"It's What the SEC Does"

That was my conclusion in a recent blog posting on the New York Times' DealBook blog. I was responding to a posting called "Questions for Harry Markopolos." Markopolos, of course, was the whistleblower who tried for many years to get the SEC to investigate the $50 billion Barnard Madoff Scandal -- all to no avail.

Mr. Markopolos (of whom I think highly) pointed out that the SEC investigators are mostly lawyers, and suggested that their lack of proficiency at math was a fundamental cause for the Commission's investigative failures.

With all due respect, that's a bunch of baloney. My response (full posting here):

The SEC’s failure to investigate financial fraud is much more fundamental than just a problem of their investigators’ proficiency at math. The fact of the matter is that the SEC itself is intimidated by high-profile investigative targets like Mr. Madoff, so it deliberately avoids going after such targets. That was never made more clear than by the sad case of SEC investigator Gary Aguirre, who was fired by his management for pursuing a case involving John Mack, who recently resigned as CEO of Morgan Stanley (but remains as Chairman of the Board). Mack had likely provided inside information to the CEO of the hedge fund Pequot Capital, which in turn made millions from their timely investment. Aguirre wanted to interview Mack under oath, but his managers would have none of it. Aguirre’s story was on the front page of the NY Times back on June 23, 2006. A Senate investigative panel and the SEC’s IG ultimately vindicated Aguirre (but much too late, of course).

My own experience in trying to get the SEC to investigate malfeasance by a recent Cabinet Secretary parallels that of Mr. Markopolos. (This Cabinet member received up to $1 million in extra stock options from a major technology company under the SEC’s radar, and for years afterward pushed federal policies and programs designed to benefit the company. Both he and the company almost certainly violated federal securities and ethics laws.) Even after sending a dozen tips to the SEC’s Enforcement tip line during Chairman Cox’ regime, no one every followed up. After Ms. Schapiro assumed the top SEC post I wrote to her and her top enforcement counsel (Stephen Cohen), and after reviewing the evidence I provided both said that they would look into this matter. Many months later and nothing. Apparently they’ve swept this matter under the rug, too. It’s what the SEC does.

Just so there's no confusion, the "recent Cabinet Secretary" I referred to was Norman Mineta, and my forthcoming book The 'Smart Road' Scam goes into great detail about Mr. Mineta's ethical and legal transgressions.

ITS corrupted: intelligent racketeering slowly unravels over traveler data monopoly

That's the title of the piece that my old friend Peter Samuel and I wrote for Peter's newsletter, tollroadsnews.com. (Read it here.)

We were motivated to write it after the U.S. Dept. of Transportation's Office of Inspector General (OIG) finally issued their final report about what I call (in my forthcoming book) the 'Smart Road' Scam.

The OIG took the easy way out, coming down hard on the Federal Highway Administration's Office of Operations (my old bosses) about the FHWA's flawed oversight. (Read our piece for more details. As you'll see, we pull no punches.)

There's no other way to say it, the OIG's findings were simply a cop out. As we concluded in our piece:

The FHWA was an easy target, but was just doing what it was told to do by corrupt legislators. The OIG at USDOT clearly decided the legislative shenanigans - the real story behind the Traffic.com racket - were too hot to touch.

As I detail in my new book, the corrupt legislators include Pennsylvania Senator Arlen Specter, Alaska Congressman Don Young, and former Pennsylvania Congressman (and Young's predecessor as Chairman of the House Transportation Committee) Bud Shuster. Corrupt Executive Branch officials include former Transportation Secretary Norman Mineta and former DOT and DHS Deputy Secretary Michael P. Jackson.

