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As Need for New Flood Maps Rises, Congress and Obama Cut Funding

May 24, 2013 - 2:04pm
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As the United States grows warmer and extreme weather more common, the federal government’s flood insurance maps are becoming increasingly important.

The maps, drawn by the Federal Emergency Management Agency, dictate the monthly premiums millions of American households pay for flood insurance. They are also designed to give homeowners and buyers the latest understanding of how likely their communities are to flood.

The government’s response to the rising need for accurate maps? It’s slashed funding for them. 

Congress has cut funding for updating flood maps by more than half since 2010, from $221 million down to $100 million this year. And the president’s latest budget request would slash funding for mapping even further to $84 million — a drop of 62 percent over the last four years.

Flood Hazard Mapping and Risk Analysis Program Budget

  (in millions, 2014 number from proposed budget)
Source: Federal Budget, Department of Homeland Security

In a little-noticed written response to questions from a congressional hearing, FEMA estimated the cuts would delay its map program by three to five years. The program “will continue to make progress, but more homeowners will rely on flood hazard maps that are not current,” FEMA wrote.

The cuts have slowed efforts to update flood maps across the country.

In New England, for instance, FEMA is updating coastal maps but has put off updating many flood maps along the region’s rivers, said Kerry Bogdan, a senior engineer with FEMA’s floodplain mapping program in Boston.

“Unfortunately, without the money to do it, we’re limited and our hands are kind of tied,” she said.  

Many of the flood maps in Vermont — including areas near Lake Champlain that have recently flooded — are decades out of date. “There are definitely communities that really need that data,” said Ned Swanberg, the flood hazard mapping coordinator with Vermont’s Department of Environmental Conservation.

Asked about the cuts, a spokesman for the White House’s Office of Management of Budget directed to us FEMA, which did not respond to our requests for comment.

New maps can guide development toward areas that are less likely to flood. They also tend to be far more accurate. Today’s mapmakers can take advantage of technologies including lidar, or laser radar, and ADCIRC, a computer program that’s used to model hurricane storm surge. They can also incorporate more years of flooding data into their models.

“It is disconcerting to have counties and areas where people still have maps from the 1970s,” said Suzanne Jiwani, a floodplain mapping engineer with Minnesota’s Department of Natural Resources.

The slashed funding for the mapping program hasn’t gone unnoticed in Congress.

Rep. David E. Price, a North Carolina Democrat on the House Appropriations subcommittee that is responsible for FEMA’s budget, told W. Craig Fugate, the FEMA administrator, at a hearing in March 2012 that FEMA’s budget “continues to lowball funding” for updating the country’s flood maps.

“Both Republican and Democratic Administrations have generally made inadequate requests for Flood Hazard Mapping and Risk Analysis funding, and under the Republican majority funding provided has been inadequate,” Price said in a statement to ProPublica.

Andrew High, a spokesman for Price, said the congressman had pushed for modest boost in funding, about $10 million this year.

It was a question from Price that prompted FEMA to detail the delays. FEMA said its ultimate goal was to get 80 percent of the country’s flood hazard data up-to-date. Cutting funding for the program “is a difficult decision,” FEMA wrote, “but it’s reasonable given multitude of competing national priorities and limited resources.”

FEMA also funds its maps through the National Flood Insurance Program. It takes a small slice of homeowners’ flood insurance premiums, about $150 million in the 2013 fiscal year. But the flood insurance programis also in trouble, and income from the premiums is already stretched thin. The program has more than $20 billion in debt after paying out massive claims after Katrina and Sandy, and it took in only $3.6 billion in premiums last year.

As part of an overhaul to the insurance program last year, Congress authorized the government to spend $400 million a year for the next five years to update flood maps. But for the 2013 fiscal year, Congress has appropriated just a quarter of that. Sequestration has cut another $5 million, according to the Office of Management and Budget, leaving $95 million for flood mapping this year.

That’s not nearly enough, said Larry Larson, director emeritus of the Association of State Floodplain Managers, a trade organization based in Madison, Wis.

“To get the mapping done, you need probably $400 million a year for 10 years,” Larson said.

The experiences of some homeowners after Sandy illustrate the dangers of outdated flood maps.

FEMA was in the process of updating the maps in New York City and New Jersey when Sandy hit. After the storm, the agency rushed to complete “advisory” flood maps designed to give homeowners a rough idea of how much they might need to raise their damaged homes by to avoid catastrophically high flood insurance premiums — more than $30,000 a year for some homeowners in the worst flood zones.

But homeowners like George Kasimos, whose Toms River, N.J., house was damaged in the storm, say they don’t want to shell out tens of thousands of dollars to raise their homes until FEMA has finalized the new maps. FEMA plans to release preliminary maps for New Jersey this summer, but the final ones aren’t expected until late next year. (Scott Duell, the risk analysis chief for FEMA in New York, said that the cuts had not slowed down work on the new maps in New York and New Jersey.)

Kasimos said any cuts to the flood mapping program were shortsighted.

“There’s going to be another hurricane somewhere, there’s going to be another disaster,” he said. “If you’re cutting the flood mapping program, somebody’s going to get screwed.”

Discussion: Military Lending and Debt

May 23, 2013 - 10:21am

In honor of Memorial Day, ProPublica and Marketplace will host a live discussion on the issues facing military members in debt.

The Military Lending Act of 2007 attempted to protect military members and their families from predatory loans. It capped annual percentage rates at 36 percent for payday and some auto-title loans.

In response, storefront lenders simply started selling other high-interest products. As our recent investigation found, they cluster around military bases in Georgia and other places around the country.

And considering that indebted service members can lose their security clearance, the rise of these loans has larger implications for the military.

So how has the Military Lending Act actually affected indebted service members? What happens to soldiers who fall into debt? And should these protections be limited to military members only?

Join us Friday, May 24th, at 2 PM ET for a discussion with ProPublica’s Paul Kiel and Marketplace’s Mitchell Hartman on service member debt.

We encourage you to leave questions in advance in the comments below. You can also tweet questions with the hashtag #MilitaryLending.

A Prosecutor, a Wrongful Conviction and a Question of Justice

May 23, 2013 - 10:00am

This is part of a series. Read Part 1 and Part 2.

May 23: This story has been corrected.

Edwin Oliva, a 29-year-old petty thief and drug addict, says he was a wreck as he sat in a chair in the Brooklyn District Attorney's office in winter 1995. A year earlier, he'd told police a lie that helped implicate a possibly innocent man in a murder. Now, prosecutors wanted him to repeat his story in court; he wanted to take it back.

Oliva says he had been on a crack and heroin binge at the time he'd made his initial claim, and that he told prosecutors he implicated the man only because of relentless pressure from police. A statement he had signed — asserting that he had heard a young man named Jabbar Collins discussing a murder plot days before a man wound up shot to death in a Brooklyn apartment building — was a fiction that detectives had fed him.

But the prosecutors, Oliva says, weren't having it. Collins, the man Oliva had fingered, had already been arraigned based in part on Oliva's word. Collins, then 21, was sitting in a Rikers Island jail cell awaiting trial, and the Brooklyn District Attorney's office was intent that he stay behind bars for a very long time. Oliva was going to be a critical witness, whether he liked it or not.

When Oliva refused to testify, the prosecutors, led by senior Brooklyn Assistant District Attorney Michael Vecchione, threatened to charge him with conspiracy to commit murder, Oliva says. Prosecutors then held Oliva for several days at Lincoln Correctional Facility, a minimum-security prison in Harlem. But Oliva held firm.

"I refused to testify to a lie," he said in a sworn statement submitted years later in federal court.

Vecchione's team, Oliva says, finally found a way to leverage him: Oliva was out of prison on a work release program, so prosecutors got the privilege revoked, and on March 1, 1995, Oliva was transferred to Ulster Correctional Facility, a maximum security state prison two hours north of New York City.

Oliva was brought back to the Brooklyn District Attorney's Office for a meeting with Vecchione's partner, Assistant District Attorney Charles Posner. According to Oliva, Posner told him that he could have his work release privileges restored if he'd testify against Collins.

"I felt trapped and desperate," Oliva said. "And so I agreed."

Oliva took the stand against Collins, insisting that his testimony was not a result of any agreement with prosecutors. And Vecchione, in a powerful closing argument, vouched for Oliva's credibility.

"He saw something. He heard something," Vecchione told the jury. "Someone asked him about it. And he is telling what he saw and he is telling what he heard. Nothing else."

Jabbar Collins was convicted of murdering Abraham Pollack, a rabbi from the Williamsburg section of Brooklyn, and spent the next 15 years in prison. But he eventually gained his freedom through a rare federal petition in 2010, one asserting that prosecutors and police had invented, distorted and withheld evidence in his case. And now Collins is suing for $150 million, naming the individual prosecutors and detectives as defendants along with the city.

Based on an assortment of prosecution and government documents, as well as a number of sworn statements, Collins and his lawyer have asserted a staggering array of misconduct on Vecchione's part:

Vecchione, they charge, coerced an illiterate drug addict named Angel Santos to testify against Collins by physically threatening him and sending him to jail for a full week. Vecchione, they claim, persuaded a minor drug dealer named Adrian Diaz to testify by chasing him down in Puerto Rico and helping him avoid violating the terms of his probation. In court, they maintain, Vecchione suborned perjury; he concocted cover stories about how Collins' family threatened one or more witnesses. And while Collins spent a decade and a half in a state prison, Vecchione oversaw an effort to deny Collins access to the information that might have freed him.

In a series of filings in state and federal court, the Brooklyn District Attorney's office has refuted Collins' claims of misconduct. Officials say Oliva was promised no deal for his testimony; Santos took the stand voluntarily; Vecchione took no special steps to protect Diaz in exchange for his testimony; and the office handled Collins' requests for records in good faith.

Today, Vecchione, 63, remains a senior figure in the office of Brooklyn District Attorney Charles J. Hynes. Hynes has stood by him, heralding Vecchione as a principled lawyer and an effective prosecutor. Both Vecchione and Hynes refused to be interviewed for this article.

Benjamin Brafman and Alan Dershowitz, two prominent defense lawyers who say they have known Vecchione for years, cautioned against concluding Vecchione was guilty of what has been alleged.

"These allegations are based largely on unproved claims made in an adversarial complaint," the lawyers said in a letter. "They have not yet been subjected to the full truth testing mechanisms of a judicial proceding."

"In our view," they asserted, "Mr. Vecchione has not been found to have committed any judicial misconduct."

A review of Vecchione's career shows that he has been a lightning rod for criticism for years. In a 1993 murder case, Vecchione was accused of withholding a cooperation agreement between himself and a key witness. State judges have chastised him for over-the-top behavior in court. Some defense lawyers, judges and former colleagues have said Vecchione is an all-too-willing lieutenant to Hynes, a loyalist interested in making headline-producing cases and then winning them at all costs.

Vecchione's aggressive pursuit of Clarence Norman, the onetime Brooklyn political kingpin, failed to produce what the district attorney's office most hoped it would — evidence that judgeships were for sale in Brooklyn.

Vecchione tried to prosecute a former FBI agent for helping arrange the murders of gangsters, only to have the case fall apart in embarrassment when it was revealed that Vecchione's chief witness was disastrously unreliable.

And just last year, a prosecutor leading a sex trafficking unit overseen by Vecchione resigned amid accusations that she had withheld a victim's recantation in a high-profile rape case.

For many legal experts, defense lawyers and advocates for the wrongly convicted, Vecchione is a prominent example of a troubling aspect of the American criminal justice system: Prosecutors who are implicated in misconduct often seem immune from meaningful punishment.

A recent investigation by ProPublica looking at more than a decade's worth of court records found that New York judges don't routinely refer prosecutorial misconduct to state panels that handle attorney discipline, even when they overturn convictions and upbraid prosecutors for constitutional violations. State disciplinary panels, when they do get referrals, rarely impose meaningful sanctions. The city's district attorneys lack the will to punish their subordinates, perhaps out of fear of embarrassment. All told, ProPublica found 30 cases in which judges reversed convictions based on misconduct by New York City prosecutors. Just one of these prosecutors was publicly disciplined.

The pattern is much the same across the country. The Northern California Innocence Project reviewed 12 years of court opinions and found that California prosecutors were hardly ever disciplined after convictions were overturned because of their misconduct.

Frederic Block, the federal judge presiding over Collins' civil lawsuit, has expressed something like amazement at Hynes' unwillingness to sanction Vecchione.

"I'm just puzzled why the district attorney did not take any action against Vecchione," Block said in court last fall. "To the contrary, he seems to ignore everything that happened. And an innocent man has been in jail for 16 years."

Hynes appears more willing to investigate detectives who might have helped make bad cases. Earlier this month, his office said it would review 50 murder cases handled by a single retired Brooklyn homicide detective. The action came after Hynes supported the release of a man who had been wrongly convicted based on the work of the detective, Louis Scarcella. So far, there's been no indication that Hynes' review of that case, or the larger case review, will extend to the prosecutors who investigated side by side with Scarcella for years, attending the same possibly suspect lineups, accepting the now supposedly dubious confessions, vouching for the witnesses Scarcella helped identify.

Collins' lawyer, Joel Rudin, is not at all surprised. Rudin has a long record of holding the city's prosecutors accountable. He's won millions of dollars in settlements from the city for wrongfully convicting people, and maintains a long list of cases in which prosecutors have broken ethics rules to win convictions, all without disciplinary sanctions. Often those prosecutors have been promoted after state and federal judges have excoriated their conduct.

Rudin's allegations against Vecchione and the office he works for are built on a formidable assortment of depositions, prison records, sworn affidavits and a review of state appellate court records. Rudin is scheduled to depose Vecchione on June 14.

Jabbar Collins — guilty or not — never got a fair trial. Two federal judges have declared it so. Both have been unsparing in condemning the conduct of Vecchione. Block, who is handling the civil lawsuit, has said in open court that he's eager to dig deeper.

"This was horrific behavior on the part of Vecchione," Block said. "We are going to have a civil proceeding, and all of this is going to be uncovered. I kid you not."

Hynes, meanwhile, does not seem outwardly concerned about Vecchione's record, or any damage it might have done to his office. As he runs for a seventh term, Hynes has agreed to have his office be the subject of a prime-time CBS television show, "Brooklyn DA."

A Second Coming

Brooklyn in the early 1990s was rife with racial tension, particularly between the borough's large Jewish and African-American populations. The conflict was most visible in Crown Heights, where in 1991 the mutual suspicions erupted in several days and nights of unrest.

The newly elected Brooklyn District Attorney, Charles "Joe" Hynes, quickly found himself on the hot seat. The Jewish vote had helped him win office, but he had reason to fear losing that support: In October 1992, his prosecutors failed to convict a 16-year-old black man named Lemrick Nelson for chasing down a 29-year-old rabbinical student and stabbing him to death during the 1991 disturbances. Hynes' handling of the case eventually became the subject of a damning state critique.

Under fire, Hynes wound up benefiting from the work of a prosecutor recently returned to his ranks. Mike Vecchione — who had begun his career in the Brooklyn District Attorney's office 15 years earlier, followed by a career as a defense lawyer — had come back to the office at Hynes' urging. Vecchione, a seasoned trial lawyer, was soon made chief of Hynes' homicide bureau, taking on the most sensitive cases involving Jewish victims.

There were more than a few, and Vecchione consistently won convictions.

There was the 1992 case of 15-year-old Tziporah Yagodayev, strangled to death on the Williamsburg Bridge. Vecchione proved that a drug-addicted thief named Raymond Vargas was the killer, sending him away for 25 years to life. Later that year, a 37-year-old Hasidic mother died after being stabbed more than 35 times during a botched robbery. Vecchione won a murder conviction by showing that the defendant's palm matched a bloody handprint found at the crime scene. When Vecchione emerged from the courtroom, he got a hero's welcome from a group of overjoyed Hasidic women.

"He's very smooth and confident in the courtroom," said Alan Vinegrad, a former U.S. attorney for the Eastern District of New York, who once helped prosecute a kidnapping case with Vecchione. "He's an excellent trial attorney. He had a great rapport with witnesses and could talk to real people in a real way."

Vecchione, who had grown up in the Prospect Heights neighborhood of Brooklyn, first came to work in the office in 1973 when Eugene Gold was the district attorney. He had gone to St. John's University, and graduated as part of the first class of Hofstra University's law school. He then took a job as a junior prosecutor.

