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6 Months After Obama Promised To Divulge More On Drones, Here’s What We Still Don’t Know

by Cora Currier, ProPublica.

Nearly six months ago, President Obama promised more transparency and tighter policies around targeted killings. In a speech, Obama vowed that the U.S. would only use force against a “continuing and imminent threat to the American people.” It would fire only when there was “near-certainty” civilians would not be killed or injured, and when capture was not feasible.

The number of drone strikes has dropped this year, but they’ve continued to make headlines. On Friday, a U.S. drone killed the head of the Pakistani Taliban. A few days earlier came the first drone strike in Somalia in nearly two years. How much has changed since the president’s speech?

We don’t know the U.S. count of civilian deaths

The administration says that it has a count of civilian deaths, and that there is a “wide gap” between U.S. and independent figures. But the administration won’t release its own figures.

Outside estimates of total civilian deaths since 2002 range from just over 200 to more than 1,000.  The Pakistani government has given three different numbers: 400, 147, and 67.

McClatchy and the Washington Post obtained intelligence documents showing that for long stretches of time, the CIA estimated few or no civilian deaths. The documents also confirmed the use of signature strikes, in which the U.S. targets people without knowing their identity. The CIA categorized many of those killed as simply “other militants” or “foreign fighters.” The Post wrote that the agency sometimes designated “militants” with what seemed like circumstantial or vague evidence, such as “men who were ‘probably’ involved in cross-border attacks” in Afghanistan.

The administration reportedly curtailed signature strikes this year, though the new guidelines don’t necessarily preclude them. A White House factsheet released around Obama’s speech said that “it is not the case that all military-aged males in the vicinity of a target are deemed to be combatants.” It did not say that people must be identified. (In any case, the U.S. has not officially acknowledged the policy of signature strikes.)

Attorney General Eric Holder confirmed only that four Americans have been killed by drone strikes since 2009: Anwar al Awlaki and his 16-year-old son, Abdulrahman, Samir Khan, and Jude Kenan Mohammed. Holder said that only the elder Awlaki was “specifically targeted,” but did not explain how the others came to be killed.

Although Obama said that this disclosure was intended to “facilitate transparency and debate,” since then, the administration has not commented on specific allegations of civilian deaths.

We don’t know exactly who can be targeted

The list of groups that the military considers “associated forces” of al Qaeda is classified. The administration has declared that it targets members of al Qaeda in the Arabian Peninsula, and “elements of Al Shabaab, but there are still questions about how the U.S. determines that an individual belonging to those groups is in fact a “continuing and imminent threat.” (After the terror alarm that led to the closing of U.S. embassies this summer, officials told the New York Times they had “expanded the scope of people [they] could go after” in Yemen.)

This ties into the debate over civilian casualties: The government would seem to consider some people legitimate targets that others don’t.

Amnesty International and Human Rights Watch conducted in-depth studies of particular strikes in Pakistan and Yemen, respectively. They include eyewitness reports of civilian deaths. (Most of the deaths investigated happened before the Obama administration’s new policies were announced, although the administration has not said when those guidelines went into effect.) The reports also raised questions of the legality of specific strikes, questioning whether the deaths were all unavoidable casualties of legitimate attacks.

It does not appear that the U.S. plans to expand strikes against al Qaeda to other countries — officials have reportedly told Iraq, for example, it won’t send drones there. But the U.S. has established a surveillance drone base in Niger, and fed information from drones to French forces fighting in Mali.

We don’t know if the U.S. compensates civilian casualties

CIA director John Brennan suggested during his confirmation hearing that the U.S. made condolence payments to harmed families. But there is little evidence of it happening. U.S. Central Command told ProPublica that it had 33 pages related to condolence payments — but wouldn’t release any of them to us.

We don’t always know which strikes are American

While unnamed officials sometimes confirm that strikes came from U.S. drones, other attacks may be from Pakistani, Yemeni, or even Saudi planes.

(It’s also worth noting that the U.S. has also used cruise missiles and Special Forces raids. But the bulk of U.S. counterterrorism actions outside Afghanistan in recent years appear to rely on drones.)

We don’t know the precise legal rationale behind the strikes

Some members of Congress have seen the legal memos behind targeted killing of U.S. citizens. But lawmakers were not granted access to all memos on the program.

Other congressmembers have introduced bills with more reporting requirements for targeted killings. (Proposals for a “drone court” for oversight have not gotten very far.)

It’s far from clear that any of that additional oversight would lead to public disclosure.

The government and the American Civil Liberties Union and the New York Times are still locked in court battles over requests for drone documents. While a judge has ruled the CIA can no longer assert the “fiction” that it can’t reveal if it has any interest in drones, the agency hasn’t been compelled to release any information yet. The government has also so far fought off disclosure of legal memos underpinning targeted killings.

And here are some things we’ve learned through leaks and independent reporting:

How the U.S. tracks targets: Documents provided by Edward Snowden to the Washington Post detailed the NSA’s “extensive involvement.” Lawyers in a terrorism-related case also uncovered reports that government surveillance of their client may have led to a drone strike in Somalia. The Atlantic published a detailed account of Yemen using a child to plant a tracking chip on a man who was killed in a U.S. strike.

What people in the countries affected think: The Pakistani government’s cooperation with at least some U.S. drone strikes — long an open secret — has now been well-documented. Public sentiment in the country is vividly anti-drone, even when violent Taliban commanders are killed, and politicians continue to denounce them as American interference. Limited polling in the region most affected by drones is contradictory, with some saying that at the very least, they prefer drones to the Pakistani military campaigns. Life in those areas is between a drone and a hard place: Residents told Amnesty International of the psychological toll from drones, and they also face reprisals from militants who accuse them of spying.

Yemen’s president continues to openly embrace U.S. strikes, though the public generally opposes them — particularly those strikes that hit lower-level fighters, or those whose affiliations with al Qaeda aren’t clear. Foreign Policy recently detailed the aftermath of an August strike where two teenagers died. Their family disputes they had any link to terrorism.

The physical infrastructure: More of the network of drone bases across the world has been revealed — from the unmasking of a secret base in Saudi Arabia to the fact that drones had to be moved off the U.S. base in Djibouti, in the Horn of Africa, after crashes and fear of collision with passenger planes.

The CIA’s role: The administration had reportedly planned to scale back the CIA’s role in targeted killing, moving control of much of the drone program to the military. But the CIA reportedly still handles strikes in Pakistan and has a role in Yemen as well.

The history of the programs: Revelations continue to change our understanding of the contours of the drone war, but two books published this year offer comprehensive accounts — The Way of the Knife, by Mark Mazzetti of the New York Times, and Dirty Wars, by Jeremy Scahill.

Photo: Corporal Steve Follows RAF via Flickr

Who Are We At War With? That’s Classified

by Cora Currier, ProPublica, July 26, 2013.

In a major national security speech this spring, President Obama said again and again that the U.S. is at war with “al Qaeda, the Taliban, and their associated forces.”

So who exactly are those associated forces? It’s a secret.

At a hearing in May, Sen. Carl Levin (D-MI) asked the defense department to provide him with a current list of al Qaeda affiliates.

The Pentagon responded — but Levin’s office told ProPublica they aren’t allowed to share it. Kathleen Long, a spokeswoman for Levin, would say only that the department’s “answer included the information requested.”

A Pentagon spokesman told ProPublica that revealing such a list could cause “serious damage to national security.”

“Because elements that might be considered ‘associated forces’ can build credibility by being listed as such by the United States, we have classified the list,” said the spokesman, Lt. Col. Jim Gregory. “We cannot afford to inflate these organizations that rely on violent extremist ideology to strengthen their ranks.”

It’s not an abstract question: U.S. drone strikes and other actions frequently target “associated forces,” as has been the case with dozens of strikes against an al Qaeda offshoot in Yemen.

During the May hearing, Michael Sheehan, Assistant Secretary of Defense for Special Operations and Low-Intensity Conflict, said he was “not sure there is a list per se.” Describing terrorist groups as “murky” and “shifting,” he said, “it would be difficult for the Congress to get involved in trying to track the designation of which are the affiliate forces” of al Qaeda.

Sheehan said that by the Pentagon’s standard, “sympathy is not enough… it has to be an organized group and that group has to be in co-belligerent status with al Qaeda operating against the United States.”

The White House tied al Qaeda in the Arabian Peninsula and “elements” of Al Shabaab in Somalia to al Qaeda in a recent report to Congress on military actions. But the report also included a classified annex.

Jack Goldsmith, a professor at Harvard Law who served as a legal counsel during the Bush administration and has written on this question at length, told ProPublica that the Pentagon’s reasoning for keeping the affiliates secret seems weak. “If the organizations are ‘inflated’ enough to be targeted with military force, why cannot they be mentioned publicly?” Goldsmith said. He added that there is “a countervailing very important interest in the public knowing who the government is fighting against in its name.”

The law underpinning the U.S. war against al Qaeda is known as the Authorization for Use of Military Force, or AUMF, and it was passed one week after the 9/11 attacks. It doesn’t actually include the words “associated forces,” though courts and Congress have endorsed the phrase.

As we explained earlier this year, the emergence of new or more loosely aligned terrorist groups has legal scholars wondering how effectively the U.S. will be able to “shoehorn” them into the AUMF. During the May hearing, many lawmakers expressed concern about the Pentagon’s capacious reading of the law. Sen. John McCain (R-AZ) described it as a “carte blanche.”

Obama, in his May speech, said he looked forward “to engaging Congress and the American people in efforts to refine, and ultimately repeal, the AUMF’s mandate.” But he didn’t give a timeframe. On Wednesday, Rep. Adam Schiff (D-CA) introduced an amendment that would sunset the law at the end of 2014, to coincide with the U.S. withdrawal from Afghanistan. It was voted down the same day, 185 to 236.

The AUMF isn’t the only thing the government relies on to take military action. In speeches and interviews Obama administration officials also bring up the president’s constitutional power to defend the country, even without congressional authorization.

Photo via Wikimedia Commons

Hunger Strikes And Indefinite Detention: A Rundown On What’s Going On At Gitmo

by Cora Currier, ProPublica

It’s been 11 years since the first detainees were brought to Guantánamo Bay. But the future of the prison, and the fate of the men inside it, is far from certain.  With 59 detainees at Gitmo currently on hunger strike, by the military’s count, here’s a primer on what’s going at the island prison.

What started the hunger strike?

It began after guards allegedly mishandled detainees’ Korans in a cell search in early February — but it’s certainly become about more than the holy books.

The military says detainees have previously hidden “improvised weapons, unauthorized food and medicine” in the spines of the Korans, and that the February searches were standard, conducted by Muslim translators. (Koran searches had set off hunger strikes before, in 2005.)

Attorneys for the hunger strikers say the detainees have offered to relinquish their Korans rather than have them searched. The military initially would not accept that option, but now says, “if they choose not to have one, they choose not to have one.”

In any case, just about everyone — from the International Committee of the Red Cross to the general in charge of U.S. Southern Command — agrees the strike comes out of growing frustration and hopelessness among detainees. As we detail below, there are few indications that Gitmo will be shuttered or detainees transferred in the near future. The last detainee to leave Gitmo, last fall, was dead.

General Kelly, of U.S. Southern Command, said last month that detainees had watched President Obama’s State of the Union address, and heard no mention of Guantánamo. “That has caused them to become frustrated and they want to … turn the heat up, get it back in the media,” Kelly said.

In an account published in The New York Times last weekend, a Yemeni hunger striker named Samir Moqbel said he hoped “that because of the pain we are suffering, the eyes of the world will once again look to Guantánamo before it is too late.” (Moqbel had recounted his story by phone to his lawyers.)

Another detainee, a Saudi Arabian named Shaker Aamer, also recently wrote an op-ed. Calling himself “a bit of a professional hunger striker,” Aamer said “this one is a whole lot different.” Lawyers say the strike is far more widespread than the military’s count.

According to the military, two detainees have attempted suicide since the strike began.

Have there been clashes between guards and the prisoners?

Yes, most recently last weekend. In an early-morning raid on Saturday, soldiers in riot gear moved about 60 of the detainees from their communal living camp into individual cells. Guards fired four “less-than-lethal” rounds; they say some prisoners wielded makeshift weapons, constructed from broken broomsticks and plastic water bottles filled with rocks.

