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Why NSA Snooping Is Bigger Deal in Germany

August 23, 2013 - 8:00am

Germans like posting baby pictures, party snapshots and witty comments on Facebook just like anyone else. They just do not want to get caught doing it. Many of us use fake names for their profiles – silly puns, movie characters or anagrams and “remixes” of their real names. (Yes, I have one. No I’m not telling you the name.)

We like our privacy (even if fake names might not be the most professional form of encryption). Which is why the revelations about NSA spying have led to a bigger debate in Germany than in the US. It has become the hottest issue during what was poised to become a dull election campaign.

Now there is a James-Bond vibe to pre-election season: Newspapers publish extensive guides on how to encrypt emails. People question whether they should still use U.S.-based social networks. The German government seems to be under more pressure over the revelations than the American one.

What makes Germans so sensitive about their data? Many have pointed to Germany’s history: Both the Nazi secret police Gestapo and the East German Stasi spied extensively on citizens, encouraging snitching among neighbors and acquiring private communication.

But that’s not the whole story. Politics and the media in Germany today are dominated by (male) citizens raised in the democratic West who have no personal recollection of either of the Stasi or Gestapo.

Germany lacks the long tradition of strong individual freedoms the state has guaranteed in the U.S. for more than 200 years. Precisely because of that, these values, imported from the Western allies after 1945, are not taken for granted.

Indeed, there have been battles about privacy – and against a perceived “surveillance state” – in Germany for decades.

While the student rebellion of the late Sixties was partly driven by anger over the Vietnam war, it was also fueled by the parliament considering emergency laws that would have limited personal freedoms. And in the seventies, as left-wing terrorist groups were attacking the state ruthlessly, government answered with then-new “dragnet tracing”, identifying suspects by matching personal traits through extensive computer-based searches in databases.

Many considered this to be unfair profiling. In 1987, authorities wanted to ask Germans about their life – but the census faced protests and a widespread boycott because people saw the collection of data as an infringement of their rights. Citizens transformed into transparent “glass humans” (“gläserner Mensch”) were a horror scenario in the late and nineties in Germany summoned up on magazine covers and in T.V. shows.

Then, there is also the disappointment of the buddy who realizes he is not, as he thought, one of the strongest guys’ best friend.

The oft-celebrated partnership with the U.S. served as a pillar of Germanys’ comeback in international politics after the war and the Holocaust. Now it turns out Germany is not only ally, but also target. According to documents Edward Snowden disclosed, 500 million pieces of phone and email metadata from Germany are collected each month by the NSA – more than in any other EU country.

The outrage at the U.S.’s snooping has continued despite a follow-on revelation that it was actually the German secret service, the BND, that handed over the data to the NSA. (The BND said that no communication by German citizens was collected.)

The German debate also has to be understood as being fueled by a widespread but low-level Anti-Americanism, an ugly staple of the German left as well as the right. The short-lived love for Obama (200,000 people celebrated him during his Berlin speech in 2008) was an exception to the widespread perception of American hubris and imperialism. Germans have managed to live with the cognitive dissonance of protesting U.S. interventions while embracing Californian culture, rap music and even Tom Cruise.

Jakob Augstein, columnist for the countries’ biggest news site Spiegel Online, considers Prism an addition to the body of evidence that already includes Abu Ghraib and the drone war: The U.S., Augstein writes, is becoming a country of “soft totalitarianism”. The only thing not to be disputable about this statement is the Germans’ expertise when it comes to totalitarianism.

While the U.S. has few laws concerning data privacy, Germany has something unknown to Americans: 17 state data protection supervisors (one national and one for each state), who watch over the compliance of authorities and companies with data privacy laws. Since the German state Hesse introduced the first of these laws in 1970, strict oversight like this has become common in Europe.

Some of the German data supervisors have been regular talking heads in the media for years, bashing U.S. companies like Facebook for their alleged violations of privacy of their customers. When Google photographed German streets for its Street View service, they were pushing the company to give citizens the possibility of opting out. That is why today, tens of thousands of buildings in Germany are blurred on Street View.

Now the data protection supervisors have an even bigger target: the National Security Agency. After the Snowden revelations, they have discontinued giving out new licenses to companies under the so-called Safe Harbor principles, which are meant to guarantee that personal data is only transferred to countries with sufficient data protection, for example when Germans use American companies’ cloud storage space. After the revelations about the Prism program, the supervisors consider user data in the hands of U.S. companies not safe anymore.

Opposition parties have picked the “NSA scandal” – as German media call it – as the big (and, since Chancellor Angela Merkel is leading all polls, only) chance for the opposition to turn around the election. Merkel has been accused of having known more about the extent of the spying before the story broke than she admitted. Since German services are coordinated from the Chancellery, her opponents don’t believe her that she did not know about the American spy efforts.

Yet it is unlikely that the revelations will seriously influence the outcome of the election. This is not only because Merkel has an economy surprisingly immune to the European crisis. It is also because the biggest opposition party, the Social Democrats, has been tainted by its proximity to power. While smaller left-wing parties such as the former communists or the Greens make bold statements, including offering Snowden asylum, Social Democrats have a hard time doing so. One of their heads, Frank-Walter Steinmeier, used to be coordinator for Merkels predecessor Gerhard Schröder. In that position, Steinmeier was responsible for the services and intensified U.S.-German intelligence cooperation in the years after 9/11. He later became Secretary of State under Merkel. Even though that was before Prism started, socialists and conservatives bash him in rare unanimity “as if he’d personally founded the NSA and tapped transatlantic internet cables”, as my colleague Michael König put it for

The government’s response to concerns about the spying reads like it was written in the Pentagon: The U.S. said it was only spying on individuals suspected of organized crime or terrorism. And the NSA said it was acting according to U.S. and German law. There is no blanket surveillance of European citizens.

But Germans don’t trust Merkel. A poll found two-thirds of questioned people voicing discontent with her dealing with the affair. Germans hoped for a more forceful reaction, like that from Brazil, another democratic country targeted by the NSA: Brazilian foreign minister Antonio Patriota publicly found strong words standing next to Secretary of State John Kerry last week: "In case these challenges are not solved in a satisfactory way, we run the risk of casting a shadow of distrust on our work.”

In Germany, the government sounds more apologetic than angry.

The U.S. is at least throwing Germany a bone. According to the government in Berlin, the NSA has offered a treaty: No more spying on each other. Georg Mascolo, former editor-in-chief of news Magazine Der Spiegel and now writing for Frankfurter Allgemeine Zeitung, considers this an “historical chance for Angela Merkel”: A treaty, if formulated without loopholes for American spying, would give new value to the German-American alliance.

In any case, we’ll keep on making up fake names on Facebook. Just in case spies are going to keep on doing what spies are supposed to do.

Jannis Brühl is an Arthur F. Burns Fellow at ProPublica. In Germany, he works mostly for Sü in Munich, the online edition of the national daily Süddeutsche Zeitung.

Categories: Media, Politics

Workers Win $2 Million Settlement From Assisted Living Giant

August 22, 2013 - 1:37pm

Emeritus Senior Living, the country’s largest assisted living company, has agreed to pay up to $2.2 million to settle claims that it routinely underpaid workers at dozens of its California facilities.

Hands-on workers at Emeritus facilities – the non-salaried aides and support staff who statewide help care for hundreds of often frail seniors – alleged in a lawsuit that the company had not only shortchanged them in their pay, but also violated state laws concerning mandated meal times and rest periods. Workers were denied overtime and not properly compensated for days during which they underwent training sessions, according to the lawsuit.

A recent investigation of Emeritus by ProPublica and PBS Frontline showed that the company’s top executives saw controlling labor costs as critical to sustaining the publicly traded company’s financial success and maintaining its appeal to investors on Wall Street. The investigation found evidence that the zeal of senior Emeritus officials to cut costs had led to understaffing at many facilities and considerable disgruntlement among remaining staff about their workload and wages.

Emeritus, both in interviews and court papers, has said its close to 500 facilities across the country are adequately staffed and that its workers are properly compensated.

Under the settlement, which needs to be approved next month by a state judge, Emeritus will compensate workers who were employed in its facilities in California from 2007 to 2013. The workers can range from the men and women who bathed and fed the elderly residents to those who administered their medications to those who cleaned the hallways and restrooms of the facilities.

Despite the settlement, Emeritus rejects the accusations made in the lawsuit.

“At Emeritus, we strive to be the employer of choice,” the company said in a statement to ProPublica. “We are competing to hire the very best staff that we can, and we are committed to our community teams. We work to be competitive in terms of total compensation within our industry, and we conduct wage analyses in markets in an effort to stay at or in line with the competition.”

Assisted living, conceived two decades ago to offer older Americans the chance to avoid nursing homes and retain greater degrees of independence and dignity, has become a multibillion-dollar industry, dominated by large chains such as Emeritus. Today, some 750,000 people are housed in assisted living facilities in the U.S., with increasing numbers of them suffering from dementia and other serious medical issues.

Experts in the assisted living industry say the low wages paid to workers by companies like Emeritus have produced a workforce that often is poorly trained and beset by poor morale. The lawsuit, initially brought by two caregivers at a single California facility, alleged that the company customarily cheated its modestly paid workforce of what it was legally owed. The lawsuit was granted class-action status, and the proposed compensation is available now to hundreds of workers at Emeritus’s more than 50 facilities in California.

“When it comes to the direct caregivers, you need to hire people who are dedicated to their work,” said Sally Clark Stearns, a professor of health policy at the University of North Carolina Gillings School of Global Public Health. “To do that, you need to pay people sufficient wages to have a stable workforce.”

J. Kevin Eckert and Erin Roth, researchers from the Center for Aging Studies at the University of Maryland who have studied the assisted living industry for more than a decade, noted that the quality of care delivered by large assisted living companies is intimately tied to how well the company pays its workers.

“I am always amazed by the commitment of direct care workers,” Eckert said. “But many of the problems in assisted living stem from the fact these workers earn minimum wage.”

“Many direct care workers haven’t graduated high school, are often immigrants, and earn roughly $20,000 a year,” Eckert added. “Many are single parents that have complicated lives. And they’re often leaving one job because they can earn fifty cents more somewhere else. That’s very disruptive. This is not the way to provide care in one of the fastest growing industries in the country.”

Categories: Media, Politics

The Best Reporting on Hurricanes and Their Aftermaths

August 22, 2013 - 11:27am

Mid-August marks the start of peak hurricane season, and the National Oceanic and Atmospheric Administration has warned that this year’s is likely to be worse than usual, with a forecast of 13 to 19 named storms. We’ve round up some of the best reporting on hurricanes and what happens after they’re over — from  inept planning to police abuses to waste and misspending during the recovery.

After the Flood, This American Life, September 2005

The week after Katrina struck New Orleans, This American Life devoted its show to giving “people who were in the storm more time than daily news shows could give, to tell their stories and talk about what happened.”

One of those people was Denise Moore, who took shelter at the New Orleans Convention Center after the levees failed. “What they kept doing the whole time was tell us to line up for the buses that never came” she told Ira Glass. “It was like they were doing drills every four hours. You all have to line up for the bus. And if you bum rush the bus, they're just going to take off without you, and nobody is going to get to go anywhere. You have to line up. You have to be in a straight line. We're talking about old people in wheelchairs and women with babies in lines, waiting for buses that you know God damn well aren't coming, like they were playing with us.”

The Deadly Choices at Memorial, ProPublica and the New York Times Magazine, August 2009

ProPublica reporter Sheri Fink spent two and a half years reconstructing what happened at New Orleans’ Memorial Medical Center during Hurricane Katrina. She found that the exhausted, overwhelmed doctors intentionally injected a number of patients with lethal doses of morphine and the sedative midazolam during the chaotic evacuation of the hospital. 

From Blue Tarps to Debris Removal, Layers of Contractors Drive Up the Cost of Recovery, Critics Say, The Times-Picayune, December 2005

The federal contractors hired using the $60 billion Congress earmarked for the Katrina recovery hired subcontractors, who hired sub-subcontractors — a process that sometimes produced sub-sub-sub-sub-subcontractors, or “fifth-tier subs,” and helped to drive up the cost of recovery. “In other words,” The Times-Picayune reported, “the guy spinning a Bobcat choked with tree limbs on a residential street may be earning as little as $1 per cubic yard of debris, although the prime contractor may be billing 20 times that amount for the service.”

After Katrina, New Orleans Cops Were Told They Could Shoot Looters, ProPublica, Frontline and the New Orleans Times-Picayune, August 2010

One commander told New Orleans police officers they had the “authority under martial law to shoot looters” in the days after Katrina, according to a videotape of his remarks. Two New Orleans cops said that the department’s second-in-command at the time, gave a similar order, even though police had no such authority under the law.

The story was part of a series on cop shootings after Katrina. Another story in the series looked at the case of Henry Glover, whose remains were found inside a burned-out car in the days after Katrina. Two witnesses said police had refused to help Glover after he had been shot and they drove him to a police command post. A cop later drove off with his body still in the car. After the stories, three officers were charged and convicted in connection with Glover’s death. An appeals court later overturned two of the convictions.  

Behind a Call That Kept Nursing Home Patients in Storm’s Path, The New York Times, December 2012

The day before Hurricane Sandy struck, Mayor Michael R. Bloomberg ordered a mandatory evacuation of New York City’s low-lying neighborhoods. But the city recommended that residents of nursing and adult homes in the same areas ride out the storm. The decision led to difficult evacuations through sand and debris after the storm, which “severely flooded” least 29 such facilities in Queens and Brooklyn.

How New Jersey Transit Failed Sandy’s Test, WNYC and The Record, May 2013

Hurricane Sandy inundated 19 of the 8,000 rail cars operated by New York’s Metropolitan Transit Authority. It engulfed hundreds of New Jersey Transit cars, more than a quarter of the fleet, thanks to the decision in yards that flooded. An investigation by WNYC and the New Jersey Bergen Record found that NJ Transit had used maps built inaccurate numbers that showed the yards wouldn’t flood.

