Lawyers - The Catbird SeatThe Catbird Seat

BUZZARDS ON THE BAR

Scary Attorney Stories

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From Spoon River Anthology –

John M. Church

– – –

I was attorney for the “Q”
And the Indemnity Company which insured
The owners of the mine.
I pulled the wires with judge and jury,
And the upper courts, to beat the claims
Of the crippled, the widow and orphan,
And made a fortune thereat.
The bar association sang my praises
In a high-flown resolution.
And the floral tributes were many –
But the rats devoured my heart
And a snake made a nest in my skull.

– Edgar Lee Masters, 1915

August 27, 2002

SECRET SETTLEMENTS
AND PUBLIC SAFETY

By Ken Paulson, Gannett News Service

The writer is executive director of the First Amendment Center with offices in Arlington, Va. and Nashville, Tenn.

I must have missed a course in law school.

At the University of Illinois College of Law, I studied contracts, constitutional law and property transactions. But I must have overlooked “Secret Settlements 101.”

Some law schools must be teaching it. Lawyers nationwide have grown accustomed to settling lawsuits with the understanding that there’ll be no public disclosure of the outcome.

It’s easy to understand the appeal of secret settlements to defendants and plaintiffs, particularly in personal injury cases. A bicycle manufacturer who constructs faulty bikes doesn’t want the world to know about his defective products. He also doesn’t want negative publicity that could affect sales of his other bikes. Plaintiffs can get a larger settlement by promising not to disclose the large sum they’ve been paid. A judge – eager to clear the docket – blesses the agreement. In this scenario, the plaintiff is compensated, the defendant is spared embarrassment or scorn and the public is left in the dark.

There’s a long and ugly history of secret settlements in which disclosure would have alerted the public to serious, ongoing dangers:

>> Eleven former employees of the John-Manville Co. filed suit in 1933 claiming that their work had caused asbestosis. The company agreed to pay off the claims, but the secret settlement would not be disclosed for more than 40 years, according to the Coalition for Consumer Rights.

“One can only guess what would have happened if the original 1933 settlement had been made public,” the coalition noted in a report.

“If the hazards of asbestos had been known during the Great Depression, a generation of workers could have been spared horrible respiratory diseases.”

>> Also kept from the public for years were settlements in lawsuits that alleged that Ford pickup trucks were defective, slipping from park to reverse.

The defect allegedly caused more than 200 deaths and 4,600 injuries.

>> Over 10 years, about 100 lawsuits were filed alleging that Firestone manufactured unsafe tires for the Ford Exployer. The National Highway Traffic Safety Administration says 148 deaths and more than 500 injuries may have been caused by these tire tread separations.

Secret settlements hid the potentially lethal problem from the public for years.

>> Amid the recent wave of sexual abuse allegations against priests, it also has been revealed this year that the Catholic Church insisted on secret settlements is cases stretching back to 1985. . . .

These abuses have not gone unnoticed. Some have taken significant steps toward reform, most recently in South Carolina where all 10 federal judges voted for a total ban on sealed, court-approved settlements. Echoing the federal judges’ concerns, South Carolina Supreme Court Chief Justice Jean Toal is now asking state judges to take a close look at secret settlements.

The Association of Trial Lawyers of America aggressively has promoted legislation that would limit secret settlements. Opponents of these bills argue for the need to protect trade secrets and patient privacy, but judges have the tools to address these issues without sealing the entire record. Arkansas, Florida, Louisiana, Washington and Virginia are among states that currently limit secret settlements when there are public safety considerations.

This kind of reform is long overdue. It’s unconscionable to take a lawsuit – filed in public courts, processed by public employees and heard by judges on the public payroll – and seal it for the convenience of the litigants.

Public safety is never a private matter.

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August 27, 2002

Ford Wins Dismissal of
Harassment Suit

By Danny Hakim, The New York Times

DETROIT – A sexual-harassment lawsuit against Ford Motor Co. was dismissed because the plaintiff and her attorneys had discussed with reporters evidence that the Michigan court deemed inadmissible. Much of the information was a matter of public record.

The suit was dismissed last week by Circuit Court Judge William J. Glovan, who ruled the plaintiff, Justine Maldonado, and her attorney had disseminated information about a defendant’s previous conviction in an attempt to prejudice potential jurors, and in violation of a Michigan law.

“The behavior in question has been intentional, premeditated and intransigent.” the judge wrote in his dismissal. “It was designed to reach the farthest boundaries of the public consciousness.”

Some legal experts said the finding was highly unusual, particularly in its implications for the right of a plaintiff in a harassment case to speak freely. Courts typically use the screening process during jury selection to resolve concerns about what jurors know.

“I don’t know why it should be that the woman who was the alleged victim of the sex harassment can’t continue to talk about in,” said Herschel Fink, a lawyer who specializes in First Amendment issues. “I believe as a matter of First Amendment law, she has a right to talk about it.”

Miranda Massie, Maldonado’s lawyer, said: “Women have the right to talk about abuse. That’s what this comes down to.”

The harassment case was filed two years ago by Maldonado, an inspector at the Wixom, Mich., assembly plant, against Ford and a supervisor, Daniel P. Bennett. Maldonado is one of four women who have sued Ford related to accusations against Bennett. Three of the suits have been dismissed, though Maldonado said she plans to appeal and another plaintiff already has.

Maldonado contended in her suit that Bennett exposed himself to her many time, demanded oral sex and followed her home.

Ford executives said their investigation of the case concluded that Maldonado’s accusations, and those of the three other women, were without merit.

Part of the company’s legal strategy has been to seek a dismissal of Maldonado’s case on the grounds that she and her lawyer prejudiced potential jurors by talking about Dennett’s conviction in 1995 on charges of exposing himself to three young women. The conviction was expunged from his record last year, as is permissible under Michigan law for meeting various good behavior requirements….

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NOW, FOR YOU YOUNG BIRD-WATCHERS WHO STILL THINK THAT ENRON, GLOBAL CROSSING, WORLDCOM, IMCLONE, AND OTHER CORPORATIONS THAT ARE CURRENTLY FEELING THE HEAT OF CORPORATE HELL, ARE A NEW PHENOMENA . . .

From www.jailhurwitz.com/textfiles/talltalefromtexas.txt

The Beebe Network –

The Cast Of Characters and The History

Ben Barnes, former Texas Lt. Governor; business associate of Herman K Beebe, Walter Mischer and John Connally.

Herman K. Beebe Sr., Louisiana financier with offices in Dallas, convicted felon and Mafia associate; many connections to the intelligence community; godfather of the dirty Texas S&L’s; did nine months in Club Fed.

Charles Hurwitz introduced Beebe to B G Wylie, half-brother of Carroll Kelly; funded start-up of Contra-related Palmer NB.

Tom Benson, a partner of Stanley Rosenberg in Groos Bank (influenced by H K Beebe) and Bank of Leon Springs; a Beebe associate; partner with Peyton McKnight and Charles Hurwitz(?) in Culebra/1676, a Rosenberg boondoggle.

John Connally, former Texas governor; Connally’s law firm, Vinson-Elkins had Walter Mischer as a client; Charles Keating worked on his 1980 Republican presidential race; he and his partner Ben Barnes, borrowed tens of millions of dollars from dirty S&L’s; served on Hurwitz’s Maxxam Inc’s board of directors from 1988 until his death in 1993. Participated in several CIA related covert actions.

Thomas Gaubert, big Democratic fundraiser from Dallas; former head of Independent American Savings, which purchased 20 branch offices from Hurwitz’ USAT; owned a piece of Sandia Federal Savings in Albuquerque; head of Telecom; A right-wing flag waver.

Joseph Grosz, Chicago mob associate; worked for Gouletas family; ran Southmark’s San Jacinto Savings; director of Gaubert’s Telecom.