Military commanders told the Miami Herald that the once-“compliant” detainees had been ignoring orders for months, “covering cameras, poking guards with sticks through fences, spraying U.S. forces with urine and refusing to lock themselves inside their cells for nightly sweeps.”

In January, there was an altercation on the facility’s new soccer field, which ended with guards shooting “one non-lethal round” at a group of detainees.

In a statement earlier this week, the military said the detainees were being placed on lockdown to allow for “round-the-clock monitoring.” In recent years, the communal living arrangement had been redone to “feel more like a dorm.” Now, the Miami Herald reports, those men are confined to their cells, without TV, legal documents, and the other things they were previously allowed.

In turn, detainees’ lawyers have said that prison guards became stricter in recent months, and that mail and personal items have been confiscated in cell searches.

An attorney with the Center for Constitutional Rights, Omar Farah, told ProPublica that he and other lawyers feared that the move to individual cells would cut off information about the strike. “The primary way we’ve been getting information is through prisoners’ accounts of one another.”

Are the strikers being mistreated?

At least one detainee has alleged that the hunger strikers are being punished, by being forced to drink potentially unsafe tap water and cold temperatures in their cells. The military disputes that, saying the tap water is safe and bottled water is available. On Monday, a federal judge ruled he did not have jurisdiction to weigh in on the prisoners’ treatment.

What about force-feeding?

As of Wednesday, 15 detainees are being force-fed nutritional supplements through tubes inserted into their noses. The military says strikers “present” themselves for the procedure, though it also says passing out counts as consent.

Others have been tied down for feedings. Moqbel, in his account in The New York Times, said he was once tied to a bed for 26 hours last month. Now, he wrote, “Two times a day they tie me to a chair in my cell. My arms, legs and head are strapped down. I never know when they will come.”

The Red Cross and other groups oppose force-feeding; they say prisoners have a right to choose whether they eat. The U.S. military position is that it would be inhumane to let prisoners starve. A spokesman told the Miami Herald allowing a detainee to harm himself “is anathema to our values as Americans.”

How many prisoners are left at Gitmo?

There are 166. Since 2002, a total of 779 people have been held there.

No one has been brought to Gitmo under President Obama. The last people to leave were two Uighur Muslims from China, who were resettled in El Salvador last spring. Adnan Latif, a Yemeni, died in an apparent suicide in September. He was the ninth detainee to die.

Does the U.S. consider the detainees still there all dangerous terrorists?

No. In fact, about half the detainees have been approved for release. Here’s the government’s categorization of people held at Gitmo, as of last November:

—56 have been cleared for transfer to their own or a third country. Last fall, the State Department made 55 of those names public.
—30 Yemenis have been cleared to be sent back to Yemen, but are being held because of an unstable security situation there.
—24 people have “possible prosecution pending.”
—46 are being held in indefinite detention under the 2001 authorization for military force: they’ve been deemed too dangerous to release, but are not facing prosecution.
—Seven are facing trial by military commissions. That includes Khalid Sheikh Mohammed and four others accused of plotting the 9/11 attacks.
—Three were convicted in military commissions and are serving out their sentences or fulfilling plea bargains. (Four others were also convicted but transferred to their home countries.)

The U.S. won’t release the names of those it considers hunger strikers, and it’s not always clear which category detainees fall into. Some of those who have spoken through their lawyers are on the cleared-for-transfer list (Moqbel, of the New York Times op-ed, is not, though he claims he is among the group of Yemenis who may be transferred.)

Carol Rosenberg of the Miami Herald says she has been told that the 9/11 defendants and the rest of the 16 “high-value” detainees, who were brought to Gitmo from the CIA’s black-site prisons, are not participating in the hunger strike. They are held in a separate, secret section of the camp. (See the Herald’sprison-camp primer” for descriptions of where the detainees are held.)

Why haven’t the people cleared for transfer been released?

Over the past few years Congress effectively prohibited bringing detainees to the U.S. and made it difficult to send them to other countries, by requiring an assurance that the individual would never pose a threat to the U.S. in the future.

Difficult, but not impossible — there are waivers in the legislation that allow the president to get around the restrictions in certain cases. Human rights groups are pushing the administration to use those waivers, but Obama has yet to do so. Four detainees have been sent abroad since the law on overseas transfers went into effect, but in each case, it was to fulfill a court-ordered release or a military commission plea agreement, which Congress allowed. (The Supreme Court has ruled the men at Gitmo have the right to challenge their detention in federal court.)

As for the Yemenis still at Gitmo, Obama announced a moratorium on transfers to Yemen after the attempted Christmas Day bombing of 2009. There are also fears about recidivism — a report this year from the Director of National Intelligence estimates that 16 percent of released detainees have “reengaged” in militant activities. (Most of them were released under President George W. Bush.)

Other countries have also called for the release of their citizens. The president of Yemen, which has worked closely with the U.S. on drones and counterterrorism, recently referred to Gitmo as “clear-cut tyranny.”  Britain has also reportedly lobbied for the release of one of the hunger strikers, Shaker Aamer, who has British residency. The UN commissioner for human rights has said that “indefinite incarceration” at Gitmo “is in clear breach of international law.”

Why hasn’t Obama closed Gitmo?

The White House says he “remains committed” to closing Gitmo, but those plans have stalled in the face of congressional opposition.

One of Obama’s first acts in office was an executive order to shut down the prison within a year. He didn’t rule out continued military detention or trial in military commissions, but temporarily suspended the commissions and required a review of the status of the Gitmo detainees.

In a speech a few months later, Obama said that “the existence of Guantánamo likely created more terrorists around the world than it ever detained,” and had “set back the moral authority that is America’s strongest currency in the world.”

Since then, lawmakers have passed restrictions and the administration has dropped many of its visible efforts to shut down Gitmo.

This January, the State Department shut down the office responsible for detainee resettlement. Even if transfer restrictions were loosened, it’s not clear what would happen to the prisoners who are being held indefinitely. A new periodic review process for the detainees was created in 2011, though it still hasn’t actually begun. Military commissions started up again, with some changes — though still plenty of controversy, including questions about government censorship and surveillance.

What can outside observers see at Gitmo?

Not much beyond what the military wants them to see.

The competing claims about water quality, numbers of strikers, and the Koran searches underscore the limited, often one-sided, information that gets out. Detainees communicate mostly through their lawyers. The military controls access to the prison.  It recently stopped commercial flights to the base, a decision met with anger from attorneys and quickly reversed. For a few weeks recently, reporters were shut out of the prison.

A Reuters photographer recently recounted his tightly monitored visit, and what he was and wasn’t allowed to shoot (totally fine: signs saying “No Photos.” Not fine: detainees’ faces.) Carol Rosenberg, of the Miami Herald, also recently described the restrictions on reporting from Gitmo, which she’s been doing for 11 years. She’s never been allowed to speak to a detainee.

The Red Cross has access to prisoners and has been to Gitmo during the strike, though its findings are rarely made public. Last week, the group’s president called the legal situation of prisoners there “untenable.

How much does Guantánamo cost?

A lot. A recent report from the Government Accountability Office said the prison costs, on average, $114 million per year, not including military personnel. A 2011 analysis put the annual cost per prisoner at $800,000 — as much as 30 times what it costs to keep someone in federal prison.

The Pentagon has proposed a $150 million overhaul of the facility this year.

JTF Guantanamo photo by U.S. Air Force Senior Airman Gino Reyes

A Public Indictment Could Shed Light On CIA’s Secret Program

by Cora Currier, ProPublica.

Federal prosecutors in Brooklyn unsealed an indictment last week charging Ibrahim Suleiman Adnan Adam Harun with six terrorism-related counts.

The announcement that Harun is in U.S. custody in New York may also shed light on a small part one of the most secretive aspects of U.S. counterterrorism operations during the Bush administration: What became of terror suspects held by the CIA in its network of “black-site” prisons around the world? Or disappeared into foreign cells in extraordinary renditions?

With their indictment of Harun, prosecutors offered a basic account of how the 43-year-old Nigerian — described as “a prototype al Qaeda operative” — spent the last decade. He fought U.S. forces in Afghanistan, prosecutors said, before leaving for Africa, where he allegedly conspired to bomb U.S. diplomatic facilities. Harun, also known by his alias Spin Ghul, eventually wound up in Libyan prison for six years before he was released amid the turmoil of the uprising against Muammar Qaddafi.

Did the U.S. know that he was in Libya, and did they play a role in his detention? Did the CIA work with the Libyans to then obtain information from him?

Testimony from an alleged former CIA detainee, a leaked document from the military prison at Guantanamo Bay, and evidence from cases of others rendered to Libya suggest that might be so.

A spokesman for the CIA said that the agency “does not, as a rule, comment on matters before the courts.” The U.S. Attorney’s office for the Eastern District of New York declined to provide information beyond what was announced with the indictment. A lawyer for Harun, David Stern, also declined to comment.

The CIA has steadfastly refused to comment on the fates of most former detainees, publicly accounting for only 16 people of the roughly 100 the agency has said it once held. The U.S. has successfully dismissed lawsuits over rendition and asserted that much about the CIA program is still classified.

President Obama, for his part, ordered the CIA black-site prisons closed when he took office. (He allowed renditions to continue, with pledges of greater oversight of the countries where suspects were sent.) But still, little about the program has been officially disclosed.

Human Rights Watch and other organizations, as a consequence, have been trying to piece together the details of the CIA’s detention and rendition programs for years. In 2009, ProPublica published a list of more than 30 people believed to have been held by the CIA whose whereabouts were still unknown—including a Spin Ghul.

Now and then, the fates of these detainees have emerged in the press or through rights groups, particularly since the upheaval caused by the Arab Spring.

Joanne Mariner, a senior researcher with Amnesty International who worked on identifying former detainees for Human Rights Watch, said that the information in the indictment of Harun lines up with what she knew about Spin Ghul. Operating in an arena of such secrecy, “when all this was going on, we’d get these little clues and bits of information. It’s really quite interesting to see confirmation that these people did exist,” she said.

Marwan Jabour, who alleges he was held in Afghanistan by the CIA (“Ghost Prisoner,”) told Human Rights Watch that he was shown photos of Harun (whom he called Ghul) during interrogations, and was led to believe he was in U.S. custody. Jabour had met Harun in Pakistan in 2003, and described him as an African who spoke Arabic. Jabour was held from 2004 to 2006, during which time, according to this week’s indictment, Harun was arrested in Libya.

A 2007 document from Guantanamo, released by Wikileaks, cites detailed information provided by Harun. For example: “Ghul also noted that Saudi authorities had detained Saudi al Qaeda members — Ghul remarked that these two individuals were al Qaeda members since approximately 1995.” In the document he is identified as both Harun and Ghul, and described as a “Nigerian [sic] national and al Qaeda operative.” The citations refer to CIA intelligence reports, but don’t specify where Harun was or when he provided the information.

Since Qaddafi’s fall, evidence has emerged of close communication between the CIA and Libyan officials during the Bush administration, despite the Qaddafi regime’s reputation for torture and brutal prison conditions. Documents found in the abandoned office of Libya’s former top intelligence official refer to the rendition of several people to Libya and the sharing of information. Other “missing prisoners” believed to have been held by the CIA turned up in Libyan prisons. Some of them have given detailed accounts of detention in U.S. custody before being sent there.

“The U.S. delegated a lot of its detention capacity to abusive governments like Libya — they were perfectly happy to have Libya holding these people,” says Mariner.

If the U.S. did know he was in Libya, it took authorities some time to catch up with him after he gained his freedom in June, 2011.

After his release, Harun told prosecutors, he was placed on a ship full of Libyan refugees bound for Italy, where he was arrested for assaulting officials onboard. Italian authorities agreed to extradite him to the U.S. last fall.

Harun is the latest in a recent string of terror suspects brought to federal court from overseas by the Obama administration — including Osama bin Laden’s son-in-law Abu Gaith, who pleaded not guilty in federal court in Manhattan to conspiring to kill Americans earlier this month.