His illusions of legal grandeur, however, were roughed up a bit on his very first day in criminal court.

"I was so proud, standing right in front of the bench, wearing my brand new suit," Vecchione wrote in a 2009 book about his role in a famous police corruption case. "I was officially part of the great American tradition of jurisprudence. And then the judge, wearing the solemn robes of his office, cleared his throat, opened a top drawer in his desk, and spit right into it. And then closed the drawer. Well, so much for majesty."

Vecchione said in the book that his first major case was a mob murder, and winning it meant more than anything to him. In a closed office late at night, preparing for trial, Vecchione said he came across a report that called into question the integrity of his main witness.

"It would have been absolutely nothing for me to take that report and tear it up or just throw it away," Vecchione wrote. "No one would have known the difference. Not one person. I would be lying if I said the prospect of getting caught didn't enter my mind. It did."

Vecchione said he kept the report in the file and went to trial. He lost.

"One lie leads to another and another and another," Vecchione said in explaining his decision. "And then the whole house of cards falls down."

In the coming years, Vecchione won dozens of cases. Cases with loads of evidence, and cases with less than overwhelming proof.

"He had a passion for trying cases. He was very aggressive," recalled Tommy Dades, a retired New York City detective who worked for years with Vecchione and who collaborated with him on the 2009 book. "Other prosecutors would want a video of the guy with a gun doing the shooting. Mike would say, 'Tommy, get me a case, and we'll try it. Corroborate it, and we'll try it.'"

After a decade in the office, Vecchione left to start his own practice, and he proved to be a respected defense lawyer, too. One of his more noteworthy accomplishments came in a murder case involving a battered woman who killed her abusive husband by setting him on fire with cleaning fluid. The woman was found guilty of a lesser charge — criminally negligent homicide — and spared prison time.

Back for a second stint in the district attorney's office, and piling up noteworthy triumphs, those who worked alongside Vecchione said his confidence only grew.

"Even back in the '70s, he looked at himself as a tough guy, a take-no-prisoners kind of guy," said one Brooklyn judge. "But at the time, nobody knew where he'd end up."

Prosecutors live in the rough-and-tumble world of investigating often terrible crimes, and confronting the people who commit them. Deception, a bit of intimidation, the patience to wait out reluctant witnesses or suspects — much of it is condoned, even admired.

But some people in and around the Brooklyn District Attorney's office in the 1990s, even fans of Vecchione, became wary of his ambition. They said they noted an emerging arrogance, and a habit of discarding friends and colleagues as he climbed in Hynes' esteem.

"Mike, years ago, was a humbler guy, but when Hynes brought him back, that was the turning point," said Dades, the retired detective. "That was when his ego started to get the better of him."

'I Refused to Testify'

Vecchione, by his own account, certainly exuded self-assurance when, early in 1994, he took over the investigation into the murder of a 35-year-old rabbi in Williamsburg. Shortly before noon on Feb. 6, 1994, Abraham Pollack was found crumpled in an apartment building hallway, oozing blood from six bullet wounds. Just moments earlier, Pollack, the father of nine, had been walking that hallway, collecting rent from his tenants.

When a homeless handyman living in the basement of the building heard gunshots, he ran to tackle the gunman, and tried to slash him with a knife. The handyman, Paul Avery, lost the tussle, badly, and ended up with two bullets in his body — one in his leg, another in his chest.

The killing stoked fear in the tight-knit Hasidic community. Early reports suggested a black man had been the assailant. Detectives hit the streets. And Mike Vecchione took charge.

In a sworn statement the district attorney's office filed in state court years later, Vecchione declared that nothing of significance happened in the Pollack investigation without his knowledge and approval.

The investigation into Pollack's murder was a couple of weeks old when, just past midnight on March 2, 1994, Edwin Oliva, high on crack or heroin or both, was brought into an interrogation room in the 90th Precinct in Williamsburg.

Oliva, in addition to a drug habit, had a lengthy rap sheet: First arrested at 17, he had, by age 28, been in and out of jail for most of his adult life. He was into stickups, burglaries, car thefts. When he got arrested, he typically pleaded guilty, did a short term behind bars — a year, maybe two — and then went right back to life on the street.

Inside the precinct that night, Oliva thought he'd be taking another routine trip through the revolving door of the New York justice system. He'd been picked up for yet another robbery. But this time, Brooklyn detectives Vincent Gerecitano and Jose Hernandez wanted to talk about something else. Oliva's latest robbery had taken place in the dead rabbi's building. The detectives pressed Oliva for any information about the murder there weeks before.

Detectives had initially been interested in two brothers from the neighborhood as the possible culprits. They were well-known local thugs and drug dealers, and under active investigation for a separate robbery. A witness said she saw one of the brothers bleeding heavily not long after the murder, raising suspicions that it was he who had been slashed by the handyman the day of Pollack's murder.

The police said they had put out an alert immediately after the killing asking hospitals to report anyone being treated for a stab wound. Detectives soon talked to members of the brothers' family, but they had denied any involvement and then got lawyers.

Not long after, police received a telephone tip from an anonymous caller saying that a young man named Jabbar Collins had killed Pollack. The focus of detectives and prosecutors turned quickly to Collins.

Collins lived in a nearby housing project and was a high school dropout who had been arrested once as a teenager for a robbery. He'd been treated as a youthful offender, and had no other record. He also, when first interviewed by police, said he had an alibi. He said he'd been at home at the time of Pollack's killing, cutting his brother's hair in his mother's living room. His mother and girlfriend gave police statements backing him up.

Collins volunteered to participate in several police lineups. No one picked him out.

Yet when Oliva was in custody on March 2, the detectives began to ask insistently about Collins. Oliva, in sworn statements years later, said he told them the truth.

"I told detectives I knew Jabbar Collins for years, that we got high together," Oliva said in a 2006 statement. He said he told police he'd heard Collins was "in trouble" concerning Pollack's murder, but had no details.

"I told them I had no personal knowledge about it," Oliva said.

But the detectives weren't satisfied; Oliva was in the stationhouse for hours. Oliva said he began to feel sick, suffering from drug withdrawal. The police, he said, presented him with a narrative implicating Collins.

The detectives, who are named defendants in Collins' lawsuit, could not be reached for comment. Arthur Larkin, senior counsel for the New York City Law Department, said the city "vigorously" disputed the allegation that detectives invented a statement for Oliva.

Oliva says that on that night in 1994, he at last succumbed to pressure. He signed a statement saying that he had overheard Collins and another man plot to rob Pollack days before the rabbi was killed. Oliva later said he signed it without so much as reading it.

Oliva pleaded guilty to the robbery he had been brought in on, and a year later was out of prison, living in a halfway house on a work release program. Collins was now going to trial, and Vecchione and Posner brought Oliva to their office. They wanted him to tell a jury the details of the robbery plot.

Oliva says he was dumbfounded. He was shown his signed statement. He insisted he had been tricked.

"I told them I had no knowledge that Jabbar committed the murder," Oliva said in his recent sworn statement. "I refused to testify."

In short order, correction department records show, Oliva was back behind bars, his work release freedom a thing of the past.

"I was devastated," Oliva said. "I realized that Vecchione and Posner were serious and could do whatever they threatened."

Vecchione and the district attorney's office have denied the claim; Posner died a decade ago. Vecchione has said he first met and interviewed Oliva the night before the trial. There was no intimidation or coaching, he has insisted. Collins' trial lawyer, Vecchione has pointed out, knew Oliva wanted to be returned to the work release program, and asked him about it at trial.

Oliva, in the end, relented, and under questioning on the witness stand, he turned into Vecchione's star witness. He said he, Collins and another man had been snorting heroin together in a housing project staircase when it was suggested that Pollack would be a good target for a robbery. Oliva said the third man in on the plot, Charles Glover, lived in Pollack's building, and had helped persuade everyone that the crime would be fairly easy.

"You don't even need a gun to do it. All you have to do is go over there to rob the man, take the money and just get out the building," Oliva testified that Glover had said.

Oliva testified further that after Pollack was killed, Glover told him not to say a word about their involvement to anyone.

"He told me to shut up because I talked too much," Oliva testified. "He had told me that Jabbar Collins had got rid of the gun. I don't know where."

Glover — the man who, in Oliva's telling, had helped hatch the robbery plan, and who lived in the very building where Pollack had been slain — never testified at trial.

According to police records, Glover was interviewed by investigators two days after the shooting and said he had been in the building when it happened and had not been involved. There is no record that police spoke with Glover after Oliva supposedly told investigators that Glover had been present for the planning of the robbery. Glover, who still lives in the same Brooklyn neighborhood, would not comment when reached this month.

Oliva, all these years later, has now signed another formal statement. He has done it on Collins' behalf. And it has been submitted in federal court.

"During my testimony, I falsely accused Jabbar Collins of planning the robbery and of discarding the weapon," the statement says. The assistant district attorneys "knew that I told them this was untrue."

Loyalty Matters

Joe Hynes had been elected in 1990 as a professional prosecutor of integrity and courage. As a special state prosecutor, he had gained acclaim three years earlier by winning manslaughter convictions against three white teens who were part of a mob that savagely beat three black men in Howard Beach, Queens, leaving one man dead and another paralyzed.

But after his election, Hynes came to be criticized by some as just another political animal. He had populated his ranks with highly paid assistants, and lost a handful of the office's most seasoned and respected prosecutors. Some of those who left said Hynes had a vengeful side, and that he rewarded loyalty above all else.

"He's another politician on the make, and his office is run in service to that," Alan Broomer, a former prosecutor in Manhattan and State Supreme Court Justice in Brooklyn told The New York Times in 1994. "He's used the office for his own ends."

In that office, Vecchione was a man on the rise, winning promotions and raises, and moving into Hynes' inner circle of strategists and confidants. His missteps did not seem to cost him. In 2001, in response to a Newsday reporter's persistent inquiry, Vecchione, the divorced father of two sons, publicly admitted that he had had an affair with a subordinate — his trial partner on the Collins case, as it turned out. But his power in the office only increased.

Current and former Brooklyn prosecutors said in interviews that Vecchione had made clear to Hynes that if the boss wanted an indictment won and a case made, he was the man to do it.

Consider the case of Eric Jackson-Knight. In 1980, Jackson-Knight had been convicted of setting a Brooklyn supermarket on fire in what became one of the city's most notorious crimes. The fire killed six firefighters, provoking weeks of grief and recrimination. Jackson-Knight was sentenced to 158 years on six counts of murder.

But doubts about Jackson-Knight's guilt began to surface years later, and in 1987 the case took a stunning turn: A lawyer representing the families of the six dead firefighters seeking compensation for their loss determined that the fire had been accidental. The evidence was so clear to the lawyer, Bob Sullivan, that he agreed to help Jackson-Knight win his freedom. And in 1988, a state judge in Brooklyn overturned Jackson-Knight's conviction.

Subsequent hearings to consider a retrial revealed a breathtaking assortment of misconduct by prosecutors that included concocting a false witness statement and concealing evidence that the fire had been accidental.

Nevertheless, Hynes, by then district attorney, decided in 1992 to retry Jackson-Knight. He was acquitted in 1994.

Even as that case was pending, Jackson-Knight could not seem to escape Hynes' crosshairs. In the early 1990s, Hynes indicted Jackson-Knight for a variety of crimes, from car theft to gun possession, sometimes prevailing and sometimes not.

In 1992, Hynes' office charged Jackson-Knight in a brutal attack: the rape and murder of a pregnant homeless woman in Coney Island. The development moved Supreme Court Justice Joseph Slavin to ask out loud in court: "Are you going to arrest this guy for every unsolved crime in Brooklyn?"

Vecchione took the case to trial.

The evidence against Jackson-Knight was far from overwhelming. Tests showed that his DNA didn't match semen in a used condom found at the scene of the crime. Vecchione's key witnesses were both drug-addicted prostitutes. One made the remarkable assertion under oath that she sold Jackson-Knight used condoms from her work with other clients so that he could cover his tracks when he raped women.

The other witness, Christine Maroney, fell apart on the witness stand, charging that prosecutors had kept her in a hotel, against her will, and coerced her to testify that she had seen Jackson-Knight rape the victim. Jackson-Knight was acquitted.

Hynes and Vecchione were not done. They took the rare step of formally charging Maroney with perjury. When she was convicted, the judge in the case, who had suspicions about the prosecution from the start, instantly set aside the verdict.

Sullivan, the fire union lawyer who represented Jackson-Knight during the rape and murder trial, said he thought Vecchione was an effective lawyer. But perhaps a too obedient one.

"In my opinion, he was just taking marching orders from Hynes," Sullivan said.

A Witness Goes to Jail

Angel Santos was working as a part-time employee at a furniture store next door to Pollack's building the day the rabbi was killed. When police interviewed him days after the murder, Santos told them he had called 911 after his father-in-law, who lived above the store, heard gunshots. Santos said he saw a black man run past the store window.

The police eventually showed Santos an array of photographs of possible suspects that included Collins. Santos said Collins was the man he saw and later picked him out of a lineup.

About a year later, Vecchione wanted Santos to appear at trial and issued what is known as a "material witness" order to force Santos to retell what he had told police.

It didn't go well.

Santos later said in federal court that he had confessed to a serious drug habit; he was high "basically 24/7." He then said he would not testify.

Vecchione became enraged, Santos later testified. He threatened to hit Santos with a coffee table. He threatened to prosecute him for perjury.

Santos said he was scared, but still refused.

"That's when they send me to jail," Santos said.

Prosecutors can legally lock up reluctant witnesses. But there are certain requirements for doing so. They must bring the witness before a judge. And they must see that the witness has a lawyer.

In this case, Vecchione persuaded the judge overseeing Collins' murder trial, Judge Francis X. Egitto, to grant a material witness order remanding Santos to "civil jail," but no evidence has come to light showing that Santos was actually presented in court, much less given a lawyer. Indeed, a federal judge said she was convinced no such basic legal steps were taken.

Hynes and Vecchione insist all protocols were followed.

Santos, in any event, remained locked up.

A week elapsed. Vecchione then arranged for Santos to be brought back to his office. Finally, Santos agreed to testify.

Collins' current lawyer, Joel Rudin, alleges that Vecchione needed to create a phony story about why Santos had been picked up and sent to jail in the first place.

Vecchione, records show, directed a paralegal in his office to prepare a "Threat Analysis" report showing that Santos had received anonymous phone calls from people warning him not to testify against Collins. One of the detectives on the case then filed a complaint report with the New York Police Department saying that Santos had received similar threats months before.

Santos took the stand against Collins. Vecchione told the judge Santos had been placed in "protective custody" because of the threats he'd received. And Vecchione underscored in the courtroom that Santos and the others who had testified against Collins had appeared voluntarily.

"There is nothing in the evidence, there is nothing in the record, there is nothing directly brought out by the defense, there is nothing impliedly brought out by the defense that suggests that any of those witnesses had any reason to come in here and lie about Jabbar Collins," Vecchione told the jury. "Nothing."

Sixteen years later, Santos took the stand in a different proceeding — the federal court consideration of Collins' bid for freedom.

He said he had never wanted to testify against Collins. He'd told prosecutors he had identified Collins at a time when he was on drugs all day, every day. He said, unequivocally, he'd never been threatened by anyone about testifying.

Except, he said, for Vecchione.

Win, Baby, Win

Conviction rates are a concern for every district attorney. They are one measure of an office's success in fighting crime. According to people who worked for Hynes, conviction rates were a major factor in determining raises and promotions.

"Joe was the kind of guy who made it immediately clear that statistics were important and you were accountable for your conviction rate. Every Bureau Chief had to regularly report convictions and pleas and there was certainly a keen desire to meet target rates," said one former Brooklyn prosecutor, who did not want to be quoted by name because of ongoing work in the courts.

In 1995, 30 prosecutors in Hynes' office were fired.

"Those of us that were asked to leave left because our stats were not what they wanted them to be," said one of the prosecutors who were forced out.

Vecchione never had issues with conviction rates. For Vecchione, summations were his specialty, emotional performances that helped win over juries. He said in his book that he loved it when he left people in the courtroom in tears, and he was unembarrassed about crying himself.

Others, including some state judges, found Vecchione's performances improper, even abusive.

