Rod Blagojevich

Report Identifies Zell Financial Adviser

Zachary Roth | December 12, 2008, 4:53PM

Since the complaint against Rod Blagojevich was made public Tuesday, we've been wondering about the identity of the "Tribune Financial Adviser" who is said to have met with John Harris, the governor's then chief of staff, about the possibility of firing Tribune editorial writers who had been critical of Blagojevich.

Now the Tribune itself is reporting that it's Nils Larsen, a Tribune exec and managing director of the Equity Group, a private investment group started by Tribune CEO Sam Zell. Larsen has been interviewed by the FBI, adds the paper.

Larsen had been at the top of our list of suspects. The complaint says that the person is someone mentioned in media reports as a top financial adviser to Zell, who played a major role in Zell's purchase of the Tribune Company.

And Larsen appears to fit the bill. Consider this paragraph from a profile in Chicago Business last year:

Mr. Larsen, 37, is a managing director at Equity Group Investments LLC, Chicago billionaire Sam Zell's private investment firm -- and the company that will lead Tribune Co. when it goes private later this year. He's been Mr. Zell's point man in arranging and negotiating $11.2 billion in financing for the deal, scoping the future of Tribune's 23 television stations and running the sale of the Chicago Cubs.

We called Larsen yesterday to ask if he was the financial adviser named in the charging documents, but he didn't respond. He didn't respond to the Tribune either, and neither did Zell.

The paper adds that the feds have also issued a subpoena to the Tribune Company (probably wasn't hard for them to get the scoop!), seeking memos that might shed light on the governor's apparent efforts to get the editorial writers fired.

Jack Abramoff

Guilty Plea For Another Abramoff Crony

Zachary Roth | December 12, 2008, 4:27PM

James Hirni, the former lobbyist who was charged last month in connection with the wide-ranging Jack Abamoff probe, pleaded guilty today to providing an all-expenses paid trip to the World Series in New York to two congressional staffers, including entertainment at a strip club and a chauffeur-driven SUV.

Hirni was at the time a lobbyist for an equipment rental company that was pushing legislation in Congress. He recently was fired from his job doing "Republican outreach" for Wal-Mart, after news of the charges surfaced.

One of the two staffers who received the free trip, Trevor Blackann, a former aide to GOP senator Kit Bond, pleaded guilty last month to failing to disclose the trip on his tax returns.

Hirni's lawyer last month told ABCNews.com that Hirni is cooperating with prosecutors, suggesting that the feds are still working to build cases against bigger fish.

Arlen Specter

Partisan Flare-Up Over Pace Of Holder Hearings

Zachary Roth | December 12, 2008, 1:30PM

We told you Wednesday about the developing fight over the pace of confirmation for Eric Holder, Barack Obama's nominee for Attorney General. And it looks like it's heating up.

Politico reports that several Senate GOPers took the floor of the chamber last night to agree with Arlen Specter, the ranking Republican on the Judiciary committee, who has argued that the January 8th start date for confirmation hearings, set by Democrats, doesn't allow for enough time to scrutinize Holder's record -- in particular his role in the controversial pardon of Marc Rich in the last days of the Clinton administration.

Minority Whip Jon Kyl said:

Nobody is talking about a long, long, long delay. We do ask that we be accorded the same consideration that was given to others in this situation and that there be adequate time to confirm him.

And another Senate Republican, Charles Grassley, agreed:

I understand the Judiciary Committee has a large number of boxes of archived documents relating to his employment at the Justice Department and those materials need to be reviewed. We haven't even gotten Mr. Holder's questionnaire, nomination materials or F.B.I. background investigation yet.

But Democrats fired back in support of Pat Leahy, the Judiciary chair who's pushing to begin hearings quickly.

Sheldon Whitehouse, who sits on the Judiciary committee, argued that the schedule was not out of keeping with precedent. He said that the average time between a presidential announcement of a nominee and the first hearing has been 29 days. If the Holder hearings began January 8th, that would be 38 days after the nomination was announced on December 1st.

And now Leahy himself has issued a lengthy statement reiterating his desire to stick to the January 8th start date.

Leahy argues that the politicization of the department under Bush makes it especially crucial to move quickly:

This is no ordinary time. Over the last eight years, political manipulation and influence from partisan political operatives in the White House have undercut the Department of Justice in its mission, severely undermined the morale of its career professionals, and shaken public confidence in our Federal justice system. Never has it been more important to have an experienced hand as Attorney General. I hope our Republican members will resist the temptation toward partisanship and join with us to consider this appointment fairly and promptly.

Leahy even dredges up an old quote from a Senate Republican, from last year when GOPers were pushing for quick hearings on President Bush's nominee, Michael Mukasey. "Attorney general nominees have been confirmed, on average, in approximately three weeks, with some being confirmed more quickly," said one Republican at the time, according to Leahy.

Late Update: More on that quote from last year, just dredged up today by Pat Leahy, in which a Senate Republican argues for a quick confirmation for Bush AG nominee Michael Mukasey. Turns out the quote was from none other than Jon Kyl, who now is stressing the dangers of a quick process for Holder. Thanks to reader CR for the tip.

Bailout

Sign Of The Times? Former Nasdaq Chair Charged With $50 Billion Fraud

Zachary Roth | December 12, 2008, 12:47PM

You might have seen the news that a former chair of the Nasdaq was arrested yesterday for running what federal investigators called a "$50 billion swindle."

Bernard Madoff was turned in by his sons, who said that their father had admitted to them that his investment advisory business was "a giant ponzi scheme," reports the Wall Street Journal.

But a close look at what happened suggests that Madoff's alleged crime may merely have represented an extreme version of the type of financial chicanery that helped cause the current economic crisis.

In a criminal complaint, an FBI agent wrote that Madoff, 70, had:

deceived investors by operating a securities business in which he traded and lost investor money, and then paid certain investors purported returns on investment with the principal received from other, different investors, which resulted in losses of approximately billions of dollars.

Madoff's firm, Bernard L. Madoff Investment Securities, serves primarily as a middleman between buyers and sellers of shares. But an offshoot of the company manages investments for hedge funds and other institutions, as well as wealthy individuals. According to a civil complaint filed by the SEC, the alleged fraud was run through this investment business.

The steady returns that this business provided appear to have caused skepticism over the years. The Journal reports:

A number of traders suggested [Madoff's] firm could be buying shares for its own account just before it filled orders for customers, an illegal act called front-running. In 2001, Mr. Madoff told Barron's that charges of front-running were "ridiculous."

An executive in the securities industry, Harry Markopolos, contacted the SEC's Boston office in May 1999, urging regulators to investigate Mr. Madoff. Mr. Markopolos continued to pursue his accusations over the past nine years, he said in an interview on Thursday, and according to documents he sent to the SEC that were reviewed by The Wall Street Journal.

"Bernie Madoff's returns aren't real and if they are real, then they would almost certainly have been generated by front-running customer order flow from the broker-dealer arm of Madoff Investment Securities LLC," Mr. Markopolos wrote to the SEC in November 2005.

The criminal complaint filed by the FBI quotes two employees -- believed to be Madoff's sons -- as saying that Madoff was "cryptic" about the activities of the company's investment arm, and kept the investment offices on a separate floor.

Things appear to have come to a head earlier this month, when Madoff told one of his sons that "clients had requested approximately $7 billion in redemptions, that he was struggling to obtain the liquidity necessary to meet those obligations."

[On Wednesday] the sons met with Mr. Madoff ... at his Manhattan apartment, the complaint says.

...At the apartment, Mr. Madoff confessed that his business was a fraud and that he was "finished." He said he had "absolutely nothing," that "it's all just one big lie," and that it was "basically, a giant Ponzi scheme." He told them the firm was insolvent, according to the complaint.

In other words, Madoff got himself into a situation where he didn't have enough money to pay back investors -- jut like those Wall Street banks we just bailed out. That's not to say that the charges against Madoff aren't serious -- it's only to point out that they're not unconnected to the broader economic turmoil.

Madoff, who is said to have started his business with $5000 he saved from working as a lifeguard at Rockaway Beach, didn't enter a plea during a court hearing last night. A preliminary hearing is scheduled for Jan. 12, 2009.

Barack Obama

Report: Rahm And Blago Talked About Senate Seat

Zachary Roth | December 12, 2008, 12:03PM

Did Rahm Emanuel speak to Rod Blagojevich about the governor's plans to fill the Senate seat left open by Barack Obama?

That's what a Fox affiliate in Chicago has reported, based on "a source familiar with the investigation" into the Illinois governor.

Fox Chicago News reports that Emanuel, the Chicago congressman who was appointed shortly after the election to be Obama's White House chief of staff, had "multiple conversations" about the issue with the governor himself and with Blagojevich's chief of staff, John Harris -- who this week was charged along with his boss.

