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Updated 2019-05-24 01:20
ProPublica Wins Two Deadline Club Awards
by ProPublica The New York City chapter of the Society of Professional Journalists announced on Monday that ProPublica won two Deadline Club Awards, which recognize the best work produced by journalists and news organizations in the area.ProPublica’s Charles Ornstein and The New York Times’ Katie Thomas won in the Business Investigative Reporting category for their series Sloan Kettering Cancer Center’s Crisis. The project uncovered widespread financial conflicts of interest at Memorial Sloan Kettering, an iconic New York institution, and led to a cascade of reforms not just at the hospital but at leading cancer centers and medical journals across the country. Most notably, within days of publishing their story on how Sloan Kettering’s top medical officer, Dr. José Baselga, failed to disclose the millions of dollars he’d received from drug and health care companies, Baselga was forced to resign from the hospital. He also later resigned from the board of Bristol-Myers Squibb.Right to Fail, an investigation by ProPublica’s Joaquin Sapien and PBS Frontline’s Tom Jennings, won in the Newspaper or Digital Local News Reporting category. The series examined how New York’s ambitious effort to move hundreds of people with mental illness from group homes to their own supported housing apartments has sometimes proven perilous, even deadly. Sapien and Jennings found at least six questionable deaths and identified more than two dozen cases in which people in supported housing were not able to care for themselves, leaving them in unsafe or inhumane living conditions.See a list of all the 2019 Deadline Club Award winners here.
TurboTax Uses A “Military Discount” to Trick Troops Into Paying to File Their Taxes
by Justin Elliott and Kengo Tsutsumi In patriotism-drenched promotions, press releases and tweets, TurboTax promotes special deals for military service members, promising to help them file their taxes online for free or at a discount.Yet some service members who've filed by going to the TurboTax Military landing page told ProPublica they were charged as much as $150 — even though, under a deal with the government, service members making under $66,000 are supposed to be able to file on TurboTax for free.Liz Zimmerman is a mother of two teenage daughters and a toddler who lives with her husband, a Navy chief petty officer, in Bettendorf, Iowa, just across the river from the Rock Island military facility. When Zimmerman went to do her taxes this year, she Googled “tax preparation military free” and, she recalled in an interview, TurboTax was the first link that popped up, promising “free military taxes.” She clicked and came to the site emblazoned with miniature American flags.But when Zimmerman got to the end of the process, TurboTax charged her $60, even though the family makes under the $66,000 income threshold to file for free. “I’ve got a kid in braces and I’ve got a kid in preschool; $60 is half a week’s worth of groceries,” she said. “Who needs date night this month? At least I filed my taxes.”In the commercial version of TurboTax that includes the “military discount,” customers are charged based on the tax forms they file. The Zimmermans used a form to claim a retirement savings credit that TurboTax required a paid upgrade to file. If they’d started from the TurboTax Free File landing page instead of the military page, they would have been able to file for free. Get Our Top Investigations Subscribe to the Big Story newsletter. Don’t miss out on ProPublica’s next investigation. Sign up and get the Big Story email whenever we break news. Like many other tax prep companies, Intuit, the maker of TurboTax, participates in the Free File program with the IRS, under which the industry offers most Americans free tax filing. In return, the IRS agrees not to create its own free filing system that would compete with the companies. But few of those who are eligible use the program, in part because the companies aggressively market paid versions, often misleading customers. We’ve documented how Intuit had deliberately made its Free File version difficult to find, including by hiding it from search engines.In a statement, Intuit spokesman Rick Heineman said, “Intuit has long supported active-military and veterans, both in filing their taxes and in their communities, overseas, and in the Intuit workplace.” He added: “Intuit is proud to support active military, including the millions of men and women in uniform who have filed their tax returns completely free using TurboTax.”To find TurboTax’s Free File landing page, service members typically have to go through the IRS website. TurboTax Military, by contrast, is promoted on the company’s home page and elsewhere. Starting through the Military landing page directs many users to paid products even when they are eligible to get the same service for no cost using the Free File edition.An Intuit press release this year announced “TurboTax Offers Free Filing for Military E1- E5” — but refers users to TurboTax Military and does not mention the actual Free File option. (E1-E5 refers to military pay grades.) It was promoted on the company’s Twitter feed with a smiling picture of a woman wearing fatigues outside her suburban home. Google searches for “TurboTax military,” “TurboTax for soldiers” and “TurboTax for troops” all produce top results sending users to the TurboTax Military page.
A False Answer, a Big Political Connection and $260 Million in Tax Breaks
by Nancy Solomon, WNYC, and Jeff Pillets A company that won the second-largest tax break in New Jersey history gave a false answer about being prohibited from working with a federal agency in sworn statements made to win $260 million in taxpayer assistance for a new plant in Camden.A review by WNYC and ProPublica found that Holtec International CEO Kris Singh responded “no” on certified forms submitted to the state in 2014 that asked if the applicant had ever been barred from doing business with a state or federal agency. The forms were submitted to the New Jersey Economic Development Authority as part of the company’s successful application for tax breaks.In fact, the international nuclear parts manufacturer was caught up in a contracting investigation at the federally owned Tennessee Valley Authority. In 2010, Holtec was barred for 60 days from doing any federal business and paid a $2 million administrative fine to the TVA, according to an agency report. Holtec’s debarment marked the first time the agency had taken such action against a contractor. A TVA official pleaded guilty in U.S. District Court in Alabama for “knowingly and willfully” making a false statement on a financial disclosure form, according to a Department of Justice press release from 2007. The official failed to disclose a payment from a contractor that originated with Holtec, the court documents said.Holtec later went on to rebuild its relationship with the TVA, and it secured additional contracts to supply casks that store spent nuclear fuel.Five days after WNYC and ProPublica contacted Holtec seeking comment about its incorrect answer on the application, an attorney representing the firm sent a letter asking the EDA to correct Singh’s answer in the 2014 application.Kevin Sheehan, an attorney with the Parker McCay law firm, which represented Holtec in its application for tax breaks, wrote to the agency that the mistake was “inadvertent.” Get Our Top Investigations Subscribe to the Big Story newsletter. Don’t miss out on ProPublica’s next investigation. Sign up and get the Big Story email whenever we break news. Joy Russell, Holtec’s senior vice president of business development and communications, in an emailed statement called the incorrect answer “an oversight” by Singh. Holtec’s company ethics policy, which is included in a court filing, warns employees to use great care in signing documents filed with government officials that could subject the company or the employee to legal problems.The application process for state tax breaks is supposed to include a rigorous review by EDA officials of all statements submitted by a company. In Holtec’s case, emails recently released to WNYC and ProPublica show that the staff went back to the company to clarify questions about the company’s financial calculations and raised concern that Singh was late in filing required certifications as the date approached for review of the EDA application.The EDA, in a statement, said the tax break law gave it the authority to take back tax credits. But the agency stopped short of saying how it might proceed against Holtec. “In the case of a representation in an application that is false, misleading or inaccurate in any material respect…the NJEDA could declare a default, potentially resulting in termination of the agreement and/or recapture of the tax credit,’’ according to EDA spokeswoman Virginia Pellerin.The board approved Holtec’s application in July 2014 in a 10-0 vote, with two board members abstaining.It is unclear what steps the agency would have taken if Singh had answered truthfully or if Singh’s false answer had been discovered during the staff review.Singh’s sworn statements were part of a checklist in which the company must attest that it has faced no criminal convictions or other legal issues. Singh checked “no” to all of the questions.Holtec’s new factory in Camden is part of a resurgence for the poverty-stricken city pushed by South Jersey Democratic boss George E. Norcross III, who is an unpaid member of Holtec’s board.Norcross’ brother Philip is managing partner at the law firm that represented the company in its EDA application, Parker McCay.Sheehan worked closely with Philip Norcross on the Holtec matter, according to the emails obtained by WNYC and ProPublica. The law firm’s work on behalf of several Camden projects is now under scrutiny,Tim Lizura, the former president and chief operating officer of the EDA, declined to be interviewed.The emails show Lizura closely monitored the Holtec application, presiding over meetings and phone calls between the agency and company representatives.Gov. Phil Murphy has appointed a task force to investigate the state tax break program. Its lead lawyer said a misrepresentation on an application could result in the cancelation of the tax break.“First of all, the EDA can suspend the grant pending the investigation,” said Jim Walden, special counsel to the task force. He declined to comment on the Holtec application specifically but agreed to discuss how the task force is handling problems with applications in general. “If the relevant authority determined there was a misrepresentation, they can terminate the grant, they can seek fines and penalties and in circumstances where there is information about a willful failure to disclose, obviously there’s a possibility of criminal penalties as well,” Walden said.At a hearing this month, Walden said misrepresentations on tax incentive applications involving other companies have resulted in federal mail and wire fraud charges elsewhere in the country.The TVA case dates to 2001, when Holtec contracted with the TVA to design and build a storage system for spent nuclear fuel. A criminal investigation by the TVA inspector general led to the creation of a formal process to debar Holtec. It was the first debarment in the federal agency’s 77-year history.In addition to being barred for two months and paying a $2 million fine, Holtec agreed to independent monitoring, according to the TVA inspector general’s report. Holtec also was required to install a corporate governance office, the inspector general said in a report, “to gauge what progress in business ethics the company was making, if any.”“Once those corrective actions were completed to the satisfaction to TVA, then the debarment was lifted,” said Jim Hopson, a spokesman for the TVA.The case appears to have been a minor bump in the road for Holtec, which is one of three companies in the world that makes dry storage casks for nuclear waste.“We currently have a great majority of the plants in the United States and more than 50 overseas that utilize our spent fuel technology,” Singh, the Holtec CEO, said at a press conference in 2017.Holtec said in its explanation to the EDA that the company now holds a $300 million contract at the TVA and “currently remains a valued client.”Holtec’s tax break in New Jersey has recently come under scrutiny. George and Philip Norcross are closely tied to the company and were involved in the 2013 legislation that helped Holtec obtain a tax break that was equal to its capital investment in Camden.George Norcross has sway over the largest voting bloc in the state Legislature, and he is particularly close to Senate President Stephen Sweeney. The Economic Opportunity Act of 2013 removed the cap on the size of the awards and gave special advantages to companies moving to Camden. As a result, at least 12 companies with connections to Norcross received $1.1 billion in tax breaks. “Camden is experiencing a tremendous buzz in the region,” Norcross told WNYC and ProPublica in March. “There’s a lot of enthusiasm going on in the city, and people, at least in our neck of the woods, are feeling pretty good about a place that is formally, embarrassingly, known as America’s most dangerous city.”George Norcross’ insurance company, Conner Strong & Buckelew, was the broker for construction insurance at the Holtec site, according to an invoice that was part of a lawsuit between Holtec and Joseph Jingoli & Son Inc., the construction contractor.Norcross has hired a team of well-known lawyers in New Jersey, and they filed a lawsuit this week trying to block the investigation by the task force appointed by Murphy into the tax break program.Another of Norcross’ brothers, U.S. Rep. Donald Norcross, has received $18,750 in campaign contributions from Singh, according to federal election records. Singh also loaned $250,000 to General Majority, a political action committee for which George Norcross raises money.
Why Did Deutsche Bank Keep Lending to Donald Trump? — “Trump, Inc.” Podcast
by Heather Vogell, ProPublica, and Andrea Bernstein, WNYC Whispers of money laundering have swirled around Donald Trump’s businesses for years. One of his casinos, for example, was fined $10 million for not trying hard enough to prevent such machinations. Investors with shady financial histories sometimes popped up in his foreign ventures. And on Sunday, The New York Times reported that anti-money-laundering specialists at Deutsche Bank internally flagged multiple transactions by Trump companies as suspicious. (A spokesperson for the Trump Organization called the article “absolute nonsense.”)The remarkably troubled recent history of Deutsche Bank, its past money-laundering woes — and the bank’s striking relationship with Trump — are the subjects of this week’s episode of the “Trump, Inc.” podcast. The German bank loaned a cumulative total of around $2.5 billion to Trump projects over the past two decades, and the bank continued writing him nine-figure checks even after he defaulted on a $640 million obligation and sued the bank, blaming it for his failure to pay back the debt. Get More Trump, Inc. Stay up to date with email updates from WNYC and ProPublica about their ongoing investigations. “Trump, Inc.” isn’t the only one examining the president’s relationship with the bank. Congressional investigators have gone to court seeking the kind of detailed — and usually secret — banking records that could reveal potential misdeeds related to the president’s businesses, according to recent filings by two congressional committees. The filings were made in response to a highly unusual move by lawyers for Trump, his family and his company seeking to quash congressional subpoenas issued to Deutsche Bank and Capital One, a second institution he banked with. Trump’s lawyers have contended that the congressional subpoenas “were issued to harass” Trump and damage him politically.Earlier today, a federal judge in New York declined to issue a preliminary injunction to block the subpoenas. During the hearing in which he delivered that ruling, U.S. District Judge Edgardo Ramos said Congress is within its rights to require the banks to turn over Trump’s financial information, even if the disclosure is harmful to him. For their part, the filings for the House Financial Services and Intelligence committees say they are “investigating serious and urgent questions concerning the safety of banking practices, money laundering in the financial sector, foreign influence in the U.S. political process, and the threat of foreign financial leverage, including over the President.” The inquiry includes investigating whether Trump’s accounts were involved in two large schemes involving Deutsche Bank and Russian clients.The committees want to determine “the volume of illicit funds that may have flowed through the bank, and whether any touched the accounts held there by Mr. Trump, his family, or business.” Links to Russia will get a particularly close look. “The Committee is examining whether Mr. Trump’s foreign business deals and financial ties were part of the Russian government’s efforts to entangle business and political leaders in corrupt activity or otherwise obtain leverage over them,” the filing stated.The podcast explores some eyebrow-raising Trump-related moves by the bank:
An (Even More) Inconvenient Truth: Why Carbon Credits For Forest Preservation May Be Worse Than Nothing
by Lisa Song An (Even More) Inconvenient TruthWhy Carbon Credits For Forest Preservation May Be Worse Than NothingBy Lisa Song, with additional reporting by Paula MouraPhotography by Fernando MartinhoProPublica is a nonprofit newsroom based in New York. Sign up for ProPublica's Big Story newsletter to receive stories like this one in your inbox as soon as they are published.RIO BRANCO, Brazil --- The state of Acre, on the western edge of Brazil, is so remote, there's a national joke that it doesn't exist. But for geochemist Foster Brown, it's the center of the universe, a place that could help save the world."This is an example of hope," he said, as we stood behind his office at the Federal University of Acre, a tropical campus carved into the Amazon rainforest. Brown placed his hand on a spindly trunk, ordering me to follow his lead. "There is a flow of water going up that stem, and there is a flow of sap coming down, and when it comes down it has carbon compounds," he said. "Do you feel that?"I couldn't feel a thing. But that invisible process holds the key to a massive flow of cash into Brazil and an equally pivotal opportunity for countries trying to head off climate change without throwing their economies into turmoil. If the carbon in these trees could be quantified, then Acre could sell credits to polluters emitting clouds of CO₂. Whatever they release theoretically would be offset, or canceled out, by the rainforest.Five thousand miles away in California, politicians, scientists, oil tycoons and tree huggers are bursting with excitement over the idea. The state is the second-largest carbon polluter in America, and its oil and gas industry emits about 50 million metric tons of CO₂ a year. What if Chevron or Shell or Phillips 66 could offset some of their damage by paying Brazil not to cut down trees?The appetite is global. For the airline industry and industrialized nations in the Paris climate accord, offsets could be a cheap alternative to actually reducing fossil fuel use.But the desperate hunger for these carbon credit plans appears to have blinded many of their advocates to the mounting pile of evidence that they haven't --- and won't --- deliver the climate benefit they promise.I looked at projects going back two decades and spanning the globe and pulled together findings from academic researchers in far-flung forest villages, studies published in obscure journals, foreign government reports and dense technical documents. I enlisted a satellite imagery analysis firm to see how much of the forest remained in a preservation project that started selling credits in 2013. Four years later, only half the project areas were forested.In case after case, I found that carbon credits hadn't offset the amount of pollution they were supposed to, or they had brought gains that were quickly reversed or that couldn't be accurately measured to begin with. Ultimately, the polluters got a guilt-free pass to keep emitting CO₂, but the forest preservation that was supposed to balance the ledger either never came or didn't last."Offsets themselves are doing damage," said Larry Lohmann, who has spent 20 years studying carbon credits. While we're sitting here counting carbon and moving it around, more CO₂ keeps accumulating in the atmosphere, he said.It's "the worst possible idea --- except for everything else," said Timothy Searchinger, a Princeton researcher who studies land use and climate change. "If we had enough money, it could probably help a lot."He echoed an idea I heard again and again from proponents of this concept: Even hundreds of attempts across the world had not given forest preservation offsets a meaningful chance to work. Many projects sold credits on a voluntary market, to corporations seeking green public relations or well-meaning consumers. That didn't allow them to generate enough money to succeed. If California and other giants joined the market, that could finally inject real resources into the effort.California's cap-and-trade program allows companies to offset a small percentage of their carbon output with forest preservation projects in North America. But this year, the state's Air Resources Board could approve its proposed Tropical Forest Standard --- a blueprint for how carbon offsets could be awarded for intercontinental programs. Experts say the standard could and likely will be adopted by other countries.Everyone is looking to Acre as the prime testing ground. "Acre's program is the most advanced," a board spokesman said in an email. Supporters kept sending me brochures that used words like "pioneer," "innovative" and "new business models" and showed smiling residents harvesting Brazil nuts instead of cutting down the rainforest.So I traveled to Acre to see how its program was working. I found swaths of cow pasture where locals once tapped rubber from trees; there's no way to make a living from sustainable alternatives, they told me, so the trees have to go. Government workers spoke of conservation, but political leaders have cut funding for it and plan to expand agribusiness. Several Acre officials readily acknowledged that their priority is getting foreign aid to protect forests; the validity of the offsets is an afterthought.Those eager to see the Acre program succeed told me it was OK if the offsets didn't really cancel out all of the carbon emissions they were supposed to, as long as some trees were saved and smaller gains were made."Perfection can be the enemy of delivery," Brown said. "There are a whole bunch of problems with it. ... What is the alternative?"A History of FailureIf the world were graded on the historic reliability of carbon offsets, the result would be a solid F.The largest program, the Clean Development Mechanism, came out of the 1997 Kyoto Protocol, when dozens of nations made a pact to cut greenhouse gases. European leaders wanted to force industry to emit less. Americans wanted flexibility. Developing nations like Brazil wanted money to deal with climate change. One approach they could agree to was carbon offsets.The idea worked marvelously on paper. If a power plant in Canada needed to shave 10% off of its emissions but didn't want to pay for technology upgrades, it could buy offsets from projects in the developing world. Investors planning to build a coal plant in India could instead decide to build a solar plant, using the money from the anticipated sale of carbon credits to cover the higher costs of developing solar power. The gap in emissions between the hypothetical coal plant and the actual solar farm would be converted to offsets. (Each credit is equal to the global warming caused by a metric ton of CO₂.)The program subsidized thousands of projects, including hydropower, wind and, infamously, coal plants that claimed credits for being more efficient than they would have been. CDM became mired in technical and human rights scandals, and the European Union stopped accepting most credits. A 2016 report found that 85% of offsets had a "low likelihood" of creating real impacts.Another global program, Joint Implementation, has a similar track record. A 2015 paper found that 75% of the credits issued were unlikely to represent real reductions, and that if countries had cut pollution on-site instead of relying on offsets, global CO₂ emissions would have been 600 million tons lower.Almost all of the projects failed to meet a standard required for any true carbon offset called additionality. What it means is that the environmental gains are only real if the solar farms or windmills would never have been built without the credits.The programs largely avoided credits for forest preservation, in which a polluter pays a landowner to reduce deforestation. The science was too complicated. How are we to know which trees were saved because of such projects, and which would have survived without them?The uncertainty didn't stop delegates at the United Nations from entertaining the idea during climate talks starting in 2007.The UN formalized the concept as REDD, or Reducing Emissions From Deforestation and Forest Degradation. Proponents expected the carbon incentives would create billions of dollars to transform conservation as countries or corporations used it to meet mandated climate goals. But the world didn't get a deal strong enough to create demand, so the anticipated funding never emerged.Instead, the UN supported pilot programs, as did the World Bank and the U.S. Agency for International Development. Nongovernmental organizations and private companies funded hundreds of small-scale offset projects, and a few countries launched "results-based" programs, which reward preservation without generating offsets.There is no central authority to deal with the varieties of REDD that now exist. No one has done a comprehensive assessment of how effective these programs actually are.I found a few that came close. In 2015, a French research center examined 120 projects and found that 37% overlapped with existing protected lands like national parks. Though offsets require an added benefit, the authors concluded REDD was simply layered onto existing conservation plans, reducing it to a "logo to attract financing."Then, there are the findings out of Norway, a major exporter of oil and natural gas and the world's largest supporter of REDD, representing about half of all funding.Tucked into a little-noticed report published last year by Norway's Office of the Auditor General was the revelation that the country's efforts had failed virtually every test:Despite a decade's work and $3 billion, results were "delayed and uncertain," the science of measuring carbon was only "partially in place" and there was "considerable" risk of what's called "leakage" --- when protecting one patch of land leads to deforestation somewhere else. That problem alone creates "considerable uncertainty over the climatic impact," the report concluded.The Carbon Credit CardI landed in Acre at midnight on March 11, and even then, the humidity felt unbelievable. The Amazon rainforest spans the entire state, an area slightly larger than Illinois with a population more the size of North Dakota's. My first morning there, I met Brown at Capybara Kiosk, a gazebo on campus next to a lake where the world's largest rodents munch on grass. The geochemist drove me to his office, which required a short journey through the Amazon's famed red mud that could best be described as whitewater rafting in a pickup truck. The dirt roads are so precarious, Brown keeps a tow rope handy; I watched him use it later that day to help another driver.It was a fitting metaphor for what I knew coming into Acre: Trying to preserve trees in any developing country is a slog, a tumultuous push against political volatility, lacking infrastructure and poverty, which drives people to violate whatever protections are in place to plant crops or mine for gold or just have enough lumber to build their homes.Layer on top of that the most pressing requirement of making carbon offsets work, and the challenge can seem insurmountable.When trees take in CO₂, the gas doesn't magically disappear: The trees simply store the carbon, incorporating it into in their living tissue as they grow. When trees are destroyed, the accumulated carbon goes back into the atmosphere as CO₂.Think of trees as "hiding the carbon for awhile," said Abigail Swann, an ecology professor at the University of Washington. Carbon dioxide lingers in the atmosphere for about 100 years. So forest offsets only work if the trees remain intact for a century.In that sense, offsets are like the world's most forgiving credit card: The buyer gets all the benefit upfront, while it takes a century for the full debt to be repaid.Proponents told me that even a half-century or a few decades could make a big difference. To them, forest offsets are about buying time for society to figure out how to power the world without fossil fuels.But I'd read about projects that sold credits, only to have trees cut down soon after.In 2014, FIFA bought a batch of credits to help fulfill a sustainability pledge it made before the World Cup in Brazil. The offsets came from a project launched in 2009, after Almir Narayamoga Suruí, a leader among the Paiter-Suruí tribe in the Brazilian state of Rondônia, struck up conversations with Google and carbon market consultants.The project aimed to cut deforestation in highly logged areas along the territory's borders, and it received funding from USAID. But some members of the tribe, disillusioned by the amount of money going to international groups for logistics management, colluded with loggers and anti-REDD activists to sabotage the project.The project sold 250,000 credits as the tribal leader documented destruction. "Every day, 300 trucks leave our territory filled with wood," he wrote in a public letter in 2016. The project was suspended last year, after the loggers destroyed more trees than all the credits sold.Then, there was the project launched in 2008 to help Cambodian monks protect the forest where they lived. The project attracted powerful allies, including funding from the Clinton Foundation and support from the Cambodian government.Meanwhile, the forest was being overrun --- by violent border disputes between the Cambodian and Thai militaries, by logging sanctioned by the same government that supported the project, and by an influx of refugees and former Khmer Rouge soldiers who settled in the forest to farm. The project's hurdles should have been obvious; the area was riddled with land mines.The project was designed to protect 13 forested sites covering a total of 246 square miles. It's sold 48,000 credits and remains on the market, even though military bases and villages were built within the protected areas, according to Timothy Frewer, an Australian researcher who spent months on the ground. After an environmental group cited Frewer's findings in a 2017 report, the airline Virgin Atlantic said it would stop buying offsets from the project.ProPublica enlisted Descartes Labs, a satellite imagery analysis firm, to review radar data for the 13 sites to determine how much forest remained. Project documents said these areas were 88% covered in forest, on average, in 2008. Our commissioned analysis found that as of 2017, they were only 46% forest. One of the protected areas, Angdoung Bor, started out as 90% forest; it is now 0%.ProPublica contacted Verra, a nonprofit that set the quality assurance standards for the credits generated. A spokeswoman said the organization couldn't comment until it had done its own research. The consultants who are supposed to provide regular on-the-ground updates to Verra haven't issued a report in more than five years. Verra said the credits sold have already been used to offset pollution.Leslie Durschinger, CEO of project developer Terra Global Capital, said in an email that the lack of carbon market buyers and donors have left the project "without the financial support it needs to succeed."Brown moved to Acre 26 years ago as a visiting professor and never left. He said the Amazon makes him feel "useful." He tracks the impact of droughts and wildfires, estimates the carbon contained in the forest and has represented the Acre government in international climate talks. Everyone knows him here. He bikes around campus in a fluorescent reflective vest and tries to reach people however he can, including climate change workshops with rural workers and a regular column for the local paper; he wrote one about why he became a vegetarian (to save trees, of course).He argues that concerns about the science behind initiatives like REDD are outweighed by the catastrophic potential of not moving to block deforestation."Trying to guarantee something for 100 years is impossible at this moment," he told me. "If we don't move quickly, now, this [science] discussion will tend to be theoretical."The scientists and forest experts I spoke with put it this way: If the Amazon loses enough trees, it will reach a tipping point, transforming from lush ecosystem into a semiarid savanna. The implications would be global. And rich nations aren't generous enough to fund the preservation of tropical forests without getting something in return.Doing The MathEveryone agrees forests are a vital buffer against climate change. The question is whether their preservation should be linked to offsets that allow others to keep polluting. For this to work, ecologists told me "rock solid" accounting is necessary.The math starts with an estimated baseline, a guess at what deforestation would look like without offsets. The more deforestation you anticipate, the more credits you generate, the more money you stand to make. It's easy to game the system by nudging the numbers toward the bleakest alternative reality.French researchers raised questions about two sites in Africa, which calculated their baselines using other, supposedly comparable areas. In Congo, the chosen reference area had many more roads and was next to shipping ports, so the logging potential was higher than in the project area. In Madagascar, deforestation in the reference area was already twice as high as in the project forest, so the project could claim to cut deforestation in half without doing a thing.Brazil, which has a third of the world's rainforests, has received more REDD funding than any other nation, and it's used different baselines to justify vastly different results.For the Amazon Fund, a Norwegian-supported program that doesn't create offsets, Brazil claimed credit for 4 billion tons of avoided CO₂ over a decade starting in 2006 and said its progress was worth $22 billion. Brazil came up with a higher estimate for separate funding from the United Nations: $36 billion, by relying more on older deforestation numbers that added an extra 3 billion tons of avoided CO₂ to its tab. Since Norway and the UN have limited budgets, Brazil has gotten less than $2 billion.Deforestation in Brazil is actually up; it was rising even under a forest-friendly government and reached a decade high last year. Then, last fall, the country elected far-right president Jair Bolsonaro, who declared support for agribusiness over what he called fanatical environmental activism. He dismantled two climate change divisions and cut 24% of the budget for the country's top environmental enforcement agency.Acre's new state government is aligned with him and says it wants to increase soy and cattle production. "Acre's economic salvation is agribusiness," Gov. Gladson Cameli declared during a meeting with the governor of Rondônia, one of the most heavily deforested states in the Amazon.Keeping track of trees is essential. For the REDD programs, Brazil has relied on a satellite program that tracks large-scale tree loss, starting at chunks the size of about 10 city blocks. But there's emerging evidence that landowners are clear-cutting smaller areas to escape detection. It doesn't account for degradation, the thinning of trees from wildfires and logging; a major study found this cut the Amazon's carbon content by an average of 55%. Luiz Aragão, who heads the remote sensing division at Brazil's National Institute for Space Research, said wildfires alone can change the numbers by 30%, and scientists are just beginning to understand how they create lasting damage.I spoke to government workers in Acre about how they could guarantee that their credits were scientifically valid.Vera Reis, executive director of Acre's state environmental agency (and Brown's wife), said the credibility is "paramount." Brazil's satellite programs can detect smaller areas of deforestation, she said; the lower resolution is used for bureaucratic purposes, to keep data consistent with historical records. Brazil uses much more detailed data for federal climate change reports.She said it's too early to tell what kind of data Acre will use if it links with California. The details will be ironed out, she said, and we "want confidence" in the numbers.In the same meeting, Acre's politically appointed secretary of the environment, Israel Milani, steered the conversation to agribusiness opportunities that wouldn't damage the environment. "We are a relatively poor state," he said. "Everyone who lives in the forest, who lives from the forest, needs a livelihood."Later, I met with Fluvio Mascarenhas, an analyst at a Brazilian federal agency that oversees the Chico Mendes Extractive Reserve, a conservation area with more than 11,000 residents. He warned against looking too closely at the quality of the credits being sold. "You are going to create a non-incentive to preserve," he said.Like Brown, Mascarenhas will take any help he can get to save trees. His team has dwindled by half in the past decade, leaving 15 staffers to oversee 11 protected areas in Acre that cover up to 12,000 square miles --- in addition to handling basic government functions on the reserve, including education, public health and infrastructure.From his office in the state capital of Rio Branco, Mascarenhas tracks cleared land through Google Earth. He showed me how he uses a yellow pushpin icon to tag landowners who've cut more than they're allowed to; the map was covered with yellow, far more offenders than they can reasonably process.To collect fines, there's no mail service, no credit card invoice. Mascarenhas' team spends weeks trekking through the forest, sleeping in hammocks and confronting loggers in person. Some can pay the fine, which amounts to about $2,400. Many are too poor.Mascarenhas told me about an attempt to create a cacao industry in the reserve so that locals could live sustainably. His agency spent two years researching how to do it. But they didn't get the funding for the second half of the project, to create a market. Those who cultivated the beans have nowhere to sell them, he said. "The animals are the only ones eating the cacao." They're applying for additional funding to implement it.The government is trying to get people to value forest products like Brazil nuts and rubber, but the market isn't following. "The world is telling us we have to conserve," he said, "but nobody's showing us how."A few weeks after I visited, the president of Mascarenhas' agency resigned. It happened after Bolsonaro's federal environment minister threatened to investigate employees who didn't attend an agribusiness conference, in which farmers fought to strip protections from land important to wildlife. Three additional directors at his agency resigned, and the government replaced them with members of the military.UnsustainableThe day after meeting with Acre officials, I woke up early to start the drive to the Chico Mendes reserve, a few hours outside Rio Branco. It is a place of legend in Acre, central to its reputation far outside of Brazil.Chico Mendes was one of the first activists to get global attention for defending the Amazon when deforestation threatened the livelihood of residents who tapped rubber from trees. In the 1980s, he organized nonviolent protests that involved confrontations with logging trucks. He was gunned down in 1988, but his legacy lives on in conservation areas that cover 18% of Brazil. One of them, the reserve named after him in Acre, is home to the descendants of rubber tappers who protested alongside him.I expected to see rainforest. But on the way there, all I saw were cow pastures. They usually had a few trees --- Brazil nut, which are a protected species, and palm trees, which are hard to cut with chainsaw blades.Dercy Teles, a former president of the rubber tappers' union, lives just outside the reserve. She told me she had defended the forest with Chico Mendes because her livelihood depended on it; now, only those deep in the conservation area, without access to markets, roads or better options, still tapped trees. Corporations and developed nations created most of the damage leading to climate change, she said, yet "people want us to starve to reduce carbon emissions."In 2010, while Acre was run by a progressive party that dubbed itself the "government of the forest," the state launched a set of sustainability policies, to steer residents toward activities like harvesting Brazil nuts and digging fish ponds, which do not require cutting down trees. The initiative gained Acre funding from Germany, which has given $33 million so far for deforestation cuts. It is a results-based program that isn't claiming to offset German pollution.Brazil takes great pride in a sharp drop in Amazon deforestation since 2004. But it's impossible to tell how much of an additional benefit its funders have created. The drop coincided with a massive federal conservation program. Once the country loosened restrictions and enforcement in 2012, deforestation began to increase. Recent research on Norway's contributions to the Amazon Fund noted that "a causal link to decreasing Brazilian deforestation rates is yet to be proven with analytical rigour."Officials said the Acre program has benefited 7,000 indigenous people and about 14,000 other families, and they're working on a report with more detailed results.The 2.3 million acres of the Chico Mendes reserve have retained 94% of their forest cover, but even so, deforestation rose 60% between 2000 to 2016, according to Mascarenhas' research. In and around the reserve, I saw evidence of the program at work --- an ecolodge for tourists, a warehouse piled with Brazil nuts. But it wasn't hard to find people frustrated with Acre's sustainability programs.Teles took me to visit her brother Pedro Teles de Carvalho, a former rubber tapper who became a teacher. The state sent him hundreds of saplings to plant fruit trees, he said, but didn't provide machinery to prepare the land --- a necessity for farming the poor Amazon soil. The saplings sat untouched in his yard, still wrapped in plastic.Next, I met Carvalho's neighbor, Francisco Maurício Rios, a retiree who gets by on a small pension. Thinking he might be able to buy a motorcycle, he tried to participate in a sustainable logging program. It didn't earn him enough for an electric bike. He said the government also paid to dig two fish ponds. One dries up every summer; the other provides enough fish to eat, but not to sell. The government also sent rubber-tapping trees. He said he can't afford fertilizer to help them grow.These kinds of frustrations have undone forest offset projects across the world. They target rural residents who would otherwise cut down trees for fuel or to clear pastures for agriculture, but that only works if carbon sales provide a reliable alternative. They rarely do. Rubber from the reserve sells for about 2 reais per kilogram, barely enough for a cup of coffee, while a single cow is worth 800 reais, about $200.José Romário Gomes da Silva and Elizete Carneiro de Brito live with their 5-year-old daughter, Thaíssa, in a home filled with things their parents never had: a cellphone, a sofa, a pink shag rug. In part, that's because of the small herd of cows they keep on land in the reserve that used to be covered with trees."Cattle is a secure market. You can get a good income selling a calf, an ox," Silva said."Who is willing to rubber tap nowadays?" Brito said. "Nobody, practically nobody. We want an easier way to live."'Ok, Smartass, What's Your Solution?'My visit to Acre suggested that even the best REDD program in the world was running into practical, political and scientific obstacles that couldn't be fixed with funding alone --- another warning sign on top of the reports concluding earlier programs hadn't worked.Yet when I explained what I'd found to 20 scientists and carbon credit researchers --- including several who have spent much of their careers working to implement, improve or study forest offsets --- they sometimes responded angrily.They agreed with the underlying facts. But when I asked if this indicated REDD was failing, they objected. Vehemently.Amy Duchelle, a senior scientist at the Center for International Forestry Research, co-edited a book published last year that said REDD "has not yet delivered the expected overall impact of reducing [greenhouse gas] emissions" and tropical deforestation hasn't slowed.She repeated these facts in an interview, emphasizing that these initiatives had been useful in other ways, helping countries improve their ability to monitor deforestation and understand its causes, and secure land rights for indigenous communities. She even found "moderately encouraging" scientific results out of some projects.When we spoke again after my trip to Acre, however, she became heated. She'd spent years in Brazil, she said. What did I know after one brief trip? "You're not quoting me," she said. "I don't like the direction of this story."Searchinger, the Princeton researcher, said people trying to make REDD work know its limitations. He helped me understand the resistance when it is criticized by outsiders, half-joking: "So the question is, 'OK, smartass, what's your solution?'"Several researchers and scientists told me that forest preservation offsets had not gotten a real chance to succeed --- that we won't really know until the world implements programs on a large scale, with billions more in funding. "The truth is, REDD remains a great idea that's hardly been tried," said Frances Seymour, a distinguished senior fellow at the World Resources Institute.That means staking the future on government-run programs like the one in Acre.At a contentious, six-hour public hearing last fall, the California Air Resources Board considered whether to adopt the Tropical Forest Standard, which would open the door for California and other governments to link with Acre or similar programs.Officials from Brazil testified in support of the standard while global human rights groups urged the opposite. Indigenous and environmental activists spoke for both sides, and two competing letters, each signed by more than 100 scientists and researchers, argued for and against the proposal.Supporters summed up what I'd heard, that it will help solve an urgent deforestation problem with global implications. Critics questioned the science. The uncertainties of carbon accounting, which get magnified by large-scale programs, are so nebulous, scientists don't even know how much they don't know.Stanley Young, a spokesman for the board, told me California's standard has built-in safeguards to avoid repeating mistakes. "We're as aware as you are of how it has not worked in the past," he said.The standard requires programs to exceed protections in existing policies and to show a drastic reduction in deforestation. It requires that trees stay standing for 100 years. But its guidance on leakage is just four sentences long, and it doesn't make countries report degradation, potentially leaving out a huge chunk of the emissions.Jason Gray, chief of the board's cap-and-trade program, said degradation is hard to measure, but the standard will incentivize better monitoring so countries can add the data later. "If we wait to have the perfect information," he said, it might be too late.In April, six members of the European Parliament urged California to reject the Tropical Forest Standard, citing concerns about Brazil's shifting politics and noting that the European Union hasn't allowed forestry credits in its cap-and-trade program "due to concerns about their environmental integrity."The standard is under review by a climate change committee within the California Legislature, which may give recommendations during this spring's session. The Air Resources Board will decide whether to approve the standard this year. Any potential purchase of tropical offsets would require additional board action.Barbara Haya, a University of California, Berkeley, research fellow who studies the carbon market, said we're deluding ourselves if we think these forestry programs will be able to accurately quantify --- and therefore, cancel out --- the amount of pollution claimed in an offset, even under the new standard.The best we can hope for is a program that helps the climate in some unmeasurable way, she said. "That's what offsets are. And I think that's the best of what offsets can be."Satellite Analysis MethodologyTo estimate the amount of forest left in the protected areas in the Cambodia project, ProPublica asked Descartes Labs to look at the official project documents filed with Verra, the nonprofit that set the standards for the credits generated. Those documents list the size of each of the 13 protected sites and how much of each site was still forested. On average, as of 2008, they were 88% forested. The project developers used Landsat satellite data with 30 meter resolution to define forested areas "containing at least 10% canopy cover, a tree height of 5 m, and a minimal area of 0.5 ha, for at least 10 years before the project start date."Descartes then used the Global PALSAR Forest map, created by the Japan Aerospace Exploration Agency, to examine the extent of forest in these areas as of 2017 using the geographic boundaries available in the project documents. The PALSAR data, which is available at 25 meter resolution, defined forested areas as "the tree covered land with the area larger than 0.5 ha and canopy cover over 10%," almost identical to the 2008 definition.The resulting maps, from 2017, show 46% of the protected areas, on average, are still forested.Lisa Song reports on the environment, energy and climate change. Previously, she was part of the reporting team on a series on Exxon that was a finalist for the 2016 Pulitzer Prize for public service, and "The Dilbit Disaster," which won the 2013 Pulitzer for national reporting.ProPublica news applications developer Al Shaw contributed to this report.Special thanks to our drivers in Brazil, Márcio Ferreira, Maiken de Araújo Oliveira and Edno Pereira Reis.Illustrations by Greg Batza, special to ProPublica. Design and production by Agnes Chang.