Stefan Halper, co-founder with fellow George Bush supporter Harvey McLean of Palmer National Bank, which was financed by H K Beebe and funneled private donations to the Contras; former son-in-law of past CIA deputy director Ray Cline; helped set up legal defense fund for Oliver North.

Peter Munk also an investor in Palmer NB.

J B Haralson, former head of Mercury Savings and Ben Milan Savings, where he was fronting for his old associate George Aubin; old Surety Savings hand, which Hurwitz attempted buy in 1977; managing officer of two other Texas S&L’s which that failed; partner of B G Wylie et al in the purchase of Brazaport S&L from Lloyd Bentsen.

Charles Hurwitz, controlled now defunct USAT, majority stockholder of Maxxam Inc; longtime friend of most Houston elite including John Connally; a Milken Insider; often accused of fraud and other security related schemes; knew H K Beebe.

Charles Keating, S&L looter; spawned by Carl Lindner; worked on John Connally’s 1980 presidential campaign as Westcoast fundraiser; controlled Lincoln Savings and Loan (the first big deal Lincoln did was with Connally); Lincoln involved in a daisy chain with Larry Mizel’s MDC Holdings, Silverado and San Jacinto; his chief pilot in 1979 was CIA operative Ken Qualls.

Carroll Kelly, who epitomized his Kappa Sigma fraternity; owner of Continental Savings and associate of H K Beebe (I’m Beebe’s man in Texas,” he bragged to S&L regulators.)

Ed McBirney, “Fast Eddie” from Dallas; former head of Sunbelt Savings; associate of H K Beebe, Jarrett Woods and George Aubin; attempted to buy branch offices from Hurwitz’ USAT; funded Hurwitz associates including Rosenberg.

Peyton McKnight, powerful Louisianan, an associate of Beebe and a partner with Charles Hurwitz, Stanley Rosenberg and Tom Benson in a Rosenberg deal.

Harvey McLean, Shreveport, Louisiana businessman and close associate of H K Beebe; owned Paris (Texas) Savings and Loan; co-founded Palmer National Bank with Stephan Halper and Beebe’s money.

Peter Munk, a Canadian businessman, investor in Palmer NB; an associate of H K Beebe; business partner with Adnan Khashoggi; an associate of John H Roberts Jr and John P Holmes Jr in Goldome FSB.

Clint Murchison Sr. and Jr., Dallas oilmen and wheeler dealers; Sr was involved in business in Haiti with a CIA operative; Jr purchased Mischer’s interest in sawmills in Honduras; Jr was involved with a CIA operative in Libya and did business with H K Beebe and Adnan Khashoggi.

David Saks, business associate of Stanley Rosenberg; partner of Doyle Spruil, both convicted felons; borrowed from Beebe controlled S&L’s.

Doyle Spruil, business partner of David Saks and Stanley Rosenberg; a convicted felon; borrowed from Beebe controlled S&L’s Beebe connections to Barnes-Connally, to Hurwitz, to S&L’s, to Mafia CONNALLY-KEATING-LINDNER- BARNES-BEEBE. (Source: References are in “Inside Job”)

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Beebe connections to Barnes-Connally,
to Hurwitz, to S&L’s, to Mafia

CONNALLY-KEATING-LINDNER-BARNES-BEEBE

(Source: References are in “Inside Job”)

1960’s

Beebe starts American Motels, Inc. (AMI); invests in Holiday Inns.

1970’s

Beebe & Barnes develop complex business association.

Beebe controls Bossier Bank & Trust, Bossier City, CA.

Barnes invests in Holiday Inns.

1972

Barnes, then Lt. Gov. of TX, involved in Bank & stock fraud scandal. In ’71 a grp of TX banks looted a network of businessmen who bought & sold stock in a business owned by Frank Sharp.

Connally bribe to cover indictment led to indictment of Connally; acquitted.

1973

Jul. – Beebe & Barnes from banking and insurance assoc. by 1976 B/B control 19 banks & S&L’s in TX & CA

Prior to Charles Keating a ExecVP & Director of Carl

1979

Lindner’s American Financial Corp. (AFC); also a founding partner in AFC’s law firm Keating, Muething & Klekamp.

Lee H. Henkel, a Republican, was Treasury Dept. & IRS Counsel in the Nixon Administration. Later a tax attorney and real estate developer in Atlanta.

Jul. 02 – SEC v. Keating, Muething & Klekamp a judgment against Lindner, Keating & Klekamp enjoins self-dealing in an Ohio bank subsidiary.

Keating buys Continental Homes of Phoenix, Inc. from Lindner & renames it American Continental Corp. (ACC)

1980

Henkel & Keating are Connally for Presidents’ East & West Coast financial chairs. Henkel is Keating’s attorney.

1983

Oct. – ACC buys Lincoln Savings with DBL issued junk bonds

1984

Lincoln makes $70mm loan to Connally on a land deal near Austin, TX and $134mm loan to Henkel; Connally defaulted leaving Lincoln (and not the taxpayers) holding a $70mm loss (Nation 11/19/90)

1986

Herman Beebe associate Ben Barnes in partnership with Connally borrows from 17 S&L’s in 3 states ($40mm from Vernon S&L and some unknown amount from Credit Banc (where Barnes’ son worked)

ACC employed Mark Connally son of John Connally

Aug. – Press reports Beebe & Marcelolo control Continental S&L (Houston). Fails in 1988.

1987

Feb. 13 – WSJ reports Lincoln S&L made at least $61.9 million in loans to corporations & partnerships in which Lee Henkel had an interest

In mid-August 1987 the records of Southmark, San Jacinto SA, Strauss, Barnes, Connally and about 200 others were seized according to the Dallas Times Herald. Southmark had done about $90 million in business with Beebe who held 62% of its Series E Pfd according to Southmarks 10K85. Southmark bought Beebe’s nursing homes and also owned 37% of Pratt Hotels. Beebe did business with Morris Shenker and also was related to many Contra figures. Southmark also purchased the Beebe built AMI tower in or before 1988. AMI had 17 subs and 14 affiliates.

1988

SEC v. MDC Holdings, MDC (has close ties with Silverado), is caught in shady deal with Lincoln S&L.

Neal Bush is loaned $550m for a house

Connally elected to Maxxam BOD. . . .

……….

The above two articles were located by a Google search for Lee H. Henkel, attorney:

www.jailhurwitz.com/textfiles/talltalefromtexas.txt

… partner in AFC’s law firm Keating, Muething & Klekamp, Lee H. Henkel, a Republican, was Treasury Dept. & IRS Counsel in the Nixon Admin. Later a tax attorney …

beebe

… Muething & Klekamp. Lee H. Henkel, a Republican, was Treasury Dept. & IRS Counsel in the Nixon Admin. Later a tax attorney and real estate developer in Atlanta. …

………..

For more on Lee H. Henkel, GO TO > > > Dirty Money, Dirty Politics & Bishop Estate

For more on Maxxam, GO TO > > > Heavens and Earth

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February 29, 2000

Pluck, leaks helped McCain
to overcome S&L scandal

By Walter V. Robinson, Globe Staff

A decade ago, Senator John McCain’s role in the most politically corrosive episode of the $150 billion savings and loan debacle threatened to end a political career that now holds some promise of concluding instead with a McCain presidency.

Back then, McCain said the Keating Five scandal was a more nightmarish experience than his years in a North Vietnamese prison camp.

What a difference a decade makes: One mischievous commentator recently suggested that the Keating Five was a rock group. And nowadays, McCain dismisses the tawdry Senate scandal as a mere asterisk in his career, in hopes the electorate will too. . . .

He was a close friend and early congressional ally of Charles H. Keating Jr. – the figure at the core of scandal – andd one of the leading beneficiaries of Keating’s political and personal largesse. Yet, he benefited from decisions by the Senate Ethics Committee that minimized his culpability and the resulting sanction.