Suffering on Long Island As Power Agency Shows Its Flaws, The New York Times, November 2012

Two weeks after Sandy hit, more than 10,000 Long Island Power Authority customers still didn’t have power. A Times investigation found that the government-run authority had “repeatedly failed to plan for extreme weather” and had fallen behind on trimming tree limbs near power lines. At the same time, the authority had become “a rich source” of high-paid patronage jobs for politicians’ friends and relatives.

Miami-Dade Cleans Up on FEMA Aid, The Sun Sentinel, November 2004

The Federal Emergency Management Agency sent $28 million worth of relief to Miami-Dade County in Florida after Hurricane Frances hit in 2004, even though the brunt of the storm struck 100 miles north of the county. The damage in Miami-Dade was limited to “a few fallen and power lines.” But FEMA shelled out for new cars, lawn mowers, thousands of appliances and even a funeral in Miami-Dade, even though no one in the county died in the storm. The story is part of a Sun Sentinel series investigating FEMA.

Weak Insurers Put Millions of Floridians at Risk, The Sarasota Herald-Tribune, February 2010

Big insurance companies like State Farm and Allstate fled the Florida property insurance market after Katrina hammered the Gulf Coast in 2005. A Herald-Tribune investigation found that millions of Floridians had turned to tiny insurance companies that had taken their place, which had nowhere near enough money to cover the billions of dollars in property they insured. Lawmakers and regulators had “ignored warnings and encouraged private companies to stretch their limited cash further.”

Want more hurricane coverage? Check out our ongoing series on FEMA and the challenge of rebuilding after storms as the climate changes.

Categories: Media, Politics

Overdozed on A-Rod? Here are Other Great Reads on Doping

August 21, 2013 - 1:31pm

We know, we know. Enough already. But as baroquely banal as Alex Rodriguez’s saga with performance enhancing drugs has become, the subject of sports and drugs is a serious and, it seems, eternal issue.

We asked David Epstein – new ProPublican, acclaimed author of “The Sports Gene” and expert on matters of science and sports – to list some memorable reads on the issue of performance enhancing drug:

What You Don't Know Might Kill You, Sports Illustrated, May 2009
This is my favorite story on supplements that I was involved with. (And it was introduced into the congressional record.) 

I Couldn’t Be More Positive, Outside, May 2011
A great story in which a journalist and amateur cyclist use drugs for a year.

The Fastest Man in the Prison Yard, ESPN, September 2009
I think this is about as interesting as athlete confessions get.

The Godfather, Sports Illustrated, March 2008
This was about a guy who sabotaged a study and made the medical community say that steroids don't work.

In Chase for Wins, a Runner Cheats, New York Times, October 2012
I like this one, just in terms of helping convince people that this is for lower level athletes too.

Who Knew, ESPN Magazine, November 2005
An ambitious look at the history of steroids in baseball.

“The Secret Race” and “Game of Shadows”
Both these books were both game changers. Here’s an excerpt from Game of Shadows.

Categories: Media, Politics

What NSA Transparency Looks Like

August 20, 2013 - 11:55am

Last week, the Washington Post published an internal audit finding the NSA had violated privacy rules thousands of times in recent years.

In response, the spy agency held a rare conference call for the press maintaining that the violations are “not willful” and “not malicious.”

It’s difficult to fully evaluate the NSA’s track record, since the agency has been so tight-lipped on the topic.

What information about rule violations has the agency itself released? Take a look:

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That is the publicly released version of a semiannual report from the administration to Congress describing NSA violations of rules surrounding the FISA Amendments Act. The act is one of the key laws governing NSA surveillance, including now-famous programs like Prism.

As an oversight measure, the law requires the attorney general to submit semiannual reports to the congressional intelligence and judiciary committees.

The section with the redactions above is titled “Statistical Data Relating to Compliance Incidents.”

One of the only unredacted portions reads, “The value of statistical information in assessing compliance in situations such as this is unclear. A single incident, for example, may have broad ramifications. Multiple incidents may increase the incident count, but may be deemed of very limited significance.”

The document, dated May 2010, was released after the ACLU filed a freedom of information lawsuit.  

As the Post noted, members of Congress can read the unredacted version of the semiannual reports, but only in a special secure room. They cannot take notes or publicly discuss what they read.

For more on the NSA, see our story on how the agency says it can’t search its own emails, and what we know about the agency’s tapping of Internet cables

UPDATE 8/22/13: The Obama Administration has now declassified the most recent version of the semiannual report to Congress and posted it online. The document includes some information about rates of "compliance incidents" but is also heavily redacted.

Categories: Media, Politics

The Best Reporting on Mental Illness in Prisons

August 19, 2013 - 10:45am

Last week, we published an investigation into the New York prison system, and how, despite protections, inmates with severe mental illness are still ending up in solitary confinement.

But New York is far from unique. Prisons and jails across the country are filling with mentally ill inmates, while access to community mental health services dwindle. The Department of Justice estimated in 2006 that over half of all U.S. inmates suffer from a mental health problem.

Those prisoners also often end up in the isolated cells known as “special housing units,” “secure housing units,” solitary confinement, or simply, “the box.” There, inmates can be locked down for 23 hours a day with little human contact. Studies show such isolation can cause or exacerbate psychiatric problems in prisoners.

We’ve rounded up some of the best deep-dive reporting on the mentally ill in U.S. prisons. Did we miss any? Let us know in the comments below.

Mental Illness Among Inmates

My Name is Not Robert, New York Times magazine, August 2000
A mentally ill man from Los Angeles is mistaken for a wanted criminal, and ends up in a maximum security prison in upstate New York. His kafkaesque story details the bureaucratic breakdown and flaws in mental health care that led to his imprisonment.

The New Asylums, Frontline, May 2005
Frontline documents the movement of America’s mentally ill away from shuttered psychiatric hospitals, and into the nation’s jails and prisons. The result is a massive strain on the minds of afflicted inmates, and on the strapped prison system tasked with treating them.

An American Gulag: Descending into Madness at Supermax (three-part series), The Atlantic, June 2012
Federal prison policy says mentally ill inmates shouldn’t be housed in the maximum-security prison ADX-Florence (also known as Supermax) in Colorado. But a lawsuit against the facility found many troubled inmates were still locked down at Supermax, where they were neglected or out-right abused by prison staff.

Trouble in Mind, Texas Monthly, March 2013
Andre Thomas had been hearing voices since he was 10 years old, and made multiple attempts at suicide. Eventually, his psychotic breakdown led him to brutally murder his wife and her two children. As Thomas awaits execution for his crimes in Texas, his story “forces uncomfortable questions about the intersection of mental illness and the criminal justice system,” writes journalist Brandi Grissom.

The Impact of Solitary Confinement

A Death in the Box, New York Times Magazine, October 2004
Inmates battling psychological problems often find themselves in “the box” for failing to comply with rigid prison policies. But what toll does isolation take on an already fragile mind? Mary Beth Pfeiffer details the death of one New York inmate who committed suicide after being stuck in solitary—rather than provided treatment. Pfeiffer’s 2011 investigationfor the Poughkeepsie Journal shows how even with new protections, the number of suicides in New York prisons spiked in 2010.

Hellhole, New Yorker, March 2009
Atul Gawande explores the trauma of long-term isolation, a daily reality for tens of thousands of U.S. prisoners. “The wide-scale use of isolation is, almost exclusively, a phenomenon of the past twenty years,” Gawande writes of confinement, a tactic meant to separate the most dangerous inmates. But while solitary can have a massive impact on inmates’ mental health, studies show it’s done little to reduce prison violence.

New York's Black Sites, The Nation, July 2012
While solitary is used across the country, New York stands out for using it to punish violations as minor as having too many postage stamps. Jean Casella and James Ridgeway (also editors of the website Solitary Watch) detail how New York State came to house roughly 4,500 inmates in solitary confinement, cutting them off from almost all human contact, often for months at a time.

Solitary in Iran Nearly Broke Me. Then I Went Inside America's Prisons, Mother Jones, November 2012
After being held for over two years in an Iranian prison, journalist Shane Bauer was shocked by what he found at California’s Pelican Bay prison: their solitary confinement cells were, in many ways, even worse. “Here, there are no windows,” Bauer writes. California uses solitary confinement to isolate thousands of inmates they claim are gang-affiliated, putting many in “the box” for up to decades.

Categories: Media, Politics

A Powerful Legal Tool, and Its Potential for Abuse

August 16, 2013 - 7:41am

Aug. 16: This story has been updated to include a recent decision by the U.S. Court of Appeals for the Second Circuit in the case of a Queens woman who says she was illegally held as a material witness in 2008.

The 20-year-old document – labeled the Hotel Custody log by the Brooklyn District Attorney’s office – is not easy to decipher. It contains a list of New York City hotels beside columns labeled “Date In” and “Date Out.” There are names of individual prosecutors and the units they worked for at the district attorney’s office.

A spokesman for the district attorney’s office, asked to explain the document, refused to say anything. And a judge recently placed the document under seal at the request of lawyers for the city.

Ruddy Quezada and his lawyers, however, are pretty sure they have figured the document out, and that it – in particular the third line from the bottom – holds a key to Quezada’s freedom after more than 20 years behind bars for a murder he insists he didn’t commit.

Quezada’s lawyers assert that the document is a record of witnesses in criminal trials held in hotel rooms by the district attorney in the winter of 1993. Some of the witnesses were prisoners released to testify and held overnight in custody. Others were witnesses who were fearful for their safety.

But some on the list were held under what are known in the criminal justice system as material witness orders, men and women who were deemed “uncooperative,” arrested by detectives and not freed until they agreed to testify.

Most specifically, Quezada’s lawyers say that on March 11, 1993, a man named Sixto Salcedo was checked into the Holiday Inn Crowne Plaza. Salcedo, they say, was released the following day, after he agreed to do what prosecutors wanted: testify that he had seen Ruddy Quezada shoot dead a man named Jose Rosado on the streets of Brooklyn.

Salcedo did testify, and Quezada was convicted. But a lot has happened since – Salcedo has recanted his testimony, another man has confessed to the murder, and Quezada has asked a federal judge to free him from prison. And much of what happens next could turn on what took place at the Crowne Plaza that night 20 years ago.

Salcedo now says in sworn testimony that he never saw Quezada shoot anyone, and that he only agreed to say otherwise after he had been arrested on a material witness order, threatened by detectives and held overnight in one of the hotels used by the district attorney’s office.

“I’m not trying to justify myself,” Salcedo said in the sworn statement, “I’m just trying to have a clear conscience, since I regret the harm that I have caused.”

For some defense lawyers in New York, the Quezada case is just one example of a wider abuse of material witness orders.

The orders are meant to help prosecutors compel testimony from problematic witnesses in criminal cases. But the orders, which must be signed by judges, are supposed to be used only in extraordinary circumstances, as a kind of last resort, often when prosecutors fear a potential witness might flee instead of testifying.

Prosecutors are required to honor basic protocols aimed at protecting the rights of such witnesses: once detained, they are to be brought directly before a judge and provided with a lawyer. A hearing is then supposed to be held to explore the reasons behind a witness’ reluctance to testify: Is it fear? Possible complicity in the crime? Or are witnesses being intimidated into testifying falsely?

Determining much about the use of material witness orders is not easy. Court administrators in New York State are able to say that prosecutors continue to seek them and judges continue to grant them, but can’t say definitively how often the orders are issued or whether prosecutors abide by the law in executing them.

A spokesman for the Queens District Attorney said prosecutors in the office always take such witnesses before a judge. But the city’s other four district attorneys told ProPublica they would not answer questions about how material witness orders are handled by their offices.

But the Quezada case is not the only one dealing with the possible abuse of material witness orders to have surfaced in recent years. Some defense lawyers say they are concerned about how often local prosecutors might have disregarded the safeguards meant to protect the witnesses.

A lawyer for a Queens woman who says she was illegally held as a material witness in 2008 is now pressing to hold prosecutors accountable, seeking to find them personally liable. She scored a considerable victory in her effort this week when a three-judge panel on the U.S. Court of Appeals for the Second Circuit held that prosecutors in the case were not entitled to “absolute immunity” from her lawsuit, and ordered the case to be reconsidered by a district court.

"A material witness warrant secures a witness’s presence at a trial or grand jury proceeding," Judge Gerard E. Lynch of the Second Circuit wrote in an opinion made public Friday. "It does not authorize a person’s arrest and prolonged detention for purposes of investigative interrogation by the police or a prosecutor."

Another lawyer, Joel Rudin, has asked a federal judge in Brooklyn to force the Brooklyn District Attorney to turn over its records concerning the detention of witnesses in hotels over the years. Rudin, who is suing the city over a wrongful conviction that was achieved in part by the abuse of a material witness order, already has won rare access to some material.

Rudin said some witnesses held in hotels were formally classified as prisoners; they may have been inmates brought to court to testify in a criminal trial. But scores of others on the logs he has seen were likely innocent men and women who were being detained under material witness orders, he said.

“If they were not happening in Brooklyn, we would associate such practices with a police state,” Rudin said in court documents filed in May.

The Brooklyn District Attorney declined to respond to Rudin’s allegations.

Controversy arose around federal prosecutors’ deployment of material witness orders after 9/11, when it came to light that they had used the warrants to detain large numbers of people to provide information about terror cases.

But the use of these orders at the state-level remains largely unexamined. In New Jersey, legislators adopted reforms to the state’s material witness statute two decades ago, prompted by a case in which a man was held in jail to testify against a defendant who hadn’t even been charged with a crime yet.

The reforms came after a state commission surveyed the laws on material witness orders across the country.

“Some states had some protections for witnesses, some had none, but no state had a comprehensive set of protections,” said John Cannel, a member of the New Jersey Law Revision Commission, an arm of the state legislature.

One Living Witness, Perhaps Too Valued

Jose Rosado was killed in a drive-by shooting in the crime-ridden Brownsville section of Brooklyn on Oct. 19, 1991. Ruddy Quezada was arrested for the crime, based on the statements to police of two alleged eyewitnesses: Sixto Salcedo and John Delacruz.