In one case, a state appeals court, while upholding the 1996 conviction of two young men in the killing of a New York police officer, said Vecchione's theatrics in closing arguments might well have been improper. In his summation, Vecchione had called the defense's argument "a fairy tale," and told the jury it would be "making a mockery of this system" if it credited any aspect of one defendant's testimony. Vecchione then read aloud the "Police Officer's Prayer," and urged the jury to convict so that the officer's rest with the Lord would be "long and peaceful."

But the state court's modest rebuke of Vecchione was nothing like what was to come: Vecchione was accused by a man he'd convicted of armed robbery of having withheld a cooperation agreement with a key witness at trial. The accusation resulted in a rare federal court hearing, during which Vecchione, under oath, was pressed about the allegation.

Vecchione insisted on the stand that, while he had talked with the witness about a cooperation deal for his testimony, there was no written agreement until after the trial. He insisted he had no obligation to disclose anything about a cooperation agreement.

Bruce Barket, the defendant's lawyer, was at the hearing and said Vecchione‘s attitude "seemed to be disdainful of the entire process," as if asking, "How dare you ask me questions."

The federal judge conducting the hearing, Edward Korman, certainly seemed unimpressed with Vecchione's account. The judge had interviewed the witness, who had been in prison before and, before testifying for Vecchione, was facing gun and rape charges. The witness had wound up with an extremely lenient sentence for a violent and repeat offender.

The judge called the witness "a pretty shrewd piece of work," and said he doubted the witness would have testified at all without a promise of a deal.

"The notion that he wouldn't ask for anything," Korman said in court, "that he would affirmatively say he didn't want anything, strikes me as being almost totally inconsistent with his personality."

Ultimately, Vecchione and the district attorney's office folded before Korman could rule on whether the convicted robber should go free. While conceding no wrongdoing, the office agreed to release the man, who they suspected of being involved in at least three murders.

False Threats, Damaging Testimony

As Vecchione prepared to try Jabbar Collins, he was determined to enlist every possible witness. Which is why in early 1995 he set off for Puerto Rico to track down Adrian Diaz.

A year before, Diaz, a small-time drug dealer who had been working as a grocery store clerk, had given police some promising information: He'd identified Collins as the man he'd seen exiting Pollack's building with a gun in his hand the day of the murder.

But Diaz had since moved to Puerto Rico, in violation of the terms of his probation. Vecchione wanted to bring him back.

Diaz, based on his statement to police, could be critical. Diaz was 19 and working at a Western Beef grocery store when he reached out to police. Records show that Diaz, among other things, was interested in the possibility of reward money. Gerecitano and Hernandez, the two detectives on Pollack's murder, soon showed up at the Western Beef store. The detectives, records show, first tried to clear up the issue of reward money. They told Diaz that the police department did not pay rewards, but that community groups often did if the information provided helped lead to an arrest and conviction.

Diaz then told the detectives that he had heard gunshots the day of the murder and seen someone he knew from the neighborhood come out of the building. That person, as he fled, seemed to be trying to hide a gun in his waistband. Diaz picked Collins out from a number of photographs, and again in a lineup.

Vecchione, preparing to find Diaz in Puerto Rico, went to court and submitted an affidavit stating that Diaz had fled the country because he had been threatened by people involved in the Collins case. At that point, Vecchione had never met Diaz. No evidence has surfaced that recorded anything about threats against Diaz.

Vecchione ultimately led a small team to Puerto Rico, tracked down Diaz and persuaded him to fly back to New York and testify. On March 10, 1995, Diaz testified that Collins was the man he saw exiting Pollack's building the day of the murder. But his testimony concerning what Collins was wearing differed markedly from the testimony of other witnesses. It differed, in fact, from what Diaz had said to police a year earlier.

There was no mention of threats against Diaz. No talk of intimidation.

After the trial, Vecchione wrote a letter notifying the Probation Department for the first time that Diaz had returned to New York to testify.

Vecchione's letter said that Diaz had fled to Puerto Rico because "the perpetrator of the crime and his family and friends" threatened "that anyone who testified against the defendant would be killed" and had to return there for his safety.

That, Diaz now says, was untrue.

"I moved to Puerto Rico without the permission or knowledge of the Probation Department," Diaz said in a sworn statement that is now part of Collins' lawsuit. "I moved for personal reasons having nothing to do with the Collins case. I was not threatened by anyone connected to Mr. Collins before I moved to Puerto Rico and fear for my safety played no part in my decision to move to Puerto Rico."

Expanded Powers

Vecchione's ascent in Hynes' office took its most dramatic turn in 2001 when he was promoted to lead the office's high-profile Rackets bureau. He would oversee a wide array of organized crime, political and other kinds of cases and conspiracies.

To his predecessor in the job, Vecchione's appointment was warranted.

"I know Michael Vecchione to be an honest, hard-working, dedicated prosecutor with outstanding trial and investigatory skills," Dennis Hawkins, who ran the Rackets bureau prior to Vecchione, said in an email.

But some of Vecchione's critics and colleagues found his new title worrisome: Vecchione's influence, seemingly unchecked, was now only being enhanced.

"He was a guy confident of his status in the office, who felt like he was untouchable, who could do no wrong, and who had the full support of Joe," said a former senior Brooklyn prosecutor who has known Vecchione for two decades and who spoke on condition of anonymity because they were now a criminal defense lawyer in New York.

Vecchione's first big case in his new job was against then Brooklyn Democratic Party Leader Clarence Norman. Hynes, with considerable reason, had declared that judicial elections in Brooklyn were a sham, complete with rigged outcomes orchestrated by the Brooklyn political machine.

Vecchione empaneled a grand jury. Norman would be charged multiple times, and tried in four separate cases. But the cases never involved the sale of judgeships. And in the end, the "corruption" proved against Norman — steering campaign work for judges to certain consultants, improperly billing the State Assembly for $5,000 — struck many as fairly pedestrian. Former Mayor Ed Koch was one of them.

"While I disagree with Clarence Norman on every political fact of life, and certainly on the way judges are appointed in Brooklyn, Joe Hynes got into the case expressing the belief that Norman had some part in a corrupt process," Koch said after the initial indictments. "Instead, he comes up with a cockamamie indictment that he took a $5,000 check made out to the county Democratic organization and was double-dipping on reimbursements for gasoline."

Norman went to prison; Hynes claimed unqualified triumph, and credited Vecchione and the office with having the rare courage to go after the borough's political powerbrokers.

Paul Schoeman, a former assistant U.S. Attorney, who represented Norman and won him an acquittal in one of four jury trials, said it was clear Hynes had a lot invested in the prosecution because he "assigned his top lieutenant to handle the case personally."

Norman, now out of prison, said the case "was politically important to Joe Hynes," but he isn't so sure Hynes was actually the man steering it.

"I wouldn't be surprised if [Vecchione] was the driving force behind the whole thing. You see his M.O. You see how he works."

In March 2006, Vecchione set his sights on another powerful target: a former FBI agent named R. Lindley DeVecchio. Vecchione charged DeVecchio with having provided critical confidential information to a mob informant, Greg Scarpa, who, armed with the information, then killed several rivals.

"The most stunning example of official corruption I have ever seen," Hynes said after Vecchione had won murder indictments against DeVecchio.

The U.S. Justice Department, it turned out, had investigated similar allegations against DeVecchio a decade earlier, and found that while Scarpa killed a lot of people while he was an informant, DeVecchio never helped him do it.

Still, Vecchione went forward, building his case on the testimony of Scarpa's mistress, a woman named Linda Schiro. Schiro, by numerous accounts, was an unstable woman, furiously trying to land a book deal about her life as a mob mistress.

DeVecchio, in his own book on his case, said he knew Schiro could not stand up as a witness. And he had nothing but disdain for the prosecutor who put her at the center of his case.

"Dark-skinned, vacant-eyed, with an aggressive, bulky body topped by a moon face and a graying crew cut," DeVecchio wrote of Vecchione. "He always seemed to be on the verge of toppling forward. He had one of those rock-star beards that never grows more than a quarter inch and endows the wearer with a degenerate look. Someone should tell him it looks ridiculous on a middle aged man with a potbelly."

At trial, Schiro gave detailed descriptions of how DeVecchio would effectively assist in the murder of mobsters. Her star turn, however, was short-lived. The day after Schiro testified, Tom Robbins, a respected New York journalist, produced tapes of interviews with Schiro from years earlier that undercut her claims.

Schiro was effectively destroyed as a witness. Vecchione's case soon crumbled completely, with the office having to drop all charges against DeVecchio.

Mark Bederow, a former Manhattan assistant district attorney who represented DeVecchio, said Vecchione had turned over records that discredited Schiro before trial.

"It is inconceivable that they brought this case," Bederow said in an email. "The star witness was known to be a compulsive liar."

About a week after trial, Vecchione's onetime police partner, New York detective Tommy Dades, also told the news media that he and Vecchione had known for years that Schiro had given inconsistent stories about the murder accusations.

Vecchione denied the claim. Hynes, for his part, tried to downplay the embarrassment. For the office and Vecchione, he said, the failed prosecution was "nothing more than a bump in the road."

And indeed, for Vecchione, that's all it was. Vecchione still heads the Rackets Bureau, which expanded three years ago to include a sex trafficking unit. His salary of $189,000 is among the highest in the office.

And, it turns out, Vecchione was at the center of the decision to cooperate with CBS's plans for a six-part documentary series on the Brooklyn District Attorney's office. In a court filing, a spokesman for the office said Vecchione was a party to negotiations over the nature and terms of the arrangement.

Richard Huff, a spokesman for CBS, would not say if Vecchione will be featured in the series, which premiers May 28, and would not discuss the controversy surrounding his role in the Collins case.

"These hard-charging prosecutors have larger-than-life personalities both inside the courtroom and out," CBS said in a March press release. "They're eccentric and living right on the edge.

"We are allowed to watch their successes and their failures — it's immediate, compelling and often heartbreaking."

The Long Escape

The sentencing of Jabbar Collins took place on the morning of April 3, 1995, and it began with him asking the judge to set aside the guilty verdict because he had been denied adequate counsel. Collins, acting as his own lawyer, cited the proper motion language; he referenced his Sixth Amendment rights; he noted that he had been identified in lineups without a lawyer present; he said his lawyer had prevented him from presenting his alibi witnesses.

Vecchione, present for the sentencing, derided the young man's appeal.

"Nothing more than boilerplate probably gotten from a jailhouse lawyer," he said.

Judge Egitto wasted little time ruling. "The motion in all respects is denied," he held.

Rabbi Pollack's widow went next.

"The defendant sitting here in this courtroom is not a destroyer of one life," Rivka Pollack told the court. "He is a destroyer of several lives. He destroyed the love of the father of my children. He destroyed the love of my dear husband."

"I wish the defendant here, I wish my husband's murderer, a very, very long, long life in jail," she continued. "He forfeited the right to live as a normal, functioning human being. He has no right to see the sunshine. He has no right to walk in the park, to hear children."

When Judge Egitto pronounced a sentence of 34 years to life, he said his only regret was that he could not sentence Collins to hard labor.

Collins, himself the father of three young children, entered Green Haven Correctional Facility, 45 miles north of New York City. Once inside, he immediately set his mind on getting out.

He wanted, first and foremost, access to the formal records of his prosecution. He wanted to examine police statements. He wanted to check if there had been cooperation agreements with the witnesses who had testified against him. He wanted to know if any of the witnesses had been held against their will, and, if so, if there were records to prove it. He requested material witness orders, subpoenas and other documents.

Rejection only fueled his persistence, and rejection came often. His requests for the basic underlying records of his trial were repeatedly denied. He was often told the records he was asking for didn't exist. On other occasions, he was told "to the extent that such documents even exist, they are not in the possession of the Brooklyn District Attorney's Office."

Collins and his lawyer, Rudin, have alleged in court papers that the denial of this material was part of a concerted effort overseen by Vecchione.

Over a period of more than 10 years, Collins broke through the wall of denials. He managed to communicate directly with Oliva, the man who had put Collins at the center of a murder plot. Oliva four years later signed an affidavit detailing the circumstances of his false testimony.

Collins also obtained a full audiotape of 911 calls the day of the murder that showed that Santos had never actually spoken with a 911 dispatcher. And, in an astounding display of resourcefulness, Collins tracked down Diaz, another one of his accusers, using a ruse to gain access to Diaz's legal record and mining that information to determine where Diaz was living. Posing as an investigator for the Brooklyn District Attorney's office, Collins secretly recorded a telephone conversation with Diaz in which Diaz told the complete story of how Vecchione got him to testify. He said he had never been threatened by anyone associated with Collins.

In 2006, Collins, joined by Rudin, filed an appeal to state judges, claiming he had been the victim of prosecutorial misconduct.

Monique Ferrell, who had worked with Vecchione on the Norman and DeVecchio cases, was assigned to represent the Brooklyn District Attorney's office and filed one indignant brief after another dismissing Collins' claims. She obtained affidavits from Vecchione, who insisted there had been no wrongdoing, and that he alone made all decisions in the case. There had been no deals. No one had recanted before the trial. Nothing had been withheld. No witness had been locked up as a means of compelling false testimony. Instead, Ferrell said, Collins was not only a murderer, but a clever jailhouse lawyer, scheming to acquire evidence through "frauds on the court."

A state judge accepted the office's defense, denying Collins so much as a hearing. "Incredible," the judge wrote of Collins' arguments. "Fanciful." "Without merit."

But Collins didn't give up. In April 2008, he filed a habeas corpus petition in federal court as a last-ditch effort to have the case reconsidered. While the appeal awaited review, Collins hatched an idea: He would file a request for much of the information he'd been seeking for years, but he would do so under another inmate's name. Remarkably, the method worked. Collins received documents he'd been denied for over a decade, showing that Vecchione forced Santos to testify by filing a material witness order and taking him into custody.

Federal Judge Dora Irizarry granted a hearing to review Collins' claims and Vecchione's conduct. She also directed the district attorney's office to share documents with Rudin. Soon he obtained hundreds of pages of records that the office previously denied Collins or told him didn't exist.

And then, in a critical development, one of the detectives in the case disclosed that Oliva had, in fact, recanted prior to trial, and that he had made the disavowal in the presence of prosecutors.

Hynes offered to retry Collins in state court within 90 days. Irizarry refused. In June 2010, days before Vecchione was scheduled to explain his conduct to the judge, Hynes authorized the dismissal of the case against Collins.

Still, Brooklyn officials insisted no one had done anything wrong. And they insisted Jabbar Collins was guilty.

Irizarry, in a brutally frank rebuke, called the conduct by Hynes' office sad and shameful. She made clear she found Vecchione's continued claim that he didn't know about Oliva's recantation beyond belief. She picked apart the office's handling of witnesses who were clearly under the influence of drugs at the time they gave their ostensibly damning information. She questioned what kind of training prosecutors received in Hynes' office.

"And we talk about justice," Irizarry exclaimed from the bench. "It's very difficult to talk about justice in the situation we're confronted with now."

"Whether or not Mr. Collins is guilty or not guilty is not really the issue here," Irizarry added. "Because what is the issue is whether or not he was deprived of his constitutional rights during that trial, and it should have been up to that trial jury to make the determination of the facts based on everything that it should have considered. And it was not given that opportunity."

Collins, who today works as a paralegal in Rudin's law firm, was in court as Irizarry spoke. She asked if he had anything he wanted to say. Collins spoke of how his three children had lost their father for 16 years, and his mother her son. He spoke of his frustration with a prosecutor's office that made him work on his own for 11 years just to get basic information about his case. And then he expressed gratitude.

"I just want to thank the court for its time," he said in closing. "For finally giving me my day in court."

Correction: Originally, this story said that Vecchione had told the jury that Angel Santos, one of the witnesses in the Jabbar Collins trial, was in "protective custody." In fact, Vecchione had told the judge.

Six Facts Lost in the IRS Scandal

May 22, 2013 - 2:44pm

In the furious fallout from the revelation that the IRS flagged applications from conservative nonprofits for extra review because of their political activity, some points about the big picture -- and big donors -- have fallen through the cracks.  

Consider this our Top 6 list of need-to-know facts on social welfare nonprofits, also known as dark money groups because they don’t have to disclose their donors. The groups poured more than $256 million into the 2012 federal elections.

1. Social welfare nonprofits are supposed to have social welfare, and not politics, as their “primary” purpose.

A century ago, Congress created a tax exemption for social welfare nonprofits. The statute defining the groups says they are supposed to be “operated exclusively for the promotion of social welfare.” But in 1959, the regulators interpreted the “exclusively” part of the statute to mean groups had to be “primarily” engaged in enhancing social welfare. This later opened the door to political spending.

