I was attorney for the “Q”
And the Indemnity Company which insured
The owners of the mine.
I pulled the wires with judge and jury,
And the upper courts, to beat the claims
Of the crippled, the widow and orphan,
And made a fortune thereat.
The bar association sang my praises
In a high-flown resolution.
And the floral tributes were many –
But the rats devoured my heart
And a snake made a nest in my skull.
– Edgar Lee Masters, 1915
August 27, 2002
AND PUBLIC SAFETY
By Ken Paulson, Gannett News Service
The writer is executive director of the First Amendment Center with
offices in Arlington, Va. and Nashville, Tenn.
I must have missed a course in law school.
At the University of Illinois College of Law, I studied contracts,
constitutional law and property transactions. But I must have overlooked
“Secret Settlements 101.”
Some law schools must be teaching it. Lawyers nationwide have grown
accustomed to settling lawsuits with the understanding that there’ll be no
public disclosure of the outcome.
It’s easy to understand the appeal of secret settlements to defendants and
plaintiffs, particularly in personal injury cases. A bicycle manufacturer who
constructs faulty bikes doesn’t want the world to know about his defective
products. He also doesn’t want negative publicity that could affect sales of
his other bikes. Plaintiffs can get a larger settlement by promising not to
disclose the large sum they’ve been paid. A judge – eager to clear the
docket – blesses the agreement. In this scenario, the plaintiff is
compensated, the defendant is spared embarrassment or scorn and the
public is left in the dark.
There’s a long and ugly history of secret settlements in which disclosure
would have alerted the public to serious, ongoing dangers:
>> Eleven former employees of the John-Manville Co. filed suit in 1933
claiming that their work had caused asbestosis. The company agreed to pay
off the claims, but the secret settlement would not be disclosed for more
than 40 years, according to the Coalition for Consumer Rights.
“One can only guess what would have happened if the original 1933
settlement had been made public,” the coalition noted in a report.
“If the hazards of asbestos had been known during the Great
Depression, a generation of workers could have been spared horrible
>> Also kept from the public for years were settlements in lawsuits that
alleged that Ford pickup trucks were defective, slipping from park to
The defect allegedly caused more than 200 deaths and 4,600 injuries.
>> Over 10 years, about 100 lawsuits were filed alleging that Firestone
manufactured unsafe tires for the Ford Exployer. The National Highway
Traffic Safety Administration says 148 deaths and more than 500 injuries
may have been caused by these tire tread separations.
Secret settlements hid the potentially lethal problem from the public for
>> Amid the recent wave of sexual abuse allegations against priests, it also
has been revealed this year that the Catholic Church insisted on secret
settlements is cases stretching back to 1985. . . .
These abuses have not gone unnoticed. Some have taken significant steps
toward reform, most recently in South Carolina where all 10 federal judges
voted for a total ban on sealed, court-approved settlements. Echoing the
federal judges’ concerns, South Carolina Supreme Court Chief Justice Jean
Toal is now asking state judges to take a close look at secret settlements.
The Association of Trial Lawyers of America aggressively has promoted
legislation that would limit secret settlements. Opponents of these bills
argue for the need to protect trade secrets and patient privacy, but judges
have the tools to address these issues without sealing the entire record.
Arkansas, Florida, Louisiana, Washington and Virginia are among states
that currently limit secret settlements when there are public safety
This kind of reform is long overdue. It’s unconscionable to take a lawsuit –
filed in public courts, processed by public employees and heard by judges on
the public payroll – and seal it for the convenience of the litigants.
Public safety is never a private matter.
* * *
August 27, 2002
Ford Wins Dismissal of
By Danny Hakim, The New York Times
DETROIT – A sexual-harassment lawsuit against Ford Motor Co.was
dismissed because the plaintiff and her attorneys had discussed with
reporters evidence that the Michigan court deemed inadmissible. Much of
the information was a matter of public record.
The suit was dismissed last week byCircuit Court Judge William J.
Glovan, who ruled the plaintiff, Justine Maldonado, and her attorney had
disseminated information about a defendant’s previous conviction in an
attempt to prejudice potential jurors, and in violation of a Michigan law.
“The behavior in question has been intentional, premeditated and
intransigent.” the judge wrote in his dismissal. “It was designed to reach the
farthest boundaries of the public consciousness.”
Some legal experts said the finding was highly unusual, particularly in its
implications for the right of a plaintiff in a harassment case to speak freely.
Courts typically use the screening process during jury selection to resolve
concerns about what jurors know.
“I don’t know why it should be that the woman who was the alleged victim of
the sex harassment can’t continue to talk about in,” said Herschel Fink, a
lawyer who specializes in First Amendment issues. “I believe as a matter of
First Amendment law, she has a right to talk about it.”
Miranda Massie, Maldonado’s lawyer, said: “Women have the right to talk
about abuse. That’s what this comes down to.”
The harassment case was filed two years ago by Maldonado, an inspector at
the Wixom, Mich., assembly plant, against Ford and a supervisor, Daniel P.
Bennett. Maldonado is one of four women who have sued Ford related to
accusations against Bennett. Three of the suits have been dismissed, though
Maldonado said she plans to appeal and another plaintiff already has.
Maldonado contended in her suit that Bennett exposed himself to
her many time, demanded oral sex and followed her home.
Fordexecutives said their investigation of the case concluded that
Maldonado’s accusations, and those of the three other women, were without
Part of the company’s legal strategy has been to seek a dismissal of
Maldonado’s case on the grounds that she and her lawyer prejudiced
potential jurors by talking about Dennett’s conviction in 1995 on charges of
exposing himself to three young women.The conviction wasexpunged
from his record last year, as is permissible under Michigan law for
meeting various good behavior requirements….
~ o ~
NOW, FOR YOU YOUNG BIRD-WATCHERS WHO STILL THINK THAT
ENRON, GLOBAL CROSSING, WORLDCOM, IMCLONE, AND OTHER
CORPORATIONS THAT ARE CURRENTLY FEELING THE HEAT OF
CORPORATE HELL, ARE A NEW PHENOMENA . . .
Ben Barnes, former Texas Lt. Governor; business associate of Herman K
Beebe, Walter Mischer and John Connally.
Herman K. Beebe Sr., Louisiana financier with offices in Dallas, convicted
felon and Mafia associate; many connections to the intelligence community;
godfather of the dirty Texas S&L’s; did nine months in Club Fed.
Charles Hurwitz introduced Beebe to B G Wylie, half-brother of Carroll
Kelly; funded start-up of Contra-related Palmer NB.
Tom Benson, a partner of Stanley Rosenberg in Groos Bank (influenced by H
K Beebe) and Bank of Leon Springs; a Beebe associate; partner with Peyton
McKnight and Charles Hurwitz(?) in Culebra/1676, a Rosenberg boondoggle.
John Connally, former Texas governor; Connally’s law firm, Vinson-Elkins
had Walter Mischer as a client; Charles Keating worked on his 1980
Republican presidential race; he and his partner Ben Barnes, borrowed tens
of millions of dollars from dirty S&L’s; served on Hurwitz’s Maxxam Inc’s
board of directors from 1988 until his death in 1993. Participated in several
CIA related covert actions.
Thomas Gaubert, big Democratic fundraiser from Dallas; former head of
Independent American Savings, which purchased 20 branch offices from
Hurwitz’ USAT; owned a piece of Sandia Federal Savings in Albuquerque;
head of Telecom; A right-wing flag waver.
Joseph Grosz, Chicago mob associate; worked for Gouletas family; ran
Southmark’s San Jacinto Savings; director of Gaubert’s Telecom.
Stefan Halper, co-founder with fellow George Bush supporter Harvey
McLean of Palmer National Bank, which was financed by H K Beebe and
funneled private donations to the Contras; former son-in-law of past CIA
deputy director Ray Cline; helped set up legal defense fund for Oliver
Peter Munk also an investor in Palmer NB.
