Law Firm Co-Founder Melvyn Weiss Must Pay $10M, Could Face 33 Months In Prison

Melvyn Weiss, the co-founder of a prominent New York law firm, pleaded guilty Wednesday to a racketeering conspiracy charge in a kickback scheme involving some of the largest corporations in the nation.  The 72-year-old Weiss entered his plea under a previously announced agreement with prosecutors. He has been ordered to pay nearly $10 million in fines and forfeiture penalties, and could be sentenced to up to 33 months in prison at a later hearing.  Asked by U.S. District Judge John F. Walter if he was pleading guilty, Weiss said, “Yes I am.”
“I take responsibility for everything,” said Weiss, who wore a navy pinstriped suit. “My direct participation differed as to each” incident.
Federal prosecutors have said they will ask Walter to impose the full 33-month term.

Attorney Benjamin Brafman, who represents Weiss, said he was hopeful the court would consider during sentencing that Weiss had acknowledged the criminal conduct and remained “one of the true legal giants of his generation.” Prosecutors have said the Milberg Weiss firm made an estimated $250 million over two decades by filing legal actions on behalf of professional plaintiffs who received $11.3 million in kickbacks.  The firm dominated the industry in securities class-action lawsuits, which involve shareholders who claim they suffered losses because executives misled them about a company’s financial condition. The kickback scheme allowed the firm’s attorneys to be among the first to file litigation and secure the lucrative position as lead plaintiffs’ counsel, according to court documents. The firm’s lawsuits targeted companies such as AT&T Inc., Lucent, WorldCom, Microsoft Corp. and Prudential Insurance. Prosecutors said Seymour Lazar, 80, was paid about $2.6 million to be a professional plaintiff and help the law firm, previously known as Milberg Weiss Bershad & Schulman, in its pursuit of the lawsuits.
The retired attorney was ordered to spend six months in home detention and two years probation. He also was fined $600,000 after pleading guilty to obstruction of justice, subscribing to a false tax return and making a false declaration to the court.
The seven-year investigation also resulted in guilty pleas by three of Weiss’ former partners.
William Lerach, whose high-profile legal victories included a $7 billion judgment against now-defunct energy company Enron Corp., pleaded guilty to one count of conspiracy to obstruct justice and make false statements. He was sentenced to two years in federal prison.
Steven Schulman pleaded guilty to a racketeering conspiracy charge. He agreed to forfeit $1.85 million to the government and to pay a $250,000 fine. Former partner David Bershad pleaded guilty to conspiracy and agreed to cooperate with the government. Schulman and Bershad are scheduled to be sentenced later this year. With Weiss’ guilty plea, there are two defendants remaining in the case — the firm itself and attorney Paul T. Selzer. Trials for those defendants are scheduled in August.

Ex-Pa. senator convicted of 137 corruption counts

PHILADELPHIA  – Vincent Fumo, once one of the most powerful figures in Pennsylvania politics, was convicted Monday of more than 130 counts of corruption for schemes that defrauded the state Senate and others of more than $3.5 million and allowed him to live a lavish lifestyle.
The 65-year-old former state senator was found guilty of all 137 counts against him, which also included obstruction of justice for destroying e-mail evidence. The jury deliberated about the Philadelphia Democrat’s fate for about six days after a five-month trial.

NEWARK, N.J. – The mayors of two New Jersey cities and a state legislator were arrested Thursday in connection with a major corruption and international money-laundering conspiracy probe. Some of the suspects were also allegedly involved in an illegal human organ-selling ring. Among the approximately 30 people arrested were Hoboken Mayor Peter Cammarano, who took office 23 days ago, Secaucus Mayor Dennis Elwell, state Assemblyman Daniel Van Pelt and Jersey City Deputy Mayor Leona Beldini, according to the U.S. Attorney’s Office in Newark.

