On Wednesday, October 28, the Special Master for Troubled Asset Relief Program (TARP) Executive Compensation (also known as the ‘Pay Czar’) Kenneth Feinberg testified before the House Committee on Oversight and Government Reform. The Committee, chaired by Edolphus Towns (D-NY) probed Feinberg on his efforts to regulate the often egregious bonuses received by executives of bailed out companies. Feinberg’s testimony came six days after the release of his first determinations on the compensation packages for the top 25 employees at the seven companies that took the most taxpayer money through the TARP (AIG, Citigroup, Bank of America, Chrysler, GM, GMAC and Chrysler Financial).

Feinberg is making a great deal of news these days. On October 9 the Associated Press reported that the Pay Czar pressured Citigroup to sell its valuable energy trading unit, Phibro, to oil company Occidental Petroleum at a bottom of the barrel price in order to avoid a confrontation over the potential bonus for Phibro’s top trader Andrew Hall. The Following week, Reuters reported on General Motors’ difficulty in finding a new CFO, citing Feinberg’s limitations on executive compensation as the main hurdle in GM’s search. Though the public are rightly outraged over the outrageous bonuses given to executives at bailed out banks,  recent events should stand out as a red flag regarding the Obama Administration’s expanding control over (what used to be) the private sector.

Much of Wednesday’s House Committee hearing was spent examining the specifics of Feinberg’s compensation determinations. However, some members of the Committee used the opportunity to delve into broader aspects and implications of the mere existence of a ‘Pay Czar.’ Ranking Member Congressman Darrel Issa (R-CA) emphasized that Feinberg’s primary obligation should be focused on returning as much bailout money to the American people as possible. Issa stated that for there to be any hope of taxpayers seeing a return, Feinberg must take into consideration the retention and attraction of talent necessary to return the companies to profitability -- the Congressman cited recent reports that top executives are fleeing the bailed out companies.

Congressman Dan Burton (R-IN) reiterated Congressman Issa’s concerns over the talent leaving bailed out companies, musing why anyone would take a 90% pay cut instead of leaving for a job not under the Pay Czar’s domain. Burton labeled Feinberg’s program as actually encouraging top talent to flee. This issue is important, especially considering that Feinberg never analyzed which executives and divisions of AIG and the other companies were actually successful, as opposed to contributing to the financial crisis.  Feinberg’s determination lacks any proper analysis of the specific failings of these companies (for which each case is unique), and therefore his is seen by many as excessively broad and largely arbitrary.

The recent controversies involving Administration czars reflect an alarming policy of government involvement and command over significant private business decisions. Ironically, these incursions into private business are not even accomplishing the policy goals that purportedly underlie the actions. Special Inspector General for TARP Neil Barofsky, testified to Congress two weeks ago that the Treasury failed to rein in the compensation paid to many executives who were actually involved in the financial crisis, and who were bailed out with billions of taxpayer dollars.  In his report Barofsky writes,

[The] Treasury invested $40 billion of taxpayer funds in AIG, designed AIG’s contractual executive compensation restrictions, and helped manage the Government’s majority stake in AIG for several months, all without having any detailed information about the scope of AIG’s very substantial, and very controversial, executive compensation obligations. Treasury’s failure to discover the scope and scale of AIG’s executive compensation obligations, in particular at AIGFP, potentially resulted in a missed opportunity to avoid the explosively controversial events and created considerable public and Congressional concern over the retention payments.

Several congressmen, including Brian Bilbray (R-CA) and Jim Jordon (R-OH) expressed grave concerns over the potential for further government interference in the private sector. In response to this concern, Feinberg declared that he could not tell Congress how to regulate, but emphasized that he is against an extension of his authority to cover the compensation packages of additional companies

However, recent reports from the Federal Reserve seem to validate Congressmen Bilbray and Jordan’s concerns. On October 22, the Fed announced a proposal that it be authorized to conduct two “supervisory initiatives” in order to assure that “compensation policies of banking organizations do not undermine the safety and soundness of their organizations.” Specifically, the Fed wants the authority to analyze the compensation policies and practices at “28 large, complex banking organizations” as well as compensation packages at “regional community, and other banking organizations not classified as large and complex” in order to ensure that they are consistent with the Fed’s own “risk-appropriate incentive compensation” principles.

