan, that have not adopted the types of ethics and open records laws common in many other states.

The results are “disappointing but not surprising,” said Paula A. Franzese, an expert in state and local government ethics at Seton Hall University School of Law and former chairwoman of the New Jersey State Ethics Commission. Franzese said that, with many states still struggling financially, ethics oversight in particular is among the last issues to receive funding. “It’s not the sort of issue that commands voters,” she said.

With a few notable exceptions, there has been little progress on these issues since the State Integrity Investigation was first carried out, in 2012. In fact, most scores have dropped since then, though some of that is due to changes made to improve and update the project and its methodology.

Since State Integrity’s first go-round, at least 12 states have seen their legislative leaders or top cabinet-level officials charged, convicted or resign as a result of ethics or corruption-related scandal. Five house or assembly leaders have fallen. No state has outdone New York, where 14 lawmakers have left office since the beginning of 2012 due to ethical or criminal issues, according to a count by Citizens Union, an advocacy group. That does not include the former leaders of both the Assembly and the Senate, who were charged in unrelated corruption schemes earlier this year but remain in office.

New York is not remarkable, however, in at least one regard: Only one of those 14 lawmakers has been sanctioned by the state’s ethics commission.

Grading the states

When first conducted in 2011-2012, the State Integrity Investigation was an unprecedented look at the systems that state governments use to prevent corruption and expose it when it does occur. Unlike many other examinations of the issue, the project does not attempt to measure corruption itself.

The 2015 grades are based on 245 questions that ask about key indicators of transparency and accountability, looking not only at what the laws say, but also how well they’re enforced or implemented. The “indicators” are divided into 13 categories: public access to information, political financing, electoral oversight, executive accountability, legislative accountability, judicial accountability, state budget processes, state civil service management, procurement, internal auditing, lobbying disclosure, state pension fund management and ethics enforcement agencies.

Experienced journalists in each state undertook exhaustive research and reporting to score each of the questions, which ask, for example, whether lawmakers are required to file financial interest disclosures, and also whether they are complete and detailed. The results are both intuitive — an F for New York’s “three men in a room” budget process — and surprising — Illinois earned the best grade in the nation for its procurement practices. All together, the project presents a comprehensive look at transparency, accountability and ethics in state government. It’s not a pretty picture.

Downward trend, blips of daylight

Overall, states scored notably worse in this second round. Some of that decline is because of changes to the project, such as the addition of questions asking about “open data” policies, which call on governments to publish information online in formats that are easy to download and analyze. But the drop also reflects moves toward greater secrecy in some states.

“Across the board, accessing government has always been, but is increasingly, a barrier to people from every reform angle,” said Jenny Rose Flanagan, vice president for state operations at Common Cause, a national advocacy group with chapters in most states.

No state saw its score fall farther than New Jersey, where scandal after scandal seems to have sunk Gov. Chris Christie’s presidential aspirations deep into the muck of the state’s brawling, back-scratching political history. New Jersey earned a B+, the best score in the nation, in 2012 — shocking just about anyone familiar with the state’s politics — thanks to tough ethics and anti-corruption laws that had been passed over the previous decade in response to a series of scandals.

None of that has changed. But journalists, advocates and academics have accused the Christie administration of fighting and delaying potentially damaging public records requests and meddling in the affairs of the State Ethics Commission. That’s on top of Bridgegate, the sprawling scandal that began as a traffic jam on the George Washington Bridge but has led to the indictments so far of one of the governor’s aides and two of his appointees — one of whom pleaded guilty to conspiracy charges — and even to the resignations of top executives at United Airlines. As a result of these scandals and others, New Jersey dropped to 19th place overall with a D grade.

Admittedly, it’s not all doom and gloom. Iowa created an independent board with authority to mediate disputes when agencies reject public records requests. Gov. Terry Branstad cited the state’s previous grade from the Center when he signed the bill, and the move helped catapult Iowa to first in the nation in the category for access to information, with a C- grade (Iowa’s overall score actually dropped modestly).

In Georgia, good government groups latched on to the state’s worst-in-the-nation rank in 2012 to amplify their ongoing push for reforms. The result was a modest law the following year that created a $75 cap on the value of lobbyists’ gifts to public officials. The change helped boost the state’s score in the category of legislative accountability to a C-, sixth-best in the nation.

Perhaps the most dramatic reforms came in Virginia, where scandal engulfed the administration of outgoing Gov. Robert McDonnell in 2013 after it emerged that he and his family had accepted more than $170,000 in loans and gifts, much of it undisclosed, from a Virginia businessman. McDonnell and his wife were later convicted on federal corruption charges, but the case underscored the state’s woefully lax ethics laws and oversight regime; Virginia received an overall F grade in 2012. At the time, there was no limit on the value of gifts that public officials could accept, and they were not required to disclose gifts to their immediate family, a clause that McDonnell grasped at to argue that he had complied with state laws. (Appeals of the McDonnells’ convictions are pending.)

Over the next two years, newly-elected Gov. Terry McAuliffe and lawmakers passed a series of executive actions and laws that eventually led, in 2015, to a $100 cap on gifts to public officials from lobbyists and people seeking state business. They also created an ethics council that will advise lawmakers but will not have the power to issue sanctions. Advocates for ethics reform have said the changes, while significant, fall far short of what’s needed, particularly the creation of an ethics commission with enforcement powers. Still, they helped push the state's grade up to a D.

States also continued to score relatively well in the categories for auditing practices — 29 earned B- or better — and for budget transparency — 16 got a B- or above (the category measures whether the budget process is transparent, with sufficient checks and balances, not whether it’s well managed).

In Idaho, for example, which earned an A and the second best score for its budget process, the public is free to watch the Legislature’s joint budget committee meetings. Those not able to make it to Boise can watch by streaming video. Citizens can provide input during hearings and can view the full budget bill online.

New York earned the top score for its auditing practices — a B+ — because of its robustly-funded state comptroller’s office, which is headed by an elected official who is largely protected from interference by the governor or Legislature. The office issues an annual report, which is publicly available, and has shown little hesitation to go after state agencies, such as in a recent audit that identified $500 million in waste in the state’s Medicaid program.

Unfortunately, however, such bright spots are the exceptions.

Access denied

In 2013, George LeVines submitted a request for records to the Massachusetts State Police, asking for controlled substance seizure reports at state prisons dating back seven years. LeVines, who at the time was assistant editor at Muckrock, a news website and records-request repository, soon received a response from the agency saying he could have copies of the reports, but they would cost him $130,000. While LeVines is quick to admit that his request was extremely broad, the figure shocked him nonetheless.

“I wouldn’t have ever expected getting that just scot-free, that does cost money,” he said. But $130,000? “It’s insane.”

The cost was prohibitive, and LeVines withdrew his request. The Massachusetts State Police has become a notorious steel trap of information — it's charged tens of thousands of dollars or even, in one case, $2.7 million to produce documents — and was awarded this year with the tongue-in-cheek Golden Padlock award by a national journalism organization, which each year “honors” an agency or public official for its “abiding commitment to secrecy and impressive skill in information suppression.”

Dave Procopio, a spokesman for the State Police, said in an email that the department is committed to transparency, but that its records are laced with sensitive information that's exempt from disclosure and that reviewing the material is time consuming and expensive. "While we most certainly agree that the public has a right to information not legally exempt from disclosure,” he wrote, “we will not cut corners for the purpose of expediency or economy if doing so means that private personal, medi[c]al, or criminal history information is inappropriately released.”

It’s not just the police. Both the Legislature and the judicial branch are at least partly exempt from Massachusetts’ public records law. Governors have cited a state Supreme Court ruling to argue that they, too, are exempt, though chief executives often comply with requests anyway. A review by The Boston Globe found that the secretary of state’s office, the first line of appeal for rejected requests, had ruled in favor of those seeking records in only 1-in-5 cases. Needless to say, Massachusetts earned an F in the category for public access to information. But so did 43 other states, making this the worst performing category in the State Integrity Investigation.

While every state in the nation has open records and meetings laws, they’re typically shot through with holes and exemptions and usually have essentially no enforcement mechanisms, beyond the court system, when agencies refuse to comply. In most states, at least one entire branch of government or agency claims exemptions from the laws. Many agencies routinely fail to explain why they they’ve denied requests. Public officials charge excessive fees to discourage requestors. In the vast majority of states, citizens are unable to quickly and affordably resolve appeals when their records are denied. Only one state — Missouri — received a perfect score on a question asking whether citizens actually receive responses to their requests swiftly and at reasonable cost.

“We’re seeing increased secrecy throughout the country at the state and federal level,” said David Cuillier, director of the University of Arizona’s School of Journalism and an expert on open records laws. He said substantial research shows that the nation’s open records laws have been poked and prodded to include a sprawling list of exemptions and impediments, and that public officials increasingly use those statutes to deny access to records. “It’s getting worse every year,” he said.

After a series of shootings by police officers in New Mexico, the Santa Fe New Mexican published a report about controversial changes made to the state-run training academy. But when a reporter requested copies of the new curriculum, the program’s director refused, saying “I’ll burn them before you get them.”

In January, The Wichita Eagle reported that Kansas Gov. Sam Brownback’s budget director had used his private email address to send details of a proposed budget to the private email accounts of fellow staff members, and also to a pair of lobbyists. He later said he did so only because he and the rest of the staff were home for the holidays. But in May, Brownback acknowledged that he, too, used a private email account to communicate with staff, meaning his correspondence was not subject to the state’s public records laws. A state council is now studying how to close the loophole. A series of court cases in California are examining a similar question there.

