First Efraim Diveroli was mocked for being the only U.S. arms dealer with a MySpace page. Now it looks like the feds will rest most of their prosecution on his emails.

The feds say they've got a pretty good paper trail on Diveroli, the 22-year-old arms trader who was just arrested and accused of providing shoddy and illegal Chinese ammo for the Afghan Army.

You remember him? He's the Miami party boy who inexplicably landed a $300 million U.S. Army weapons contract in January 2007. The New York Times put him on the front page back in March.

He was arrested along with several others involved with his company, AEY, Inc., including David Packouz, the AEY director and vice president; Alexander Podrizki, the company's man in Tirana, Albania; and Ralph Merrill, who provided "financial and managerial assistance."

They were charged with violating the Arms Export Control Act, which prohibits buying and selling weapons from certain countries.

According to the indictment released today by the U.S. attorney in Miami, Diveroli got nervous last year when his Albanian supplier emailed him some photos showing that the weapons he planned to buy and ship were clearly marked "Made in China."

Diveroli emailed the U.S. State Department in April asking whether, hypothetically, it was OK to fulfill a U.S. Army contract with weapons from China, the indictment says.

It's not, they told him. Not without special permission from the President.

He emailed back and asked if there was an exception for weapons that may have been sitting in Albania for 20 years, the indictment says.

The State Department emailed back and said there was no such exception.

So he had one of his financial backers, Ralph Merrill, help take care of the problem.

On or about April 25,2007, RALPH MERRILL sent an electronic communication to EFRAIM DIVEROLI and DAVID PACKOUZ, which referenced attached photographs showing methods of "cleaning wooden crates." Attached to the communication was a photograph showing a person scraping the words "MADE IN CHINA" off of a wooden crate.

Diveroli then filled out forms for the Army indicating that the ammo was from Hungary rather than China.

The Army paid AEY more than $10 million between July and December 2007, according to the indictment, before the Times broke the story in March and his arms exporting license was suspended.

There may be more charges coming from this investigation. A spokeswoman for the ICE office, Nicole Navas, said Friday that the investigation was ongoing and declined to comment further.

Another week, another DOJ investigation of itself.

The latest, reported this morning by the Washington Post, involves J. Robert Flores, the Administrator at the Department of Justice's Office of Juvenile Justice and Delinquency Prevention, who has been the subject of a recent series of articles by ABC News investigating grants awarded by his office.

Flores is facing a federal criminal investigation for questions arising from "his hiring practices, travel expenses, and personal ties to groups which he gave millions of dollars" the Post reports.

ABC documented several questionable grant awards by Flores. He gave the World Golf Foundation's First Tee Initiative a grant, after the group invited him on a trip and paid for him to play a round of golf. The group's honorary chairman is former President George H. Bush. Though Flores reimbursed the organization for the $159 in green's fees, he did so only yesterday -- hours before his Congressional testimony.

Flores awarded a half-million dollar grant to First Tee, despite it ranking 47th out of 104 applicants and being "not recommended" by staff who said they "didn't understand how funding this program would advance juvenile justice." The decision was openly rebuked by members of the committee.

"The foundation paid for your greens fees and then the next year you disregard the recommendations of your professional staff and award the foundation a half-million dollar federal grant. You have tainted the process," said Rep. Elijah Cummings (D-MD).

Of the 104 applicants ranked by the peer review process, Flores failed to award grants to any of those in the top five. Rather, Flores gave funding to five programs, not recommended by staff, including an abstinence education program called Best Friends, led by Elaine Bennett, the wife of Reagan administration Cabinet official Bill Bennett. Two faith based programs were also selected.

From Chairman Henry Waxman's (D-CA) opening statement:

Mr. Flores awarded a $1.1 million grant to the Best Friends Foundation, an abstinence- only organization, that ranked 53 out of 104 applications. The career staff who reviewed this application said it was "poorly written," "had no focus," "was illogical," and "made no sense."

Flores testified to the distribution of over $8 million in department grants. According to emails and testimony from Flores' own staff in the office of Juvenile Justice, as well as the peer review board that ranks the grants, the grant administration was distinctly slanted.

"Mr. Flores, it seems you're the only person at the Department of Justice who thinks your process was fair, transparent and served the interest of taxpayers," Waxman concluded.

The Bush Administration has had since March 12 to respond to the subpoenas from the House oversight committee requesting documents pertaining to the EPA decisions on greenhouse gas and ozone regulations. Yet it waited until this morning -- the day the Committee was scheduled to vote on their contempt for their failure to respond -- to assert executive privilege.

Time and again, that inveterate stonewaller, EPA administrator Stephen Johnson, has gone up against committee Chairman Henry Waxman (D-CA) and bobbed and weaved through his testimony, never quite answering questions but never quite invoking executive privilege either.

During a May 20, 2008, appearance before the committee, Johnson was specifically asked by Waxman whether he was invoking executive privilege. "Not at this time," Johnson replied.

Well that time must have passed.

More on "Stonewall" Johnson's evasive maneuvers after the jump.

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Scott McClellan isn't offering much in the way of new revelations about the Plame affair during his testimony on Capitol Hill today but there has been a moment or two of good political theater.

Rep. Steve King (R-IA) asked whether McClellan's very presence today was poisoning the relationships between all future presidents and their press secretaries.

"What is your advice to your successor secretaries, White House press secretaries, as to how they should handle themselves and how a president might want to handle them - and there's two parts to this question - what would you say to the succeeding secretaries on whether, at what point they should step up and tell the world in the middle of their job perhaps, and how will the president handle this from this point? Does he have to then put the next press secretary into a cubicle and slide press releases to him under the door for fear that he'll be coming, either write a book or come before the judiciary committee and divulge information that I believe was at least from a national security- not national security but from the integrity standpoint, could you not have taken some of this to the grave with you and done this country a favor?"