But by the time prosecutors were preparing for trial in late 1992, Salcedo was the only witness alive. Delacruz had turned up dead in the Bronx, leaving prosecutors with a badly weakened case without Salcedo’s testimony.

But Salcedo now says that in the run-up to Quezada’s trial he was no longer so certain about what he’d seen that night and refused to testify. Frustrated by Salcedo, prosecutors went to a judge in December 1992 to get an order to arrest him, and question him about just how uncertain he really was.

Salcedo says he eventually was picked up by an investigator with the Brooklyn District Attorney’s office, and brought to the Crowne Plaza hotel. Salcedo says he was never brought before a judge or provided with an attorney, and the Brooklyn District Attorney’s office has offered no evidence to the contrary.

Instead, he got a night with a New York Police Detective named Thomas Buda, who, according to court filings, threatened Salcedo with jail if he didn’t cooperate with prosecutors. Salcedo relented and testified the next day.

At trial he said he was standing in front of a bodega when he saw a black Cadillac with the headlights turned off pull up across the street. Quezada was in the passenger seat. He raised a machine gun and fired multiple shots out of the window.

“I saw him,” Salcedo said of Quezada, according to records of the trial. “I saw his face and then I saw some movement, then the shots, then we ran.”

The prosecutor, Ephraim Shaban, reassured the jury that Salcedo had come forward voluntarily.

Quezada, then 30, was convicted of second-degree murder and sentenced to 25 years to life in state prison.

Quezada immediately began to file appeals. And he eventually pressed for information concerning the circumstances of Salcedo’s testimony. He and his lawyers wanted to know if Salcedo had been arrested under a material witness order prior to trial.

For nearly a decade, in court filings and hearings, the Brooklyn District Attorney’s office insisted there was no material witness order used to compel Salcedo’s testimony. State judges accepted the district attorney’s claims. Quezada’s appeals were rejected.

But in 2011, close to 20 years after Quezada’s conviction, prosecutors produced what they had long insisted didn’t exist: a warrant to arrest Salcedo signed by Judge Abraham Gerges on Feb. 8, 1993. It stated that Salcedo should be brought “before the court forthwith” for a hearing to determine whether he did in fact have testimony relevant to the case and whether he should be held in police custody. Quezada’s lawyers also were given the page of the hotel custody log that recorded Salcedo’s night at the Crowne Plaza hotel.

The Brooklyn District Attorney’s office offered no explanation or apology for its failure to turn over the material earlier.

A federal court is now deciding whether to hold a hearing to examine Quezada’s claim of innocence.

Rudin, who is representing a wrongfully convicted Brooklyn man named Jabbar Collins in a multimillion-dollar lawsuit against New York City, suspects the abuse of material witness orders has been a regular feature of the way the Brooklyn District Attorney’s office did business over the years.

Collins, convicted of killing a Brooklyn rabbi in 1995, was told for years that an order used to prompt the testimony of a critical and damning witness in the case against him didn’t exist. Rudin ultimately found that to be false. Much like Quezada’s lawyers, he found that the key witness was picked up on a material witness order and then held for several days before he testified.

Rudin is now digging into the office’s use of material witness orders to bolster his accusation that there has been systemic misconduct in the Brooklyn District Attorney’s office. As part of that effort, Rudin has obtained the sworn testimony of Christopher Salsarulo, a former investigator for the district attorney’s office who says he executed many material witness orders during his three years with the office.

Salsarulo said in his sworn testimony that he received next to no training on how to properly execute a material witness order. He says nothing about bringing witnesses before judges or getting them lawyers.

Salsarulo said he was simply told “to do your best to find the material witness and bring her back to the DA’s office.” Salsarulo said material witnesses were sometimes put in handcuffs and taken to locked hotel rooms under armed guard.

The Brooklyn District Attorney’s office has denied Rudin’s claim that the office ran a rogue operation in which witnesses were routinely jailed and coerced into testifying falsely. To date, the office has not responded to Salsarulo’s portrayal of how material witnesses were handled.

Salsarulo, in his affidavit, painted a vivid picture of how uncooperative witnesses were dealt with, and how such treatment could produce useful testimony.

Witnesses, he said, would be left handcuffed in their underwear.

“You like pants?” Salsarulo said he would ask the witness.

Salsarulo, who now works as an agent for the U.S. Drug Enforcement Administration in New Jersey, said the technique often worked.

“If they’re compliant,” he said of the jailed witnesses, “we dress them and give them water, whatever they need so they would be comfortable.”

“I Didn’t Want to Come to Trial”

At 6 a.m. one January morning in 1992, 19-year-old Michael Thompson was asleep in his mother’s apartment on Avenue C in Manhattan when police rousted him from bed, according to court records. They had a material witness order to bring him before a judge and explore why he had been resistant to testify in a murder case. Six months earlier, Thompson had told police he’d seen someone shoot a man outside a Manhattan nightclub. He’d said he could identify the dead man, and his killer, a man named Fernando Bermudez.

But police and prosecutors had become frustrated over the months by what they viewed as Thompson’s lack of cooperation.

According to court documents, Thompson repeatedly told a Manhattan homicide prosecutor, James Rodriguez, that he didn’t want to testify against Bermudez. He told Rodriguez he’d never been sure of what he had seen that night outside the club.

But Rodriguez wasn’t persuaded. Several other witnesses had also identified Bermudez as the shooter. Rodriguez was determined to have Thompson testify. And so Rodriguez went before Manhattan Judge John A.K. Bradley, and obtained a material witness order authorizing his arrest.

Under New York law, Thompson should’ve been taken before a judge immediately after his arrest. But testimony and court records indicate that didn’t happen. He was supposed to get a lawyer. That didn’t happen. Instead, police drove him directly to the Manhattan District Attorney’s office to meet Rodriguez.

The Manhattan District Attorney’s office, which is now being sued by Bermudez, has declined to comment on the case.

In court filings, city attorneys representing the Manhattan District Attorney have denied any wrongdoing in the case. They claim that neither Thompson, nor any other witness, was pressured to testify falsely. To the contrary, they’ve suggested that the witnesses who recanted did so only as a result of pressure from Bermudez. Rodriguez, the prosecutor on the case, no longer works for the Manhattan District Attorney.

Thompson had been at the scene when Raymond Blount, his 16-year-old friend, was shot to death outside the club. He and others later picked Bermudez’s photograph out of a smattering of pictures provided by police in the days following the shooting. Thompson also picked Bermudez out of a line-up. But the photo was just of his face. And during the line-up, Bermudez never stood up, so Thompson couldn’t see how tall he was.

The man who shot Blount, Thompson said, was 5’8” or 5’9” and weighed about 160 pounds. Bermudez was 6’2” and about 215 pounds.

Thompson says he repeated his concerns to Rodriguez at the office that day he was picked up.

“I didn’t want to come to trial. I kept telling the ADA this because I doubted the identification. It was dark when Raymond got shot, and late,” Thompson said in a sworn statement he signed a year after the trial.

Police had found a toy gun in Thompson’s bedroom that morning. Thompson, who already had a criminal record, said he feared they’d make a case against him for it.

So he testified against Bermudez, as did several others.

“Before I went into the trial court the ADA took me and Frank Kent into his office to rehearse us. I was mad at what I had to do,” Thompson said in his sworn statement. “When I was in court I wasn’t sure no more of what to do. I remember looking at the defendant and thinking ‘he ain’t the kid who did it.’ I said what I was told to say by the ADA… I know now that it was a mistake.”

Bermudez was convicted and given a sentence of 23 years to life.

A year later, all of the witnesses recanted, including Thompson.

After nearly two decades in prison, the case finally imploded completely. State Judge John Cataldo found that Thompson’s forced false testimony was one of a raft of problems with the prosecution of Bermudez: the witnesses, teenagers all, viewed pictures of Bermudez and discussed them while they were all grouped together, violating basic police procedure and rendering their identifications unreliable; one witness feared being charged with the crime himself, and a substantial amount of evidence implicated another gunman.

In the case of Thompson, Cataldo found that he was arrested and threatened in secret, resulting in false testimony that contributed to a wrongful conviction.

“He was arrested and taken to the trial Assistant and told to make the identification or see if the judge would jail him for his lack of cooperation. The resulting testimony was tainted by these actions,” Cataldo said in a 79-page decision.

Thompson and another witness against Bermudez, Cataldo ruled, were left with a “feeling they had no recourse but to walk into court and identify Mr. Bermudez as the shooter, no matter what their doubts might have been.”

A Rare Review for an Overlooked Statute

In the late 1980s, New Jersey’s Hackensack River was suffering from decades of heavy industrial pollution. The 50-mile-long river had absorbed the waste of the state’s booming chemical processing industry. There were high levels of lead, cadmium, petroleum products, and other toxic refuse.

In 1989, state prosecutors were trying to hold polluters to account, and they thought they’d found someone who could help them: a man named Janos Misik, a low-level employee who worked for the Petro King Terminal Corp., a company suspected of dumping petroleum into the river. But Misik failed to attend a scheduled appointment with prosecutors. The prosecutors obtained a material witness order from a state judge and arrested Misik.

Misik’s attorney objected to the arrest. Misik’s employer hadn’t even been indicted, the attorney pointed out; therefore the state had no business obtaining a material witness order to pick him up.

A state judge ultimately found that prosecutors used the warrant as an “oppressive tool which amounted to a clear abuse of the court’s process,” and also identified some glaring deficiencies in the New Jersey law governing material witness orders. For one thing, the judge noted, the statute was over a century old. Second, it didn’t even define the term “material witness.” It didn’t include standards for determining the circumstances under which a witness could be arrested.

The judge suggested the state legislature undertake a review of the law.

So a case of toxic waste dumping, it turned out, gave rise to an uncommon inquiry on the long-obscure issue of material witnesses.

The New Jersey Law Revision Commission— an investigative arm of the state’s legislature— began examining the state’s material witness law in 1990.

Comprised of deans from three New Jersey law schools, two state legislators, and four practicing attorneys, the commission spent nearly two years analyzing academic work on the subject, case law and material witness statutes from all over the country.

It found that other state statutes were similarly out of date. So in 1992, the commission suggested its own reforms and the state legislature adopted them in 1994.

In order to obtain a material witness order from a judge, a New Jersey prosecutor now has to prove by clear and convincing evidence that the person does indeed have information material to the case and will not agree to cooperate.

When judges authorize such orders, witnesses have to be brought immediately to court for hearings in which judges evaluate their testimony and determine whether they need to be held in custody.

To date, there has been no similar move to examine New York’s statute.

At ProPublica’s request, Professor Bennett Gershman, a leading expert on prosecutorial misconduct, reviewed the material witness laws for New Jersey and New York. He suggested that they’re actually quite similar. The laws are not problematic, Gershman said, but rather the compliance of prosecutors with them.

“These are strong-arm tactics under the guise of something that looks official to bring people into the D.A.’s office or hotel room or some other place where the witness is being held secretly incommunicado and the witness is interrogated,” said Gershman, who has closely followed the New York cases involving material witnesses. “It’s possible that material witness order laws are being bypassed in New York as a matter of policy.”

Categories: Media, Politics

Sandberg’s Lean In Called For an Unpaid Intern – And That’s Apparently Legal

August 15, 2013 - 12:06pm

Aug. 16: This post has been corrected and updated.

A top editor at Lean In, the nonprofit offshoot of Facebook COO Sheryl Sandberg’s book about empowering women to achieve their goals, has come under fire for seeking an unpaid intern.

And though many online questioned the ethics of the position, it likely would have been legal for the nonprofit to do so.

Jessica Bennett, Lean In’s Editor-at-Large, posted on Facebook yesterday: "Wanted: editorial intern, to work with our editor (me) in New York. Part-time, unpaid, must be HIGHLY organized with editorial and social chops and able to commit to a regular schedule through end of year. Design and web skills a plus! HIT ME UP. Start date ASAP."

The public was less than pleased. Noting that the unpaid position seemed to conflict with the organization’s mission to help women “pursue their ambitions,” over 200 people replied to Bennett’s post, the bulk of them saying the organization should pony up:

“By restricting it to those who can afford to have done all that and live in NYC without pay on a permanent position, you excluded an awful a lot of people, namely those with less possessions and women included. Your medium and behavior does not meet the message – and that is a tremendous shame.” – Sofia Diogo Mateius

“Unpaid work, be it internships for young women or volunteer positions for older moms, is exploitive. Shame on you lean in. Pay up.” – Michele Morris

“Have to agree, the message is, at best, mixed, here. What you are “offering” and what the organization supposedly stands for, stand in contrast.” – Shawn Eggers Gypsea

It’s worth noting that three-quarters of unpaid interns are women, according to a recent study.

But despite the online uproar, Lean In is likely not under any legal obligation to pay their interns — because Lean In is a nonprofit, any unpaid interns would be deemed “generally permissible” under federal guidelines issued by the Department of Labor.

Within a few hours of her original post, Bennett clarified that she was indeed looking for a volunteer, not an unpaid intern. “Since I joined Lean In, many people have reached out asking if they can volunteer – and specifically, intern. This was MY post, looking for a volunteer to help me in New York. LOTS of nonprofits accept volunteers. This was NOT an official Lean In job posting. Sorry for the confusion.”

Lean In spokeswoman Andrea Saul also sent us a statement emphasizing that the opening was a volunteer position.

“LeanIn.Org, like many nonprofits, has enjoyed the participation of some part-time volunteers to help us advance our education and peer support programs,” Saul said.

We have reached out to Bennett, and will update this post if she responds.

Update: Lean In Pledges to Establish Paid Internship Program

Late Thursday, Lean In president Rachel Thomas posted a statement on Facebook, noting that while the organization has worked with volunteers in the past, the position in question “doesn’t fall within LeanIn.Org’s definition of ‘volunteer.’”

