Feeds:
Posts
Comments

Archive for the ‘Corruption’ Category

October fundraiser enters final week; your contribution will help us write and publish book about Jindal administration

Posted in ATC, Budget, Civil Service, Commissions, Contract, Contracts, Corruption, Courts, DHH, DOA, Economy, Ethics, Governor's Office, Grant, Grants, Health Care, Higher Education, Legislature, Legislators, OGB, Office of Group Benefits, Privatization, Public Records, Retirement, Revenue, State Agencies, State Fire Marshal, State Police, Teague, Transparency on October 26, 2014| 4 Comments »

Our October fund raiser enters its final five days and we still need assistance to help us offset the cost of pursuing legal action against an administration that prefers to conduct its business behind closed doors and out of sight of the people to whom they are supposed to answer.

We also are launching an ambitious project that will involve considerable time and expense. If Gov. Bobby Jindal does seek higher office as it becomes more and more apparent that he will, the people of America need to know the real story of what he has done to our state and its people. Voters in the other 49 states need to know not Jindal’s version of his accomplishments as governor, but the truth about:

  • What has occurred with CNSI and Bruce Greenstein;
  • How Jindal squandered the Office of Group Benefits $500 million reserve fund;
  • The lies the administration told us two years ago about how state employee benefits would not be affected by privatization;
  • The lies about how Buck Consultants advised the administration to cut health care premiums when the company’s July report said just the opposite;
  • How Jindal attempted unsuccessfully to gut state employee retirement benefits;
  • How Jindal attempted to sneak a significant retirement benefit into law for the Superintendent of State Police;
  • How Jindal appointees throughout state government have abused the power entrusted to them;
  • How Jindal has attempted a giveaway plan for state hospitals that has yet to be approved by the federal Center for Medicare & Medicaid Services (CMS);
  • How regulations have been skirted so that Jindal could reward supporters with favorable purchases and contracts;
  • How Jindal fired employees and demoted legislators for the simple transgression of disagreeing with him;
  • How Jindal has refused Medicaid expansion that has cost hundreds of thousands of Louisiana’s poor the opportunity to obtain medical care;
  • How Jindal has gutted appropriations to higher education in Louisiana, forcing tuition increases detrimental to students;
  • How Jindal has attempted to systematically destroy public education in Louisiana;
  • How Jindal has refused federal grants that could have gone far in developing internet services for rural areas and high speed rail service between Baton Rouge and New Orleans;
  • How Jindal has rewarded major contributors with appointments to key boards and commissions;
  • How Jindal attempted to use the court system to persecute an agency head who refused to knuckle under to illegal demands from the governor’s office;
  • How Jindal has manipulated the state budget each year he has been in office in a desperate effort to smooth over deficit after deficit;
  • And most of all, how Jindal literally abandoned the state while still governor so that he could pursue his quixotic dream of becoming president.

To this end, LouisianaVoice Editor Tom Aswell will be spending the next several months researching and writing a book chronicling the Jindal administration. Should Jindal become a presidential contender or even if he is selected as another candidate’s vice presidential running mate, such a book could have a national impact and even affect the outcome of the 2016 presidential election.

This project is going to take time and involve considerable expense as we compile our research and prepare the book for publication in time for the 2016 election.

To accomplish this, we need your help.

If you are not seeing the “Donate” button, it may be because you are receiving our posts via email subscription. To contribute by credit card, please click on this link to go to our actual web page and look for the yellow Donate button: https://louisianavoice.com/

If you prefer not to conduct an internet transaction, you may mail a check to:

Capital News Service/LouisianaVoice

P.O. Box 922

Denham Springs, Louisiana 70727-0922

Read Full Post »

West Baton Rouge judge accepts free flight from plaintiff lawyer who wins $1.2M in his court; what was he thinking?

Posted in Corruption, Courts, Ethics, Judges, Lawsuits on October 26, 2014| 3 Comments »

Did you ever have one of those what were you thinking moments?

We’re talking about when you do something that in hindsight simply defies all logic. You’ve seen them in stupid criminal emails and on videos.

Whenever we watch the local newscast and see a report of some incredibly stupid criminal action in which the perpetrator had to have known things wouldn’t end well, we find ourselves wishing we just sit across the table from him, just us, and ask him, “What were you thinking? How did you think this turn out?”

Usually, it’s some petty thief or someone from an uneducated background whose rash judgment overrides his ability to think things through to the obvious conclusion of terrible consequences.

