Sketchy Gets Sketchier: Senator Loeffler Received $9 Million 'Gift' Right Before She Joined The Senate

from the seems-iffy dept

Kelly Loeffler is, by far, the wealthiest elected official in Congress, with an estimated net worth of half a billion dollars (the second wealthiest is Montana Rep. Greg Gianforte (famous for his body slamming a journalist for asking him a question and then lying to the police about it)). Loeffler may be used to getting away with tearing up the red tape in her previous life, but in Congress, that often looks pretty corrupt. In just the last few months since she was appointed, there were concerns about her stock sales and stock purchases, which seemed oddly matched to information she was getting during briefings regarding the impact of COVID-19. She has since agreed to convert all her stock holdings to managed funds outside of her control (something every elected official should do, frankly).

Now, the NY Times is noting another form of what we've referred to as "soft corruption" -- moves that might technically be legal, but which sure look sketchy as hell to any regular non-multimillionaire elected official. In this case, Senator Loeffler received what was, in effect, a gift worth $9 million from her former employer, Intercontinental Exchange (the company that runs the NY Stock Exchange, and where her husband is the CEO).

The key issue was that since she was leaving the job to go join the Senate, she had a bunch of unvested stock. For normal people, if you leave a job before your stock vests, too bad. That's the deal. The vesting period is there for a reason. But for powerful, rich people, apparently the rules change. Intercontinental Exchange changed the rules to grant her the compensation that she wasn't supposed to get, because why not?

Ms. Loeffler, who was appointed to the Senate in December and is now in a competitive race to hold her seat, appears to have received stock and other awards worth more than $9 million from the company, Intercontinental Exchange, according to a review of securities filings by The New York Times, Ms. Loeffler’s financial disclosure form and interviews with compensation and accounting experts. That was on top of her 2019 salary and bonus of about $3.5 million.

The additional compensation came in the form of shares, stock options and other instruments that Ms. Loeffler had previously been granted but was poised to forfeit by leaving the company. Intercontinental Exchange altered the terms of the awards, allowing her to keep them. The largest component — which the company had previously valued at about $7.8 million — was a stake in an Intercontinental Exchange subsidiary that Ms. Loeffler had been running.

The entitlement factor oozes out of the statement put out from her office in response to this:

“Kelly left millions in equity compensation behind to serve in public office to protect freedom, conservative values and economic opportunity for all Georgians,” said Stephen Lawson, a spokesman for Ms. Loeffler. “The obsession of the liberal media and career politicians with her success shows their bias against private sector opportunity in favor of big government.”

No, Stephen, that's not the issue. The issue is that normal people who haven't vested yet, don't get to have the board change the vesting rules as you're leaving to go legislate in order to give you a $9 million windfall you didn't earn because it hadn't vested. If it had just been a question of compensation, no one would be complaining. If she had played by the rules that everyone else played by, lived up to her end of the contract and vested the equity, then no big deal. The problem is the last minute changing of the rules to get her a pretty massive payout (perhaps not by her standards, but by anyone else's).

Indeed, the details show that this wasn't just a timing thing, like a standard vesting deal, but that Loeffler was supposed to reach certain milestones to be able to get the equity. She didn't, but she still gets it. That's the part that has people concerned.

In February 2019, Intercontinental Exchange gave Ms. Loeffler a stake in a limited liability company that owned a stake in Bakkt, according to a March 2019 securities filing. The company at the time estimated the award was worth $15.6 million. But Ms. Loeffler would be able to cash in on the award only under certain circumstances, including if Bakkt’s value soared or if it became a publicly traded company.

When Ms. Loeffler stepped down from the company less than 10 months later, she was poised to forfeit much of that Bakkt stake. But Intercontinental Exchange sped up the vesting process so that she got half of it immediately.

The company, of course, puts a nice spin on it, saying "We admire Kelly’s decision to serve her country in the U.S. Senate and did not want to discourage that willingness to serve,” but what else are they going to say anyway?

Still waiting for that supposed swamp draining we keep hearing about.