The irony in all of this is that the government has already attacked “excessive employee remuneration,” and in the process likely increased the very financial risk-taking it is now seeking to regulate. In 1993, the Budget Reconciliation Act barred corporations from using salary payments over $1 million as normal business expense tax deductions. Instead, stock options were the government’s preferred form of compensation, because these were theoretically performance based.  Yale law professor Jonathan Macey reports that the 1993 revision in the tax code “led to the very compensation packages that incentivized risk taking” – one of the favorite areas to assign blame for 2008’s financial crisis. Sixteen years later, the Administration and the Fed’s unanimous solution to the problem of excessive risk taking is the return to regulation of compensation.

Though there are legitimate concerns over the structure of executive compensation policies, these issues need to be debated in a public forum instead of simply regulated by a Pay Czar. While the Administration failed to use the salary controls it gained through TARP on many of those involved in the financial crisis, it is now using the expanded authority to prevent bailed out companies from attracting new talent – hurting the chances that the taxpayers will ever get paid back for the billions given away. The purported wrongdoers have escaped oversight and the target companies are being hurt in their attempts to return to financial soundness. Such is the unfortunate irony of the Obama Administration’s control over executive compensation.

The Senate Committee on Homeland Security and Governmental Affairs, chaired by Joe Lieberman, held a hearing on Thursday, October 22 to address the proliferation of policy ‘czars’ throughout the Obama Administration. Titled “Presidential Advice and Senate Consent: The Past, Present, and Future of Policy Czars” it is the second time the Senate has addressed the issue of czars this month.

Witnesses at the hearing included:

• Former Assistant to the President for Homeland Security and Secretary of Homeland Security, Tom Ridge
• George Mason University professor, Dr. James P. Pfiffner
• Former Attorney-Advisor in the Office of Legal Counsel at the U.S. Department of Justice, Lee A. Casey
• Former specialist in American National Government at the Congressional Research Service, Dr. Harold C. Relyea

As powerful Obama Administration “advisors” continue to make headlines, concerns are intensifying both in Congress and among the American public. Under the Obama Administration there are numerous powerful and unconfirmed czars who are enacting major policy decisions. In fact, one of Obama’s appointments - ‘Health Care Czar’ Nancy-Ann DeParle – has been granted under Executive Order the power to “develop and implement strategic initiatives.”

The Administration’s Czars are invested with massive amounts of power and lack any level of congressional oversight. Without oversight, many of the czars are shrouded in a veil of secrecy, threatening the government transparency required for an effective democracy. At the Congressional Hearing on Thursday, Ranking Committee Member Susan M. Collins addressed the inseparability of accountability and transparency in her opening statement, noting that “[O]versight ensures the accountability and transparency our Founding Fathers envisioned”

The Hearing touched upon the practical problem of ineffective government management due to a complex system of policy-advisors and czars. Unlike Cabinet-level leaders, who hold clearly defined and Senate confirmed positions, the various presidential czars hold positions of murky/undefined power. This leaves Congress and the public in the dark when it comes to who is really calling the shots, and as Senator Collins notes, undermines the “promises Obama made to the American people.” In his testimony, Former Homeland Security Secretary Tom Ridge argued against presidential dependence on policy czars, pointing instead to the advantages of clearly defined policy-makers. He notes “Greater transparency and communication about role delineation and reporting structure will promote greater collaboration and management effectiveness, which will promote good governance.”

