The Rundown Blog
UPDATE: Wall Street Bonus Tax Fails in Senate
The Wall Street bonus tax did not survive today in Congress. But its backers insist it may not be altogether dead.
Democratic Sens. Jim Webb of Virginia and Barbara Boxer of California had proposed a one-time 50 percent tax on bonuses of more than $400,000 awarded by the 13 firms receiving the most federal bailout money. Targeted firms included JPMorgan Chase & Co. and Goldman Sachs.
As we reported this morning, Webb and Boxer were pushing to have the tax attached to a roughly $150 billion bill that would extend unemployment benefits and tax credits. The bill cleared an important procedural vote today, but the bonus tax was left behind.
The bonus tax could still be introduced as an amendment to another bill, congressional sources say, including the Senate’s upcoming financial regulatory reform overhaul.
"We're not done trying to get a vote," Webb said on MSNBC this afternoon.
Hard Times Update: Readers Share Tales of Foreclosure Schemes, Mortgage Misfortune
Send Us Your Tips and 'Bandit Sign' Photos
Last month, we put out a call for stories and photos to help document the effect that "Hard Times Profiteers" are having on distressed borrowers and others suffering financial hardship because of the recession. The response was robust. We received more than 100 tips from borrowers, tenants, real estate brokers, investors and others who have experienced or observed misfortune amid the current housing crisis. We also collected dozens of photos documenting bandit signs from California to Maryland, a sampling of which are below.
That nearly half of the tips we received dealt with loan modification or foreclosure rescue schemes came as no surprise -- complaints about advance-fee loans and credit repair schemes ranked 9th among those compiled in 2009 by the Federal Trade Commission, and the agency noted a 12 percent spike in fraud-related cases last year.
We're in the midst of reporting out some of the most promising leads generated by our tipsters, but in the meantime, we've published several stories to our interactive map tracking "Signs of Deception." Among the themes that emerged:
Loan Modification, Foreclosure Schemes
In one case, a woman from Mesa, Ariz. , was persuaded by a direct-mail advertisement to pay a lawyer up front for loan modification assistance. "The fee was $3800 to submit a home modification loan package... He did (at least he said he did) and I never heard anything more until about six months later I received a letter saying he was out of the home modification business and that I had $137.50 coming to me over and above the expenses it took him to submit. I was declined."
A man in Bedford Hills, N.Y. , said he turned to a modification services company after having difficulty getting through to a nonprofit counseling service. "To get in contact with them over the phone was nearly impossible," he wrote. So he paid $1,500 paid up front to a modification company that never delivered. "I got nothing done, they refused to give me my money back."
Another reader in Petaluma, Calif. , took a chance on a company called 2nd Chance Mortgage, which charged $2,400 for its modification services. The man says he volunteered tax forms and hundreds of pages of documentation over eight months, but was denied. His lender says it never received paperwork from the modification service. "Losing $2400 is bad enough but not knowing where my personal information has gone is even worse," he wrote. The state of California shut down 2nd Chance last March, but our reader worried that the company is still operating under a different name.
Investor Schemes
Borrowers aren't the only ones getting trapped. The glut of distressed homes has also drawn the interest of small investors who are then targeted by shady real estate investment companies. One couple from Trabuco Canyon, Calif. , invested with a company that promised to manage their newly-acquired rental property. The couple is facing foreclosure after the company failed to rent the property or pay the mortgage. According to the couple, the company helped investors "purchase distressed homes from banks, rehab/upgrade them, and then sell them to other investors that want a rental property. My wife and I were the 'second' investor that wanted a rental property. [They] promised to act as property manager, find renters, and guaranteed to cover the mortgage for up to one year until it was rented. After two months we asked a friend to check out the house and learned then that it was vacant."
The Tenant Victim
As foreclosures soar, renters are also finding themselves increasingly at risk of losing their housing. Many are getting caught up inadvertently in foreclosure proceedings filed against large rental-unit developments and single-unit properties. But others seem to be deliberately targeted.
A woman in Hollywood, Fla., told of a friend who fell victim to a foreclosure scheme. The woman, who has a son with severe autism, reportedly paid three months' rent in advance and signed a lease on a property that had already been foreclosed upon. "Yes, the home from which friends just helped her move had also undergone complete foreclosure with no prior notice from her landlord of many years, all the while she was paying rent."
You can see these stories and bandit sign photos plotted on our interactive map at huffpostfund.org/profiteers. We've just created a new Hard Times Profiteers group on Flickr to make it easier for you to contribute photos, but you can still submit tips and photos at huffpostfund.org. Thanks to all who've contributed already!