Filed Under: conflicts, equity, gifts, kelly loeffler, soft corruption, vesting
Companies: bakkt, intercontinental exchange

Keith Alexander Now Being Vetted By Everybody For Everything After Leaving The Protective Shelter Of The NSA

from the missing-the-old-'No-Such-Accountability'-already dept

Former NSA head Keith Alexander continues to draw the sort of attention he probably hoped he had left behind by resigning his post. His questionable business venture -- a private banking security firm seemingly dependent on patents and methods polished during his tenure at the NSA -- has drawn pointed questions from legislators and a second glance from the internal ethics apparatus of the intelligence agency.

Alexander apparently thought it would be fine for him to use the talents of the NSA's current Chief Technology Officer, Patrick Dowd, for his new private venture. You see, Alexander didn't want the country to lose a bright spy mind, but didn't really want his own IronNet Security firm to go without Dowd's talents either. So he compromised. The country could have Dowd full-time as long as he could spend 20 hours a week securing banks with Chief Keith.

Due to the extra level of scrutiny being directed at everything NSA-related, the agency decided to take another look at the this unholy unethical alliance. It didn't necessarily not like what it saw, but it wasn't absolutely enthralled with it either. But there will be no official statement forthcoming. Alexander has called the whole thing off.

On Tuesday, Alexander said: "While we understand we did everything right, I think there's still enough issues out there that create problems for Dr. Dowd, for NSA, for my company," that it was best for him to terminate the deal.

"Everything right" is apparently the equivalent of basically every other current and former intelligence official interviewed stating, "we've never heard of such a thing," and "pretty much a conflict of interest," etc.

In other news, Alexander's recently disclosed ("disclosed" pronounced "forced out of the NSA's clutches by journalist Jason Leopold's lawsuit") financial statements are gathering a bit more attention as well.

As I noted here, there were some questionable aspects about Alexander's investments, some of which related to government contractors, but nothing that screamed financial impropriety. The conclusion I reached was that the most surprising aspect was the NSA's adamant refusal to release these mostly innocuous declarations. There just wasn't much "there" there, from what I could see.

(The fact that the agency claimed the release of these financial disclosure statements could harm "national interests" was enjoyably ridiculous, but it's also the standard response when asked to open up about anything. Just because "security" is your middle name doesn't mean everything in your possession is instrumental to protecting the nation against terrorist activity.)

Shane Harris at Foreign Policy has done some deeper digging into Alexander's financial statements and excavated some rather strange investment patterns. Harris notes that there's very little in the way of discernible rationale for Alexander's purchases and sales. There's also no indication that any of these trades were very beneficial for Alexander's bottom line. And there's some weird dabbling in some markets where being the head of the NSA would possibly provide more insight than is available to other investors.

The financial disclosure documents, which were released to investigative journalist Jason Leopold and published this month by Vice News, reveal nothing explicitly about why Alexander sold the shares when he did. On Jan. 7, 2008, Alexander sold previously purchased shares in the Potash Corp. of Saskatchewan, a Canadian firm that mines potash, a mineral typically used in fertilizer. The potash market is largely controlled by companies in Canada, as well as in Belarus and Russia. And China was, and is, one of the biggest consumers of the substance, using it to expand the country's agricultural sector and produce higher crop yields.

"It's a market that's really odd, involving collusion, where companies essentially coordinate on prices and output," said Craig Pirrong, a finance professor and commodities expert at the University of Houston's Bauer College of Business. "Strange things happen in the potash market. It's a closed market. Whenever you have Russians and Chinese being big players, a lot of stuff goes on in the shadows."

The same day that Alexander moved his Potash Corp. shares, he also divested himself of his holdings in China-based Aluminum Corp., a state-owned entity that is the second-largest producer of aluminum in the world.

Alexander bought and sold shares in both companies, but never during price peaks or collapses. Instead, his divestments seem to be motivated not by profitability, but by the government's increasing interest in combating Chinese state-sanctioned hacking.

In the spring of 2008, shortly after Alexander sold his positions, senior U.S. officials began to speak on the record for the first time about the threat of cyber-espionage posed by Russia and especially China. Public attention to the intelligence threat was higher than it had been in recent memory. The optics of the NSA director owning stock in a company that his own agency believed may have been receiving stolen information from the Chinese government would have been embarrassing, to say the least.

Those embarrassing optics have been dulled by the passage of time. Withholding these yearly, mandatory disclosures for "national security" reasons has sheltered Keith Alexander from any embarrassing external questions over the last half-decade of investments.