Transportation Secretary Mineta's (Almost) Invisible Fingerprints

Today there's an article in the New York Times, entitled "U.S. Withheld Data on Risks of Distracted Driving," that's a real eye-opener. In a nutshell, back in 2003 the National Highway Traffic Safety Administration (NHTSA) was pressured from the top levels of the U.S. Department of Transportation to not make public hundreds of pages of research and warnings about the hazardous use of cellphones by drivers. Quoting from that piece, by investigative reporter Matt Richtel:

The former head of the highway safety agency said he was urged to withhold the research to avoid antagonizing members of Congress who had warned the agency to stick to its mission of gathering safety data but not to lobby states.

Critics say that rationale and the failure of the Transportation Department, which oversees the highway agency, to more vigorously pursue distracted driving has cost lives and allowed to blossom a culture of behind-the-wheel multitasking.

At one point, NHTSA had even drafted a letter for Transportation Secretary Norman Y. Mineta to send to the states, warning them that their hands-free laws might not solve the problem. Again, quoting from the Times piece:

Dr. Jeffrey Runge, then the head of the highway safety agency, said he grudgingly decided not to publish the Mineta letter and policy recommendation because of larger political considerations.

The fate of the research was discussed during a high-level meeting at the transportation secretary’s office. The meeting included Dr. Runge, several staff members with the highway safety agency and John Flaherty, Mr. Mineta’s chief of staff.

It turns out that not only did Secretary Mineta not (supposedly) know about that meeting, but he (supposedly) didn't even know that the cellphone safety research even existed. Again, quoting from the Times piece:

Mr. Mineta, who left as transportation secretary in 2006, said he was unaware of the meeting.

“I don’t think it ever got to my desk,” he said of the research.

Mr. Mineta's professed lack of awareness of this issue is almost impossible to believe -- particularly since this topic was discussed in his own office by his own Chief of Staff. He clearly wanted to leave the impression that was completely out of the loop on this important issue. However, his own quote in an Associated Press story in February 17, 2003 seems to strongly contradict that intended impression. "I'm a delegator, but I want to know what the details are," Mr. Mineta was quoted of saying in that piece.

Then too, who would be more sensitive to the "political considerations" of upsetting Congress and/or the cellular industry than the long-time politician and former Congressman and Chairman of the House Transportation & Infrastructure Committee?

Mr. Mineta is extremely adept at orchestrating things behind the scenes without ever leaving his fingerprints. Excerpting from the section entitled "Candidates for the Hidden Payoff" from Chapter 23 of my forthcoming book The 'Smart Road' Scam:

Former Transportation Secretary Norman Mineta was the consummate "inside man" who quietly put the underpinning for Traffic.com's monopoly in place. Despite the fact that the Federal Highway Administration [another administration, like NHTSA, under the USDOT's umbrella] wanted to openly compete the ITIP program's expansion from a two-city pilot to a national program, Mineta seized the opportunity to continue the sole-source arrangement for Traffic.com...

Mineta would continue to support Traffic.com's monopoly behind the scenes. He directed the reassignment of Dr. Christine Johnson, the FHWA manager whose department managed the ITIP program and who saw through this scam early-on, to a field position in which she could no longer threaten Traffic.com's monopoly. After the passage of SAFETEA-LU in August, 2005, the Mineta-led USDOT simply ignored the new "Part II" provisions Senator Hatch had put into the bill to break up Traffic.com's ongoing monopoly.

Mr. Mineta's own failure to disclose the details of his capital gains income from Trimble Navigation stock options of up to $1 million -- as is required by federal law -- suggests that he unethically received money "under the radar" for another company.

The truth about former Secretary Mineta's behind-the-scenes manipulation and orchestration of federal policies to benefit private-sector interests over the public's interest, and his clear breach of federal ethics/false claims laws is bound to come out eventually.

As William Shakespeare said way back in 1600 in the Merchant of Venice: "Truth will out."

Jerry

Finished!

The first draft of The 'Smart Road' Scam: A Whistleblower's Odyssey in Exposing Big-Time Government Corruption, that is. The draft comprises 27 chapters, almost 120,000 words, and over 400 references to correspondence, financial disclosures, white papers, etc.