Some congressional Republicans have insisted that such cases are better prosecuted in military commissions like the one at Guantanamo. Senator Saxby Chambliss (R-GA) said of Harun: “The administration has once again decided to forgo an extensive intelligence interrogation and instead bring an enemy combatant immediately into the federal court system.”

According to court documents, Harun was interviewed by U.S. officials last September in Italy, with his Italian counsel present. He waived his Miranda Rights before those sessions. The indictment against him remained sealed because the government believed “he may be in a position to provide information…relevant to the national security of the United States.”

Harun could face life in prison. Whether or not his trial reveals more about the CIA’s role, at the very least, he can be crossed off the list of the missing.

Photo: U.S. Air Force Senior Airman Gino Reyes

Drone Strikes Test Legal Grounds For War On Terror

by Cora Currier, ProPublica.

In his second inaugural address, President Barack Obama declared that “a decade of war is now ending.” White House press secretary Jay Carney later said there was “no question” that the U.S. conflict with al Qaeda was “entering a new phase.”

That day in Yemen, a U.S. drone strike reportedly killed three suspected al Qaeda militants. It was one of several strikes there that week and followed a spate of them in Pakistan. Outgoing Secretary of Defense Leon Panetta said this weekend that drone strikes “ought to continue to be a tool we ought to use where necessary.”

Like the war in Afghanistan, these and hundreds of other drone strikes have occurred under the authority of a concise law passed one week after 9/11. It reads:

That the President is authorized to use all necessary and appropriate force against those nations, organizations, or persons he determines planned, authorized, committed, or aided the terrorist attacks that occurred on September 11, 2001, or harbored such organizations or persons, in order to prevent any future acts of international terrorism against the United States by such nations, organizations or persons.

That law — known as the 2001 Authorization for Use of Military Force, or AUMF — is now more than 11 years old. Will it cover this “new phase” of war?

Obama, like President George W. Bush before him, has claimed that the 2001 authorization is the domestic legal basis of the authority to kill and detain not only members of al Qaeda and the Taliban in Afghanistan but also their “associated forces.” Courts have largely agreed with that interpretation, and in 2011 Congress codified it in authorizing military detention.

A Justice Department memopublished Monday by NBC News — repeatedly cites Congress’ authorization in laying out the case for targeting a U.S. citizen “who is a senior operational leader of al Qaeda or an associated force.”

Officials note the AUMF does not have a geographic boundary. Individuals far from the “hot” battlefield in Afghanistan, officials have argued, can still be said to be engaged in an armed conflict with the U.S.

But legal scholars say the AUMF’s authority to detain and kill militants may be undermined if there is no “core” al Qaeda group to speak of, or when active conflict in Afghanistan ends.  It may also falter when it isn’t clear exactly how a group or individual is tied to al Qaeda — such as in the web of militant and extremist groups operating in Africa and elsewhere that may claim an affiliation or be ideologically aligned.

“There’s room for shoe-horning them into the AUMF,” says Robert Chesney, a professor at University of Texas School of Law. “But any honest assessment has to concede it’s not obvious that all the more loosely affiliated groups are encompassed.”

The AUMF doesn’t include an expiration date. But the law does have its limits, says Chesney. “It’s not claiming an armed conflict with all terrorism, but with al Qaeda and its associated forces. In theory, there can come an end.”

Last November, shortly before he stepped down as the Pentagon’s general counsel, Jeh Johnson gave a speech on that end. He spoke of a “tipping point,” when the U.S. counterterrorism efforts “should no longer be considered an ‘armed conflict’ against al Qaeda and its associated forces.” Counterterrorism efforts would then be aimed against individuals and could be handled primarily by law enforcement.

Johnson conceded it was hard to imagine that tipping point. There would be no “peace treaty” to mark it, he said, and he could “offer no prediction about when this conflict will end.”

A preview of the dilemma came in 2011, when the U.S. indicted a Somali man named Ahmed Abdulkadir Warsame in federal court in New York. Warsame was a member of Al-Shabaab, a group in Somalia, and had ties to al Qaeda in the Arabian Peninsula, but he was not connected to any plot against the U.S. He had initially been held by the military, but according to Newsweek reporter Daniel Klaidman, the Obama administration was unsure where he fit under the law.

Jack Goldsmith, a professor at Harvard Law School and former head of the Office of Legal Counsel for President Bush in 2003 and 2004, says “the AUMF is losing its efficacy. We’re in a place when we’re engaged in types of warfare that the nation hasn’t openly debated.”

The “shoehorn” approach may eventually run into a legal gray area. Chesney points out that court decisions upholding military detention have generally been linked in some way to the conflict in Afghanistan. (So far, U.S. courts have not taken up lawsuits challenging targeted killing.)

“When the war in Afghanistan ends, and if core al Qaeda is decimated, how do we define who we are at war with?” says Hina Shamsi, director of the National Security Project at the American Civil Liberties Union.

Shamsi argues that the Obama administration is already relying on an overbroad interpretation of the AUMF to justify strikes against alleged militants in Yemen or Somalia without demonstrating precisely how they are associated with al Qaeda or engaged in anti-U.S. hostilities.

Militant groups have emerged as a threat in North Africa — some claiming an affiliation with al Qaeda. The degree to which those groups are plotting against the U.S. or interested in regional control is still being debated. The U.S. is expanding its presence in the region, but at least initially, the government says it is bolstering surveillance and training and assistance for local governments, not taking military action.

A Pentagon spokesman said last week he was “unaware of any specific or credible information at this time that points to an [al Qaeda in the Islamic Maghreb] threat against the homeland, but, again, I’m not ruling it out.”

The U.S. has provided refueling and cargo planes to assist the French intervention in Mali. That is lawful because France is acting “in response to a request for assistance from the Malian government,” Tommy Vietor, a spokesman for the National Security Council, told ProPublica.

Administration officials say strikes against al Qaeda and associated forces are permitted under international law on the basis of self-defense, in addition to the authority the AUMF provides under domestic law. The U.N. has been investigating targeted killings and civilian casualties from drone strikes.

In a case where the 2001 AUMF did not apply, the administration could seek a new authorization from Congress or rely on presidential powers to use force against an imminent threat.

Gen. Carter Ham, the head of U.S. Africa Command, said in an interview with The Wall Street Journal in December that an authorization to address new threats in North Africa was a “worthy discussion.” But what form that would take is unclear. The Pentagon and White House did not comment to ProPublica on the possibility of a new AUMF.

Presidents have used force without congressional authorization by invoking presidential powers under Article II of the Constitution.

Obama ordered airstrikes over Libya in the spring of 2011 citing international cooperation and “national interest” as justification. (Several lawmakers subsequently sued the administration for bypassing them, but the case was dismissed.) He has also claimed authority to launch pre-emptive cyberattacks, the New York Times reported this weekend. President Bill Clinton cited the nation’s right to self-defense when he bombed Afghanistan and Sudan in 1998 in retaliation for the bombing of U.S. embassies in East Africa.

Obama officials regularly cite self-defense alongside the AUMF in justifying targeted killing. White House counterterrorism advisor John Brennan has said that the U.S. uses “a flexible understanding of ‘imminence’ ” in determining what constitutes a threat. The Justice Department memo on targeting U.S. citizens also references a “broader concept of imminence,” which it holds “does not require the United States to have clear evidence that a specific attack on U.S. persons and interests will take place in the immediate future.”

Shamsi and other critics of the drone war have noted that some strikes in Yemen in particular appear to target insurgents acting against local government. The U.S. almost never acknowledges particular strikes or details the specific threat posed by an individual.

Johnson, the former Pentagon counsel, told The Wall Street Journal that “the president always has the Constitutional authority to protect the nation and important national interests by responding to individual terrorist threats, militarily or otherwise.”

Johnson noted that for a “sustained armed conflict, the preference should be congressional authorization.”

Photo credit: Corporal Steve Follows RAF

 

Cutting Through The Controversy About Indefinite Detention And The NDAA

by Cora Currier, ProPublica.

On Tuesday, the Senate passed the National Defense Authorization Act, or NDAA, a yearly military spending bill.

Last year, the bill affirmed the U.S.’s authority to hold suspected terrorists indefinitely and without charges. The provision had generated plenty of controversy, particularly about whether U.S. citizens could be detained indefinitely.  This year, the Senate bill says that citizens can’t be detained in the U.S. — but concerns remain about the scope of detention powers.

We’ve taken a step back, run through the controversy, and laid out what’s new.

What does the law currently say about military detention?

Section 1021 of last year’s National Defense Authorization Act affirms the military’s ability under the law of war to detain people “without trial until the end of hostilities.”

It also says they can be tried at a military commission, transferred to another country or to “an alternative court” — leaving open the possibility of civilian trials.

Who can be detained?

Anyone who “planned, authorized, committed, or aided” the 9/11 attacks, or “harbored those responsible.” Also, anyone who has been “part of or substantially supported” al Qaeda, the Taliban, “or associated forces that are engaged in hostilities against the U.S. and its coalition partners.”

Does that include U.S. citizens?

Congress left that deliberately unspecified last year, essentially punting the issue to the courts.

The language in the bill didn’t outright permit or prohibit indefinite detention of U.S. citizens. The act stated that it wouldn’t affect “existing law or authorities relating to the detention of United States citizens, lawful resident aliens of the United States, or any other persons who are captured or arrested in the United States.”

But existing laws and authorities don’t actually give a definitive answer. There were cases involving U.S. citizens held by the military under President George W. Bush, but no precedents were established. The Supreme Court ruled only narrowly on the case of Yaser Hamdi, on the basis that he was captured on the battlefield in Afghanistan. (Hamdi was released and went to Saudi Arabia in 2004.) In a second case, Jose Padilla was transferred to a civilian court. (For more legal details, see these backgrounders from the blog Lawfare and the Congressional Research Service.)

In signing the bill last year, Obama said that his administration “will not authorize the indefinite military detention without trial of American citizens.” Critics were quick to point out that this was a non-binding policy, and that the law left the door open for future administrations to interpret it differently.

But this year’s bill fixed all this confusion, right?

Kind of.

In a replay of last year’s debate, a flurry of proposed amendments went around the Senate in an attempt to clarify the language about indefinite detention. Ultimately, the Senate passed an amendment from Senator Dianne Feinstein (D-CA) that seems to protect U.S. citizens:

“An authorization to use military force, a declaration of war, or any similar authority shall not authorize the detention without charge or trial of a citizen or lawful permanent resident of the United States apprehended in the United States, unless an Act of Congress expressly authorizes such detention.”

What about people detained in the U.S. who aren’t citizens or permanent residents?

They could still be indefinitely detained.

Human rights and civil libertarian groups criticized the amendment for falling short of the protections in the Constitution under the Fifth Amendment, which says that any “person” in the U.S. be afforded due process.

In the floor debate, Feinstein said she agreed with critics that allowing anybody in the U.S. to be detained indefinitely without charges “violates fundamental American rights.” Feinstein said she didn’t think she had the necessary votes to pass a due-process guarantee for all.

So does that settle it? Citizens can’t be detained?

Depends which senator you ask.

Some voted for Feinstein’s amendment even though they think the military should be able to indefinitely detain people within the U.S. They think her amendment still allows it, because of the last clause — “unless an Act of Congress expressly authorizes such a detention.”

As The Hill reported, senators Lindsey Graham (R-SC), John McCain (R-AZ), and Carl Levin (D-MI) all claim that Congress’ 2001 Authorization for Use of Military Force does authorize the detention of citizens, even in the U.S. They cited the Hamdi case, despite the fact that he was captured abroad.

What about last year’s NDAA? Isn’t that an Act of Congress authorizing detention?

Not expressly. It gets back to that non-position that last year’s bill settled on — “Nothing in this section shall be construed to affect existing law or authorities” about the detention of U.S. citizens.

Does the NDAA go farther than the post-9/11 AUMF?

On the surface, yes, but many courts have already used AUMF to affirm broad presidential powers.

The AUMF doesn’t mention detention, or al Qaeda, the Taliban and associated forces, which the NDAA claims the U.S. has the authority to detain. It authorizes “necessary and appropriate force” against anyone involved with or harboring anyone involved with the 9/11 attacks.