Government agencies are supposed to be on the lookout for not only conflicts of interest, but the "appearance of impropriety." Alexander's investments (and his post-NSA ventures) both sport the outward trappings of impropriety. But everything being questioned now was previously signed off on by NSA officials as being above board. Now, even the NSA is second-guessing itself -- not because it's striving for a higher ethical standard -- but because the standard-operating-procedure of "hide everything" no longer works as well as it used to.

Filed Under: conflict of interest, conflicts, keith alexander, nsa, patrick dowd, surveillance
Companies: ironnet cybersecurity

CNET Reports On Losing CES 'Best In Show' Powers, But Hides Byline

from the wtf-is-going-on? dept

So we just wrote about how CEA had taken away CNET's ability to name the "best of show" product at CES (then re-named the Dish Hopper with Sling as the Best in Show as CNET staff had originally intended). Somewhat surprisingly, given the publications' reluctance to say too much about all of this so far, CNET, itself, reported the story, talking about itself in an almost creepily bland manner, and never even noting the oddity that it is reporting on itself. However, one tidbit stands out: See that byline? It just says "CNET News staff" rather than naming whoever wrote it. I cannot recall ever seeing that before on CNET. At the very least, it raises some questions. Is this a form of a "byline strike" that some journalists have used to protest management practices at other publications? Is it CNET cowardice in reporting on stories that reflect poorly on CNET? Is it a random cry for help among CNET reporters, blinking furiously as a signal to the outside world, while trapped inside their CBS-imposed-editorially-compromised prisons, letting us know they're alive and want out? I'm betting on that last one.

Filed Under: bylines, conflicts, journalism, reporting
Companies: cbs, cea, cnet, dish

CNET Finally Reports On Its Own Fight With CBS Over Dish CES Award

from the a-bit-slow-out-the-gate dept

Realizing that the longer it did nothing, the worse it looked, CNET itself has finally reported on the events that transpired last week when corporate boss CBS stepped into the middle of their editorial process and sought to deny CNET the ability to choose the product they thought was the best of CES, the Dish DVR with Hopper and Sling.

After the vote, we communicated the winners, as we always do, through normal channels. CNET immediately got down to the business of preparing for a massive stage show the following morning and preparing a press release.

Later that evening, we were alerted to the legal conflict for CBS. All night and through to morning, my managers up and down CNET and I fought for two things: To honor the original vote and -- when it became clear that CBS Corporate did not accept that answer -- to issue a transparent statement regarding the original vote.

Ultimately, we were told that we must use the official statement and that we must follow corporate policy to defer all press requests to corporate communications.

Of course, this is only coming out well after tons of other sources had reported on this -- and upstart competitor the Verge had already broken the story about how CBS didn't just tell CNET not to vote on the Dish device, but made them rescind the award that had already been chosen.

The CNET post, by reviews Editor in Chief Lindsey Turrentine, suggests that most of the staff had no idea that CBS was in litigation with Dish and they were just doing what they were supposed to do. She also pushes back against the idea that she should resign:

We were in an impossible situation as journalists. The conflict of interest was real -- a legal case can impact the bottom line of our company and introduce the possibility of bias -- but the circumstances demanded more transparency and not hurried policy.

I could have quit right then. Maybe I should have. I decided that the best thing for my team was to get through the day as best we could and to fight the fight from the other side. Every single member of the CNET Reviews team is a dedicated, ethical, passionate technology critic. If I abandoned them now, I would be abandoning the ship.

The thing is, if she had quit, I would bet that many on her team would not have seen it as being abandoned, but actually as real leadership of someone supporting their editorial independence.

She then goes on to insist that she'll fight to make sure this doesn't happen again -- but that seems difficult to believe since earlier in the existing story it suggests that she and others gave up the fight when CBS told them what they had to do:

If I had to face this dilemma again, I would not quit. I stand by my team and the years of work they have put into making CNET what it is. But I wish I could have overridden the decision not to reveal that Dish had won the vote in the trailer. For that I apologize to my staff and to CNET readers.

The one thing I want to clearly communicate to my team and to everyone at CNET and beyond is this: CNET does excellent work. Its family of writers is unbiased, focused, bright, and true. CNET will continue to do excellent good work. Of that I am certain. Going forward, I will do everything within my power to prevent this situation from happening again.

