Saturday, July 31, 2010

Special Army Unit Ready To Be Deployed On American Soil Just Before Nov. Elections – Update (Video)


Note:  An update has been posted at the end of the article.

In October of this year, one month prior to the November midterm elections, a special army unit known as 'Consequence Management Response Force' will be ready for deployment on  
 American soil if so ordered by the President.

The special force, which is the new name being given to the 1st Brigade Combat Team of the 3rd Infantry, has been training at Fort Stewart, Georgia and is composed of 80,000 troops.

According to the Army Times,

They may be called upon to help with civil unrest and crowd control or to deal with potentially horrific scenarios such as massive poisoning and chaos in response to a chemical, biological, radiological, nuclear or high-yield explosive, or CBRNE, attack.

The key phrase is 'may be called upon to help with civil unrest.'


This afternoon a local radio talk show host reported that he had been in contact with a member of the military.  This military source stated that the armed forces have been alerted to the strong possibility that civil unrest may occur in the United States this summer, prior to the midterm elections of 2010.

The source described this as 'our long, hot summer of discontent' that could be eerily reminiscent of the summer of 1968 when riots broke out in many of our largest cities. 

However, the summer of 2010 could well be much worse due to the players involved.  In 1968 the major players were war protesters.  This time, the outrage simmering beneath the surface of American society involves a broad cross-section of the heartland, and most of them are heavily armed.

It is highly unlikely that these citizens would ever initiate armed conflict of any kind.  In their view, gun rights are for self-defense--and for defense against tyrannical government, which our Founders regarded as the most dangerous force on earth.

However, it has become clear that other groups may well initiate violence in order to start an 'incident' that would give Obama and a rogue Congress a reason to implement martial law, confiscate the citizens' guns, enforce curfews, and suspend all future elections until such time as it is deemed 'safe' to proceed with human liberty as encapsulated in the right to vote.

Tea Party members, for example, have been warned in recent days that members of Andy Stern's SEIU union and members of the organization formerly known as ACORN plan to infiltrate Tea Party gatherings in order to incite some sort of incident that could result in armed conflict.
In addition, all indications point to a humiliating defeat for the Democrats and Obama in November.  Not only will the House in all likelihood transfer to Republican control, but it is increasingly possible for the Democrats to lose the Senate as well.

And there are Leftwing groups in this country that would use whatever means necessary to prevent that from happening.

ACORN has already gone underground, changing its name so as to fly beneath the radar screen.  How many people will  the group register to vote illegally?

And with Obama's plan to naturalize between 10 and 20 million illegal aliens, a brand new voter base for the Democrats will be in place prior to November.
Add to this the growing unrest over continued high unemployment, the coming spike in interest rates and inflation, and the still-boiling outrage over the manner in which Obama and the Democrats shoved ObamaCare down the throats of the citizens, and all of the ingredients are present for a major F-5 tornado to sweep across the heartland.

To what extent would soldiers use deadly force during such 'civil unrest' should the Consequence Management Response Team be utilized?  During the anti-war riots of the 1960s they killed student protesters.  What about now?

The military source cited by the radio host today was asked this very question.  He would merely say that the culture of the U.S. military is changing--half support Obama and the other half are dead-set against him.

His conclusion?  There is no way to know for sure if they would obey an order to open fire on ordinary citizens. 

Update:  The Cato Institute published this warning when the program was launched in its first phase in 2008 (the program has been updated and expanded since 2008).   The Founders insisted that standing armies were never to be used against American citizens on our own soil, no matter what violations of this principle have occurred in the years following.  In the spirit of the Patriots and of real journalists government must be questioned constantly and held to intense scrutiny in order to preserve liberty.

Conservative Examiner

Teacher Facing Assault Charge for Alleged Spanking - More Evidence of a Nation Turning To Liberal Extremism

At what point should we continue to tolerate and coddle incorrigible children? When are we going to realize that sparing the rod spoils the child?

(July 30) -- A high school teacher in Connecticut is in hot water after spanking an unruly student, police say.

Francis Hajosy, 54, of Stafford, has been charged with fourth-degree sexual assault and second-degree breach of peace for the incident, which occurred last month in his classroom at Enfield High School, according to court documents.
Francis Hajosy
Enfield Police Department
 
High school teacher Francis Hajosy, 54, of Stafford, Conn., has been charged with fourth-degree sexual assault and second-degree breach of peace for allegedly spanking a student.
The student, who has not been identified, was reportedly in Hajosy's classroom during her study hall period. The incident was sparked when she put her feet on a desk, prompting Hajosy to say, "You know, you're not too big for me to put over my knee and spank," the Hartford Courant reported, citing the arrest affidavit.