Unfortunately, the final chapter, "Sustaining the Culture of Corruption," suggests that the same games that have gone on for years will continue into the new Administration.

I wish that the book ended on a more positive note, but the factors that allowed this scam to flourish (greed and unethical behavior by high-level "public servants," practitioners' apathy, and the "you scratch my back and I'll scratch yours" modus operandi in Congress) continue unabated.

Hopefully I'm wrong, and things will get better. I believe that exposing the details of The 'Smart Road' Scam will help.

I've already shared this new expose with a number of friends and colleagues. If you'd like to read it, shoot me a note (jerrycw at attglobal.net).

Jerry

Couldn't Leave Well Enough Alone

Sometimes when I know something is wrong deep down in my gut, I can't just let it go without a response. So was the case with former Commerce/Transportation Secretary and current Hill & Knowlton Vice Chairman Norman Mineta's recent posting on Hill & Knowlton's Ampersand blog, entitled "The Changing Face(s) of K Street."

K Street, of course, is home to many of the most powerful lobbyists in Washington, DC. Mr. Mineta himself is a high-paid consultant/lobbyist as Vice Chairman of the big international PR firm Hill & Knowlton, and his own company's office in DC is just a short five block detour off K street.

Mr. Mineta's Ampersand posting talks all about how, to quote him directly, "this change [to the Obama Administration] is going to extend to the way that we, as consultants and lobbyists, conduct business on behalf of our clients."

I found his remarks both condescending and arrogant, especially in light of his own serious ethical lapse that I discovered by accident in digging into his and others' involvement in the whole Traffic.com debacle. He was, in effect, lecturing his audience about the impact of the Obama Administration's attempt to institute more ethics and honesty in the federal government.

(To be sure, the jury is still out as to whether these new ethics rules will "take" or not. While President Obama announced some very significant ethics reforms, he immediately circumvented these rules with the proposed appointment of the new Deputy Secretary of Defense, a recent Raytheon lobbyist -- see this recent alert from POGO. Not a very good precedent.)

I noticed that the Ampersand blog invited comments to its postings, so added a short one of my own to Mr. Mineta's piece: "Interesting commentary. One hopes that the changing terrain that Mr. Mineta talks about includes a new and more ethical government than we've seen in recent years." I included a link to my invited guest editorial last June in HawaiiReporter.com in which I laid out the facts of Mr. Mineta's ethics problem.

Much more publicly available evidence is laid out in four chapters of my new book, The 'Smart Road' Scam, including details of how the U.S. Office of Government Ethics apparently tried to lose Mr. Mineta's key CY2000 disclosure in which he was required by law to disclose his stock options income of up to $1 million (but didn't). It's very likely that Mr. Mineta violated the same federal disclosure laws for which Alaska Sen. Ted Stevens was recently convicted, except that more money may well be involved in Mr. Mineta's case.

Here's a PDF of Mr. Mineta's Ampersand piece showing my comments. I'm not holding my breath to see if they approve it.

Jerry

My Complaint to the DHS Inspector General

To: DHSOIGHOTLINE@dhs.gov
Subject: Fraud/Corruption Involving Former Deputy Secretary Michael P. Jackson

To the DHS OIG Hotline,

I would like to make you aware of fraud and corruption within the Department of Homeland Security involving former DHS Deputy Secretary Michael P. Jackson. Mr. Jackson was long involved behind the scenes, both at the U.S. Dept. of Transportation and most recently at DHS, in securing a federal monopoly and business for a company called Traffic.com, which is part of NAVTEQ (which was recently acquired by Nokia). Mr. Jackson almost certainly had a substantial hidden financial interest in Traffic.com's success, which accounted for his efforts to push policies and business to benefit the company.

