Dan is Mother Jones' deputy DC bureau chief. He is the New York Times best-selling author of Sons of Wichita(Grand Central Publishing), a biography of the Koch brothers that is now out in paperback. Email him at dschulman (at) motherjones.com.
Did the selection of an ex-energy company lobbyist to serve on the Commodity Futures Trading Commission drive a recent rally in the oil market? Energy analyst and Fox Business contributor Phil Flynn raises this theory in a recent column, pointing out that Scott O'Malia's nomination is being viewed as a positive sign by investors who are worried that the commission, under chairman Gary Gensler, may take an overly aggressive stand on speculation.
Another interesting take on the weird movements in oil actually was suggested by one of my readers. He seemed to think that the recent buying in oil had to do with politics and the CFTC. He seemed to think that the CFTC’s approval of Scott O’Malia as CFTC Commissioner reduces the risk that the agency will force aggressive position limits on oil... Mr. O ‘Malia is seen by the marketplace as more of a free marketer and will provide balance to the debate over speculation by filling the fifth and final seat on the CFTC commission...
Hopefully this will provide some balance as the agency's new chairman Gary Gensler seems biased against the speculators argument that they did not cause the spike in oil price but only reflected the massive uncertainty surrounding the greatest economic crisis in recent times. As the agency moves to reign in speculation, it is hoped that this confirmation of O’Malia will make sure the agency doesn't go too far in a rush to judgment.
Here's a nominee for one of the 111th Congress' most dubious earmarks: $3 million to subsidize a mining concern owned primarily by Goldman Sachs, recipient of a $10 billion bailout (since repaid), and two hedge funds. Politicoreports that the measure was slipped into the House defense appropriations bill by Rep. Jerry Lewis (R-Calif.), the top Republican on the House appropriations committee who's regularly featured on Citizens for Responsibility and Ethics' annual list of the most corrupt members of Congress. How'd he earn a spot on the list? For allegedly trading earmarks for campaign contributions—a matter for which he's presently under federal investigation.
Lewis and his supporters say this particular earmark is a matter of national security. The mining project in question, run by a company called Molycorp Minerals, is harvesting rare elements that are an ingredient in the magnets used in precision-guided missiles and smart bombs. (Among Lewis' top contributors are defense and aerospace firms that produce such munitions.) China, as Politico notes, is the world's primary producer of these hard-to-come-by minerals, but the country has threatened to stop exports, prompting a search for other sources.
An ex-lobbyist is tapped to serve on a regulatory agency he tried to weaken. And the Senate is fine with that.
Daniel SchulmanOct. 5, 2009 6:00 AM | Scheduled to publish Mon Oct. 5, 2009 6:00 AM EDT
What type of vetting can you expect if you're an ex-lobbyist for an Enron-like firm who's been nominated to a seat on the regulatory commission that's supposed to prevent Enron-style abuses? Not much. Exhibit A: Last week's confirmation hearing of Scott O'Malia, a Republican Senate staffer selected by President Obama to fill an open seat on the Commodity Futures Trading Commission (CFTC).
Recently Mother Jones reported on O'Malia's two-year stint as the director of federal legislative affairs for Mirant, an energy company that state and federal regulators—including the CFTC—accused of market manipulation, including intentionally withholding power from California consumers during the state's energy crisis. Its shady business practices ultimately led to a nearly half-billion-dollar settlement with the state of California. In a separate case, spearheaded by the CFTC and the Justice Department, Mirant traders pleaded guilty to criminal charges in connection with a scheme to rig natural gas prices.
Over at the Sunlight Foundation, Paul Blumenthal runs down the resume of Paul Kirk, the ex-DNC chair and close Kennedy family friend who has been named to temporarily fill the late senator's seat. Given Kirk's background as a drug company lobbyist and ties to a top financial and insurance firm, Blumenthal notes, he seems like a slightly incongruous pick—even on an interim basis—with health care and financial reform topping the congressional agenda.