The student picked up a bottle of spray glue and sprayed it into the air, at which time Hajosy put his hands on her shoulders, authorities say. A brief scuffle ensued, during which the girl attempted to kick Hajosy; police say he responded by spanking her four times.

After a school resource officer launched an internal investigation, Hajosy was questioned by police. He said, "I screwed up; I need to make it right," the court documents allege.

Hajosy was subsequently arrested and ordered not to have any contact with the student. He was also been suspended from his job, pending the outcome of the investigation.

Hajosy was arraigned Wednesday and released on $5,000 bond. He is scheduled to appear in court again on Aug. 13.

Friday, July 30, 2010

Fallen Soldiers' Families Denied Cash as Insurers Profit - Despicable Practices by Insurers Allowed to Go On Without Any Government Oversight

The package arrived at Cindy Lohman’s home in Great Mills, Maryland, just two weeks after she learned that her son, Ryan, a 24-year-old Army sergeant, had been killed by a bomb in Afghanistan. It was a thick, 9-inch-by- 12-inch envelope from Prudential Financial Inc., which handles life insurance for the Department of Veterans Affairs.

Inside was a letter from Prudential about Ryan’s $400,000 policy. And there was something else, which looked like a checkbook. The letter told Lohman that the full amount of her payout would be placed in a convenient interest-bearing account, allowing her time to decide how to use the benefit.

“You can hold the money in the account for safekeeping for as long as you like,” the letter said. In tiny print, in a disclaimer that Lohman says she didn’t notice, Prudential disclosed that what it called its Alliance Account was not guaranteed by the Federal Deposit Insurance Corp., Bloomberg Markets magazine reports in its September issue.

Lohman, 52, left the money untouched for six months after her son’s August 2008 death.
“It’s like you’re paying me off because my child was killed,” she says. “It was a consolation prize that I didn’t want.”

As time went on, she says, she tried to use one of the “checks” to buy a bed, and the salesman rejected it. That happened again this year, she says, when she went to a Target store to purchase a camera on Armed Forces Day, May 15.

‘I’m Shocked’

Lohman, a public health nurse who helps special-needs children, says she had always believed that her son’s life insurance funds were in a bank insured by the FDIC. That money -- like $28 billion in 1 million death-benefit accounts managed by insurers -- wasn’t actually sitting in a bank.
It was being held in Prudential’s general corporate account, earning investment income for the insurer. Prudential paid survivors like Lohman 1 percent interest in 2008 on their Alliance Accounts, while it earned a 4.8 percent return on its corporate funds, according to regulatory filings.

“I’m shocked,” says Lohman, breaking into tears as she learns how the Alliance Account works. “It’s a betrayal. It saddens me as an American that a company would stoop so low as to make a profit on the death of a soldier. Is there anything lower than that?”

Millions of bereaved Americans have unwittingly been placed in the same position by their insurance companies. The practice of issuing what they call “checkbooks” to survivors, instead of paying them lump sums, extends well beyond the military.

Touching Americans

In the past decade, these so-called retained-asset accounts have become standard operating procedure in an industry that touches virtually every American: There are more than 300 million active life insurance policies in the U.S., and the industry holds $4.6 trillion in assets, according to the American Council of Life Insurers.

Insurance companies tell survivors that their money is put in a secure account. Neither Prudential nor MetLife Inc., the largest life insurer in the U.S., segregates death benefits into a separate fund.

Newark, New Jersey-based Prudential, the second-largest life insurer, holds payouts in its own general account, according to regulatory filings.

New York-based MetLife has told survivors in a standard letter: “To help you through what can be a very difficult, emotional and confusing time, we created a settlement option, the Total Control Account Money Market Option. It is guaranteed by MetLife.”

No FDIC Insurance

The company’s letter omits that the money is in MetLife’s corporate investment account, isn’t in a bank and has no FDIC insurance.

“All guarantees are subject to the financial strength and claims-paying ability of MetLife,” it says.
Both MetLife, which handles insurance for nonmilitary federal employees, and Prudential paid 0.5 percent interest in July to survivors of government workers and soldiers. That’s less than half of the rate available at some banks with accounts insured by the FDIC up to $250,000.

Bank of New York Mellon Corp. handles the paperwork and monthly statements for customers with MetLife “checking accounts.” The insurance company, not the bank, most recently reported holding about $10 billion in death benefits, in 2008.

The “checkbook” system cheats the families of those who die, says Jeffrey Stempel, an insurance law professor at the William S. Boyd School of Law at the University of Nevada, Las Vegas, who wrote ‘Stempel on Insurance Contracts’ (Aspen Publishers, 2009).

‘Bad Faith’

“It’s institutionalized bad faith,” he says. “In my view, this is a scheme to defraud by inducing the policyholder’s beneficiary to let the life insurance company retain assets they’re not entitled to. It’s turning death claims into a profit center.”