A very probing Freedom of Information Act request from the non-profit Project on Government Oversight (POGO) to DHS last fall very possibly led to Mr. Jackson's unexpected resignation as DHS Deputy Secretary. By resigning and removing key records, the materials POGO requested detailing his connections to Traffic.com would be unavailable by the time that DHS staff got around to filling that FOIA request. It's also very possible that Jack Tomarchio, a senior DHS manager who had a direct impact over DHS' potential business with Traffic.com, also resigned because of this FOIA request. An in-depth search of the department's email records by the Inspector General's office might well reveal Messrs. Jackson's and Tomarchio's relationships with Traffic.com.

Mr. Jackson was directly involved in creating this federal monopoly and promoting business for Traffic.com in his earlier role as Deputy Secretary for the U.S. Dept. of Transportation, as well. For background on this scam, I encourage you to review this white paper:

The U.S. TTID Program: When Politics, Competition, and the Public Interest Collide

A shorter version of this white paper without footnotes/references (called "The 'Smart Road' Scam) was just published in the current issue of Regulation magazine, and is attached.

The more I dug into the details of this scam from my former insider's perspective, the deeper I have found it goes. Because this is not the way that our federal government should function, I decided to write an expose about all of the fraud and corruption I discovered. I have now nearly completed a draft of that expose, entitled: "The 'Smart Road' Scam: A Whistleblower's Odyssey in Investigating and Exposing Big-Time Corruption in Our Federal Government." Chapter 19 (attached), "The Homeland Security Connection," very specifically details Messrs. Messrs. Jackson's and Tomarchio's connections to Traffic.com. It also links (through footnotes) to numerous related pieces of supporting material, including POGO's FOIA correspondence with DHS that I believe ultimately led to both individuals' departures.

Mr. Jackson was almost certainly "on the take" for Traffic.com for years, as Deputy Secretary for both the USDOT and USDHS. I'm sure you agree that this is not appropriate behavior for trusted "public servants." I would be glad to share additional evidence I have collected (much of it detailed in related chapters from my new book) with the DHS Inspector General's Office, if you would be willing to investigate this matter further.

The integrity and honesty of the federal government rests in your hands.

Thank you.

Jerry


Jerry Werner
(formerly Editorial Director of the National Transportation Operations Coalition, www.ntoctalks.com)

The 'Smart Road' Scam

That's the title of the new article that just came out today in Regulation magazine, which is published by the Cato Institute. I co-wrote it with my old friend Peter Samuel, the long-time publisher of TollRoadsnews.com. I've known Peter at least a dozen years.

Even though our article in Regulation is brand new, Peter has already received some interesting feedback from his own contacts. One well-known transportation consultant sent him a note that said: "Very interesting piece Peter. I hope it will get picked up more broadly. But don't expect a Xmas card from the ops office."

There's actually an interesting "back story" related to the publication of this article, which I'm writing right now in Chapter 21 of "Outing Traffic.com." That story involves Traffic.com's successful efforts to threaten another magazine that had already accepted our article for publication with legal action should they publish it. The working title of Chapter 21 is "Intimidating the Trade Press."

I imagine that Traffic.com will be quite surprised when they find out that the article has been published in a different magazine that is particularly well read among DC policymakers. (My guess is that they especially won't like Regulation's cute custom graphic very much.)

Yesterday morning I finished the draft of Chapter 20, "Pay-to-Play," which details Traffic.com's connection (lobbyists, political donations) to key legislators, particularly to Cong. Don "Bridge to Nowhere" Young. This chapter explains how Cong. Young helped sustain the company's monopoly over the years when their original lead benefactor, Cong. Bud Shuster, "retired" after being the subject of an expose on 60 Minutes and a rebuke from the House Ethics Committee. It details the interesting proximity in time between Traffic.com's and its lobbyists' contributions to Young's reelection campaign and PAC, and his actions on the company's behalf. (Hence the "Pay-to-Play" title.)