An FBI spokesman told NBC affiliate WNBC that the investigation involved a “high-volume international money-laundering conspiracy.” WNBC reported that some of the suspects also were accused of accepting cash payments that were taken to help find organs for sick patients in need of transplants. It was unclear where the body parts might have come from or how many surgeries may have been done. Several rabbis in New York and New Jersey were also taken into custody, federal prosecutors said. Cars were backed up four deep with suspects outside the FBI’s Newark office.

FBI and IRS agents were making the roundups in what is being described as one of the biggest investigations of its kind in state history, according to WNBC. The probe is said to have been launched when money transfers drew the interests of federal investigators. The Newark-based Star-Ledger newspaper reported that federal investigators removed at least three boxes of evidence from a Jewish school. A synagogue in Deal, N.J., was also searched. Newark Mayor Cory Booker, who has fought corruption in New Jersey’ largest city, says it’s “an unbelievable morning so far.” A news conference is scheduled for noon at the U.S. attorney’s office in Newark.

In recent years, New Jersey has seen more than 130 corruption-related convictions of public officials. Earlier this month, prosecutors alleged that Assemblyman Joseph Vas, a former Perth Amboy mayor, engaged in a scheme with a political adviser to funnel money through people who were given funds to make contributions. Vas had previously been accused of using his political influence to further a real estate deal that netted him nearly $300,000.

WASHINGTON — Steven Rattner, head of the Obama administration’s auto task force, is leaving that post and will be replaced by former steelworkers official Ron Bloom. The administration said Monday that Rattner decided to return to private life and his family in New York City. Rattner won praise for the job he did managing the massive restructuring of General Motors and Chrysler. But his government service came under a cloud with an investigation of an influence peddling scandal back in New York.  Authorities have said that Rattner, an investment banker, was unlikely to face charges in the investigation which involved a giant state pension fund that provides retirement benefits for more than 1 million government employees.

In a statement, Treasury Secretary Timothy Geithner praised Rattner’s work on the auto industry overhaul. “We are extremely grateful to Steve for his efforts in helping strengthen GM and Chrysler, recapitalize GMAC and support the American auto industry,” Geithner said. “I hope that he takes another opportunity to bring his unique skills to government service in the future.”

Rattner will be replaced by Bloom. He assumes leadership of the task force’s activities as the government transitions from day-to-day restructuring to “protecting the substantial investment the American taxpayers have made in GM, Chrysler and GMAC,” Geithner said.

How Washington’s new riches destroyed Tom Daschle.
Norman Ornstein, The New Republic Published: Wednesday, February 04, 2009

So Damn Much Money is the title of Bob Kaiser’s penetrating book on the explosion of lobbying and corruption in Washington over the past quarter century. Kaiser is right, and so is Barack Obama in his attempt to attenuate the corrosive links between lobbying and government–even with the hiccup created by Tom Daschle’s withdrawal.

In over 39 years in Washington, I have seen the city transformed from a sterile national capital akin to Canberra or Brasilia into a social, cultural, culinary, and economic metropolis that can (almost) compete with London and Paris. In 1969, when I arrived here, there was limited regional theater, the Smithsonian museums, and a literal handful of “exotic” restaurants (the most exotic of which was a Cuban dive called the Omega). Fancy clothing was the purview of Raleigh’s, where Hickey-Freeman was as hip as it got.

Today, the museums are world-class, as are the restaurants, the art scene, the fashion. But all this pales in comparison to the biggest change: the sheer amount of money sloshing around. In 1970, the federal budget was all of $195 billion. Today, the budget is over $3 trillion.

With so many federal dollars at stake, the capital injected into the system to influence government decisions has exploded. Law firms, lobbying firms, public relations firms–all have mushroomed over the past four decades, creating thousands of high-paying jobs, some going well into the seven figures.

In 1969, a member of Congress earned $42,500. Today, the pay is nearly four times that, $169,300. But in 1969, the salary of a first-year associate at prime Washington firms was around $10,000–while today, the starting pay for a first-year associate is $160,000, not including hefty bonuses for those who have clerked for a federal judge. Back then, a senior partner in a Washington law firm would earn a bit more than a member of Congress; today, that partner might make ten times a congressional salary.