J B Haralson, former head of Mercury Savings and Ben Milan Savings,
where he was fronting for his old associate George Aubin; old Surety Savings
hand, which Hurwitz attempted buy in 1977; managing officer of two other
Texas S&L’s which that failed; partner of B G Wylie et al in the purchase of
Brazaport S&L from Lloyd Bentsen.
Charles Hurwitz, controlled now defunct USAT, majority stockholder of
Maxxam Inc; longtime friend of most Houston elite including John Connally;
a Milken Insider; often accused of fraud and other security related
schemes; knew H K Beebe.
Charles Keating, S&L looter; spawned by Carl Lindner; worked on John
Connally’s 1980 presidential campaign as Westcoast fundraiser; controlled
Lincoln Savings and Loan (the first big deal Lincoln did was with Connally);
Lincoln involved in a daisy chain with Larry Mizel’sMDC Holdings, Silverado
and San Jacinto; his chief pilot in 1979 was CIA operative Ken Qualls.
Carroll Kelly, who epitomized his Kappa Sigma fraternity; owner of
Continental Savings and associate of H K Beebe (I’m Beebe’s man in Texas,”
he bragged to S&L regulators.)
Ed McBirney, “Fast Eddie” from Dallas; former head of Sunbelt Savings;
associate of H K Beebe, Jarrett Woods and George Aubin; attempted to
buy branch offices from Hurwitz’ USAT; funded Hurwitz associates
Peyton McKnight, powerful Louisianan, an associate of Beebe and a partner
with Charles Hurwitz, Stanley Rosenberg and Tom Benson in a Rosenberg
Harvey McLean, Shreveport, Louisiana businessman and close associate of H
K Beebe; owned Paris (Texas) Savings and Loan; co-founded Palmer
National Bank with Stephan Halper and Beebe’s money.
Peter Munk, a Canadian businessman, investor in Palmer NB; an associate of
H K Beebe; business partner with Adnan Khashoggi; an associate of John H
Roberts Jr and John P Holmes Jr in Goldome FSB.
Clint Murchison Sr. and Jr., Dallas oilmen and wheeler dealers; Sr was
involved in business in Haiti with a CIA operative; Jr purchased Mischer’s
interest in sawmills in Honduras; Jr was involved with a CIA operative in
Libya and did business with H K Beebe and Adnan Khashoggi.
David Saks, business associate of Stanley Rosenberg; partner of Doyle
Spruil, both convicted felons; borrowed from Beebe controlled S&L’s.
Doyle Spruil, business partner of David Saks and Stanley Rosenberg; a
convicted felon; borrowed from Beebe controlled S&L’s Beebe connections
to Barnes-Connally, to Hurwitz, to S&L’s, to Mafia CONNALLY-KEATING-LINDNER- BARNES-BEEBE. (Source: References are in “Inside Job”)
~ ~ ~
Beebe connections to Barnes-Connally,
to Hurwitz, to S&L’s, to Mafia
(Source: References are in “Inside Job”)
Beebe starts American Motels, Inc. (AMI); invests in Holiday Inns.
Beebe & Barnes develop complex business association.
Beebe controls Bossier Bank & Trust, Bossier City, CA.
Barnes invests in Holiday Inns.
Barnes, then Lt. Gov. of TX, involved in Bank & stock fraud scandal. In ’71 a
grp of TX banks looted a network of businessmen who bought & sold stock in
a business owned by Frank Sharp.
Connally bribe to cover indictment led to indictment of Connally; acquitted.
Jul. – Beebe & Barnes from banking and insurance assoc. by 1976 B/B control
19 banks & S&L’s in TX & CA
Prior to Charles Keating a ExecVP & Director of Carl
Lindner’sAmerican Financial Corp. (AFC); also a founding partner in AFC’s
law firm Keating, Muething & Klekamp.
Lee H. Henkel, a Republican, was Treasury Dept. & IRS Counsel in the
Nixon Administration. Later a tax attorney and real estate developer in
Jul. 02 – SEC v. Keating, Muething & Klekamp a judgment against Lindner,
Keating & Klekamp enjoins self-dealing in an Ohio bank subsidiary.
Keating buys Continental Homes of Phoenix, Inc. from Lindner & renames it
American Continental Corp. (ACC)
Henkel & Keating are Connally for Presidents’ East & West Coast financial
chairs. Henkel is Keating’s attorney.
Oct. – ACC buys Lincoln Savings with DBL issued junk bonds
Lincoln makes $70mm loan to Connally on a land deal near Austin, TX and
$134mm loan to Henkel; Connally defaulted leaving Lincoln (and not the
taxpayers) holding a $70mm loss (Nation 11/19/90)
Herman Beebe associate Ben Barnes in partnership with Connally borrows
from 17 S&L’s in 3 states ($40mm from Vernon S&L and some unknown
amount from Credit Banc (where Barnes’ son worked)
ACC employed Mark Connally son of John Connally
Aug. – Press reports Beebe & Marcelolo control Continental S&L (Houston).
Fails in 1988.
Feb. 13 – WSJ reports Lincoln S&L made at least $61.9 million in loans to
corporations & partnerships in which Lee Henkel had an interest
In mid-August 1987 the records of Southmark, San Jacinto SA, Strauss,
Barnes, Connally and about 200 others were seized according to the Dallas
Times Herald. Southmark had done about $90 million in business with Beebe
who held 62% of its Series E Pfd according to Southmarks 10K85.
Southmark bought Beebe’s nursing homes and also owned 37% of Pratt
Hotels. Beebe did business with Morris Shenker and also was related to
many Contra figures. Southmark also purchased the Beebe built AMI tower
in or before 1988. AMI had 17 subs and 14 affiliates.
SEC v. MDC Holdings, MDC (has close ties with Silverado), is caught in
shady deal with Lincoln S&L.
Neal Bush is loaned $550m for a house
Connally elected to Maxxam BOD. . . .
The above two articles were located by a Google search forLee H. Henkel,
Pluck, leaks helped McCain
to overcome S&L scandal
By Walter V. Robinson, Globe Staff
A decade ago, Senator John McCain’s role in the most politically corrosive
episode of the $150 billion savings and loan debacle threatened to end a
political career that now holds some promise of concluding instead with a
Back then, McCain said the Keating Five scandal was a more nightmarish
experience than his years in a North Vietnamese prison camp.
What a difference a decade makes: One mischievous commentator
recently suggested that the Keating Five was a rock group. And nowadays,
McCain dismisses the tawdry Senate scandal as a mere asterisk in his career,
in hopes the electorate will too. . . .
He was a close friend and early congressional ally of Charles H. Keating Jr.
– the figure at the core of scandal – andd one of the leading beneficiaries of
Keating’s political and personal largesse. Yet, hebenefited from decisions by
the Senate Ethics Committee that minimized his culpability and the resulting
And there is evidence that McCain averted major damage to his public image
with well-choreographed news leaks from his office that undermined three
of the four other senators caught up in the controversy. In 1992, McCain
denied under oath that he or his aides had anything to do with the leaks.
The scandal’s raw content is unflattering: McCain and four other senators –
indelibly known ever since as the Keating Five – pressuring federal
regulators on behalf of Keating, a prodigious fund-raiser and owner of the
Lincoln Savings & Loan Association. His bank’s subsequent $3.4 billion
failure made Keating the most enduring symbol of the devil-may-care S&L
excesses of the 1980s.
To be sure, the record shows that McCain did less for Keating than most of
the others, and abandoned Keating the moment he learned there might be
criminal charges against his friend. The Senate Ethics Committee gave
McCain, along with Senator John Glenn, the lightest of reprimands, saying
they displayed ”poor judgment” for going to two meetings with banking
regulators. . . .
But in an interview this month, Clark B. Hall, a former FBI agent and
congressional investigator who led the GAO investigation, told the Globe he
had no doubt, after doing scores of interviews and obtaining documentary
evidence, that McCain was one of the principal leakers. But Hall said the
Ethics Committee ”smoothed it over.”