Of course, the decision to quit is one that every individual has to make themselves. But completely taking it out of the realm of possibility gives CBS the easy power to do this again and again and again. She's signalling to CBS that it can continue to walk over CNET's editorial independence, and while the editor-in-chief may protest loudly, in the end, she won't leave. That's only going to add to the cloud over CNET's reviews going forward.

Filed Under: conflicts, editorial independence, journalism
Companies: cbs, cnet, dish

Massive Conflict Of Interests In ICANN Called Out By CEO, Start To Get Some Attention

from the the-system-is-broken dept

We've noted what a joke ICANN has been for quite some time, culminating with some of its more bizarre decisions to help governments seize domains and censor the internet. Separately, its sense of entitlement towards its role managing domain registrations is really pretty disgusting. Of course, for years we've also discussed its ridiculous policy of rolling out new top level domains whose sole purpose appeared to be to transfer money from companies to registrars.

At a recent ICANN meeting, however, outgoing ICANN boss Rod Beckstrom (who we had hoped would clean up ICANN back when he took the job) blasted his own organization for the massive conflicts of interest that have made the organization almost entirely ineffectual when it comes to doing anything for the public's benefit.

"I believe it is time to further tighten up the rules that have allowed perceived conflicts to exist within our board," Mr. Beckstrom said in a speech during an Icann meeting in San Jose, Costa Rica, last week. "This is necessary, not just to be responsive to the growing chorus of criticism about Icann's ethics environment, but to ensure that absolute dedication to the public good supersedes all other priorities."

In fact, it looks like the conflicts are even worse than originally discussed, with a significant number of top people being closely tied to registrars directly, such that their positions are heavily influenced by what makes registrars the most money rather than what's best for the public or the internet as a whole. Isn't it time to just start over again from scratch, rather than letting this farce continue?

Filed Under: conflicts, icann, rod beckstrom
Companies: icann

The Atlantic Mocks Digg For Having BP As A Sponsor... In An Article Sponsored By Exxon

from the pot,-kettle dept

There was some attention last week, to the fact that Digg had apparently allowed BP to step in as a sponsor on the site -- and I do admit that, at a first pass, the image presented does not look good: The article uses this example to suggest just how desperate Digg has become in the wake of its redesign, which resulted in many users revolting or going elsewhere. However, Chas Edwards from Digg, actually makes a pretty good point in responding to the article, in noting, first that the BP catastrophe is horrifying:

The deaths, the images of oil-soaked birds, and the enormous environmental and economic tragedy they symbolize, are deeply painful. For people above a certain age, they likely trigger traumatic memories of another gigantic and horrifying oil spill, when the captain and crew of the Exxon Valdez tanker crashed in waters off Alaska and spilled millions of gallons of oil into the ocean.

However, he then notes that the very same Atlantic article which mocks Digg for taking money from BP... happens to have been sponsored by Exxon: Edwards points out that there are always issues in ad-supported media, but the mocking tone was unnecessary and somewhat hypocritical given The Atlantic's own sponsorship practices.

At times, we've had the same sort of debate here. Do we take advertising money from companies we disagree with over certain things? There's one argument that says that you should never agree to allow advertising from a company you disagree with. The flip-side might be that if a company you don't like wants to give it's money to you, perhaps you can put their money to much better use. In the end, I tend to view it in the same manner as I view censorship of unpopular speech: I'd rather let everything be out in the open, clearly stated, rather than trying to suppress views.

When I was in Germany recently, speaking at an event, a German guy in the audience got up and read aloud a comment on Techdirt that said less-than-nice things about Germans, and demanded to know why I had not deleted the comment (noting that, under German law, I was legally responsible for those comments). Beyond the ridiculousness of German law that puts the liability on third parties for others' speech, I noted that free speech means allowing free speech for all -- and if that includes ignorant speech, it's better to let that ignorance out into the open where it can be countered and responded to, rather than trying to hide it and delete it. I said that blocking or simply deleting such speech only reinforces the ideas of those who make such speech that they're saying something so "truthful" the world can't bear to hear it. I don't think that pushes the conversation forward.