Afghan Contractors and the 'Taliban Tax'
Delivering the goods in a war zone is risky business. In Afghanistan, it’s work bedeviled by bribes and kickbacks.
The British commander in the south of the country has just ordered a major investigation into how bribery has corrupted private contracting in Afghanistan, according to a report by The Independent newspaper in London. Major General Nick Carter wants construction and logistic contracts examined amid “mounting concerns” that bribery to ensure safe travel has created a “billion-dollar black hole for aid funds.”
The story quotes anonymous Afghans as saying that truckers must pay bribes of up to $1,500 to drive from Karachi to Camp Bastion, the main British military base in Afghanistan –- a fee that contractors call the “Taliban tax.” At least one source who knows the route told the Huffington Post Investigative Fund that bribes are routinely calculated into the cost of doing business: “Of course, they all pay. They all have to.”
Corruption in Afghanistan is rampant. The administration of President Hamid Karzai has been blamed for allowing, if not indirectly profiting from, the bribery. The presidents’ brothers and the son of Afghanistan’s defense minister have been accused of controlling private security firms that have been paying off the Taliban.
Help Us Investigate: Abuses in Student Debt Industry
We at the Investigative Fund are partnering with a team of graduate students at the Stabile Center for Investigative Journalism at Columbia University. The topic of their investigation is the student lending and debt collection industry, and they are asking for your help:
$527 billion.
That’s how much money Americans owe in student loan debt.
Last school year alone, U.S. students took out about $95 billion in loans.
And, according to the latest figures, college students are, on average, saddled with a record $23,200 in debt upon graduation.
As students and recent graduates confront the toughest job market in a generation, the squeeze to repay their school loans has incited countless conflicts with lenders and debt collectors.
The Stabile Center for Investigative Journalism, in partnership with the Huffington Post Investigative Fund, is examining the student loan crunch. In particular, we’re investigating abusive practices by debt collectors—and the federal government’s response to these problems.
We’re interested in hearing if you – or someone you know – have had problems dealing with your debt collector. We're also interested in your dealings with the government’s mediator, known as the Department of Education's Ombudsman office. Your stories and tips will help us investigate.
Some debt collection companies, according to lawsuits, have violated federal rules that prohibit contacting graduates through late-night phone calls and threatening letters. Students are also encountering problems with their lenders– such as lost payments, shifting interest rates, or disputes about the total amount owed.
When these problems occur, the government ombudsman is supposed to be a resource for independent, neutral mediation. Some of the most difficult complaints for the ombudsman to resolve come from former students trying to discharge their student loans due to disability, according to the Department of Education's 2009 Annual Report on federal student aid.
Have you had trouble discharging your debt due to disability? Have you had other issues with the ombudsman? Has your debt collector been harassing you? Tell us your story by completing the form below, or e-mail us at stabiletips@gmail.com. We look forward to hearing from you!
About the Investigative Fund-Stabile Partnership: The Stabiles are a team of student reporters at the Columbia Graduate School of Journalism working with the Huffington Post Investigative Fund to examine the student lending industry. Most recently, we reported how nonprofit lenders -- some of them with checkered histories -- lobbied to win special treatment in the student lending bill approved last September in the U.S. House.
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Sugar Tax Absent in Childhood Obesity Campaign
As First Lady Michelle Obama officially launched her campaign against childhood obesity today, a proposal pushed by some health groups was conspicuous by its absence – a federal tax on sugared drinks.
The silence on taxes has been sweet for the U.S. beverage lobby, which – as the Investigative Fund and Center for Public Integrity reported in November -- spent millions of dollars to ward off such talk. Some health advocates have long argued that taxing sugared beverages not only would cut calorie consumption by children but also would raise money for health care and education needs. The industry maintains that such a levy would hurt low-income people the most and would not improve public health.
A proposal for a national excise tax on soft drinks surfaced last year during early deliberations on health care reform. But it did not emerge in any health care legislation. (The plan is still dead, The Los Angeles Times reported this week.)
The beverage industry now aims to position itself as a partner in the administration’s efforts. It announced a voluntary initiative to better label products so that consumers know the full calorie count of every container of soda or juice. Vending machines will display calorie counts. So will fountain beverage machines.
“We always said a tax wouldn’t work. It wouldn’t address the problem of obesity,” said Kevin Keane, senior vice president for the American Beverage Association. Kean said the trade group had been discussing the complex factors contributing to childhood obesity since last year with the First Lady’s office.