And there is evidence that McCain averted major damage to his public image with well-choreographed news leaks from his office that undermined three of the four other senators caught up in the controversy. In 1992, McCain denied under oath that he or his aides had anything to do with the leaks.

The scandal’s raw content is unflattering: McCain and four other senators – indelibly known ever since as the Keating Five – pressuring federal regulators on behalf of Keating, a prodigious fund-raiser and owner of the Lincoln Savings & Loan Association. His bank’s subsequent $3.4 billion failure made Keating the most enduring symbol of the devil-may-care S&L excesses of the 1980s.

To be sure, the record shows that McCain did less for Keating than most of the others, and abandoned Keating the moment he learned there might be criminal charges against his friend. The Senate Ethics Committee gave McCain, along with Senator John Glenn, the lightest of reprimands, saying they displayed ”poor judgment” for going to two meetings with banking regulators. . . .

But in an interview this month, Clark B. Hall, a former FBI agent and congressional investigator who led the GAO investigation, told the Globe he had no doubt, after doing scores of interviews and obtaining documentary evidence, that McCain was one of the principal leakers. But Hall said the Ethics Committee ”smoothed it over.”

”You don’t betray other people to protect yourself, and that’s what he was doing,” Hall said. ”And he was breaking Senate rules to do it.” The targets of the leaks were Democrats Dennis DeConcini of Arizona, Alan Cranston of California, and Donald Riegle of Michigan. (In the end, DeConcini and Riegle would be sharply criticized by the committee; Cranston drew a formal reprimand.) . . .

A pugnacious strategy

From the beginning, Keating also adopted a pugnacious strategy in his attempts to outfox, intimidate, and even seize control of the federal regulatory apparatus that sniffed big trouble in the way his Lincoln Savings & Loan Association was lending depositors’ money for risky ventures. Many of the loans were for real estate developments by Keating’s Phoenix-based American Continental Corp., which purchased the California-based Lincoln S&L in 1984.

As federal banking regulators closed in, Keating deployed powerful allies against them. He raised enormous sums for members of Congress – $1.3 million for the five senators alone, $112,000 of that for McCain’s campaigns. He and his lobbyists prevailed on McCain and others to write letters and support congressional resolutions condemning Federal Home Loan Bank Board regulations that would restrict risky direct investments like those Lincoln’s deposits were used for.

In 1989, Keating himself left no doubt that the campaign funds he lavished on the five senators were designed to produce results, when he declared to reporters: ”One question, among the many others raised in recent weeks, had to do with whether my financial support in any way influenced several political figures to take up my cause. I want to say in the most forceful way I can: I certainly hope so.”

Months before he pushed the five senators to meet with regulators, Keating even sought to seize control of the bank board by asking his congressional allies to support two of his choices for the three-member board that was overseeing the investigation of Lincoln. One of the two, Lee H. Henkel Jr., was appointed to the board in November 1986.

During the Ethics Committee investigation, one of the leaked stories that benefited McCain reported that DeConcini and Riegle, at Keating’s behest, had lobbied the White House for Henkel’s appointment. But in a little noticed finding in its final report, the committee reported that McCain had, too.

Alone among the five senators, McCain counted Keating as a personal friend; their families vacationed together from 1983 to 1986 – the four years McCain served in the House – flying to Keating’s private retreat in the Bahamas aboard corporate aircraft paid for by Keating’s company.

In 1986, McCain’s wife, Cindy, and her father, James W. Hensley, also invested $359,100 in a Phoenix shopping mall developed by a subsidiary of Keating’s American Continental Corp.

When the scandal became public, and along with it his family’s personal and business links to Keating, McCain reimbursed Keating $13,433 for the flights and vacations. By not reporting them and reimbursing Keating at the time they occurred, McCain had violated House ethics rules. (He was elected to the Senate in 1986.)

But the Senate Ethics Committee decided that the vacation subsidies were House matters – outside its jurisdiction. The committee did not consider the mall investment germane. Nor was it troubled by McCain’s lobbying for Henkel.

With public hearings looming, the bipartisan panel – three members from each party – split over whether to follow the urging of its counsel, Robert M. Bennett, that the case against McCain and Glenn be dropped. The committee Democrats resisted, and McCain has long insisted they did so because he was the sole Republican among the five and they feared that a pared-down ”Keating Three” would be recast as a Democratic scandal.

Most important, the committee concluded it was not improper for five senators to seek two separate meetings with regulators, even though Keating orchestrated the April 1987 meetings. The first meeting was with bank board chairman Edwin J. Gray, at a time when Gray was seeking Senate approval for a $15 billion bailout bill to rescue hundreds of failing thrifts. Gray was summoned to a meeting in DeConcini’s office and told to come alone. The second meeting, a week later, was with regulators who were directly overseeing the investigation.

Fred Wertheimer, then president of Common Cause, which filed the official complaint that prompted the Ethics investigation, said the committee’s decision on the propriety of the meetings was unfortunate.

”The meetings themselves were wrong and should not have occurred. The five senators involved put undue and inappropriate pressure on regulators,” Wertheimer said. The meetings, Common Cause argued in 1990, were ”seemingly designed to put the maximum senatorial pressure on the board to accede to Keating’s wishes.”

McCain’s own role remains a puzzle. Before the meetings, he had a falling out with Keating when he learned that Keating wanted the senators to negotiate on his behalf. McCain, new to the Senate and concerned about recent publicity over Keating’s fund-raising for him, said he would attend the meetings only to assure himself that regulators were treating Keating fairly.

But at both meetings, first with Gray and then with thrift regulators flown in from San Francisco, McCain looked on as DeConcini pushed the regulators to give Lincoln a dispensation on a board regulation that barred further risky investments – a ban that Lincoln had already exceeded by $600 million.

Two years later, Gray told a House committee that the meetings were an attempt to ”subvert” the regulatory process.

William Black, one of the regulators who attended the second meeting, said in an interview that Keating clearly intended to intimidate the bank board by assembling ”one-twentieth of the US Senate, to include two bona fide American heroes, a Democratic leader [Cranston] and the man who was about to become chairman of the Banking Committee [Riegle].”

McCain, despite his later insistence that he had refused to negotiate on Keating’s behalf, did not raise objections to DeConcini’s advocacy for Keating, according to Black.

But Dowd, McCain’s attorney, said McCain ”did nothing improper, and he didn’t know that…DeConcini was going to misbehave.”…

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From www.dcia.com/settlement.html:

BILLIONS WON BY INVESTORS

The Arizona Republic

Damages and out of court settlements won by investors in Charles H. Keating Jr.’s American Continental Corp. who filed a $1.2 billion fraud and racketeering lawsuit in U.S. District Court in Tucson:

DAMAGES AWARDED BY JURY:

Defendants will share in a judgement of $1.8 billion in compensatory damages returned by a jury Friday against:

Charles Keating, former chairman of American Continental, who also owes $1.5 billion in punitive damages.

Editor’s note: Now that really sounds wonderful but what does it mean? Since Keating says he is broke that $1.5 billion just disappears form the equation. Now there is just chicken feed left for the investors. This headline is a lie. Notice (buried at the very end of the article!) the amount Michael Milken had to pay and remember he was making $550 million per year when he was stopped. That is what it means to have attorneys like the Dershewitz brothers, Melvin McDonnald, and John Dowd. I can think of about 200 million people who would think serving a few years in the pen and keeping all that loot was a pretty good deal!!

Saudi European Investment Corp. of Paris, was a financial partner.

Conley Wolfswinkel of Tempe, was a borrower from Lincoln Savings and Loan Association, an American Continental subsidiary.

Continental Southern Inc., Atlanta, was a Lincoln borrower.

SETTLEMENTS REACHED

Former executives of American Continental and Lincoln Savings, $4.75 million.