Aside from the clear problems of how to achieve effective governance in the absence of any clear lines of accountability, policy-czars also violate the fundamental spirit of the Constitution. This is a problem because White House czars are able to circumvent Congressional authority by the President delegating authority that already is in the purview of other officials (which is arguably the case with Paul Volcker, Nancy Ann deParle and Carol Browner whose duties greatly overlap those of Secretaries). In a deliberate non-partisan effort, Senator Collins specifically pointed to both the Bush and Obama Administrations’ appointments of ‘WMD Czars’ (Gary Samore currently) as a complete circumvention of a statutory position that was created by Congress in 2007. The congressionally created WMD Officer is “To provide for the implementation of the recommendations of the National Commission on Terrorist Attacks Upon the United States. “ However, this Officer requires the same oversight required of all statutory officers. To avoid this pesky check on the presidency, the Obama Administration simply neglected to fill the congressionally created office, and created its own -- “Special Assistant to the President and White House Coordinator for Arms Control and Weapons of Mass Destruction, Proliferation, and Terrorism.” For Obama to leave a statutory office vacant and instead announce his own Czar -- who is to carry out the exact same duties --is a clear circumvention of Congressional oversight.

During this line of discussion, Lee A. Casey was the lone dissenter raising the question of whether Congress even has the authority to create a position to act as an adviser to the President.  He argued that such a creation raises an issue of the separation of powers.  After murmuring amongst colleagues, Senator Collins refuted Casey’s concern by noting that if such a question were valid it could be raised about any congressionally created position and had the President taken exception to the position, he had the authority to veto the law. 

Beyond the problem of policy-czars, witness James Pfiffner brought up a number of other threats to congressional constitutional authority. These include the use of signing statements “to imply that the president may not faithfully execute the law,” secret programs “that effectively nullify or circumvent the laws”, as well as a President’s use of the state secrets privilege “to avoid the disclosure of or accountability for their actions." To this extent, the czar issue is one among a number of threats to the fundamental values enshrined in the Constitution. Nonetheless, the unprecedented proliferation of czars makes it crucial that the issue be dealt with sooner rather than later. Defending the proper system of checks and balances is a necessity if the United States is to preserve the accountability and transparency required for a successful democracy. 

The Senate Judiciary Subcommittee on the Constitution, chaired by Democrat Russ Feingold of Wisconsin, held a hearing Tuesday, October 6, focused on “Examining the History and Legality of Executive Branch ‘Czars.” The hearing was called to address increasing concerns from the lack of Congressional oversight over the unprecedented number of special policy advisors appointed by the Obama administration.

The Obama administration’s ‘Czar’ appointments made headlines throughout the summer. The resignation of ‘Green Jobs Czar’ Van Jones after exposure of his radical ties, along with the recent exposure of ‘Safe Schools Czar’ Kevin Jennings’ controversial past statements regarding an underaged boy’s relations with an older man have left Congress and the public concerned with the need for Congressional oversight of such powerful executive appointments. As Chairman Feingold noted in his opening statement, “it’s not surprising that some Americans feel uncomfortable about supposedly all-powerful officials taking over areas of the government.” To this effect, Ranking Member Tom Coburn (R-OK) noted that transparency is needed to “reestablish confidence” in the government.

Witnesses at the hearing included: T.J Halstead, Deputy Assistant Director of the Congressional Research Service; John C. Harrison and Tuan Samohan, law professors from the University of Virginia and Villanova University; Bradley H. Patterson, Jr, Author of To Serve a President (2008); and Matthew Spaulding, Director of the B. Kenneth Simon Center for American Studies. Notably absent was any witness from the White House, despite an invitation from Senator Feingold. In response, the Senator noted that,

“The White House seems to want to fight the attacks against it for having too many ‘czars’ on a political level rather than a substantive level. I don’t think that’s the right approach. If there are good answers to the questions that have been raised, why not give them instead of attacking the motives or good faith of those who have raised questions?”

The subcommittee probed the group of expert witnesses regarding the constitutional limits on the involvement of presidential advisors, not subject to Senate consent, in establishing public policy. Witnesses defended the President’s right to advisors, but cited the well-publicized National Endowment of the Arts’ conference call asking artists to support the President as an incident that brings into question managerial issues with presidential advisors. In light of the NEA conference calls, it is imperative that Congress investigate the extent to which presidential advisors wield inappropriate influence over normal departmental issues.