“As a startup, we haven’t had a formal internship program,” she continued. “Moving forward we plan to, and it will be paid.”

When asked what the difference is between an unpaid intern and a volunteer, professor of labor law David Yamada laughed. "If I had the answer to that, I could be a sitting federal judge."

The difference between an unpaid intern and a volunteer at a nonprofit is simply a complicated issue, Yamada said.

"I don’t think anyone thought about this when the law was being drafted. Internships weren’t a big deal in the 1930s when they were drafting this statute. Now the intern economy is raising questions that weren’t an issue before," he said.

Correction: This post has been corrected to note that federal guidelines for unpaid interns at nonprofits are issued by the Department of Labor, not contained in the Fair Labor Standards Act. We also changed the headline from "perfectly legal" to "apparently legal" to reflect this distinction.

Categories: Media, Politics

New York Promised Help for Mentally Ill Inmates – But Still Sticks Many in Solitary

August 15, 2013 - 4:00am

This story was co-produced with WNYC.

When Amir Hall entered New York state prison for a parole violation in November 2009, he came with a long list of psychological problems. Hall arrived at the prison from a state psychiatric hospital, after he had tried to suffocate himself. Hospital staff diagnosed Hall with serious depression.

In Mid-State prison, Hall was in and out of solitary confinement for fighting with other inmates and other rule violations. After throwing Kool-Aid at an officer, he was sentenced to seven months in solitary at Great Meadow Correctional Facility, a maximum-security prison in upstate New York.

Hall did not want to be moved. When his mother and grandmother visited him that spring, Hall warned them: If he didn't get out of prison soon, he would not be coming home.

A grainy tape of Hall's transfer on June 18, 2010, shows prison guards spraying chemicals into his cell, forcing him to come out. He barely says a word as he is made to strip, shower, bend over and cough. His head drops, his shoulders slump. His face is blank and expressionless. He stares at his hands, except for a few furtive glances at the silent guards wearing gas masks and riot gear.

"There was somebody who looked defeated, like the life was beat out of him," said his sister Shaleah Hall. "I don't know who that person was. The person in that video was not my brother."

Multiple studies have shown that isolation can damage inmates' minds, particularly those already struggling with mental illness. In recent years, New York state has led the way in implementing policies to protect troubled inmates from the trauma of solitary confinement.

A 2007 federal court order required New York to provide inmates with "serious" mental illness more treatment while in solitary. And a follow-up law enacted in 2011 all but bans such inmates from being put there altogether.

But something odd has happened: Since protections were first added, the number of inmates diagnosed with severe mental illness has dropped. The number of inmates diagnosed with "serious" mental illness is down 33 percent since 2007, compared to a 13 percent decrease in the state's prison population.

A larger portion of inmates flagged for mental issues are now being given more modest diagnoses, such as adjustment disorders or minor mood disorders.

It's unclear what exactly is driving the drop in "serious" diagnoses. But "whenever you draw a magic line, and somebody gets all these rights above it and none below it," said Jack Beck, director of the Prison Visiting Project for the nonprofit Correctional Association of New York, "you create an incentive to push people below." The association was one of a coalition of organizations that called for the change in policy.

The New York Office of Mental Health says the decrease reflects improvements to the screening process. Efforts to base diagnoses on firmer evidence "has resulted in somewhat fewer, but better-substantiated diagnoses" of serious mental illness, said a spokesman for the office in an emailed statement.

In Hall's case, prison mental health staff never labeled his problems as "serious."

Instead, they repeatedly downgraded his diagnosis. After three months in solitary — during which Hall was put on suicide watch twice — they changed his status to a level for inmates who have experienced "at least six months of psychiatric stability."

Two weeks after his diagnosis was downgraded, and two days after he was transferred to solitary at Great Meadow, guards found Hall in his cell hanging from a bed sheet.

As part of a report issued on every inmate death, the Corrections Department's Medical Review Board found no documented reason behind the change in Hall's diagnosis.

A 2011 Poughkeepsie Journal investigation detailed a spike in inmate suicides in 2010, which disproportionately took place in solitary confinement. Death reports from the state's oversight committee obtained by the Journal suggest several inmates who have committed suicide in recent years may have been under-diagnosed.

Hall's family is suing the Corrections Department and the Office of Mental Health, among other defendants, for failing to treat his mental illness and instead locking him in solitary.

"If someone knew anything, had any inkling that there was that going on, why was he put there?" asked his aunt Sonya Hall.

New York State's Office of Mental Health, which is in charge of inmates' mental health care, declined to comment on Hall's case, citing the litigation.

Amir Hall (or Mir, as his family calls him) was originally arrested in October 2007, for the unarmed robbery of a Verizon store. He made off with $86. Released on parole, he lived with his sister Shaleah Hall and her two sons while working at a local Holiday Inn and studying to become a nurse.

"Sometimes I sit there thinking that he's going to walk through the door and make everybody laugh," said Shaleah, who has "In Loving Memory of Amir" tattooed in a curling ribbon on her right bicep. "He was the life of the party. If you met him, you would just love him."

But Hall's mood could shift in an instant, Shaleah said. He was often paranoid, worried that people judged him for being gay. He would snap, then apologize repeatedly for it afterward.

"You had to walk on eggshells sometimes, because you never knew if he was going to be happy or sad that day," Shaleah said. "It was like this ever since we were kids."

One of those outbursts landed Hall back in prison for violating parole, after he got into a fight with Shaleah's friend.

Knowing her brother's history of mental illness, Shaleah said solitary confinement must have "drove him crazy."

"I feel like they treated him like an animal," she said. "They just locked him away and forgot about him."

The lawsuit over Hall's death claims mental health and prison staff ignored recommendations that he receive more treatment, and that staff members failed to properly assess his mental health when he arrived at Great Meadow.

.right-sidebar-media { width: 250px; float:right; margin: 0 0 12px 12px; } .right-sidebar-media h2.definition { font-size: 15px; font-weight: bold; font-family: "ff-meta-serif-web-1", "ff-meta-serif-web-2", "Georgia", serif; margin-bottom: 10px; } .right-sidebar-media p.definition { font-size: 13px; font-family: font-family: "Helvetica Neue", Arial, sans-serif; } .right-sidebar-media p.definition .termtbd { text-transform: uppercase; font-weight: bold; } Timeline of Amir Hall's Case

October 2007 Amir Hall is arrested for robbing $86 from a Verizon store, unarmed.

May 11, 2009 After fighting with his sister’s friend, Hall is given a sentence of 16 months to four years for violating his parole.

Aug. 31, 2009 Officers at Albany County Jail find Hall attempting to suffocate himself. He is sent to a state psychiatric hospital, where he is diagnosed with “serious” depression.

Nov. 3, 2009 Hospital staff drop Hall’s diagnosis to a non-serious case of borderline personality disorder and addiction. He is discharged to Downstate Correctional Facility.

Nov. 13, 2009 Prison mental health staff re-diagnose Hall with adjustment disorder, personality disorder and addiction.

December 2009 Staff decide to take Hall off anti-depressants.

Jan. 2, 2010 Hall is put on suicide watch after cutting himself with a razor.

Feb. 17, 2010 After a series of small prison violations, Hall is sentenced to 21 days in solitary confinement. In March, he gets 30 more days for fighting.

March/April 2010 Hall is put on suicide watch twice while in solitary confinement.

June 4, 2010 Mental health staff drop Hall’s diagnosis to a level for inmates who have experienced at least “six months of psychiatric stability.”

June 9, 2010 Hall is sentenced to seven months in isolation after throwing Kool-Aid at a guard.

June 18, 2010 Prison guards gas Hall out of his cell to move him to a maximum-security prison, where staff fail to give him a health screening or refer him for a mental health review.

June 20, 2010 Hall is found hanging from a bed sheet in his cell. He is pronounced dead at 3:37 p.m.

In a response to the state oversight committee's assessment of Hall's case, the Office of Mental Health said they were retraining staff on screening for suicide risk. The Corrections Department said they were working to improve communication when inmates are transferred to new facilities.

Sarah Kerr, a staff attorney with the Prisoners' Rights Project of the Legal Aid Society, noted Hall's case during a Senate hearing on solitary confinement. "The repeated punitive responses to [Hall] as he psychiatrically deteriorated in solitary confinement exemplify the importance of vigilance and monitoring, and the need for diversion from harmful solitary confinement," she wrote.

Kerr points out that significant improvements have been made for inmates diagnosed above the "serious" mental illness line. The new mental health units provide at least four hours of out-of-cell treatment a day, and speed up an inmate's return to the general population.

"I don't think those improvements should be taken lightly," said Kerr. "In terms of mental health policy, we're way ahead of the country."

But when it comes to solitary confinement, "New York is among the worst states," said Taylor Pendergrass of the New York Civil Liberties Union, which is suing the state over its use of isolation. "Even if you're totally sane and you go into solitary, it's incredibly hard to deal with the psychological toll of that," he said.

Solitary confinement is used in jails and prisons across the country, though there's no reliable data to compare its prevalence among states. Experts say New York stands out for sentencing inmates to solitary for infractions as minor as having too many postage stamps or a messy cell. A report from the NYCLU found that five out of six solitary sentences in New York prisons were for "non-violent misbehavior."

Under the state's new law, all inmates housed in solitary — known in New York as Special Housing Units, or SHU — receive regular check-ins from mental health staff. The screenings are meant to catch inmates not originally diagnosed with a disorder who develop problems in isolation.

But Jennifer Parish, director of criminal justice advocacy at the Urban Justice Center, said she thinks many staff members still view inmates' symptoms as attempts to avoid punishment. "If you don't believe that being in solitary can have detrimental effects to a person's mental health, you're going to see someone who just says, 'I want to get out of here,'" she said.

Beck has seen the same skepticism in conversations with some prison staff. "There's a bias in the system that looks at the incarcerated population as anti-social, malingerers, manipulators," Beck said. "I hear that all the time."

When inmates ask to see mental health staff, "we have found far too often that it appears security staff really resent people asking for these interventions," Beck said. "We have in a few facilities what I think are credible stories of individuals being beaten up when they want to go to the crisis center."

As Sarah Kerr sees it, "if mental health staff are overly concerned that people are feigning illness, that they're conning their way out of special housing ... that will lead to tragedies."

The Corrections Department says any unusual behavior by inmates or attempts to hurt themselves are reported to mental health staff. A spokesman for the Office of Mental Health said "inmates reporting psychiatric symptoms are taken seriously and assessed carefully."

Donna Currao said prison staff ignored her and her husband, Tommy Currao, when he attempted suicide at least 10 times over the course of 10 months in solitary confinement. According to his wife, Currao had been sent to solitary after testing positive for heroin.

Currao's first suicide attempt in solitary was in July 2012, when he tried to overdose on heroin. That October, guards found him attempting to hang himself in his cell. While on suicide watch after he tried again to overdose, Currao broke open his hearing aid and used the metal inside to cut his wrists. (He received a bill of $500 for "destruction of state property," Donna said.)

Both the Corrections Department and the Office of Mental Health declined to comment on Currao's case.

According to the Corrections Department, an inmate can be returned to solitary confinement after being on suicide watch if they're cleared by the Office of Mental Health. In 2011, 14 percent of the 8,242 inmates released from New York's mental health crisis units were sent to solitary confinement.

After just three weeks in isolation, Donna noticed a dramatic change in her husband. He "was withdrawn, all he would do is apologize," Donna said. He was no longer laughing with her, playing cards or chatting with other inmates. She watched him drop from 240 pounds to 160.

Currao stopped writing the almost daily letters he'd sent for 13 years. When Donna persuaded him to start again, as a way to escape, he talked of an overwhelming sadness.

Donna says she repeatedly called the prison. She faxed them copies of Currao's suicidal letters. But he remained in isolation.

"I don't know if they don't want to spend the money, or think it's a joke," she said. "They still thought he wanted out of solitary. He wanted out of the picture is what he wanted."

A survey by the state's independent oversight committee found many family members who said prison officials didn't listen to concerns about inmates' psychological wellbeing. None of the mental health files reviewed by the oversight committee contained information from family members about a prisoner's psychiatric history.

The Office of Mental Health says it's working on creating new procedures to "insure that the call is responded to promptly and in a manner that addresses the family member's concern as best as possible."

Prisoner rights advocates are also working on a new legislative proposal to ensure that mentally ill inmates get the treatment they need. A coalition of groups is drafting a new bill, which would expand protections from solitary for inmates with mental illness, and put a limit on solitary confinement sentences for any prisoner, whether or not they're diagnosed with a disorder.

"Even though there's a law that says you can't do this for people with serious mental illness, it hasn't stopped [Corrections] from using solitary," said Parish. "I think they just replaced it with lower-level tickets instead of some of the most serious ones."

In May, Donna's persistence in trying to get her husband treatment finally saw results. Currao met with a psychologist, and was diagnosed with "serious" anti-social personality disorder and dysthymic disorder. He was moved out of solitary confinement and into one of the 170 Residential Mental Health Treatment beds created under the recent law.

Currao "seems to be 1,000 times better" since entering treatment, Donna said. He talks about wanting to become a counselor when he's released.

But Donna wonders why it took so many suicide attempts and nearly a year of pressure to get her husband a proper diagnosis and the treatment he was legally owed. "They are not enforcing this law," she said. "Why do we have to fight so hard to get them evaluated?"

Hall's family is left with the same questions as they search for answers about his death. "How many more people have to die?" Shaleah asked. "They need help. Locking them away is hurting them more."

Categories: Media, Politics

The Sweeping Presidential Power to Help Prisoners That Holder Didn’t Mention

August 14, 2013 - 3:59pm

This week, Attorney General Eric Holder spoke out against the impacts of “draconian” sentences for nonviolent drug offenders. “Too many Americans go to too many prisons for far too long, and for no truly good law enforcement reason,” said Holder.

But in unveiling the new “smart on crime” initiative, Holder skipped mention of the sweeping power the president has to shorten or forgive a federal prisoner’s sentence.

