The Next Hurrah

Tommy K and the Shitpile

by emptywheel

I'm still trying to sort through what it might mean that, after signing an unlikely plea agreement with the government, Duke Cunningham briber Tommy K has continued to engage in mortgage fraud, at the expense of the company most deeply buried in the shitpile, Washington Mutual (WaMu).

But let's start with the description John Michael's lawyers gave of Tommy K's method.

Kontogiannis would have a loan application prepared in the name of a putative home purchaser, sometimes with the knowledge of the person (who might be paid a fee) and sometimes without the person’s knowledge, for a property that Kontogiannis either had developed or had planned to develop. Fraudulent paperwork would be prepared related to, for example, income, assets, or appraisal. (Kontogiannis presumably would pay a kickback to the individual preparing these documents.) Applications would then otherwise be submitted for approval to various financial institutions in accordance with normal industry practices. At closing, all title documentation (such as the mortgage and note, the uniform settlement statement (HUD-1 form), title-insurance paperwork, and affidavits pertaining to the purchaser’s identity and intent of occupancy) would be fraudulently executed by a loan officer controlled by Kontogiannis. The settlement agent, using money that had been forwarded by the lender and placed in escrow, would issue checks to cover mortgage taxes, transfer taxes, recording fees, title insurance, and lender fees, as well as the net proceeds (the balance of the loan money), all of which (with the exception, sometimes, of lender fees) would go to Kontogiannis-controlled entities, including companies ostensibly owned by one of Kontogiannis’s daughters and controlled by Kontogiannis. The mortgage and note, however, would never be recorded, the taxes never paid, and title insurance never purchased. Instead, the funds that had been disbursed for these purposes would eventually be steered to another company ostensibly owned by one of Kontogiannis’s daughters but controlled by Kontogiannis.

These fraudulent loans would ultimately be sold into the secondary-mortgage market to a lender who would be led to believe, based on the loan documentation provided by Kontogiannis’s agent, that the loan had been sent for recording and that all taxes and recording fees had been paid. A Kontogiannis controlled financial-services company, typically Parkview Financial, Inc. (“Parkview”), would assume responsibility for making monthly payments on the loan. So long as timely payments were made, the loan would be viewed by the new owner as performing and, consequently, never questioned.

Kontogiannis’s greed, however, did not stop there. He would then market the property to an end-user, whose financing was often out of Kontogiannis’s control. Upon closing with the end-user, Kontogiannis would take a second bite from the mortgage-fraud apple: iin light of the fact that the first mortgage on the property had never been recorded, the settlement
agent would release the net proceeds of the second loan directly to a Kontogiannis-controlled company without paying off the existing loan because the latter had never been recorded. For
its part, the lender who had purchased the first mortgage would not know that the property had been sold again and that, consequently, its position in the chain of title had been compromised. [my emphasis

So basically, Tommy K would double dip on mortgages on houses that no one (except for at least one corrupt Congressman) was really buying. Here's where we get into WaMu's role in this. The "one company alone" in the following paragraph must be WaMu, given the government's assertion that WaMu had purchased $50 million in Tommy K's fraudulent loans.

The volume of Kontogiannis’s fraudulent loans as of June 1995 is shown by one of Parkview’s bank-account statements. See Exhibits 12 and 13. The statement reveals mortgage payments on 140 different properties. One company alone had purchased over 100 of the loans in the secondary market, with an average loan amount of approximately $500,000. That publicly traded and federally chartered bank thus had approximately $50,000,000 in loans that were potentially worthless because, as a result of Kontogiannis’s scams, none of the mortgages were recorded in primary position as the bank had assumed. That, in turn, meant that if any of the loans defaulted, the bank would not be able to foreclose on any real property and thereby recoup any of the losses. Needless to say, the impact of such losses would be profound both on the individual bank and on the shareholders of the company. Even scarier, that bank may have since purchased many more such loans from Kontogiannis. [my emphasis]

Note, Michael's lawyers are citing how many bad mortgages WaMu had bought in 1995, not how many they bought by 2007. And, as they helpfully point out, Tommy K may well have continued this fraud after he signed his plea deal in February. That's certainly the implication of this passage from yesterday's filing.