So what does “primarily” mean?  It’s not clear. The IRS has said it uses a “facts and circumstances” test to say whether a group mostly works to benefit the community or not. In short: If a group walks and talks like a social welfare nonprofit, then it’s a social welfare nonprofit.

This deliberate vagueness has led some groups to say that “primarily” simply means they must spend 51 percent of their money on a social welfare idea -- say, on something as vague as “education,” which could also include issue ads criticizing certain politicians. And then, the reasoning goes, a group can spend as much as 49 percent of its expenditures on ads directly advocating the election or defeat of a candidate for office.

Nowhere in tax regulations or rulings does it mention 49 percent, though. Some nonprofit lawyers have argued that the IRS should set hard limits for social welfare nonprofits -- setting out, for instance, that they cannot spend more than 20 percent of their money on election ads or even limiting spending to a fixed amount, like no more than $250,000.

So far, the IRS has avoided clarifying any limits.

2. Donors to social welfare nonprofits are anonymous for a reason.

Unlike donors who give directly to politicians or even to super PACs, donors who give to social welfare nonprofits can stay secret. In large part, this is because of an attempt by Alabama to force the NAACP, then a social welfare nonprofit, to disclose its donors in the 1950s. In 1958, the Supreme Court sided with the NAACP, saying that public identification of its members made them at risk of reprisal and threats.

The ACLU, which is itself a social welfare nonprofit, has long made similar arguments. So has Karl Rove, the GOP strategist and brains behind Crossroads GPS, which has spent more money on elections than any other social welfare nonprofit. In early April 2012, Rove invoked the NAACP in defending his organization against attempts to reveal donors.

The Federal Election Commission could in theory push for some disclosure from social welfare nonprofits -- for their election ads, at least. But the FEC has been paralyzed by a 3-3 partisan split, and its interpretations of older court decisions have given nonprofits wiggle room to avoid saying who donated money, as long as a donation wasn’t specifically made for a political ad.

New rulings indicate that higher courts, including the Supreme Court, favor disclosure for political ads, and states are also stepping into the fray. During the 2012 elections, courts in two states -- Montana and Idaho -- ruled that two nonprofits engaged in state campaigns needed to disclose donors.  

But sometimes, when nonprofits funnel donations, the answers raise more questions. It’s the Russian nesting doll phenomenon. Last election, for instance, California’s election agency pushed for an Arizona social welfare nonprofit to disclose donors for $11 million spent on two California ballot initiatives. The answer? Another social welfare nonprofit, which in turn got the money from a trade association, which also doesn’t have to reveal its donors.

3. The Supreme Court’s Citizens United decision meant that corporations could pay for political ads, anonymously, using social welfare nonprofits.

In January 2010, the Supreme Court ruled that corporations and unions could spend money directly on election ads. A later court decision made possible super PACs, the political committees that can raise and spend unlimited amounts of money from donors, as long as they don’t coordinate with candidates and as long as they report their donors and spending.

Initially, campaign finance watchdogs believed corporations would give directly to super PACs. And in some cases, that happened. But not as much as anyone thought, and maybe for a reason: Disclosure isn’t necessarily good for business. Target famously faced a consumer and shareholder backlash after it gave money in 2010 to a group backing a Minnesota candidate who opposed gay rights.

Many watchdogs now believe that large public corporations are giving money to support candidates through social welfare nonprofits and trade associations, partly to avoid disclosure. Although the tax-exempt groups were allowed to spend money on election ads before Citizens United, their spending skyrocketed in 2010 and again in 2012.

A New York Times article based on rare cases in which donors have been disclosed, sometimes accidentally, explored the issue of corporations giving to these groups last year. Insurance giant Aetna, for example, accidentally revealed it gave $3 million in 2011 to the American Action Network, a social welfare group founded by former Sen. Norm Coleman, a Republican, that runs election ads.

Groups that favor more disclosure have so far failed to force action by the FEC, the IRS, or Congress, although some corporations have voluntarily reported their political spending. Advocates have now turned to the Securities and Exchange Commission, which is studying a proposal to require public companies to disclose political contributions.

The idea is already facing strong opposition from House Republicans.

4. Social welfare nonprofits do not actually have to apply to the IRS for recognition as tax-exempt organizations.

With all the furor over applications being flagged from conservative groups -- particularly groups with “Tea Party,” “Patriot” or “9/12” in their names -- it’s worth remembering that a social welfare nonprofit doesn’t even have to apply to the IRS in the first place.

Unlike charities, which are supposed to apply for recognition, social welfare nonprofits can simply incorporate and start raising and spending money, without ever applying to the IRS.

The agency’s nonprofit wing is mainly concerned about ferreting out bad charities, which are the biggest chunk of nonprofits and the biggest source of potential revenue. After all, the IRS’s main job is to collect revenue. Charities allow donors to deduct donations, while social welfare nonprofits don’t.

Most major social welfare nonprofits do apply, because being recognized is seen as insurance against later determination by the IRS that the group should have registered as a political committee and may face back taxes and disclosure of donors. A recognition letter is also essential to raise money from certain donors -- like, say, corporations.

But some of the new groups haven’t applied.

The first time the IRS hears about these social welfare nonprofits is often when they file their first annual tax return, not due until sometimes more than a year after they’ve formed.

In many cases, the first time the IRS hears about these groups is a full year after an election.   

5. Most of the money spent on elections by social welfare nonprofits supports Republicans.

Of the more than $256 million spent by social welfare nonprofits on ads in the 2012 elections, at least 80 percent came from conservative groups, according to FEC figures tallied by the Center for Responsive Politics.

None came from the Tea Party groups with applications flagged by the IRS. Instead, a few big conservative groups were largely responsible.

Crossroads GPS, which this week said it believes it is among the conservative groups "targeted" by the IRS, spent more than $70 million in federal races in 2012. Americans for Prosperity, the social welfare nonprofit launched by the conservative billionaire brothers Charles and David Koch, spent more than $36 million. American Future Fund spent more than $25 million. Americans for Tax Reform spent almost $16 million. American Action Network spent almost $12 million.

Besides Crossroads GPS, each of those groups has applied to the IRS and been recognized as tax-exempt. (You can look at their applications here.)

All of those groups spent more than the largest liberal social welfare nonprofit, the League of Conservation Voters, which spent about $11 million on 2012 federal races. The next biggest group, Patriot Majority USA, spent more than $7 million. Planned Parenthood spent $6.5 million. spent more than $3 million.

None of those figures include the tens of millions of dollars spent by groups on certain ads that run months before an election that are not reported to the FEC.

6. Some social welfare groups promised in their applications, under penalty of perjury, that they wouldn’t get involved in elections. Then they did just that.

Much of the attention when it comes to Tea Party nonprofits has focused on their applications and how the IRS determines whether a group qualifies for social welfare status.

As part of our reporting on dark money in 2012, ProPublica looked at more than 100 applications for IRS recognition. One thing we noted again and again: Groups sometimes tell the IRS that they are not going to spend money on elections, receive IRS recognition, and then turn around and spend money on elections

The application to be recognized as a social welfare nonprofit, known as a 1024 Form, explicitly asks a group whether it has spent or plans to spend “any money attempting to influence the selection, nomination, election, or appointment of any person to any Federal, state, or local public office or to an office in a political organization.”

The American Future Fund, a conservative nonprofit that would go on to spend millions of dollars on campaign ads, checked “No”in answer to that question in 2008. The very same day the group submitted its application, it uploaded this ad to its YouTube account:

Even before mailing its application to the IRS saying it would not spend money on elections in 2010, the Alliance for America’s Future was running TV ads supporting Republican candidates for governor in Nevada and Florida. It also had given $133,000 to two political committees directed by Mary Cheney, the daughter of the former vice president. 

Another example of this is the Government Integrity Fund, a conservative nonprofit that ran ads in last year’s U.S. Senate race in Ohio. Its application was approved after it told the IRS that it would not spend money on politics. The group went on to do just that.

For more on the IRS and nonprofits active in politics, read our story on how the IRS's nonprofit division got so dysfunctional, Kim Barker's investigation, "How nonprofits spend millions on elections and call it public welfare" and our Q&A on dark money.    

A Prolonged Stay: The Reasons Behind the Slow Pace of Executions

May 22, 2013 - 12:23pm

States that impose the death penalty have been facing a crisis in recent years: They are short on the drugs used in executions.

In California, which has the country's largest death row population, the chief justice of the state supreme court has said there are unlikely to be any executions for three years, in part due to the shortage of appropriate lethal drugs. As a result, state prosecutors are calling for a return of the gas chamber.

Ohio, which is second only to Texas in the number of executions carried out since 2010, said it will run out of the drug it uses in executions, pentobarbital, on Sept. 30. The state has two men scheduled for execution in November, and eight more set to be killed after that. Every state's supply of pentotbarbital, which has been the principal execution drug, expires at the end of November.

The shortage has forced death penalty states to scramble on two fronts: They are hunting for new suppliers or different drugs to use, and enacting changes to public records laws to keep the names of suppliers and manufacturers of those alternative drugs secret.

The lack of lethal drugs, and the fight over keeping new ones secret, are partly the result of a remarkably effective campaign by opponents of the death penalty, who have, in effect, taken their efforts from the court room to the boardroom.

Each time a state has found a new source for a drug to use in executions, Reprieve, an anti-death penalty organization based in London, in collaboration with death penalty lawyers in the United States, has used freedom of information laws, the local news media and the powers of persuasion to compel the drug's manufacturer to cut off the supply.

"Who's easier to persuade? The Supreme Court or a corporation that has financial interests?" said Clive Stafford Smith, a British-American, who was a death penalty lawyer in the South for many years before founding Reprieve. "You can make it not worth their while to allow their drugs in executions."

The effectiveness of Reprieve's campaign might well be behind the action taken last year by the state of Texas, which leads the nation in executions.

When a reporter for the Austin American-Statesman, Mike Ward, using the state's Public Information Act, sought information about the drugs used in executions, the Texas Department of Criminal Justice fiercely resisted.

In one legal filing, Patricia Fleming, the agency's assistant general counsel, said revealing the information about the drugs and who made them would invite "financial intimidation and negative publicity," as well as "intensive lobbying" and "unrestrained harassment." Referring to death penalty opponents, Fleming asserted that "essential to their strategy is knowledge of the private companies" that supply the drugs used in lethal injections.

The state attorney general ruled against her, and the department disclosed that it had enough pentobarbital at the time for 23 executions, Ward reported.

Death penalty states are now taking measures to keep anti-death penalty activists, and journalists, from learning the identity of suppliers. A Georgia law enacted in March provides that any information about a "person or entity that manufactures, supplies, compounds, or prescribes the drugs, medical supplies or medical equipment" used in an execution shall be considered a "confidential state secret." Already this year, at least three other states — Arkansas, South Dakota and Tennessee — have amended their public records laws to exempt the names of suppliers from disclosure.

Lethal injection was first proposed as a method of execution in the 19th century by a New York doctor who argued it would be cheaper than hanging. It took 100 years or so for it to be used, but every state that set out to execute people eventually adopted it as the chosen method.

Generally, states have used a three-drug protocol. The first was an anesthetic, sodium thiopental, intended to render the prisoner unconscious so that he or she does not experience the pain and suffering from the drugs to come. The second drug, pancuronium bromide, paralyzes the diaphragm and lungs, making it impossible for the condemned to breathe. Finally, potassium chloride is injected, causing death by cardiac arrest.

In 2008, the Supreme Court, in Baze v. Rees, held that lethal injection did not run afoul of the Eighth Amendment proscription on "cruel and unusual punishment."

But the Court recognized care had to be taken in the killing, so that it wasn't unconstitutionally "cruel." The most critical drug, it emphasized, is the anesthetic.

"It is uncontested that, failing a proper dose of sodium thiopental that would render the prisoner unconscious, there is substantial, unconstitutionally unacceptable risk of suffocation from the administration of pancuronium bromide and pain from the injection of potassium chloride," Chief Justice John Roberts wrote.

The problems for death penalty states, and the opening for opponents of the death penalty arose when the only company that had governmental approval to make the anesthetic, Hospira, announced in 2011 that it was suspending production because of manufacturing problems at its plant in North Carolina.

Arizona, with two executions pending in late 2011, managed to find another source of sodium thiopental; but it didn't want the public to know what it was or where it came from.

When lawyers for Jeffrey Landrigan, one of the men facing death, sought the name of the supplier, Arizona's state attorney general refused to say. Ultimately, on the eve of Landrigan's execution, the attorney general disclosed that the drug had come from Britain. He did so, he said, to allay fears that the drugs had been made in a Third World country and might be contaminated and unsafe.

Tennessee also acknowledged that one of its execution drugs had been made in Britain but refused to divulge the company's name.

At Reprieve, Maya Foa, head of the lethal investigation project, searched through medical and pharmaceutical directories to identify British companies that made sodium thiopental.

The British company selling sodium thiopental to Arizona, Tennessee and other states turned out to be a tiny wholesaler that operated out of the back of a driving school in a working class neighborhood in West London.

It was called Dream Pharma, and it was basically a one-man operation. It also suddenly became more profitable, as states in America moved to improvise. Stafford Smith, Reprieve's director, wrote a letter to Dream Pharma.

"You have played a significant role and hold responsibility for the potential deaths of many people in the United States," he wrote.

Reprieve sent the letter, along with Dream Pharma's address and phone number, to journalists, and articles appeared in British newspapers and on the BBC. Dream Pharma shut down. The company has declined to comment on its battles with Reprieve or the sale of drugs to the U.S. for executions.

Reprieve then successfully lobbied the British government to ban exports of any drugs to the U.S. for executions. Capital punishment for murder was abolished in Britain in the early 1960s even though polls showed the public supported it.

With Hospira out of the business, states had become fairly desperate. That urgency was captured in government emails and documents obtained by death penalty defense lawyers.

"I have been given a task to obtain some Sodium Pentothal by any means available," the director of the pharmacy in the Nebraska department of corrections wrote to her counterparts in several states. "Does anyone know where I might start looking?"

She eventually found a small wholesaler in Mumbai, India, which operated out of two rooms on the ground floor of an apartment building; it had no air conditioning, raising doubts about the safety and efficacy of any drugs stored there.

Reprieve again went to work, alerting local reporters and holding a news conference in Mumbai. Officials from India's food and drug administration raided the offices. The company was quickly out of business.

In California, prison officials turned to hospitals throughout the state in search of sodium thiopental, without success. The warden at San Quentin explored buying some in Pakistan.

In the end, Arizona officials solved California's problems, supplying 12 grams of sodium thiopental from its limited supply, a happy exchange according to government emails unearthed by death penalty opponents.

"You guys in AZ are life savers," a California corrections officer wrote to his Arizona counterpart. "Buy you a beer next time I get that way."

Some death penalty states, looking to solve their drug supply problems in a more reliable way, switched drugs — opting for pentobarbital, an anesthetic commonly used in putting animals to sleep. The first state to use it for an execution was Oklahoma, in December 2010, and it quickly became one of the execution drugs of choice.

This time, however, Reprieve was not up against a small entity. Only one company had government approval to sell pentobarbital in the U.S., and it was a major international pharmaceutical company, Lundbeck Inc. Headquartered in Denmark, it had some 6,000 employees worldwide; its American plant was in Kansas.

When Reprieve approached Lundbeck, in early 2011, the company said it was "adamantly opposed" to its drugs being used in executions — its primary use is in the treatment of epilepsy — but it said it had no control over what happened after its products were sold to wholesalers or distributors.

Reprieve ratcheted up the pressure. Every time Lundbeck's pentobarbital was used in an execution, it issued a press release.

Anti-death penalty activists campaigned against Lundbeck on Twitter and Facebook, shareholders raised questions at the company's annual meeting, a pension fund sold its shares, and the company's place on an annual ranking of Denmark's best companies fell from 17 to 40.

Lundbeck then did what it had said it couldn't do: It devised a distribution system that would keep its pentobarbital from the states that conducted executions.

Last month, Hospira announced that it was putting controls in place so that three of its drugs — pancuronium bromide, potassium chloride and propofol — would not be used in executions.

