Mojo - January 2014

Watch the TV Ads That Triggered Chris Christie's Latest Scandal

| Mon Jan. 13, 2014 1:20 PM EST

On Monday, CNN reported that federal officials are investigating whether New Jersey Gov. Chris Christie misused Hurricane Sandy relief funds to produce tourism ads that functioned as campaign spots when he was running for reelection. The allegations come as Christie is already immersed in scandal after internal emails suggested that a close aide to the governor—who has now been fired—orchestrated a traffic jam near the George Washington Bridge for the sake of political revenge. With the bridge episode now being investigated by the US attorney for New Jersey, this latest news means Christie, a leading potential GOP presidential contender in 2016, is facing two federal probes.

This second investigation focuses on a $25 million radio, television, and web campaign mounted by Christie's administration to promote the Jersey Shore's recovery in the wake of Hurricane Sandy, a project dubbed "Stronger Than the Storm." Rep. Frank Pallone, Jr. (D-N.J.), who last summer called for the investigation, claims that Christie awarded this advertising campaign to a firm whose bid was $2.2 million higher than the next lowest bidder—and that Christie favored this company because it would feature him and his family in the ads. The Department of Housing and Urban Development's inspector general notified Pallone late last week that there were sufficient grounds to launch a full investigation.

In May, Democrats criticized Christie for the ads, accusing the governor of using the taxpayer-funded advertisements to boost his political image as he ran for reelection. (Christie was largely praised for how he handled hurricane relief.) Senator Rand Paul (R-Ky.) also called the ads "offensive," noting that "in New Jersey, $25 million was spent on ads that included somebody running for political office. You think there might be a conflict of interest there?" A Christie spokesman told the Asbury Park Press in August that the the firm that was awarded the contract, MWW, was the best option because it had statewide connections and could get the campaign done quickly.

Word of a new investigation couldn't come at a worse time for Christie. The governor apologized for his administration's role in the Fort Lee traffic snarl last week, but plenty of questions remain, including those related to text messages that may incriminate other Christie aides.

The governor's spokesman, Colin Reed, released a statement on Monday responding to the controversy: "The Stronger Than The Storm [ad] campaign was just one part of the first action plan approved by the Obama Administration and developed with the goal of effectively communicating that the Jersey Shore was open for business during the first summer after Sandy. We're confident that any review will show that the ads were a key part in helping New Jersey get back on its feet after being struck by the worst storm in state history."

Check out two more "Stronger than the Storm" ads featuring Christie and his family:

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Fallen Foreclosure King David J. Stern Disbarred

| Mon Jan. 13, 2014 1:19 PM EST

The long, legal saga of David J. Stern, the south Florida attorney who made a fortune off the wave of home foreclosures stemming from the housing crisis, has reached its end.

After years of court battles over the practices of Stern's once-mighty, multimillion-dollar law firm, the Florida Supreme Court last week disbarred Stern. As the Palm Beach Post reports, a Palm Beach County judge who refereed Stern's case and who recommended disbarment criticized the 53-year-old lawyer for failing to take responsibility or show "any remorse" for his firm's actions. Mother Jones was one of the first news outlets to expose the shoddy and legally questionable work done by Stern's army of lawyers and paralegals as it foreclosed on hundreds of thousands of Floridians, including backdating crucial documents used to foreclose on homeowners. Nancy Perez, the Palm Beach County judge, said the blame fell on Stern for that shoddy work. "The incidents were not isolated, but rather a representation of the culture of the firm, as to the low level of competence and ethics," Perez wrote. "(Stern) is the lawyer. It was his firm. Mr. Stern is responsible."

Stern's firm, at its peak, was a juggernaut. In the mid and late 2000s, the government-owned enterprises Fannie Mae and Freddie Mac, as well as many of the nation's largest banks, retained Stern's firm to litigate an ever-growing pile of foreclosure cases in Florida, an epicenter of the housing meltdown. At one point, the Law Offices of David J. Stern handled as many as 100,000 foreclosure cases. Stern's firm and others like it were dubbed "foreclosure mills," employing hundreds and even thousands of lawyers and paralegals who pushed through foreclosure cases assembly-line-style. Incredibly, the federal government played a key role in creating foreclosure mills, as I reported:

Fannie and Freddie also reshaped the foreclosure industry. Their huge holdings meant they had to deal with thousands of foreclosures annually—even during time when relatively few loans were going bad. In the 1990s, the market expanded into subprime territory to feed the securitization beast, and borrowers began defaulting at higher rates. Hiring lawyers on a case-by-case basis was burdensome, so Fannie and Freddie put together a stable of law firms willing to litigate large bundles of foreclosures quickly and cheaply. They urged these handpicked firms to bring all foreclosure-related services—inspections, eviction notices, sales of repossessed properties, and so forth—in-house. Thus emerged the foreclosure supermarket.