Law firms and individual lawyers

Jones, Day, Revis & Pogue, Cleveland: helped Lincoln prepare for a 1986 federal examination, $24 million.

Kaye, Scholer, Fierman, Hays & Handler, New York: represented Lincoln in its disputes with federal regulators, $20 million.

Parker, Miliken, Clark, O’Hara & Samuelian, Los Angeles: worked with American Continental’s Lincoln subsidiary in connection with investigations by California regulators, $5.65 million

Sidley & Austin, Chicago: represented Lincoln in dealings with federal regulators, $4 million.

Mariscal, Weeks McIntyre & Freidlander, Phoenix: represented Lincoln in dealings with federal regulators, particularly in disputes over appraisals of properties, including the Phoenician Resort, $2 million.

Barbara Thomas, New York, $90,000.

Accountants

Arthur Young & Co. (succeeded by Ernst& Young); audited Lincoln and Continental’s financial statements for 1986 and 1987, $63 million.

Arthur Anderson & Co.: audited Lincoln and American Continental’s financial statements for 1984 and 1985, $22.8 million.

Touche, Ross & Co.: audited Lincoln and American Continental from November 1988 until April 1989, $7.5 million, plus $1 million in services for accounting and distribution of payments to investors.

Lincoln borrowers

MDC Holdings, Denver, $1 Million

Isaac Heimbinder, US Homes president, Houston, $1 million.

C.V. Nalley, Atlanta, $750,000

Lee H. Henkel Jr., Atlanta, $100,000

E.C. Garcia & Co., Phoenix $90,000

Others

Offerman & Co., Minneapolis, investment bankers, $1.5 million.

Lexecon Inc., Chicago Financial Consultant, $1 million in services for investors.

Jeffery C. Patch, PHX, appraiser, $500, 000

Richard Fenn, former vice chairman of Saudi European Investment Corp. a financial partner, $16,000

ANTICIPATED SETTLEMENTS

Drexel Burnham Lambert Inc. Investment bankers, $40 to $50 million

Michael Milken, former head of junk bond sales for Drexel, $35 million to $50 million.

Emerald Homes, PHX, Lincoln borrower, $200, 000

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From: Where does Kaye Scholer Leave Us?

“Ethical Responsibilities in Regulatory Practice: Where does Kaye Scholer Leave Us?”

By Professor Dorothy J. Glancy

ASHVILLE, N.C., September 30, 1993

“Kaye Scholer” has come to stand for a variety of administrative and civil actions brought against attorneys by banking regulators in connection with the failure of Lincoln Savings & Loan and other financial entities controlled by Charles H. Keating, Jr.

Most of the legal actions against Lincoln Savings lawyers have now been settled. But the settlements seem to have left the legal profession, especially lawyers engaged in practice involving regulatory agencies, with a great many more questions regarding ethical responsibilities than answers….

Settlements in the Banking Cases

Over the past several years, three federal regulatory agencies which regulate financial institutions, including the Office of Thrift Supervision (OTS), the Resolution Trust Corporation (RTC) and the Federal Deposit Insurance Corporation (FDIC), have brought roughly 100 claims against lawyers for several hundred failed banks and over 700 savings and loans. The failure of Lincoln Savings & Loan was the most prominent source of claims against professional service providers.

Accounting firms, as well as law firms and lawyers who had worked for Lincoln Savings were charged with professional misconduct which allegedly resulted in losses of more than $2 billion to the taxpayers and more than $250 million to the bondholders of Lincoln Savings’ parent corporation, American Continental Corporation.

Banking regulators and American Continental bondholders brought monetary claims against at least eleven professionals who served Lincoln Savings. Eight of the eleven were law firms and lawyers.

Over the past two years, settlements of these professional liability claims related to Lincoln Savings have amounted to more than a third of a billion dollars – at least $337.65 million, to be more precise. Of these settlements, legal professionals paid approximately 53%, amounting to at least $180.15 million.

Additional costs resulting from these and other settlements by former lawyers for Lincoln Savings and other failed thrifts will affect most of the legal profession through increased malpractice insurance premiums. Natural resources, energy and environmental lawyers are among those with an interest in the professional responsibility aspects of these cases involving lawyers for financial institutions….

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Money is surely not the measure of the ethical responsibilities of lawyers. Large dollar figures certainly should not be allowed to obscure the real issues of professional responsibility which lie behind these figures. However, regulators believe that large monetary settlements direct attention to important issues regarding the ethical responsibilities of lawyers, particularly those engaged in regulatory practice….

Professional Principles Asserted by Regulators of Financial Institutions

In presiding over early litigation involving Lincoln Savings, Federal District Judge Stanley Sporkin denounced professional ethics failures on the part of both accountants and lawyers for Lincoln Savings in a series of haunting questions:

Where were these professionals … when these clearly improper transactions were being consummated?

Why didn’t any of them speak up or disassociate themselves from these transactions?

Where also were the outside … attorneys when these transactions were effectuated?

What is difficult to understand is that with all the professional talent involved (both accounting and legal), why at least one professional would not have blown the whistle to stop the overreaching that took place in this case.

Here it is clear that the private sector was not willing to cooperate with the public oversight regulators. Indeed, the private sector at times impeded the regulatory authorities from discharging their duties….

Perhaps the most expansive expression of the professional ethics theories which banking regulators enforced against the Lincoln Savings lawyers has been offered by former OTS General Counsel Weinstein. In a 1992 speech, he suggested six professional principles:

The first is that a lawyer must be sensitive to the role he or she chooses to play, for the rules and principles that govern an advocate in the courtroom do not apply to the lawyer as advisor or to the lawyer in the bank examination process.

The second is the need to practice the whole law. So-called “loophole lawyering” must be illuminated by the whole body of law that pertains to an issue.

The third is that a lawyer is at all times governed by a duty to deal honestly with the facts and to comply with the disclosure and other regulations that govern submissions to the regulatory agency.

The fourth is that a lawyer advising a fiduciary must not forget that the fiduciary’s conduct must be in the best interests of the institutional client.

The fifth is that a lawyer must report unlawful client activity up the corporate chain of command, going as far as the corporate board of directors.

The sixth is that a lawyer may not knowingly further a client’s unlawful activity.

More recently, Mr. Weinstein suggested that four professional principles should guide the professional conduct of lawyers for financial institutions:

[1] That a lawyer should, if necessary, go up the corporate chain of command to seek to induce a corporate client to abandon an illegal course of conduct.

[2] That a lawyer may not assist a client in implementing an illegal plan.

[3] That a lawyer must give serious consideration to resignation if the client persists in going forward illegally.

[4] And that a lawyer may not tell misleading partial truths in circumstances where the law would make such action by the client actionable. . . .

A lawyer shall not counsel a client to engage, or assist a client, in conduct that the lawyer knows is criminal or fraudulent, but a lawyer may discuss the legal consequences of any proposed course of conduct with a client and may counsel or assist a client to make a good faith effort to determine the validity, scope, meaning or application of the law.

Model Rule 1.6 provides with regard to Confidentiality of Information:

(a) A lawyer shall not reveal information relating to representation of a client unless the client consents after consultation, except for disclosures that are impliedly authorized in order to carry out the representation, and except as stated in paragraph (b).

(b) A lawyer may reveal such information to the extent the lawyer reasonably believes necessary:

(1) to prevent the client from committing a criminal act that the lawyer believes is likely to result in imminent death or substantial bodily harm; or

(2) to establish a claim or defense on behalf of the lawyer in a controversy between the lawyer and the client, to establish a defense to a criminal charge or civil claim against the lawyer based upon conduct in which the client was involved, or to respond to allegations in any proceeding concerning the lawyer’s representation of the client.

Portions of Model Rule 1.13 provide with regard to the Organization as Client,

(a) A lawyer employed or retained by an organization represents the organization acting through its duly authorized constituents.