Cuillier said in most states, courts or others have determined that discussions of public business are subject to disclosure, no matter whether the email or phone used was public or private. But the debate is indicative of a larger problem, and it reveals public records laws as the crazy old uncle of government statutes: toothless, antiquated appendages of a bygone era.

Governments write ethics laws for a reason, presumably. Public officials can’t always be trusted to do the right thing; we need laws to make sure they do. The trouble is, a law is only as good as its enforcement, and the entities responsible for overseeing ethics are often impotent and ineffective.

In many states, a complex mix of legislative committees, stand-alone commissions and law enforcement agencies police the ethics laws. And more often than not, the State Integrity Investigation shows, those entities are underfunded, subject to political interference or are simply unable or unwilling to initiate investigations and issue sanctions when rules are broken. Or at least that’s as far as the public can tell: many of these bodies operate largely in secret.

The Tennessee Ethics Commission, for example, rose in 2006 out of the ashes of an FBI bribery probe that had burned four state lawmakers. In its decade of operation, the commission has never issued a penalty as a result of an ethics complaint against a public official (it did issue one to a lobbyist). That may seem surprising, but the dearth of actions is impossible to assess because the complaints become public only if four of six commissioners decide they warrant investigation. Of 17 complaints received in 2013 and 2014, only two are public.

“There just haven’t been that many valid complaints alleging wrongdoing,” said Drew Rawlins, executive director of the Bureau of Ethics and Campaign Finance, which includes the commission.

In 2013, in a case that did become public, the commission decided against issuing a fine to a powerful lobbyist and former adviser to Gov. Bill Haslam who had failed to disclose that he’d lobbied on behalf of a mining company that was seeking a state contract. The lobbyist had maintained that his failure was simply an oversight, and only one commissioner voted to issue a penalty.

In Kansas, staff shortages mean the state’s Governmental Ethics Commission is unable to fully audit lawmakers’ financial disclosures, according to Executive Director Carol Williams. “We would love to be able to do more comprehensive audits,” Williams told the investigation’s Kansas reporter. Instead, she said, all her staff can do is make sure officials are filling out the forms. “Whether they are correct or not, we don't know.” Only two states initiate comprehensive, independent audits of lawmakers’ asset disclosures on an annual basis.

The State Integrity Investigation found that in two-thirds of all states, ethics agencies or committees routinely fail to initiate investigations or impose sanctions when necessary, often because they’re unable to do so without first receiving a complaint.

“Many of these laws are out of date. They need to be revised,” said Robert Stern, who spent  decades as president of the Center for Governmental Studies, which worked with local and state governments to improve ethics, campaign finance and lobbying laws until it shut in 2011. Stern, who is currently helping to write a ballot initiative that would update California’s ethics statutes, said that while he thinks the State Integrity Investigation grades are unrealistically harsh, they do reflect the fact that state lawmakers have neglected their responsibilities when it comes to ethics and transparency. “It’s very, very difficult for legislatures to focus on these things and improve them because they don’t want these laws, they don’t want to enforce them, and they don’t want to fund the people enforcing them.”

In 3-in-5 states, the project found, ethics entities are inadequately funded, causing staff to be overloaded with work and, occasionally, forcing them to delay investigations.

The Oklahoma Ethics Commission is charged with overseeing ethics laws for the executive and legislative branches, lobbying activity and campaign finance. This year, the commission operated on a budget of $1 million. In 2014, the nonprofit news site Oklahoma Watch reported that the commission had collected only 40 percent of all the late-filing penalties it had assessed to candidates, committees and other groups since it was created in 1990. Part of that failure was the result of a challenge to the commission’s rules, but Executive Director Lee Slater said that much of it was simply due to a lack of resources.

“Until about a month ago, we had five employees in this office,” Slater said. “We’ve now got six. Try to do it with six employees.” Slater said the commission this year began collecting all fees it is owed, thanks to the sixth employee — whose salary is financed with fees — and new rules that clarify its authority. But he said the agency simply does not have enough money to do what it ought to. “I’m not going to sit here and tell you that we do everything we should,” he said. “But I will tell you that we do the best that we can, whatever that is.”

Slater said he’s been told to expect a cut of between 5 and 20 percent to the commission’s appropriations next year ($775,000 of the commission’s current budget comes from appropriations).

Oklahoma is hardly an outlier. “They don’t have the resources,” Stern said, speaking of similar agencies across the country. “That’s the problem.”

New frontier points to old problem

Not long ago, journalists and citizen watchdogs were thrilled to get access to any type of information online. But standards have changed quickly, and many have come to expect government to not just publish data online, but to do so in “open data” formats that allow users to download and analyze the information.

"By making data available digitally, it can be more easily reused and repurposed,” said John Wonderlich, policy director at the Sunlight Foundation, an advocacy group. (Global Integrity consulted with the Sunlight Foundation when writing the open data questions for this project).

Only nine states have adopted open data measures, according to the Sunlight Foundation, some of which do little more than create an advisory panel to study the issue.

The 2015 State Integrity Investigation included questions in each category asking whether governments are meeting open data principles. Almost universally, the answer was no. More than anything, these scores were responsible for dragging down the grades since the first round of the project.

While open data principles are relatively new, the poor performance on these questions is indicative of the project’s findings as a whole. “If we really wanted to do it right we’d just scrap it all and start from scratch,” said Cuillier, of the University of Arizona, speaking of the broken state of open records and accessibility laws. That clearly is not going to happen, he said, so instead, “we’re going to continue to have laws that are archaic and tinkered with, and usually in the wrong direction.”

This articles draws on reporting from State Integrity Investigation reporters in all 50 states.

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25 Years After America's Biggest Nuclear Cleanup Project Began, Not a Single Drop of Waste Has Been Treated

The largest and most costly U.S. environmental cleanup project has been dogged for years by worries about an accidental nuclear reaction or a spill of toxic materials that could endanger residents nearby, as well as a history of contractor retaliation against workers who voice worries about persistent safety risks.

“The Board finds that expressions of technical dissent affecting safety at WTP, especially those affecting schedule or budget, were discouraged, if not opposed or rejected without review,” Winokur wrote in June 2011. “Project management subtly, consistently, and effectively communicated to employees that differing professional opinions counter to decisions reached by management were not welcome and would not be dealt with on their merits.”

As a result, the safety board formally recommended the Energy Department strictly monitor the safety culture and technical soundness of the WTP project. Wednesday’s hearing was an extension of those recommendations.

Safety board member Jessie Roberson asked the assembled Energy Department representatives what has changed since scrutiny of the project has increased.

Kevin Smith, manager of the Energy Department’s Office of River Protection that helps oversee the project, acknowledged that workers’ “trust had been degraded” by what they’d seen happen when others spoke up . But he said workers now are freer to report safety concerns than they were in the past. Smith said he sent an email message to every worker on the WTP project inviting them to contact him when they’re frustrated by management responses to safety observations.

“Nobody shoots the messenger,” Smith said. “We want all the issues out. We want to get them all on the table and fundamentally change.”

But accusations of whistleblower retaliation persist at Hanford and other nuclear sites. Glenn Podonsky, head of the Office of Enterprise Assessments that has enforcement authority over Energy Department contractors, told the safety board on Wednesday that his office was at Hanford last week investigating another whistleblower’s complaint.

Sen. Ron Wyden, D-Oregon, said ending management’s hostile reactions to dissent is essential to the future of the WTP project.

“The bottom line here is [Tamosaitis] and other whistleblowers should never have been retaliated against in the first place for calling attention to the problems at Hanford,” Wyden said in an email to The Center for Public Integrity. “Whistleblowers play a crucial role in holding government and government contractors accountable. It is my hope that this case acts as a further catalyst for the Department of Energy to protect workers who seek to improve the culture and effectiveness of its facilities.”


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Koch Brothers: Teach Our Libertarian Claptrap and Get Millions for Your College!

In 2007, when the Charles Koch Foundation considered giving millions of dollars to Florida State University’s economics department, the offer came with strings attached.

Florida State University ranked a distant second behind George Mason University of Virginia as a recipient of Charles Koch Foundation money. In atax document filed with the Internal Revenue Service, the foundation described its Florida State University funding for 2012 as "general support." 

Some schools’ professors and students were aghast at the funding, arguing that such financial support wasn't widely known on their campuses and could threaten schools’ academic freedoms and independence. Others argued that colleges and universities — long bastions of liberal academics — would be well served by more libertarian courses of study.

Separately, Charles Koch is the financial force behind a “curriculum hub” for high school teachers and college professors that criticizes government and promotes free-market economic principles. He’s also funded programs for public school students, and this year, his foundation donated $25 million to the United Negro College Fund.

At Florida State University, Benson noted in a November 2007 memorandum that the Charles Koch Foundation would not just “give us money to hire anyone we want and fund any graduate student that we choose. There are constraints.”

Benson later added in the memo: “Koch cannot tell a university who to hire, but they are going to try to make sure, through contractual terms and monitoring, that people hired are [to] be consistent with ‘donor Intent.’”

A separate email from November 2007 indicates that Benson asked Charles Koch Foundation officials to review his correspondence with Florida State associates about potential Koch funding.

Trice Jacobson, a Charles Koch Foundation representative, did not respond to questions, although Benson and Florida State University spokesman Dennis Schnittker each confirmed that the emails and documents are authentic.

But Benson noted that the documents were meant for internal use and reflect the “early stages of discussion” well ahead of a 2008 funding agreement signed by the university and the foundation.