President Obama has given just one person early release from prison. As ProPublica has documented, Obama has overall granted clemency at a lower rate than any modern president, which includes both commutations – early release – and pardons. Last year, ProPublica reported that the Justice Department’s Office of the Pardon Attorney rarely gives positive clemency recommendations to the president. Experts have been calling for reform of the entire clemency process.

“Holder’s speech begs the question, why is not more attention given to the broken pardons office?” said Robert Ehrlich, a former Republican governor of Maryland who recently started a law clinic devoted to pardons

One person who is still waiting to hear about his petition for commutation is Clarence Aaron. He has been in prison since 1993, when he was sentenced to three life terms for his role in a drug deal. Aaron was not the buyer, seller, nor supplier of the drugs. It was his first criminal offense.

The White House ordered a fresh review of Aaron’s petition last year after ProPublica found that the  pardon attorney, Ronald Rodgers, had misrepresented Aaron’s case when it was brought to President George W. Bush. An Inspector General’s report released in December supported ProPublica’s findings, and referred the incident to the Deputy Attorney General to determine if “administrative action is appropriate.”

Nine months later, Justice Department spokesman Wyn Hornbuckle says the “issues raised in the report are still being examined.”

In his speech, Holder expressed concern about racial disparities in sentencing and treatment of prisoners. In 2011, a ProPublica investigation found that whites were four times as likely to receive pardons as minorities. Following our story, the Justice Department commissioned a study on racial disparities in pardons. Hornbuckle says that study is “ongoing.”

“The clemency process will need to be invigorated both from the bottom up and the top down,” said Jeffrey Crouch, a professor at American University, who wrote a book on pardons. “One step is the pardon attorney giving applicants a fair review and a positive recommendation. The other step is President Obama being more willing to use his pardon power.”

For now, Holder’s initiative has little to offer prisoners already behind bars. He directed prosecutors to avoid charges that carried mandatory minimum sentences for certain low-level, nonviolent drug offenders and urged the passage of legislation to change those sentencing requirements. But in 2010, there were more than 75,000 people in federal custody that had been given mandatory sentences.

“We’ve been getting a lot of calls asking, does this mean my loved one gets to go home?” said Molly Gill, government affairs counsel at Families Against Mandatory Minimums. “For the vast majority of people it doesn’t change their sentences and it isn’t retroactive.” (Holder did expand “compassionate release” for some elderly prisoners.)  

While clemency does not generally reach wide swaths of prisoners, Presidents Gerald Ford and Jimmy Carter used it to affect policy on a larger scale, creating programs to forgive thousands of Vietnam War draft evaders.

In the 1960s, Attorney General Robert F. Kennedy also took a stand against what he described as “grossly unjust” outcomes of sentencing practices – and used commutations to do so. He directed federal prison wardens to seek out and bring him prisoners deserving of early release. Kennedy acknowledged that presidential commutations were “at best only stop-gaps” in a sentencing regime that needed reform. President John F. Kennedy commuted 100 sentences in total, and President Lyndon B. Johnson 226.

Mark Osler, a law professor at St. Thomas University who runs a clinic on commutations, said Obama could also do more. “Holder’s emphasis on how wrong these laws have been, and how damaging the Justice Department’s enforcement of those laws has been, gives me hope that this only the first step,” Osler said. 

Categories: Media, Politics

Podcast: What You Need to Know About Assisted Living

August 13, 2013 - 9:47am

Earlier this month, ProPublica reporter A.C. Thompson and Jonathan Jones – in partnership with PBS Frontline - published a revealing expose on the assisted living industry and the largest provider of those facilities in the U.S. – Emeritus. The pair explained how and why the assisted living business has become so large, why the industry is loosely regulated by the states, and how Emeritus, in its quest for profits, endangered some residents by not providing enough qualified staff to care for them.

For the podcast, Thompson spoke to ProPublica editor-in-chief Stephen Engelberg about assisted living and how they told the narrative through the eyes of one resident (Joan Boice) who was fatally injured while in an Emeritus home. When asked what types of fines the state of California levies against assisted living facilities, Thompson said, “What you see in California typically is if you have an incident that leads to real serious physical harm or the death of a resident, you will see a fine. And that fine will be – wait for it - $150. Every now and then, there’s multiple violations, so you might see $300. And you don’t get the sense that these fines are really having any sort of deterrent effect on the companies that are getting them.”

He continued, “In California, you are going to be in a lot more trouble if you abuse an animal than if you abuse or neglect a senior in one of these facilities – a human being.”

Read the full story and watch the Frontline investigation as well.

Categories: Media, Politics

Meet Our Kickstarter Intern!

August 13, 2013 - 9:33am

We’re very pleased to announce that we have selected an intern to help us investigate the intern economy. Meet Casey McDermott!  

Casey is a recent graduate of Penn State University, and will join us fresh off an internship at the Chronicle of Higher Education, where she covered several aspects of the student experience (including a piece on schools’ role in fostering unpaid internships). Before that, Casey was Editor-in-Chief of the Daily Collegian at Penn State. While there, she guided the paper’s coverage of the Jerry Sandusky scandal, and helped oversee the launch of their mobile app and mobile website.

As an intern herself, McDermott said she’s excited to explore this issue. “There's been no shortage of debate surrounding this issue,” she said. “But it demands serious attention from reporters who are willing to look beyond the rhetoric — examining internships from legal, financial and other perspectives. I'm excited to have the chance to help ProPublica take a closer look at the intern economy and its implications for the people who keep it running.”

We’re excited to add Casey’s unique mix of accountability reporting experience, keen editorial judgment and multimedia skills to our internship team. She’ll start here at ProPublica HQ on September 3rd, and will hit the road soon after that to document the intern experience on the ground. What kind of support is available to those who may not be able to afford an unpaid internship? Are schools doing their part to ensure unpaid internships are educational and beneficial? These are some of the questions Casey will be looking into.

We’re still working out the details of Casey’s route, so stay tuned for updates on how to follow her journey. You can also follow her on Twitter.

And of course, a huge thank you to everyone who made this possible by donating to our Kickstarter campaign! We literally couldn’t have done this without you.

For more from our internships investigation, read our explainer on how unpaid interns aren't protected against sexual harassment, explore lawsuits unpaid interns have brought against employers and share your intern story with us.

Categories: Media, Politics

Unfair Share: How Oil and Gas Drillers Avoid Paying Royalties

August 13, 2013 - 9:20am

Don Feusner ran dairy cattle on his 370-acre slice of northern Pennsylvania until he could no longer turn a profit by farming. Then, at age 60, he sold all but a few Angus and aimed for a comfortable retirement on money from drilling his land for natural gas instead.

It seemed promising. Two wells drilled on his lease hit as sweet a spot as the Marcellus shale could offer – tens of millions of cubic feet of natural gas gushed forth. Last December, he received a check for $8,506 for a month’s share of the gas.

Then one day in April, Feusner ripped open his royalty envelope to find that while his wells were still producing the same amount of gas, the gusher of cash had slowed. His eyes cascaded down the page to his monthly balance at the bottom: $1,690.

Chesapeake Energy, the company that drilled his wells, was withholding almost 90 percent of Feusner’s share of the income to cover unspecified “gathering” expenses and it wasn’t explaining why.

“They said you’re going to be a millionaire in a couple of years, but none of that has happened,” Feusner said. “I guess we’re expected to just take whatever they want to give us.”

Like every landowner who signs a lease agreement to allow a drilling company to take resources off his land, Feusner is owed a cut of what is produced, called a royalty.

In 1982, in a landmark effort to keep people from being fleeced by the oil industry, the federal government passed a law establishing that royalty payments to landowners would be no less than 12.5 percent of the oil and gas sales from their leases.

From Pennsylvania to North Dakota, a powerful argument for allowing extensive new drilling has been that royalty payments would enrich local landowners, lifting the economies of heartland and rural America. The boom was also supposed to fill the government’s coffers, since roughly 30 percent of the nation’s drilling takes place on federal land.

Over the last decade, an untold number of leases were signed, and hundreds of thousands of wells have been sunk into new energy deposits across the country.

But manipulation of costs and other data by oil companies is keeping billions of dollars in royalties out of the hands of private and government landholders, an investigation by ProPublica has found.

An analysis of lease agreements, government documents and thousands of pages of court records shows that such underpayments are widespread. Thousands of landowners like Feusner are receiving far less than they expected based on the sales value of gas or oil produced on their property. In some cases, they are being paid virtually nothing at all.

In many cases, lawyers and auditors who specialize in production accounting tell ProPublica energy companies are using complex accounting and business arrangements to skim profits off the sale of resources and increase the expenses charged to landowners.

Deducting expenses is itself controversial and debated as unfair among landowners, but it is allowable under many leases, some of which were signed without landowners fully understanding their implications.

But some companies deduct expenses for transporting and processing natural gas, even when leases contain clauses explicitly prohibiting such deductions. In other cases, according to court files and documents obtained by ProPublica, they withhold money without explanation for other, unauthorized expenses, and without telling landowners that the money is being withheld.

Significant amounts of fuel are never sold at all – companies use it themselves to power equipment that processes gas, sometimes at facilities far away from the land on which it was drilled. In Oklahoma, Chesapeake deducted marketing fees from payments to a landowner – a joint owner in the well – even though the fees went to its own subsidiary, a pipeline company called Chesapeake Energy Marketing. The landowner alleged the fees had been disguised in the form of lower sales prices. A court ruled that the company was entitled to charge the fees.

Costs such as these are normally only documented in private transactions between energy companies, and are almost never detailed to landowners.

“To find out how the calculation is done, you may well have to file a lawsuit and get it through discovery,” said Owen Anderson, the Eugene Kuntz Chair in Oil, Gas & Natural Resources at the University of Oklahoma College of Law, and an expert on royalty disputes. “I’m not aware of any state that requires that level of disclosure.”

To keep royalties low, companies sometimes set up subsidiaries or limited partnerships to which they sell oil and gas at reduced prices, only to recoup the full value of the resources when their subsidiaries resell it. Royalty payments are usually based on the initial transaction.

In other cases, companies have bartered for services off the books, hiding the full value of resources from landowners. In a 2003 case in Louisiana, for example, Kerr McGee, now owned by Anadarko Petroleum, sold its oil for a fraction of its value – and paid royalties to the government on the discounted amount – in a trade arrangement for marketing services that were never accounted for on its cash flow statements. The federal government sued, and won.

The government has an arsenal of tools to combat royalty underpayment. The Department of Interior has rules governing what deductions are allowable. It also employs an auditing agency that, while far from perfect, has uncovered more than a dozen instances in which drillers were “willful” in deceiving the government on royalty payments just since 2011. A spokesman for the Department of Interior’s Office of Natural Resources Revenue says that over the last three decades, the government has recouped more than $4 billion in unpaid fees from such cases.

There are few such protective mechanisms for private landowners, though, who enter into agreements without regulatory oversight and must pay to audit or challenge energy companies out of their own pockets.

ProPublica made several attempts to contact Chesapeake Energy for this article. The company declined, via email, to answer any questions regarding royalties, and then did not respond to detailed sets of questions submitted afterward. The leading industry trade group, the American Petroleum Institute, also declined to comment on landowners’ allegations of underpayments, saying that individual companies would need to respond to specific claims.

Anderson acknowledged that many landowners enter into contracts without understanding their implications and said it was up to them to do due diligence before signing agreements with oil and gas companies.

“The duty of the corporation is to make money for shareholders,” Anderson said. “Every penny that a corporation can save on royalties is a penny of profit for shareholders, so why shouldn’t they try to save every penny that they can on payments to royalty owners?”

* * *

Gas flows up through a well head on Feusner’s property, makes a couple of turns and passes a meter that measures its volume. Then it flows into larger pipes fed by multiple pipelines in a process the industry calls “gathering.” Together, the mixed gases might get compressed or processed to improve the gas quality for final sale, before feeding into a larger network of pipelines that extends for hundreds of miles to an end point, where the gas is sold and ultimately distributed to consumers.

Each section of pipeline is owned and managed by a different company. These companies buy the gas from Chesapeake, but have no accountability to Feusner. They operate under minimal regulatory oversight, and have sales contracts with the well operator, in this case Chesapeake, with terms that are private. Until Chesapeake sold its pipeline company last winter, the pipelines were owned by its own subsidiaries.

As in many royalty disputes, it is not clear exactly which point of sale is the one on which Feusner’s payments should be based – the last sale onto the open market or earlier changes in custody. It’s equally unclear whether the expenses being charged to Feusner are incurred before or after that point of sale, or what processes, exactly, fall under the term “gathering.” Definitions of that term vary, depending on who is asked. In an email, a spokesperson for Chesapeake declined to say how the company defines gathering.

Making matters more complicated, the rights to the gas itself are often split into shares, sometimes among as many as a half-dozen companies, and are frequently traded. Feusner originally signed a lease with a small drilling company, which sold the rights to the lease to Chesapeake. Chesapeake sold a share of its rights in the lease to a Norwegian company, Statoil, which now owns about a one-third interest in the gas produced from Feusner’s property.

Chesapeake and Statoil pay him royalties and account for expenses separately. Statoil does not deduct any expenses in calculating Feusner’s royalty payments, possibly because it has a different interpretation of what’s allowed.

“Statoil’s policy is to carefully look at each individual lease, and to take post-production deductions only where the lease and the law allow for it,” a company spokesman wrote in an email. “We take our production in kind from Chesapeake and we have no input into how they interpret the leases.”

Once the gas is produced, a host of opaque transactions influence how sales are accounted for and proceeds are allocated to everyone entitled to a slice. The chain of custody and division of shares is so complex that even the country’s best forensic accountants struggle to make sense of energy companies’ books.

Feusner’s lease does not give him the right to review Chesapeake’s contracts with its partners, or to verify the sales figures that the company reports to him. Pennsylvania – though it recently passed a law requiring that the total amount of deductions be listed on royalty statements – has no laws dictating at what point a sale price needs to be set, and what expenses are legitimate.