Someone like the hapless bank robber in one Baton Rouge-area city several years who slipped a “This is a robbery” note in the drawer at a bank drive-through window—a bullet-proof window, no less. The teller read the note, turned it over and wrote, “I don’t see a gun” and sent the note back to the nervous driver who promptly placed his gun in the drawer and sent it in to the teller. What was he thinking?

But you wouldn’t normally associate such transgressions with a high profile individual like a district judge who took an oath to uphold the law and to protect the citizenry from the lawless, a judge who no doubt pledged to “be tough on crime” when he was running for office. Nor would you think the question would apply to the state Judiciary Commission which meted out a recommendation for a 30-day suspension for the errant judge, a mere slap on the wrist for a serious breach of judicial ethics that might well have deserved a permanent suspension.

Judge Robin Free of West Baton Rouge Parish is guilty of one of the most blatant what were you thinking? flaunting of ethics and he compounded his sin when he attempted to minimize the severity of his actions by claiming he was unfamiliar with the judicial canons governing such behavior.

And it wasn’t even Free’s first offense, which should have provoked the commission’s fury at his arrogance.

Here’s what happened. Free presided over the trial of a class action lawsuit in which a): his mother was a potential plaintiff and b): he accepted a free flight to a south Texas hunting camp—on the private jet of a plaintiff attorney only days after that attorney had won a $1.2 million settlement in Free’s court in another case.

What was he thinking? Most likely that he wouldn’t get caught.

The flight to the Casa Bonita Ranch in Goliad County south of Corpus Christi was made at the suggestion of Assistant District Attorney Tony Clayton who regularly appears in matters before Free. Both men represent the 18th Judicial District, which includes West Baton Rouge Parish. Clayton supposedly was interested in purchasing the property but ultimately did not.

But here’s the rub: The ranch is owned by Texas attorney David Rumley who, it turned out, was working with Clayton on the personal injury case and judiciary commission determined the invitation came “at or near the time of settlement negotiations” in the case.

Free described the trip as “just some friends going to look at some property together and boiling crawfish and hanging out,” according to the Baton Rouge Advocate. http://theadvocate.com/news/10518947-123/judiciary-commission-recommends-30-day-suspension

Free, in an incredulous admission, said there were “a lot of things I was not aware of in the canons.”

It’s something of a stretch for someone who has probably told a defendant or two that ignorance of the law is no excuse to attempt to plead ignorance, especially for a man who has been on the bench for 17 years—since 1997—and who has had previous dust-ups with the judiciary commission.

In 1998, only a year after taking office, Free was “cautioned” by the judiciary commission after an earlier hunting lodge relationship that resulted in accusations of a biased decision. And in 2001, Free signed what is known as a deferred recommendation of discipline agreement with the commission following his failure to recuse himself from a case in which he had previously served as the prosecutor of a defendant.

Then in 2005, he again came under criticism and was given a warning by the commission to avoid appointments which might create the appearance of impropriety after he named a political ally ex parte as a temporary liquidator in a case.

In the class action case involving Free’s mother, his attorney, Steven Scheckman, called it a misunderstanding and said his client was a “fall guy” for a mapping error that had gone unnoticed in the class action for two years.

But the special counsel for the judiciary commission said an attorney for Dow Chemical, a defendant in the matter, had informed Free of the conflict in a letter to the judge. Instead of calling a status conference involving all the parties, however, Free instead improperly called the attorney’s law partner to complain—yet another breach of judicial canons.

Scheckman said Free had not known the boundaries in the class action had been changed by a prior judgment to include his mother’s address even though it was Free who signed the judgment, all of which prompted Baton Rouge Advocate columnist James Gill to observe that Scheckman’s protestations of ignorance on the part of his client were “unlikely to wash.”

http://theadvocate.com/news/acadiana/10544318-123/james-gill-free-ride-in

Called before the Judiciary Commission, Free took a strategy that has become all too familiar whenever any high profile individual, be it an elected official or professional athlete: he publically apologized for his bad judgment.

But a judge should not be making bad judgments. And these contrite admissions, coming as they always do after the sinner is caught, are becoming a little thin and time worn—and void of any real substance.

As Gill pointed out, the opinion put forth by the Judiciary Commission that Free should have known better because of his seniority on the bench is laughable. “The sleaze here is so obvious that no judicial experience whatsoever is required to recognize it,” he wrote.