Separated by Design: How Some of America’s Richest Towns Fight Affordable Housing
by Jacqueline Rabe Thomas, Connecticut Mirror WESTPORT, Conn. — A dirt field overgrown with weeds is the incongruous entrance to one of America’s wealthiest towns, a short walk to a Rodeo Drive-like stretch replete with upscale stores such as Tiffany & Co.But this sad patch of land is also the physical manifestation of a broader turf war over what type of housing — and ultimately what type of people — to allow within Westport’s borders.It started when a developer known for building large luxury homes envisioned something different back in 2014 for the 2.2 acre property: a mix of single- and multifamily housing that would accommodate up to 12 families. A higher density project is more cost efficient, he said, and would allow him to sell the units for less than the typical Westport home.But the site was zoned to hold no more than four single-family houses, so he needed approval from a reluctant Westport Planning and Zoning Commission, which denied his plan. Residents erupted in fury each time he made a scaled-back proposal, and it took the developer four years after purchasing the property to win approval to build two duplexes and five single-family homes.“You are selling out Westport,” one resident yelled out as the final plan came up for a commission vote last spring. Other residents picketed commission meetings with signs reading “Zoning is a Promise.”The commission’s discussion was couched in what some would regard as code words and never directly addressed race or income. Chip Stephens, a Republican planning and zoning commissioner, voted against the plan, declaring, “To me, it’s too much density. It’s putting too much in a little area. To me, this is ghettoizing Westport.” Get Our Top Investigations Subscribe to the Big Story newsletter. Don’t miss out on ProPublica’s next investigation. Sign up and get the Big Story email whenever we break news. Now under construction, these two-bedroom duplexes and single-family homes have a price tag of $1.2 million, the going rate for a home in this swanky village just outside Bridgeport and Norwalk.“We spent hundreds of thousands of dollars to get this through. Would I do this all over again? No. Probably not,” said the developer, Johnny Schwartz, of Able Construction.Welcome to Connecticut, a state with more separate — and unequal — housing than nearly everywhere else in the country.This separation is by design.Westport is only one example of a wealthy Connecticut suburb that has surrounded itself with invisible walls to block affordable housing and, by extension, the people who need it.In a liberal state that has provided billions in taxpayer money to create more affordable housing, decisions at local zoning boards, the Connecticut Capitol and state agencies have thwarted court rulings and laws intended to remedy housing segregation. As far back as data has been kept, Connecticut’s low-income housing has been concentrated in poor cities and towns, an imbalance that has not budged over the last three decades.Many zoning boards rely on their finely tuned regulations to keep housing segregation firmly in place. They point to frail public infrastructure, clogged streets, a lack of sidewalks and concerns of overcrowding that would damage what’s often referred to as “neighborhood character.” An investigation by the Connecticut Mirror and ProPublica has found that more than three dozen Connecticut towns have blocked construction of any privately developed duplexes and apartments within their borders for the last two decades, often through exclusionary zoning requirements. In 18 of those towns, it’s been at least 28 years.In Westport — where gated residences overlook the Long Island Sound and voters solidly backed Democrats in the most recent state and presidential elections — private developers have been allowed to open just 65 affordable housing units over the last three decades. Public housing rentals operated by the local housing authority have also grown at a snail’s pace, with 71 new units opening in this charming small town of 10,400 homes.The impact of this logjam on families is that the share of housing specifically dedicated for low-income residents has actually decreased by small percentages in one-quarter of Connecticut’s municipalities since 1990.“I think the vestiges of our racial past are far from over,” said former Democratic Gov. Dannel P. Malloy, who left office in early 2019 after eight years and regularly butted heads with General Assembly members who wanted local officials to have even more authority over housing decisions. For minority residents striving for safe and affordable housing, the state has “denied the opportunity that we allowed white middle-class aspirants to access,” Malloy said.Meanwhile, state lawmakers and bureaucrats watch from the sidelines, reluctant to intervene.This doesn’t appear likely to change any time soon.Gov. Ned Lamont, a Democrat from Greenwich who took office this year, declined to be interviewed for this story, but he has said his statewide goal is to “work collaboratively with the locals in terms of what they want and what they are not willing to take. At the end of the day, that community will probably take the lead on making that choice.”Lisa Tepper Bates, Lamont’s senior coordinator for housing and transit-oriented development, said in an interview that the administration hopes to bring change by adopting a “different philosophy, which is to go to the communities and try and have this discussion and try and see how far we can get.”The Cunningham family is feeling the brunt of decisions left to local zoning boards.Ashana Cunningham, a 33-year-old mother of three, lives 9 miles from Westport’s posh downtown. Each workday, she takes a bus from a homeless shelter in Bridgeport, where she lives with her family among a landscape of abandoned factories, run-down houses and trash-lined streets to her job in a suburban cornucopia a few miles away.She tends to children from privileged families at a pricey day care in Fairfield. Two days a week she works a second job at Family Dollar.This is not the life Cunningham imagined. She earned an associate degree to become a medical assistant but has never made more than $14 an hour. She and her wife struggled to pay $1,200-a-month rent for a small Bridgeport apartment, and then her wife became disabled and could not work.A car crash further complicated their lives. Cunningham was injured and left without transportation — and, ultimately, out of a job.By the time she found the day care job, which pays $12.50 an hour, the family was living in the shelter, where the smell of bleach lingers and bachata music from a neighbor’s apartment pulses through the walls. Her second job as a cashier pays $11 dollars an hour.She knows that she is trapped, that moving to a town like Westport, Trumbull or Fairfield is impossible.“There’s no other place for us to go. Fairfield or Trumbull? Forget about it,” Cunningham said. “You can’t afford to pay your rent if you are only making $707 every two weeks.”“You Build Where You Can”Racial and economic segregation is not unique to Connecticut, but it is extreme and runs counter to the state’s liberal image. Democrats have controlled the state legislature for 22 years and the governor’s mansion for eight.In southwest Connecticut, the gap between rich and poor is wider than anywhere else in the country. Black and Hispanic residents statewide live in some of the nation’s most segregated neighborhoods, census data shows.The repercussions of living in segregated neighborhoods often last a lifetime.“Neighborhoods matter,” researchers at Brown, Harvard and the U.S. Census Bureau concluded.The “Opportunity Atlas” they created makes clear just how much it matters by showing the stark differences in where the 20.5 million children they tracked ended up. For example, children who grew up in Cunningham’s Bridgeport neighborhood were five times more likely to be imprisoned on April 1, 2010, than those who grew up 2 miles down the road over the Fairfield line. The Bridgeport natives also made half the income of their Fairfield peers.But the families of low-income children have few housing options in Connecticut’s higher-opportunity neighborhoods: 63 of the state’s 169 municipalities have no housing authorities to facilitate the creation of public housing and manage it.In southwest Connecticut, where Cunningham lives with her family, it costs 3.5 times more to live near high-scoring elementary schools than the struggling schools her children attend, the Brookings Institution reported.“Would-be movers would have to spend about $25,000 more per year on housing to make that jump,” Brookings found.Malloy, now a visiting professor at Boston College, explained in an interview why such a large share of affordable housing that opened during his tenure was in the poorest neighborhoods.“You build where you can, where a community is inviting,” he said. “I do believe that there is not an openness and willingness to have the people who work in town, live in town. Maybe that’s because some towns want everyone to be the same. I don’t know why a town wouldn’t want a fireman or a policeman or a day care worker who works in their community to be able to live in that community.” Dannel P. Malloy, the former Democratic governor of Connecticut, in Bridgeport. (Spencer Platt/Getty Images) During Malloy’s years in office, his administration directed $2.1 billion in public funding to renovate run-down public housing or build new housing so more low-income residents have an affordable place to live. The new housing was disproportionately built in the state’s poorest communities, however. Three-quarters of the new units constructed since 2011 were in the state’s 10 poorest municipalities, although only 20% of Connecticut’s housing stock is located in these communities. Just over 5% opened in the 10 wealthiest towns.Government subsidies aside, another way to bring down housing costs is to build duplexes or apartments on a lot — but that’s not being allowed in many communities, despite state law requiring local zoning commissions to “encourage” such development in order to “promote housing choice and economic diversity in housing.”While dozens of towns have not permitted any duplexes and apartments to be built in two decades, the multiunit construction in another three dozen towns just replaced similar units that had been demolished. (This new construction data only includes privately owned residential developments and not public housing, dorms or hotels.)Local zoning rules are often to blame for the lack of more affordable development.“You can’t even build a duplex. Zoning just kills it,” said Sean Ghio, policy director at the Partnership for Strong Communities, an advocacy group that lobbies for more affordable housing. “People often fear the unknown, and as a result try to keep the unknown out of their lives by maintaining the status quo. The status quo in Connecticut is living in segregated communities.”Local officials, however, say there are often legitimate reasons to deny multiunit housing because local infrastructure is not in place or there are environmental concerns.“Unfortunately, we are limited in what we can provide,” said Joyce Stille, who since 1995 has been the administrative officer of Bolton, a small town in central Connecticut that has limited sewer access and where just one duplex has received a permit in 30 years. “Because of our proximity to Vernon and Manchester, we don’t really need any [affordable housing]. They have such a wide range of options. People don’t come to Bolton because Bolton has a higher cost of living.” Only 19 cities or towns allow housing with three or more units to be built without requiring special permits, according to a 2013 review by Trinity College’s Cities, Suburbs, and Schools Project and the Connecticut Fair Housing Center. Twenty-five municipalities explicitly prohibit such housing and 123 require a special town permit.In some towns that do allow it, other zoning requirements make it exceedingly difficult for projects to come to fruition since they need more land to build anything besides a single-family home.For example, Monroe, a high-income town in southwest Connecticut, requires at least 70 acres for multifamily housing construction, and each unit may have no more than two bedrooms. A single-family home requires 1 acre.In its specially zoned “Housing Opportunity District,” 20 acres of land are required to build multifamily housing, but because of density restrictions only 13 apartments or townhomes may be built.Avon requires 15 acres for a two-unit home, compared with 1/3 acre for a single-family residence.“A large lot requirement makes it financially infeasible for such housing to be built. That’s just logic,” said Fionnuala Darby-Hudgens, who did the analysis that Connecticut’s Department of Housing used in its mandatory report to the federal government on exclusionary zoning.A Watered-Down LawAll of this comes 30 years after the Connecticut Supreme Court ruled for the first time that exclusionary zoning practices that quash moderate-priced housing are illegal. That groundbreaking case involved a truck driver attempting to build an affordable single-family home in middle-class East Hampton that was smaller than the minimum square feet the town required. The justices ruled against the town, saying its requirements “are a form of economic discrimination.”In the following months, state lawmakers passed a law that set the stage for the courts to review local zoning decisions in towns with few affordable homes. Most notably, the law — commonly referred to by its statutory reference as 8-30g — outlined the process for developers to bypass local zoning decisions by going through the courts if they set aside 30% of a project’s units for poor people. But the law had limited impact. Just 2% of all the housing developed in Connecticut since then is dedicated to low-income families. Since the law passed, the share of housing for low-income residents has actually decreased in 47 of the state’s 169 municipalities, according to state Department of Housing data.“Any developer who’s going to use [this law] has to be ready for the potential of a long, expensive slog, first through the zoning commission and then through the court system,” said Timothy Hollister, the land-use attorney who won the East Hampton case. He has been trying since 2005 to win approval for a client to open affordable units in Westport.Each year, legislators file a slew of bills to weaken the law.State Rep. Brenda Kupchick, a Republican from Fairfield who served as the ranking member of the legislature’s Housing Committee from 2013 to 2018, said her top committee priority is to scale back the law.“Predatory developers are taking advantage of communities, and we aren’t getting much affordable units out of it,” she said. “In 30 years, the needle hasn’t moved. It’s not working. Let’s brainstorm and come up with some ideas that may actually work.”Former Senate Minority Leader John McKinney, a Republican from Fairfield, said amending the law was a big issue for his caucus during his 16 years in the state Senate.“Look, I get the argument that you need it. You can’t let the Westports and the Greenwichs off. You have to have something. I just think there is a better way,” said McKinney, who left office in 2014 to run for governor, a bid he ultimately lost.He and Kupchick believe the state should provide financial incentives for towns that allow more affordable housing to be built within their borders.Otherwise, he said, developers game the system. “They are not really out to build affordable housing for the community. They are out to build market-rate housing, and if they have to put some affordable units with it to get approval, that’s what happens,” McKinney said. “There are developers who literally come into these meetings with two plans and say, ‘Give us this plan, or you get this affordable housing plan.’”After years of failed attempts, lawmakers in 2017 finally weakened 8-30g by making it easier for towns to get exemptions from the law’s requirements.Malloy vetoed the measure, because he said it would “perpetuate the harmful effects of bad economic policy and institutional segregation.” But the General Assembly overrode the veto.This March, the Department of Housing granted Westport — where 3.4% of the housing is considered affordable — a four-year exemption, which prevents a judge from overriding its zoning decisions.The exemption protects the town from legal challenges, but it came after the zoning commission had already approved 44 new low-income units, mostly studios or one-bedroom units with monthly rents starting at $1,400. A commissioner made it clear during project hearings that only the threat of a lawsuit under 8-30g persuaded him to approve the plans. And now that threat is gone.“The statute requires me as a commissioner to essentially pass this proposal, or give very narrow reasons for denying it, none of which were presented as evidence to this commission. So we don’t have that option. We must pass it,” said then-Commissioner Alan Hodge, a Democrat, before the 2016 vote.Westport currently has 265 units for low-income individuals that were constructed with public or private funding, though one-third of those units replaced existing affordable housing. For example, the town purchased Westport’s only trailer park and replaced its 60 mobile homes with 93 affordable apartments run by the local housing authority.What this means is that approximately 1 out of every 30 housing units in Westport is dedicated to low- or moderate-income residents, compared with 1 in 8 next door in Norwalk, or 1 in 5 in Bridgeport 9 miles away. This site was eyed for multifamily housing for low-income residents in a heavily residential single-family section of Westport in the early 2000s. The town purchased the land from the developer, and it is now a community garden. (Jacqueline Rabe Thomas/The Connecticut Mirror) In May, the commissioners signaled they were prepared to reject a new batch of affordable units. They say they are doing a great job developing affordable housing.“They are unnecessary,” Danielle Dobin, a Democratic commissioner, said during the panel’s discussion of the proposed units. “This commission and the commission before us have been very successful in creating so much more affordable housing in Westport.”Just over 4% of Westport residents are considered to be living in poverty — two-and-a half times less than the state’s poverty rate. Just under 1% of those who live in this town are black and 5% are Hispanic, a long way off from the state’s makeup.The Lamont administration expressed satisfaction with the current law as it stands.“8-30g is the law in Connecticut and can be one of many important tools we have to ensure that the housing our residents need is available to them,” Bates, the senior coordinator for housing and transit-oriented development, said. “The administration is seeking no changes at this time.”Asked what happens if minds can’t be changed, Bates declined to talk about next steps.“I constitutionally don’t believe that in general people’s minds can’t be changed. I think it’s a question of whether there is an effective way to engage them in discussion and conversation. I think sometimes you can go a lot further that way,” Bates said. “You know this is a new administration, so it is hard to come into it and say you are ready to beat somebody with a hammer when you haven’t had that conversation with them.”Vehement OppositionLocal objections to affordable housing projects run the gamut, with developers typically facing intense zoning board scrutiny about issues like a lack of sidewalks or potential impact to the environment.Broader concerns, such as preserving a community’s character or the quality of its schools, are also frequently cited.During his State of the Town Address a few months ago, Westport’s Republican first selectman, Jim Marpe, said high-density developments keep him up at night.“The challenge to our community is not just to the character of neighborhoods, but also to firefighting and police response, potentially to educational capacity, to human services support and to our tradition as a single-family home community,” Marpe told his audience.He added, “Within the tri-state region, Westport remains an attractive and desirable location relative to many nearby communities, and we must invest in keeping our town in that position.”This mindset was on display in March, when a disgruntled Westport board discussed a proposed 187-unit apartment complex, of which 57 units would be available to low-income residents, located a half-mile from the town’s commuter train station. This developer has been trying to break ground since 2005. Two Westport planning and zoning commissioners. (Jacqueline Rabe Thomas/The Connecticut Mirror) At one point, board members became incensed when the developer’s attorney expressed disappointment that town officials declined to meet with officials in neighboring Norwalk to negotiate changes that would need to be made so the gravel road in that city could be used for emergencies at the complex. The pathway is on land adjacent to the proposed apartment complex and would serve as a second exit that Westport officials say is necessary for emergency vehicles to access the property. Board members appeared to resent the suggestion that they take any action that would be interpreted as benefiting the developer.“I would like to put it on the record, I am vehemently opposed, disappointed and don’t understand why the town of Westport would be involved in a meeting like that,” Stephens, a planning and zoning commissioner, said. Asked why he was opposed, Stephens declined to elaborate during a recent interview, saying it’s an ongoing legal matter.When unanimously rejecting the proposed development last week, however, commissioners pointed to uncertainty about whether Norwalk would allow its gravel road to be paved and used as a second exit during emergencies.Sometimes local officials even offer money to keep affordable housing from being built.Richard Freedman, another developer who has been trying for years to build in Westport, said the town offered to purchase the land on which he proposed building 48 apartments, 29 of which would be for low-income families.“The town attorney approached my attorney to buy the property. I said: ‘It’s not for sale. We are building affordable housing,’” said Freedman, president of Garden Homes Management.Email correspondence from the developer’s attorney to town attorney Ira Bloom in October 2015 specifically rejects the town’s offer to buy the property. Bloom responds the next day with alternative locations that might be more appealing..Asked about the town’s attempt to purchase the property, Bloom said, “I don’t recall that.” He remembers conversations about finding an alternative building site for the developer, and he said he helped connect the developer with other groups interested in purchasing the property.In 2001, the town paid $4.2 million to purchase a 4-acre property adjacent to a local elementary school where only 5% of the students come from low-income families. The developer had planned to develop 60 units, of which 15 would have been dedicated for poor residents. The land is now a community garden and parking lot.Several years later, the town’s first selectman reached out to several potential buyers to facilitate the $14.5 million purchase of another property where the owner wanted to build 200 apartments by replacing a local hotel, the Westport Inn. Sixty of the units would have been for poor residents.A hotel remains there today.Even if elected officials are supportive of affordable housing, the opposition from residents can be intense.Petition drives are launched. Pamphlets are mailed. Lawn signs go up. Facebook groups are set up to strategize. Fundraising campaigns are created to pay for land-use attorneys and environmental experts. Connecticut has more law firms than any other state specializing in land use, a key indicator of restrictive zoning, the Brookings Institution reported.In Westport, a political party was established to help elect zoning commissioners who the party’s leaders believe will preserve the neighborhoods and small-town New England character.Occasionally, residents voice fear of the type of people they believe affordable housing will bring. “The drug addicts are going to be here, believe me,” William Woermer, of Branford, testified in November 2017 about a proposal to demolish a 50-unit, run-down low-income housing project for seniors and replace it with 67 units for poor families. “Retirees, disabled, old people — I have no objection to renovate the whole place and make it nice for them. But don’t get too much of that riffraff in. There will be a lot of riffraff. Then we go onto, with a project like this, you need security guards in the area.” Woermer did not respond to an interview request.In Greenwich, a public hearing in August 2017 about plans for an apartment complex next to the town’s commuter train station quickly devolved into residents complaining that low-income residents wouldn’t be able to afford to shop locally. “Nobody goes to our restaurants [if you’re] living in affordable housing,” Adam Tooter, a resident who had recently bought a $1.5 million home, said during the August hearing. Tooter did not respond to messages.Gayle DePoli, another local resident, said: “Those people won’t be able to afford to live in Old Greenwich. They won’t be able to afford to shop in King’s [gourmet grocery store]. They won’t be able to afford to eat in any restaurant but Dunkin’ Donuts and maybe grab a slice at Arcadia Pizza. They won’t even be able to afford getting a scoop of ice cream at Darlene’s.”During a recent interview, DePoli said she is opposed to the development because the area is already too congested and it is unfair to have poor people living in such high-cost areas.“It’s not about not in my neighborhood. It’s: enough in my area. It’s overbuilt with condos,” said DePoli, an independent contractor for media companies in Manhattan. “Your heart’s got to bleed a little bit for people that need low-income housing, and then you are going to put them in the middle of something they can’t afford. They can afford the rent, but what else? They aren’t going to the restaurants down there. Everything they can afford [is a car or bus ride] away. It’s pretty sad.” In March, the commissioners approved a scaled-back version of this proposed development that will have about half as many affordable apartments. The apartment will be located 2 miles from Greenwich Point, a beach restricted to residents only until the Connecticut Supreme Court in 2001 unanimously ordered the town to open it to everyone.During a zoning commission meeting in rural Oxford in 2014 for a proposed affordable housing project, the town’s first selectman expressed concern there would not be enough parking for visitors on holidays, specifically pointing to one that originated in Mexico.“I’m sure they could have their little parking spaces, but somebody throws a party, or it’s Cinco de Mayo or something else and pretty soon you can’t park there. Well, you also can’t bring an ambulance there and you can’t bring a fire engine there,” said First Selectman George Temple during a public hearing on the project, adding: “I’m not for putting slumlords into Oxford. You know, that’s perhaps an overstatement, and I am sure it is, but I am concerned about these units.”Malloy has little patience for such concerns.“Is safety genuinely 100% the fear or is there something else at play and the reason why these projects aren’t moving forward,” he said. “Let’s drill down for a second. Every one of those towns has housing on a street that doesn’t have a sidewalk. The difference being that those are single-family homes which are not affordable.”All of this pushback is code for not allowing in poor people, says Hollister, the land-use attorney.“Does anybody say we need to keep blacks and Hispanics out of Westport? No, but they talk about property values, safety and preserving open space — all the things that a town can do to prevent development that would bring up a more economically and racially diverse housing population,” Hollister said. “They don’t use the overt racial terms, but it’s absolutely clear to everybody in the room that’s what they’re talking about.”Unmet DemandMarpe, Westport’s first selectman, disputes the idea that the town has practiced discriminatory zoning.“I have lived in many communities in the United States and I would argue Westport is as open and welcoming as any community I have ever lived in. So to cast that as an underlying principle, I would disagree,” he said during an interview. “Anyone who asserts that we don’t want anything to do with ‘those people,’ I would strongly disagree.”Marpe points to the town’s commitment to providing emergency housing for men, women and children, such as homeless shelters and halfway houses.He also points out that decisions on what gets to break ground do not rest with him alone. He cites a proposal he made early in his five and a half years in office for a private developer to build 167 units for senior citizens — 111 dedicated for low-income residents — on a 23-acre town-owned site where an abandoned mansion has sat vacant for years. That proposal was rejected by the town’s Planning and Zoning Commission and the Representative Town Meeting, Westport’s legislative body, didn’t have enough votes to override their decision. Construction of a multimillion-dollar beachfront property in Westport. (Jacqueline Rabe Thomas/The Connecticut Mirror) Town officials have designated the site as open space, preventing anything from being developed on the land. Marpe and Mary Young, the town’s director of planning and zoning, said there is a path for projects to make their way more easily through zoning approval. That “streamlined process” is only available, however, for those looking to build in one section of town: the highly commercialized Route 1.Winning approval outside of that zone is hard. That was the case for the developer who waited four years to build multiunit housing on the lot of a former landscaping business, which is a short distance from the high-end shopping district.“Should it have gone faster? I’m sure from anyone’s perspective, it was not streamlined. But it was not one of the processes that was enacted by my Planning and Zoning Commission. That was a developer who took his own path,” Young said. “If we’ve laid out the red carpet and asked you to come, you’re more likely to get what you need more quickly.”Stephens, the zoning commissioner, said there were legitimate reasons for the application to take so long, none of which had to do with the type of residents it would attract.“We have one of the most welcoming communities here,” Stephens said. “We go above and beyond. I would be aghast if anyone suggested differently.”Marpe said he must listen to voters.“I have to respect the fact that people who have moved here, or have grown up here and continue to live here, are here because the nature of the community is what they are looking for,” Marpe said. “So to try and change that nature with large structures maybe gets to some goal, but I don’t believe [that’s why] people who have invested in this community and want to be part of this community … came here or stayed here.”When asked if the town has, in fact, purchased or arranged for others to purchase property to keep it from being developed as affordable housing, Marpe said it is not a strategy of the town to avoid having more affordable housing. He facilitated the purchase of the Westport Inn because it’s the town’s only hotel outside a 12-room inn on the Long Island Sound, he explained.“When we have had serious storms, the Westport Inn was the one place we could offer somewhat permanent shelter,” he said. “I believe there is a need for that as well. That was the motivating factor in my mind.”Several hotels are a few miles down the road in Norwalk or Fairfield.The new developments that have been built in Westport are not meeting the demand for affordable housing.The last time the town’s housing authority opened its wait list three years ago, 1,000 people applied in 30 days. Then the waitlist closed, and it hasn’t been opened since. The housing authority still gets calls every day, including on weekends.“They come in at all hours,” said Carol Martin, the executive director of the Westport Housing Authority. “It is very much at a crisis.”
Emails Show How Much Pull Political Bosses Had Over State Tax Breaks
by Nancy Solomon and Jeff Pillets, WNYC A law firm linked to New Jersey political boss George E. Norcross III enjoyed extraordinary influence over the state’s tax break program, crafting new rules and regulations in hundreds of calls, meetings and messages with top officials in Trenton, newly released emails reveal.The emails, obtained by WNYC and ProPublica through a public information request, provide a rare look at how the Norcross family machine leveraged its access to top state officials to advance the interests of clients and friends allied with the political leader. The lawyers pushed officials at the New Jersey Economic Development Authority for client concessions, pressed staffers for expedited reviews and went over their heads to appeal objections. Kevin Sheehan, an attorney with Parker McCay, where Norcross’ brother Philip is managing partner, focused on getting bigger tax breaks for the Philadelphia 76ers, Cooper Health System and nuclear services giant Holtec International, which won some of the most lucrative tax awards in state history. The companies were promising to move to downtrodden Camden as part of a renaissance pushed by George Norcross, a Democrat whose insurance brokerage was among the tax break recipients.Sheehan phoned or emailed EDA chief Tim Lizura nearly every day. He arranged dozens of meetings and conference calls with Lizura’s lieutenants and lower-level staffers, who spent hours consulting with the lawyer and working out financial projections and various development scenarios for his clients. Sheehan also communicated with top officials at former Gov. Chris Christie’s Department of the Treasury and the Attorney General’s Office, which advised him on questions raised by Parker McCay clients. At Sheehan’s request, Lizura advised Sheehan on how tax break winners could sell their credits to raise capital, passing along the names of financial contacts.When necessary, Sheehan brought in Philip Norcross for leverage, and he also contacted the office of Christie, a Republican aligned with George Norcross in bolstering the tax incentive program to encourage job creation and retention.Sheehan made a growing list of changes he wanted to make to a brand new law that offered tax breaks to companies willing to invest in new jobs, the emails suggest. “Thanks Kevin,” Christie administration senior counsel Colin Newman wrote to Sheehan in June 2014 after reviewing language the lawyer suggested in a tax credit “cleanup” bill.“A copy of the bill incorporating all the changes we previously discussed would be very helpful,” Newman wrote. The bill passed in October 2014 and included extra bonus credits for specific companies, a lessening of the hiring requirements and changes to what kinds of businesses are eligible for the tax break.The newly released documents comprise 12,000 pages in all and cover 18 months between September 2013 and February 2015.But Kevin Marino, an attorney for Sheehan and Parker McCay, said the volume may leave a misleading impression of the extent of Sheehan’s communications with the agency. The documents include many emails on which Sheehan was merely copied and others that contain long attachments, Marino said.“I am absolutely confident that Parker McCay and Kevin Sheehan have behaved lawfully and ethically with all their interactions with the EDA,” said Marino, who also represents George Norcross.However, the emails illuminate possible irregularities in how the program was administered by the state, a charge that has prompted investigations and at least one criminal referral from a special task force appointed this year by Gov. Phil Murphy, who is also a Democrat. It has not been disclosed who is the subject of the criminal referral.On Tuesday, George Norcross, Parker McCay and other entities affiliated with the Norcross family sued Murphy, arguing the governor “unlawfully empowered the task force with powers he did not possess and authorized the retention and payment of New York lawyers who proceeded to commence and conduct an investigation in violation of multiple provisions of New Jersey law.”The task force has said that EDA regulators at times did not rigorously verify financial information submitted by applicants and accepted claims that other states were trying to convince them to relocate. Verifying such claims is crucial because the law says companies may only receive breaks after documenting competitive offers from other states.One EDA staffer, responding to a question from Sheehan about potential tax breaks, suggested that his client produce documentation comparing alternative locations. “Perhaps he can produce a cost benefit analysis comparing the Philly site [to Camden] but it wouldn’t have to be too in depth,” the staffer wrote. Get Our Top Investigations Subscribe to the Big Story newsletter. Don’t miss out on ProPublica’s next investigation. Sign up and get the Big Story email whenever we break news. The new details about Sheehan’s role in steering state policy go beyond recent allegations made in task force hearings about the generous tax breaks, which Murphy has panned as an “$11 billion black hole.”Spurred by a state audit that found major flaws in the program, Murphy appointed the task force to investigate possible program fraud. In its first months, the task force has heard from company whistleblowers and focused attention on awards made to South Jersey companies affiliated with George Norcross.The party leader and his many allies have responded with a barrage of criticism aimed at the governor and have defended the Camden developments. They argue that the program is more generous to projects in Camden because, as the poorest city in the state, it needs the most help. But state records show Norcross has been a main beneficiary of the tax breaks.WNYC and ProPublica reported this month that more than $1.1 billion of the $1.6 billion committed to tax breaks in Camden so far went to companies owned by or affiliated with George Norcross or tied to Philip Norcross, who is also a lobbyist representing firms that have collected tax awards.“This is the first thing that was needed to happen, to move people to the city of Camden in order to help create jobs and create an influx of activity in the city which would hopefully draw some private capital investment,” George Norcross said.In a December 2013 email inquiring about possible tax credits for a Camden charter school founded by George Norcross, Sheehan reminds Lizura about new regulations that could benefit Cooper Hospital, which is chaired by Norcross. At that time, companies providing retail jobs were not eligible for tax breaks. Cooper Hospital had no immediate comment.“My suggestion would be to add a sentence at the end of the definition to say: a university research hospital shall not be considered final point of sale retail,” Sheehan wrote.The New York Times reported this month that Sheehan helped draft sections of the 2013 Economic Opportunity Act that specifically benefited his clients.Lizura declined to be interviewed for this story. In a statement sent by his lawyer, he said, “During my tenure at the EDA, we routinely worked with companies and their representatives to provide them with feedback regarding the requirements of the program, and to assist them with their applications, consistent with the EDA’s purpose of encouraging job growth and economic development in New Jersey.” The emails show Sheehan successfully pressed state officials for new rules to protect companies that bought tax breaks from the original recipients. The tax break law calls for “clawbacks” — or a return of money — if a project supported by tax credits fails to create promised jobs.Sheehan suggested in a May 2014 email, and elsewhere, that language be added to the state administrative code to protect tax credit purchasers from “recapture” by tax agencies. He said such language would help Norcross law firm clients, such as Holtec International and Eastern Metal Recycling, sell their tax credits. The two companies later received tax breaks totaling almost $400 million. At times, the emails suggest, staffers at the EDA and other state agencies pushed back.In May 2014, for example, EDA development officer Justin Kenyon declined Sheehan’s request to perform a time-consuming “net benefit analysis” for Eastern Metal Recycling as the company considered applying for tax breaks. Eastern Metal Recycling, Sheehan explained, wanted to know how big the tax award might be.In one case, he asked a staffer for a five-day turnaround and was told the review normally took six weeks. Sheehan took his case to Lizura, Kenyon’s boss, and got the approval letter he was seeking two weeks later.Sheehan barraged the state with requests, demands for meetings and special client inquiries. He advocated for the cost of architects, insurance or permit fees to be calculated as a capital expense, which would raise the total tax break significantly in some cases.In some email exchanges, Lizura pushed back and prevailed. But in several instances, the rejection of a request resulted in Sheehan enlisting the help of Philip Norcross to win a meeting.“Can Phil and I meet with you this week to discuss this issue? Preferably Wednesday or Thursday,” Sheehan wrote to Lizura.EDA staffers rushed to meet Sheehan’s deadlines but sometimes found that applications from his clients lacked key information. The EDA acknowledged emailed questions Tuesday but has yet to respond.Reviewing Cooper Hospital’s application for $39.9 million in tax breaks in November 2014, staffers found that it lacked a cost-benefit analysis and certification from the hospital CEO that the tax breaks were essential to keep hospital jobs from leaving the state.Nine days before the application was approved by the EDA board, the staff was still scrambling to get information from the hospital about the cost of a competing site in Philadelphia. “I am touring alternative locations in Pa. on Wednesday and hope to have term sheets by the end of the week,” Andrew Bush, a Cooper Hospital executive, wrote to EDA staffer Teresa Wells in an email copied to Sheehan.Wells wrote back, “Thanks, it is very important that I have some back-up to the lease terms as presented in the Cost Benefit analysis — it’s all verbal at this point?” The application was approved on schedule.A spokesman for Cooper Health says the questions about an out-of-state location were driven by the EDA staff, who must have been confused about the law.“It is inconceivable that the EDA would have thought that Cooper intended all along to move jobs out of state,” said Thomas Rubino, senior vice president of communications and marketing for Cooper Health. “ Under the Growth Zone provisions of the statute, firms moving into Camden did not have to show they were considering out of state sites under the net benefits test.”Sheehan’s largest win at EDA, at least in dollars, was the $260 million tax break awarded in July 2014 to Holtec International, where George Norcross sits as a board member.The emails record a series of breaks for Holtec and its representatives, whose complex demands spurred the EDA to schedule twice-a-month conference calls with the company.Holtec’s top demand, the emails show, was to cover the costs of building a new headquarters and manufacturing compound in Camden entirely with tax breaks. “Our ultimate goal is a 1 to 1 ratio of Tax Credits to Capital Investment,” one executive wrote to the EDA.Holtec set the agency to work calculating possible tax break scenarios based on hypothetical numbers of employees it might bring to Camden. The company also won approval to count employees hired as far back as Jan. 1, 2013, as “new hires” for the purpose of satisfying job creation requirements.Krishna Singh, Holtec’s CEO, was allowed to withhold his certification of new and retained jobs until days before the final vote, a pace that appears to have irked EDA staffers. “Staff will work diligently through this process, but please be mindful that in other tax credit programs it has been customary to submit the certification 90 days prior to the deadline,” EDA staffer Kevin McCullough wrote to Holtec.On June 30, days before the board vote, the EDA was still trying to verify how Holtec came up with price estimates for its Camden project.Sheehan, in a single-sentence email to McCullough, cites figures from the South Jersey Port Corporation, the state agency that owns the waterfront site. The agency’s former chairman is a longtime ally of George Norcross.Ten days later, the EDA board awarded Holtec the second-largest tax break in New Jersey history. In a congratulatory note, Singh refers to a business fable.“Thank you, Kevin. Like the proverbial pig, we are now committed to the ham sandwich !!!!”“Cheers, K.”
Soon You May Not Even Have to Click on a Website Contract to Be Bound by Its Terms
by Ian MacDougall If you’re like most people, you’ve probably clicked “I agree” on many online contracts without ever reading them. Soon you may be deemed to have agreed to a company’s terms without even knowing it. A vote is occurring Tuesday that would make it easier for online businesses to dispense with that click and allow websites that you merely browse — anything from Amazon and AT&T to Yahoo and Zillow — to bind you to contract terms without your agreement or awareness.As public outcry mounts over companies like Facebook collecting and selling user information, the new proposal would prime courts and legislatures to give businesses even more power to extract data from unwitting consumers. If the proposal is approved, merely posting a link to a company’s terms of service on a homepage could be enough for the company to conclude that a user has agreed to its policies. That includes everything from provisions that allow the sale of customer data or grant the right to track visitors to policies that limit consumers’ legal rights by barring them from suing in court or in class actions. Some courts have already given their blessing to this practice. But the proposal up for a vote Tuesday is set to make those kinds of business-friendly rulings all the more common.The proposal has outraged consumer advocates, state attorneys general and other constituencies. They see it as improperly tilting the scales in favor of business interests. They argue that the solution is creating clearer, simpler contracts rather than lengthy, confusing ones that are harder to find. The proposal’s authors counter that they have simply summarized trends in American law. Get Our Top Investigations Subscribe to the Big Story newsletter. Don’t miss out on ProPublica’s next investigation. Sign up and get the Big Story email whenever we break news. There’s been little discussion of the impending change in the general public. That’s because the vote isn’t before Congress, the Supreme Court or a regulatory agency. It’s before a private association virtually unknown outside legal circles: the more than 4,700 judges, legal scholars and practicing attorneys that constitute the American Law Institute. The new proposal was drafted by three law professors affiliated with the organization.Almost a century old, ALI is about as elite an institution as the United States has to offer. It counts among its founders two chief justices of the U.S. Supreme Court — one of whom, William Howard Taft, was also the 27th president — and its membership is a who’s who of the American bar. Speakers at ALI’s annual conclave in Washington this week include Chief Justice John Roberts and former Justice Anthony Kennedy.For decades, ALI has exerted profound influence over American law and life through the publication of what it calls the “Restatements of the Law.” The Restatements are, in essence, guidebooks to the common law. That body of law — created by judicial opinions rather than statutes — plays a central role in governing everything from property rights to contract disputes to who’s liable when accidents happen. But it’s a messy realm; courts in each state are free to create or put their own spin on common-law rules. The point of the Restatements is to clarify the common law and impose order on it.The reputation of the Restatements is such that for decades courts have treated them as something close to an authoritative explanation of what the law is and where it’s heading. “The ALI is the unofficial College of Cardinals of the U.S. legal profession,” said Adam Levitin, a Georgetown University law professor and ALI member who has helped spearhead opposition to the new Restatement. “Even though its members are not representatives of the public, once the ALI approves these Restatements, lawyers, arbitrators, judges and justices use them as a handy reference guide to what the law is and should be.”At the heart of consumer advocates’ objections to the Restatement is a section that substantially weakens in the consumer context a core concept of contract law — that a contract requires a “meeting of the minds,” with each party assenting to its terms. Instead, the Restatement requires businesses only to give customers notice of the contract terms and an opportunity to review them. The Restatement provides examples of how little businesses need to do to bind consumers to their terms and conditions. In one hypothetical, a user simply browsing a website becomes bound by its terms of use because the homepage contains a notice that links to the language and reads, “By continuing past this page, you agree to abide by the Terms of Use for this site.” In another, a user becomes bound by the website’s terms merely by clicking a “Read More” button to access the full text of a webpage. (Companies can continue using “I Agree” buttons if they prefer.)The authors of the Restatement — three professors from Harvard Law School, NYU School of Law and the University of Chicago Law School — contend that courts have reasoned there’s no need for businesses to do more, because nobody reads these contract terms anyway.Consumer advocates and other critics acknowledge that nobody reads online contracts. But they argue the proposed cure is worse than the disease. They say it provides businesses an incentive to bury objectionable terms inside ever-longer and more impenetrable contracts — think Apple’s user agreements — instead of identifying better ways to alert consumers to significant or intrusive contract terms.“Weakening the requirement of mutual assent is not only contrary to fundamental principles of contract law,” New York State Attorney General Letitia James wrote in a May 14 letter to ALI, “but will encourage a veritable race to the bottom, as market forces will drive businesses — which will know they can bind consumers to all but the most odious terms — to draft standard form contracts with egregiously self-serving terms.” The letter was signed by 23 other state attorneys general and top consumer protection officials. All but one are Democrats.Worse still, critics claim, the proposed Restatement departs from the traditional role of Restatements — to synthesize the law as it is — and doesn’t accurately reflect the state of the law. Opponents assert that the Restatement’s authors have relied on faulty empirical methods and cherry-picking from case law to reach their preferred rules. “They’re being a little disingenuous,” Levitin said. “They claim they’re following what courts are doing, and this is out of their hands. Except that it all depends on some rather constrained readings of the cases.” One lawyer who represents financial institutions offers a similar view. “It’s not a good portrayal of the common law of contracts as it applies to consumers,” said Alan Kaplinsky, an ALI member and partner at the law firm Ballard Spahr. (The firm has represented ProPublica in the past.) “This is more of a document expressing the aspirations of the three reporters — what they would like the law to be rather than what the law actually is.”ALI and the Restatement’s authors dispute these claims. They have defended their methodology and say they have followed the traditional approach. The Restatement doesn’t reflect personal opinion, noted one of the three authors. “We are not partisans,” said University of Chicago law professor Omri Ben-Shahar. “We are not anti-consumer or anti-business. ALI entrusted us to identify patterns in the law as developed in the courts. We did our best to identify what are the relevant precedents and rules.” As Ben-Shahar put it, “The grounds for the opposition is that people don’t like the law and hope that either the ALI will try to change the law or not engrave into stone existing law, in the hope that maybe it would change in courts over time, since we’re talking about common law that’s developed by courts.”Proponents of the Restatement argue that it hews to how courts have responded to the rise of e-commerce. “The courts (and everyone else) recognize that most don’t read the contracts,” Steven Weise wrote in an email to ProPublica. Weise is a partner at the law firm Proskauer Rose and a member of the ALI’s governing council. “But that doesn’t mean that the law should give up — the courts have taken classic rules on contract law and applied them in the changing, online environment.”The authors also contend that there’s a benefit for consumers: tools that make it easier to sue in court.But consumer advocates see that as meaningless. Most consumers don’t litigate contract issues because they can’t afford to, they say. Consumer goods usually aren’t worth the legal fees, and contracts often include mandatory arbitration clauses or class-action waivers that further deter litigation. The consumer advocates have found an unexpected ally among some in the business community, who oppose the proposed changes to the rules that apply to consumer lawsuits. Some companies fear that the stronger legal tools will result in a flood of lawsuits and leave businesses unsure of how to conduct themselves to avoid liability.The combination of consumer and business opposition has led to a groundswell of critical op-eds, law review articles, posts on legal blogs and letters. Their goal is to stop the Restatement altogether and leave consumer contracts guidelines as they currently are.The extent of the opposition makes Tuesday’s vote hard to predict, according to ALI members.Proponents are confident. Historically, the broader membership has followed the organization’s governing council, which in this case voted in favor of the Restatement.Opponents seem pessimistic. “My hope is they drop it altogether,” said Kaplinsky, who served on ALI’s board of advisers for the consumer contracts Restatement. “The best the opponents can hope for is that it gets sent back” for revision to the authors and the governing council “and dies a slow death.”
Blistering Report Details Serious Safety Lapses at St. Luke’s in Houston
by Mike Hixenbaugh, Houston Chronicle When government inspectors descended on Baylor St. Luke’s Medical Center in March, they found a once-renowned hospital system beset with problems threatening the health and safety of patients.It was a place where some people were given medications not ordered by their doctors, where objects had been mistakenly left in patients after surgery, and where sewage backed up into a kitchen stocked with moldy vegetables.It was also a place where transvaginal ultrasound probes, the type used to examine a fetus during an early pregnancy, were not always disinfected properly before being used in subsequent patients, and where staff members weren’t always following protocols needed to prevent air from seeping into the blood of patients receiving dialysis, a potentially fatal complication.In area after area, from infection control to quality assurance, from the kitchen to the executive suite, inspectors found that hospital administrators didn’t have adequate processes in place to ensure the staff always followed safety standards and learned from serious mistakes.Those findings were detailed in a 203-page deficiency report from the Texas Department of State Health Services and the Centers for Medicare and Medicaid Services, which was delivered to hospital leaders last month and made public Friday.The report follows months of scrutiny by federal regulators and comes one year after the start of an investigation by the Houston Chronicle and ProPublica that revealed a high rate of deaths and complications following heart transplants at St. Luke’s. Subsequent stories uncovered other concerns related to surgical outcomes, hospital management and nursing care. Get Our Top Investigations Subscribe to the Big Story newsletter. Don’t miss out on ProPublica’s next investigation. Sign up and get the Big Story email whenever we break news. The Medicare agency cut off funding for heart transplants at St. Luke’s in August, prompting officials at the hospital and its affiliated Baylor College of Medicine to bring in new cardiac surgeons to lead the program and begin an ongoing effort to regain federal certification.But the government scrutiny of St. Luke’s broadened a few months later, when a patient died in the emergency room after staff used the wrong blood type during a transfusion. The error was so severe that it led the St. Luke’s board of directors to replace three top executives in January, including the hospital’s CEO. The officials did not respond to requests for comment at the time.The fatal mistake followed a pattern of blood labeling errors at St. Luke’s, according to a report from the Medicare agency made public in February. The review prompted the government to order a top-to-bottom inspection of the hospital.That inspection spanned more than two weeks in late March and early April, after new hospital leaders had already begun implementing reforms, and covered every aspect of care at the 850-bed facility. The hospital, long regarded as one of the best in the nation for heart surgery, is owned by Catholic Health Initiatives, a behemoth national nonprofit hospital chain, and co-managed by Baylor.In a letter posted on the hospital’s website Friday, hospital CEO Doug Lawson pledged to make additional changes needed to regain the trust of patients. “The conditions described in the CMS report did not occur overnight, nor were they the result of any single factor,” Lawson wrote. “We take the issues CMS identified seriously and we owe it our patients and their families to correct them immediately — and we have already started to do so through our internal quality program.”Some of the deficiencies — those related to infection control, patient safety and food services — were so serious that federal regulators concluded they “placed all patients at risk for the likelihood of harm, serious injury, and possibly subsequent death” and ordered the hospital to make immediate fixes while the inspection was still ongoing.The hospital complied, avoiding the immediate loss of Medicare funding. This week, having been presented with the complete deficiency report, the hospital submitted a detailed plan of correction that Lawson said should bring St. Luke’s into compliance with federal standards.When the Chronicle and ProPublica first detailed problems with the heart transplant program last year, St. Luke’s executives said any issues had been corrected and stressed that they did not affect the hospital as a whole. Executives also took out full-page newspaper advertisements touting the hospital’s quality. Lawson’s more recent comments acknowledged the depth of the hospital’s troubles and promised to address them.“This is a challenging time for our hospital,” Lawson wrote Friday. “While we cannot change the past, we can continue to do everything possible to provide the highest quality, safest possible care and to do so with compassion. I remain confident that Baylor St. Luke’s will emerge stronger than ever.”Reporters requested an interview with Lawson or other hospital leaders following the release of the report, but David Gonzalez, of Pierpont Communications, a Houston public relations firm, said they were not available.Serious ProblemsThe government report details a litany of problems at St. Luke’s and some of its outpatient treatment facilities.In one instance, regulators noted that a cart of medical equipment had been removed from the room of a patient with a rare flesh-eating bacteria infection, with no evidence that the cart had been disinfected and no documentation of where the cart had been taken. Infections can spread if caregivers touch a cart that carries bacteria and then come in contact with another patient.Later, an inspector observed a nurse touching a contaminated dialysis machine without gloves. When confronted, the nurse replied, “I thought because we clean it really good we do not wear gloves.”In 2018, St. Luke’s recorded worse-than-average infection rates in several areas, according to the report. When an inspector asked an administrator why the hospital wasn’t tracking staff compliance with several prevention protocols, the director said it “was because of lack of resources” in infection control. Hospital administrators didn’t have adequate follow-up processes in place to ensure staff continued to learn from serious mistakes, regulators wrote, as was the case in 2018 after surgical objects — a sponge, a surgical towel and a cervical instrument — were mistakenly left inside three different patients during a three-month span.Medical experts consider accidentally leaving an instrument or sponge inside a patient during surgery a “never event,” meaning the error is so egregious that it should never happen.Regulators found that some nurses weren’t following hospital policy for the safe administration of medications, including one who gave an additional dose of anti-psychotropic drugs to calm a patient who’d been yelling — without first consulting a doctor.In some instances observed by inspectors, nursing staff failed to take steps necessary to protect frail patients from the risk of falls. In others, staff failed to ensure patients fully understood the risks before asking them to consent to a procedure.Even the facility — a 65-year-old building at the heart of the Texas Medical Center — posed a potential danger to patients, according to the inspectors, with sewage backed up in the kitchen, malfunctioning dishwashers, moldy ceiling tiles, water leaks creating slip hazards and paint chipping from walls in operating rooms.At a 2016 groundbreaking, Baylor St. Luke’s leaders said a new hospital tower to replace its aging facility would be completed by 2019, but construction contracts were later canceled. This year, hospital leaders announced the new facility is now “scheduled for completion in the fall of 2024.”Regaining TrustIn response to the findings, the hospital submitted a 129-page plan of correction, including fixes to the hospital’s kitchen equipment, and several policy, staffing and training changes aimed at correcting each of the deficiencies.Specifically, the hospital reported that it conducted training to ensure the safe use of dialysis machines, changed the process to ensure doctors track the administration of psychotropic drugs and increased oversight of all hospital departments, including dietary services, infection control and surgery. “Many significant improvements already have been completed across the hospital,” Lawson wrote, adding, “we are confident remaining findings will be implemented in the coming weeks.”Vivian Ho, a health care economist at Rice University, said the hospital’s new leadership team now must work to regain the trust of the community.“I’m concerned that this news could cause them to lose patients, and reduced patient volume means lower revenues and affects their ability to provide quality care,” Ho said. “It becomes a vicious cycle.”Ho, who’s also a professor at Baylor College of Medicine, which helps manage St. Luke’s, said she hopes hospital administrators succeed in turning things around.“Robust local competition leads to better care for patients,” Ho said. “We can’t afford to lose this hospital in Houston.”