The source said it was likely that these conversations were recorded, since they took place after the federal wiretaps had begun.

Of course, it would not be surprising if Emanuel had spoken to the governor about options to fill the seat. Fox Chicago said that the source didn't say whether those conversations involved any quid pro quo or dealmaking.

Obama yesterday pledged to canvass his staff about conversations with Blagojevich's office over the seat, and disclose what he finds out soon. Obama said that none of his staff had discussed any kind of deal for the seat.

Barack Obama

Axelrod: Jarrett Withdrew From Senate Contention Because Obama Wanted Her In WH

Zachary Roth | December 12, 2008, 11:18AM

Looks like David Axelrod is trying to push back against talk that Valerie Jarrett, a close friend and adviser to Barack Obama, may have abruptly pulled out of the contest for the president-elect's Senate seat because she had an idea of how the governor was approaching the task of filling the seat.

Bloomberg reports that Axelrod, Obama's top strategist, told an audience last night at Harvard's Kennedy School of Government:

[Obama'] preference was always that she serve in the White House, and ultimately he expressed that to her and said look, 'I just need you,' and that's why she made that decision.

Jarrett withdrew from contention days after a Nov. 10 conference call where, according to charging documents filed by prosecutors, Blagojevich talked about appointing "Senate Candidate 1" in exchange for his wife getting a corporate board appointment. Soon afterwards, Jarrett was announced as a White House adviser to Obama.

The Chicago Tribune has identified Jarrett as Senate Candidate 1.

Axelrod added:

No one in their wildest imagination could have imagined the scenario that ensued. There's a vacancy, the governor, apparently, in the complaint of the government had some ideas about what to do with it. We were not involved in that discussion or any discussion of that nature.

Jesse Jackson Jr.

Report: Businessmen Said They Were Raising Money For Blago To Get Senate Seat For Jackson

Zachary Roth | December 12, 2008, 10:57AM

This doesn't look great for Jesse Jackson Jr.

The Chicago Tribune reports:

As Gov. Rod Blagojevich was trying to pick Illinois' next U.S. senator, businessmen with ties to both the governor and U.S. Rep. Jesse Jackson Jr. discussed raising at least $1 million for Blagojevich's campaign as a way to encourage him to pick Jackson for the job, the Tribune has learned.

At a luncheon meeting on October 31, Nayak and Rajinder Bedi told many of the attendees that they were organizing a fundraiser for Blagojevich, and that the purpose of the event was to get Jackson named to the Senate seat, two sources tell the Trib.

The meeting led to a fundraiser last Saturday which was attended by Jesse Jackson's brother, a former business partner of one of the businessmen, Raghuveer Nayak.

One source told the paper that he overheard Nayak and Bedi discussing plans with another politically active Indian-American businessman.

Raghu said he needed to raise a million for Rod to make sure Jesse got the seat," the second businessman said. "He said, 'I can raise half of it, $500,000.' The idea was that the other two would help raise the rest.

Nayak and Bedi are politically active in Chicago's Indian-American community. Nayak has raised money for Blagojevich and contributed to Jackson. Bedi is an aide to Blagojevich, who the governor is said to call "my Sikh warrior."

Speaking to a local Fox affiliate outside his home this morning, Jackson responded to the Trib's report.

He called Nayak a "great man" and a" family friend, but then said: "I'm confident that no one on my behalf made a single offer to anyone for anything. I wouldn't accept the position if it were offered under those circumstances."

Jackson continued:

I had not met with Governor Blagojevich in four years until I was granted a meeting on Monday, where I presented the governor with my credentials. What I was unaware of was that the governor was pitting Candidate 1 against Candidate 5, against Candidate 2, against Candidate 3, trying to exact (sic) something out of everyone in the process.

Jackson's own lawyer has all but confirmed that Jackson is Candidate 5. In the charges filed Tuesday against Blagojevich, the governor says he was approached by an "emissary" from Candidate 5, proposing a "pay to play" arrangement for the Senate seat.

The Daily Muck

The Daily Muck

Chris Black | December 12, 2008, 10:15AM

The Chicago office of Winston & Strawn has found itself the most recent addition to the list of complaints against Rod Blagojevich. Because of the lengthy ongoing federal investigation into the governor, Blagojevich's political fund is unable to foot the full legal bill; Winston & Strawn is now refusing to continue representation of their client. (WSJ)

The Portuguese foreign minister has offered his country as a place of asylum for at least some Guantanamo detainees and called on other members of the European Union to do likewise. U.S. officials have been hindered in their attempts to shut down the controversial program because of the question over where freed prisoners will go. (FT)

An investigation into misappropriation of campaign funds by a campaign staffer for Rep. Chris Shays' (R-CT) campaign is focusing on Shays' campaign manager, sources say. Accounting for the $3.6 million campaign has been incomplete, although an exact amount for missing funds has still not been finalized. Rep. Shays lost his bid for reelection in Connecticut's 4th congressional district. (Hartford Courant)

Read more »

Bailout

Bailout Oversight: Too Little, Too Late?

Zachary Roth | December 11, 2008, 5:09PM

Remember back in September when Congress blocked the Bush administration's initial effort to ram through a bailout bill that would have given Treasury Secretary Hank Paulson virtually unlimited authority to spend $700 billion however he saw fit?

Among the measures that Congressional Democrats successfully held out for -- against the wishes of the White House -- were meaningful oversight mechanisms that would allow Congress and others to track what the Treasury Department is doing with all that money.

That seemed like a victory for taxpayers at the time. But now, over two months later, we've learned a bit about what those oversight mechanisms have been able to provide. And there's real reason to question whether in fact they were designed adequately for the task in the first place.

"It's a mess," Eric M. Thorson, the Treasury Department's inspector general, told the Washington Post last month. "I don't think anyone understands right now how we're going to do proper oversight of this thing."

Perhaps the single biggest obstacle to adequate oversight of Treasury is how little oversight Treasury itself is exercising over the bailout funds, whether through indifference or an inability to hire qualified staff. In the first report issued by the Congressional Oversight Panel (COP) -- the main oversight mechanism that Congress fought to include in the bailout bill, over Paulson's objections -- the authors made clear that they were concerned about Treasury's lack of tracking mechanisms: "Treasury cannot simply trust that the financial institutions will act in the desired ways; it must verify." But COP also suggested that it was prevented from going further by the fact that Treasury wasn't keeping extensive enough records of its allocation of funds to be able to provide much more information.

A different overseer, the Government Accountability Office -- which functions as the investigative arm of Congress -- drew similar, albeit somewhat firmer, conclusions about Treasury's handling of the bailout money. Its preliminary report last week found a litany of problems, perhaps most fundamentally that there were no procedures to ensure that bailout funds are used as intended.

Just as important, the system of oversight doesn't appear to have been set up under conditions that would have allowed it to function effectively. With just three paid staff members (who started only this week -- two days before the panel's first report was to be released), COP was still struggling to get office space as it was preparing the report. Warren confirmed in an email to TPMmuckraker that "time constraints" had played a role in limiting the scope of the report's conclusions, saying that the panel met for the first time only two weeks ago.

Congress dragged its feet in naming the panel's members: although the bailout bill was passed in early October, they weren't named until mid-November. And it hasn't helped that Senate GOP leader Mitch McConnell still hasn't named a replacement for Sen. Judd Gregg, who stepped down last week as one the panel's two Republicans, saying he was too busy.

Still, at least GAO and the Congressional panel have been in place long enough to offer those reports. The single person who's most directly responsible for overseeing Treasury's bailout spending, Special Inspector General for the bailout, Neil Barofsky, was only confirmed this week. That's because one unnamed Republican senator -- it now seems all but certain that it was Kentucky's Jim Bunning -- placed a hold on Barofsky's nomination.

Congress may be talking belated steps to fix the problem. The Senate yesterday passed a bill that would let Barofsky investigate any use of bailout funds that he deems questionable, and hire auditors for the job. And the House has passed an amendment to the auto bailout bill that would require banks to say more about what they're doing with the TARP money.

Still, it appears that the rush to take action affected not just Treasury -- which was clearly scrambling to set up the bailout program without adequate record-keeping -- but also Congress, which failed to ensure that the oversight system it set up was designed as effectively as it needed it to be. And much of the damage may already have been done.

EPA

Ex-EPA Official To Congress On Midnight Regs: "Maybe We Should Have A Little More Polite Discussion."

Natalie Sherman | December 11, 2008, 4:54PM

The Bush administration's record on the environment is so abysmal that even a former Bush EPA official had difficulty defending it today.

Environmentalists blasted the administration's policies at a hearing called by the Select Committee on Energy Independence and Global Warming, convened to highlight Bush's use of midnight regulations -- proposals made in the waning days of a presidency when political consequences are minimal -- to ram through rule changes on behalf of business interests.