Concerns about royalties have begun to attract the attention of state legislators, who held a hearing on the issue in June. Some have acknowledged a need to clarify minimum royalty guarantees in the state, but so far, that hasn’t happened.

“If you have a system that is not transparent from wellhead to burner tip and you hide behind confidentiality, then you have something to hide,” Jerry Simmons, executive director of the National Association of Royalty Owners (NARO), the premier organization representing private landowners in the U.S., told ProPublica in a 2009 interview. Simmons said recently that his views had not changed, but declined to be interviewed again. “The idea that regulatory agencies don’t know the volume of gas being produced in this country is absurd.”

Because so many disputes come down to interpretations of contract language, companies often look to courts for clarification. Not many royalty cases have been argued in Pennsylvania so far, but in 2010, a landmark decision, Kilmer v. Elexco Land Services, set out that the state’s minimum royalty guarantee applied to revenues before expenses were calculated, and that, when allowed by leases, energy companies were free to charge back deductions against those royalties.

Since then, Pennsylvania landowners say, Chesapeake has been making larger deductions from their checks. (The company did not respond to questions about this.) In April, Feusner’s effective royalty rate on the gas sold by Chesapeake was less than 1 percent.

Paul Sidorek is an accountant representing some 60 northeastern Pennsylvania landowners who receive royalty income from drilling. He’s also a landowner himself – in 2009, he leased 145 acres, and that lease was eventually sold to Chesapeake. Well aware of the troubles encountered by others, Sidorek negotiated a 20 percent royalty and made sure his lease said explicitly that no expenses could be deducted from the sale of the gas produced on his property.

Yet now, Sidorek says, Chesapeake is deducting as much as 30 percent from his royalties, attributing it to “gathering” and “third party” expenses, an amount that adds up to some $40,000 a year.

“Now that the royalties are flowing, some people just count it as a blessing and say we don’t care what Chesapeake does, it’s money we wouldn’t have had before,” Sidorek said. But he’s filed a lawsuit. “I figure I could give my grandson a first-class education for what Chesapeake is deducting that they are not entitled to, so I’m taking it on.”

Landowners, lawyers, legislators and even some energy industry groups say Chesapeake stands out for its confusing accounting and tendency to deduct the most expenses from landowners’ royalty checks in Pennsylvania.

“They’ve had a culture of doing cutthroat business,” said Jackie Root, president of Pennsylvania’s chapter of the National Association of Royalty Owners.

Chesapeake did not respond to questions on whether its approach differs from that of other companies.

Root and others report good working relationships with other companies operating wells in Pennsylvania, and say that deductions – if they occur at all – are modest. Statoil, which has an interest in a number of Chesapeake wells, does not deduct any expenses on its share of many of the same leases. In an email from a spokesperson, the company said “We always seek to deal with our lease holders in a fair manner.”

Several landowners said that not only do deductions vary between companies using the same gas “gathering” network – sales prices do as well.

On Sidorek’s royalty statements, for example, Chesapeake and Statoil disclose substantially different sales prices for the same gas moved through the same system.

“If Statoil can consistently sell the gas for $.25 more, and Chesapeake claims it’s the premier producer in the country, then why the hell can’t they get the same price Statoil does for the same gas on the same day?” Sidorek wondered.

He thinks Chesapeake was giving a discount to a pipeline company it used to own. Chesapeake did not respond to questions about the price discrepancy.

Chesapeake may be the focus of landowner ire in Pennsylvania, but across the country thousands of landowners have filed similar complaints against many oil and gas producers.

In dozens of class actions reviewed by ProPublica, landowners have alleged they cannot make sense of the expenses deducted from their payments or that companies are hiding charges

Publicly traded oil and gas companies also have disclosed settlements and judgments related to royalty disputes that, collectively, add up to billions of dollars.

In 2003, a jury found that Exxon had defrauded the state of Alabama out of royalty payments and ordered the company to pay nearly $103 million in back royalties and interest, plus $11.8 billion in punitive damages. (The punitive damages were reduced to $3.5 billion on appeal, and then eliminated by the state supreme court in 2007.)

In 2007, a jury ordered a Chesapeake subsidiary to pay $404 million, including $270 million in punitive damages, for cheating a class of leaseholders in West Virginia. In 2010, Shell was hit with a $66 million judgment, including $52 million in punitive fines, after a jury decided the company had hidden a prolific well and then intentionally misled landowners when they sought royalties. The judgment was upheld on appeal.

Since the language of individual lease agreements vary widely, and some date back nearly 100 years, many of the disagreements about deductions boil down to differing interpretations of the language in the contract.

In Pennsylvania, however, courts have set few precedents for how leases should be read and substantial hurdles stand in the way of landowners interested in bringing cases.

Pennsylvania attorneys say many of their clients’ leases do not allow landowners to audit gas companies to verify their accounting. Even landowners allowed to conduct such audits could have to shell out tens of thousands of dollars to do so.

When audits turn up discrepancies, attorneys say, many Pennsylvania leases require landowners to submit to arbitration – another exhaustive process that can cost tens of thousands of dollars. Arbitration clauses can also make it more difficult for landowners to join class action suits in which individuals can pool their resources and gain enough leverage to take on the industry.

“They basically are daring you to sue them,” said Aaron Hovan, an attorney in Tunkhannock, Pa., representing landowners who have royalty concerns. “And you need to have a really good case to go through all of that, and then you could definitely lose.”

All of these hurdles have to be cleared within Pennsylvania’s four-year statute of limitations. Landowners who realize too late that they have been underpaid for years – or who inherit a lease from an ailing parent who never bothered to check their statements – are simply out of luck.

Even if a gas company were found liable for underpaying royalties in Pennsylvania, it would have little to fear. It would owe only the amount it should have paid in the first place; unlike Oklahoma and other states, Pennsylvania law does not allow for any additional interest on unpaid royalties and sets a very high bar for winning punitive penalties.

“They just wait to see who challenges them, they keep what they keep, they give up what they lose,” said Root, the NARO chapter president. “It may just be part of their business decision to do it this way.”

Categories: Media, Politics

Does the U.S. Pay Families When Drones Kill Innocent Yemenis?

August 12, 2013 - 12:48pm

There have been nine drone strikes reported in Yemen in the past two weeks – an uptick apparently connected to the Al Qaeda threat that shut down U.S. embassies across the Middle East and Africa. As many as six civilian deaths have also been reported.

President Obama has promised increased transparency around drones, but when asked about the strikes on Friday, Obama wouldn’t even confirm U.S. involvement.

“I will not have a discussion about operational issues,” he said.

The military is also following that line, refusing to release details about what happens when civilians are harmed in these strikes, including if and how families of innocent victims are compensated.

In response to a Freedom of Information Act request, U.S. Central Command told ProPublica it has 33 pages somehow related to condolence payments in Yemen – but it won’t release any of them, or detail what they are.

The military’s letter rejecting our FOIA cites a series of reasons, including classified national security information. (Here’s the letter.)

There’s no way to know what the military is withholding. A Pentagon spokesman told us they haven’t actually made condolence payments in Yemen. But CIA director John Brennan said during his confirmation process in February that the U.S. does offer condolence payments to the families of civilians killed in U.S. strikes. (Both the military and CIA fly drones over Yemen.)    

In May, the White House released new guidelines for targeted killing, saying that there must be a “near certainty that non-combatants will not be injured or killed.” But the administration has said little about how civilian deaths are assessed or handled when they do occur. It has refused to address the U.S. role in almost any particular death – including that of a 10-year-old boy, killed a few weeks after Obama’s promise of increased transparency.

Outside reporting on drone strike deaths is spotty and often conflicted. On Sunday, a Yemeni activist and journalist named three civilians who had been injured, “just hanging arnd n thir neighborhood.” Another recent strike killed up to five “militants,” according to Reuters and other news agencies. But Yemenis reported on Twitter that a child was also killed. (The White House declined to comment to ProPublica on the recent strikes or on condolence payments.)

In Afghanistan, the U.S. has long given out condolence payments, which military leaders have come to see as a key part of the battle for hearts and minds. What might seem like a callous exercise – assigning a dollar amount to a human life – is also embraced by many humanitarian groups. The Center for Civilians in Conflict, for example, sees it as a way to help families financially and as “a gesture of respect.” In fiscal year 2012, condolence payments in Afghanistan totaled nearly a million dollars.

It’s likely harder to do that in the drone war. Military and intelligence leaders have expressed concern about “blowback” from local populations resentful of the strikes. But the U.S. has no visible troops on the ground in countries like Yemen or Pakistan, and almost never acknowledges specific strikes.

Despite the recent surge, overall there have been far fewer drone strikes and civilian deaths alleged in 2013 than in previous years.


For more on the U.S.’ shadowy drone war, read our latest story, “Who Are We at War With? That’s Classified,” our coverage of the controversial practice of “signature strikes”, and our chat with national security reporters on the challenges of covering a remote and secret war.

Categories: Media, Politics

How Unpaid Interns Aren’t Protected Against Sexual Harassment

August 9, 2013 - 8:00am

In 1994, Bridget O’Connor began an internship at Rockland Psychiatric Center, where one of the doctors allegedly began to refer to her as Miss Sexual Harassment, told her that she should participate in an orgy, and suggested that she remove her clothing before meeting with him. Other women in the office made similar claims.

Yet when O’Connor filed a lawsuit, her sexual harassment claims were dismissed because she was an unpaid intern. A federal appeals court affirmed the decision to throw out the claim.

Unpaid interns miss out on wages and employment benefits, but they can also find themselves in “legal limbo” when it comes to civil rights, according to law professor and intern labor rights advocate David Yamada. The O’Connor decision (the leading ruling on the matter, according to Yamada) held that because they don’t get a paycheck, unpaid interns are not “employees” under the Civil Rights Act -- and thus, they’re not protected.

Federal policies echo court rulings. The laws enforced by the U.S. Equal Employment Opportunity Commission, including the Civil Rights Act, don’t cover interns unless they receive “significant remuneration,” according to commission spokesperson Joseph Olivares.

“At least with respect to the federal law that we enforce, an unpaid intern would not be legally protected by our laws prohibiting sexual harassment,” Olivares said in an email to ProPublica.

It’s unclear how many interns are sexually harassed at work. The commission doesn’t keep those statistics, according to Olivares. And as the Chicago Tribune detailed in 2011, interns often don’t know where to turn when faced with harassment or can fear retaliation from bosses they look to for future jobs or recommendations.

“You can understand perhaps why there haven’t been more cases,” said Yamada. “If you’re a young student, and have been trying to get a career off the ground, the bind that puts someone in is significant, because there’s retaliation.”

Olivares noted that while federal laws don’t protect unpaid interns, company policies and state or local laws could sometimes broaden workplace protections.

In June, Oregon passed a law expanding discrimination and harassment protections to interns, whether they are paid or not. According to Charlie Burr, spokespersonfor the state’s Bureau of Labor and Industries, Oregon is the first state to pass such protections.

“Those principles of protecting people in the workplace have been in place for a long time, but they’ve never applied to interns,” said Oregon Labor Commissioner Brad Avakian. “It really left them with few options.”

Oregon’s law protects interns from sexual harassment and discrimination based on race, religion, gender, disability, and sexual orientation and covers wrongful termination tied to discrimination — but it doesn’t create an employment relationship or impact wages, an issue the state was careful to avoid, according to Avakian.

The idea for the law came from Carole Delogu, a former unpaid intern in the state’s Bureau of Labor and Industries, after she read an article in the Public Interest Law Journal on the workplace protections not afforded to interns.

“I was in disbelief,” Delogu said, of her reaction to the loophole. “Interns are in a fragile place, they want to get their foot in the door, so they don’t complain.”

So Delogu brought her concerns to the Labor bureau, and helped draft a proposal to close the gap in protections. Under the new law, Delogu hopes “more people will be able to stand up for their rights.”

D.C. has made similar strides to protect interns. Council member Mary Cheh lobbied successfully to extend the D.C. Human Rights Act protections against sexual harassment to interns after hearing the story of one intern’s sexual harassment claims against her employer, a massage and body therapy center in Friendship Heights. The intern’s case was dismissed because she was unpaid.

Yet as Maurice Pianko, attorney and founder of Intern Justice, points out: if for-profit employers paid their interns when they should (and usually they should be paid), protection from discrimination and sexual harassment would automatically apply.

“It’s a surprise to me to see that there are still companies not paying their employees,” Pianko said. “If any general counsel wants to find out the law they can, and honestly I don’t know what they’re thinking.” 

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Categories: Media, Politics

New Study Finds High Levels of Arsenic in Groundwater Near Fracking Sites

August 8, 2013 - 9:45am

A recently published study by researchers at the University of Texas at Arlington found elevated levels of arsenic and other heavy metals in groundwater near natural gas fracking sites in Texas’ Barnett Shale.

While the findings are far from conclusive, the study provides further evidence tying fracking to arsenic contamination. An internal Environmental Protection Agency PowerPoint presentation recently obtained by the Los Angeles Times warned that wells near Dimock, Pa., showed elevated levels of arsenic in the groundwater. The EPA also found arsenic in groundwater near fracking sites in Pavillion, Wyo., in 2009 — a study the agency later abandoned.

ProPublica talked with Brian Fontenot, the paper’s lead author, about how his team carried out the study and why it matters. (Fontenot and another author, Laura Hunt, work for the EPA in Dallas, but they conducted the study on their own time in collaboration with several UT Arlington researchers.) Here’s an edited version of our interview:


What led you guys to do the study?

We were sort of talking around lunch one day, and came up with the idea of actually going out and testing water in the Barnett Shale. We’d heard all the things that you see in the media, all the sort of really left-wing stuff and right-wing stuff, but there weren’t a whole lot of answers out there in terms of an actual scientific study of water in the Barnett Shale. Our main intent was to bring an unbiased viewpoint here — to just look at the water, see if we could find anything, and report what we found.


What kind of previous studies had been done in this vein?