New York City’s Early Voting Plan Will Favor White, Affluent Voters, Advocacy Groups Say
by Jessica Huseman An analysis from three advocacy groups has found that New York City’s plan for early voting for the 2020 national elections is grossly inadequate and, as designed, will favor white, affluent voters.The New York Civil Liberties Union, Common Cause New York and the Lawyers’ Committee for Civil Rights Under Law this week sent a letter to the New York City Board of Elections decrying plans to staff 38 early voting locations in a city with some 5 million registered voters. The letter also claimed that the placement of the locations — seven in both Staten Island and Queens — “will impose a severe burden on many of the City’s low-income voters, particularly those who work long or inflexible hours and face transportation challenges, who are disproportionately minority residents.”The analysis comes after the office of Mayor Bill de Blasio offered its own damning assessment of the plan and demanded the Board of Elections release a new list before the end of the month. De Blasio has offered $75 million to help pay for as many as 100 early voting sites. Get Our Top Investigations Subscribe to the Big Story newsletter. Don’t miss out on ProPublica’s next investigation. Sign up and get the Big Story email whenever we break news. “We put up the money. Now. Do. Your. Job,” he tweeted on April 30.The Board of Elections has remained silent in the face of the criticism. It pledged to put the current list online on May 1, but it still has not. Instead, Executive Director Michael Ryan read the locations out loud at a meeting, leaving journalists to transcribe the list. The Board of Elections has not, so far, announced its justification for the number or locations of the voting sites or explained any research it may have done.When asked for comment on Thursday, Valerie Vazquez, a board spokeswoman, emailed, “No comment.”Perry Grossman, senior staff attorney for the New York Civil Liberties Union’s Voting Rights Project, said that the city appeared to have given “little, or maybe no thought at all, to making sure that the sites were distributed in a way that is racially equitable.”The announcement of the locations followed the passage of a state law in January, making New York the 39th state to implement early voting. The law, which allows nine additional days for voting, will go into effect this fall.The law requires that there should be one early voting location for every 50,000 voters, but that no county is “required” to have more than seven locations. With the exception of Kings County — which is the most populous in the state, is home to Brooklyn and has 10 polling locations under the plan — all other counties in New York City have seven locations.The law also indicates that “any voter may vote at any polling place for early voting” established by the city, unless it’s “impractical” for the city to implement such a model. In which case, all voters must have access to one polling location “on a substantially equal basis.”Printing the correct ballot for voters from a variety of precincts in the same place can be a logistical challenge. New York City has 51 City Council districts, and ballots must be available in multiple languages. During primaries, voters would require their correct ballot in the correct language in the party of their choice.The city has, it appears, determined that challenge is too great and will assign all voters a single early voting precinct. It has not provided any explanation for this decision, nor has it provided a rationale for how voters were assigned to their given location.Other areas of the state created plans that followed the law far more closely. Neighboring Nassau County, on Long Island, serves 1 million voters and has announced it will open 15 early voting locations. Voters there will be able to cast their ballots at any of the locations.“Nassau figured this out, why can’t we do the same?” Grossman said.Using census data, Jason Enos, a social scientist with the Lawyers’ Committee for Civil Rights Under Law, found that voters in predominantly white Richmond County, home to Staten Island, will have substantially greater access to polling locations than any other county in the five boroughs. While Queens, a majority-minority county, has four times as many registered voters as Richmond County, they’ll have the same number of polling locations. And Queens voters might have to walk more than half an hour to reach their polling place.In an interview, Enos said that the people most likely to be affected by long walks are people of color, those in low-income neighborhoods or newly naturalized citizens. Some areas, he said, are “served pretty well” — like midtown Manhattan, the Upper West Side and Staten Island. But other places, like the neighborhoods around LaGuardia Airport in Queens or the far-flung areas of Brooklyn, would require quite a substantial commute.“We found that rather troubling,” he said.The letter hints that all of this might result in litigation. Derek T. Muller, an associate professor of law at Pepperdine University who specializes in election law, said that whatever the merits of the board’s choices for locations, the lack of transparency concerned him.“Unless the board comes forward with explanations or solutions, I think litigation is a real possibility,” he said.Elliott Fullmer, an assistant professor of political science at Randolph-Macon College, has studied the impact of early voting for several election cycles. His research has shown that, when controlling for other factors that tend to affect turnout, early voting has a positive impact on turnout, as does the availability of early voting locations.Across the United States, Fullmer said, early voting availability is “significantly lower in heavily African American communities.” He has found that if you compare two counties of around 100,000 people, if one of those counties had 20% more African American voters it likely had five fewer early voting sites.For his part, Muller is not as convinced of early voting’s impact on turnout, but he said that inequitable voting locations can have a huge impact on lines on Election Day. Given the current arrangement, Election Day on Staten Island would likely involve far shorter lines and less confusion while Queens and Brooklyn would have far longer wait times and a greater potential for administrative mishaps and disputes.“If you fail to build out the infrastructure well enough there can be really frustrating and devastating impacts,” he said.
Five ProPublica Projects Named Finalists for Loeb Awards
by ProPublica The UCLA Anderson School of Management has named five ProPublica projects as finalists for this year’s Gerald Loeb Awards, one of the most prestigious prizes in business and financial journalism.The finalists include Trump, Inc., ProPublica and WNYC’s joint podcast exploring the mysteries of the president’s businesses — what deals are happening and who might be profiting from his administration — in the audio category.An investigation into age discrimination, by Peter Gosselin, Ariana Tobin and Ranjani Chakraborty, of Vox, is a finalist in beat reporting. The series showed how IBM, in its scramble to compete with new rivals, has cut swaths of its most senior employees — flouting rules against age bias.Marshall Allen’s ongoing series, Health Insurance Hustle, is a finalist in the explanatory category. Co-published with NPR Shots, Allen’s reporting exposed the confounding ways insurers game their profits: using hidden schemes, side deals and fees that drive up costs.Sloan Kettering Cancer Center’s Crisis, a collaboration between ProPublica’s Charles Ornstein and The New York Times’ Katie Thomas, is a finalist in local reporting. Their investigation uncovered multiple conflicts of interest between the renowned New York hospital’s staff and health care companies, ultimately leading to the resignation of the hospital’s chief medical officer.ProPublica’s first full-length feature film, Unprotected, is a finalist in the video category. The documentary, in partnership with Time, examined how the acclaimed American charity More Than Me rose to fame for saving vulnerable girls in Liberia from sexual exploitation. But from the beginning, girls were being raped by one of the nonprofit’s key leaders, provoking international discussion about the lack of accountability for charities working abroad.Winners will be announced at a ceremony in June. See the full list of finalists here.
ProPublica Builds Washington News Staff With Three Journalists
by ProPublica ProPublica announced Friday three additions to its expanding reporting team on the federal government. J. David McSwane and Yeganeh Torbati are joining ProPublica’s Washington office as reporters, and Moiz Syed will work from New York as a news applications developer. Other hires for the D.C. office will be coming.“We could not be more thrilled with this lineup of journalists,” Marilyn Thompson, senior editor for Washington coverage, said. “With their track records of aggressively digging into the work of government and landing revelatory stories, we’re off to a great start as we expand our reporting on crucial policy decisions and their impact on people’s lives.”J. David McSwane has been an investigative reporter at the Dallas Morning News since 2015, where he led investigations from the Texas Capitol. His reporting on the state’s outsourced Medicaid system, which benefited companies that systematically deny care to sick children and disabled adults, spurred multiple legislative reforms. Another investigation, exposing that state caseworkers were not checking on tens of thousands of abused children, prompted lawmakers to invest millions to hire and retain more caseworkers to examine reports of abuse and neglect. McSwane previously covered state government for the Austin American-Statesman and served as a reporter and deputy projects editor at the Sarasota Herald-Tribune. In addition to winning this year’s Goldsmith Investigative Reporting Prize, he has been honored with the Worth Bingham Prize for Investigative Reporting, a Scripps Howard Award and a Peabody Award.Yeganeh Torbati comes to ProPublica from Reuters, which she first joined in 2011, most recently covering immigration. Torbati was the first to reveal in 2018 the Trump administration’s detailed plans to penalize foreigners who use public benefits by making it harder for them to get green cards, and her narrative feature about a library on the U.S.-Canada border that played host to reunions of families separated by the travel ban was adapted for a segment on “This American Life.” In her previous role as a national security reporter for Reuters, she and colleagues exclusively obtained State Department cables in March 2017 detailing the Trump administration’s implementation of “extreme vetting,” and as an Iran reporter she co-led the news organization’s coverage during the country’s domestic political crisis, nuclear negotiations and international sanctions. Among other honors, Torbati’s work has won a National Press Club Award, a Gerald Loeb Award and the Society of American Business Editors and Writers’ Best in Business Award.Moiz Syed is a data journalist, designer and developer who, before joining ProPublica, worked at The Intercept. His interactive map in a co-reported story on how toxic firefighting foam is contaminating U.S. drinking water was later used by the Environmental Protection Agency. As part of a team that obtained reports from the Department of Homeland Security, including 1,224 sexual assault complaints from people under U.S. Immigration and Customs Enforcement detention, he helped reveal a staggering pattern of abuse against women held at immigration detention centers, and his work tracking international terrorism prosecutions since the 9/11 attacks revealed that most of those prosecuted never committed a violent act. He also previously worked at the Wikimedia Foundation, leading projects to improve Wikipedia’s search and mobile user experience.
Three Ways Chicago’s City Council Keeps Its Committees Out of the Public Eye
by Logan Jaffe This week, we went deep into the inner workings of Chicago’s City Council and how its 16 legislative committees often fail to provide basic oversight of city government. Stories like this one by my colleague Mick Dumke provide a vital look at how an entrenched political system, based on favor-trading and loyalty, has not only cost taxpayers money but has allowed Chicago’s mayors to rule like monarchs.I encourage you to read the story to best understand the system as a whole (I often joke with Mick that his stories are the most difficult to summarize because they’re so “big-picture”). Below, I’ve excerpted some of Mick’s reporting that highlights how the committee system is kept out of the public eye and how some aldermen have thwarted efforts to increase transparency.1. “Chicago aldermen have also made it almost impossible for the public to see what they’re up to. Committee meeting schedules are posted online and meetings are open to the public, but they’re not broadcast, recorded or transcribed — unless a chair makes arrangements.”The Traffic Committee meeting on March 6 was late to start. Four of its 16 members showed up. The committee chair called in to say he couldn’t make it. The agenda was 12 pages. Within three and a half minutes, everything was approved and the meeting was over.“This is extremely common,” tweeted A.D. Quig, reporter at The Daily Line, which covers the day-to-day business at City Hall. The Daily Line and City Bureau’s Documenters also frequently live-tweet public meetings. Dive Deeper Into Our Reporting Our newsletter is written by a ProPublica Illinois reporter every week Discover what makes Illinois tick from our team of investigative journalists covering the state. Delivered every Friday. 2. “The council has passed laws to make sure committee operations are kept from any oversight. … Aldermen then passed a substitute ordinance that explicitly blocked the inspector general from looking into many council functions, including committee spending.”Through the Freedom of Information Act, Mick found that Anthony Beale, alderman of the far South Side 9th Ward and chair of the Transportation Committee, spent committee money on his own transportation, including payments on a Chevy Tahoe SUV, thousands of dollars in parking expenses as well as office furniture — including a “bourbon cherry” wardrobe cabinet. In recent weeks, Beale has tried to line up support to have himself or an ally picked as the next chair of the powerful Finance Committee. The alderman didn’t respond to requests for comment about committee spending.3. “The public has no ready way to see how many people are hired by the committees or what they do.”Committee chairs have acknowledged using their committee budgets to hire employees who do whatever the chairs want, including work on issues specific to their wards. So aldermen who chair big-budget committees — and the constituents who live in their wards — may unfairly benefit from the extra help and gain an advantage at election time.What’s next?Aldermen have prohibited the city’s inspector general from keeping tabs on the council or its committees. Proposals to improve transparency, such as by livestreaming committee meetings, have died without being brought for a vote.Mayor-elect Lori Lightfoot, who takes office Monday, has said she plans to “blow up all the old concepts” as she remakes the City Council. That includes weighing in on new committee chairs and pushing for oversight from the inspector general.As I said, read our story this week in full. Especially with a new mayor taking over, the more people with their eyes on local government, the better.We’ll be watching and hope you will be as well.
2019 Reader Survey Results: A Loyal Audience Craving Government Coverage
by Jill Shepherd The results are in for this year’s ProPublica reader survey. Many thanks to the over 3,500 people who responded to this unscientific poll.How you primarily get your national news has continued its yearslong trend toward the web, and it now stands at 80%, compared with 77% last year. The latest shift seems to have come at the expense of television, with only 7% of you using that medium as your primary source for national news, a 4% drop from last year, perhaps a reflection of this not being an election year. For local news, television is more popular, with 20% of you primarily tuning in to a local network affiliate to stay informed.This year, we wondered how long our readers have been with us. Thirteen percent of you are new to ProPublica’s work. Forty-two percent have been reading our work for one to two years, 32% for three to five years and 13% for over five years. We also asked how often you read ProPublica’s stories. Thirty-four percent of survey respondents reported being readers pretty much every day. Forty-eight percent read us once a week or so, 14% of you read our work once a month and 4% read us less often than that.As for what topics you’re most interested in seeing us investigate, the federal government got the highest number of votes: 68%. Close behind that were health care, the environment and inequality, all earning around 60% levels of high interest. Among all aspects of ProPublica’s work, 80% of you felt that “exposing wrongdoing” was the most valuable journalism we provide.Your own political leaning has remained almost exactly the same as last year. Seven percent of you reported being conservative, 6% moderately so. Eighty-eight percent of you reported being liberal, 47% moderately so. (Gallup’s latest report is that 35% of Americans describe themselves as conservatives and 25% as liberals.) How you view our reporting, however, has changed a bit. Last year, 40% of you thought that our work was non-ideological; this year, that jumped up to 51%. We’re glad so many of you think so, as we intend our work to be non-ideological.The overall demographics of our readers are very similar to what you reported last year. For gender, the split of our readers remains very close to even, with 49% female and 51% male. Last year, it was flipped at 51% female and 49% male. You continue to be a highly educated group, with fully 86% of you having a college degree, 49% holding a postgraduate degree. Income, too, is similar to last year, with 34% of you earning $50,000 to $100,000 and 43% earning over $100,000. Sixty-four percent of survey respondents report being older than 55, 24% are 35 to 54 years old and 12% are younger than 35. This year, 84% report being non-Hispanic white (it was 82% last year), 2% black or African American, 4% Latinx or Hispanic, 2% East Asian or Asian American and 1% or less Native American, Pacific Islander, Middle Eastern or Arab American. Seven percent of respondents preferred not to answer regarding their race.We’re grateful for everyone who took the time to fill out this year’s survey. While unscientific, these results are useful to us as we try to understand who you are, who we are not yet reaching, what you value about ProPublica and how we can better serve you.
New Jersey’s $300 Million Nuclear Power Bailout Is Facing a Court Challenge. Does It Have a Chance?
by Talia Buford When the New Jersey Board of Public Utilities approved $300 million in subsidies last month for nuclear plants operated by the energy company PSEG, it wasn’t a surprise. The company had pumped millions into lobbying, and it threatened to close the facilities, which are seen as a vital piece of the state’s clean energy agenda.But some of the board members who voted for subsidies had openly questioned the need for them, echoing concerns expressed by the board’s staff and objections raised by utility watchdogs.Now, the unusual circumstances around the vote are the basis of a legal challenge by the state-appointed utility advocate, who says the subsidies — and the surcharge financing them — should be cut off.In an appeal filed on Wednesday in state court, Stefanie Brand, the state’s rate counsel, said that by ignoring its own staff experts and providing little basis for the amount of the surcharge, the board had violated the law.“It’s very unusual and inconsistent with the statute,” Brand said.But will that argument persuade a court? Get Our Top Investigations Subscribe to the Big Story newsletter. Don’t miss out on ProPublica’s next investigation. Sign up and get the Big Story email whenever we break news. “It’s hard, in general, to beat regulators at their own game,” said Ari Peskoe, a lawyer and director of the Electricity Law Initiative at the Harvard Law School.Any party to a matter before the Board of Public Utilities can appeal a decision. And the Division of Rate Counsel, which by law represents the public in these matters, periodically does.But it loses more than it wins. Of the 11 cases appealed by Brand’s office since she took over in 2007, three were sent back to the board, according to a ProPublica review of the opinions in the appeals. Seven cases were affirmed in whole or in part, and one case was dismissed, according to the opinions, which are published on a site maintained by Rutgers Law School.That record suggests that it is difficult to convince the courts that the BPU has acted improperly.“We don’t win them all, but we’ve won some significant ones,” Brand said. “We win some, we lose some.”Among the wins was a 2011 decision that found the BPU failed to provide adequate notice for public comment before making a decision that could have put ratepayers on the hook for a $50 million increase in energy costs. Another decision in 2017 found that a change to how utilities calculate tax savings should have been done through the formal rule-making process rather than decided by the board’s discretion. Read More Nuclear Lobbying Power: N.J. Utility Customers Will Pay $300M in Subsidies Regulators voted Thursday to approve subsidies, even though PSEG plants are “financially viable.” In a Time of Cheap Fossil Fuels, Nuclear Power Companies Are Seeking — and Getting — Big Subsidies Illinois and New York have approved hundreds of millions of dollars in clean-energy incentives for nuclear power companies. New Jersey, Pennsylvania and Maryland could be next. Those sorts of wins are typical, experts and former regulators said, as they hinge on procedural missteps or issues that could have ramifications in the future.The initial filing over the nuclear subsidy only offers broad strokes of Brand’s argument, so until her office files briefs in case, it will be difficult to gauge the appeal’s chances of success.“The significant thing about this filing is the rate counsel was given this on a silver platter on why these subsidies are unwarranted,” said Doug O’Malley, director of Environment New Jersey. “It’s not a surprise that she’d be filing an appeal. I think the surprise is the ratepayer has such a strong case.”The appeal focuses on four issues: the staff findings that PSEG didn’t meet the criteria for the subsidy; the board’s dismissal of those findings; the lack of reasoning for setting the subsidy rate at $0.004 per kilowatt hour, which was calculated to provide a total subsidy of $300 milion; and whether the amount of the subsidy represented clean-energy benefits as legislators claimed. PSEG’s Hope Creek and Salem plants in Salem County make up the second-largest nuclear facility in the United States, and they serve as an economic anchor for the area, which is represented by New Jersey’s most powerful legislator, Senate President Stephen Sweeney. New Jersey passed its nuclear subsidy last year after intense lobbying by PSEG, which spent nearly $4 million in 2017 and 2018 on the effort.Similar measures that offer incentives for nuclear plants to stay open after the companies have threatened to close them survived challenges in federal court. This month, Pennsylvania legislators said they didn’t have the support to bring the proposed subsidy bill to a vote, prompting Exelon to announce plans to close Three Mile Island nuclear plant in September.Since the debate over the New Jersey measure began in 2017, Brand has questioned how legislators came up with the amount of the subsidy. In the lead-up to the BPU’s vote last month, Sen. Bob Smith, D-Middlesex, a sponsor of the bill, told The Star-Ledger that PSEG CEO Ralph Izzo convinced him $300 million was the right amount for the subsidy.“The normal process doesn’t always work,” Smith told the paper. “There are some issues with the BPU.”At the board meeting last month, BPU staff and an independent consultant reported that PSEG was including some ineligible costs and inflating others in an attempt to satisfy the statute’s requirements, but they said that the facilities were not actually in danger of closing.Peter Peretzman, a spokesman for the board, declined to answer any questions about Wednesday’s filing, saying that the board does not comment on pending litigation.PSEG spokesman Michael Jennings said the company showed its plants “fully met the criteria” for the subsidies, which were subject to “extensive public discussions.”“We believe the BPU’s decision was proper,” he said.At least in the near term, the legal proceedings will change nothing for New Jersey customers.The surcharge went into effect last month, adding an estimated $35 to $45 annually for the typical residential customer and, on average, $570,000 for large commercial customers, according to Brand. All New Jersey electricity customers pay the surcharge, no matter what company provides their power.The subsidies are paid each summer, Brand said. So PSEG will receive a prorated payment this year, but the next payment wouldn’t come until 2020. Brand said she hopes that the panel of judges hearing the appeal will rule before then.While the run-up to the BPU vote was marked by full-page newspaper ads and stories in local media, the only indication that customers were subsidizing PSEG’s nuclear plants was, for some, a note on the top corner of their latest bills.
Lawless
by Kyle Hopkins, Anchorage Daily News Kiana, Alaska — Village Police Officer Annie Reed heard her VHF radio crackle to life in the spring of 2018 with the familiar voice of an elder. I need help at my house, the woman said.Reed, who doesn’t wear a uniform because everyone in this Arctic Circle village of 421 can spot her ambling gait and bell of salt-and-pepper hair at a distance, steered her four-wheeler across town. There had been a home invasion, she learned. One of the local sex offenders, who outnumber Reed 7-to–1, had pried open a window and crawled inside, she said. The man then tore the clothes from the elder’s daughter, who had been sleeping, gripped her throat and raped her, according to the charges filed against him in state court.Reed, a 49-year-old grandmother, was the only cop in the village. She carried no gun and, after five years on the job, had received a total of three weeks of law enforcement training. She had no backup. Even when the fitful weather allows, the Alaska State Troopers, the statewide police force that travels to villages to make felony arrests, are a half-hour flight away.It’s moments like these when Reed thinks about quitting. If she does, Kiana could become the latest Alaska village asked to survive with no local police protection of any kind.ProPublica is a nonprofit newsroom based in New York. Sign up for ProPublica’s Big Story newsletter to receive stories like this one in your inbox as soon as they are published.An investigation by the Anchorage Daily News and ProPublica has found one in three communities in Alaska has no local law enforcement. No state troopers to stop an active shooter, no village police officers to break up family fights, not even untrained city or tribal cops to patrol the streets. Almost all of the communities are primarily Alaska Native.Seventy of these unprotected villages are large enough to have both a school and a post office. Many are in regions with some of the highest rates of poverty, sexual assault and suicide in the United States. Most can be reached only by plane, boat, all-terrain vehicle or snowmobile. That means, unlike most anywhere else in the United States, emergency help is hours or even days away.When a village police officer helps in a sex crime investigation by documenting evidence, securing the crime scene and conducting interviews, the case is more likely to be prosecuted, the University of Alaska Anchorage Justice Center concluded in 2018. Yet communities with no first responders of any kind can be found along the salmon-filled rivers of Western Alaska, the pancake tundra of the northwest Arctic and the icy rainforests in the southeast panhandle.The state recognizes that most villages can’t afford their own police force and has a special class of law enforcement, called village public safety officers, to help. But it’s not working. In the 60 years since Alaska became a state, some Alaska Native leaders say, a string of governors and Legislatures have failed to protect indigenous communities by creating an unconstitutional, two-tiered criminal justice system that leaves villagers unprotected compared with their mostly white counterparts in the cities and suburbs.ProPublica and the Daily News asked more than 560 traditional councils, tribal corporations and city governments representing 233 communities if they employ peace officers of any sort. It is the most comprehensive investigation of its kind in Alaska.Here is what we learned:
Have You Experienced Sexual Violence in Alaska? We’d Like To Hear Your Story.
by Adriana Gallardo, ProPublica, and Kyle Hopkins, Anchorage Daily News By the numbers, sex crimes in the Alaska occur at nearly three times the U.S. average. One in three communities in Alaska have no local law enforcement. That’s a tough combination. Alaskan communities that lack police and cannot be reached by road have nearly four times as many sex offenders, per capita, than the national average. In some Alaska Native communities, sex crime rates are double the statewide average.At the crossroads of these statistics are generations of victims and survivors. Last year, more than 200 people confidentially shared their experiences with the Anchorage Daily News. Many described a system that discredited victims if they had been drinking before a sexual assault or in which detectives said a case couldn’t move forward unless the victim called her alleged rapist to obtain a confession. Get Our Top Investigations Subscribe to the Big Story newsletter. Don’t miss out on ProPublica’s next investigation. Sign up and get the Big Story email whenever we break news. Those who responded said they wanted to inspire others and create permanent change. We’re taking this seriously. The Anchorage Daily News and ProPublica have teamed up to listen. If you, too, have experienced sexual violence, we hope you’ll share your story with us. If you work with victims, in government or law enforcement, we need to hear from you, too.You might be asking yourself: Why us? Why now? And to that, we’d say: We’re always happy to talk about who we are and why we’re doing these stories. Please reach out with questions. This is our mission statement. We believe great journalism and great impact is guided by those at the center of it. We don’t pretend to know how to prevent future harm. We think journalism can spur long-lasting change in policy and, we hope, the healing of communities.On that note: We understand that your privacy is important. We won’t voluntarily publish any personal information you share without your explicit permission. If you’d rather talk on Signal or WhatsApp, which are more secure, send a message to 347-244-2134 or email alaska@propublica.org.
Why We’re Investigating Sexual Violence in Alaska
by Kyle Hopkins, Anchorage Daily News Life in Kotzebue came to a standstill last fall when a 10-year-old girl vanished from a playground in the center of this northwest arctic town. After searchers found her body hidden in the tundra, police charged a local man with kidnapping, sexual abuse and murder.As one of the reporters covering the case, I tried to learn as much as possible about the 42-year-old suspect. He was a lifelong Alaskan and was not a registered sex offender. Yet two family members soon told me he had raped them decades earlier when they were girls, beginning a pattern of abuse. (He has pleaded not guilty to charges stemming from the Kotzebue homicide and has not responded to his relatives’ claims.) Get Our Top Investigations Subscribe to the Big Story newsletter. Don’t miss out on ProPublica’s next investigation. Sign up and get the Big Story email whenever we break news. Around the same time, a police dispatcher in Nome said her colleagues ignored her when she attempted to report that she had been raped on camera, prompting demotions and upheaval within that seaside police department. Inspired by the dispatcher’s willingness to share her tale, a young woman from the nearby village of St. Michael said she too had been raped in Nome and that no one faced charges. As one article led to the next, more and more survivors of sexual assault in Alaska agreed to tell their stories.Here is what hit me the hardest about the interviews: Each person had more than one story to tell. I might ask someone about a specific sexual assault that occurred in the past few years, only to learn she also had been victimized as a child, and again as a teen and as an adult. Sometimes the crimes were reported to police, sometimes not. Sometimes the victims were adults, sometimes children. Mostly women, but sometimes men.I can’t recall one instance, from those interviews in the fall, in which a survivor said someone was ever held accountable.At the Anchorage Daily News, whenever we’d talked about the most pressing issues the newsroom ought to cover, sexual violence and the sexual abuse of children loomed in the background. Alaska’s sexual assault rate is three times the national average.Sometimes the issue felt too big for a news organization with limited resources. We worried about missing the big picture. About promoting stereotypes or failing to present the context of historical trauma that must be considered when talking about modern problems in Alaska.Often, we found people in villages and cities alike were simply unable or unwilling to talk about this subject with the same openness that they might discuss alcohol abuse or even suicide. Until recently.Something has changed in the way Alaskans talk about sexual assault.We asked survivors to help us learn more about breakdowns in the Alaska criminal justice system. More than 200 people from across Alaska confidentially shared their experiences, many describing a system that assumes the survivor had been drinking before a sexual assault, or prosecutors who were uninterested in cases in which the victim was inebriated, or detectives who said the case couldn’t move forward unless the victim called her rapist to obtain a recorded confession. Survivors, attacked in remote villages, said they were told not to shower, to climb on a plane and fly hundreds of miles to be interviewed and undergo a physical examination because rural clinics are not equipped to conduct a rape investigation.About three-fourths of the people who responded said they would be willing to talk to a reporter on the record about their experiences with sexual violence in Alaska. They wanted to inspire others, to provoke permanent change.At that point, our small newsroom asked for help. We were selected to join ProPublica’s Local Reporting Network, and collectively we reached out to every city, town and village, every tribal council and corporation and every police department in Alaska. We obtained thousands of records from the court system. We asked police chiefs for information on every sex crime reported in their jurisdictions over multiple years. Today, we report how one in three Alaska communities have no local police protection of any kind.This is more than a professional pursuit. It is personal for me.I was born and (mostly) raised in Alaska. I spent afternoons on cold beaches, overturning rocks in search of eels. Later, as a high schooler staring out the window of a float plane or sleeping on ferry boats en route to basketball tournaments, I remember thinking I was lucky to see and do these things.The roots of this series date back to when I started working as a reporter here in the mid-2000s. At the time, Alaska Native villages were fighting for equal police protection from the state, arguing that if Alaska would not recognize the crimefighting powers of tribal courts, then villages should be safeguarded by publicly funded, armed and certified law enforcement — the same as in mostly white cities.The villages lost the lawsuit, not because the Alaska Supreme Court decided we do not have a two-tiered justice system, but because that inequity was not purposefully racist.To tell this story right, we need your help. If you are an Alaskan with a story to share about sexual assault or our legal system, please consider taking part in our confidential survey. If you have a tip or want to talk privately with a reporter, email me at khopkins@adn.com or call me directly at 907-257-4421.As Alaskans, we live in a magical place. Bountiful and beautiful and filled with resilient people. I’m grateful to have grown up here and to raise my daughters here. But for many, it is not safe. Let’s try and understand why, and how to change it.
How We Tallied Alaska Villages Without Local Law Enforcement
by Kyle Hopkins, Anchorage Daily News, and Alex Mierjeski, ProPublica The Alaska agency that certifies police officers does not track how many cops work in remote villages or the identities of many of those law enforcement officers. We set out to find which communities have no police protection as well as to identify officers with criminal records who, under state law, are not qualified to wear a badge.To do this, we used several databases to create a master list of Alaska communities and local organizations that might employ police officers. We reached out to every employer, in some cases up to a dozen times, in a multitude of ways.The Data We UsedThe Alaska Division of Community and Regional Affairs lists some 434 communities across Alaska. But some are ghost towns, abandoned logging camps or simply neighborhoods that do not exist as separate communities with their own local governments. In order to narrow our list to cities, towns and villages large enough to have some expectation of local law enforcement protection, we considered only locations that already had basic state and federal services. Get Our Top Investigations Subscribe to the Big Story newsletter. Don’t miss out on ProPublica’s next investigation. Sign up and get the Big Story email whenever we break news. Namely, in order to be considered a candidate for police protection for the purposes of this research, a community had to have all three of the following:
Why the “Most Egregious” Ethics Case in Louisiana Remains Open Nine Years Later
by Andrea Gallo, The Advocate It’s been nine years since the Louisiana Ethics Board first took up what its former chairman called “the most egregious case” to ever come before him.In 2010, the board accused former state Sen. Robert Marionneaux Jr. of failing to disclose to the board that he was being paid to represent a company in a lawsuit against Louisiana State University. The lack of transparency was only part of the problem. Marionneaux offered to get the Legislature to steer public money toward a settlement, according to charges the Ethics Board later filed against him. The money would also help pay off his contingency fee, which an LSU lawyer pegged at more than $1 million.Marionneaux, a Democrat from Maringouin, outside Baton Rouge, has denied wrongdoing and has filed multiple lawsuits saying the board lacked the authority to target him. Get Our Top Investigations Subscribe to the Big Story newsletter. Don’t miss out on ProPublica’s next investigation. Sign up and get the Big Story email whenever we break news. The case is pending, and Marionneaux hasn’t been punished. The Ethics Board is set to discuss the matter again in executive session on Thursday.Watchdogs and ethics advocates say the glacial pace of the Marionneaux case and its limited scope exemplify the weaknesses of Louisiana’s ethics enforcement apparatus.In 2008, the Legislature delivered ethics reforms that then-Gov. Bobby Jindal billed as a new “gold standard” that any state would covet. But more than a dozen people involved in the system said in interviews that the reforms have done the opposite, chipping away at and dragging out ethics enforcement.The flaws in the system are particularly pronounced when legislators catch the attention of the Ethics Board, which polices conflicts of interest among state and local officials of all types and oversees campaign finance.Since the 2008 reforms, just six legislators — Marionneaux included — have faced ethics and campaign finance charges or entered “consent opinions,” akin to plea deals.Only one person interviewed for this story said the reforms had delivered the lofty standard Jindal promised: Jindal’s former executive counsel, who helped shepherd their passage. Jindal has not responded to requests for comment made through the Washington Speakers Bureau, which represents him, and through his former chief of staff. Jindal walks into the Louisiana House of Representatives chamber to deliver his opening speech to start a special legislative session on ethics reform in 2008. (Richard Alan Hannon/The Advocate) Former Ethics Board Chairman Frank Simoneaux, an ex-legislator who served on the board for four years until 2012, said he was shocked to learn from a reporter that Marionneaux’s case is still unresolved. “I would classify it, and the board did also classify it, as the most egregious case we had seen,” he said.Since its filing, the case has pingponged among administrative, district and appeals courts, and the files have mushroomed to more than 1,000 pages. Today, the scandal is a distant memory, and Marionneaux has been out of office so long that his successor is nearing the end of his second four-year term.The slow pace of ethics cases isn’t the only indication that changes to the ethics rules may have created more loopholes than they closed. Last year, The Advocate and ProPublica documented how legislators found ways not to disclose public money that their private firms received; pushed bills that benefited their own businesses and those of their relatives and clients; and lobbied their old colleagues when their terms ended. But none of those actions violate state ethics laws.Reached by phone at his Port of Greater Baton Rouge office, Marionneaux declined to comment. He said that he would not discuss the case during litigation, and that he could not talk while he was on “port time.”Marionneaux’s attorney, former Ethics Administrator Gray Sexton, also said he would not discuss the specifics of the case. But he said he hopes to resolve the Ethics Board’s concerns and to have its actions against Marionneaux dismissed.“I’m absolutely confident that if we go forward with this matter in district court, Sen. Marionneaux will be exonerated,” Sexton said.It’s nearly impossible to measure how the state’s handling of ethics concerns has changed since the 2008 reforms. For starters, the Ethics Board doesn’t keep numbers on its caseload before 2008. And the rule changes, which were substantial, could have had an effect on which cases, and how many, it was asked to consider.However, the data that does exist shows that the number of matters referred to the Ethics Board for investigation spiked in the years following the 2008 reforms, possibly as those required to fill out new forms adjusted to the rules.The number of ethics investigations, meanwhile, has held fairly steady, at between 100 and 200 per year. (This figure excludes campaign finance investigations.)But in recent years, the number of charges filed by the board has fallen precipitously. There were 140 charges filed in 2013, but just 20 last year.That’s a drop of 86%. Ethics Board members meet on April 12, 2019, in Baton Rouge. It’s been 11 years since the Legislature delivered the ethics reforms that Jindal billed as a new “gold standard” that any state would covet. (Bill Feig/The Advocate) Moreover, most of the 20 cases were against local officials. Some were flagrant conflicts of interest, like a school clerk who transferred $14,806 in school funds to her personal account. But the board also filed charges for such low-level offenses as substitute bus drivers not completing ethics training.Some people admit their wrongdoing and agree to pay fines through consent opinions, which can be reached before or after charges are filed.“We knew that Bobby Jindal was about to do the opposite of what he was saying,” said Elliott Stonecipher, a Shreveport-based political consultant who used to advise the Ethics Board. “We were watching a trainwreck on its way.”The downturn in enforcement happened even though Jindal’s reforms more than doubled the Ethics Board’s budget from nearly $2 million to more than $4 million annually and increased the number of full-time employees from 23 to 39.Funding and staffing have stayed roughly the same since then, and Ethics Administrator Kathleen Allen said the extra employees are needed to handle paperwork filing requirements added in 2008.Ethics Board members who’ve served since the reforms questioned why enforcement is so weak after changes that were supposed to improve Louisiana’s oversight. Scott Schneider, a Jindal appointee to the Ethics Board who served from 2008 to 2013, said it seemed easier for ethics officials to focus their attention on venial sins committed by minor players, rather than powerful targets that could also pose greater challenges.“What it felt like was the goal was to go after the lowest-hanging fruit possible,” Schneider said. “It was never staffed with the idea that we’re going to go actively investigate and look for more serious ethical breaches.”Marionneaux’s case stands out both for its lifespan and for the seeming gap between the serious misconduct of which he was accused and the mild nature of the charges filed against him.The former senator got in trouble for his involvement in a dispute between Bernhard Mechanical Contractors Inc. and LSU over a power plant that Bernhard built on campus. The two parties sued each other, and in 2009, Marionneaux set out to craft a settlement.Marionneaux invited both the president and chancellor of LSU to a meeting that typically would have only included attorneys. Louisiana State University’s cogeneration power plant at the southeast corner of Tiger Stadium in Baton Rouge. (Hilary Scheinuk/The Advocate) In a Senate conference room, he laid out the plan: LSU would pay Bernhard $7.15 million to settle; the state would chip in another $5.5 million even though it was not a party to the suit. Marionneaux commanded enough influence to make that happen: He was chairman of the Senate Revenue and Fiscal Affairs Committee. Marionneaux stood to earn at least $1 million from his contingency fee, paid for with public dollars, according to Raymond Lamonica, LSU’s general counsel at the time, who rejected Marionneaux’s proposal.“A non-lawyer legislator couldn’t get away with this,” said Lamonica, a former U.S. attorney for Louisiana’s Middle District. “Just think of a legislator who says, ‘I’m going to get an appropriation for $5.5 million to give to a constituent who’s going to give me a part of it for doing such a good job.’”In contemporaneous emails, LSU’s former Chancellor Michael Martin and then-system President John Lombardi traded concerns about whether the Legislature might cut LSU’s funding because the university had not agreed to Marionneaux’s proposal. LSU settled the suit in 2010 by taking ownership of the power plant to eliminate maintenance fees and agreeing to pay Bernhard $9.6 million over four years. A company spokesman declined to comment.Lamonica said LSU did not meet with Marionneaux again after the meeting at the Capitol, and that he did not believe Marionneaux received a contingency fee.Two months before the Ethics Board charged Marionneaux, he sponsored an amendment to a bill that would have changed the disclosure requirement the board was considering using against him. The bill failed.“The irony is that as a profession, the lawyer/legislator should have a higher standard of ethics and responsibility to the public than a non-lawyer legislator, not a lower standard,” Lamonica said.Before the Jindal-era ethics laws took effect, lawmakers were occasionally disciplined for conflicts of interest.Take the case of Charlie DeWitt, speaker of the Louisiana House of Representatives from 2000 to 2004. DeWitt proposed unsuccessful legislation in 2003 that would have helped the New Orleans Fair Grounds derive more money from a video poker formula. The Fair Grounds’ owners had previously given him a share in two race horses, named Voodoo Princess and Noinbetweeners, and DeWitt had a long history of pushing legislation that helped the racetrack, including bills to allow the Fair Grounds to add slot machines.Less than a year after he came under scrutiny, DeWitt entered into a settlement with the Ethics Board. The deal cited him for accepting improper gifts, but it cleared him of improperly favoring the Fair Grounds. He agreed to pay a $5,000 penalty.He now says he took the deal because it was expedient.“To tell you the truth, the fine is cheaper than hiring attorneys,” DeWitt said in a recent interview.Even so, DeWitt said he believes the ethics system in Louisiana is now worse than it’s ever been.All but one Ethics Board member signed a letter on March 3, 2008, that implored Jindal to veto a key piece of the “gold standard” legislation that curbed its powers, saying the board was “an apolitical body whose authority, in our opinion, became a political target.”A few months later, Ethics Board members resigned en masse in protest of the new system and predicted that ethics enforcement would be weaker and more cumbersome.“I remember being taken aback that, as an Ethics Board member who had served for several years, we weren’t involved in the discussions,” said Gwen Hamilton, who was the first of 10 board members to resign in 2008. “The reform added another bureaucratic process to a process that already existed.”Jimmy Faircloth, Jindal’s executive counsel at the time of the reforms, said in a recent interview that the outcry from by Ethics Board members underscored the need to curb their authority. Faircloth, who represented the Jindal administration in a number of high-profile lawsuits, including one challenging the governor’s private-school voucher plan, stood by Jindal’s ethics program. Marionneaux, left, and Jimmy Faircloth during a House Ways and Means Committee meeting in 2008. Faircloth helped lead Jindal's ethics reforms in 2008. (Patrick Dennis/The Advocate) “These aren’t legislators, they don’t make law, they don’t even make ethics code provisions,” Faircloth said. “They enforce them. They don’t make the law. And the fact that they say, ‘We’re outraged because we’re not making the law,’ demonstrated the proof of the conflict.”On top of the effect of the reforms themselves, courts have also played a major role in shielding legislators from scrutiny — though lawmakers have done almost nothing to counteract the court’s carveouts.In one key case, legislators Alex Heaton and Jeff Arnold were accused of violating ethics laws by writing and supporting bills to protect their family members’ jobs as elected New Orleans assessors. They argued that the Louisiana Constitution prevented the Ethics Board from penalizing them for that.In May 2008, the First Circuit Court of Appeals sided with Heaton and Arnold, ruling that the Ethics Board could not punish the lawmakers’ actions taken within the “legitimate legislative sphere” because the Louisiana Constitution protects legislators from facing arrest or questioning for their speech. That meant lawmakers were free to write and advocate for bills in which they and their close relatives have “substantial economic interests.”“That’s an example of the rulings by the courts that tend to check the aggressiveness of the Ethics Board,” said Terry Ryder, who was executive counsel to former Gov. Kathleen Blanco and special counsel and deputy chief of staff to former Gov. Mike Foster.Courts have also neutered the Ethics Board when it comes to holding elected officials accountable for spending campaign money on certain personal items, like football tickets. When the Ethics Board filed a lawsuit in 2012 over former East Baton Rouge Mayor-President Melvin “Kip” Holden’s campaign spending, for instance, the courts sided with Holden. He had donated campaign money to a constituent’s funeral, to an ambassador program and to an educational trip for a councilwoman’s daughter.The First Circuit ruled in 2013 that a lack of clarity about the definition of “personal use” for campaign funds meant Holden’s spending was, “in the broadest sense, related to the holding of public office.”Jindal’s ethics laws were supposed to make the adjudication of charges speedier as well as more professional, by outsourcing the role to the Division of Administrative Law. Of the six lawmakers who have been charged by the Ethics Board or entered into consent opinions since the reforms championed by former Gov. Bobby Jindal, former state Sen. Robert Marionneaux Jr.’s case has gone on the longest.The Ethics Board charged Marionneaux, a Democrat from Maringouin, in 2010 for failing to disclose his role in a lawsuit between Bernhard Mechanical Contractors and Louisiana State University. Marionneaux’s case has yet to be resolved, and his attorney has said he did nothing wrong.Among the other cases, two legislators were accused of failing to file proper paperwork, the most mundane of sins.Former state Rep. Michael L. Jackson, D-Baton Rouge, signed consent opinions with the Ethics Board in 2009 and 2011 over his failure to file campaign finance reports and his business with a public entity. But then he sued the board – even though those who sign consent opinions forfeit their right to sue. A district court in 2012 upheld the Ethics Board’s arguments and ordered him to pay $5,000. In 2014, he was hit with another campaign finance charge for failing to file a campaign finance report, which he later filed.Former state Sen. Julie Quinn, R-Metairie, also entered a consent opinion in 2010 and agreed to pay $5,000 for failing to file accurate campaign finance reports. She said at the time that any inaccuracies were unknown and unintentional.The other cases captured more attention.Soon after the 2008 special session on ethics, the Ethics Board charged former state Sen. Derrick Shepherd, D-Marrero, while the former senator was awaiting trial on federal charges of conspiracy to commit money laundering. Shepherd resigned his seat, pleaded guilty to one charge and served more than a year in federal prison. The Ethics Board cleared him of wrongdoing in 2009, and dismissed its charges against him.Grambling State University President and former state Sen. Rick Gallot, a floor leader for Jindal during the ethics reforms, was charged in 2009 because his law firm represented a nonprofit in business dealings with Grambling and the University of Louisiana System board. Gallot’s mother sat on the board. But an Ethics Adjudicatory Board dismissed the charges later that year, saying the Ethics Board took too long to prosecute them — the shorter timeline was a change under the new ethics system that the Gallot had helped shepherd.The most recent ethics case against a legislator came in 2017, when state Rep. Jerome “Dee” Richard, an independent from Thibodaux, signed a consent opinion in which he acknowledged using $37,000 in campaign funds to feed a gambling addiction. Richard apologized, said his anti-Parkinson’s disease medication spurred a gambling addiction and agreed to pay back the money. Instead, those changes have slowed the process dramatically.Under the 2008 reforms, once the ethics board files charges in a case, people can contest them at the Ethics Adjudicatory Board. Whatever happens there can be appealed by either side at district and appeals courts. Ethics cases are unique in that rulings on motions filed before an administrative trial can be appealed, unlike other administrative law proceedings.It can take a long time, and often does.Of the seven cases the Ethics Adjudicatory Board resolved last year, it took a median of nearly four years between the filing of charges and a final ruling. At one of the most recent Ethics Adjudicatory Board hearings this May, defendant Ralph Johnson complained, “this has been ongoing for seven years; I think it’s a waste of this panel’s time and a waste of the state’s resources.”Johnson served on Baton Rouge’s Alcoholic Beverage Control board while he was executive director of a community association. The Ethics Board in 2012 charged that he cut a side deal with a business to pay money to the community association while the business was seeking a liquor license. He denied wrongdoing at his hearing, and the panel has yet to issue a ruling.Taking final decision-making away from the Ethics Board was intended to create more due process for people under investigation. But both sides — and even Faircloth — agree that cases need to be resolved quickly, preferably while the public still remembers them.“When a final decision is made down the road, anybody who might have been very interested in it two years earlier might not be watching,” said Ryder, who worked for two governors. “And we lose the value of everybody getting answers and encouraging compliance.”Some officials now question the Ethics Board’s authority to charge them, rather than argue against the facts of the case.That’s been Marionneaux’s strategy: He has repeatedly challenged the Ethics Board’s standing. Even if he loses that gambit, Marionneaux’s case will join a long queue of cases awaiting hearing by the Ethics Adjudicatory Board. Sexton acknowledged that Marionneaux’s case is representative of how the system works now.“When the Ethics Board lost the power to adjudicate, it resulted in a lengthy and expensive resolution process,” he said.These days, Marionneaux is the Port of Greater Baton Rouge’s director of governmental affairs and outreach, which pays him $165,360 annually, on top of his law practice. And he remains active in politics: He was part of an entourage that visited Cuba with Gov. John Bel Edwards in 2016 on a trade mission, and he sometimes hangs out with the governor at Saints games. If the district court does rule on Marionneaux’s ethics case, it could also affect a second unresolved ethics charge against him. That case, dating to 2012, alleges the then-senator failed to disclose he represented a woman in a lawsuit against the state’s Department of Transportation and Development.For those who have filed complaints about Marionneaux, the former senator is Exhibit A in a lopsided system of justice.“You need to resolve these things if the public is going to have trust in the system,” said Richard “Jerry” Dodson, who represented Marionneaux’s former law partner, Lewis Unglesby, when the pair’s practice split and a judge ruled in 2014 that Marionneaux improperly took $1 million from him. Marionneaux denied at the time that he had done anything wrong, but Dodson said Marionneaux has paid back the money.“Just because you serve in the Legislature, does that give you a free pass for everything you do in the future?”