...as a direct result of being contacted by Michael's defense counsel, Washington Mutual contacted the government with information regarding Mr. Kontogiannis's continued illegal activity.  [my emphasis]

Michael's filing was in August, which would leave several months after Tommy K's plea deal for him to continue to sell Greek shitpile to WaMu. And of course, the government didn't bother to tell anyone that Tommy K had been selling Greek shitpile until June, which appears to have allowed WaMu to continue to buy up Tommy K's fraudulent loans. Five or seven months of Greek shitpile, depending on how you're counting--that might be a significant amount of shitpile.

Now, I might feel bad for WaMu. Except for the fact that they're pretty damned corrupt themselves, and seem to have been in the business of making sure they didn't know if they bought shitpile. Here's what Andrew Cuomo alleges them to have done.

Joe Klein, Do You Really Think Crazy Pete Is Credible?!?!?!

by emptywheel

Mr. emptywheel and I have a running joke about "English Day"--where your dog, for one day only out of his entire life, can speak and understand English. What would we learn in that one day, we speculate, when McCaffrey the MilleniaLab could tell us precisely what he was thinking?

Which gives me another cool idea--"Source Day"--where for one day, we can see all of the sources that journalists use and consider credible. Because there's nothing that would damage journalists' credibility further than to discover that they consider certifiable loons like Pete Hoekstra credible.

But that's just what--thanks to Christy--Joe Klein apparently believes. From Crazy Pete's column in NRO:

As one of Klein’s sources for the complex technical and legal points that seem to be in contention — and because Klein, his critics, and Democrats in Congress have accused Republicans of trying to “misrepresent” these issues — it is important to correct and clarify the record on three critical points, which also bear heavily on the broader debate currently at hand.

Crazy Pete's column, btw, is no more coherent than Joe Klein's articles on the topic, so I guess we can surmise where Klein borrowed his abysmal logic from.

But here's the thing. Crazy Pete is, well, crazy. He's one of the guys who still believes that Iraq had WMDs. He's the guy who thought it'd be a good idea to put a bunch of Iraqi documents (and Al Qaeda documents dumped in just for fun) online, regardless of the fact that the documents included plans from Iraq's pre-1991 nuke program. He's the guy who hired Fred Fleitz to write propaganda on Iran for the HPSCI.

In short, he's nuts, and very much in the business of creating propaganda. And that's the guy that Joe Klein finds so credible that he's unwilling to refute, even if the plain language of the document in question proves he is wrong.

Tommy K Apparently Violated His Plea Agreement

by emptywheel

Tommy K says he shouldn't go to jail because he has a bad ticker (h/t chrisc). But it sounds like going to jail in the first place may be the least of his worries. According to a filing submitted yesterday, it appears that John Michael's earlier allegations were correct, and that Tommy K violated his plea agreement by continuing his bank fraud after the plea deal.

(4) During the pre-trial proceedings of coconspirators Brent Wilkes and John Michael, the government first received information suggesting that defendant Kontogiannis was, in fact, still committing federal criminal offenses, including, but not limited to bank fraud in violation of Title 18, United States Code, Section 1344.

(5) As part of these proceedings, defense counsel for John Michael obtained various financial documents indicating that Mr. Kontogiannis was--unbenknownst to the government--still continuing his illegal mortgage fraud scheme. In addition, Michael's defense counsel contacted Washington Mutual to obtain information regarding the fraudulent mortgages that they had purchased from Mr. Kontogiannis.

[snip]

...as a direct result of being contracted by Michael's defense counsel, Washington Mutual contacted the government with information regarding Mr. Kontogiannis's continued illegal activity.

(8) Within the past two weeks, we obtained clearer indications that Mr. Kontogiannis was engaged in post-plea illegal activity.

About this, a couple points.

First, this filing suggests that "the government" had no clue that Kontogiannis continued to engage in fraud. Does that include those agents of the government who had him cooperating in some cockamamie scheme? Because that sounds like a bit of a problem, if one of the guys cooperating in what looks like an FBI or CIA investigation is engaged in all this fraud.

Second, Andrew Cuomo is suing First American for deliberately giving Washington Mutual beneficial home appraisals.

In a scheme detailed in numerous e-mails, eAppraiseIT (“EA”), a subsidiary of First American Corporation (NYSE: FAF), caved to pressure from Washington Mutual (“WaMu”) (NYSE: WM) to use a list of preferred “Proven Appraisers” who provided inflated appraisals on homes.  The e-mails also show that executives at EA knew their behavior was illegal, but intentionally broke the law to secure future business with WaMu. 