The disparities have grown even sharper with lobbyists. In 1969, a newly minted lobbyist with solid Capitol Hill experience could count on making a touch more than the $10,000 they earned as congressional staff. Today, the congressional staffer making $50,000 can look at a peer making five or six times that much as a lobbyist. An assistant secretary in an executive department can make similar multiples upon leaving office and taking up lobbying. The explosion of public relations and lobbying firms has meant that huge conglomerates like Burson-Marsteller, Ogilvy, Hill & Knowlton, and WPP have bought up boutique firms created by former executive branch and congressional staffers, turning these staffers into instant multi-millionaires.

It is no wonder that the Washington area is now filled with neighborhoods of three-million-dollar houses; that the city now has its own version of Rodeo Drive, with a Jimmy Choo shoe store even.

Living in a prosperous, vibrant city is nice. But the corrupting influence of all that money is palpable. For senior members of Congress, it is not easy to see one’s peers–much less one’s former employees–leave the Hill and make so much more money. The seemingly inexplicable petty corruption of powerhouses like Dan Rostenkowski and Ted Stevens can be explained, I believe, by their belief that they were making such immense sacrifices to stay in public service that a few additional perks were well-deserved–and still left them far poorer than their lobbyist friends. And for the first time, we have young people who enter public service, not out of idealism or even a thirst for power, but out of a desire to make money.

Jack Abramoff and his colleagues showed that corruption can be painfully blatant. But often a more subtle dynamic is present: congressional staffers, members of Congress, and executive officials answer the phone calls and see the unsavory clients of lobbyists who enjoy prime tickets to Redskins games and golf at Burning Tree or might at some future point be their employers–who wants to alienate someone who might hold the key to a million-dollar job? Laws and regulations get more complicated when drafted by staffers and agency officials who know their market value is much higher when they are the ones who can interpret the nuances or find the loopholes when they leave government service.

Many of these lobbyists and consultants are my friends; most are very honorable people, but all–including Tom Daschle, a man of real integrity and strong basic values–are caught up in a system that is becoming more difficult to keep on the straight and narrow

That is why President Obama’s tough ethics and lobbying restrictions, the most far-reaching ever, are so welcome. Obama’s executive order has a blanket gift ban, will block lobbyists from taking jobs in his administration in any area where they have lobbied over the previous two years, and will bar administration officials from lobbying his administration at all after they leave office–for what could be a full eight years.

There is no doubt that some extremely talented people will be barred from taking jobs in the administration–and others will shrink from the prospect, given the hit on their future earning capability. But there are many talented people who will answer the call to public service without seeing it as an inevitable route to riches. In the rare case where a person is deemed indispensable, there is a waiver provision (first employed for Obama’s nominee for Deputy Secretary of Defense Bill Lynn) but the president has pledged to make it very rare. And, as the Lynn nomination shows, each waiver will get a lot of scrutiny.

Of course, there is another serious price, which has become more apparent over the past few days. Set tough standards, combine them with the kind of vetting process that is the equivalent of full body cavity searches, and you will inevitably have casualties, like Tom Daschle and Nancy Killefer.

None of this suggests that Obama should rethink or dilute either his ethics reform package or his willingness to recruit Washington insiders for key positions. And tough as the reform measures are, they are only the first step in breaking the corrupting influence of money in Washington. Ideally, these moves will encourage Congress to create its own sharper limitations on members and staff moving into lucrative lobbying posts. And it is now critical to pass campaign finance reform that tilts the system dramatically toward small donors and away from big shots, including Washington lobbyists. These steps will not end corruption or the impact of money; a huge federal government invites both. They will not keep some nominees from stepping into embarrassing situations; indeed, they may result in some very good people deciding it is not worth entering government. But at least, for the first time in a long time, public service is being framed as a calling, not as a springboard to get a larger piece of that huge pie.