Then, Jeff Holmstead, the lone witness called by the GOP minority, was given a chance to speak.

Holmstead, once the head of the Air office at the EPA and now a lawyer at Bracewell & Giuliani, gamely attempted to defend his own record, touting an improvement in air quality in his opening statement. But hostile questioning put him on the defensive. The timing of the last-minute proposals, he said, was simply due to human responsiveness to deadlines. And as for global warming, other countries "have not achieved anything either."

Finally, Holmstead gave up. "Maybe we should have a little more polite discussion," he said.

Of the 39 rules proposed in the final days of the president's term, 20 pare back environmental restrictions. (ProPublica has a tally going here.)

Rep. Edward Markey (D-MA), the select committee chair, closed the meeting promising to "shine a light" on the Bush administration's activities.

"We are going to be on their case," he said. "We are going to be there every single minute."

Barack Obama

Obama Pledges Openness On Blago Contacts

Zachary Roth | December 11, 2008, 11:34AM

If any of Barack Obama's aides talked to Rod Blagojevich about the Senate seat the president-elect left open, we may be about to find out who it was, and what was said. And that's a lot better than we've been used to over the last few years.

At an appearance moments ago to announce his healthcare team, Obama led off by telling reporters that he has asked his team to gather the facts about contacts with the governor on the subject. "What I want to do is to gather all the facts about any staff contacts that may have taken place" between the governor's office and the transition team, he said. In response to a question, he added that he would present the findings publicly in the next few days.

But Obama said he is "absolutely certain" that if such contacts took place between his team and the governor's office, they would not have included discussion of any kind of "deal" for the seat.

Obama also repeated that he himself never spoke to the governor about the seat. "I did not speak to the governor about these issues," he added.

It's worth noting that Obama's pledge to canvass his staff and present what he's found stands in contrast to the approach taken by President Bush after news reports suggested that a member of his team had improperly leaked the name of a covert CIA operative. Bush at first pledged to get to the bottom of the matter, but soon appeared uninterested in quickly doing so, or in disciplining those members of his administration -- Karl Rove, Scooter Libby, and Richard Armitage -- who were ultimately found to have been the culprits.

We should wait to see if Obama fully delivers on his pledge to reveal what he's found, but so far, he seems to be approaching the issue with greater openness than his predecessor.

The Daily Muck

The Daily Muck

Natalie Sherman | December 11, 2008, 10:17AM

The 2008 Republican and Democratic conventions were underwritten by hefty contributions from the institutions and individuals at the center of the country's financial crisis, according to a report released Wednesday by the Center for Responsive Politics and the Campaign Finance Institute. Insurance giant AIG, which has since received more than $150 billion in federal money, gave $1.5 million; mortgage company Freddie Mac, now a government enterprise, donated $500,000. In all, the donations come to about $14 million. (Wall Street Journal/Politico)

The Supreme Court could hold former Attorney General John Ashcroft and FBI Director Robert Mueller responsible for abuse of Muslim and Arab detainees in the days after September 11, 2001, if Javaid Iqbal, a Pakistani Muslim held in solitary confinement in Brooklyn for 6 months, wins the case he has brought against the officials. Iqbal must prove that Ashcroft and Mueller are responsible for his treatment. On Wednesday, the justices "offered no clear indication" that it would stop Ashcroft and Mueller from being named in the suitaccording to the AP. (NYTimes/AP)

Part of the proposed auto bailout plan would reinstate a tax loophole, Silo, which allows companies to avoid paying billions of dollars in taxes. The I.R.S. outlawed the shelter in 2004. A version of the bill passed the House Wednesday, though its fate in the Senate remained uncertain. (New York Times)

Read more »

Arlen Specter

Leahy and Specter At Odds Over Holder Confirmation

Zachary Roth | December 10, 2008, 6:09PM

Trouble in paradise?

Pat Leahy and Arlen Specter, the ranking Democrat and Republican respectively on the Senate Judiciary committee, have had a relationship over the years that, on the whole, has been a model of bipartisan comity as they've passed the gavel back and forth.

But are they falling out over Eric Holder?

In a speech on the Senate floor today, reports The Hill, Specter expressed surprise that Leahy, the committee chair, had scheduled a January 8 kickoff for Holder's confirmation hearing for the Attorney General job. Barack Obama is scheduled to be sworn in January 20.

Specter cited concerns about Holder's role in the pardon of Marc Rich in the
waning days of the Clinton administration.

"We need to be sure the attorney general does not bend his views in any way that is partisan or political," Specter said. "There are many other matters that warrant inquiry."

Given the amount of material to go through, Specter said, the hearings should not begin until January 26 at the earliest.

The speech followed a letter sent last night by Specter to Leahy.

In response, Leahy just now fired off a letter back to his longtime colleague -- "Dear Arlen", it begins -- expressing surprise at Specter's surprise.

Leahy writes:

As I have said repeatedly from the time reports of his likely designation began appearing in the press in mid-November, I thought we should move promptly. It hardly came as a surprise when the President-elect announced that Eric would be a key part of his national security team at the designation announcement on December 1. My recollection is that your initial reaction on November 18 was that you were at that time already reviewing his record. Of course, Eric is someone you and I both know well and have known and worked with for years.

Leahy also cites historical precedent to argue that the timing of the hearings is not unusual:

After the contentious 2000 presidential election, I also proceeded promptly to hold the hearing on the designation by President-elect Bush of John Ashcroft to be Attorney General. John's designation was not formally announced until December 22, but I held his hearing 25 days later. I do not think President-elect Obama should be penalized for proceeding promptly with transition and designating his Attorney General selection three weeks before President Bush had.

I am sure you recall during your first year in the Senate how promptly Chairman Thurmond proceeded on the designation of William French Smith to be Attorney General at the beginning of the Reagan administration. The Committee completed its consideration of President Reagan's lawyer to be the Attorney General of the United States with a vote on January 16, even though he was not designated until December 11. We have known about Eric's designation officially for 10 days, and unofficially for more than three weeks. The Committee would have to vote on January 6, the first day of the new Congress, to approximate that timeline.

President Carter's first Attorney General, Griffin Bell, was not designated until December 18, yet his hearing and Committee consideration were completed by January 19. Approximating that timeline would have the Committee voting before the new Congress even comes into session.

Leahy even brings up past favors he has done for Specter:

I have sought to accommodate your interests on many occasions. I scheduled field hearings for you in Pennsylvania on foreclosure and health care mergers issues, and worked hard to ensure fair treatment and confirmation for nominations in which you had a personal interest.

We'll keep you posted on how this plays out...

Jesse Jackson Jr.

Blitzer: Fitz Doesn't Have Jackson On Tape

Zachary Roth | December 10, 2008, 5:25PM

On CNN within the last hour, Wolf Biltzer slipped in some interesting and potentially important news about what federal prosecutors might and might not have on Jesse Jackson Jr., who today was all but confirmed by his lawyer to be Senate Candidate 5.

Talking to legal analyst Jeffrey Toobin, Blitzer said that according to law enforcement sources, Pat Fitzgerald's office does not have recordings of Jackson himself speaking to Rod Blagojevich as part of the US Attorney's investigation into the governor.

If true, that would be significant, because the indictment filed yesterday against the governor quotes him telling an aide that an "emissary" from Jackson approached the governor and proposed a "pay-to-play" deal in regard to the open US Seante seat that Blagojevich has the power to fill.

If Fitzgerald doesn't have evidence of Jackson himself talking about any such deal, it would appear to lessen the chances that Jackson will be charged.

Of course, there are some caveats here. We've been unable to get more details on Blitzer's report, and haven't seen it corroborated elsewhere.

And even if true, Blitzer's report doesn't exlcude the possibility that Fitzgerald has a recording of an aide to Jackson -- perhaps the "emissary" to whom Blagojevich referred -- talking about the alleged deal.

Still, this is worth trying to learn more about...

Bailout

Bailout Overseer: We're Still Trying To Get Office Space

Natalie Sherman | December 10, 2008, 4:55PM

Elizabeth Warren, the Harvard Law professor who chairs the Congressional Oversight Panel, which is monitoring the Treasury's spending of the bailout money, appeared this afternoon before a House commmitee to testify about the report -- better characterized as a set of questions -- the panel released this morning.

And from what Warren said, it doesn't appear that oversight of the billions of dollars at stake is being treated by either Treasury or Congress as a top priority.

Warren told the committee that the panel's four members had met for the first time just two weeks ago, and were still "struggling" to find office space. She added that all the members of the panel are serving part-time.

"Well, that raises the question of whether this can really be taken seriously," said Rep. Melvin Watt (D-NC), echoing fears about the strength of the oversight mechanisms are in place.

