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Twenty-Five Ideas for Mayor Garcetti

Peter Dreier

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Eric Garcetti has enormous potential to be one of L.A.’s great mayors. He is young (just 42), full of energy, experienced in politics and government, passionate about L.A., brimming with policy ideas, compassionate toward the disadvantaged and a great communicator and explainer. I saw many of these traits up-close when I co-taught a course with him at Occidental College in 2000, and have watched him blossom as he joined the City Council and served as its president.

Now he faces the daunting challenges of running America’s second-biggest, and most diverse, city.

No mayor can succeed unless he or she attends to the routine civic housekeeping tasks that residents expect from municipal governments – fix the potholes, keep traffic flowing, maintain public safety, keep the parks and playgrounds clean and in good repair.

But Garcetti didn’t run for mayor just to be a caretaker. He promised more. He can build on some of the successes of his predecessor but also stake out new directions.

Garcetti inherits a city with more millionaires than any other, while also the capital of homeless and the working poor.

Garcetti inherits a city where the divide between the rich and everyone else is widening. It has more millionaires than any other city but is also the nation’s capital of the working poor. Equally important, the condition of the city’s middle class is precarious as the prices of basic things like housing, health care, food and gas increase faster than incomes.

Despite several years of declining housing prices, the city still has a huge shortage of homes that most L.A. workers and residents can afford. This undermines the city’s business climate. L.A. is a city of renters (over 60% of the population) and most of them are paying more than they can afford just to keep a roof over their heads. If families are paying half or even two-thirds of their incomes in rent, as many are, they have little left to spend at neighborhood businesses and for other basic necessities. And they are constantly at risk of losing their homes. So, not surprisingly, L.A. is the nation’s homelessness capital.

Moreover, the nation’s epidemic of foreclosed and “underwater” homes (where the mortgage exceeds the value of the home) has damaged Los Angeles in several ways.  Even if home prices rise, as they are doing now, many families are hurting, victims of banks that engaged in risky, reckless predatory lending.  But these banks have not been held accountable for bursting the housing bubble, which led to plummeting home prices and a huge loss in property tax revenues. This – and not the pay and pensions for municipal employees – is the major cause of the city’s fiscal problems.

Los Angeles outgrew its suburban roots years ago when the freeways became parking lots. Now Los Angeles needs to grow up around transit stops. Making public transit a real possibility for people trapped in their cars means both building up Los Angeles’ bus and rail system and building up the areas within walking distance of that system.

Los Angeles needs to grow up around transit stops.

In recent years, traffic flows have improved, and new rapid bus routes are in place. The city is now in the early stages of a large-scale expansion of public transportation, which will be the largest land-use change in the city since the build-out of the freeway system. Garcetti’s job will be to help manage land-use policies around that expansion so that they create livable, walkable neighborhoods and maximize use of the transit system, thereby reducing traffic congestion, pollution and harmful gas emissions. Such goals require that working families and core transit riders be able to live around the transit stops and do not get displaced or shut out of those areas by rising rents and home prices.

The success of Measure R in 2008, the “30-10” plan to accelerate implementation of our transit revolution and the 66 percent “yes” vote on Measure J in 2012 (just short of the two-third needed for passage) demonstrate that Los Angeles voters are ready to invest in a transportation transformation. Garcetti should build on this voter trust – and on the partnership between elected officials and labor, business, environmental and community groups – to expand our transit system into one that is robust, environmentally sustainable and financially sound, and that contributes to economic prosperity.

No mayor of a city of more than 4 million people – balkanized by a City Council comprised of 15 powerful fiefdoms and a separate school board – can please everyone. As a member of the City Council, Garcetti had a mostly good relationship with L.A.’s business community, labor unions and neighborhood groups. As mayor, he will be called upon to make some tough choices about raising revenues, spending money and setting rules.

Traditionally, city officials have allowed private investors and developers to dictate the terms of economic development and growth. Business lobbyists consistently warn that efforts to raise wages, improve the environment and public health, and require corporations to be more socially responsible will scare away private capital, increase unemployment and undermine a city’s tax base. Typically, they are bluffing – or, more bluntly, lying. In the 1990s, for example, the L.A. Chamber of Commerce and the Central City Association warned that passing a “living wage” law would bankrupt the city and kill jobs. They were crying wolf. The city’s living wage law has been so successful that it has been expanded several times.

The lesson here is that Los Angeles can and should promote a progressive “growth with equity” policy agenda that balances private profit and public interest.

One of Garcetti’s key tasks is to educate L.A. residents about what city government can and can’t do. No city on its own has the all the resources or legal authority needed to address the myriad of problems — poverty, homelessness, crime and underfunded schools,  traffic congestion and pollution, accelerating foreclosures and abandoned homes, crumbling infrastructure, widening wage inequality,  and escalating health care and food costs – it must confront.  It needs to forge partnerships with county, state and federal officials to adequately address these issues.

At the same time, cities have much more capacity to bring about change than most people realize. They have lots of levers – zoning, regulations, subsidies, tax breaks – to shape economic, physical and environmental conditions.

Another one of Garcetti’s most important tasks will be to persuade business groups that a “healthy business climate” is one where economic prosperity is widely shared by working families. This requires business leaders to have a more enlightened view of their responsibility to the broader community.

Garcetti’s supporters will need to have patience. He and the City Council must reach some consensus on the top priorities for the first year, and then consider what can be accomplished in subsequent years. Inevitably, unanticipated events and crises will intervene, but it is important to have a clear roadmap of where he wants to go. This is a time that requires bold initiatives and decisive action.

 

Here are 25 recommendations to consider:

 

Good Green Jobs and a Clean Environment

1) Support the full implementation of  the newly adopted Don’t Waste LA plan to promote citywide recycling by business and apartment owners, improve working conditions for garbage and recycling workers, and improve public health by eliminating polluting sanitation trucks. Getting the city to zero waste could also create thousands of living wage jobs.

The Don't Waste LA plan would bring recycling to all apartments and businesses.

2) Expand the Department of Water and Power’s goal of reducing energy consumption from 10% to 15% by 2020. That’s like taking more than 50,000 cars off the road. It now gets 40% of its energy from coal-fired plants that pollute our air and contribute to climate change. The DWP has pledged to eliminate coal from its energy mix by 2025 and replace it with cleaner energy sources, including renewable power like solar and wind. Energy efficiency should be part of the new energy mix, as it is the cheapest alternative to dirty energy sources, keeps customer bills low, creates local jobs and helps L.A. adapt to climate change by making homes and businesses more comfortable. The new mayor and City Council should push the DWP to expand programs and help tens of thousands of small businesses, schools and struggling families reduce energy and  water consumption by installing energy-efficient lighting, faucet aerators, attic insulation and the like. This not only greens our neighborhoods. If done right, it can provide middle-class union jobs for L.A.’s unemployed who are being trained to retrofit buildings.

3) Use the city’s land use powers to encourage clean manufacturing jobs centered in green industrial parks and to promote new grocery stores in underserved “food deserts” where residents lack access to affordable and health food.

4) Continue greening the ports and the regional goods movement system – an enormous resource that provides hundreds of thousands of jobs and can do so with clean technology. There are plans for clean freight. We need to create an investment program to build it. Garcetti should support the ongoing efforts to improve the brutal conditions faced by the Port’s 10,000 truck drivers, most of whom are misclassified as independent contractors.

5)  Push for final passage of the city’s ban on plastic bags, which pollute our streets, parks and beaches and cost a small fortune in tax dollars to clean up.

 

Living Wage Employment

6) Support a $15 living wage for the city’s hotel workers.  Tourism is one of L.A.’s biggest industries, occupancy rates are very high and hotels are making big profits. Even so, many of them pay poverty-level wages. Moreover, hotels can’t threaten to move to Arizona, Mexico or Asia. The wage boost would increase workers’ pay by $71 million, most of which would be spent in the local economy and create more jobs.

7) Create a task force to consider adopting a citywide minimum wage for all workers, like the ones in San Francisco and several other cities.

8.) Continue and expand L.A.’s pioneering workforce investment and job training programs, including the path-breaking Construction Careers model, to provide young people with the skills they need to secure good jobs. Build the partnership with the community college system as a key link in the job training system.

9) Take a strong stand against Walmart’s efforts to bring its low-wage jobs to Los Angeles. The retail giant’s attempts to open grocery stores in Chinatown and elsewhere threaten the vitality of the city’s unionized supermarket chains, one of the last remaining sources of decent blue-collar jobs.

 

Affordable Housing and Economic Development

10) Champion, protect and increase the supply of affordable housing, especially in neighborhoods with strong transit service. Increase density and reduce parking requirements around transit stops, but only once there is a clear way to ensure that existing affordable homes are protected and new ones are built. Start to “land bank” property near transit stations to ensure there is land priced reasonably enough to make affordable housing feasible in the “hot” transit-adjacent market. Require that private developers who take advantage of increased density or reduced parking around transit stations include more affordable homes in the development than they tear down or convert.