Prudential’s Alliance Account is helpful to families of soldiers, says company spokesman Bob DeFillippo.

“For some families, the account is the difference between earning interest on a large amount of money and letting it sit idle,” he says. Prudential follows the law, he says.

“We fully and regularly disclose the nature and terms of the account to account holders,” DeFillippo says. “We make it clear that the money can be withdrawn at any time by simply writing a draft.”

Metlife spokesman Joseph Madden says his company’s customers are very happy with the Total Control Account.

‘Overwhelmingly Positive’

“The feedback from TCA customers has been overwhelmingly positive,” he says. “The TCA affords beneficiaries security, peace of mind and time to make an informed decision -- while earning interest in the interim.”

Madden says the company was paying some survivors 0.5 percent in July while some others got 1.5 percent or 3 percent, depending on the age and origin of insurance accounts. The accounts don’t violate any laws, Madden says, and are authorized by New York state insurance law.

Insurers are holding onto at least $28 billion owed to survivors, according to three firms that handle retained-asset accounts for about 130 life insurance companies. There are no public records showing how much companies are holding in these accounts.

The “checks” that Cindy Lohman wrote, the ones rejected by retailers, were actually drafts, or IOUs, issued by Prudential. Even though the “checks” had the name of JPMorgan Chase & Co. on them, Lohman’s funds weren’t in that bank; they were held by Prudential.

Federal Bank Law

Before a check could clear, Prudential would have to send money to JPMorgan, bank spokesman John Murray says.

Insurance companies -- in addition to holding onto the money of survivors, paying them uncompetitive interest rates and giving them misleading guarantees -- may be violating a federal bank law. A 1933 statute makes it a felony for any company to accept deposits without state or federal authorization.

That means only banks or credit unions can accept deposits, says Arthur Wilmarth, a professor at George Washington University Law School in Washington who has testified before Congress about banking regulations.

If a prosecutor pressed an insurance company, retained- asset accounts could be outlawed because insurers say they deposit money into these accounts and don’t have bank charters or banking regulation, Wilmarth says. MetLife also offers its own version of certificates of deposit.

“If it swims, quacks and flies like a duck, the court could decide that it is indeed a duck,” he says. “You then potentially could have a criminal violation.”

Potential Bank Run

This unregulated quasi-banking system operated by insurers has none of the protections of the actual banking system. Lawrence Baxter, a professor at Duke University School of Law in Durham, North Carolina, says the potential exists for a catastrophe.

If one insurer is unable to meet its obligations on retained-asset accounts, people could lose faith in other companies and demand immediate payment, triggering a panic, says Baxter, who has consulted with federal agencies on financial regulation.

The government established the FDIC in 1933 after frantic depositors tried to pull their money from banks. The federal government has no such program for death-benefit accounts.

“There’s more than $25 billion out there in these accounts,” Baxter says. “A run could be triggered immediately by one insurance company not being able to honor its payout. The whole point of creating the FDIC was to put an end to bank runs.”

No Federal Regulation

The sweeping financial regulatory legislation signed by President Barack Obama on July 21 doesn’t address retained-asset accounts. It creates a new federal insurance office, which won’t be a regulator. It will collect information, monitor the industry for systemic risk and consult with state insurance regulators.

An industry with $19.1 trillion in potential liabilities will remain unregulated by the federal government. In 2008, insurers approved claims totaling $60 billion in death benefits, according to the life insurance council.

The federal government doesn’t even regulate the life insurance it supplies, via MetLife, to its own employees in a program called Federal Employees’ Group Life Insurance. As the VA does for soldiers, the U.S. Office of Personnel Management sends handbook to nonmilitary government workers -- some 4 million active employees and retirees.

The handbook says their life insurance policies automatically pay out death benefits in the form of a “money- market-account checkbook.” The 217-page handbook omits that the money isn’t FDIC insured and will stay with MetLife until someone writes a “check.”

‘Unfair Advantage’

This lack of disclosure is unconscionable, says Harvey Goldschmid, a commissioner of the U.S. Securities and Exchange Commission from 2002 to 2005.

“I can’t imagine why bank regulators haven’t been requiring a prominent ‘no FDIC insurance’ disclosure,” says Goldschmid, who’s now a law professor at Columbia University in New York. “This system works very badly for the bereaved. It takes unfair advantage of people at their time of weakness.”

The closest relative to retained-asset accounts may be money-market mutual funds, which are pools of cash invested in short-term debt securities.

Money Market Rules

The SEC requires fund companies to warn investors that money market funds don’t have FDIC insurance. It also mandates that fund managers provide a prospectus, that they invest in specific types of safe debt and that they post a detailed schedule of their investments monthly on their websites.