But both Bush and Obama have maintained in court that the AUMF does authorize detention, and that its authorization applies to al Qaeda, the Taliban, and “associated forces.”

So the detention section of the NDAA largely echoes the authorities that Bush and Obama have previously asserted and gotten through the courts.

What the NDAA does do, as Lawfare phrased it, is “put Congress’s stamp of approval” on these claims, which could have implications for future litigation. The Congressional Research Service report goes into more detail on the way that courts have interpreted “associated forces” and “substantial support”—phrases the NDAA doesn’t attempt to define.

Isn’t there a lawsuit going on over the NDAA?

Yes. Last year, a coalition of journalists and activists sued to block the indefinite detention provision on Constitutional grounds. A U.S. District Court judge ruled in their favor in September, claiming that the government had overstepped in its interpretation of the AUMF. Her decision was stayed by an appeals court, who found it overly broad. The case is ongoing.

So what happens next?

The bill still has to be reconciled with the House version, which did not include an amendment to the detention provision like Feinstein’s.

Obama has threatened to veto the NDAA over other measures, including restrictions on transfers from Guantanamo prison. But he said the same thing last year, and ended up signing the bill into law.

JTF Guantanamo photo by U.S. Air Force Senior Airman Gino Reyes, accessed via Flickr.com

 

Why Florida Is Sitting On $300 Million Meant To Help Homeowners

by Cora Currier, ProPublica

Florida has the highest percentage of home loans in foreclosure in the country. So why is more than $300 million that could help homeowners sitting unused?

Florida was awarded those millions in February as part of the $25 billion national settlement between five of country’s biggest banks and 49 states and the District of Columbia. The settlement resolved allegations of wrongful foreclosures and other mortgage servicing abuses, and required banks to offer some homeowners the opportunity to modify their loans or refinance, or, in some cases pay homeowners directly for wrongful foreclosure.

The banks also had to pay $2.5 billion directly to state governments. Florida’s sum was the largest, after California, in part a measure of how deeply the mortgage crisis affected the Sunshine State.

Yet Florida is one of just a few states where the attorney general has not announced plans for a significant portion of the money. We’ve contacted every state to find out what they were doing with that money. Of the $2.5 billion going to states, just over a billion dollars has been pledged for housing-related programs, while a roughly equal amount has been diverted to plug budget holes or fund programs unrelated to the foreclosure crisis. And $378 million is still to be determined, and almost all of that is Florida’s.

Florida’s funds are caught between the attorney general, Republican Pam Bondi, and the Republican state legislature. Bondi has pledged to make the money available to homeowners; earlier this year, she called for suggestions from the public. Some state lawmakers, however, insist that it needs to go through the regular appropriations process — where it could potentially be siphoned off into other programs. And that wouldn’t happen until March, when the legislative session begins.

“We were very happy about the attorney general’s commitment early on that the money be used within the spirit of the settlement,” said Jaimie Ross, president of the Florida Housing Coalition, an advocacy organization. “But is it just going to sit there until the legislature starts so that we can wait to see how they want to use it? The silence is deafening.”

A spokesman for the attorney general said, “it’s a matter of having a dialogue between the two sides.” He could not give a timeline for when a decision might be reached. The 2013 budget request Bondi submitted to the legislature last week made no mention of the settlement.

The mortgage settlement states that Florida’s money can be spent “as directed” by the Florida attorney general for “purposes consistent with” the settlement, such as programs aimed at homeowner protection or consumer fraud. But the legislature should still “play a role,” according to Katie Betta, a spokeswoman for incoming State Senate President Don Gaetz, a Republican.

The Democratic minority leader of the state senate, Nan Rich, said, “It’s unconscionable to be sitting on this money.” Eleven percent of Florida’s mortgaged homes are currently in foreclosure, and the state saw 92,000 completed foreclosures in the year ending August 2012, second only to California.

Both Rich and the Florida Housing Coalition’s Ross expressed concern that the legislature could divert the money away from housing. One Democratic representative has already suggested it be used to fund a pay raise for state employees.

It wouldn’t be the first state to see that happen. In May, we showed how almost $1 billion that states received for the settlement had gone to plug budget holes or fund programs unrelated to the housing crisis. California, for example, received $410 million, but it all went to the general fund. Ultimately, the attorney general’s office ended up with just $18.4 million earmarked for housing counseling and overseeing the settlement.

Arizona’s state assembly diverted $50 million—more than half the state’s total—to the general fund. Housing advocates challenged the transfer in court, but a judge ruled this month that it was legitimate. North Carolina legislators also ended up rerouting $7.8 million that had been intended for housing counseling to free up money in the state budget.

New Jersey put the $75 million it received towards various social programs, including affordable housing. But the money funded preexisting programs, rather than supplementing them or starting new initiatives, as part of an effort to balance the budget.

A spokesman for the state treasury told us earlier this year that the settlement did not require them to spend extra money. “If we put [the money] into the budget and don’t have to cut something else, that’s a net gain,” he said. (The treasury didn’t respond to our more recent requests for comment.)

Advocates and some lawmakers protested the decision not to boost spending for housing. They say it may follow the letter of the settlement, but not the spirit. According to CoreLogic, New Jersey had the second-highest percentage of mortgages in foreclosure, after Florida.

What other states are doing with the money

When we first mapped out where the settlement millions were going, many states hadn’t yet outlined plans. We’ve updated our comprehensive map to show developments since then. Here’s a sampling of what’s happened:

Attorneys general and lawmakers are still working out how the money will be used in a few other states besides Florida.

Some of the states that turned over their settlement money to their legislature haven’t yet seen it spent. The biggest case is Texas, where the legislature won’t meet until January to determine how to budget the $134 million it received.  There’s no requirement that any of that money be spent on housing.

Additional reporting by Paul Kiel.

 

The Bush Administration’s Oft-Repeated (And Now Challenged) Waterboarding Claims

by Cora Currier, ProPublica

For many years, Bush administration officials have said that the CIA waterboarded only three terror suspects. Despite nearly endless revelations and investigations about the U.S.’s treatment of detainees, there has never been evidence contradicting those claims. But that changed earlier this month.

Human Rights Watch recently released a report detailing the accounts of 14 Libyan men who claim they were detained and, in some cases, subject to harsh interrogations by the U.S. before being transferred back to Libyan prisons, where they also faced abuse.

One man, Mohammed Al-Shoreoiya, provided a detailed account of being waterboarded “many times” while in U.S. custody in an Afghan prison between 2003 and 2004. Another man described a similar form of water torture, conducted without a board.

None of the men’s accounts could be confirmed, but as the New York Times noted, the detainees did not seek out Human Rights Watch, and their descriptions of their treatment, including waterboarding, are consistent with CIA procedural documents that have been made public.

The CIA first confirmed waterboarding in February 2008, when then-CIA director Michael Hayden told a Senate committee that “only three detainees” had been waterboarded — Khalid Sheikh Mohammed, Abu Zabaydah, and Abd Al Rahim al-Nashiri. No one, he said, had been subjected to the process since 2003. That claim has been repeated by former President George W. Bush and top officials from his administration. Former Defense Secretary Donald Rumsfeld has also noted that the military did not waterboard.

A spokesman for the CIA told ProPublica that “the Agency has been on the record that there are three substantiated cases in which detainees were subjected to the waterboarding technique under the program.”

Here are top Bush administration officials stating, again and again, only three detainees were waterboarded [emphasis added]:

George W. Bush

Of the thousands of terrorists we captured in the years after 9/11, about a hundred were placed into the CIA program. About a third of those were questioned using enhanced techniques. Three were waterboarded.

– November 2010, in his memoir, Decision Points.

President Bush also repeated the line in interviews that fall with the Times of London and Fox News.

Dick Cheney, former vice president

It is a fact that only detainees of the highest intelligence value were ever subjected to enhanced interrogation. You’ve heard endlessly about waterboarding. It happened to three terrorists.

— May 21, 2009: Dick Cheney, in a speech at the American Enterprise Institute.

In 2009, Cheney made the same claim in another speech and in interviews with the Washington Times, CNN and CBS. In 2011, he mentioned it again in a speech at AEI.

Donald Rumsfeld, former defense secretary

[Michael Hayden] looked at all the evidence and concluded that a major fraction of the intelligence in our country on al Qaeda came from individuals, the three, only three people who were waterboarded… no one was waterboarded at Guantanamo by the U.S. military. In fact, no one was waterboarded at Guantanamo, period. Three people were waterboarded by the CIA, away from Guantanamo and then later brought to Guantanamo.

— May 3, 2011, in an interview with Fox News.

Rumsfeld repeated the line that year in interviews with CNN, CBS, the Associated Press, Charlie Rose and in a speech in February 2012.

Michael Hayden, former CIA director

Let me make it very clear and to state so officially in front of this committee that waterboarding has been used on only three detainees. It was used on Khalid Sheikh Mohammed, it was used on Abu Zubaydah, and it was used on Nashiri. The CIA has not used waterboarding for almost five years. We used it against these three high-value detainees because of the circumstances of the time.

–Feb. 5, 2008, in testimony to a Senate committee.

Hayden also reiterated the three-person figures in a memo circulated that month to CIA employees and on Meet the Press that March. He repeated it again in an interview with Newsweek in 2009.

John Yoo, former Justice Department official

Waterboarding we think is torture, but it happened to three people. The scale of magnitude is different….We’ve done it three times.”

–June 1, 2008, in an interview with Esquire Magazine.

Yoo also said three people had been waterboarded in a June 2008 congressional hearing.

Karl Rove, senior adviser to Bush

[Coercive techniques] were used against some thirty hard-core terrorist detainees who had successfully resisted other forms of interrogation. Only three were waterboarded.

–March 2010, in his memoir, Courage and Consequences.

Michael Mukasey, former attorney general

The fact is that Khalid Sheikh Mohammed, who was subjected to enhanced interrogation techniques, including waterboarding — he was one of three people who were waterboarded — did disclose the name — the nickname actually, which was the name that this courier actually used — in the course of the questioning that took place after enhanced interrogation techniques.

–May 17, 2011, in remarks at the American Enterprise Institute.

Jose Rodriguez Jr., former director of the National Clandestine Service at the CIA

In fact, only three detainees: Mohammed, Zubaydah and one other were ever waterboarded, the last one more than nine years ago.

— May 10, 2012: Jose Rodriguez Jr., in an op-ed on CNN.com

Rodriguez also mentioned the figure in interviews this spring with Fox News and the New Yorker.

Bill Harlow, who co-authored Rodriguez’ book on interrogations, said that Rodriguez stands by his statement. “These procedures were not done without extensive documentation and authorization, as part of an officially approved program, and all the documentation there shows three individuals,” Harlow said.

The other officials we’ve cited did not respond to requests for comment.

President Obama came into office proclaiming a ban on torture, stating that waterboarding was unequivocally a form of torture, and making the infamous “torture memos” public. But the administration has said no one would be prosecuted for waterboarding or other interrogation methods previously sanctioned by the government, and announced last month it would close the last two investigations into CIA abuse.

A Justice Department spokesman would not comment on whether the government ever investigated the Libyan cases. Laura Pitter, the author of the Human Rights Watch report, said that none of the men she interviewed said they had been contacted by U.S. investigators about their detention.

The CIA spokesman said that he could not comment on specific allegations, but that “the Department of Justice has exhaustively reviewed the treatment of more than 100 detainees in the post-9/11 period — including allegations involving unauthorized interrogation techniques — and it declined prosecution in every case.”

Photo Credit: AP/J. Scott Applewhite, File

 

Mitt Romney’s Tax Mysteries: A Reading Guide

by Cora Currier, ProPublica

Last week, the website Gawker published more than 900 pages of documents from Bain Capital, the private equity firm Mitt Romney founded, and headed from 1984 until 1999. The document dump didn’t reveal much about Romney’s personal investments, but it added a bit more to the pressure on Romney to release more of his tax returns. Romney and his wife Ann have repeatedly rebuffed such calls. In a primary debate in January, Romney said he’d paid “all the taxes that are legally required and not a dollar more.”

So what do we know about how he avoided that extra dollar? For an overview of the questions surrounding Romney’s tax strategies, see Vanity Fair’s comprehensive story “Where the Money Lives,” and this commentary from tax lawyers Edward Kleinbard and Peter Canellos. We’ve also rounded up the best reporting on the central controversies.