Trump’s VA Firing Spree Falters in Court
by Isaac Arnsdorf President Donald Trump often touts a law he signed to speed up firings at the Department of Veterans Affairs. He and other Republicans see the law as a model for weakening civil service protections across the federal government.The administration’s case for the new law centered on Brian Hawkins. Hawkins was the director of the VA hospital in Washington when an internal investigation discovered safety risks for patients. The VA tried to fire Hawkins but got held up on appeal. Then-Secretary David Shulkin said Hawkins showed why “we need new accountability legislation and we need that now.” Once Congress passed the legislation, the VA used it to go after Hawkins a second time.Now, almost two years later, the VA’s case against Hawkins has fallen apart. On Tuesday, the government said it would give Hawkins his job back rather than defend the statute in court.While the administration tried to make Hawkins into a symbol of why it needed the legislation, court records tell a different story: of Trump appointees so eager to score political points that they ran roughshod over legal protections for civil servants.“They couldn’t defend their actions in court,” Hawkins said in an interview. “The VA took away my rights, I had no say, my 25-year career was gone. It violated everything I tried to teach my family and tried to believe in myself: this country was founded on a Constitution, the Bill of Rights, equal opportunity for all.”Hawkins argued that his firing was unconstitutional because the VA used a standard of proof that was too low. Since the government opted not to contest that claim, it could have repercussions for thousands of other VA employees who were fired under the accountability law, according to Jason Briefel, the executive director of the Senior Executives Association, which lobbies for high-ranking career officials.“The passage of this law was a signature achievement for the president and many members of Congress,” said Briefel, who also works for the law firm that represented Hawkins. “If they were wrong and this was indeed unconstitutional, now they’re going to have to go figure out what to do with thousands of folks fired under this authority.” Get Our Top Investigations Subscribe to the Big Story newsletter. Don’t miss out on ProPublica’s next investigation. Sign up and get the Big Story email whenever we break news. VA spokesman Curt Cashour said the agency “has complete confidence” in the law but declined to comment on the Hawkins case. A White House spokesman didn’t respond to a request for comment.House veterans committee chairman Mark Takano, a California Democrat, said he would hold hearings this summer to examine the VA’s implementation of the accountability law.“This is another example of how VA has misconstrued and unfairly applied legislation once lauded as the Administration’s preferred method to root out corruption,” Takano said in a statement. “Instead of weeding out troubled leadership and incompetent supervisors, this law has been exploited and misused to target whistleblowers and employees.”According to the government’s court filing, Hawkins will get back pay, but the VA could try to fire him again. The government now wants the judge to throw out Hawkins’ case as moot.Many of the details in the litigation have been sealed for more than a year because the government considers the information protected by attorney-client privilege. But ProPublica uncovered the information from other documents and people involved.Hawkins, 50, started working at the VA in 1992 cutting grass. He worked his way up through the ranks and in 2011 became director of the Washington hospital, overseeing a staff of 2,000 at the 200-bed facility three miles north of the Capitol. Under Hawkins’ charge, the hospital struggled with stocking medical supplies and filling leadership positions. In early 2017, Hawkins found out about problems in the logistics department and reported his concerns to the VA’s inspector general.The inspector general’s office found dirty storage areas and supply shortages that were endangering patients. The inspector general’s report didn’t name Hawkins but suggested that even higher-ranking officials in the VA health system were aware the problems and had failed to fix them. Shulkin was under pressure from Trump. As a candidate, Trump had campaigned on cracking down on errant VA employees, a rallying cry for conservative critics of the government-run health system. “You just need to start firing people,” Trump told Shulkin at a spring 2017 meeting with veterans groups, as reported in The Wall Street Journal. “Let them sue us. I don’t care if they sue us.”The VA could have taken action against Hawkins based on the problems at the hospital he ran, but that would have required an investigation — and time. The Trump administration didn’t want to wait. Political appointees said they wanted to fire Hawkins “for any reason we can find,” according to a June 2017 email sent by Scott Foster, a senior official overseeing the staff responsible for investigating VA executives. According to the email, the staff investigators responded that there was “insufficient evidence.” (Foster declined to discuss personnel matters, citing privacy rules, but he agreed to tell his story.)“We are setting ourselves up for slam-dunk due process fouls,” Foster said in the email, sent to his boss and the VA’s top lawyer. “We will lose this case on appeal, and in a very embarrassing way.”The VA fired Hawkins anyway.That same day, Foster was on a conference call where his boss, a political appointee named Peter O’Rourke, said he wanted 10 to 15 people who could be fired as soon as Trump signed the new accountability law, according to notes that Foster recorded later that month. Foster cautioned that the VA would still need to follow the legal process and act on evidence.O’Rourke responded by moving to fire Foster. The stated reason, according to the written notice that O’Rourke gave to Foster, was that Foster had voiced concerns about the legality of how the agency was firing civil servants.Foster knew that the law protected him from such explicit retaliation, but he wasn’t sure if that would matter. “I was wondering if I was going to be caught up in a time in our country’s history when the people who ran the government did not necessarily feel compelled to follow the law,” Foster said.O’Rourke, who later served as acting secretary and left the agency late last year, didn’t respond to phone messages.Foster filed a complaint with the Office of Special Counsel, or OSC, an independent federal agency that investigates retaliation against whistleblowers. OSC blocked the VA from firing Foster.OSC also received a complaint from Michael Culpepper, another senior official overseeing investigations of VA executives. Culpepper “witnessed VA leadership violate norms in seeking to terminate several senior level employees,” according to his lawyer, Mark Zaid. Culpepper became a whistleblower and suffered retaliation, Zaid said. Culpepper resigned in May 2017.Based on the complaints from Foster and Culpepper, OSC moved to halt Hawkins’ removal. An administrative judge agreed to pause the firing for 45 days so that OSC could investigate further.Shulkin seethed at the intervention. “No judge who has never run a hospital and never cared for our nation’s veterans will force me to put an employee back in a position when he allowed the facility to pose potential safety risks to our veterans,” he said in a press release.Shulkin, who was forced out in March 2018, didn’t respond to a request for comment.Rather than honor the 45-day pause, the VA said it would deploy the new accountability law that Trump had just signed. A Wall Street Journal editorial headlined “Can the VA Fire Anyone?” called the Hawkins case a critical test for the law’s powers. The order firing Hawkins was signed by Assistant Secretary for Congressional and Legislative Affairs Brooks Tucker, a political appointee who is outside the hospital system’s chain of command.“The media circus that the secretary went on really made me feel less than human,” Hawkins said. “My children were laughed at and questioned by their friends. My neighbors stopped speaking to my family. It was a struggle to leave my home. I gained 30 pounds. I developed hypertension. I’ve been in counseling for stress and depression. I was unsure of how was going to provide for my family.” Hawkins maintains that the Washington hospital had been on the upswing during his six-year tenure. When the inspector general’s office completed its review, it said Hawkins provided “ineffective leadership” but also faulted others above and below him. (A separate investigation found that Hawkins broke agency policy by sending sensitive information to a personal email account.)Conditions at the hospital got worse after Hawkins left. The facility was designated “critical” last year and now ranks among the worst-performing hospitals in the entire VA system. The inventory problems still weren’t fixed — inspections found that some procedures had to be canceled because the hospital ran out of needed equipment.“You’re using civil servants as political pawns to say, ‘OK, I fired them, therefore the problem is better,’ but a year or two years later, the logistics problem is still an issue,” Hawkins said. “It kills the efficiency of the organization, and then the ‘big bad VA doing bad things for veterans’ becomes a self-fulfilling prophecy.”Cashour, the VA spokesman, said the Washington hospital is making “significant improvements” such as reducing wait times, hiring nurses and referring more patients to private providers. The latter was another Trump campaign promise.
Intuit CEO in Internal Video: Hiding Free TurboTax Was In “Best Interest of Taxpayers”
by Justin Elliott and Lucas Waldron Sasan Goodarzi, the CEO of Intuit, says the company’s efforts to make its free tax-filing software harder to find on Google were part of the software giant’s commitment to educating taxpayers.In an 11-minute video sent to Intuit employees, Goodarzi said the company was trying to help consumers by steering them to “educational content” instead of TurboTax’s free filing website.The company promised the IRS it would offer a free option to tens of millions of taxpayers earning less than $34,000.Responding to our reporting, which shows that Intuit, H&R Block and other for-profit tax software companies were steering low-income customers to their paid products, Goodarzi said the company’s marketing practices “had been misinterpreted to signal that we were trying to hide the product we offer in the IRS program. That is inaccurate.”“Our choice around search was intended to be [in] the best interest of taxpayers so they were more fully informed about their options and could choose what they felt was best for them,” Goodarzi said in the video, which was marked “Intuit Confidential” and was sent to staff on May 3. Get Our Top Investigations Subscribe to the Big Story newsletter. Don’t miss out on ProPublica’s next investigation. Sign up and get the Big Story email whenever we break news. Goodarzi, who started as CEO in January, received $12.6 million in compensation last year as the head of the division that includes QuickBooks. He previously ran the company’s Consumer Tax Group, which includes TurboTax.“We are and will always be a values-driven company,” Goodarzi said in the video obtained by ProPublica. “And chief among those values is integrity without compromise.”An Intuit spokesman said the video “is part of our commitment to an ongoing dialogue with our 9,000 employees and reflects our culture of transparency. We stand behind the video as a clear description of our actions as being both appropriate and consistent with our values.”There’s a lot more to it, so we’ve provided more context below. (You can watch the full video here.)
The Trade Secret: Firms That Promised High-Tech Ransomware Solutions Almost Always Just Pay the Hackers
by Renee Dudley and Jeff Kao From 2015 to 2018, a strain of ransomware known as SamSam paralyzed computer networks across North America and the U.K. It caused more than $30 million in damage to at least 200 entities, including the cities of Atlanta and Newark, New Jersey, the Port of San Diego and Hollywood Presbyterian Medical Center in Los Angeles. It knocked out Atlanta’s online water service requests and billing systems, prompted the Colorado Department of Transportation to call in the National Guard, and delayed medical appointments and treatments for patients nationwide whose electronic records couldn’t be retrieved. In return for restoring access to the files, the cyberattackers collected at least $6 million in ransom.“You just have 7 days to send us the BitCoin,” read the ransom demand to Newark. “After 7 days we will remove your private keys and it’s impossible to recover your files.”At a press conference last November, then-Deputy Attorney General Rod Rosenstein announced that the U.S. Department of Justice had indicted two Iranian men on fraud charges for allegedly developing the strain and orchestrating the extortion. Many SamSam targets were “public agencies with missions that involve saving lives,” and the attackers impaired their ability to “provide health care to sick and injured people,” Rosenstein said. The hackers “knew that shutting down those computer systems could cause significant harm to innocent victims.”In a statement that day, the FBI said the “criminal actors” were “out of the reach of U.S. law enforcement.” But they weren’t beyond the reach of an American company that says it helps victims regain access to their computers. Proven Data Recovery of Elmsford, New York, regularly made ransom payments to SamSam hackers over more than a year, according to Jonathan Storfer, a former employee who dealt with them.Although bitcoin transactions are intended to be anonymous and difficult to track, ProPublica was able to trace four of the payments. Sent in 2017 and 2018, from an online wallet controlled by Proven Data to ones specified by the hackers, the money was then laundered through as many as 12 bitcoin addresses before reaching a wallet maintained by the Iranians, according to an analysis by bitcoin tracing firm Chainalysis at our request. Payments to that digital currency destination and another linked to the attackers were later banned by the U.S. Treasury Department, which cited sanctions targeting the Iranian regime.“I would not be surprised if a significant amount of ransomware both funded terrorism and also organized crime,” Storfer said. “So the question is, is every time that we get hit by SamSam, and every time we facilitate a payment — and here’s where it gets really dicey — does that mean we are technically funding terrorism?”Proven Data promised to help ransomware victims by unlocking their data with the “latest technology,” according to company emails and former clients. Instead, it obtained decryption tools from cyberattackers by paying ransoms, according to Storfer and an FBI affidavit obtained by ProPublica.Another U.S. company, Florida-based MonsterCloud, also professes to use its own data recovery methods but instead pays ransoms, sometimes without informing victims such as local law enforcement agencies, ProPublica has found. The firms are alike in other ways. Both charge victims substantial fees on top of the ransom amounts. They also offer other services, such as sealing breaches to protect against future attacks. Both firms have used aliases for their workers, rather than real names, in communicating with victims.The payments underscore the lack of other options for individuals and businesses devastated by ransomware, the failure of law enforcement to catch or deter the hackers, and the moral quandary of whether paying ransoms encourages extortion. Since some victims are public agencies or receive government funding, taxpayer money may end up in the hands of cybercriminals in countries hostile to the U.S. such as Russia and Iran.In contrast to Proven Data and MonsterCloud, several other firms, such as Connecticut-based Coveware, openly help clients regain computer access by paying attackers. They assist victims who are willing to pay ransoms but don’t know how to deal in bitcoin or don’t want to contact hackers directly. At the same time, Coveware seeks to deter cybercrime by collecting and sharing data with law enforcement and security researchers, CEO Bill Siegel said.Siegel refers to a handful of firms globally, including Proven Data and MonsterCloud, as “ransomware payment mills.” They “demonstrate how easily intermediaries can prey on the emotions of a ransomware victim” by advertising “guaranteed decryption without having to pay the hacker,” he said in a blog post. “Although it might not be illegal to obfuscate how encrypted data is recovered, it is certainly dishonest and predatory.”MonsterCloud chief executive Zohar Pinhasi said that the company’s data recovery solutions vary from case to case. He declined to discuss them, saying they are a trade secret. MonsterCloud does not mislead clients and never promises them that their data will be recovered by any particular method, he said.“The reason we have such a high recovery rate is that we know who these attackers are and their typical methods of operation,” he said. “Those victims of attacks should never make contact themselves and pay the ransom because they don’t know who they are dealing with.”On its website, Proven Data says it “does not condone or support paying the perpetrator’s demands as they may be used to support other nefarious criminal activity, and there is never any guarantee to obtain the keys, or if obtained, they may not work.” Paying the ransom, it says, is “a last resort option.”However, chief executive Victor Congionti told ProPublica in an email that paying attackers is standard procedure at Proven Data. “Our mission is to ensure that the client is protected, their files are restored, and the hackers are not paid more than the minimum required to serve our clients,” he said. Unless the hackers used an outdated variant for which a decryption key is publicly available, “most ransomware strains have encryptions that are too strong to break,” he said.Congionti said that Proven Data paid the SamSam attackers “at the direction of our clients, some of which were hospitals where lives can be on the line.” It stopped dealing with the SamSam hackers after the U.S. government identified them as Iranian and took action against them, he said. Until then, he said, the company did not know they were affiliated with Iran. “Under no circumstances would we have knowingly dealt with a sanctioned person or entity,” he said.Proven Data’s policy on disclosing ransom payments to clients has “evolved over time,” Congionti said. In the past, the company told them it would use any means necessary to recover data, “which we viewed as encompassing the possibility of paying the ransom,” he said. “That was not always clear to some customers.” The company informed all SamSam victims that it paid the ransoms and currently is “completely transparent as to whether a ransom will be paid,” he said.“It is easy to take the position that no one should pay a ransom in a ransomware attack because such payments encourage future ransomware attacks,” he said. “It is much harder, however, to take that position when it is your data that has been encrypted and the future of your company and all of the jobs of your employees are in peril. It is a classic moral dilemma.”No U.S. laws prohibit paying ransoms. The FBI frowns on it officially — and winks at it in practice. Ransom payment “encourages continued criminal activity, leads to other victimizations, and can be used to facilitate serious crimes,” an FBI spokesperson told ProPublica in an email. But in 2015, the assistant special agent in charge of the FBI’s cyber program in Boston said at a cybersecurity conference that the bureau will “often advise people just to pay the ransom,” according to news reports.Paying a ransom while pretending otherwise to a client, though, could constitute deceptive business practices prohibited by the Federal Trade Commission Act, said former FTC acting chairman Maureen Ohlhausen. “Any claim that a company makes, they can legally be held to that claim,” she said. Neither MonsterCloud nor Proven Data has been cited by the FTC.Storfer, who worked for Proven Data from March 2017 until September 2018, said in a series of interviews that the company not only paid ransoms to the SamSam hackers, but also developed a mutually beneficial relationship with them. As that relationship developed, he said, Proven Data was able to negotiate extensions on payment deadlines.“With SamSam, we could say, hello, this is Proven Data, please keep this portal open while we contact and interact with the customer while moving forward,” Storfer said. “And they would remove the timer on the portal. And then they would respond quicker and in many cases would be able to provide things a little bit easier.”The SamSam attackers didn’t identify themselves, he said. While Proven Data generally concealed its identity when responding to ransom demands, “we were very open” with the SamSam hackers, “and we would essentially announce ourselves,” Storfer said.Eventually, the attackers began recommending that victims work with the firm. “SamSam would be like, ‘If you need assistance with this, contact Proven Data,’” said Storfer, who declined to identify clients. Some of them wondered about this endorsement. “Honestly, the weirdest thing was clients would ask us why, and we would have to respond to that, which was not a really fun conversation,” he added.The referrals indicate the SamSam hackers’ confidence that Proven Data would pay the ransom, said Bart Huffman, a Houston lawyer specializing in privacy and information security. Such prior understandings could be seen as a criminal conspiracy and may violate the U.S. Computer Fraud and Abuse Act, he said.“That does seem like you are working for the other side,” Huffman said. “You are facilitating the payment at the recommendation of SamSam, in the manner suggested by SamSam.”Proven Data has never been charged with such a violation. The company “never had a ‘close relationship’ with SamSam attackers,” said Congionti, who didn’t comment on the recommendations specifically. “Our contact with attackers is limited to minimizing the attack on the customer. … Anyone can reach out to a hacker and tell them to keep the portal open longer.”The father of ransomware was Harvard-educated anthropologist Joseph L. Popp Jr. While researching the theory that AIDS originated in green monkeys in East Africa, Popp in 1989 mailed more than 20,000 floppy disks about AIDS education to people interested in public health. When recipients ran the disk, their computers froze, and a message on the screen instructed them to send up to $378 to a post office box in Panama for a second disk that would restore their access.The FBI arrested Popp before he could carry out his plan to distribute another 2 million disks. U.S. officials extradited him to England, where he was deemed mentally unfit to stand trial, John Kilroy, one of his lawyers, said.“I believe he sincerely wanted to stop the spread of AIDS,” Kilroy said. “He lost his way in doing the ransom. I don’t think he had a good understanding of the consequences for other people.”Popp, an Ohio native, returned to the U.S. and settled in Oneonta, New York. There, he helped establish a butterfly conservatory that was named in his honor after he died in a 2006 car accident at age 55, according to a local news clipping and his death certificate.He didn’t live to see his brainchild become one of the world’s most common types of cybercrime. It wasn’t until 2012, when bitcoin began gaining traction, that ransomware took off. The decentralized digital currency made it difficult to trace or block payments.Since 2016, more than 4,000 ransomware attacks have taken place daily, or about 1.5 million per year, according to statistics posted by the U.S. Department of Homeland Security.“Ransomware continues to spread and is infecting devices around the globe,” the FBI said in a statement. “We are seeing different kinds of ransomware, different deployment methods, and a coordinated distribution. The FBI considers it one of the top cybercriminal threats.”Yet the FBI’s Internet Crime Complaint Center counted only 1,493 ransomware victims in 2018 — a figure the bureau itself says represents only a small fraction of total incidents. Victims don’t report attacks, perhaps because they’re embarrassed or reluctant to admit to gaps in their IT security, according to law enforcement officials.Even when victims do report ransomware, the culprits are rarely caught. The Iranians who allegedly distributed SamSam were the first people ever indicted by the U.S. government for deploying a ransomware scheme, although others have pleaded guilty to money laundering or computer damage in connection with ransomware.While demands to businesses and municipal governments have reached as high as six figures, the average ransom sought is a few thousand dollars, according to cyberresearch firms. That’s well below the thresholds maintained by federal prosecutors to trigger an investigation, said former FBI Deputy Director John Pistole. Local police departments lack the resources to solve cybercrime and themselves are frequently ransomware targets. “It is a weird gray area where there is a law but it isn’t enforced,” said Jeffrey Kosseff, an assistant professor of cybersecurity law at the United States Naval Academy. “Ransomware is a real failure of the current legal system. There is not a good remedy.”European law enforcement agencies have had more success. In March 2018, for example, the Polish Police — in cooperation with the Belgian Federal Police and Europol — arrested a Polish national suspected of having infected several thousand computers with ransomware. European law enforcement officials “just hang out on Slack channels where we tell them stuff,” said Fabian Wosar, a U.K.-based security researcher, referring to the popular messaging platform.Asked whether its agents also gather information via Slack, the FBI said that it “must adhere to rules relating to federal agency recordkeeping, which makes the adoption of more agile communication methods trickier for us than for private sector companies.”When Wosar discovered servers in the U.S. and the Netherlands that likely contained the attackers’ decryption keys for the ASN1 ransomware strain and could help identify the criminals, he and another researcher notified the FBI and the Dutch National Police. “Great news,” a member of the Dutch high-tech crime team responded. “We are eager to start things up” and “try to seize the servers.” The FBI replied with basic questions that reflected a lack of understanding of how ransomware works, said Wosar, who is head of research at anti-virus provider Emsisoft.On another occasion, Wosar had what he called a “very hot lead” on the inventor of the ACCDFISA strain. He tried one FBI agent after another and ended up submitting his tip on the “FBI homepage like everyone else,” he said. “I’m sure it got lost among hundreds of thousands of submissions.” The bureau declined to comment on the incidents.As ransomware proliferated without an effective law enforcement response, an industry sprang up to unlock victims’ computers. In the U.S., it was dominated by two firms: Proven Data and MonsterCloud. Each says it has assisted thousands of victims.The companies’ claims to be able to release files using their own technology aroused Wosar’s curiosity. He and other security experts sometimes find ways to disable ransomware, and they post those fixes online for free. But they can decrypt ransomware only if there are errors in the underlying software or if a security lapse allows the researchers to hack into the attacker’s server, he said; otherwise, it’s essentially bulletproof.“If there is a company that claims they broke the ransomware, we are skeptical,” Wosar said. “Everything the ransomware did has been analyzed by other researchers. It’s incredibly unlikely they were the only ones to break it.”In December 2016, he devised an experiment dubbed “Operation Bleeding Cloud,” after MonsterCloud and the notorious “Heartbleed” software vulnerability. He and another researcher created a variant of ransomware and used it to infect one of their own computers. Then they emailed MonsterCloud, Proven Data and several data recovery firms based in the U.K. and Australia, posing as a victim who didn’t want to pay a ransom.Wosar said he sent some sample encrypted files to the firms along with a fake ransom note that he had written. Like many ransom notes, the demand included an email address to contact the attacker for instructions on how to pay. Each note also contained a unique ID sequence for the victim, so Wosar could later identify which firm had contacted him even if it used an anonymous email account.The firms eagerly agreed to help. “They all claimed to be able to decrypt ransomware families that definitely weren’t decryptable and didn’t mention that they paid the ransom,” Wosar said. “Quite the contrary actually. They all seemed very proud not to pay ransomers.”Soon, the email accounts that he’d set up for the imaginary attacker began receiving emails from anonymous addresses offering to pay the ransom, he said. He traced the requests to the data recovery firms, including MonsterCloud and Proven Data.“The victims are getting taken advantage of twice,” he said.Proven Data’s Congionti and MonsterCloud’s Pinhasi both said they could not recall this particular case. “If someone is saying that we promised up front that we would be able to decrypt their files, I am certain that this is inaccurate,” Pinhasi said.Last year, the research division of Israeli cybersecurity company Check Point Software Technologies used a similar tactic to unmask Dr. Shifro, a Russian company. Dr. Shifro purported to use its own technology to liberate computers locked by ransomware, but it actually negotiated with a security researcher posing as the hacker, according to Check Point. Dr. Shifro did not respond to an email in both Russian and English seeking comment.Storfer, the former Proven Data ransom negotiator, said he was saddened to read of Dr. Shifro’s tactics. “That’s basically what I was doing,” he said.In 2017, Storfer was a year out of college and looking online for a job close to his Westchester County, New York, home when he spotted an opening for an office manager at Proven Data. He’d never heard of the company, but he applied and was hired.He thought he would be scheduling meetings, sending out packages and accepting deliveries. But prior jobs at retail stores and restaurants had honed his customer service skills. After a short time at Proven Data, he was given the title of client solutions manager and assigned to negotiate with hackers. Storfer “was responsible for some of the correspondence with ransomware attackers,” Victor Congionti said. The job, which Storfer said paid a starting salary of about $41,000 a year, provided a unique window onto the rarely glimpsed underworld of cybercrime.He soon realized that ransomware is a vast global industry. Most attacks on U.S. targets originate from abroad, especially Russia and Eastern Europe. There are hundreds of ransomware strains and thousands of variants of those strains. Some are sidelined as their revenues diminish or cybersecurity researchers devise ways to neutralize them, while new ones are always emerging.Some ransomware attacks hit millions of computers indiscriminately, hoping to infiltrate them through infected spam email attachments. Others target businesses, government agencies and nonprofit organizations, sometimes with “brute-force” tools that invade computer networks. While individuals are frequently attacked, criminals increasingly extort institutions that have deeper pockets and readily pay the ransom to minimize disruption to their operations.Once ransomware penetrates the computer, victims are unable to open their files, which are often renamed with a new extension. Generally, a ransom note pops up on the screen. It may direct victims to a page only accessible through Tor, a dark web browser, or to a hacker’s email address, for information on how to pay. The hackers may offer to decrypt a sample file. When they receive confirmation of payment — usually in bitcoin but sometimes in even less traceable forms of cryptocurrency, such as Dash and Monero — they send the software and key to unlock the files. Most hackers live up to their end of the deal, Storfer said. Otherwise, they are denounced as cheaters on websites frequented by victims, researchers and data recovery firms, and their ransom demands lose credibility, he and others said.Some attackers warn victims to avoid data recovery firms. “Decryption of your files with the help of third parties may cause increased price (they add their fee to our),” said one ransom note posted on Coveware’s website.More sophisticated cyberattackers cultivate firms like Proven Data as a source of income. The hackers sometimes offer discounts, which Congionti said the company’s “present policy” is to pass on to clients. The dark website for the GandCrab strain offers a “promo code” box on its ransom checkout page exclusively for data recovery firms. After paying a ransom, the firms receive a code for a discount on a future ransom.Proven Data’s rival, MonsterCloud, is run by Pinhasi, who describes himself as a former IT security intelligence officer for the Israeli military. He declined ProPublica’s request to visit its South Florida storefront office, saying it was being renovated. Instead, over a mid-February lunch at Shalom Haifa, a nearby restaurant, Pinhasi guardedly discussed his business.He said MonsterCloud handles up to 30 calls a day and has about 20 employees in South Florida as well as extensive global contacts. “Our network is in the hundreds,” he said. “Because keep in mind that we have people who we are connected to pretty much all over the globe, who are working with us in various cases.” Asked what these people do, he said, “I can’t really dive into it.”In some cases, he said, MonsterCloud uses its contacts on the darknet — hidden, anonymous networks that communicate over the internet. “Our goal is to restore the data and help the customer. If we need to walk to the moon on broken glass, we will. We don’t care how, what, where, whatever. Our goal is to get the data out.”In a video posted online touting MonsterCloud’s services, Pinhasi wears a dark suit and tie and rimless glasses. At lunch, the 43-year-old sported a white long-sleeve T-shirt emblazoned with the logo of teen retailer Abercrombie & Fitch.Pinhasi said he came to the U.S. in 2002. He told ProPublica that he has led MonsterCloud since 2003, but Florida corporation records show the business began 10 years later. Instead, in 2003, he co-founded a Florida company called PC USA Computer Solutions Providers.One PC USA client, Maurice Oujevolk, vented his unhappiness on Yelp. Oujevolk hired PC USA for his Sunrise, Florida, model car business, and paid regularly for cloud backup service. In March 2016, his company’s computer system crashed. He called PC USA for help. But Pinhasi told Oujevolk that PC USA’s system had also failed, and complete backups were not available, Oujevolk said. Pinhasi demanded more money to try to recover the files. Oujevolk refused.“I lost tremendous time and money to rebuild the information that disappeared,” Oujevolk said. He didn’t sue PC USA, he said, because the dispute was impairing his health and he wanted to put it behind him. “I am surprised he can still be doing business in Florida. We were trusting them, and they took our money and disappeared. They had told us we didn’t need to do any backups.”Pinhasi said that Oujevolk’s was the only complaint he had received in 18 years of service. He said Oujevolk’s “fact recollection was flawed,” and the problem was that the client’s hard drive provided to PC USA for storage was “corrupted.” He said Oujevolk declined PC USA’s offer to send the hard drive to a recovery company in California. Oujevolk said there was no such offer.Pinhasi flourished financially. Public records show he’s driven three new Mercedes in the past decade and owns two houses in South Florida, including a waterfront home in Hallandale Beach assessed at $1.4 million. Once ransomware took off, he pivoted from cloud services to data recovery.On its website, MonsterCloud offers “guaranteed results.” It tells prospective clients, “Don’t Pay the Ransom.” Paying the ransom, it says, “doesn’t guarantee you’ll get your data back.” It’s “a risk you don’t want to take. Let our experts handle the situation for you.”Pinhasi declined to say whether MonsterCloud pays ransoms. “We work in the shadows,” he said. “How we do it, it’s our problem. You will get your data back. Sit back, relax and enjoy the ride.”The lack of transparency deterred Tim Anderson, an IT consultant based in Houston. When the Nozelesn strain of ransomware attacked one of his clients this past January, he reached out to MonsterCloud. The firm wanted $2,500 for an analysis and up to $25,000 for actual recovery, he said. The ransom was 2 bitcoin, worth about $7,000 at the time.When Anderson requested an explicit technical description of how MonsterCloud would unlock the files, the firm demurred.“I immediately smelled a rat,” Anderson said. “How do I know they’re not taking the $25,000 and paying the ransom guy $7,000 of it? The consumer doesn’t know what’s going on.”He declined MonsterCloud’s services. Instead, his client hired another firm to pay the ransom.Pinhasi points to MonsterCloud’s ties to law enforcement as evidence of its integrity.“We are trusted by law enforcement and intelligence agencies,” he said. “We recently met with the FBI to share with them our deep knowledge of Ransomware, and we often share with them our cyberintelligence gathering findings. They wouldn’t waste their time with us if we were a deceptive company.” ****John Pistole, a former deputy director of the FBI under Robert Mueller, is featured in a promotional video on MonsterCloud’s homepage. “Police departments, government agencies, hospitals, small business and Fortune 500 firms trust MonsterCloud to help recover from attacks and protect against new ones,” Pistole said in the video. “MonsterCloud’s proprietary technology and expertise protects their professional reputations and organizational integrity.”Pistole, who also headed the Transportation Security Administration under President Barack Obama, is listed on MonsterCloud’s website as the only member of its “Cyber Security Advisory Council.” Now president of Anderson University in Indiana, he said in an interview that he became acquainted with Pinhasi after MonsterCloud reached him through a speaker’s bureau. Pistole said that MonsterCloud pays him indirectly through the bureau.Pistole said his testimonial was scripted by Pinhasi. He is well aware, he said, that in most cases the only way to decrypt computers hit by ransomware is to pay the hackers. That’s MonsterCloud’s approach, he said.“The model I’m used to is, you pay the ransom,” he said. “That’s the business model as I understood it last year when I did my initial look at it after meeting Zohar. … Based on my experience and knowledge, ransom is paid and they facilitate the best practices moving forward.”Pistole is listed in Florida corporation records as an “authorized member” of another company run by Pinhasi, Skyline Comfort LLC. Pistole said that Skyline’s business plan is putting massage chairs in airports. For a few minutes’ massage, passengers would pay a fee, which Skyline would split with the airport authority. Pistole said that he connects Pinhasi with airport officials and will be paid if the company becomes profitable. A former TSA colleague and Pinhasi’s brother-in-law are also involved in Skyline, he said.In other testimonials on MonsterCloud’s website, four local law enforcement agencies praise the firm for restoring their data following ransomware attacks. ProPublica spoke with all but the Kaufman, Texas, Police Department, which did not respond to messages. Officials at the three departments we spoke with were all under the impression that MonsterCloud decrypted their computer networks without paying a ransom.Chief Deputy Ward Calhoun of the Lauderdale County Sheriff’s Office in Meridian, Mississippi, which enlisted MonsterCloud after a ransomware attack in May 2018, said in an interview that other victims seek his advice “once or twice a month.” He tells them that MonsterCloud can help them. “The danger is, even if you give money to hackers, you don’t know you’re gonna be able to unlock your data anyway,” he said. “We decided we weren’t going to do that. We went with MonsterCloud instead.”The Trumann, Arkansas, Police Department was another satisfied customer. When its computer system was infected in November, decades’ worth of data including case notes, witness statements, affidavits and payroll records were frozen. The department’s IT manager came across MonsterCloud on a Google search while “frantically looking for a way to fix the problem,” said the chief of police, Chad Henson.Henson, who oversees about two dozen officers serving a population of 8,000, said he was reassured about MonsterCloud’s capabilities when he discovered “how friendly they are to law enforcement and to government entities.”“That’s when we made the phone call to them,” he recalled. “They said: ‘Don’t worry about it. We are pretty sure we can get everything back.’”Another reason he chose MonsterCloud, he said, was that it wouldn’t pay the ransom. “I’m the one in the seat, the one charged to safeguard the department,” he said. “To turn around and spend taxpayer money on a ransom — that is absolutely the wrong decision. It is the nuclear option. But with MonsterCloud, we can just remove that option.”MonsterCloud restored the Police Department’s files within 72 hours and assured the department it did not pay a ransom, Henson said. In return for the testimonial, it waived its $75,000 fee.MonsterCloud’s contract with the Trumann Police, obtained under a public records request, calls its recovery method a “trade secret” and says the firm would not explain the “proprietary means and methods by which client’s files were restored.” It also says that if “all possible means of directly decrypting client’s files have been exhausted,” the firm would attempt to recover data by “communicating with the cyber attacker.”Pinhasi said that the Trumann department was crippled by the Dharma strain of ransomware. Wosar and Michael Gillespie, a software analyst in Illinois whom the FBI has honored with a community leadership award for his help on ransomware, said there was no known way of decrypting the Dharma ransomware in use at the time. They said MonsterCloud must have paid a hacker.MonsterCloud also received a testimonial in lieu of a fee from the Lamar County, Texas, Sheriff’s Office. A May 2018 ransom note said: “You are unlucky! The terrible virus has captured your files!” The sheriff’s office brought in MonsterCloud, which “did an excellent job,” said Lamar County network administrator Joel Witherspoon.He said MonsterCloud contacted the hacker, who was demanding 1 bitcoin, worth about $8,000 at the time. Witherspoon then told the company that the county wouldn’t pay the ransom. MonsterCloud didn’t answer him, he said.“I don’t think they would ever pay” the ransom, Witherspoon said. “They just said they had a team of specialist engineers working on it.”Pinhasi declined to say how MonsterCloud retrieved the law enforcement agencies’ data but noted that it did so for free. “We provide complimentary services to law enforcement agencies,” he said. “There has never been one cent of taxpayer money used for any ransom we’ve been involved with.”Witherspoon was especially impressed by his primary contact at MonsterCloud, Zack Green. “Zack’s title, dear God, it’s a mile long title. He seems to know a lot.”Green’s titles on his email signature include “Ransomware Recovery Expert,” “Cyber Counterterrorism Expert,” “Cyber Crime Prevention Expert” and “Cyber Intelligence Threat Specialist.” We called MonsterCloud asking for Green but were told he was in a meeting. Cybersecurity experts said the credentials he lists are not actual industry designations.Pinhasi said Green is an alias, but he declined to say for whom. “We go based on aliases, because we’re dealing with cyberterrorists,” he said.After we told Witherspoon that Green was an alias, his opinion of MonsterCloud changed. “It makes me think, ‘Did we get attacked, or did they attack us?’ I am surprised,” he said.Some tributes to MonsterCloud on its website may also be fabricated. Under a section titled “Real Testimonials,” MonsterCloud posted 58 five-star Google reviews from clients like “Brad Stevens” and “Sam Smith” — the names of the Boston Celtics coach and a Grammy Award-winning singer, respectively. The reviews were replete with exclamation points and details of MonsterCloud’s heroics. A Google search showed that about half of them were submitted six months ago, when some of those same reviewers, including Stevens and Smith, also raved about a skin-care establishment down the street from MonsterCloud’s office. The two businesses share the same marketing director: Boris Zion.Under his own name, Zion gave MonsterCloud a five-star Google review and more plaudits on TrustPilot.“MonsterCloud is #1 ransomware company hands down!” he wrote in October. “I knew them for a while before I became a customer [when] I found myself in situation where my business was attacked.”Pinhasi and Zion said that the testimonials are legitimate. “We sent out an email to our clients to ask for reviews as many businesses do, so many of our reviews came in around the same time,” Pinhasi said. Zion acknowledged it was “kind of coincidental” that the same customers had praised MonsterCloud and the skin care company. He said that it’s challenging to persuade publicity-shy ransomware victims to post positive reviews. “For the most part, nobody wants to write a review online,” he said. “You don’t tell anybody that you got hacked.”He said that he couldn’t recall when he was attacked by ransomware, or by which strain. “I’m a marketing guy, not a cybersecurity expert,” he said. He agreed to send us the ransom note but never did.After defending the reviews, MonsterCloud on Tuesday removed them from its website.Storfer soon realized that neither his co-workers nor his bosses, brothers Victor and Mark Congionti, had much expertise in writing computer programs to disable ransomware. Before they started Proven Data, Mark Congionti had been a substitute math teacher. Victor Congionti had a more technical background — he had worked as an IT security analyst for an insurance company — but his passion was electronic dance music. Victor was building a side business as a disc jockey and rarely came to the Proven Data office, which was then in Mark’s house in White Plains, New York, Storfer said. The company moved this past March to an office building in Elmsford.A 2016 resume posted on an archived version of Victor Congionti’s personal webpage said his roles at Proven Data included adding “to existing customer profitability” and “developing new business and strategic partnerships.” In his profile on a roommate-search website, he describes himself as a “foodie,” “fitness junkie” and “party person” who works from home. He told ProPublica that he is no longer a partier now that he has a 4-year-old son and is going to college to study electronic music production.“We are not coders,” Victor Congionti acknowledged. He said Proven Data uses its network “to research any emerging ransomware variants and the potential for cracking encryptions.”Richard Moavero, Proven Data’s client services manager, said that Mark Congionti is more involved than Victor in running the company day to day, including negotiating with hackers. “Mark’s really cool about it,” Moavero said. “If it was up to me, I’d punch them through the computer. His demeanor is really good in dealing with these people. Just the way he doesn’t get flustered. … He’s able to take the emotional part out of it.”The Congionti brothers established Proven Data around 2011 primarily to recover information from broken hard drives and cameras and other hardware. As ransomware proliferated, and calls poured in from prospective clients seeking help releasing their encrypted files, the business model shifted, according to Victor Congionti and a review of the company’s archived web pages.During his year and a half at Proven Data, Storfer fielded hundreds of these calls. He took a “don’t ask, don’t tell,” approach to informing clients that Proven Data would pay their ransoms.
We’re Reporting on Ransomware. Do You Know Something About an Attack?
by Renee Dudley and Jeff Kao Ransomware is a form of extortion in which hackers lock computer files until victims pay money to regain access to their networks. Attacks have targeted individuals, large public companies, government agencies and nonprofit institutions such as hospitals.If you’re hit by ransomware and don’t have backups, there’s usually little you can do other than pay the ransom. Companies that say they can recover your files with their own technology often just pay the ransom and charge you a fee on top of it.While ransomware is one of the most common types of cybercrime, victims often don’t report attacks. As a result, federal crime statistics drastically underestimate its prevalence and impact. ProPublica is trying to go beyond the numbers. If you have inside knowledge of ransomware, or if your organization has been attacked, please fill out the questionnaire below. Fill out our form.