Concerns were also raised with the July negotiations between auto industry leaders and ‘Climate Czar’ Carol Browner (in which she told industry executives to “put nothing in writing.”) When an unconfirmed ‘czar’ is negotiating in situations seemingly appropriate for an existing statutory officer, it raises concerns that executive authority may be dodging traditional constitutional requirements. As witness Matthew Spaulding notes in the case of czar Browner’s negotiations. “In addition to seeming to be beyond congressional legislative intent, it also seems to circumvent the authority of the EPA administrator.” Under today’s massive government bureaucracy, just who is holding the real reigns of authority with which to create policy is a baffling issue.

Citizens should be concerned that Congress itself is delegating away too much authority to the Executive Branch (through programs like “TARP”, to cite just one example). As recent events demonstrate, Americans are right to question whether Czars accountable only to the President are tilting the balance of government toward a precariously unaccountable Presidency.

Last month, a Food and Drug Administration panel approved the use of Gardasil for males.  Gardasil, a vaccine created to prevent the sexually transmitted Human Papillomavirus (HPV), was approved for women under the age of 25 in 2006, and recently several states have moved to mandate the vaccine for young girls.  On September 9th, the FDA's Vaccines and Related Biological Products Advisory Committee (VRBPAC) panel voted 7 - 1 in favor of approving Gardasil for males, and it is expected that the FDA will officially approve the decision shortly. 

HPV  is the most common sexually transmitted disease in the world.  While the majority of sexually active people have contracted HPV, very few will ever experience symptoms.  HPV can lead to cervical cancer in women, but in men the most common complaint is genital warts.  Although genital warts are contagious and can cause discomfort and embarrassment, they are usually not serious.  Also, according to a briefing document provided to the VRBPAC, only "~1% of all sexually active adults in the U.S." has genital warts.  Given the extremely low number of males who experience complications from HPV, it is worth questioning whether the vaccine is necessary for males at all.  The VRBPAC briefing document shows that Gardasil is only 67.2% effective for men, and for men who have been exposed to HPV, the efficacy rate is only 23.2%.  Another document provided to the VRBPAC revealed that in safety studies, "overall, 46.1% of male subjects who received Gardasil...reported one of more new onset medical conditions after Day 1."

As the FDA moves to approve Gardasil for males, other sources still question its safety for use in females.  According to the FDA's Clinical Review, released in September 2008, 85.9% of girls aged 9 -17 experienced adverse events after receiving the Gardasil vaccine.  92.5% of women aged 18 - 26 experience adverse events.  The percentage of patients with new medical conditions after receiving their first dose of Gardasil was 38.6%.  The report also found that "there was only an 18.4%...reduction of any HPV related CIN 2/3 in the entire study population."  CIN 2/3 are lesions that often lead to cervical cancer.  The study concluded that "it is not known the ultimate duration of immune response elicited by Gardasil, nor its long term safety." 

In addition to supplemental documents, the FDA and the Centers for Disease Control (CDC) have a reporting system put in place to monitor adverse reactions.  The Vaccine Adverse Event Reporting System (VAERS) tracks all adverse events reported in relation to Gardasil.  Judicial Watch routinely requests these reports using the Freedom of Information Act.  In the latest VAERS produced, Judicial Watch received reports from May 2009 to September 4, 2009, roughly a four month period.  In those four months:      

• 1510 adverse event reports were filed
• 19% were classified as "serious"
• 40 cases were life threatening
• 77 cases resulted in permanent disability

Also, 8 deaths were reported, making the total number of deaths connected to Gardasil vaccinations 55.  Given these numbers, one might ask why anyone would approve the vaccine, let alone mandate it.  However, the FDA and CDC continuously downplay the importance of VAERS data.

While some VAERS are filed by physicians and medical staff, in many cases a VAERS report must be submitted by the patient or a family member because a doctor or nurse refuses to fill out the form.  In those instances, the FDA has claimed that there is not "sufficient detail" to evaluate the cases.  This does not in any way imply that the adverse reactions in these reports are any less real, but instead raises a question:  Why do the FDA and CDC continue to use what they deem an unreliable system to collect their data?  Instead of dismissing the information that they collect, they ought to either reform the system or start analyzing information from every VAERS. 

