TPM News

We may be getting some answers in the saga of former Alabama Gov. Don Siegelman sooner rather than later.

DOJ's Office Of Professional Responsibility expects "in the near future" to complete its probe into allegations of politicized prosecution in the Siegelman case, according to a letter from the DOJ sent to Rep. John Conyers (D-MI) yesterday. The letter also reveals that the OPR is looking into the allegations of improper communications between jurors and members of the prosecution team during Siegelman's trial.

At issue are charges made by a whistle-blower, who worked in the U.S. Attorney's office in Alabama, that were first publicly reported in November after Conyers sent a letter to the DOJ about the matter.

Emails provided by the whistle-blower suggested that U.S. Attorney Leura Canary -- whose husband was a top GOP operative and Karl Rove associate -- continued to be involved in the case after recusing herself. Other emails suggested inappropriate contact between jurors and the prosecution, including expressions of romantic interest by jurors in an FBI agent on the prosecution team.

In an interview with TPMmuckraker last month, an outraged Siegelman called it "astounding" that the alleged impropriety involving the jury had not been revealed to the judge and the defense. There has long been evidence that Siegelman's prosecution on corruption charges was politically motivated.

It was back in July that the DOJ publicly acknowledged the existence of an OPR investigation into whether the prosecution was "selective and politically motivated."

The letter sent to Conyers yesterday gives us a fuller picture of the OPR probe.

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Yesterday we told you about the trend of financial institutions jumping on the bailout "gravy train" by acquiring -- or transforming themselves into -- traditional banks, which are eligible for the government's $700 billion TARP program.

Well add one more big institution to the list. The federal government has given preliminary approval to a $2.33 billion injection of gravy into CIT Group less than 24 hours after the firm's application to become a bank holding company was approved.

The AP reports:

Commercial financial firm CIT Group Inc. said Tuesday it received preliminary approval to obtain $2.33 billion as part of the government's $700 billion bank investment program.

The approval comes just hours after the government approved CIT's application to become a bank holding company. ...

CIT recently announced it was raising $300 million through a public stock offer and bolstering its capital through a debt exchange offer as it worked to win approval to become a bank holding company.


You can read the Fed's approval of CIT's switch to a bank holding company here (pdf).

I was doing a little more research on Darrel Dochow, the senior bank regulator with the Office of Thrift Supervisions who was removed from his post for apparently helping the now-failed IndyMac to paper over some of its financial problems, and I came across this letter he wrote to bank CEOs back in September 2007 after he'd been appointed to his new post as west region director for OTS.

I look forward to continuing the close working relationship that I have enjoyed with many of you and to developing such a relationship with those whom I did not work with as closely in my Regional Deputy Director position. ...

I believe strongly in having open and ongoing discussions so that we and you benefit from knowing about any regulatory changes and how the challenges and competitive pressures facing the industry are being met.


It's not smoking gun to be sure, but it sure doesn't suggest an adversarial relationship of any kind between regulator and the regulated.

The defense for Sen. Ted Stevens (R-AK) has called for his conviction to be thrown out after receiving new evidence of an FBI complaint. The complaint regards the Justice Department's refusal to turn over evidence during the trial and a potentially inappropriate relationship between the prosecution and a representative of the government. (Associated Press)

New facilities set up by the Department of Homeland Security on the recommendations of the September 11 Commission may infringe upon the rights of Americans. The facilities, set up to enhance intelligence sharing among local and government agencies, threaten privacy in "no fewer than seven ways," according to Homeland Security officials in a Privacy Impact Assessment released today. (McClatchy)

A Boston man with ties to the Mafia has recently been involved with Bernard Madoff's investment firm. Robert Jaffe, currently a vice president at a company partly owned by Madoff, was once a stockbroker for the Angiulo crime family until members were convicted of racketeering charges in the 1980s. Jaffe has been subpoenaed by Boston-area authorities. (Boston Globe)

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We now know that the federal employee alleging government misconduct in the Ted Stevens case is a special agent with the FBI, according to a heavily redacted version of the agent's complaint released today.