The new mayor should champion, protect and increase the supply of affordable housing. Photo from Los Angeles County.

11) Enact a desperately needed housing demolition/conversion ordinance to protect rent-regulated units from demolition and condo conversion, particularly as the market heats up and developers trigger another wave of speculation and gentrification. This is particularly important in order to protect affordable rental housing near transit stations.

12) Help break the logjam on an inclusionary mixed-income housing ordinance by advocating for state legislation to give cities the clear authority to adopt inclusionary housing.

13) Champion SB1, the Sustainable Communities bill sponsored by Senator Darrell Steinberg, which would give cities new tools to create revitalize neighborhoods with affordable housing and good jobs without triggering gentrification and displacement. He can help build a coalition of labor, business, environmentalists and community activists to support the legislation and lead the way in inventing a new generation of bottom-up community development.  At the same time, the mayor should work with local housing advocates to create a permanent funding source for affordable housing in the city and county. To make sure this is a top priority, he should appoint a Deputy Mayor to coordinate the many city agencies involved in housing.

14) Make a firm commitment to oppose and stop any effort to weaken or eliminate rent control or housing code enforcement. In a city where more than half of all residents live in rental housing, the administration needs to quickly investigate complaints of rent-control violations and ensure strict landlord compliance.  This will require much better outreach to tenants so they know their rights.

 

Public Transportation

15) Become a national leader in advocating for a federal transportation policy that turns transit investments into a win-win for cities across the country. L.A. has created the model, with the adoption of the Construction Careers policy and the U.S. Employment Plan, to make sure that public funds used to purchase buses and trains create good jobs for those who need them most. By working with business, labor, environmentalists and other transit advocates, along with the new Secretary of Transportation and L.A.’s Congressional delegation, Garcetti can urge Congress to put more resources into the America Fast Forward program, which will improve public transit, create good jobs and improve the environment in cities around the country, and provide LA Metro with the financing needed to build the 30-year transit program in 10 years.

Los Angeles can continue leveraging transit funds to create good jobs where they're needed most, as it has with the groundbreaking Construction Careers policy at Metro.

16) Help L.A. dream big again, as it did in 2008, and begin planning what we could accomplish with another countywide ballot measure in 2016 to fund completion of the transit system. This includes extending the Crenshaw Line to Wilshire Boulevard and connecting it with a new line from Hollywood and Highland, forming a continuous system from North Hollywood to LAX. It also includes a light rail connection from the San Fernando Valley to LAX, extending the Foothill Gold Line to San Bernardino County and on to Ontario Airport, and extending the Eastside Gold Line to both Whittier and El Monte.  In addition, it would complete the Greenline/Crenshaw connection to LAX and extend the Green Line to Torrance, finalize the West Santa Ana Line from downtown L.A. to Cerritos, connect the San Fernando Valley from Burbank Airport to the San Gabriel Valley and finish the “Subway to the Sea” along Wilshire Boulevard.

17) Collaborate with LA Metro to build out the new strategic plan that’s underway for first mile/last mile bicycle, pedestrian and shuttle improvements.

 

Budgets, Taxes and Finance

18) In terms of the city budget, raise revenues by closing loopholes like cracking down on city parking lot owners that skim money from the city’s parking tax. Don’t eliminate the business tax. And don’t blame municipal employees for the city’s budget woes.

19) Review and renegotiate the city’s financing deals with Wall Street banks. During the past decade, the city (including the Port of Los Angeles and LAX) got swindled by banks just like many homeowners did. Banks gouged the city with predatory fees and interest rates, increasing the city’s debt load. Debt service and finance costs together now constitute a huge drain on the city’s budget. Last year, for example, the city paid $560 million, or 8.4% of its expenditures, to service its debt. The city should make the banks renegotiate these deals on better terms and thus save money that is now being siphoned off by Wall Street, whose reckless practices crashed the nation’s (and L.A.’s) economy in the first place.

20) Help build a statewide coalition to champion a California constitutional amendment that lowers the local voter threshold to 55% and restores democracy to the voting process. Why should every “no” vote count twice as much as a “yes” vote? Reducing the local voter threshold will enable voters to step up and provide local governments, and school districts, with the revenue that’s needed to make government work for everyone.

21) Work with L.A. County, the United Way and employers to guarantee that every eligible working person in the city gets the Earned Income Tax Credit, a federal program that boosts the income of the working poor but is sadly underused. Expanding enrollment in the EITC would bring tens of millions of dollars into the local economy.

 

Education

22) Use his bully pulpit to make sure L.A. stops catering to the out-of-state corporations and billionaires, like Walmart and Rupert Murdoch, who want to privatize our public schools, rely on high-stakes testing to evaluate students and teachers, and treat teachers like hired hands rather than professional educators. L.A. has more charter schools than any other big city. A handful of them – like the L.A. Leadership Academy – are innovative and creative. Most of them, however, are educational fast-food franchises. Research shows that most charters are no better and often much worse than public schools in terms of learning outcomes, especially for low-income students and English-language learners. The mayor should use his influence to refocus attention on what’s needed to fix our schools: smaller class sizes, expanded pre-school, more collaborative professional development for teachers and more state funding for public education (California now ranks 47th in per-student funding).

 

Health Care

23) Work with L.A. County to make sure that eligible residents are enrolled in the new Affordable Care Act so they have access to health care services from local providers, especially community health clinics.

 

Immigration Reform

24) If Congress passes comprehensive immigration reform, support groups like the Coalition for Humane Immigrant Rights in LA (CHIRLA) to provide aspiring Americans with basic immigration services.

 

Media Ownership

25) Lend his influence to the effort to keep the Koch brothers or Rupert Murdoch from buying the Los Angeles Times and help find a consortium of local civic leaders to purchase the paper and restore local ownership (or stewardship) that cares more about the city than about quarterly earnings.

Finally, Garcetti must recognize that his success as mayor will depend in part on the ability of L.A.’s progressive movement – unions, community organizing groups, environmentalists, public health advocates, community development organizations, enlightened businesses and others – to join forces around a common agenda to catalyze good jobs, livable neighborhoods and a healthy environment. I hope that our new mayor will follow the example of FDR, who told his progressive supporters: “I agree with you. Now go out and make me do it.”

 

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Politics & Government

NY Pension Chief Cashes in on Natural Gas

Co-published by WNYC and Sludge
Revolving Doors: New York state’s chief investment officer invested millions of retirement dollars in a fossil fuel company – and then joined the company’s board the same week she retired.

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Co-published by WNYC and Sludge

 

New York State’s former top pension investment officer was appointed to the board of a natural gas conglomerate after the pension system bought up the company’s bonds, rejected demands to divest from fossil fuels and supported multimillion-dollar pay packages for the company’s executives after the firm’s stock price had dropped.

Vicki Fuller was appointed as a director of The Williams Companies on July 31st — the same week she left her position as the chief investment officer of the New York State Common Retirement Fund.

The CIO job — appointed by State Comptroller Thomas DiNapoli — is considered one of the world’s most powerful financial positions, directing $207 billion of investments for a system responsible for safeguarding the retirement savings of more than a million current and former state employees and their beneficiaries. Fuller will be granted $275,000 worth of salary and company stock every year for the part-time position serving on Williams’ board.

On the Spot: NY State Comptroller Thomas DiNapoli

The move comes during an increasingly bitter policy debate between the comptroller’s office and environmental groups over whether the pension fund should divest itself from fossil fuel companies that contribute to climate change. In correspondence with DiNapoli over the last two months, major environmental groups have asked whether Fuller’s new position is a reward for her and DiNapoli’s ongoing opposition to selling off the fund’s fossil fuel holdings.

As September’s Climate Week commences in New York, those same pro-divestment groups on Monday sent a letter to the state ethics commission requesting a formal investigation of a comptroller’s office that has already seen one leader sent to prison in an influence-peddling scandal, and another bond investment official recently convicted on bribery charges.

“Ms. Fuller’s appointment calls into question the integrity of the management of the New York State Common Retirement Funds by New York State Comptroller Tom DiNapoli,” wrote 30 groups to state ethics officials. “It is outrageous to us that a person can one day be CIO of the New York state pension funds and the next day take a well-compensated appointment as a board member of the corporation into which she oversaw – or even directed – large investments while helping to shield the company from an adverse divestment decision by the funds.”

DiNapoli’s office says they’ve already reviewed the matter and found nothing wrong. In an August letter to environmental groups, his counsel, Nancy Groenwegen, wrote: “We are not aware of any facts to support a conclusion that Ms. Fuller’s post-[Common Retirement Fund] appointment as an independent director on the Williams board creates a conflict of interest, nor are we aware of any decision under the State’s ethics laws by the Joint Commission on Public Ethics or its predecessor agencies that would prohibit her from accepting such an appointment.”