Gardasil's safety is a growing concern.  The FDA has not done a thorough job of evaluating problems with the vaccine, despite issues raised by numerous scientists and concerned parents whose daughters have experienced adverse reactions.  At present, it is not known whether Gardasil is safe or effective in the long term.  As the FDA moves to approve Gardasil for males and more states begin to mandate the vaccine, the public ought to carefully examine the available data and determine whether Gardasil is worth the risk.  Judicial Watch has obtained thousands of documents on Gardasil.  All the information obtained from FDA documents, as well as Judicial Watch's special report and press releases, may be found at our Gardasil Investigation page. 

Documents

VAERS, May 2009 - September 2009

September 2009 VRBPAC Briefing Information

FDA Information on Gardasil

It is merely an illusion.  The river and the fence do not provide any special protection. The Rio Grande and the segments of border fencing along the U.S.-Mexican border do not deflect drug cartel violence. Reports of violence in the United States are increasing, and there are reports and statistics to prove it. Politicos engage in wishful thinking – hoping the full force of the violence stays south of the border. They only concede that there may be a potential escalation in violence at some point in the future. In border towns, however, whispers are about current violence.

Judicial Watch asked for a sampling of police crime reports along the border, focusing primarily on Arizona. Arizona was our focal point because of the use of its freeways and cities for smugglers (Please see our “Drop House Map”).  The police reports clearly do not distinguish crime by correlation to narco-terrorism. The Yuma Sheriff County’s Office provided incident summaries showing roughly 72 incidents in 2008 that are either kidnapping, homicide or missing persons. The number is significant, but without gaining direct access to these law enforcement records, it is unclear whether these crimes are connected with drug trafficking and cartels. We also reviewed incident reporting from the Cochise County Sheriff’s Office and the Santa Cruz County Sheriff’s Office. The Deputy Reports from the Santa Cruz Sheriff, located in Nogales, AZ (or “Nogadishu” as some Border Patrol agents refer to it, with a rhetorical tip-of-the-hat to the war-torn Somali capitol) detail the victim’s name, the date, location, and a brief summary of the incidents.  Many of these incidents detail exploitation of illegal aliens crossing the border. The illegal aliens’ vulnerability to criminal predators resulted in nearly $10,000 of stolen property per year that has been recorded in one single county. No one guesses at the amount that goes unreported. Perhaps, this value would appear to be insignificant, but the easy money could lead to increased criminal activity and bring more petty and serious criminals into the area as it did with smuggling. (Recall that smuggling was a “mom and pop” operation until cartels realized that the benefits outweighed the risks and they could successfully expand and diversify their operations).   

Judicial Watch also sought medical records of violent deaths from County Medical Examiners (ME) along the border.  The MEs seemed reticent to provide the sort of data that would lead to a thoughtful analysis of violent deaths associated with criminal activity along the border. Cochise County Medical Examiner informed Judicial Watch that “Every single case would have to be pulled to determine [the] exact place of death in the county” and that “homicide cases are not releasable by [them].” Judicial Watch withdrew its request from Pima Medical Examiner after being informed that they have no way of determining whether the homicides are drug related.  Fully exploring the circumstances and conditions of these deadly border violence cases remains an open investigative lead for Judicial Watch.

We know from our previous border investigations that many violent border crimes go unreported. Cartels are infamous for retribution. Keeping silent about one murder may prevent the death of family members back in Mexico.  At some point, common sense also needs to be part of the evaluation of border crime rather than statistics alone.  With just a thin muddy river separating two cities as is the case between Juarez and El Paso, is it plausible that one city has a 1000 murders while the other has only 13?¹ It is misleading to claim that cartel violence has not spread to the United States-- the reports and statistics are not maintained to account for this correlation and crime that is surrounded by lethal deterrence to talking is likely to go unreported. The whisperings tell us that the crime has already crossed the border and it is only time until the statistics catch up.  