That agreement, initiated in 2009, has earned Florida State $1 million through April, according to the university. Until it was revised in 2013, an advisory board would consult with the Charles Koch Foundation to select faculty members funded by the foundation's money.

Benson also said that while he continued serving as Florida State’s economics department chairman until 2012, Charles Koch Foundation money wasn’t a factor.

While foundation initially discussed providing money to help fund Benson’s salary, “that idea was taken off the table very early in negotiations,” he said. “I continued as chair because I felt I could still make a valuable contribution to the department.”

The 2008 agreement between the school and the foundation nevertheless faced harsh criticism from some professors and students who argued it indeed gave the foundation too much power over university hiring decisions.

The school and foundation revised their agreement in 2013 “for clarity” and to emphasize the “fact that faculty hires would be consistent with departmental bylaws and university guidelines,” Schnittker said. “Our work with CKF [Charles Koch Foundation] has always upheld university standards.”

Those guidelines, spelled out in a Florida State University statement about the foundation from May, say the money will not compromise “academic integrity” or infringe on the “academic freedom of our faculty.”  

Ralph Wilson, a mathematics doctoral student and member of FSU Progress Coalition, doesn’t buy it.

Florida State University “willfully and knowingly violated the integrity of FSU by accepting funding meant only to further Koch’s free-market agenda,” said Wilson, whose student group works to “combat the corporatization of higher education.”

The Charles Koch Foundation, meanwhile, “is using our universities solely to further their own agenda and plunder the very foundations of academic freedom,” Wilson said.

At the end of 2012, the foundation reported having almost $265.7 million in assets, according to its most recent tax return filed with the Internal Revenue Service. 

In his 2007 memo to colleagues, Benson acknowledged the school’s relationship with the foundation would invite blowback.

“I guess I am trying to say that this is not an effort to transform the whole department or our curriculum,” Benson wrote. “It is an effort to add to the department in order to offer some students some options that they may not feel they have now, and to create (or more accurately, expand) a cluster of faculty with overlapping interests.”

Benson also predicted entering into an agreement with the foundation carried some risk.

“There clearly is a danger in this, of course. For instance, we might be tempted to lower our standards in order to hire people they like,” Benson wrote, in advocating that the university not do so. “We cannot expect them to be willing to give us free reign to hire anyone we might want, however, so the question becomes, can we find faculty who meet our own standards but who are also acceptable to the funding sources?”

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Casinos and Offshore Gaming Sites Furiously Battle Over Billions in Gambling Revenue

Ever since Bugsy Siegel opened the Flamingo Hotel in 1946 and launched the Las Vegas Strip, gambling has held a tenuous position in American life, suggesting glamour, wealth, depravity and corruption all at once. Now that casinos have spread throughout the nation and allegedly shed their mafia ties, a new branch of the industry is fighting for legitimacy here.

Las Vegas-based casinos and overseas operators have begun an all-out battle over Internet gambling, which is mostly banned nationwide but carries with it the promise of billions of dollars in additional revenue for casinos and state governments. Three states began licensing online betting last year, and lawmakers are debating online gambling bills in seven others right now. In Washington, meanwhile, Congress is facing increasing pressure to either bar or regulate the fledgling industry federally.

An American market: New Jersey

Even before the Justice Department revised its opinion, the offshore companies had begun looking for a legitimate way into the American market, with a particular focus on New Jersey. In early 2009, Joe Brennan Jr., who ran a small, Washington D.C.-based industry group called the Interactive Media Entertainment and Gaming Association, met with state Sen. Raymond Lesniak, a New Jersey lawmaker representing a densely populated patch of the state south of Newark. Lesniak, one of the state’s most powerful politicians, had caught Brennan’s attention when he introduced a bill to legalize sports betting.

The senator, who has thinning red-gray hair, shares a district office with two other legislators in Elizabeth, where he greets visitors in an unadorned conference room. He speaks confidently, as if whatever he’s saying should be self-evident. In a recent interview, Lesniak said he proposed legalizing sports betting after growing tired of annual raids on Super Bowl gambling rings in the Garden State, even as betting on the game is legal in Las Vegas. When Brennan came to visit five years ago, however, he had another idea for the New Jersey lawmaker. Why not legalize gambling over the Internet?

For Lesniak, the proposal offered hope for Atlantic City: a new form of gambling to draw younger clientele and help the state’s struggling casinos, which had been losing money for three straight years because of increasing competition in nearby states. Brennan’s group, which has since ceased operations, never published a list of members. But in a 2007 lawsuit,  the group acknowledged that some of its members “provide an Internet gambling opportunity to private individuals located both within and beyond the territorial borders of the United States.” In 2009, when Brennan first met with Lesniak, his organization collected $1 million in membership dues, which Brennan quickly devoted to fighting for a law in New Jersey.

“There was no silver bullet to this,” he said. “It was, very simply, a lot of hard work.” Brennan hired one of New Jersey’s most influential lobbying firms, Princeton Public Affairs Group, which drew up what proved to be an effective strategy. The idea was to have the Atlantic City casinos run the Internet gambling operations, because no bill would pass without their support.

Lesniak was a dogged sponsor, ushering a bill to passage in January 2011. Gov. Chris Christie vetoed the measure, however, saying it would violate the state constitution, which allows gambling only in Atlantic City. Another factor: the casinos, led by Caesars, opposed the bill at the time. The big national gaming companies had gotten behind Internet gambling but wanted a federal law instead, worrying that a patchwork of state statutes would lead to a more arduous and expensive regulatory system. (Lesniak suspects the industry pressed Christie to veto the bill. David Satz, Caesars’ top lobbyist, was a member of Christie’s transition team in 2009 and helped write a report arguing against legalizing Internet gambling at the time.) A spokesman for Christie did not respond to questions about the veto. Neither Caesars nor any of the other casinos contacted for this story offered any comment.

By 2012, though, Caesars and some other casinos had changed course, realizing that Congress was unlikely to approve online gambling, and so they threw their support behind the legislation. Lesniak had reintroduced the bill, tweaking it to address Christie’s concerns, and after two more rounds, Christie signed the law in February 2013.

The online gambling bill received little organized opposition in the state. Only six lawmakers voted against it, compared to 105 in favor. One of the opponents, Assemblyman Ralph R. Caputo, a Democrat, said he was concerned about gambling addiction. One of the few voices against the move from outside the capitol was Carl Zeitz, who served on the state Casino Control Commission from 1980 to 1988.

“It is one thing to have to get on a bus, drive a car, take a train, get on an airplane to Vegas, to go to casinos. It is another thing to sit home in your skivvies in bed or at the kitchen table playing gambling games for real,” he said. “That to me is really unwise public policy.”

The bill allows licensed casinos to apply for online gambling permits and to offer a wide array of games. Players have to be in New Jersey to log in, a detail the casinos verify by tracking a computer’s IP address and using geo-location on cellphones. The state takes 15 percent of the proceeds, along with $400,000 up front and $250,000 each year from any casino running online betting. While the casinos are the only ones eligible for licenses, they have generally partnered with other companies, including overseas operators such as Gibraltar-based Digital Entertainment, to run the websites.

The casinos, which were in favor of an Internet gambling law by 2012, spent $1.2 million on lobbying in 2012 and 2013 in New Jersey, with Caesars spending $703,100 of that both directly and through its donations to the Casino Association of New Jersey. The offshore companies were also active in lobbying. The Interactive Gaming Council, a Vancouver-based industry association for online gambling companies, spent another $253,700, and PokerStars’ parent company, Rational Services, spent $204,353 last year. Both of those entities hired Princeton Public Affairs, the same firm that had represented Brennan’s group.

The various groups also donated generously to Lesniak and other supporters. Brennan, his wife Jennifer and his association gave $22,225 to New Jersey politicians and committees since 2009, including $4,600 to Lesniak and $7,000 to Assemblyman John Burzichelli, the prime sponsor of the legislation in the lower chamber of the legislature.

Another donor was that Washington-based poker group, the Poker Players Alliance, which has been one of the strongest proponents for legalizing online poker. It has unleashed torrents of social media attention on state and federal politicians, pre-writing tweets for its members to send. When the Massachusetts Gaming Commission held a forum on Internet gambling in March, the alliance’s vice president for player relations, Rich Muny, tweeted a link directed at Gov. Deval Patrick: “@MassGovernor I'm glad to see today's Gaming Commission Internet Forum. Please support Internet #poker for Massachusetts!” Within a day, dozens of supporters had sent the tweet.

The alliance was formed in 2005 by a group of poker players, and says it represents 1.2 million players around the country. But according to federal tax filings published by the website, nearly all of its money in 2005  came from $1.1 million given by Ruth Parasol and James Russell DeLeon, a married couple who started PartyGaming, one of the world’s largest online poker companies.

The couple, both born in California, were living in Gibraltar at the time, and their company eventually entered into a “non-prosecution” agreement with the Justice Department in 2009, after it had pulled out of the American market in response to the 2006 Internet gambling enforcement act. Under the agreement, PartyGaming paid a $105 million fine and acknowledged that some of its “customer transactions” prior to the 2006 law “were contrary to certain US laws.” In exchange, the Justice Department agreed not to prosecute the company for those transactions.

The company later merged with another to become, which announced in October that Parasol and DeLeon would divest their 14 percent stake as part of the company’s application for a license to operate in New Jersey (in its partnership with the Borgata Hotel Casino and Spa, in Atlantic City, the company holds about 40 percent of New Jersey’s Internet gambling market so far).

John Shepherd, a spokesman for, said the couple decided the time had come to part ways with the company, in part because they were in the midst of divorce proceedings. He said the company had some contact with the Poker Players Alliance prior to 2006, but that Parasol and DeLeon gave their own money to the group and that the company has never contributed money.