At Chicago’s City Council, Committees Are Used to Reward Political Favors and Fund Patronage
by Mick Dumke The Chicago City Council’s Transportation Committee has an annual budget of more than $467,000 to cover expenses related to its work on legislation and government oversight.But little of that work was on display during the committee’s March 6 meeting.“Fairly quick agenda this morning,” the committee chair, Anthony Beale, said at the start. He and the six other aldermen then ran through its 70-page agenda in about 23 minutes, approving dozens of ordinances that dealt with hyperlocal administrative matters such as signs, awnings, light fixtures or sidewalk cafes for particular addresses.That was typical for Beale’s committee. While it rarely does in-depth legislative work, the committee and its budget have been far more valuable for Beale as perks. Beale, alderman of the far South Side 9th Ward, has used committee funds to hire employees — eight were on the payroll as of December — though he acknowledged they don’t spend all their time on committee work. He’s spent Transportation Committee money on his own transportation, including payments on a Chevy Tahoe SUV and thousands of dollars in parking expenses. And committee funds have gone toward furniture for his City Hall office, including a bourbon cherry wardrobe cabinet, according to records obtained under the Freedom of Information Act.The Transportation Committee isn’t an outlier.At great cost to taxpayers, the City Council’s 16 legislative committees are the heart of a favor-trading system that’s enabled mayors to rule like monarchs distributing favors to loyalists. At the same time, the committees have failed to provide even basic oversight of city government.Many meet infrequently, and when they do, they frequently rubber-stamp agendas in a matter of minutes — often without a quorum of half the members. The budgets for the committees added up to $5.8 million in 2018, but the amount each committee receives is not tied to the volume of legislation it reviews or the regularity of its meetings.Instead, funding appears more closely aligned with tradition and the clout of the chairs. Dive Deeper Into Our Reporting Our newsletter is written by a ProPublica Illinois reporter every week Discover what makes Illinois tick from our team of investigative journalists covering the state. Delivered every Friday. Chicago aldermen have also made it almost impossible for the public to see what they’re up to. Committee meeting schedules are posted online and meetings are open to the public, but they’re not broadcast, recorded or transcribed — unless a chair makes arrangements.The topper: The council has passed laws to make sure committee operations are kept from any oversight. In 2016, aldermen voted 25-23 to kill a proposal to allow the city’s inspector general to investigate and audit the council. Aldermen then passed a substitute ordinance that explicitly blocked the inspector general from looking into many council functions, including committee spending. Mayor-elect Lori Lightfoot, who will be sworn in with aldermen on Monday, has called for changing the law so the inspector general can audit the council and its committees. She and key aldermen continue to negotiate over who will lead the committees. As current chairs maneuver to hold onto power, reformers say it’s time for significant changes.City Inspector General Joe Ferguson said Lightfoot and the new council face an urgent need to open the books and bring accountability “with respect to budgets, expenditures, staffing and operations at both the whole Council and Committee levels.”“Government cannot fully escape corruption, mismanagement and waste without accountability,” Ferguson wrote in a statement responding to ProPublica Illinois’ findings. “That applies as equally to a legislative body as it does an executive, and even more so in Chicago, with its history of a weak, compliant City Council most noted for a decades-long trail of corruption. At this moment in the City’s history, both the public and the incoming Mayor desperately need a productively engaged City Council that fully inhabits its legislative oversight responsibility.”In most legislative bodies, members pick their own leaders and committee chairs. The Chicago City Council’s rules say that’s what aldermen should do as well. For decades, though, the mayor has picked council committee chairs. It’s no secret at City Hall that only aldermen who support the mayor’s initiatives are rewarded with the posts, though they often claim otherwise. As Alderman Walter Burnett Jr. tells it, he was shocked when, in 2007, former Mayor Richard M. Daley offered to make him chair of the Special Events Committee. Burnett had never led a committee before. And he had been pushing an affordable housing plan that was more aggressive than the mayor wanted.“I thought there might be a hit out on me,” Burnett joked. Instead, Daley came up with a watered-down affordable housing plan. After Burnett signed on, “the next thing I knew, I got a committee.”Despite their back-and-forth over affordable housing, Burnett had supported almost all of Daley’s agenda, including the mayor’s plan to demolish dozens of public-housing buildings and replace them with mixed-income developments.In 2011, Rahm Emanuel campaigned for mayor on a promise to rid City Hall of corruption. He even suggested he might replace Ed Burke, the dean of the City Council, as chair of the Finance Committee, the council’s most powerful. Once in office, Emanuel eliminated three other council committees and shaved funding for others.But soon after, the city’s annual budgets — proposed by the mayor and approved by aldermen — began boosting the money available to committees again. By 2017, the council committees were spending more than when Emanuel became mayor. Emanuel also let council insiders stay on as committee chairs — including, most notably, Burke — so he could count on their help advancing his agenda. Some loyalists got promotions. In 2013, for example, Emanuel shifted Burnett to the Traffic Committee, which had an annual budget of about $215,000, a bump from the $155,000 he had to spend as Special Events Committee chair. The Traffic Committee budget has since grown to about $249,000.Emanuel’s chosen committee chairs have proven to be reliable supporters. Two of the current chairs sided with the mayor on 93% of divided council roll call votes from 2017 to 2018 — and those are the most independent voting records of any of the committee leaders. Burnett and five others voted with Emanuel 100% of the time, according to a study by political scientists at the University of Illinois at Chicago.The committees are valuable because of a simple fact: Like most public officials, every alderman would like more staff and money to work with.For years, the city’s annual budget — approximately $10.7 billion for 2019 — has allocated funds for each alderman to hire three aides. Most aldermen say that’s not enough to manage their daily barrage of constituent service requests, let alone to prepare for their jobs as legislators.Aldermen have a limited number of options for adding staff. They can try to cut office expenses and spend more money on employees. They can also use campaign funds to hire more people, the approach taken by Brendan Reilly of the downtown 42nd Ward.That’s not easy for most aldermen, especially those who struggle to raise money.Chairing a committee offers another possibility. Committee staff members are exempt from city rules meant to prevent political hiring and firing, which means the chairs can fill the jobs any way they want, for any reason.Tom Tunney, the current chair of the Special Events Committee, said he needs extra help to keep up with constituent needs in his busy ward, the 44th, based on the North Side’s Lakeview neighborhood.He acknowledged that most of the legislation his committee oversees — concerning festivals, cultural events and other matters connected to the arts — comes from the mayor’s office and the Department of Cultural Affairs and Special Events. The committee had three employees as of December, but since they only spend about a week each month preparing for committee meetings, Tunney also assigns them to help with issues in his ward.“Do they just work on committee stuff? No,” Tunney said.Tunney conceded it’s not fair that committee chairs essentially get more help to take care of their wards. But he’s also skeptical of proposals that would require committee employees to limit their work to committee matters, because he doesn’t think they would have enough to do.“I wouldn’t agree with that because practically; I want my people working all the time, given my workaholic nature,” he said. Last month, Tunney said he would like to be considered for Finance Committee chair after the new council is sworn in on Monday, and other committee chairs are lining up behind him.Burnett said he, too, counts on committee staff to help with ward matters. At the end of 2018, he had eight employees on the Traffic Committee payroll.“It helps you with your ward, especially if you’ve got a ward like mine,” said Burnett, whose 27th Ward includes parts of the near North and West sides that have boomed with development over the last two decades. “I get everything from yuppies worried about permit parking to people [dealing with] sewage. It’s never ending. … So the extra staff people help, and they do dual roles. Everybody works on the ward and everybody works on the committee, too.”Burnett said his committee employees put in a lot of work to prepare for the committee’s meetings. But that wasn’t evident when it convened on March 6.Several minutes after the meeting was scheduled to start, the chairman’s seat was still empty. So were most of the seats around them. Only four of the committee’s 16 members had shown up.Finally, an aide to Burnett got a call on his cellphone and waved Marty Quinn over. Quinn, alderman of the 13th Ward on the Southwest Side, appeared taken aback for a moment. Then he understood: Burnett wasn’t going to show. Quinn was going to have to lead the meeting.Under City Council rules, at least half of the members of a committee need to be present for a quorum. But neither Quinn nor the other three aldermen noted that they were four short. Quinn gaveled the meeting to order and moved to pass the first 19 proposed ordinances on the committee’s 12-page agenda.“All those in favor?”“Aye!” the other three aldermen said in unison.“In the opinion of the chair, the ayes have it,” Quinn said.As is usually the case with the Traffic Committee, each of those ordinances concerned parking restrictions, loading zones or traffic signs for single addresses or streets. And if the local alderman has approved, the committee signs off.In a series of rapid-fire motions and choruses of “aye,” Quinn and his three colleagues ran through the next 10 pages of ordinances with no discussion or break in their rhythm.All told, the meeting took less than three and a half minutes. The public has no ready way to see how many people are hired by the committees or what they do. Annual city budgets allocate money for committee staff. But only the budget for the Finance Committee specifies the number or titles of committee employees, giving the other committee chairs the power to use those funds as they see fit.At the end of 2018, council committees had a total of 133 employees, according to city payroll records. That’s 108 more than were listed in the city budget approved by aldermen and released to the public. Most of the employees are listed in payroll records as “legislative aide.”The Finance Committee has long had the largest committee budget, as well as the broadest jurisdiction, including city bonds, taxes, legal settlements and privatization deals. It also housed the city’s workers’ compensation program. In January, Burke, its longtime chairman, was charged in federal court with attempted extortion; Burke has denied any wrongdoing. Emanuel then had Burke deposed as finance chair and moved the workers’ comp program to the city comptroller’s office. For years, the Finance Committee’s accounting was even more opaque than other committees’. According to the city budget, the Finance Committee had a 2018 budget of $2.3 million, which included the salaries of 25 employees. But expense records show that Burke had access to far more money and workers. Burke kept between 61 and 78 people on the payroll at different points in the year, costing a total of about $3.4 million in worker pay. Employees listed as full time were paid salaries ranging from about $21,000 a year for a legislative aide to $171,000 for the chief administrative officer of the workers’ comp program.Following the Finance Committee money gets tricky fast. In addition to money allocated for the committee, Burke also paid workers out of funds he controlled in other city departments. One employee was paid out of the budget for the Fire Department’s workers’ compensation costs; others were covered out of allocations for “investigation costs” buried deep within the budget.At least four employees were paid from multiple funds during the course of the year.Last December, the Finance Committee transferred $862,000 from its reported expenditures to the balance sheets of other city departments. The end-of-the-year accounting maneuver came after Burke’s staff said some employees assigned to the committee should have been paid out of funds available for the workers’ compensation program. The spending records don’t show what the employees’ duties were.The complicated money flow — and lack of oversight — put Burke in the enviable position of being able to dispense favors and largesse to other aldermen. For years, he essentially loaned employees to other aldermen who needed help, as WTTW reported in March. On occasion, the Finance Committee paid expenses for other aldermen, such as when it reimbursed 40th Ward Alderman Pat O’Connor about $2,900 total for travel to conferences of the National League of Cities in Nashville in 2015 and Kansas City the next year. O’Connor did not respond to a request for comment.From 2015 to 2018, the Finance Committee also paid more than $46,000 to cellphone provider Verizon Wireless. Invoices don’t provide details about the account or why the bills were so high.Burke didn’t respond to requests for comment.As chair of the Committee on Committees, Rules and Ethics, 8th Ward Alderman Michelle Harris oversees council procedures and has the power to decide which legislation is assigned to which committees, or to hold up legislation altogether. “I do everything I can to be aboveboard and be transparent because I am the rules chair, but every now and then it doesn’t work out that way,” Harris said in an interview.In April 2018, $8,820 in committee funds went to pay a South Side company to print and mail an 8th Ward newsletter, according to a copy of the invoice obtained from the city under the Freedom of Information Act.Harris said the mailing was focused on city services and wasn’t political, but she conceded it should have come out of her ward account. She blamed the error on a new employee and promised to “have her re-trained.” Harris also wondered why city finance officials didn’t catch the mistake.“What I’m further concerned about is that it wasn’t flagged anywhere along the process,” she said.Between 2015 and 2018, Harris paid $82,000 in Rules Committee funds to The Salient Group, a downtown firm, for what was described in a February 2018 invoice as “PR Consulting.”Harris said Salient’s president has attended committee meetings and helped Harris respond to news coverage about her role as chair, such as criticism that she has buried legislation when it was opposed by Emanuel and his allies.“I’ve gotten torn up on by some people, so I’ve had to come up with a strategy about how to deal with those issues,” Harris said. Asked if all of the PR work was connected to the committee, she said, “You are 10,000% correct.” Beale, chair of the Transportation Committee, also dipped into committee funds for public relations.Beale became the committee’s leader after a slow, steady climb up the City Hall ladder. In 2007, Daley picked Beale to lead the council’s Landmarks Committee. Its previous chair, Arenda Troutman, had been charged in federal court with taking a bribe and then lost her reelection bid.Three years later, Daley moved Beale to the helm of the Police and Fire Committee, which had a larger budget. When Emanuel was elected mayor in 2011, he shifted Beale to chair the Transportation Committee.The new post was another boost for Beale. The Transportation Committee has an annual budget more than twice as large as his old committee’s. And most of its work consists of rubber-stamping hyperlocal administrative ordinances. Between 2015 and 2018, 99% of the ordinances introduced to the committee were passed, records show, typically without discussion or debate.In addition to putting eight employees on the payroll, Beale used committee funds to pay $15,000 in 2015 and 2016 to the public relations firm MK Communications for “professional services,” including “project strategy, planning and management, media, writing and editing,” according to invoices.Another $13,000 went to Rightsize Facility, an office furniture company, for items that included a bourbon cherry wardrobe cabinet delivered to City Hall, records show.Beale also used committee funds to pay for a car and parking costs. More than $9,000 went to GM Financial Leasing for a 2015 Chevy Tahoe SUV, records show. Another $11,000 covered parking expenses.Pointing to the committee’s 70-page agenda after its March meeting, Beale said all his committee staff positions are needed.“That’s a lot of work, man,” he said.But Beale said those employees don’t limit their work to committee matters.“I mean, people call downtown for a city service, of course they’re going to serve the people,” Beale said. “I’m not going to tell a [committee] staff person, ‘This is an aldermanic call, someone calling to have a street light put on,’ and transfer that call. You take care of that city service. You’re still doing a service to the public.” Marilyn Katz, the president of MK Communications, said her firm works on a range of issues with Beale. They include matters before the committee, such as taxi regulations, as well as ward issues such as housing and the opening of a Whole Foods store. She said she couldn’t comment on the committee expenditures but would ask Beale.The alderman didn’t respond to that or other requests for comment about committee spending.In recent weeks, Beale has been among the council chairs lining up support from colleagues to hold onto their committee posts. They’ve also been working to block 32nd Ward Alderman Scott Waguespack, a Lightfoot ally and head of the council’s Progressive Caucus, from becoming the next chair of the Finance Committee.Perhaps the highest cost of the current committee system is the hardest to measure: the failure of the City Council to provide oversight of city government and, when necessary, serve as a check on mayoral power. More than a dozen people were reportedly shot over the first weekend of April — a number that’s not unusual in Chicago as the weather warms up. But the city’s ongoing struggles with gun violence were not mentioned during the April 8 meeting of the Committee on Public Safety. Just one item was on the agenda: an ordinance that would temporarily allow helicopters to land near McCormick Place so they could be exhibited during the upcoming convention of the International Association of Chiefs of Police.The committee rarely holds discussions of crime trends or policing strategies. That’s been true even within the last year, as aldermen have drafted and introduced proposals to create community oversight of the police department. After one proposal sat in the committee for two years, aldermen shot it down last fall. The committee chair, Alderman Ariel Reboyras, of the 30th Ward, hasn’t held votes on other proposals.Last October, 20 aldermen signed a letter asking Reboyras for a hearing on a report from the office of the city inspector general that found police officers assigned to city schools lacked proper training, standards and accountability. Reboyras hasn’t called that hearing either.From 2015 through 2018, 12 of the 25 ordinances approved by the committee concerned donations of used fire trucks and other vehicles to nonprofit groups or towns in Mexico, Puerto Rico or Argentina. The committee also considered 25 mayoral appointments to city boards. It approved all but one. Only six of the committee’s 19 aldermen were present for its April 8 meeting, well below the 10 needed for a quorum. Once again, no aldermen asked for a quorum vote, so the meeting continued.The committee members had just two questions about the helicopter-landing proposal. Had it been done before? Yes, a police sergeant told them — in 2011 and 2015, when the police chiefs last held their conference in Chicago.Reboyras, the chair, asked the other question: “Where was the previous conference held?”Orlando, the sergeant told him.With that, the committee voted unanimously to approve the ordinance. The meeting lasted about five and a half minutes.As of the end of last year, the committee had two employees, records show. But Reboyras didn’t want to talk after the April meeting about their responsibilities.Asked if they spend all their time on committee work, he said, “What are you trying to get at?” Asked again if the committee staff do work in his ward, Reboyras said, “Yes, they do,” and walked off.
Did You Pay to Use TurboTax? Help Us Hold the Tax Prep Industry Accountable.
by Ariana Tobin, Justin Elliott, and Meg Marco We’ve heard from hundreds of people who said they paid to file their taxes even when they were eligible to file for free. These reader tips have been incredibly helpful in getting the truth out about how Intuit, the maker of TurboTax, manipulates users into using a paid product and lies to customers who then ask for refunds. Many of these stories came from Americans who really needed the money.We’re nowhere near finished with this reporting. To that end, we’ve created this brief questionnaire to collect as many of your stories as possible. If you used TurboTax, we’re interested in hearing about your experience. If you’ve asked for a refund, you can let us know what happened or upload audio of the call below. At the moment, we would particularly like to hear from active-duty service members and military families who used TurboTax. If that’s you or anyone in your community, we’d love it if you would pass this along. Anyone who is an active-duty service member should be able to use TurboTax for free if they made under $66,000.Thanks in advance for your help.And if you work for Intuit, TurboTax or elsewhere in the tax prep industry, we’d love to hear from you too. We’ve got another questionnaire for you.
KentuckyWired: Our Rural Broadband Investigation, Explained
by Alfred Miller, Louisville Courier-Journal Kentucky’s ambitious plan to improve high-speed internet access across the state is years behind schedule and more than $100 million over budget. Naturally, taxpayers have questions. Here are some answers.What Is KentuckyWired?Kentucky wants to drape more than 3,000 miles of fiber-optic cable across the state. The high-speed network is supposed to connect about 1,000 government sites to one another and to the internet. The cable, organized in six massive loops, won’t connect directly to individual homes and businesses. But the state is banking on indirectly supporting the spread of high-speed internet by selling third-party internet service providers access to the new network, which is called KentuckyWired.When Did This All Get Started?Efforts to wire up individual communities have sprouted up for years in individual Kentucky communities. Eastern Kentucky’s Peoples Rural Telephone Cooperative, for example, installed high-speed fiber-optic lines within reach of every home and business in Jackson and Owsley counties using federal stimulus money made available in 2010. But a statewide version wasn’t introduced until Kentucky solicited bids for the KentuckyWired public-private partnership in July 2014. A team led by Macquarie, an Australian investment bank, won the bid in December 2014. Negotiations continued into the closing weeks of the administration of former Gov. Steve Beshear until a final deal was signed in September 2015. Sign Up for the Miswired Newsletter This story is part of an ongoing investigation into what went wrong with KentuckyWired. Sign up for the Miswired newsletter to receive updates in this series as soon as they publish. Who Supported This and Why?Initially, KentuckyWired won bipartisan support. Beshear, a Democrat, and longtime U.S. Rep. Hal Rogers, a Republican, pushed the project as a way to jump-start Kentucky’s rural economy. Lawmakers were told that Rogers would secure $20 million in federal grants and the state would only have to put up $30 million, at no additional cost to Kentucky taxpayers. The state would simply shift what it was already paying companies like AT&T for internet service to the team led by Macquarie that was building and operating the new state-owned network.Who Raised Red Flags?The Kentucky Department of Education warned Beshear administration officials that strict federal procurement rules would likely disqualify the project from taking from AT&T about $13 million that Kentucky schools paid annually for internet service, part of a federal program known as E-rate that subsidizes broadband access in public schools and libraries. Then-Commissioner of Education Terry Holliday warned Finance and Administration Cabinet Secretary Lori Flanery that KentuckyWired couldn’t qualify as early as February 2015, according to a June 2015 email on which was copied Mary Lassiter, Beshear’s former cabinet secretary. Flanery and Lassiter ignored the warnings, state Auditor Mike Harmon said in his September 2018 report on the project. When the state issued a new bidding solicitation on school internet service in October 2015, AT&T lodged a protest. Less than a month later, the state canceled the solicitation. Suddenly, KentuckyWired had a 45% funding gap.What Else Went Wrong?As negotiations dragged on during 2015, the state quietly agreed to assume most of the risk for the public-private partnership. Kentucky is providing Macquarie with a steady stream of payments adding up to $1.2 billion over 30 years. But the state agreed to make those payments regardless of whether the network was generating revenue from the sale of access to third parties — something that still hasn’t begun.And it agreed to cover the cost of unforeseen circumstances that experts say it probably should have foreseen. For example, the state promised to get the permission of AT&T, KentuckyWired’s primary competitor, to hang cable from some 12,000 utility poles the telecom giant owns in the state. It promised to do that in less than a month or pay penalties to the Macquarie team. In the end, it took more than seven months to get the necessary agreements.In February 2019, the state finalized a settlement that pays Macquarie and its partners $93 million for that delay and others, and pushes back the project completion date two years to late 2020.What Is Gov. Matt Bevin Doing to Get KentuckyWired Back on Track? Bevin administration officials have been sending mixed messages about the project from Day One. At first, Bevin said he would scale back KentuckyWired. But after meeting with Rogers, he said he had solved the project’s funding problems without saying how. Bevin’s cabinet secretary Scott Brinkman says the project is “on the cusp” of generating revenue. But Bevin’s technology chief, his old Army buddy Chuck Grindle, who makes clear he does not directly supervise the project, has publicly disdained it. His job gives him the power to direct millions in state business annually away from KentuckyWired to other vendors.What Are the Implications for the Governor’s Race?Candidates for governor of both parties are now using KentuckyWired to bash Bevin. House Minority Leader Rocky Adkins, D-Sandy Hook, said Bevin’s “lack of commitment to keep it on schedule” has damaged the project, while Democratic candidate and former state Auditor Adam Edelen said Bevin “doesn’t care” enough to fix the project. The campaign manager for Attorney General Andy Beshear, the son of the former governor, called for “working together across party lines.” And state Rep. Robert Goforth, R-East Bernstadt, a challenger to Bevin for the Republican Party’s nomination for governor, said Bevin should have killed the project years ago and has much to learn from the Peoples Rural Telephone Cooperative broadband project in Jackson County, which Goforth represents.
The Country That Exiled McKinsey
by Ian MacDougall, ProPublica, and Anand Tumurtogoo for ProPublica In 2010, amid a historic commodities boom fueled by the explosion of China’s economy, international companies began turning their attention to Mongolia as it opened its vast deposits of coal and copper to commercial exploitation. Mongolia, which is located on China’s northern border, stood to make prodigious sums of money if it could sell that copper and coal to its resource-hungry neighbor.To make that happen, Mongolia concluded that it needed to lay thousands of miles of railroad tracks. Such a project would cost billions of dollars and throw off hefty fees for construction companies, banks, law firms and consultants of various stripes. The consulting contracts alone could be worth tens of millions over a decade. And if the railroad expansion worked out, there’d be even more opportunities after that. McKinsey & Co.’s logo at an office building in Zurich, Switzerland. (Arnd Wiegmann/Reuters) McKinsey & Co., the global consulting behemoth, was interested. In the fall of 2010, Jimmy Hexter, a senior partner at the firm, began talking with Mongolia’s government about the railroad project. Hexter had spent decades in the region, at one point running McKinsey’s office in Beijing. He was a veteran of multiple infrastructure projects in Asia, a global leader of the firm’s infrastructure practice and enthusiastic about Mongolia’s potential.Operating there required unusual caution. Earlier in 2010, the U.S. State Department had issued a warning. Corruption was on the rise in Mongolia, the State Department explained, and U.S. enterprises needed “measures in place to detect and prevent” it. In a section titled “current views on Mongolian corruption,” the first problem cited was a “blurring of the lines between the public and private sector brought about by systemic conflicts of interest at nearly all levels.”A year after that warning was published, Hexter and McKinsey did exactly what American diplomats had cautioned could be risky: The firm signed a consulting agreement with a government entity even as the government adviser who brought McKinsey into the project also landed a piece of the same contract for his own private company.McKinsey acknowledges that it did not vet the adviser or his company in any formal way. The adviser, Chuluunkhuu Ganbat, played a central role in shaping the country’s rail expansion. Mongolia’s state-owned rail company hired a team assembled by Ganbat, with McKinsey playing the leading role, to conduct an analysis of whether the railroad plan was feasible. McKinsey’s payment was little more than an introductory fee by the firm’s standards — $4 million — but the contract spelled out that McKinsey would be eligible for more lucrative multiyear contracts if the project progressed.The railroad expansion quickly went bad. Construction stalled amid financial problems and political uncertainty. By 2015, Mongolian police were investigating claims of widespread embezzlement and fraud. McKinsey was drawn into the investigation, with authorities ordering the firm to hand over records related to the project. Get Our Top Investigations Subscribe to the Big Story newsletter. Don’t miss out on ProPublica’s next investigation. Sign up and get the Big Story email whenever we break news. The scrutiny rattled McKinsey enough that its then-head of Asia operations, Kevin Sneader, went above the heads of investigators. Shortly after police approached the firm, he wrote to Mongolia’s prime minister without copying the investigators. He insisted the firm had done nothing wrong and is “committed to the highest professional and ethical standards.” The letter suggested that Mongolia’s commercial prospects might be better served if McKinsey were a partner. It cited the prime minister’s “strong interest in promoting U.S.-Mongolian business ties and growing third-neighbor investment in Mongolia.” Later in the letter Sneader offered to “discuss with you in more detail our firm’s desire to further contribute to the Mongolian economy or our work in Mongolia to date.” McKinsey says its letter had no inappropriate purpose. Sneader has since become the global managing partner of McKinsey, the firm’s highest position.Mongolian prosecutors did not charge McKinsey. But the case and the events that led up to it, which have never been reported apart from limited articles in the Mongolian press, are part of a disturbing pattern for the consulting giant. The Mongolia episode bears a striking similarity to the firm’s actions in South Africa, where McKinsey reaped a global wave of bad press, parliamentary scrutiny, client defections and criminal referrals after briefly working alongside an unvetted company that had close ties to scandal-plagued associates of that country’s president. The firm’s operation in Saudi Arabia was also criticized in recent years for hiring the children of government officials, an act that could potentially run afoul of American anti-corruption laws. McKinsey has denied wrongdoing in both cases.The Mongolian project raises questions about McKinsey’s compliance with the Foreign Corrupt Practices Act, or FCPA, according to legal experts. One red flag was a government official doubling as a profit-seeking business partner. Then there’s the allegation by Mongolian prosecutors that the contract value was increased to $5.65 million from the $4 million they say the McKinsey team had requested. Assuming the prosecutors are right, said Alexandra Wrage, president of TRACE International, which works with companies to help them comply with anti-corruption laws, “the only reason government officials and their cronies do that is so money can be kicked back to them.” Kevin Sneader, McKinsey’s global managing partner, speaks onstage in Oxfordshire, England, in November. (John Phillips/Getty Images for The Business of Fashion) McKinsey’s absence of due diligence wouldn’t necessarily shield it from potential culpability, experts say. The FCPA “specifies that engaging in willful avoidance is the same as an affirmative act,” said Thomas Fox, a veteran lawyer who advises companies on how to comply with the law.McKinsey has not been accused of violating the FCPA. It says it acted legally. “We took legal advice throughout the course of the negotiations and project,” a spokesman said. “We have seen no evidence that McKinsey personnel were involved in or aware of any corruption in connection with this project.” The firm says its work “delivered significant value and impact to our client” and was “important for the country’s development.” In a separate statement, the firm added, “This project was completed nearly a decade ago. Since then, consistent with our commitment to continuously improve our approach to risk and governance, we have strengthened a number of our policies at a global level, including those governing how we serve public sector and state-owned clients and where we partner with other firms in client work.”Corruption charges were ultimately filed against three people involved in the railroad project: the country’s former transportation minister, the ex-director of the state-owned railway company and Ganbat. The men misused their positions to profit illegally off the McKinsey contract, prosecutors alleged: steering the contract to McKinsey’s team, ensuring that the consulting team include Ganbat’s private company and then increasing the contract’s value by $1.65 million. Ganbat also faces corruption charges tied to a later contract where his company was paid to help raise financing for the railroad. The three men have denied the allegations and called them politically motivated.In two lengthy interviews, Ganbat insisted that his relationship with the Transportation Ministry was at arm’s length. “Even though we were inside the ministry, we were really the external team,” he said. “And that, I think, has caused a lot of confusion. They were perceiving that I was a government employee.”This account of McKinsey’s Mongolia dealings is based on hundreds of pages of government, financial and McKinsey documents reviewed or obtained by ProPublica and interviews with more than two dozen current and former Mongolian officials, ex-McKinsey consultants and people familiar with the firm’s work in the country.Officially, the railroad-related corruption case remains open. But a key change occurred in the summer of 2017: One of the three men charged in the case, former Transportation Minister Khaltmaa Battulga, was elected president of Mongolia. Viewed by critics as autocratic, he has taken steps to torpedo the case.The political change has also benefited McKinsey. The firm had found itself unofficially barred from doing business in Mongolia for more than a year as a result of the railroad case. The government has since permitted it to operate in the country again, and Battulga’s election ensures that will continue. He remains a devoted fan of McKinsey.Before he ran for office, Battulga, now 56, was one of Mongolia’s wealthiest businessmen and a distinctive personage. A barrel-chested sambo wrestling champion, he has long cultivated a tough-guy persona. He was so taken with Francis Ford Coppola’s “Godfather” films that he took to wearing a Borsalino fedora and named his holding company Genco, after the front company set up by Vito Corleone. The Mongolian Genco owned a nightclub, a taxi service, a lottery and a meat-processing plant, among other things.Battulga’s swagger would prove appealing to Mongolian voters, but it could come across as thuggish and off-putting to international investors. Ganbat became a key ambassador to that world. He had returned to Mongolia after eight years in the United States, where he had attended graduate school and worked at Commerzbank in New York. Ganbat offered business polish and finance bona fides. He was young and handsome, with a charismatic smile. He dressed in sleek suits, spoke excellent English, and came across as savvy and refined. He would quickly become a close and trusted confidant to the minister. Mongolian President Khaltmaa Battulga addresses the Eastern Economic Forum on Sept. 12, 2018, in Vladivostok, Russia. (The Asahi Shimbun via Getty Images) Then-Transportation Minister Battulga appointed Ganbat, 35 at the time, as an adviser in September 2009 and tasked him with laying the groundwork for constructing the new railroad and other infrastructure projects. By spring 2010, Ganbat was flying to Europe as a government representative to drum up interest in the railroad among investors.Even as Ganbat undertook his public role, he also formed his own company, Liberty Partners, on the side. Ganbat assembled a small staff of young Mongolians like himself, educated abroad, with backgrounds in finance. They, too, had dual roles, serving both the Transportation Ministry and Ganbat’s profit-making endeavors. “The ministry did not have the necessary talent and skill set to develop these projects,” he said. “The ministry was basically piggybacking on us getting the government job done.”In the fall of 2010, a mutual acquaintance introduced Ganbat to Hexter. The interests of the two men aligned. Hexter was hunting for infrastructure consulting contracts in Mongolia. Ganbat and Liberty Partners were putting together a team with an eye toward obtaining consulting contracts from the MTZ, the Mongolian government-owned company responsible for building the new railroad. Ganbat had already recruited the U.S. law firm Pillsbury Winthrop Shaw Pittman and the French bank BNP Paribas. (Pillsbury and BNP did not respond to requests for comment. Hexter, who left McKinsey in 2014, did not reply to interview requests and questions emailed to him.)The first contract up was for a feasibility study, an analysis of whether and how the railroad could be built and operated in a cost-effective way. It was four months of work, but more important, a chance to build an ongoing relationship. The contract specified that McKinsey could become a general adviser for the railroad project after the feasibility study was complete.A small initial assignment followed by an ongoing role is typical, according to “The Firm,” Duff McDonald’s 2013 history of McKinsey. “Once they get the wedge end of a relationship into a company in the form of one engagement, they usually manage to hammer in the rest,” he wrote. “To wit: They never leave.”For much of its 93-year existence, McKinsey was a modest-sized partnership focused on its role as counselor of top executives at giant multinational corporations. Partners prided themselves on turning down business they felt was beneath the firm.But as the Cold War’s end opened new markets worldwide, McKinsey reoriented its priorities toward aggressive expansion. Between 1989 and 2019, the firm vastly enlarged its global footprint, from offices in 44 cities across 23 countries to offices in more than 130 cities spread across 66 countries today. McKinsey reported $10 billion in revenues last year.To sustain that kind of growth, McKinsey had to push into less familiar territory, like Mongolia, and into sectors, like government contracting, that the firm had traditionally eschewed. Government contracts often require more disclosure, bring more scrutiny, and are subject to more rules than corporate ones. “McKinsey has grown to the point that it is taking on work that prior incarnations of the firm would have turned down due to the political risk involved,” a former McKinsey consultant wrote in an anonymous recent essay in the magazine Current Affairs. Mongolia offered opportunities in two sectors: infrastructure and mining. The country had recently undertaken to excavate massive coal and copper deposits buried beneath the Gobi Desert. Headlines in the international press were trumpeting what they called “Minegolia,” and the government was planning several major infrastructure projects to capitalize. McKinsey had already found its way into the mining sector, advising the Mongolian government on privatizing state-owned mines. Now, Ganbat offered a foothold in infrastructure.The railroad project would take years to complete. The plan envisioned laying nearly 3,500 miles of rail across an area more than twice the size of Texas. It was harsh and undeveloped terrain, a plateau of desert and steppe roamed by Bactrian camels and yurt-dwelling herders.Even apart from the U.S. government warning, there were reasons to proceed with extra caution. Government infrastructure projects in resource-rich nations are notorious hotbeds of corruption, and Mongolia already had a bad reputation. It earned poor marks on Transparency International’s Corruption Perceptions Index. On a scale ranging from 10 (“very clean”) to 0 (“highly corrupt”), Mongolia scored a 2.7, making it a tiny notch more pristine than Azerbajian, but dirtier than Kazakhstan.The greatest source of concern for McKinsey, legal experts say, ought to have been Liberty Partners, a new company run by a government adviser. According to a U.S. Justice Department manual on the FCPA, a prospective local partner owned by a foreign official raises “red flags that warrant significant scrutiny.” Even a local partner “closely associated with” a foreign official is a red flag.Liberty came with a second warning sign, experts say. It wasn’t paid upfront for assisting the government in the railroad project. In exchange for that, the ministry gave Ganbat’s company the right to obtain pieces of the contracts awarded to foreign consultants, which is what ended up happening when Liberty partnered with McKinsey. “I have not ever seen that situation, where someone is representing a government and not being paid, with the expectation of receiving contracts on the backend,” said Fox, the FCPA specialist.The arrangement aroused suspicions in the Mongolian government at the time. “It felt shady,” said one former official. “If you’re an adviser to the minister, you have to deal on behalf of the country. You shouldn’t be fronting for some company.”Ganbat says he resigned his position as Battulga’s adviser in the fall of 2010, before the government’s contract with Liberty and McKinsey became effective. But a letter accepting the resignation is dated months after they teamed up and two weeks after the MTZ was authorized to hire McKinsey’s team. People who worked and dealt with Ganbat at the time say he continued to operate as the top railroad adviser. (Initially, McKinsey told ProPublica it couldn’t tell what its consultants knew about Ganbat’s government role. But after ProPublica raised questions about his resignation, the firm said Hexter believed Ganbat had resigned before work began on the feasibility study.)Documents and interviews confirm that Ganbat was, in fact, a government official. The Mongolian law under which Ganbat was appointed designates advisers like him public servants responsible to the Transportation Ministry. He had a Transportation Ministry email address and phone number. He introduced himself as “Minister Battulga’s chief representative on railway,” according to Mark Fung, an American lawyer who represented a group of Chinese investors.Michael Koehler, a law professor at Southern Illinois University specializing in anti-corruption law, said, “If he had a government email address and was acting on behalf of the Mongolian government, DOJ would consider that person to be a Mongolian official himself.”Despite the risks Ganbat’s government role posed, McKinsey made no effort to investigate him and his company before embarking on the project together. “Under standard best practices, what McKinsey would do is take a deep dive into” Ganbat, given his mix of public and private roles, said Fox, the FCPA lawyer. That would include a review of business and tax records and likely interviewing people familiar with Ganbat’s work.McKinsey admits it didn’t conduct any formal due diligence on Ganbat and Liberty Partners. The firm says it felt comfortable working with them in part because other foreign companies, like the law firm Pillsbury, had worked with Ganbat before.McKinsey’s lawyer acknowledges that the firm could’ve been more careful and says it would do better today. “With the enhanced policies McKinsey has today, I do think McKinsey would have taken a different approach to diligence,” said Charles Duross, who represents the firm in FCPA-related matters and led the Justice Department’s FCPA unit from 2010 to 2014. “But that doesn’t mean, at the end of the day, that because there are red flags or risks related to a particular partner, that the conduct itself was corrupt or improper or a violation of the FCPA.”As the contract proposal came under review, even more warning signs cropped up. Battulga abruptly replaced the director of the MTZ, the entity that would hire the Liberty-McKinsey team, with his former bodyguard, Baasandorj Batzaya.Then there was the absence of competitive bidding. That, prosecutors allege, violated Mongolian law. (Criminal charges aren’t generally public in Mongolia, but a 2017 document from the prosecutor general’s office, which ProPublica obtained, quotes at length from the charges.)Lastly, the price for the feasibility study contract was increased in a suspicious way, according to the prosecutors. McKinsey, Liberty Partners and their team had offered to conduct the study for $4 million, prosecutors allege, but just before the agreement was finalized, Ganbat and Battulga persuaded the MTZ to raise the figure to $5.65 million. (McKinsey’s cut was $4 million before taxes. Liberty Partners got $800,000. The remainder went to BNP Paribas and Pillsbury.)If prosecutors are correct, legal experts say, that would constitute a significant red flag, given the risk the extra money might serve as a kickback. The FCPA makes it illegal for an American company to give anything of value to a foreign government official, directly or indirectly, in order to secure an improper advantage in obtaining business. McKinsey said it has seen no evidence that the contract’s price increased. Ganbat described it differently. He said the contract’s value did rise during negotiations but only by about $400,000 and for a legitimate reason: the MTZ had asked Liberty to hire subcontractors to analyze the soil along the proposed railroad route and survey the terrain.McKinsey and Ganbat contend that a series of resolutions and directives permitting the MTZ to hire their team led them to believe the contracting process was legal.But here, too, there were irregularities. The head of the State Property Committee, which oversees state-owned companies, declined to approve the contract unless Battulga co-signed the relevant resolution. The SPC chief “was not feeling comfortable signing alone” because of political issues around the railroad project, Ganbat recalled.And top officials at the Ministry of Finance were unusually deferential to Battulga during the approval process, according to a former ministry official. “My bosses were frightened to ask him questions,” the former official recalled. He never quite understood why. “That was a very secretive process.”Eventually, the contract received formal approval and McKinsey and Liberty undertook the feasibility study.From mid-April to mid-August 2011, McKinsey consultants flew into Mongolia each week. Battulga was closely involved, meeting frequently with Hexter and Ganbat.Liberty Partners served as a local liaison for the foreign consultants. They arranged meetings, supplied translations and helped McKinsey’s team collect data and prepare presentations. Ganbat himself provided something more, people familiar with the project said: His ties to Battulga were so close that he was a conduit to the transportation minister and his thinking.Neither Hexter nor a second McKinsey partner on the project, both based in Beijing, had worked in Mongolia before, and the firm leaned on Liberty for local intelligence.They weren’t the only ones dependent on Ganbat and his staff. “MTZ was heavily, heavily reliant on Liberty for all of its decisions,” Ganbat said. Its employees didn’t speak English and lacked experience in finance. “So we basically almost had to play in the shoes of the client on one hand and then also the adviser on the other hand, since they didn’t have the capacity.”McKinsey’s team ultimately concluded that constructing and operating the first phase of the new railroad could be done in a cost-effective manner. In all, according to the team’s slide deck, the project would cost several billion dollars. McKinsey predicted that, with increased coal exports and other revenue streams, Mongolia could pay back investors within nine and a half years.The government used the feasibility study mainly to raise more than $1.5 billion to fund the railroad and other infrastructure projects, a person familiar with the process said. In retrospect, that would be the high point of the endeavor.Within a couple of years, “Minegolia” was already starting to look like an example of the resource curse: The railroad project stalled amid a welter of misfortunes, as the government squandered funds on dubious handouts and subsidies. “Like a number of other large infrastructure projects in Mongolia, the railroad project got stuck in a quagmire of competing domestic political and economic interests, fluctuations in commodity prices, questionable policy decisions, corruption and plain theft,” said Julian Dierkes, a Mongolia expert and professor at the University of British Columbia.As boom collapsed into bust, financial crimes and anti-corruption investigators in Mongolia began to pursue allegations of graft in failed infrastructure projects. In the fall of 2015, the investigation reached McKinsey. Police began to request information about the feasibility study. At the same time, they raided the offices of the MTZ and Liberty Partners, where they seized contracting records, financial documents and Ganbat’s computers, according to police records and people familiar with the investigation. They issued subpoenas for Liberty’s banking records.“McKinsey wasn’t the principal object of the investigation, but the police did investigate them quite seriously,” said a person with direct knowledge of the investigation. “It got quite aggressive.” The firm says it cooperated with investigators’ requests. McKinsey also says it investigated the matter internally. But even as that process continued, McKinsey wrote directly to the prime minister. In a letter dated Nov. 24, 2015, Sneader began: “Given your strong interest in promoting U.S.-Mongolian business ties and growing third-neighbor investment in Mongolia, I’m writing to you today to inform you of a current situation facing McKinsey & Company related to past work in Mongolia.” He asserted that the firm operated with “highest levels of probity” and invited the prime minister to visit McKinsey’s U.S. offices. McKinsey submitted a statement to ProPublica that read, “As its text makes clear, this letter was sent to address misconceptions about our firm’s work, including those appearing in the local media, to explain to the prime minister that McKinsey had conducted itself with the utmost integrity, and to express our commitment to assist the ongoing investigation. Before sending the letter, we consulted with outside advisors on how to appropriately convey this message. To suggest that this letter was intended for any inappropriate purpose would be false.”Around the same time, prosecutors charged Batzaya and Ganbat with manipulating the feasibility study contract to enrich themselves. Police arrested Batzaya. Ganbat was traveling abroad at the time and decided not to return, believing he wouldn’t receive a fair trial. Prosecutors charged Battulga as a co-conspirator in 2017, after he lost his seat in Parliament and was no longer shielded by governmental immunity.The three men have denied the charges. Although Batzaya and Battulga did not respond to requests for comment, Ganbat and his allies say the case is part of a smear campaign orchestrated by Battulga’s enemies.“Yes, there was the situation” with McKinsey, Ganbat said, “how exactly McKinsey was hired and whether we had any conflict of interest. There were fine points to it. Yes, we were in a peculiar situation. But in my mind, at least, I tried to do as much as possible to remove myself out of conflict and do what’s best for the country.”McKinsey never faced charges. But the affair left its consultants unwelcome in Mongolia. The banishment was a blow, shutting the firm out of a potentially lucrative market.Meanwhile, things went from bad to worse for Mongolia. Politicians there misspent or stole hundreds of millions of dollars raised to fund the railroad’s construction, and in 2017, the government was forced to seek a bailout package from the International Monetary Fund to avoid defaulting on its bond obligations.In the wake of criticism for its problems in South Africa and elsewhere, McKinsey has begun announcing new procedures in the past year.Prospective local partners will now be subjected to “a rigorous pre-screening.” Projects for state-owned enterprises will now face the same in-depth risk review government projects receive. In recent interviews with CNBC and Fortune, Sneader said the firm is planning further changes to how it oversees its consultants’ work and vets its clients and partners. Dominic Barton, McKinsey’s former global managing partner, speaks during a Global Business Summit in New Delhi in February. (Money Sharma/AFP/Getty Images) But there are structural barriers at McKinsey to making these changes effective, according to former consultants and observers. The firm is a partnership; it lacks the top-down control of a corporation. “McKinsey has always been a decentralized organization,” McDonald wrote in “The Firm.” “The actual business of consulting” tends “to be left to the consultants themselves.”That has bred a culture of partner autonomy. People who have worked or dealt with the firm’s previous chief, Dominic Barton, recall instances where senior partners openly rejected his requests. “You have to realize that most McKinsey partners are at McKinsey because they don’t want to be told what to do,” Angus Dawson, the new head of the firm’s operations in Australia and New Zealand, told a local newspaper in March.A diffuse operating style worked for McKinsey when it had 300 partners or so, as it did 30 years ago. But the firm now has over 2,100 partners, and oversight of their engagements remains limited. Sneader told the Financial Times that he would like to see the entire partnership weigh in on more decisions. But corralling 2,100-plus partners who cherish their independence is no easy task.Past efforts at central management have fared poorly. One past managing partner, for example, assigned a senior partner to instill discipline within the financial institutions group, a rainmaker division with a habit of disregarding wider firm interests, according to “The Firm.” The group shrugged off its would-be master. After four months, the senior partner gave up and resigned from McKinsey.McKinsey’s exile from Mongolia was a grave enough matter that the firm’s leaders attempted high-level diplomacy at the ultimate conclave of the elite: the World Economic Forum in Davos, Switzerland. In January 2017 at the Alpine conference, then-managing partner Barton and Sneader met with Mongolia’s president at the time, Tsakhia Elbegdorj.Sneader followed up with a letter to a top presidential aide. Calling the conversation “warm” and “productive,” he wrote: “As we discussed at our meeting, I’d be very grateful if we could receive an assurance at your earliest convenience that our consultants would be welcome in Mongolia. An official letter to that effect would help us make arrangements to reestablish our presence in the country.”It’s not clear whether McKinsey ever received such a letter. But the firm was ultimately allowed to return to Mongolia.Battulga’s election to the presidency, in July 2017, has only improved the outlook. He retained a soft spot for McKinsey. On the campaign trail, he recalled having “proudly worked” with its consultants, whom he called “the smartest business thinkers in the world.” Battulga’s election may have benefited McKinsey. But its effect on Mongolia is an open question. His critics have decried what they call his authoritarian moves. In March, Battulga rushed through Parliament a law that makes it easier for him to dismiss senior prosecutors and the leadership of the anti-corruption agency that investigated the railroad project. In a statement at the time, he justified the new statute as targeting corruption among the nation’s law enforcement leadership, and in particular those who investigated and charged him. Battulga and his allies promptly fired the country’s top prosecutors, who had supervised the case against him, Ganbat and Batzaya and threw out the leaders of the anti-corruption agency.Meanwhile, construction of the railroad remains halted indefinitely, the project far from complete. In the Gobi Desert, eroding earthen berms — unfinished rail beds — rise like burial mounds. “We really needed this railroad,” one former Mongolian official said. “We have one of the biggest coking coal deposits in the world, and we’re sitting right next to China,” a major coal consumer. He doesn’t know what happened to much of the money raised while he was in government. But he knows where a few million dollars went. McKinsey’s legacy, he said, “is just a pile of dirt.”
¿En qué parte de los Estados Unidos es más probable que el IRS lleve a cabo auditorías?
por Paul Kiel y Hannah Fresques Leer más.
NYU Hires Law Firm to Investigate Behavior of Steinhardt, a Prominent Donor
by Sharon Otterman, The New York Times NYU said on Monday that it had hired a prominent law firm to investigate whether the namesake of its school of education, Michael H. Steinhardt, had engaged in inappropriate conduct with students, faculty or staff.The review will be headed by Joan McPhee, a lawyer who last year helped lead an investigation of Lawrence G. Nassar, a USA Gymnastics team doctor who last year was sentenced to 40 to 175 years in prison for sexually abusing young women. McPhee was hired by NYU as part of its response to a New York Times-ProPublica article that alleged a pattern of crude and demeaning sexual comments by Steinhardt toward women over decades.Steinhardt, a hedge fund pioneer and philanthropist, denied many of the specifics of the allegations, saying that his behavior was always meant in jest, and never involved physical contact.The NYU Steinhardt School of Culture, Education and Human Development, the largest graduate school at the university, got its name after Steinhardt and his wife, Judy, donated $10 million to the school in 2001. It was the largest gift the graduate school had ever received. Get Our Top Investigations Subscribe to the Big Story newsletter. Don’t miss out on ProPublica’s next investigation. Sign up and get the Big Story email whenever we break news. The allegations, which were published in March, prompted some students to ask for the school to be renamed. The school's student body is predominantly women."As somebody who is graduating, I don't want to accept a diploma with this man's name on it," Beena Rachel Jacob, a 23-year-old senior in the education studies program at NYU Steinhardt, said on Monday. After the article was published, the dean of NYU Steinhardt, Dominic Brewer, told the school's community in a statement that while the Steinhardts had been generous, "the kind of remarks and behavior recounted in the news story are out-of-step with our school's values and how we expect people to conduct themselves in this day and age."The university, he wrote, would undertake a review of Steinhardt's interactions with NYU students, faculty and staff. Monday's announcement, which came as the academic year was ending, was the first update about the situation the school had provided."The only new development is the identity of the law firm that is handling the previously-announced investigation," said a lawyer for Steinhardt, Tom Clare.The firm set up a phone number and email address where people could give an account of improper behavior. Clare called that step "routine" for this kind of investigation. Read More Women Who Worked with Billionaire Philanthropist Michael Steinhardt Say He Asked for Sex “Institutions in the Jewish world have long known about his behavior, and they have looked the other way,” said one of seven women who have recounted Steinhardt making sexual requests. Steinhardt denied many of the allegations but apologized for “boorish” comments. Carol Anne Spreen, an associate professor of international education at Steinhardt, said that the university's response should not just depend on what may have happened on its campus. "I know students are really upset," Spreen said. "It's about how the university gets represented out in the public. It's not just about their experiences with him."In the article, six women said in interviews, and one said in a lawsuit, that Steinhardt askedthem to have sex with him, or made sexual requests of them, while they were relying on or seeking his support. He also regularly made comments to women about their bodies and their fertility, according to the seven women and 16 other people who said they were present when Steinhardt made such comments. None of the incidents described by the women were alleged to have occurred at NYU"As I have said before, I deeply regret cavalierly making comments in professional settings that were boorish, disrespectful and just plain dumb," Steinhardt said in a statement in response to the article.McPhee, formerly a federal prosecutor in Manhattan and now a partner at Ropes & Gray, did not respond to a request for comment. She was one of two lawyers commissioned by the United States Olympic Committee who led a 10-month investigation into Nassar.Several students at NYU Steinhardt said in interviews on Monday that many of their peers were appalled after hearing allegations against the school's namesake. But efforts to hold protests or write petitions failed to gain traction, the college newspaper, the Washington Square News, reported in early April. After the couple's initial donation in 2001, Steinhardt and his wife gave $20 million to NYU between 2006 and 2014 to support programs and fund scholarships. Judy Steinhardt is among the university's 61 voting board of trustee members.Morin Mikaya, a 24-year-old who is studying for a master's degree in drama therapy, said Monday that she was encouraged by the call for people to report potential incidents of misconduct."I always think that these things should be done quicker," she said. "That's the thing with big universities. Everything moves slowly. There's a lot of bureaucracy. But this is a good thing."At least one school has already responded to the allegations against Steinhardt. Abraham Foxman, the former longtime head of the Anti-Defamation League, was asked not to give a planned graduation speech this year at Hebrew Union College-Jewish Institute of Religion, the nation's main Reform Jewish seminary, because of his remarks in support of Steinhardt in the Times-ProPublica article.The seminary had asked Foxman for a public clarification of his remarks, "which appeared to dismiss the seriousness of sexual harassment and failed to condemn the behavior described," the college said in a statement. When Foxman declined to provide one, his invitation, which included an honorary degree, was rescinded. Foxman was traveling Monday and could not be reached for comment.One of the women who had alleged inappropriate remarks by Steinhardt was a rabbi who had graduated from and taught at the seminary. Andrew Rehfeld, the seminary's president, said on Monday that he was proud of his students and alumni for voicing their concerns. "It is really a reflection of our values about treating every human being with dignity and respect," he said.
