Monthly Archive for October, 2009

In Russia, corruption is worn on the wrist

October 26, 2009, by Seth Hettena. 1 Comment

Vedomosti, a gutsy Russian business newspaper, has come up with a rather ingenious way of studying local officials for possible signs of corruption.

It published 36 photos of Russian officials, including Prime Minister Vladimir Putin and President Dmitry Medvedev.

Vedomosti found the most expensive watch on the wrist of Vladimir Resin, the deputy mayor of Moscow responsible for the construction sector. In his official biography, he says his only hobby is labor.

That labor has been quite lucrative for Deputy Mayor Resin. He is shown above wearing a GreubelForsey Double Tourbillon 30° that costs either $360,000 (for the white gold edition) or $425,000 for the platinum edition.

But that’s not even the most expensive watch in his collection.

He was also photographed wearing a watch made by DeWitt, the La Pressy Grande Complication model. This is a watch that retails for more than $1 million.

Resin has overseen a building boom in Moscow that has been thoroughly corrupted. Earlier this year, the Russian interior ministry announced that a group of Moscow city officials took $250 million in bribes. Also this year, Ikea halted construction in Russia, citing pervasive corruption and demands for bribes, according to The New York Times.

Ramzan Kadyrov, the former warlord who switched sides to become president the Chechen region wears a Bovet watch worth around $300,000, the newspaper wrote. The governor of the industrial Samara region, Vladimir Artyakov, poses in a DeWitt watch worth $223,427.

President Dmitry Medvedev’s timepiece is a far more modest $32,200 Breguet. Putin has twice given away Blancpain watches worth $10,500.

Transparency International ranks Russia 147th out of 180 in its global corruption index.

Brent Wilkes: Justice Delayed

October 9, 2009, by Seth Hettena. Closed

Remember Brent Wilkes? The formerly high-flying San Diego defense contractor was sentenced to 12 years in prison for bribing former Congressman Randy “Duke” Cunningham, but it will be a long time before Wilkes is behind bars.

Wilkes has been free since January on $2 million bail while he appeals his conviction.

The 9th U.S. Circuit Court of Appeals recently delayed the appeal for the third time this year after Wilkes’ court-appointed attorneys argued that they needed more time.

All the paperwork in the case is now due April 9, 2010. Unless there’s another delay.

According to the court, it takes on average 4-5 months for the 9th Circuit to hear oral arguments, and then three months to a year for the court to decide, so Wilkes likely won’t have a decision before 2011.

By then, Wilkes’ former consultant and fellow convicted Cunningham briber, Mitch Wade, will be nearing the end of his sentence, as will Wilkes lifelong best friend, Kyle “Dusty” Foggo, the CIA’s former executive director.

Cunningham has a 2013 release date.

How defense giant SAIC made $3.5b in 5 years

October 9, 2009, by Seth Hettena. Closed

In the Hall of Fame of missed business opportunities, a special place is reserved for Emmit McHenry.

In 1995, McHenry sold his small company called Network Solutions for $4.7 million to the secretive and powerful San Diego defense giant SAIC.

Five years later, McHenry’s business sold again for $3.5 billion.

Network Solutions (known today as VeriSign) administers a database of 90 million domain names that includes all the dot-coms on the Internet (including this one). This database told your computer where to find the page you are now reading. Without it, there would be no Internet as we know it. No Google. No Amazon.

If you haven’t heard the full story of SAIC and Network Solutions it’s because the full story hasn’t really been told before. SAIC hasn’t exactly tooted its own horn on the whole the Network Solutions saga. Many were outraged that the government had granted the employee-owned company what amounted to a license to print money.

In this 2-part piece by my friend Bruce Bigelow at Xconomy, a local San Diego business website that I have done some work for in the past, got SAIC founder Robert Beyster to tell the story.

In SAIC’s hands, McHenry’s small company turned out to be “unbelievably profitable,” says  Robert Beyster, the scientist who founded and ran SAIC until his ouster from the company in 2004. In fact, thanks to Network Solutions, SAIC may have been making too much money:

X: Why did SAIC decide to do the partial IPO in 1997? Did that turn out to be a smart thing to do? SAIC sold 3.3 million common shares, or a 21 percent-stake in Network Solutions, raising more than $59 million. SAIC retained almost 12 million shares of the stock, which carried preferential rights that basically preserved 96 percent control of the company.

JRB: The value of NSI was becoming so great that we wanted to take some of the profits we had made off the table in case of difficulties later on. (emphasis added)

There were — and still are — many people who think this never should have been allowed. The Internet had its origins in a network created by a research unit at the Pentagon and thus belonged to no one. The National Science Foundation oversaw the domain name registration database, a job that it contracted out to Network Solutions.