While working on Operation Polar Pen -- the wide-ranging probe into public corruption in Alaska whose most prominent catch has been Ted Stevens -- the agent "witnessed or learned of serious violations of policy, rules, and procedures as well as possible criminal violations."

Among the agent's more eye-popping charges -- which you can read here -- is that an unnamed government employee "accepted multiple things of value from sources," including "drawing/artwork, house-hunting assistance and employment for ___."

TPMmuckraker can't help but wonder how the artwork in question compares to Ted Stevens' salmon statue -- one of the unreported gifts that led the government to prosecute the elderly senator in the first place.

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The Office of Thrift Supervision has removed its west region director as a result of an inspector general's investigation into the collapse of IndyMac earlier this year, according to correspondence made public today by Sen. Charles Grassley (R-IA).

Darrel Dochow was fingered by the OTS inspector general as having approved a backdated capital infusion of $18 million into IndyMac by its holding company to stave off a downgrade in the rating assigned to the bank. A downgrading in its level of capitalization would have triggered additional regulatory restrictions on IndyMac, according to a letter to Grassley from OTS Inspector Eric M. Thorson.

This isn't the first time Dochow has been the regulator involved in a major banking collapse. A generation ago he resisted calls to shut down Charles Keating's Lincoln Savings and Loan before its collapse, which became notorious thanks to the Keating Five scandal.

Dochow's approval for the backdating came in early May and was intended to buttress the bank's capital position as of the end of the first quarter, March 31. The plan -- some details of which, Thorson concedes, remain unclear -- was discovered by the inspector general for the FDIC in documents held by IndyMac's auditor, Ernst and Young, and were turned over to Thorson's office.

Thorson's investigation, which is ongoing, found that OTS allowed other thrifts to similarly backdate capital infusions, but the letter provides no additional details about those other cases.

In a separate letter to Thorson responding to the allegations, OTS Director John M. Reich defended his agency's handling of the matter, saying that the backdated capital injection "was a relatively small factor in the events leading to the failure of IndyMac." Reich, however, acknowledged that he had "removed" Dochow as regional director pending completion of the investigation.

Late Update: The Washington Post has more:

Dochow was appointed regional director in September 2007 after serving as the No. 2 in the western region. He was paid $230,000 in 2007, according to government records. Dochow got the job shortly after playing a leading role in persuading Countrywide to move under OTS supervision, a major coup for the agency, which is funded by fees from the companies it oversees.

In the late 1980s, Dochow had been the chief career supervisor of the savings-and-loan industry, and federal investigators later concluded he played a key role in the collapse of Charles Keating's Lincoln Savings and Loan by delaying and impeding proper oversight of that thrift's operations.

Dochow was shunted aside in the aftermath and eventually sent to the agency's Seattle office. Several of his former colleagues and superiors have said that he gradually reestablished himself as a credible regulator and again rose in the organization.

It's now been about two months since Ted Stevens' conviction on seven counts of making false statements on his Senate financial disclosure forms, and there's yet another twist in the case, this time in the form of new allegations of prosecutorial misconduct by an anonymous federal "whistle-blower."

This one may end up being a lot more consequential than the last twist in the case -- that juror who skipped out of the trial early to catch a horse race in California and later admitted lying about it.

The new charges came to light in a 29-page ruling issued late Friday by Judge Emmet Sullivan. The prosecution first alerted the court to the whistle-blower complaint on Dec. 11 in a sealed filing, prompting the defense to urge the judge to make the complaint public, the Washington Post reports. Sullivan described the whiste-blower as someone "significantly involved in the investigation and prosecution of the defendant."

The Post details some of the charges:

Among the accusations were that the government intentionally "schemed to relocate a witness" and that an employee working on the investigation accepted artwork and employment for a relative from a cooperating source, according to a legal ruling issued late last night by the federal judge who presided over Stevens's trial.


Sullivan ordered prosecutors to make a redacted version of the complaint public Monday afternoon.

The new charges are just the latest in a string of developments that will determine whether the outgoing Alaska Senator ever faces punishment for his felony convictions.