...Stern's company is one of dozens of mills that now churn through more than a million cases a year for Fannie and Freddie, big banks, and private lenders. Built like industrial assembly lines, the mills employ small armies of paralegals and other low-level employees who mass-produce court filings, run title searches, and schedule scores of hearings and property auctions daily. Staff attorneys appear for dozens of court hearings in rapid succession, dashing from one courtroom to the next with rolling file cabinets. Stern and his ilk typically create in-house subsidiaries that bill the parent law firm for the various paper-pushing tasks. "All sorts of crap is loaded on," notes Irv Ackelsberg, a Philadelphia consumer-law attorney.

The business model is simple: to tear through cases as quickly as possible. (Stern's company handled 70,382 foreclosures in 2009 alone.) This breakneck pace stems from how the mills get paid. Rather than billing hourly, they receive a predetermined flat fee for the foreclosure—typically around $1,000—plus add-ons for all the side services. The more they foreclose, the more they make. As a result, say consumer attorneys and legal experts, even families who have been foreclosed upon illegally—and can afford to make good on their mortgages—end up getting steamrolled. "It's 'How fast can I turn this file?'" says Ira Rheingold, executive director of the National Association of Consumer Advocates in Washington, DC. "For these guys, the law is irrelevant, the process is irrelevant, the substance is irrelevant."

The foreclosure mill model made Stern a very rich man. When I reported on him in August 2010, he lived in a $15 million, 16,000-square-foot mansion on the Atlantic Intracoastal Waterway in Fort Lauderdale. Docked on his property was Misunderstood, his 130-foot, jet-propelled Mangusta yacht—a $20 million-plus replacement for his previous 108-foot Mangusta. He also owned four Ferraris, four Porsches, two Mercedes-Benzes, a Cadillac, and a Bugatti.

But the cavalier, always-be-foreclosing attitude of his firm caught up with Stern. Days after I published my investigation into Stern, then-Florida Attorney General Bill McCollum opened an investigation into his firm and two other foreclosure mills for "allegedly improper actions." Since then, Stern has been in and out of court fighting off lawsuits targeting him and his firm, which has since the vast majority of its business. The news of Stern's disbarment is just the latest blow for the one-time king of the foreclosure business. The state Supreme Court ruling ordered Stern to close his firm within 30 days. 

Stern, for his part, seems to have found a new calling after his foreclosure empire crumbled. He's now an investor in Five Guys burger joint franchises.

Rich GOP Donor Gets Lawmaker to Draft a Bill to Lower His Child Support Payments

| Mon Jan. 13, 2014 12:55 PM EST

After Michael Eisenga, a wealthy GOP donor and Wisconsin business owner, failed to convince several courts to lower his child support payments, he came up with an inventive plan B—he recruited a Republican state legislator to rewrite Wisconsin law in his favor.

A set of documents unearthed Saturday by the Wisconsin State Journal shows Eisenga and his lawyer, William Smiley, supplying detailed instructions to Republican state Rep. Joel Kleefisch on how to word legislation capping child support payments from the wealthy. Kleefisch began work on the legislation last fall, weeks after an appeals court rejected Eisenga's attempts to lower his child support payments.

For example, in a September 13 letter, a drafting lawyer with Wisconsin's legislative services bureau complained to a Kleefisch aide, "It's hard to fashion a general principle that will apply to only one situation."

According to the Milwaukee Journal Sentinel, Eisenga's current child support payments for the three children he has with his ex-wife are set at $216,000 a year. (Per the couple's prenuptial agreement, the divorce settlement left his $30 million in assets untouched.)

