The Times has an interesting piece on the Shag Fund.

One key point is that it wasn’t just shagging expenses that got shifted to all these obscure NYC offices. From what I can tell, there was actually some legitimate travel: some political trips to upstate when Rudy was thinking he was going to run for senate and security for the second wife Donna Hanover when she traveled out of town.

I fear, though, that we are only rubbing the surface of the true Shag Fund in this incipient probe. Clearly there’s the travel money — billed to whatever NYC office — used for trips and security for Rudy out at the Hamptons shags. But we also know now that while Rudy was conducting an extramarital affair with Judi he gave her her own NYPD car and driver to be squired around the city with. Where’d the money for that come from? He later assigned her her own security detail, though this did apparently come after he fired Donna Hanover as First Lady of NYC so he apparently yanked some of them from her and gave them to Judi. Where’d the money for that come from?

According to City Comptroller Bill Thompson, auditors from the Comptroller’s office first started raising questions about Rudy’s travel costs during his predecessor’s tenure. Rudy folks basically told them to go jump in a lake. Then after Bloomberg came in they asked again. Bloomberg’s office reviewed the matter, decided the payments were for legitimate security functions and then referred it on to the city Department of Investigation. From there …

“We were told it that it was for security purposes, that it was used for legitimate security reasons,” Mr. Thompson said. “And once you get that assurance, particularly from not the same mayor’s office, but from a different mayor’s office, that they had taken a look, then we had no reason to believe that it wasn’t.”

“Our biggest concern,” he continued, “was making sure there was no misappropriation.” Mr. Thompson said he had not heard anything further about the matter from the Department of Investigation, but said normal procedures would call for the agency to contact him only if it found something improper.

A spokeswoman for the agency declined to comment about the matter and would not say whether it had produced a closing memorandum, a standard practice in any investigation, saying it was “gathering the files related to the investigation.”

Yes, misappropriation of funds. Like setting your mistress up with a city car and police chauffeur? This, of course, wasn’t part of the investigation. Or was there even one?

I’m still trying to make sure I fully understand the New York Times article referenced below. But I think it’s clear that Rudy’s best defense at this point is that he didn’t just use these accounting shenanigans to conceal the Shag Fund but also to conceal trips by his wife and purely political trips to Upstate New York.

But I guess that doesn’t role off the tongue that easily.

Ed Koch’s Budget Director Alaire Townsend on Shag Fund budgeting …

“Money might get moved around within the mayor’s office, but I don’t know why an expense of the NYPD would get recorded that way unless you just didn’t want people to find it.”

Michael Granof, University of Texas government accounting expert: “On the face of it, I can’t see any reason why the mayor’s travel expenses should be allocated to the Loft Board, unless he is traveling to examine lofts in other cities.”

Earlier this evening we noted that the new line from the Giuliani camp is that the Shag Fund’s convoluted financing was put in place to help the cops on Rudy’s security detail. Giuliani spinmeister Joe Lohta told the AP that “was necessary because the police officers did not make a lot of money and their department took up to two months to repay them for their travel expenses. So Giuliani’s office got a credit card and paid it off with funds from the various agencies.”

Lohta gave a little more detail to Newsday. Lohta told the paper “the practice started when officers on his security detail complained that the police department was slow to reimburse them for rental cars and lodging.”

Not to state the obvious again, but this doesn’t tell us anything about why the expenses were squirreled away in the budgets of obscure city offices. It’s non-responsive. But is it even true? I’ve basically got two-to-three reporters on this story. And I’m a pretty rough boss so I’ve got them working a bunch of other stuff too. But someone needs to find out who the cops were and just ask them: is that true? Is that how it happened?

So why were they squirreled away? The Times quotes Lhota as saying, “I’ve continued to try to find out.” But he’s not just some flack brought in to figure out the story. For part of Rudy’s term he was the city budget director. It’s a big city and there’s a lot more to do than manage the Shag Fund. But he’s still trying to find out?

It’s a key part of how we work every day. But sometimes I like to point it out explicitly and ask for your help. We’re going to reporting all day today on the Shag Fund. But we really rely on you to let us know when new reports surface with key new details, in newspapers and websites large and small. We need your eyes to help us find the latest details. So when you see a new story break today, shoot us an email. Let us know.

So far, the “no explanation” explanation seems to be the best spin the Giuliani camp has for the Shag Fund.

The New York Times comes through big time with an epic fact-check of Rudy’s chronic bamboozling.

There’s an irony emerging in the Shag Fund story. As is often the case, it’s an irony Rudy isn’t in a position to make much use of. But I think it’s important to flesh it out.

Rudy’s defense in all this has been that there’s nothing wrong here because this Enron accounting he was using in the mayor’s office wasn’t specifically to conceal the Shag Fund. And we’re getting the sense that he’s right. At least in part.

It seems more likely in his final years and months as mayor Rudy was living larger and larger on the NYC dime. And a look at the book-keeping details that are emerging suggests a very conscious effort to use these squirrelly accounting techniques to hide Rudy’s high-living ways from public scrutiny. Some of it was Shag Fund spending, but not all, probably not even most.

The problem is that even though the accounting techniques were part of a general effort to hide Rudy’s living the high-life on the city’s dime, it’s now shined a bright light on the Shag Fund. And the Shag Fund was evidently spread more widely than the stuff accounted for with the squirrelly book-keeping.

Who paid for the city car and driver given to Judi while she was still Rudy’s mistress?

Who paid for her security detail?

Why did she have one?

Does the city have to pay for travel and expenses for Rudy’s wife and his mistress? Can’t the budgeting be monogamous even if Rudy’s not?

The point is that the effort to hide Rudy’s mounting travel and high life expenses really does appear to have been a general practice, one not restricted to hiding the Shag Fund — a point that Rudy’s flacks are now trying to make, but one, as you can imagine, that isn’t possible to make in a really straightforward way.

A week ago we brought you word of our end of the year Muck-O-Rama contest. Now you’ve given us your category suggestions and we’re ready to announce those and move on to the next stage of the contest where you, the vast TPM readership, can submit nominations for excellence in muck, scandal and corruption and compete for your own prizes (quality TPM swag) for best nominations.

We’ll be announcing the categories and rules later today.

But for now we wanted to let you know about the great panel of distinguished judges we’ve assembled who will sit in judgment on the year in muck that was 2007.

In choosing them, we were careful not only to pick potential muck jurists with the requisite wit, discernment and analytic heft to properly judge the muck. But we also wanted to assemble a panel with a diverse range of expertise suited to that range of muck (legal, literary, psycho-sexual, political, purely ridiculous) that came down the pike in 2007.

So without further ado, our panel is …

Susie Bright, author, sexologist, analyst of erotic endeavors

John Dean, former Nixon White House Counsel, author, critic, columnist, muckster-turned-muckraker

Hendrik Hertzberg, essayist, political reporter, general TPM hero

Matthew Yglesias, blogger, representative of the rising generation, advocate of the typo-challenged

Dahlia Lithwick, law and legal affairs writer

We will be bringing you more exciting updates shortly. So get your nomination pens ready.