”You don’t betray other people to protect yourself, and that’s what he was
doing,” Hall said. ”And he was breaking Senate rules to do it.” The targets
of the leaks were Democrats Dennis DeConcini of Arizona, Alan Cranston of
California, and Donald Riegle of Michigan. (In the end, DeConcini and Riegle
would be sharply criticized by the committee; Cranston drew a formal
reprimand.) . . .
A pugnacious strategy
From the beginning, Keating also adopted a pugnacious strategy in his
attempts to outfox, intimidate, and even seize control of the federal
regulatory apparatus that sniffed big trouble in the way his Lincoln Savings &
Loan Association was lending depositors’ money for risky ventures. Many of
the loans were for real estate developments by Keating’s Phoenix-based
American Continental Corp., which purchased the California-based Lincoln
S&L in 1984.
As federal banking regulators closed in, Keating deployed powerful allies
against them. He raised enormous sums for members of Congress – $1.3
million for the five senators alone, $112,000 of that for McCain’s campaigns.
He and his lobbyists prevailed on McCain and others to write letters and
support congressional resolutions condemning Federal Home Loan Bank Board
regulations that would restrict risky direct investments like those Lincoln’s
deposits were used for.
In 1989, Keating himself left no doubt that the campaign funds he lavished
on the five senators were designed to produce results, when he declared to
reporters: ”One question, among the many others raised in recent weeks,
had to do with whether my financial support in any way influenced several
political figures to take up my cause. I want to say in the most forceful way I
can: I certainly hope so.”
Months before he pushed the five senators to meet with regulators, Keating
even sought to seize control of the bank board by asking his congressional
allies to support two of his choices for the three-member board that was
overseeing the investigation of Lincoln. One of the two, Lee H. Henkel Jr.,
was appointed to the board in November 1986.
During the Ethics Committee investigation, one of the leaked stories that
benefited McCain reported that DeConcini and Riegle, at Keating’s behest,
had lobbied the White House for Henkel’s appointment. But in a little
noticed finding in its final report, the committee reported that McCain had,
Alone among the five senators, McCain counted Keating as a personal friend;
their families vacationed together from 1983 to 1986 – the four years
McCain served in the House – flying to Keating’s private retreat in the
Bahamas aboard corporate aircraft paid for by Keating’s company.
In 1986, McCain’s wife, Cindy, and her father, James W. Hensley, also
invested $359,100 in a Phoenix shopping mall developed by a subsidiary of
Keating’s American Continental Corp.
When the scandal became public, and along with it his family’s personal and
business links to Keating, McCain reimbursed Keating $13,433 for the flights
and vacations. By not reporting them and reimbursing Keating at the time
they occurred, McCain had violated House ethics rules. (He was elected to
the Senate in 1986.)
But the Senate Ethics Committee decided that the vacation subsidies were
House matters – outside its jurisdiction. The committee did not consider the
mall investment germane. Nor was it troubled by McCain’s lobbying for
With public hearings looming, the bipartisan panel – three members from
each party – split over whether to follow the urging of its counsel, Robert M.
Bennett, that the case against McCain and Glenn be dropped. The committee
Democrats resisted, and McCain has long insisted they did so because he was
the sole Republican among the five and they feared that a pared-down
”Keating Three” would be recast as a Democratic scandal.
Most important, the committee concluded it was not improper for five
senators to seek two separate meetings with regulators, even though Keating
orchestrated the April 1987 meetings. The first meeting was with bank
board chairman Edwin J. Gray, at a time when Gray was seeking Senate
approval for a $15 billion bailout bill to rescue hundreds of failing thrifts.
Gray was summoned to a meeting in DeConcini’s office and told to come
alone. The second meeting, a week later, was with regulators who were
directly overseeing the investigation.
Fred Wertheimer, then president of Common Cause, which filed the official
complaint that prompted the Ethics investigation, said the committee’s
decision on the propriety of the meetings was unfortunate.
”The meetings themselves were wrong and should not have occurred. The
five senators involved put undue and inappropriate pressure on regulators,”
Wertheimer said. The meetings, Common Cause argued in 1990, were
”seemingly designed to put the maximum senatorial pressure on the board to
accede to Keating’s wishes.”
McCain’s own role remains a puzzle. Before the meetings, he had a falling out
with Keating when he learned that Keating wanted the senators to negotiate
on his behalf. McCain, new to the Senate and concerned about recent
publicity over Keating’s fund-raising for him, said he would attend the
meetings only to assure himself that regulators were treating Keating fairly.
But at both meetings, first with Gray and then with thrift regulators flown in
from San Francisco, McCain looked on as DeConcini pushed the regulators to
give Lincoln a dispensation on a board regulation that barred further risky
investments – a ban that Lincoln had already exceeded by $600 million.
Two years later, Gray told a House committee that the meetings were an
attempt to ”subvert” the regulatory process.
William Black, one of the regulators who attended the second meeting, said
in an interview that Keating clearly intended to intimidate the bank board by
assembling ”one-twentieth of the US Senate, to include two bona fide
American heroes, a Democratic leader [Cranston] and the man who was
about to become chairman of the Banking Committee [Riegle].”
McCain, despite his later insistence that he had refused to negotiate on
Keating’s behalf, did not raise objections to DeConcini’s advocacy for
Keating, according to Black.
But Dowd, McCain’s attorney, said McCain ”did nothing improper, and he
didn’t know that…DeConcini was going to misbehave.”…
* * *
BILLIONS WON BY INVESTORS
The Arizona Republic
Damages and out of court settlements won by investors in Charles H.
Keating Jr.’sAmerican Continental Corp. who filed a $1.2 billion fraud and
racketeering lawsuit in U.S. District Court in Tucson:
DAMAGES AWARDED BY JURY:
Defendants will share in a judgement of $1.8 billion in compensatory
damages returned by a jury Friday against:
Charles Keating, former chairman of American Continental, who also owes
$1.5 billion in punitive damages.
Editor’s note: Now that really sounds wonderful but what does it mean?
Since Keating says he is broke that $1.5 billion just disappears form the
equation. Now there is just chicken feed left for the investors. This
headline is a lie. Notice (buried at the very end of the article!) the
amount Michael Milken had to pay and remember he was making $550
million per year when he was stopped. That is what it means to have
attorneys like the Dershewitz brothers, Melvin McDonnald, and John
Dowd. I can think of about 200 million people who would think serving a
few years in the pen and keeping all that loot was a pretty good deal!!
Saudi European Investment Corp. of Paris, was a financial partner.
Conley Wolfswinkel of Tempe, was a borrower from Lincoln Savings and Loan
Association, an American Continental subsidiary.
Continental Southern Inc., Atlanta, was a Lincoln borrower.
Former executives of American Continental and Lincoln Savings, $4.75
Law firms and individual lawyers
Jones, Day, Revis & Pogue, Cleveland: helped Lincoln prepare for a 1986
federal examination, $24 million.
Kaye, Scholer, Fierman, Hays & Handler, New York: represented Lincoln in
its disputes with federal regulators, $20 million.
Parker, Miliken, Clark, O’Hara & Samuelian, Los Angeles: worked with
American Continental’s Lincoln subsidiary in connection with investigations by
California regulators, $5.65 million
Sidley & Austin, Chicago: represented Lincoln in dealings with federal
regulators, $4 million.
Mariscal, Weeks McIntyre & Freidlander, Phoenix: represented Lincoln in
dealings with federal regulators, particularly in disputes over appraisals of
properties, including the Phoenician Resort, $2 million.
Barbara Thomas, New York, $90,000.
Arthur Young & Co. (succeeded by Ernst& Young); audited Lincoln and
Continental’s financial statements for 1986 and 1987, $63 million.
Arthur Anderson & Co.: audited Lincoln and American Continental’s
financial statements for 1984 and 1985, $22.8 million.
Touche, Ross & Co.: audited Lincoln and American Continental from
November 1988 until April 1989, $7.5 million, plus $1million in services for
accounting and distribution of payments to investors.
MDC Holdings, Denver, $1 Million
Isaac Heimbinder, US Homes president, Houston, $1 million.
