About Sophia Autor

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Mnuchin_hearing

Mnuchin Should Put His Money Where His Mouth Is & End Secret Companies

At a recent hearing before the House Financial Services  Committee, Treasury Secretary Steven Mnuchin called on Congress to enact legislation that would discourage criminal activity carried out behind the veil of anonymous shell companies in the United States. For more than a decade, lawmakers have rallied behind two bipartisan bills that would do just that.

Anonymous shell corporations (or secret companies) are corporations that are able to conceal their ownership because most states do not require disclosure of that information when a company is formed. In fact, it takes more information in most states to check out a library book than it does to start a corporation.  Although secret companies are themselves legal, their owners have in many cases abused their anonymity to engage in a range of illegal activities. The primary way that secret companies function to facilitate crime is by providing a legitimate front to use to open bank accounts and transfer funds incognito, providing an easy way to launder money.

In one particularly prominent case of abuse facilitated by a secret company, a phantom firm stole more than $4.5 million of federal Medicare funds by establishing fake clinics in Florida. Other cases have exposed anonymous shell corporations for laundering drug money, financing terrorism, selling fraudulent credit cards to American consumers, and participating in human trafficking schemes. Because their owners are secret, law enforcement officials are blocked from being able to lock up criminals even when they can prove that a secret company has facilitated a crime. Worse, frequently one secret shell company owns another shell company, like nesting Russian dolls, further compounding the problems for law enforcement agencies.

The common thread in all of these examples is the corporate secrecy that made these crimes possible. Corporate formation is overseen by the states, not the federal government and almost universally, companies are not required to share ownership information with state government officials or law enforcement authorities. This lax regulation led a 2015 academic study to find that the United States is one the easiest countries in the world in which to form a secret company. The World Bank reports that one eighth of all anonymous shell companies incorporated between 1980 and 2010 were incorporated in the United States.

The solution to this problem is passage of legislation like the True Incorporation Transparency for Law Enforcement (or TITLE) Act that requires states to collect “beneficial ownership info”—a list of the real people who benefit from and manage the company’s business. This has to be the true owners, not a stand-in like a corporate formation agent. This is essential since currently these sorts of proxies are used frequently. We know from the Panama Papers disclosures, a single person was listed as “director” or “shareholder” for more than 10,000 different companies.

Given that lawmakers and groups like Public Citizen have been working for years to pass legislation that requires beneficial ownership information for companies to be collected at the time they are formed, it was great to hear Secretary Mnuchin tell lawmakers recently that they need to resolve this anonymous ownership issue within the next six months. Fortunately, lawmakers on both sides of the aisle have already backed legislation to counter illicit activity by secret shell companies by requiring companies to provide  accurate information about their beneficial owners to government authorities. A little sunshine can go a long way toward dragging criminals out of the dark.

Tweet at Steve Mnuchin (@stevenmnuchin1) demanding that he work with lawmakers to pass bipartisan commonsense legislation that requires collection of corporate beneficial ownership information.

Medicare going out of business

On their 53rd Anniversary, Medicare and Medicaid Face Attacks

Medicare and Medicaid, signed into law by President Lyndon Baines Johnson on July 30th, 1965, were founded on the premise that healthcare is a right, not a privilege, for Americans over 65 and those in poverty. Over the past 53 years, Medicare and Medicaid have provided essential health services to families and individuals that likely could not afford private market insurance.

In 1965 alone, 19 million Americans signed up for Medicare. In 2017, 58.5 million Americans 65 and older or with disabilities, representing nearly one-fifth of the U.S. population, were Medicare beneficiaries. Nearly one in four Americans, 72.3 million, were enrolled in Medicaid, which provides coverage for low-income individuals including families, seniors, and persons with disabilities.

Despite their success over the past 53 years, these programs face threats to their efficacy and future existence. Neither Medicare nor Medicaid are perfect. But, instead of improving and expanding these crucial programs, the Trump administration and Republicans in Congress are working to undermine them.

Having failed in repeated attempts to repeal the Affordable Care Act (ACA), Republicans are now focused on dismantling government-sponsored health care by other means. One strategy involves restricting the number of people who are eligible for Medicaid. In January, the White House announced that it would allow states to refuse Medicaid to unemployed individuals, with certain exceptions. President Trump is the first to make medical coverage for low-income Americans conditional on work, something that would have been unthinkable in the past.