Current law instructs judges to calculate child support as a percentage of income, with no cap and the option to include assets. Under Kleefisch's bill, which making its way through the Wisconsin statehouse, payments would top out at $150,000 annually, and judges would be prohibited from taking assets into account when determining child support. The bill also includes language that would allow Eisenga to restart court proceedings over his child support payments, as it requires courts to slash such payments if they are 10 percent higher than they would be under the new cap.

In 2010, Eisenga donated $10,000 to Kleefisch and his wife, Lt. Gov. Rebecca Kleefisch, according to the Journal Sentinel. Eisenga also donated $15,000 to Republican Gov. Scott Walker.

The drafting documents, available on the Wisconsin legislature's website, leave little not doubt that the bill was written to Eisenga's specifications. According to the documents, on September 5, Eisenga's lawyer briefed him on changes he was suggesting to a draft of Kleefisch's bill. "We focused only on the portion that would require the court to modify your child support order based solely on the passage of the bill," Smiley wrote. Eisenga then forwarded that letter to Kleefisch and one of his aides, saying, "Please have the drafter make these SPECIFIC changes to the bill." The next day, Kleefisch's aide forwarded the letter to the legislative lawyer drafting the bill.

A hearing for the bill is scheduled Wednesday before the Assembly Family Law Committee.

Eisenga and Smiley declined to speak to local news outlets about their emails with Kleefisch. On Saturday, Kleefisch told the Journal, "I do a gamut of legislation with the help and assistance of many, many constituents, and whether they gave a contribution or not has not made a difference."

The Supreme Court Could Halt the Recess Appointments That Got Scalia's Son His Job

| Mon Jan. 13, 2014 12:15 PM EST

The Supreme Court will hear a case on Monday that could upend longstanding precedent on presidential powers. President Barack Obama and his successors will have a tougher time staffing the White House if the court sides with a 2013 decision from the DC Circuit Court on Noel Canning v. National Labor Relations Board.

The case revolves around three Obama recess appointees to the labor board in January 2012. At the time, Senate Republicans were hindering Obama's nominees at every turn, not because they had any particular objection to the specific appointee, but because they wanted to block the agency in question. So, while Congress went home for its winter break, Obama used his recess appointment power to put three new members on the labor board.

The tricky question is whether the Senate was actually in recess when Obama made that announcement. For all standard purposes, Congress was on vacation. But House Republicans used an obscure constitutional clause to force the Senate to hold pro-forma sessions throughout their January recess.

We're Still at War: Photo of the Day for January 13, 2014

Mon Jan. 13, 2014 11:08 AM EST

U.S. Army Soldiers assigned to the Combined Joint Special Operations Task Force-Afghanistan watch the Afghanistan countryside from the tail of an aircraft after delivering bundles containing care packages, Christmas stockings and mail to soldiers stationed at a remote base in eastern Afghanistan Dec. 24, 2013. (US Army photo)

Elizabeth Warren's New Bill Could Save Taxpayers Billions

| Mon Jan. 13, 2014 7:00 AM EST

Last week, Sen. Elizabeth Warren (D-Mass.) introduced a bill with Sen. Tom Coburn (R-Okla.) that aims to make government settlements with corporations more transparent and fair. It could end up saving taxpayers billions of dollars.

When banks and other corporations are accused of breaking the law, the government often settles cases instead of going to trial. In the wake of the financial crisis, for example, the Department of Justice (DOJ) and government banking watchdogs have settled cases against banks that helped tank the economy. Regulatory agencies have argued that settlements are adequate tools to enforce the law, but Warren has protested. She notes that many settlements are tax-deductible. Other deals are confidential, meaning the public has no idea whether the terms of the agreement are fair.

Warren's bill would discourage tax-deductible settlements by forcing federal agencies to explain why certain settlements are confidential, and to publicly disclose the terms of nonconfidential agreements so that taxpayers can see how much settlement tax-deductibility is costing them.

For a sense of how much Americans could save if Warren and Coburn's legislation passes, just take a look at how much taxpayers lost in each of these settlements over the past decade:

JPMorgan Chase

Jamie Dimon
JPMorgan Chase CEO Jamie Dimon Steve Jurvetson/Flickr

In October, JPMorgan reached a record-breaking $13 billion settlement with the DOJ over the dicy financial products that it created and sold in the run up to the financial crisis. But JPMorgan will be allowed to soften the blow by claiming up to $4 billion in tax deductions from the settlement.