While the poker alliance hasn’t received funding from, John Pappas, the group’s executive director, said that most of its money does comes from other offshore online gambling companies, including the Rational Group, which owns PokerStars.

And as Lesniak and Brennan were pushing the law through New Jersey’s legislative process, the alliance was there to help it along. Pappas and other members met with Christie’s staff in January 2013 to urge him to sign the bill. The organization, Pappas, and four prominent poker players gave Lesniak a total of $15,600 after the law passed last year, along with $2,000 to the Union County Democratic Committee, which gave $144,089 to Lesniak. The alliance gave another $2,600 to Burzichelli, the maximum allowed under state law.

Lesniak, Burzichelli and Sen. Jim Whelan, a co-sponsor, received an additional $17,300 collectively from four law and lobbying firms and their employees and family members, including Princeton Public Affairs, that represented the offshore companies in New Jersey, Pennsylvania and Washington, D.C.

Licensed casinos are barred from contributing to politicians in New Jersey. But in 2013, the country’s largest casino companies and their representatives, several of which operate in New Jersey, gave at least $1.5 million to the Republican Governors Association, with $1 million coming from Adelson, the casino mogul. The RGA, in turn, spent $1.7 million last year helping reelect Christie as governor. In November, Christie became chairman of the organization, anointing him the chief fundraiser for the group. Adelson and his wife Miriam also gave $7,600 directly to Christie’s campaign last August, even though Christie had already signed the law legalizing online gambling, which Adelson opposes. Adelson does not have operations in New Jersey.

Jon Thompson, a spokesman for the RGA, said in an email that his organization does not solicit funds for specific races, and there’s no way to tie money from donors to individual contributions the RGA makes. A spokesman for Las Vegas Sands, of which Adelson is chairman and CEO, did not respond to repeated requests for comment.

Despite all the cash being thrown around in the Garden State, the revenue from Internet gambling has so far proved disappointing. The casinos pulled in $27.2 million since they began operating the new websites in late November, through the end of February. At that rate, revenue will fall well short of the $200-$300 million analysts had forecast for the first year of operation; Christie’s initial budget projections suggested even more.

But other states and casino firms still envision a potential Internet gambling bonanza. By the time Christie had signed the law, Nevada and Delaware had passed their own online gambling laws too, with Nevada legalizing only poker. In February, those two states announced an agreement to allow players from each state to place bets with sites based in the other. One of the biggest concerns for less populated states has been that casinos won’t have enough customers to run viable games, and early returns in Delaware have proved disappointing too.

Several other states are looking at Internet gambling this year, including MassachusettsCalifornia, Illinois, Iowa, Minnesota and Mississippi, where a bill was introduced but failed to pass. Lawmakers in Louisiana held hearings on the issue.

The Rational Group, the firm that owns PokerStars, hired lobbyists in at least six states last year, including New York, where the company’s lobbyist met with an adviser to Gov. Andrew Cuomo in November, according to a report by Capital New York. In late March, a lawmaker introduced legislation to legalize online poker in the Empire State. But the bill’s language makes clear that companies that continued to offer U.S. betting even after the 2006 federal law limiting online gambling — with PokerStars the most prominent example — would have a hard time obtaining licenses in New York.

Rational Group declined to comment for this article.

While Nevada and Delaware have teamed up, it’s competition among the states that, more than anything, is driving the push for online gambling. The decline in revenue that so concerned Lesniak, Christie and others began in 2006, two years after Pennsylvania legalized casinos. New Jersey’s casinos have seen revenue fall each year since, and Pennsylvania’s casino revenue passed New Jersey’s in 2012, pulling in $3.2 billion.

Now Pennsylvania is finding itself in a similar situation to New Jersey. Since Ohio and Maryland legalized casinos in 2008 and 2009, Pennsylvania’s gambling growth has stagnated: last year was the first that the Keystone State’s casino revenue did not grow. It’s no surprise the state is now considering legalizing online gambling, with New Jersey as its model, offering a glimpse of how the debate may spread across the country in coming years.

All about revenue: Pennsylvania

Pennsylvania’s ornate state capitol sits high on a hill overlooking Harrisburg and the Susquehanna River. The building dates back to a more prosperous time in the Keystone State’s history, when wealthy industrialists like Andrew Carnegie drove a growing industrial economy. Today, Harrisburg sprawls out below the capitol in a gritty grid of mostly empty streets.

In the plush offices of the capitol, the debate over online gambling is circumscribed almost entirely by the question of whether or not it will generate money for Pennsylvania and its casinos. The state takes 55 percent of revenue from slots and 14 percent from table games, making it essentially a partner in the business. “It’s about revenue,” said state Sen. Kim Ward, who chairs the Community, Economic and Recreational Development Committee, which oversees gambling. “Because every year we’re in a budget squeeze.”

The state is facing a deficit of more than $1 billion this year. Pennsylvania and neighboring states have steadily increased the number of allowable forms of legalized gambling over the past decade, increasing competition within the industry, and casinos have responded with a cry for help.

In December, the Senate funded a study that will look at updating the state’s gambling regulations and taxes and allowing Internet gambling in an effort to boost revenue. The report is due by May 1, in time for this year’s budget debate. Rep. Tina Davis, a Democrat, had already introduced a bill to legalize online gambling last year. But Republicans control both chambers and are likely to write their own bill if they decide to advance the issue after the report comes out.

The state’s tremendous casino stake gives the industry a powerful tool to influence policy, said Barry Kauffman, executive director of the good-government group Common Cause Pennsylvania. All told, various interest groups spent $7.4 million lobbying on gambling and wagering issues last year in Pennsylvania, with Adelson’s Las Vegas Sands spending nearly $234,000, the most of the big casinos. PokerStars spent $42,500 lobbying in Pennsylvania last year, pressing to make sure it’s not cut out of an Internet gambling bill because of its troubled legal history. All told, Pennsylvania’s biggest casinos retained 12 lobbying firms in the state last year, including some of the state’s most powerful, like Greenlee Partners and J.M. Uliana and Associates. Most lawmakers say the casinos have not begun lobbying aggressively on the issue — that would come once a bill is introduced — and that some of the smaller, local casinos have expressed concerns that online gambling could hurt business.

Like in New Jersey, the casinos cannot give directly to candidates or committees in Pennsylvania. But since 2010, casinos operating in the state or their executives and executives’ families have given at least $6 million to the Republican Governors Association. That cash cannot be traced to particular expenditures by the RGA, but the governors’ group has spent generously in Pennsylvania over a period of several years, giving $6 million to Gov. Tom Corbett in 2010 along with $2.3 million to the Pennsylvania Republican Party. Corbett is up for reelection this year in what is expected to be one of the toughest governor’s races in the country. Last year, the RGA gave Corbett another $210,028 and $16,110 to the Pennsylvania Republican Party.

Casinos have also given more than $850,000 since 2010 to the Republican State Leadership Committee, a national group that distributes money to state politicians. In 2012, that group gave $500,000 to the Pennsylvania House Republican Campaign Committee, which in turn distributed money to candidates and to the Pennsylvania Republican Party.

Jill Bader of the Republican State Leadership Committee said in an email that her group has created a “segregated account” for Pennsylvania and that money from casinos is not deposited into the fund.

In response to a question asking whether some casino funds had made their way to Pennsylvania, Thompson, the RGA spokesman, said only that the group invests money “in full compliance of the law.”

The Pennsylvania Gaming Control Board oversees casinos in the state, and spokesman Richard McGarvey said his agency tries to make sure that PACs and other committees are in compliance with the law, but that the agency has no authority over federal political organizations. “We deal with the constraints that we have,” he said.

The casinos’ lobbying firms contributed hundreds of thousands of dollars to Pennsylvania candidates last year, though the lobbyists represent many other clients as well.

Pennsylvania lawmakers say that because of the ban on campaign contributions, they don’t feel influenced by the casinos. And unlike in New Jersey, there is opposition in both parties to allowing online gambling. Republicans in the House have introduced bills to ban online betting. Adelson runs a casino in the state, so he carries considerable weight.

In February, state Rep. Mario Scavello, a Republican, introduced a bill to create criminal penalties for gambling online illegally. The Coalition to Stop Internet Gambling, an advocacy group funded by Adelson, quickly issued supportive statements. The Poker Players Alliance called its members to action with the opposite goal, directing people to flood Scavello’s Facebook page with comments, which the representative later deleted. “If you had read those things, you wouldn’t leave them up there,” he said.

When Rep. Mike Tobash included a note about the Scavello bill in a recent newsletter, the alliance again unleashed its members, who put up a solid block of nearly 40 posts on his Facebook wall, some of them presenting detailed arguments, others with more direct assertions like, “I guess you hate freedom!

Scavello said he’s not convinced by the poker players’ arguments. “I’m really set on seeing something happen,” he said.

Dianne M. Berlin, who helped lead a loose coalition of religious, good-government, minority and other advocacy groups that campaigned against the 2004 gambling expansion, sees a repeat of what occurred a decade ago. She said the industry preys on Pennsylvania’s weakest citizens, from the elderly to the poor, and that lawmakers are hoping for revenue while ignoring the costs of addiction and increased gambling.

“I find it a slap in the face to the people of Pennsylvania when they only look at one side,” she said. “If I open a shoe store and say, oh my god, I can make 60 percent on each pair of shoes, and don’t look at my rent and my lights and the people I’ll have to employ, that’s stupid.”