The closest analog that I could find to our type of study are the things that have been done in the Marcellus Shale, with Rob Jackson’s group out at Duke University. Ours is set up very similarly to theirs in that we went out to private landowners’ wells and sampled their water wells and assayed them for various things. We decided to go with a list of chemicals thought to be included in hydraulic fracturing that was actually released in a congressional report. Our plan was to sample everyone’s water that we could, and then go through that list of these potential chemical compounds within the congressional list.


How did you do it?

We were able to get a press release put out from UT Arlington that went into the local newspapers that essentially called for volunteers to be participants in the study. For being a participant, you would get free water testing, and we would tell them our results. We were upfront with everyone about, you know, we don’t have a bias, we’re not anti-industry, we’re not pro-industry. We’re just here to finally get some scientific data on this subject. And we had a pretty overwhelming response.

From there we chose folks that we would be able to get to. We had to work on nights and weekends, because we had an agreement with EPA to work on this study outside of work hours. So we spent quite a few weekend days going out to folks who had responded to our call and sampling their water. But that wasn’t quite enough. We also had to get samples from within the Barnett Shale in areas where fracking was not going on, and samples from outside the Barnett Shale where there’s no fracking going on, because we wanted to have those for reference samples. For those samples we went door to door and explained to folks what our study was about.

We have people that were pro-industry that wanted to participate in this study to help out — saying, you know, ‘You’re not going to find anything and I’m going to help you prove it.’ And we also had folks that were determined to find problems. We have the whole gamut of folks represented in our study.  

We would take a water well, and we would go directly to the head, the closest we could get to the actual water source coming out of the ground, and we would purge that well for about 20 minutes. That ensures that you’re getting fresh water from within the aquifer. So we didn’t take anything from the tap, and nothing that had been through any kind of filtration system. This was as close to the actual groundwater as we could get. We took some measurements, and then we took several samples back to UT Arlington for a battery of chemistry analyses. That’s where we went through and looked for the various volatile organic compounds and heavy metals and methanols and alcohols and things like that.


What did you find?

We found that there were actually quite a few examples of elevated constituents, such as heavy metals, the main players being arsenic, selenium and strontium. And we found each of those metals at levels that are above EPA’s maximum contaminate limit for drinking water.

These heavy metals do naturally occur in the groundwater in this region. But we have a historical dataset that points to the fact that the levels we found are sort of unusual and not natural. These really high levels differ from what the groundwater used to be like before fracking came in. And when you look at the location of the natural gas wells, you find that any time you have water wells that exceed the maximum contaminate limit for any of these heavy metals, they are within about three kilometers of a natural gas well. Once you get a private water well that’s not very close to a natural gas well, all of these heavy metals come down. But just because you’re close to a natural gas well does not mean you’re guaranteed to have elevated contaminate levels. We had quite a few samples that were very close to natural gas wells that had no problems with their water at all.

We also found a few samples that had measureable levels of methanol and ethanol, and these are two substances that don’t naturally occur in groundwater. They can actually be created by bacterial interactions underwater, but whenever methanol or ethanol occur in the environment, they’re very fleeting and transient. So for us to be able to actually randomly take a grab sample and detect detectable methanol and ethanol — that implies that there may be a continuous source of this.


You found levels of arsenic in areas with fracking that were almost 18 times higher than in areas without fracking or in the historical data. What would happen to someone who drank that water?

Arsenic is a pretty well-known poison. If you experience a lot of long-term exposure to arsenic, you get a lot of different risks, like skin damage, problems with the circulatory system or even an increased risk of cancer. The levels that we found would not be a lethal dose, but they’re certainly levels that you would not want to be exposed to for any extended period of time.


What about the other stuff you found?

The heavy metals are a little bit different because they are known to be included in some fracking recipes. But they’re also naturally occurring compounds. We think the problem is that they’re becoming concentrated at levels that aren’t normal as a result of some aspect of natural gas extraction.

It’s not necessarily that we’re saying fracking fluid getting out. We don’t have any evidence of that. But there are many other steps involved, from drilling the hole to getting the water back out. A lot of these can actually cause different scenarios whereby the naturally occurring heavy metals will become concentrated in ways they normally wouldn’t. For example, if you have a private water well that’s not kept up well, you’ll have a scale of rust on the inside. And if someone were to do a lot of drilling nearby, you may find some pressure waves or vibrations that would cause those rust particles to flake out into the water. Arsenic is bound up inside that rust, and that can actually mobilize arsenic that would never be in the water otherwise.

Methanol and ethanol are substances that should not be very easy to find in the groundwater naturally. We definitely know that those are on the list of things that are known to be in hydraulic fracturing fluid. But we were unable to actually sample any hydraulic fracturing fluid, so we can’t make any claims that we have evidence fluids got into the water.


Have you talked with the homeowners whose wells you sampled?

We have shown those homeowners the results. I think most of the folks that had high levels of heavy metals were not necessarily surprised.  You hear so much I think maybe they were expecting it to come back with something even more extreme than that. I don’t want to say they were relieved, but I think they all sort of took the news in stride and realized, OK, well, as a private well owner there’s no state or federal agency that provides any kind of oversight or regulation, so it’s incumbent on that well owner to get testing done and get any kind of remediation.


Do you think fracking is responsible for what you found?

Well, I can’t say we have a smoking gun. We don’t want the public to take away from this that we have pegged fracking as the cause of these issues. But we have shown that these issues do occur in close relation, geographically, to natural gas extraction. And we have this historical database from pretty much the same exact areas that we sampled that never had these issues until the onset of all the fracking. We have about 16,000 active wells here in the Barnett Shale, and that’s all popped up in about the last decade, so it’s been a pretty dramatic increase.

We noticed that when you’re closer to a well, you’re more likely to have a problem, and that today’s samples have problems, while yesterday’s samples before the fracking showed up did not. So we think that the strongest argument we can say is that this needs more research.

Categories: Media, Politics

SEC Reportedly Passes on Charging Magnetar

August 7, 2013 - 3:44pm

The Securities and Exchange Commission appears to be concluding its investigation of Magnetar, a hedge fund that played a pivotal role in the disastrous mortgage bond market that helped fuel the financial crisis. Citing anonymous sources, the Wall Street Journal reported this morning that SEC staff had decided not to recommend filing civil charges against the Illinois-based hedge fund.

The SEC declined to comment to ProPublica. Magnetar did not respond to requests for comment.

As we detailed in 2010, Magnetar worked with investment banks to build mortgage-backed securities called collateralized debt obligations – CDOs – that the hedge fund also bet against.

Magnetar would buy the riskiest part of the CDO, which gave it influence in picking which bonds would be included in the CDO. In turn, the hedge fund pushed bonds that would make the investment more likely to fail.

Magnetar has always denied that it had a strategy of betting against the deals it helped created. The hedge fund says it was “market neutral,” meaning it designed a deal where it would profit whether housing rose or fell.

In less than two years Magnetar helped create more than $40 billion worth of CDOs.

What made Magnetar an elusive candidate for enforcement action is that it never marketed these CDOs to outside investors. All it did was convince banks to construct the CDOs, for which the banks received millions in fees. The banks in turn sold the CDOs to investors who were not aware that a hedge fund was betting against deals it had helped create.

To date, most of the SEC’s enforcement over CDOs has focused primarily on banks. It appears those cases have still not concluded. In a recent securities filing, Bank of America revealed that it is still under investigation by the SEC over a CDO, created by Merrill Lynch, which Bank of America purchased in 2009.

As we have previously noted, Magnetar had a particularly active role in the creation of that CDO, called Norma. The hedge fund invested less than $50 million in Norma. Magnetar also placed a $600 million bet against the deal. Norma was initially worth $1.5 billion but collapsed, costing investors hundreds of millions of dollars. Magnetar has never disclosed what it made from the deal.

Categories: Media, Politics

The Surveillance Reforms Obama Supported Before He Was President

August 7, 2013 - 9:24am

When the House of Representatives recently considered an amendment that would have dismantled the NSA’s bulk phone records collection program, the White House swiftly condemned the measure. But only five years ago, Sen. Barack Obama, D-Ill. was part of a group of legislators that supported substantial changes to NSA surveillance programs. Here are some of the proposals the president co-sponsored as a senator.

As a senator, Obama wanted to limit bulk records collection.

Obama co-sponsored a 2007 bill, introduced by Sen. Russ Feingold, D-Wis., that would have required the government to demonstrate, with “specific and articulable facts,” that it wanted records related to “a suspected agent of a foreign power” or the records of people with one degree of separation from a suspect. The bill died in committee. Following pressure from the Bush administration, lawmakers had abandoned a similar 2005 measure, which Obama also supported.

We now know the Obama administration has sought, and obtained, the phone records belonging to all Verizon Business Network Services subscribers (and reportedly, Sprint and AT&T subscribers, as well). Once the NSA has the database, analysts search through the phone records and look at people with two or three degrees of separation from suspected terrorists.

The measure Obama supported in 2007 is actually similar to the House amendment that the White House condemned earlier this month. That measure, introduced by Reps. Justin Amash, R-Mich., and John Conyers, D-Mich., would have ended bulk phone records collection but still allowed the NSA to collect records related to individual suspects without a warrant based on probable cause.

The 2007 measure is also similar to current proposals introduced by Conyers and Sen. Bernie Sanders, I-Vt.

As a senator, Obama wanted to require government analysts to get court approval before accessing incidentally collected American data.

In Feb. 2008, Obama co-sponsored an amendment, also introduced by Feingold, which would have further limited the ability of the government to collect any communications to or from people residing in the U.S.  

The measure would have also required government analysts to segregate all incidentally collected American communications. If analysts wanted to access those communications, they would have needed to apply for individualized surveillance court approval.

The amendment failed 35-63. Obama later reversed his position and supported what became the law now known to authorize the PRISM program. That legislation — the FISA Amendments Act of 2008 — also granted immunity to telecoms that had cooperated with the government on surveillance.

The law ensured the government would not need a court order to collect data from foreigners residing outside the United States. According to the Washington Post, analysts are told that they can compel companies to turn over communications if they are 51 percent certain the data belongs to foreigners.

Powerpoint presentation slides published by the Guardian indicate that when analysts use XKeyscore — the software the NSA uses to sift through huge amounts of raw internet data — they must first justify why they have reason to believe communications are foreign. Analysts can select from rationales available in dropdown menus and then read the communications without court or supervisor approval.

Finally, analysts do not need court approval to look at previously-collected bulk metadata either, even domestic metadata. Instead, the NSA limits access to incidentally collected American data according to its own “minimization” procedures. A leaked 2009 document said that analysts only needed permission from their “shift coordinators” to access previously-collected phone records. Rep. Stephen Lynch, D-Mass., has introduced a bill that would require analysts to get special court approval to search through telephone metadata.

As a senator, Obama wanted the executive branch to report to Congress how many American communications had been swept up during surveillance.

Feingold’s 2008 amendment, which Obama supported, would have also required the Defense Department and Justice Department to complete a joint audit of all incidentally collected American communications and provide the report to congressional intelligence committees. The amendment failed 35-63.

The Inspector General of the Intelligence Community told Senators Ron Wyden, D-Ore., and Mark Udall, D-Co. last year that it would be unfeasible to estimate how many American communications have been incidentally collected, and doing so would violate Americans’ privacy rights.

As a senator, Obama wanted to restrict the use of gag orders related to surveillance court orders.

Obama co-sponsored at least two measures that would have made it harder for the government to issue nondisclosure orders to businesses when compelling them to turn over customer data.

One 2007 bill would have required the government to demonstrate that disclosure could cause one of six specific harms: by either endangering someone, causing someone to avoid prosecution, encouraging the destruction of evidence, intimidating potential witnesses, interfering with diplomatic relations, or threatening national security. It would have also required the government to show that the gag order was “narrowly tailored” to address those specific dangers. Obama also supported a similar measure in 2005. Neither measure made it out of committee.

The Obama administration has thus far prevented companies from disclosing information about surveillance requests. Verizon’s surveillance court order included a gag order.

Meanwhile, Microsoft and Google have filed motions with the Foreign Intelligence Surveillance Court seeking permission to release aggregate data about directives they’ve received. Microsoft has said the Justice Department and the FBI had previously denied its requests to release more information. The Justice Department has asked for more time to consider lifting the gag orders.

As a senator, Obama wanted to give the accused a chance to challenge government surveillance.

Obama co-sponsored a 2007 measure that would have required the government to tell defendants before it used any evidence collected under the controversial section of the Patriot Act. (That section, known as 215, has served as the basis for the bulk phone records collection program.) Obama also supported an identical measure in 2005.

Both bills would have ensured that defendants had a chance to challenge the legalityof Patriot Act surveillance. The Supreme Court has since held that plaintiffs who cannot prove they have been monitored cannot challenge NSA surveillance programs.

Those particular bills did not make it out of committee. But another section of the Foreign Intelligence Surveillance Act requires that the government tell defendants before it uses evidence collected under that law.

Until recently, federal prosecutors would not tell defendants what kind of surveillance had been used.

The New York Times reported that in two separate bomb plot prosecutions, the government resisted efforts to reveal whether its surveillance relied on a traditional FISA order, or the 2008 law now known to authorize PRISM. As a result, defense attorneys had been unable to contest the legality of the surveillance. Sen. Dianne Feinstein, D-Calif., later said that in both cases, the government had relied on the 2008 law, though prosecutors now dispute that account.

On July 30, the Justice Department reversed its position in one bomb plot prosecution. The government disclosed that it had not gathered any evidence under the 2008 law now known to authorize sweeping surveillance.


But that’s not the only case in which the government has refused to detail its surveillance. When San Diego cab driver BasaalySaeedMoalin was charged with providing material support to terrorists based on surveillance evidence in Dec. 2010, his attorney, Joshua Dratel, tried to get the government’s wiretap application to the Foreign Intelligence Surveillance Court. The government refused, citing national security.