Once again, that has left states trying to figure out what to do. In Colorado, a man who killed three teenagers and their boss in a pizza restaurant in 1993 is set to be executed in August. But the state does not have the proper drugs, causing the director of prisons to send an urgent plea to the state's compounding pharmacies. At "compounding pharmacies," pharmacists mix, or compound, the ingredients for drugs on site.

Last October, South Dakota became the first state to use a compound drug in an execution, and it did so twice.

Lawyers for one of the men to be executed, Robert Moeller, who had kidnapped, raped and murdered a 9-year-old girl, filed a lawsuit to obtain information about the supplying pharmacy. The state resisted, and a federal judge sided with the state.

South Dakota was among the states to recently pass a law exempting the names of suppliers of lethal injection drugs from its public records law. The change was necessary, said South Dakota State Sen. Jean Hunhoff, "because there's been harassment that has occurred against non-protected manufacturers and pharmacists, thereby causing difficulty for the state in obtaining the necessary chemicals for the lethal injection."

South Dakota's law passed in the state senate without opposition, and the house by a lopsided 60-8.

Raymond Bonner, a lawyer and former New York Times reporter, is the author of "Anatomy of Injustice: A Murder Case Gone Wrong."

Sound, Fury and the IRS Mess

May 21, 2013 - 10:00am

ProPublica’s job is to report the news rather than to make news ourselves, but sometimes we find an article of ours to be itself a subject of public debate. Last week was such a time, when two articles we had published back in December and January became the subject of significant attention in light of the uproar over IRS oversight of the process for granting tax exemption to so-called “social welfare” groups under section 501(c)(4). We triggered that attention, with a third article we published on May 13, setting out everything we knew about the circumstances of our previous stories.

Largely ignored in a public outcry last week—radio rants, Twitter storms, congressional, presidential and prosecutorial posturing-- were the following:

Our pieces in December and January raised very serious questions about whether six different “dark money” political groups seeking tax exemption had made false statements on their applications. Those applications are signed under penalty of perjury . If any false statements were made knowingly, the groups— including Karl Rove’s Crossroads GPS —may have committed a crime. There is no indication, however, that either the IRS or the Department of Justice has done anything since January to investigate whether such crimes were indeed committed. The groups in question happen all to be conservative. Not one congressional Republican has, to my knowledge, expressed any concern about this possible criminality.

Even more remarkably, leading public figures have asserted as fact that they know how we came to receive nine documents in the mail—statements that appear to have little basis (and in some cases, no basis at all).

The former acting Commissioner of Internal Revenue said on May 17 that the agency’s inspector general had found that the disclosure to us was “inadvertent”—we had requested the applications, but they should not have been sent to us before they were approved. The IRS followed later the same day with a statement to the same effect—but then refused to answer questions about who had made the mistake, and why they should be believed when they denied having acted intentionally (and thus likely denied committing a crime).

What really seems to have happened at the IRS in Cincinnati, across the last three presidencies (a Democrat, then a Republican, then a Democrat), and across two turns of the partisan screw in the House of Representatives, from Republicans to Democrats to Republicans again, is that the agency has been starved of resources, and badly mismanaged.

But while it took the IRS four long days to tell people about their conclusion of “inadvertence” and the same four days for ProPublica to report out the dysfunction , people like Rush Limbaugh, and their followers and fellow travelers on Twitter and in the fringe press, rushed headlong to judgment. Here’s what Limbaugh said about the mid-level federal employees at the IRS in Cincinnati on Tuesday: “The people at these government agencies have been stocked with leftists for decades now, and they’re all activists.” What evidence did he offer for this? None. How could he know that someone in a large bureaucracy, shuffling thousands of pieces of paper, didn’t make a mistake? He couldn’t, and he didn’t.

Well, you might say, that’s Limbaugh. But it wasn’t just Limbaugh. Stephen Moore writes for the Wall Street Journal (where I worked for 15 years, and where Mr. Rove also writes). Yet, he called the documents we were sent “ illegally leaked .” He knew nothing more than Limbaugh. “What is the motivation,” Moore asked, “for leaking these documents? The answer is that the left is trying to dry up the money of tea party and conservative groups by intimidating donors.” He noted that another group, in another case, had its donor list released. But in our case, there were no donor lists, and we had redacted the limited financial information on the forms we published. Moreover, these applications are completed with the expectation that they’ll eventually be made public—because they are when they are approved. Never mind all that; presumably no need to mention it.

And what of the investigators? Congressional committees leapt into action. The inspector general for the IRS had apparently already investigated. The President demanded another investigation; the Department of Justice said it had commenced a criminal inquiry.

Knowing that such is the way in Washington, we waited at ProPublica for someone to send us a subpoena, show up on our doorstep, or maybe just call. Nothing. Nothing since December 13, when we told the IRS we had these documents they weren’t supposed to have sent us—or since the next day, when we published that fact. Nothing before the inspector general reached his conclusion, nothing before the congressional hearings started televising their demands for answers and their righteous indignation, nothing since.

In point of fact, the investigators would have found out that we have nothing of value to them. But the fact that they didn’t even ask tells you a lot. And it reinforces the point that much of the heat generated last week on this subject is just the latest expression of Washington cynicism and its consequences—that the talk show hosts and their fellow travelers, and the representatives and senators and officials in the executive branch, aren’t really looking for answers here. They’re just putting on a show.

Podcast: ProPublica and the IRS Scandal

May 20, 2013 - 1:59pm

Update: A transcript of this conversation was added to this post.

Last week, ProPublica's Kim Barker and Justin Elliott explained how the IRS sent us tax-exempt applications for nonprofit status from conservative groups.  We also noted some of the dysfunction that exacerbated the problems at the IRS’s Exempt Organizations office in Cincinnati.

In-between those stories, ProPublica editor-in-chief Steve Engelberg sat down with Barker to talk about the burgeoning scandal and ProPublica’s role in it.  The pair discussed who sent the documents to us, whether it was deliberate or a mistake, why we published some of the information, what was Barker’s first thought when she found out she got the Crossroads GPS application and whether we burned a source at the IRS?  On that latter point, Barker told Engelberg, “I’d love to be able to say I have some Deep Throat source in the IRS that sends me stuff – that just isn’t the case.  They don’t even return my phone calls.”

We hope this podcast clears up any questions you might’ve had about the situation. 



Steve Engelberg:  Hi, I'm Steve Engelberg and welcome to the ProPublica Podcast. As most of you know by now, the Internal Revenue Service recently admitted to targeting the tax exempt status applications of some conservative groups. According to an Inspector General's report in the matter, the IRS delayed approval and gave extra scrutiny to groups that had conservative sound names like "Tea Party," "Patriots," "We, The People," or "Take Back the Country."

Last year, ProPublica focused on the ways in which certain groups on the left and right told the IRS they were doing social welfare work but misled the agency about the extent of their political activities. During the course of that series, we made a number of public records requests to the IRS to see tax exempt applications ourselves.

In fact, in December 2012 the IRS sent us applications for Karl Rove's Crossroads GPS and other groups whose applications had not yet been approved and were not supposed to be made public.

Joining us in the podcast to talk about ProPublica's involvement in this story is the lead reporter, Kim Barker. We're going to set the record straight on what we received, how we got it, when it came in, and what we did with it.

Last year, Kim, you were covering the subject of campaign finance. You were focused on the issue of these dark money‑called "501(c)(4)s." What's dark money mean? What's dark about them?

Kim Barker:  They don't have to report their donors to the FEC. Anybody can cover campaign finance. It's pretty easy to look at the FEC website and to see who's spending money on what, who's giving to who. The groups that I found particularly interesting were these groups that did not have to report their donors. That's really what we spent last year investigating.

Steve:  OK, so a group is a 501(c)(4). They're chartered by the IRS. What makes them special? What's their tax status?

Kim:  Well, chartered by the IRS. Interesting. Interesting point there because they're not, really. You can go out tomorrow, Steve, and form a 501(c)(4) and you don't actually have to be approved by the IRS to do so. A 501(c)(4) is simply a social welfare nonprofit. It is primarily supposed to be involved in improving the public good of the community and making things better. But it also is allowed to do a certain amount of lobbying and it's allowed to be involved in politics as long as it can prove that its primary purpose is, indeed, social welfare.

These groups essentially were allowed to keep their donors secret to the FEC because they were able to say, "I'm not a political action committee. My major thing that I'm doing out here is social welfare."

So the FEC typically might file a letter saying, "Who are your donors?" but then it doesn't really pursue things because the groups come back and say, "We're not a political committee," so they don't have to tell anybody where this money is coming from.

Steve:  OK, let's say I want the IRS to give their stamp of approval to my group. I'm going to start "Steve's Group to Make America Better." I'm going to file an application. Now, that application is going to ask certain things about what? What am I going to have to tell the IRS?

Kim:  It's called a form 1024. This application asks you really basic questions. Who are the people behind your group? What is the primary purpose of your group? What do you plan to do? How will you spend your activities? Divide them up into percentages. Maybe 50 percent on education. Maybe you want to improve the environment. Maybe you want to work on how government works. You can have all these different, vague descriptions of what your primary purpose is. Then they'll go along and ask you, "How much will different people make from this particular organization? How are you going to raise money?" They'll also ask you, "Do you plan to spend money to influence or elect certain candidates for office or not?" You have to answer yes or no to that question.

It's a long questionnaire. You would probably have to hire a lawyer, unfortunately Steve, to actually fill it out properly.

Steve:  OK, so I do that. Now I've got my Steve's Group application in and you're Kim, investigative reporter and you believe that Steve's Group might not be all it says it or maybe we're going to engage in politics. The IRS is looking at my application. Can you ask for it?

Kim:  I can ask for anything I want. They don't have to give it to me, but I can file as many FOIAs as I want to the IRS and ask for certain information. A lot of this is public. As soon as a nonprofit...whether it's a charity or a social welfare nonprofit or a trade association. As soon as they are recognized as tax exempt by the IRS, that document automatically becomes public. In fact, if I go to the actual organization...I show up in person and say, "I want this document," they're supposed to give it to me within 24 hours.

Does that happen? Not necessarily, but the IRS has to release these documents once these groups are recognized as tax exempt. They've got 30 days to do so.

Steve:  So this is a pretty important point. When I, Steve's Group, writes my document it's not exactly the deep, dark secrets of Steve's Group because I know it's going to get made public if I'm approved, right? This is everything I know is eventually going to be on the public record.

Kim:  Sure, which is why you'll have some sort of vague descriptions. They're very interesting for a reporter to look at and to compare what a group told the IRS in the very beginning with what it actually ended up doing later on.

Steve:  You mentioned that you filed these FOIA requests...Freedom of Information Act requests. Now, does the IRS announce to you which groups have been approved?

Kim:  No. In fact, they will send back a response to me saying, "We have no record of the tax exempt status of these particular groups," and then will list them. It doesn't tell me whether a group has actually applied. It doesn't tell me whether a group has actually been denied. It just says, "We have no record of the tax exempt status of this particular group." Then it will send me the applications for the groups that have been recognized.

Steve:  To do your job then it would be typical of you to maybe find the name of a group in the FEC records, the Federal Election Commission records, and then file a request with the IRS to see if they've been approved. That's how you do your job.

Kim:  That's pretty much what I was doing last year. I think the IRS probably got very tired of me sending in one or two requests every month and sometimes two or three a week asking for these particular documents. I must have on my desk...I've got hundreds of these documents there.

Steve:  To be clear on this, because this gets into some of the rather interesting, inaccurate statements that have been made about this. We can go through a few of them here. First of all, the request in question which came back to you from the IRS that's now the subject of some coverage and controversy. When did you file that one? When did you ask for the information?

Kim:  I sent the letter in. It was dated November 15th of 2012. I asked for the applications for 67 different groups that had spent money on the elections according to FEC records. These were the groups I didn't yet have the applications of because plenty of them, obviously with my previous reporting, I already had. I sent in this very long request for applications for 67 different groups that I didn't already have. Then in return, the IRS sent me back information dated November 28th. That included information for 31 of these groups. I believe it was something like 30 applications and one notice that they could not find the application but that the group had been recognized.

I've got information for 31 groups. The other groups? They had no record of the tax exempt status of those groups. That could mean that those groups have applied. It could also mean they haven't yet applied. It could mean their applications are pending.

We really have no idea about those other groups, but I can say that that request included information for conservative groups, for liberal groups, for middle of the road groups. The only criteria I had for requesting that information was groups that had spent money on the election and did not disclose their donors.

Steve:  Just to be clear, in case anyone's forgotten the excitement of last fall, November 15th was after the election, right?

Kim:  It is true. That was actually after the election.

Steve:  OK, because that's been a little bit of a point of confusion. Now, when this material came back to you, was there anything in the material relating, for example, to the confidential donor information as Senator McConnell has suggested? Was there anything of that nature given to you by the IRS?

Kim:  No. I wish. I would love to have confidential donor information. I did not get any of that information. What I got that was confidential were nine applications of groups that had not yet been recognized as tax exempt.

Steve:  Now again, to be clear, these are the applications that will be made public if the IRS ultimately approves the requests. These are applications written by the group expecting them to be made public, correct?

Kim:  Yeah, but they would not be made public if the group is, for instance, rejected.

Steve:  And among them was Crossroads GPS. What was your first thought when you saw a Crossroads GPS document in there?

Kim:  "Holy cow! Crossroads GPS was recognized by the IRS and we are the first journalism outlet to get this. We've got to get this up right away." That was my first reaction because everybody wanted this application. Every journalist wanted this application because this was the group...Remember, the biggest social welfare nonprofit spending on the election in 2012. It spent more than $70 million on the election that was reported to the FEC and millions more on these issue ads that mentioned candidates before they had to reported. It spent a lot of money.

Everybody was very interested in what Crossroads told the IRS when it first applied. I really thought that I had that kind of scoop. That the IRS had recognized them and that we were going to be the first ones to report that.

Steve:  And then what happened?

Kim:  Then I looked for their recognition letter. The recognition letter is typically something that the IRS attaches to the front of these applications. It says, "You are hereby recognized as a social welfare nonprofit," and it is stamped with a date. This application did not have that letter and it did not have that date.

Steve:  Which suggested to you, perhaps, that this had been sent to us in error.

Kim:  It did, because I had never seen this before. Then I looked through all of the applications and I found a total of 12, in fact, that did not have these recognition letters. Then I went through these particular 12 and I called all the organizations to find out whether they had been recognized or not. Many folks didn't get back to me, but Crossroads confirmed our suspicions, which were that they had not been recognized by the IRS as far as they knew.

Now, in doing all the reporting that I did and in going through the IRS database that they've got. It's very cumbersome to use. It lists the different organizations. I found out that only nine of the applications were supposed to be confidential. Only nine of these groups had not yet been recognized by the IRS.

Steve:  Now these groups that we got these applications for that turned out to not be the stuff that was supposed to be given to us in the first place, were they all conservative groups?

Kim:  All nine of those groups were conservative groups. We chose to write two stories. The first story was simply about the Crossroads GPS application and what it said, because it said that it was going to have, I believe, limited political activity. We found that that was interesting to compare what it said on its application with the fact that it spent more than $70 million. Again, this was an application that everybody was interested in. We put that out there. We wrote a story about that. We were very transparent about the fact that we weren't supposed to have this and we even wrote about the fact that the IRS had basically told me that if you publish this, publishing this is a felony and you're risking five years in prison and a $5,000 fine.

What we ended up doing after the advice of legal counsel was redacting financial information because that's the one thing that everybody said, "Well, that could be construed as confidential because they have not yet been recognized by the IRS." So we published the application and we wrote a story about it while redacting the financial information.

Then we did a second story. We did not do a story on all of the other groups that had not been recognized by the IRS, just the ones that had told the IRS on their applications that they would not engage in politics but then turned around and did in 2012. We felt like that was also a story.

As part of that story, we also talked about how we got these documents and the fact that we had been told that we could face five years in prison and a $5,000 fine.

Steve:  I should just point out to our listeners that we and receive an outside legal opinion which suggested that the IRS's interpretation of this law was not correct and that we had every right to publish this. So far, we have not been accused of any wrongdoing in this matter. Now, these stories were published in December of last year right after we received this material, correct? We made no secret of this.

Kim:  One was published in mid‑December, the one on Crossroads and I'm fairly certain that the other story was published in early January of this year.

