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Nov 30, 2011

SEC Watchdog Uncovers Inappropriate Communications between SEC Official and Hedge Fund Manager

By MICHAEL SMALLBERG

The Washington Post is reporting that the Securities and Exchange Commission (SEC) Office of Inspector General (OIG) uncovered a series of inappropriate communications between an SEC attorney and a hedge fund manager whose firm was under investigation for insider trading and market manipulation.

The full version of the OIG’s investigative report on the matter, issued to the agency on August 8, 2011, has not been posted online (we just submitted a Freedom of Information Act request seeking the full version). But the OIG provided a detailed summary of the investigation in its semiannual update to Congress (released today):

Continue reading "SEC Watchdog Uncovers Inappropriate Communications between SEC Official and Hedge Fund Manager" »

Morning Smoke: See the Decline of Congressional Oversight in a Single Chart


MORNING SMOKE

Where there's smoke, there's fire. POGO's Morning Smoke is a collection of the freshest investigations, scoops, and opinions related to the world of government oversight. Have a story you'd like to see included? Contact POGO's blog editor.

 

Government Oversight

The Decline of Congressional Oversight, in One Chart
Suzy Khimm, The Washington Post

Nuclear Oversight

Nuclear Money Pit: America's Atomic Arsenal is Stuck in the Cold War Era
Kelley Beaucar Vlahos, The American Conservative

Financial Oversight

Six Banks that Benefited Most from Fed's Sweetheart Lending Were Big Political Players
Lee Drutman, Sunlight Foundation

SEC's Shapiro Asks for Congress to Raise Limits on Securities Fines
Joshua Gallu, Businessweek

Inspector General Says Housing Regulator Failed to Stop Fannie, Freddie Mortgage Issues
Associated Press

Crony Capitalism? Hank Paulson's Extraordinary Meeting
Jesse Eisinger, ProPublica

For SEC, Court Ruling on Penalties Ties a Hand
Edward Wyatt, The New York Times

National Security

Lifetime Cost of V-22s Rose 61% in Three Years
Tony Capaccio, Bloomberg News

Butter Beats Guns at Creating Jobs, Profs Say
Colin Clark, Aol Defense

Kendall Cites Flawed Army Future Combat Systems as Costly Lesson
Tony Capaccio, Businessweek

The Department of Homeland Security Wants All the Information It Has on You Accessible from One Place
Kashmir Hill, Forbes

Public Health

What Vacancies? FDA Conflit Rules and Advisory Panels
Ed Silverman, Pharmalot

TRACking the Decline in Criminal Prosecutions for Financial Fraud

By MICHAEL SMALLBERG

In the aftermath of the financial crisis, the federal government launched several high-profile initiatives to crack down on financial fraud in the banking and mortgage industries. So why haven't we seen more criminal prosecutions in these areas?

The Transactional Records Access Clearinghouse (TRAC) recently reported that federal criminal prosecutions for financial institution fraud are at a 20-year low. This grim news comes at a time when everyone from Wall Street protestors to federal judges is questioning the government’s enforcement efforts.

It’s now been over two years since Congress passed the Fraud Enforcement and Recovery Act (FERA), which provided the Department of Justice (DOJ) and other agencies with significantly enhanced resources to investigate and prosecute financial fraud. Shortly after FERA was enacted into law, President Obama created an interagency task force to coordinate these efforts.

These initiatives have certainly produced some flashy headlines. But the actual data on criminal prosecutions are much less impressive. Granted, the statistics alone do not tell us much about the complexity or quality of the cases that have been investigated and prosecuted by the federal government in recent years. However, the numbers are a starting point for oversight in government enforcement efforts and they raise some questions.

TRAC reported that criminal prosecutions for financial institution fraud are at a 20-year low, according to information obtained from the Executive Office for U.S. Attorneys under the Freedom of Information Act:

Continue reading "TRACking the Decline in Criminal Prosecutions for Financial Fraud" »

Nov 29, 2011

High Cost of Under-the-Radar Nuke Facility Becoming Hard to Ignore

By MIA STEINLE

Ten years into the planning process, opposition is ramping up against a proposed nuclear facility in New Mexico--and not just from the usual suspects. Ever-vigilant of how the government is spending taxpayer dollars, we here at POGO have repeatedly voiced our opposition to the Chemistry and Metallurgy Research Replacement  Nuclear Facility(CMRR-NF), a facility with little justification and a price tag now estimated at $3.7 to $5.8 billion. This October, in a review of the nation’s “bloated nuclear weapons budget,” The New York Times editorial page echoed our recommendation to stop construction on CMRR-NF. And today, The American Conservative published a damning article by Kelley Beaucar Vlahos, which highlights the controversy behind the mammoth facility, “which has never been the subject of a public congressional hearing or passionate floor speech—much less a heated debate on cable TV or talk radio.”