The Trump-GOP tax law codified additional tactics in this multi-pronged attack against our existing health protections. Passed in 2017, the misleadingly-named Tax Cuts and Jobs Act repealed the Affordable Care Act’s individual mandate, which required Americans to maintain a minimum level of health care coverage or seek an exemption. The individual mandate previously lowered health care costs by widening the insurance risk pool to include both healthy and unhealthy individuals.

As predicted, the repeal of the individual mandate has already begun to inflate the price of health care as healthy people leave the insurance marketplaces while sicker people maintain (or sign up for) coverage. EmblemHealth recently warned policy-makers that it plans to raise the price of insurance premiums by 25 percent because the individual mandate was eliminated. “When only sicker people buy health coverage,” an EmblemHealth representative explained, “it costs more.” EmblemHealth is only one of many insurers that have raised premiums citing Trump-GOP tax cuts. The non-partisan Congressional Budget Office (CBO) predicts that rolling back the individual mandate will increase the price of insurance premiums by 10 percent per year for the next decade

The CBO also predicts that eliminating the individual mandate will cause 13 million to lose coverage by 2027. A decline in the number of insured Americans since the tax law took effect provides early evidence of the accuracy of this grim forecast. A recent study found that 3 million more people lacked health insurance at the end of 2017 compared to the end of 2016.

Trump-GOP tax reforms also took aim at health care funding in the long term. According to CBO analysis, the tax law will increase the federal deficit by $1.9 trillion over the next decade. President Trump and House Republicans have already proposed trillions of dollars in cuts to Medicare and Medicaid to trim the budget gap.

Finally, the Trump Administration is working to roll back protections for people with pre-existing conditions. The ACA barred insurance companies from denying coverage, or charging higher premiums, to people with chronic illnesses or prior health issues. The White House has asked the Justice Department to overturn this provision—a provision supported by a majority of registered voters from both parties.

If overturned, insurance companies could refuse coverage to the approximately 130 million Americans under 65 with pre-existing conditions and a recent study estimated that  52 million of these American may be uninsurable due to their pre-existing conditions. Public outcry has so far stopped many Congressional Republicans from supporting the President’s attack on fair treatment for Americans with pre-existing conditions. However, pending legal cases on pre-existing conditions seem likely to reach the Supreme Court, which could strike down these crucial protections.

On the 53rd anniversary of Medicare and Medicaid’s creation, expanding, not dismantling, public healthcare is the solution and Medicare-for-All is the next step. Call your Member of the House of Representatives at 202-224-3121 to tell them to join the Medicare for All Caucus and support the Expanded and Improved Medicare for All Act (H.R.676).

Janus vs. afscme

Janus v. AFSCME: A Dangerous First Amendment Precedent

The United States Supreme Court’s recent ruling on Janus v. American Federation of State, County, and Municipal Employees (AFSCME) is the result of a decade-long effort by the far right to dismantle unions’ ability to advocate on behalf of American workers. Last week, Senate Democrats held a hearing to shed light on how secret political influence impacted the Janus case and continues to threaten democratic political processes.

The 5-4 Janus decision dealt a major blow to public sector labor unions. Right-wing groups, the Koch brothers’ Americans for Prosperity chief among them, supported lead plaintiff Mark Janus, a state employee who argued that an Illinois state law permitting public sector unions to collect payments from non-union members was unconstitutional.

Prior to the ruling, Illinois state law required public sector unions to negotiate on the behalf of both union and non-union employees for better wages, working conditions, employment benefits, and a range of other worker interests. This advocacy, which takes place through collective bargaining that is demanding of both time and financial resources, is made possible by fees paid by union members and by lower “agency” or “fair share” fees paid by non-union members. Conservative Justices sided with the Koch-backed plaintiff, arguing that fair-share laws (previously upheld in Abood v. Detroit Board of Education) infringe on employees’ First Amendment rights to free speech. This ruling will weaken unions’ power to improve the lives of working Americans.

However, Janus vs. AFSCME is not just about unions. This case cannot be viewed in isolation from two major issues: secret political influence and the future of government rule-making.

On secret influence in politics, Senator Sheldon Whitehouse (D-RI.) called the Janus case “faux litigation with faux parties backed by big Republican special interests.” Whitehouse explained how an alliance of conservative groups brought a case they knew they would lose in the lower courts. The case moved quickly to the Supreme Court, where the Koch Brothers and their partners correctly predicted that five conservative justices would deliver their anticipated pro-corporate outcome.