Steve:  Now, all of this suddenly came right back into the news again with the revelation that several employees of the office in Cincinnati, Ohio of the IRS that handled this had been improperly targeting groups with the name "Tea Party" in their title. At that point, we decided to come out with another story to remind readers of what we had already said in December and January. What was that story about? Why was it newsworthy?

Kim:  I felt like when I saw what was coming out about the head of the Exempt Organizations Division last Friday apologizing in advance for what was going to come out in this Inspector General's report this week and basically blaming folks in Cincinnati for improperly targeting the Tea Party. It made me look at where we got the documents in the first place from and where we were requesting them from, which was the same office in Cincinnati. It seemed worth it to point out the same office that was now getting blamed for improperly targeting the Tea Party had also been the one that sent us documents that we weren't supposed to get.

Steve:  Did anyone leak to you a document relating to confidential material from the IRS?

Kim:  I was sent, in response, to a public records request applications for nine different groups that were still confidential. I don't know why I was sent them, but I had requested them and they were sent as part of a response to a public records request that also included information on 22 other groups that I had requested information on.

Steve:  There's no evidence that we are aware of that this operation here at ProPublica and Investigative Newsroom, that these documents were sent to us deliberately or accidentally. We have no...

Kim:  We have no idea. I'd love to be able to say I have some Deep Throat source in the IRS that sends me stuff. It just isn't the case. They don't even return my phone calls. Yeah, we have no idea why we got them or how we got them except by the mail.

Steve:  Except by the mail. Essentially what happened is material lands in our office in an official envelope responding to an official request and we write about it. In no way are we burning a source here because we have no source. We have no reason to believe that this was given to us as a kind of leak or a revelation. This arrived through the usual means.

Kim:  I mean, Steve, all we know is we requested the documents and we got them in the mail. That's all we know.

Steve:  Obviously, at this point, from what Attorney General Holder has said, there will be an investigation into, among other things, how those documents ended up in an envelope sent to us and who knows what they'll find.

Kim:  Right. I have no idea.

Steve:  Kim, one of the things that people have pointed out is that in our writing in general on the subject of 501(c)(4)s, we've written about a fair number of conservative leaning groups and not so many liberal groups. Is there a reason for that?

Kim:  Yes, it's because more conservative groups have been using social welfare nonprofits to spend money on politics. In 2012, I believe it was about 84 percent of the money that was spent on the elections by these social welfare nonprofits and anonymous spending groups came from the conservative side. We do write about the liberal groups. What, to me, is interesting about a lot of these liberal groups that have been engaged in this is they don't even bother applying to the IRS. They just go and form a 501(c)(4). They spend money on politics. They file their annual returns that they're supposed to file and they do not apply to the IRS because the IRS does not require these groups to even be approved to operate.

Steve:  That is a fact that you reported at some length in your coverage over the last year.

Kim:  Yes. It is a fact that I've reported many times.

Steve:  That was Kim Barker. To read more of our reporting on this issue, go to Thanks for listening. For ProPublica, I'm Steve Engelberg. We'll catch you next time

Congressmen to Hagel: Where Are the Missing War Records?

May 20, 2013 - 1:40pm

The top Republican and Democrat on the House Committee on Veterans’ Affairs are demanding more information from defense Secretary Chuck Hagel about lost Army field records from the wars in Afghanistan and Iraq, the subject of a ProPublica investigation last year.

In an unusually detailed letter sent Friday to Hagel, Reps. Jeff Miller, R-Fla., and Michael Michaud, D-Maine, said the Defense Department’s response to an earlier request about why records are missing — and what the military is doing about it — didn’t go far enough.

“Congress must have a clear understanding of the extent  of the lost records in order to safeguard the best interests of our service members and veterans,’’ the letter says.

The 12 questions posed to Hagel in the letter focus largely on the Army because it has the largest records deficit. Among other things, the congressmen want to know what happened to operational records for the 1st Armored Division and the 82nd Airborne Division and what is being done to reconstruct them.

In November, ProPublica and the Seattle Times reported that they were among numerous Army units that had lost or failed to keep battlefield records as required, making it harder for some veterans to obtain benefits and for historians to recount what actually happened.

“Operational records can be used to track the history of our nation’s military, plan for future operations and support innovative medical research,’’ Miller and Michaud wrote to Hagel.

In addition to chairing the veterans’ panel, Miller sits on the House Armed Services Committee, which has direct oversight responsibility for the Defense Department and service branches.

The department did not return a phone call seeking comment. 

Transcript: What’s Going on at Gitmo?

May 17, 2013 - 6:54pm

The current hunger strike at Guantanamo has entered its fourth month, with resistance growing to involve 100 detainees. More medics have been flown in to assist with force-feeding 29 inmates, and five are currently hospitalized. The strike began after searches of inmates’ Korans, but has grown into a protest of indefinite detention.

“The situation is desperate now. People are fainting with exhaustion every day,” wrote detainee Samir Naji al Hasan Moqbel in a recent New York Times op-ed.

We’ve covered the details of detainees’ cases, and the Obama administration’s back and forth on closing Guantanamo. Friday, we brought together a group of journalists to answer your questions about the U.S.' most controversial prison. 

ProPublica’s Cora Currier (@coracurrier) was joined by Carol Rosenberg of the Miami Herald (@carolrosenberg), Ryan J. Reilly of the Huffington Post (@ryanjreilly), and Charlie Savage of the New York Times (@charlie_savage) to discuss what’s going on at Gitmo. Some key takeaways:

Guantanamo is currently under a media blackout: Four reporters left this morning, and no new journalists will be allowed back until June. The Pentagon is in the process of training new Public Affairs escorts (known as "minders") who take reporters on scripted tours of the prison camps. "They don't like it when you call it a blackout, but that's what it is," Reilly said.

Gitmo guards are trapped in the middle of detainees and D.C.-level decisions: Guards, many of whom are younger then the men they patrol, are in a difficult position. "The detainees are mad because basically no one is allowed to leave anymore - low-level transfers dried up after Jan 2011 - and to them the guards are the face of all that," Savage said.

Officials won't say who is on hunger strike: But lawyers are alerted when their clients are being force-fed. Attorneys for 13 hunger strikers gave their names to the Miami Herald.  

Eighty-six detainees have been approved for transfer — but it's not so simple: "The problem is they come from chaotic countries - primarily Yemen - which makes it harder for officials to say it would be safe to send them because it's not clear the central government is capable of keeping an eye on them," Savage said. As Rosenberg pointed out, saying detainees are "cleared" is a misnomer. "They're not cleared to walk out of the prison camps and board a flight to Fort Lauderdale."

See the full transcript of their discussion below:

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How the IRS’s Nonprofit Division Got So Dysfunctional

May 17, 2013 - 6:14pm
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May 18: This post has been corrected.

The IRS division responsible for flagging Tea Party groups has long been an agency afterthought, beset by mismanagement, financial constraints and an unwillingness to spell out just what it expects from social welfare nonprofits, former officials and experts say.

The controversy that erupted in the past week, leading to the ousting of the acting Internal Revenue Service commissioner, an investigation by the FBI, and congressional hearings that kicked off Friday, comes against a backdrop of dysfunction brewing for years.

Moves launched in the 1990s were designed to streamline the tax agency and make it more efficient. But they had unintended consequences for the IRS’s Exempt Organizations division. 

Checks and balances once in place were taken away. Guidance frequently published by the IRS and closely read by tax lawyers and nonprofits disappeared. Even as political activity by social welfare nonprofits exploded in recent election cycles, repeated requests for the IRS to clarify exactly what was permitted for the secretly funded groups were met, at least publicly, with silence.

All this combined to create an isolated office in Cincinnati, plagued by what an inspector general this week described as “insufficient oversight,” of fewer than 200 low-level employees responsible for reviewing more than 60,000 nonprofit applications a year.

In the end, this contributed to what everyone from Republican lawmakers to the president says was a major mistake: The decision by the Ohio unit to flag for further review applications from groups with “Tea Party” and similar labels. This started around March 2010, with little pushback from Washington until the end of June 2011.

“It’s really no surprise that a number of these cases blew up on the IRS,” said Marcus Owens, who ran the Exempt Organizations division from 1990 to 2000. “They had eliminated the trip wires of 25 years.”

Of course, any number of structural fixes wouldn’t stop rogue employees with a partisan ax to grind. No one, including the IRS and the inspector general, has presented evidence that political bias was a factor, although congressional and FBI investigators are taking another look.

But what is already clear is that the IRS once had a system in place to review how applications were being handled and to flag potentially problematic ones. The IRS also used to show its hand publicly, by publishing educational articles for agents, issuing many more rulings, and openly flagging which kind of nonprofit applications would get a more thorough review.

All of those checks and balances disappeared in recent years, largely the unforeseen result of an IRS restructuring in 1998, former officials and tax lawyers say.

“Until 2008, we had a dialogue, through various rulings and cases and the participation of various IRS officials at various ABA meetings, as to what is and what is not permissible campaign intervention,” said Gregory Colvin, the co-chair of the American Bar Association subcommittee that dealt with nonprofits, lobbying, and political intervention from 1991 to 2009.

“And there has been absolutely no willingness in the last five years by the IRS to engage in that discussion, at the same time the caseload has exploded at the IRS.”

The IRS did not respond to requests for comment on this story.

Social welfare nonprofits, which operate under the 501(c)(4) section of the tax code, have always been a strange hybrid, a catchall category for nonprofits that don’t fall anywhere else. They can lobby. For decades, they have been allowed to advocate for the election or defeat of candidates, as long as that is not their primary purpose. They  also do not have to disclose their donors.

Social welfare nonprofits were only a small part of the exempt division’s work, considered minor when compared with charities. When the groups sought IRS recognition, the agency usually rubber-stamped them. Out of 24,196 applications for social welfare status between 1998 and 2009, the exempt organizations division rejected only 77, according to numbers compiled from annual IRS data books.

Into this loophole came the Supreme Court’s Citizens United decision in January 2010, which changed the campaign-finance game by allowing corporate and union spending on elections.

Sensing an opportunity, some political consultants started creating social welfare nonprofits geared to political purposes. By 2012, more than $320 million in anonymous money poured into federal elections.

A couple of years earlier, beginning in 2010, the Cincinnati workers had flagged applications of tiny Tea Party groups, according to the inspector general, though the groups spent almost no money in federal elections.

The main question raised by the audit is how the Cincinnati office and superiors in Washington could have gotten it so wrong. The audit shows no evidence that these workers even looked at records from the Federal Election Commission to vet much larger groups that spent hundreds of thousands and even millions in anonymous money to run election ads.

The IRS Exempt Organizations division, the watchdog for about 1.5 million nonprofits, has always had to deal with controversial groups. For decades, the division periodically listed red flags that would merit an application being sent to the IRS’s Washington, D.C., headquarters for review, said Owens, the former division head.

In the 1970s, that meant flagging all applications for primary and secondary schools in the south facing desegregation. In the 1980s, during the wave of consolidation in the health-care industry, all applications from health-care nonprofits needed to be sent to headquarters. The division’s different field offices had to send these applications up the chain.

“Back then, many more applications came to Washington to be worked — the idea was to have the most sensitive ones come to Washington,” said Paul Streckfus, a former IRS lawyer who screened applications at headquarters in the 1970s and founded the industry publication EO Tax Journal in 1996.

Because this list was public, lawyers and nonprofits knew which cases would automatically be reviewed.

“We had a core of experts in tax law,” recalled Milton Cerny, who worked for the IRS, mainly in Exempt Organizations, from 1960 to 1987. “We had developed a broad group of tax experts to deal with these issues.”

In the 1980s, the division issued many more “revenue rulings” than issued in recent years, said Cerny, then head of the rulings process. These revenue rulings set precedents for the division. Revenue rulings along with regulations are basically the binding IRS rules for nonprofits.

“We would do a revenue ruling, so the public and agents would know,” Cerny said. “Over the years, it apparently was felt that a revenue ruling should only be published at an extraordinary time. So today you’re lucky if you get one a year. Sometimes it’s less than that. It’s amazing to me.”

Other checks and balances had existed too. Not only were certain kinds of applications publicly flagged, there was another mechanism called “post-review,” Owens said. Headquarters in Washington would pull a random sample every month from the different field offices, to see how applications were being reviewed. There was also a surprise “saturation review,” once a year, for each of the offices, where everything from a certain time period needed to be sent to Washington for another look.

So internally, the division had ways, if imperfect, to flag potential problems. It also had ways of letting the public know what exactly agents were looking at and how the division was approaching controversial topics.

For instance, there was the division’s “Continuing Professional Education,” or CPE, technical instruction program. These articles were supposed to be used for training of line agents, collecting and putting out the agency’s best information on a particular topic — on, say, political activity by social welfare nonprofits in 1995.

“People in a group would write up their thoughts: ‘Here’s the law,’” said Beth Kingsley, a Washington lawyer with Harmon, Curran, Spielberg & Eisenberg who’s worked with nonprofits for almost 20 years. “It wasn’t pushing the envelope. It was, ‘This is how we see this issue.’ It told us what the IRS was thinking.”

The system began to change in the mid-1990s. The IRS was having trouble hiring people for low-level positions in field offices like New York or Atlanta — the kinds of workers that typically reviewed applications by nonprofits, Owens said.

The answer to this was simple: Cincinnati.

The city had a history of being able to hire people at low federal grades, which in 1995 paid between $19,704 and $38,814 a year — almost the same as those federal grades paid in New York City or Chicago. (Adjusted for inflation, that’s between $30,064 and $59,222 now.)

“That was well below what the prevailing rate was in the New York City area for accountants with training,” Owens said. “We had one accountant who just had gotten out of jail — that’s the sort of people who would show up for jobs. That was really the low point.”

So in 1995, the Exempt Organizations division started to centralize. Instead of field offices evaluating applications for nonprofits in each region, those applications would all be sent to one mailing address, a post-office box in Covington, Ky. Then a central office in Cincinnati would review all the applications.

Almost inadvertently, because people there were willing to work for less than elsewhere, Cincinnati became ground zero for nonprofit applications.

For the time being, the checks remained in place. The criteria for flagged nonprofits were still made public. The Continuing Professional Education text was still made public. Saturation reviews and post reviews were still in place.

But by 1998, after hearings in which Republican Senator Trent Lott accused the IRS of "Gestapo-like" tactics, a new law mandated the agency’s restructuring. In the years that followed, the agency aimed to streamline. For most of the ‘90s, the IRS had more than 100,000 employees. That number would drop every year, to slightly less than 90,000 by 2012.

Change also came to the Exempt Organizations division.

The IRS tried to remove discretion from lower-level employees around the country by creating rules they had to follow. While the reorganization was designed to centralize power in the agency's Washington headquarters, it didn’t work out that way.

“The distance between Cincinnati and Washington was such that soon Cincinnati became a power center,” said Streckfus, the former IRS lawyer.

Following reorganization, many highly trained lawyers in Washington who previously handled the most sensitive nonprofit applications were reassigned to focus on special projects, he said.

Owens, who left the IRS in 2000 but stayed in touch with his old division, said the focus on efficiency meant “eliminating those steps deemed unimportant and anachronistic.”

In 2003, the saturation reviews and post reviews ended, and the public list of criteria that would get an application referred to headquarters disappeared, Owens said. Instead, agents in Cincinnati could ask to have cases reviewed, if they wanted. But they didn’t very often.

“No one really knows what kinds of cases are being sent to Washington, if any,” Owens said. “It’s all opaque now. It’s gone dark.”

By the end of 2004, the Continuing Professional Education articles stopped.

Recommendations from an ABA task force for IRS guidelines on social welfare nonprofits and politics that same year were met with silence. 

Even the IRS’s Political Activities Compliance Initiative, which investigated complaints of charities engaged in politics — primarily churches — closed up shop in early 2009 after less than five years, without any explanation. 

Both before and after the changes, the Exempt Organizations division has been a small part of the IRS, which is focused on collecting money and chasing delinquent taxpayers.  

IRS employee count in 2012

Rulings and Agreements, the division that handles applications of all nonprofits, accounted for less than 0.5 percent of all IRS employees in 2012.


Source: IRS Data Books, IRS Exempt Organizations Annual Report

Of the 90,000 employees at the agency last year, only 876 worked in the Exempt Organizations’ division, or fewer than 1 in 100 employees.

Of those, 335 worked in the office that actually handles applications of nonprofits.  

Most of those — about 300 — worked in Cincinnati, Streckfus estimates. The rest were at headquarters, in Washington D.C.