Keane said the group also has worked in conjunction with the Alliance for a Healthier Generation, an initiative of the Clinton Foundation and the American Heart Association, to come up with guidelines for selling beverages in schools. He said the beverage companies support the idea of a federal law that would ban full-calorie soft drinks in school but allow lower-calorie and smaller portions of waters, sodas, teas, juices and sports drinks.
Those other beverages, of course, are a growing source of profit for the soft-drink companies – a trend likely to continue as families grow more conscious of the calories contained in what their children drink.
Victim of a Real Estate Scheme? Tell Us Your Story
It’s a no-brainer: As people lose their jobs and struggle to pay the mortgage, they are increasingly vulnerable to those looking to make a quick profit off their troubles.
The Huffington Post Investigative Fund would like to shine a light on real estate schemes going on around the country. How widespread are these activities? Who is behind them? And who is getting hurt?
We’re looking for your tips and stories to help us investigate.
Consumer groups, federal authorities and state officials say that some of the most common practices that prey on desperate homeowners include:
House Flipping -- An old real estate tactic that has been resurrected in the current financial crisis, with some tweaks. Typically, speculators push distressed homeowners into selling on the cheap and then immediately resell the house to someone who, quietly, has agreed to pay a higher price.
Loan Modifications – Many people have been lured into paying upfront fees to companies or agents who promise to negotiate with lenders for lower mortgage payments. The California State Bar says it is investigating more than 300 lawyers accused of making such promises without following up.
Foreclosure ‘Rescue’ -- Once families are past the point of modifying their loans, there are plenty of traps around the foreclosure process itself. Homeowners are sometimes tricked into forfeiting their home equity, unknowingly entering bankruptcy or paying thousands of dollars in fees without receiving anything in return.
Federal investigators say some versions of these practices operate within the confines of the law, some are in a legal gray area and others amount to clear-cut fraud. In January, the FBI was investigating nearly 3,000 mortgage fraud cases, up more than 300 percent from five years ago.
“The fraud schemes have adapted with the changing economy and now individuals are preyed upon even as they are about to lose their homes,” John S. Pistole, the deputy director of the FBI, told the House judiciary committee last year.
The Huffington Post Investigative Fund wants to take a broader look at real estate schemes around the country: Have you seen signs of profiteering where you live? Have you been caught up in a scheme? Do you know someone who has? Share your story below, and we may publish your response in our interactive map.
If you don't have a personal story but are still interested in participating, you can sign up with our citizen journalist assignment desk for updates on future projects.
Congressman to AIG: Show Us Your E-mail
You might imagine that by now the public would know every last cause and consequence of the government’s $180 billion bailout of insurance giant American International Group. The AIG deal has been the subject of dozens of public hearings (including a confrontational one this week), an inspector general’s report last fall and a recent congressional subpoena that produced some 250,000 documents.
But many people inside and outside the government believe the whole story has yet to be told.
Among them is Rep. Steve Israel (D-N.Y.), who this week introduced a bill that he said would “get to the bottom of the AIG collapse.” Israel’s Financial Crisis Public Disclosure Act would require the Treasury Department to obtain and publicly release all internal AIG e-mail related to the current financial crisis. Treasury would put the results online for citizens and journalists to examine.
“My bill will force AIG to publicly open company e-mails from top employees so we can find out what they were thinking as they made decisions that wrecked our economy,” Israel said in a statement.
The Investigative Fund previously reported on calls for AIG’s trustees to make public a decade’s worth of AIG’s e-mail and internal accounting documents. Experienced fraud investigators, including former New York Governor Eliot Spitzer and University of San Diego Law School professor Frank Partnoy, have made that request. So far the trustees – appointed by the Federal Reserve Bank of New York, which made the original decision to bail out AIG – are resisting the idea.
Most recent scrutiny of the bailout has centered on the Fed’s decision to use about $24 billion in government money to help AIG settle deals with big banks.
AIG had sold the banks insurance on risky mortgage investments. When the insured investments soured, AIG owed billions to Goldman Sachs, among others. Instead of honoring the insurance, AIG used taxpayer funds to buy the mortgage investments from the banks at 100 cents on the dollar, even though they were worth much less.
Rep. Darrell Issa of California, the ranking Republican on the Committee on House Oversight and Government Reform, recently released e-mails showing that the New York Fed kept details of these payouts secret while now-Treasury Secretary Timothy Geithner was in charge of the New York Fed. Rep. Ed Towns (D-N.Y.), chairman of the oversight committee, ultimately subpoenaed the New York Fed for all documents related to the payouts, including Geithner’s e-mail and phone logs.