For those who've read McClellan's book, we not hearing much new. He's talking about the "permanent campaign" and how the Bush Administration was "less than truthful" in selling the Iraq invasion to the public in 2002 and 2003.

About Bush and Iraq: "I think his driving motivation was this idealistic and ambitious vision that he could transform the Middle East...that Iraq would be a lynch pin for democracy in the Middle East."

Rep. Sheila Jackson Lee (D-TX) was looking for more.

Should the president be impeached?

"I do not support impeachment based on what I know," McClellan said.

The Democrats on the House Judiciary Committee seemed eager to extract something new from McClellan, asking him for all sorts of the details about the administration's inner workings.

Steve Cohen (D-TN) asked McClellan what he knew about Iran.

"I think the views of the people in the administration are pretty well know in terms of what we ought to do to confront Iran," McClellan said.

As for Republican National Committee email accounts, Cohen asked: "Are you aware of any particular policy to use those to avoid government oversight?"

"No," McClellan said.

Cohen finally asked: Is there anything else that your editor 'edited out?'

"I don't think there is anything that would be of interest to this committee that was, as you say, edited out," McClellan said.

Rep Hank Johnson (D-GA) asked about the commutation of Scooter Libby's prison sentence.

"There are some who believe that he did that so that he could make sure that Scooter Libby would not at some point spill the beans on the VP or someone else."

"I don't know," McClellan said. "I can understand why people view it that way."

"It sends a terribly message... and I think that the president should not have made that decision. But that is his right to do it."

The repeated mention of impeachment seemed to irritate some Republicans.

"You didn't come here believing someone ought to be impeached did you?"
Dan Lungren (R-CA) asked.

"I am not here for that purpose," McClellan said.

"I have heard my colleagues here refer to impeachment four times, yet we've been told by the leadership on the Democratic side that impeachment is off the table," Lungren said. "Is what we are doing here Kucinich like?"

No surprises. The House has passed a new federal surveillance law. It's expected to go to the Senate next week and on to the President for a signature.

The final vote was 293 for, 129 against.

A big win for AT&T and Verizon.

Meanwhile, the House Judiciary Committee is getting underway again with the Scott McClellan hearing.

The House is now voting on changes to the new federal surveillance law.

There were plenty of Democrats speaking out against it during the hour-long debate.

"This bill scares me to death and I urge a no-vote," said Rep. Barbara Lee (D-CA), co-chair of the House's Progressive Caucus.

She compared the bill to the era of former FBI head J. Edgar Hoover. "We already remember how Dr. [Martin Luther] King and his family were the victims of the government's most shameless wiretapping. We must never go down this road again."

House Speaker Nancy Pelosi (D-CA), gave the bill a lukewarm endorsement, saying the bill many supported was "not an option."

She said the real decision was between this "compromise" bill and the one the Senate has passed, which offered even broader surveillance powers and more protection for telecom companies. "That is the comparison, the contrast, that we have to make today."

"I'm not asking anybody to vote for this bill. I just wanted you to know why I was," Pelosi told the House. "Difficult decisions for all of us. ... I respect every point that was expressed on this floor today. ... The knowledge, the sincerity, the passion and intelligence of those who supported and who don't support this bill have been very valuable in making this bill better."

Rep. John Conyers (D-MI) pointed to a constitutional concern.

"The grant of retro-active immunity is inconsistent with our basic principles. We are breaking with a very proud tradition and intervening in a pending court decision in an effort to reach a preordained legal outcome. This is a bad precedent," he said.

Republicans without exception spoke in favor of the bill, often citing the dangers of terrorism.

"This bill will prove that we have the ability to monitor the conversations of al Qaeda overseas," said Rep. Dan Lungren (R-CA) "It's not the Mona Lisa, but it's not a bad paint job."

Rep. Dennis Kucinch (D-OH) spoke briefly. "These blanket wiretaps make it impossible to know whose calls are being intercepted by the National Security Agency."

From the Miami Herald:

A 22-year-old munitions dealer and others in his Miami Beach company were arrested on charges of selling prohibited Chinese weaponry to the U.S. government to supply allied forces in Afghanistan, according to law enforcement officials.

Efraim Diveroli, president of AEY Inc., and three other employees were arrested Thursday night and Friday morning -- accused of conspiring to misrepresent the types of munitions they sold to the U.S. Department of Defense as part of a $300 million Army weapons contract, officials said.

Diveroli and the others are charged with violating the Arms Export Control Act stemming from an investigation that began earlier this year by the Pentagon and Immigration and Customs Enforcement.

Remember this guy?

The White House pulled out the old executive privilege trump card at the last minute today to avert a House government oversight committee vote to hold Administration officials in contempt of Congress.

Committee Chairman Henry Waxman (D-CA) has announced that EPA Administrator Stephen Johnson and Susan Dudley, administrator for information and regulatory affairs at the White House, have invoked executive privilege as the basis for not complying with subpoenas from Waxman's committee seeking documents about new smog requirements and a decision blocking California greenhouse gas limits.

Waxman postponed the vote on contempt in order to determine whether the statements of executive privilege were valid. "But," he emphasized, "to date I have not seen a valid instance of their executive privilege":

I don't think we've had a situation like this since Richard Nixon was president. When the President of the United States, may have been involved in acting contrary to law and the evidence that would determine that question for Congress, in exercising our oversight, is being blocked by an assertion of executive privilege. I would hope and expect this administration would not be making this assertion without a valid basis for it, but to date I have not seen a valid instance of their executive privilege.