But Gill did not limit the sleaze factor to Free; he also took the Supreme Court and the Judicial Commission to task, criticizing them for the practice of keeping judicial disciplinary matters secret until the ethics violations become so blatant as to demand public airing.

He said the Office of the Special Council recommended to the Judiciary Commission that Free be suspended for a full year but the commission reduced its recommendation to 30 days, a sentence Gill called “derisory.”

Saying Free might not have been re-elected unopposed in his last run for office had his ethical lapses been known to the public, Gill added that “Litigants have no way of knowing how many more Judge Freerides are out there” and that if Free really did not understand what he had done wrong, he is “too stupid to be a judge.”

We can certainly concur in that evaluation and for our part, we’re still waiting for a politician to apologize for some wrongdoing before he is caught. That would be a public official we could trust.

 

Read Full Post »

Jindal, Kristy Nichols draw ‘budget surplus’ criticism from two former commissioners who have been there, done that

Posted in Audit Reports, Auditor, Budget, Corruption, DOA, Ethics, Governor's Office, Legislature, Legislators, Politicians, Revenue on October 18, 2014| 26 Comments »

State Treasurer John Kennedy isn’t the only one who disputes the veracity—or the political motives—of administration claims of a $178.5 million budget surplus for the fiscal year that ended on June 30.

There are a couple of Kristy Nichols’ predecessors, former commissioners of administration and a former state budget officer who have been there, done that and got the T-shirts, who are genuinely perplexed and skeptical of the whimsical claims.

Bobby Jindal (R-Iowa, R-New Hampshire, R-Anywhere but Louisiana), aka Booby Jindini, through Commissioner of Administration Nichols, is claiming the implausible “discovery” of some $360 million, dating back to 2002 that pulls the state from the jaws of a $141 million deficit in favor of the surplus explained thus far only as Immaculate Discovery.

LouisianaVoice, meanwhile, has learned that the true “discovered” money is more like $500 and that it actually goes back as far as 1998, near the end of Gov. Mike “the Jindal Creator” Foster’s second term. But, says Kennedy, the money has already been spent, which would make the real deficit more like $200 million, instead of the mere $141 hole claimed by Kennedy.

But the devil, as they say, is in the details and the details have not been readily forthcoming from the administration. And members of the Joint Legislative Committee on the Budget (JLCB) sat mutely Friday morning as committee Chairman Rep. Jim Fannin (D/R-Jonesboro) proclaimed that the committee would not be discussing the matter until it received a report from the Legislative Auditor’s office, probably sometime in December.

“What?!!!!!!!” legislators should have sputtered, shouted and otherwise protested.

Sorry, guys, you should have stood as one and protested that the time to discuss this little matter is now and the place is right here. Right here, right now. We want, no, demand an explanation, an accounting of where this money suddenly came from and how it is that the administration did not know of its existence for the past seven years.

And while we’re at it, why is it that Fannin sudden decided to exercise his power to disallow a request by Rep. James Armes (D-Leesville) that a non-member of the JLCB, Rep. Kenny Havard (R-Jackson), be allowed to sit in on the committee as his proxy. Legislative observers cannot recall a time when such a request was denied. Was Fannin afraid Havard might ask some embarrassing questions about the budgetary procedure?

Or was it that Havard was not among the members who had been called in a few at a time in advance of Friday’s meeting to be reminded by the administration that capital outlay projects in their respective districts could suddenly face a lack of funding for their implementation?

Regardless, it is quite obvious from our perspective that the fix is in.

Instead, committee members sat mutely as one as Fannin, desperate to hang onto his chairmanship and reportedly considering a run at the State Senate seat currently held by Sen. Bob Kostelka (R-Monroe), allowed that rather than demanding details and explanations from the administration, there was no urgency to the issue that could not wait until December.

Retired state budget officer Stephen Winham said that in his 21 years in that office, nothing of this magnitude ever occurred.

“The hidden piles of money is a myth,” he said. “There may have been hidden pockets of money before modern accounting and information technology, but it is impossible to hide money in the state treasury today.

“This has to be the most ridiculous thing I have ever seen happen with regard to the state’s financial condition and its reputation,” he said. “How can $500 million simply have been hiding in the state treasury? Do Ms. Nichols and others have any idea how her contention totally undermines the integrity of our financial system? It makes a mockery of our accounting system and our annual Comprehensive Financial Reports for the past 16 years, if not longer, and of our state itself. People already routinely suspected the numbers they were given. Now there is no reason to believe anything.