The coalition has largely dissipated, though. The faith-based Pennsylvania Family Institute and it's sister group, the Family Council, represent the most established anti-gambling organizations in the state, but Thomas J. Shaheen, the group's vice president, said the institute is focused more on blocking the state lottery from adopting a new type of video gambling. Last year, the two groups spent $52,714 lobbying on a handful of issues, including gambling.

A battle royale in the nation’s capital

While many of the big casinos turned their attention to the states over the past couple of years, the Washington lobbying game is ramping up again, driven largely by Adelson’s new push to ban online gambling.

Adelson had already begun pushing for a ban through Las Vegas Sands, which spent $320,000 on lobbying in Washington last year. But in November, the Washington Post reported that he was forming a group called the Coalition to Stop Internet Gambling (the group’s website,, was registered in June, according to The group hired former New York Gov. George Pataki, former Sen. Blanche Lincoln of Arkansas (who was also recently hired as a lobbyist by Las Vegas Sands) and former Denver Mayor Wellington Webb as national co-chairmen and recently announced the support of 38, mostly faith-based organizations.

The coalition has begun a national media campaign to convince the public of the ills of online gambling, with Pataki and Webb writing opinion pieces in major newspapers and appearing on television. In February, the group released its first television ad, which warns that “disreputable gaming interests are lobbying hard to spread Internet gambling throughout the country.” The group also secured signatures from 15 state attorneys general on a letter expressing their concern about online gambling and urging Congress to restore the Justice Department’s initial interpretation of the Wire Act; in March, Gov. Rick Perry of Texas and Gov. Nikki Haley of South Carolina sent their own letters — each nearly identical to the other — with the same request to Congress.

Meanwhile, Las Vegas Sands lobbyists were reportedly circulating draft legislation to achieve this goal, a copy of which was published in January by poker blogger Marco Valerio. Several reports tied the draft to Adelson’s representatives.

In late March, the campaign scored a major victory when Sen. Lindsey Graham, R-S.C., and Rep. Jason Chaffetz, R-Utah, introduced a bill with the same title and intent as that draft legislation: to amend the Wire Act to prohibit online gambling. M.J. Henshaw, a spokeswoman for Chaffetz, said the Congressman wants the issue decided by Congress, not a Justice Department lawyer, and that he’s particularly concerned because Utah does not allow any form of gambling. Asked whether the bill originated with Adelson’s lobbyists, Henshaw said, “like any issue that my boss takes on, he seeks the advice of industry folks.”

While Graham has not received much money from casinos, Adelson and his wife and daughter contributed $15,600 to his campaign account last year, and a Sands PAC gave another $5,000, according to the Center for Responsive Politics. The senator’s office did not respond to requests for comment, but Graham told NPR that his Baptist constituents and Adelson “are one with this,” and that “this is really easy politics for me back in South Carolina.” Chaffetz has not received contributions from Adelson or any other gambling interests, according to the Sunlight Foundation.

Neither Las Vegas Sands nor the coalition responded to requests for interviews, but in January, the Sands’ vice president for government relations, Andrew Abboud, told Nevada political reporter Jon Ralston that Adelson was “prepared to mount full campaigns in every state where a bill is introduced,” adding, “we are going to make it ‘the plague.’ ”

Adelson, 80, says he is morally opposed to the practice. He warns of a rash of underage gamblers betting in their living rooms and of the ease with which criminals and terrorists could rig games to launder money. Adelson and his coalition have widely cited an FBI letter, sent last year in response to a request from the late Rep. C.W. Bill Young, which warns that, “online casinos are vulnerable to a wide array of criminal schemes,” including identity theft, money laundering and public corruption. Effective regulation could prevent much of this activity, the letter notes, but “sophisticated methods” might evade detection.

In a recent interview with Politico Magazine, however, Adelson admitted that beyond the morals, he fears for his industry, warning that if online gambling is legalized, software giants like Google or Facebook will take over the market, “and that’s going to be the end of all of it.”

Most of the rest of the casino industry disagrees, and the American Gaming Association, of which Sands is a member, announced in January that it was launching a campaign to fight back. The group added several new staff members and also hired Jim Messina, who led President Obama’s 2012 reelection campaign, to help with “grassroots initiatives,” including online gambling.

The following month, the gaming association and other casino interests formed the Coalition for Consumer and Online Protection, which has hired former Reps. Michael Oxley and Mary Bono and launched a $250,000 ad campaign to block a federal ban. The coalition has framed the question in terms of states’ rights, consumer protection and Internet freedom.

In the Poker Player’s Alliance, the offshore companies have a voice in Washington, too. Pappas has a long history as a political operator — he began his career working for former Rep. John Shadegg before going on to political work with Dittus Communications, a well-connected Washington public relations firm that was later bought by a competitor. Pappas joined the alliance in 2007 and now spends his time criss-crossing the country, testifying on behalf of his group to lawmakers in Washington D.C.Springfield, Ill., and wherever else someone is talking about online gambling. His message: millions of Americans are already gambling over the Internet, and legalizing and regulating the practice would make it easier to protect those gamblers from criminal activity and addiction problems.

Pappas said Adelson appears to be reaching for any argument he can to try to ban online gambling, though most of them, he says, are specious. What’s more, Pappas argues, Adelson has offered visitors to his Venetian Palazzo Las Vegas the opportunity to use computers or smartphones to place bets from anywhere on the property.

The alliance has shifted its focus from direct lobbying to playing more of a pesky role through its own “grassroots” effort, Pappas said, particularly with a heavy social media presence. A December Facebook post by Adelson’s group, showing an image of a child in front of a computer and warning of the “threat to kids,” garnered more than 50 comments after the PPA urged members to fight back. The group’s spending on direct lobbying is far lighter than in previous years, down to $350,000 last year from a high of $2 million in 2007.

The alliance has also given some $363,000 in federal campaign contributions since it began operating in 2005, with the top recipient being former Rep. Barney Frank, who for years pushed to legalize online poker. Frank received $15,024 in direct contributions from the group over the years, and in the 2010 election cycle Pappas bundled contributions worth $51,200 for Frank, according to the Sunlight Foundation. and its predecessor also spent $2.7 million on lobbying in Washington since 2007, hiring influential firms such as Heather Podesta and Partners. Shepherd, the spokesman, said that money was, “very much to geared to having political radar as opposed to having full-on lobbying.”

Over the past few years, lawmakers have introduced several bills that would create a federal system for regulating Internet gambling, but they garnered little support. In February, Sen. Dean Heller, R-Nev., said he is working on a bill that would legalize Internet poker but ban all other types of online gambling — a move he and Sen. Harry Reid, D. Nev., have pushed in previous years — telling the Las Vegas Review-Journal that “Adelson brings up some reasonable concerns.”

Adelson and his wife have given $18,800 to Heller’s campaigns since 2006, and other Sands employees have given another $27,550. Over the same period, the casino industry as a whole has given Heller nearly $640,000.

The chances of passing such a federal bill, though, will become more difficult as more states legalize their own systems of Internet gambling. To many, there’s a sense of inevitability to online gambling. Rose, of Whittier Law School, said that the wave of gambling expansion that swept the country over the past 25 years has inured politicians to the reservations they once had. “Adding one more form, like Internet poker, is not a big deal now,” he said. “Every state has entrenched political operatives who have no problem with Internet gambling. As long as they’re the ones to run it.”

Ben Wieder contributed to this report.

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Our Airwaves for Sale: The Wireless Company Free-For-All

The setting was ornate, the subject esoteric, but the implications huge.

The airwaves to be auctioned next year are some of the most valuable that will ever, in the foreseeable future, be available to wireless providers.  Most of the spectrum targeted for sale is in the 600 megahertz band of frequencies — what wireless carriers call “beachfront property.”

The frequencies are currently occupied by television broadcasters. The FCC will ask them to give up their airwaves voluntarily and if they don’t, some may be moved to another part of the spectrum. The FCC plans to share the proceeds of the auction with those television stations that choose to sell their licenses.

The 600 megahertz band is the kind of airwaves that wireless companies want and need. It travels farther than frequencies above 1,000 megahertz, can penetrate buildings, navigate hilly terrain and more easily go through vegetation, all of which makes it less likely to lose a connection compared with those traveling on higher bands. It’s also cheaper to operate because it requires fewer towers.

As of August 2012, Verizon and AT&T together owned 74 percent of the low-band airwaves, according to calculations using the FCC’s most recent annual report on the competitiveness of the mobile wireless market. Sprint controlled 12 percent, and T-Mobile owned just 0.2 percent.

Most of T-Mobile’s and Sprint’s frequencies are in the higher bands. AT&T and Verizon argue that the high-band spectrum is equally good because it can carry more data, a characteristic that is desirable in urban areas where demand for wireless data is greatest.

Corporate accountants, however, put a higher value on the lower frequencies. Verizon says in its company filings that its frequencies are worth $75.7 billion, second only to the combined value of all of its plants, properties and equipment.

AT&T reports its licenses are worth $56.4 billion. Sprint owns more spectrum than any carrier but it is almost all above 1,000 megahertz. The company priced its spectrum at $41.8 billion. T-Mobile, which has about half the spectrum Verizon has, reported its wireless licenses are worth $18.1 billion.

Verizon and AT&T have used their low-band spectrum to build networks that cover much of the United States, allowing them to attract more customers. Verizon has about 119 million subscriptions, or about 35 percent of all U.S. wireless subscribers, and AT&T has 32 percent, according to the latest report by Strategy Analytics, a technology consulting firm.

Sprint and T-Mobile, whose networks are spotty by comparison, trail a distant third and fourth with 16 percent and 13 percent of the market, respectively, according to the report.