Congress authorized the creation of a five-member panel in the Oct. 2 bailout bill, but progress has been slow-going. Appointments were not announced until Nov. 14, and the panel remains one member short. (Sen. Jud Gregg, a New Hampshire Republican who was originally named to the position, stepped down Dec. 1.) The panel has little authority to do more than request information and report back to Congress about it.

In addition to Warren the other three members of the panel are Rep. Jeb Hensarling (R-TX), Richard Nieman, the state superintendent of banks for New York, and Damon Silvers, an associate general counsel of the AFL-CIO .

Barack Obama

Jackson: I Did Nothing Wrong

Zachary Roth | December 10, 2008, 4:40PM

Rep. Jesse Jackson Jr. just gave a press conference adamantly denying any wrongdoing in connection with the Blagojevich charges.

"I reject and denounce pay-to-play politics, and have no involvement whatsoever in any wrongdoing,"Jackson said.

He added: "I did not initiate or authorize anyone at any time to promise anything to Governor Blagojevich at any time."

Jackson continued: "I spoke to the US Attorney's office and they shared with me that ... I am not accused of any misconduct."

Jackson said he met with the governor Tuesday (he meant Monday, it appears) to discuss the Senate seat, as was reported at the time, but that he believed he was in consideration on the merits.

He closed with an effort to associate himself with civil-rights history, saying he wanted to be judged "on the content of my character."

Earlier today, Jackson's lawyer all but admitted that Jackson is Senate Candidate 5. In the indictment filed against Blagojevich, the governor claims that an "emissary" from Candidate 5 approached him about a "pay to play" deal for the open Senate seat that Blagojevich has the power to fill.

Jesse Jackson Jr.

Jackson's Lawyer: I "Assume" He's Candidate 5

Zachary Roth | December 10, 2008, 3:59PM

In a televised press conference this afternoon, Jesse Jackson Jr.'s lawyer all but confirmed that his client is Senate Candidate 5 -- as we suspected from the start.

Asked whether he believes that Jackson is Candidate 5, James Montgomery said: "I do." He added: "He did not specifically tell me that, but I can assume it from our conversation."

Montgomery said that Jackson is guilty of no wrongdoing, and that both Montgomery and Jackson have been told by law enforcement that Jackson is not a target of the investigation. And he said that he and Jackson are scheduled to meet with US Attorney Pat Fitzgerald on Friday or Monday.

Just to remind you, in the indictment filed against Rod Blagojevich, the governor claims that an "emissary" from Candidate 5 approached him about a "pay to play" deal for the open Senate seat that Blagojevich has the power to fill.

Bailout

Oversight Board To Treasury: What's Going On?

Versha Sharma | December 10, 2008, 12:16PM

A four-person oversight panel for the Treasury's $700 billion bailout released a bewildered preliminary report this morning looking into how Treasury is spending its billions of dollars of taxpayer money.

U.S. stocks have declined 40 percent this year, 12 of the nation's largest financial institutions are teetering on the brink of bankruptcy, and 171 banks are on the Treasury's "problem list." Since Congress approved the bailout in October, the Treasury has allocated some $335 billion, but some of the most fundamental questions about where that money went remain unanswered.

"It is unclear" the report -- written by a panel led by Harvard Law professor and bankruptcy expert Elizabeth Warren -- says at one point, and it continues that way for some time, wondering "What is Treasury's Strategy?" "Is the Strategy Working?" What Have Financial Institutions Done with the Taxpayers' Money?" Or as Rep. Paul Kanjorski (D-PA) put it at a hearing of the House Financial Services Committee this morning: "We're like mad scientists in an economic laboratory trying to make the right potion to solve this problem."

The most strongly worded section appears on page 20, when the panel charges Treasury with administering "the TARP program without seeking to monitor the use of funds provided to specific financial institutions." It adds: "Treasury cannot simply trust that the financial institutions will act in the desired ways; it must verify."

The panel also raises questions about how Treasury is deciding which institutions get money.

Critics have repeatedly wondered how much power the Treasury's oversight mechanisms actually have -- and the report's inconclusiveness suggests that it's not sure either.

Take this excerpt, in which the panel says it will develop standards to measure the program's success, a request also put forward in the Government Accountability Office report from last week.

The Oversight panel intends over time to make its own assessment of the effectiveness of the TARP program in achieving the objectives set forth by Congress. The Oversight Panel would be greatly assisted in its effort if Treasury did the same.

Let's hope the next reports from the panel, due out Jan. 10 and 20, contain more teeth. In the meantime we await the new website for the congressional oversight panel (or in a moment of wishful thinking, COP for short) with baited breath.

Jesse Jackson Jr.

Report: Jackson Jr. Is Candidate Five

Zachary Roth | December 10, 2008, 11:49AM

ABC News is reporting that Rep. Jesse Jackson is "Senate Candidate 5". The report is attributed to "federal law enforcement sources."

The charging documents in the Rod Blagojevich case quote the governor telling an aide that an "emissary" from Candidate 5 contacted him and proposed a "pay to play" arrangement in regard to the US Senate seat left open by Barack Obama, which Blagojevich has the authority to fill.

The governor also says he thinks he might be able to get something "tangible, up front" from Candidate 5 in return for the appointment.

Jackson Jr. said this morning he was contacted by federal prosecutors who "asked me to come and share with them my insights and thoughts about the selection process."

Asked whether he was Candidate 5, Jackson Jr. said "I don't know," but added that he had been told he was not a target of the investigation.

We suggested yesterday that Jackson Jr. might be Candidate 5.

The Daily Muck

The Daily Muck

Natalie Sherman | December 10, 2008, 9:42AM

The House ethics committee will expand its investigation of New York Democratic Rep. Charles Rangel to include questions about his decision to support a controversial tax shelter. The loophole was supported by a company that donated $1 million to a project championed by the congressman. Rangel, the chairman of the powerful Ways and Means Committee, already faces questions from the committee for failing to report income on a Caribbean villa and dodgy real estate dealings in New York. The latest allegations were reported by the New York Times in November. (AP)

Troubled insurance giant American International Group, the recipient of more than $150 billion in federal bailout funds, proposed "retention payments" to 38 top executives --whose salaries already range from $160,000 to $1 million -- of up to $4 million, the company confessed Friday in a letter to Rep. Elijah Cummings (D-MD). AIG, the company that made headlines earlier this fall for a $443,344 trip to the St. Regis resort and a $343,000 hush-hush retreat to Arizona, has lost $37.6 billion this year, and owes more than $10 million, reports the Wall Street Journal. The government owns nearly 80 percent of the firm. (Bloomberg/Wall Street Journal)

The Minnesota Court of Appeals denied the appeal by Sen. Larry Craig (R-ID) to withdraw his guilty plea in a sex sting case. Craig, who is accused of soliciting sex from an undercover officer in the bathroom of the Minneapolis airport, pleaded guilty in 2007 without consulting a lawyer. He attempted to retract the claim after his arrest became public, saying his plea had simply been meant to dispose quickly of the issue. Craig will retire from the Senate in January. (CNN)

Read more »

FBI

Report: FBI Probing Charges In Kazeminy/Coleman Suit

Zachary Roth | December 10, 2008, 9:12AM

The FBI is looking into the allegations against Nasser Kazeminy, a close friend and supporter of Minnesota senator Norm Coleman, reports the St. Paul Pioneer Press.

The paper reports: "Agents with the FBI have talked to or made efforts to talk to people in Texas familiar with the allegations, according to a source familiar with the situation."

The lawsuit, filed by the former CEO of a company owned by Kazeminy, alleges, among other things, that Kazeminy tried to use the company, Deep Marine Technologies, to pass money to Coleman via an insurance company that employed the senator's wife.

Coleman's campaign, which is in the midst of a recount against Democrat Al Franken to decide the fate of Coleman's seat, released the following statement last night:

"We are not aware of any investigation that is under way, nor have we been contacted by any agency with respect to this matter. As we have said repeatedly, we welcome any investigation of these lawsuits by the appropriate authorities to get to the bottom of these baseless, sleazy and politically inspired allegations.

That denial -- which Coleman's Senate office had declined to offer to TPMmuckraker despite repeated calls -- would appear to rule out the possibility of Coleman having been contacted by Senate ethics investigators, though there may be wiggle room in the wording. A Minnesota good government group last month called on both the FBI and the Senate to launch probes.

The FBI, contacted by the Pioneer-Press, did not confirm or deny the existence of the investigation.

Rod Blagojevich

Blago Lawyer: Gov "Didn't Do Anything Wrong"

Zachary Roth | December 9, 2008, 6:04PM

Rod Blagojevich's lawyer has said the governor has no plans to resign and will be vindicated, Politico reports.

The attorney for Illinois Gov. Rod Blagojevich said the governor will be vindicated and he has no plans to resign.

"He didn't do anything wrong," attorney Sheldon Sorosky told reporters after Blagojevich was arraigned. "A lot of this is just politics."

Blagojevich should be in the office Wednesday, Sorosky added.