“I cannot overstate how horrible this is.”

Raymond Laborde and Stephanie Laborde agree.

Raymond Laborde (Stephanie Laborde’s uncle) served as commissioner of administration from 1992 to 1996 under former Gov. Edwin Edwards. Before that, he served five terms in the Louisiana House, serving as Speaker Pro Tem from 1982-1984 and also served as Chairman of the House Ways and Means Committee.

He was re-elected without opposition to a sixth term in 1991 but immediately resigned to become Commissioner of Administration during Edwards’ fourth and final term as governor. In 2003, Raymond Laborde was inducted into the Louisiana Political Museum and Hall of Fame in Winnfield.

“I haven’t seen any details yet and neither, apparently has John Kennedy,” he said.

“We had surpluses each year during my tenure, but they were legitimate surpluses. If the money was there, it should have been seen. If Kennedy’s approach is correct, there is a heck of a difference between what the administration says and what he says.”

Reminded that Kennedy has said any money found from prior years has already been spent, Raymond Laborde said, “It should have been spent.”

Stephanie Laborde served as commissioner of administration during Edwards’ third term (1984-1988) when she was Stephanie Alexander.

Her observations were supportive of Winham’s and were equally critical of the administration.

“If the surplus is real, where were those dollars when the budget was being developed 15 months or so ago?” she asked, perhaps not so rhetorically.

“That is not to say when there was not extra money,” she said. “There were times when there were more taxes collected than anticipated or when the price of oil was higher than expected but for this much in surplus funds to be lying around for years? That just didn’t happen.”

She also said the sources of such revenue would have been considered one-time money and not recurring revenue. “There is a difference of philosophy, a difference of opinion with the character of funds found in the past.

“But it still comes down to where was this money during the budget writing process, where was it, in fact, for all these years?

“If it was there, it speaks to the administration’s competence, its ability—or inability—to give us an accurate budget.

“If the money was not there as is being claimed, it speaks to something else entirely,” she said.

Read Full Post »

Though last in dollar amount among incumbents, after only a year in office McAllister quickly learns to attract PAC money

Posted in Campaign Contributions, Corruption, Elections, Finances on October 17, 2014| Leave a Comment »

Of all the incumbents running in Louisiana’s Senate and five House elections, no less than $6.5 million in political action committee (PAC) money has been poured into the various campaigns.

Incumbent Sen. Mary Landrieu led the pack with $2.6 million in PAC money with Rep. Steve Scalise, 1st District, a distant second at $1.7 million), followed by Charles Boustany, 3rd District ($984,000), Landrieu challenger Congressman Bill Cassidy, 6th District ($724,550), Cedric Richmond, 2nd District ($723,000), John Fleming, 4th District ($258,000) and Vance McAllister, 5th District ($123,000).

Others with PAC contributions include

  • S. Senate candidate Rob Maness ($35,000);
  • 5th District congressional candidates Monroe Mayor Jamie Mayor ($6,000), Zach Dasher ($5,000) and Ralph Abraham and Harris Brown ($1,000 each);
  • 6th District congressional candidates Dan Claitor ($15,601), Paul Dietzel II ($15,325), Edwin Edwards ($8,700), Trey Thomas ($3,500), Cassie Felder ($2,500) and Lenar Whitney ($500).

In Congressional Districts 1, 2, 3, and 4, no candidates other than the incumbents already covered in previous stories reported any PAC contributions.

Among all incumbents, 5th District Congressman Vance McAllister, facing re-election only a year after winning a special election to succeed retired Rodney Alexander, had the fewest PAC contributions.

Still, the $123,000 he received is ample evidence of how quickly an incumbent can attract PAC money—even an incumbent with a single year under his belt.

Here are some of McAllister’s PAC contributions:

ALTRIA GROUP PAC: $1,000

  • Altria Group, Inc. (previously named Philip Morris Companies Inc.) The name change alternative offers the possibility of masking the negatives associated with the tobacco business,” thus enabling the company to improve its image and raise its profile without sacrificing tobacco profits,
  • According to the Center for Public Integrity, Altria spent around $101 million on lobbying the U.S. government between 1998 and 2004, making it the second most active organization in the nation.
  • Altria also funded The Advancement of Sound Science Coalition which lobbied against the scientific consensus on climate change.
  • Daniel Smith, representing Altria, sits on the Private Enterprise Board of the American Legislative Exchange Council (ALEC).