(b) If a lawyer for an organization knows that an officer, employee or other person associated with the organization is engaged in action, intends to act or refuses to act in a matter related to the representation that is a violation of a legal obligation to the organization, or a violation of law which reasonably might be imputed to the organization, and is likely to result in substantial injury to the organization, the lawyer shall proceed as is reasonably necessary in the best interests of the organization … Such measures may include among others:

(1) asking reconsideration of the matter;

(2) advising that a separate legal opinion on the matter by sought for presentation to appropriate authority in the organization; and

(3) referring the matter to higher authority in the organization, including, if warranted by the seriousness of the matter, referral to the highest authority that can act in behalf of the organization as determined by applicable law.

(c) If, despite the lawyer’s efforts in accordance with paragraph (b), the highest authority that can act on behalf of the organization insists upon action, or a refusal to act, that is clearly a violation of law and is likely to result in substantial injury to the organization, the lawyer may resign in accordance with rule 1.16.

Portions of Model Rule 1.16 regarding Terminating Representation provide:

(a) …a lawyer shall not represent a client or, where representation has commenced, shall withdraw from the representation of a client if:

(1) the representation will result in violation of the rules of professional conduct or other law;…

(b) …a lawyer may withdraw from representing a client if withdrawal can be accomplished without material adverse effect on the interests of the client, or if:

(1) the client persists in a course of action involving the lawyer’s services that the lawyer reasonably believes is criminal or fraudulent;

(2) the client has used the lawyer’s services to perpetrate a crime or fraud;

(3) a client insists upon pursuing an objective that the lawyer considers repugnant or imprudent;…

(d) Upon termination of representation, a lawyer shall take steps to the extent reasonably practicable to protect a client’s interests, such as giving reasonable notice to the client, allowing time for employment of other counsel, surrendering papers and property to which the client is entitled and refunding any advance payment of fee that has not been earned. The lawyer may retain papers relating to the client to the extent permitted by other law.

Portions of Model Rule 3.3 provide with regard to Candor Toward the Tribunal:

(a) A lawyer shall not knowingly:

(1) make a false statement of material fact or law to a tribunal;

(2) fail to disclose a material fact to a tribunal when disclosure is necessary to avoid assisting a criminal or fraudulent act by the client; … or

(4) offer evidence that the lawyer knows to be false. If a lawyer has offered material evidence and comes to know if its falsity the lawyer shall take reasonable remedial measures.

Under Model Rule 3.9, the candor required under Model Rule 3.3 also applies to advocates in nonadjudicative proceedings before legislative or administrative bodies. At the heart of most of the ethical issues posed by the application of these professional ethics rules to the conduct of lawyers for rogue financial institutions, such as Lincoln Savings, is the nature of a lawyer’s ethical responsibilities when her client has engaged, or is engaging, in misconduct.

Judge Sporkin and the banking regulators faulted former lawyers for Lincoln Savings for failing to do something about illegal activities which culminated in the failure of the thrift. Precisely what the Lincoln Savings lawyers should have done, but failed to do, is much less clear. Banking regulators now usually deny that their actions against Lincoln savings lawyers were based on any generalized ethical duty on the part of lawyers to “blow the whistle” and inform regulators of the misconduct of their clients, as Judge Sporkin’s opinion in Lincoln Savings & Loan Ass’n v. Wall might have seemed to suggest. Banking regulators’ current views regarding this issue seem to be reflected in a speech by former OTS general counsel, Weinstein, this past April:

The OTS did not claim that the [Kaye Scholer] law firm had a professional obligation to blow the whistle on its client by volunteering confidential client information. Had the lawyers and their client remained silent instead of making affirmative representations, the charge of omission of material facts would not have been available. The material omission counts were premised on the client’s disclosure obligation, coupled with a charge that the lawyers by their conduct had assumed the client’s obligation for compliance with the OTS rules that forbid material omission in communications with the agency.

According to the chief architect of the charges against Kaye Scholer, what was unethical about the law firm’s conduct was that the lawyers transformed themselves into “institution-affiliated parties” by controlling the information flow in the regulatory examination of Lincoln Savings. The law firm then violated legal duties imposed on such affiliates, including the duty to avoid misleading the regulatory agency….

Truthfulness in Regulatory Practice

Truthfulness is among the virtues generally expected of ethical persons, including lawyers, whether or not they are involved in regulatory practice. The Model Rules of Professional Conduct require truthfulness to tribunals before which a lawyer practices under Model Rule 3.3, noted above. Model Rule 3.9 extends these duties of candor to nonadjudicative proceedings….

The conduct of counsel for the United States in violating the duty of candor has been most egregious and disturbing. Such conduct is worthy of sanction and must also be deterred. Dismissal with prejudice accomplishes these dual aims….

Today we will send a message to all counsel who appear before this court that the duty of candor will be upheld and preserved at all times irrespective of the identity of the parties and the monetary stakes in the litigation….

Truthfulness is required of lawyers who represent regulatory agencies, just as it is required of lawyers for regulated parties.

Truthfulness in dealing with federal agencies is something more than an ethical virtue. It is required by law. Being untruthful to federal agencies can result in statutory criminal penalties under 18 U.S.C. ‘ 1001:

Whoever, in any matter within the jurisdiction of any department or agency of the United States knowingly and willfully falsifies, conceals or covers up by any trick, scheme, or devise a material fact, or makes any false, fictitious or fraudulent statements or representations, or makes or uses any false writing or document knowing the same to contain any false, fictitious or fraudulent statement or entry, shall be fined not more than $10,000 or imprisoned not more than five years, or both.

Other statutes, such as the False Claims Act, provide severe penalties for fraud and misrepresentation in monetary claims made to federal agencies. The False Claims Act could apply, for example, to claims for compensation made by lawyers who assist federal agencies with environmental remediation. Criminal penalties for false claims are provided under 18 U.S.C. ‘ 287. Civil actions for false claims are governed by 31 U.S.C. ” 3729 and 3730. The controversial qui tam provisions of 31 U.S.C. ‘ 3730 offer rewards (15-20% of the amount recovered) to those, including attorneys, who blow the whistle and report false claims which have defrauded the U.S. government. Natural resources, energy and environmental lawyers are required by these and other statutes, as well as general ethical principles, to be truthful in their dealings with federal regulatory agencies. Of course, lawyers for regulatory agencies are required to be truthful as well.…

Particularized Ethical Duties for Lawyers in Specialized Practice

One final issue regarding ethical responsibilities in regulatory practice has been implicit throughout this discussion. That is the issue whether the particular regulatory context of a lawyer’s actions does or should create different ethical responsibilities. Part of what the regulatory actions against the Lincoln Savings lawyers has come to signify is the importance of paying attention to the particular regulatory context, when lawyers represent regulated clients.

Judge Sporkin, who asked why professionals, such as lawyers and accountants, had not prevented the Lincoln Savings debacle, refers to this focus on legal specialization as “new world lawyering.”

In a speech before the Securities Litigation Committee of the San Francisco Bar Association in January of 1992, Judge Sporkin suggested that a lawyer’s ethical duties may vary according to the regulatory context in which she practices . . .

To those of you who are just now settling into comfortable complacency regarding the particular ethical uprightness of natural resources, energy and environmental lawyers, let me suggest just two words: “Teapot Dome.”

Seventy years ago it was the scandal of the century. Will Rogers called it the “great morality panic of 1924.”

The transfer of the Teapot Dome and Elk Hills petroleum reserves and the corrupt issuance of the mineral leases on them could not have been pulled off without the assistance of lawyers.

In fact, many of those accused in the scandal were lawyers. But that was not why they were accused. Teapot Dome clearly involved lawyers who worked with natural resources, energy and the environment, although, aside from natural resources law, these areas of the law did not exist, as such, at the time of Teapot Dome….