Largely flying under the radar of the general public since its inception as a $375-million facility in 2001, CMRR-NF has been championed by politicians like Senator Jon Kyl (R-AZ), and has been the foe of organizations like the Los Alamos Study Group and Nuclear Watch of New Mexico.

While the National Nuclear Security Administration (NNSA)—the semi-autonomous branch of the Department of Energy that oversees nuclear weapons—blames rising costs on safety and seismic concerns (the facility is going to be built near a fault line and a volcano), CMRR-NF isn’t simply replacing an older facility. It’s also facilitating the increased production of nuclear weapon components called “pits.” As the article notes, a new treaty with Russia, in fact, calls for fewer nuclear weapons in America’s future:

Critics say the entire landscape of nuclear-weapons production has changed since CMRR-NF was conceived—all in the direction of reducing the nuclear stockpile—yet every adjustment in the facility’s blueprints has resulted in more capacity to store plutonium and build additional pits.

While CMRR-NF is clearly a candidate to be cut from the already tight U.S. budget (as POGO’s own Peter Stockton notes in the article, the facility is “a huge waste of money.”), critics have found that arguing against the facility is difficult when legislators can’t understand the NNSA’s “intimidating scientific and technical jargon,” and are wary of halting construction after so much planning has been done (the facility’s design, by the way, is only 45 percent complete, meaning current cost estimates aren’t even based on a finished design). Still, with more and more outlets—from non-partisan groups and from groups all across the political spectrum—laying out the case against CMRR-NF so clearly, it’s becoming harder to claim ignorance of this nuclear “monster.”

Mia Steinle is a POGO Investigator.

Today's Military: The Most Top-Heavy Force in U.S. History

Star Creep

By BEN FREEMAN

After Thanksgiving, waistlines aren't the only things that are bloated--the Pentagon's top ranks are fattening at an alarming rate.

Despite a plan set forth by former Secretary of Defense Robert Gates to rein in the Department of Defense's (DoD) increasingly top-heavy force and assurances from Pentagon personnel that these plans were being enacted, the U.S. military is still adding top brass faster than you can say tryptophan.

In September, I testified before the Senate Armed Services Subcommittee on Personnel about the military becoming increasingly top-heavy as a result of growth in the proportion of general and flag officers at the Pentagon. This trend, which we at POGO dubbed Star Creep, is costly to taxpayers who have to foot the large bill for every new general and admiral. It also hinders military effectiveness by leading to what Gates referred to as a “bureaucracy which has the fine motor skills of a dinosaur.”

My fellow witnesses at the hearing—several generals and admirals as well as former Under Secretary of Defense for Personnel and Readiness Clifford Stanley—assured the concerned Committee that they had everything under control. They cited Gates’ Efficiency Initiatives, which purportedly eliminate 102 general and flag officer positions, as evidence of the DoD’s commitment to combating Star Creep. Stanley confirmed to Chairman Jim Webb (D-VA) that Gates’ successor—Secretary of Defense Leon Panetta—supported these efforts and, “has accepted the policies and the things put in place by his predecessor.” (Stanley tendered his notice of resignation in late October.)

What Senator Webb and I did not know at the time—and perhaps Stanley did—was that Gates’ initiative to cut general and flag officers had already come to a screeching halt. Data that were released recently on the DoD personnel office's website tell the tale.

Continue reading "Today's Military: The Most Top-Heavy Force in U.S. History" »

Morning Smoke: SEC-Citigroup Settlement Rejected by Judge Rakoff


MORNING SMOKE

Where there's smoke, there's fire. POGO's Morning Smoke is a collection of the freshest investigations, scoops, and opinions related to the world of government oversight. Have a story you'd like to see included? Contact POGO's blog editor.