“The independence of the appraiser is essential to maintaining the integrity of the mortgage industry.  First American and eAppraiseIT violated that independence when Washington Mutual strong-armed them into a system designed to rip off homeowners and investors alike,” said Attorney General Cuomo.  “The blatant actions of First American and eAppraiseIT have contributed to the growing foreclosure crisis and turmoil in the housing market.  By allowing Washington Mutual to hand-pick appraisers who inflated values, First American helped set the current mortgage crisis in motion.”

From the reports, this sounded like a garden variety scheme, in which First American just inflated home appraisal values, slightly. But do you think it a mere coincidence that Tommy K continued to engage in mortgage fraud, apparently with Washington Mutual?

Scruggs and Lott

by emptywheel

Lotus is right--the indictment against Dickie Scruggs is pretty damning. Here's the bit everyone is keying on, from a conversation between Timothy Balducci and Judge Lackey:

"my relationship with Dick [Scruggs] is such that he and I can talk very private [sic] about these kinds of matters and I have the fullest confidence that if the court, you know, is inclined to rule ... in favor ... everything will be good..." "The only person in the world outside of me and you that has discussed this is me and Dick [Scruggs]." "...We, uh, like I say, it ain't but three people in the world that know anything about this ... and two of them are sitting here and the other one ... the other one, uh, being Scruggs ... he and I, um, how shall I say, for over the last five or six years there, there are bodies buried that, that you know, that he and I know where ... where are, and, and, my, my trust in his, mine in him and his in mine, in me, I am sure are the same."

We are talking Mississippi, I guess.

That said, I've got a couple of questions.

First, why was Zach Scruggs indicted? Best as I can tell, his involvement in this amounts to receiving the order they allegedly bribed Judge Lackey for and handing off the check--along with cover documents designed to hide the bribe. Given that Zach Scruggs is not alleged to have been involved with creating the cover documents, it is possible he did not know the check was for a bribe. And, his participation in one conversation in which Balducci said, "we paid for this ruling; let's be sure it says what we want it to say." Which, again, does not necessarily reflect knowledge of a bribe. Maybe they've got more evidence that Zach Scruggs was involved, but it's not in the indictment.

Second, what did the search on Monday net? The search warrant apparently named a specific document.

FBI agents were barring all but employees from the office Tuesday during the search, which began at 10:30 a.m. and stretched into the afternoon.

"It is a search warrant for a thing, a document," said Langston, an Oxford attorney who represents the firm. "I don't think anyone has made an allegation that the Scruggs Law Firm has done anything improper or illegal. I think that the federal authorities will probably learn when they complete their investigation that whatever the allegation of wrongdoing is, that the Scruggses were not involved."

And it took a long time to find it, from 10:30 into the afternoon, if they in fact did find it.

Most of the evidence described in the indictment involves phone and email traffic (and it appears the judge wore a wire for some of the conversations he was involved in). Plus, it appears that Balducci flipped at some point (which might be why Zach Scruggs got indicted). So presumably, they had all of this through wiretaps and recordings going back months. They wouldn't need to search for the order itself, as Judge Lackey would have had a copy. So what was the document described in the search warrant? Or does it pertain to something further, something that didn't make it into yesterday's indictment?

Finally, Trent. Recall that Trent sued State Farm over his own Katrina settlement. Turns out, the Scruggs law firm represented Trent in that suit. This whole State Farm litigation is a mess, with suit inside suit inside contempt case and so on. Is Trent's one of the suits involved? Did he get directly involved in this?

Then Again...

by emptywheel

Perhaps it was just a confluence of events that convinced Trent now was the time to quit.

After Senate Minority Whip Trent Lott (R-MS) announced his resignation this week, it was widely speculated that Lott was quitting in order to dodge Senate ethics standards that take effect next year. The new rules require senators to wait two years before entering “the lucrative world” of lobbying Congress. Lott denied the rumor at a press conference, saying the new law “didn’t have a big role” in his decision.

At the same press conference, Lott was also asked about Senate ethics rules regarding “negotiating with a future employer,” to which he replied that he’s “not really involved in negotiation,” but that “there are some opportunities out there” that he wants “to be able to consider”:

QUESTION: Senator, I understand there’s a rule in the Senate that if you’re negotiating with a future employer, that you must register with the Ethics Committee. Have you been down to that committee yet?