AT&T PAC: $2,500

  • AT&T is the second-largest donor to United States political campaigns, and the top American corporate donor, having contributed more than US$47.7 million since 1990, 56% and 44% of which went to Republican and Democratic recipients, respectively. Also, during the period of 1998 to 2010, the company expended US$130 million on lobbying in the United States. A key political issue for AT&T has been the question of which businesses win the right to profit by providing broadband internet access in the United States.
  • Bobby Jindal rejected an $80 million federal grant for the expansion of broadband internet service in rural Louisiana even as AT&T was contributing $250,000 to the Foundation run by Jindal’s wife Supriya after Gov. Jindal signed SB- 807 into law (Act 433) in 2008 over the objections of the Louisiana Municipal and the State Police Jury associations. The bill, the Consumer Choice for Television Act removed from local and parish governments their authority and responsibility to negotiate cable franchise agreements with companies that relied largely on locally-owned public infrastructure such as utility poles. The bill also allows AT&T to sell cable television service without the necessity of obtaining local franchises.
  • Bill Leahy, representing AT&T, sits on the Private Enterprise Board of the American Legislative Exchange Council (ALEC).

EVERY REPUBLICAN IS CRUCIAL PAC: $10,000

  • Every Republican is Crucial (ERIC) has contributed nearly $9.2 million to Republican candidates, including $50,000 to fellow Louisiana Rep. Steve Scalise.
  • ERIC is the PAC of defeated Virginia House member Eric Cantor whose campaign was underwritten in turn by a gaggle of Wall Street bankers, including Goldman Sachs, Blackstone Group, and Citigroup.

CMR POLITICAL ACTION COMMITTEE: $3,500

  • CMR is the political action committee launched by Congresswoman Cathy McMorris Rodgers (R-Washington) who is apparently as AWOL from her eastern Washington district as Gov. Bobby Jindal is from Louisiana. In challenging Jindal for racking up frequent flyer miles, she has visited North Carolina, Indiana, Las Vegas, Florida, Colorado, New Hampshire, Ohio, and California on behalf of Republican candidates.

EXXON MOBIL CORP. PAC: $5,000

  • ExxonMobil has drawn criticism from scientists, science organizations and the environmental lobby for funding organizations critical of the Kyoto Protocol and seeking to undermine public opinion about the scientific conclusion that global warming is caused by the burning of fossil fuels. Mother Jones Magazine said the company channeled more than $8 million to 40 different organizations that have employed disinformation campaigns including “skeptical propaganda masquerading as journalism” to influence opinion of the public and of political leaders about global warming and that the company was a member of one of the first such groups, the Global Climate Coalition, founded in 1989. ExxonMobil’s support for these organizations has drawn criticism from the Royal Society, the academy of sciences of the United Kingdom. The Union of Concerned Scientists released a report in 2007 accusing ExxonMobil of spending $16 million, between 1998 and 2005, towards 43 advocacy organizations which dispute the impact of global warming. The report argued that ExxonMobil used disinformation tactics similar to those used by the tobacco industry in its denials of the link between lung cancer and smoking, saying that the company used “many of the same organizations and personnel to cloud the scientific understanding of climate change and delay action on the issue.” These charges are consistent with a purported 1998 internal ExxonMobil strategy memo, posted by the environmental group Environmental Defense, which said:

“Victory will be achieved when

  • Average citizens [and the media] ‘understand’ (recognize) uncertainties in climate science; recognition of uncertainties becomes part of the conventional wisdom;
  • Industry senior leadership understands uncertainties in climate science, making them stronger ambassadors to those who shape climate policy;
  • In 2003, the United States Attorney for the Southern District of New York announced that J. Bryan Williams, a former senior executive of Mobil Oil Corp., had been sentenced to three years and ten months in prison on charges of evading income taxes on more than $7 million in unreported income, including a $2 million kickback he received in connection with Mobil’s oil business in Kazakhstan. Documents filed with the court said Williams’ unreported income included millions of dollars in kickbacks from governments, persons, and other entities with whom Williams conducted business while employed by Mobil. In addition to his sentence, Williams must pay a fine of $25,000 and more than $3.5 million in restitution to the IRS, in addition to penalties and interest.
  • Those promoting the Kyoto treaty on the basis of extant science appear out of touch with reality.”