Insurers’ retained-asset accounts have none of those regulatory protections.

A June 2009 MetLife standard condolence letter to survivors leaves out that accounts aren’t in a bank and aren’t federally insured. In June 2010, 25 years after MetLife invented retained- asset accounts, the company released a customer agreement that does disclose that retained assets aren’t in a money market account nor in a bank and that they have no FDIC insurance.

“The assets backing the Total Control Accounts are maintained in MetLife’s general account and are subject to MetLife’s creditors,” the agreement says. That language contradicts the federal employee handbook, which says survivors get a money market account.

Gerry Goldsholle, the man who invented retained-asset accounts, says MetLife makes $100 million to $300 million a year from investment returns on the death benefits it holds. A former president of MetLife Marketing Corp., Goldsholle, 69, devised the accounts in 1984. He’s now a lawyer in private practice in Sausalito, California.

‘This Is Crazy’

Goldsholle says he pondered the billions of dollars of death-benefit proceeds the company paid out each year.

“I looked at this and said this is crazy,” says Goldsholle, who left the firm in 1991. “What are we doing to retain some of this money? It’s very expensive to bring money in the front door of an insurance company. You’re paying very large commissions and sales expenses.”

So he came up with a way for MetLife to hold onto death benefits.

“The company would win because we would make a nice spread on the money,” Goldsholle says, while customers would earn interest on their accounts. MetLife, he says, can earn 1 to 3 percentage points more from its investment income -- mostly from bonds -- than it pays out to survivors.

Misconceptions

The accounts Goldsholle invented have spread much faster than the ability of state regulators to track them -- or even to understand how they work. Ted Hamby, North Carolina’s deputy insurance commissioner for life and health, says he believes retained-asset accounts have FDIC protection.

“Whatever money is on deposit in that checking account will be insured, up to the limits of the FDIC,” he says. He’s wrong. No retained-asset accounts have FDIC coverage.

In Connecticut, where 106 insurance companies are based, state insurance department manager for market conduct Kurt Swan also says that retained-asset accounts are kept in banks, with FDIC coverage.

“I think they’re just trying to offer some flexibility to the beneficiary,” he says. Swan and his colleague, William Arfanis, the department’s principal financial examiner, both say the insurers don’t profit from the retained-asset accounts. That too is wrong. The companies do earn investment gains on death benefits.

Some Rules

Just six states had any rules for retained-asset accounts as of July 2009, according to the National Association of Insurance Commissioners. Arkansas, Colorado, Kansas, Nevada, North Carolina and North Dakota require insurers to disclose fees and interest rates and to tell survivors they may withdraw all of the money by writing a single check.

Maryland, which isn’t on the NAIC list, also has rules.

Pennsylvania Insurance Commissioner Joel Ario, whose state has no rules for retained-asset accounts, says he has asked his staff to prepare a regulation forbidding insurance companies from using such accounts as the default method of paying a death claim.

“I haven’t heard a plausible argument about why these accounts are better for the consumer,” Ario says.

If state insurance regulators have paid scant attention to retained-asset accounts, state bank regulators have taken an even more hands-off approach.

‘Not Drawn Attention’

“Quite honestly, we deal with issues that our members want us to deal with,” says Michael Stevens, senior vice president for regulatory policy at the Washington-based Conference of State Bank Supervisors. “This is not one that has drawn their attention.”

Three companies have not only noticed but have also profited by handling retained-asset accounts for insurers. Open Solutions Inc., based in Glastonbury, Connecticut, oversees 400,000 accounts for 67 insurance companies.

Open Solutions sends out “checkbooks,” prints periodic statements and computes accrued interest for accounts with total deposits of $10 billion, says Jay Woldar, director of sales and account management at Open Solutions.

One of its competitors, Bank of New York Mellon, administers more than 500,000 retained-asset accounts holding a total of $14 billion, including MetLife’s retained assets. Chicago-based Northern Trust Corp. handles about $4 billion in 125,000 accounts, spokesman John O’Connell says.

Survivors generally don’t touch these accounts immediately.

Accounts Stay Opened

“About 40 percent of the money stays in for more than a year,” Woldar says. Insurers can have use of survivors’ money for years, even decades, says Randi Lichtenstein, a product line manager at Bank of New York.

“They can stick around for quite a while,” she says. “There are accounts that all insurance companies have on these platforms that go back 10, 15, 20 years.”

MetLife’s Madden says most of its customers’ retained-asset accounts are closed within one year. About 28 percent of survivors of soldiers and veterans keep their retained-asset accounts open for more than two years, the VA says.

During a routine audit completed in 2004, the New York State Insurance Department found that 1,476 retained-asset accounts, worth a total of $33.5 million, at Hartford, Connecticut-based Phoenix Life Insurance Co., had been dormant for more than three years.