Lexecon Inc., Chicago Financial Consultant, $1 million in services for
Jeffery C. Patch, PHX, appraiser, $500, 000
Richard Fenn, former vice chairman of Saudi European Investment Corp. a
financial partner, $16,000
Drexel Burnham Lambert Inc. Investment bankers, $40 to $50 million
Michael Milken, former head of junk bond sales for Drexel,$35 million to
Emerald Homes, PHX, Lincoln borrower, $200, 000
* * *
From: Where does Kaye Scholer Leave Us?
“Ethical Responsibilities in Regulatory Practice: Where
does Kaye Scholer Leave Us?”
By Professor Dorothy J. Glancy
ASHVILLE, N.C., September 30, 1993
“Kaye Scholer” has come to stand for a variety of administrative and civil
actions brought against attorneys by banking regulators in connection with
the failure of Lincoln Savings & Loan and other financial entities controlled
by Charles H. Keating, Jr.
Most of the legal actions against Lincoln Savings lawyers have now been
settled. But the settlements seem to have left the legal profession,
especially lawyers engaged in practice involving regulatory agencies, with a
great many more questions regarding ethical responsibilities than answers….
Settlements in the Banking Cases
Over the past several years, three federal regulatory agencies which
regulate financial institutions, including the Office of Thrift Supervision
(OTS), the Resolution Trust Corporation (RTC) and the Federal Deposit
Insurance Corporation (FDIC), have brought roughly 100 claims against
lawyers for several hundred failed banks and over 700 savings and loans. The
failure of Lincoln Savings & Loan was the most prominent source of claims
against professional service providers.
Accounting firms, as well as law firms and lawyers who had worked for
Lincoln Savings were charged with professional misconduct which allegedly
resulted in losses of more than $2 billion to the taxpayers and more than
$250 million to the bondholders of Lincoln Savings’ parent corporation,
American Continental Corporation.
Banking regulators and American Continental bondholders brought monetary
claims against at least eleven professionals who served Lincoln Savings. Eight
of the eleven were law firms and lawyers.
Over the past two years, settlements of these professional liability claims
related to Lincoln Savings have amounted to more than a third of a billion
dollars – at least $337.65 million, to be more precise. Of these settlements,
legal professionals paid approximately 53%, amounting to at least $180.15
Additional costs resulting from these and other settlements by former
lawyers for Lincoln Savings and other failed thrifts will affect most of the
legal profession through increased malpractice insurance premiums.
Natural resources, energy and environmental lawyers are among those with
an interest in the professional responsibility aspects of these cases involving
lawyers for financial institutions….
~ ~ ~
Money is surely not the measure of the ethical responsibilities of lawyers.
Large dollar figures certainly should not be allowed to obscure the real
issues of professional responsibility which lie behind these figures. However,
regulators believe that large monetary settlements direct attention to
important issues regarding the ethical responsibilities of lawyers,
particularly those engaged in regulatory practice….
Professional Principles Asserted by Regulators of Financial Institutions
In presiding over early litigation involving Lincoln Savings, Federal District
Judge Stanley Sporkin denounced professional ethics failures on the part of
both accountantsand lawyers for Lincoln Savings in a series of haunting
Where were these professionals … when these clearly improper
transactions were being consummated?
Why didn’t any of them speak up or disassociate themselves from these
Where also were the outside … attorneys when these transactions were
What is difficult to understand is that with all the professional talent
involved (both accounting and legal), why at least one professional would not
have blown the whistle to stop the overreaching that took place in this case.
Here it is clear that the private sector was not willing to cooperate with the
public oversight regulators. Indeed, the private sector at times impeded the
regulatory authorities from discharging their duties….
Perhaps the most expansive expression of the professional ethics theories
which banking regulators enforced against the Lincoln Savings lawyers has
been offered by former OTS General Counsel Weinstein. In a 1992 speech,
he suggested six professional principles:
The first is that a lawyer must be sensitive to the role he or she
chooses to play, for the rules and principles that govern an advocate in
the courtroom do not apply to the lawyer as advisor or to the lawyer in
the bank examination process.
The second is the need to practice the whole law. So-called “loophole
lawyering” must be illuminated by the whole body of law that pertains to
The third is that a lawyer is at all times governed by a duty to deal
honestly with the facts and to comply with the disclosure and other
regulations that govern submissions to the regulatory agency.
The fourth is that a lawyer advising a fiduciary must not forget that the
fiduciary’s conduct must be in the best interests of the institutional
The fifth is that a lawyer must report unlawful client activity up the
corporate chain of command, going as far as the corporate board of
The sixth is that a lawyer may not knowingly further a client’s unlawful
More recently, Mr. Weinstein suggested that four professional principles
should guide the professional conduct of lawyers for financial institutions:
 That a lawyer should, if necessary, go up the corporate chain of
command to seek to induce a corporate client to abandon an illegal course
 That a lawyer may not assist a client in implementing an illegal plan.
 That a lawyer must give serious consideration to resignation if the
client persists in going forward illegally.
 And that a lawyer may not tell misleading partial truths in
circumstances where the law would make such action by the client
actionable. . . .
A lawyer shall not counsel a client to engage, or assist a client, in conduct
that the lawyer knows is criminal or fraudulent, but a lawyer may discuss the
legal consequences of any proposed course of conduct with a client and may
counsel or assist a client to make a good faith effort to determine the
validity, scope, meaning or application of the law.
Model Rule 1.6 provides with regard to Confidentiality of Information:
(a) A lawyer shall not reveal information relating to representation of a
client unless the client consents after consultation, except for disclosures
that are impliedly authorized in order to carry out the representation,
and except as stated in paragraph (b).
(b) A lawyer may reveal such information to the extent the lawyer
reasonably believes necessary:
(1) to prevent the client from committing a criminal act that the lawyer
believes is likely to result in imminent death or substantial bodily harm;
(2) to establish a claim or defense on behalf of the lawyer in a
controversy between the lawyer and the client, to establish a defense to
a criminal charge or civil claim against the lawyer based upon conduct in
which the client was involved, or to respond to allegations in any
proceeding concerning the lawyer’s representation of the client.
Portions of Model Rule 1.13 provide with regard to the Organization as
(a) A lawyer employed or retained by an organization represents the
organization acting through its duly authorized constituents.
(b) If a lawyer for an organization knows that an officer, employee or
other person associated with the organization is engaged in action,
intends to act or refuses to act in a matter related to the
representation that is a violation of a legal obligation to the organization,
or a violation of law which reasonably might be imputed to the
organization, and is likely to result in substantial injury to the
organization, the lawyer shall proceed as is reasonably necessary in the
best interests of the organization … Such measures may include among
(1) asking reconsideration of the matter;
(2) advising that a separate legal opinion on the matter by sought for
presentation to appropriate authority in the organization; and
(3) referring the matter to higher authority in the organization,
including, if warranted by the seriousness of the matter, referral to the
highest authority that can act in behalf of the organization as
determined by applicable law.
(c) If, despite the lawyer’s efforts in accordance with paragraph (b),
the highest authority that can act on behalf of the organization insists
upon action, or a refusal to act, that is clearly a violation of law and is
likely to result in substantial injury to the organization, the lawyer may
resign in accordance with rule 1.16.
Portions of Model Rule 1.16 regarding Terminating Representation
(a) …a lawyer shall not represent a client or, where representation has
commenced, shall withdraw from the representation of a client if:
(1) the representation will result in violation of the rules of professional
conduct or other law;…
(b) …a lawyer may withdraw from representing a client if withdrawal can
be accomplished without material adverse effect on the interests of the
client, or if:
(1) the client persists in a course of action involving the lawyer’s services
that the lawyer reasonably believes is criminal or fraudulent;
(2) the client has used the lawyer’s services to perpetrate a crime or
(3) a client insists upon pursuing an objective that the lawyer considers
repugnant or imprudent;…
(d) Upon termination of representation, a lawyer shall take steps to the
extent reasonably practicable to protect a client’s interests, such as
giving reasonable notice to the client, allowing time for employment of
other counsel, surrendering papers and property to which the client is
entitled and refunding any advance payment of fee that has not been
earned. The lawyer may retain papers relating to the client to the
extent permitted by other law.