Now, obviously, advertising is not the same kind of "speech" as discussed in the paragraph above, but there is something to be said for allowing companies to advertise in an open manner, and allowing the discussion to then occur, even about that advertising -- something Digg tends to encourage openly. It's been said that the best response to speech you don't like isn't censorship, but more speech -- and I would argue that applies to advertising as well. Now, I'm sure some will cynically say that, of course anyone who accepts advertising will want to accept whatever ads they can to make money. But I think that sites like Digg, which have been pretty careful not to go down the road of really annoying advertising, show that they won't just do anything for money.

Plenty of newspapers who covered the BP oil spill -- including the NY Times, the Washington Post and the Wall Street Journal -- all accepted advertising from BP in the wake of the spill. I didn't see any sanctimonious articles condemning any of them for doing so. It may be tempting, at a gut level, to suggest this is somehow "wrong," but I think I'd rather BP was out there trying to talk to people -- and letting the people talk back -- than being told it can't spend its money that way at all.

Filed Under: advertising, conflicts, ethics
Companies: bp, digg, exxonmobil, the atlantic

Judge In FTD Copyright Case Worked For Movie Studio's Lawyer On The Side?

from the bias?-ethics? dept

A few folks have sent this one in. Last week, we wrote about a really troubling ruling in the Netherlands against usenet community FTD. While we had originally described it as saying that links to infringing files were illegal, it actually went even further, saying that mentioning file names of infringing files was infringing. But, perhaps even more ridiculous is the news that the judge in the case also happened to teach classes on intellectual property where his boss was the lawyer representing the movie studios. Under just about any normal system, you would think that this would reason enough for a judge to recuse himself from the case. Apparently not here.

Filed Under: conflicts, copyright, netherlands

As The FTC Goes After Bloggers, Doctors Making Millions Promoting Drugs With Little Oversight

from the feeling-healthy-yet? dept

Clay Shirky points us to a column from a few months back by Marcia Angell, which explains why clinical research on drugs isn't even remotely trustworthy, as it all-too-often seems to involve doctors who have serious conflicts:

Or consider Dr. Alan F. Schatzberg, chair of Stanford's psychiatry department and president-elect of the American Psychiatric Association. Senator Grassley found that Schatzberg controlled more than $6 million worth of stock in Corcept Therapeutics, a company he cofounded that is testing mifepristone--the abortion drug otherwise known as RU-486--as a treatment for psychotic depression. At the same time, Schatzberg was the principal investigator on a National Institute of Mental Health grant that included research on mifepristone for this use and he was coauthor of three papers on the subject.

Angell notes that this is pretty common:

Indeed, most doctors take money or gifts from drug companies in one way or another. Many are paid consultants, speakers at company-sponsored meetings, ghost-authors of papers written by drug companies or their agents, and ostensible "researchers" whose contribution often consists merely of putting their patients on a drug and transmitting some token information to the company.

And as the relationship between doctors and pharma has gotten deeper and deeper, it means that the results of those all important "clinical trials" -- which the pharma supporters always insist are so important -- are highly suspect:

Because drug companies insist as a condition of providing funding that they be intimately involved in all aspects of the research they sponsor, they can easily introduce bias in order to make their drugs look better and safer than they are. Before the 1980s, they generally gave faculty investigators total responsibility for the conduct of the work, but now company employees or their agents often design the studies, perform the analysis, write the papers, and decide whether and in what form to publish the results. Sometimes the medical faculty who serve as investigators are little more than hired hands, supplying patients and collecting data according to instructions from the company.

In view of this control and the conflicts of interest that permeate the enterprise, it is not surprising that industry-sponsored trials published in medical journals consistently favor sponsors' drugs--largely because negative results are not published, positive results are repeatedly published in slightly different forms, and a positive spin is put on even negative results. A review of seventy-four clinical trials of antidepressants, for example, found that thirty-seven of thirty-eight positive studies were published. But of the thirty-six negative studies, thirty-three were either not published or published in a form that conveyed a positive outcome. It is not unusual for a published paper to shift the focus from the drug's intended effect to a secondary effect that seems more favorable.

And yet the FTC is more worried about a mommy blogger recommending a book that a publisher sent her for free?

Filed Under: conflicts, doctors, drugs, fda, ftc