 

Fresenius Medical Care Holdings

rangizzz/Shutterstock

In 2000, the health care company Fresenius Medical Care Holdings entered into a $486 million settlement agreement with the federal government over allegations that it defrauded Medicare and other federal health care programs. Last year, a court allowed Fesenius to write off $50 million of that settlement payment.

 

BP

BP/Facebook

BP, the company responsible for the massive 2010 Gulf oil spill, entered into a settlement that year with the federal government that set up a $20 billion clean up fund. BP was able to deduct $10 billion of that settlement.

 

HSBC

Michael Fleshman/Flickr

Last year, the banking giant HSBC settled charges that it turned a blind eye to billions of dollars of money laundering by entering into a $1.9 billion settlement with the federal government. The DOJ has not yet disclosed whether the settlement is tax-deductible, but if it is, taxpayers will lose $700 million.

 

Exxon

Paulo Ordoveza/Flickr

Exxon got a $576 million tax deduction on its $1.1 billion Alaska oil spill settlement, which saved the oil giant half of the cost of the deal.

 

Marsh & McLennan

Marsh & McLennan

In 2005, the insurance brokerage firm Marsh & McLennan reached an $850 million settlement with New York state regulators over bid-rigging and conflicts of interest. The firm was eligible for up to a $298 million tax write-off, according to calculations by Francisco Enriquez, an expert on corporate taxation at US Public Interest Research Group, a consumer advocacy organization.

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New Christie Bridge Scandal Email: Cops Forced to Direct Traffic Instead of Responding to Emergencies

| Fri Jan. 10, 2014 7:09 PM EST
Christie leaves Fort Lee city hall after apologizing to Mayor Mark Sokolich on Thursday.

The massive, four-day September traffic jam orchestrated by New Jersey Gov. Chris Christie's deputy chief of staff as an act of political retribution caused police in Fort Lee, New Jersey to spend their time directing traffic instead of responding to local emergencies, according to an email released on Friday by state investigators probing the scandal.

On September 9, the first day of the traffic problems, Robert Durando, the Port Authority's general manager of the George Washington Bridge, wrote to Cedrick Fulton, the Port Authority's director of tunnels, bridges and terminals: "Traffic conditions required Ft Lee police to remain out on corners, managing traffic instead of attending to public safety issues."

The email is more evidence of the public safety consequences of September's traffic jams. On Wednesday, a Fort Lee borough councilman told Mother Jones that the traffic slowed the police search for a missing 4-year-old child. NorthJersey.com reported that the traffic doubled EMS response times in two emergencies on September 9. In a third instance, emergency responders "took nearly an hour to arrive at a building where a person was experiencing chest pains."

Members of Christie's inner circle appear to have considered the potential public safety ramifications of the traffic jam while it was ongoing. In one exchange released on Wednesday, Port Authority official David Wildstein, a Christie appointee, waved away complaints from the Fort Lee mayor that school buses filled with children were stuck in traffic. "Bottom line is he didn't say safety," Wildstein wrote.

Durando's message was part of an email thread, "Angry Patron," describing locals' reactions to the traffic problems. In a separate email, Lisa Herrera, an employee of the Port Authority tunnels, bridges and terminals division, said she received a complaint from a woman whose husband arrived 40 minutes late for his first day of work at a job he landed after being unemployed for a year. The women accused the Port Authority of "playing God with people's jobs," Herrera wrote.

A New Jersey legislative panel investigating the bridge scandal released these emails Friday as part of a collection of hundreds of private emails and text messages related to September's lane closures. Read those documents here.

New Bridge Scandal Emails: Port Authority Official Said Christie Team's Lane Closure "Violates Federal Law"

| Fri Jan. 10, 2014 5:13 PM EST
New Jersey Gov. Chris Christie

Editor's note: Alhough the bulk of these emails were released to the public for the first time on Friday, the contents of some were reported by the Wall Street Journal in December.

In a September 13 email released Friday by the New Jersey Assembly panel probing Republican Gov. Chris Christie's George Washington Bridge scandal, Port Authority Executive Director Patrick Foye wrote that the decision to shut down access lanes to the bridge violated state and federal laws.

