folo

So, I’ve got an eyewitness report that Zach Scruggs was in the Lafayette County Detention Center yesterday (meeting with a “suit”). And all kinds of odd rumblings why that would be, but no real answers.

Update: Zach Scruggs is being held in the Lafayette County Detention Center, on issues relating to that lunch in Oxford.  Watch this space for newspaper reporting in the next day or so.

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Anita Lee reports that the prosecution replied yesterday to the Warrs’ demand for particulars of the fraud charges against them. “Brent and Laura Warr sent their insurance company a six-page list of personal property Katrina destroyed in their waterfront home,” writes Anita, “but federal prosecutors contend ‘a substantial portion of the property was not in the dwelling.’”

Prosecutors also say in court documents filed Friday that Brent Warr lied in a letter to Lexington Insurance Co. when he said the couple paid $1,400 a month rent from October 2005 to the date of the letter, March 2007. He typed his name as Mayor Brent Warr at the top of the letter and used the title again under his signature. …

“The government’s proof will show that prior to Katrina, Lexington Insurance Co. had required a coverage change in the subject policy to a second-home policy for the reason that the dwelling was not occupied as a full-time residence and was still under renovation,” prosecutors wrote. “What was relevant to the policy in effect at the time of Katrina was whether or not the personal property was present in the insured dwelling.”

[Lead prosecutor Assistant U.S. Attorney Annette] Williams said work on the house continued up until Katrina hit. The document also said, “The further proof will show that there was existing water damage before the storm caused by a leak or problem with the geothermal air conditioning system for which full repairs had not been made.”

The Warrs’ list of personal property includes “a $4,469 refrigerator, an $8,000 pool table, $9,500 in women’s clothing and shoes, a $5,200 chandelier, $1,875 in men’s ties, a $7,500 motorcycle and two boats and motors valued at $7,500.”

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Today’s Clarion-Ledger reports that the toxicology results on Karen and Stuart Irby are back from the state crime lab — but JPD is “withholding the information so it can be presented to a grand jury.” As for the Irbys themselves:

Karen Irby, the driver of the black Mercedes-Benz that slammed into the couple, was released from UMC on Thursday. Her husband, Stuart Irby, a passenger, remains in serious condition. …

Stuart Irby’s brother, Charles Irby, said Karen Irby is in rehabilitation, according to the Web site CaringBridge.org that connects families and friends of patients in critical care or recovery.

“Pray that Karen will continue to make progress in her therapy. Pray for her healing – so many wounds and repairs. Pray for her upcoming big surgery on her foot that it scheduled for next Tuesday,” Charles Irby wrote on Thursday. “Please pray that Stuart will be able to come off the ventilator soon and breathe on his own. Pray that he will continue to wake up and show functionality.”

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Ye gods. Our pal imstillnotbowie just sent in this very strange video:

This kid addressing CPAC is 13 years old, and they eat him with a spoon.

“No wonder,” says isnb. “I haven’t seen anybody point this out but it hit me with ball-peen subtlety. The kid is mimicking Limbaugh so well he seems to be channeling him. The speech patterns, targets and ideas, the hand gestures along with body slumps and pull-backs, the whole schtick. The kid is Limbaugh on diet pills.”

Well, having watched maybe a whole minute of Limbaugh in my entire life, I’ll take isnb’s word for it. For me, though, he’s Alex P. Keaton out of Limbaugh.

Yeeesh.

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This is some kind of fun to watch.

If you can’t watch it, read it (emphasis mine):

… I realize that passing this budget won’t be easy. Because it represents real and dramatic change, it also represents a threat to the status quo in Washington. I know that the insurance industry won’t like the idea that they’ll have to bid competitively to continue offering Medicare coverage, but that’s how we’ll help preserve and protect Medicare and lower health care costs for American families. I know that banks and big student lenders won’t like the idea that we’re ending their huge taxpayer subsidies, but that’s how we’ll save taxpayers nearly $50 billion and make college more affordable. I know that oil and gas companies won’t like us ending nearly $30 billion in tax breaks, but that’s how we’ll help fund a renewable energy economy that will create new jobs and new industries.

In other words, I know these steps won’t sit well with the special interests and lobbyists who are invested in the old way of doing business, and I know they’re gearing up for a fight as we speak. My message to them is this:

So am I.

The system we have now might work for the powerful and well-connected interests that have run Washington for far too long, but I don’t.

I work for the American people.