In New York, funds in an account that remains dormant for more than three years may be turned over to the state. Phoenix spokeswoman Alice Ericson says the company now has a policy of sending letters to people whose accounts have been inactive for two years.

Inactive Accounts

Almost one-third of the 6,890 retained-asset accounts run by Mony Life Insurance Co. were inactive for more than three years, New York auditors found in 2002. Mony is now owned by Axa SA, Europe’s second-largest insurer by market value.

A few people have sued insurers over the use of retained- asset accounts. Prudential won a lawsuit in 2009 in which a survivor complained about the Alliance Account. MetLife has a case pending in which a survivor says that she was cheated by the retained-asset account. In court-filed papers, MetLife denies any wrongdoing.

There has been only one ruling by a federal appellate court on the substance of such accounts -- and it went against an insurance company.

After a federal judge in Boston dismissed a policyholder suit claiming that Chattanooga, Tennessee-based insurer Unum Group was stealing account earnings from survivors, the U.S. Court of Appeals for the First Circuit overruled the lower court in 2008. It reinstated the case.

‘Euphemistically Named’

“The euphemistically named ‘Security Account,’ accompanied with a checkbook, was no more than an IOU which did not transfer the funds to which the beneficiaries were entitled out of the plan assets,” the three-judge panel wrote.

Unum spokeswoman Mary Clarke Guenther says retained-asset accounts are a commonly accepted practice in the industry. The case is pending.

Absent regulatory or legal intervention, bereaved family members like Cindy Lohman will continue to find death benefits going into retained-asset accounts. Her son, Ryan, posthumously received a Purple Heart and Bronze Star Medal for sacrificing his life to save fellow soldiers in 
Afghanistan in August 2008.

He had ordered a Humvee to swerve to avoid an explosive device, exposing himself to its deadly blast.

‘Accept The Reality’

Three days after learning of her son’s death, Lohman says, an Army casualty assistance officer came to her home, explaining that Ryan had a life insurance policy and that her signature was needed to release the money.

“By signing that, it forced me to accept the reality that he was dead and not coming back,” she says.

Since 1999, the VA has allowed Prudential to send survivors “checkbooks” tied to its Alliance Account. In 2009 alone, the families of U.S. soldiers and veterans were supposed to be paid death benefits totaling $1 billion immediately, according to their insurance policies. They weren’t.

Prudential’s VA policies promise either a lump sum payout or 36 monthly payments. About 90 percent of survivors, including Lohman, choose to receive the full amount upfront. When they do, they don’t get a check; they get a “checkbook.”

Under a 2008 law, survivors covered by Prudential’s VA policy are allowed one year to put death benefits into a Roth IRA, allowing them to earn investment gains for the rest of their lives tax-free. Prudential never informed Lohman, she says.

‘If They Had Told Me’

“I definitely would have done that if they had told me,” Lohman says.

Even Stephen Wurtz, deputy assistant director for insurance at the VA, who has overseen the insurance program for 25 years, has been kept in the dark by Prudential.

“Prudential runs the program on a cost-reimbursement basis only,” he initially said, referring to the $4.2 million in fees the VA paid Prudential in 2009. “They’re really good guys. They do it patriotically. They don’t make any money from the Alliance Account.”

Wurtz, 62, said he had believed that the Alliance Account money went into a bank. After he learned that the payouts actually stayed in Prudential’s general fund, Wurtz says, he asked Prudential how much money the insurance company made from these accounts and how many dollars it held in retained assets.

Prudential declined to answer, saying that information was proprietary, Wurtz says.

‘Maybe I Didn’t’

Prudential, which has had the insurance contract with the VA since 1965, pitched the checkbook payout to the VA in 1999 as an added benefit to survivors, Wurtz says. The government agency accepted Prudential’s offer, he says.

“Maybe I didn’t ask enough questions,” he says.

Printed on each “check,” next to “Prudential’s Alliance Account” is the name of JPMorgan, the second-biggest U.S. bank by assets. JPMorgan spokesman Murray declined to say how much the bank is paid for its role with Prudential.

The way Prudential has set up the “checks” implies that JPMorgan stands behind the accounts and that they are thus backed by the FDIC, Duke’s Baxter says.

“That’s misleading the beneficiaries,” he says.

“We disclose the roles of all companies involved in administering these accounts,” Prudential’s DeFillippo says. JPMorgan’s Murray declined to comment.

Prudential’s general account earned 4.4 percent in 2009, mostly from bond investments, according to SEC filings. The company has paid survivors 0.5 percent in 2010.