In Cincinnati, the employees’ primary job was sifting through the applications of nonprofits, making determinations as to whether a nonprofit should be recognized as tax-exempt. In a press release Wednesday, the IRS said fewer than 200 employees were responsible for that work.

In 2012, these employees received 60,780 applications. The bulk of those — 51,748 — were from groups that wanted to be recognized as charities.

But the number of social welfare nonprofit applications spiked from 1,777 in 2011 to 2,774 in 2012. It’s impossible to say how many of those groups indicated whether they would engage in politics, or why the number of applications increased. The IRS said Wednesday that it “has seen an increase in the number of tax-exempt organization applications in which the organization is potentially engaged in political activity,” including both charities and social welfare nonprofits, but didn’t specify any numbers.

Total 501(c)(4) Nonprofit Applications from 2002 to 2012

From 2011 to 2012, applications increased by more than 50 percent.


Source: IRS Data Books

On average, one employee in Cincinnati would be responsible for going through roughly one application per day.

Some would be easy — say, a local soup kitchen. But to evaluate whether a social welfare nonprofit has social welfare as its primary purpose, the agent is supposed to use a “facts and circumstances” test. There is no checklist. Reviewing just one social welfare nonprofit could take days or weeks, to look through a group’s website, track down TV ads and so forth.  

“You’ve got 60,000 applications coming through, and it’s hard to do that with the number of agents looking at them,” said Philip Hackney, who was in the IRS’s chief counsel office in Washington between 2006 and 2011 but said he wasn’t involved in the Tea Party controversy. “The reality is that they cannot do that, and that’s why you’re seeing them pick stuff out for review. They tried to do that here, and it burned them.” 

As we have previously reported, last year the same Cincinnati office sent ProPublica confidential applications from conservative groups. An IRS spokeswoman said the disclosures were inadvertent. 

Mark Everson, IRS commissioner for four years during the George W. Bush administration, said he believed the fact that the division is understaffed is relevant, but not an excuse for what happened. “The whole service is under-funded,” he pointed out.

And Dan Backer, a lawyer in Washington who represented six of the groups held up because of the Tea Party criteria, said he doesn’t buy the notion that low-level employees in Cincinnati were alone responsible.

“It doesn’t just strain credulity,” Backer said. “It broke credulity and left it laying on the road about a mile back. Clearly these guys were all on the same marching orders.”

The inspector general’s audit was prompted last year after members of Congress, responding to complaints by Tea Party groups, asked for it.

Like former officials interviewed by ProPublica, the audit suggests that officials at IRS headquarters in Washington were unable to manage their subordinates in Cincinnati. When Lois Lerner, the Exempt Organizations division director in Washington, learned in June 2011 about the improper criteria for screening applications, she instructed that they be “immediately revised.”

But just six months later, Cincinnati employees changed the revised criteria to focus on “organizations involved in limiting/expanding government” or “educating on the Constitution.” They did so “without executive approval.”

“The story people are overlooking is: Congress is complaining about underpaid, overworked employees who are not adequately trained,” said Bryan Camp, a former attorney in the IRS chief counsel’s office.

In the end, after all the millions of anonymous money spent by some groups to elect candidates in 2012, after all the groups that said in their applications that they would not spend money to elect candidates before doing exactly that, after the Cincinnati office flagged conservative groups, the IRS approved almost all the new applications. Only eight applications were denied. 

Graphics by Sisi Wei and Lena Groeger

Correction: This post originally said that fewer than 1 in 1,000 IRS employees worked in the Exempt Organizations’ division. In fact, the figure is fewer than 1 in 100.

Your Hospital May Be Hazardous To Your Health

May 17, 2013 - 2:15pm

As part of our ongoing investigation into patient safety, ProPublica reporters Marshall Allen and Olga Pierce produced this interactive story in collaboration with PBS Frontline and Ocupop during a May 11-16 hackathon.

The Story Behind Our Hospital Interactive

May 17, 2013 - 2:15pm

Here at ProPublica, we love to find new ways to tell stories. We’ve built data-driven news apps, commissioned our own news songs and crafted narratives with a novelist’s touch, all to enrich our investigative reporting.

Your Hospital May Be Hazardous To Your Health,” co-published today with PBS Frontline, is our newest try at innovation. And it had an unusual gestation - as part of a five-day hackathon that brought together teams of journalists, filmmakers, developers and designers to produce interactive stories for the Web.

The piece draws from ongoing reporting about patient safety by ProPublica reporters Marshall Allen and Olga Pierce. Our collaborators were documentary filmmakers Tom Jennings and Sabrina Shankman and Director of Development Sam Bailey, all with Frontline, and a team from Ocupop, a web design and development group based in Milwaukee, Wisc.

The hackathon - “Tribeca Hacks: Storytelling Innovation Lab” - is a project of the Tribeca Film Institute and Mozilla that is supported by the Ford Foundation.

Transcript: Installment Loans and the Shifting Debt Industry

May 16, 2013 - 4:41pm

Monday, we co-published a story with Marketplace on installment loans, a growing industry that offers quick money to low-income borrowers – and is flying under regulators’ radars.

Installment loans are the cousins of payday loans. They exist in at least 19 states, mostly in the South and Midwest, and offer borrowers with poor credit easy access to money. World Finance, a billion-dollar installment loan company, has more than 800,000 customers across the U.S. World and other installment lenders often put their stores near military bases.

Yet as our story explains, installment loans can be “deceptively expensive.” Lenders often persuade borrowers to renew their loans over and over, pushing the effective annual percentage rate sky-high. If state law caps the rate, installment lenders often sell borrowers a slew of unnecessary insurance products. World says it informs borrowers in writing of the terms of its loans, that it renews loans only if its customers want to, and that it provides a valuable financial service to many satisfied customers.

So how could regulation be strengthened? How do installment lenders fit into a shifting debt industry? And what does the everyday borrower need to know if they’re considering taking out an installment loan?

Join us for a live discussion this Thursday, May 16, at 2 PM ET, with Marketplace’s Mitchell Hartman and ProPublica’s Paul Kiel.

 We encourage you to leave questions in advance in the comments below. You can also tweet questions with the hashtag #BeyondPayDay. 

The Most Important #Muckreads on Rape in the Military

May 16, 2013 - 10:00am

May 17: This post has been updated to include the number of men in the military who reported suffering from military sexual trauma.

The Pentagon announced this week that a sergeant working in the military’s sexual assault prevention office had been charged with — you guessed it — sexual assault. This news came just a week after the officer in charge of the Air Force’s rape prevention program was arrested for sexual battery

An estimated 26,000 service members were sexually assaulted in 2012, according to the latest government report. That’s up from 19,000 in 2010, despite recent claims that the military has been focusing more on prevention efforts.

Amid the growing controversy, Congress is hurrying to draft new legislation and Obama has called for stricter punishment for sexual offenders. All officers in the sexual assault prevention office will be re-screened and re-trained, the Pentagon announced. As lawmakers and military officials debate what to do next, we’ve rounded up some of the best journalism on sexual assault in the military.

Did we miss any? Let us know in the comments below, or tweet them to us with the hashtag #muckreads.

The Invisible War, documentary, June 2012

The academy-award nominated documentary has helped bring the military’s rape crisis to national attention. Filmmakers interviewed victims and military personnel to reveal the overwhelming obstacles to prosecuting military rape, and how inadequate efforts have been so far to curbing sexual assault.

Trauma Sets Female Veterans Adrift Back Home, New York Times, February 2013

According to the Pentagon report, 48,100 women (and 43,700 men) reported military sexual trauma last year, which studies say makes them nine times more likely to suffer from PTSD. This two-part New York Times series documents the struggles facing women veterans who’ve suffered from sexual assault, including homelessness and unemployment.

The Rape of Petty Officer Blumer, Rolling Stone, February 2013

The story of one naval officer’s rape details the consequences victims face for coming forward — consequences that keep most victims from reporting sexual attacks. After telling her superiors she had been raped, Rebecca Blumer was accused of lying, sexually harassed, denied promotions and ultimately discharged.

Rape victims say military labels them 'crazy', CNN, April 2012

A CNN investigation found another way the military handles rape accusations: labeling victims as emotionally unstable. After reporting a sexual assault, multiple service members were diagnosed with a personality disorder and discharged. Their abuse allegations were ignored.

The Enemy Within, National Journal, September 2012

What is it about the military that makes sexual assault so pervasive? The National Journal digs into the policies behind the statistics, and the legal loopholes exploited by sexual predators.

Pentagon grapples with sex crimes by military recruiters, Washington Post, May 2013

Active service members aren’t the only ones vulnerable to sexual assault. A recent series of scandals across the country exposed military recruiters accused of sexually abusing young people looking to enlist.

Betrayal in the Ranks, The Denver Post, 2004

The Denver Post spoke with more than 60 victims about their battle for justice, and the psychological trauma that lasted long after their assault. Many felt the military blamed them for their rape, while shielding their attackers from punishment. 

On Victory Drive, Soldiers Defeated by Debt

May 15, 2013 - 6:50am

This story was co-produced with Marketplace. Listen to their coverage.

Seven years after Congress banned payday-loan companies from charging exorbitant interest rates to service members, many of the nation's military bases are surrounded by storefront lenders who charge high annual percentage rates, sometimes exceeding 400 percent.

The Military Lending Act sought to protect service members and their families from predatory loans. But in practice, the law has defined the types of covered loans so narrowly that it's been all too easy for lenders to circumvent it.

"We have to revisit this," said Sen. Dick Durbin, D-Ill., who chairs the defense appropriations subcommittee and is the Senate's second-ranking Democrat. "If we're serious about protecting military families from exploitation, this law has to be a lot tighter."

Members of the military can lose their security clearances for falling into debt. As a result, experts say, service members often avoid taking financial problems to their superior officers and instead resort to high-cost loans they don't fully understand.

The Department of Defense, which defines which loans the Military Lending Act covers, has begun a process to review the law, said Marcus Beauregard, chief of the Pentagon's state liaison office.

The act mainly targets two products: payday loans, usually two-week loans with annual percentage rates often above 400 percent, and auto-title loans, typically one-month loans with rates above 100 percent and secured by the borrower's vehicle. The law caps all covered loans at a 36 percent annual rate.

That limit "did do a great deal of good on the products that it covered," Holly Petraeus, the Consumer Financial Protection Bureau's head of service member affairs, said in an interview. "But there are a lot of products that it doesn't cover."

Representatives from payday and other high-cost lenders said they follow the law. Some defended the proliferation of new products as helpful to consumers.

A 400 Percent Loan

In June 2011, when Levon Tyler, a 37-year-old staff sergeant in the Marines, walked into Smart Choice Title Loans in Columbia, S.C., it was the first time he'd ever gone to such a place, he said. But his bills were mounting. He needed cash right away.

Smart Choice agreed to lend him $1,600. In return, Tyler handed over the title to his 1998 Ford SUV and a copy of his keys. Tyler recalled the saleswoman telling him he'd probably be able to pay off the loan in a year. He said he did not scrutinize the contract he signed that day.

If he had, Tyler would have seen that in exchange for that $1,600, he'd agreed to pay a total of $17,228 over two and a half years. The loan's annual percentage rate, which includes interest and fees, was 400 percent.

Tyler said he provided his military ID when he got the loan. But even with an annual rate as high as a typical payday loan, the Military Lending Act didn't apply. The law limits the interest rate of title loans — but only those that have a term of six months or less.

In South Carolina, almost no loans fit that definition, said Sue Berkowitz, director of the nonprofit South Carolina Appleseed Legal Justice Center. The reason? Ten years ago, the state legislature passed consumer protections for short-term auto-title loans. In response, lenders simply lengthened the duration of their loans.

Today, plenty of payday and auto-title lenders cluster near Fort Jackson, an army base in Columbia, legally peddling high-cost loans to the more than 36,000 soldiers who receive basic training there each year.

Tyler's loan showcases other examples of lenders' ingenuity. Attached to his contract was an addendum that offered a "Summer Fun Program Payoff." While the loan's official term was 32 months, putting it outside both South Carolina's regulations and the Military Lending Act, the "Summer Fun" option allowed Tyler to pay off the loan in a single month. If he did so, he'd pay an annual rate of 110 percent, the addendum said.

Michael Agostinelli, the chief executive of Smart Choice's parent company, American Life Enterprises, told ProPublica he wants his customers to pay off their loans early. "They're meant to be short-term loans," he said. He also said that customers who pay on time get "a big discount." In Tyler's case, he would have paid an annual rate of 192 percent if he had made all his payments on time.

But Tyler fell behind after only a couple of payments. Less than five months after he took out the loan, a repo company came in the middle of the night to take his car. Three weeks later, it was sold at auction.

"This was something new, and I will never do it again," Tyler said. "I don't care what type of spot I get in."

American Life Enterprises companies operate nine title-lending branches in Nevada and South Carolina. Agostinelli said loans to members of the military are rare for his companies but that service members might go to a title lender for the same reason anybody else does: They need money immediately and discreetly.

Loans similar to the one Tyler took out are broadly and legally available from stores and over the Internet. QC Holdings, Advance America, Cash America and Ace Cash Express — all among the country's largest payday lenders — offer loans that fall outside the definitions of the Military Lending Act, which defined a payday loan as lasting three months or less.

The annual rates can be sky high, such as those offered by Ace Cash Express in Texas, where a five-month loan for $400 comes with an annual rate of 585 percent, according to the company's website.

Ace Cash is among a number of payday lenders just outside the gates of Lackland Air Force Base in San Antonio, and it has four stores within three miles of Fort Hood in Texas.

A 2012 report on the Military Lending Act by the Consumer Federation of America found there had been no drop in the number of payday lenders around Fort Hood since the 2006 law went into effect.

Amy Cantu of the Community Financial Services Association of America, which represents the payday industry, said payday lenders are careful to screen out service members for their short-term products. But she acknowledged that payday companies may provide soldiers and their families with other types of loans. "We welcome more products in the market," she said of the trend of payday lenders increasingly offering longer-term loans. "Options are good for consumers."

Earned a Purple Heart, Lost a Car

Some lenders apparently haven't bothered to change their loan products in response to the law.

A 2011 federal class-action suit filed in Georgia's Middle District alleges that one of the largest auto-title lenders in the country, Community Loans of America, has been flouting the law. The suit names among its plaintiffs three soldiers who took out what appeared to be classic title loans. All agreed to pay an annual rate of around 150 percent for a 30-day loan. All had trouble repaying, according to the suit. One, an Army staff sergeant and Purple Heart recipient, lost his car. The other two managed to pay interest but almost none of the principal on their loans for several months.

The company was fully aware that its customers were soldiers, because they presented their military identifications, said Roy Barnes, a former governor of Georgia who is representing the plaintiffs.

Community Loans, which boasts more than 900 locations nationwide, argued in court that the transactions were not covered by the Military Lending Act because they weren't loans but sales. Here's how Community Loans said the transaction worked: The soldiers sold their vehicles to the company while retaining the option to buy back the cars — for a higher price. In early 2012, the judge rejected that argument. The case is ongoing.

Community Loans, which did not respond to numerous calls and emails, has been making loans to service members through businesses with various names.

Leading up to the gates of Fort Benning in Columbus, Ga., Victory Drive is crowded with lenders. Among them is Georgia Auto Pawn, a Community Loans of America storefront where one of the plaintiffs in the class action, an Army master sergeant, took out his loan.

Just another half-mile down the road is a lender advertising "Signature Loans for the Military." The lender goes by the name of Title Credit Finance, but the parent company is Community Finance and Loans, which shares the same corporate address as Community Loans of America.

A billboard for Title Credit Finance promises to rescue borrowers: Showing a picture of a hamster on a wheel, it says, "Avoid the title pawn treadmill," referring to customers who get caught paying only interest month after month.

Title Credit Finance offers installment loans, a product which, as the company advertises, does seem to provide "CASH NOW The Smart Way" — at least when compared to a title loan. Interest rates tend to be lower — though still typically well above 36 percent. And instead of simply paying interest month upon month, the borrower pays down the loan's principal over time.

But the product comes with traps of its own. Installment lenders often load the loans with insurance products that can double the cost, and the companies thrive by persuading borrowers to use the product like a credit card. Customers can refinance the loan after only a few payments and borrow a little more. But those extra dollars typically come at a far higher cost than the annual rate listed on the contract.