LOTT: Well, I have not yet, but I’m not really involved in negotiation. I’ve tried to stay away from that. There are some opportunities out there that I want to be able to consider, but I have nothing that we’ve agreed to or lined up.

One of the “opportunities” that Lott is considering, according to his son, Chester Lott — who is also a lobbyist — is “a partnership” with former Sen. John Breaux (D-LA), who until today, was the senior counsel at a powerhouse lobbying firm. But just this afternoon, Breaux announced that he was leaving Patton Boggs in order “to form his own firm with his son, John Jr.”

I can imagine the conversation now (note, this is purely a fictional creation):

Lott: Breauzie, it looks like we're going to have to accelerate our little plan to get rich.

Breaux: Whaysthat, Trent? I thought we were good to do it in December.

Lott: Dickie's in trouble again, and with all the ruckus about the US Attorney firings, I can't afford to help him out this time.

Breaux: Ah, I see. What's the time frame?

Lott: Well, Karl's on this kick to make sure everyone resigns before scandal hits. So I'm thinking maybe in about 20 minutes.

There's a longer version of this, where I add in Trent's concerns about Larry Flynt's pictures of him with a boy for hire. But so far, that's not materializing. Yet.

Sure Looks Like It Was Trent's Brother-in-Law

by emptywheel

Any speculation on whether Trent knew this was coming down when he resigned the other day?

Prominent Mississippi trial attorney Richard "Dickie" Scruggs, the brother-in-law of outgoing GOP Sen. Trent Lott, was indicted by a federal grand jury Wednesday on charges that he and four other men tried to bribe a Mississippi state court judge.

According to the 13-page indictment, Scruggs and three other attorneys -- including Lott's nephew Zach -- attempted to bribe Mississippi Third Circuit Court Judge Henry L. Lackey with at least $40,000 in cash.

Lackey was assigned to hear a lawsuit in which Scruggs' firm was named as a defendant in a dispute involving $26.5 million in attorneys' fees stemming from a court settlement with State Farm Insurance over Hurricane Katrina claims.

The indictment alleges that the bribe was intended to resolve the case in Scruggs' and his firm's favor.

Now, as bmaz pointed out on yesterday's thread on Scruggs, Scruggs was due to hold a fundraiser for Hillary Clinton--so it's not like Scruggs espouses the same politics as his brother-in-law, and it adds this to a long list of cases in which Trial Lawyers who support Democrats get into legal trouble. Also note, this is not the Paul Minor case, as I suggested it might be yesterday. This has to do with Scruggs' efforts to help a lot of Katrina victims get their money from State Farm.

I have no idea if there's merit to the charges--with this DOJ, who knows?

Who Has Been Lobbying Director of National Intelligence Mike McConnell?

by emptywheel

McConnell doesn't want you to know, no doubt fearing there will be the same kind of firestorm when we learn who has been schmoozing him as there was when we learned who was schmoozing Jello Jay Rockefeller. Thankfully, a Federal Judge thinks we ought to know this information before Congress passes its amendment to FISA (h/t Mad Dog for the heads up).

The Director of National Intelligence must quickly release documents relating to 2007 meetings with telecoms concerning proposed amnesty bills for companies that helped government's secret domestic spying program, a federal judge ruled Wednesday. The Northern California District Court judge ruled that the government must produce the documents by December 10 so that the public can be informed about the extent of telecom lobbying before Congress votes on immunity.

The Electronic Frontier Foundation, which is leading a lawsuit against AT&T for the telco giant's alleged cooperation with internet monitoring and call record data-mining, asked for the documents in September via a government sunshine request.

The group asked for documents detailing meetings between telecoms and the nation's top spy office, as well as meetings between the spies and legislators. The government agreed to the civil liberties request to 'fast-track' the request.

But months later the DNI still hadn't released any of the 250 unclassified pages of documents or the 65 pages of classified material, prompting the EFF to ask for a judge to force a document dump before Congress finishes work on bills amending the nation's spy laws.

Now, frankly, we may not get those documents before the final debate on this bill. Reid originally had the Senate debate scheduled for Tuesday; it has been rescheduled, but the new date has not been announced (and in any case, it sounds like it'll be in the next week or so, so almost certainly before the 10th). That's rather troubling, because it seems that McConnell was stalling the production of these documents precisely for this purpose: he originally said he could have the initial release on November 30. But somehow, it has taken another court hearing to reinforce even that deadline. And originally, McConnell wanted to hand over the documents on December 30--which was almost certain to be after the passage of the bill.