"I believe this hasty and ill-advised decision violates Federal Law and the laws of both States," Foye noted, explaining his decision to reopen those lanes to traffic. "I am appalled by the lack of process, failure to inform our customers and Fort Lee and most of all by the dangers created to the public."

Foye sent his email after four days of heavy traffic jams caused by the closures to nearly a dozen officials at the Port Authority, including chairman David Samson, a Christie appointee. 

Private messages released on Wednesday strongly suggested that a top aide to Christie orchestrated the lane closures as an act of political revenge. Samson's role in the scandal remains unclear. 

Screenshot from new emails released as part of an investigation into politically motivated lane closures on the George Washington Bridge

 

On Thursday, Christie expressed confidence that Samson played no part in causing the Fort Lee traffic disaster, saying, "I am convinced that he had absolutely no knowledge of this, that this was executed at the operational level and never brought to the attention of the [Port Authority] board of commissioners." Yet when Foye ordered the lanes reopened on September 13, David Wildstein, a Christie appointee at the Port Authority official wrote to a Christie staffer, "We are appropriately going nuts. Samson helping us to retaliate."

Another email released on Friday shows an effort to keep the story from going public. On the night of September 13, Foye received an email from Bill Baroni, a Port Authority official appointed by Christie (who resigned in December as the scandal was unfolding). It read, "I am on my way to the office to discuss. There can be no public discourse."

And another email released on Friday indicates that the Christie crew was worried about Foye. On September 18, Samson wrote Scott Rechler, the vice chair of the Port Authority Board of Commissioners,* that he strongly suspected Foye of "stirring up trouble" by speaking anonymously to a Wall Street Journal reporter about the Fort Lee traffic debacle. He went on: "This is yet another example of a story—we've seen it before—where [Foye] distances himself from an issue in the press and rides in on a white horse to save the day In this case, he's playing in traffic, made a big mistake."

These emails were released as part of a collection of hundreds of emails and text messages that journalists and investigators are now scrutinizing. Read them here.

Correction: An earlier version of this article failed to note Rechler's position in the Port Authority. He is the vice chair of its Board of Commissioners.

Chris Christie's Not in the Clear Yet. These Text Messages Show Why.

| Fri Jan. 10, 2014 4:57 PM EST
New Jersey Gov. Chris Christie

At his Thursday press conference, New Jersey Gov. Chris Christie said he played no part in causing a traffic jam last fall on the George Washington Bridge and in nearby Fort Lee. He ultimately took responsibility for the debacle, but Christie said his deputy chief of staff, Bridget Anne Kelly, had ordered the traffic jam without his knowledge. Emails showed that she had been in cahoots with David Wildstein, a Christie appointee at the Port Authority of New York and New Jersey. Christie fired Kelly on Thursday, and he insisted that she was the only member of his inner circle who knew that the traffic mess was politically motivated and not the result of a supposed traffic study.

Yet text messages turned over to investigators by Wildstein raise the possibility that months before the disclosure this week of Kelly's bombshell email—"Time for some traffic problems in Fort Lee"—other senior Christie aides knew the traffic study excuse wasn't true.

Here's the backstory. The traffic jam happened on the week of September 9 and quickly became a local controversy. Lawmakers began investigating, and on November 25, Bill Baroni, another Christie appointee at the Port Authority, testified before the New Jersey Assembly's transportation, public works, and independent authorities committee. Baroni told lawmakers that the lane closures were part of a study to determine whether Fort Lee should have three dedicated lanes leading onto the George Washington Bridge.

State lawmakers didn't buy Baroni's explanation. "I think that at best this was clumsy and ham-handed," said committee chair John Wisniewski, a Democrat. "At worst, this was political mischief by a political appointee."