 

What’s Been Disclosed?

Romney has released his 2010 tax return, and an estimate of his 2011 return. (He filed for an extension this year and has said he’ll release the full returns when they are finished. The deadline is Oct. 15). We also have 2010 returns for blind trusts for Romney, Ann, and their family, and the family foundation, as well as financial disclosures from his campaigns, beginning with his 2002 Massachusetts gubernatorial run.

Mitt Romney said recently that he has paid “at least 13 percent” in federal income taxes each year, but the campaign won’t go into more detail (for a closer look at his 13.9 percent rate in 2010, see our previous reading guide). Ironically, it was Mitt Romney’s father, George, who set the precedent for the kind of comprehensive disclosure that’s standard for most presidential candidates: During his 1967 bid for the Republican nomination, he released 12 years of tax returns, saying that just one or two seen in isolation could be misleading.

 

Romney’s Bain Career

Buyout Profits Keep Flowing to Romney, New York Times, December 2011 The New York Times laid out how Romney’s generous retirement deal let him keep investing in new Bain funds for 10 years after he left the company in 1999. He got a share of the profits from 22 funds, as Bain’s assets grew 20-fold. (If you’re hazy on how private equity, or leveraged buyout firms, as they used to be commonly known, actually work, see Marketplace’s plain-speak explanation.) Such retirement deals aren’t without their critics among tax professionals. Lee Sheppard of the blog Tax Notes argues that compensation packages should not include capital gains from funds which the individual had nothing to do with.

Romney using ethics exception to limit disclosure of Bain holdings, Washington Post, April 2012 Candidates for federal office are required to disclose financial holdings, but since the 2004 election, the Office of Government Ethics has let candidates postpone reporting underlying assets in accounts that are bound by confidentiality agreements. That applies to most of Romney’s Bain assets. It’s not the first time a presidential candidate has used the confidentiality exception — in fact, in 2004 Democratic nominee Sen. John Kerry didn’t report the underlying assets held in a Bain Capital fund by his wife, Teresa Heinz Kerry. But the size and portion of Romney’s assets that are shielded are unprecedented, according to the Post.

Romney’s Tax Rate

Why Mitt Romney’s Tax Rate is 15 Percent, Planet Money, and Romney as Multimillionaire Gets Break for Taxes, Bloomberg, January 2012 Much of Mitt Romney’s “income” from his private equity career likely isn’t considered income at all, but something called carried interest. Private equity firms (like hedge fund managers) are paid along a “two-and-twenty” model — a fee of two percent of the assets under management, and then 20 percent of whatever profits there are, the “carried interest.” The fee gets taxed as income, at a rate of 35 percent, but the carried interest is treated like investment income, and so it is taxed at the capital gains rate of 15 percent. There’s debate over whether that’s fair. That carried interest is a part of managers’ fee-structure, so some argue it should be considered earned income rather than capital gains. In 2007, members of Congress proposed legislation that would make carried interest be taxed as income. (For more on the debate, see also our previous reading guide).

Romney’s Management Fee Conversions, Victor Fleischer, August 2012 About that two percent in the two-and-twenty model. Colorado University Law School professor Victor Fleischer noted that the Gawker documents show that for several funds in which Romney was invested, Bain had waived the two percent fee, in exchange for another profit share arrangement. According to the Times, the documents show four Bain funds converted $1.05 billion in fees into capital gains. In this model, if there are profits, the fee, which had been taxed as ordinary income, is now converted into carried interest, and taxed at the much lower 15 percent rate.

Fleischer, whose research fueled efforts in Congress to tax carried interest as income, maintains that such conversions are illegal. The risk that Bain takes by waiving the fee, he argues, is immaterial, because the firm is so well-positioned to know which investments will succeed. If fee conversions are indeed illegal, they are nonetheless widespread in the private equity world; Fleischer doesn’t know of any cases in which the agency has challenged them.

Romney has reported investments in some of the funds that waived fees, but since we don’t have specifics, we don’t know for sure if or how he benefitted from the conversions.

 

Overseas Accounting

Romney’s IRA’s off-shore investments: helping his tax bill? Wall Street Journal, January 2012 While the Gawker documents provide a detailed look at how Bain runs offshore accounts, we’ve known for some time that Romney has considerable assets stashed in them. Romney said Sunday that Bain uses accounts in the Cayman Islands and elsewhere to attract foreign investors, and that he’s gotten “not one dollar reduction in taxes” from the offshore accounts. But as the Journal reported back in January, that claim is misleading. Non-profits and large retirement accounts can be subject to the “unrelated business income tax,” which is meant to keep tax-exempt entities from competing with commercial businesses. If Romney’s IRA was invested in Bain funds in the U.S., it would probably be subject to the tax. By investing in blocker-corporations — offshore partnerships that then make investments for them — IRAs avoid it.

Documents Show Details on Romney Family’s Trusts, New York Times, August 2012 The Times lays out what the Gawker documents show about Bain’s use of an investment strategy known as equity or total-return swaps. It’s a strategy, widely in use, that lets non-U.S. investors avoid a tax on dividends paid by American companies. An offshore fund will enter an agreement with a U.S. bank or brokerage firm, in which the American company “owns” stocks, but transfers all the gains or losses to the offshore fund, in exchange for interest. The swaps are side-bets, mirroring the motions and benefits of owning stocks, but aren’t subject to the dividends tax. Congress passed legislation curbing such swaps, and pending IRS regulations are supposed to put a stop to them, but they aren’t fully in effect yet.

Aside from the IRA account, what’s the motivation for an American individual like Romney to invest overseas? It may just be to have access to investment funds that are held offshore to attract foreigners, as Romney has explained. Still a little murky are entities like the Bermuda-based Sankaty High Yield Asset Investors Ltd., wholly owned by Romney and the subject of scrutiny from Vanity Fair and the Associated Press. Edward Kleinbard, a professor at the University of Southern California’s Gould law school, says there are legitimate reasons Romney might have organized such a corporation to serve a specialized tax purpose, but without full disclosures, “there’s no way to know why he needs to hold Sankaty, personally, overseas.”

Tax Credits Shed Light on Romney, New York Times, August 2012 An in-depth look at how Romney, like many wealthy individuals, has used foreign tax credits to reduce his U.S. tax bill. In 2010, Romney claimed nearly $130,000 in foreign tax credits. Unused credits can be rolled over from year-to-year, making them a handy tool for offsetting gains in particular years. Again, nothing illegal, but another way to apply the complexities of the tax-code so as to minimize his bill.

Boston Lawyer Keeps Steady Hand on Romney’s Holdings, Boston Globe, January 2012 In an interview with the Globe, R. Bradford Malt, the lawyer in charge of Romney’s trust, defends the use of a (now-closed) Swiss bank account. The Swiss account was opened in order to diversify Romney’s investment in foreign currencies, not to hide assets, Malt says. The Swiss account was initially left off the federal financial disclosure Romney filed last year, in what his campaign called an oversight. We don’t know if Romney reported the account in earlier tax returns, or in required reports to the Treasury aimed at preventing money-laundering and other offenses. Non-reporting of Swiss and other accounts was widespread until an IRS crackdown in 2009.

Romney’s Children’s Trust

A Clue Emerges to Romney’s Gift-Tax Mystery, Wall Street Journal, August 2012 The Romneys established a trust for their heirs, which is now worth roughly $100 million. The campaign told the Journal that Ann and Mitt have never paid gift taxes on contributions to the account, because they were under the lifetime maximum — $600,000 each in 1995, then $1 million, until a recent exemption raised it to $5.12 million. Even the couple’s maximum contributions still would have had to grow ten-fold to get to $100 million.

The Journal uncovered a 2008 presentation by Ropes & Gray, a law firm that has advised Bain Capital (and where Malt, Romney’s trustee, is a partner). It reveals one strategy that was apparently common until about 2005: Because carried interest is a share in potential profits, it could be given away at low or even zero value, since those profits theoretically might never materialize. It’s hard to believe that an established private equity firm like Bain could really envision no profits from that carried interest, raising questions about whether those were fair-market valuations of the gifts. A Romney adviser told the Journal that the Ropes & Gray presentation described industry practice, and that one “should not assume” the Romneys took advantage of the strategy. This mystery wouldn’t necessarily be solved if Romney released his tax returns, since gift-tax returns are filed separately.

 

Romney’s Enormous IRA

Bain Gave Staff Way to Swell IRAs by Investing in Deals, Wall Street Journal, March 2012 Romney has somewhere between $20 million and $102 million in an individual retirement account. Given the limits on contributions to IRAs, that’s an unusually large one: According to the Boston Globe, even an IRA with $20 million would put him in the top .001% of such accounts. One way it might have grown so spectacularly: Bain employees had the opportunity to invest, via their retirement accounts, in the company’s deals. Employees often bought high-risk, low-cost shares for their retirement accounts. During Bain’s boom, they exploded in value, with none of it taxed in the short-term. Were those shares undervalued when they were placed in IRAs? According to the Journal, tax lawyers couldn’t point to an instance where the IRS challenged valuations in private equity retirement accounts. Romney did use his IRA to co-invest in Bain deals, but it’s not apparent whether he used the strategy outlined by the Journal.

 

Blind Trusts

Mitt Romney’s Blind Trust Not So Blind, ABC News, December 2011 When faced with questions about his investments in offshore accounts or carried interest, the Romney campaign generally points to the fact that since 2003, when Romney became governor of Massachusetts, his assets have been held in a blind trust, over which Romney has no control. But some have questioned whether Romney’s trustee, who is his personal lawyer and longtime associate Malt, is too close to Romney to make the trust truly blind. ABC noted a million-dollar investment in a company founded by Romney’s son, Tagg. The trust would not meet the requirements for federal office, which hold that an institution with no financial ties to the official must control the assets.

 

Rafalca the Horse

Romneys Have Tax Deduction with Olympic Hopes on Rafalca, Bloomberg, July 2012 Since you’ve made it this far, one more nugget of controversy: On their 2010 returns, the Romneys claimed their Olympian dressage horse was a business, not a hobby. It’s not a profitable business, though; Ann Romney reported a $77,731 loss for the year. For a business, with losses, Ann was able to claim a deduction, Bloomberg says, though only $50 that year. According to Bloomberg, the IRS regularly challenges people who classify their horses as a business.

Photo by Gage Skidmore via Flickr.com

 

Washington’s War On Leaks, Explained

by Cora Currier, ProPublica

Accusations continue to fly from lawmakers and presidential hopeful Mitt Romney that the Obama administration has leaked national security information for political gain. Leaks, of course, are nothing new in Washington, but now the Senate has jumped into the fray, with a new proposal to tighten control over the flow of information between intelligence agencies and the press.

This summer the Justice Department opened two investigations into leaks about a foiled terror plot and U.S. cyber-attacks against Iran. But leak prosecutions haven’t always proved easy. As we’ve explained before, there’s no single law criminalizing the disclosure of classified information. National security leaks are sometimes prosecuted under the Espionage Act, which has been used a record six times under Obama, but there is perennial debate over whether to introduce more stringent laws against leaks.

On Monday, the Senate Select Committee on Intelligence filed new anti-leak legislation. The bill wouldn’t amend the Espionage Act, or make any blanket criminal penalty for leaks. But it does include several provisions that could stymie reporting on national security.

One provision would require intelligence employees to report all contact with the media. This goes farther than most existing policies; a standard intelligence polygraph question asks whether employees have leaked classified information, but not about any media contact. The measure also doesn’t define “media,” or “contact” — does a blogger, or think tank count?

Prospects for the anti-leak provisions aren’t clear. Previous attempts to pass anti-leak legislation over the past decade have failed, usually faltering on concerns about whistleblower protections and press freedom. Senator Dianne Feinstein, D-Calif., who chairs the intelligence committee and helped author the proposed measures, told Politico that she would be open to revising the bill.

Other language in the bill states that only a director, deputy director, or designated public affairs staff of an intelligence agency “may provide background or off-the-record information on intelligence activities” to the media. As the Washington Post noted, that would make standard background intelligence briefings on unclassified information by CIA and other analysts illegal. (Intelligence employees could still give authorized, on-the-record interviews, but those, of course, are rare because those employees usually need to protect their identities).