The controversy combines ongoing concerns about Albany corruption with the simmering debate over whether Democrats like DiNapoli are following through on their promises to do all they can to combat climate change. While DiNapoli escaped a primary challenge in his current reelection bid, environmental groups furious with his opposition to divestment are now pressuring him as he heads into a general election campaign against Republican investment banker Jonathan Trichter.

“This creates red flags because the CIO job is the most powerful appointed financial position in the state of New York,” said former Deputy New York Comptroller Thomas Sanzillo, who served under DiNapoli. “There needs to be an independent review because there is a perception of a conflict of interest.”

The decision to launch an investigation will be up to the Joint Commission on Public Ethics, which is largely comprised of commissioners appointed by a governor who himself has ties to Williams. Capital & Main previously reported that a Cuomo-led political group raked in $100,000 from Williams earlier this year, and Cuomo’s own re-election campaign this year is run by a registered lobbyist for Williams who is on leave from her firm. At the same time, Williams is asking the Cuomo administration to approve a controversial pipeline that environmentalists say threatens the state’s waterways.

Comptroller’s Office Cites Internal Review

As comptroller, DiNapoli serves as the sole trustee of the state’s pension system. He appointed Fuller CIO in 2012. During Fuller’s six-year tenure in that $365,000-a-year job, the pension fund more than doubled its total stock and bond holdings in Williams. New York’s state pension fund is now one of Williams’ 100 largest institutional shareholders, according to Nasdaq records.

Last year, as a major shareholder, the pension system voted to support an executive compensation program that paid the company’s top officials $62 million between 2014 and 2016 — a period that saw the firm’s stock price plummet nearly 20 percent. This year, nine days after Fuller left her state job, the comptroller’s office voted against the company’s executive compensation program.

Under Fuller, the pension system in early 2015 added $110 million worth of Williams bonds to the state’s portfolio. That same year, Moody’s changed Williams’ financial outlook to “negative” in a report warning that its bonds could be particularly risky investments.

The company and its affiliates, wrote Moody’s, were “weakly positioned for their respective [bond] ratings owing to their high financial leverage and the execution risk on growth projects.”

The specific bonds New York purchased were downgraded in 2016, but have since returned to investment grade, according to the comptroller’s office.

DiNapoli, a former assemblyman from Long Island, took over the office in 2007 following the resignation of then-Comptroller Alan Hevesi in a fraud scandal. Later, Hevesi also pleaded guilty in a pay-to-play scandal in which he steered $250 million of pension fund investments to a private equity fund after receiving nearly $1 million in gifts from the founder of the fund.

In 2009, DiNapoli issued an executive order that created a new code of conduct for the comptroller’s office. It established wide-reaching policies governing conflicts of interest and financial transparency. In 2016, those policies were lauded by an outside contractor that was hired by the comptroller’s office to review its ethics rules. However, DiNapoli’s updated code of conduct still did not place any limitations on the type of employment investment officers can seek after leaving the comptroller’s office or any other post-employment ethics guidelines.

While environmental groups are calling for an independent investigation of Fuller’s move, the comptroller’s office says it has already conducted its own internal review, according to the letter from DiNapoli’s counsel.

In the lead-up to Fuller announcing her plan to retire from her government job, Fuller was told of an ethics advisory that requires state officials to recuse themselves from matters involving companies offering them post-government employment, and to wait 30 days from the recusal before discussing that employment.

Fuller told the comptroller’s office “that the company had no matters pending” before the pension fund, and DiNapoli’s office said it “confirmed that there were no investment matters involving the Williams Companies pending during the relevant time frame of May-July 2018.”

During that time, however, state officials had the ongoing power to buy or sell the pension fund’s holdings in Williams — and the pension fund considered resolutions for Williams’ May 10th shareholder meeting. Additionally, Williams was also at that time asking for input from the pension fund and other stockholders on a proposed merger and financial reorganization of the company.

For its part, Williams said Fuller’s appointment to the company’s board had nothing to do with decisions at the pension fund.

“Ms. Fuller came to the company’s attention through a third-party recruitment firm that was engaged to assist the company in replacing a retiring director,” said Williams spokesperson Keith Isbell. “She did not meet with any members of the company’s board or management until after the May 2018 announcement of her retirement from the NYS Common Retirement Fund.”

Isbell said Fuller will not be expected to interact with the New York state pension fund in her role on Williams’ board. Both Fuller and DiNapoli declined interview requests for this story.

A Larger Debate Over Divestment

The battle over Fuller’s move underscores not only ongoing concerns about the revolving door between business and government in Albany, but also environmentalists’ demands for investors across the globe to sell off their holdings in fossil fuel companies. Already, institutions representing more than $6 trillion of capital have committed to divest, and in New York City, Mayor Bill de Blasio and city Comptroller Scott Stringer have supported divestment and announced new investments in renewable energy.

More than six percent — or roughly $13 billion — of New York’s state pension fund is in fossil fuel-related investments, according to a report by the activist group Fossil Free. While DiNapoli was running for reelection the year before the state bought Williams’ bonds, he said he would consider following environmental groups’ demands to divest the fund from fossil fuel companies.

However, DiNapoli has since refused to divest, even as New York City pension funds divest and state legislators and the governor have demanded the state follow suit. In 2016 — less than two years before being appointed to Williams’ board — Fuller led the fight against legislation that would require divestment. She argued that shareholders should instead engage with companies to show them that climate change is a significant risk to their business model.

“We do actively engage our portfolio companies, but we’re patient,” Fuller said at an October 2016 roundtable hosted by state senators Liz Krueger and Brad Hoylman at Baruch College. “So if we think a particular issue requires our attention we will engage the company, write a letter, propose resolutions, vote against board members. And if we are not successful the first time we keep coming back. That approach has borne fruit for us. Some people don’t believe in engagement, but I can tell you the proof is what we’ve been able to accomplish.”

To support this assertion, the comptroller’s office has touted DiNapoli-led shareholder resolutions prompting fossil fuel companies to more thoroughly disclose environmental information. Those include a resolution that led to an agreement with Cabot Oil and Gas requiring the company to disclose its policies on using toxic chemicals for fracking; a resolution compelling ExxonMobil to conduct a study of its impact on climate change; and resolutions prompting DTE Energy, Dominion Energy and Southwestern Energy to detail how they would comply with the 2015 Paris Agreement that committed nations across the globe to carbon emission reductions.

Groups like 350.org counter that the most powerful way to reduce fossil fuel development and reduce carbon emissions is for large institutions to divest from oil and gas companies, thereby denying them investment capital.

“Engagement with the fossil fuel producers isn’t working – they’re determined to stick to their business model,” 350.org founder Bill McKibben said in 2015, when New York lawmakers first introduced legislation that would require the pension fund to divest its fossil fuel holdings.

With DiNapoli still opposing divestment three years later, McKibben in May 2018 authored a Rolling Stone magazine essay that said: “Because of (DiNapoli’s) high-profile insistence on ‘engagement’ with the industry, he’s become a stand-in for a thousand other political ‘leaders’ who can’t quite summon the nerve necessary to break with the fossil-fuel industry, even when science and economics are making it clear where the future must lie. It’s so much easier to keep doing what you’ve always done – but at this point inertia is the planet’s most powerful enemy, and DiNapoli is threatening to become inertia’s avatar.”

DiNapoli Touts Work on Climate Change, But Critic Says He’s Being “Used.”

DiNapoli has continued to stake out a public profile as a crusader against climate change. He has said he views climate change as a “material risk for our portfolio” and his office has shifted some of the pension fund’s investments into companies that reduce their carbon footprint. Earlier this month, the pension fund was praised by the Asset Owners Disclosure Project for its work addressing climate risk.

“I continue to speak out when the Fund’s portfolio companies fail to take the steps necessary to adapt to the changing world,” DiNapoli said at the time. “Those of us who are working to make the Paris Agreement a reality may take separate avenues, but we share a common goal — to help build the growing low carbon economy. I am proud that the Fund is part of that worldwide effort.”

The office does not appear to have used that kind of leverage against Williams during Fuller’s tenure. And more generally, some of the fund’s highest profile moves against the industry have not always generated significant results. For example, after DiNapoli made headlines forging the deal with ExxonMobil to publish a study on how climate change could affect its future business, the company used the study to simply reiterate its commitment to a business based on fossil fuel profits.

Meanwhile, the fossil fuel industry has aggressively used DiNapoli to deflect increasing pressure from the divestment movement. In just the last year, the Independent Petroleum Association of America published five separate blog posts and two newspaper essays citing DiNapoli’s opposition to divestment — and embrace of shareholder engagement — as a reason other public officials across the country should reject environmentalists’ demands.

