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Under Investigation, and Doing the Investigation

Is it a good thing that much of the effort to police corporate misconduct seems to have been shifted to lawyers retained by the companies under investigation?

A corporate investigation can easily cost a company millions of dollars, and sometimes much more. The German conglomerate Siemens paid over $1 billion in legal and accounting fees for its global inquiry into extensive bribery by employees. Companies would prefer not to conduct an investigation at all. But having a law firm they hired overseeing the inquiry means they can maintain control over information, and minimize any surprises.

Big Law Steps Into Uncertain Times

Members of Congress trade in companies while making laws that affect those same firms

 One-hundred-thirty members of Congress or their families have traded stocks collectively worth hundreds of millions of dollars in companies lobbying on bills that came before their committees, a practice that is permitted under current ethics rules, a Washington Post analysis has found.
The lawmakers bought and sold a total of between $85 million and $218 million in 323 companies registered to lobby on legislation that appeared before them, according to an examination of all 45,000 individual congressional stock transactions contained in computerized financial disclosure data from 2007 to 2010.
Almost one in every eight trades — 5,531 — intersected with legislation. The 130 lawmakers traded stocks or bonds in companies as bills passed through their committees or while Congress was still considering the legislation. The party affiliation of the lawmakers was almost evenly split between Democrats and Republicans, 68 to 62.

STATE OF GEORGIA, USA: A Case Study on How NOT to Run an Ethics Commission

Perhaps no state illustrates the political perils of ethics enforcement better than Georgia, where the ethics commission has been the nexus of more infighting, vitriol and litigation than a Univision novella. Keeping track of all the resignations, firings, accusations and countercharges there has challenged even the most knowledgeable observers of Peach State politics. Three executive directors have resigned or been fired since 2006. Two other employees collected $405,000 in damages for allegedly wrongful termination. Lawmakers stripped the agency of 40 percent of its funding, its power to make new rules, even its name.

Today, public pressure builds for ethics reform in Georgia, which received an 'F' grade and ranked dead-last in the State Integrity Investigation's review of state government ethics and accountability. The agency charged with policing government ethics there faces a host of challenges:

  • Two former top-ranking officials allege the commission fired them for investigating suspected campaign abuses by Gov. Nathan Deal.
  • Thousands of candidate disclosures swamp the agency’s online filing system, paralyzing it at peak periods for many users.
  • Violators continue to avoid stiffer penalties because the commission has not devoted the resources to formally notifying them.
  • Thin staffing keeps the staff from reviewing even 10 percent of the tens of thousands of filings it receives each year.

Much of this has come to pass, critics say, because the commission answers to the very politicians it’s supposed to regulate and investigate. Legislative leaders set its budget, control its powers and, along with the governor, decide who its five members will be. In the view of many of the body’s critics, that system has failed.

STATE OF GEORGIA: Ethics commission: State has defanged its watchdog

The state ethics commission is an agency in free fall.

That is not news to local officials who complain of its slow, inefficient bureaucracy, or state officials who kick it around like a political football, or even good government groups wailing at its ineffectiveness.

Still, the completeness of its collapse is striking. In five years, the commission’s funding declined 41 percent, and its staff was cut by a nearly equal percentage. The number of cases it handled plummeted even more. Civil penalties it levied for ethics violations dropped 94 percent.

For the Millionth Time: Yes, Ethics Matter... Duke Energy Corp paid CEO $44 million to work for one day

Duke Energy agreed to acquire Progress Energy, and the widely known, publicly disclosed plan called for Progress CEO Bill Johnson to lead the combined company as the chief executive. The sale closed last week, and within hours Duke announced that, no, actually its
pre-existing CEO Jim Rogers would continue in that role, and Johnson would leave with a severance package worth, in total, $44 million...
It may well be that Duke Energy did nothing illegal. The company signed an employment agreement with Johnson on June 27, and that agreement did include all the severance awards he now seems poised to get. Johnson was then appointed CEO of Duke Energy on the morning of July 2, and resigned that afternoon...
...even if this deal passes legal muster, it still stinks to the public, and Duke's leaders failed to follow to standards of good behavior. The directors at Progress Energy have publicly stated that they feel duped, misled by Duke into a merger they never would have approved had they known that Johnson was a dead man walking.

Capitol Assets: A Washington Post Investigation of the Wealth of the Members of the US Congress

A Washington Post investigation finds that, contrary to many popular perceptions, lawmakers don’t get rich by merely being in Congress. Rich people who go to Congress, though, keep getting richer while they’re there...
  • Seventy-three members of Congress have pushed legislation in recent years that could benefit businesses or industries in which they or their family are involved or invested...
  • At least 34 members of Congress recast their financial portfolios following phone calls or meetings with high-ranking Treasury Department and Federal Reserve officials during the economic crisis...
  • One-hundred-thirty members of Congress or their families have traded hundreds of millions of dollars worth of stocks in companies lobbying on bills that came before their committees...
  • Some members of Congress send tax dollars to institutions where their spouses, children and parents work...
  • Thirty-three members of Congress have steered more than $300 million in earmarks and other spending provisions to dozens of public projects that are next to or within about two miles of the lawmakers’ own property...