So, reporters asked, he does not intend to resign?

"Not that I know of, no," said Sorosky, who added that the governor was "surprised" by the day's events.

Bailout

Congress Slams Fannie, Freddie

Zachary Roth | December 9, 2008, 5:10PM

The House Oversight committee held hearings today on the role of Fannie Mae and Freddie Mac in the housing crisis and financial meltdown. And, no surprise, committee members didn't exactly heap praise on the troubled mortgage giants.

Committee chair Henry Waxman: "The CEOs of Fannie and Freddie made reckless bets that led to the downfall of their companies. Their actions could cost taxpayers hundreds of billions of dollars."

GOP Rep. Darrell Issa: "Outright fraud and greed wasn't isolated to just Wall Street. Fannie and Freddie shared in this disgrace as it drove much of the poor decision making that have led us to where we are today."

From the Wall Street Journal:

Lawmakers cited thousands of documents collected by the committee that Waxman said "show that the companies made irresponsible investments" that destabilized the firms and forced the government to put the companies in conservatorship in September.

Specifically, the panel released a June 2005 presentation made by former Fannie CEO Daniel Mudd that suggested the firm should move away from the traditional mortgage market in order to take advantage of the growing subprime and non-prime loan businesses.

"If we do not seriously invest in these 'underground' type efforts and the market changes prove to be secular, we risk: becoming a niche player; becoming less of a market leader; becoming less relevant to the secondary market," the presentation slides say.

Fannie, the slides continue, could "meet the market where the market is" by accepting higher risk and more volatile earnings

Daniel Mudd, CEO of Fannie Mae, offered this defense to the committee: "We couldn't afford to make the bet that the changes were not going to be permanent," he said.

Don Siegelman

Siegelman Lawyers Make Oral Arguments In Appeal Of Conviction

Zachary Roth | December 9, 2008, 3:37PM

Lawyers for Don Siegelman -- the former Alabama governor who was convicted in 2006 on corruption chrages, despite evidence that the prosecution was politically motivated -- have made their first oral arguments in their appeal.

The Associated Press reports that the the defense lawyers are leading with a different argument, that the conviction should be overturned "partly because jurors communicated with each other during the trial."

It continues:

Siegelman attorney Sam Heldman also told the panel of the 11th U.S. Circuit Court of Appeals in Atlanta that prosecutors did not prove Siegelman had a "quid pro quo" agreement to appoint [HealthSouth CEO Richard] Scrushy to a hospital board in exchange for contributions to a state lottery campaign.

As we've told you before, the US Attorney in the case continued to advise prosecutors even after formally recusing herself becasue her husband is a GOP operative and Karl Rove ally.

Rod Blagojevich

CREW To Blago: "Resign Immediately"

Zachary Roth | December 9, 2008, 2:37PM

In what is likely the start of a trend, Citizens for Responsibility and Ethics in Washington (CREW), the DC-based good government group, has released a statement calling on Blagojevich to resign as Illinois governor.

It's fair to say that if the allegations in the charging documents are true, the governor has shown neither responsibility nor ethics.

Barack Obama

Blago: Senate Candidate 5 Wanted To Trade Campaign Cash For Seat

Zachary Roth | December 9, 2008, 2:10PM

We don't know for sure who Senate Candidate 5 is. But we'll likely find out. So it's worth understanding what his or her (though it appears to be his) alleged role in the affair is.

For Candidate 5, the most damaging passage in the document is this:

On December 4, 2008, ROD BLAGOJEVICH spoke to Advisor B and informed Advisor B that he was giving Senate Candidate 5 greater consideration for the Senate seat because, among other reasons, if ROD BLAGOJEVICH ran for re-election Senate Candidate 5 would "raise money" for ROD BLAGOJEVICH, although ROD BLAGOJEVICH said he might "get some (money) up front, maybe" from Senate Candidate 5 to insure Senate Candidate 5 kept his promise about raising money for ROD BLAGOJEVICH. (In a recorded conversation on October 31, 2008, ROD BLAGOJEVICH described an earlier approach by an associate of Senate Candidate Five as follows: "We were approached 'pay to play.' That, you know, he'd raise me 500 grand. An emissary came. Then the other guy would raise a million, if I made him (Senate Candidate 5) a Senator.")

That last part, in which the governor says he was approached by an "emissary" from Candidate 5 proposing a pay-to-play deal for Barack Obama's vacated Senate seat, is the key. Though it's worth noting, of course, that Blagojevich hardly has a reputation for honesty.

There is also this passage:

Later on December 4, 2008, ROD BLAGOJEVICH spoke to Fundraiser A. ROD BLAGOJEVICH stated he was "elevating" Senate Candidate 5 on the list of candidates for the open Senate seat. ROD BLAGOJEVICH stated he might be able to cut a deal with Senate Candidate 5 that provided ROD BLAGOJEVICH with something "tangible up front." ROD BLAGOJEVICH noted he was going to meet with Senate Candidate 5 in the next few days. ROD BLAGOJEVICH told Fundraiser A to reach out to Individual D, an individual who ROD BLAGOJEVICH is attempting to obtain campaign contributions from and who, based on intercepted phone calls, ROD BLAGOJEVICH believes to be close to Senate Candidate 5. ROD BLAGOJEVICH told Fundraiser A to tell Individual D that Senate Candidate 5 was very much a realistic candidate for the open Senate seat, but that ROD BLAGOJEVICH was getting "a lot of pressure" not to appoint Senate Candidate 5. ROD BLAGOJEVICH told Fundraiser A to tell Individual D that ROD BLAGOJEVICH had a problem with Senate Candidate 5 just promising to help ROD BLAGOJEVICH because ROD BLAGOJEVICH had a prior bad experience with Senate Candidate 5 not keeping his word. ROD BLAGOJEVICH told Fundraiser A to tell Individual D that if Senate Candidate 5 is going to be chosen to fill the Senate seat "some of this stuffs gotta start happening now . . .right now. . . and we gotta see it. You understand?"

ROD BLAGOJEVICH told Fundraiser A that "you gotta be careful how you express that and assume everybody's listening, the whole world is listening. You hear me?" ROD BLAGOJEVICH told Fundraiser A to tell Individual D if there is "tangible political support (campaign contributions) like you've said, start showing us now." Fundraiser A stated he will call Individual D on the phone to communicate ROD BLAGOJEVICH's message. ROD BLAGOJEVICH responded that "I would do it in person. I would not do it on the phone." ROD BLAGOJEVICH told Fundraiser A to communicate the "urgency" of the situation to Individual D.

So it certainly seems clear that the governor believed Candidate 5 would play along -- though that's not proof that he was correct in that assumption.

Barack Obama

Looks Like AG Madigan Is Candidate 2

Zachary Roth | December 9, 2008, 1:35PM

Senate Candidate 2 appears to be Illinois Attorney General Lisa Madigan.

From the charging document:

On November 6, 2008, ROD BLAGOJEVICH talked with Spokesman. ROD BLAGOJEVICH told Spokesman to leak to a particular columnist for the Chicago Sun-Times, that Senate Candidate 2 is in the running for the vacant Senate seat. According to ROD BLAGOJEVICH, by doing this, he wanted "to send a message to the [President-elect's] people," but did not want it known that the message was from ROD BLAGOJEVICH.

Thereafter, ROD BLAGOJEVICH and Spokesman discussed specific language that should be used in the Sun Times column and arguments as to why Senate Candidate 2 made sense for the vacant Senate seat. A review of this particular Sun Times column on November 7, 2008, indicates references to the specific language and arguments regarding Senate Candidate 2 as a potential candidate for the Senate seat, as discussed by ROD BLAGOJEVICH and Spokesman.

So let's look at that November 7 item. Written by Michael Sneed and headlined: "Tipsville", it reads (via Nexis):

The latest from Blagoville: Is Gov. Rod Blagojevich toying with tossing Barack Obama's U.S. Senate seat to Illinois Attorney General Lisa Madigan, who wants Blago's job?
- It's his pick . . . and it would get rid of a rival.
- It may endear him to powerful House Speaker Mike Madigan, Lisa's dad, who is Blago's political foe.
- It would enable Gov. Blago to choose a new Illinois attorney general.
- Hmmm: Even though this sounds like looneyville . . . stay tuned.

It's worth making clear: Candidate 2 is not accused of wrongdoing.

Trib Agreed To Hold Story On Blago Probe

Zachary Roth | December 9, 2008, 1:15PM

Pat Fitzgerald also talked at his recent press conference about his request to the Chicago Tribune to hold off on a story they were planning to publish on the investigation -- a request the paper granted.