“With the retirement money of New York’s working families on the line, let’s hope that the State Legislature supports Comptroller DiNapoli and pushes back against fossil fuel divestment,” said one of the association’s essays.

“DiNapoli as the sole person in charge of the pension fund’s investment strategy has made it clear that he has no plans to divest,” said another. “Let’s hope the fiduciaries of other pensions across the country follow suit.”

Sanzillo, the former deputy comptroller, said it all adds up to “a rather sophisticated game” in which DiNapoli has become a shield for the industry.

“Why has DiNapoli allowed himself to be used by the industry as their poster child for responsible shareholder engagement?” he asked. “The industry has basically said [DiNapoli] is the greatest thing in the world, and the reason they said that is because he pulled punches on the shareholder work and he is not being forceful….It looks cynical. It looks like he was saying he was pressuring the companies, and then he backed off, and that’s a game that cynical shareholders do play, and there’s something wrong here.”

DiNapoli has rejected suggestions that his anti-divestment strategy is a deliberate defense of the oil and gas industry. Instead, he has asserted that ownership stakes in fossil fuel companies give him necessary leverage over those firms, and he has also insisted that he is fulfilling his fiduciary obligations to generate the largest possible investment returns for pensioners.

“The New York State Common Retirement Fund and the State Comptroller are not being used by anyone,” said DiNapoli’s spokesperson, Jennifer Freeman. “The State Comptroller, as the trustee of the (pension fund), is acting as a prudent investor, committed to ensuring the New York State and Local Retirement System is able to pay retirement income to state and local workers. The Fund’s interest is in protecting its long-term value so public workers have peace of mind that their retirement funds are growing and the cost to taxpayers is minimized.”

In 2017, a study from the Suffolk County Association of Municipal Employees found that the state could forfeit up to $2.8 billion of investment returns if it divests from fossil fuels.

But those projections — and DiNapoli’s underlying argument — have been questioned.

A May report by Corporate Knights found that New York’s pension fund would have generated an additional $15 billion of returns had it sold off its fossil fuel holdings and reinvested them in renewable energy. A July report from the Institute for Energy Economics and Financial Analysis found that in the past three to five years, “Global stock indexes without fossil fuel holdings have outperformed otherwise identical indexes that include fossil fuel companies.”

“Investors with long-term horizons should avoid oil and chemical stocks on investment grounds. They face a sustained headwind,” wrote Jeremy Grantham, the legendary asset manager who co-founded the investment firm GMO. “Ethical arguments for divestments are simply not necessary. They are a pure bonus.”

Critics of the oil and gas industry have asserted that corporations are not properly accounting for their exposure to climate-related losses. Last week, U.S. Senator Elizabeth Warren introduced legislation that would require more climate-related disclosures. At the same time, a new book by journalist Bethany McLean finds that natural gas investments are on shakier financial footing than their quarterly financial reports suggest.

Sanzillo said that if New York state’s pension fund embraces divestment, it can play a pivotal role in the climate change fight because of its sheer size.

“This is the third-largest fund in the United States,” he said. “If the comptroller tells his money managers that we need a portfolio that is fossil-free, every large money manager in the world will have to adapt.

“It tells JP Morgan, Morgan Stanley and all the other major financial advisers that this is the product institutional investors want, and you better come up with it, or you aren’t going to have customers any more,” Sanzillo said.


This story was produced in partnership with WNYC public radio and Sludge, which covers money in politics.

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Politics & Government

A Law Ending Cash Bail Gives Judges Enormous Power Over Defendants

A recently signed bill was supposed to end the tyranny of money bail over low-income people in California’s jails. But critics say it is an example of good intentions becoming bad law.

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Politics & Government

Rick Scott Invested in the Same Financial Firms As Florida’s Pension System

Co-published by MapLight
For most of his time in office, Florida’s governor has shielded his investments from public view. A new disclosure shows Rick Scott and his wife have invested at least $18 million in financial firms managing money for the state’s pension system that he oversees.

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Former SEC Lawyer: “There needs to be an investigation into whether the state is subsidizing Rick Scott’s personal returns.”


Co-published by MapLight

 

Florida Gov. Rick Scott and his wife have invested at least $18 million in three financial firms managing money for the state’s pension system that Scott oversees — a situation that intertwines the governor’s personal finances with his responsibility for supervising state employees’ retirement savings.

The investments were first divulged in a federal financial disclosure form that Scott filed as part of his U.S. Senate campaign in July. For most of his time in office, Scott has shielded his investments from public view, and only reported their overall value in his blind trust.

The terms of Scott’s investments remain undisclosed. The firms’ own corporate documents say they can give certain investors special preferences not afforded to other investors — and experts have in recent years argued that hedge funds, private equity firms, and other “alternative investments” are giving such preferences to elite investors. One former Securities and Exchange Commission attorney told MapLight and Capital & Main that Scott must disclose whether he is being given such preferences.


Critics have raised questions about how blind the Scott family trusts really are.


Florida ethics laws are supposed to prohibit state officials from entering into contractual relationships with companies that do business with their agencies. However, after Scott became governor in 2011, state ethics officials said he and his family members could put their assets into a blind trust to avoid conflicts of interest and still maintain their investments in companies operating in Florida.

Critics have raised questions about how blind the Scott family trusts really are. Scott placed one of his longtime business associates in charge of managing his blind trust. The Tampa Bay Times reported that Scott’s blind trust has invested with a private equity firm tied to a high-speed rail project in Florida. The trust also had an indirect interest in a cancer treatment company that received tax breaks from Scott’s administration.


“The question is whether Rick Scott is being allowed to invest on better terms than the state pension fund.”


“When Governor Scott was elected, he put all of his assets in a blind trust, which is managed by an independent financial professional who decides what assets are bought, sold or changed,” said Scott campaign spokesperson Lauren Schenone. “The rules of the blind trust prevent any specific assets or the value of those assets within the trust from being disclosed to the governor, and those requirements have always been followed.”

Scott is one of three state officials who serve as trustees for the Florida State Board of Administration, which manages a $160 billion fund for roughly 400,000 retirees. Scott, Attorney General Pam Bondi, and Chief Financial Officer Jimmy Patronis oversee lucrative state investment deals granted to cash-hungry Wall Street firms.

The three firms that have received $325 million worth of Florida pension investments have allowed the Scott family’s blind trusts to simultaneously invest their personal fortunes in these funds. Scott’s investments in the funds did not appear in a 2014 disclosure itemizing his holdings. His campaign did not say when the investments were made.

“There are no ethics rules that prohibit or limit a trustee from investing in funds also invested in by the SBA,” said SBA spokesperson John Kuczwanski, though he added that trustees are subject to Florida’s general code of ethics. Kuczwanski said that the governor has no involvement in specific pension investment decisions.

Don Hinkle, a Democratic lawyer, filed a lawsuit last year alleging that the governor has failed to comply with the state’s blind trust and financial disclosure laws. He said he was surprised by the news that Scott had invested in the same firms as the Florida pension system.

“I would think that he would have avoided investments where the state of Florida’s money is propping his up,” Hinkle told MapLight and Capital & Main.

In 2011, a few months after Scott became governor, the SBA committed $150 million to Highline Capital Partners, a New York-based hedge fund. Scott’s financial disclosure shows that his family’s trusts have invested at least $4 million in the same Highline fund as the state.

The SBA also committed $100 million in 2015 to a hedge fund managed by Canyon Capital Advisors, a Los Angeles-based firm created by veterans of the notorious investment bank Drexel Burnham Lambert, which was driven into bankruptcy as a result of illegal and unethical trading practices. Scott and his family have invested at least $12 million in Canyon funds, according to his financial disclosure.

Before Scott became governor, the SBA invested $75 million with VSS, a New York-based private equity firm that was launched by a co-founder of Psychology Today. Scott and his wife, Ann, have invested more than $2.2 million in another VSS fund. A spokesperson for VSS said the firm doesn’t comment on its investors.

All three firms’ SEC filings say they can offer certain investors special fee terms or other benefits not offered to other investors.

“Alternative investment funds have the ability to offer every investor different fees at a different rate of return, so the question is whether Rick Scott is being allowed to invest on better terms than the state pension fund,” said former SEC attorney Edward Siedle, whose Florida-based firm conducts forensic investigations of state pension systems.

“If you give one investor an advantage, another investor has to be disadvantaged,” Siedle said. “That means there needs to be an investigation into whether the state is actually subsidizing Rick Scott’s personal returns and whether the governor enjoys advantages that are harming the retirees.”

Schenone, Scott’s spokesperson, said that his blind trust has “been upheld multiple times by the State Commission on Ethics and the court system. Governor Scott has also followed the requirements of all state and federal financial filings.”