We'll have video of Waxman's statements coming shortly.

The House debate about the FISA law is underway. The House has capped debate at just one hour.

So far, the Democrats seem to emphasize that this legislation will not get the Bush Administration off the hook.

Rep. John Conyers (D-MI) said he opposed the bill, but did point to one bright spot in the legislation.

"[The bill] will ask the inspector general to conduct an independent investigation of the president's wiretapping program," Conyers said. "This will uncover the truth for the American people, hopefully, about the president's activity."

Rep. Sylvester Reyes (D-TX), the chair of the House Intelligence Committee, also noted that: "This bill does not grant immunity to any government official that might have violated the law."

The girlfriend of fugitive Samuel Israel III was arrested Thursday, for aiding and abetting his flight. Israel, recently sentenced to 20 years in prison for swindling his hedge fund clients out of almost $400 million, faked his suicide days before he was supposed to enter prison. His girlfriend told authorities that she had helped Israel pack a recreational vehicle, attach a motor scooter and then drove with him to a rest area, where the R.V. was left for later use. (New York Times)

Two former Bear Stearns senior executives were arrested on Thursday for securities fraud relating to the subprime mortgage fallout. The former hedge fund managers were among 60 people arrested this week in a sweep the Justice Department is calling "Operation Malicious Mortgage." Over 400 people have been arrested since March on charges of mortgage fraud. (New York Times)

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Scott McClellan's testimony is underway before the House Judiciary Committee.

He was asked early on about President Bush's involvement in the leak of CIA operative Valerie Plame's identity.

"I do not think the president in any way had knowledge of it," McClellan said.

Also, we heard he got a $75,000 advance for the book.

Read more for the text of his opening statement.

Late Update: The Judiciary Committee recessed for the House debate on the compromise bill on the federal wiretapping law. That debate is underway and will last one hour.

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After everyone had a chance to sift through yesterday's breakthrough "compromise" on a new federal surveillance law, the biggest winer of the day was not Republicans or Democrats but the telecom companies.

Today's Washington Post summarizes the legal impact succicntly in it's front-page story :

The agreement extends the government's ability to eavesdrop on espionage and terrorism suspects while effectively providing a legal escape hatch for AT&T, Verizon Communications and other telecom firms. They face more than 40 lawsuits that allege they violated customers' privacy rights by helping the government conduct a warrantless spying program after the Sept. 11, 2001, attacks.

The final compromise on the immunity issue was this: Many Democrats had wanted the federal courts to review whether the surveillance program was legal before granting immunity. The White House wanted the courts to have no involvement whatsoever. The "compromise" calls on the courts to consider the surveillance legal if the companies can prove that the Administration told them it was legal. (Which we know they did).

The Chicago Tribune reports:

The new bill would require federal courts to cast those lawsuits aside if the companies can show that they received written requests from the government stating that their cooperation was deemed lawful and had been authorized by the president.

The House is expected to vote on the measure today. Though billed as a compromise, the final version was viewed as a victory for the White House, according to the Post.

But overall, the deal appears to give Bush and his aides, including Attorney General Michael B. Mukasey and Director of National Intelligence Mike McConnell, much of what they sought in a new surveillance law.

As for the future of the spying program, this new law allows it to grow.

The Wall Street Journal this morning wrote:

The lasting impact of the agreement would be a broader scope for the government's domestic surveillance.

Before 9/11, the NSA had to acquire a specific warrant if it wanted to listen to any conversation involving a U.S. citizen. Now, the secret court would be able to approve broad patterns of surveillance, focused on groups of people believed to be overseas, even if they are communicating with people in the U.S. So without a warrant, the NSA could listen to the conversation of a U.S. citizen if he or she was talking to a suspicious person overseas.

Several Democrats spoke out against the bill, but enough of them agreed to assure this version will pass into law.

Again, from the Journal:

The outcome was driven largely by the realities of election-year politics. Democrats, particularly more conservative ones, in vulnerable re-election races couldn't afford to appear to be dodging a big national-security issue. And many believed the law needed to be updated before surveillance orders expired in August. House Democratic leaders struggled for months to find a proposal their entire party could support but couldn't overcome splits between conservative and liberal Democrats -- some of whom are reacting angrily to the deal.

Behind the political positioning, however, was the pressure from the telecom firms -- particuarly AT&T and Verizon, which both stepped up their lobbying efforts this spring.

Just who makes up Rep. Don Young's "A Team," the nine transportation lobbyists listed in Young's "Intern Survival Guide" who "can talk to whoever they want" when they call his congressional office?

We've put together a snapshot of each "team" member. Pictures, mysterious silhouettes and more after the jump.

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We know the feds have had their eye on former Rep. John Sweeney for a while.

DOJ investigators pulled some of Sweeney's financial records from the House clerk in 2006 and reviewed them along with those from other lawmakers linked to convicted Washington lobbyist Jack Abramoff.

Now we're learning about a previously unreported search of his congressional office just about the time voters kicked him out of office in late 2006.

The Times Union up in Albany has made two references (here and here) to the search in its recent coverage:

The FBI also entered Sweeney's congressional office on his last day in Congress in 2006 and took computers, cellphones, various electronic devices, equipment and records from his aides, two sources familiar with the matter said.

A source close to Sweeney's former congressional office said the FBI first indicated its interest in Sweeney's activities when it seized records and computers of his staffers at the end of 2006.