Hilarious! This is like watching a grade school argument unfold. Democrats tossed the Republicans a hard ball (we will indict and prosecute former Bush lawyers for advising legalities of torture) – so the Republicans toss the ball back “you knew this was happening and never objected” – The political winds have shifted and now pols are getting caught in a sandstorm. Even Majority leader, Steny Hoyer, is asking for ALL the facts to be revealed. My guess? This will die a slow death because both parties would be harmed. In the meantime – more lies, deceit and distractions while Rome is burning…

WASHINGTON (CNN) — A source close to House Speaker Nancy Pelosi now confirms that Pelosi was told in February 2003 by her intelligence aide, Michael Sheehy, that waterboarding was actually used on CIA detainee Abu Zubaydah. Source says Nancy Pelosi didn’t object about waterboard usage because she wasn’t personally briefed about it. Source says Nancy Pelosi didn’t object about waterboard usage because she wasn’t personally briefed about it. This appears to contradict Pelosi’s account that she was never told waterboarding actually happened, only that the administration was considering using it. Sheehy attended a briefing in which waterboarding was discussed in February 2003, with Rep. Jane Harman, D-California, who took over Pelosi’s spot as the ranking Democrat on the House Intelligence Committee. This source says Pelosi didn’t object when she learned that waterboarding was being used because she had not been personally briefed about it — only her aide had been told. The source said Pelosi supported a letter that Harman sent to the administration at the time raising concerns. The source asked not to be identified because of the sensitive nature of matters discussed in classified intelligence briefings.

Pelosi admits attending one briefing in September 2002, but at a news conference last month, she was adamant that she did not know waterboarding was used. “At that or any other briefing, and that was the only briefing that I was briefed on in that regard, we were not — I repeat, we were not — told that waterboarding or any of these other enhanced interrogation methods were used, ” Pelosi said on April 23. Some Republicans have called for Pelosi to testify at congressional hearings. The number two House Democrat — Majority Leader Steny Hoyer, D-Maryland — said Tuesday, “I think the facts need to get out” regarding what members of Congress had been told about harsh interrogations. But when asked whether Pelosi testifying would be appropriate, Hoyer did not directly answer the question, saying, “The issue is what was done. If you don’t have the facts pounded on the table, they (Republicans) are pounding on the table, or they are pounding on Speaker Pelosi. Take your pick. But they are doing so as a distraction, as a distraction from what was done in this case.”

Murtha could have an entire website devoted to his corruption tactics…
The Washington Post – Tues., May 5, 2009

WASHINGTON – The headquarters of Murtech, in a low-slung, bland building in a Glen Burnie business park, has its blinds drawn tight and few signs of life. On several days of visits, a handful of cars sit in the parking lot, and no trucks arrive at the 10 loading bays at the back of the building. Yet last year, Murtech received $4 million in Pentagon work, all of it without competition, for a variety of warehousing and engineering services. With its long corridor of sparsely occupied offices and an unmanned reception area, Murtech’s most striking feature is its owner — Robert C. Murtha Jr., 49. He is the nephew of Rep. John P. Murtha, the Pennsylvania Democrat who has significant sway over the Defense Department’s spending as chairman of the House Appropriations defense subcommittee.

Robert Murtha said he is not at liberty to discuss in detail what his company does, but for four years it has subsisted on defense contracts, according to records and interviews. He said Murtech’s 17 employees “provide necessary logistical support” to Pentagon testing programs that focus on detecting chemical, biological, radiological and nuclear threats, “and that’s about as far as I feel comfortable going.” Giving more details could provide important clues to terrorist plotters, he said. Murtha said he does not advertise being the nephew of John Murtha and considers it “unfortunate” that some will unfairly assume Murtech received its federal contracts because of his uncle’s influence at the Pentagon. “If we’re not doing our job well, we wouldn’t be doing our job,” he said. “I’m successful at the work I do because of the skill sets I have. . . . You don’t know how good someone is unless you work with them.” A spokesman at Murtha’s office did not return calls seeking comment. The lawmaker, a former Marine, has said in the past that he is proud of his family’s service to the military and the government.