Tom Devine, legal director for the Whistleblower Protection Act, said that those two provisions amounted to “a gag order on unclassified information,” which could violate whistleblower and free speech protections.

Gregg Leslie, the interim director of the Reporters Committee for Freedom of the Press, says that the restrictions would hamper reporting on sensitive issues, but not because they stem leaks. “It’s not all about getting a scoop on some hot story, it’s about getting the facts straight,” he said. “You need to be able to bounce your ideas, your theories, your tips from a million sources, off of someone in the government who knows what’s right.” The Reporters Committee supports other media groups who filed a memo opposing the bill.

Another provision of the bill asks the Attorney General to consider changes to the Justice Department’s leak investigations, including its policy of only rarely subpoenaing journalists because of the First Amendment implications.

The Senate bill focuses almost exclusively on the intelligence community. It mostly doesn’t cover the White House, most of the State Department, much of the Pentagon, and Congressional aides with security clearance.

The measures would also require the Director of National Intelligence, who oversees the 17-agency “intelligence community,” to set up new procedures for reporting leaks, and to specify internal punishments. Even if a leaker was not subject to criminal prosecution, they could lose their federal pensions, and if the information they disclosed was about a covert action, their security clearance would be permanently revoked.

Some of that overlaps with existing agency policies — government employees and contractors with security clearance already usually have to sign non-disclosure agreements, and in June, the Director of National Intelligence introduced his own beefed-up anti-leak measures.

But Senator Ron Wyden, D-Ore., who cast the sole vote against the bill in committee, wrote in a commentary that he was concerned about the bill’s implications for whistleblowers. The provision that someone could lose their pension if they were “determined” to have leaked, Wyden wrote, is vague and could potentially be used to retaliate against whistleblowers.

The bill also describes the seemingly paradoxical official leak, or “authorized disclosure.” Officials would be required to notify Congress of any disclosure of classified information to the media or others. The report must specify why the disclosure was authorized, and whether the information was specifically declassified for disclosure or if it remained classified.

It’s not clear what Congress could do if they believed that an “authorized disclosure” was wrongfully disclosed. Spokespeople for Senators Feinstein and Saxby Chambliss, R-Ga., vice-chairman of the intelligence committee, did not respond to requests for further comment on the bill. Responding in Politico to criticisms of the bill, Feinstein said that “we know there’s harm done,” to national security by leaks and that it was “worth a trial” to stem the danger.

The proposals for tighter control over classified information come at a time when members of Congress have complained about the administration’s lack of transparency on several classified programs — in particular, the CIA’s drone program and the targeted killing of terror suspects — which they say has hampered Congress’ oversight role.

Since 9/11, the amount of information classified and the number of people with security clearance has ballooned, to more than 4.8 million people. This has led some to question whether “classified” always describes truly sensitive national security information. Leslie, of the Reporters Committee for Freedom of the Press, described it as “an old steam boiler — the answer is not always to patch the leaks but to relieve the pressure. Imposing so much secrecy means people are more likely to leak.”

In July the Pentagon announced that it would be instituting “top-down” monitoring of the press for leaked classified information. Journalists and transparency advocates have criticized the initiative, worrying that it could stifle reporting.

A Pentagon spokesman said Monday that exactly how that new policy will be implemented was still being finalized. He said that the effort was meant to identify when classified information has come out in the news, not to monitor journalists as they report. Per a preexisting Pentagon policy, Public Affairs officers are supposed to be “the sole release authority for all DoD information.”

 

HSBC’s Money Laundering Lapses, By The Numbers

by Cora Currier, ProPublica.

 

This week a Senate investigation detailed that HSBC had lax controls against money-laundering and often ignored warnings about clients with ties to drug cartels and terrorists.

The bank is also reportedly nearing a settlement with the Justice Department, which has two criminal investigations into whether HSBC was complicit in money-laundering and tax evasion.The federal regulator that should have been keeping tabs on all this, the Office of the Comptroller of the Currency, also came under fire for “systemic weaknesses” in its oversight of banks’ anti-money laundering procedures.

The report reaches back more than a decade, and in testimony in front of the Senate this week, the bank apologized and vowed it has recently overhauled its anti-money-laundering efforts. The bank’s head of compliance stepped down this week. But the Senate report notes that HBSC made similar promises of reform back in 2003 when it was cited by regulators for poor oversight of suspicious transactions. HSBC declined to comment further on the report or on the DOJ’s ongoing investigation.

There are lot of blunders and blind spots detailed in the Senate’s 335-page takedown. Here’s a rundown — in each instance, we’ve linked to the relevant page in the report.

17,000: The backlog of unreviewed, potentially suspicious activity alerts at HSBC’s U.S. arm as uncovered by government regulators in 2010.

200: Number of compliance staff in bank’s U.S. branch between 2006 and 2009, of which a smaller group was charged with making sure the bank was following anti-money-laundering rules. HBUS had millions of accounts, and more than 16,000 employees overall, and according to the report, kept compliance staff small as a cost-cutting measure.Members of the anti-money-laundering group told investigators that understaffing was a key problem.

85: Number of problems with the anti-money-laundering efforts at bank’s U.S. arm red-flagged by the OCC between 2005 and 2010. That was a third more than the next-closest major bank.

0: number of enforcement actions the OCC took in that time period.

3: number of years, from 2006 to 2009, for which HSBC’s U.S. branch didn’t do any money-laundering monitoring for transactions with HSBC banks in other countries.

15 billion: Total value of U.S. dollar bills (as in paper money) the bank accepted as part of bulk-cash transactions from foreign HSBC banks during that period, with no anti money-laundering controls.

Concerns about HBMX, the bank’s Mexican arm

7 Billion: U.S. dollars exported from 2007-2008 from HBMX accounts to HSBC’s U.S. accounts. At the time, both American and Mexican officials raised concerns that such a volume was only possible if it included illegal drug money.

1: Rank of HBMX in repatriation of U.S. dollars from Mexico for those years. HBMX is only the 5th largest bank in Mexico.

50,000: Number of clients in 2008 with U.S. dollar accounts at an HBMX shell operation in the Cayman Islands.

75: Estimated percentage of those accounts for which HBMX had incomplete information on the account holder.

15: Estimated percentage of such accounts for which the bank had no account holder information. (In 2009, HBMX closed 9,000 Cayman U.S. dollar accounts, but continues to allow new ones to be opened there).

Potentially Violating Sanctions

28,000: Number of transactions by HSBC’s U.S. arm between 2001 and 2007 involving countries, groups, or individuals that the U.S. Treasury has sanctions against.

25,000: number of those transactions that involved Iran. The vast majority, auditors found, were sent through the U.S. without disclosing Iranian ties. In many cases, foreign HSBC banks substituted their own names for clients’ with Iranian ties to avoid triggering red flags.

300,000: dollar amount of a wire transfer that went through HBUS because a compliance officer didn’t realize “Persia” meant Iran.

2: transactions with Myanmar that slipped through filters because they didn’t recognize “Burmese” or “Mynmar.” [sic]

2: Number of U.S. dollar accounts established by HBSC’s European operation in the U.K. for the “Taliban.” HSBC’s U.S. operation was unable to tell Senate investigators whether they ever processed transactions for the account.

Other shady ties

1 billion: U.S. dollars bought from HSBC between 2006 and 2010 by Al Rajhi, a Saudi Arabian bank previously cut off because of ties to terrorism. An HSBC official fought against concerns from compliance employees, because of the revenue they brought to the bank.(He apologized in front of the Senate committee Tuesday).

290 million: Amount in U.S. dollar travelers’ checks cleared by HSBC’s U.S. operation for a Japanese bank over four years. The checks originated at a Russian bank and were brought in by 30 clients who all claimed to be in the used car business. Compliance officers raised concerns in 2005, but HSBC didn’t stop processing the checks until October 2008. (When questioned by the Senate committee, the Japanese bank could offer no explanation for why “the parties were using U.S. dollars to purchase used cars located in Japan or why [the bank] had so little information about the 30 clients carrying in U.S. dollars travelers checks totaling about $500,000-$600,000 each day.”)

2,000: number of U.S.-based HSBC accounts opened by “bearer-share” corporations — where whoever physically holds the stock owns the corporation, so there’s virtually no record of who owns them.

1,670: number of those accounts in the bank’s Miami branch, holding $2.6 billion in assets. One such account was linked to a Miami real estate family convicted of tax fraud for hiding nearly $200 million through bearer-share accounts. Another account, for a Peruvian family, was opened without the normal controls on bearer-shares. One HSBC executive wrote in an email in support of waiving the requirements, “this is too important a family in Peru for us not to want to do business with.”

 

 

Classified Confusion: What Leaks Are Being Investigated, And What’s The Law On Leaks?

by Cora Currier, ProPublica

Recent scoops on national security have drawn the ire of Republican lawmakers, who have accused the Obama White House of leaking stories that burnish its image.

Obama responded that he has “zero tolerance” for leaks. He also said: “the writers of these articles have all stated unequivocally that they didn’t come from this White House. And that’s not how we operate.”

Someone somewhere has to be talking. Eric Holder said he’s assigned two U.S. attorneys to lead separate criminal investigations into “potential unauthorized disclosures.” Although the Justice Department won’t comment on which particular leaks are under investigation, unnamed officials (of course) have given reporters an idea.

Here’s what we know about leak investigations underway, the legality of leaks, and why leak prosecutions have been so rare.

Leak: Stuxnet

The New York Times reported that Obama ordered cyberattacks against Iran using Stuxnet, a computer virus the U.S. developed with Israel.

Sources: “participants” in the program and the attack, “members of the president’s national security team,” “current and former American, European and Israeli officials,” “one of [Obama’s] aides,” “a senior administration official.”

Investigation: The CIA reportedly sent a “crime report” to the Justice Department on the leak, and it is — as unnamed officials told Reuters — one of the two new investigations.

Leak: Foiled Underwear Bomber

The AP reported that the CIA foiled an Al-Qaeda plot out of Yemen to deploy a new kind of underwear bomb. Subsequent stories identified the role of a double-agent in stopping the plot.

Sources: “U.S. officials who were briefed on the operation.”

Investigation: The story also apparently prompted the CIA to send a “crime report” to the Justice Department, making it the second of the criminal inquiries mentioned by Holder.

Leak: The CIA’s drone program

The CIA’s drone program and targeted strikes have been written about for years, but recent articles from Newsweek and the New York Times got particular attention.

Sources: Too many to count. The Times article alone cites “three dozen of [Obama’s] current and former advisers.” Staffers from the House and Senate Intelligence committees — whose members have been among the most vocal in their concern about leaks — were cited just last week in an article on CIA drone strikes.

Investigation: Apparently not. The CIA reportedly hasn’t filed a report on drone leaks. Unnamed officials told Reuters one reason is that the CIA’s drone program has already been so openly discussed (this despite the government’s position in a separate case that the public doesn’t know the program exists). A Justice Department official recently noted to Congress that agencies sometimes don’t request an investigation because of “wide dissemination” of the leaked information.

What laws have leakers violated?

There is no single law making the disclosure of any information stamped “classified” a crime. The Espionage Act has been used, though rarely, to prosecute the leaking of national security information. There are also laws on computer hacking and a patchwork of other statutes.

Under most of these laws, it’s not enough to show that someone leaked — the government needs to prove they did so with intent or reason to believe that the information would hurt the U.S. or help a foreign country. Prosecutions of media leaks can also be hampered by First Amendment protections. (For an in-depth legal history, see this report from the Congressional Research Service). In some cases the government has decided not to prosecute because classified information would be confirmed or further revealed in the process.

From 2005 to 2009, the Justice Department got 183 “crime reports” on leaks from others in the government. Those notifications led to 26 investigations. (The Justice Department can also start an independent investigation without a referral.) Obama has already brought six prosecutions under the Espionage Act, though many of the investigations were initiated under George W. Bush. Email and other technological changes have also made it easier, in some cases, to track leakers.

So what comes next?