It's not precisely clear whether this was a search of Sweeney's office on Capitol Hill or an office back in his district. Whatever the FBI got during that search might not be much help. A federal judge has since ruled that FBI searches in Congressional offices can violate the constitution. (Thanks to Rep. William Jefferson, whose Hill office was raided in May 2006.)

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As lawmakers continue to react to the "compromise" deal on a new federal surveillance law, several Democrats in the Senate are coming out against the bill.

Sen. Russ Feingold (D-WI) has been the most outspoken since the deal was unveiled this morning.

"The proposed FISA deal is not a compromise; it is a capitulation. The House and Senate should not be taking up this bill, which effectively guarantees immunity for telecom companies alleged to have participated in the President's illegal program, and which fails to protect the privacy of law-abiding Americans at home. Allowing courts to review the question of immunity is meaningless when the same legislation essentially requires the court to grant immunity. And under this bill, the government can still sweep up and keep the international communications of innocent Americans in the U.S. with no connection to suspected terrorists, with very few safeguards to protect against abuse of this power. Instead of cutting bad deals on both FISA and funding for the war in Iraq, Democrats should be standing up to the flawed and dangerous policies of this administration."

Sen. Patrick Leahy (D-VT) also said he opposed the House deal.

"This bill would dismiss ongoing cases against the telecommunications carriers that participated in that program without allowing a judicial review of the legality of the program. Therefore, it lacks accountability measures that I believe are crucial.

Sen. Harry Reid (D-NV), who has been cool to recent talk about the House deal, appears on the fence, and issued this statement today:

"Senator Reid believes this version is better than the bill the Senate passed in February and much better than the Protect America Act signed by the President last summer, but he remains opposed to retroactive immunity and is reviewing the bill in its entirety."

The Senate passed a bill that provided retroactive immunity to telecom companies earlier this year, so it's unlikely that there will be enough votes to defeat the latest version of immunity.

Besides the sub-prime mortgage crisis, UBS has an entirely different set of problems to worry about: the criminal prosecution of their former employees and the possible public exposure of their massive wealth management business.

Bradley Birkenfeld, a former UBS banker in Geneva, pled guilty in a Florida court today, for conspiring to hide $200 million in client assets in order to avoid paying U.S. taxes. The plea is the latest in bad news for the bank, who has its wealthiest clients running for cover as authorities pressure bank officials to give up the names of over 20,000 of their high-net- worth clients.

And it's all because no one wanted to pay their taxes. Birkenfeld and colleague Mario Staggl, currently at large, helped billionaire American real estate developer and owner of Olen Properties Corp., Igor Olenicoff avoid almost $7.2 million in taxes between 2001 and 2006. Olenicoff was sentenced on April 14, 2008 and agreed to pay $52 million in back taxes.

In his statement today in U.S. District Court in Fort Lauderdale, Birkenfeld detailed how he, Staggl and other managers and bankers at UBS had concealed client assets.

From a Department of Justice press release earlier today:

Birkenfeld, managers and bankers at the Swiss bank, and U.S. clients prepared false and misleading IRS forms that claimed that the owners of the accounts were sham off-shore entities' and failed to prepare and file IRS forms that should have identified the true U.S. owner of the accounts.

To further assist U.S. clients of the bank in concealing their offshore accounts, Birkenfeld admitted that he, Mario Staggl, additional private bankers and managers at the Swiss bank, and others advised U.S. clients to place cash and valuables in Swiss safety deposit boxes, and purchase jewels, artwork and luxury items using the funds in their Swiss bank account while overseas. Additionally, they advised the clients to misrepresent the receipt of funds from the Swiss bank account in the United States as loans from the bank; destroy all off-shore banking records existing in the United States; utilize Swiss bank credit cards that they claimed could not be discovered by U.S. authorities; and file false U.S. individual income tax returns that omitted income earned by the clients and fraudulently misrepresented that the clients did not have an interest in and signature authority over accounts held offshore.

. . . To circumvent the requirements of the agreement between the bank and the IRS, Birkenfeld and others conspired to conceal the American real estate developer's ownership and control of the $200 million of assets hidden offshore by creating and utilizing nominee and sham entities, including Bahamian corporations, Liechtenstein trusts and Danish corporations.

According to the DOJ, Birkenfeld and his co-conspirators actions were in direct violation of a 2001 agreement between UBS and the American government, which stated that the Swiss bank would "identify and document any customers who received reportable U.S. source income or would withhold and anonymously pay a 28 percent withholding tax."

The guilty plea is the latest in what has been an ongoing and dramatic investigation of UBS and its Geneva bankers. In April of 2008, Martin Liechti, head of UBS' international wealth management business for the America's was briefly detained while passing through Miami airport. Birkenfeld, who has been talking to prosecutors for over a year regarding this matter, was arrested on May 7 upon entering the U.S. at Logan Airport for a high school reunion.

Staggl, co-founder of New Haven Trust Company Ltd. in Liechtenstein is considered a fugitive and is still at large.

Clearly the wrangling is over regarding the surveillance compromise. A formal statement went out today that everyone agrees on this matter.

Senate Intelligence Committee Chairman John "Jay" Rockefeller (WV), Senate Intelligence Committee Vice-Chair Kit Bond (MO), House Majority Leader Steny Hoyer (MD), and House Minority Whip Roy Blunt (MO) announced today that a bipartisan compromise has been agreed to that will modernize the Foreign Intelligence Surveillance Act.
...
"This bipartisan bill balances the needs of our intelligence community with Americans' civil liberties, and provides critical new oversight and accountability requirements," said Hoyer. "It is the result of compromise, and like any compromise is not perfect, but I believe it strikes a sound balance. Furthermore, we have ensured that Congress can revisit these issues because the legislation will sunset at the end of 2012."