Portions of Model Rule 3.3 provide with regard to Candor Toward the
(a) A lawyer shall not knowingly:
(1) make a false statement of material fact or law to a tribunal;
(2) fail to disclose a material fact to a tribunal when disclosure is
necessary to avoid assisting a criminal or fraudulent act by the client; …
(4) offer evidence that the lawyer knows to be false. If a lawyer has
offered material evidence and comes to know if its falsity the lawyer
shall take reasonable remedial measures.
Under Model Rule 3.9, the candor required under Model Rule 3.3 also applies
to advocates in nonadjudicative proceedings before legislative or
administrative bodies. At the heart of most of the ethical issues posed by
the application of these professional ethics rules to the conduct of lawyers
for rogue financial institutions, such as Lincoln Savings, is the nature of a
lawyer’s ethical responsibilities when her client has engaged, or is engaging,
Judge Sporkin and the banking regulators faulted former lawyers for Lincoln
Savings for failing to do something about illegal activities which culminated in
the failure of the thrift. Precisely what the Lincoln Savings lawyers should
have done, but failed to do, is much less clear. Banking regulators now usually
deny that their actions against Lincoln savings lawyers were based on any
generalized ethical duty on the part of lawyers to “blow the whistle” and
inform regulators of the misconduct of their clients, as Judge Sporkin’s
opinion in Lincoln Savings & Loan Ass’n v. Wall might have seemed to
suggest. Banking regulators’ current views regarding this issue seem to be
reflected in a speech by former OTS general counsel, Weinstein, this past
The OTS did not claim that the [Kaye Scholer] law firm had a professional
obligation to blow the whistle on its client by volunteering confidential client
information. Had the lawyers and their client remained silent instead of
making affirmative representations, the charge of omission of material facts
would not have been available. The material omission counts were premised on
the client’s disclosure obligation, coupled with a charge that the lawyers by
their conduct had assumed the client’s obligation for compliance with the
OTS rules that forbid material omission in communications with the agency.
According to the chief architect of the charges against Kaye Scholer, what
was unethical about the law firm’s conduct was that the lawyers transformed
themselves into “institution-affiliated parties” by controlling the information
flow in the regulatory examination of Lincoln Savings. The law firm then
violated legal duties imposed on such affiliates, including the duty to avoid
misleading the regulatory agency….
Truthfulness in Regulatory Practice
Truthfulness is among the virtues generally expected of ethical persons,
including lawyers, whether or not they are involved in regulatory practice.
The Model Rules of Professional Conduct require truthfulness to tribunals
before which a lawyer practices under Model Rule 3.3, noted above. Model
Rule 3.9 extends these duties of candor to nonadjudicative proceedings….
The conduct of counsel for the United States in violating the duty of candor
has been most egregious and disturbing. Such conduct is worthy of sanction
and must also be deterred. Dismissal with prejudice accomplishes these dual
Today we will send a message to all counsel who appear before this court
that the duty of candor will be upheld and preserved at all times irrespective
of the identity of the parties and the monetary stakes in the litigation….
Truthfulness is required of lawyers who represent regulatory agencies,
just as it is required of lawyers for regulated parties.
Truthfulness in dealing with federal agencies is something more than an
ethical virtue. It is required by law. Being untruthful to federal agencies
can result in statutory criminal penalties under 18 U.S.C. ‘ 1001:
Whoever, in any matter within the jurisdiction of any department or
agency of the United States knowingly and willfully falsifies, conceals or
covers up by any trick, scheme, or devise a material fact, or makes any
false, fictitious or fraudulent statements or representations, or makes or
uses any false writing or document knowing the same to contain any
false, fictitious or fraudulent statement or entry, shall be fined not
more than $10,000 or imprisoned not more than five years, or both.
Other statutes, such as the False Claims Act, provide severe penalties
for fraud and misrepresentation in monetary claims made to federal
agencies. The False Claims Act could apply, for example, to claims for
compensation made by lawyers who assist federal agencies with
environmental remediation. Criminal penalties for false claims are
provided under 18 U.S.C. ‘ 287. Civil actions for false claims are
governed by 31 U.S.C. ” 3729 and 3730. The controversial qui tam
provisions of 31 U.S.C. ‘ 3730 offer rewards (15-20% of the amount
recovered) to those, including attorneys, who blow the whistle and report
false claims which have defrauded the U.S. government. Natural
resources, energy and environmental lawyers are required by these and
other statutes, as well as general ethical principles, to be truthful in
their dealings with federal regulatory agencies. Of course, lawyers for
regulatory agencies are required to be truthful as well.…
Particularized Ethical Duties for Lawyers in Specialized Practice
One final issue regarding ethical responsibilities in regulatory practice has
been implicit throughout this discussion. That is the issue whether the
particular regulatory context of a lawyer’s actions does or should create
different ethical responsibilities. Part of what the regulatory actions
against the Lincoln Savings lawyers has come to signify is the importance of
paying attention to the particular regulatory context, when lawyers
represent regulated clients.
Judge Sporkin, who asked why professionals, such as lawyers and
accountants, had not prevented the Lincoln Savings debacle, refers to this
focus on legal specialization as “new world lawyering.”
In a speech before the Securities Litigation Committee of the San Francisco
Bar Association in January of 1992, Judge Sporkin suggested that a lawyer’s
ethical duties may vary according to the regulatory context in which she
practices . . .
To those of you who are just now settling into comfortable complacency
regarding the particular ethical uprightness of natural resources, energy
and environmental lawyers, let me suggest just two words: “Teapot Dome.”
Seventy years ago it was the scandal of the century. Will Rogers called it the
“great morality panic of 1924.”
The transfer of the Teapot Dome and Elk Hills petroleum reserves and
the corrupt issuance of the mineral leases on them could not have been
pulled off without the assistance of lawyers.
In fact, many of those accused in the scandal were lawyers. But that was not
why they were accused. Teapot Dome clearly involved lawyers who worked
with natural resources, energy and the environment, although, aside from
natural resources law, these areas of the law did not exist, as such, at the
time of Teapot Dome….
Today, the practice of natural resources, energy and environmental law is
growing ever more complex. You may have seen the Arthur Andersen
Environmental Services survey for the National Law Journal (August 30,
1993), which reported that nearly 70 percent of the corporate counsel
surveyed believed that total compliance with all federal and state
environmental regulation is simply not achievable.
“Due to the complexity of the law, the varying interpretations of
regulators, the ever-present role of human error and the cost,” violation
of environmental laws and regulations seems to be both constant and
inevitable for just about every business.
Perceptions such as these highlight some of the reasons why natural
resources, energy and environmental lawyers in regulatory practice face
so many ethical challenges….
The above was excerpted from a Google search:
Where does Kaye Scholer Leave Us?
~ ~ ~
FOR A CLOSER LOOK AT MORE BUZZARDS ON
Angela Styles – Bush’s Administrator for the Office of Federal
Pre-hearing Questions for Angela Styles to be Administrator
the Office of Federal Procurement Policy of the Office of
Management and Budget
I. Nomination Process and Potential Conflicts
1. Why do you believe the President nominated you to serve as Administrator
for the Office of Federal Procurement Policy (OFPP)?
I was chosen based on my extensive legal and legislative experience in the
fields of procurement and cost accounting. Over a number of years, I have
represented clients in numerous aspects of procurement law and litigation,
including regulatory compliance, procurement fraud, bid protests, claim
preparation, cost and pricing issues, defective pricing, accounting issues,
contract disputes and claims, contract negotiation, litigation of complex
corporate-wide accounting and contract issues, and negotiation of broad
corporate-wide advance agreements with the Defense Contract
Management Command. Of particular importance because the Administrator
of OFPP serves as chair of the Cost Accounting Standards Board, a
significant portion of my legal practice focused on Cost Accounting
Standards compliance, cost allowability, and cost allocation.