She noted that former Florida Republican Gov. Jeb Bush and Scott’s 2010 Democratic opponent Alex Sink had also used blind trusts, although Scott’s campaign attacked Sink for hers at the time.

“Blind trusts sound good but can run afoul of state laws requiring public officials to disclose their personal finances,” a Scott campaign ad said in 2010. “[But] simply moving large amounts of money into a blind trust does not magically erase the knowledge of what you own.”


This piece was reported by Andrew Perez of MapLight and David Sirota of Capital & Main, and published in partnership with the Florida Center for Investigative Reporting

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Politics & Government

Cuomo Kept Fossil Fuel Pipeline Alive, Then Hired Pipeline’s Lobbyist to Run Reelection Bid

Co-published by WNYC New York Governor Andrew Cuomo’s administration delayed — rather than blocked — a fracked-gas pipeline project just before Cuomo hired Maggie Moran, a registered lobbyist for the pipeline’s parent company, to run his reelection campaign.

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Despite questions about special interests and revolving doors, Cuomo decided to hire a registered lobbyist to run his campaign.



Co-published by WNYC

 

New York Governor Andrew Cuomo hired a lobbyist for a natural-gas pipeline company to run his re-election campaign at the same time his administration was throwing a potential lifeline to the company’s controversial New Jersey-New York pipeline project.

Less than three months before the administration postponed a decision on the project, the fossil fuel company in question also donated $100,000 to a Democratic Party governors’ organization that supports Cuomo, government records show.

Cuomo spokesperson Rich Azzopardi asserted that there was no link between the lobbying, the donations and the administration’s pipeline decisions.

“Protecting New Yorkers and our environment are this administration’s top priorities, which is why decisions on individual projects are made at the agency level by career public servants who conduct a rigorous review of the facts and the science,” Azzopardi said.

The company — Transco, a subsidiary of The Williams Companies, a Tulsa-based fossil fuel conglomerate — has been seeking permission from Cuomo administration regulators since June of 2017. The project is a 23-mile natural gas pipeline from Old Bridge, New Jersey to Rockaway, New York.


Cuomo touts his environmental record but has also declined to reject fossil fuel industry campaign cash.


As residential customers seek to switch from heating oil to natural gas, Williams has argued that the pipeline expansion is necessary to “help ensure that reliable gas supplies are available to support these conversions.” The company says the project will displace about 900,000 barrels of heating oil a year and reduce CO2 emissions in New York City and Long Island.

Critics say the location of the pipeline puts the waters and shores of Lower New York Bay at risk of contamination and other environmental damage, and that it will continue the region’s reliance on fossil fuels, thereby setting back the fight against climate change.

Just this week, New York City Comptroller Scott Stringer called for the project to be terminated — echoing local activists who have demanded a permanent halt to the project.

Cuomo’s Department of Environmental Conservation (DEC) temporarily denied a water quality certification for the pipeline in April. But the ruling also allowed the company to re-submit the proposal for approval “without prejudice” — a maneuver that keeps the embattled project alive. The company submitted a new application in May — and Cuomo has declined to answer questions about whether or not he agrees with Stringer that the proposal should be blocked.

Amid the intensifying battle over the pipeline, Williams hired lobbying firm Kivvit to advocate for its interests in Albany last fall, according to state ethics records. Among the lobbyists registered to represent Williams is Maggie Moran, a well-known operative who advised his gubernatorial campaign in 2010.

In June, while she was registered as a pipeline lobbyist, Cuomo hired her to take the reigns of this year’s campaign. Moran took over two months after Joe Percoco, who ran both of Cuomo’s previous campaigns, was convicted on federal corruption charges — one of several corruption scandals that have dogged the Cuomo administration in recent months. She took a leave of absence from Kivvit when she joined the campaign, a spokesman says.


In the last few years, Cuomo’s administration has faced multiple corruption scandals, fueling critics’ assertions that he is too close to Albany influence peddlers.


State records show that Moran, who declined an interview request, began lobbying on behalf of Williams in September 2017 — three months after Williams first submitted its pipeline proposal to Cuomo administration regulators. Those records also show that Moran’s lobbying has been specifically targeted at the executive branch that Cuomo heads. Kivvit’s website says Moran “oversees all aspects of Kivvit’s day-to-day operations” and Kivvit has continued to lobby for Williams in 2018. Kivvit’s managing director is former Cuomo communications director Rich Bamberger.

As Cuomo administration regulators were reviewing the pipeline, Williams made two donations totaling $100,000 to the Democratic Governors Association, which lists Cuomo as a member of its leadership team and which has provided the campaign with polling research.

Internal Revenue Service records show that in February, one $50,000 donation came from Williams Companies and another $50,000 contribution came from the “Williams Transcontinental Gas Pipeline Company” — which is the overseer of the pipeline project before Cuomo’s administration. The New York Times on Friday reported that in that same month, Cuomo traveled to a Washington, D.C. DGA event on a chartered plane — and the association paid $10,725 for his trip.

Soon after the Williams donations to the DGA and Cuomo’s trip to the DGA event, the DGA gave more than $20,000 to Cuomo’s campaign, according to state disclosure records.

A Cuomo campaign spokesperson, Abbey Collins, said the governor did not solicit Williams’ contribution to the DGA.

Azzopardi, the spokesman for the governor’s office, said: “At no point did the agency or the governor’s office get approached on this project by Kivvit — any suggestion otherwise would be a trip into tinfoil hat country.”

The company has given regularly to both the Democratic and Republican governors’ associations in the past.

Timeline

June 30, 2017 – Transco, a Williams subsidiary, submits an initial application to the New York Department of Environmental Conservation for a water permit for the NESE pipeline.

September, 2017 – The Williams Companies hires public-affairs firm Kivvit to represent the pipeline project to the Cuomo administration.

Feb. 13, 2018 – The Williams Companies make a $50,000 contribution to the Democratic Governors Association, which lists Andrew Cuomo on its leadership team.

Feb. 21, 2018 – Transco makes a separate $50,000 contribution to the DGA.

April 20, 2018 – Under pressure from environmental groups to permanently block the NESE, the state instead keeps the project alive by dismissing Transco’s application “without prejudice.”

May 17, 2018 – Transco resubmits the water permit application, effectively delaying a final decision on the project until 2019.

May-June, 2018 – New York State ethics records show that Maggie Moran, managing partner at public affairs firm Kivvit, was registered to lobby for Williams on “Energy Issues.”

June 13, 2018 – The DGA makes a $20,166.66 contribution to Cuomo’s reelection campaign.

June 15, 2018 – Cuomo hires Moran to run his campaign, according to Politico.

The 2018 donations appear to be among the company’s largest ever to the DGA. The DGA has said corporate donations to the group cannot be earmarked to specific campaigns or candidates, and therefore there is no link between donations and public-policy influence.

Williams spokesperson Keith Isbell declined to discuss the company’s lobbying activities, its relationship with Moran or its donations to the DGA on the record.

“New York’s energy demands continue to grow at a startling rate,” he said. “The Northeast Supply Enhancement project is a critical step toward ensuring New York has the infrastructure in place to meet that demand with a mix of energy sources that are reliable, affordable and clean.”

In the last few years, Cuomo has faced multiple corruption scandals, fueling critics’ assertions that he is too close to Albany influence peddlers. Percoco, one of his closest aides, was convicted in March on federal corruption charges, and in July several other top Cuomo allies were found guilty of perpetrating a massive bid-rigging scheme.

Despite questions about special interests and revolving doors, Cuomo decided to hire a registered lobbyist to run his campaign amid the corruption trials. That decision follows Cuomo’s 2015 hiring of lobbyist William Mulrow to serve as his top aide in Albany.

Cuomo appointed Mulrow chairman of his reelection campaign last year, and Mulrow returned to his job at Blackstone, a Wall Street colossus that also has had fossil fuel-related business before Cuomo’s administration.

Cuomo is now facing a spirited Democratic primary challenge from actress Cynthia Nixon, who has demanded an end to pipeline approvals. During the campaign, the governor has touted his environmental record, including his formation of the U.S. Climate Alliance with other blue-state governors following the Trump administration’s withdrawal from the Paris Agreement last year. The Cuomo administration has also rejected two other proposed pipeline projects.

But Cuomo has declined to reject fossil fuel industry campaign cash, and earlier this year affirmed his support for natural gas development — even as environmental groups continue to pressure his administration to block proposals for new gas-fired plants and pipeline projects around the state.

In the NESE pipeline fight, the Cuomo administration denied Williams’ subsidiary Transco a water quality certification, citing “potentially significant environmental impacts that raised serious concerns.”

“The construction of the project could have significant water quality impacts in New York State,” said Cuomo DEC appointee Thomas Berkman in a letter released just weeks after Nixon entered the primary race against the governor. “This includes potentially significant impacts from the resuspension of sediments and other contaminants, as well as to habitats due to the disturbance of shellfish beds and other benthic resources. In addition, the construction of the Project could potentially impact Atlantic sturgeon and other protected species.”