I didn’t come here to do the same thing we’ve been doing or to take small steps forward, I came to provide the sweeping change that this country demanded when it went to the polls in November. That is the change this budget starts to make, and that is the change I’ll be fighting for in the weeks ahead – change that will grow our economy, expand our middle-class, and keep the American Dream alive for all those men and women who have believed in this journey from the day it began.

Thanks for listening.

(h/t Kycol)

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The interesting story that GlitterGirl linked from yesterday’s Commercial Appeal concludes,

The amended SEC complaint filed Friday would seem to dispel any final hopes investors might have that Stanford may have just gotten caught in some accounting mistakes.

One charge is especially ominous for investors: “Stanford and Davis fabricated the performance of the bank’s portfolio. Each month, Stanford and Davis decided on a predetermined return on investment for Stanford Investment Bank’s portfolio. Using this predetermined number, Stanford Investment Bank’s internal accountants reverse-engineered the bank’s financial statements to report investment income that the bank did not actually earn.”

Stanford Investment Bank’s internal accountants

You know who that would be (at least according to the February 19 Times of London)? A frail little old man — he died last month — figuring away in a 20×20 “one-room office delicately positioned above a North London hair salon and next to the local chip shop.” His initials were, I am not making this up, C.A.S.H., and the glimpse ToL gives of him is every bit as Dickensian as that.

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Reviewing the headlines in the Courier-Journal, I’m just wondering what Kentucky makes of Jim Bunning these days:

• Bunning denies he may resign to punish GOP foes
• Some say Bunning, in frustration, hinted he may quit GOP seat
• Mongiardo says it’s time for Bunnning to exit Senate race
• Bunning lashes out at GOP official
• Mongiardo calls for Bunning to leave race
• Readers express shock over Bunning comments
• Bunning apologizes for his remarks on Ginsburg’s illness
• Bunning criticizes GOP Senate campaign chief
• Bunning: Justice Ginsburg may die this year

If the homefolks let you know how this is going down with his constituents, I’ll be interested, okay?

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Still reflecting on what Only When I Laugh said the other day, I just now saw Andrew Sullivan posting, with expressed empathy, this email from one of his readers:

I’m one of those “wealthy” people who will be pinched hard by Obama’s tax hike. I came to this country legally 17 years ago with $300.00 in my pocket but with good education. I struggled at the beginning but nevertheless, worked my way up in the high tech world. I too think that the Obama’s tax proposals are extremely unfair as if I don’t pay already enough to Uncle Sam. And this article on a liberal web site just infuriated me beyond belief.

But after listening to and reading about CPAC conference which is held currently in Washington, DC, I realized that I would rather take my chances with Obama than anybody from that group. I can’t imagine that these people were in power for 8 years and yearn for more. This rabid bunch MUST be kept away from any kind of power for all of our sake.

Had I been a more astute investor, I might well find myself (somewhat) similarly situated. But like that of most Americans, the wee pile I have left invites no onerous tax bill.

Back when I had much more, though, I paid without resentment what my CPA said I owed — including a large chunk of inheritance tax when my mom’s estate settled. See, I’ve never understood the mindset that balks at shared responsibility for keeping our society going. If we want a basic level of physical and social safety and functionality, rather than state-of-nature anarchy, how else to achieve it than through our government?

And you know what? I believe Barack Obama tells the truth when he says that the healthcare restructuring he plans will, in the end, draw less out of all our pockets while improving our composite health. Matters not to me who gets to cash my checks — the IRS or BCBS — I’d just rather write them for amounts I can actually afford.

If that CPAC crowd were in control again, no chance on earth that could happen.

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The reason I ask is,

A new nationwide study (pdf) of anonymised credit-card receipts from a major online adult entertainment provider finds … [t]hose states that … consume the most porn tend to be more conservative and religious than states with lower levels of consumption …

Utah leads the nation in broadband porn subscriptions per thousand population, then Alaska, then Mississippi. Montana shows the least interest, with Idaho and Tennessee next (in that order).

Matter of fact, of the ten states that consume the most online porn, eight voted for McCain. And in the communities most supportive of “family values” and most opposed to gay marriage, guess what? Yepper.

I found this at NewScientist.com, by the way. Okay, y’all carry on . . .

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Last night magnolia said, “… Pendergrast-Holt did not INVENT what has happened on Wallstreet, it’s just that the FBI can untangle her web, where on Wallstreet the FBI could not or would not get involved and the so called “to big to fail” was thrust upon the American taxpayer. …”

Actually, mag, I’ve just read (h/t Marioth) that the FBI did get involved. In fact, hair-on-fire in September 2004, the Bureau issued warnings of a coming multi-billion-dollar “epidemic” of mortgage fraud. But as befell its summer 2001 warnings on al-Qaeda, the Bush Administration said “pish tosh” and looked away.

