The Huffington Post Investigative Fund

Wall Street Is the New Tax Collector? Governments Relinquish Taxation Powers to Big Banks

Nearly a dozen major banks and hedge funds, anticipating quick profits from homeowners who fall behind on property taxes, are quietly plowing hundreds of millions of dollars into businesses that collect the debts, tack on escalating fees and threaten to foreclose on the homes of those who fail to pay.

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Woman Sees Her Home Confiscated Over a Water Bill

One raw day in early February, Vicki Valentine stood by helplessly as real estate investors snatched her West Baltimore home over what began with an unpaid city water bill of $362.

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Why Fannie and Freddie Continue to Cost Taxpayers Billions

Of all the companies bailed out by the federal government, mortgage finance giants Fannie Mae and Freddie Mac are shaping up as the deepest money pits. A close look at their past and recent financial filings shows why their losses continue to mount.

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Flaws in Iraqi Police Contract Raise Questions About Afghan Effort

In a report that offers lessons for the growing war in Afghanistan, the inspector general overseeing Iraqi reconstruction efforts has found major flaws in the State Department’s oversight of a $2.5 billion contract to help build Iraq’s police force.

The State Department does not have enough people in Iraq to monitor the work or track the money being spent by DynCorp International, according to the audit issued Monday by Stuart W. Bowen Jr., the Special Inspector General for Iraq Reconstruction. One contracting officer in Iraq oversees all receipts and task orders, with no time to visit work sites or to ensure payroll accuracy. At least $1 billion in past invoices have yet to be reconciled, part of a backlog of work that State has promised for years to fix.

"We are questioning what value the government got for $2.5 billion," Bowen said in an interview.

The report said that the entire contract was "vulnerable to waste and fraud" because of the poor oversight. The State Department, in a written response, said that conclusion was "unfounded" and not substantiated in the report.

DynCorp, which provides services to the U.S. government and military in hot spots around the world, has been under contract since 2004 to support police training in Iraq and Afghanistan. The contract is the single largest in State Department history, according to the inspector general.

The price tag for Afghanistan under the contract so far is $437 million, according to State Department records. The cost of police training there is expected to soar along with the growing American military presence. Training and enlarging the Afghan national police force is a key element of the Obama administration’s plan to shift security to the Kabul government and eventually allow the United States to draw down its troops.

DynCorp spokesman Douglas Ebner stressed that the report addressed only the State Department’s oversight and not the company’s work. "The basic point is the audit did not look at performance," Ebner said. "We are performing under the contract and we are training Iraqi police."

The report, one of a series of reviews of U.S. efforts in training foreign security forces, triggered swift criticism of the State Department from lawmakers who oversee wartime contracting.

"They’ve been managing this contract in Iraq since 2004 and, according to this report, they have no idea where any of the money went," Sen. Claire McCaskill (D-Mo.), chair of a Senate subcommittee that monitors contracting. "What’s even worse is that these are the same people responsible for police training in Afghanistan, so I don’t have any confidence that they’re doing a better job there."

Sen. Susan Collins (R-Maine), senior Republican on the Homeland Security and Governmental Affairs Committee, called the findings "simply outrageous" and illustrated "the need to move quickly and systemically to reform how the government manages federal contracts."

The State Department’s Bureau of International Narcotics and Law Enforcement Affairs is responsible for overseeing the contract. In a written response to the audit, State officials said invoices were reviewed both in Iraq and Washington to prevent fraud. Nineteen percent of invoices are rejected during the Washington review, the department said.

The department acknowledged that, after a critical audit in 2007, it had promised to increase the number of contract officers in Iraq to 11. But that group remains at three people, State officials said, because of space constraints at the embassy in Baghdad.

The report released Monday is the first of two audits expected to focus on police training in Iraq by the inspector general. A joint State and Defense inspector general report of the DynCorp contract is expected by the end of the month. Multiple audits of U.S. efforts in Iraq and Afghanistan in the past years have documented waste and flaws in government oversight.

Contractors are expected to surge in number as the U.S. military increases the training of police and army in Afghanistan. According to testimony last month before the independent Commission on Wartime Contracting, the number of U.S. defense contractors in Afghanistan is expected to reach 160,000 this year, more than the number of U.S. troops.

The Defense Department is poised to take over the police training contract in Afghanistan from the State Department, a move that has been portrayed in public hearings as an attempt to accelerate training critical to an anticipated U.S. withdrawal.