2. Were any conditions, express or implied, attached to your nomination to be
3. Have you made any commitments with respect to the policies and programs
which you will attempt to implement as Administrator? If so, what are they?
4. Are there any issues involving OFPP from which you may have to disqualify
yourself? If so, what system will you establish to carry these out?
Any potential conflicts of interest will be handled through the recusal
process, in which I would remove myself from the action, and refer all
activity to the next responsible official within the Office of Federal
Procurement Policy or the Office of Management and Budget. I have
notified the Designated Agency Ethics Official within OMB of certain
former clients whose legal matters I handled while in private practice. In
accordance with 5 CFR §§ 2635.502, for one year following the termination
of my employment at the law firm of Miller & Chevalier, Chtd., I will not
participate in any particular matter involving specific parties in which, to my
knowledge, my former employer, Miller & Chevalier, Chtd., or my former
clients, is a party or represents a party, unless I am authorized to
My spouse is employed by Bergner, Bockorny, Castagnetti, Hawkins and
Brain. Pursuant to 5 CFR §§ 2635.502, I will not participate in any particular
matter involving specific parties in which Bergner, Bockorny, Castagnetti,
Hawkins and Brain is or represents a party, unless I am authorized to
participate. Furthermore, pursuant to 5 CFR §§ 2635.502, I will not
participate in any particular matter involving specific parties in which any
client of my spouse is or represents a party, unless I am authorized to
participate. In addition, my spouse has agreed not to represent any client
with respect to any particular matter before the Office of Federal
Procurement Policy during my tenure.
* * *
Federal Procurement Chief Outlines Priorities
Bush administration supports continuation of public-private
by Elizabeth G. Book
Government procurement policies will not change drastically in light of the
planned “war on terrorism,” a senior procurement official told defense
“The Defense Department hasn’t said yet that they need more acquisition
authority, so we are not going to do anything right now to change our policies.
We have a wait-and-see attitude,”” said Angela B. Styles, the president’s
appointee as administrator for the Office of Federal Procurement Policy.
The OFPP is part of the Office of Management and Budget.
The OFPP, which has been without an administrator since June 2000, is
undergoing change and reforms, she said. Styles spoke recently at a luncheon
with defense industry representatives. She is responsible for advising the
administration on government-wide procurement initiatives.
The Bush administration’’s priorities in procurement policy involve
competitive sourcing, which is based on public-private competitions. The
White House also seeks to improve the level of government performance and
to return the government to the principles of competition, she said. Styles
mentioned that one of her planned initiatives is to phase out the mandatory
source status for the Federal Prison Industries (FPI), a policy that has
been criticized by the business community for being anti-competitive and
detrimental to small, niche-type suppliers.
Under a law in place since the 1930s, if the federal government wants to buy
any product that FPI produces, it must purchase the product from FPI. FPI
is a quasi-governmental organization that manufactures items at facilities
manned by federal inmates.
Styles wants to allow the private sector to compete for these contracts.
Currently, if a federal agency wants to use a private sector source for a
product that FPI produces, they have to submit a waiver to the FPI. “Our
office will work to phase out the policy,” she said. The Competition in
Contracting Act, which deals with this issue, is favored by the current
Styles said another OFPP priority is to change the way that rules are
published in the Federal Register. The Federal Register, a government-wide
publication, is used by the agencies to publish rules and regulations, which
are governing tools for the federal agencies. They do not have to be codified
by Congress. “There is a lack of quality and logical analysis in what we see
published in the Federal Register,” Styles said.
“We don’t often see a rational analysis,” she said, especially in the preambles
to rules, which are supposed to contain background information, reasoning
for the proposed rules, and a summation of industry comments.
“We can do a lot better to explain to you why we are making the decisions we
are,” she said.
“The OFPP should have a greater leadership role in the rule-making
process. Right now, I am holding back on rules that I don’t think are
specific in their explanations.”
Styles reported that she had testified before the House of Representatives
subcommittee on technology and procurement policy and made the case for
another of her priorities, competitive sourcing. She said that competition
helps to attract “viable, responsive, innovative and cost-effective public and
private competitors to the federal sector.”
She testified that “when a commercial function performed by the public
sector undergoes competition, that competition results in significant
economic savings to the taxpayer,”” she said. “The use of public-private
competition consistently reduces the cost of public performance by more
than 30 percent,” she said.
Styles explained that the Federal Activities Inventory Reform (FAIR) Act,
which was codified in 1998, seeks to publicize those government functions
that can be outsourced to the private sector. The FAIR Act requires that a
list be published each year for jobs that are available to non-governmental
entities, but also maintains ““a list of activities that are inherently
governmental, that cannot be outsourced,”” she said.
The enforcement of the FAIR Act at all federal agencies, Styles said,
underscores her office’s “commitment to competition.”
“It is a tool to encourage good management at the agencies. I want good
cost, good quality, and availability of service. I’m not really concerned
about who’s providing it,” she said.
“We’re not trying to de-layer the workforce. Nor are we discouraging
agencies that want to bring things back in-house. This is an opportunity to
solve problems we see in procurement.
“Competitive sourcing facilitates our use of performance-based service
contracts, which bring innovation, creativity, new ideas,” she said.
Styles said that competitive sourcing policies bring integrity to the process,
to assure taxpayers that their money is not being wasted.
OFPPopposes a contracting bill that gained momentum during the closing
months of the Clinton administration and appears to be gaining fresh support
on Capitol Hill. The Truthfulness, Responsibility and Accountability in
Contracting (TRAC) Act places a six-month moratorium on all federal
contracts which are not deemed “essential,” and could permanently freeze,
or “blacklist” the contractor’s activities if it is shown that the work could be
performed more cost-effectively by the public sector. According to Styles,
the TRAC act “would put at risk the federal government’s ability to acquire
needed support services in both the short and the long term,” she said.
“There is no aspect of the TRAC Act that would contribute to competition,
efficiency or accountability,” she said.
Prior to her confirmation in May 2001, Styles was a counselor to the director
of OMB. From January to April 2001, she was in a temporary appointment at
the General Services Administration’s (GSA) office of government-wide
policy and public buildings service. Before that, she was an attorney for
Miller & Chevalier, a law firm in Washington, D.C. She also did a stint on
Capitol Hill, working as a legislative aide for Rep. Joe Barton, R-Texas.
Styles’ legal practice concentrated in the area of federal procurement law
and litigation, including cost and accounting issues, defective pricing,
procurement fraud matters, contract disputes and claims, contract drafting
and negotiations, and compliance matters. During the past several years, her
practice increasingly focused on government contract disputes involving cost
accounting standards compliance, cost allowability and allocation.
Styles litigated contractors’ claims against the U.S. governmentbefore
the Armed Services Board of Contract Appeals, the United States Court
of Federal Claims, and the United States Court of Appeals for the Federal
Circuit. Since 1998, she has chaired the American Bar Association’s
Contract Law Committee. She has a bachelor’s degree from the University of
Virginia, and a law degree from the University of Texas. —— Elizabeth G.
Bridgestone/Firestone, Inc. – Where the rubber meets the road….and
sometimes stays there.
June 24, 2001
Lawyers Knew of Explorer Tire Woes
Attorneys withheld complaints for four years to protect cases …
The New York Times
A group of personal-injury lawyers and one of the nation’s top traffic-safety
consultants identified a problem with Firestone ATX tires on Ford Explorer
sport utility vehicles in 1996. But they did not disclose the pattern to
government safety regulators for four years, out of concern that private
lawsuits would be compromised.
Sean Kane, the consultant, said he had identified 30 cases of tire failure in
1996 – a few of them involving deaths – after being retained by lawyers in
Texas preparing lawsuits against Bridgestone/Firestone, Inc.
But Kane and the lawyers, lacking confidence in federal regulators,
repeatedly decided not to tell the National Highway Traffic Safety
Administration about the problem, said Kane, who in 1997 became the
partner for tire issues at Strategic Safety, a top traffic-safety consulting
firm. As Strategic Safety began working on Explorer crashes with lawyers
across the country, the consultants and lawyers chose not to submit the
safety complaint forms that might lead to government investigations. . .