Over the years, John Murtha has proudly claimed credit for using his Appropriations Committee seat to steer hundreds of millions in Pentagon work to companies in his district, many of them fledgling enterprises run by campaign contributors. His influence also may be seen in the military improvements at the Johnstown airport that bears his name. The little-used commuter airport doubles as a wartime preparedness facility for the Pentagon after $30 million in improvements.

Family ties
Murtha’s power has had beneficial effects within his family. His brother, Robert C. “Kit” Murtha, built a longtime lobbying practice around clients seeking defense funds through the Appropriations Committee and became one of the top members of KSA, a lobbying firm whose contractor clients often received multimillion-dollar earmarks directed through the committee chairman. Robert C. Murtha Jr. of Murtech is Kit Murtha’s son. He also is a former Marine who once served as a presidential security officer and aide to the president for White House functions. He worked for eight years for ACS, a defense and information technology contractor. When Lockheed purchased ACS in 2004, he started several companies, including Murtech, which he registered as a defense contracting firm. Murtech received its contracts primarily from the Army Space and Missile Defense Command in Huntsville, Ala., which has been generous to companies in John Murtha’s district and enjoys a close relationship with the congressman through a mutual interest in breast cancer research. The Army command has won at least $200 million a year in federal funding for the cancer research, of which Rep. Murtha is a stalwart supporter. In a program called Missiles to Mammograms the command has collaborated with a contractor in Murtha’s district, Windber Medical Center, in a multimillion-dollar project to explore using missile-tracking technology to detect breast cancer. The command awarded its first storage contract to Murtech without competitive bidding, paying $1.4 million a year. Robert Murtha Jr. says the no-bid arrangement was “the government’s choice” and occurred because the government “got itself in a bind.” A contract with SA Scientific of San Antonio was about to lapse, and the command needed Murtech, then serving as a subcontractor to the Texas company, to store materials for the military’s Critical Reagents Program. The program produces lab materials that can be used in handheld devices and sensors to detect the presence of biological toxins.

“We were uniquely qualified because we had already been doing that work,” Murtha said. In justifying the award, the command said in a spring 2007 notice that “Murtech, Inc. possesses a unique combination of certain essential capabilities” to perform the warehousing. Leo Fratis, the Army contracting officer who handled the matter, said there was “nothing improper” about the contract. He said it was awarded on a no-bid basis only because the Army command “had a lot of things going on at the time.”
Pentagon spokesman Julius Evans said the congressman never contacted the Army command about his nephew’s company and has no say in its procurement decisions. “Congressman Murtha has had no influence over any contract award by our organization,” Evans said. The Pentagon has paid $2 million to Murtech to provide “logistics and engineering” for tests of joint dismountable reconnaissance systems, emergency tools and kits that troops can use to evaluate the environment when a release of biological or chemical agents is suspected. Robert Murtha Jr. explained that the work involves Murtech employees moving equipment to Army test locations.

Murtech also was awarded a large piece of military business in September, as part of a contract for detection equipment awarded to ICX Technologies, a client of the lobbying firm PMA Group. PMA founder Paul Magliocchetti is a close friend of John Murtha’s, and his firm’s clients were highly successful in securing hundreds of millions of dollars in defense earmarks from Murtha. PMA is under federal investigation for its campaign donations to Murtha and other lawmakers. Several members of the congressman’s family have served in the military and worked in the government contracting arena. There’s no evidence that Murtech has received direct congressional earmarks. A congressional rule imposed in 2007 requires that lawmakers certify that the earmarks they add to the federal budget would not benefit them or their family members. The nephew disputes the notion that he has secured Pentagon work because of his family ties. In fact, he said, having a powerful relative can sometimes be a distraction. “I’ve been critiqued all my life, having the last name of Murtha,” he said. “Whenever I walk into a room, I don’t know if you like him or if you don’t like him.”