The Electronic Frontier Foundation has a copy of the new legislation here.

Read on for the complete text of the Congressional statement.

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Rep. Laura Richardson (D-CA) has money troubles. She's had her homes fall into default five times in the last 13 months (seven times total), all while lending over $175,000 to her campaigns.

Maybe that's why the ethics watchdog group, Citizens for Responsibility and Ethics in Washington (CREW), called her a "deadbeat Congresswomen," and filed a request yesterday for a congressional investigation into shady looking mortgages and foreclosures.

Richardson responded through her spokesperson, who called the investigation request slim-pickings. From the LA Times:

William Marshall, a spokesman for Richardson, called the complaint "pretty mean-spirited. It rehashes old news." He said the House ethics counsel last week met with the congresswoman and said her ethics statement met House rules.

From the Wall Street Journal:

WASHINGTON -- After more than a year of partisan acrimony over government surveillance powers, Democratic and Republican leaders have agreed to a bipartisan deal that would be the most sweeping rewrite of spy powers in three decades. The House is likely to vote on the measure Friday, House aides said.

Removing the final barrier to action on the measure, which has been hashed out in recent weeks by senior lawmakers in both parties, House Democratic leaders decided to allow a vote on the bill, despite the opposition of many in their party.

The new agreement broadens the authority to spy on people in the U.S. and provides conditional legal immunity to companies that helped the government eavesdrop after the 2001 terrorist attacks, according to congressional aides in both parties.

Late Update: The deal-maker was offering some retroactive immunity to the telecom companies who have already participated in the program.

Critical to sealing the deal was a compromise that would grant conditional immunity to telecommunications companies for assistance they provided from September 2001 through January 2007. If the companies can show a federal district court judge "substantial evidence" they received a written request from the attorney general or head of an intelligence agency stating the president authorized the surveillance and determined it to be lawful, the cases against them will be dismissed.

We haven't heard what "conditional" means.

Politico reports that the House Democrats have agreed to vote for it, possibly tomorrow.

Late Update: The Electronic Frontier Foundation says the deal offers broad immunity and says the Democrats caved in to pressure from the telecom industry and the White House.

"Whatever gloss might be put on it, the so-called 'compromise' on immunity is anything but: the current proposal is the exact same blanket immunity that the Senate passed in February and that the House rejected in March, only with a few new bells and whistles so that political spinsters can claim that it actually provides meaningful court review," said EFF Senior Staff Attorney Kevin Bankston. "We call on all members of Congress to reject this sham compromise and maintain the rule of law, rather than deprive the millions of ordinary Americans whose privacy rights were violated of their day in court."

EFF is representing plaintiffs in a class-action lawsuit of AT&T customers who claim their records were illegally handed over to the National Security Agency (NSA).

Career officials are in open revolt over at the Office of Special Counsel.

The underlings are outraged at their boss, Scott Bloch, who is under investigation by the FBI. The one man in the Bush Administration who is supposed to investigate whistle blower complaints is himself accused of retaliating against whistle blowers.

"We're trying to deal with this by decapitation," one official told TPM. "The big question is: Why isn't the White House letting him go?"

Meanwhile, Bloch is desperately trying to improve morale.

Against the advice of career officials in the office -- some of whom have been subpoenaed in the investigation -- Bloch is convening a day-long "retreat" in Alexandria, VA, flying in officials from offices in Dallas, Oakland and Detroit, for a pep talk.

During the training session, Bloch himself will give a talk entitled: "Training on Accountability, Efficiency, OSC's Independence, and "What a Whistleblower is."

The meeting was scaled back from Bloch's original idea of a multi-day retreat out in the Shenandoah Valley.

"He brought up the idea and said, 'What does everybody think? And everybody just kind of sat there," the official said.

We'll post the agenda for next week's retreat shortly.

Late Update: One former OSC official points to the afternoon session on "E-Discovery Training" and says it's "ironic in the extreme, given the accusations of his own attempted destruction of computer files that were requested in connection with the investigation of him!"

Bloch reportedly hired Geeks on Call to erase his email files.

Late Update: Here's the agenda.

Former UBS banker Bradley Birkenfeld appears in court today and is expected to enter a guilty plea in a tax evasion scam. Birkenfeld and his fugitive co-worker Mario Staggls stand accused of helping their ultra-high-net worth clients evade hundreds of millions of dollars in taxes to the U.S. government. (WRS Worldradio.ch)

The dominoes continue to fall for Wall Street banks in the wake of the mortgage fallout. Two former Bear Stearns hedge fund managers were arrested this morning on charges of securities fraud. Matthew Tannin and Ralph Cioffi are the first executives to face criminal charges as a result of the subprime mortgage crisis.
(Associated Press)

A massive report issued by Physicians for Human Rights detailing torture suffered by 11 prisoners from Guantanamo Bay and Abu Ghraib was released Wednesday, the most extensive such study done on the torture tactics used on detainees. One of the interviewed detainees, Ali al-Qaisi, detailed horrors of defecation, sodomy, excruciating pain and humiliation. (Associated Press and Physicians for Human Rights)

Members of Congress have called for increased attention into an ABC News report that revealed government-run pharmaceutical drug testing was done on mentally distressed veterans. The members, in a letter to the Secretary of Veterans' Affairs, called for an end to the testing of the drug Chantix that has been linked to nearly 40 veteran suicides and over 400 incidents of suicidal behavior. (ABC News)

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More than five years after the U.S. invasion of Iraq, the western alliance of big oil firms is making its final move on Mesopotamian oil reserves.