If McHenry didn’t realize what he had, SAIC sure did. A few months after SAIC acquired the company, the government amended the terms of Network Solutions’ contract. The amendment allowed SAIC to charge $100 to register a domain name (subsequently lowered). Equally important, the contract amendment allowed SAIC to keep 70 percent of the revenue, and gave the company a monopoly over the business.

This monopoly began to rub people the wrong way, and a spate of lawsuits were filed. So SAIC turned to its friends in Washington, says Mitch Daniels, who engineered the Network Solutions deal:

MD: We spent significant amounts of time and money at NSI educating the public, Congress, and senior government officials about aspects of the business that were really important: the Internet, domain names, Internet security, major policy questions involved with domain names, and keeping the “A” server and the other domain names servers running and secure. From 1995 until 2000, we brought at least one-half of the entire United States Senate and House members as well as senior White House and cabinet-level officials to tour our facilities in Herndon, VA.

Even if McHenry had hung on to the company, he would have been unable to marshal the kind of firepower that SAIC had in Washington. After a court held that Network Solutions was assessing an illegal tax, Congress in 1998 slipped language into an appropriations bill that retroactively made this “fee” legal. (See Thomas v. Network Solutions.) One of SAIC’s lobbyists in 1998, incidentally, was the ethically challenged former San Diego congressman Bill Lowery.

Last month, SAIC moved its headquarters to McLean, Va. At last report, it had annual revenues of more than $10 billion.

As for McHenry, he’s moved on and tries not to dwell on what could have been.

CIA Lawyers and the “Legal Principles” memo

October 1, 2009, by Seth Hettena. Closed

This month’s issue of The American Lawyer includes a piece I wrote on the CIA’s Office of General Counsel. Click here to read it (.pdf).

An interesting legal issue that I didn’t mention in the piece involves a document released to the ACLU in August titled “Legal Principles Applicable to CIA Detention and Interrogation of Captured al-Qa’ida Personnel.”(.pdf)

It was written by unnamed CIA attorneys with help from John Yoo, the attorney in the Justice Department’s Office of Legal Counsel. The OLC provides authoritative legal advice to the Executive Branch, and Yoo authored a whole bunch of controversial opinions dealing with torture and wiretapping and who knows what else that were later rescinded.

The “Legal Principles” was drafted in the spring of 2003. Why it was drafted isn’t clear. A few months earlier, Yoo had given the CIA specific advice on the interrogation of Abu Zubaydah, (.pdf) whom President Bush called one of the top three leaders in al-Qaida.

The key difference between the classified Yoo memo and the CIA’s “Legal Principles” is that the latter broadened the application of “enhanced” interrogation, including the waterboard, to apply to anyone connected with the terrorist group.

The “Legal Principles” memo also set no limits on the number of times that the waterboard could be applied, and it added new techniques such as diapering to the list of approved interrogation techniques previously authorized.

Thus the document provided the legal cover needed for aggressive interrogation of all al-Qaida personnel, not just one.

Or did it?

Whether or not the Justice Department formally approved the “Legal Principles” and with it, the expansion of the CIA’s interrogation program, is now a matter of dispute.

The Office of Legal Counsel at the Justice Department said the undated and unsigned bullet points do not constitute a formal opinion, and that this position was made clear to the CIA.

According to the CIA’s Office of General Counsel, the “Legal Principles” memo “embodies DoJ agreement” that the Justice Department’s opinion “extends beyond” the interrogation of a single detainee.  The agency also cited a  National Security Council meeting in July 2003, during which Attorney General John Ashcroft approved use of multiple applications of the waterboard on other detainees.

Even with Ashcroft’s verbal assent, it became clear that the CIA was legally on shaky ground without a formal opinion.

In a review of the interrogation program, CIA Inspector General John Helgerson apparently recommended that CIA lawyers seek a formal opinion from the Justice Department confirming the conclusions outlined in the bullet points.

In March 2004, CIA General Counsel wrote Jack Goldsmith, head of the Justice Department’s Office of Legal Counsel, and asked him to “reaffirm” these “Legal Principles.” Goldsmith declined to do so.

The debate over the “Legal Principles” memo isn’t merely academic. The question of who authorized what is a critical one, especially as a federal prosecutor is reviewing the interrogation program to see whether crimes may have been committed.

As human rights lawyer John Sifton asked, “Without formal authorization, how can anyone involved in the subsequent authorization assert that their actions were legally authorized?”

The “Legal Principles” memo may be the most overlooked document in the whole torture debate.