‘It’s Shameful’

“It’s shameful that an insurance company is stealing money from the families of our fallen servicemen,” says Paul Sullivan, who served in the 1991 Gulf War as an Army cavalry scout and is now executive director of Veterans for Common Sense, a nonprofit advocacy group based in Washington. “I’m outraged.”

Sullivan, a project manager at the VA’s benefits unit from 2000 to 2006, says he was never told Prudential kept money and earned investment gains from soldiers’ insurance payouts instead of sending it to survivors.

“There shouldn’t be secret profits,” he says. “This should be transparent. The lack of oversight is appalling.”

It’s not much different for the 4 million nonmilitary U.S. government employees and retirees -- including staff of the FDIC -- covered by MetLife policies. That program, begun in 1965, averages more than $2 billion in death benefits claimed every year, the government says.

Payouts are handled by the Office of Federal Employees’ Group Life Insurance. That makes it look like the government is taking care of its employees’ insurance coverage. It isn’t. That “office” is a unit of MetLife.

MetLife Holds the Money

Edmund Byrnes, a spokesman for the Office of Personnel Management, which oversees MetLife’s federal employee contract, says MetLife segregates death benefits into beneficiary accounts after it approves death claims.

“Once MetLife transfers the funds to the Total Control Account, the monies are no longer under MetLife’s control,” Byrnes says.

MetLife spokesman Madden says something different.

“The assets that back the liabilities on all the TCAs are placed in MetLife’s general account,” he says.

Back at the Veterans Affairs office, Deputy Assistant Director Wurtz, who’s a civilian employee, says he now understands for the first time that since he’s covered by the federal insurance program, his own wife could receive a MetLife “checkbook” someday.

‘Ripping Off Their Own’

“Uncle Sam is ripping off their own,” Wurtz says. “My wife would get the money, and they would blood-suck some of it out of her.”

It took Wurtz, who’s been working with insurers for most of his career, more than a decade to understand how retained-asset accounts work. Companies like MetLife and Prudential have never told millions of Americans with insurance policies that when they die, the insurer plans to hold their family’s money in its own account to make investment gains from the death benefit.

“It’s outrageous that somebody’s profiting off other people’s grief,” says Mark Umbrell of Doylestown, Pennsylvania. His 26-year-old son, Colby, an Army Airborne Ranger who earned a Bronze Star and a Purple Heart, was killed in Iraq in May 2007. Umbrell was among those who got a “checkbook” account.

“I think we’re being taken,” he says.

The question for Umbrell, Lohman and a million others with these accounts is whether anything will change. State bank regulators say if there are to be any reforms, they should be made by insurance departments. Officials at those state agencies often say they don’t even understand what a retained-asset account is.

“It’s flown under the radar,” professor Stempel says. “Regulators have not done their job.”
Until public officials wake up, the bereaved will remain a secret profit center for the life insurance industry. 

Bloomberg.com

Thursday, July 29, 2010

A Good Time For A Corrupt Dinosaur To Fade Into The History Books

A House ethics panel on Thursday unveiled 13 allegations of misconduct against longtime Rep. Charles Rangel, prompting the New York Democrat to declare he's done nothing wrong.

The allegations -- which include failure to report rental income from vacation property in the Dominican Republic and to report more than $600,000 in assets on his congressional financial disclosure statements -- came as lawyers for Rangel and the House ethics committee worked on a plea deal.

But Republicans on the panel suggested a deal was not forthcoming. Rep. Michael McCaul, R-Texas, ranking member on the House Committee on Standards of Official Conduct, said Rangel was given an opportunity to settle charges during the investigative process, and that time has passed. 

"Let me be clear that Mr. Rangel under these rules was given opportunities to negotiate a settlement during the investigation. Let me be clear that I did not participate in any attempts to cut a back room deal behind closed doors," McCaul said at the start of a hearing on possible corruption charges. 

McCaul said it's not lost on any member of the panel that the approval rating of Congress is at an all time low, and requires the probe, which has involved 28,000 pages of documents and 60 meetings as well as one deposition from Rangel, be fair and open.

Committee Chairwoman Zoe Lofgren added that the "task is to determine whether Rangel violated that trust."

Rangel said Thursday that no deal had been struck to spare him from the drawn-out ethics trial, as reports surfaced than an agreement with the congressional panel investigating several alleged violations was in the works. 

"I'm not involved in a deal," Rangel said after a CBS affiliate in New York and Reuters reported that a deal was being worked out. Any arrangement would have to be approved by the subcommittee hearing the case, the full ethics committee and potentially the full House of Representatives. 

Despite the meeting, Rangel said there is "no inference of corruption" in his dealings, a contention that flies in the face of the meeting taking place by the adjudicatory subcommittee, which was asked to "prove" the allegations.