About eight weeks ago, before we had the bug installed, and before we had the wiretap up, we were contacted by the Tribune to comment or confirm or deny on a story that they were going to run. Had they ran that story, we thought we'd never have the opportunity to install the bug or place the telephone tap. And we made an urgent request for the Tribune not to publish that story. That is a very rare thing for us to do, and it's an even rarer thing for a newspaper to grant. We thought that the public interest request that the story not run. It was a very difficult conversation to have because we weren't allowed to describe what we were doing. And I have to take my hat off that the Tribune withheld that story for a substantial period of time, which otherwise might have compromised the investigation from ever happening.

Here's the video:

The cooperation from the Trib is ironic because, as we noted earlier, part of Fitzgerald's investigation involved Blagojevich pressuring Tribune owner Sam Zell to remove editorial board members who had written articles against the governor. And Blagojevich was left with the impression that Zell was willing to do so.

Here's a statement from the Tribune:

The Chicago Tribune investigated allegations of misconduct involving Illinois Gov. Rod Blagojevich independent of the U.S. attorney's criminal probe.

As a standard practice, our reporters contact individuals involved in these stories for confirmation and comment prior to publication. Consequently, we contacted the U.S. attorney's office in the course of our reporting.

On occasion, prosecutors asked us to delay publication of stories, asserting that disclosure would jeopardize the criminal investigation. In isolated instances, we granted the requests, but other requests were refused.

The Chicago Tribune's interest in reporting the news flows from its larger obligation of citizenship in a democracy. In each case, we strive to make the right decision as reporters and as citizens. That's what we did in this case.

FBI

Blago To FBI: "Is This A Joke?"

Zachary Roth | December 9, 2008, 12:41PM

An FBI agent just said at a press conference that when Blagojevich was woken by a phone call from the FBI this morning, informing him that agents were coming to arrest him, he asked: "Is this a joke?"

Here's the video:

Barack Obama

Fitzgerald: "The Conduct Would Make Lincoln Roll Over In His Grave"

Zachary Roth | December 9, 2008, 12:25PM

At a press conference to announce the charges against Blagojevich, Pat Fitzgerald said:

But the most cynical behavior in all this -- the most appalling -- is the fact that Governor Blagojevich tried to sell the appointment to the Senate seat vacated by President-Elect Obama. The conduct would make Lincoln roll over in his grave.

Here's the video:

It's good to have America's favorite prosecutor back on the scene.

Barack Obama

Is Jesse Jackson Jr. Candidate 5?

Zachary Roth | December 9, 2008, 12:06PM

Is Senate Candidate 5, who appears to have been particularly willing to play ball with Blago, Rep. Jesse Jackson Jr?

The unnamed candidate appears to be a man. From the charging documents:

Rod Blagojevich told Fundraiser A to tell Individual D that Rod Blagojevich had a problem with Senate Candidate 5 just promising to help Rod Blagojevich because Rod Blagojevich had a prior bad experience with Senate Candidate 5 not keeping his word. (our itals)

That rules out Valerie Jarrett -- already assumed to be Candidate 1 -- Tammy Duckworth, Lisa Madigan, and Rep. Jan Schakowsky.

There's also this from the charges:

On December 4 ... ROD BLAGOJEVICH noted he was going to meet with Senate Candidate 5 in the next few days.

Now look at this from the Chicago Tribune on December 6:

Jackson, the South Side and south suburban congressman, said Blagojevich's office is looking to set up a meeting between him and the governor, who has the sole power of filling the vacancy.

"Every indication, I believe, is in the next four or five days a meeting will take place," Jackson said.

And indeed, Jackson and Blagojevich met yesterday.

And as of December 3, National Journal reported at the time, he had already met with Rep. Luis Gutierrez as well as some of the female candidates.

That's a long way from proof that Candidate 5 is Jackson. But it's at least suggestive.

Rod Blagojevich

Blagojevich's Wife: "Hold Up That Fucking Cubs Shit ... Fuck Them"

Zachary Roth | December 9, 2008, 11:26AM

From page 44 of the Blagojevich charges, about the deal the Tribune company was seeking on behalf of the Cubs:

During the call, Rod Blagojevich's wife can be heard in the background telling Rod Blagojevich to tell Deputy Governor A 'to hold up that fucking Cubs shit ... fuck them'"

Guess she's a White Sox fan.

Barack Obama

Blago Thought Zell Promised To Go After Trib Ed Board

Zachary Roth | December 9, 2008, 11:16AM

Is Sam Zell, the Tribune Company owner, implicated in the charging documents of Rod Blagojevich?

From Fitzgerald's statement:

According to the affidavit, intercepted phone calls revealed that the Tribune Company, which owns the Chicago Tribune and the Chicago Cubs, has explored the possibility of obtaining assistance from the Illinois Finance Authority (IFA) relating to the Tribune Company's efforts to sell the Cubs and the financing or sale of Wrigley Field. In a November 6 phone call, Harris explained to Blagojevich that the deal the Tribune Company was trying to get through the IFA was basically a tax mitigation scheme in which the IFA would own title to Wrigley Field and the Tribune would not have to pay capital gains tax, which Harris estimated would save the company approximately $100 million.

Intercepted calls allegedly show that Blagojevich directed Harris to inform Tribune Owner and an associate, identified as Tribune Financial Advisor, that state financial assistance would be withheld unless members of the Chicago Tribune's editorial board were fired, primarily because Blagojevich viewed them as driving discussion of his possible impeachment. In a November 4 phone call, Blagojevich allegedly told Harris that he should say to Tribune Financial Advisor, Cubs Chairman and Tribune Owner, "our recommendation is fire all those [expletive] people, get 'em the [expletive] out of there and get us some editorial support."

On November 6, the day of a Tribune editorial critical of Blagojevich , Harris told Blagojevich that he told Tribune Financial Advisor the previous day that things "look like they could move ahead fine but, you know, there is a risk that all of this is going to get derailed by your own editorial page." Harris also told Blagojevich that he was meeting with Tribune Financial Advisor on November 10.

In a November 11 intercepted call, Harris allegedly told Blagojevich that Tribune Financial Advisor talked to Tribune Owner and Tribune Owner "got the message and is very sensitive to the issue." Harris told Blagojevich that according to Tribune Financial Advisor, there would be "certain corporate reorganizations and budget cuts coming and, reading between the lines, he's going after that section." Blagojevich allegedly responded. "Oh. That's fantastic." After further discussion, Blagojevich said, "Wow. Okay, keep our fingers crossed. You're the man. Good job, John."

In other words, the Tribune company wanted a deal that would save them millions. Harris, the governor's aide, told them that if they removed the paper's ed board, the governor would play ball. In response, Harris got the impression that Zell had received the message and would do what Blagojevich wanted. The governor was pleased.

Late Update: Here's a statement from the Tribune Company, denying the charge.

Barack Obama

Feds: Obama Wouldn't Play Ball With Blago

Zachary Roth | December 9, 2008, 11:05AM

From Fitzgerald's statement:

In a conversation with Harris on November 11, the charges state, Blagojevich said he knew that the President-elect wanted Senate Candidate 1 for the open seat but "they're not willing to give me anything except appreciation. [Expletive] them."

Looks like Obama wouldn't pay to play.

Barack Obama

Jarrett Is Senate Candidate One

Zachary Roth | December 9, 2008, 10:53AM

From the Fitzgerald statement:

On November 12, Blagojevich spoke with SEIU Official who was in Washington. This conversation occurred about a week after Blagojevich had met with SEIU Official to discuss the Senate seat, with the understanding that the union official was an emissary to discuss Senate Candidate 1's interest in the Senate seat. During the November 12 conversation, Blagojevich allegedly explained the non-profit organization idea to SEIU Official and said that it could help Senate Candidate 1. The union official agreed to "put that flag up and see where it goes," although the official also had said he wasn't certain if Senate Candidate 1 wanted the official to keep pushing her candidacy. Senate Candidate 1 eventually removed herself from consideration for the open seat. (itals ours)

Both Valerie Jarrett, a friend and adviser to Barack Obama, and Tammy Duckworth, an Iraq vet who runs the Illinois Veteran Affairs Department, have been mentioned as candidates for the seat.

There appears to be no allegation of wrongdoing by Senate Candidate 1.

Late update: The charges themselves say:

By this time, media reports indicated that Senate Candidate 1, an advisor to the President-elect, was interested in the Senate seat if it became vacant, and was likely to be supported by the President-elect.