Financial Oversight

Judge Rejects SEC-Citigroup Settlement
David S. Hilzenrath, The Washington Post

How Paulson Gave Hedge Funds Advance Word
Richard Teitelbaum, Bloomberg

Government Oversight

Accident Investigators Troubled by Scant Safety  Oversight of Thousands of Government Aircraft
Associated Press

Congressional Panel Investigates Dover Air Force Base Mortuary
Craig Whitlock, The Washington Post

National Security

Air Force Mentor's Ties Illustrate Conflict of Interest
Tom Vanden Brook and Ray Locker, USA Today

Defense Spending Continuing Resolution Looms
Jen DiMascio, Aviation Week

Star Wars: Congratulations to the Air Force's 39 Newest Generals
Mark Thompson, Battleland

How Much Defense is Enough in the Asia-Pacific Region?
Walter Pincus, The Washington Post

Energy Oversight

Companies Will Face New Spill Allegations
Jennifer A. Dlouhy, The Houston Chronicle

Revolving Door

Bromwich: Revovling Door 'Is Going to Stop With Me'
Ben Geman, The Hill

Nov 28, 2011

Morning Smoke: Fed Gave $13 Billion in Secret Loans to Banks


MORNING SMOKE

Where there's smoke, there's fire. POGO's Morning Smoke is a collection of the freshest investigations, scoops, and opinions related to the world of government oversight. Have a story you'd like to see included? Contact POGO's blog editor.

Financial Oversight

Secret Fed Loans Gave Banks Undisclosed $13 Billion
Bob Ivry, Bradley Keoun and Phil Kuntz, Bloomberg

Financial Finger-Pointing Turns to Regulators
Louise Story and Gretchen Morgenson, The New York Times

Republicans Try to Starve Wall Street Watchdog
William D. Cohan, Bloomberg

SEC Said to Investigate Firm Run by 49er Legends Lott, Barton
Edward Robinson, Businessweek

Slipping Backward on Swaps
Gretchen Morgenson, The New York Times

National Security

Boeing May Exceed Aerial Tanker Cost Ceiling by $500 Million
Tony Capaccio, Bloomberg Government

Congress Fails, Defense Pays
Jen DiMascio, Aviation Week

Contract Oversight

Supreme Group Probed Over No-Bid Contracts to Feed Troops in Afghanistan
Aram Roston, The Daily Beast

Foreign Corrupt Practices Act

Critics Target Bribery Law
Joe Palazzolo, The Wall Street Journal

Open Government

Obama Wants Better Digital Archive of Federal Records
Ed O'Keefe, The Washington Post

Public Health

FDA, Adulterated Drugs and Industry Silence
Ed Silverman, Pharmalot

White House at Odds with Senate Contracting Proposals

By NEIL GORDON and PAUL CHASSY

When it comes to the use and oversight of contractors, the Senate and White House haven't been seeing eye-to-eye lately.

Sen. Dick Durbin (D-IL) would like to clamp down on the use of contractors to perform "functions that are closely associated with inherently governmental functions" and require agencies to collect data to help better determine the actual cost of contractors.

Inherently governmental functions are functions that must be performed by federal government employees, not contractors. These functions include conducting criminal investigations, commanding military forces, determining agency policies and budgets, and awarding and administering contracts. The Federal Acquisition Regulation (FAR) also recognizes a category of functions not considered inherently governmental but which “may approach” being inherently governmental in certain circumstances. Typically, these are functions that support the performance of inherently governmental functions. The government may contract out these functions, but with extreme caution to ensure this line is not crossed.

Continue reading "White House at Odds with Senate Contracting Proposals" »

Nov 27, 2011

Interview: Improving Lobbying Transparency Encourages Competition and Democracy

By DANA LIEBELSON

Publishing lobbying activity online would promote competition and a vibrant democratic process, according to a paper released last month by two researchers at the Academic Center of Law and Business, an international institute of higher education located in Israel.

In the paper, authors Moshe Cohen-Eliya and Yoav Hammer outline a proposal to expand the scope of transparency requirements in U.S. law, requiring lobbyists to publish online all written materials transmitted to politicians and to list all areas of lobbying activity. 

POGO interviewed one of the authors about improving transparency in the lobbying process, the problems with the “revolving door” phenomenon, and why they believe their proposal would serve the public interest better than the Lobbying Disclosure Act.