Are taxpayers getting best value?
But Steve Ellis, a spokesman for the watchdog group Taxpayers for Common Sense, said contracts to Murtech raise questions about whether taxpayers are getting the best value. “Historically we’re always concerned when there is a sole-source or single-bidder contract,” he said. “By definition, the taxpayer isn’t necessarily getting the best deal possible. And certainly when you see the company has close ties to one of the most powerful appropriators in Congress, our antenna really perks up.” During an unannounced visit to Murtech headquarters last week, a reporter asking to talk to the owner was waved away by an employee. “He’s not here. Come back another day,” said the woman who opened Murtech’s security door. “Unfortunately, everybody’s stepped out.” But a few minutes later, Murtha emerged and answered questions about the company.

In an interview, Murtha expressed concern that publicity could be harmful to his business. Tom Mann, a Murtech vice president, also defended the company’s operations, noting that Murtech had won the confidence of the Army by doing a good job. Mann said the $4 million in contracts has not been excessive for the quality of work performed and the demands on the business. “With a warehouse and distribution center, there’s a lot of overhead,” he said. “There’s a huge recurring utility bill.” “Busy, busy. We’re always busy here,” said one employee walking outside the building.

May 4, 2009
BAGHDAD (Reuters) – Iraq’s top anti-corruption official vowed Monday to detain senior Trade Ministry officials even though most of them disappeared last week after Iraqi forces tried to serve them arrest warrants.”We are going ahead with pursuing the arrest of the wanted officials. We are especially determined after what happened a few days ago at the ministry,” Rahim al-Ugaili, a judge and head of the Iraqi Integrity Commission, told Reuters. Last Wednesday, guards at the Trade Ministry in central Baghdad fired shots into the air when the Integrity Commission sent forces to serve arrest warrants for nine ministry employees, including the head of the Iraqi Grain Board and Trade Minister Abdul Falah al-Sudany’s two brothers. The commission forces responded by firing into the air as most of the officials facing arrest orders escaped out the ministry’s back exit. Only the ministry spokesman was arrested.

The government of Prime Minister Nuri al-Maliki has vowed to curb rampant corruption in Iraq, a fledgling democracy whose government was rebuilt from the ground up after the 2003 ouster of Saddam Hussein, but very few officials have been prosecuted.
Iraq has been awash in opportunities for corruption since 2003, due to huge U.S.-funded reconstruction projects, billions of dollars in oil revenues, and weak government oversight. In 2008, only Somalia and Myanmar were seen as more corrupt than Iraq, according to Transparency International. In a country where tens of thousands of people have died since 2003, and armed groups have vied for control of state resources, many anti-corruption officials have been killed or threatened. One former anti-corruption boss fled the country.
The Trade Ministry has denied wrongdoing in the corruption charges, which include allegations of fraud related to the import of food used in Iraq’s public rations program. Sudany, who was not charged, denied in the state newspaper Monday that he was preparing to flee the country and said he was ready to answer any questions about the ministry, which includes the state Grain Board.
An employee of the Trade Ministry, requesting anonymity, said she had not seen any of the officials facing arrest since last Wednesday. Iraq is one of the world’s top importers of rice and wheat. The Grain Board regularly tenders for millions of dollars worth of grain, which is shipped to its southern Basra port and distributed across the country.

In November of 2007, while campaigning, John Edwards said: “Washington is awash with corrupt money, with lobbyists who pass it out, with politicians who ask for it,” he said. In finishing his speech, he reiterated: “this election is the ‘great moral test of our generation.’ Now, 18 months later we have Mr. Edwards being investigated for use of PAC money for personal use.
Review this release and try and control your anger…

RALEIGH, N.C. (AP) — His once-prominent political career is buried and the turmoil of his marriage is playing out in public. Now, John Edwards is facing a federal inquiry. The two-time Democratic presidential candidate acknowledged Sunday that investigators are assessing how he spent his campaign funds — a subject that could carry his extramarital affair from the tabloids to the courtroom. Edwards’ political action committee paid more than $100,000 for video production to the firm of the woman with whom Edwards had an affair. The former North Carolina senator said in a carefully worded statement that he is cooperating. “I am confident that no funds from my campaign were used improperly,” Edwards said in the statement. “However, I know that it is the role of government to ensure that this is true. We have made available to the United States both the people and the information necessary to help them get the issue resolved efficiently and in a timely matter.”