The Daily Muck

The Daily Muck

Chris Black | December 9, 2008, 10:45AM

Embattled Rep. Don Young (R-AK) may have improperly spent $20,000 from his campaign account last quarter on a Seattle law firm, according to recent campaign filings. It is unclear whether the fees were related to the ongoing federal probe into Young or if they were for campaign-related expenses. FEC guidelines forbid candidates from using campaign funds for non-campaign related matters. Young, who is tight-lipped about the federal probe, has been under investigation by the Justice Department for over a year -- possibly related to his notorious earmarking. (Anchorage Daily News)

Sen.-elect Mark Begich (D-AK), who beat Sen. Ted Stevens (R-AK) in a week-long contested race in November, said he doesn't believe it is "appropriate" to send the 85-year-old Stevens to jail. Stevens, who was convicted on corruption charges in October, asked for a new trial on Friday. (AP/Roll Call)

Attorneys general will attend conferences this month funded by corporate sponsors that may have legal issues, including drug companies and tobacco firms. The financial ties "represent at least the appearance of a conflict of interest for the attorneys general, and could be improper," reports theKansas City Star. (Kansas City Star)

Read more »

Barack Obama

Blago on Senate Seat Authority: "I've Got This Thing And It's [Expletive] Golden"

Zachary Roth | December 9, 2008, 10:42AM

A great nugget from the Fitzgerald statement:

Later on November 5, Blagojevich said to Advisor A, "I've got this thing and it's [expletive] golden, and, uh, uh, I'm just not giving it up for [expletive] nothing. I'm not gonna do it. And, and I can always use it. I can parachute me there."

Rod Blagojevich

Fitzgerald: Blago Thought About Appointing Himself To Senate, Mulled Prez Run

Zachary Roth | December 9, 2008, 10:35AM

More from Fitzgerald's statement:

Throughout the intercepted conversations, Blagojevich also allegedly spent significant time weighing the option of appointing himself to the open Senate seat and expressed a variety of reasons for doing so, including: frustration at being "stuck" as governor; a belief that he will be able to obtain greater resources if he is indicted as a sitting Senator as opposed to a sitting governor; a desire to remake his image in consideration of a possible run for President in 2016; avoiding impeachment by the Illinois legislature; making corporate contacts that would be of value to him after leaving public office; facilitating his wife's employment as a lobbyist; and generating speaking fees should he decide to leave public office.

Rod Blagojevich

Blago Was Rushing To Raise Money Before Ethics Law Kicked In

Zachary Roth | December 9, 2008, 10:27AM

Here's a bit more from the statement, which goes some way to explaining why Blagojevich might have been reckless enough to put a Senate seat up for sale even while knowing that he was under federal investigation:

The charges focus, however, on events since October when the Government obtained information that Blagojevich and Fundraiser A, who is chairman of Friends of Blagojevich, were accelerating Blagojevich's allegedly corrupt fund-raising activities to accumulate as much money as possible this year before a new state ethics law would severely curtail Blagojevich's ability to raise money from individuals and entities that have existing contracts worth more than $50,000 with the State of Illinois. Agents learned that Blagojevich was seeking approximately $2.5 million in campaign contributions by the end of the year, principally from or through individuals or entities - many of which have received state contacts or appointments - identified on a list maintained by Friends of Blagojevich, which the FBI has obtained.

Barack Obama

Charges: Blago Discussed Cash For Obama Seat

Zachary Roth | December 9, 2008, 10:21AM

More from Pat Fitzgerald's statement on the Blagojevich charges:

A 76-page FBI affidavit alleges that Blagojevich was intercepted on court-authorized wiretaps during the last month conspiring to sell or trade Illinois' U.S. Senate seat vacated by President-elect Barack Obama for financial and other personal benefits for himself and his wife. At various times, in exchange for the Senate appointment, Blagojevich discussed obtaining:
- a substantial salary for himself at a either a non-profit foundation or an organization affiliated with labor unions;
- placing his wife on paid corporate boards where he speculated she might garner as much as $150,000 a year;
- promises of campaign funds - including cash up front; and
- a cabinet post or ambassadorship for himself.

Just last week, on December 4, Blagojevich allegedly told an advisor that he might "get some (money) up front, maybe" from Senate Candidate 5, if he named Senate Candidate 5 to the Senate seat, to insure that Senate Candidate 5 kept a promise about raising money for Blagojevich if he ran for re-election. In a recorded conversation on October 31, Blagojevich claimed he was approached by an associate of Senate Candidate 5 as follows: "We were approached 'pay to play.' That, you know, he'd raise 500 grand. An emissary came. Then the other guy would raise a million, if I made him (Senate Candidate 5) a Senator."

Who's Senate Candidate 5? Sounds like we'll find out...

Rod Blagojevich

Blagojevich Charged With Selling Obama's Senate Seat, Plotting To Purge Trib

Zachary Roth | December 9, 2008, 10:12AM

From a statement from US Attorney Pat Fitzgerald...

Blagojevich was intercepted on court-authorized wiretaps during the last month conspiring to sell or trade Illinois' U.S. Senate seat vacated by President-elect Barack Obama for financial and other personal benefits for himself and his wife.

It's also alleged that Blagojevich wanted to purge Chicago Tribune editorial board and in return help them sell Wrigley Field.

After the jump is the full statement...

Read more »

Rod Blagojevich

Illinois Governor Arrested

Zachary Roth | December 9, 2008, 9:51AM

Beleaguered Illinois governor Rod Blagojevich was taken into custody by law enforcement authorities at his home this morning, reports the Tribune Company, sourcing a US Attorney's office spokesman. The governor's chief of staff, John Harris, was also arrested.

Hours earlier, the Chicago Tribune reported that the federal probe of pay-to-play politics in the Blagojevich administration had expanded to include the question whether the process of filling Barack Obama's US Senate seat -- for which the governor is responsible -- had become tainted.

Earlier this week, the same (also beleaguered!) paper reported that the feds had secretly taped Blagojevich as part of their investigation.

Yesterday, the governor told reporters: "I don't believe there's any cloud that hangs over me. I think there's nothing but sunshine hanging over me".

Late Update: Prosecutors have filed a criminal complaint.

John Thain

On Second Thought, Merrill CEO Will Forgo Yearly Bonus

Zachary Roth | December 9, 2008, 9:11AM

That didn't take long.

Yesterday, as we noted, the Wall Street Journal reported that Merrill Lynch CEO John Thain was seeking an annual bonus of as much as $10 million -- after seeing his company lose over $11 billion this year.

New York Attorney General Andrew Cuomo and Senate Majority Leader Harry Reid were both quick to express their outrage, noting that Bank of America, which has completed a deal to buy Merrill, received $15 billion from the bailout fund this fall. And Merrill's board appeared reluctant to go along.

And sure enough, at the company's board meeting yesterday afternoon, Thain announced that he, along with other senior execs, would forgo bonuses this year, "given current economic and market conditions."

Given the level of outrage that Thain's request had provoked so quickly, the board's apparent opposition, and the broader public mood against excessive CEO pay, Thain may have seen the writing on the wall.

And given that he got a $15 million bonus when he joined the firm last fall, we think he should be fine.

Bernard Kerik

Bernie Kerik's Legal Defense Fundraiser: "Like An Extended Giuliani Campaign Commercial."

Matt Berman | December 8, 2008, 5:18PM

Last week, the Bernie Kerik Legal Defense Trust held a $75-a-plate-minimum beefsteak dinner in honor of the man himself.

First, a quick reminder of why the former New York City Police Commissioner needs the money:

Kerik became mired in muck in late 2004 after President Bush unsuccessfully nominated him to be Homeland Security Secretary. The national scrutiny helped to result in a 16-count indictment filed late last year, for charges that included lying to White House officials during the nomination process, accepting mob-tied money for renovations to his apartment, and tax fraud. Last Friday, federal prosecutors accused him of having embarked on a "crime spree." His trial begins in January.

The beefsteak dinner fundraiser, which attracted 200 people to Kerik's hometown of Paterson, NJ, was detailed by The New Yorker, which described "thick-necked" men tucking into their steaks. The program celebrated both Kerik's Jersey roots and his now infamous New York career. It culminated in a fifteen minute long "soundtrack of strings and bagpipes...as a video of still images from the World Trade Center site played--like an extended Giuliani campaign commercial."

And it looks like Kerik's colorful personal life apparently hasn't alienated some members of the religious community. The magazine reports:

"...Monsignor David Cassato, an N.Y.P.D. chaplain, had made the trip from Bensonhurst to offer a blessing. "Tonight, I was supposed to meet Cardinal Martino," Cassato said. "He lives in Rome, and he's very, very close to our Holy Father. I got a call and they said, 'There's this function going on for Bernie.' I said, 'I'm skipping the Cardinal and I'm coming.'"

Kerik ended the night with a speech met by a standing ovation.

Bailout

Reid, Cuomo, Blast Merrill CEO's Request for $10-Million Bonus

Zachary Roth | December 8, 2008, 2:47PM

The news that John Thain, the CEO of Merrill Lynch, has requested a $10 million bonus isn't sitting well with some prominent political figures.