If the Justice Department decides not to prosecute, the case goes back to the agency that reported it, which could take administrative steps to punish a leaker, anything from a reprimand to stripping security clearance. Many Republican senators have said the Justice Department isn’t sufficiently independent to investigate potential White House leaks. Last week more than 30 senators sent a letter calling for a special counsel. They also suggested a congressional investigation could be launched.

In response to recent leaks, Director of National Intelligence James Clapper — who oversees the seventeen-agency intelligence community — issued a new directive asking the intelligence community’s inspector general to lead further investigations in some cases where the Justice Department decides not to. Such an investigation wouldn’t be a criminal inquiry, but it would reach beyond the scope of one agency. According to a DNI spokesman, the new investigative power wouldn’t apply to leaks from the White House or non-intelligence agencies2014but if the investigation pointed to a leaker outside the intelligence community, “there would be a process to make sure the employer was notified and could take their own steps.”

The directive also mandates that intelligence employees getting periodic polygraph tests be asked if they’ve leaked information. Earlier this month, another DNI directive said personnel with access to national intelligence (and that’s a lot of people) would be “continually evaluated and monitored.”

Members of both the House and Senate have indicated they are working on legislation efforts to stem future leaks, but details are still unclear.

Aren’t leaks par for the course in Washington?

That’s part of the reason Congress hasn’t made a comprehensive law penalizing them. In 2000, Bill Clinton vetoed a provision making it easier to prosecute leaks, saying it was too broad and would have had a “chilling effect” on legitimate communications.

Administrative penalties and the tools for criminal investigations that the government already has are sufficient, maintains Elizabeth Goitein, of the Brennan Center for Justice. Goitein says that new crackdowns could have an effect on would-be whistleblowers. Intelligence employees are specifically exempt from the Whistleblower Protection Act, which gives most government employees protection from retaliation for reporting wrongdoing. The government’s position (as the DOJ told us in February) is that there are internal channels by which intelligence employees can report issues and the media is not one of them.

A spokesman for the DNI said that it was “the Director’s number-one concern” that his new anti-leak policies were implemented without affecting whistleblowers.

 

JPMorgan’s Connections To The House Finance Committee

by Cora Currier, ProPublica.

JPMorgan Chase CEO Jamie Dimon is on Capitol Hill again today, this time to talk to the House Financial Services committee about the bank’s recent multibillion-dollar trading loss. According to his prepared testimony, Dimon plans to deliver basically the same remarks he gave the Senate banking committee last week, apologizing but giving few details.

His Senate hearing was hardly a grilling; senators mostly praised him for his “emphasis on continuous quality improvement,” in the words of Senator Jim DeMint, R-S.C.

As we charted last week, JPMorgan happens to have plenty of connections to the Senate committee. The House committee where Dimon is appearing today has its own ties to the bank. Congressmen and staff from the committee have gone to JPMorgan and its lobbying firms. Members have also gotten hefty campaign contributions from the bank’s PACs and employees.

The House Connections

JPMorgan has two in-house lobbyists with connections to the House Financial Services committee.

-Rick Lazio joined JP Morgan in 2004 as chief of government relations. He previously served as a congressman from New York from 1993-2000, and sat on the committee.

-Tom Koonce is a lobbyist for JP Morgan and formerly a legislative director for Brad Miller, D-N.C., who sits on the committee.

There are also three former congressional staffers with committee ties at firms currently lobbying for JPMorgan:

-Collins Lionel is a lobbyist at Jones, Walker et al., and a former staff member on the committee. JPMorgan hired the firm this year.

-Nicholas Leibham, who works JPMorgan lobbying firm K&L Gates, was formerly an aide to Gary L. Ackerman, D-N.Y., another committee member.

-Bart Gordon also works at K&L Gates. He’s a former Democratic congressman from Tennessee who, back in the 1980s, sat on the committee.

Data compiled by the Center for Responsive Politics also shows how representatives on the committee have benefited from the generosity of JPMorgan’s employees and PACs.

In the 2012 election cycle, JPMorgan’s PACs and employees have so far given $168,000 to members of the committee. About 80 percent of that came from one of the bank’s PACs.

-JPMorgan’s PAC and employees have been the second-largest contributors to committee chairman Spencer Bachus, R-Ala., since 1993, donating a total of $119,000 to the congressman’s campaigns — $11,000 so far this election cycle. (These numbers don’t include contributions to Super PACs or other outside groups.)

-The committee’s vice-chair, Jeb Hensarling, R-Texas, has received a relatively modest $50,000 from JPMorgan since 2003. Overall, commercial banks have been his largest campaign contributor.

-Other big Republican career recipients include Steve Stivers of Ohio, who has only served since 2010 but has already received more than $70,000.

-On the Democratic side, JPMorgan’s PAC and employees have given ranking member Barney Frank, D-Mass., $84,500 since 1989, making them his 4th biggest donor overall.

-JPMorgan is number one for Carolyn Maloney, D-N.Y., with more than $100,000 since 1993.

Despite the hearings, neither the House nor Senate is actually conducting investigatons of JPMorgan’s losses. But the Department of Justice is, along with five of JPMorgan’s regulators — the FDIC, SEC, CFTC, OCC and the Fed. Lest you find that load of government acronyms as bewildering as Dimon said he did, we’ve also laid out their various investigations, and in a few cases, their own JP Morgan connections.

The SEC

The Securities and Exchange Commission is looking into how JPMorgan disclosed risks to shareholders. SEC chairman Mary Schapiro outlined in testimony to the House today the various kinds of disclosure the SEC can target, without going into details on JPMorgan.

JPMorgan has two former SEC enforcement heads working for them now: the company’s general counsel is Steven Cutler, who headed enforcement at the SEC from 2001 to 2005. They have also reportedly retained William McLucas from an outside law firm, another SEC enforcement director who spent two decades at the agency.

The CFTC

The Commodity Futures Trading Commission is flexing new muscles gained from the Dodd-Frank financial reform. According to the Wall Street Journal, they are subpoenaing internal bank emails to determine if JPMorgan officials made deceptive statements — something that could constitute fraud or manipulation of derivatives market. The CFTC has never brought charges under the new rules, which went into effect last year.

The OCC

The Office of the Comptroller of the Currency director’s testimony for today echoes what he told the Senate earlier this month. The agency is looking at JPMorgan’s risk-management strategy leading up to the losses, and reviewing the OCC’s own oversight of the bank.

As ProPublica’s Jesse Eisinger wrote recently, this is also something of a test for the OCC under its new commissioner Thomas Curry. The agency has had a reputation for favoring light regulation — including a watered-down version of the Volcker Rule, a Dodd-Frank ban on proprietary trading that some say would stop trades like the one that led to JP Morgan’s loss when it goes into effect. Curry cautioned in his testimony for today that the OCC hadn’t determined whether JP Morgan’s trade would have been banned under Volcker.

The Fed

In his testimony, the legal counsel of the Federal Reserve said that the agency was still looking, but had not yet turned up any evidence of weak risk controls at JPMorgan.

Jamie Dimon sits on the board of the New York Federal Reserve — something that’s prompted a proposed bill from Democratic senators that would ban officials of banks that can receive loans from the Fed from serving on any of its boards. JPMorgan and 17 other banks whose execs served on regional Fed boards got emergency loans from the Fed between 2007 and 2009. A government report found no evidence of conflict of interest from the arrangement, but did raise the concern of “reputational risks” from the appearance of one.

The FDIC

The Federal Deposit Insurance Commission chair testified that the FDIC has added extra staff and has “met daily” with JPMorgan employees to take a broader look at the company’s risk management beyond the unit that made the losing trades, according to their prepared testimony.

A recent appointee to the board of the FDIC, Jeremiah Norton, is a former executive at JPMorgan Securities. Before that, he was an aide to Ed Royce, R-Calif., who sits on the House finance committee.

The DOJ

The DOJ isn’t testifying this morning, but they have started an inquiry into what executives at JPMorgan knew when they initially dismissed the losses. It’s not clear what kind of charges could come from that investigation.

 

Charting The Cozy Connections Between JP Morgan And The Senate Banking Committee

by Cora Currier, ProPublica.

This morning, Jamie Dimon, the CEO of JP Morgan Chase, faced a Senate hearing over more than $2 billion in bank losses caused by risky hedges that blew up. Dimon said that the hedges — investments meant to protect the bank — had grown into “complex and hard-to manage risks.” The losses “let a lot of people down, and we are sorry for it.”

Many lawmakers are holding up the losses as evidence of the need for stronger financial regulation. The chairman of the Senate banking committee, Tim Johnson, D-S.D., in his opening remarks, asked for “a full accounting” of JP Morgan’s losses.

But through campaign contributions and well-connected staff, JP Morgan appears to have already taken its own accounting of the Banking committee. Here’s a picture of connections between the company and the committee:

Revolving Door

One current staffer on the Senate banking committee, Dwight Fettig, is a former lobbyist for JP Morgan. In 2009, the bank hired him to work on “financial services regulatory reform.” Meanwhile, JP Morgan is stacked thick with former committee staff.

· Naomi Camper: Currently a lobbyist for JP Morgan. Prior to that, from 2001-2004, she was an aide to Senator Johnson.

· Kate Childress: A JP Morgan lobbyist since 2008, she is also a former aide to Chuck Schumer, D-N.Y., who sits on both the Senate Banking and Finance committees.

· Steven Patterson: A JP Morgan lobbyist and formerly a staff director for economic policy for the Banking committee.

· Nate Gatten: A JP Morgan lobbyist based in London who was reportedly called back to Washington recently to help with the company’s damage control. He is a former lobbyist for Fannie Mae, and, in the 1990s, was a banking aide to former Senator Robert Bennett, R-Utah, who also sat on the committee.

· P. Michael Nielsen: A lobbyist with a firm run by former Senator Bennett, he has been retained by JP Morgan for help with federal probes, according to Bloomberg. He was also a senior policy adviser to the committee from 2007 to 2010.

American Banker also reported that three other outside lobbyists currently working for JP Morgan were once affiliated with the committee:

· Jason Rosenberg: A lobbyist at The Glover Park Group and formerly an aide to Jon Tester, D-Mont., who sits on the committee.

· Jenn Fogel-Bublick: A lobbyist at McBee Strategic Consulting and formerly a Democratic counsel on the committee.

· Mike Chappell: A lobbyist for Fierce, Isakowitz & Blalock and a former press assistant to Senator Roger Wicker, R-Miss., another committee member.

A former senator on the committee, Mel Martinez, R-Fl., is also now the JP Morgan exec in charge of Florida, Central America, and the Caribbean. Martinez was elected to the Senate in 2004 and went to the bank in 2010. Bloomberg reported that he was called to Washington after the losses were reported.

Lobbyists for JP Morgan appear to be keeping busy. The bank spent $7.6 million on lobbying last year, according to the Center for Responsive Politics.

Campaign Contributions:

JP Morgan has also been a generous donor to banking committee members, both Republican and Democratic.

· JP Morgan is the second largest campaign contributor to Johnson, the committee chair, and to the top Republican on the committee, Richard Shelby of Alabama, over the past twenty years, according to a tally from American Banker.

· JP Morgan employees have donated more than $80,000 to Johnson since 1998 and more than $136,000 to Shelby since 1990.

· So far in 2012, Dimon has personally donated to committee members Bob Corker, R-Tenn., and Mark Warner, D-Va. In 2008, he gave $2,000 each to Johnson and Shelby.

· Six of the 22 members of the banking committee have not received any money from JP Morgan PACs or employees in recent election cycles. Two of those members are retiring and aren’t collecting campaign funds.

It’s not clear what the committee will do beyond the hearings. Numerous federal agencies are investigating JP Morgan’s losses, including the Commodity Futures Trading Commission, the Office of the Comptroller of the Currency, the Department of Justice, and the Securities and Exchange Commission. Next Tuesday, Dimon will testify in front of the House Committee on Financial Services.

 

Everything You Ever Wanted to Know About Drones

by Cora Currier, ProPublica.

 

Everyone is talking about drones. Also known as Unmanned Arial Vehicles, or UAVs, remote-piloted aircrafts have become a controversial centerpiece of the Obama administration’s counter-terrorism strategy. Domestically, their surveillance power is being hyped for everything from fighting crime to monitoring hurricanes or spawning salmon. Meanwhile, concerns are cropping up about privacy, ethics and safety. We’ve rounded up some of the best coverage of drones to get you oriented. Did we miss anything? Let us know.