The documents showed Geithner approved the full payouts, but did not suggest he was involved in concealing them. E-mails show that some Fed officials questioned the decision to pay the banks in full. One document also indicated that Goldman had approached AIG about tearing up the insurance contracts months before the government got involved.
Still, for all this congressional digging, much remains unknown about the causes of AIG’s collapse and we surely haven’t heard the last revelation.
Help Track Down Members of Congress Headed to the Super Bowl
In less than two weeks, the New Orleans Saints and the Indianapolis Colts will take to the field for Super Bowl 44. While football fans get ready for the big game, our friends at the nonprofit investigative reporting site ProPublica are looking ahead to another set of potential winners and losers: Congressional candidates gearing up for the November races. As ProPublica's Amanda Michel and Marcus Stern noted:
The Super Bowl is America's most expensive sports spectacle, and it has long been used to rub shoulders, gain influence and form ties that help congressional candidates raise the approximately $1 billion they spend on their campaigns every two years. While most of us can't afford a ticket to the Super Bowl, we know the NFL sets aside a large number of them for public officials and corporations to buy at face value (the cheapest tickets are going for as much as $1,799 on StubHub). Politicians use the tickets to reward big donors, and corporations use them to reward politicians.
The stakes are extraordinarily high this year. The resurgent Republican Party victory in Massachusetts last week raises the likelihood of yet another record-smashing year of campaign fundraising in advance of congressional elections this fall. Last week's Supreme Court ruling, which allows corporations and other groups to spend unlimited amounts of money on ads for or against sitting members of Congress, also will trigger a spending spree.
ProPublica is looking for readers who can help call all 535 members of Congress to find out: who attended the Super Bowl last year, and who plans to attend this year? If you're interested in finding out more about the wheeling and dealing that goes on behind closed skybox doors, consider helping out by following the instructions below. We'll collect your answers, and forward them on to ProPublica.
- Please call your own member of Congress first. You can find your congressional district with this handy tool. Contact information for all members can be found in the chart below.
- Make sure you get the name of the person you speak with (spelled correctly). The phone numbers we've listed are main-office numbers. The first person you'll get is most likely the office staff assistant, who handles incoming calls and routes requests. If the staff assistant doesn't know whether the boss attended last year's Super Bowl or plans to attend this one, ask to speak with the office scheduler.
- E-mail us at superbowlblitz@huffpostfund.org with the name of the person you spoke with, date and time, and what information you got. If someone promises to get back to you with an answer, let us know, so we can update our chart. You will be credited in the chart for helping us get this information.
Hat Tips: Contemplating Journalism Contests of the Future
As submission deadlines loom for most of the major journalism awards, we're assessing which of our hats we'd like toss into the various rings. Although we've only been fully operational for about four months now, we feel as if we have much to be proud of.
That's why it was particularly pleasing to see our senior reporter, David Heath, get a nod two weeks ago by Investigative Reporters and Editors for his work on subprime lending fraud, and then get another two days ago by Pulitzer Prize historian Roy Harris.
And while all of us here at the Investigative Fund would be thrilled if we capture a few awards, we're just as interested in capturing the attention of new audiences for investigative journalism. To do so, we have to build upon the tradition of investigative reporting with the newest bricks in online media: citizen journalism, distributed research, multimedia and Twitter are just a few that we're already using. But we have much more innovating to do.
One thing is certain: Five years from now, awards judges will be looking at very different submissions than they are today. No doubt, the heart of investigative reporting will remain, thanks to the perseverance of newspapers and nonprofits. But the heightened role of multimedia and interactivity, propelled by informed citizens, will reshape these stories in ways that we have yet to realize.
Our Joint Project on the Student Lending Industry
In collaboration with Columbia University’s Stabile Center for Investigative Journalism, we published two articles today about the nonprofit student lending industry.
Students from the Stabile Center, part of Columbia’s Graduate School of Journalism in New York, investigated and wrote the stories. We at the Investigative Fund oversaw the reporting process and edited the work.
The pieces are the first to result from an ongoing project with the Stabile program that will focus on the relationships between financial companies and universities.
One of today’s stories explores how nonprofit lenders in more than a dozen states ran afoul of state and federal rules in recent years. The other story details how nonprofit lenders persuaded the U.S. House to award them the equivalent of no-bid contracts potentially worth millions of dollars each.
Let us know what you think of today’s stories and stay tuned for more.
Do you have information about risky or deceptive lending practices? What should we know about the relationship, or any dealings, between banks, other financial companies and your school? We want to hear from you.