However, because state regulators rejected the application “without prejudice,” the state allowed Williams to resubmit its proposal in May. That has raised fears among environmental activists that Cuomo’s administration is delaying a decision on the pipeline until after next week’s gubernatorial primary and the general election in November.

According to bi-monthly reports filed with the state’s Joint Commission on Public Ethics, Moran was registered to lobby the executive branch of New York State government on behalf of Williams as recently as May and June of this year — just as the pipeline’s water quality permit was resubmitted, and just before she joined the Cuomo campaign as manager.

Cuomo campaign spokeswoman Abbey Collins said “Maggie was not on the campaign when the decision was made by the governor’s administration.”

She said Moran’s firm handled media relations and advertising for the company but didn’t lobby the legislature or the executive branch. She said it was required to register as a lobbyist by new rules about companies that have contact with the press.

In a letter filed with state ethics regulators, an official from the Williams Companies said the conglomerate hired Moran’s firm to “engage in communications activities to the general public that spur communications to the executive and legislative branches of New York State government.”

Williams is not the only Moran client with business before Cuomo. State records show that as of June, Moran has also been registered to lobby “administrative branches of New York State government” on behalf of Vertex Pharmaceuticals, which is currently negotiating with the New York Department of Health over the price of its cystic fibrosis drug Orkambi. Records show that Vertex hired Kivvit in May of this year, immediately following a state panel’s recommendation that New York’s Medicaid program impose a price cap on Orkambi.

Another of Moran’s clients at Kivvit is Tesla. The electric carmaker is the parent company of SolarCity, whose state-funded RiverBend factory is at the center of the ongoing Buffalo Billion probe. That investigation has seen Percoco convicted in federal court on three counts of bribery and fraud, and another former Cuomo aide, Todd Howe, plead guilty on similar charges.

Kivvit clients have contributed at least $544,000 to Cuomo’s campaigns since 2014, according to state campaign finance disclosures. Moran herself has donated $10,000 to Cuomo since 2015, records show.

In addition to approval from the Cuomo administration, Williams’ NESE pipeline also needs approval from the Federal Energy Regulatory Commission (FERC), whose five commissioners — four of whom are appointees of President Trump — are expected to issue a ruling on whether the project can move forward later this month.

The agency in March issued a report finding that the project “would result in some adverse environmental impacts” including “long-term impacts on air quality and noise” from a compressor station. However, the same report also asserted that most of the “impacts would be temporary and occur during construction.”

A coalition of environmental and citizens groups, Stop the Williams Pipeline, submitted more than 6,000 comments in opposition to the pipeline to the FERC during its public comment period. The group is also collecting signatures on a petition its members plan to submit to Cuomo later this year.

In announcing his opposition to the pipeline this week, New York City Comptroller Scott Stringer said he was concerned about the impact on many of the region’s sensitive ecosystems.

“The 23-mile pipeline would extend from New Jersey, along the Staten Island coast, past Coney Island and into the Rockaways,” he said in a statement. “Allowing the construction of the pipeline risks damage to many of New York’s most precious habitats and natural assets, including New York Harbor, Jamaica Bay, and the Rockaways’ many beaches.”


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Judging Kavanaugh

Kavanaugh’s Artful Dodging Leaves Roe v. Wade and Other Questions Unanswered

Legal scholar Erwin Chemerinsky says the Supreme Court nominee “is going to move constitutional law very substantially to the right, and this will hurt a lot of people. I think he’s going to be the fifth vote to gut many federal civil rights laws.”

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White House photo of Kavanaugh family with President Trump.

Throughout the Senate Judiciary Committee confirmation hearings on U. S. Supreme Court nominee Brett Kavanaugh, Capital & Main will discuss the proceedings with Erwin Chemerinsky, dean of the University of California, Berkeley School of Law. Below is an excerpt of an interview that followed Wednesday’s testimony.


Capital & Main: Kavanaugh has written extensively on the idea of precedent and, on Wednesday, when asked about Roe v. Wade, described it as “precedent upon precedent.” What does that mean? Is he saying anything of substance?

Erwin Chemerinsky: He’s saying nothing of substance. First, even if the court doesn’t explicitly overrule Roe v. Wade, they can kill it by a thousand cuts by upholding the myriad of laws that impose restrictions on abortion. Two years ago, the court struck down a Texas law that would have closed most of the facilities in the state where abortions were performed. It was 5-3, with Justice [Anthony] Kennedy in the majority. The court can uphold laws like that and basically undercut Roe v. Wade. But beyond that, the fact that he says it’s precedent upon precedent, or that he respects precedent, doesn’t tell us what he’s going to do when he’s a justice and he has the power to overrule Roe v. Wade.

You can respect precedent until you don’t.

Exactly. And that’s true of every justice. I wrote a piece in the National Law Journal a few weeks ago saying that I don’t think the senators should waste their time asking his views on precedent. Because what he’ll say is, “Of course I believe in precedent.” Except sometimes precedent has to be overruled.

Also Read: “Supreme Court Nominee Brett Kavanaugh Faces a Low Admissions Bar”

Earlier this week, the Brookings Institution released a report in which the authors argued that Kavanaugh, if confirmed, must recuse himself from any future cases that deal with criminal investigations personally involving Trump.

I read it. We’re in an unprecedented situation. I can’t think of another time when a president who was under such active criminal investigation and being subjected to so many civil suits was nominating somebody to the Supreme Court. In the context of Richard Nixon, his appointments were in 1969 and 1971, and the Watergate burglary wasn’t until June of 1972. But it’s got to be remembered that whether a justice is recused is entirely up to that justice. Ultimately, if Kavanaugh is confirmed, whether he’ll recuse himself is up to Kavanaugh.

You were also among hundreds of legal scholars who signed a letter opposing the nomination of Kavanaugh. The letter argued that he “reflects a backward-looking view of the Constitution” and that his record “reveals a predisposition to decide cases in order to achieve results that threaten fundamental rights and in some cases the very lives of Americans.” If he is confirmed, what might change?

I think he is going to move constitutional law very substantially to the right, and that this will hurt a lot of people. I think he will be the fifth vote to either effectively or explicitly overrule Roe v. Wade. I think he will be the fifth vote to find that all affirmative action is unconstitutional. I think he’s going to be the fifth vote to allow states much more latitude in imposing the death penalty and draconian punishments. I think he’s going to be the fifth vote to gut many federal civil rights laws. I think that no longer will the majority of the court protect gay and lesbian rights.

During the second day of the confirmation hearing, Kavanaugh was pressed by Democratic senators about his views on executive power—specifically about whether a president has the ability to pardon himself, or whether he can be forced to respond to a subpoena.

He wouldn’t say a word.

So if we’re not going to get any new information from Kavanaugh during the hearing, what does a look at his past tell us about his views on executive power?

He’s got a paper trail on that. He wrote a law review article saying that he doesn’t believe that a sitting president should be subject to criminal or civil investigations. He gave a speech in which he said the case he most wants to see overruled in the Supreme Court is a case called Morrison v. Olson. That was a 1988 case that was 7-1, and which upheld the constitutionality of the independent counsel. He gave a speech where he said that the United States v. Nixon was likely wrongly decided. This was the unanimous Supreme Court case that said President Nixon had to release the Watergate tapes. This is something that makes Kavanaugh very troubling at this moment in history. Now more than ever, we need the courts to enforce the Constitution and check the president. This is a president who shows no understanding of the Constitution at all, who shows enormous autocratic impulses, and we have a Congress that so far has been unwilling to check the president. That means it’s the courts or nothing.


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Judging Kavanaugh

Supreme Court Nominee Brett Kavanaugh Faces a Low Admissions Bar

“Kavanaugh,” says UC Berkeley law school dean Erwin Chemerinsky, “doesn’t have to say any more than is needed to make sure he doesn’t lose the Republican vote, and he knows that.”

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Photo by Drew Angerer/Getty Images

Throughout the Senate Judiciary Committee confirmation hearings on U. S. Supreme Court nominee Brett Kavanaugh, Capital & Main will discuss the proceedings with Erwin Chemerinsky, dean of the University of California, Berkeley School of Law. Below is an excerpt of an interview that followed Tuesday’s testimony.


Capital & Main: The first day saw more than 70 arrests of protesters, along with an attempt by Democrats to delay Kavanaugh’s hearing. How unusual are these sorts of tactics?

Erwin Chemerinsky: It was very unusual for the Democrats to, in such a coordinated way, say that the hearing should be postponed until they have access to documents. Their point is: There’s no hurry. What’s the rush? Why not give us a chance to look at the documents? The problem is, of course, that the Republicans have the majority of the committee, and there’s nothing the minority party can do about it.