While Edwards focused his comment on campaign funds, he also had a range of other fundraising organizations — including two nonprofits and a poverty center at his alma mater — that have come under scrutiny. Chief among them was the PAC that paid Rielle Hunter’s company for several months in 2006 for Web videos that documented Edwards’ travels and advocacy in the months leading up to his 2008 presidential campaign. The committee also paid her firm an additional $14,086.50 on April 1, 2007. Edwards acknowledged the affair with Hunter last year, months after dropping his presidential bid.

At the time of the 2007 payment, the PAC only had $7,932.95 in cash on hand, according to records filed with the Federal Election Commission. That day, according to the records, Edwards’ presidential campaign paid the PAC $14,034.61 for what is listed as a “furniture purchase.” Willfully converting money from a political action committee for personal use is a federal crime. The furniture money was one of just five contributions to the political action committee between April 1 to June 30, 2007. The other four were on June 30, the last day of the reporting period, including a $3,000 contribution from the wife of Edwards’ finance chairman, Fred Baron.
Baron, Edwards’ national finance chairman and a wealthy Dallas-based trial attorney, said last year that he quietly began sending money to Hunter to resettle in California. He said no campaign funds were used and that Hunter was not working for the campaign when he started giving her money. Edwards has said he was unaware of the payments. Baron died of cancer in October.

U.S. Attorney George Holding has declined to comment and said he won’t confirm or deny an investigation. Kate Michelman, a former head of the abortion-rights group NARAL who advised the Edwards campaign, said she hopes there was no wrongdoing.

“All of us remain very saddened by what has happened to John, because he was right on the policies,” Michelman said Sunday. “It remains a very sad occurrence for all of us. It’s sad for John and Elizabeth, and this is just one more problem for them to deal with.”
Edwards, 55, powered onto the national scene in 1998, when he won a seat for the U.S. Senate in his first political campaign. With smooth speech and good looks, the former trial lawyer ran for the White House in 2004 and was tapped as Sen. John Kerry’s running mate. He returned to the campaign trail in a 2008 presidential bid but was largely overshadowed by a duel between Hillary Clinton, vying to be the first female president, and Barack Obama, who did become the first black president. Since announcing the affair, Edwards has remained largely secluded, and he canceled all his public appearances before the November election because he said he didn’t want to be a distraction for Obama.

His wife, Elizabeth, who is terminally ill with cancer, will soon be releasing a book talking about the affair. In it, she writes that news of the affair made her vomit. She also describes Hunter as “pathetic.”

14 February 2008
It will take more than one dramatic bust to clean up New York’s mob-plagued building industry. Federal and local prosecutors were quick to brand last week’s massive bust of 62 alleged Gambino crime family members, union officials, and construction executives as “historic,” “extraordinary,” and “a milestone toward eradicating” mob influence in New York’s building industry. But the real message of the indictments is that even after decades of intensive investigation by law enforcement, organized crime remains a powerful force within the city’s construction industry and in related businesses—like trucking—that are particularly susceptible to mob corruption. Even spectacular busts won’t end mob influence unless government presses for reforms that transform the very nature of the construction business—something that politicians have long refused to do. The construction industry operates like few other businesses today, especially in New York, because of outdated labor practices. In most unionized industries, a firm hires workers who then join the union; in construction, by contrast, labor law permits contracts between builders and unions in which unions effectively have power over hiring. They enlist workers in their organizations first and then send them out on jobs.