The New York Times reports today that the Iraqi government will soon announce the award of no-bid oil service contracts with a coalition of western oil companies, marking the first legal agreement between big oil and the post-Saddam Iraqi government.

The no-bid contracts are unusual for the industry, and the offers prevailed over others by more than 40 companies, including companies in Russia, China and India. The contracts, which would run for one to two years and are relatively small by industry standards, would nonetheless give the companies an advantage in bidding on future contracts in a country that many experts consider to be the best hope for a large-scale increase in oil production.

The Times notes the four main companies -- the Texas-based Exxon Mobile, British BP, Total of France and Royal Dutch Shell, which has its headquarters in the Netherlands -- were the four companies that made up the Iraq Petroleum Company that Saddam Hussein ousted when he nationalized Iraq's oil resources in 1968.

According to the Times, "It is not clear what role the United States played in awarding the contracts."

To be sure, the companies are somewhat disappointed that this is how they have to return to Iraq. The companies and the Bush Administration for years pushed the Iraqis to accept a so-called Hydrocarbon Law that would permit Production Sharing Agreements for the oil companies. That was among the so-called "benchmarks" that Bush enumerated at the outset of the "surge" in early 2006.

The PSA's are often called "colonial" style agreements that permit western oil companies to exert a lot of control over a nation's subterranean resources. Few countries still use them, as most, like Venezuela and Russia, demand more control over their own oil.

These no-bid deals were probably as good as the companies could expect.

The no-bid deals are structured as service contracts. The companies will be paid for their work, rather than offered a license to the oil deposits. As such, they do not require the passage of an oil law setting out terms for competitive bidding. The legislation has been stalled by disputes among Shiite, Sunni and Kurdish parties over revenue sharing and other conditions.

And it gives the Western oil giants a leg up on companies like the Russian-run Lukoil, which lost out big after the U.S. invasion.

A clause in the draft contracts would allow the companies to match bids from competing companies to retain the work once it is opened to bidding, according to the Iraq country manager for a major oil company who did not consent to be cited publicly discussing the terms.

Oil has been a major source of strife in domestic Iraqi politics. Opposition to giving foreigners access to Iraq's oil wealth has always been a critical motivation for followers of Moqtada al-Sadr, for example.

I wonder how this news will go over in Sadr City?

One day after Rep. William Jefferson (D-LA) announced he will seek re-election despite his upcoming federal trial, his sister pleaded guilty in a federal court in New Orleans.

From the New Orleans Times-Picayune:

Brenda Jefferson, a younger sister of embattled U.S. Rep. William Jefferson, pleaded guilty this afternoon to concealing her knowledge of an alleged conspiracy to take money from nonprofits that involved several of her relatives.

The alleged conspiracy was the centerpiece of an recent indictment charging her sister, 4th District Assessor Betty Jefferson, her brother, political strategist Mose Jefferson, and her niece, Angela Coleman, with plundering more than $600,000 from three charities they controlled.

Brenda Jefferson, who also goes by the name Brenda Foster, signed a summary of the government's case against her in which she says that Coleman and Betty Jefferson made out a series of checks to her but then deposited the money in their own accounts.

Jefferson is awaiting trial on separate corruption charges in Virginia.

Rep. Don Young (R-AK) has had his share of federal investigations, scandal and legal bills, but he may now have a new problem: "The A Team."

In a document obtained today by TPMmuckraker.com, entitled 'An Intern's Survival Guide,' new interns in Young's office are given various instructions on how to thrive and excel working in Young's office. The document was distributed to new interns by a paid member of Young's staff.

The advice and rules range from the jocular to the mundane. But the most striking is the section on phone duty. The 'Guide' refers to an "A-Team" of nine lobbyists who should immediately be connected to any member of the staff they ask to speak with.

The A Team: Rick Alcade [sic], Colin Chapman, Randy DeLay, Billy Lee Evans, Jack Ferguson, Mike Henry, Ducan Smith [sic], CJ Zane or Jay Dickey. These people can talk to whomever they want, normally Mike or Sara. Tell them who it is and transfer over unless they say otherwise. I recommend looking up who they are.

Most notable on the list is Rick Alcalde, the lobbyist at the center of the "Coconut Road" earmark scandal, which the Senate, in an unprecedented move, has formally asked the Justice Department to investigate.

For readers (and interns who may have fallen behind on their duties), we've done the work for you. What do these nine all have in common besides being the perfect number for a baseball team? They're all transportation lobbyists.

Young was Chairman of the House Transportation and Infrastructure Committee from 2000 to 2006.

As we mentioned, there's Rick Alcalde who besides organizing the Coconut Road earmark debacle for Young, is a lobbyist for wealthy Florida developer Daniel Aronoff.

Jack Ferguson, is the former Chief of Staff for Sen. Ted Stevens (R-AK), another of Alaska's scandal ridden representatives, and an Administrator for Midnight Sun PAC.

Randy DeLay, lobbyist brother of former House Majority Leader Tom DeLay.

Billy Lee Evans, the former Georgia congressman turned lobbyist.

Mike Henry, a former Young legislative assistant turned lobbyist.

Jay Dickey, a former Arkansas congressman turned lobbyist.

Duncan Smith, a former Young staffer and Alaska Fisheries Marketing Board member turned lobbyist.

CJ Zane, a former Young Chief of Staff, turned lobbyist.

and Colin Chapman, another former Young Chief of Staff, turned lobbyist.

At first glance, seems like an All-Star lineup.