Of the 203 deaths related to Firestone tires reported to regulators, all
but 13 occurred after 1996. . . .
Dr. Ricardo Martinez, the administrator of the traffic safety agency from
1994 to 1999, said he was appalled to learn that information had been kept
from his staff for years. . . .
“It’s outrageous, I can’t say that enough,” said Martinez, a trauma surgeon.
“If I saw something was killing my patients and I didn’t say anything because
that would reduce the demand for my services, I would be putting my benefit
over the benefit of my patients and the public, and that would clearly be
Kane said that the lawyers’ first duty was to win as much money as possible
for the crash victims whom they represented. The lawyers can collect up to
a third of any settlement or court verdict.
Geoffrey C. Hazard Jr., the trustee professor of law at the University of
Pennsylvania Law School and a leading expert on legal ethics, said the
lawyers had not broken any laws or ethical codes.
“They had a civic responsibility the same as you or I do, but they didn’t
have a legal duty,” he said. . . .
In October 1996, KPRC, a Houston TV station, ran a report on the tires and
forwarded to Kane some complaints from people whose tires had failed. . . .
Kane said he told reporters at several television news magazines about the
problem in 1998. But the reporters decided not to run stories.
Regulators did not open an investigation of the tires until February 2000,
after a report on another Houston TV station prompted a flurry of
complaints from consumers who had not retained lawyers. . . .
Global Funding Limited Trust –
October 17, 2001
Former Castle Rock attorney arrested
in Florida for part in investment scam
By Terri Moon Cronk
A former Castle Rock attorney, blighted by bounced checks and civil cases in
Douglas County courts dating as far back as 1994, recently was arrested in
Florida in a $20 million investment scam.
Royce Edward Tolley, 42, was arrested in Gainesville in mid-October and
charged with four others with rotating money through a “maze of national
and international accounts,” says a story by The Associated Press. . . .
Tolley was named as a trust owner with George Melvin Bevre, 48, of
Atlanta. Both were arrested.
Investors reportedly were told they would “reap enormous returns” through
an investment program identified as Global Funding Limited Trust.
Federal investigators aren’t sure how many investors were affected, the
A federal indictment, once unsealed, showed that the five men “rotated”
money from June 1996 to January 1998 to keep funds hidden from
customers and retain the money for themselves, the story said.
Also named in the indictment were California attorney James Charles
Morris, 54, of Gardnerville, Nev., and Florida residentsCalvin Frederick
Brown, a 53-year-old exotic bird dealer, of Williston, and house painter
Robert Charles Stewart, 40, of Gainesville.
Each of the five men faces 19 felony counts from wire fraud, interstate
transportation of stolen property and money laundering conspiracy, The
Associated Press reported. . . .
Harvey Pitt – Chairman of the Securities and Exchange Commission.
July, 2001 – From Web Today:
Harvey Pitt Bad Choice for
by Rev. Louis Sheldon, Chairman: Traditional Values Coalition
The Securities and Exchange Commissionshould be headed by a person
who has both the professional skills and the moral clarity to make tough
decisions about financial matters. The chairmanship of the SEC should be
held by someone who has a moral compass, not a person who is willing to
represent the interests of a pornography empire.
Last week, TVC sent a letter of concern to President Bush over his choice of
Harvey Pitt to be our nation’s Securities and Exchange Commission
chairman. We expressed our concern about Pitt after learning that in 1999
he had done legal work for the New Frontier Media company. Pitt had
helped New Frontier overcome a problem with the NASDAQ over two stock
sales. According to news reports, Pitt’s aid to this pornography company
helped it keep its listing on the NASDAQ.
New Frontier Media is a purveyor of sexually explicit filth that is piped
into homes through its three cable services: Pleasure, TeN, and Extasy.
Three of New Frontier’s biggest pornography customers are AT&T, Time
Warner, and Echo-Star Communications (DISH-TV).
This company also operates IGallery.com, an Internet company that hosts
such sites as “Teen Sex,” “Café Flesh,”and two other sites with names
describing oral sex and women’s sex organs.
The Vice President of Corporate Development at New Frontiers isGreg
Dumas, who has the dubious distinction of having been Vice President of
Marketing forLarry Flynt Publications. Dumas helped launchHustler
Hustler, of course, is one of the most obscene magazines in print and Flynt’s
smut empire demeans and humiliates women by portraying them as body
parts to be used and thrown away. Flynt has also promoted pedophilia
through his “Chester the Molester” cartoon. Pedophiles in the North
American Man-Boy Love Association (NAMBLA) must gain inspiration from
Hustler’s pro-child molester messages.
Is Harvey Pitt really proud that he represented such an evil and perverse
company? Harry Gracin, New Frontier’s securities lawyer says he is
offended by TVC’s efforts against Harvey Pitt. According to Gracin, Pitt “…
is an honest and decent man, and he took the case to help us out. All he
agreed to was to get us a fair hearing.”
Gracin must have a different definition of what constitutes an “honest and
decent man,” than we do. Pitt aided a company that earns millions by selling
the sexual exploitation of women and teenage girls for profit. And a company
where one of its vice presidents proudly lists his association with Larry
Flynt as a positive professional accomplishment.
Pitt’s nomination reminds me of the recent choices of former Massachusetts
Governor Paul Cellucci to be our Canadian Ambassador and homosexual
activist Scott Evertz to be White House AIDS czar. These were unfortunate
choices, but it is not too late for the White House to change course on the
choice of Pitt.
We urge the White House to look elsewhere for our nation’s next SEC
Traditional Values Coalition is an inter-denominational public policy
organization comprising over 43,000 member churches. For more information
call Christy Moore at (202) 547-8570. TVC, 139 C Street, SE, Washington,
DC 20003. Web address: www.traditionalvalues.org.
~ ~ ~
August 3, 2001
Senate Confirms SEC Chairman Harvey Pitt
WASHINGTON (SmartPros) —— The Senate unanimously approved Harvey
Pitt as SEC chairman for a term expiring June 5, 2007. President Bush is
expected to appoint Pitt as chairman now that the confirmation process is
Pitt was nominated in early July by President Bush to head the SEC and was
confirmed by the Senate Committee on Banking, Housing and Urban
Affairs in late July. The final confirmation occurred on August 1 by the U.S.
Pitt has spent two decades as a lawyer and corporate partner resident in
international law firm Fried Frank’s Washington, DC and New York offices.
He has represented clients in every facet of securities-related issues,
including the AICPA and Big Five firms.
“Mr. Pitt’s work at the SEC and representing clients brought before the SEC
give him an extraordinary knowledge of Federal securities laws,” said
Senator Paul S. Sarbanes, Chairman of the Committee on Banking,
Housing and Urban Affairs.
Pitt follows the footsteps of former SEC chairman Arthur Levitt, the
longest-serving chairman in the history of the organization who left shortly
after President Bush entered office. Republican commissioner Laura Unger
has served as acting chairman in the interim….
New Jersey Buyers of ‘Dream Homes’
Relate Their Nightmares
By Richard Cowen, The Record, Hackensack,
N.J. Knight Ridder/Tribune Business News
For some homeowners, New Jersey’s housing boom has been a bust – and
some of them went to Trenton on Wednesday with tales of new homes filled
with cracked walls, flooding basements, and broken dreams.
The citizens who testified before the State Commission of
Investigations said they had been burned not once, but twice – first by
greedy builders who did shoddy work and refused to make repairs, and then
by the state’s own clumsy bureaucracy, which failed to come to their rescue.
By the end of the day, SCI Chairman Francis E. Schiller was shaking his head
“It is unconscionable that in this, the 21st century – an era in which the mere
flick of a switch brings us crystal-clear, close-up images of Mars – that
hardworking, law-abiding citizens here at home are victimized by a system
that often cannot decipher and implement the simplest features of a
warranty,” Schiller said.