Mobsters have used control of hiring to dominate construction in New York. “Wise guys” can place friends or “associates” in key positions, sending them to oversee construction sites, where they shake down contractors and enforce mob discipline among union members. And they can demand payoffs from people trying to get into the business, providing a lucrative source of cash. Indeed, last week’s indictment contained a number of counts charging that Gambino associates accepted bribes so that “unqualified” individuals could gain union cards. Control of hiring also gives mob-connected union bosses access to pension and health benefits funds, which they regularly fleece. The latest indictments, for instance, charge Gambino associates with underreporting the hours worked by some Teamsters’ union members who drive trucks that service construction sites, and pocketing money that was supposed to fund benefits and pensions. Such schemes are a reminder that mobbed-up construction unions haven’t represented their workers’ best interests.

New York State’s laws and policies add to the industry’s problems by snuffing out competition. The state decrees that on all public construction projects—representing a huge chunk of the industry’s revenue pie—government must pay even nonunionized workers a “prevailing” wage that in most cases is equal to the highest union worker’s wage. The law sharply reduces the ability of non-union contractors to get government work, since they lose any pricing advantage that lower wages would give them. Thus, many don’t even bother to bid on government contracts, which the construction unions inevitable win. That’s the kind of monopoly that mobsters love. One of the rare circumstances when the “prevailing wage” doesn’t prevail on public jobs in New York State is when mobbed-up unions solicit bribes from contractors so that they can use nonunion workers. The mob, in other words, plays both sides of the fence.

The state’s Wicks Law further aids the wise guys by requiring government to carve up public construction projects into at least four separate bidding packages, multiplying the number of contractors and subcontractors involved in any project and adding layers of complexity that encourage fraud, bribery, and bid rigging. For decades, organized crime experts have urged the state to repeal or modify the law because it’s so hard for local officials to police. But the unions’ political allies in the state legislature have refused to do so—the unions love the bureaucracy, inefficiency, and extra work (and workers) that Wicks requires. Governor Eliot Spitzer is the latest to propose amending Wicks, but his reform efforts are stuck in the state legislature.

Using control of construction unions as leverage, the mob has also extended its tendrils to the many contractors and subcontractors that do business in New York, effectively creating cartels that reduce legitimate competition and drive up prices. Over the years, mob-owned or controlled companies in the city have monopolized everything from supplying concrete for construction projects to contracts for painting and drywall installation. The price of this mob control—what prosecutors last week branded the “corrosive influence” of organized crime on the construction industry—adds hundreds of millions of dollars to the cost of building in the city. In one infamous and representative case from the early 1980s, New York State was overcharged some $12 million for the concrete used to build the Jacob Javits Convention Center because a mob cartel led by Anthony “Fat Tony” Salerno controlled the business, and no legitimate firms would bid against it.

The current state of the local construction industry contrasts unfavorably with the city’s carting industry, in which the mob’s influence was dramatically suppressed in the 1990s by aggressive prosecutions and structural reforms. Prompted by threats against a major national competitor, BFI, that tried to pry its way into New York, local authorities began a vigorous investigation of the carting industry and followed up successful indictments and prosecutions by seizing mobbed-up companies and urging landlords to do business with BFI and other “clean” shops. The city, meanwhile, set up a commission to investigate and oversee new companies entering the industry. The eventual result: a significant decline in carting prices for local businesses and an end to mob violence that had plagued the industry for years.

In the aftermath of these moves, then-Mayor Rudolph Giuliani proposed a similar commission to oversee the construction industry. But the Giuliani-led effort died in the face of fierce opposition from the industry and its city council friends, who complained that a commission would make the construction business too bureaucratic and cumbersome. Not surprisingly, neither the industry nor its political friends proposed any alternate solutions to the problem, leaving the status quo unchanged—and that was just fine with the mob. Even as prosecutors make strides with indictments against members of the so-called five Mafia families in New York, investigators warn that new groups representing Asian and Eastern European mobsters are making headway in labor racketeering in New York City. Without better oversight and structural changes to the construction industry, a new generation of mobsters lies waiting to take over.
Steven Malanga is senior editor of City Journal and a senior fellow at the Manhattan Institute. He is a coauthor of The Immigration Solution.