Some of Kirk's recent career highlights:
Kirk is the CEO and Chairman of Kirk & Associates, a business consulting company, and sits on the board of both an insurance company, The Hartford Financial Group, and a timber and real estate company, Rayonier, Inc. Kirk also previously worked as a lobbyist for a pharmaceutical company, Aventis.
Kirk sits on the Compensation and Personnel Committee for The Hartford in charge of employee compensation and executive bonuses. While compensation fell significantly from 2007 to 2008, this did not keep The Hartford from escaping criticism for compensation policies. Ramani Ayer, CEO and Chairman of The Hartford, was named by Forbes Magazine one of the most overpaid executives in 2008...
In 1999, Kirk represented the pharmaceutical company Aventis as a lobbyist for Sullivan & Worcester. Kirk listed on his lobbying disclosure forms “FDA reform” as the sole issue and the Senate as the only body he was lobbying. In 1997, Congress passed and the President signed into law the FDA Modernization Act. One provision of the bill sought to curb red-tape and regulation to streamline the drug approval process. After the bill’s passage pharmaceutical companies and their lobbying arm, PhRMA, complained about the FDA’s speed at implementing the legislation and continued existence of some regulatory barriers. In 1999, the Senate held hearings on the subject with PhRMA President Alan Holmer told the Senate Health, Education, Pensions and Labor Committee that the legislation “fails to provide the regulatory relief Congress intended and actually codifies some of the agency’s prior-approval practices that Congress wanted to eliminate.” Kirk’s focus on “FDA reform” for Aventis was likely related to the complaints about the FDA Modernization Act and its implementation.
UPDATE: Here's Public Citiizen's Craig Holman commenting to the Boston Herald on Kirk's appointment: "Obviously, this is a conflict of interest and raises serious concerns. It is distressing. There were many qualified people."
It's been a rough week for the Defense Contract Audit Agency, home to the Pentagon beancounters charged with insuring the goverment doesn't get robbed blind by military contractors. They are supposed to be doing that, at least. Recently, though, there have been questions about how effective the agency has been in protecting billions in taxpayer dollars from falling prey to waste, fraud, and abuse. On Tuesday, the Commission on Wartime Contracting—which has a former DCAA deputy director as its co-chair—blasted the problem-plagued DCAA, along the Defense Contract Management Agency, for failing to provide adequate oversight. Today, in tandem with a Senate hearing on the DCAA, the Government Accountability Office followed with a report [PDF] that found big time flaws with the agency's audits and operations. How big? Well, let's put it this way: Of the 69 audits and cost-related reviews the GAO looked at, it determined that every single one of them had problems— and the majority of them had "serious" ones. The GAO explains the heart of the issue:
A management environment and agency culture that focused on facilitating the award of contracts and an ineffective audit quality assurance structure are at the root of the agencywide audit failures we identified. DCAA’s focus on a production-oriented mission led DCAA management to establish policies, procedures, and training that emphasized performing a large quantity of audits to support contracting decisions and gave inadequate attention to performing quality audits. An ineffective quality assurance structure, whereby DCAA gave passing scores to deficient audits compounded this problem.
Flawed audits are just the half of it. An earlier GAO report [PDF], in July 2008, found abusive work environments at two DCAA field offices, including auditors who were threatened with disciplinary action if they refused to change audit findings or draft favorable reports. Today, the Pentagon's Inspector General, Gordon Heddell, told [PDF] the Senate homeland security committee that an investigation by his office had centered on one senior DCAA official in particular, the deputy director responsible for the agency's west coast operations. Heddell said his office concluded that she "improperly directed changes" to one audit that "could have allowed Boeing to recover $271 million in unallowable costs."
In the past, committee member Claire McCaskill (D-Mo.)—a former auditor herself—has demanded changes at the DCAA, saying in 2008 that "somebody needs to be fired this." The "the top of my head is about to pop off" she tweeted during today's hearing, remarking on the "unbelievable" problems at the agency. "In the world of auditing," she said later, "what has been committed here is a capital crime."