POGO has long advocated for increased lobbying transparency. While we don’t take a particular position on the authors’ proposal, we thought it’d be worth highlighting the issue to spark discussion, especially considering all the money pouring into politics and contracting. Find the interview below the jump.

Continue reading "Interview: Improving Lobbying Transparency Encourages Competition and Democracy" »

Nov 26, 2011

Pentagon Inspector General Gordon Heddell to Step Down on Christmas Eve

By NICK SCHWELLENBACH

HeddellPOGO got word this morning that Department of Defense Inspector General (DoD IG) Gordon Heddell announced earlier this week that he will step down as IG on December 24, Christmas Eve. Heddell's email announcing his upcoming resignation is posted below.

Heddell has had a challenging task. To say that the DoD is a bastion of questionable spending and is rife with secrecy would be understatements. But that would only begin to describe the oversight difficulties. It is essentially the only government department that is unauditable. Different whistleblower laws with different standards apply to civilians versus military personnel versus contractor personnel. The chaos of war makes fact-finding more difficult and more expensive to conduct. Plus, Heddell inherited an office that has been described by many insiders who've talked to me and others as a backbiting place. The Office of Inspector General (OIG) is a bit of a colossus too: more than 1600 people worked in the OIG as of March of this year.

But from what I've observed, Heddell's steady hand at the tiller for the last several years has healed some of the internal problems with the OIG, and has been a key reason for the improvements in the OIG's auditing and revamping of its handling of whistleblower reprisal investigations. Heddell also instituted formal internal structures to handle misconduct claims coming from inside the OIG. This doesn't mean the OIG is out of the woods yet or is nearly as effective as it could be, as investigations by Senator Charles Grassley (R-IA) have argued. Yet it does seem to be moving in the right direction. For instance, some of the recent audits on spare parts overcharges dig deep.

I hope Heddell's last months as IG are productive and I wish the best of luck to him.

Nick Schwellenbach is POGO's Director of Investigations.

Photo of Heddell from the Recovery.gov website.

Continue reading "Pentagon Inspector General Gordon Heddell to Step Down on Christmas Eve" »

Nov 24, 2011

Happy Thanksgiving: 50 Stunning Flickr Photos of America the Beautiful

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Abraham Lincoln, the U.S. president who proclaimed a national day of Thanksgiving on Nov 26, 1863. Photo from the Lincoln Memorial in Washington, D.C. by Stuck in Customs.

By JOE NEWMAN

On most days, our blog is often a stark reminder of how much still needs to be done to make government more accountable to the American people. We're usually writing about corruption and waste, conflicts of interest and the need for more effective oversight.

But as we spend time this Thanksgiving with our families and loved ones, sometimes it's just nice to take a moment to enjoy the day. Head to the jump to see more fabulous Flickr photos from all 50 states. Happy Thanksgiving from all of us at the Project On Government Oversight!

Continue reading "Happy Thanksgiving: 50 Stunning Flickr Photos of America the Beautiful" »

Nov 23, 2011

United Space Alliance and the Price of Working as a Federal Contractor

United Space Alliance

By NEIL GORDON

A federal court has ruled that United Space Alliance (USA), a Boeing-Lockheed Martin joint venture that served as prime contractor on the Space Shuttle program, must turn over employee compensation data to the government.

We blogged about USA in April when it was reported that NASA was on the hook for more than $500 million to cover the soon-to-be-downsized USA's pension fund shortfall. We also noted that USA was facing debarment from federal contracting by the Department of Labor. Specifically, the Department of Labor's Office of Federal Contract Compliance Programs (OFCCP) was threatening to terminate all of USA's existing federal contracts and debar it for refusing to turn over compensation data as part of an OFCCP review of USA’s pay practices.

OFCCP enforces laws and regulations to ensure that those who do business with the federal government do not discriminate against their employees on the basis of sex, race, color, religion, national origin, disability or status as a veteran. OFCCP gave USA until May 11 to turn over the data.

The deadline passed, and POGO heard nothing more about the case. But on November 14, the Department of Labor announced the U.S. District Court for the District of Columbia had ruled in the government’s favor.

“The Department has merely required United Space to submit data about its employee compensation,” Chief Judge Royce Lamberth wrote in the decision. “Submission to such lawful investigations is the price of working as a federal contractor.”

Continue reading "United Space Alliance and the Price of Working as a Federal Contractor" »