At TitleMax, a title-lender with more than 700 stores in 12 states, soldiers who inquire about a title loan are directed to InstaLoan, TitleMax's sister company, which provides installment loans, said Suzanne Donovan of the nonprofit Step Up Savannah. A $2,475 installment loan made to a soldier at Fort Stewart near Savannah, Ga., in 2011 and reviewed by ProPublica, for example, carried a 43 percent annual rate over 14 months — but that rate effectively soared to 80 percent when the insurance products were included. To get the loan, the soldier surrendered the title to his car. TMX Finance, the parent company of both TitleMax and InstaLoan, did not respond to multiple calls and emails seeking comment.

Another lender on Victory Drive is the publicly traded World Finance, one of the country's largest installment lenders, with a market capitalization of about $1 billion and more than 1,000 stores around the country. World was the subject of an investigation by ProPublica and Marketplace earlier this week. Of World's loans, about 5 percent, approximately 40,000 loans, are made to service members or their families, according to the company. Active-duty military personnel and their dependents comprise less than 1 percent of the U.S. population, according to the Defense Department.

Bill Himpler, the executive vice president of the American Financial Services Association, which represents installment lenders, said the industry's products had been rightfully excluded from the Military Lending Act. The Pentagon had done a good job preserving soldiers' access to affordable credit, he said, and only "tweaking the regulations here or there to tighten them up" was necessary.

The Commander and the Collectors

It's not known how many service members have high-priced loans. The Pentagon says it intends to conduct a survey on the matter soon and issue a report by the end of the year.

But some commanders, such as Capt. Brandon Archuleta, say that dealing with soldiers' financial problems is simply part of being an officer. Archuleta, who has commanded soldiers in Iraq and Afghanistan, recalled fielding numerous calls from lenders trying to track down soldiers who were delinquent on debts.

"In the last 12 years we've seen military officers as war fighters, we've seen them as diplomats, we've seen them as scholars," Archuleta said. "But what we don't see is the officer as social worker, financial adviser and personal caregiver."

While some soldiers seek help from their superior officers, many don't. That's because debt troubles can result in soldiers losing their security clearance.

"Instead of trying to negotiate this with their command structure, the service member will typically end up refinancing," said Michael Hayden, director of government relations for the Military Officers Association of America and a retired Air Force colonel. "It'll typically start out with some type of small crisis. And then the real crisis is just how you get that loan paid off."

Soldiers who hide their debt often forego the military's special aid options. Army Emergency Relief and the Navy-Marine Corps Relief Society offer zero-interest loans. But in seeking that help, a soldier risks alerting the commanding officer to his or her troubles, particularly if the sum needed is a large one.

Russell Putnam, a legal-assistance attorney at Fort Stewart, says he often finds himself making a simple argument to soldiers: "A zero percent loan sure as heck beats a 36 percent plus or a 25 percent plus loan."

From our partners at Marketplace:

IRS Office That Targeted Tea Party Also Disclosed Confidential Docs From Conservative Groups

May 13, 2013 - 6:40pm

May 20: Listen to ProPublica editor-in-chief Steve Engelberg talk to Kim Barker in a podcast about this story

May 17: This post has been updated.


The same IRS office that deliberately targeted conservative groups applying for tax-exempt status in the run-up to the 2012 election released nine pending confidential applications of conservative groups to ProPublica late last year.

The IRS did not respond to requests Monday following up about that release, and whether it had determined how the applications were sent to ProPublica.

In response to a request for the applications for 67 different nonprofits last November, the Cincinnati office of the IRS sent ProPublica applications or documentation for 31 groups. Nine of those applications had not yet been approved—meaning they were not supposed to be made public. (We made six of those public, after redacting their financial information, deeming that they were newsworthy.)

On Friday, Lois Lerner, the head of the division on tax-exempt organizations, apologized to Tea Party and other conservative groups because the IRS’ Cincinnati office had unfairly targeted them. Tea Party groups had complained in early 2012 that they were being sent overly intrusive questionnaires in response to their applications.

That scrutiny appears to have gone beyond Tea Party groups to applicants saying they wanted to educate the public to “make America a better place to live” or that criticized how the country was being run, according to a draft audit cited by many outlets. The full audit, by the Treasury Department’s inspector general for tax administration, will reportedly be released this week. (ProPublica was not contacted by the inspector general’s office.) (UPDATE May 14: The audit has been released.)  

Before the 2012 election, ProPublica devoted months to showing how dozens of social-welfare nonprofits had misled the IRS about their political activity on their applications and tax returns. Social-welfare nonprofits are allowed to spend money to influence elections, as long as their primary purpose is improving social welfare. Unlike super PACs and regular political action committees, they do not have to identify their donors.

In 2012, nonprofits that didn’t have to report their donors poured an unprecedented $322 million into the election. Much of that money — 84 percent — came from conservative groups. 

As part of its reporting, ProPublica regularly requested applications from the IRS’s Cincinnati office, which is responsible for reviewing applications from nonprofits.

Social welfare nonprofits are not required to apply to the IRS to operate. Many politically active new conservative groups apply anyway. Getting IRS approval can help with donations and help insulate groups from further scrutiny. Many politically active new liberal nonprofits have not applied.  

Applications become public only after the IRS approves a group’s tax-exempt status.

On Nov. 15, 2012, ProPublica requested the applications of 67 nonprofits, all of which had spent money on the 2012 elections. (Because no social welfare groups with Tea Party in their names spent money on the election, ProPublica did not at that point request their applications. We had requested the Tea Party applications earlier, after the groups first complained about being singled out by the IRS. In response, the IRS said it could find no record of the tax-exempt status of those groups — typically how it responds to requests for unapproved applications.)

Just 13 days after ProPublica sent in its request, the IRS responded with the documents on 31 social welfare groups.

One of the applications the IRS released to ProPublica was from Crossroads GPS, the largest social-welfare nonprofit involved in the 2012 election. The group, started in part by GOP consultant Karl Rove, promised the IRS that any effort to influence elections would be “limited.” The group spent more than $70 million from anonymous donors in 2012.

Applications were sent to ProPublica from five other social welfare groups that had told the IRS that they wouldn’t spend money to sway elections.  The other groups ended up spending more than $5 million related to the election, mainly to support Republican presidential candidate Mitt Romney. Much of that money was spent by the Arizona group Americans for Responsible Leadership. The remaining four groups that told the IRS they wouldn’t engage in political spending were Freedom Path, II, America Is Not Stupid and A Better America Now. 

The IRS also sent ProPublica the applications of three small conservative groups that told the agency that they would spend some money on politics: Citizen Awareness Project, the YG Network and (No unapproved applications from liberal groups were sent to ProPublica.)

The IRS cover letter sent with the documents was from the Cincinnati office, and signed by Cindy Thomas, listed as the manager for Exempt Organizations Determinations, whom a biography for a Cincinnati Bar Association meeting in January says has worked for the IRS for 35 years. (Thomas often signed the cover letters of responses to ProPublica requests.) The cover letter listed an IRS employee named Sophia Brown as the person to contact for more information about the records. We tried to contact both Thomas and Brown today but were unable to reach them.

After receiving the unapproved applications, ProPublica tried to determine why they had been sent. In emails, IRS spokespeople said ProPublica shouldn’t have received them.

“It has come to our attention that you are in receipt of application materials of organizations that have not been recognized by the IRS as tax-exempt,” wrote one spokeswoman, Michelle Eldridge. She cited a law saying that publishing unauthorized returns or return information was a felony punishable by a fine of up to $5,000 and imprisonment of up to five years, or both.

In response, ProPublica’s then-general manager and now president, Richard Tofel, said, "ProPublica believes that the information we are publishing is not barred by the statute cited by the IRS, and it is clear to us that there is a strong First Amendment interest in its publication.”

ProPublica also redacted parts of the application to omit financial information.

Jonathan Collegio, a spokesman for Crossroads GPS, declined to comment today on whether he thought the IRS’s release of the group’s application could have been linked to recent news that the Cincinnati office was targeting conservative groups.

Last December, Collegio wrote in an email: “As far as we know, the Crossroads application is still pending, in which case it seems that either you obtained whatever document you have illegally, or that it has been approved.”

This year, the IRS appears to have changed the office that responds to requests for nonprofits’ applications. Previously, the IRS asked journalists to fax requests to a number with a 513 area code — which includes Cincinnati. ProPublica sent a request by fax on Feb. 5 to the Ohio area code. On March 13, that request was answered by David Fish, a director of Exempt Organizations Guidance, in Washington, D.C. 

In early April, a ProPublica reporter’s request to the Ohio fax number bounced back. An IRS spokesman said at the time the number had changed “recently.” The new fax number begins with 202, the area code for Washington, D.C. 

For more on the IRS and nonprofits active in politics, read our story on how the IRS's nonprofit division got so dysfunctional, Kim Barker's investigation, "How nonprofits spend millions on elections and call it public welfare", our Q&A on dark money, and our full coverage of the issue.    

Update: Testifying before a House committee Friday, former acting IRS Commissioner Steven Miller said that the disclosure of unapproved applications of conservative nonprofits to ProPublica last year, as well as the separate disclosure of confidential documents of the National Organization for Marriage, was “inadvertent.” Miller also mentioned that there had been discipline in one of the cases because procedures had not been followed.

We followed up on the issue, and the IRS sent this statement:

“When these two issues were previously raised concerning the potential unauthorized disclosures of 501(c)(4) application information, we immediately referred these cases to TIGTA [Treasury Inspector General for Tax Administration] for a comprehensive review. In both instances, TIGTA found these instances to be inadvertent and unintentional disclosures by the employees involved.”

The IRS did not respond to questions on who had been disciplined and how. TIGTA did not respond to requests for comment. 

‘Act of Congress’ Stresses Hopeful Creation of Dodd-Frank, Omits Grim Ending

May 10, 2013 - 6:08pm

This was co-published with The Washington Post.

President Obama signed the Dodd-Frank financial reform law in July 2010, hailing it as an overhaul to prevent the kind of crisis that hit the world economy in 2008 and one of the signature achievements of his first term. Almost three years later, much of the big stuff the law calls for is on hold, under legal and legislative assault, or still working its way through the regulatory intestines. According to a law firm that tracks the legislation, only 38 percent of the 398 Dodd-Frank rules have been imposed, while regulators haven't yet publicly put forward versions of almost a third of them.

Is this the face of success? A new book, "Act of Congress," by Robert Kaiser, an associate editor and senior correspondent for The Washington Post, gives that question a qualified yes. "The story of Dodd-Frank does demonstrate that Congress still canwork," he writes, "and it shows how, but only in extreme circumstances."

To a Beltway expert such as Kaiser, that a dysfunctional and hyperpartisan Congress passed such a sweeping bill constitutes a small miracle. He concludes that "the big banks and Wall Street institutions never gave up trying to shape the bill to serve their interests, but that they had little success." As former Massachusetts Congressman Barney Frank, whose name is on the bill, says: "Money is influential [in Congress], but votes will kick money's ass any time they come up against each other. . . . Public opinion drove that bill." At another point, Frank declares, "The big banks got nothing."

Kaiser's account reminds you of those fairy tales that end with the wedding and don't follow up to see how the prince and princess's married life turns out. "Act of Congress" doesn't cover what happened after the law's enactment. In large part because of the ongoing, messy aftermath, many students of finance don't see Dodd-Frank as much of a triumph at all. In the wake of this generation's worst global financial and economic crisis, Congress passed the bare minimum of what was necessary. Dodd-Frank did not restructure the financial industry. It did not remake the financial regulatory architecture. Instead, the law tinkered around the edges, increasing regulation for this, expanding the power for that. Congress left much of the toil to financial regulators with limited resources. Troublingly, this has given the banks another opportunity, out of the public eye, to wrest exemptions that emasculate the rules.

Kaiser's book is roughly divided into two parts. The first covers how the House version of the law, shepherded by Frank, came to be; the second half covers the work of then-Sen. Christopher Dodd of Connecticut in his chamber. The legislation is both men's capstone achievement, and both left Congress after it was passed.

The author has delivered a blow-by-blow account of the tawdry compromises, Republican intractability and factional fighting within the Democratic Party that went into making the law. Congress comes across as the nation's grandfather: antiquated, inconsistent, as slow-moving as it is dull-witted. The book is in part an elegy for the Congress — particularly the Senate — of yore, the Senate of Dodd's father, Thomas J. Dodd.

Kaiser repeatedly characterizes today's Congress as "dysfunctional." But he doesn't demonstrate that so much as he shows Republican obstructionism. The Democrats — Frank, Dodd and their staffs — repeatedly seek compromise with the other party. Dodd gives significant ground without ever having a true negotiating partner. Instead, he has Sen.Richard Shelby of Alabama, the ranking Republican on the Senate Banking Committee. Kaiser gives us a damning portrait of Shelby's evolution from a reasonable, though conservative, voice for a certain level of banking regulation into a partisan hack and the cat's paw of his extreme staffers. Shelby repeatedly flirts with working on the bill and then capriciously withdraws, unfairly denounces Dodd for not working in bipartisan fashion and assails the bill with inaccurate attacks.

And when the bill emerges from committee, Sen. Mitch McConnell of Kentucky, the Republican leader, moves to filibuster it, giving up only when some Republicans defect.

This isn't dysfunction so much as a demonstration of the Republican leadership's lack of interest in doing anything about a reckless and out-of-control financial system that gave the country such a terrible global crisis. More broadly, Kaiser's account once again shows how unserious the modern Republican Party is about policy, how beholden to special interests it is and how determined to not give any victories to the Democrats and a president it views as illegitimate.

With its focus on Congress, Kaiser's account underplays the work of financial industry lobbyists and the White House. Kaiser does point out that the financial industry employed 2,700 lobbyists (including 1,447 former government employees) to work against reform in 2009 and 2010, spending more than $750 million. By contrast, groups advocating reform to the system spent a paltry $5 million. But the author doesn't show us much actual lobbying. And given the modesty of the eventual law and the myriad delays in implementation, Frank's crowing that the banks got nothing for all of this dough rings false.

Obama White House officials, especially then-Treasury Secretary Timothy Geithner, play only bit parts in Kaiser's book. The White House created the template for the House version of the bill, which was "generally cautious," he writes. But then throughout the many months of negotiations, White House officials made only rare appearances. When the law was finally enacted, Dodd was angry that the Obama administration took so much credit. But since Kaiser hasn't focused much attention on the White House's contribution, it's hard to evaluate who has the better claim. According to other reports, Geithner and his staff played a large role, often working to blunt more radical reforms. In one case, the Treasury secretary personally lobbied against the Brown-Kaufman amendment, a truly transformative and dramatic proposal that would have set high capital requirements on banks and put limits on their size.

Frank is the star of this book. The congressman lives up to his reputation as brilliant and witty. But he is also a flawed boss who leaves to his staff the difficult job of bringing less brilliant colleagues around to his way of thinking. Dodd isn't nearly as interesting a character. If Dodd has a core ideology or set of principles, Kaiser didn't find them. Instead, Dodd wants to get something, anything, done — and it's important for that something to be bipartisan.

Kaiser enjoys pointing out the intellectual limitations of our nation's politicians, and we enjoy reading about them. At one point, Rep. Jeb Hensarling, a Republican from Texas, attacks what he thinks is a taxpayer-funded bank bailout fund. He likens it to his college fund, which he and his wife have "because we intend to send our children to college." The author writes slyly, "This bit of rhetorical wizardry seemed to please Hensarling." Like many Republican charges about Dodd-Frank, Hensarling's comparison was erroneous. The banks, not taxpayers, were going to pay for the fund. But his objection also made no sense. The fund was more like insurance. Buying fire insurance doesn't mean you are counting on your house to burn down.

By contrast, Frank understood the complexities of financial regulation. But perhaps being smart in this context wasn't such a good thing. Smart legislative and regulatory solutions may embrace flexibility and exemptions that banks can later exploit. Regulations that create clear, bright lines may seem simplistic and dumb. But such rules tie regulators' hands, freeing them from banking influence.

Dodd-Frank may have been too smart for its own good.

Coming Soon: Prescriber Checkup

May 10, 2013 - 11:45am

Nonprofit Explorer

May 9, 2013 - 4:44pm

Use our database to find almost 616,000 tax-exempt organizations and see details like their executive compensation, revenue and expenses, as well as download their tax filings going back as far as 2001.

Dr. Radut