A statement from Senate Majority Leader Harry Reid notes that in October, Merrill received $10 billion in bailout money. Reid then declares:

The TARP program, from which Merrill Lynch has taken billions of taxpayer dollars, was designed explicitly to limit executive compensation, bonuses and golden parachutes. While American families struggle to keep their jobs and their homes, I question the chutzpah of asking for a $10 million taxpayer-subsidized bonus. Americans deciding which bills to pay this month just to make ends meet do not want their hard-earned money even indirectly spent rewarding executives from banks that are largely responsible for the economic crisis. I sincerely hope that Merrill Lynch rejects this request.

Meanwhile, New York Attorney General Andrew Cuomo, who is conducting an investigation of executive pay on Wall Street, has written a letter to Merrill board members that makes similar points. Cuomo writes:

Paying executives at Merrill millions each in "performance" bonuses in this context [of a taxpayer-funded bailout of Wall street firms] would be oxymoronic to say the least and certainly a thumb in the eye to taxpayers. Enough is enough.

Bailout

Gingrich's Ties To Fannie, Freddie Go Even Deeper

Zachary Roth | December 8, 2008, 2:26PM

Earlier today we reported that Newt Gingrich had recently been on Fox denouncing Democatic lawmakers for ties to Fannie Mae and Freddie Mac -- despite himself having worked as a consultant for Freddie back in 2006, helping to fight off potential regulation.

But it turns out that the Newt-Freddie relationship goes even deeper.

A July 1999 story in the American Banker, a banking trade publication (via Nexis), reports that the former House Speaker had recently been hired by Freddie "to provide strategic counsel on a range of issues," according to a company spokesman.

The same story adds that Gingrich's former chief of staff, Arne Christenson, was hired that year by Fannie Mae as senior vice president for regulatory policy.

Just to remind you, Gingrich is the guy who was saying in September:

what you have today is that the rich in Wall Street and the powerful at Fannie Mae and Freddie Mac had so many politicians beholden to them that, in fact, nobody was going to check them. And so they got away with things that were absolute bologna, and it's a tragedy.

Bailout

Merrill Chief Wants $10-Million Bonus For Presiding Over $11-Billion Loss

Zachary Roth | December 8, 2008, 1:06PM

Talk about tone deaf!

Merrill Lynch chief John Thain wants a bonus of as much as $10 million, reports (sub. req.) the Wall Street Journal.

Merrill's compensation committee is, not surprisingly, said to be objecting, pointing out among other things that, due to the dire economic situation, other firms like Goldman Sachs -- which did better than Merrill -- are forgoing bonuses this year.

Merrill has lost almost $12 billion this year, and is about to be taken over by Bank of America. Its shares have fallen fom $50 when Thain took over late last year to $13.04 at close of trading Friday.

It looks like Thain -- who was a major fundraiser for John McCain's campaign and was described by USA Today as a member of McCain's "team" -- is a practitioner of the bargaining strategy in which you begin with a maximalist offer as a starting point for negotiation:

A few months ago, when the board began seriously considering 2008 bonuses, a proposal was presented to the compensation committee by Merrill that Mr. Thain should be paid in excess of $30 million, according to people familiar with the matter. That number has since come down in recent talks with various board members and Mr. Thain has recently indicated to committee members that $5 million to $10 million is more reasonable.

The Journal notes some evidence in Thain's favor:

Mr. Thain's decision to sell Merrill likely salvaged billions of dollars for shareholders and saved a huge number of jobs at the firm, even though thousands of positions will be eliminated following the takeover.

Mr. Thain's quick moves won him respect on Wall Street, especially in contrast to top executives at Lehman Brothers Holdings Inc. and Bear Stearns.

Still, to Americans hit by the mortgage crisis that Merrill and other Wall Street firms helped set the stage for, those points may not carry much weight.

Blackwater

Indictments Unsealed In Blackwater Shooting Case

Zachary Roth | December 8, 2008, 12:27PM

Moments ago, officials with the Department of Justice wrapped up a press conference at which they are publicizing the charges -- previously contained in a sealed indictment -- against the five former Blackwater guards charged with manslaughter in the deadly September 2007 shootings of 17 unarmed Iraqi civilians.

The case has been assigned to a US District Court in Washingotn DC, but defense lawyers want the case moved to Utah, where one of the former guards lives, and where they would presumably find a more conservative, pro-gun jury, reports the Associated Press.

The ex-guards could face 30-year sentences under an anti-machine gun law designed to target drug offenders.

We're also seeing an interesting emerging defense strategy of suggesting that DOJ is bowing to Iraqi pressure: "We are confident that any jury will see this for what it is: a politically motivated prosecution to appease the Iraqi government," Steven McCool, who represents one of the defendants, told the AP.

One ex-Blackwater guard, Jeremy Ridgewater, has already come to a plea deal with prosecutors, pleading guilty to voluntary manslaughter.

Blackwater is the largest security contractor in Iraq.

Late Update: In a lengthy statement emailed to TPMmuckraker, Blackwater responds:

Blackwater does not have access to all of the information gathered by federal investigators. Based on the information available to us, we understand that these individuals acted within the rules set forth for them by the government and that no criminal violations occurred.

...

As noted by the Department of Justice during its press conference, Blackwater as a company has not been charged with any crimes, and neither have any of the hundreds of other Blackwater professionals serving in Iraq.

Late Late Update: Read the court documents:
- Indictment against Blackwater
- Jeremy Ridgewater charges
- Jeremy Ridgewater plea deal

Bailout

Gingrich Slammed Pols "Beholden" to Fannie and Freddie -- But Shilled For Freddie Himself

Zachary Roth | December 8, 2008, 11:27AM

We already knew Newt Gingrich doesn't lack for chutzpah. But this looks like a whole new level...

Back when Congress was debating the bailout package this fall, Gingrich was bravely sounding the alarm about the nefarious influence wielded in Washington by mortgage giants Fannie Mae and Freddie Mac.

Here he is talking to Bill O'Reilly on Fox News in late September:

One of the provisions that I wanted to put into any kind of financial package is that no company that gets money from the Treasury in this process be allowed to hire a lobbyist. I mean, what you have today is that the rich in Wall Street and the powerful at Fannie Mae and Freddie Mac had so many politicians beholden to them that, in fact, nobody was going to check them. And so they got away with things that were absolute bologna, and it's a tragedy.

Gingrich was particularly vocal about some Democratic politicians' ties to Fannie and Freddie:

In Dodd's case, he is the largest single recipient of money from Freddie Mac and Fannie Mae. Barack Obama was No. 2. The fact is that to have Dodd preside over writing this bill, I think, is absolutely disgusting. I am appalled that Harry Reid appointed him to sit in there. But it is the nature of politics up there right now. And I think it's very, very bad for the country.

Now, one of the major reasons that Fannie and Freddie had "so many politicians beholden to them", of course, is that they hired people to work those politicians and to make public arguments that dovetailed with Fannie and Freddie's interests. And one of the people they hired, it turns out, was Gingrich.

The Associated Press reports today that in 2006, Freddie Mac paid the former House Speaker $300,000 to help fight off potential regulation. "Gingrich talked and wrote about what he saw as the benefits of the Freddie Mac business model," says the wire service.

So, in Gingrich world: Democratic politicians getting campaign contributions from Fannie and Freddie -- bad! Republican lobbyists getting paid by Fannie and Freddie to make the case against regulating the mortgage giants: good!

It's nice to be Newt...

The Daily Muck

The Daily Muck

Natalie Sherman | December 8, 2008, 10:00AM

Fannie Mae and Freddie Mac, mortgage giants whose financial collapse prompted a government takeover earlier this fall, hired a who's who of lobbyists to kill legislation that would impose more regulation. In 2006, Freddie Mac shelled out $11.7 million to lobbyists and consultants with ties to Republican lawmakers -- including former Minnesota Rep. Vin Weber and Susan Hirschmann, the former Chief of Staff to Texas Rep. Tom DeLay -- the most ferocious critics of the institutions. The organizations will be the topic of a congressional hearing tomorrow. (AP)

The government is gearing up in its case against the five Blackwater security guards charged with killing 17 Iraqi civilians in an unprovoked shooting in 2007. The guards, who face minimum 30-year prison sentences if convicted, will "surrender" in Utah, where one of them is from, in order, it appears, to have the trial take place in a gun-friendly environment. Meanwhile, the government is set to unveil the indictment today. A prosecutor in the case is also traveling to Baghdad this week to speak to people connected to the victims about the case. (AP/New York Times)

Rep. William Jefferson (D-LA), who faces trial next year on 16 counts of corruption, lost his seat in a heavily Democratic district this weekend to a little-known Republican attorney Anh "Joseph" Cao, who will be the first Vietnamese American in Congress. The upset underscored "the unwritten rule that indictments kill the political careers of even the safest-seeming incumbents," reports The Hill. Jefferson achieved renown when federal investigators found nearly $100,000 in cash in his freezer, money allegedly taken from an FBI informant in a scheme to bribe a Nigerian official. (The Hill)

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