Competition or revenue?

When Congress ordered the FCC in 2012 to hold the spectrum auction, the goals were to increase the frequencies available to wireless carriers, raise money to build a nationwide emergency radio network and pay down the national debt.

The agency now is writing the auction rules to balance the need to raise money with the desire to maintain competition.

Verizon and AT&T argue that capping what they can buy will lower the price paid for the spectrum, cutting the revenue to the government, or worse, cause the auction to fail altogether.

Sprint and T-Mobile argue caps will allow them and other carriers to obtain low-band frequencies needed to compete against their two bigger rivals. The competition will lower prices and encourage the carriers to develop advanced technologies to decrease costs and improve services.

They also argue limits will encourage more bidders, because companies will believe they have a chance of submitting winning bids if AT&T and Verizon cannot bid in every market. More bidders, they argue, means more revenue for the government.

The Justice Department agrees with Sprint and T-Mobile.

In a filing with the FCC in April that drew sharp criticism from supporters of an open auction, the department’s antitrust division argued “rules that ensure the smaller nationwide networks, which currently lack substantial low-frequency spectrum, have an opportunity to acquire such spectrum could improve the competitive dynamic among nationwide carriers and benefit consumers.”

Lobbying war

Those opposing arguments are at the center of the lobbying war.

AT&T and Verizon operate some of the most powerful influence operations in Washington.

AT&T Services, Inc.Verizon Communications Inc.T-Mobile USA, Inc.Sprint Corporation20092010201120122013$0$3,000,000$6,000,000$9,000,000$12,000,000$15,000,000$18,000,000$21,000,000

Source: Center for Responsive Politics

Last year AT&T doled out $15.9 million for lobbying on a range of issues, according to the Center for Responsive Politics, which tracks lobbying spending. AT&T spent the 11th largest amount of all companies that year, while Verizon ranked 18th.

T-Mobile has increased its lobbying 74 percent in the past three years since its purchase by AT&T was blocked, but at $5.2 million it remains far behind AT&T and Verizon. Sprint spent even less, $2.8 million in 2013.

The spending pays for lobbyists to visit members of Congress, or to urge them to call or write the agency. Sen. Chuck Schumer, D-N.Y., who sits on the Judiciary Committee, sent a letter Nov. 20 to FCC Chairman Tom Wheeler to urge Wheeler not to institute spectrum limits.

Schumer wrote that the caps “would simply … reduce the amount of spectrum offered for auction as well as the revenue that would be generated in return” as broadcasters would choose not to put up their frequencies for sale for fear that they wouldn’t be able to get the high price that the big carriers could offer — an argument found in FCC filings submitted by AT&T, Verizon and their hired economists.

AT&T’s and Verizon’s political action committees gave Schumer a combined $18,000 between 2009 and 2013, compared with $10,000 from Sprint and T-Mobile PACs during the same period, according to CRP.

Six Republican House lawmakers — including Fred Upton, R-Mich., chairman of the Energy and Commerce Committee, which oversees the FCC, and Greg Walden, R-Ore., chairman of the committee’s communications and technology subcommittee — wrote FCC commissioners in April in response to the Justice Department’s filing, arguing that spectrum caps “will reduce the potential revenues from the auction and possibly cause the auction to fail.”

The six authors, who also included committee members Marsha Blackburn from Tennessee, Ed Whitfield from Kentucky, Billy Long from Missouri, and Robert Latta from Ohio, received among the largest campaign contributions in Congress from AT&T’s and Verizon’s PACs for the 2012 elections — a total of $107,000 from both carriers, according to CRP.

T-Mobile’s and Sprint’s PACs gave the group as a whole about half that much, a total of $42,000, according to the center.

Spokesman for Latta and Whitfield said AT&T’s and Verizon’s campaign donations didn’t influence the representatives’ positions on spectrum limits. The other members didn’t reply to requests for comment.

“AT&T and Verizon have put on a full-scale lobbying campaign and they’re spreading money all over town and writing op-eds,” said Michael Calabrese, director of the Wireless Future Project at the New America Foundation, which supports limits. “Each side is trying to pressure the FCC, sometimes with public letters, and sometimes with research, and equally often it’s with private phone calls.”

The spending also pays for lobbyists to visit the FCC, where they meet with the staff writing the auction rules and with commissioners who will ultimately vote on them.

Between October 2012, when the FCC issued its notice to develop rules for the incentive auctions, and Jan. 30, when the FCC held a public meeting to discuss its progress, the agency received more than 400 filings that include comments, papers, presentations and information about visits, Gary Epstein, head of the commission task force writing the auction rules, said at the Jan. 30 meeting.

The outpouring ranks the incentive auction among the most active issues at the FCC in years, said a senior FCC administrator. “It’s a lot,” the administrator said. “A whole lot.”

T-Mobile, which views the auction as a make-or-break event for the company, has been a fixture at the agency. 

From October 2012 through March 13, lobbyists and executives for the company visited the FCC 36 times, and submitted 20 comments, presentations, letters and research papers for a total of 56 filings, the most of any organization or company, according to data compiled by the Center for Public Integrity.

One of the biggest complaints T-Mobile gets from customers is the inability to get access deep inside buildings, which can be alleviated with low-band spectrum, said Tim O’Regan, a spokesman for T-Mobile. “Lack of low-band spectrum is the biggest challenge T-Mobile faces,” he said. “It’s critical to the future of our network and critical for the future of the company.”

AT&T and Verizon visited the FCC 15 times each during the same period, according to the Center’s analysis, ranking the carriers as the fifth most active. Sprint met with commissioners and agency staff 11 times during the same period, which ranked it tied at 11th.

It’s not the number of FCC filings “that matters most, but rather the quality and depth of a stakeholder’s conversation and advocacy with FCC staff,” said John Taylor, a Sprint spokesman.

The Expanding Opportunities for Broadcasters Coalition, a group of more than 70 television stations that support the auction, had the second most meetings with the FCC, and the National Association of Broadcasters, which may lose members if stations choose to sell their frequencies, was the third-most active group. Other organizations that have frequented the FCC’s offices in southwest D.C. the most have been the Competitive Carriers Association, a group that includes as members Sprint and T-Mobile and supports spectrum limits, and Dish Network Corp., which is considering launching its own nationwide wireless network.

Buying academic research

But tracking traditional lobbying doesn’t tell half the story of the spectrum influence game.

Wireless carriers have hired economists from some of the most prestigious universities to conduct research to support specific positions and attend FCC meetings where they can explain arcane auction theories and rebut other economists’ papers filed by their rivals.

“With this [spectrum auction], the number of factors that go into what is right and wrong is very complicated and subject to debate,” Public Knowledge’s Feld said, “so this has been an extraordinary boon to academic economists. If you do spectrum auction research, you are making a lot of money now.”

AT&T has assembled the largest team of consultants and economists, most from top universities including Yale, Columbia, and the University of Pennsylvania.

One of the key studies the company has cited during its meetings with the FCC, according to the center’s research, was conducted by Philip Haile, an economics professor at Yale University, with co-authors Maya Meidan, an economist at the consulting firm Compass Lexecon LLC, and Jonathan Orszag, also at Compass Lexecon, a former member of President Bill Clinton’s National Economic Council.

The authors conclude the government would lose up to $13.4 billion if the FCC institutes the mildest limitations and twice that if tougher restrictions are followed. In a footnote on the front page of the study, the authors disclose that the study “was supported by funding from AT&T.”

T-Mobile has the second-largest team, with Greg Rosston, deputy director of Stanford University’s Institute for Economic Policy Research and a former deputy chief economist at the FCC, figuring prominently. Rosston and another Stanford economist proposed a bidding process in which spectrum limits are sequentially eased if not enough revenue is raised under the caps. T-Mobile also paid Jonathan Baker, an economist at American University, who argued spectrum limits can increase auction revenue.

“We have retained a number of experts … to help us respond and provide expert guidance on complex issues,” said T-Mobile’s O’Regan. He declined to disclose how much T-Mobile paid the economists, saying the compensation was “consistent with what gets charged in the market and the field” for such research.

Enjoying financial support

Verizon also has paid a former FCC economist on its team, Leslie Marx, who researches auction theory at Duke University’s Fuqua School of Business. Marx concluded in her research submitted to the FCC that an auction with no limits increases revenue and the amount of spectrum applied for mobile use.

AT&T and Verizon didn’t reply to repeated requests to comment on its spending on spectrum lobbying and support of research and associations.

Sometimes relationships are less obvious. Economists at Georgetown University’s Center for Business and Public Policy Research — including a former undersecretary of commerce in the Clinton administration and a former director of the Congressional Budget Office, Congress’ economic research arm — published a study in April 2013 that found spectrum limits would result in “a less robust and competitive auction and reduce auction revenues by as much as 40 percent” and slow the transition to faster networks, all arguments that are similar to AT&T’s and Verizon’s.

The center states on its website that it “has enjoyed the financial support” of AT&T and the Verizon Foundation and more than a dozen other organizations. John Mayo, an economics professor and executive director of the center, said the financial support didn’t lead to the study or influence its conclusions. He declined to say how much AT&T and Verizon gave to the center.

Spectrum caps “is an important topic that the Center’s experts in telecommunications policy proposed would be ripe for research, ultimately leading to our study,” Mayo said in an email. “The research methods, analysis, and findings in all Center studies are designed and determined solely by the authors and are released subject to internal quality review with no external input.”

The authors state on the front page of the study that their research “is not dependent upon any of the policy positions of current, previous or prospective Center supporters.”