What might these documents reveal?

They could contain information that is very relevant to evaluating Brett Kavanaugh. As an example, the memos regarding Jay Bybee, the judge on the Ninth Circuit of Appeals, didn’t come out until after [Bybee] was already confirmed. Among the documents that came out was [his approval of] the so-called torture memos. [Bybee was confirmed by the Senate in 2003; his role in the torture memos wasn’t revealed until the following year.] Bybee would not have been confirmed if those documents had been known prior to his confirmation. So what the Democrats are saying is, “We should have access to all these documents—and we just got 42,000 of them last night. We need time to process them.”

Overall, did the American public learn anything new Tuesday?

No, not anything that we didn’t know before. We knew that Kavanaugh was going to give an opening statement filled with platitudes. And that’s what we got.

Supreme Court confirmation hearings can feel like a public performance in which very little, by design, is actually revealed.

In January 2006, I testified against the confirmation of Samuel Alito. At a break in the proceeding, then-Senator Joe Biden came up to me and said, “This is all an exercise in Kabuki theater.” He said that everyone knew that Samuel Alito was going to be a very conservative Supreme Court justice. The Republicans were all pretending he had no ideology, and the Democrats were all trying to ask him a question to trip him up, and he was too smart for that. I think that’s what we’re seeing again. Kavanaugh doesn’t have to say any more than is needed to make sure he doesn’t lose the Republican vote, and he knows that. I’m guessing that’s what we’re going to see this week.

It’s a low bar.

Right, exactly. What he knows is that he doesn’t have to actually answer questions.


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Labor & Economy

Ohio, NJ and California Pension Funds Invested $885 Million in Hedge Fund That Controls National Enquirer Parent

Co-published by MapLight and Fast Company
Under Republican governors, two states pumped hundreds of millions of dollars of pension cash into a high-risk hedge fund that took control of the National Enquirer’s parent company, American Media Inc.

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Co-published by MapLight and Fast Company

During the last five years, taxpayers in New Jersey, Ohio and California  have owned large financial stakes in the owner of the media company that allegedly helped the Trump campaign bury negative stories, according to documents reviewed by Capital & Main and MapLight.

Under Republican governors, New Jersey and Ohio committed at least $650 million of pension cash into Chatham Asset Management, a high-risk hedge fund that has taken control of the National Enquirer’s parent company, American Media Inc., which is at the center of the federal investigation into President Donald Trump’s 2016 campaign. California’s pension fund also has a $235 million stake in a Chatham fund.

The hedge fund is run by Anthony Melchiorre, a GOP donor who reportedly met with the president and AMI CEO David Pecker at the White House soon after Trump took office. Melchiorre and his wife have donated more than $100,000 to Republican candidates and party committees since 2010.

Trump’s former attorney, Michael Cohen, recently pleaded guilty to breaking campaign finance laws stemming from payments he made to women to hide affairs with the former reality TV star and real estate magnate. AMI executives helped Cohen purchase stories that could have hurt Trump’s presidential bid, according to the Wall Street Journal.

AMI has denied it helped Trump’s campaign, although Pecker was recently granted immunity as part of the Cohen probe. Former FEC commissioner Trevor Potter, the head of the nonprofit Campaign Legal Center, last week said the situation “presents a serious legal problem for AMI.” If those legal troubles end up depressing the market value of AMI, teachers, firefighters, cops and other public employees also could potentially suffer losses at a time when their pension funds are already facing shortfalls.

A New Jersey Treasury Department spokesperson said in an email that its Division of Investment “is in regular contact with its investment partners regarding underlying portfolio companies and provides feedback when appropriate. While DOI plays no role in the management of a fund’s portfolio companies, it expects the funds to invest in good businesses with strong management teams that follow all applicable laws.”

“I am personally appalled by the Enquirer being an accessory to Cohen’s criminal behavior on behalf of the candidate,” said Tom Bruno, a state union representative who is the chairman of the pension’s board of trustees and serves on New Jersey’s State Investment Council, which oversees the pension system’s investments.

“If the allegations are true, I would vote and argue for full divestiture,” he said. “I cannot talk on behalf of the entire SIC, but I will be doing everything in my power to convince a majority to vote the same way.”

Chatham did not respond to questions about how exposed taxpayers and pension systems might be to AMI and any financial consequences of its legal entanglements. A spokesman for the Ohio pension system said Thursday that the state asked for its money to be withdrawn from the Chatham fund in 2015; the money was redeemed in 2017.

“State officials are well-positioned and duty-bound to investigate allegations of potential wrongdoing in hedge fund portfolios,” said former Securities and Exchange Commission attorney Edward Siedle.

In 2013, former New Jersey Gov. Chris Christie’s administration moved $300 million of pension cash into the Chatham Fund, LP, which has owned a stake in AMI, according to SEC records. Last year, barely three months before Christie left office, his administration steered another $200 million to another Chatham vehicle.

In 2013 and 2014, an Ohio pension system partially controlled by Gov. John Kasich’s appointees committed $150 million to Chatham. The hedge fund finalized its deal to buy an ownership stake in AMI in the summer of 2014.

The Christie administration’s shift of $500 million into Chatham makes New Jersey retirees a substantial investor in the hedge fund, which manages $3.2 billion in assets, according to state records. Those records show the original $500 million investments are now worth as much as $692 million.

Best known for its lurid Enquirer headlines (“Aliens Are Living in My Toilet”), AMI has been beset by a difficult environment for print publications. Chatham has warned that its investments are risky and that a client “may lose its entire investment in a troubled company.” In early 2018, private equity giant Blackstone removed Chatham from one of its major investment funds.

Along with the public pension funds, four other private pension funds — including those for Ford and Toyota Motors employees — have had investments with Chatham, according to financial research firm Preqin.

AMI represents a large portion of Chatham’s portfolio. Internal hedge fund records from late 2017 show that AMI investments comprised 23 percent of the Chatham Asset Partners High Yield Fund’s portfolio. The hedge fund also has officials who serve as directors at AMI.

Attorney Jay Youngdahl, a former Harvard researcher who has served as a steelworkers pension trustee, said state officials may be able to take action to try to protect retiree investments.

“There are often clauses in agreements between pension funds and hedge funds that give states certain rights and recourse if they believe retirees’ money has been invested in companies engaging in criminal activity,” he said.


This story has been updated from its original version.

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Politics & Government

Cuomo Received $25,000 From Weinstein Lawyer’s Firm as He Suspended Probe

Co-published by Sludge
New York Governor Andrew Cuomo halted an investigation into the Manhattan DA’s handling of the Harvey Weinstein case just as the law firm representing the Hollywood producer gave Cuomo’s campaign $25,000.

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Andrew Cuomo photo by Diana Robinson.

Co-published by Sludge

Last year, a political firestorm erupted when journalists revealed that Hollywood producer Harvey Weinstein’s lawyer David Boies gave $10,000 to Manhattan District Attorney Cyrus Vance Jr. in the months after Vance declined to prosecute the movie producer on sexual assault charges. Now, less than a year later, New York Gov. Andrew Cuomo has halted an investigation into the handling of the Weinstein case just as Boies’ law firm gave Cuomo’s campaign $25,000, according to state records reviewed by Capital & Main and Sludge.

The controversies spotlight ongoing questions about whether law enforcement actions in New York are being inappropriately influenced by campaign donations.

Amid explosive headlines about Boies’ donations to Vance and the district attorney’s decision not to prosecute Weinstein, Cuomo in March called for the New York Attorney General’s office to investigate the handling of the case, which revolved around accusations that Weinstein groped an Italian model.

While Vance in May opted to reverse course and charge the Hollywood producer, Cuomo declared that an investigation into Vance’s original decision to not prosecute Weinstein was necessary because, the governor said, “it is critical not only that these cases are given the utmost attention but also that there is public confidence in the handling of these cases.”

However, BuzzFeed on Tuesday reported that Cuomo reversed himself in June, sending a letter to New York Attorney General Barbara Underwood asking her to suspend the investigation for six months. The suspension effectively shields Boies from scrutiny of any potential relationship between his 2015 donation to Vance and Vance’s decision not to prosecute Weinstein.

Cuomo’s June order came six days  after Boies, Schiller & Flexner gave $25,000 to Cuomo’s reelection campaign, according to New York campaign finance records. In all, Boies and his law firm have given Cuomo’s gubernatorial campaigns more than $245,000 since 2009.

“Neither Mr. Boies, nor anyone from his firm, ever discussed Harvey Weinstein or Mr. Vance with Mr. Cuomo, or anyone from his office, at any time,” a spokesperson for Boies Schiller & Flexner said in an emailed statement. “Mr. Boies is a longtime supporter of Mr. Cuomo and his contribution in June was consistent with his contributions to Mr. Cuomo over years past.”