There's a hearing scheduled for Jan. 15 for a witness who said he lied on the stand about having no immunity deal with prosecutors. Sullivan also has set a Feb. 25 hearing on Stevens' lawyers' motion for a new trial.

Maybe TPMmuckraker will reorganize as a bank to get our hands on some taxpayer money. After all, everyone's doing it.

The Project on Government Oversight (POGO), a good-government group, last week sent a letter to Congressional leaders identifying eight financial institutions that have sought to qualify for funds under the federal bailout program by purchasing banks, to which bailout money is restricted. In a related blog post, POGO accused the companies of "apparently trying to jump on the gravy train."

The details:

- Lincoln National Corporation is in the process of acquiring Newton County Loan and Savings, an Indiana bank. - Hartford Financial is acquiring Federal Trust Corporation, the parent company of Federal Trust Bank in Florida. - Genworth Financial is purchasing InterBank FSB in Minnesota. - CIT Group has converted its Utah Industrial Bank to a Utah State Bank. - Morgan Stanley was approved as a Bank Holding Company on September 21, 2008. - GMAC Financial Services has opened GMAC Bank, a Utah chartered Federal Reserve Bank member bank. - American Express was approved as a Bank Holding Company on November 10, 2008. The company owns American Express Centurion Bank, an industrial loan bank, and American Express Bank FSB, a federal savings bank in Utah. - Goldman Sachs was approved as a Bank Holding Company in mid-September and opened Goldman Sachs Bank USA in Salt Lake City.


As POGO noted, these institutions "seem to be straying from their business models to become traditional banks."

And it pointed out that in the case of one of these companies, its CEO had recently said they were doing fine:
Kenneth Chenault, American Express's CEO, asserted that the company's "business model is well positioned to generate earnings and excess capital even in an economic environment that is likely to be among the weakest in many years"13 less than a month before becoming a Bank Holding Company and, presumably, applying for TARP funds.


In a sense though, it's hard to blame these companies for trying to get a piece of the action. After all, despite their financing arms, GM and Chrysler aren't banks either, but it looks like their federal bailout will come from the very same TARP funds.

A report from the SEC's inspector general has found evidence not only of an employee bypassing computer controls to download pornography, but also tells of employees operating "private photography businesses" out of their offices and one senior level employee abusing his position to intimidate a broker involved with family members' money. The report seems to have gone unnoticed in the days after its post-Thanksgiving release. (ProPublica)

Bernard Madoff's niece is drawing scrutiny from the SEC inspector general. Shana Madoff, who was married to former SEC official Eric Swanson, worked as a compliance lawyer in Madoff's firm. Although they met in 2003, the couple did not get married until 2007 after Swanson left the agency. (Wall Street Journal)

The Illinois House of Representatives will expand impeachment allegations against Gov. Rod Blagojevich. In addition to the charges against the Governor revealed on Dec. 9, the impeachment committee now alleges that Blagojevich used his power to make "emergency rules" exempt from committee oversight to usher through initiatives aimed at expanding health care programs and making foreign-made prescription drugs more easily accessible. (Washington Post)

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The revelation that Bernard Madoff -- who himself had in the past served as an adviser to the SEC on electronic trading -- was running an alleged "$50 billion ponzi scheme" has rocked the SEC to its core, according to a current long-serving member of the commission's enforcement division.

"This has put the agency into a state of complete panic," the SECer told TPMmuckraker in an interview.

The source said that one associate director in the enforcement division had in recent days ordered junior staff to review every case that's been closed over the last few years, to ensure that violations weren't missed -- as they appear to have been in the 2006 investigation of Madoff. "There's a real paranoia around here," the source added.

That paranoia -- or at least extreme concern -- apparently extends to commission officials in Washington. The source said that since the Madoff allegations came to light last week, SEC brass had sent out numerous emails warning staffers not to destroy documents relating to the case -- which is being investigated both by SEC enforcement and by the FBI. There have also been several warnings not to speak with the press, the source added.

Separate from the SEC and FBI investigations, SEC chair Chris Cox announced last week that he has has asked the commission's inspector general to probe how the SEC failed to uncover catch Madoff after receiving several complaints going back to 1999.

TPMLivewire