Testifying before Sen. Whitehouse and other Senate Democrats at Tuesday’s hearing, Nancy MacLean, Professor at Duke University and author of Democracy in Chains, described how the ruling represents another victory in the Koch brothers’ long-term project to counter the desires of the public majority with outsize political influence. The Koch brothers, MacLean said, understand they cannot persuade a voting majority that supports policies they oppose. Thus, they have used personal wealth—funneled to conservative organizations and political campaigns—to wield disproportionate sway over public policy.

The ruling also represents a victory for far-right groups seeking to change the rules that allow agencies to effectively govern. Central to the Koch’s belief system, MacLean explained, is the idea that “ironclad” restrictions must limit what the government can do. Declaring unions’ ability to charge fees to non-members for the benefits of representation in collective bargaining unconstitutional under the First Amendment establishes a dangerous precedent—a precedent that the Koch Brothers and other right-wing interests will likely use to argue that a wide range of regulations violates the principle of free speech.

The interpretation of the First Amendment adopted by the Supreme Court will erode the government’s ability to supervise economic markets, protect public health, preserve the environment, and carry out a range of other commonsense policies that protect—not threaten—basic freedoms. Writing for the minority opinion, Justice Elena Kagan warned that conservatives are “turning the First Amendment into a sword.” As she noted, almost all economic and regulatory policy affects or touches speech. So the majority’s road runs long. And at every stop are black-robed rulers overriding citizens’ choices.”

Many people are unaware of these efforts to “override citizens’ choices.” Last week, Prof. MacLean told Senators that the “goal of people who care about government of, by, and for the people should be to inform.” We need your help making sure all Americans are informed. Watch the full hearing here to learn more, and please share this blog to help spread the word about the dangers of a view of the First Amendment that prioritizes corporate interests.

Wilbur Ross investigation

No Shortage of Murky Morals in the Trump Cabinet: Commerce Secretary Ross Faces Possible Ethics Investigations

This is the third in a series of posts looking at ethics issues in the Trump Administration.

If you’ve been following investigations into Environmental Protection Agency Chief Scott Pruitt and U.S. Interior Secretary Ryan Zinke, then a potential ethical inquiry into yet another Trump cabinet appointee comes as no surprise.

On June 28th, congressional Democrats requested that the Securities and Exchange Commission (SEC) investigate Interior Secretary Wilbur Ross for a potentially illegal trade on non-public information. In their letter to the SEC, Senator Elizabeth Warren (D-Mass.), Senator Richard Blumenthal (D-Conn.), and Representative Elijah Cummings (D-Md.) alleged that Secretary Ross may have engaged in insider trading when he sold his stocks in Navigator, a shipping company with close ties to Russian President Vladimir Putin’s inside circle, this fall.

The timing of Ross’s Navigator stock sale raises questions about whether the Secretary leveraged non-public information, potentially known to him because of his government position, to make investment choices. On October 26, 2017, the New York Times informed Ross that a forthcoming story would focus on Ross’s business with Navigator and Navigator’s business with the Russian government. Five days later, on October 31, Ross shorted his stocks—an investment strategy that allows sellers to sell securities and buy them back at a lower price after share values fall.

It seems likely that Ross’s short sale—valued between $100,000 and $250,000—was made on the correct bet that Navigator’s share price would fall when the story broke. Shortly after the Times and the International Consortium of Investigative Journalists released the Navigator report (as part of the Paradise Papers) on November 5, 2017, Navigator’s stock value fell by four percent. Democrats have asked the SEC to investigate whether this sale violated both the Trading Sanctions Act of 1984, which prohibits individuals from purchasing or selling securities while holding non-public information, and the STOCK Act of 2012, which prohibits executive branch officials from using insider information gained because of their government position “as a means for making private profit.”

Ross also faces the possibility of a separate investigation on an additional count of ethical wrongdoing. Last week, Citizens for Responsibility and Ethics in Washington (CREW) filed their own request for a Ross investigation led by the Office of Government Ethics (OGE). In addition to raising the possibility of insider trading, CREW leveled a second accusation: that Ross knowingly submitted false information to the OGE. Ross may have violated federal rules when he submitted inaccurate information about completed compliance with his ethics agreement.