Boies has since severed his ties to Weinstein in the wake of a report that he personally hired the private intelligence company Black Cube to collect information on Weinstein’s accusers and the reporters investigating those allegations.

Cuomo’s spokesperson said the investigation was suspended temporarily in order to avoid interfering with Vance’s ongoing prosecution of Weinstein.

“As we said when the Governor directed the Attorney General to investigate the Manhattan DA’s Office, it should not interfere with the DA’s ongoing criminal case,” Cuomo press secretary Dani Lever told Buzzfeed. “Given the recent indictment and prosecution of Harvey Weinstein by the district attorney, the attorney general’s investigation has been postponed for six months.”

However, Buzzfeed’s report pointed out that as criminal proceedings against Weinstein could drag on for years, the attorney general’s investigation may effectively be suspended indefinitely.


Update: After this article was published, a state official responded, saying that suspending the investigation had nothing to do with Boies’ campaign contributions: “The attorney general’s investigation was suspended to avoid situations in which Weinstein’s defense attorneys would be able to constantly petition the attorney general’s office for information about what they uncovered and undermine a criminal prosecution.”

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Top Republican on Tax Subcommittee Received Yacht Loan From Foreign Bank Lobbying on 2017 Tax Bill

Federal records show that one of Rep. Vern Buchanan’s LLCs financed foreign bank loans to purchase a yacht and a private luxury jet.

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Vern Buchanan, center. (Photo by Alex Wong/Getty Images)

Co-published by Maplight and the Florida Center for Investigative Reporting

As Republicans were finalizing tax cut legislation in late 2017, a foreign-owned bank seeking to shape the bill gave a seven-figure yacht loan to a top GOP lawmaker on the committee writing the measure, according to documents reviewed by Capital & Main and MapLight.

Representative Vern Buchanan (R-FL), who sits on the House Ways and Means Committee and leads its tax policy subcommittee, has been under fire in recent weeks for purchasing a yacht on the same day he voted for the GOP tax package. Buchanan registered a 73-foot Ocean Alexander vessel named Entrepreneur with the U.S. Coast Guard a month later, according to federal records.

Although Buchanan is one of the wealthiest members of Congress — worth at least $80 million — federal records show one of his limited liability companies financed the purchase with a BMO Harris Bank loan worth as much as $5 million. Since 2016, Buchanan’s companies have received three loans worth as much as $35 million from BMO Harris, which is the American subsidiary of the Bank of Montreal. In total, since he was appointed to the Ways and Means Committee in 2010, Buchanan and his companies have received between $17 million and $85 million worth of loans from four lenders.

At the time Buchanan’s company received the 2017 yacht loan, BMO Harris was lobbying congressional lawmakers on tax policy overseen by the Ways and Means Committee, according to federal records. Buchanan received a separate BMO Harris loan for a plane in 2016. Records show that loan, worth between $5 million and $25 million, was made around the same time that the bank began lobbying lawmakers on “tax reform proposals.”

In all, BMO spent $760,000 lobbying lawmakers in 2017, and records show the bank paid for tax reform lobbying from Tony Podesta, whose firm is being investigated for potential violations of foreign lobbying laws.

In recent years, lending to lawmakers has been a source of controversy, with some critics alleging that politically connected banks can use favorable loan terms as a stealth conduit of political influence. Buchanan did not list the terms of the BMO Harris loans in his 2017 financial disclosure report, which was filed in May, and his office did not respond to questions about the deal.

“For privacy reasons we do not disclose information about specific loans,” said BMO Harris spokesperson Patrick O’Herlihy. “We do not provide services or products to public officials that are not also available to the general public.”

Craig Holman, an ethics advocate at Public Citizen, said that the bank’s loans to Buchanan’s company pose a “particularly egregious” conflict of interest.

“It isn’t just business for Buchanan,” he said. “The loans grant Buchanan the luxuries of a personal jet and a yacht. It is very reasonable to assume those luxuries could well influence Buchanan’s official actions.”

Both BMO Harris and Buchanan could reap a financial windfall from the tax legislation.

The bank’s first annual report after the passage of the GOP measure said corporate tax cuts in the bill are “expected to increase our annual net income from what it would have otherwise been.” In late May, shortly after its report was published, the company announced record U.S. profits. BMO Harris had publicly celebrated the bill in January and said it would increase its minimum wage to $15 per hour as a result of the tax cut. Both the Trump administration and House Republicans touted BMO Harris as an example of the tax cut’s success.

The bank also announced a plan to repurchase as many as 20 million shares of its own stock — providing ammunition to critics who predicted that companies would use the tax cut windfall to enrich executives and shareholders, rather than to create new jobs.

For his part, Buchanan has promoted the tax cut as a boon to working families.

“The sweeping tax reform bill signed into law last month is already producing results,” he said in a statement posted on his website soon after the tax bill passed. “As the son of a factory worker who grew up in the blue-collar suburbs of Detroit, I know firsthand how important a bonus or pay raise can be for a family struggling to make ends meet.”

The tax bill could also boost Buchanan’s earnings from various corporate entities that he controls, which include real estate holdings and an auto dealership. The legislation slashed rates on “pass-through” income that flows to individuals through businesses that include limited liability corporations, S-corporations and partnerships.

In the case of Buchanan’s new yacht, the Republican’s financial disclosure forms show that the BMO Harris loan for the vessel — as well as the earlier loan for the purchase of an Embraer luxury jet airplane that can seat 10 people — were made to Buchanan’s company, Aircraft Holding and Leasing, LLC.

Buchanan’s financial disclosure forms report that he has collected as much as $5 million in pass-through income from Aircraft Holding and Leasing since being elected to Congress in 2006. Buchanan’s 2017 disclosure forms report that he had between $1.5 million and $3.3 million of assets in a BMO Harris investment account.

The House Ethics Committee says that it is a violation of congressional gift rules if a lawmaker “is given a loan at a below-market interest rate,” though members of Congress aren’t required to publicly disclose the terms of loans they receive.

In 2012, congressional investigators found that mortgage lender Countrywide Financial Corp. had a special unit that made discounted loans and gave preferential treatment to lawmakers, congressional staff and other high-ranking government officials. A 2016 Institute for New Economic Thinking study by researchers at the London Business School found that lawmakers who join financial oversight committees receive larger, more favorable loans than other lawmakers.


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Proposed Los Angeles Law Would Give Tenants Access to Attorneys

The City Council is considering a ‘right to counsel’ program that could help curb evictions and homelessness.

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Photo by B-A Graphix

An estimated 30,000 eviction cases are filed in court each year against Los Angeles city residents. Many more tenants do not show up in court since they know “they have limited legal rights and they have limited access to legal representation,” according to a recent report by Tenants Together, a renter advocacy organization.

Urged on by renter advocates, a Los Angeles City Council housing committee voted August 8 to support the creation of a ‘right to counsel’ law similar to ones that have been adopted by San Francisco and New York.

The committee approved a motion, authored by L.A. City Councilman Paul Koretz, which directs staff to craft a program that would give more tenants facing eviction access to attorneys.

“Basic fairness dictates that if one side of an eviction proceeding has legal representation, the other side should have representation, too, and that equality before the law shouldn’t depend on income level,” said Jerry Jones, director of public policy at the Inner City Law Center. Jones joined about a dozen speakers at the committee meeting.

Compared to the high cost of addressing the homeless crisis, eviction defense is a relatively inexpensive means to prevent people from becoming homeless, according to Jones.

County and city officials are struggling to find temporary and permanent housing for the tens of thousands of residents who become homeless every year. And while there has been a slight decrease in the county’s homeless population since last year, the number of homeless – 53,000 – is still staggering, according to the last count. In addition, more people were homeless for the first time this year than last, suggesting unaffordable rents may be pushing people onto the street.

At the hearing, Janet Gagnon, a representative of the Apartment Association of Greater Los Angeles, complained that a right-to-counsel program would “simply give money to defense attorneys.” She said that public money would be better spent on vouchers “so that the people can avoid the eviction process entirely.”

But a 2017 analysis of pilot programs that offered free legal service to tenants concluded that providing counsel does have benefits. Eviction cases involving represented tenants are more likely to end in settlement, and most of those settlements reduced back-owed rent or helped protect tenants’ credit by keeping eviction notices off the public record.

The study, which was conducted by the Judicial Council of California, also found that 67 percent of cases involving represented tenants settled, as compared to 34 percent of cases in which people represented themselves. While all clients in the study received eviction notices, only 6 percent were ultimately evicted from their homes.

Jim Bickhart, a representative of Councilman Paul Koretz, said that the intent of the proposed measure was to expand the capacity of the current network of legal services, which currently serves “several thousand clients a year.”

“There is no way this proposal could provide free legal service to every tenant faced with eviction, but we should start somewhere,” he added. The motion is scheduled to be voted on by the full City Council on August 17.

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