A statement release late this afternoon by Young's congressional office claims that 'Guide' was unofficial and "outdated":

"Rep. Young has welcomed dozens of interns into his office over the years and finds their assistance in the office invaluable. But interns are not staff. This incredibly outdated "survival guide" was pieced together by several former interns and not by staff. This "guide" in no way reflects the official policies of Rep. Young's office.

"It's always interesting to see how students view their intern experience. It appears that some of what they have written is tongue in cheek, some to help relieve the daily stresses of working on Capitol Hill. At the end of the day, our goal is to ensure that all interns have the best experience possible.

"As for those listed, they include either former staffers (who represent Alaskans) or close friends and former colleagues of Rep. Young, whom he has known for many years."

Contrary to this account, TPMmuckraker.com has learned that the 'Guide' and other initiation materials were distributed by a paid member of Young's staff.

After getting zinged for having a number of domestic and foreign lobbyists advising the candidate, the McCain campaign recently introduced
new campaign rules barring anyone currently employed as a lobbyist from serving on the campaign.

But they seem to have another new policy too: not telling anyone who the candidate's advisers are.

Until a couple weeks ago, JohnMcCain.com included a page with a long list of its advisers.

But they took it down right after TPM asked about an economic adviser who was linked to Jack Abramoff's lobbying scheme.

A McCain aide explained at the time that the list was outdated and did not reflect the new no-lobbyist rules that took effect in May. (Yes, the adviser we asked about, Carlos Bonilla, is both a lobbyist and a former White House official accused of taking favors from Abramoff's shop. He's no longer with the campaign, the aide said.)

We were curious about a handful of people with lobbying backgrounds who had been working for or advising the campaign. So we drew up a list and asked a McCain spokesman to tell us which ones remained with the campaign and which ones, like Bonilla, had been removed.

The spokesman refused to comment on the people individually and only reiterated the policy announced a few weeks ago, that no registered lobbyists work for the campaign and policy advisers can't be registered to lobby on issues they advise the campaign on.

It's been about a month since the campaign's new rules took effect, and the Web page we asked about is still blank.

When we asked today about the Web page that used to list advisers, the McCain aide told us they are "updating the page."

So how can anyone know who's on the McCain campaign, then?

The McCain spokesperson suggested that we go to the Federal Election Commission for information about staff and advisers.

Of course, that won't really tell us much. The FEC filings include expense records with outdated payroll payments for hundreds of campaign workers -- but without any indication of what the individuals actually do.

The McCain aide also responded: "Please show me a list of Obama campaign staff and advisers."

We asked the Obama campaign about that this morning and we haven't hear back from them. We'll let you know when we do.

Senators Chris Dodd (D-CT) and Kent Conrad (D-ND) are still fending off questions about special-rate loans they received from Countrywide Financial.

Countrywide's been at the center of the mortgage meltdown, and the GOP is cranking up the pressure on the two Democratic lawmakers.

Dodd told reporters yesterday that a loan officer specifically told him and his wife they were getting "VIP" consideration in 2003 when they took out two loans on their Connecticut home and Capitol Hill townhouse.

But Dodd said he didn't think to ask precisely what that meant. Even though he is chairman of the Senate Banking Committee, which oversees the mortgage industry, Dodd said he "assumed" that "it was more of a courtesy thing."

From the New York Times.

"Somebody told you you were in a V.I.P. program," a reporter said, "And you didn't think you were getting ... "

Mr. Dodd cut off the reporter and finished the question himself. "A special deal on a loan?" the senator asked. "No."

According to Portfolio, which broke the story last week, the lower rates Dodd received saved him "about $58,000 on his Washington residence over the life of the loan, and $17,000 on the Connecticut home."

Calculating the exact benefit is a challenge, and some suggest Dodd's perk was far less. The Washington Post reports:

Dodd borrowed $506,000 at 4.25 percent to refinance a Capitol Hill townhouse, originally purchased in 1999, and $275,042 at 4.5 percent to refinance a home in East Haddam, Conn.

Rather than requiring him to pay the full amount to obtain the reduced mortgage rates, as other customers must, Countrywide waived three-eighths of a point, or about $2,000, on the first loan and a quarter-point, or $700, on the second.

Meanwhile, Sen. Conrad has moved quickly to quell the criticism. Through the special program -- known as the "F-O-A program", or "Friends of Angelo, named for Countrywide CEO Angelo Mozilo -- Conrad got a good deal on loans for both a Delaware beach vacation home as well as an eight-unit investment property he owns in Bismarck with his brothers.

Conrad said he gave $10,700 to Habitat for Humanity to compensate for any benefit he may have received on the vacation home loan. And this week, he said, he paid off the final $32,000 on the investment property.

Conrad spoke to Mozilo about his mortgage in 2002, but the deals under scrutiny were not finalized until 2004. Yet like Dodd, Conrad also said he was unaware of any discount. "I had absolutely no clue they had done that," he said yesterday.

"My conscience is absolutely clear," he told the Times.