HONEYWELL INTERNATIONAL PAC: $1,000

  • In December 2011, the non-partisan liberal organization Public Campaign criticized Honeywell International for spending $18.3 million on lobbying while paying no taxes during 2008–2010, instead getting $34 million in tax rebates, despite making a profit of $4.9 billion, laying off 968 workers since 2008, and increasing executive pay by 15% to $54.2 million in 2010 for its top 5 executives.
  • Honeywell has been criticized in the past for its manufacture of deadly and maiming weapons. The Honeywell Project, for example, targeted Honeywell executives in an attempt to halt the production of cluster bombs.
  • The EPA said that no corporation has been linked to a greater number of Superfund toxic waste sites than has Honeywell. Honeywell ranks 44th in a list of US corporations most responsible for air pollution, releasing more than 9.4 million pounds of toxins per year into the air. In 2001, Honeywell agreed to pay $150,000 in civil penalties and to perform $772,000 worth of reparations for environmental violations involving:
  • failure to prevent or repair leaks of hazardous organic pollutants into the air
  • failure to repair or report refrigeration equipment containing chlorofluorocarbons.
  • inadequate reporting of benzene, ammonia, nitrogen oxide, dichlorodifluoromethane, sulfuric acid, sulfur dioxide and caprolactam emissions.
  • In 2003, a federal judge in New Jersey ordered the company to perform an estimated $400 million environmental remediation of chromium waste, citing “a substantial risk of imminent damage to public health and safety and imminent and severe damage to the environment.” In the same year, Honeywell paid $3.6 million to avoid a federal trial regarding its responsibility for trichloroethylene contamination in Illinois. In 2004, the State of New York announced that it would require Honeywell to complete an estimated $448 million cleanup of more than 165,000 pounds of mercury and other toxic waste dumped into Onondaga Lake in Syracuse. In 2005, the state of New Jersey sued Honeywell, Occidental Petroleum and PPG to compel cleanup of more than 100 sites contaminated with chromium, a metal linked to lung cancer, ulcers and dermatitis. In 2008, the state of Arizona made a settlement with Honeywell to pay a $5 million fine and contribute $1 million to a local air-quality cleanup project, after allegations of breaking water-quality and hazardous-waste laws on hundreds of occasions between the years of 1974 and 2004.

PROSPERITY ACTION, INC. PAC: $5,000

  • Founded by Rep. Paul Ryan (R-Wisconsin), Prosperity Action leadership PAC has contributed $182,500 to incumbent congressional candidates and challengers seeking election in 2014. Ryan was Mitt Romney’s running mate in the 2012 presidential election.
  • Among Ryan’s most consistent—and generous—supporters were David and Charles Koch of Koch Industries, the major benefactor of the American Legislative Exchange Council (ALEC).

REYNOLDS AMERICAN PAC: $1,000

(It seems curious that a physician would accept campaign money from a tobacco company.)

  • In 1994, then CEO James Johnston testified under oath before Congress, saying that he didn’t believe that nicotine is addictive.
  • In 2002, the company was fined $15m for handing out free cigarettes at events attended by children, and was fined $20m for breaking the 1998 Master Agreement, which restricted targeting youth in its tobacco advertisements.
  • In May 2006 former R.J. Reynolds vice-president of sales Stan Smith pleaded guilty to charges of defrauding the Canadian government of $1.2 billion through a cigarette smuggling operation. Smith confessed to overseeing the 1990s operation while employed by RJR. Canadian-brand cigarettes were smuggled out of and back into Canada, or smuggled from Puerto Rico, and sold on the black market to avoid taxes. The judge referred to it as biggest fraud case in Canadian history.

COMMITTEE FOR THE PRESERVATION OF CAPITALISM: $5,000

  • Committee membership includes Bill Gates, four members of the Walton (Walmart) family, former Mississippi governor Haley Barbour, a member of his lobbying firm, George W. Bush’s former White House Chief of Staff Andrew Card and Jeffrey Immelt, CEO of General Electric which has managed to avoid paying any corporate income tax for the past half-dozen years despite record-breaking profits and extensive operations that have been outsourced to other countries which provide cheap labor.