“You can have a peer-reviewed journal article with good data by distinguished scholars that comes to a conclusion that goes to a corporate point of view, and that’s fine,” American University’s Thurber said. “But we should clearly know that it does [support a corporate view], and then we can make a judgment about whether there is a conflict of interest.”

Sprint has been much less active. The company filed a study by two European economists who found “restrictions on the amount of sub-1 GHz spectrum operators can acquire at auction have not resulted in any reduction in auction revenue in the myriad European nations that have adopted them.”

Sprint and T-Mobile also have funded groups supporting spectrum limits. The two carriers and Dish each gave between $10,000 and $24,999 in 2013 to the New America Foundation, which has met with the FCC to argue for caps on frequencies, according to the New America Foundation website.

“As always we are aligned with the other consumer groups and we are all in a coalition with the smaller carriers,” the foundations’ Calabrese wrote in an email. The financial support from T-Mobile, Sprint and Dish, however, was “not for any research papers or anything in particular.”

Free Press, a consumer advocacy and journalism organization in Washington that supports restricting spectrum purchases and has testified before Congress, doesn’t accept money from corporations and has funded no independent research, according to the group’s website. Public Knowledge has received donations from all four carriers for an awards program, and Sprint gave money to the group to analyze FCC spectrum data to develop Public Knowledge’s position on limits, according to Feld.

But consumer groups are outgunned by AT&T and Verizon. With their big spending on traditional lobbying and funding of associations, think tanks and universities, the corporations play the influence game better than anyone else, said Kevin Werbach, who studies Internet and communications policy at the University of Pennsylvania’s Wharton School of Business.

“This is their core competency, and they have been playing this game for a long time,” Werbach said.  “These are companies that support foundations and other groups that do a lot of good work, but in the end are strategically designed to advance [AT&T’s and Verizon’s] interests.”

Two sides of Wheeler

FCC commissioners are scheduled to vote on proposed auction rules, including whether it will include limits, at its May 15 meeting. That could open another round of public comments, and at that point the lobbying “will hit its peak,” said an executive at one of the wireless carriers.

Two of the Democrats on the commission, Jessica Rosenworcel and Mignon Clyburn are likely to support limits. The two Republicans, Ajit Pai and Michael O’Rielly, are less likely to.

That leaves the affable FCC chairman, Tom Wheeler, who President Barack Obama appointed last year, to decide. Wheeler knows a lot of about lobbying, having headed up the National Cable Television Association, one of the biggest lobbying spenders in Washington, and the Cellular Telecommunications & Internet Association.

Wheeler, who wields a lot of power as chairman, hasn’t indicated how he would vote. At a speech at his alma mater, Ohio State University, he described himself both as “a rabid believer in the marketplace” and as “an unabashed supporter of competition.”

“A key goal of our spectrum allocation efforts is ensuring that multiple carriers have access to airwaves needed to operate their networks,” he then said.

It remains to be seen which Wheeler will show up to vote — the former lobbyist who fought federal regulations and whom AT&T lobbyist called “an inspired pick to lead the FCC” or the Obama appointee who believes that the wireless market needs more, not less, competition.

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The Shocking Ways Debt Collectors Are Hounding U.S. Military Service Members

Debt collectors are targeting members of the Armed Services by calling their superior officers, threatening reduction in rank and even courts-martial, despite stepped-up efforts to protect them from abuse, according to a government report issued last week.

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San Francisco Takes the Lead in Defining Role of School Police, Sets Limits on Interrogations, Arrests

As debate over harsh school discipline heats up nationwide, San Francisco is taking a lead role among big cities by formally limiting the role of police on campuses and requiring specific types of training for school-based officers.

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Inside the Fight to Prevent Billions in International Money Laundering and Tax Shelters

In June 2000, international groups rolled out blacklists targeting offshore refuges that shelter tax dodging and money laundering. Some observers predicted “the death of tax havens.” 

This spring U.K. Prime Minister David Cameron made headlines by promising to crack down on British-flagged havens that provide cover for tax cheats and other seekers of financial opacity. After a meeting in May at the White House with U.S. President Barack Obama, Cameron pledged to “tackle the scourge of tax evasion” and fight for a new era of financial openness.

This fall, after getting assurances from British overseas territories and Crown dependencies that they would change laws and practices, Cameron declared that it is now unfair to call them tax havens. They “have taken the necessary action and should get the backing for it,” Cameron said during a Parliamentary session.

Richard Murphy, a U.K. accountant who had been a leading advocate for change in Britain’s offshore empire, calls Cameron’s recent remarks “absurd.”

What Cameron is saying, Murphy says, is that the Caymans and others are no longer tax havens because “they made a vague commitment to take unspecified actions at an unspecified time in the future.”

A Cameron spokeswoman did not answer questions for this story, but pointed to a recent speech in which Cameron says he continues to work to “close the door” on “shadowy, corrupt, illegal practices once and for all.”

For their part, the Caymans and other U.K. overseas territories argue that they offer not secrecy but rather legitimate confidentiality. They praised Cameron’s remarks, saying in a joint statement that they are “well regulated, independent financial services jurisdictions” and will “continue to lead on meeting international standards of tax and transparency.”

Operation Red Spider

Questions about how well global standards are enforced arose earlier this year amid a banking scandal in India.

The case began when a man introducing himself as an operative for a corrupt politician visited dozens of bankers across India, explaining candidly that he was seeking to launder “black money” and turn it into “white money.”

Almost every banker he met, he later reported, was willing to help, with many offering to channel cash overseas and use shell companies to cover the trail.

Only later did the bankers learn the man’s real identity: he was a journalist doing a hidden-camera sting for Cobrapost, a muckraking Indian magazine that codenamed its undercover effort “Operation Red Spider.”

When the magazine announced its findings this spring, it asserted that “money laundering services are being offered practically as a standard product across the country.”

Government regulators did not share that assessment.

“Let us not unnecessarily downgrade ourself,” a deputy governor of the Reserve Bank of India, the nation’s central bank, told reporters. “Our system to prevent money laundering is perfect.”

Indian authorities got support from the Financial Action Task Force, a Paris-based intergovernmental body that developed nations have deputized as the main watchdog in the global fight against money laundering.

In June, FATF released a long-in-the-works evaluation that gave India’s systems for fighting money laundering the organization’s stamp of approval. India was doing so well, in fact, that FATF said it no longer needed to do regular follow-ups to check India’s technical compliance with international standards.

Ultimately, though, Indian officials had to acknowledge that the country’s anti-money laundering regime fell short of perfect. A review by the Reserve Bank in the wake of Cobrapost’s exposés found that 25 banks had indeed violated anti-money laundering rules. Among them were some of India’s largest banks.

Aniruddha Bahal, Cobrapost’s founder, says the episode suggests FATF is more interested in shuffling papers than in cracking down on money laundering.

The United Nations Office on Drugs and Crime estimates that just a fraction of 1 percent of money that’s laundered around the globe is intercepted and recovered.

Instead of focusing on paper compliance, Bahal says, FATF “should have people on the ground. You have to have a way for international organizations to do spot checks on banks.”

FAFT acknowledged in a prepared statement that its assessment focused on India’s on-paper compliance rather than on how well its anti-money laundering regime works. It says future reviews of India and other countries will shift the focus to their on-the-ground success in reducing the flow of dirty money.

Offshore wars

Concerns about the role of offshore havens in money laundering and tax evasion go back the better part of a century.

In 1921, the U.S. Congress raised questions about foreign subsidiaries that were used to “milk” their U.S. parent corporations, helping them cut tax bills. In 1937, U.S. Treasury Secretary Henry Morgenthau warned President Franklin D. Roosevelt that Americans were dodging taxes by setting up holding companies in the Bahamas, Newfoundland and elsewhere, resorting to “all manner of devices to prevent the acquisition of information regarding their companies.”

It wasn’t until the late 1990s that world powers began their first coordinated attack on offshore shell games.

Two multinational groups counting the U.S., Japan and other powerful nations as members led the effort. The Financial Action Task Force targeted money laundering by criminals and terrorists. The Organization for Economic Cooperation and Development zeroed in on offshore-enabled tax evasion.

In 2000, FATF and the OECD announced blacklists for “non-cooperative” jurisdictions that, for example, failed to do much to help foreign authorities investigating tax and financial crimes.

The OECD listed 35 jurisdictions, including the Bahamas, the Cook Islands and Monaco. OECD members threatened economic sanctions against jurisdictions that didn’t change banking secrecy provisions and other practices that encouraged the flow of unreported cash.

The U.S. supported the OECD’s blacklist under the Clinton administration. American support didn’t hold, though, after the 2000 election put George W. Bush in the White House.

The Center for Freedom and Prosperity — a Washington, D.C.-based group associated with corporate-funded think tanks — launched an aggressive lobbying campaign against the OECD’s efforts.

The group painted the OECD, which like FATF is headquartered in Paris, as a band of European socialists bent on destroying free enterprise. Along with calling on anti-tax conservatives in the U.S. Congress, it also enlisted the support of the liberal-leaning Congressional Black Caucus, which voiced concern that the measures could hurt island nations’ fragile economies.

The lobbying paid off.

The Bush administration announced in May 2001 that it was withdrawing U.S. support for the OECD’s tax haven assault. Undercut by the U.S.’s reversal and bureaucratic infighting in other big countries, the OECD’s blacklist dwindled into “a mixture of cheerleading and scorekeeping,” the authoritative newsletter Tax Notes said.

Saint-Amans, who joined the OECD in 2007, says the organization’s early 2000s push was “not a great success” because it allowed offshore havens to escape its blacklist by making empty promises.