Also note--it's not just the telecom lobbyists that McConnell has to release. It's also his meetings with Congress. You know, the big long luncheon with DiFi?

So what do you think McConnell is trying to hide?

The Infintite Recursion of Asset Seizures

by emptywheel

Steven Aftergood must have had an extra dose of turkey over the weekend, because it seems like Steven Aftergood week here at TNH. Today, he has a liberated CRS report on the implementation of Bush's EO 13438, which authorizes the seizure of the assets of people determined to "threaten stabilization efforts in Iraq." At least according to the Congressional Research Service, the EO allows for incredibly broad application, since it allows for the asset seizure of people who financially support people who financially support people who financially support the destabilization of Iraq--you get the idea.

The scope, objectives and precedents of the order -- Executive Order 13,438, "Blocking Property of Certain Persons Who Threaten Stabilization Efforts in Iraq" -- were examined in a new report (pdf) from the Congressional Research Service.

"The broad language of this executive order has been the subject of a degree of criticism as potentially reaching beyond insurgents in Iraq to third parties, such as U.S. citizens, who may unknowingly be providing support for the insurgency," the CRS report noted, citing prior reports in the Washington Post, TPM Muckraker, and elsewhere.

In fact, the potential application of the order appears to be technically unlimited since it includes a recursive clause that has no defined endpoint.

Thus, section 1(b) of the Order states that any person who provides goods or services to a person whose actions are proscribed under section 1(a) is himself subject to section 1(a). But then, anyone who provides similar support to that person could likewise be swept up in the expansive terms of the order. And so on, without end. [my emphasis]

Now, if the Administration's standards for this kind of thing were rational, it might not be a problem. But its behavior in similar circumstances has proven to be anything but. Consider this story from the LAT. It describes how a businessman who had long been blacklisted as a financial backer of terrorism got magically removed from the list recently--with no explanation.

"I Was Under Sedation"

by emptywheel

That was the answer John Ashcroft gave to Kathleen when she asked him whether David Addington called Ashcroft's wife to pressure her to let Alberto Gonzales and Andy Card into Ashcroft's hospital room, or whether Dick Cheney called personally.

I asked Former Attorney General John Ashcroft EW's question "did President Bush call your wife directly to tell her that Gonzales and Andrew Card were on the way to the hospital" I then asked "or was it Vice President Cheney or David Addington" He answered as he peered down at the stage "I was under sedation".

His talk at the Univ of Colorado was focused on 9/!!, terroist and how we will deal with this "paradigm" shift in the threat to the U.S. He was still pushing we are the best country in the world "we're number one" propaganda. Repeating that the reason that they hate us is due to our liberty. Sure the opposite of what Micheal Scheuer(the resigned head of the Osama bin Laden unit who has said they hate us because of our policies, military bases and the unbridled support of Israel no matter what they do.

Ashcroft and Scheuer's thinking are miles apart.

The Univ of Colorado audience were rowdy and disrespectful at times.  This left less time for pertinent questions.

" I was under sedation"  Yeah right      

Give Ashcroft credit for this--it's a new twist on that old favorite: "No Comment."

But real kudos to Kathleen for asking the question we all want answered...

And Speaking of Missing Emails

by emptywheel

So far the RNC has spent $231,615 looking for Turdblossom's missing emails.

The Sleuth has learned, the hunt for those missing gigabytes has cost the RNC more than $250,000.

According to an RNC filing with the Federal Election Commission, the committee paid $231,615 in October to Stroz Friedberg, a forensics firm chock full of former FBI agents hired to retrieve the lost electronic data. The report shows the committee also paid $41,217 in October to Covington & Burling, the law firm representing the RNC on the missing e-mail controversy.

[snip]

But now that we know the RNC has paid Stroz Friedberg nearly a quarter million dollars, does that mean they've found the missing e-mail messages?

The RNC isn't saying, nor is Stroz Friedberg.

So add that $231,615 to the $90,000 that Congressman Tom Feeney has paid to FTI to (apparently) recover his own missing emails.

This habit of deleting emails is beginning to cost the Republicans. How long do you think it'll be before they start a special kind of defense fund, the email reconstruction fund (and celebrity golf tournament)?