Conflict of interest rules require that the Commerce Secretary divest from his investments in trading companies upon taking public office. Ross agreed to carry through with these divestitures during his confirmation process. On November 1, 2017, Ross informed the ethics office that he had “completed all of the divestures indicated in (his) ethics agreement.” Investigative journalists for Forbes, however, find this statement to be false: in November, Ross still held $10 million in stock in Invesco, one of several companies he promised to divest from. Ross himself admitted to continuing to hold stocks in Invesco after the November 1st deadline. On December 21, 2017, Ross revealed in a Public Financial Disclosure Report that he made official sales of Invesco stock on December 19 and 20, 2017.

Ethics lawyers are calling foul on Ross’s claims to have made an unknowing mistake. “There is substantial evidence that Secretary Ross may have knowingly and willfully made false and fraudulent statements,” an action prohibited by federal law, wrote CREW in its request for an ethics investigation of Ross.

You may be growing weary of stories about ethical transgressions by Trump cabinet appointees. We are too. But we need you not to give up–don’t become numb to these outrages. Only with sustained protest—with a loud refusal to accept corruption at the highest levels of U.S. government—can we protect our democracy. Participate in “Defend Democracy, Confront Corruption” vigils, taking place across the country on July 18th, and keep making noise.

zinke investigation

Interior Secretary Ryan Zinke Faces Inquiries into his Swampy Moral Practices

This is the second in a series of posts looking at ethics issues in the Trump Administration.

Last week, Public Citizen and House Democrats requested an ethics investigation into U.S. Interior Secretary Ryan Zinke after Politico broke the story about a real-estate deal between Zinke’s family foundation and the chairman of Halliburton, “a fossil fuel services company whose profits are directly affected by the Secretary’s policy decisions,” wrote Democrats in their letter to the U.S. Committee on Natural Resources.

The Great Northern Veterans Peace Park Foundation, created by Zinke and currently run by his wife, Lola Zinke, has agreed to allot a portion of its land—land donated to the foundation to build a public veterans park that also would serve as a children’s sledding park—to a commercial development in the Zinke’s hometown of Whitefish, Montana. Halliburton Chairman David Lesar has plans to build a hotel, retail shopping center, and microbrewery on a large lot neighboring the Zinke’s planned veterans park. Zinke sought to own and operate a microbrewery in 2012 and lobbied town officials to approve his proposal over the following six years. Whitefish city planner, David Taylor, reported that the new project’s developer recommended setting the brewery aside for Ryan and Lola Zinke to run.

Zinke’s involvement in the so-called 95 Karrow project looks fishy on several counts. For one, the Zinke’s not only stand to gain from the microbrewery, but the development would also increase the value of their next-door land. Secondly, the Halliburton chairman is a long-time friend of the Zinke’s: he donated $10,400—the maximum allowed by law—to Zinke’s campaign for a House seat. Federal disclosures also reveal that Halliburton’s lobbyists met with Interior officials on several occasions to discuss the department’s policies on hydraulic fracturing—a fracking technique that leaks methane gas into ground and surface water, contributes to air pollution, and increases the risk of earthquakes.

Most importantly, Zinke’s ties to 95 Karrow may violate conflict of interest rules that bar executive branch officials from involvement in government decisions concerning people with whom they or their close relatives have a financial relationship. This possible transgression is again telling of how some Trump appointees have cooperated with the industries they are supposed to regulate, pursuing personal enrichment at the public’s expense.

Zinke has denied allegations of ethical misconduct by arguing that he resigned from the Northern Veterans foundation when he became Interior Secretary. However, recently released emails suggest the Zinke’s engagement with his family foundation did not end with his resignation. Six months after Zinke took office, 95 Karrow’s chief developer continued to correspond with the Interior Secretary. “I want you to know,” the developer wrote in an email to Zinke on September 14, 2017, “that whatever assistance you need to protect and promote your vision for the park, please let me know and I will make sure it is communicated and executed.”

Zinke dodged ethical questions when new scandals over the Russia investigation distracted the public from Puerto Rico’s cancellation of a contract with a two-man firm, located in Zinke’s hometown to rebuild Puerto Rico’s power grid. Let’s prevent Zinke from evading due scrutiny this time. Call your members of Congress at 202-224-3121 and tell them to support a Zinke ethics investigation.

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