“They all committed, but did nothing,” he says.

By April 2002, all but seven of the 35 jurisdictions named by the OECD — Andorra, Liechtenstein, Liberia, Monaco, the Marshall Islands, Nauru and Vanuatu — had managed to get off the OECD’s blacklist. By 2009, no countries remained on the list.

Tough talk

The next big push to combat offshore secrecy began in 2008.

Acting on information from a whistleblower, U.S. authorities charged that Swiss banking giant UBS maintained some 17,000 undisclosed accounts for U.S. citizens. UBS eventually turned over the names of nearly 5,000 clients and paid a $780 million to settle charges that it had carried out a scheme to defraud the U.S.

As the UBS case was playing out, governments around the globe were becoming increasingly concerned about shrinking tax collections in the aftermath of the September 2008 financial crash.

In advance of the July 2009 Italian summit of the “Group of 8” club of rich nations, Cameron’s predecessor as U.K. Prime Minister, Gordon Brown, proclaimed: “The world should be in no doubt that the writing is on the wall for tax havens.”

Tough talk from Brown and other leaders produced modest reforms.

Rich nations moved to expand what financial transparency advocates say is a mostly ineffectual method of policing offshore transactions — agreements between countries in which they promise to honor requests from each other about specific individuals suspected of hiding assets.

If Spain, for example, wants information about assets a Spaniard has stashed in the Bahamas, it lodges a request with Bahamian authorities. The catch is Spanish authorities must already know the name and account details of the suspected tax dodger, or see the request rejected as a “fishing expedition.”

By 2010 “the tax havens were sort of relieved,” says Jason Sharman, an Australian political scientist and co-author of a forthcoming book on offshore issues, Global Shell Games. “They thought that they had had a near-death experience in 2009, but that their problems were behind them.”

Perfect storm

Over the next two years, policymakers and activists kept pushing for change, winning small victories but also hitting roadblocks.

In 2012, the European Union’s tax commissioner, Lithuanian economist Algirdas Semeta, found his efforts to fight cross-border tax evasion schemes frustrated by Austria and Luxembourg, two EU members with traditions of banking secrecy. “Tax havens give EU commissioner the runaround,” a headline in the independent EU Observer said.

Things were about to change. What Semeta called a “perfect storm” of events would soon transform tax politics in Europe, making it easier for him and like-minded officials around the world to put aggressive plans in motion.

These events included an offshore scandal in France involving President Hollande’s former budget minister and the rollout of a potent U.S. law, the Foreign Account Tax Compliance Act, which threatens to slap financial penalties on foreign banks that refuse to report accounts controlled by U.S. citizens.

The offshore issue reached a boiling point in April 2013 when the International Consortium of Investigative Journalists revealed a leak of 2.5 million secret tax-haven records, publishing stories in more than 40 news outlets, including France’s Le Monde, which added to the pressure on Hollande by exposing the offshore holdings of yet another confidant, his campaign manager.

ICIJ’s “Offshore Leaks” probe sparked official investigations in Greece, South Korea, the Philippines and other lands, and was credited with helping force Hollande to promise an end to tax havens. The EU’s Semeta called ICIJ’s disclosures “the most significant trigger” in the transformation of tax politics in Europe.

Days after the leak stories broke, France, Germany, Italy, Spain and the U.K. announced they had agreed to an expansive plan for swapping tax information across borders. Soon after, British tax havens in the English Channel and the Caribbean promised to share information on offshore bank accounts.

At a summit in September in Russia, the “Group of 20” club approved a historic plan for automatic sharing of tax information across borders — a big change from the previous one-off system of information sharing “on request.” More than 60 nations have agreed to join.

Under the plan, countries would regularly hand over data on financial activities of foreign citizens to the tax authorities in their home nations. The Netherlands, for example, would as a matter of course share information with Germany about Germans with accounts in Dutch banks.

The G20 says its members will begin automatic data exchange by 2015, and that the group will work to help developing nations “reap the benefits of a more transparent international tax system.”

In the shadows

How well the G20 plan will succeed may depend on the answer to this question: How good is the information that will be shared?

Anti-corruption activists worry that information-sharing efforts will be frustrated by the secrecy that pervades the offshore system. Few people who move assets offshore set up bank accounts in their own names. Instead, they hide behind layers of anonymous corporate structures that obscure the paper trails and the players.

A bank account in Switzerland might, for example, be controlled by a shell company in Belize that’s owned by a shadowy trust in the South Pacific’s Cook Islands and overseen, on paper, by a corporate director in Cyprus who is paid to know nothing about the company’s activities.

Most jurisdictions — offshore and onshore — don’t verify and collect the names of the real people behind companies created within their borders.

“If you don’t have a public register of who owns what companies, it defeats the purpose of having automatic exchange of information,” says Alvin Mosioma, the Kenya-based director of Tax Justice Network Africa, a non-governmental advocacy group.

Sharman, the Australian political scientist, believes automatic information sharing will limit middling tax dodgers in the EU and the U.S., but won’t do much to stop super-wealthy tax evaders who can afford to set up sophisticated offshore structures that either provide maximum secrecy or a “veneer of legality” created by accounting ingenuity.

Without transparency on company ownership, he says, “you’re only going to catch the real idiots who are maintaining bank accounts in their own names — the real small-timers.”

Around the world, shell companies are a key tool for hiding the flow of offshore money, according to a World Bank study of 150 “grand corruption cases” spanning more than three decades.

When James Ibori was governor of Nigeria’s oil-rich Delta State, for example, he and his cronies pocketed an estimated $250 million in government graft with the help of a web of companies based in Switzerland, Mauritius and elsewhere.

These companies provided cover that allowed him to shift millions of dollars through accounts at Citibank, Barclays and HSBC. He purchased a $20 million private jet, a fleet of armored Range Rovers and million-dollar homes in London, Houston and Washington, D.C.

Ibori was eventually brought to justice in London and sentenced to 13 years in prison, thanks in large measure to Scotland Yard’s discovery of two incriminating computer hard drives.

Most investigations involving shell companies, however, come up empty.

In a case highlighted by a U.S. Senate probe, U.S. Homeland Security agents investigating nearly $150 million in suspect wire transfers uncovered a network of some 800 U.S. companies that were shifting money among themselves and out to offshore havens. U.S. Sen. Carl Levin of Michigan, who has campaigned against tax havens for decades, described this arrangement as a “massive financial shell game.”

None of the incorporation documents in various states listed the firms’ real owners. The paper trail on 200 Utah companies involved in the scheme led to a Delaware-based “company formation agent” who had been questioned in at least eight earlier investigations targeting suspected money laundering by U.S. shell companies, Levin said.

The incorporation agent said he didn’t know the identities of the real owners behind the companies he set up, because the law didn’t require him to collect that information. The investigation — like the eight previous investigations that had ended up at his door — “hit a dead end,” Levin said.

The case illustrates that the U.S. and other big nations aren’t simply victims of the offshore secrecy. Western countries play a role in the offshore system through laws that allow company owners to remain hidden and through the offshore activities of brand-name companies and banks.

Apple, Google and other U.S. multinationals have embraced offshore havens and complex shelters that allow them to avoid taxes. Big U.S. banks frequently provide access to money launderers and fraudsters, government investigations have found. Wachovia Bank, for example, paid $160 million to settle charges that it had allowed Mexican drug cartels to launder billions of dollars.

Many state governments across America, meanwhile, benefit from serving as tax and secrecy havens for corporations. Delaware collects hundreds of millions of dollars each year in taxes and fees from absentee corporations, about a quarter of the tiny state’s budget.

Offshore centers’ defenders often cite Delaware’s reputation as a haven for arms smugglers and con men as evidence of the U.S.’s failure to keep its own house clean. The Cayman Islands financial industry’s trade group calls Delaware “the biggest hypocrisy of all … Delaware continues to provide probably the best option to set up a corporation without proper disclosure.”

‘We can’t wait’

Legislation proposed in August by Sen. Levin would require states to identify the real owners of companies created within their borders.

The bill faces hurdles. Similar legislation has been repeatedly shot down in Congress in recent years, and the bill has some influential opponents, including the American Bankers Association, the American Bar Association and the U.S. Chamber of Commerce. The Chamber believes such legislation would hit  “every form of business, particularly small businesses, with new, costly and complex regulatory burdens.”

Global Financial Integrity, a leading anti-corruption group, notes that the U.S. and other Western nations have failed for a decade to live up to their pledges to meet even FATF’s less-than-stringent standards for transparency on company ownership.

The advocacy group wants a worldwide requirement that company ownership be verified and listed in public registries, so the information is open not only to government authorities but also to non-governmental organizations, media and citizens.

UK Prime Minister Cameron announced in October that Britain would open a public registry that names the true owners of British companies. But that decision doesn’t appear to apply yet to the country’s overseas territories and dependencies — and the EU and the U.S. have yet to follow suit.

Mosioma, the Kenya-based activist, says poor nations desperately need swift, global action on shell companies and other tools of the offshore trade.

Offshore secrecy, he argues, “lies at the heart” of corruption and poverty in Africa and other struggling regions, allowing corrupt officials and businesspeople to loot public treasuries and plunder oil and mineral wealth. Global Financial Integrity estimates Africa lost between $850 billion and $1.8 trillion in illicit financial transfers from 1970 to 2008.

“Rich nations have a reputation for making grand pronouncements and not keeping them. That for us is a reason for pessimism,” Mosioma says. “It’s also a reason to keep the pressure on. We can’t wait for another decade of talking about this.”

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