“I Now Have the Perspective of Both Sides”: 18 Voting Officials Take Civil Rights Tour
by Jessica Huseman MONTGOMERY, Ala. — The exuberant greeter, who said her name was Wanda, hugged each of the secretaries of state as they walked through the doors of Dexter Avenue Baptist Church. “Thank you for being here,” she said as each crossed into the small, orange-brick building.It was, she said, “hallowed ground.” Martin Luther King Jr. had preached here for six years and organized the Montgomery bus boycott in the church’s basement. The church is only feet away from the Alabama State Capitol, on whose steps Jefferson Davis was sworn in as president of the confederacy. At the end of Dexter Avenue is the Court Square Fountain, once the site of a slave trade.Wanda greeted those arriving on the second day of the “Democracy Tour” organized by Michigan Secretary of State Jocelyn Benson and Alabama Secretary of State John Merrill — a three-day visit to Alabama’s most historically significant civil rights monuments and museums for the chief election administrators of 18 states. It was the first time election administrators had done such a tour, and they made clear to note there were 11 Republicans and seven Democrats in attendance.The event had provoked a fair degree of online anger. Some people demanded to know why more secretaries of state were not in attendance. Others criticized certain officials for being there at all, citing the controversial voting requirements enforced in their states. What struck many as an awkward juxtaposition was made all the more striking when the secretaries of state joined hands and, at Wanda’s enthusiastic insistence, sang “We Shall Overcome.”“Come on!” she shouted, commanding them to sway first to the left.They sang, swaying as instructed:“We shall overcome, we shall overcome
ProPublica Illinois Honored With Five Peter Lisagor Awards From the Chicago Headline Club
by ProPublica Illinois ProPublica Illinois won five Peter Lisagor Awards on Friday for its investigative reporting, feature writing, data journalism and blogs. The Lisagor Awards, presented by the Chicago Headline Club, the nation’s largest chapter of the Society of Professional Journalists, recognizes exemplary journalism produced in 2018 in Illinois and Northwest Indiana.ProPublica Illinois received three awards in the All Media division and two in the Online Media division.The Driven Into Debt series, begun by ProPublica Illinois and continued in partnership with WBEZ Chicago, won in All Media for Best Investigative Reporting and Best Data Journalism. The investigation revealed that Chicago’s parking ticket system has been driving motorists into bankruptcy through fines and fees that unfairly target majority-black neighborhoods and people who can least afford to pay.The reporting led to a number of policy proposals and reforms, including city officials agreeing to refund or dismiss 35,000 duplicate citations and calls for action from Chicago mayoral election candidates. ProPublica Illinois reporter Melissa Sanchez and WBEZ Chicago’s digital editor Elliott Ramos collaborated on the series, with contributions from ProPublica Illinois news applications developer David Eads and former data reporter Sandhya Kambhampati.“We Will Keep on Fighting for Him” won in All Media for Best Feature Story. The project was part of The $3 Million Research Breakdown investigative series, which found misconduct in a drug research trial at the University of Illinois at Chicago for children with bipolar disorder. The story details the pain and heartbreak of a family caught in a child psychiatry study, and it focuses on the mother’s journal entries and present-day annotations from her and her son. While keeping their voices at the center of the narrative, the interactive display blends the journals with family photos, video and audio clips, and deep original reporting. ProPublica Illinois reporter Jodi S. Cohen and engagement reporter Logan Jaffe collaborated on the feature, with multimedia design contributions by editorial experience designer Rob Weychert.In the Online Media division, Politic-IL Insider won awards for Best Continuing Blog (Affiliated) and Best Individual Blog Post (Affiliated). The online investigative column by reporter Mick Dumke provides insight on a bevy of political issues such as government surveillance, access to open records and the aftermath of election campaigns. Dumke was the first to obtain and publish Chicago’s controversial gang database, documenting its many errors and discrepancies. He found similar problems with the gang database maintained by the Cook County Sheriff’s Office, prompting the Cook County Board’s unanimous vote to ban it.ProPublica Illinois reporting fellow Lakeidra Chavis also received the award for Best Health or Science Reporting in a Radio Broadcast for “Chicago’s Black Communities Hit Hardest in Opioid Overdoses.” The story, which aired while she worked at WBEZ Chicago, highlighted how the problem deeply affects African Americans in the city, even as most narratives about the nation’s opioid crisis have focused on white, suburban areas. WBEZ Chicago senior news editor Rob Wildeboer also contributed to the project.To learn more about the Peter Lisagor Awards and for the full list of winners, visit the Chicago Headline Club’s website.
A High-Speed Internet Boondoggle Is Now a Campaign Issue in Kentucky
by Alfred Miller, Louisville Courier-Journal Candidates for governor of both parties are using Kentucky's long-delayed and over-budget statewide internet project to bash Gov. Matt Bevin, following a jointly published report by the Courier Journal and ProPublica.KentuckyWired — a bipartisan plan pushed by former Democratic Gov. Steve Beshear and Republican Rep. Hal Rogers — promised to bring improved broadband internet connectivity to the state's farthest corners. But it is years behind schedule and more than $100 million over budget.Bevin's Democratic opponents in the governor's race laid blame with the current administration."The governor has damaged the project with his lack of commitment to keep it on schedule," House Minority Leader Rocky Adkins, D-Sandy Hook, said in an emailed statement. "In fact, it will cost the state more to get out of the contract than if we continue. In order to go the last mile and complete this project, we need to look at successful models in other states and bring new partners to the table." Representatives for Bevin and his technology chief, Chuck Grindle, did not respond to multiple requests for comment on the report, which highlighted dissent in the Republican administration's approach to salvaging the troubled KentuckyWired project.Democratic candidate and former state Auditor Adam Edelen, who has made improved broadband connectivity part of his platform in the governor's race, said in an emailed statement that Bevin "doesn't care" enough to fix the project."As governor, I will prioritize building a real system to provide broadband to the hundreds of thousands of Kentuckians who still lack access, whether in the hills of eastern Kentucky or Southern and Western Jefferson County," Edelen said. "It must be done through partnership between the public and private sector, but that doesn't mean pushing a half-baked plan that leaves taxpayers holding the bag."The campaign manager for Attorney General Andy Beshear, the son of the former governor, called for "working together across party lines.""As governor, Andy's first step will be evaluating the KentuckyWired program in a nonpartisan way focused on both its costs and potential benefits for our families," campaign manager Eric Hyers said in an emailed statement. "From there, he can keep what's working and change what isn't."A spokeswoman for Rogers, however, issued an emailed statement last week defending Bevin's stewardship."With any public-private project of this magnitude, delays and challenges are to be expected," the statement said. "Since Gov. Bevin inherited this project, he has worked diligently to comb through the unexpected problems and carefully balanced rising expenses with future benefits."Wednesday's Courier Journal-ProPublica report underscored warnings that Beshear administration officials received about likely roadblocks.Despite these, KentuckyWired moved ahead with what experts have said is an unrealistic three-year construction schedule for the project that saw the state accept most of the risk for the public-private partnership.In his statement, Rogers described KentuckyWired as the "only path" to affordable, high-speed internet for his constituents in eastern Kentucky.But state Rep. Robert Goforth, R-East Bernstadt, a challenger to Bevin for the Republican Party's nomination for governor, disagreed.In an interview with the Courier Journal, Goforth said Bevin should have killed the project years ago. He said Bevin has much to learn from a broadband project in Jackson County, which Goforth represents. Read More Kentucky’s $1.5 Billion Information Highway to Nowhere Gov. Matt Bevin has offered no solution to the boondoggle he inherited, a plan to bring high-speed internet to Kentucky’s remote corners. The Kentucky-based nonprofit Peoples Rural Telephone Cooperative used federal stimulus money to bring high-speed fiber-optic lines within reach of every home and business in Jackson and Owsley counties, the Courier Journal and ProPublica reported."If Jackson County can do it, the rest of Kentucky should be able to follow their example and be able to duplicate what they have done to be able to provide the fastest internet service to one of the most rural communities in Kentucky," Goforth said. "We can do this."State Rep. Lynn Bechler, R-Marion, described as "marvelous" the job Peoples Rural and other similar cooperatives and rural providers have done. He said he wished the Peoples Rural model could be followed in his area of western Kentucky, where residents such as Christy Hardison say they pay upward of $120 a month for unreliable satellite internet service, the only available option.Bechler, co-chairman of the Program Review and Investigations Committee, which is investigating KentuckyWired, reiterated his call for a halt to the project.To solve the problem of poor rural broadband access, Bechler proposed the creation of a state incentive program to encourage more projects like the one in Jackson County.Keith Gabbard, head of Peoples Rural, told the Courier Journal that a state-level program, similar to Tennessee's new Broadband Accessibility Grants, would encourage rural providers like his to expand service."The state doesn't have to build their own network that way," Gabbard said. "People that have already been doing that work can do a little more of it and would have an incentive to expand into areas that, it appears, the bigger companies are not going to build fiber to."Meanwhile, a longtime KentuckyWired skeptic, state Sen. Chris McDaniel, R-Taylor Mill, said he's still waiting for the first section of the state-owned network to operate.The project's overseers said in December that the first loop, an area that includes Frankfort, Lexington, Louisville and northern Kentucky, was nearly ready to be turned on.Phillip Brown, then head of the state authority in charge of KentuckyWired, promised "very good news" in the first quarter of 2019."I'm still waiting to see the press release on that happening," McDaniel told the Courier Journal. "This thing is a mess and it's going to continue to be a mess. I don't know where it ends."
More Than Me Still Lacks Adequate Systems to Protect Children in Its Care, New Report Says
by Finlay Young for ProPublica The U.S. charity More Than Me has released a report by law firm McLane Middleton that identifies significant deficits in the charity’s policies, governance and administration and strongly criticizes the actions of founder and ex-CEO Katie Meyler, who resigned last month.The report was commissioned following publication of ProPublica’s October 2018 investigation showing how senior staff member Macintosh Johnson, a man with whom Meyler once had an intimate relationship, had serially sexually abused girls in the charity’s care and how Meyler and other charity officials failed to respond promptly to concerns about his conduct. The investigation outlined how the charity wasn’t transparent about the extent of Johnson’s abuse and didn’t make sure that all of his potential victims were tested after it came to light that he had AIDS when he died. Ten MTM students testified against Johnson in a 2015 trial that ended with a hung jury.McLane Middleton’s audit report was based on interviews conducted in America and Liberia with 30 people, including Meyler, MTM board members and staff, and Liberian government officials. While it is described as an audit of the charity’s current child safety practices rather than an investigation into how MTM responded to the rape allegations, the report says Meyler did not do adequate due diligence on Johnson or do enough to get the truth when she became aware of suspicions that he was harming girls. Get Our Top Investigations Subscribe to the Big Story newsletter. Don’t miss out on ProPublica’s next investigation. Sign up and get the Big Story email whenever we break news. “The leader of an organization entrusted with the care of children must understand the fundamental steps to be taken when abuse of a child is suspected,” the report says. “Meyler had a duty to protect the children to whom MTM provided services. Given MTM’s mission to serve the most vulnerable girls, the duty of care was heightened. This heightened duty became urgent once Meyler had a suspicion that the girls were being molested.”The audit report notes that she did not inform her board of her suspicions and instead made her own inquiries “despite having no qualifications to do so,” and subsequently hired Johnson without implementing appropriate safeguards. In recommending her removal, the audit states, “Meyler’s good intentions do not excuse the devastating impact of her inadequate actions on the vulnerable girls in her care.”Meyler did not respond to ProPublica’s emailed request for comment.In her resignation post on facebook, issued in April after the firm’s interim report had been supplied to MTM’s board, Meyler referred to “false allegations” that she knew or should have known of Johnson’s abuse. The audit, however, takes her to task for not accepting her part in what happened. “It is deeply concerning that Meyler continues, to this day, to assert that her actions based on her suspicions or concerns were ‘adequate’ and that her actions constituted ‘due diligence,’” it says. Of the wider organization, the audit report acknowledges the efforts and commitment of MTM’s staff and that the charity has made significant strides. But it also identifies ongoing shortcomings in how the organization protects children in its care. ProPublica’s story highlighted the lack of relevant experience of the charity’s board and failure to provide effective oversight. According to the law firm audit, five years on, the current board has “limited experience and training” in fulfilling its duties to safeguard children, and it has no members familiar with Liberian culture, law and politics.The audit report also highlights an ongoing need for “stable” and “qualified” leadership for the charity’s operations in Liberia. Of the organization’s scholarship program, which Johnson coordinated and used to abuse students, the report says, “The MTM scholarship program lacks meaningful oversight, including with regard to safeguarding” of children.Five years after Johnson’s abuse came to light, and three years after another staff member accused of sexual abuse was allowed to escape following disagreement among MTM’s senior staff on whether the organization was responsible for reporting the case to authorities, the audit recommends MTM establish protocols on suspected cases of child abuse “for dealing with students and parents” and “for dealing with Liberian authorities.” The audit report, which was overseen by the charity’s U.S. board, was one of two the organization had said it would release to the public. However, in a May 9 letter transmitting McLane Middleton’s work to the Liberian Ministry of Education, the charity said the report of an independent “special investigative panel” consisting of MTM’s Liberian advisory board is now being treated as an “internal document.” Citing the best interests of MTM’s students and the organization, the charity said it has “not yet concluded when and how” that panel’s work can be released.James Dorbor Jallah, chair of the Liberian advisory board, wrote in an email to ProPublica that after reviewing the report, members of the Liberian board had raised some questions, but the Liberian board “intends to release the Panel’s report after these questions have been suitably addressed in the report.”According to the letter, MTM also has not shared the Liberian advisory board’s report with the Liberian government, which is itself conducting an investigation by an unprecedented seven-agency “joint ministerial committee.” Despite pressure from activists, who launched a campaign for accountability under the banner “We Are Unprotected,” a reference to the headline of ProPublica’s story and the title of a related documentary, the government has not yet said when it will release its findings.In the May 9 letter, More Than Me also reiterated the apology it first issued following the publication of ProPublica’s story. Under a section titled “Great Strides in Child Safeguarding,” the charity states that both the audit report and unreleased investigative report “highlighted the importance of the work More Than Me is doing in Liberia and the substantial strides made in addressing safeguarding since 2014.”MTM’s letter asserts that both reports “recognized that MTM ... effected substantial changes in its operations and overall governance that are adequate to prevent or ensure the timely discovery of any actual or threat of abuse.” In an email to ProPublica, an MTM spokesperson wrote: “The work of the Panel and McLane Middleton ... represents an important opportunity for More Than Me to continue to hold itself accountable as we strive to provide a safe, quality education for our students.”The spokesperson outlined significant organizational changes, saying the charity would be restructured into two entities, the first an organization with programmatic oversight in Liberia that will be overseen by mostly local Liberian trustees, and the second a U.S.-based organization primarily focused on fundraising for the Liberian entity. A new Liberian country director with 20 years of experience has been hired, the spokesperson said, as well as a similarly experienced Liberian “Academy Director of Safety.”The spokesperson said the charity expects to hire a safety manager in 2019 “to become the main point of contact for government authorities on safety related issues, and oversee incident reporting and follow ups” for the 18 public schools More Than Me also manages in Liberia. The charity has said it will continue to provide support to the victims of Johnson.This is the full text of the organization’s statement following publication of the audit:
New York Regulator Launches Investigation Into TurboTax Maker Intuit and H&R Block
by Justin Elliott New York’s Department of Financial Services, one of the most powerful state regulators in the country, has launched an investigation into Intuit, the maker of the leading tax preparation software TurboTax, according to a person familiar with the matter.DFS is also investigating H&R Block and two other tax prep companies.The agency served subpoenas to all four companies this week, seeking a wide range of documents about the Free File program and the companies’ marketing practices. The tax software industry has an agreement with the IRS promising to give free tax preparation and filing services to Americans who earn below $66,000 a year.In a series of stories in recent weeks, ProPublica has detailed how the companies had a deliberate strategy to steer customers away from the free product and into paid versions in deceptive ways. The companies hid their free offerings from Google, and Intuit lied to some customers who sought refunds in the wake of the reporting. Get Our Top Investigations Subscribe to the Big Story newsletter. Don’t miss out on ProPublica’s next investigation. Sign up and get the Big Story email whenever we break news. The investigation, which Gov. Andrew Cuomo called for last week, is being run out of the Department of Financial Services’ Consumer Protection and Financial Enforcement Division. The agency regulates financial services in New York state. Intuit also holds a license from the agency to be a money transmitter.The Intuit subpoena seeks internal marketing materials that would shed light on the company’s purchase of Google ads on particular search terms as well as documents related to code that hid the TurboTax Free File page from search engines, the person said. It also seeks records that show how many New Yorkers used paid TurboTax products even though they were eligible for the Free File product. Two other companies that signed on to the IRS’ Free File deal, TaxSlayer and Drake Software, which runs 1040.com, were also served with subpoenas. The companies have until May 30 to respond.An Intuit spokesman said “we will be cooperating with the agency’s review.” An H&R Block spokeswoman said that “we review and respond to all subpoenas we receive.” Spokespeople for the other two companies didn’t immediately respond to requests for comment.Previous unrelated investigations by the Department of Financial Services have led to settlements and fines for companies such as Deutsche Bank, Zenefits and Western Union.The New York subpoenas follow lawsuits that were filed privately in California and by the Los Angeles city attorney against the tax software companies in recent weeks.
We Stick With Our Stories Until We See Results
by Steve Mills You know how in “The Godfather, Part III,” the aging Michael Corleone describes Mafia life: “Just when I thought I was out, they pull me back in”? The journalism we do at ProPublica Illinois is like that, too.Stories never really end. We publish a story and it leads to impact: a government, company or other organization taking action in response to our reporting. Or the story prompts more sources to come forward to suggest new avenues for investigation. Those avenues result in additional stories.We stick with stories “as long as it takes to hold power to account.” It’s what we do. Dive Deeper Into Our Reporting Our newsletter is written by a ProPublica Illinois reporter every week Discover what makes Illinois tick from our team of investigative journalists covering the state. Delivered every Friday. So, today, I’d like to highlight a few examples from our reporters of stories we’re continuing to update, and where we’re at now:Melissa Sanchez: Even though I’ve moved on to another project, I continue to monitor issues related to our “Driven Into Debt” series. I’m tracking the progress of legislation to end driver’s license suspensions tied to debt from unpaid parking tickets; we previously reported on how these suspensions disproportionately affect black motorists from Chicago and its suburbs. The legislation passed the state Senate but didn’t get called for a vote during a critical House committee meeting this week, making its odds of passage this year very slim. Separately, I’m also waiting to see what recommendations come out of a citywide task force studying how to make municipal fines and fees less burdensome for the poor. Those should be coming out any day now.Duaa Eldeib: I continue to monitor developments at Aurora Chicago Lakeshore Hospital while working on new investigations. In October, I reported that the hospital was at risk of losing key federal funding following allegations of sexual assault and physical abuse of children, including some who were cleared for release but remained at the hospital because state child welfare officials did not find them more appropriate homes. A recent inspection by the Illinois Department of Public Health found additional deficiencies. This week, federal officials said in court documents that they plan to terminate the hospital’s Medicare funding because “serious risks to patients continue to exist.” The hospital, which submitted a plan of correction, is expected to file its response in court next month. Jodi Cohen: I’m continuing to keep readers updated on developments related to a former University of Illinois at Chicago child psychiatrist who violated research protocols and put vulnerable children with bipolar disorder at risk. UIC refused to provide many records under the Freedom of Information Act, and, after we appealed, the Illinois attorney general ruled this year that those records should be public. The records showed that UIC acknowledged to federal officials that it had missed several warning signs that Dr. Mani Pavuluri’s clinical trial on lithium had gone off track, eventually requiring the university to return $3.1 million in grant funds to the federal government. We are still fighting for other documents the university refused to provide, including research protocols, documents submitted to the university’s research oversight panel and records created as part of investigating and correcting issues related to Pavuluri’s work and university oversight, and are waiting for a ruling from the attorney general’s office. If we get more records, and they shed more light on the issues, we will tell you about it. We are also monitoring ongoing investigations and will let you know if Pavuluri faces discipline from the state medical licensing board or from an ongoing federal research oversight investigation at the U.S. Department of Health and Human Services.Have something to tell us about any of these investigations? Just click on the reporter’s name and send them an email.
What We’ve Learned From Trump’s Tax Transcripts — “Trump, Inc.” Podcast
by Andrea Bernstein President Donald Trump has refused to release his tax returns. He has sued his former accountants and Deutsche Bank to keep them from releasing his returns after they were subpoenaed to do so. And his treasury secretary has refused to provide the returns to Congress.But bit by bit, The New York Times’ Susanne Craig and Russ Buettner have been gathering returns and tax data from Trump’s earlier years. In the latest installment, they show how Trump claimed over a billion dollars in business losses from 1985 to 1994. In some years, he lost more than any other taxpayer.In this “Trump, Inc.” podcast extra, we speak to Craig about how she got the story, what she found and what to look for if and when the president’s tax returns are released. “You don’t lose this much money unless you’re a really bad businessman,” Craig told us. When the Times asked for comment from Trump officials, a spokesperson initially said, “You can make a large income and not have to pay large amount of taxes.” Later, Trump’s lawyer Charles Harder, wrote that the tax information was “demonstrably false.” He cited no specific errors.Listen to the episode.You can contact us via Signal, WhatsApp or voicemail at 347-244-2134. Here’s more about how you can contact us securely.You can always email us at tips@trumpincpodcast.org.And finally, you can use the postal service:Trump Inc at ProPublica
The New Gold Rush: Illinois Lawmakers Are Growing Worried as Neighbors Move to Expand Gambling
by Derrick Clifton 1) Welcome to Kentucky, where the gambling industry was “buying its own regulator.”Horse racing tracks in Kentucky were paying to regulate their own video gambling machines, says the Kentucky Center for Investigative Reporting.Here’s what was happening:
ProPublica Wins Hechinger Grand Prize for Distinguished Education Reporting
by ProPublica The Education Writers Association announced this week that ProPublica reporter Hannah Dreier won the Fred M. Hechinger Grand Prize for Distinguished Education Reporting, the top prize in their National Awards for Education Reporting. Dreier was honored for two articles in the “Trapped in Gangland” series, which told the stories of students caught up in Long Island’s effort to crack down on MS-13.Published jointly with New York magazine and the New York Times Magazine, the stories also won a National Award for Education Reporting in the features category.Dreier reported on the cases of two asylum-seekers from Central America, Henry and Alex. Both were flourishing in Long Island high schools and getting good grades. In the fall of 2016, Henry wrote an essay in English class about how he belonged to the gang MS-13 but was desperate to escape from its violence. Six months later, bored in algebra class, Alex drew a doodle of a horned devil — which was his school mascot, but also happened to be an MS-13 symbol.In a pair of compelling narratives based on a year and a half of reporting, Dreier revealed what happened next to the two boys. Henry’s essay and Alex’s doodle were both relayed from the supposed sanctuary of the classroom to federal authorities. Agents used Henry as an informant and then betrayed him, marking him for deportation. Falsely accused of gang membership, Alex was suspended, arrested and deported back to Honduras, one of the world’s most dangerous countries.As Dreier meticulously documented, the downfalls of these teenagers reflected a threat to student privacy and academic freedom nationwide. Circumventing Family Educational Rights and Privacy Act protections, school-based police officers had passed on the teenagers’ writings to the FBI and U.S. Immigration and Customs Enforcement. In response to the stories, the Department of Homeland Security opened a civil rights investigation, ICE changed a practice that jeopardizes informants and several Long Island school districts sought a formal agreement with the police limiting officers’ roles in schools.“This remarkable ‘life and death’ story exposes the complicated relationship not just between schools and law enforcement but educators and troubled students,” one contest judge said. “The reporter’s relentless work to document the harrowing experiences of two teenagers trapped in the violent world of MS-13 is eye-opening and tragic.”For more on the Education Writers Association’s top prize winners, click here. For a list of all this year’s National Awards for Education Reporting winners, click here.
Listen to TurboTax Lie to Get Out of Refunding Overcharged Customers
by Justin Elliott and Meg Marco The makers of TurboTax have long been luring customers into paying for a service that they promised the government they’d give away for free. Now they’re lying to customers to avoid giving refunds.We’ve heard from 16 people who say they were denied refunds and told that the truly free version — Free File — is a government product that’s not run by TurboTax. Ten others reported being told that ProPublica’s stories were inaccurate, or that our coverage is “fake news” or “fictitious.”None of that is true. Get Our Top Investigations Subscribe to the Big Story newsletter. Don’t miss out on ProPublica’s next investigation. Sign up and get the Big Story email whenever we break news. TurboTax’s Free File product is created and run by the company. It is offered as part of a deal between the tax software industry and the government. The deal is specifically designed to keep the IRS from creating its own free online filing system.Several people gave us recordings of their calls.Here’s audio from one caller, a graduate student in Virginia whose income was around $16,000 — meaning he easily qualified for TurboTax’s Free File. He was charged $105. Lucas Waldron/ProPublica The graduate student asked the agent why there were no links to the actual free version — Free File — on the TurboTax website:
Years Ago, I Investigated Mississippi’s Prisons. Here’s Why I’m Doing It Again.
by Jerry Mitchell, Mississippi Center for Investigative Reporting The call came in the fall of 2013.It was an inmate on his cellphone. He was inside a Mississippi prison, and he had something to tell me.I waited for the words that I thought would come next. Perhaps he would share the details of the conviction that led to his time there. Or insist he had been railroaded. Or mistreated.Instead, he wanted to explain to me all the corruption that was going on inside the prison.I was intrigued, and my colleagues and I at the Clarion Ledger began a 13-month investigation into Mississippi prisons.In the days that followed, he continued to call, reporting on what was happening inside the prison, sometimes giving me a play-by-play. “We’re supposed to be on lockdown, and there are guys [fellow inmates] walking around with samurai swords — 3- or 4-foot swords,” he told me. “We’re living in a Martin Scorsese movie.”He and other inmates sent me pictures of the weapons and other scenes from inside prison. Some showed walls that inmates had ripped out to remove reinforcing steel.“Why would they do that?” I asked.“For weapons,” he explained.Another time he called from prison and said, “You hear that?”The noise sounded like a busy construction site.He explained that it was metal striking metal as gang members made weapons.He connected me with other inmates, who detailed how they said they bribed correctional officers to bring in contraband.“It’s easy,” one inmate told me. “You just walk up to a guard and say, ‘Hey, little lady, how’d you like to make $1,000?’”I also talked with families of inmates who had been extorted for thousands of dollars by gangs vowing to harm their loved ones if the families didn’t pay.My colleagues and I exposed a Mississippi correctional system where gangs ruled, where corruption festered and where prison served as a “college of criminality.”Ten days after our last story ran, then-Mississippi Corrections Commissioner Chris Epps was charged in a 49-count federal indictment, the result of an FBI corruption probe.In the wake of this, Gov. Phil Bryant replaced Epps with longtime law enforcement officer Marshall Fisher to clean up what was happening. Bryant also appointed a task force to review prison contracts and called for better oversight of contracts statewide.State officials tore up more than $868 million in contracts that may have been tainted by corruption, and the task force concluded in its report that “corruption at the lowest levels creates a culture that invites corruption through the [Mississippi Department of Corrections] system.”In 2017, Fisher’s assistant, Pelicia Hall, took his place as commissioner and vowed to continue the corruption cleanup.Epps ultimately pleaded guilty to bribery and filing a false tax return.He forfeited his investment and bank accounts, his $310,000 home in the Jackson suburb of Flowood, a $237,601 condo on the Mississippi Gulf Coast and two Mercedes-Benz vehicles to satisfy a nearly $1.3 million judgment. Epps is now serving almost 20 years in prison.His imprisonment closed a chapter, but the story hardly ends there.Back in 2014, after my series in the Clarion Ledger ran, the Mississippi Legislature passed and the governor signed legislation aimed at reforming corrections and reducing the prison population, which Pew Charitable Trusts predicted would save the state $266 million by 2024.There were savings all right, but all of them went back into the general fund. Meanwhile, the Legislature has slashed more than $185 million in total from the Corrections Department’s budget over the last five years.After these cuts, Mississippi’s prisons now have fewer than half as many correctional officers as in 2014 with about the same number of inmates behind bars.Fewer officers mean fewer eyes on what happens inside prisons as well as putting the remaining officers in jeopardy, experts say.Since 2014, inmates and their families have continued to reach out to me. So have correctional officers, who say they fear for their lives.They’ve told me about gangs and horrible conditions. Delayed medical care. Corruption. Prisons without heat. Unchecked violence. Lockdowns that have kept inmates behind bars for months — and have blocked them from communicating with their families.What they have told me is that the conditions inside Mississippi prisons now are worse than they were in 2014.After one inmate survived a stabbing, his wife reached out to me. “Take any man or animal, put them in such conditions eventually they become hungry, nasty, lonely, enraged, out of control, emotionally unstable and uncaring bloodthirsty beast that’s only thought is survival, kill or be killed,” she wrote. “Then they throw them back on the outside to a judgmental society and expect them to function as if that nightmare never happened.”An inmate stabbed an officer more than a dozen times at the Mississippi State Penitentiary at Parchman in November. On April 3, inmates attacked another officer at the privately run Marshall County Correctional Facility in Holly Springs, and the prison was set on fire.“You have very dangerous inmates,” some of them serving life without parole sentences, a former officer told me, “and they know nothing can be done to them, so they don’t respect the staff.”For these reasons, the Mississippi Center for Investigative Reporting and ProPublica are spending this year investigating the state’s corrections system. Our first story explores how the 2014 reforms have faltered, despite national praise from President Donald Trump and others. We would like to hear from you.We’re interested in talking with those who have been in prison, those who work for prisons and families that have been affected by the system. We want to hear from those who are working to make a difference in corrections.The more people we can talk to, the more we can learn about a system that costs Mississippi taxpayers nearly $1 million a day.
Trump Hailed This State’s Prison Reforms as a National Model — but the Numbers Reflect a Grim Reality
by Jerry Mitchell, Mississippi Center for Investigative Reporting Last November, as he rallied support for federal prison reform, President Donald Trump visited Gulfport, Mississippi, touting the legislation and what Mississippi had accomplished.Trump talked about the “fantastic job” that Mississippi Corrections Commissioner Pelicia Hall was doing of turning the state’s prisons into places that train inmates for jobs.The following month, Trump signed the First Step Act, whose goal is to reduce the federal prison population and better prepare offenders for life outside bars. Yet the implementation of Mississippi’s reforms has been marked by broken promises and a lack of funding, according to interviews, data and documents reviewed by the Mississippi Center for Investigative Reporting and ProPublica.The Mississippi law promised to send offenders to drug courts for treatment rather than to prison; provide ID cards to all offenders leaving prison to help them secure housing and jobs; offer training for offenders eligible for parole; and keep offenders guilty of technical probation violations from returning to prison.But in each case, those efforts have faltered.When Gov. Phil Bryant, a Republican, signed House Bill 585 into law in 2014, the measure drew widespread praise from conservatives and liberals alike because it promised to reduce the prison population, save millions and reinvest some of the money into programs for offenders.Instead, all of those savings have gone back into the state’s coffers, helping to pay for huge corporate tax cuts at a time the state was struggling to meet revenue estimates. Over five years, the Mississippi Department of Corrections spent $185 million less in total than it would have had its budget remained at the level it was in 2014. The department’s $347 million budget for the coming fiscal year is $30 million less than it was in 2014.Meanwhile, the number of prisoners is creeping back up, and the lack of funding and staff is contributing to worsening conditions. Over the rest of this year, the Mississippi Center for Investigative Reporting and ProPublica will explore those conditions.In an interview, Senior U.S. District Judge Keith Starrett, of Hattiesburg, called House Bill 585 “a good law, but up until now, it’s never been fully implemented. Had it been fully implemented, it would have reduced recidivism. How much, we’ll unfortunately never know.”Before the Mississippi Legislature met in 2019, Hall told lawmakers that the reforms of House Bill 585 were “for naught if we don’t reinvest the savings.”With the Corrections Department understaffed, “we cannot offer the programs we want to,” such as educational programs, alcohol and drug treatment and the like, she said.Experts say Mississippi provides a cautionary tale for the nation as it implements the First Step Act.Emptying prisons of offenders “without treating their addiction, without mental health treatment and without job training is really irresponsible,” said Pat Nolan, director of the American Conservative Union Foundation’s Center for Criminal Justice Reform, which campaigned for the passage of the state and federal legislation.“It’s unconscionable.”Between 1993 and 2013, Mississippi’s prison population more than quadrupled, thanks largely to mandatory minimum sentences, with the population peaking in the past decade at more than 23,000. The state had a higher per capita rate of incarceration than countries such as China or Russia.In 2013, lawmakers created a bipartisan Corrections and Criminal Justice Oversight Task Force to look into possible solutions, which led to House Bill 585.By the time the bill became law in July 2014, the Mississippi Parole Board was paroling more offenders and had already reduced the prison population by about 2,000 inmates. Within six months, it fell even more, to below 19,000. The Pew Charitable Trusts, which provided assistance to officials on the reform, predicted that by 2024 Mississippi would save $266 million by reducing its prison population.Supporters of the First Step Act point to such numbers as evidence of the federal law’s potential. “We’ve based it on a lot of what’s been done in a lot of the states like Mississippi,” said White House adviser Jared Kushner, who is Trump’s son-in-law, at the Gulfport event.Other numbers, however, tell a different story.The prison population has begun to tick back up, from 18,964 in January 2018 to 19,697 last week, largely due to probation and parole revocations putting offenders back behind bars. If current trends continue, Misissippi will have more inmates in 2020 than it did before the reform became law.“The good news is it’s not as high as it was in 2014,” Parole Board Chairman Steve Pickett said. “But to quote President Reagan, ‘Are we better off than we were four years ago?’ Do we have more parole and probation officers? Do we have more prison guards?”The answer, data shows, is no.In 2014, the Corrections Department had 1,591 correctional officers, according to the state Personnel Board. Now there are 772, fewer than half as many.In 2014, the department had 23 vocational education instructors. Now there are 15.In 2014, there were three vocational counselors. Now there are two.In 2014, there were 319 probation officers, according to the state Personnel Board. Now there are 257.Moreover, the investments in prisoner rehabilitation and training haven’t happened either.Hal Kittrell, of Columbia, who chaired the task force and is a past president of the Mississippi Prosecutors Association, said House Bill 585 “was designed to have a savings in cost, but it also anticipated reinvestment back into the program.”Texas saw $443 million in savings from prison reform between 2008 and 2009 and reinvested more than half of that into expanding drug treatment and similar programs for offenders, according to the Council of State Governments.Five years after Mississippi passed House Bill 585, “we’ve not spent one dime more on reentry, drug treatment and mental health counseling,” Kittrell said. “Where did the money go?”House Corrections Committee Chairman Bill Kinkade, R-Byhalia, said Mississippi’s economy is now growing, and that should enable lawmakers to spend more on reentry programs. He said the legislative leadership supports this move as well.But the state has favored other priorities in recent years.In 2015, lawmakers approved spending $9 million on vouchers for special education students to attend private schools. A year later, the Legislature began phasing out the corporate franchise tax, which was bringing in $260 million a year. At the same time, it cut $145 million in income taxes.Hall, the corrections commissioner, said she has asked the Legislature for more funding. She called the decreased number of personnel “alarming,” especially for correctional officers, saying they “can’t afford to live” on the entry-level salary of $24,900. The promise of insurance and a state retirement isn’t enough for those seeking to support a family, and neighboring states are offering much more, she said. Alabama, which already pays thousands more than Mississippi, is considering raising its starting pay even more.One bright spot, Pickett said, is that the Corrections Department has increased its funding for transitional beds, which are similar to halfway houses. The number of beds had remained mostly unchanged until this past year when they went from 120 to 314.“Am I satisfied with the progress?” Kinkade asked. “No, but we’re making strides and progress. Yes, there are tweaks that still need to take place.”Among its primary aims, House Bill 585 promised to redirect more offenders whose behavior was driven by drug and alcohol dependence away from prison and to drug courts, which connect them with job and life-skills training as well as drug, alcohol and mental health treatment.A memo written by the nonprofit Pew talked of a reinvestment of nearly $11 million in savings into drug courts.Instead, Mississippi lawmakers cut the annual budget for drug courts in half from nearly $8 million in 2013. It has since inched up somewhat, to $6.5 million this year.Inside Mississippi’s prisons, three-fourths of the more than 19,000 inmates suffer from alcohol or drug woes. Mental health problems also play a role.Despite that, the Corrections Department has only 20 drug and alcohol counselors and one licensed psychologist, according to the state Personnel Board. Arkansas, which has a similar prison population, has eight psychologists and 33 administrators of its substance abuse programs.“Addiction is the prison driver,” Pickett said.Steps so far to provide community mental health have been small. Over the past three years, the Corrections Department has received $1.4 million in federal grants for drug treatment and mental health treatment of offenders who returned to seven counties. State Department of Corrections Deputy Commissioner Jerry Williams, upper right, helps teach inmates at South Mississippi Correctional Institution about job interviewing strategies while Hall observes. The class is part of Hall’s plan to turn the state’s prisons into places that teach and train offenders. (Vickie D. King/Mississippi Department of Corrections) Good news came this spring when lawmakers passed, and the governor signed into law, a bill transforming the drug courts into intervention courts, which can also tackle mental health matters and issues affecting military veterans.In interviews, offenders gave mixed reviews of the 12-step recovery program. One woman recently released from the Central Mississippi Correctional Facility praised it. A second, who had a different instructor, called the program “a joke,” saying they spent their time watching Hollywood movies rather than working on recovery.Hall said the recovery program has been changed and is now evidence-based. One problem that corrections officials face is Mississippi inmates can’t be forced to enter drug treatment programs, as those in federal prisons are. “I can’t make them participate,” she said.She acknowledged that the shortage of counselors is hurting the system.State Public Defender André de Gruy said evidence shows drug courts can reduce recidivism if operated properly. “That means clinical assessments on the front end, heightened supervision and available treatment options, especially for relapse,” he said. “I think the last part is most important and most lacking in Mississippi.”Mississippi also lacks the programming to help offenders transition from prison to their communities, according to the task force that spearheaded the legislation.These reentry programs, as they are known, play a key role in offenders’ success on the outside, Kinkade said.Right now in Mississippi, nearly every inmate “comes home at some point, unsupervised and unmanaged,” said the House Corrections Committee chairman.To help correct that, Hall said her department is focusing more on educational programming, drug treatment and vocational programs.But she acknowledged it has been forced to slash the number of correctional officers in the wake of legislative cuts, making it difficult to carry out some of these reentry programs.Kinkade said he would like to see the state’s new intervention courts operate like federal reentry courts, providing a support mechanism for offenders seeking jobs, getting alcohol and drug treatment, and getting counseling and other mental health treatment. In Hattiesburg, Starrett, the federal judge, operates a federal reentry court, and he recently presided over the graduation of three onetime criminals from a yearlong program to help transform their lives. (The federal reentry court does not have jurisdiction for those convicted in state court.)Of the 35 offenders who have participated in the program since 2012, only five were rearrested, according to the court’s figures.Transforming these career criminals into hard-working citizens also saves taxpayers millions of dollars, he said.Other states are following a similar path. Offenders entering Louisiana prisons are interviewed and given tests to assess their needs. Corrections officials then create plans to reduce the offenders’ risk of returning to prison and enter them in programs, including job training and money management.The Mississippi Corrections Department had a risk-assessment test before, but it lacked proof that it worked, Hall said. The department “had spent an exorbitant amount of money on it. I think somebody sold them a bill of goods.”A new tool is being used on every offender who enters prison, she said.It will be used again as they leave, she said.House Bill 585 requires Mississippi’s Corrections Department to ensure each of the more than 8,000 offenders leaving prison annually has a driver’s license or state ID card, but lawmakers provided no extra funding for these cards. Fewer than 100 offenders are receiving them a month, according to the department.“You can’t get a job without an ID,” said Starrett, the federal judge. “If you somehow get a job, you can’t cash a check without an ID. You can’t even get some prescriptions from the drugstore without an ID.”The problem is many offenders lack birth certificates or Social Security cards, and the Department of Public Safety requires both for an ID card, Hall said. It can take months or even longer for replacements to arrive, she said. By contrast, Louisiana corrections officials try to get at least two forms of identification for offenders, as well as replacement birth certificates and Social Security cards if needed.Since taking over the Corrections Department in 2017, Hall said she has made providing IDs a priority. The Mississippi Department of Public Safety now comes to the prisons as often as once a week, she said.Louisiana also enables judges to preside over a reentry program, where nonviolent offenders who face up to 10 years in prison may qualify to join a job-training program that can cut their time behind bars down to two years.Those who finish the program have a recidivism rate of 9.4%, compared with more than 30% for the average inmate in Louisiana.Louisiana inmates can earn more than 60 industry based certifications, enabling them to line up jobs before they leave prison. Mississippi has fewer than 10 of these programs.One of the most valuable ones that Mississippi now offers is trucking, where offenders can often get jobs, Hall said. Louisiana is now copying this program.Ingalls Shipbuilding is also aiding the department in training offenders and providing jobs, she said. “They leave, making more money than my correctional officers,” up to $25 an hour.Mississippi offenders taking part in educational or vocational programs have a lower recidivism rate than the state as a whole, 16% to 19% compared with 33%, Hall said.Once outside prison, support is even harder to come by because Mississippi operates no halfway houses, and probation officers say they are overwhelmed.One former Mississippi probation officer said her caseload earlier this year included as many as 340 offenders. She assisted many in getting into rehab, some into jobs and some in getting their driver’s licenses back. Trump recognizes senior adviser Ivanka Trump, his daughter, at the 2019 White House Prison Reform Summit and First Step Act celebration, held in April 2019. (Cheriss May/NurPhoto via Getty Images) “We were desperately understaffed,” said the officer, who asked not to be named for fear it could hurt her new job in another state. “It was very stressful.”The Corrections Department has far fewer probation-parole officers than recommended by staffing formulas developed by the American Probation and Parole Association. In November 2016, the agency said it would need 233 additional officers to be at recommended levels.More recent data was not available, but Hall acknowledges a lack of staffing. To handle such woes, probation officers now focus on high-risk offenders. But with caseloads of 200 to 300 people, the task is difficult, if not impossible, she said.Kittrell, a district attorney for five counties in south central Mississippi, said unless the state starts investing in reentry programs, offenders are destined to return to prison.“Here we are, releasing them into the same neighborhood, with no skill sets at all, and expecting a different outcome,” he said. “That’s the definition of insanity.”Another priority of the law was to reduce recidivism. But the very nonprofit that the Legislature created to reduce recidivism, Mississippi Prison Industries, can’t prove it is fulfilling its mission, according to the state’s legislative watchdog.The Performance Evaluation and Expenditure Review Committee determined that the nonprofit failed to maintain accurate data about the program, discovering missing invoices and receipts to substantiate travel and other expenses. In just two years, the nonprofit lost $3.2 million more than it raised.Rep. Jerry Turner, R-Baldwyn, who chairs the Mississippi House Committee on Accountability, Efficiency and Transparency, said: “People are trying to figure out how to make Mississippi Prison Industries viable and effective. We don’t have the answer.”Mississippi Prison Industries officials did not return repeated calls, but they have defended their operation as sound to lawmakers and journalists.Hoping to reduce probation revocations, House Bill 585 requires judges to send offenders guilty of two or fewer technical violations to a Technical Violations Center.Many judges balked. “They feel like some discretion has been taken away from them,” Circuit Judge Prentiss Harrell, of Hattiesburg, said in an interview.Circuit Judge Dal Williamson, of Laurel, blasted House Bill 585 from the bench, saying that it “strips from the law the court’s authority to impose serious consequences.”Another judge ruled House Bill 585 unconstitutional, saying it violated the separation of powers, a decision the Mississippi Supreme Court later overturned.The push to reduce the actual time offenders spend behind bars has rankled some judges and prosecutors.District Attorney Ronnie Harper, of Natchez, said prosecutors want to be able to tell victims what to expect from an offender’s sentence.If he has promised the victim that the offender will serve 25% of his or her time, and the offender is released earlier, running into the victim at the grocery store, that’s a problem, Harper said.“They lose confidence in the system, and they lose confidence in you.”Despite its flaws, House Bill 585 has meant a new beginning for some.Jody Owens II, the Southern Poverty Law Center’s managing attorney for Mississippi, said the law has paved the way for trial judges to help give new lives to nonviolent offenders. The Parole Board is releasing about two offenders per month under this provision, the board says.Inmate Jerry Johnson hopes to join them. In 1993, he received 60 years without parole in Coahoma County Circuit Court for making two $20 crack cocaine sales under Mississippi’s “three strikes” rule. In March, a judge there authorized Johnson’s eligibility for parole.If the Parole Board agrees, the 60-year-old Johnson would walk free after 26 years in prison. Owens said Johnson wants to help his ill sister and assist youth in the community.This would “save Mississippi approximately $620,000,” the expected cost of imprisoning him for the rest of his term, Owens said. “This is so significant. It is giving people freedom.”