Read Full Post »

Jindal’s latest accounting ploy bolsters disturbing perception that his administration is quickly mutating into ‘Enron East’

Posted in Book Review, Budget, Business, Contract, Contracts, Corruption, DOA, Ethics, Finances, Fraud, Governor's Office, Legislators, Legislature, Office of Group Benefits, OGB, Politicians, Privatization, Public Records, Revenue, State Agencies, Teague, Transparency on October 12, 2014| 33 Comments »

When Jeff Skilling took over as President and Chief Operating Officer of Enron in June of 1990, he did so only after insisting that the company convert from conventional accounting principles to a method preferred by his former employer, McKinsey & Co.

In 2001, hedge fund manager Richard Grubman said to Skilling, “You are the only financial institution that can’t produce a balance sheet or cash flow statement with their earnings.” By October of that same year, Enron had begun its death spiral in a historic collapse that would pull the giant accounting firm Arthur Andersen down with it.

The key to Enron’s failure was the mark-to-market accounting method, where anticipated revenues and profits are entered into the company’s books before they are ever received. The system allowed Enron to conceal losses and to inflate profits for nearly 11 years before its house of cards came crashing down.

On Thursday (Oct. 8), nearly seven years into his administration, Gov. Bobby Jindal (R-Iowa, R-New Hampshire, R-Anywhere but Louisiana) rolled out a new accounting formula with an alarmingly familiar ring to it.

Jindal, like Skilling, is a McKinsey alumnus.

Commissioner of Administration/Surrogate Gov. Kristy Kreme Nichols announced that the state, instead of having a deficit of $141 million as claimed by State Treasurer John Kennedy, will suddenly have a surplus of $178.5 million, a gaping difference of $319.5 million.

Nichols did not reveal how the $178.5 million was arrived at but Kennedy said the administration is switching to a cash balance form of accounting instead of the modified accrual basis employed by state governments. “If we use the methodology we have always used,” he said, “we don’t have a surplus. We have a $141 million deficit.

“The commissioner says the calculation has been inaccurate for years and it needs to be changed,” he said. “They have to explain why we have been doing it wrong all these years and why the Revenue Estimating Conference is doing it wrong.”

Nichols, an appointed state employee, was less than deferential to Kennedy, a statewide elected official when she sniped back at Kennedy, saying, “I’m surprised the treasurer is not reporting this.” She added that Kennedy is obligated to report available revenue. “He should probably do a review of the accounts to ensure there are no more outstanding revenues he is not reporting.”

Kennedy and Jindal have been at odds for years over fiscal policy, so it was no surprise to see Kristy Kreme, with her super-sized ego, get a little mouthy with the state treasurer. After all, she bolted from a House Appropriations Committee hearing on the Office of Group Benefits on Sept. 25 to take her daughter to a One Direction boy band concert at the New Orleans Smoothie King Arena where she watched from the comfort of Jindal’s executive suite.

Just as Enron misrepresented its finances for years, it now appears that the Jindal administration may be attempting the same tactic, prompting one political observer to say, “If cooking the books isn’t malfeasance, what is? The bond rating agencies and others rely on the CAFR (Comprehensive Annual Financial Report), where the year-end position is officially reported in decision making and they are not going to like this.”

Another Jindal critic asked rhetorically, “What happens when a state ends a fiscal year with a deficit of $141 million but the administration of the day pretends that there is actually a surplus of $178 million? I don’t think there is any precedent for such a thing ever happening anywhere. This is starting to sound like Enron!”

Odd as it may seem to make that comparison, the similarities between Jindal and Enron run much deeper than the latest developments surrounding the new accounting methods. Here are some points about Enron lifted from The Smartest Guys in the Room: the Amazing Rise and Scandalous Fall of Enron (Penguin Books, 2003), a probing book by Bethany McLean and Peter Elkind about the failed energy company: http://www.goodreads.com/book/show/113576.The_Smartest_Guys_in_the_Room