Former SEC Watchdog Kotz Violated Ethics Rules, Review Finds

The former internal watchdog for the U.S. Securities and Exchange Commission violated ethics rules by overseeing investigations that touched on people with whom he had “personal relationships,” an outside review found. H. David Kotz, who resigned as the agency’s inspector general in January amid questions about his tactics and conduct, shouldn’t have participated in a probe of the SEC’s office re- organization because he engaged in “extensive” and “flirtatious” communications with an employee associated with the project, according to the review. Kotz also shouldn’t have opened an investigation related to R. Allen Stanford’s Ponzi scheme because he was friends with a female attorney who represented victims of the fraud, investigators said in the 66-page report.

Defence firms "not open about anti-corruption measures"

The Transparency International Defence Companies anti-corruption index 2012 finds that 85% of defence industry leaders are not speaking up enough about the importance of ethics and preventing corruption. It also says that only 10% of companies have good disclosure of what they do to stop of the reasons the defence industry has been prone to corruption in the past is that so many defence contracts have been secret, with little public pressure brought to bear.

US Cabinet Flunks Disclosure Test With 19 in 20 Ignoring Law

Untangling FOIA: An Analysis of Administration's
                                        Open-Government Pledge

The Freedom of Information Act, signed into law by President Lyndon B. Johnson on July 4, 1966, is designed to reduce the amount of secrecy surrounding government decisions. Individuals and organizations have the right to file requests with 100 federal agencies subject to the law, which requires them to answer the query within 20 working days or offer a timetable for the information's release.

In 2011 the Department of Justice established, a government website that aggregates annual FOIA data for the 100 agencies subject to the law. According to the most recent request disposition data, a little more than a third of the requests received across all agencies are fully granted.

130 lawmakers traded stocks or bonds in companies 
lobbying on bills that passed through their committees

In 5,531 transactions

So out of a total of 45,000 transactions analyzed, that's nearly one in eight trades . . .

. . . or an average of 43 transactions per person.

Involving 323 companies

Percentage of transactions in the following sectors:

Lawmakers reworked financial portfolios after talks with Fed, Treasury officials

34 members of Congress...took steps to recast their financial portfolios during the financial crisis after phone calls or meetings with (Treasury Secretary) Paulson; his successor, Timothy F. Geithner; or Federal Reserve Chairman Ben S. Bernanke, according to a Washington Post examination of appointment calendars and congressional disclosure forms.

The lawmakers, many of whom held leadership positions and committee chairmanships in the House and Senate, changed portions of their portfolios a total of 166 times within two business days of speaking or meeting with the administration officials. The party affiliation of the lawmakers was about evenly divided between Democrats and Republicans, 19 to 15.

The period covered by The Post analysis was a grim one for the U.S. economy, and many people rushed to reconfigure their investment portfolios. The financial moves by the members of Congress are permitted under congressional ethics rules, but some ethics experts said they should refrain from taking actions in their financial portfolios when they might know more than the public.

“They shouldn’t be making these trades when they know what they are going to do,” said Richard W. Painter, who was chief ethics lawyer for President George W. Bush. “And what they are going to do is then going to influence the market. If this was going on in the private sector or it was going on in the executive branch, I think the SEC would be investigating.”

Graft Allegations Fuel More Bickering in Peru's Presidential Family

A congressional panel yesterday sought permission to investigate Alexis Humala after a report alleged that Krasny del Peru, a pharmaceuticals company in which he’s shareholder, won more than 500 million soles ($191 million) of government contracts even though Peruvian law bars relatives of public officials from bidding in state tenders...The probe...will be a distraction for Humala and further strain relations with his parents and siblings, who have become his harshest critics since he took office a year ago...The president said yesterday he regretted his father’s comments. “The law is the same for everyone. I govern for everyone and not for personal interests,” 


AUTHOR'S OPINION: "Once you realize just how many of Monsanto's employees have shifted into positions of power within the federal government, it suddenly becomes a lot easier to see how this biotech giant managed to rake in a net income of $126 million for the first quarter of fiscal year 2012..."



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Criteria for inclusion on this site of "BIG Corruption" cases: 
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  • Very Large amount of money lost;
  • International financing/aid agency program; 
  • Global impact on numerous countries/businesses/investors; and/or
  • Classic example that can be used in training/seminarsmajor cases of global fraud and corruption.
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