A Little History

The idea of unmanned flight had been around for decades, but it was in the 1990s, thanks to advances in GPS and computing, that the possibilities for drones really took off, as the New Yorker recently recounted. While hobbyists and researchers looked for uses for automated, airborne cameras, the military became the driving force behind drone developments. (This history from the Washington Post has more details) According to the Congressional Research Service, the military’s cache of U.A.V.’s has grown from just a handful in 2001 to more than 7,000 today. This New York Times graphic shows the variety of drones currently employed by the military — from the famous missile-launching Predator to tiny prototypes shaped like hummingbirds.

This February, Congress cleared the way for far more widespread use of drones by businesses, scientists, police and still unknown others. The Federal Aviation Administration will release a comprehensive set of rules on drones by 2015.

The Shadow Drone War: Obama’s Open Secret

As the ground wars in Iraq and Afghanistan wind down, the Obama administration has escalated a mostly covert air war through clandestine bases in the U.S. and other countries. Just this week, the administration’s drone-driven national security policy was documented in this book excerpt by Newsweek reporter Daniel Klaidman and a New York Times article.

Both the CIA and military use drones for “targeted killings” of terrorist leaders. The strikes have been an awkward open secret, remaining officially classified while government officials mention them repeatedly. Obama admitted the program’s existence in an online chat in February, and his counterterrorism advisor, John Brennan, gave a speech last month laying out the administration’s legal and ethical case for drone strikes.

The crux of it is that they are a precise and efficient form of warfare. Piloted from thousands of miles away (here’s an account from a base outside Las Vegas), they don’t put U.S. troops at risk, and, by the government’s count, harm few civilians.

How Many Civilians Do Drone Strikes Kill?

Statistics are hard to nail down. The Long War Journal and the New America Foundation track strikes and militant and civilian deaths, drawing mainly on media reports with the caveat that they can’t always be verified. The Long War Journal tallied 30 civilian deaths in Pakistan in 2011. Obama administration officials, the New York Times reported this week, have said that such deaths are few or in the “single digits.”

But the Times, citing “counterterrorism officials,” also reported that the U.S. classifies all military-age men in a drone strike zone to be militants, unless their innocence is proven after the attack. If that’s true, it raises questions about the government statistics on civilian casualties. One State Department official told the Times that the CIA might be overzealous in defining strike targets — he told them that “the joke was that when the C.I.A. sees ‘three guys doing jumping jacks,’ the agency thinks it is a terrorist training camp.

What About the Political Fallout?

The U.S. has also used airstrikes to side-step legal arguments about the boundaries of the campaign against al Qaeda. Both Bush and Obama administration officials have argued that Congress’ September 2001 Authorization for Use of Military Force extends to al Qaeda operatives in any country, with or without the consent of local governments.

Drone strikes are extremely unpopular in the countries where they’re deployed. They’ve led to tense diplomatic maneuvers with Pakistan, and protests and radicalization in Yemen. Iraqis have also protested the State Department’s use of surveillance drones in their country.

Domestic concerns about civil liberties and due process in the secret air war were inflamed last fall, when a drone strike in Yemen killed Anwar al Awlaki, an al Qaeda member and a U.S. citizen. Weeks later, Awlaki’s 16-year-old American son was also killed by a drone.

Costs and Crashes

Drones are cheap relative to most military manned planes, and they were a central feature of the Pentagon’s scaled-back budget this year. But drones aren’t immune from cost overruns. The latest version of the Global Hawk surveillance drone was put on the back-burner this January after years of expensive setbacks and questions about whether they were really better than the old U-2 spy planes they were slated to replace.

And while drones may not carry pilots, they can still crash. Wired has also reported on drones’ susceptibility to viruses.

Another problem? The Air Force is playing catch-up trying to train people to fly drones and analyze the mountains of data they produce, forcing them to sometimes rely on civilian contractors for sensitive missions, according to the LA Times. The New York Times reported that in 2011, the Air Force processed 1,500 hours of video and 1,500 still images daily, much of it from surveillance drones. An Air Force commander admitted this spring that it would take “years” to catch up on the data they’ve collected.

Drones, Coming to America…

There are already a number of non-military entities that the FAA has authorized to fly drones, including a handful of local police departments. How drones might change police work is still to be determined (the Seattle police department, for example, showed off a 3.5-pound camera-equipped drone with a battery life of a whopping 10 minutes.)

Police drones may soon be more widespread, as the FAA released temporary rules this month making it easier for police departments to get approval for UAVs weighing up to 25 pounds, and for emergency responders to use smaller drones. The Department of Homeland Security also announced a program to help local agencies integrate the technology — principally as cheaper and safer alternatives to helicopters for reconnaissance. The Border Patrol already has a small fleet of Predators for border surveillance.

Law enforcement officials are staving off a backlash from privacy advocates. The ACLU and other civil rights groups have raised concerns about privacy and Fourth Amendment rights from unprecedented surveillance capability — not to mention the potential of police drones armed with tear gas and rubber bullets, which some departments have proposed. Congressmen Ed Markey, D-Mass., and Joe Barton, R-Texas, co-chairs of the Congressional Privacy Caucus, have asked the FAA to address privacy concerns in their new guidelines.

One of the first drone-assisted arrests by a local police department took place in North Dakota this year, with the help of a borrowed DHS Predator. It was deployed, as the New Yorker detailed, to catch a group of renegade ranchers in a conflict that originated over a bale of hay.

Scholarly drones

Universities actually have the most permits to fly drones at this point, for research on everything from pesticide distribution to disaster preparation. As Salon points out, the Pentagon and military contractors are also big funders of university drone research.

The Electronic Frontier Foundation, an advocacy group that has been outspoken about privacy concerns related to drones, put together the map below of entities authorized to fly drones by the FAA.

Get Your Own Drone!

Could you, too, become the proud owner of a drone? At the low-end, a drone can be a glorified model helicopter, and there’s a dedicated community of DIY-drone builders. This fall, a group from Occupy Wall Street tried to use the “Occucopter” do their own surveillance of police movements.

 

Air Force Pilots Balk At Flying The World’s Most Expensive Fighter Jet

by Cora Currier, ProPublica

The pricey F-22 Raptor jet has just gotten back up in the air, but the safety problem that grounded it doesn’t seem to be resolved.

Last year, the F-22 was grounded for four months because pilots were experiencing dizziness and other symptoms of hypoxia, which is caused by a lack of oxygen. The Air Force looked into possible malfunctions in the plane’s oxygen-generation system, but in September, the planes were cleared for service after technicians were unable to pinpoint a source of the problem.

Yesterday, however, the Air Force’s Air Combat Command confirmed that some pilots — they would specify only “a very small” number — have requested not to fly the F-22.

General Mike Hostage, who heads the Air Combat Command, said in a news briefing yesterday that the Air Force is taking cautionary measures but would continue to fly the planes. “We don’t have a conclusive answer yet, and that’s why we continue to fly with the mitigating procedures, because I can’t learn about the problem if I don’t fly the airplane,” he said.

Since the planes started flying again in September, there have been more than 12,000 sorties and 11 reported instances of “hypoxia-like symptoms.” An Air Combat Command Center spokesman told ProPublica today that a team of two-dozen Air Force and outside specialists is monitoring the planes and pilots for both mechanical and medical problems regarding the hypoxia symptoms, but that no “root cause” has been determined.

Before the grounding, there had been at least 12 separate reports of hypoxia-like symptoms, and planes had been limited to flying at lower altitudes. In late 2010, an F-22 pilot died in a crash after he apparently lost control of the plane when the oxygen system malfunctioned. The Air Force’s official report on the incident acknowledged the oxygen system failure but blamed the pilot’s response for the crash.

As ProPublica has detailed, the roughly $70 billion F-22 program has long experienced structural deficiencies and cost overruns. The U.S. halted orders of the jets in 2009, as then-Secretary of Defense Robert Gates argued the F-22’s specific capability was not widely applicable in the nation’s “spectrum of conflict.”

The planes have yet to be deployed in combat, though last week a number of them were reportedly sent to the United Arab Emirates.

News Corp. Exec Considered Enlisting Newspaper Editors in Lobbying Effort

by Cora Currier ProPublica

 

In front of a British government panel today, Rupert Murdoch denied that he tried to wield political influence or use his media holdings to further the business interests of News Corp.

“I take particular pride in the fact that we’ve never pushed our commercial interests in our newspapers,” Murdoch said at the media ethics inquiry brought on by the phone-hacking scandal at News of the World last year.

He was responding to questions about contacts between News Corp. and government officials in connection with the company’s attempted $12 billion takeover of BSkyB, Britain’s top satellite TV network.

But email messages released Tuesday indicate that News Corp. executives at least considered dispatching top editors of The Wall Street Journal Europe and The Times of London, both News Corp. holdings, to advocate the BSkyB deal.

The newly released emails, totaling 163 pages, were exchanged among News Corp. chief lobbyist Frédéric Michel, company officials and government aides. Several refer to Lord Matthew Oakeshott, a member of Parliament whom News Corp. perceived as key to influencing Vince Cable, the government minister who had the authority in the fall of 2010 to approve the BSkyB deal.

News Corp. execs were worried that Oakeshott wouldn’t be receptive to their overtures. In one email to James Murdoch’s aide, Matthew Anderson, and Rebekah Brooks, chief executive at News International, Michel described Oakeshott as “a difficult character [who] hates lobbying (and doesn’t like our empire either…).”

So Michel, the lobbyist, suggested that they arrange a meeting between Oakeshott and James Harding, editor in chief of The Times. From the email, dated Oct. 12, 2010:

It was suggested that we should try a very soft approach with him; get him meet with James Harding to get his views on some of BIS key items, like migration cap; and get me to pop in at some stage to give him an update on the current battle we face and inform his views. It would be a much better setting than a direct lobbying conversation. Do we think it’s ok?

On Oct. 18, Michel wrote that Oakeshott would also be “VERY receptive” to a message from Patience Wheatcroft, then the editor of The Wall Street Journal Europe:

Lord Oakeshot said he would be VERY receptive to a message from Patience on this: Matthew can we discuss asap?

That November, Wheatcroft left The Journal after she was named to the House of Lords as a member of the Conservative party, by Prime Minister David Cameron.

It is not clear whether Harding and Wheatcroft were actually asked to lobby Oakeshott.  A spokeswoman for Harding said that “there was never a meeting between James Harding and Lord Oakeshott,” but did not say whether News Corp. officials had asked Harding to have such a meeting. Wheatcroft did not respond to our requests for comment, nor did Oakeshott.

A News Corp. spokesman declined to comment on any of the emails.

Apart from raising questions about Rupert Murdoch’s claim that there was no use of his media holdings to further his company’s interests, the emails document a more general strategy to turn media coverage of the deal in favor of News Corp. in order to give political cover to the minister, Vince Cable, who could approve the deal:

-the adviser was very clear that if we try to agressively push Cable, it will have a negative impact. But changing the narrative in the main media would help him politically a lot and help him inside the Cabinet.

Cable was removed from the bid approval process after he was recorded by journalists saying he had “declared war” on Murdoch.  Cable was replaced by Jeremy Hunt, with whom News Corp. appears to have had more luck — the emails point to close communication between Hunt’s aide and News Corp. about how best to push approval of the BSkyB buyout. Hunt said Wednesday that he “didn’t know the volume of those communications or the tone” of the interactions between his aide and News Corp. The Guardian also reported Wednesday that in 2009 Hunt was at News Corp. headquarters in New York during the company’s meetings on whether to launch the bid.

News Corp. threw the support of its British newspapers behind Cameron’s Conservative party in the 2010 elections, shortly before the BSkyB bid was announced. Cameron has maintained that he had had no “inappropriate conversations” with Murdoch about the deal.

Competing news organizations and others had opposed the deal because they said it would further concentrate the media power of Murdoch, who controls 40 percent of Britain’s newspaper circulation. The bid was eventually put on hold when news of phone-hacking by Murdoch papers broke last summer and engulfed the company in scandal.