Jerry

Latest Piece of the Puzzle

Just this morning, in researching information for Chapter 10 of "Outing Traffic.com," I came across yet another piece of key information related to former Commerce/Transportation Secretary Mineta's likely violation of the federal Ethics in Government Act. Here's an excerpt:

The good news was that both of Mr. Mineta's confirmation hearings had been conducted by the same Senate Commerce, Science, and Transportation Committee. So January 16, 2007 - just after returning to Austin -- I called that committee and asked Margaret Spring, the Committee's Assistant Staff Director, about the availability of much more detailed financial disclosures than the ones Mr. Mineta had filed with the OGE. Ms. Spring said that she was new on the job, but would check into it and get back to me. A couple days later she called to let me know that the OGE's "new entrant" reports were, in fact, the financial disclosures used in the confirmation process. Mason Alinger, one of our government's leading experts on the financial disclosure process, had apparently been mistaken.

The Library of Congress' excellent Thomas online archive lists both Mr. Mineta's July 17, 2000 Secretary of Commerce confirmation hearing (Nom. No. PN1140-106), as well as his January 24, 2001 Secretary of Transportation confirmation hearing (Nom. No. PN104-107). However, only the latter listing links to a hearing transcript. That transcript reads almost like a group testimonial to Mr. Mineta's past achievements (which are many), rather than an objective and rigorous questioning of the individual who would soon be CEO of a federal department with over 60,000 employees and an annual budget in the tens of billions of dollars.

Amazingly, even though Mr. Mineta served on the Board of Directors for NYSE listed Trimble Navigation just 6 months earlier and reported a capital gains income of up to $1 million from Trimble Stock options on the financial disclosure he filed with the OGE the day prior to the hearing, the word "Trimble" doesn't show up anywhere in this 116 page document. In section A, entitled "Biographical and Financial Information Requested of Department/Agency Nominees," Mr. Mineta lists well over a dozen business relationships, but there's nary a mention of Trimble. While Mr. Mineta could certainly claim that on January 24, 2001 he did not have an "official" business relationship with the company, many of the relationships he did provide (e.g., Santa Clara County Council) clearly appeared to be in his past. Perhaps he could argue that there "is no business relationship with Trimble Navigation," taking a cue what his former boss President Clinton had once said, "that depends on what 'is is'". However, it's clear that Mr. Mineta should have listed his recent business relationship with Trimble and let the Senate nomination panel decide whether or not it was relevant.

Mr. Mineta's response to item 3. in Section C ("Potential Conflicts of Interest") is even more telling:

3. Describe any business relationship, dealing, or financial transactions which you have had during the last 10 years, whether for yourself, on behalf of a client, or acting as an agent, that in any way constitute or result in a possible conflict of interest in the position to which you have been nominated.

His response:

During the past 10 years, I have had no clients and only three employers. I do not anticipate any conflict of interest being created by any of my past activities. I will disqualify myself from participating in matters concerning Lockheed Martin or organizations with which I have served, as provided in ethics regulations.

Charitably speaking, that answer was either "disingenuous" or a "misrepresentation." Less charitably, it was an out-and-out deliberate failure to disclose vital information. He had failed to mention that he had recently served on the Board of Directors of a company that just 6 months earlier had awarded him a sufficient number of stock options that he had claimed a "capital gains income" on his OGE financial disclosure of up to one million dollars.

Not only did he fail to disclose that "potential conflict of interest," but location technology and GPS - Trimble Navigation's bread-and-butter business - was clearly impacted by federal policies and initiatives pursued by both the Commerce and Transportation Departments. (See the white paper, Mr. Mineta's Support for GPS and Location Technology as Secretary of Commerce/Transportation.) Just six months earlier the company had very likely given him substantial extra stock options beyond its published policy for compensating directors. The "potential conflict of interest" was both huge and obvious. Yet Mr. Mineta failed to disclose any of those details to the Senate Commerce, Science, and Transportation Committee, likely hoping that no one would notice, and no one did. Such details were not appropriate for a political "love-in."