Today, the practice of natural resources, energy and environmental law is growing ever more complex. You may have seen the Arthur Andersen Environmental Services survey for the National Law Journal (August 30, 1993), which reported that nearly 70 percent of the corporate counsel surveyed believed that total compliance with all federal and state environmental regulation is simply not achievable.

“Due to the complexity of the law, the varying interpretations of regulators, the ever-present role of human error and the cost,” violation of environmental laws and regulations seems to be both constant and inevitable for just about every business.

Perceptions such as these highlight some of the reasons why natural resources, energy and environmental lawyers in regulatory practice face so many ethical challenges….

The above was excerpted from a Google search:

Where does Kaye Scholer Leave Us? (www.scu.edu/law/FacWebPage/Glancy/html/kaye.html)

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FOR A CLOSER LOOK AT MORE BUZZARDS ON THE BAR

Angela Styles – Bush’s Administrator for the Office of Federal Procurement Policy.

Pre-hearing Questions for Angela Styles to be Administrator for
the Office of Federal Procurement Policy of the Office of Management and Budget

I. Nomination Process and Potential Conflicts

1. Why do you believe the President nominated you to serve as Administrator for the Office of Federal Procurement Policy (OFPP)?

I was chosen based on my extensive legal and legislative experience in the fields of procurement and cost accounting. Over a number of years, I have represented clients in numerous aspects of procurement law and litigation, including regulatory compliance, procurement fraud, bid protests, claim preparation, cost and pricing issues, defective pricing, accounting issues, contract disputes and claims, contract negotiation, litigation of complex corporate-wide accounting and contract issues, and negotiation of broad corporate-wide advance agreements with the Defense Contract Management Command. Of particular importance because the Administrator of OFPP serves as chair of the Cost Accounting Standards Board, a significant portion of my legal practice focused on Cost Accounting Standards compliance, cost allowability, and cost allocation.

2. Were any conditions, express or implied, attached to your nomination to be Administrator?

No.

3. Have you made any commitments with respect to the policies and programs which you will attempt to implement as Administrator? If so, what are they?

No.

4. Are there any issues involving OFPP from which you may have to disqualify yourself? If so, what system will you establish to carry these out?

Any potential conflicts of interest will be handled through the recusal process, in which I would remove myself from the action, and refer all activity to the next responsible official within the Office of Federal Procurement Policy or the Office of Management and Budget. I have notified the Designated Agency Ethics Official within OMB of certain former clients whose legal matters I handled while in private practice. In accordance with 5 CFR §§ 2635.502, for one year following the termination of my employment at the law firm of Miller & Chevalier, Chtd., I will not participate in any particular matter involving specific parties in which, to my knowledge, my former employer, Miller & Chevalier, Chtd., or my former clients, is a party or represents a party, unless I am authorized to participate.

My spouse is employed by Bergner, Bockorny, Castagnetti, Hawkins and Brain. Pursuant to 5 CFR §§ 2635.502, I will not participate in any particular matter involving specific parties in which Bergner, Bockorny, Castagnetti, Hawkins and Brain is or represents a party, unless I am authorized to participate. Furthermore, pursuant to 5 CFR §§ 2635.502, I will not participate in any particular matter involving specific parties in which any client of my spouse is or represents a party, unless I am authorized to participate. In addition, my spouse has agreed not to represent any client with respect to any particular matter before the Office of Federal Procurement Policy during my tenure.

* * *

Federal Procurement Chief Outlines Priorities

Bush administration supports continuation of public-private competitions

by Elizabeth G. Book

Government procurement policies will not change drastically in light of the planned “war on terrorism,” a senior procurement official told defense industry executives.

“The Defense Department hasn’t said yet that they need more acquisition authority, so we are not going to do anything right now to change our policies. We have a wait-and-see attitude,”” said Angela B. Styles, the president’s appointee as administrator for the Office of Federal Procurement Policy.

The OFPP is part of the Office of Management and Budget.

The OFPP, which has been without an administrator since June 2000, is undergoing change and reforms, she said. Styles spoke recently at a luncheon with defense industry representatives. She is responsible for advising the administration on government-wide procurement initiatives.

The Bush administration’’s priorities in procurement policy involve competitive sourcing, which is based on public-private competitions. The White House also seeks to improve the level of government performance and to return the government to the principles of competition, she said. Styles mentioned that one of her planned initiatives is to phase out the mandatory source status for the Federal Prison Industries (FPI), a policy that has been criticized by the business community for being anti-competitive and detrimental to small, niche-type suppliers.

Under a law in place since the 1930s, if the federal government wants to buy any product that FPI produces, it must purchase the product from FPI. FPI is a quasi-governmental organization that manufactures items at facilities manned by federal inmates.

Styles wants to allow the private sector to compete for these contracts. Currently, if a federal agency wants to use a private sector source for a product that FPI produces, they have to submit a waiver to the FPI. “Our office will work to phase out the policy,” she said. The Competition in Contracting Act, which deals with this issue, is favored by the current administration.

Styles said another OFPP priority is to change the way that rules are published in the Federal Register. The Federal Register, a government-wide publication, is used by the agencies to publish rules and regulations, which are governing tools for the federal agencies. They do not have to be codified by Congress. “There is a lack of quality and logical analysis in what we see published in the Federal Register,” Styles said.

“We don’t often see a rational analysis,” she said, especially in the preambles to rules, which are supposed to contain background information, reasoning for the proposed rules, and a summation of industry comments.

“We can do a lot better to explain to you why we are making the decisions we are,” she said.

“The OFPP should have a greater leadership role in the rule-making process. Right now, I am holding back on rules that I don’t think are specific in their explanations.”

Styles reported that she had testified before the House of Representatives subcommittee on technology and procurement policy and made the case for another of her priorities, competitive sourcing. She said that competition helps to attract “viable, responsive, innovative and cost-effective public and private competitors to the federal sector.”

She testified that “when a commercial function performed by the public sector undergoes competition, that competition results in significant economic savings to the taxpayer,”” she said. “The use of public-private competition consistently reduces the cost of public performance by more than 30 percent,” she said.

Styles explained that the Federal Activities Inventory Reform (FAIR) Act, which was codified in 1998, seeks to publicize those government functions that can be outsourced to the private sector. The FAIR Act requires that a list be published each year for jobs that are available to non-governmental entities, but also maintains ““a list of activities that are inherently governmental, that cannot be outsourced,”” she said.

The enforcement of the FAIR Act at all federal agencies, Styles said, underscores her office’s “commitment to competition.”

“It is a tool to encourage good management at the agencies. I want good cost, good quality, and availability of service. I’m not really concerned about who’s providing it,” she said.

“We’re not trying to de-layer the workforce. Nor are we discouraging agencies that want to bring things back in-house. This is an opportunity to solve problems we see in procurement.

“Competitive sourcing facilitates our use of performance-based service contracts, which bring innovation, creativity, new ideas,” she said.

Styles said that competitive sourcing policies bring integrity to the process, to assure taxpayers that their money is not being wasted.

OFPP opposes a contracting bill that gained momentum during the closing months of the Clinton administration and appears to be gaining fresh support on Capitol Hill. The Truthfulness, Responsibility and Accountability in Contracting (TRAC) Act places a six-month moratorium on all federal contracts which are not deemed “essential,” and could permanently freeze, or “blacklist” the contractor’s activities if it is shown that the work could be performed more cost-effectively by the public sector. According to Styles, the TRAC act “would put at risk the federal government’s ability to acquire needed support services in both the short and the long term,” she said.

“There is no aspect of the TRAC Act that would contribute to competition, efficiency or accountability,” she said.