Recent weeks have seen a rash of activity from some of the old players involved in the investigation of shamed Washington insider Jack Abramoff, including the uber-lobbyist himself. Here are complete listings from the Associated Press and TPM's own ongoing tally of the Abramoff ripple effect. (Associated Press)

Committee hearings in the House and Senate are revealing evidence of abuse, possible torture, handicapped legal proceedings and innocent detainees in prisons like Guantanamo Bay. The Senate Armed Services Committee released documents detailing the U.S. military's policy of hiding detainees from outside humanitarian groups such as the Red Cross. (McClatchy)

Sen. Barack Obama-antagonizer and polygraph-test failure Larry Sinclair is responsible for charging the presidential candidate with past sex trysts, drug use and accusations of murder, mainly through an oft-visited YouTube video. Public records show Sinclair has a hefty, 27-year-old rap sheet and is wanted in Colorado. Nevertheless, the National Press Club is giving Sinclair time to speak today in Washington D.C. (Politico)

Read more »

As we reported yesterday, the China-drilling-off-Cuba story that has been a talking point for high level Republicans for the last few weeks is an urban legend. And the GOP is slowly acknowledging that:

From Roll Call:

"We're not using the China talking point anymore, but we will continue to point out that it is absurd that Cuba is developing its deep-water energy resources while Democrats are blocking America from doing the same," said Michael Steel, spokesman for House Minority Leader John Boehner (R-Ohio).

Yesterday we learned about the CIA's larger involvement in developing torture techniques at Guantanamo Bay -- techniques previously thought to have been developed primarily by the military.

In an epic eight-hour, three-panel hearing, the Senate Armed Services Committee examined dozens of documents and grilled former Pentagon officials involved in developing the interrogation methods introduced in 2002.

(Among several good articles on the hearings, a good place to start isSpencer Ackerman's article at the Washington Independent.)

Key to the hearings were the minutes of a meeting between CIA counter-terrorism lawyer Jonathan Fredman and a group of military and intelligence officials who convened at the base in Cuba to discuss the use of harsher interrogation techniques on detainees at Guantanamo Bay. The techniques derived from a training regimen U.S. Special Forces troops used prepare troops to withstand torture --Survival Evasion Resistance Escape, or SERE.

The SERE program -- first introduced to many by a 2005 article by the New Yorker's Jane Mayer -- is not an interrogation program. Nor is it an intelligence-collection program. Instead, it's an obscure program across the different military services' special-forces wings that teaches troops how to withstand torture if captured. Instructors subject students -- under the rigorous watch of psychologists and physicians -- to various torture techniques, including waterboarding, prolonged stress positions, sleep deprivation and sensory manipulation. Waterboarding "is an overwhelming experience that induces horror, triggers a frantic survival instinct," Malcolm Nance, a former Navy SERE instructor who was himself waterboarded, testified to Congress in November. "As the event unfolded, I was fully conscious of what was happening: I was being tortured."

On July 25, 2002, the Defense agency that oversees the SERE program, known as the Joint Personnel Recovery Agency, or JPRA, was contacted by a representative of Pentagon General Counsel William Haynes for information about SERE practices for the "exploitation process" -- that is, getting detainees to cooperate with their interrogators. The next day, JPRA's chief of staff, Air Force Lt. Col. Daniel Baumgartner, sent Haynes a lengthy memorandum explaining how the program worked.

. . . Baumgartner's memorandum was not the last time SERE techniques were introduced into the interrogation bloodstream. On the week of Sept. 16, 2002, JPRA officials invited a contingent of senior Guantanamo-based officers to a briefing session at Ft. Bragg, N.C. Haynes and his legal counterparts at the Central Intelligence Agency, Justice Dept. and the vice president's office visited Guantanamo the following week for an update on interrogations. The minutes of that meeting record that the commander of the detention facility "did take Mr. Haynes and a few others aside for private conversations."

Just the week after that, a senior CIA lawyer, Jonathan Fredman, instructed Guantanamo officers on various SERE-pedigreed torture methods, including waterboarding. "If the detainee dies," Fredman said, "you're doing it wrong." In response, the chief Guantanamo Bay attorney, Lt. Col. Diane Beaver, said, "We will need documentation to protect us."

The Washington Post today emphasized that the meeting records, specifically Feldman's statements, revealed the CIA's larger involvement in advising on the torture techniques, the creation of which was previously thought to fall mainly under the purview of the Defense Department.

Baumgarten and Beaver testified about their involvement:

Before the Senate panel, Baumgartner said he did not realize that Haynes wanted to use SERE techniques on enemy combatants. "I had no idea how it would be used," he testified. "When tasked by my higher headquarters... I can't really turn around and tell the flag officers and the senior executive service people no."

Beaver testified today for the first time since Haynes declassified her guidance in mid-2004. She said she intended for the techniques to be used under supervised and restricted circumstances. It turned out that not a single other military lawyer submitted written guidance in support of the SERE-derived techniques. "In hindsight," Beaver told the Senate panel, "I can only conclude that others chose not to write on this issue in order not to be linked to it. For me, that was not an option."

Meanwhile, Haynes attempted to distance himself from the policy.

Haynes, who retired from the Pentagon in April, after his nomination to the federal judiciary foundered, pled ignorance. "No, sir, I don't remember it at the time," Haynes said when asked if he had received Baumgartner's memorandum. "But I saw it a long time ago... it's possible I saw it at the time."

Pressed by Levin on how he could not have seen a memorandum concerning terrorism detentions and interrogations, Hayes replied, "the recipient is the Office of the Secretary of Defense General Counsel, which [was] not my precise title."

For more coverage, also see Ackerman's live blog of the hearing as it took place.

We pointed out this morning the New York Times story that suggested KBR was over charging the military on Iraq-related contracts and threatening to cut off services to combat troops if the bills weren't paid.

Now here's another one about KBR's billing. This time from the Department of Defense Inspector General. And it looks at the company's role in the clean-up efforts after Hurricane Katrina.

The Houston Chronicle reports:

The Pentagon Inspector General said he could find no documentation in Navy contracting files to back up KBR claims it paid fair and reasonable prices to subcontractors that served meals in New Orleans.

"The prices KBR agreed to pay were greatly inflated," the 86-page audit said.

"The Navy paid approx