"The good thing is that no matter how this thing ends, corruption and dishonesty have never been on the table," he said.

Rangel did not attend the meeting, which lasted about 15 minutes, but submitted a 32-page written statement.

A Pox on All Their Houses
 
Earlier in the day, House Speaker Nancy Pelosi said the chips will "fall where they may" in the case. She acknowledged "individual cases" of ethical lapses as Rangel prepared to face the panel over a string of tax violation allegations that have embroiled not only him but the entire House Democratic delegation.

Pelosi said the hearing and investigation are a "top priority" and that she has no idea what the committee will recommend. She made no mention of a deal. 

"This ethics process will play out and we'll go from there," she said. But House Minority Leader John Boehner said "the speaker owes the American people some answers to their questions."

"The fact is, the swamp has not been drained," Boehner, R-Ohio, said. "This is a sad moment for the House. Not for Charlie Rangel. It's about Speaker Pelosi and her most glaring promise to drain the swamp."

Amid the hubbub, Rangel admitted Thursday morning that he was having a bad day, or a series of them, a confession very unlike Rangel's usual behavior to shrug off complaints about him. 

"Years ago, I survived a Chinese attack in North Korea and as a result I wrote a book that having survived that, that I hadn't had a bad day. Today, I have to reassess that statement, thank you," he said.

The comment was a reference to him being wounded by shrapnel on the battlefield in Korea in 1950. That experience was the inspiration for his 2007 autobiography, "And I Haven't Had a Bad Day Since."

The special subcommittee convened to spell out by a lower-level ethics panel is a rare forum. The House has only conducted two similar open hearings in the past 13 years -- one for former Rep. Jim Traficant and one for former House Speaker Newt Gingrich. 

Eight House lawmakers had been tasked with determining the former Ways and Means chairman's guilt or innocence relating to a series of possible tax violations. A number of Democrats considering calls for the Democrat to resign will get their first look at the allegations.
Rangel and his counsel are not required to speak at the hearing and so far have not asked to make a statement. Though the allegations will be detailed this afternoon, an outcome was not expected Thursday. If a deal is not approved, a trial-like forum probably would not begin until September -- dangerously close to Election Day for Democrats. 

In the end, the House only recognizes three forms of discipline -- reprimand, censure and expulsion, though the House occasionally sanctions members with letters of admonishment. 
"I think everyone is looking forward to getting all the facts out in the open and people will have to react once we know what we're dealing with," said Rep. Mike Quigley, D-Ill. 

Rangel is tied for fourth in House seniority. He's still vigorous at 80 years old. He had substantial influence as chairman of the ways and means panel, which handles taxes, trade, portions of health care, Medicare and Social Security. Rangel stepped down from that post in March after the ethics committee criticized him in a separate case, saying he should have known that corporate money paid for two trips to Caribbean conferences

After a two-year investigation, researchers have narrowed the allegations to Rangel's misuse of his office for fundraising, failure to disclose income, belated payment of taxes and possible help with a tax shelter for a company whose chief executive was a major donor. 

The 42-member Congressional Black Caucus has warned Democrats against a rush to judgment, and any lawmaker with a significant African-American constituency must consider whether it's worth asking Rangel to quit. 

However, some Democratic House members in close races may think it's more important to distance themselves from Rangel. They don't want to have to answer negative Republican ads about Speaker Nancy Pelosi's promise to wipe Congress clean of ethical misdeeds. 
Two Democrats didn't wait to hear the charges. 

Rep. Betty Sutton of Ohio, a second-term lawmaker who received 65 percent of the vote two years ago, said Rangel needs to resign to preserve the public's trust in Congress. 
Rep. Walt Minnick of Idaho, a freshman who got 51 percent of the vote last time, called for resignation if the charges are proven.