Prior to her confirmation in May 2001, Styles was a counselor to the director of OMB. From January to April 2001, she was in a temporary appointment at the General Services Administration’s (GSA) office of government-wide policy and public buildings service. Before that, she was an attorney for Miller & Chevalier, a law firm in Washington, D.C. She also did a stint on Capitol Hill, working as a legislative aide for Rep. Joe Barton, R-Texas.

Styles’ legal practice concentrated in the area of federal procurement law and litigation, including cost and accounting issues, defective pricing, procurement fraud matters, contract disputes and claims, contract drafting and negotiations, and compliance matters. During the past several years, her practice increasingly focused on government contract disputes involving cost accounting standards compliance, cost allowability and allocation.

Styles litigated contractors’ claims against the U.S. government before the Armed Services Board of Contract Appeals, the United States Court of Federal Claims, and the United States Court of Appeals for the Federal Circuit. Since 1998, she has chaired the American Bar Association’s Contract Law Committee. She has a bachelor’s degree from the University of Virginia, and a law degree from the University of Texas. —— Elizabeth G. Book

See also: Miller & Chevalier

Bridgestone/Firestone, Inc. – Where the rubber meets the road….and sometimes stays there.

June 24, 2001

Lawyers Knew of Explorer Tire Woes

Attorneys withheld complaints for four years to protect cases …

The New York Times

A group of personal-injury lawyers and one of the nation’s top traffic-safety consultants identified a problem with Firestone ATX tires on Ford Explorer sport utility vehicles in 1996. But they did not disclose the pattern to government safety regulators for four years, out of concern that private lawsuits would be compromised.

Sean Kane, the consultant, said he had identified 30 cases of tire failure in 1996 – a few of them involving deaths – after being retained by lawyers in Texas preparing lawsuits against Bridgestone/Firestone, Inc.

But Kane and the lawyers, lacking confidence in federal regulators, repeatedly decided not to tell the National Highway Traffic Safety Administration about the problem, said Kane, who in 1997 became the partner for tire issues at Strategic Safety, a top traffic-safety consulting firm. As Strategic Safety began working on Explorer crashes with lawyers across the country, the consultants and lawyers chose not to submit the safety complaint forms that might lead to government investigations. . . .

Of the 203 deaths related to Firestone tires reported to regulators, all but 13 occurred after 1996. . . .

Dr. Ricardo Martinez, the administrator of the traffic safety agency from 1994 to 1999, said he was appalled to learn that information had been kept from his staff for years. . . .

“It’s outrageous, I can’t say that enough,” said Martinez, a trauma surgeon. “If I saw something was killing my patients and I didn’t say anything because that would reduce the demand for my services, I would be putting my benefit over the benefit of my patients and the public, and that would clearly be unethical.”

Kane said that the lawyers’ first duty was to win as much money as possible for the crash victims whom they represented. The lawyers can collect up to a third of any settlement or court verdict.

Geoffrey C. Hazard Jr., the trustee professor of law at the University of Pennsylvania Law School and a leading expert on legal ethics, said the lawyers had not broken any laws or ethical codes.

“They had a civic responsibility the same as you or I do, but they didn’t have a legal duty,” he said. . . .

In October 1996, KPRC, a Houston TV station, ran a report on the tires and forwarded to Kane some complaints from people whose tires had failed. . . .

Kane said he told reporters at several television news magazines about the problem in 1998. But the reporters decided not to run stories.

Regulators did not open an investigation of the tires until February 2000, after a report on another Houston TV station prompted a flurry of complaints from consumers who had not retained lawyers. . . .

Global Funding Limited Trust –

October 17, 2001

Former Castle Rock attorney arrested
in Florida for part in investment scam

By Terri Moon Cronk

A former Castle Rock attorney, blighted by bounced checks and civil cases in Douglas County courts dating as far back as 1994, recently was arrested in Florida in a $20 million investment scam.

Royce Edward Tolley, 42, was arrested in Gainesville in mid-October and charged with four others with rotating money through a “maze of national and international accounts,” says a story by The Associated Press. . . .

Tolley was named as a trust owner with George Melvin Bevre, 48, of Atlanta. Both were arrested.

Investors reportedly were told they would “reap enormous returns” through an investment program identified as Global Funding Limited Trust.

Federal investigators aren’t sure how many investors were affected, the story said.

A federal indictment, once unsealed, showed that the five men “rotated” money from June 1996 to January 1998 to keep funds hidden from customers and retain the money for themselves, the story said.

Also named in the indictment were California attorney James Charles Morris, 54, of Gardnerville, Nev., and Florida residents Calvin Frederick Brown, a 53-year-old exotic bird dealer, of Williston, and house painter Robert Charles Stewart, 40, of Gainesville.

Each of the five men faces 19 felony counts from wire fraud, interstate transportation of stolen property and money laundering conspiracy, The Associated Press reported. . . .

Harvey Pitt – Chairman of the Securities and Exchange Commission.

July, 2001 – From Web Today:

Harvey Pitt Bad Choice for
SEC Chairmanship

by Rev. Louis Sheldon, Chairman: Traditional Values Coalition

The Securities and Exchange Commission should be headed by a person who has both the professional skills and the moral clarity to make tough decisions about financial matters. The chairmanship of the SEC should be held by someone who has a moral compass, not a person who is willing to represent the interests of a pornography empire.

Last week, TVC sent a letter of concern to President Bush over his choice of Harvey Pitt to be our nation’s Securities and Exchange Commission chairman. We expressed our concern about Pitt after learning that in 1999 he had done legal work for the New Frontier Media company. Pitt had helped New Frontier overcome a problem with the NASDAQ over two stock sales. According to news reports, Pitt’s aid to this pornography company helped it keep its listing on the NASDAQ.

New Frontier Media is a purveyor of sexually explicit filth that is piped into homes through its three cable services: Pleasure, TeN, and Extasy. Three of New Frontier’s biggest pornography customers are AT&T, Time Warner, and Echo-Star Communications (DISH-TV).

This company also operates IGallery.com, an Internet company that hosts such sites as “Teen Sex,” “Café Flesh,” and two other sites with names describing oral sex and women’s sex organs.

The Vice President of Corporate Development at New Frontiers is Greg Dumas, who has the dubious distinction of having been Vice President of Marketing for Larry Flynt Publications. Dumas helped launch Hustler Online.

Hustler, of course, is one of the most obscene magazines in print and Flynt’s smut empire demeans and humiliates women by portraying them as body parts to be used and thrown away. Flynt has also promoted pedophilia through his “Chester the Molester” cartoon. Pedophiles in the North American Man-Boy Love Association (NAMBLA) must gain inspiration from Hustler’s pro-child molester messages.

Is Harvey Pitt really proud that he represented such an evil and perverse company? Harry Gracin, New Frontier’s securities lawyer says he is offended by TVC’s efforts against Harvey Pitt. According to Gracin, Pitt “… is an honest and decent man, and he took the case to help us out. All he agreed to was to get us a fair hearing.”

Gracin must have a different definition of what constitutes an “honest and decent man,” than we do. Pitt aided a company that earns millions by selling the sexual exploitation of women and teenage girls for profit. And a company where one of its vice presidents proudly lists his association with Larry Flynt as a positive professional accomplishment.

Pitt’s nomination reminds me of the recent choices of former Massachusetts Governor Paul Cellucci to be our Canadian Ambassador and homosexual activist Scott Evertz to be White House AIDS czar. These were unfortunate choices, but it is not too late for the White House to change course on the choice of Pitt.

We urge the White House to look elsewhere for our nation’s next SEC chairman.

Traditional Values Coalition is an inter-denominational public policy organization comprising over 43,000 member churches. For more information call Christy Moore at (202) 547-8570. TVC, 139 C Street, SE, Washington, DC 20003. Web address: www.traditionalvalues.org.

~ ~ ~

August 3, 2001

Senate Confirms SEC Chairman Harvey Pitt

WASHINGTON (SmartPros) —— The Senate unanimously approved Harvey Pitt as SEC chairman for a term expiring June 5, 2007. President Bush is expected to appoint Pitt as chairman now that the confirmation process is complete.