What’s Really Going On Inside Mississippi’s Prisons? We Need Your Help to Find Out.
by Jerry Mitchell, Mississippi Center for Investigative Reporting, and Kengo Tsutsumi, ProPublica The Mississippi Department of Corrections has received national praise for its criminal justice reform efforts. The department claims to be improving the system, but there’s very little transparency about what’s actually changing and how taxpayer money is being spent.Meanwhile, we’ve been hearing a very different story from those who are closest to the situation.We’ve heard about gangs and unchecked violence. Delayed medical care. Corruption. Prisons without heat. Inmates unable to communicate with their families.And they’re not the only ones paying the price. Mississippi’s prisons now have fewer than half as many correctional officers as in 2014, with about the same number of inmates behind bars. We’ve heard from correctional officers who fear — every day — for their lives. Former or current inmates, family and friends, contractors, employees or those working to make a difference in corrections: We’re looking for anyone who’s had any experience with Mississippi’s prisons recently to help us understand what’s going on behind these walls.Here is what we need: more stories, more proof and information about who, what and where we should be investigating.Please reach out to us at mississippi@propublica.org or by filling out the form below.We won’t publish any of the information you share with us without your permission, and the following questionnaire is submitted securely. However, the administrator of the network you’re on may be able to see your communication. If you’d rather talk on Signal, WhatsApp or LINE (which are more secure), or SMS text, send a message to 213-271-7217. Fill out our form.
Una de las pediatras que atendió a niños inmigrantes describe un patrón de brechas en la atención médica proporcionada en los albergues
por Michael Grabell En un hogar grupal deteriorado y pintado de verde, en el sur de Nueva Jersey, Yosary se debilitaba cada vez más. Se sentía cansada todo el tiempo, y, a veces, al levantarse por las mañanas, se mareaba tanto que tenía que volverse a acostar. Luego le comenzaron a salir moretones por todo el cuerpo. Se le antojaba el hielo, el cual se comía a mordidas cada vez que lograba obtener un vaso lleno de cubitos.Durante meses esta chica delgada de 15 años de edad que había huido de Honduras con su pequeño de dos años, informaba al personal del albergue acerca de sus síntomas. Pero ellos no tomaron en serio sus súplicas de ayuda, diciéndole que se mareaba por haberse puesto de pie rápidamente. ¿Y los moretones? Probablemente se había golpeado con algo y no se acordaba. Masticar hielo era un mal hábito que tendría que romper.Cuando por la llevaron a una de las pediatras del albergue el pasado verano, Yosary estaba en un estado tan grave que tuvieron que internarla en un hospital de la localidad y conectarle infusiones intravenosas. La pediatra, Elana Levites-Agababa, reconoció los signos obvios de una anemia grave que podría haberle provocado hasta insuficiencia cardíaca y daños a otros órganos, si no se hubiese tratado. El personal debería haber sabido lo que estaba sucediendo, ya que los antecedentes de anemia de la adolescente estaban documentados en el expediente del albergue.“Me sentí devastada por la atención que recibió”, comentó Levites-Agababa. “Es muy probable que se hubiera podido prevenir su hospitalización si la hubieran traído cuando comenzó a indicar que necesitaba ver a un médico”. Manténte informado/a Suscríbete a nuestra newsletter en español y te avisaremos cada vez que publiquemos una historia en español. Levites-Agababa, pediatra de CAMcare, consideró que ese fue otro lapso alarmante. Durante meses ella había notado la actitud de descuido en cuanto a las necesidades médicas de los niños de los albergues para menores inmigrantes sufragados por el gobierno federal y administrados por el Centro para Servicios Familiares (Center for Family Services - CFS), organización sin fines de lucro basada en Camden, Nueva Jersey. Fue por eso que decidió revisar los expedientes de los noventa pacientes del CFS que habían sido atendidos en el centro de salud comunitaria.Comentó, por ejemplo, que los menores, que incluyeron bebés, habían acudido al mismo hasta diez semanas tarde para ser vacunados, lo cual aumentó sus riesgos de contraer enfermedades infecciosas. Hubo una serie inusual de faltas a consultas y cancelaciones, aunque casi todas clínicas del centro de salud se encuentran a menos de media hora de los albergues. Y comenzó a ser rutina que estos no programaran las consultas de seguimiento ordenadas después de una visita a la sala de emergencias, hospitalización o admisión a instituciones psiquiátricas.La doctora informó sus hallazgos a CAMcare, organización contratada por CFS para brindar atención médica a menores inmigrantes, muchos de ellos en Estados Unidos por haber cruzado la frontera con México para pedir asilo. Sin embargo, y conforme pasaron los meses sin que mejorara la situación, Levites-Agababa comenzó a inquietarse aún más y presentó quejas a principios de este año ante la Oficina Federal de Reasentamiento de Refugiados y las autoridades de Nueva Jersey, ambas entidades encargadas de reglamentar por separado los albergues de ese estado.Mientras que esperaba respuesta, Levites-Agababa dijo que el consultorio médico recibió una solicitud nueva y preocupante: CFS quería autorización médica para restringir físicamente a los menores bajo su cuidado.“No se sienten obligados a proporcionar atención adecuada para estos niños ni a seguir ninguna recomendación dictada por un proveedor de atención médica”, dijo Levites-Agababa, quien ha trabajado en CAMcare desde 2015. “Y eso lo han demostrado una y otra vez al grado de que es algo que interfiere con nuestra capacidad para practicar la medicina”.CFS negó haber hecho nada mal, además de rehusarse a contestar preguntas específicas.“El objetivo principal del programa es la seguridad y el bienestar de todos los niños bajo nuestro cuidado”, dijo por correo electrónico Eileen Henderson, Directora de Operaciones. “CFS sigue trabajando con la Oficina de Reasentamiento de Refugiados y nuestros proveedores de atención médica, con el fin de asegurar que los niños reciban el tratamiento médico adecuado de acuerdo con las instrucciones que recibimos de la misma (ORR).”El cuidado de los menores inmigrantes custodiados por los EE. UU. durante el año pasado, ha sido escudriñado intensamente en vista de los miles de alegatos de abuso sexual y los reportajes sobre el enriquecimiento de algunas instituciones sin fines de lucro; cosas que han ventilado dudas acerca de la capacidad del gobierno federal para monitorear su red de aproximadamente cien albergues.Ahora, una nueva oleada de familias y menores no acompañados en la frontera está retando al sistema de manera nunca vista. El Departamento de Salud y Servicios Humanos de EE.UU. ya tenía dificultades para encontrar lugares nuevos donde hospedar a niños inmigrantes cuando las políticas de la administración del Presidente Donald Trump hicieron que hubiera más niños detenidos por más tiempo. Con el despido reciente de los funcionarios principales de inmigración del Presidente, se espera que Trump establezca políticas aún más severas y hasta un esfuerzo más activo para separar a menores de sus familias.A finales de febrero había 13,500 niños en albergues, cinco y pico veces más que hace dos años. El pasado miércoles Trump solicitó fondos adicionales del Congreso para casi duplicar el cupo de camas.La atención médica de estos recién llegados se convirtió en punto de enfoque el pasado diciembre, cuando dos pequeños enfermos murieron estando bajo la custodia de la Oficina de Aduanas y Protección Fronteriza cerca de la frontera. Sin embargo, y a diferencia de esos niños, Yosary (quien pidió que solo se usara su primer nombre), fue desarrollando sus síntomas mucho después de haber cruzado al país. Ella y otros menores revisados por Levites-Agababa se encontraban en un lugar supuestamente seguro, bajo el cuidado de personal capacitado para atender a menores y a reconocer síntomas de salud bajo supervisión de agencias federales y estatales a cargo de servicios médicos y sociales.La ORR declinó nuestra solicitud para entrevistar a su personal médico. La agencia dijo que, después de investigar la queja presentada por Levites-Agababa, había suspendido provisionalmente la recepción de niños de parte del CFS hasta que se abordaran los problemas. No mencionaron cuándo entró en efecto la suspensión, cuánto tiempo duró, o lo que CFS hizo para resolver las problemáticas.La ORR tampoco mencionó cuántas quejas había recibido relacionadas con la atención médica, aunque sí dijo que “los médicos y las enfermeras que tienen inquietudes relativas a la salud, a menudo se comunican” con su personal para plantearlas y resolverlas. El año pasado Yosary huyó de Honduras con su hijo de dos años después de recibir amenazas y por temer ser secuestrada. (Tamika Moore para ProPublica) Los lapsos documentados por Levites-Agababa plantean preguntas críticas acerca del rompecabezas de reglamentos estatales de los cuales depende la ORR para monitorear los albergues, mismos que van desde hogares colectivos pequeños, hasta instalaciones con dos mil camas ubicadas en poblados pequeños y localidades remotas. El pasado martes un chico de 16 años murió poco después de llegar a un albergue de la ORR en Texas.Las preocupaciones de Levites-Agababa fueron substanciadas recientemente por las autoridades regentes de Nueva Jersey quienes encontraron fallas numerosas en la atención de niños inmigrantes proporcionada por CFS. Aun con las faltas de cumplimiento, la agencia estatal no tiene capacidad para imponerle multas al operador del albergue ni para retirarle a los menores bajo su cuidado.Levites-Agababa comentó que teme que podría ser despedida por hablar del tema, pero que aceptó hacerlo públicamente con la esperanza de enfocar algo de atención hacia el cuidado de estos menores en los albergues.CAMcare no devolvió nuestras llamadas con las que pedimos comentarios.En virtud de que queda estrictamente limitado obtener expedientes médicos de estos menores, también resulta difícil saber si los problemas que informó Levites-Agababa son únicos o más bien emblemáticos de problemáticas más extensas. En una evaluación hecha el año pasado acerca del Centro de Detención Juvenil del Condado de Yolo en California, se encontraron problemas similares con el acceso a atención médica de parte de los adolescentes inmigrantes, los cuales incluyeron “falta de seguimiento de lesiones graves” y largas esperas para atender urgencias médicas.La inquietud relacionada con estos lapsos ha hecho que el Inspector General del HHS lleve a cabo una revisión nacional de la atención médica y de salud mental que se está proporcionando en los albergues de menores.La Academia Americana de Pediatría declaró una seria preocupación acerca de las consecuencias de salud mental relacionadas con detener a menores, resaltando que aun los periodos cortos pueden ocasionar traumas psicológicos y grabar consecuencias de por vida. La AAP no considera que los albergues sean un tipo de detención y el enunciado sobre sus políticas no plantea el impacto de una estadía de largo plazo en albergues de la ORR. Los albergues fueron diseñados como alternativas basadas en la comunidad en lugar de reclusorios, aunque actualmente los menores permanecen en estos durante más tiempo.Levites-Agababa dijo que su experiencia ha hecho que crea que los pediatras deben adoptar una postura más firme, comparándolos con la época en la que los médicos se rehusaron a dar inyecciones letales cuando decidieron que su papel para aliviar el sufrimiento tenía más peso que el daño ocasionado por asistir en la ejecución de un reo. Levites-Agababa agregó que también considera que brindar atención médica a menores inmigrantes no sobrepasa los efectos traumáticos de estar detenido en un albergue.“Nos están utilizando como sello oficial médico para justificar el mantenerlos detenidos”, dijo. “Y, cuando participamos sin objetar, permitimos que continúe la detención de miles y miles de niños y niñas”.Los encargados de monitorear el cuidado de menores inmigrantes en los albergues, y la eficacia de esa supervisión, dependen mucho de los lugares donde terminen estos niños.Todos los albergues deben seguir las reglas de la ORR, pero la agencia depende bastante de los estados cuando se trata de otorgar licencias a las instituciones y garantizar la seguridad de los menores. Por ende existe un conjunto desorganizado de normas.En Texas, los albergues se consideran centros residenciales de cuidado de menores y deben seguir reglamentos estrictos establecidos por funcionarios de bienestar infantil. En Arizona, los albergues se consideran instituciones de salud mental, con un conjunto más limitado de reglas que obstruyen las inspecciones del estado.En Nueva Jersey, los funcionarios de bienestar infantil que normalmente supervisan instalaciones con niños, están impedidos por la ley para inspeccionar los albergues de menores inmigrantes en virtud de que estos no son sufragados por el estado, dijo Tammori Petty, vocera del Departamento de Asuntos Comunitarios de Nueva Jersey.En su lugar, las instalaciones de la ORR tienen licencia para operar como albergues de emergencia para indigentes y son inspeccionados por la Oficina de Normas de Alojamiento Provisional del Departamento. Las reglas permiten que los niños vivan en los albergues siempre y cuando sean parte de una familia. En el caso de los niños inmigrantes, dijo Petty, el departamento decidió que la ORR calificó debido a que ofrece cuidado bajo custodia para menores. La restricción burocrática presenta una yuxtaposición interesante. Los albergues del CFS para menores inmigrantes, los cuales no pueden ser supervisados por funcionarios de bienestar infantil, se conocen como el Programa “Juntos”, así en español. Para contrastar, el programa del centro para atender crisis de adolescentes estadounidenses, llamado simplemente albergue Together (juntos en inglés), queda reglamentado por la agencia estatal de bienestar infantil.“Me preocupa la falta de supervisión estatal; el hecho de que estos albergues no reciban licencia de cualquier organismo estatal dedicado a supervisar el cuidado infantil”, dijo Farrin Anello, abogado principal de la American Civil Liberties Union (Unión Americana de los Derechos Civiles) de Nueva Jersey.De conformidad con un acuerdo emitido por un tribunal federal, los albergues tienen el requisito de proporcionar atención médica de rutina y servicios de emergencia que incluyan chequeos médicos, vacunas y pruebas de detección de enfermedades infecciosas dentro de un periodo de 48 horas posteriores a la admisión.Las normas de la ORR también exigen que el personal de los mismos observe a los niños para detectar señales de enfermedad y que reaccionen a peticiones de atención médica regulares (no de emergencia) dentro de 24 a 48 horas. Los albergues deben notificar a la ORR acerca de una visita a la sala de emergencias dentro de las siguientes cuatro horas, además de revisar las instrucciones de dada de alta y seguir las recomendaciones de tratamiento giradas por los médicos.No obstante, y aunque la ORR tenga poder para retirar a los menores de los albergues y recortar fondos, también carece desesperadamente de plazas y cualquier reducción de cupo crearía una crisis. Quienes abogan por los niños han dicho que estas prioridades conflictivas son el motivo por el cual es importante la supervisión.La atención que se brinda en los albergues se ha hecho cada vez más crítica conforme evoluciona su función. Originalmente, estos se vieron como estaciones provisionales donde se alojarían los menores mientras el gobierno ubicara y verificara a los familiares que los cuidarían mientras se evaluaran sus casos de asilo. Sin embargo, el otoño pasado ya durante la administración de Trump, el promedio de la estadía subió a tres meses.Los albergues de Nueva Jersey habían existido casi sin conocerse aun cuando la crisis de separación de familias del verano pasado enfocó la atención del público en la red de instalaciones gubernamentales que ha recibido $5 miles de millones de dólares desde que comenzó a aumentar la cantidad de niñas y niños no acompañados que entraron al país a partir de 2014.CFS, dedicado a proporcionar servicios sociales en Camden y el sur de Nueva Jersey durante casi cien años, abrió su primer albergue para menores no acompañados en 2017. Desde esa fecha ha recibido casi $11 millones de dólares en fondos federales. Un hogar grupal en la parte trasera de una iglesia en Burlington acoge a veinte menores de 13 a 17 años de edad. Otro en Woodbury fue asignado para un grupo de hasta diez madres adolescentes que cruzaron la frontera con sus hijos. El programa recibió autorización reciente para abrir un tercer albergue cerca de Atlantic City este año.Una evaluación de los archivos de inspecciones muestra que antes de la queja presentada por Levites-Agababa, la Oficina de Normas de Alojamiento y Vivienda Provisional había emitido infracciones por faltas menores de cumplimiento en los albergues; cosas como un inodoro suelto, una ducha que necesitaba compostura, recordatorios para llevar a cabo ensayos mensuales de evacuación para casos de emergencias. En una ocasión durante el otoño, también emitió una infracción para el CFS por operar su albergue en Burlington con una licencia y un certificado de incendios vencidos. Sin embargo, el Departamento de Asuntos Comunitarios mencionó posteriormente que, básicamente, la oficina no había enviado la licencia a tiempo para la inspección.Las reglas de Nueva Jersey que rigen los albergues de emergencia para indigentes contienen poco en relación con el bienestar infantil. Los albergues deben ofrecer tres comidas diarias, expedir recomendaciones para atención médica de los residentes, informar acerca del abuso de menores al Departamento de Menores y Familias, y contar con una “cantidad suficiente” pero no identificada “de personal competente” en las instalaciones, para supervisarlas. Los informes de policía obtenidos por ProPublica muestran pocos incidentes que atraerían el escrutinio típico de los encargados del cumplimiento. En noviembre, un chico de 16 años huyó del albergue de Burlington. Y, el pasado abril, la policía acudió a revisar un informe relacionado con un varón del personal que había hecho comentarios indebidos y tocado a una chica durante una evaluación realizada a puerta cerrada.En otros estados, incidentes similares han dado lugar a infracciones por no supervisar bien a los menores y no mantener límites adecuados. Pero los informes de las inspecciones en Nueva Jersey no mencionan ninguno de este tipo de incidentes ni tampoco los problemas médicos. Los funcionarios del Departamento de Asuntos Comunitarios insisten que nunca recibieron la queja de la Dra. Levites-Agababa. Pero, después de que el Departamento de Menores y Familias emitiera una recomendación por negligencia médica sobre la cual ella misma había presentado una queja, además de varias llamadas de ProPublica, un inspector finalmente visitó el albergue a finales de marzo, para encontrar una cantidad de faltas.CFS no había cumplido con garantizar que el personal recibiera capacitación adecuada para monitorear cambios de conducta entre los residentes, concluyó el inspector. Tampoco había cuidado que el personal entendiera cómo tratar las emergencias. Falló en tramitar atención médica cuando uno de los residentes desarrolló un padecimiento que requería atención. No investigó ni llevó archivos relacionados con casos en los que menores fueron puestos en peligro. Ni tampoco informó a la agencia estatal de bienestar infantil acerca de abuso y maltrato de menores.El informe indicó que las “instalaciones deben tener cuidado al manejar y documentar las emergencias, lo cual incluye enviar a los residentes a obtener atención médica u otro servicio de emergencia y documentar archivos acerca de necesidades médicas especiales o padecimientos, los regímenes recetados que habría que seguir, y los números telefónicos de los médicos a contactar” en casos de emergencia.El Departamento de Asuntos Comunitarios dijo posteriormente que, en efecto, CFS había presentado el informe del abuso del menor y que atribuyó la falta de seguimiento a una confusión con el papeleo en la oficina.Aun así, mientras que la oficina autorizara el plan de CFS para componer las faltas de cumplimiento, no cuenta con muchas opciones adicionales. La única herramienta que tiene a su disposición para hacerlas cumplir es revocar la licencia de los albergues, cosa que no planea hacer.¿Cuál es la consecuencia de eso? De conformidad con las leyes de Nueva Jersey, en vez de estar reglamentados como albergues para indigentes, las instalaciones serían regidas como hoteles. Las leyes estatales para hoteles no tienen reglas relacionadas con el cuidado de menores.Después de entrar al Hospital de Cooper University en Camden, Yosary recibió la primera de lo que serían varias infusiones de hierro. Encamada en el hospital, separada de su bebé y lejos de otros familiares que también huyeron de Honduras, Yosary pensaba en su madre quien murió de cáncer cuando ella era muy pequeña.“Tenía mucho miedo”, recuerda. “Pensé que no me quería morir”.Yosary se vino a los Estados Unidos el pasado marzo buscando asilo. En Honduras, dijo que la habían violado cuando tenía doce años, quedando embarazada de su hijo. Cuando su familia denunció el ataque, agregó, comenzaron a recibir una serie de amenazas. En su ciudad, las líneas entre la pandilla local, la policía y las fuerzas militares se borraban cada vez más.Conforme crecía su niño, Yosary dijo que su atacante comenzó a merodear por su casa y ella temió que fuera a secuestrarlo.Fue entonces que Yosary decidió huir con varios miembros de su familia, marchando a pie con su bebé a cuestas, luego en camión y, finalmente en una lancha inflable con la cual atravesó el Río Bravo. Cuando encontró a los agentes de la Patrulla Fronteriza la llevaron a un puesto de procesamiento donde la separaron del resto de su familia para ser enviada con su hijo al hogar de madres y bebés del CFS de Nueva Jersey.Dijo que los primeros meses se sintió bien, pero que a finales de la primavera comenzó a sentirse mareada y somnolienta todo el tiempo y a notar que le salían moretones en los brazos y las piernas.“Les dije varias veces”, comentó. “Pero no me tomaron en serio”.Yosary comenzó a sentirse atrapada en el albergue, donde sólo había tres otras chicas junto con sus bebés, dijo. Era raro que les permitieran salir del lugar, ni siquiera a respirar aire fresco. Su única conexión con el mundo exterior eran dos llamadas breves semanales con miembros de su familia que se encontraban en la misma situación precaria de inmigración.Por fin, en algún se llevó a cabo una junta en el hogar que incluyó personal de fuera. Yosary les comentó acerca de los moretones, pero aun en el consultorio médico y en el hospital, agregó, CFS no le permitió hablar con la doctora a solas. “Siempre había alguien allí conmigo” dijo. Yosary dijo que se sentía atrapada en uno de los albergues para menores inmigrantes de Nueva Jersey. Dijo también que había informado sobre sus síntomas de anemia grave durante meses, pero que el personal no había tomado en cuenta sus llamados de ayuda. (Tamika Moore para ProPublica) Levites-Agababa dijo que ese era un problema recurrente con los pacientes del programa, y que le preocupaba que hiciera que los niños temieran hablar acerca del cuidado que recibían en el albergue.“Cuando insistí que los chaperones salieran del consultorio para que yo hablara con los niños a solas, se rehusaban a salir e insistieron que esa era la política”, mencionó.Yosary fue dada de alta varios días después con instrucciones de que obtuviera otro tratamiento intravenoso. Pero CFS no informó a CAMcare acerca del mismo, según la queja de Levites-Agababa.Levites-Agababa añadió que comenzó a ser rutina que no se programaran consultas de seguimiento, ni se siguieran las recomendaciones de ir a un especialista u obtener radiografías o análisis de laboratorio. La doctora también indagó con CFS acerca de estos lapsos.Dijo que al principio el personal le informaba que la ORR no aprobaría los tratamientos, pero que luego se enteró que CFS ni siquiera había presentado las órdenes médicas.Una enfermera de CAMcare, quien pidió que no se identificara su nombre, repitió las inquietudes de Levites-Agababa. “Hubo muchas consultas que negaron, o a las que faltaron”, mencionó. Otro médico de CAMcare dijo que sabía acerca de los problemas pero que no tenía suficiente información para hablar de ellos.En algunos casos, agregó Levites-Agababa, las madres de los bebés traían los registros de vacunas de sus países de origen, pero que el personal de los albergues no llevaron los documentos al examen médico inicial.“Esta pobre madre adolescente viajó atravesando varios países con todo tipo de peligros y contratiempos, y protegió el documento de las vacunas al igual que a su niño”, dijo, “¿y ni siquiera lo traen a la consulta?”Yosary, ya instalada en Alabama con su hermana mayor, dijo que no podía olvidar los cinco meses que pasó en el albergue y que quería levantar su voz para ayudar a las demás chicas en ese lugar.“Espero que no les pase como a mí” dijo con el pequeño de cabello rizado en su regazo, “porque fue horrible estar encerrada en ese lugar”.Agregó que incluso hasta ahora recuerda la falta de interés por su bienestar. De acuerdo con las reglas de la ORR, cuando se da de alta a una menor no acompañada los albergues deben entregarles una copia de su historial médico.La hermana de Yosary, quien no quiso que se usara su nombre para proteger a su familia, sacó un sobre grande de papel manila con los registros de Yosary y su niño. Aunque hay páginas bien impresas, una tras otra resulta ilegible. Se supone que los albergues deben entregarles a los menores no acompañados una copia de su historial médico. Pero muchas de las páginas del expediente que el albergue le entregó a la familia de Yosary son ilegibles porque la impresora se quedó sin tinta. (Michael Grabell/ProPublica) “Me dijeron que estos son los papeles de la escuela, del hospital, de todo”, dijo Yosary. Pero aparentemente la impresora se quedó sin tinta. “Ni siquiera se puede leer”, agregó. “Uno de los papeles hasta está en blanco”.En Nueva Jersey, Levites-Agababa dijo que se preocupa de lo “que está sucediendo sistemáticamente en este y en un sinfín de hogares en todo Estados Unidos” y se pregunta si otros médicos serán lo suficientemente atrevidos para quejarse. “Realmente no se quien más podría sacar a relucir esta inquietud ante el público o la ORR”.Yosary y su hermana dijeron estar contentas de que Levites-Agababa decidiera alzar su voz.“Nadie del albergue va a denunciar nada”, dijo la hermana de Yosary, quien también estuvo en un albergue federal para menores cuando llegó.“Yo no lo hubiera hecho porque yo aquí soy inmigrante”, dijo Yosary.“Y”, añadió su hermana, “ella no conoce las reglas o las leyes”.
Kentucky’s $1.5 Billion Information Highway to Nowhere
by Alfred Miller, Louisville Courier-Journal The internet arrived in some parts of eastern Kentucky’s Jackson and Owsley counties on the back of a mule named Old Bub.Nine years ago, Old Bub trudged between the rugged counties’ most remote utility poles, hauling the high-capacity fiber-optic cable intended to help bring Appalachian residents into the information age.Today, Old Bub symbolizes something else — a poor state plodding along the information highway. Despite spending hundreds of millions of state and federal dollars, Kentucky still lags behind other states in providing high-speed internet access to its residents. The state’s signature effort to catch up — an ambitious statewide broadband project known as KentuckyWired that was launched with bipartisan support five years ago — is well behind schedule and more than $100 million over budget, a joint investigation by the Courier Journal and ProPublica reveals. So far, Republican Gov. Matt Bevin has offered no solution to the boondoggle he inherited.State officials estimate that a little over one-third of KentuckyWired’s more than 3,000 miles of fiber-optic cable has been installed. The state’s private sector partners don’t give the precise location of much of that cable.State Auditor Mike Harmon conservatively estimates that Kentucky taxpayers over the next 30 years will be on the hook for $1.5 billion — 50 times what they were originally told the project would cost them. That’s because the state quietly assumed most of the risk for this public-private partnership in the closing weeks of the previous Democratic Gov. Steve Beshear’s administration, Harmon said in his September 2018 report on the project.Perhaps Bevin’s boldest move to dig the state out of its technological quagmire has been hiring an old Army buddy, Chuck Grindle, to advise him as the state’s IT chief at a salary of $375,000 annually, the highest-paid position of its kind in any state.While Grindle makes clear that he does not directly supervise the stalled project, he has publicly disdained it. And his job gives him the power to direct millions in state business annually away from KentuckyWired to other vendors.Grindle has hitched the state’s tech future to AT&T and other major tech companies, which have raised his national and international profile by featuring him as a speaker at company conventions, the Courier Journal and ProPublica found in an investigation that included dozens of interviews across Kentucky and a review of thousands of pages of documents obtained under public records laws.Bevin has said Grindle’s stature in the tech world justifies his high salary, which stayed intact despite a legislative furor this year. But Bevin administration officials are engaged in a high-dollar tug of war over KentuckyWired, with some officials fighting to complete the project as promised and others such as Grindle seemingly willing to let it die an expensive death.The result threatens to keep Kentucky, with its estimated 4.5 million people, lagging behind neighboring states in its attempts to bring high-speed internet to rural areas thirsty for new jobs and economic prosperity.For disenchanted Kentuckians like Tina Sparkman, the frustrations of the state’s lagging and unreliable internet service hit painfully close to home. Sparkman, who lives on a farm in eastern Kentucky’s rural Letcher County, pays $69 a month for the only internet service available there — satellite.Each month, she’s able to download the equivalent of three Kindle e-books before her bandwidth is throttled. On cloudy days, she’s lucky to get any service at all, she said.“We can’t wait 10 more years for internet,” Sparkman said.Creating “Silicon Holler”Tucked away in the hills and crags of Daniel Boone National Forest, Jackson and Owsley highlight the challenges of wiring Kentucky’s rural counties.Without a telephone provider as late as 1950, residents of the two eastern Kentucky counties formed the nonprofit Peoples Rural Telephone Cooperative. Over the years, the co-op shifted focus from telephone lines to the 21st century’s more essential communication medium: the internet.When the Obama administration made federal stimulus money available in 2009 for rural broadband projects, the co-op’s longtime CEO, Keith Gabbard, pounced.The Jackson County native saw it as a way to kick-start the economy of what historically had been two of the country’s poorest counties and turn eastern Kentucky into what hopeful proponents named “Silicon Holler.” The project required a mule team like Old Bub’s and about five years to complete, but visitors to Jackson County today are greeted by a giant billboard declaring the area home to the state’s fastest internet.All told, the project cost about $50 million in Jackson and Owsley. But it brought high-speed fiber-optic lines within reach of every home and business of both counties’ combined 18,000 residents.Unemployment in the two counties is still nearly double the national rate, but an influx of call center jobs that followed the advent of high-speed internet has helped offset the loss of factory work. Last year, the combined unemployment rate there dropped to 7% from 8.5%, according to data from the Kentucky Education and Workforce Development Cabinet.“It’s really making a difference in our community,” Gabbard told the Courier Journal. “We re seeing our economy change.”Building the Kentucky “I-Way”In December 2014, at about the same time the phone co-op was completing its rural broadband project, Kentucky leaders unfurled a plan for a statewide version.Kentucky would build a new information superhighway — the “I-Way,” longtime U.S. Rep. Hal Rogers, a Republican, called it. Rogers and Beshear pushed the project as a way to jump-start Kentucky’s rural economy.Six massive loops of fiber-optic cable would be draped across the state, connecting about 1,000 government sites to one another and the internet. The state-owned loops wouldn’t connect directly to individual homes and businesses, but the private companies the state chose to construct and operate the loops would be able to sell access to third-party internet service providers.In theory, that would promote broadband access in areas otherwise lacking good internet infrastructure. However, where exactly private companies have existing fiber lines is typically a closely held trade secret, meaning the project could duplicate existing private infrastructure.In addition to indirectly supporting the spread of high-speed internet to homes and businesses across Kentucky, the state was also taking in-house what it had for two decades paid a group led by AT&T to do: provide state agencies with internet service.In 1995, it was this AT&T internet service that was praised for pushing Kentucky into the information age, said Aldona Valicenti, the state’s first chief information officer, who is now head of the Lexington city government’s IT arm.Through AT&T, Kentucky schools were the first in the nation to all be connected to the internet, something the state Department of Education still notes proudly on its website. As part of that deal, state agencies also began buying internet service through AT&T and its partners.In the intervening years, however, the state as a whole has stumbled far behind in the internet race. The Federal Communications Commission ranks Kentucky below the national average for access to high-speed internet and cellular data.Kentucky is fifth worst in the nation when it comes to the rate of high-speed internet use, Microsoft says. According to the latest U.S. Census Bureau data, it’s also fifth poorest, with a median household income of $46,535. To catch up, the state essentially decided it wanted to stop renting its internet equipment and service at a cost of $27.2 million annually. Instead, it wanted to buy its own set of internet pipes — the new I-Way.Doing so would require the equivalent of a 30-year mortgage, said Australian investment bank Macquarie Capital and its partners, which were awarded the KentuckyWired contract in December 2014.Negotiations with the Macquarie team dragged on for months after the initial award, but in September 2015, in the waning days of the Beshear administration, a deal was signed that won praise from bond market observers.Bond Buyer magazine named KentuckyWired its 2015 “Deal of the Year,” and Fitch Ratings later described it as a first-of-its-kind project.The deal was to work like this. Macquarie and its partners — Kansas engineering firm Black & Veatch and Canadian construction company Ledcor, among others — would build and operate the I-Way that Kentucky wanted, at a price not too much greater than what the state was already paying annually to companies like AT&T for internet service. In exchange, Macquarie could count on a steady flow of cash for 30 years, adding up to about $1.2 billion. Afterward, the state would own its I-Way.Much of that $1.2 billion was supposed to come from the money state agencies were paying existing internet service providers like AT&T. The state also promised to put up an extra $30 million in equipment and Rogers, then chair of the powerful House Appropriations Committee, promised to secure another $23.5 million in federal grant money.Macquarie would also have the ability to sell access to the network to third-party internet service providers and split the spoils with the state. The share, after expenses, that Macquarie can keep varies from 10% to 25% depending on the type of access it sells, but it’s estimated at $600 million over 30 years.All told, the project was supposed to cost roughly $330 million to build, Finance and Administration spokeswoman Pamela Trautner said at the time. But Rogers promised KentuckyWired would deliver to constituents “unlimited potential.”“This is going to give you the mechanics, the technology, the capability to expand your business and attract new ones like you’ve never even thought of before,” Rogers said to applause at a speech in eastern Kentucky announcing the deal. “So I’m asking you to open up your head and start dreaming about the future and what you can do with this new technology that will be in place in eastern Kentucky by April of next year.”His constituents are still waiting.A “Wildly Aspirational” ProjectWhat taxpayers didn’t realize were all the concessions Kentucky made to its private partners to seal the deal during the nine months of negotiations in 2015. That $330 million construction cost estimate didn’t tell the whole story; it didn’t even tell a quarter of it.The state was obligated to provide Macquarie its steady stream of payments regardless of whether the network was generating revenue from the sale of access to third parties, which has not yet begun. That adds up to $1.2 billion over 30 years, potentially out of the state’s general fund — at taxpayers’ expense.Then there are the costs the state agreed to cover in the event of unforeseen circumstances. Take, for instance, what are known as “pole attachment agreements.”Wiring Kentucky meant physically hanging fiber-optic cable from tens of thousands of utility poles across the state. Source: Kentucky Communications Network Authority; Credit: Jesse Hazel/Louisville Courier Journal For each utility pole, KentuckyWired needed the pole owner’s permission to hang its cable and the consent of existing utilities already attached to the pole to make space for the new competitor. Every pole required an engineering check to plan the safe rejiggering of the pole’s many lines.Further complicating things, one of the biggest pole owners in the state was KentuckyWired’s main competitor, AT&T.But the state didn’t realize how big a player AT&T was until it agreed to work out a deal with the communications giant on behalf of Kentucky’s Australian banker, according to the state auditor’s report.Kentucky, on the advice of Macquarie’s partners, thought AT&T owned 5,000 of the poles that KentuckyWired needed, the state auditor said.In reality, AT&T owned nearly 12,000 poles, and because of the deal Kentucky signed with Macquarie, suddenly the state had less than a month to negotiate agreements for all of them — or pay penalties to the Macquarie team.In the end, it took more than seven months to get the agreements. All the while, Kentucky racked up penalties with its partners. That was just one of the reasons for cost overruns and delays on KentuckyWired.In February 2019, the state finalized a settlement that pays Macquarie and its partners $93 million for that and other delays, and pushes back the project completion date two years to late 2020.Add that to $1.2 billion in payments Kentucky owes Macquarie, along with the cost of network upgrades and of running a state agency to keep tabs on KentuckyWired, among other project costs, and the state auditor estimates taxpayers will be responsible for $1.5 billion. The costs would eventually be offset by money the state is already spending on internet service as well as revenue from the sale of access to the network to third parties. Phillip Brown, who until recently oversaw the state agency in charge of KentuckyWired, said in an interview that it was implausible to negotiate a pole attachment agreement with AT&T in 3 weeks. He contends the state set an unrealistic construction schedule to make it appear the state would break even on the project from Day One.Brown led the Kentucky Communications Network Authority for two years starting in April 2017. He resigned from the authority in April 2019 to take a job with cell tower operator Crown Castle, authority spokesman Randy Lutke said.“What would the reaction to KentuckyWired have been if the state had said at the beginning it will take us until 2020 and it’s going to cost about $400 million?” Brown asked. “Well, maybe the state doesn’t do the project, but it also means that we don’t have those false expectations that were created by a schedule that wasn’t achievable.”The state made the mistake of letting its desired costs on paper dictate an ultimately impossible construction schedule, he said.Lawyers who negotiated the deal for the Macquarie team did not respond to requests for comment. Attorney James Baller, who advised the state, also did not respond to a request for comment. Another attorney for the state, Marc Lemon, declined to comment, citing attorney-client privilege.An expert in rural broadband at the University of Texas at Austin, Sharon Strover, agreed that Kentucky’s overall timetable was unrealistic.“Building a big network in four years is quite a feat, actually,” she said.Three years? “That would be wildly aspirational.”Saving the “Taj Ma-Hal”KentuckyWired’s next problem was Bevin’s 2015 election as governor.The network represented the antithesis of the small-government approach that Bevin and his conservative followers espoused. Shortly after taking office in December 2015, Bevin vowed to scale back the project.He was prompted in part by the revelation in November 2015 that nearly half the money the state had counted on for KentuckyWired suddenly disappeared — and perhaps never existed.The venture had banked on taking from AT&T about $13 million that Kentucky schools paid annually for internet service, part of a federal program known as E-rate that subsidizes broadband access in public schools and libraries.But strict federal procurement rules disqualified the state-owned network, AT&T said in a protest it lodged at the time. Less than a month later, the state canceled a new solicitation for bids on school internet service that it had counted on KentuckyWired winning.Then-Commissioner of Education Terry Holliday had warned Finance and Administration Cabinet Secretary Lori Flanery that KentuckyWired couldn’t qualify as early as February 2015, according to a June 2015 email on which was copied Mary Lassiter, Beshear’s former cabinet secretary.Flanery and Lassiter ignored the warnings, the state auditor later found. Flanery did not respond to a request for comment. Lassiter, through attorney Guthrie True, declined to comment.Suddenly, KentuckyWired had a huge funding gap. The money from Kentucky schools was supposed to account for about 45% of the annual payments the state owed Macquarie and its partners.Scaling back the project earned approval from some. The Bluegrass Institute, a conservative, free-market think tank, praised the announcement and called for more cutbacks.Soon, however, Bevin changed his position on KentuckyWired. Standing beside Rogers at a September 2016 press conference in the state Capitol, Bevin announced he had solved KentuckyWired’s funding gap, but didn’t explain how. Bevin’s office did not respond to an interview request.The lack of detail seemed par for the course to Bluegrass Institute head Jim Waters, who called KentuckyWired one of the state’s “most secretive projects” ever when it comes to tracking how taxpayer dollars are being spent.“I was disappointed when only a short time after the governor said he would scale back this project we find him standing in the rotunda with a big-spending congressman from Washington telling us that the funding issue had been solved,” Waters told the Courier Journal.As a member of an eastern Kentucky economic development group that initially hatched KentuckyWired as a way to bring jobs to the region, Jim Host had previously briefed the new Republican administration on the project but hadn’t won Bevin’s full backing until that press conference.Why Bevin’s change of heart? The press conference followed a meeting between Rogers and Bevin.While he wasn’t present in that one-on-one meeting, Host, a former state commerce secretary and longtime friend of Rogers, said the congressman can be very persuasive. Get Our Top Investigations Subscribe to the Big Story newsletter. Don’t miss out on ProPublica’s next investigation. Sign up and get the Big Story email whenever we break news. “All I know is that he has a pretty good-sized arm when he wants to put his arm on somebody,” Host said.Bevin also saw that scaling back the project wouldn’t actually be cheaper, said former KentuckyWired overseer Brown. In early 2016, the state examined multiple scenarios, including scaling back the project to just its eastern ring.The savings were “negligible to nonexistent,” Brown said. He placed the cost of terminating the project at that time at $163.9 million, before any lawsuits.Dropping the two westernmost of the project’s six loops would still cost the state $300 million overall and leave Kentucky less able to pay back Macquarie, Brown said.The deal Kentucky signed with Macquarie was, by design, difficult for the state to get out of. That’s not unusual for complex public-private partnerships, said Aaron Renn, who has studied such deals as a senior fellow at the Manhattan Institute, a free-market think tank. Renn said states must be wary when their negotiating partner is a sophisticated player like Macquarie.“The contracts are generally written to protect these investors very well and often not necessarily to protect the public,” Renn told the Courier Journal, adding, “I’ve never heard of anybody being able to easily break out of one of these deals.”Moreover, the big costs in a large-scale broadband project are not in the raw materials — the miles of fiber-optic cable — but in mobilizing the workforce to lay that fiber, Brown said.To offset those costs, the state needed the money that would otherwise go to KentuckyWired’s competitors, namely AT&T and others already providing internet service to government offices.Rogers, whose office did not respond to a request for an interview, perhaps had another reason to push for the full project’s completion.In his hometown of Somerset, Kentucky, stands the Center for Rural Development, a nonprofit dedicated to stimulating eastern Kentucky’s economy. Locals call it the “Taj Ma-Hal.”The glass-faced 90,000-square-foot complex, along with an array of nonprofits similarly tied to Rogers, have benefited over the years from tens of millions in federal funds, according to left-leaning ethics watchdog Citizens for Responsibility and Ethics in Washington.But with Rogers, now 81, approaching retirement age, the Taj Ma-Hal needed a new funding stream to perpetuate its economic development work.The nonprofit center would oversee construction of the eastern portion of KentuckyWired. In exchange, it would be entitled to half of the net revenues generated from what, when completed, would likely be one of the network’s busiest portions — the “I-75 spine” from Cincinnati to Georgetown, Lexington and Richmond — and all net revenues generated from portions in eastern Kentucky, according to an addendum to the KentuckyWired deal revealed by the state auditor last September.The addendum doesn’t define “net revenues.”The state auditor has questioned under what authority the addendum was created. Center for Rural Development President and CEO Lonnie Lawson did not respond to a request for comment.Mixed Messages From Bevin’s AdministrationMore than three years after taking over, Bevin administration officials are still sending conflicting messages about KentuckyWired.The governor’s cabinet secretary, Scott Brinkman, who is chairman of the authority overseeing KentuckyWired, pleaded with state lawmakers not to shut it down during a February skirmish in the state legislature over the project’s request for an additional $20 million related to the settlement with Macquarie.Last year, lawmakers reluctantly granted KentuckyWired the ability to borrow $110 million for the settlement agreement and future loss claims. In February, they didn’t provide the additional $20 million needed for what officials described as unanticipated borrowing costs, but they held back from killing the project altogether.That would have triggered a $325.4 million charge, not to mention the likely damage to Kentucky’s credit rating, Brown said, which would hurt taxpayers by making it more expensive for state agencies to borrow money.“We’re on the cusp — the eve, literally — of this project being completed and starting to produce revenues, and we’re having a discussion about terminating this project? It makes no sense, financial or otherwise,” Brinkman told state lawmakers. “It makes no sense.”At around the same time, however, Grindle, the administration’s technology czar, was saying something quite different.Kentucky’s Tech Colonel Targets a “Terrible Project”With his close-cropped white hair and square jaw, Grindle looks and sounds every bit a retired U.S. Army colonel.In a speech to academics and business people at the University Club on the University of Louisville’s campus in February 2019, Grindle lambasted KentuckyWired as a “terrible project” that was “underhandedly done” and said he wasn’t ready to immediately switch over the state’s business from AT&T.“At any location I have a government connection, I’m supposed to immediately terminate that contract and start using the KentuckyWired fiber there,” Grindle said before rattling off all the added security and network optimization features AT&T provides.He added: “I’m supposed to just stop and move over to this new environment? And they don’t have a call center set up.”Grindle cast doubt on whether he would allow KentuckyWired to bill the state for internet service without it first demonstrating its comparability to AT&T. Emails obtained by the Courier Journal show that the telecom giant is now deeply entrenched within the Commonwealth Office of Technology when it comes to billing for internet service. Charles Grindle, Kentucky’s chief technology officer, speaks at a hearing in Frankfort about the changes he’s made during his tenure overseeing the state’s IT infrastructure. Gov. Matt Bevin has touted Grindle as saving taxpayers millions. “His plan for a new converged server and storage infrastructure will create an estimated $3 million in annual savings in Fiscal Year 2019,” said Bevin in October. (Matt Stone/Louisville Courier Journal) Describing data billing as a “manual process,” state technology office employee Ozanna Waltz-Allen praised AT&T’s billing manager for her “outstanding performance” in an email that made its way to the company’s regional sales director last March.“It makes a difference when you can trust the resource AT&T provides to do the job and to do it right!” wrote Waltz-Allen, asking that the billing manager’s colleagues let her know “how deeply she is valued” by the state.Grindle appeared to be looking for the same level of customer service from KentuckyWired.“They’re trying to come to me in order to do billing,” Grindle said during his speech at the University Club. “They want me to bill once a year for every single agency. One time. Think about that. One time at the beginning of the year, X number of millions of dollars.“Doesn’t matter if it’s turned up or not. Just pay. Not happening. We got challenges. And we’re working through them.”Grindle, through a spokeswoman, declined to be interviewed because his office doesn’t directly run KentuckyWired.Grindle told the audience at the University Club that AT&T is doubling down on its rural broadband infrastructure.AT&T is building a network of cell towers called FirstNet for the federal government. A post-9/11 initiative, FirstNet is designed to allow emergency responders to communicate with one another from even the most remote locations using a dedicated nationwide broadband system.Ordinary AT&T customers in those areas are set to benefit as well from the increased connectivity, AT&T spokeswoman Ashley Hoptay said.In Kentucky alone, AT&T is planning to build 182 new cell towers, Grindle said. That means AT&T’s fiber-optic infrastructure in Kentucky is likely also expanding.But if the state doesn’t switch to KentuckyWired’s internet service, the premise of the entire $1.5 billion project would be negated.Grindle said he prefers working with “trusted partners” such as AT&T. And his office argues that the money he has saved by consolidating contracts under larger players has more than paid for his hefty $375,000 public salary.Grindle has pointed, for example, to his consolidation of the state’s various video conferencing agreements and to his cancellation of a contract with IT consultant Gartner.Grindle’s affinity for big technology companies has won him invitations to their exclusive conferences in such places as Las Vegas and Dallas. It has also put him on a first-name basis with Dell Technologies founder Michael Dell, according to a March 18, 2019, letter the Courier Journal obtained through a public records request.“On behalf of the global Dell Technologies team, thank you,” Dell wrote in the letter addressed to Bevin and “Chuck” after the state opened a new Dell-powered data center. “We can’t wait to see what’s next.”In September, AT&T brought Grindle up on stage at an invitation-only business conference in Dallas that featured private concerts by Gwen Stefani and Imagine Dragons.The two-day conference is valued at $2,995 but is free for clients nominated by AT&T salespeople, The Dallas Morning News reported. Asked whether the company paid for Grindle to attend, a spokesman for AT&T said the company doesn’t comment on conference expenses. Representatives for Grindle did not respond to multiple inquiries about who paid for the trip.Sitting on stage between an industry analyst and an AT&T executive, Grindle talked about the importance of choosing “trusted partners” for state contracts, according to a video of the appearance posted on YouTube. There Grindle said he preferred Kentucky work with a “trusted partner.”Two weeks after the conference, AT&T told Grindle’s office it was slashing the rate it charged Kentucky for internet service by 31%, according to emails obtained by the Courier Journal through a public records request.KentuckyWired Project “on the Cusp”But while AT&T may be playing hardball, that doesn’t mean the state should abandon KentuckyWired now, insists Brown, the project’s former overseer within state government.The project has saved money by striking deals with existing local fiber providers, like Cincinnati Bell Telephone in Northern Kentucky, to fill gaps quickly in KentuckyWired’s six proposed rings across the state, Brown said. The state won’t own those sections at the end of 30 years, but the deals have accelerated the project.“We’re on the cusp,” Brown said before leaving state government at the end of April.He noted the first of the project’s rings would be completed by September, followed a month later by a second.That means some of the project’s biggest customers, including the University of Kentucky, the University of Louisville and Northern Kentucky University, should be able to use the network — if only KentuckyWired can figure out how to start charging its own creator.The network promises to be up to 50 times faster than what is currently installed at most government sites, and software changes could increase those speeds by another 100 times, Brown said.Administrators still have their doubts. In an email obtained by the Courier Journal through a public records request, the chief of technology for Kentucky’s Education Department, David Couch, questioned the quality and skill of the people operating KentuckyWired.“It’s much more important to have the right amount of bandwidth at a fair price that is of high quality that is valued/respected by a very high percentage of customers versus gobs more bandwidth than is needed at a cheaper price that is not of high quality,” Couch wrote last April.The longer Kentucky waits, the more costly KentuckyWired becomes to taxpayers; it’s the state’s responsibility to switch government sites over to the state-owned network as soon as possible, Brown said.“If Kentucky wants the project to pay for itself — or part of itself — we have to use it,” he said.But Kentuckians such as Sparkman have lost faith that KentuckyWired will ever arrive, or even be of much help when it does, leaving her with unreliable service. Her two sons, now in college and graduate school, rarely visit her these days, she said.“They can’t be guaranteed that they’ll have internet available to them if they have homework or have to do a project. … As a mom, it’s kind of heartbreaking,” she said. “But I have to understand that their school has to come first right now.”Sparkman joined her county government’s broadband board to lobby for better broadband options. That board is currently pitching a plan that would draw on fiber now serving an AT&T cell tower rather than KentuckyWired, fellow board member Roland Brown told the Courier Journal. Unlike AT&T, the KentuckyWired fiber footprint just doesn’t come close enough to the neediest parts of Letcher County, Brown said.Asked about the project’s future, the governor’s office released an email statement saying Bevin recognizes the value of “having a fully functioning high-speed broadband network.”“As has been well documented, the Bevin administration inherited a project guaranteed to have significant challenges from the day it was launched by the prior administration,” spokesman Woody Maglinger wrote. “However, Gov. Bevin is encouraged by the current pace of construction of the KentuckyWired project, and he remains firmly committed to completing the project on a statewide basis.”