Related Reading

1. Bloodbath of Juarez rarely spills into El Paso The Houston Chronicle October 5, 2008 Sunday

The Border Violence Myth

U.S.-Mexico Border Closed Due to Shootout

Officials: Mexico Drug Violence Spills to US

In a labyrinthine transaction, the United States Department of Homeland Security (DHS) paid the President of China’s son, Hu Haifeng, to provide port security for Los Angeles. The transaction began with the Department of Homeland Security’s Federal Emergency Management Agency granting funding to Los Angeles through the Port Security Grant Program. Los Angeles Harbor Department then contracted with Duly Research. Duly research then enlisted China’s Nuctech. If you follow the money, DHS employed an individual with very close ties to China’s communist regime to provide a mobile scanning unit for the port. Government Security News (GSN) reported that while George Cummings, the Director of Homeland Security with the Port of Los Angeles, claimed to have “no heartburn” over the contract in fall 2008, by February 2009 the Port planned to cancel the agreement due to contract default.

The GSN article raised several thought-provoking questions about the exchange of money. It is not clear whether Nuctech was able to outbid other companies due to government subsidies and was in fact engaged in dumping; or whether Nuctech engaged in reverse engineering and China will be able to gain access to images from the device. Equally disconcerting is the recent allegations of graft involving Nuctech in Namibia.  Meanwhile, Hu Haifeng, Jintao’s son, has been promoted to Communist Party Secretary of Tsinghua Holdings.

Judicial Watch originally solicited records from the Port of Los Angeles and the Department of Homeland Security (DHS). DHS fielded the request to a component not responsible for the contract resulting in a “no records” response. Judicial Watch then submitted the request to Federal Emergency Management Agency (FEMA), the grantor of funding. FEMA proceeded to lose the request and prolonged its response over 6 months to finally declare that it did not have responsive records. Rather than allaying concerns about the contract, FEMA’s response has provoked suspicions and the matter is under appeal. The documents obtained from the Port of Los Angeles further stoke these suspicions.

An unresolved concern relates to the purpose of the machine. GSN notes that George Cummings, the Director of Port Homeland Security, acknowledges the potential of the machine to capture and transmit images, but discards the concern by indicating the machine will be used for insignificant scans of groceries. Two problems arise with Cummings’ disregard: current use of the machine may not reflect future use and the contract itself indicates the machine will be used to combat terrorism. While Cummings and the Port have stated the machine is intended for grocery scans, they upgraded their purchase order by $398,901.25 in March 2008 to include items that “address needs and requirements with direct operational function in the Port’s efforts to combat terrorism.”  The Port specified “boom angles” to detect “false walls, hidden compartments and small objects near walls or larger items of cargo in subject vehicles or containers.”  By buying such applications, it would appear that there is a concern about sabotage, smuggling, or terrorism in containers, even the food ones.

A second area of concern with the contract is the qualification and preference given by the small and local business program. With one breath, the Port of Los Angeles claims that the requirements do not provide for Buy American (federal trade and acquisition agreements on certain purchases that requires a product to be made and sold in the United States), and in the next breath, they provide small and local business preference. The preference allows a bid to be considered at 10% less than its cost for competitive purposes. While Duly Research is a small and local business in California, the entire liability for its product lies with Chinese firm, Nuctech. Clause 14 of the General Conditions for the Small and Local Business Program requires that liability remain with the contractor to save the city of Los Angeles. The bid includes a letter from Nuctech to the City of Los Angeles in which it refers to Clause 14 and states that “Nuctech shall, at all times, relieve, protect, save harmless, and fully indemnify the City of Los Angeles.” The situation raises the issue of whether the Small and Local Business Program preference was justified. It would appear that Nuctech simply used Duly’s name and small and local business status to enter its product as a bid.

While it is obvious that the government too quickly negated “heart burn,” the problem with government “heart burn” is that the government does not learn from the experiences. Recall that during the 1990s the Clinton Administration was aware that Hutchison Whampoa had ties to China’s regime and its involvement with the Panama Canal could pose a security risk for the United States, but did not act upon such information. Several years later, the Whampoa debacle was out of mind and the US once again treaded dangerous ground intermingling US security issues with Chinese involvement.  As we know from the these incidents, the US can at times be a slow learner from its mistakes and may once again crave Chinese involvement despite the upset it will necessarily cause.