Dratel only learned that the government had used Moalin’s phone records as the basis for its wiretap application — collected under Section 215 of the Patriot Act — when FBI Deputy Director Sean Joyce cited the Moalin case as a success story for the bulk phone records collection program.

Reuters has also reported that a U.S. Drug Enforcement Administration unit uses evidence from surveillance to investigate Americans for drug-related crimes, and then directs DEA agents to “recreate” the investigations to cover up the original tip, so defendants won’t know they’ve been monitored.

As a senator, Obama wanted the attorney general to submit a public report giving aggregate data about how many people had been targeted for searches.

Under current law, the attorney general gives congressional intelligence committees a semiannual report with aggregate data on how many people have been targeted for surveillance. Obama co-sponsored a 2005 bill that would have made that report public. The bill didn’t make it out of committee.

Despite requests from Microsoft and Google, the Justice Department has not yet given companies approval to disclose aggregate data about surveillance directives.

As a senator, Obama wanted the government to declassify significant surveillance court opinions.

Currently, the attorney general also gives congressional intelligence committees “significant” surveillance court opinions, decisions and orders and summaries of any significant legal interpretations. The 2005 bill that Obama co-sponsored would have released those opinions to the public, allowing redactions for sensitive national security information.

Before Edward Snowden’s disclosures, the Obama Justice Department had fought Freedom of Information Act lawsuits seeking surveillance court opinions. On July 31, the Director of National Intelligence released a heavily redacted version of the FISA court’s “primary order” compelling telecoms to turn over metadata.

In response to a request from Yahoo, the government also says it is going to declassify court documents showing how Yahoo challenged a government directive to turn over user data. The Director of National Intelligence is still reviewing if there are other surveillance court opinions and other significant documents that may be released. Meanwhile, there are severalbills in Congress that would compel the government to release secret surveillance court opinions.

Categories: Media, Politics

How One State Succeeded in Restricting Payday Loans

August 6, 2013 - 8:00am
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A version of this story was co-published with the St. Louis Post-Dispatch.

In 2009, consumer advocates in Washington State decided to try a new approach to regulating payday loans. Like reformers in other states, they’d tried to get the legislature to ban high-cost loans outright — but had hit a brick wall. So, instead, they managed to get a law passed that limited borrowers to no more than eight payday loans in one year.

Lenders would still be free to charge annual rates well into the triple digits, but the law would eliminate what critics say is the worst aspect of payday loans: borrowers caught in a cycle of debt by taking out loans over and over.

Lenders Reaped a Majority of Their Fees From a Minority of Repeat Borrowers

Two-thirds of borrowers in 2009 took out eight or fewer loans...

Total Borrowers, by number of loans in 2009

1-4 loans","5-8","9-12","13-16","17-20","21+"]" data-type="vertical" data-values="[183404,87725,67159,32950,18664,20139]">

...but two-thirds of all loans went to borrowers who took out nine or more loans.

Total Loans Issued, by number of loans per borrower in 2009

Source: 2009 Payday Lending Report, Washington State Dept. of Financial Institutions

At least in Washington, most payday loan borrowers didn’t take out eight loans in a year. Data from 2009, the last year before the reform bill went into effect, shows how many people in 2009 took out one to four loans, five to eight loans, and so on. Two-thirds of these borrowers took out eight or fewer loans in 2009.

But the people who take out only a few payday loans do not drive industry profits. That becomes clear when, instead of looking at the number of people, one looks at the number of loans. Then the trend flips: About two-thirds of loans went to borrowers who took out nine or more loans in 2009.

In other words, one-third of payday loan borrowers accounted for two-thirds of payday loans made in Washington State in 2009.

The Consumer Financial Protection Bureau found a similar imbalance when it studied a national sample of payday loans earlier this year: Lenders reaped three-quarters of their loan fees from borrowers who had more than 10 payday loans in a 12-month period.

As expected, Washington’s reform has not affected most borrowers. According to the 2011 report from state regulators, only about 24 percent of borrowers had taken out the maximum eight loans over a 12-month period.

But the total number of payday loans has plummeted. In 2009, Washington borrowers took out more than 3.2 million payday loans. In 2011, the last year for which data is available, the number had plunged to 856,000.

During the same time, the number of payday loan stores in the state dropped by 42 percent.

The law “worked way better than we expected,” said Marcy Bowers, director of the nonprofit Statewide Poverty Action Network.

Meanwhile, the industry, which opposed the 2009 law, has recently pushed legislation to allow high-cost installment loans in the state. As we report, that’s a typical response by the industry to unwanted legislation.


Washington’s law has proven a model for other states. Delaware passed a law in 2012 that limited payday loans to five in a 12-month period. Earlier this year, consumer advocates pushed a similar law in California, but it stalled.

Asked for comment about Washington’s law, Amy Cantu, a spokeswoman for the Community Financial Services Association, the payday lenders’ trade group, said lenders work closely with state regulators and cited the group’s best practices, which include offering customers a payment plan when they want more time to repay a loan.

Categories: Media, Politics

Whack-a-Mole: How Payday Lenders Bounce Back When States Crack Down

August 6, 2013 - 8:00am

A version of this story was co-published with the St. Louis Post-Dispatch.

In 2008, payday lenders suffered a major defeat when the Ohio legislature banned high-cost loans. That same year, they lost again when they dumped more than $20 million into an effort to roll back the law: The public voted against it by nearly two-to-one.

But five years later, hundreds of payday loan stores still operate in Ohio, charging annual rates that can approach 700 percent.

It’s just one example of the industry’s resilience. In state after state where lenders have confronted unwanted regulation, they have found ways to continue to deliver high-cost loans.

Sometimes, as in Ohio, lenders have exploited loopholes in the law. But more often, they have reacted to laws targeted at one type of high-cost loan by churning out other products that feature triple-digit annual rates.

To be sure, there are states that have successfully banned high-cost lenders. Today Arkansas is an island, surrounded by six other states where ads scream “Cash!” and high-cost lenders dot the strip malls. Arkansas’ constitution caps non-bank rates at 17 percent.

But even there, the industry managed to operate for nearly a decade until the state Supreme Court finally declared those loans usurious in 2008.

The state-by-state skirmishes are crucial, because high-cost lenders operate primarily under state law. On the federal level, the recently formed Consumer Financial Protection Bureau can address “unfair, deceptive or abusive practices,” said a spokeswoman. But the agency is prohibited from capping interest rates.

In Ohio, the lenders continue to offer payday loans via loopholes in laws written to regulate far different companies — mortgage lenders and credit repair organizations. The latter peddle their services to people struggling with debt, but they can charge unrestricted fees for helping consumers obtain new loans into which borrowers can consolidate their debt.

Today, Ohio lenders often charge even higher annual rates (for example, nearly 700 percent for a two-week loan) than they did before the reforms, according to a report by the nonprofit Policy Matters Ohio. In addition, other breeds of high-cost lending, such as auto-title loans, have recently moved into the state for the first time.

Earlier this year, the Ohio Supreme Court agreed to hear a case challenging the use of the mortgage law by a payday lender named Cashland. But even if the court rules the tactic illegal, the companies might simply find a new loophole. In its recent annual report, Cash America, the parent company of Cashland, addressed the consequences of losing the case: “if the Company is unable to continue making short-term loans under this law, it will have to alter its short-term loan product in Ohio.”

Amy Cantu, a spokeswoman for the Community Financial Services Association, the trade group representing the major payday lenders, said members are “regulated and licensed in every state where they conduct business and have worked with state regulators for more than two decades.”

“Second generation” products

When unrestrained by regulation, the typical two-week payday loan can be immensely profitable for lenders. The key to that profitability is for borrowers to take out loans over and over. When the CFPB studied a sample of payday loans earlier this year, it found that three-quarters of loan fees came from borrowers who had more than 10 payday loans in a 12-month period.

But because that type of loan has come under intense scrutiny, many lenders have developed what payday lender EZCorp chief executive Paul Rothamel calls “second generation” products. In early 2011, the traditional two-week payday loan accounted for about 90 percent of the company’s loan balance, he said in a recent call with analysts. By 2013, it had dropped below 50 percent. Eventually, he said, it would likely drop to 25 percent.

But like payday loans, which have annual rates typically ranging from 300 to 700 percent, the new products come at an extremely high cost. Cash America, for example, offers a “line of credit” in at least four states that works like a credit card — but with a 299 percent annual percentage rate. A number of payday lenders have embraced auto-title loans, which are secured by the borrower’s car and typically carry annual rates around 300 percent.

The most popular alternative to payday loans, however, are “longer term, but still very high-cost, installment loans,” said Tom Feltner, director of financial services at the Consumer Federation of America.

Last year, Delaware passed a major payday lending reform bill. For consumer advocates, it was the culmination of over a decade of effort and a badly needed measure to protect vulnerable borrowers. The bill limited the number of payday loans borrowers can take out each year to five.

“It was probably the best we could get here,” said Rashmi Rangan, executive director of the nonprofit Delaware Community Reinvestment Action Council.

But Cash America declared in its annual statement this year that the bill “only affects the Company’s short-term loan product in Delaware (and does not affect its installment loan product in that state).” The company currently offers a seven-month installment loan there at an annual rate of 398 percent.

Lenders can adapt their products with surprising alacrity. In Texas, where regulation is lax, lenders make more than eight times as many payday loans as installment loans, according to the most recent state data. Contrast that with Illinois, where the legislature passed a bill in 2005 that imposed a number of restraints on payday loans. By 2012, triple-digit-rate installment loans in the state outnumbered payday loans almost three to one.

In New Mexico, a 2007 law triggered the same rapid shift. QC Holdings’ payday loan stores dot that state, but just a year after the law, the president of the company told analysts that installment loans had “taken the place of payday loans” in that state.

New Mexico’s attorney general cracked down, filing suits against two lenders, charging in court documents that their long-term products were “unconscionable.” One loan from Cash Loans Now in early 2008 carried an annual percentage rate of 1,147 percent; after borrowing $50, the customer owed nearly $600 in total payments to be paid over the course of a year. FastBucks charged a 650 percent annual rate over two years for a $500 loan.

The products reflect a basic fact: Many low-income borrowers are desperate enough to accept any terms. In a recent Pew Charitable Trusts survey, 37 percent of payday loan borrowers responded that they’d pay any price for a loan.

The loans were unconscionable for a reason beyond the extremely high rates, the suits alleged. Employees did everything they could to keep borrowers on the hook. As one FastBucks employee testified, “We just basically don’t let anybody pay off.”

“Inherent in the model is repeated lending to folks who do not have the financial means to repay the loan,” said Karen Meyers, director of the New Mexico attorney general’s consumer protection division. “Borrowers often end up paying off one loan by taking out another loan. The goal is keeping people in debt indefinitely.”

In both cases, the judges agreed that the lenders had illegally preyed on unsophisticated borrowers. Cash Loans Now’s parent company has appealed the decision. FastBucks filed for bankruptcy protection after the judge ruled that it owed restitution to its customers for illegally circumventing the state’s payday loan law. The attorney general’s office estimates that the company owes over $20 million. Both companies declined to comment.

Despite the attorney general’s victories, similar types of loans are still widely available in New Mexico. The Cash Store, which has over 280 locations in seven states, offers an installment loan there with annual rates ranging from 520 percent to 780 percent. A 2012 QC loan in New Mexico reviewed by ProPublica carried a 425 percent annual rate.

“Playing Cat and Mouse”

When states — such as Washington, New York and New Hampshire — have laws prohibiting high-cost installment loans, the industry has tried to change them.

A bill introduced in Washington’s state senate early this year proposed allowing “small consumer installment loans” that could carry an annual rate of more than 200 percent. Though touted as a lower-cost alternative to payday loans, the bill’s primary backer was Moneytree, a Seattle-based payday lender. The bill passed the state senate, but stalled in the house.

In New Hampshire, which banned high-cost payday loans in 2008, the governor vetoed a bill last year that would have allowed installment loans with annual rates above 400 percent. But that wasn’t the only bill that high-cost lenders had pushed: One to allow auto-title loans, also vetoed by the governor, passed with a supermajority in the legislature. As a result, in 2012, New Hampshire joined states like Georgia and Arizona that have banned triple-digit-rate payday loans but allow similarly structured triple-digit-rate auto-title loans.

Texas has a law strictly limiting payday loans. But since it limits lenders to a fraction of what they prefer to charge, for more than a decade they have ignored it. To shirk the law, first they partnered with banks, since banks, which are regulated by the federal government, can legally offer loans exceeding state interest caps. But when federal regulators cracked down on the practice in 2005, the lenders had to find a new loophole.

Just as in Ohio, Texas lenders started defining themselves as credit repair organizations, which, under Texas law, can charge steep fees. Texas now has nearly 3,500 of such businesses, almost all of which are, effectively, high-cost lenders. And the industry has successfully fought off all efforts to cap their rates.

Seeing the lenders’ statehouse clout, a number of cities, including Dallas, San Antonio and Austin, have passed local ordinances that aim to break the cycle of payday debt by limiting the number of times a borrower can take out a loan. Speaking to analysts early this year, EZCorp’sRothamel said the ordinances had cut his company’s profit in Austin and Dallas by 90 percent.

But the company had a three-pronged counterattack plan, he said. The company had tweaked the product it offered in its brick-and-mortar outlets, and it had also begun to aggressively market online loans to customers in those cities. And the industry was pushing a statewide law to pre-empt the local rules, he said, so payday companies could stop “playing cat and mouse with the cities.”

Jerry Allen, the Dallas councilman who sponsored the city’s payday lending ordinance in 2011, said he wasn’t surprised by the industry’s response. “I’m just a lil’ ol’ local guy in Dallas, Texas,” he said. “I can only punch them the way I can punch them.”

But Allen, a political independent, said he hoped to persuade still more cities to join the effort. Eventually, he hopes the cities will force the state legislature’s hand, but he expects a fight: “Texas is a prime state for these folks. It’s a battleground. There’s a lot of money on the table.”

Categories: Media, Politics