The Obama administration has envisioned an Afghan army that would number 134,000 by the end of this year and grow to 240,000 in 2013. The Afghan national police currently stand at 96,800 with a proposal to expand to 160,000 by 2013, according to recent Pentagon testimony.

Training of security forces has been particularly tough in Afghanistan where, unlike Iraq, education is limited and literacy is hard to calculate. Official estimates suggest about 30 percent of the Afghan population is literate. Diplomats and military who have worked in the region believe about 10 to 20 per cent of the population can read, write and count at a sufficient level for security training.

Police recruits are decidedly less proficient than military recruits, they said, and will be particularly challenging to train. "Afghanistan is not Iraq," one general told the wartime contracting commission during a hearing in December.

Auditors who recently traveled to Iraq described the oversight of DynCorp’s police training support as "extremely weak." Invoice review, property control, and lease negotiations were all problematic, they said. Invoices were stuffed in boxes without review, auditors said, and thousands of timesheets were found not signed by supervisors or employees.

One staffer whose job was to approve purchase orders was found in November 2009 to have a backlog of over 700 orders, according to the report.

State’s contract officers also negotiated storage, land and housing facilities at excessive rates, auditors said. In one instance cited in the report, the State representative and DynCorp prepared a lease agreement for land at a cost that was seven times what the U.S. embassy considered the going rate.

FDIC Chief Got Bank of America Loans While Working on Its Rescue

Sheila Bair, one of the chief regulators overseeing Bank of America’s federal rescue, took out two mortgages worth more than $1 million from the banking giant last summer during ongoing negotiations about the bank’s bailout and its repayment.

In the weeks between the closings on her two mortgage loans, Bair met with Bank of America’s chief negotiator in the bailout talks.

To avoid conflicts of interest, the Federal Deposit Insurance Corp., which Bair heads, prohibits employees from participating in “any particular matter” involving a bank from which they are seeking a loan.

Bair did not seek or receive an exemption until last week, when her agency gave her a retroactive waiver from the rules after an inquiry by the Huffington Post Investigative Fund.

FDIC officials said there was no link between Bair’s duties and her mortgages. They also contend that even without the waiver Bair violated no ethics rules. Moreover, the FDIC said, Bair received no preferential treatment for either loan, paying interest rates at or above the national average. [Editor's Note: The FDIC also responded to this story in a Jan. 22 statement.]

However, the circumstances surrounding the mortgage on Bair’s house in Amherst, Mass., raise questions about whether she and her husband should have qualified for the terms they received.

Bair was teaching financial regulatory policy at the University of Massachusetts in Amherst when President Bush appointed her to head the FDIC in 2006. Her family rented a house in Washington until they borrowed $898,000 from Bank of America in July 2009 to buy a $1.1 million six-bedroom home in the Maryland suburbs. Seven weeks later, they borrowed $204,000 from Bank of America to refinance the Massachusetts house as a second home.

Mortgage documents for that 14-room home include a provision, known as a second-home rider, stating that Bair and her husband must keep the house for their “exclusive use and enjoyment” and may not use it as a rental or timeshare.

Yet the couple has been renting out part of the house since they left for Washington, with Bair listing income from the “rental property” in Amherst as between $15,000 and $50,000 a year on her most recent financial disclosure form as head of the FDIC.

Banks generally consider loans on rental properties to be riskier and charge more for them than for loans on second homes. For a $204,000 loan, according to Bank of America rate sheets examined by the Investigative Fund with the help of a mortgage broker, closing costs on a rental property could be $4,000 higher and the interest rate could rise by a half-point.

Bair declined a request for an interview. Asked about the second-home rider, Andrew Gray, Bair’s spokesman, said that the fact that Bair had renters at her Massachusetts home was “generally known” and that the couple had disclosed it to Bank of America. [Read FDIC statement].

Gray said that after reviewing the mortgage documents, “Our legal counsel does not believe it prohibits the rental arrangement in place and which was disclosed to Bank of America. Chairman Bair’s family have used retained space in the house repeatedly for family visits and vacations.”

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Rape Is a Pre-Existing Condition? The Heartlessness of the Health Insurance Industry Exposed

Christina Turner feared that she might have been sexually assaulted after two men slipped her a knockout drug. She thought she was taking proper precautions when her doctor prescribed a month's worth of anti-AIDS medicine.

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Thanks to EPA You May Be Unknowingly Drinking Water Contaminated With Weed Killer

One of the nation's most widely-used herbicides has been found to exceed federal safety limits in drinking water in four states, but water customers have not been told and the Environmental Protection Agency has not published the results.

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