“Something must be done, and through this process, by publicly exposing and
examining the extensive flaws of that system, we have taken an important
The warranty on newly constructed homes is one of many documents a buyer
picks up at the closing – and is so thick with legal terminology that many
people don’t know where they stand until something goes wrong with the
And as the SCI investigation found, the warranty system is both confusing to
homeowners and fraught with abuse by builders.
“A nightmare” is the way Graham Fill of Butler described his life since
January 2001, when he bought a new house in the Hemlock Estates
development. Shortly after moving in, Fill noticed water running down the
walls of his basement.
Fill figured his warranty was strong enough to force the builder, Majestic
Homes of Boonton, to fix the problem. But despite the warranty, the
builder refused, Fill said.
Fil had hired his own engineer, who determined that a 30-foot patch of brick
facade would have to be removed to install flashing to protect the inner
walls. When the builder refused to do the work, Fill had two choices: sue the
builder in state Superior Court, or submit to binding arbitration, a system
run by the state Department of Community Affairs.
He chose arbitration.
“I thought it would be quicker and cheaper,” Fill said. Three years
later, the repair hasn’t been made, Fill testified before the SCI on
Fill said he made a videotape of the damage and submitted other documents
to the arbitrator, Steven Rapp, appointed by Construction Arbitration
Services Inc. of Dallas, Texas. Fill told the SCI he got the immediate
impression that Rapp wasn’t impartial. He said Rapp didn’t think the
submitted evidence was enough to warrant replacing the brick facade.
Fill then hired as attorney and threatened to sue. It was only after Rapp
agreed to review his own arbitration decision that he made a startling
admission, Fill testified.
“He came by [the house] and said that he had a business relationship with
the builder,” Fill told the SCI. “He said he and the builder had done some
Neither Rapp nor anyone from Majestic Homes could be reached for
comment Wednesday. But a lawyer for Construction Arbitration
Services, Marshall Lippman, said Rapp should have disclosed that
information to the company, which would have recused him from the case.
“That was information that should have been disclosed before he took the
case,” Lippman said.
Fill said he lost all faith in the arbitration process at that point.
“I just about exploded,” he said. After waiting three years and spending
thousands of dollars on legal and expert fees, Fill said, he appealed the initial
arbitration ruling and won. Majestic Homes is supposed to replace the
facade when the weather warms up, he said.
The SCI plans to hold more hearings in coming months. Homeowners who
have had problems with their warranties can contact the SCI at (609) 202-6767 or online at www.state.nj.us …
* * *
DISTRICT OF COLUMBIA COURT OF APPEALS
BOARD ON PROFESSIONAL RESPONSIBILITY
In the Matter of:
MARSHALL E. LIPPMAN, Respondent
Bar Docket No. 240-01
REPORT AND RECOMMENDATION OF THE BOARD ON PROFESSIONAL RESPONSIBILITY
Respondent is a member of the District of Columbia Bar, having been
admitted by motion on July 9, 1993. Respondent was also admitted to practice in
New York. On July 17, 1997, the Appellate Division of the First Department of the
New York Supreme Court disbarred Respondent. That discipline was based on a
determination that Respondent had committed misconduct in five matters, including,
in two matters, intentional misappropriation of client funds. Bar Counsel argues,
and we agree, that the identical reciprocal discipline of disbarment should be
The charitable trust said its total revenue for the year ended June 30,
2000, was $995.9 million, an 18.7 percent rise from the year-earlier’s
The $5.7 billion estate – founded in 1884 to educate children of Hawaiian
ancestry – said that its subsidiaries and outside investments netted $567.9
million last year, including the Goldman Sachs sales. Last year, the trust sold
11 million shares, worth about $1 billion.
Its real estate arm, Bishop Holdings Corp., produced $38.7 million, while its
Southern Nevada Income Properties subsidiary netted $24.3 million.
In a tax filing with the Internal Revenue Service, the trust reported that it
spent $132.7 million on its educational program and construction, down 7.2
percent from 1999’s $143 million. . . .
The tax filing also provided a detailed description of the salaries paid to
trustees, staffers and expenditures made to its outside contractors.
Former interim trustees David Coon, Francis Keala, Ronald Libkuman
andConstance Laueach earned $192,500 during the 2000 fiscal year
while retired Admiral Robert Kihune, the board’s chairman, was paid
In January, the interim board was replaced by a permanent board, which
includedLau, Kihune, attorneyDouglas Ing, local business executiveDiane Plottsand Hawaiian navigatorNainoa Thompson.
Hamilton McCubbin, who became the trust’s first chief executive officer
in February 2000, was paid $122,031 for the February 2000 to June 2000
period. McCubbin’s contract called for a salary of about $300,000 for the
2000 calendar year. School President Michael Chun earned $213,578
during the 2000 fiscal year while Nathan Aipa, the estate’s former acting
chief operating officer, earned$195,451. Aipa currently serves as special
As for the trust’s outside contractors, the Washington D.C. law firm ofMiller & Chevalier was paid$3.4 million for work relating an IRS audit
and the removal of the former trustee last year while the accounting firm of
KPMG Consulting LLCbilled the trust $1.3 million.
Cades Schutte Fleming & Wright billed the trust $1.3 million while
Watanabe Ing & Kawashima was paid $1.2 million.
Morgan Lewis & Bockius – Big, “reputable” law firm and lobbyist.
June 11, 2001
Convicted Morgan Lewis Partner
Denied New Trial
From New York Lawyer
Former Morgan Lewis & Bockius partner Allen W. Stewart — who was
convicted of racketeering, fraud and money laundering in 1997 and sentenced
to 15 years in prison — has been denied a new trial by a federal judge,
Philadelphia’s Legal Intelligencer reports.
The former head of Morgan Lewis’ insurance department was convicted on
charges of draining the assets of two insurance companies he controlled and
then selling the companies to unwitting buyers who soon discovered they
were insolvent. . . .
The indictment charged that Stewart’s schemes were designed to obtain
money and property, including licenses and the retention of licenses,
premiums from policyholders and customers, dividends, consulting and
management fees, and an inflated sales price for the Summit National Life
* * * * *
August 15, 1996
Mary Frangipanni’s Political Notebook
By Mary Frangipanni, Philadelphia CityPaper.net
By 9 p.m. Monday, Pennsylvania Republicans attending the Republican
convention in San Diego had to chill out after listening to all those speeches.
And what better way to relax then at the poolside party for Lackawanna
County Congressman Joe McDade?
This was a victory party for McDade, who was just acquitted on charges of
campaign fund fraud after an eight-year investigation. McDade is theChairman of the House Appropriations Committee and as Northeast
Philadelphia State Rep. George Kenney put it, “Now the Republicans are
back in power, which means more tax dollars for our state.”
There was, however, much more interesting —— and ironic —— news floating
around the McDade soiree.
A prominent Philadelphia law firm and its senior partners will soon
be indicted, according to sources close to the case.
The firm, Morgan Lewis Bockius, represented defrocked State Attorney
General Ernie Preate.
What’s ironic about that?
The fact that people attending a party to celebrate the exoneration of
McDade were talking about the continuing miseries associated with a local pol
who wasn’t able to dodge the prosecutorial bullet.
The crux of the investigation into Morgan Lewis Bockius, sources say, are
the legal fees paid to the firm by the Commonwealth of PA.
The Commonwealth, according to sources, paid the law firm$441,000 to
represent not Preate, but the office of attorney general.
However, say sources, the law firm used a portion of that money to
represent Preate personally in the mail fraud case against him because
Preate could not afford to pay his legal bills.
Investigators, say the sources, are specifically looking into whether there
was any conflict of interest involved because one of Preate’s top deputies,Walter Cohen, at the time worked for the law firm.
Mark Dichter, managing partner of the law firm’s Philadelphia office,
acknowledged the investigation. However, he said he has “no knowledge of
any pending indictment, or any discussion of an indictment, in this matter.”
Sources say the firm knew that the money was going to Preate’s personal
defense. They add that they expect the indictment to occur shortly after
Labor Day. . . .
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