Texas House Unanimously Votes to Create Governor’s Task Force on Sexual Assault
by Mark Greenblatt, Newsy The Texas House of Representatives voted 146-0 Tuesday to create the Sexual Assault Survivors’ Task Force inside the governor’s office, bringing money and support at the highest levels of state government to reform how rapes are tracked, investigated and prosecuted across Texas.The measures provides up to $3 million to fund the task force, which will collect, analyze and make publicly available a new set of information showing where gaps remain in the system to prevent and prosecute sexual assaults.The lead sponsor of the bipartisan measure said reporting by Newsy, Reveal from The Center for Investigative Reporting and ProPublica proved pivotal in convincing Texas lawmakers they needed to act. Get Our Top Investigations Subscribe to the Big Story newsletter. Don’t miss out on ProPublica’s next investigation. Sign up and get the Big Story email whenever we break news. “The series was pretty alarming I think,” said Rep. Donna Howard, a Democrat from Austin, of Case Cleared, published in November. The articles showed how the Austin Police Department and dozens of others across the country frequently use “exceptional” clearances to close rape cases without solving them, increasing publicly reported clearance rates while leaving suspects on the streets. The series also led to an audit by the Texas Department of Public Safety, which concluded that nearly one-third of the cases Austin police had exceptionally cleared were misclassified.Howard said the series woke up lawmakers, who supported creating a high-level task force to collect more detailed information about how rape cases drop out of the system. “I’m not sure any of it would have happened otherwise,” she said. “Knowing the concern that was out there through your reporting and through what’s been going on specifically here in Austin, as well as in other parts of the state, gave us the unique opportunity to say, this is a real problem.”Howard’s office also said the lawmaker grew particularly concerned after hearing directly from survivors concerned about why their cases were not being prosecuted. The task force will survey communities, highlighting those that provide survivors of sexual assault with good services and those that don’t.The bill passed Tuesday is part of a suite of legislation that earmarks up to $80 million to improve support for sexual assault survivors, audit programs and increase public disclosures about the prevalence of rape on college campuses.The measure now heads to the Texas Senate for approval.
What Happened to All the Jobs Trump Promised? An Update
by Daniela Porat, Lena V. Groeger and Isaac Arnsdorf
The Birth-Tissue Profiteers
by Caroline Chen Their shoulders and backs and knees were giving out. Pills and steroid injections hadn’t eased their pain. They were scared of surgery. So, one afternoon last October, two dozen men and women, many of them white-haired, some leaning on canes, shuffled into a meeting room at Robson Ranch, a luxury retirement community in Denton, Texas. Sipping iced tea and clutching brochures that promised a pain-free tomorrow, they checked off their ailments on a questionnaire.They were there to see a presentation by Dr. David Greene, who was introduced as a “retired orthopedic surgeon.” Atlas Medical Center, a local clinic that specializes in pain treatment, hosted the event. Greene, a short, trim man with his hair slicked up, ignored the stage and microphone and stood close to his audience. After warming up the crowd with a joke about his inept golf skills, Greene launched into his sales pitch. A tiny vial no larger than the palm of his hand, he told the group, contains roughly 10 million live stem cells, harvested from the placenta, amniotic fluid, umbilical cord or amnion, the membrane that surrounds the fetus in the womb. Injected into a joint or spine, or delivered intravenously into the bloodstream, Greene told his listeners, those cells could ease whatever ailed them.On a screen behind him, Greene displayed a densely printed slide with a “small list” of conditions his stem cell product could treat: arthritis, tendinitis, psoriasis, lupus, hair loss, facial wrinkles, scarring, erectile dysfunction, heart failure, cardiomyopathy, chronic obstructive pulmonary disease, asthma, emphysema, stroke, Alzheimer’s disease, multiple sclerosis, ALS, neuropathy, pelvic pain, diabetes, dry eye, macular degeneration, kidney failure. And that was just a sample. “I need to add a couple more slides,” Greene said with a laugh. Get Our Top Investigations Subscribe to the Big Story newsletter. Don’t miss out on ProPublica’s next investigation. Sign up and get the Big Story email whenever we break news. Greene said that amniotic stem cells derive their healing power from an ability to develop into any kind of tissue, but he failed to mention that mainstream science does not support his claims. He also did not disclose that he lost his license to practice medicine in 2009, after surgeries he botched resulted in several deaths. Instead, he offered glowing statistics: amniotic stem cells could help the heart beat better, “on average by 20%,” he said. “Over 85% of patients benefit exceptionally from the treatment.”“Patients come back to the center saying, ‘I can walk farther, I can breathe easier, I can sleep better,’ ” he proclaimed. “It’s remarkable the outcomes we’ve been seeing for the last few years.”In the second row, a slender woman in a striped jacket, who had hobbled into the meeting on a wooden cane, pumped her fists in the air. “Stem cells!” she cheered.For more than half a century, the regenerative possibilities of stem cells — which the body stores to repair damaged tissue and organs and restore blood supply — have tantalized the medical community. Bone marrow transplants for cancer patients, which rely on blood stem cells, fulfill this potential. But alongside legitimate, scientifically proven treatments, an industry has sprung up in which specialized clinics offer miracle remedies from poorly understood stem cell products.These clinics are multiplying in the United States. According to a tally by Leigh Turner, an associate professor of bioethics at the University of Minnesota, there were 12 such clinics advertising to consumers in 2009; in 2017, there were more than 700. Unproven cellular therapies are a $2 billion global business, according to a recent paper co-authored by Massimo Dominici, the lead investigator at the cellular therapy lab at the University of Modena and Reggio Emilia, in Italy.This burgeoning business is largely unregulated. Technically, manufacturers are required to submit stem cell therapies for review as a drug, and to provide evidence of their safety and efficacy, but the U.S. Food and Drug Administration hasn’t enforced the rule consistently. The former FDA commissioner Dr. Scott Gottlieb acknowledged in an interview that the agency’s laissez-faire attitude has made it easier for stem cell clinics to proliferate. “This is an example where the FDA, for a long period of time, took enforcement discretion, then the field grew,” he said. “Then it becomes hard to step in and actually apply the regulation.”Many clinics offer stem cells taken from a patient’s own bone marrow or fat. But they’re being challenged by a newer technology: amniotic stem cells.Greene’s company, R3 Stem Cell, was established in 2013. It distributes amniotic stem cells to about 30 clinics nationwide, which have administered them to 10,000 patients, according to an R3 brochure. It also handles marketing for the clinics. In an interview, Greene acknowledged that the benefits of amniotic stem cells that he touted at the Robson Ranch seminar are based on “a lot of success stories,” rather than on clinical trials. “I don’t claim anything,” he added. “I don’t claim that this is a treatment. I don’t claim that it cures anything. I don’t claim that it’s a permanent fix. All I discuss is maybe, potentially, people can get some improvements from stem cell care.” A brochure from Dr. David Greene’s company, R3 Stem Cell, touts the healing abilities of amniotic stem cells. One appeal of amniotic stem cell treatments is convenience. They don’t require patients to undergo liposuction or bone marrow extraction; instead, manufacturers harvest the cells from tissues donated by women who have recently given birth, and the cells are then frozen and shipped to clinics. There’s no special training needed to administer amniotic treatments, either — a nurse practitioner on staff can give injections — so chiropractors, beauticians and sports medicine doctors can enter the field with relative ease. A procedure such as an injection into a joint might take about 10 minutes and cost between $5,000 and $10,000. For systemic diseases such as lupus, some clinics also administer the cells intravenously, which can cost more than $10,000 per session.Because amniotic stem cell treatments don’t undergo the clinical trials required for FDA approval, there’s little data or research on them. Their efficacy is highly questionable and, in one case where bacteria contaminated the supply, the lack of accountability in the industry has led to serious infections for a dozen patients. An investigation by ProPublica and The New Yorker found disgraced doctors who were recast as salespeople, manufacturers that cloaked themselves in pseudoscience and had few scientists on staff, and clinics that offer to treat conditions like multiple sclerosis or kidney disease without specialized training. Unscientific methods, deceptive marketing, price gouging and disregard for patients’ well-being were rampant across the amniotic stem cell therapy industry.The supply chain for amniotic therapy starts and finishes with people who are at vulnerable times in their lives: the cells come from new mothers and go to chronically ill patients. Women who undergo cesarean sections are often asked to donate their birth tissue shortly before the procedure. By law, they can’t be compensated for it. Mothers who donated their tissue told ProPublica and The New Yorker that they assumed, or were assured, that it would be used for a worthy cause — and that otherwise it would be disposed of as medical waste. But they couldn’t recall the details of the donation process, owing to the haze of childbirth.“Someone walked in with a form while I was in labor and asked if I wanted to donate” the umbilical cord, said Julie Menge, who gave birth in Pittsburgh in 2015. “I said, ‘Sure!’ And I have no idea what happened to it.”Tissue banks do collect birth tissue for important medical reasons. For instance, blood stem cells from umbilical cords can be used in the treatment of some blood disorders, such as leukemia. Placentas can be turned into wound dressings, including surgical grafts and bandages for people who have had ocular surgery. Other donations, though, find their way to commercial amniotic stem cell manufacturers, which sell them at a steep markup. The patients are taking an expensive gamble. A 66-year-old insurance auditing specialist, who asked not to be named for privacy reasons, suffered constant pain from arthritis in both knees but wanted to avoid replacement surgery. After attending a seminar in Irving, Texas, hosted — like the one at Robson Ranch — by Atlas Medical Center, she booked an appointment at Atlas in November 2017.There, the staff told her that the supplier was offering a discount that would lower her cost to $7,300 for injections in both knees. “They were just acting so shocked, one of them said, ‘I’ve never seen a discount this high before,’” she recalled. “I was so gullible.”She received an injection in each knee and returned every two months for a checkup. “They had me fill out this form every time to record my pain level, and it was close to 10 every time,” she said. The staff assured her that she would improve within six months, but her knees did not get better.Alexandra Schnee, a chiropractor from Atlas who introduced Greene at the Robson Ranch event, defended the treatment. “As with any procedure, there will be patients who have success and others that don’t,” she said in an email. “We have many more patients who have experienced improvement with this therapy.”The patient canceled her last appointment. “After six months, I was pretty ticked off,” she said.When most people hear the words “stem cell,” the first thing that often comes to mind is embryos. Embryonic stem cells are truly wondrous: They can evolve into all types of cells in the body. But their power is fleeting. By the time a fetus is fully formed, its stem cells are stratified: blood-forming stem cells can make both white and red blood cells, for example, but they won’t naturally turn into skin. Skin stem cells can regenerate the various layers of skin, but they won’t give rise to a new brain cell. Only in a lab, with genetic modifications, can scientists get differentiated stem cells to regain embryonic capabilities.Amniotic stem cell products are made solely from tissues related to childbirth, not from embryonic cells. The scientific consensus is that they may be able to turn into a limited range of tissue types — namely bone, fat and cartilage — but they can’t turn into liver, heart or brain cells, for example. Even if such a transformation were possible, scientists don’t know how it could happen or what would trigger it. Until this regenerative capacity is proved, some researchers say, these birth-tissue cells shouldn’t be called stem cells at all.Yet providers of amniotic stem cell treatments often attribute to their products all the powers of embryonic stem cells, minus the ethical issues associated with deriving cells from early-stage embryos. In his talk at Robson Ranch, Greene blurred the distinction between embryonic and amniotic stem cells, saying, “I think of a stem cell as a blank slate, a master cell that has not made the decision of what it wants to specialize in.” The cells he markets “can turn into anything we clinically need them to become,” he said.That assertion is “simply not true,” said Jeanne Loring, the director of the Center for Regenerative Medicine at the Scripps Research Institute and chief scientific officer at Aspen Neuroscience. “If a stem cell from one organ is put into another, like a placenta or umbilical cord cell into a knee, it will die. It can’t become something else.”Greene acknowledged that most patients don’t understand the difference between embryonic and other types of stem cells, and that the language he uses in his seminars is largely guided by market research. “When you look at what people are typing on the web, ‘stem cell’ is the No. 1 key phrase,” he told me. “That is the key word that the public in America understands.”Greene later cited a 2017 paper from a Chilean study as evidence that amniotic stem cells could help patients with heart failure. In the trial, 15 patients received umbilical cord-derived cells and saw improvement in the amount of blood pumped with each heartbeat. Dr. Steven Nissen, chairman of the department of cardiovascular medicine at the Cleveland Clinic, reviewed the study at ProPublica and The New Yorker’s request and noted that the trial was “tiny” and “is so preliminary (and frankly limited in quality) that no conclusions are possible.” He added that the Chilean findings had not been reproduced, while other studies had been negative. “This is NOT a justification for commercial administration of stem cells,” he said. At the Robson Ranch seminar, Schnee, the Atlas chiropractor, played a news clip about a two-part study at Stanford and the University of Pittsburgh in which stem cells were used to treat stroke patients. It showed a woman who had lost much of her limb function raising her arm above her head with a look of awe. But the cells used in the Stanford trial — which the clip referred to as “modified adult stem cells” — weren’t taken from amniotic tissue. Instead, the study used bone marrow cells that had been cultivated in a lab, genetically modified to be more potent and then delivered with a needle into a precisely selected spot in the brain.Dr. Gary Steinberg, the chair of neurosurgery at Stanford University, ran the trials and has been developing stem cell therapies for stroke patients for two decades. When he was told how the clip about his study was used, he said that there is no evidence to show that products made from amniotic cells are beneficial. “I have no control over how these clips get used, unfortunately,” Steinberg said. “I’m not happy about it.” He added, “I’m an advocate for thoughtful, controlled trials, and they will never know, unless we do controlled trials, if it works.” A promotional video on R3 Stem Cell’s YouTube channel includes clips of medical experts used without their consent. Steinberg isn’t the only academic whose work has been distorted to promote Greene’s products. A video on YouTube by R3 Stem Cell includes clips of David Schaffer, the director of the Stem Cell Center at the University of California, Berkeley, talking about regenerative medicine. Schaffer told ProPublica and The New Yorker that he has never heard of R3 and does not work with amniotic tissue. “That footage was not included with my consent,” he said. “I would be suspicious of the business.”Greene’s main supplier is the Utah Cord Bank, in Sandy, Utah, which was established in 2005 as a private facility where customers paid to store umbilical cord blood and other birth tissue taken from their babies to be used, among other reasons, if the child or a sibling had a blood disorder. For years, the bank’s website boasted of “bottom line prices,” advertising the “lowest yearly storage fee in the nation.”Around 2016, the bank began making two amniotic stem cell products, called StemShot and StemVive. (StemShot was later renamed Stemii.) Although the bank continued to store birth tissue, amniotic stem cells soon became its biggest moneymaker.The Utah Cord Bank was co-founded by a man named Eliott Spencer, who holds a doctorate in biochemistry from Brigham Young University. When the bank started producing StemShot and StemVive, Spencer was the only scientist on the company’s management team and the only person who knew the recipe for making the products, according to two former employees who spoke on condition of anonymity. Spencer said in an email that the bank now has “more than one scientist and many technicians, as well as multiple people who know how to safely procure, process and package our products.”Spencer said that he and his wife, Carlee, “currently work side by side as co-founders and presidents of the company.” According to her LinkedIn page, Carlee has a degree in design graphics. A former volunteer youth religion teacher, she originally joined Spencer’s company as a lab support worker and, the next year, rose to executive vice-president and director of procurement. The bank’s chief executive officer, Leigh Kimball, says on his LinkedIn page that the company makes “100% organic stem cells” and is “on track to double in size in 2019 to $20M.” He has a bachelor’s degree in journalism.Friends and former employees described Spencer as a computer whiz who mined bitcoin in his spare time. They also portrayed him as a libertarian who dislikes government regulation and can be thrifty to a fault. Last November, he pleaded guilty to a misdemeanor charge of criminal mischief after trying to exit an airport parking lot without paying an $18 parking fee. According to a court filing, he caused $3,755 worth of damage to the parking-lot gate, which he agreed to pay for. He said in his email that he doesn’t believe he was responsible for the damage and that the incident “is in no way indicative of major flaws in my character.” Industry insiders and the two former employees said that one placenta should yield between two and four hundred vials of amniotic stem cells. The Utah Cord Bank would harvest as many as 800, the ex-employees said. Also according to the former employees, it costs less than $50 to make a single vial, which is then sold to a clinic or a distributor for about $1,000.Spencer also used expired chemicals and reagents in his lab, according to two former employees. In January 2018, the FDA sent an inspector to the Utah Cord Bank to audit it for compliance with regulations on laboratory operations, according to the FDAzilla database, which tracks inspections. After the inspector notified the company that she would arrive on a Monday, workers spent the previous weekend getting rid of expired materials, two former employees said. Spencer didn’t respond to a request to comment on this incident. The bank passed the audit.Spencer said that the Utah Cord Bank has a perfect safety record and has never been cited for deficiencies by the FDA. “With tens of thousands of treatments shipped worldwide, and with no serious adverse events reported, UCB has helped a lot of people overcome their health challenges,” he said. “Sadly, this cannot be said for so many others in this space.”On its website, the Utah Cord Bank touts its products as containing “young multipotent cells” that can turn into many kinds of tissue. It and other manufacturers typically ship amniotic stem cells cryogenically preserved to a doctor’s office, where they’re thawed before they are injected into a patient. But despite the effort to preserve the cells, research suggests that many of them do not survive. Dead cells, once injected, have no effect; the body breaks them down.“For most of these products, there’s not many healthy cells left,” said Daniel Kuebler, the dean of the School of Natural and Applied Sciences at Franciscan University of Steubenville, Ohio. Kuebler has tested amniotic products for manufacturers including the Utah Cord Bank, but he declined to comment on any specific product, saying that his contracts bound him to confidentiality. Even if there are some cells that are still alive post-thaw, “I have a hard time getting them to grow,” Kuebler said. “Just because they’re alive doesn’t mean they’re not in the process of dying.”Dr. Lisa Fortier, a researcher at Cornell University and a consultant for a company that sells birth-tissue products, tested nine of them from four manufacturers — Utah Cord Bank was not one of them — and also found no live cells. It is “very unlikely” that the amniotic membrane “works as a stem cell product,” she said. Fortier and Kuebler said that there may be other proteins in the products that could somehow wake up the immune system or restore tissue, which might account for the benefits reported by some patients, but there’s not enough data to know for sure.Greene supplied ProPublica and The New Yorker with two lab analyses of Utah Cord Bank products. Both showed that up to 42% of the cells in the tested vials were alive. One analysis, done by Kuebler, counted roughly 600,000 live cells in the vial. That’s far less than the 10 million live stem cells that Greene cited at the seminar. The testing also didn’t indicate whether the living cells were stem cells or another type of tissue. “There’s a good chance most of these cells are not stem cells,” Paul Knoepfler, professor of cell biology and human anatomy at the University of California, Davis, said, after reviewing the reports sent by Greene. “The majority could be fibroblasts” — connective tissue cells — “or other unhelpful cells.”In its advertising, the cord bank features employee testimonials about the excellence of its products. Eliott Spencer said that “nearly all” of the bank’s employees “have used our products to treat shoulder pain, knee pain and more” and have “experienced the benefits.” The two former Utah Cord Bank employees described “shoot-up parties” where the staff were given vials of the product for personal use. According to one former employee, Spencer’s brother “would come in and do IV pushes on people.” The other former employee said that he became concerned about Spencer’s secretive production methods and worried that the amniotic cells weren’t being properly tested for disease. He said he’d take his dose to the bathroom and trash it.On an overcast day in November 2017, a 90-year-old man named Norman Graf, one of 27 million Americans who suffer from arthritis, attended a seminar at the Holiday Inn in Bismarck, North Dakota, hosted by West2North Medical Solutions. West2North is not part of Greene’s network, but it is also supplied by Utah Cord Bank. Dean Jones, a chiropractor who co-owns West2North, assured the audience at the seminar that amniotic stem cells alleviate arthritic pain. Graf later told his daughter, Libby Graf, that he had planned to go home and think about a stem cell injection, but the clinic’s staff convinced him to have it done immediately.“He was telling me he went and got an injection for $5,400 and I was, like, What?” Libby recounted. Her father’s cognitive abilities have diminished with age, and “it’s obvious that he doesn’t have enough wherewithal to make this decision,” she said.Jones said in an email that, while confidentiality prevents him from commenting on specific patients, the clinic “does not ‘convince’ anyone to do a procedure immediately. We fully explain the different options and benefits, and allow the patient to decide.” All patients sign consent forms and are told there’s no guarantee that the therapy will help them, Jones said.Graf told his daughter that his condition hadn’t improved. Yet he was planning to go back, because the clinic had promised him a discount — to $3,600 — for a second shot. Libby persuaded him not to go. Graf’s other daughter, Jodi Jacobson, complained to the North Dakota attorney general, as did other patients, prompting a state investigation. In May, West2North agreed to repay $19,733 to Graf and three other patients, and to be “permanently enjoined from engaging in any stem cell injections” that don’t comply with FDA rules, but denied any violation of state law. A page from the West2North website says patients undergoing stem cell therapy “generally experience much quicker recovery times, without all of the lingering side effects.” Spencer said that Utah Cord Bank was contacted by the North Dakota attorney general about one physician but wasn’t a target of the investigation. “We have been burdened and troubled by claims made by some physicians that use our products,” he said.West2North couldn’t stay away from the lucrative stem cell market. As of February 2019, the clinic’s website said, “Bone marrow stem cells coming soon.” Jones said that the state attorney general has been informed of this plan and hasn’t objected.North Dakota is still reviewing the matter, according to assistant attorney general Parrell Grossman. “We have approved nothing,” he said.Jones faced tougher regulation from the state of North Dakota than he did from the FDA. Nearly 15 years ago, the FDA established rules on the use of human tissue. If the tissue was “minimally manipulated” and used in the same way it originally functioned in the body, it didn’t need FDA approval as a drug. However, if the cells were modified in a lab or were given a new purpose — such as using placenta cells to treat a brain disease — they would be considered a drug and would have to undergo FDA review.The problem is that the agency left it up to manufacturers to decide which group their products belonged to. Seeking FDA approval entails running multiple human trials, which can cost hundreds of millions of dollars. There was no incentive for the stem cell manufacturers to put their treatments through this process, so they took the position that their products didn’t count as drugs.The FDA rarely disagreed with their stance. From 2010 to 2017, the agency sent warning letters to only seven of the hundreds of companies that made or marketed stem cell treatments, according to a tally of letters in the FDA database. The agency said it could not confirm the exact number because it “does not maintain lists of actions by product.” In the early 2010s, the agency decided it should issue stricter guidelines on the use of human tissue. But it wasn’t until November 2017 that the guidelines were updated, clarifying that many tissue products, including amniotic stem cells, must be characterized as drugs. The FDA gave the clinics another three years — until 2020 — to comply. (In the meantime, the agency continues to send warning letters to more companies.)Gottlieb, the former FDA commissioner, said he is disappointed that, during this interim period, few firms have submitted their products to the FDA for approval as drugs. “There are literally hundreds of clinics, and some of them are engaging in very risky actions,” he said. “They’re crossing the line.”Gottlieb acknowledged that the agency doesn’t have the resources to go after them all at once. He said that the FDA will prioritize the clinics that offer the riskiest procedures, such as injections into the eye and spinal cord. On March 5, a few weeks after our interview, Gottlieb announced his resignation. It’s not clear yet if his successor will maintain his commitment to cracking down on the stem cell industry.Greene, who is 50, travels the country to deliver seminars, drawing in patients with his friendly patter. His website, R3stemcell.com, connects patients to clinics, referred to as “Centers of Excellence,” that have signed contracts with him.Greene enlists doctors at those clinics to offer amniotic stem cell treatments. The clinics pay Greene at least $495 to join his network, another $495 per month and $75 for each prospective patient that comes to them through his website, according to a brochure.Greene regularly holds training sessions in Las Vegas for potential providers. On another R3 website, eight “top providers and industry thought leaders” are listed as trainers. They included a “Functional Oriental Medicine Expert” who doesn’t have a medical degree, a “biologics expert” who is the president of a surgical supplies consulting company and has no scientific training, and a pain doctor who was once disciplined by the Texas Medical Board for inadequate care of two patients who received spinal cord stimulators.Among the most recent doctors to join Greene’s network is Dr. Prabhat Soni, who runs a private practice out of a townhouse in Brooklyn, New York. In the clinic’s waiting area, banners advertise the “O-shot” and “P-shot” for erectile dysfunction, promising to “rejuvenate your sex life and your marriage.” Another banner, which carries Greene’s logo, advertises “cosmetic stem cell therapies: effective regenerative procedures for facelift, hair restoration and scar improvement!” Above: Dr. Prabhat Soni’s clinic is operated out of a Brooklyn townhouse. Below: Promotional banners on display in the lobby of Soni’s office. (Demetrius Freeman for ProPublica) Soni told me that he has been offering procedures using fat stem cells for about a decade. He joined Greene’s network, at the end of 2018, because amniotic treatments were a better value proposition, he said. “For fat cells, you have to numb the patient, do the liposuction to take fat, and then process the fat. It can take three hours. For amniotic cells, you just take the vial between your hands and warm it up, then you can go. It takes 10 minutes.” Either way, Soni charges $5,000 for one injection and $10,000 for intravenous treatment.He told me that he sees patients for stem-cell treatments about once a day and that stem cells can work for any ailment known to mankind. “They do everything,” Soni said, “because stem cells are our friend.” When asked why they hadn’t replaced all other medicines, Soni blamed a conspiracy by the pharmaceutical industry, saying, “because then the pharmaceutical companies will die.”Soni put me in touch with Joseph Longo, a 72-year-old who developed arthritis in his knees after decades of working as a ballroom dancer and instructor. Last December, Longo paid Soni $12,000 for two injections, one in each knee. When he woke up the next morning, he said, he felt “a little different. Not so stiff, not so much pain.” When we met, two months later, Longo was limping slightly but said that his left knee continued to feel somewhat better.Soni told Longo that three more injections were required for him to feel a significant difference, but, by early May, Longo had decided not to seek further treatment, saying that his left knee hadn’t improved any more. “I don’t think the regenerative properties were happening,” Longo said.Earlier this year, Soni’s Web site displayed the names and faces of a team of clinicians, including a cardiologist, a cosmetologist, a neurologist, and a urologist. None of them were listed on New York State’s license look-up page, and their photos were traced back to stock photo websites.When initially asked about these specialists, Soni said, “They are all seeing patients for me” and changed the subject. After ProPublica and The New Yorker expressed doubts about the clinicians’ existence to Soni, the names and photos vanished from the website. A promotional flyer advertising Soni’s services. In a biography on his website, Soni said that he is an assistant clinical professor at NewYork-Presbyterian/Weill Cornell Medical Center. When asked if he was still affiliated with the hospital, Soni said he was in the pulmonary division, asserting inaccurately, “I’m the chief of department.”The hospital said that Soni’s assistant professorship ended in December 2017, and he no longer has a position there. After ProPublica questioned him, Soni updated his website to reflect that he no longer works at the hospital. Greene said he dropped the doctor from the R3 network.Soni expressed confidence that his stem cell practice is poised to grow. “Someday I will be on TV,” he said. “So many people will come.”For some patients, stem cell treatments have been disastrous. Last July, Dorothy O’Connell, an 89-year-old grandmother living in Brazoria, Texas, went to see Sammy Tao, a chiropractor offering stem cell therapy. She had read about him in a newspaper piece by Gin Crawford, a local columnist who, when not sharing recipes for strawberry sheet cakes or tips for opening pickle jars, regularly extolled amniotic stem cell treatments and recommended Tao’s clinic as a local option for her readers.Tao assured O’Connell that stem cells could help her arthritic shoulders and back, said O’Connell’s daughter Elaine Dilley, who took her to the appointment. “He told her that her life would change, that she could go back to being herself again,” Dilley recalled. That prospect seemed worth the $12,250 price.On Aug. 9, a nurse practitioner at the clinic injected stem cells in both of O’Connell’s shoulders, according to her daughter and court documents. The following month, O’Connell returned for injections in her spine. Three days later, she called the clinic complaining of severe back pain and muscle spasms. Dr. Omar Vidal, a pain management physician who worked with Tao, prescribed a muscle relaxant and Tylenol.Tao had said that O’Connell might feel under the weather for a few days. But she kept getting worse. “I was scared I was hurting her when I moved her, because, every time you would touch her, she would scream, she was in so much pain,” Dilley said.Finally, Dilley called an ambulance. The local hospital had her mother flown to Baylor St. Luke’s Medical Center in Houston, because blood tests showed that she had sepsis. O’Connell’s kidneys were failing and her body was shutting down.Amniotic stem cells are unlikely to cause major complications if they’re clean, but the ones injected into O’Connell were contaminated with bacteria, according to the U.S. Centers for Disease Control and Prevention. The product Tao’s team used was made from umbilical cord blood and came from a privately held distributor in California, called Liveyon. At least 11 other patients across Texas, Florida and Arizona were also infected with various strains of bacteria, including E. coli and E. cloacae, and hospitalized after being treated with contaminated cells from Liveyon. Under pressure from the FDA, Liveyon recalled the product. Amniotic stem cells injected into Dorothy O’Connell (shown here with her daughter Elaine Dilley) were contaminated with bacteria. (Scott Dalton for ProPublica) Liveyon’s ads feature a dignified looking doctor with graying hair and piercing blue eyes telling patients about the benefits of stem cells. He shows one woman a glowing blue vial, and a narrator declares that the stem cells will provide “a new standard of living, free of pain and limitation.”The doctor is Dr. Alan Gaveck, the company’s director of education. Gaveck used to work as a podiatrist, in Arizona, but, in 2007, the state’s medical board put him on probation after he bungled a foot surgery and the patient had to have a toe amputated. “I felt horrible at the time and still do to this day that the patient suffered such a loss,” Gaveck said. He acknowledged that he is not trained in stem cell biology. His “relevant experience,” he said, “has been learned through eight years of being immersed in the industry and daily reading of journal articles related to regenerative medicine.”Liveyon’s founder and chief executive officer, John Kosolcharoen, pleaded guilty in 2016 to paying illegal kickbacks as part of a scheme to steer prescriptions for military members covered by TRICARE, the U.S. military’s health care program, to specific pharmacies. He is awaiting sentencing.Kosolcharoen readily acknowledged the felony conviction, saying that he got tripped up by a change in the law. He blamed the contaminated stem cells on his supplier, a San Diego-based manufacturer called Genetech. Once the FDA contacted Liveyon, it immediately cut ties with Genetech, he said. Genetech’s president, Edwin Pinos, could not be reached. His company’s San Diego office has been closed.O’Connell spent two weeks at St. Luke’s and five more in a rehabilitation center. “My mother used to be able to wash her car, mow the yard, cook,” Dilley said. “Now she can barely get down the steps.” O’Connell has a lawsuit against Liveyon, Genetech, Vidal and Tao pending in a Texas district court. Tao and Vidal denied all allegations in court filings and said that they weren’t responsible for O’Connell’s injuries. Tao’s lawyer declined to comment and Vidal didn’t respond to a request for comment.Crawford, the local newspaper columnist, said she was upset to hear of O’Connell’s infection. “I’ve been sick about this whole thing,” she said. “My whole intent was to help people, not harm people.” In a March column, Crawford told her readers that she no longer recommends Tao’s clinic.Now Liveyon is making its own product, from umbilical cords that it buys from a public cord bank, Kosolcharoen said. The bank, which he declined to identify, sells donated cords that don’t meet FDA standards for treatment of blood disorders, he said. Liveyon, he noted, uses them for a different purpose — to create stem cell products. He called the new treatment “clinical trial grade” and said that Liveyon plans to start trials to prove its safety and benefits. But, even before conducting trials, Liveyon is already marketing the product, which it calls Pure, with the tagline “The Pure Feeling of Healing.”In his talk at Robson Ranch, Greene assured his listeners that the FDA supports regenerative medicine. “They’ve realized that there are clinical uses now,” he said. He also warned against what he called “endgame surgery,” telling his audience, “You can’t go back from a spinal fusion or knee replacement.”Greene knows firsthand how dangerous surgery can be. After earning his bachelor’s and medical degrees, at the University of Virginia, Greene began working as an orthopedic surgeon, in Arizona, in 2004. By 2007, he was earning more than $400,000 a year, but the outcomes of his surgeries were dire. From 2005 to 2007, he botched at least a dozen of them, the Arizona Medical Board later found.In April 2005, a 35-year-old U.S. Air Force master sergeant, James DeJong, came to Greene complaining of back pain, according to court filings. DeJong left Greene’s operating room as a paraplegic. “I wouldn’t buy a bottle of water from him if I was lost in the Sahara Desert,” DeJong said in a recent email. In January 2006, Greene operated on 78-year-old Lola Ollerton for what was supposed to be a routine surgery. Her five daughters sat in the waiting room with their father, joking and “talking about history, about when our parents started dating,” until they were called into a conference room, said one of Ollerton’s daughters, Peggy Archuleta. Greene then told them that “there was a complication,” another daughter, Susan Fuller, recounted. “He then said that she had died. My eldest sister, Pam, said — and I will never forget this — ‘You mean to tell me that our mother’s death was a complication?’” Besides her husband and daughters, Ollerton left behind 28 grandchildren and 46 great-grandchildren.Four more of Greene’s patients died in that two-year period. Others suffered from infections, meningitis, excessive bleeding and permanent injuries such as a dropped foot. Alarmed by the “sheer volume of cases” and Greene’s “continued insistence that he made no mistakes in the care of his patients,” the Arizona Medical Board revoked his license in 2009.Inundated with 14 malpractice lawsuits, Greene filed for bankruptcy that year. His insurance settled most of the cases. The Ollerton family received a six-figure settlement, the filings show.Greene said he had “great outcomes” as a surgeon and the same rate of complications as other doctors who haven’t been sanctioned. He also said that he settled the lawsuits because he couldn’t afford to fight them in court. “I had a disagreement with the medical board that went on, and I ran out of money.” Greene said that several board certified doctors testified on his behalf, and these incidents are not relevant to his work today. Read More Behind the Scenes, Health Insurers Use Cash and Gifts to Sway Which Benefits Employers Choose The insurance industry gives lucrative commissions and bonuses — from six-figure payouts to a chance to bat against Mariano Rivera — to the independent brokers who advise employers. Critics call the payments a “classic conflict of interest” that drive up costs. You Snooze, You Lose: Insurers Make The Old Adage Literally True Millions of sleep apnea patients rely on CPAP breathing machines to get a good night’s rest. Health insurers use a variety of tactics, including surveillance, to make patients bear the costs. Experts say it’s part of the insurance industry playbook. Health Insurers Are Vacuuming Up Details About You — And It Could Raise Your Rates Without any public scrutiny, insurers and data brokers are predicting your health costs based on data about things like race, marital status, how much TV you watch, whether you pay your bills on time or even buy plus-size clothing. He defended his continuing use of the honorific “Dr.,” likening himself to a television personality. “Well, what about Dr. Phil?” he asked. The loss of his license, he said, “doesn’t take away the fact that I did a fellowship and a six, seven year residency. … But I just hate that we’re even talking about this because I’ve been through it, all these malpractice things, but, you know, my life is very, very different now.” He asserted that none of the stem cell patients in his network have suffered major complications from their treatments.After the lawsuits, Greene returned to school and got an MBA at Arizona State University. Then he launched his second act, in stem cells. He was barred from practicing medicine, but he could still profit from it.Schnee, the chiropractor who introduced Greene at Robson Ranch, said that she was unaware of Greene’s disciplinary record when he spoke there. After learning of it from ProPublica and The New Yorker, Atlas cancelled all seminars with him, she said.Archuleta, whose mother died in Greene’s operating room, was quiet on the phone as she heard about his new business. “I hope he is remorseful and he’s taking decent care of people in some other line of work,” she said. “But if he’s not changed, if he still disregards the truth and is harming people, then he needs to be stopped. Someone needs to stop him again.”
Once Defiant, All Four White Supremacists Charged in Charlottesville Violence Plead Guilty
by A.C. Thompson Last year, when federal authorities arrested and charged four members or associates of a white supremacist gang for their roles in the infamous 2017 “Unite the Right” rally in Charlottesville, Virginia, the men and their supporters struck a defiant tone.The men proclaimed their innocence, and their backers described them in social media posts as “patriots” and “political prisoners.” The gang, known as the Rise Above Movement and based in Southern California, set up an anonymous tip line for people to share evidence that might exonerate the imprisoned members, and it established a legal defense fund, with donations taken via PayPal and bitcoin.But in the following months, the men, one after the other, have pleaded guilty. Last Friday saw the final two guilty pleas, including one from Ben Daley, 26, one of the group’s leaders. He was joined by Michael Miselis, 30, a former Northrop Grumman aerospace engineer. The men pleaded guilty to conspiracy to riot.“These avowed white supremacists traveled to Charlottesville to incite and commit acts of violence, not to engage in peaceful First Amendment expression,” U.S. Attorney Thomas T. Cullen said in announcing the guilty pleas. “Although the First Amendment protects an organization’s right to express abhorrent political views, it does not authorize senseless violence in furtherance of a political agenda.” Get Our Top Investigations Subscribe to the Big Story newsletter. Don’t miss out on ProPublica’s next investigation. Sign up and get the Big Story email whenever we break news. The Rise Above Movement and its role in the violence in Charlottesville in 2017 and at rallies in other cities was the subject of reporting by ProPublica and Frontline, work the authorities have credited in taking action against the men. Federal prosecutors in California are pursuing charges against four other RAM members, including its founder, Robert Rundo.The plea documents filed during Friday’s court proceedings in Charlottesville lay out a detailed narrative of what the authorities say were RAM’s repeated acts of violence two years ago.The narrative chronicles RAM’s combat training and the visual evidence capturing its members attacking protesters, including in Charlottesville, where, the authorities spell out, they “collectively pushed, punched, kicked, choked, head-butted, and otherwise assaulted several individuals, resulting in a riot.”In pleading guilty, the authorities said, Daley and Miselis admitted their actions were not in self-defense. In the contemporary white supremacist scene, RAM had positioned itself as the violent vanguard of the movement, a successor to the volatile and hyper-aggressive skinhead gangs that were prevalent during the 1980s and 1990s. Since its formation in 2016, the group has recruited several members of the Hammerskin Nation, the largest skinhead gang in the country, which has been tied to numerous killings, including the massacre of six Sikh worshippers at a temple outside Milwaukee.Though RAM has eschewed the skinhead style — combat boots and bomber jackets — in favor of a more mainstream look, its members have embraced the bloody tactics of the Nazi skinhead gangs.Miselis, a onetime engineering student at UCLA, was fired from his job at Northrop Grumman after ProPublica and Frontline exposed his membership in RAM. In a companywide email, then-CEO Wesley Bush said he was “deeply saddened yesterday to see news reports alleging that one of our employees engaged in violence as part of the Charlottesville protests.” Miselis held a government-issued security clearance while at Northrop, a major defense contractor, though the company has so far declined to say what projects Miselis was assigned to.Rundo, who was living in Orange County at the time of his arrest, has also portrayed the federal prosecutions as a miscarriage of justice. “The rioting charges brought against us have not been used in 70 years,” Rundo said in a jailhouse interview posted on YouTube in February. “This has little to do with rioting and all to do with censorship and silencing anyone that they deem too radical by today’s standards.”In the interview, Rundo blamed the media for demonizing RAM and described the group as a self-improvement club for white men.Rundo has pleaded not guilty, and he could be headed to trial. The RAM prosecutions have become something of a cause celebre for the racist right. Augustus Invictus, a fringe political figure and attorney, has set up a legal defense fund to solicit donations for the RAM members facing charges. “The federal government has taken an absolute political hard line against the right wing,” Invictus said in a 53-minute YouTube video discussing the case. The video has generated more than 22,000 views and nearly 700 comments, most of them sympathetic to RAM and many of them racist, anti-Semitic and Islamophobic.One of RAM’s most infamous supporters is Robert Bowers, the Pennsylvania man accused of murdering 11 congregants at the Tree of Life synagogue in Pittsburgh last October. Shortly before the massacre, Bowers posted a message decrying the RAM prosecutions on Gab, a far-right social media platform. Bowers has pleaded not guilty in the unfolding case.
Senior IRS Leaders Launch Review of Agency’s Partnership With TurboTax and H&R Block
by Justin Elliott Amid calls for investigations from members of Congress, the IRS announced late Friday that it has convened a team of senior leaders to review concerns raised about its Free File public-private partnership with the tax software industry, following a series of ProPublica stories.“The IRS is reviewing the concerns raised about the Free File program. We take these issues seriously, and a senior leadership team was assembled to review the current Free File program,” according to a statement. It added: “The IRS team will take fast action to ensure the integrity of the program.” Get Our Top Investigations Subscribe to the Big Story newsletter. Don’t miss out on ProPublica’s next investigation. Sign up and get the Big Story email whenever we break news. Under the Free File program, companies including Intuit, the maker of TurboTax, and H&R Block have promised to offer free preparation and filing options to millions of Americans. In exchange, the IRS has promised not to create its own free online system, which would compete with the industry.But, as we have reported, use of the free option, which was never high, has dropped sharply in the past decade. Insiders say that Intuit and H&R Block deliberately steered users away from the Free File option and to paid products. At least five of the companies in the Free File program added code to their free websites effectively hiding them from Google and other search engines.The move is a sharp break for the agency, which as recently as April 26 defended Free File as a “successful program and partnership that’s benefited millions of taxpayers.”The agency said it has already reached out to the companies and others as part of its review. Last week, members of Congress led by Sen. Elizabeth Warren, D-Mass., called for the IRS and the Federal Trade Commission to investigate the companies’ compliance with the Free File program and laws banning deceptive advertising.Separately, the IRS’ independent watchdog, the Treasury Inspector General for Tax Administration, is launching an audit of the Free File program in response to ProPublica’s reporting, the inspector general confirmed.The inspector general last looked at the program over a decade ago, in 2007. The title of that audit report was “Additional Action Is Needed to Expand the Use and Improve the Administration of the Free File Program.”Spokespeople for Intuit and H&R Block didn’t immediately respond to requests for comment but previously said the companies are proud of their role in Free File.
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