Immediately after his testimony, according to documents released this week, Baroni texted David Wildstein asking how Christie administration officials in Trenton, the state capital, had reacted to his testimony:

[11/25/2013 11:58 AM] David Wildstein: You did great
[11/25/2013 11:58 AM] Bill Baroni: Trenton feedback
[11/25/2013 11:59 AM] Bill Baroni: ?
[11/25/2013 11:59 AM] David Wildstein: Good
[REDACTED MESSAGE]
[11/25/2013 11:59 AM] Bill Baroni: Just good? Shit
[11/25/2013 12:00 PM] David Wildstein: No i have only texted brudget [Bridget Anne Kelly] and Nicole they were VERY happy
[11/25/2013 12:00 PM] Bill Baroni: Ok
[11/25/2013 12:00 PM] David Wildstein: Both said you are doing great
[11/25/2013 12:06 PM] David Wildstein: Charlie said you did GREAT

Note the two names in that exchange we have placed in bold type: Nicole and Charlie. According to public records and news stories, the only Nicole politically close to Christie at the time was Nicole Davidman, who was the governor's campaign finance director in 2013 and the wife of Christie's press secretary. The only Charlie in Christie's inner circle was Charles McKenna, Christie's chief counsel and the aide who helped lead Christie's internal investigation of the bridge mess. State investigators assume that the Charlie mentioned in this text is McKenna, according to a legislative source, but they are not yet certain about Nicole (though they have not yet identified other possibilities).

Presuming these texts refer to Davidman and McKenna, here's what needs to be answered: Were these two Christie lieutenants happy about Baroni's testimony for the same reason as Kelly? Both Kelly and Wildstein knew the study wasn't the true cause of the traffic mess, and it's reasonable to conclude that they were delighted because Baroni had stuck to that story and not said anything about Kelly instructing Wildstein to cause the jam that paralyzed traffic in Fort Lee for days. But did Charlie and Nicole cheer Baroni's bogus testimony in the same way? And what does it mean that Wildstein, the man who arranged the lane closures, lumped together Kelly, the aide who instigated the closures, and Nicole? (Christie touched on this only briefly in his press conference: "I believe that I've spoken to everyone who was mentioned in the emails except for Charlie McKenna, who is away at a family funeral. And I am confident, based upon my conversations with them, that they had no prior knowledge nor involvement in this situation.")

This is just one line of inquiry Bridgegate investigators ought to focus on. Christie asserts that Kelly was the only member of his political team in on the bridge caper. But if others were aware of Baroni's stonewalling, the governor has a problem—especially if that includes McKenna, whom Christie has used to probe the bridge scandal. At the least, it might be ill-advised for the governor to have a fellow who apparently praised Baroni's bogus testimony in charge of investigating the cover-up.

Christie's office did not respond to a request for comment for this article.

Meet the Other Mayor Accusing Chris Christie of Retaliation

| Fri Jan. 10, 2014 3:08 PM EST

His city might not have been flooded with traffic as an act of political retribution, but Jersey City Mayor Steven Fulop still considers himself Gov. Chris Christie's number one enemy.

Like Fort Lee Mayor Mark Sokolich, Fulop wouldn't endorse Christie in last year's gubernatorial race. (Though Fulop is a Democrat, Christie spoke at his inauguration in July.) Fulop alleged in a statement Thursday that he received swift punishment from the governor's office after informing the Christie camp in September that he would not be endorsing the Republican incumbent. Fulop claimed that Christie officials canceled meetings and rejected his requests to discuss city issues immediately following the news.

"Cancelations include an entire day of meetings with state commissioners scheduled to be in Jersey City that was abruptly canceled, with each of the commissioners individually canceling within an hour of the time I communicated my intention to not endorse," Fulop said.

The Jersey City mayor is referenced in the bridge closure emails released on Wednesday. After being told that Sokolich was asking questions about the George Washington Bridge lane closures, recently resigned Port Authority official David Wildstein replied, "Radio silence. His name comes right after mayor Fulop." Fulop told the Jersey Journal that after seeing that exchange he believes he's "Enemy Number 1."

Shortly after Christie won re-election, Fulop announced plans to sue the Port Authority for $400 million. He claims the agency, which is run by New Jersey and New York, has not been paying enough taxes on the 32 properties it owns in Jersey City.

When Christie was asked about the Jersey City controversy during his long press conference on Thursday, he said he didn't know if Fulop's meetings were canceled for purposes of payback, and he promised to look into the matter. "What Mayor Fulop knows is, when we agree with him from a policy perspective we'll work with him," Christie said. "When we disagree with him, we'll express those disagreements. And sometimes that'll mean friction."

He added: "Have I at times been angry with Mayor Fulop and disagreed with him? You bet I have."