Fox News

SEC Says New Financial Regulation Law Exempts it From Public Disclosure

So much for transparency.
Under a little-noticed provision of the recently passed financial-reform legislation, the Securities and Exchange Commission no longer has to comply with virtually all requests for information releases from the public, including those filed under the Freedom of Information Act.
The law, signed last week by President Obama, exempts the SEC from disclosing records or information derived from "surveillance, risk assessments, or other regulatory and oversight activities." Given that the SEC is a regulatory body, the provision covers almost every action by the agency, lawyers say. Congress and federal agencies can request information, but the public cannot.
That argument comes despite the President saying that one of the cornerstones of the sweeping new legislation was more transparent financial markets. Indeed, in touting the new law, Obama specifically said it would “increase transparency in financial dealings."
The SEC cited the new law Tuesday in a FOIA action brought by FOX Business Network. Steven Mintz, founding partner of law firm Mintz & Gold LLC in New York, lamented what he described as “the backroom deal that was cut between Congress and the SEC to keep the  SEC’s failures secret. The only losers here are the American public.”
If the SEC’s interpretation stands, Mintz, who represents FOX Business Network, predicted “the next time there is a Bernie Madoff failure the American public will not be able to obtain the SEC documents that describe the failure,” referring to the shamed broker whose Ponzi scheme cost investors billions.
"The new provision applies to information obtained through examinations or derived from that information," said SEC spokesman John Nester. "We are expanding our examination program's surveillance and risk assessment efforts in order to provide more sophisticated and effective Wall Street oversight. The success of these efforts depends on our ability to obtain documents and other information from brokers, investment advisers and other registrants. The new legislation makes certain that we can obtain documents from registrants for risk assessment and surveillance under similar conditions that already exist by law for our examinations. Because registrants insist on confidential treatment of their documents, this new provision also removes an opportunity for brokers, investment advisers and other registrants to refuse to cooperate with our examination document requests."
Criticism of the provision has been swift. “It allows the SEC to block the public’s access to virtually all SEC records,” said Gary Aguirre, a former SEC staff attorney-turned-whistleblower who had accused the agency of thwarting an investigation into hedge fund Pequot Asset Management in 2005. “It permits the SEC to promulgate its own rules and regulations regarding the disclosure of records without getting the approval of the Office of Management and Budget, which typically applies to all federal agencies.”
Aguirre used FOIA requests in his own lawsuit against the SEC, which the SEC settled this year by paying him $755,000. Aguirre, who was fired in September 2005, argued that supervisors at the SEC stymied an investigation of Pequot – a charge that prompted an investigation by the Senate Judiciary and Finance committees.
The SEC closed the case in 2006, but would re-open it three years later. This year, Pequot and its founder, Arthur Samberg, were forced to pay $28 million to settle insider-trading charges related to shares of Microsoft (MSFT: 25.95 ,0.00 ,0.00%). The settlement with Aguirre came shortly later.
“From November 2008 through January 2009, I relied heavily on records obtained from the SEC through FOIA in communications to the FBI, Senate investigators, and the SEC in arguing the SEC had botched its initial investigation of Pequot’s trading in Microsoft securities and thus the SEC should reopen it, which it did,” Aguirre said. “The new legislation closes access to such records, even when the investigation is closed.
“It is hard to imagine how the bill could be more counterproductive,” Aguirre added.
FOX Business Network sued the SEC in March 2009 over its failure to produce documents related to its failed investigations into alleged investment frauds being perpetrated by Madoff and R. Allen Stanford. Following the Madoff and Stanford arrests it, was revealed that the SEC conducted investigations into both men prior to their arrests but failed to uncover their alleged frauds.
FOX Business made its initial request to the SEC in February 2009 seeking any information related to the agency’s response to complaints, tips and inquiries or any potential violations of the securities law or wrongdoing by Stanford.
FOX Business has also filed lawsuits against the Treasury Department and Federal Reserve over their failure to respond to FOIA requests regarding use of the bailout funds and the Fed’s extended loan facilities. In February, the Federal Court in New York sided with FOX Business and ordered the Treasury to comply with its requests.
Last year, the network won a legal victory to force the release of documents related to New York University’s lawsuit against Madoff feeder Ezra Merkin.
FOX Business’ FOIA requests have so far led the SEC to release several important and damaging documents:
•FOX Business used the FOIA to obtain a 2005 survey that the SEC in Fort Worth was sending to Stanford investors. The survey showed that the SEC had suspicions about Stanford several years prior to the collapse of his $7 billion empire.
•FOX Business used the FOIA to obtain copies of emails between Federal Reserve lawyers, AIG and staff at the Federal Reserve Bank of New York in which it was revealed the Fed staffers knew that bailing out AIG would result in bonuses being paid.
Recently, TARP Congressional Oversight Panel chair Elizabeth Warren told FOX Business that the network’s Freedom of Information Act efforts played a “very important part” of the panel’s investigation into AIG.
Warren told the network the government “crossed a line” with the AIG bailout.
FOX News and the congressional oversight panel has pushed, pushed, pushed, for transparency, give us the documents, let us look at everything. Your Freedom of Information Act suit, which ultimately produced 250,000 pages of documentation, was a very important part of our report. We were able to rely on the documents that you pried out for a significant part of our being able to put this report together,” Warren said.
The SEC first made its intention to block further FOIA requests known on Tuesday. FOX Business was preparing for another round of “skirmishes” with the SEC, according to Mintz, when the agency called and said it intended to use Section 929I of the 2000-page legislation to refuse FBN’s ongoing requests for information.
Mintz said the network will challenge the SEC’s interpretation of the law.
“I believe this is subject to challenge,” he said. “The contours will have to be figured out by a court.”
Fox Business News