Pitt was nominated in early July by President Bush to head the SEC and was confirmed by the Senate Committee on Banking, Housing and Urban Affairs in late July. The final confirmation occurred on August 1 by the U.S. Senate.

Pitt has spent two decades as a lawyer and corporate partner resident in international law firm Fried Frank’s Washington, DC and New York offices. He has represented clients in every facet of securities-related issues, including the AICPA and Big Five firms.

“Mr. Pitt’s work at the SEC and representing clients brought before the SEC give him an extraordinary knowledge of Federal securities laws,” said Senator Paul S. Sarbanes, Chairman of the Committee on Banking, Housing and Urban Affairs.

Pitt follows the footsteps of former SEC chairman Arthur Levitt, the longest-serving chairman in the history of the organization who left shortly after President Bush entered office. Republican commissioner Laura Unger has served as acting chairman in the interim….

For much more on Harvey Pitt, GO TO > > > Spotting the SEC

For more on Arthur Levitt, GO TO > > > Birds that Drink from Cesspools

Marshall Lippman – Disbarred, but doing fine.

January 22, 2004

New Jersey Buyers of ‘Dream Homes’
Relate Their Nightmares

By Richard Cowen, The Record, Hackensack,
N.J. Knight Ridder/Tribune Business News

For some homeowners, New Jersey’s housing boom has been a bust – and some of them went to Trenton on Wednesday with tales of new homes filled with cracked walls, flooding basements, and broken dreams.

The citizens who testified before the State Commission of Investigations said they had been burned not once, but twice – first by greedy builders who did shoddy work and refused to make repairs, and then by the state’s own clumsy bureaucracy, which failed to come to their rescue.

By the end of the day, SCI Chairman Francis E. Schiller was shaking his head in disbelief.

“It is unconscionable that in this, the 21^st century – an era in which the mere flick of a switch brings us crystal-clear, close-up images of Mars – that hardworking, law-abiding citizens here at home are victimized by a system that often cannot decipher and implement the simplest features of a warranty,” Schiller said.

“Something must be done, and through this process, by publicly exposing and examining the extensive flaws of that system, we have taken an important first step.”

The warranty on newly constructed homes is one of many documents a buyer picks up at the closing – and is so thick with legal terminology that many people don’t know where they stand until something goes wrong with the house.

And as the SCI investigation found, the warranty system is both confusing to homeowners and fraught with abuse by builders.

“A nightmare” is the way Graham Fill of Butler described his life since January 2001, when he bought a new house in the Hemlock Estates development. Shortly after moving in, Fill noticed water running down the walls of his basement.

Fill figured his warranty was strong enough to force the builder, Majestic Homes of Boonton, to fix the problem. But despite the warranty, the builder refused, Fill said.

Fil had hired his own engineer, who determined that a 30-foot patch of brick facade would have to be removed to install flashing to protect the inner walls. When the builder refused to do the work, Fill had two choices: sue the builder in state Superior Court, or submit to binding arbitration, a system run by the state Department of Community Affairs.

He chose arbitration.

“I thought it would be quicker and cheaper,” Fill said. Three years later, the repair hasn’t been made, Fill testified before the SCI on Wednesday.

Fill said he made a videotape of the damage and submitted other documents to the arbitrator, Steven Rapp, appointed by Construction Arbitration Services Inc. of Dallas, Texas. Fill told the SCI he got the immediate impression that Rapp wasn’t impartial. He said Rapp didn’t think the submitted evidence was enough to warrant replacing the brick facade.

Fill then hired as attorney and threatened to sue. It was only after Rapp agreed to review his own arbitration decision that he made a startling admission, Fill testified.

“He came by [the house] and said that he had a business relationship with the builder,” Fill told the SCI. “He said he and the builder had done some land acquisition.”

Neither Rapp nor anyone from Majestic Homes could be reached for comment Wednesday. But a lawyer for Construction Arbitration Services, Marshall Lippman, said Rapp should have disclosed that information to the company, which would have recused him from the case.

“That was information that should have been disclosed before he took the case,” Lippman said.

Fill said he lost all faith in the arbitration process at that point.

“I just about exploded,” he said. After waiting three years and spending thousands of dollars on legal and expert fees, Fill said, he appealed the initial arbitration ruling and won. Majestic Homes is supposed to replace the facade when the weather warms up, he said.

The SCI plans to hold more hearings in coming months. Homeowners who have had problems with their warranties can contact the SCI at (609) 202-6767 or online at www.state.nj.us …

* * *

DISTRICT OF COLUMBIA COURT OF APPEALS
BOARD ON PROFESSIONAL RESPONSIBILITY

In the Matter of:

MARSHALL E. LIPPMAN, Respondent

Bar Docket No. 240-01

REPORT AND RECOMMENDATION OF THE
BOARD ON PROFESSIONAL RESPONSIBILITY

Respondent is a member of the District of Columbia Bar, having been admitted by motion on July 9, 1993. Respondent was also admitted to practice in New York. On July 17, 1997, the Appellate Division of the First Department of the New York Supreme Court disbarred Respondent. That discipline was based on a determination that Respondent had committed misconduct in five matters, including, in two matters, intentional misappropriation of client funds. Bar Counsel argues, and we agree, that the identical reciprocal discipline of disbarment should be imposed here….

For more on Marshall E. Lippman, GO TO > > > Paradise Paved

Miller & Chevalier – Big, politically-connected law firm.

May 17, 2001

Estate’s revenues hit record
$996 million in 2000

The sale of Goldman Sachs stock figures largely in the
18.7 percent rise for Kamehameha Schools

By Rick Daysog, Star-Bulletin

The Kamehameha Schools posted record revenues last year due in large part to the sale of its stock in Goldman Sachs Group Inc.

The charitable trust said its total revenue for the year ended June 30, 2000, was $995.9 million, an 18.7 percent rise from the year-earlier’s $839 million.

The $5.7 billion estate – founded in 1884 to educate children of Hawaiian ancestry – said that its subsidiaries and outside investments netted $567.9 million last year, including the Goldman Sachs sales. Last year, the trust sold 11 million shares, worth about $1 billion.

Its real estate arm, Bishop Holdings Corp., produced $38.7 million, while its Southern Nevada Income Properties subsidiary netted $24.3 million.

In a tax filing with the Internal Revenue Service, the trust reported that it spent $132.7 million on its educational program and construction, down 7.2 percent from 1999’s $143 million. . . .

The tax filing also provided a detailed description of the salaries paid to trustees, staffers and expenditures made to its outside contractors.

Former interim trustees David Coon, Francis Keala, Ronald Libkuman and Constance Lau each earned $192,500 during the 2000 fiscal year while retired Admiral Robert Kihune, the board’s chairman, was paid $203,500.

In January, the interim board was replaced by a permanent board, which included Lau, Kihune, attorney Douglas Ing, local business executive Diane Plotts and Hawaiian navigator Nainoa Thompson.

Hamilton McCubbin, who became the trust’s first chief executive officer in February 2000, was paid $122,031 for the February 2000 to June 2000 period. McCubbin’s contract called for a salary of about $300,000 for the 2000 calendar year. School President Michael Chun earned $213,578 during the 2000 fiscal year while Nathan Aipa, the estate’s former acting chief operating officer, earned $195,451. Aipa currently serves as special projects officer.

As for the trust’s outside contractors, the Washington D.C. law firm of Miller & Chevalier was paid $3.4 million for work relating an IRS audit and the removal of the former trustee last year while the accounting firm of KPMG Consulting LLC billed the trust $1.3 million.

Cades Schutte Fleming & Wright billed the trust $1.3 million while Watanabe Ing & Kawashima was paid $1.2 million.