  • The Deutsche Bank once described Enron as “the industry standard for excellence.” Jindal boasted of instituting the “gold standard for ethics” in Louisiana.
  • When the chief accounting officer of Enron Wholesale expressed concern about wholesale electricity sales, she was reassigned. When another employee questioned Skilling on his claim that Enron was going to make $500 million, she was laid off that same day. When state employees or legislators complain or do not vote with the administration, they are teagued.
  • Pollster Frank Luntz said instability and chaos were defining features at Enron and the six company reorganizations in just 18 months were a “running joke” and that Enron’s lack of discipline was “destructive and demoralizing.” Jindal’s penchant for reorganization and reform has created a similar atmosphere within state government.
  • Enron sold assets and booked the one-time proceeds as recurring earnings. Nearly 40 percent of Enron’s 1998 and 1999 earnings came from sales of assets rather than from ongoing operations. Jindal over the past several years has sold state property, buildings, and entire agencies and turned state hospitals over to private entities.
  • Both Skilling and Jindal are alumni of the blue-chip consulting firm, McKinsey & Co., which wrote the Enron business plan and as far back as 1986, advised AT&T there was no future in the market for cell phones. McKinsey also was an advocate of mark-to-market accounting practices.
  • Both Skilling and Jindal thought—and think—like a consultant. Skilling felt that a business should be able to declare profits at the moment of the signing of an agreement that would earn those profits. But just because traders were reporting earnings under mark-to-market accounting, it did not necessarily follow that the money was in hand. See this link: http://theadvocate.com/news/10494146-123/jindal-budget-surplus-questioned
  • A Wall Street banker said of Skilling: “He’s either compulsively lying or he’s refusing to recognize the truth.” Another banker worried that Enron executives were not carrying out their fiduciary duties and questioned “sweetheart deals” negotiated by them.
  • Skilling believed that social policies designed to temper the markets were “wrongheaded” and counterproductive. “Wrongheaded” has been a favorite term invoked by Jindal whenever he has suffered setbacks at the hands of the courts on issues ranging from education reform to a revamp of state retirement plans.
  • When asked a question he didn’t like, Skilling, in a tactic learned from his days at McKinsey, responded by dumping “a ton of data on you.” Jindal’s one outstanding skill is to spew statistics and factoids in rapid-fire fashion that can overwhelm and confuse challengers.
  • Skilling, like Jindal, was considered brilliant and extremely articulate. He, like Jindal, always seemed to have the right answer and whenever he was asked about problems it was always someone else’s fault.
  • Skilling displayed no remorse for his own actions, nor did he have any sense that he hired the wrong people or emphasized the wrong values. (See above.)
  • Enron founder Ken Lay saw himself as a business visionary, much as Jindal portrays himself as a policy guru. Lay traveled the world to offer his wisdom on everything from energy deregulation to corporate ethics to the future of business. (Ditto)
  • At the end, Enron employees’ accounts were frozen even as top executives were walking away with fortunes.
  • Efforts by Enron and Arthur Andersen to avoid reporting $500 million in losses “only pushed the problem further off and added another tangle to the fragile web of accounting deceptions.” Do we really need to elaborate here?
  • Enron executives accepted the argument that wealth and power demanded no sense of broader responsibility which in turn led them to embrace the notion that ethical behavior requires nothing more than avoiding the explicitly illegal, that refusing to see the bad things happening in front of you makes you innocent and that telling the truth is the same thing as making sure no one can prove you lied.
  • Enron’s mission was nothing more than a cover story for massive fraud, much as Jindal’s administration is being exposed almost daily as a sham. The story of Enron, like that of Jindal, was a story of human weakness, of hubris and greed and rampant self-delusion, of ambition run amok, of a business model that didn’t work and of smart people who believed their next gamble would cover their last disaster—and most of all, of people who couldn’t—or wouldn’t—admit they were wrong.
  • Enron once aspired to be “the world’s greatest company” but rather became a symbol for all that was wrong with corporate America, exposing Lay’s flaws as a businessman that could no longer be hidden behind Enron’s impressive but misleading façade and Skilling’s glib rhetoric.
  • Despite Enron’s efforts to camouflage the truth, there was more than enough in the public record to raise the hackles of any self-respecting analyst (read: reporter). Analysts (read: reporters) are supposed to dive into a company’s financial records, examine footnotes and even elbow their way past accounting obfuscations. Their job, in short, is to analyze (re: report).

In the end, of course, Enron crumpled under the weight of its own corruption and mismanagement, destroying thousands of lives and even taking down one of the big five accounting firms in the process.

The Jindal administration with each passing day, with every revelation of some new scandal (the Edmonson Amendment, CNSI, the Murphy Painter fiasco, et al) and with each new flawed policy (the Office of Group Benefits debacle), is looking more and more like a train wreck that will adversely affect Louisiana citizens for years to come.

Just call it Enron East.

Read Full Post »

« Newer Posts - Older Posts »