Criminologist, former financial regulator, author (The Best Way to Rob a Bank is to Own One) and professor William K. Black explains at HufPo,

When the person that controls a seemingly legitimate business or government agency uses it as a “weapon” to defraud we categorize it as a “control fraud” … . Financial control frauds’ “weapon of choice” is accounting. Control frauds cause greater financial losses than all other forms of property crime — combined. Control fraud epidemics can arise when financial deregulation and desupervision and perverse compensation systems create a “criminogenic [crime-generating] environment” …

The FBI correctly identified the epidemic of mortgage control fraud at such an early point that the financial crisis could have been averted had the Bush administration acted with even minimal competence.

Black points to a September 17, 2004, CNN story in which Assistant FBI Director/Criminal Division Chief Chris Swecker states that, though rampant fraud in the mortgage industry “has the potential to be an epidemic … We think we can prevent a problem that could have as much impact as the S&L crisis.”

As we now can grieve, Swecker’s optimism would prove unfounded: the Administration ignored him. And if the impact of what that allowed had equaled merely the S&L crisis, the Bush Depression wouldn’t be staring us in the face.

Black links two documents that, he says, anyone hoping to understand what’s happened should read.

The first document everyone should read is by S&P, the largest of the rating agencies. The context … is that a professional credit rater has told his superiors that he needs to examine the mortgage loan files to evaluate the risk of a complex financial derivative whose risk and market value depend on the credit quality of the nonprime mortgages “underlying” the derivative. A senior manager sends a blistering reply with this forceful punctuation [note: Black's link goes to a House Oversight Committee page; there, you want the separately-linked pdf E-mail from Frank Raiter to Richard Gugliada et al., March 20, 2001]:

Any request for loan level tapes is TOTALLY UNREASONABLE!!! Most investors don’t have it and can’t provide it. [W]e MUST produce a credit estimate. It is your responsibility to provide those credit estimates and your responsibility to devise some method for doing so.

“Fraud is the principal credit risk of nonprime mortgage lending,” Black continues.

It is impossible to detect fraud without reviewing a sample of the loan files. Paper loan files are bulky, so they are photographed and the images are stored on computer tapes. Unfortunately, “most investors” (the large commercial and investment banks that purchased nonprime loans and pooled them to create financial derivatives) did not review the loan files before purchasing nonprime loans and did not even require the lender to provide loan tapes.

Without reviewing any sample loan files either, the rating agencies slapped “AAA” ratings (meaning: “as risk-free as U.S. government bonds”) on nonprime mortgage financial derivatives.

The supposedly most financially sophisticated entities in the world — in the core of their expertise, evaluating credit risk — did not undertake the most basic and essential step to evaluate the most dangerous credit risk. They did not review the loan files. …

If they had reviewed even small samples of nonprime loans, they would have had only two choices: (1) rating them as toxic waste, which would have made it impossible to sell the nonprime financial derivatives or (2) documenting that they were committing, and aiding and abetting, accounting control fraud.

Worse (emphasis mine):

What commentators have missed is that the big banks often do not have the vital nonprime loan files now. That means that neither they nor the Treasury know their asset quality. It also means that Geithner’s “stress tests” can’t “test” assets when they don’t have the essential information to “stress.” No … meaningful stress tests are possible of the nonprime assets that are causing the greatest losses.

The second document Black recommends is from the Fitch rating agency, which — only after the secondary market’s collapse dried up nonprime lending almost completely — finally examined a small sample of nonprime loan files and (pdf) reported:

Fitch’s analysts conducted an independent analysis of these files with the benefit of the full origination and servicing files. The result of the analysis was disconcerting at best, as there was the appearance of fraud or misrepresentation in almost every file.

[F]raud was not only present, but, in most cases, could have been identified with adequate underwriting, quality control and fraud prevention tools prior to the loan funding. Fitch believes that this targeted sampling of files was sufficient to determine that inadequate underwriting controls and, therefore, fraud is a factor in the defaults and losses on recent vintage pools.

Black’s long-story-short: the real markets “became perverse — ‘due diligence’ and ‘private market discipline’ became oxymoronic.”

So there you have it, mag: Lah-di-dah George W. Bush not only gave us an eight-year “criminogenic environment” to rival or beat the worst this country has ever seen, his government’s, the industry’s, and the rating agencies’ “don’t ask, don’t tell” negligence assures that we can’t even find its seeds. But the FBI did try to warn him.

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