Wednesday, January 16, 2008

It's a sweet little scam if you happen to be connected

Just when you thought this crew couldn't possibly be more corrupt, a new depth is plumbed.

The latest scam to enrich cronies and former cronies of the Bush administration goes by the name of "Monitorships." Monitorships are unique and unusual contractual arrangements under which an outside entity (headed by a former administration crony) is given broad powers to "expose corruption and change business practices." The arrangements allow the companies to avoid criminal charges while giving prosecutors cover - the companies have to clean up their act and the prosecutors can move on to more important matters than white collar crime - you know - like getting back to pissing away money losing that misguided futile "war on drugs."

Last month I wrote about one such arrangement with former Attorney General John Ashcroft, which somewhere between $29 and $52 million dollars - to be paid by the company in question - for serving as corporate watchdog for a mere 18 months. The no-bid contract was bestowed upon Ashcroft by the US Attorney for New Jersey - who was Ashcroft's employee when he was the head of the Department formerly known as Justice.

[Keep reading]

But the Eagle isn't the only one cashing in. Several former Bush administration officials have snagged similar deals, which are paid using corporate funds, and there are minimal checks on spending.

Now these spurious deals are being scrutinized.

But legal experts and lawmakers are expressing growing concern about inconsistency and secrecy surrounding the appointments.

The chairmen of the House and Senate Judiciary committees last week demanded that Justice Department leaders provide a list of all such deals and the fees they have generated. The Project on Government Oversight watchdog group has questioned whether the agreements reward "cronies" who share political affiliations or backgrounds with the U.S. attorneys handing out the deals.

The arrangements raise alarms about "potential favoritism and political interference that can undermine our judicial system," said Rep. Frank Pallone Jr . (D-N.J.). Pallone has been critical of U.S. Attorney Christopher J. Christie, the New Jersey prosecutor who chose Ashcroft and a possible GOP gubernatorial candidate in the state.

The number of corporate monitors has risen more than sevenfold since 2001, researchers said, a move that reflects a shift from lodging criminal indictments against businesses for fear they will collapse and cost employees their jobs. Instead, the government has taken a different path: forcing companies to submit to outside oversight at their own expense as a condition of settling fraud and corruption cases. Major companies from AOL and Bristol-Myers Squibb to Merrill Lynch have yielded to such oversight after recent financial scandals.

So - companies with deep pockets can fork over a few million, and buy their way out of indictments and public humiliation - and prosecutors all but get a seat in the boardroom. Monitors have virtually unlimited authority to interview employees, pore over contracts, expose violations and force companies to change their cheating and kick-backing ways - none of which is a bad thing, by the way.

But - as the number of monitorships has grown in recent years, they have usurped more and more power, enlisting high-priced accountants of the monitor's choosing and even making recommendations on who to fire - and who to hire. Typically, the monitors send their reports to prosecutors and their bills to the companies being monitored.

As a general rule, monitorship fees are not made public, but those 'in the know' say it is common for such fees to exceed tens of millions of dollars over two or three years. The fees rarely, if ever, involve any court approval, and defense attorneys say that they are hardly ever questioned by the companies being monitored out of fear of reprisal. Executives at companies that were monitored years ago still decline comment.
Richard C. Breeden, a former Republican chairman of the Securities and Exchange Commission, engineered a nearly complete overhaul at WorldCom after its top executives faced criminal charges in one of the largest fraud schemes in the nation's history. After being appointed by a federal judge from a different political party, Breeden and his team helped reshape WorldCom from its board of directors to its executive ranks, before guiding the telecommunications company, which emerged from bankruptcy protection as MCI, into a 2006 merger with Verizon.

"People should be very careful to make sure that monitorships do not become political plums," said Breeden, who stressed that he was not speaking about specific cases. "The key is the person who is monitor has to have a very good understanding of the business they're dealing in."

In the past few years, U.S. attorneys in Alabama, New York and Virginia have turned to corporate monitors to keep companies clean, hiring various former prosecutors and SEC officials with ties to President Bush, his father and other Republican luminaries. Some prosecutors hammer out with companies a short list of candidates from which to choose, while others have retained veto power over a business's choice. A smaller group has given corporate executives little input on the selection.

You can call me a crusty old liberal with a mean streak and a fetish for openness - go ahead, it has the advantage of being true - but damnit! I do not like the idea of privatizing justice and sure as hell not for a profit! And anyway, isn't that sort of oversight supposed to fall to the purview of the courts?