'The Watchdog': Raw Milk Is A Cosmetic? FX Fraud May Be Next Big Scandal
Welcome to our new blog, "The Watchdog," which will keep a close eye on regulatory agencies and how their actions impact the lives of everyday Americans. Though the rules and regulations they write -- from determining how much arsenic is allowable in your drinking water to whether your favorite TV show can drop the F-bomb in primetime - affect all of us, their deliberations and the way that lobbyists influence their decisions receives very little coverage.
To make sense of these debates, follow the implementation of health care reform and financial reform and decipher the minutia of the Federal Register, "The Watchdog" is on the case. If you have any tips or suggestions, send them to marcus@huffingtonpost.com.
Speaking on a panel of academics and commentators at a British Institute of International and Comparative Law event, Julian Assange's lawyer said that poor regulation of freedom of information laws -- rendering those laws ineffective -- helped inspire his client to create WikiLeaks.
'What is the phenomenon that Julian Assange recognised and identified that allowed him to think of an electronic drop box?' Mark Stephens asked the audience, reports BigPondNews.
"I think partly it is because of freedom of information laws... also I think you have to look at the way they are used and abused by the people who are the subject of freedom of information requests."
Stephens added that there has to be a better balance between regulating and embracing the release of information."The government on freedom of information is the gatekeeper... Ultimately, if the government doesn't like what it's being asked to release, it won't."
Some of the world's biggest oil companies are planning within weeks to set up a safety organization for deepwater drilling but the proposal is raising eyebrows due to its association with the American Petroleum Institute.
The API, which came under fire by the National Commission inquiry into the Deepwater Horizon disaster, may have a conflict of interest because it has two roles -- setting technical standards for the industry and lobbying for oil companies' interests in Washington, reports the Financial Times.
William Reilly, one of the co-chairmen of the commission and a former head of the EPA, told the FT: “The new safety body has to be a different institution with a different staff, a different name and a different physical location from the API.â€
In response to the deadly disaster that killed 29 men at the Upper Big Branch mine last April, federal regulators are proposing new safety rules that would lead to speedier enforcement for mines with a pattern of significant violations (POV).
The Mine Safety and Health Administration's proposal would drop the use of warning letters, which have proven largely ineffective at pressuring mine owners to remedy violations.
Two other changes -- the proposed rule would require MSHA to conduct POV screenings twice a year, compared to the current once a year. And the rule would allow the agency to consider violations before they become final orders (many violations are immediately appealed by mine operators, delaying the consequences of non-compliance).
Major oil and gas service companies -- including Halliburton, Schlumberger and BJ Services -- may have violated the Safe Drinking Water Act by injecting diesel fuel into wells in 19 states between 2005 and 2009, according to a congressional investigation.
None of the companies sought or were issued permits for the use of diesel fuel in hydraulic fracturing or "fracking," a technique used to extract natural gas from shale, which could be a violation of the law, according to a letter sent by a trio of Congressmen -- Henry Waxman (D-Calif.), Ed Markey (D-Mass.) and Diana DeGette (D-Colo.) -- to EPA chief Lisa Jackson.
The states that recorded the highest amounts of hydraulic fracturing fluids containing diesel fuel injected (in gallons) were Texas (16 million), ( North Dakota (3.1 million), Wyoming (3 million) and Louisiana (3 million).
Here is the intro to the letter:We have been investigating the practice of hydraulic fracturing and its potential impact on water quality in the United States. Because EPA is also examining this issue, we are writing to share our findings regarding the use of diesel fuel in hydraulic fracturing fluids.In 2003, EPA signed a memorandum of agreement with the three largest providers of hydraulic fracturing to eliminate the use of diesel fuel in coalbed methane formations in underground sources of drinking water. Two years later, Congress exempted hydraulic fracturing from the Safe Drinking Water Act except when the fracturing fluids contain diesel. As a result, many assumed that the industry stopped using diesel fuel altogether in hydraulic fracturing.
Our investigation has found that this is not the case. Between 2005 and 2009, oil and gas service companies injected 32.2 million gallons of diesel fuel or hydraulic fracturing fluids containing diesel fuel in wells in 19 states. Halliburton injected more than 7 million gallons of diesel fuel or fluids containing diesel; BJ Services injected even more, 11.5 million gallons.
According to EPA, any company that performs hydraulic fracturing using diesel fuel must receive a permit under the Safe Drinking Water Act. We learned that no oil and gas service companies have sought—and no state and federal regulators have issued—permits for diesel fuel use in hydraulic fracturing. This appears to be a violation of the Safe Drinking Water Act. It also means that the companies injecting diesel fuel have not performed the environmental reviews required by the law.
A key question is whether the unauthorized injection of hydraulic fracturing fluids containing diesel fuel is adversely affecting drinking water supplies. None of the oil and gas service companies could provide data on whether they performed hydraulic fracturing in or near underground sources of drinking water, telling us that the well operators, not the service companies, track that information. We also asked about diesel fuel use in coalbed methane formations, which tend to be shallower and closer to drinking water sources. The three largest companies—Halliburton, BJ Services, and Schlumberger—told us they have stopped using diesel fuel in coalbed methane formations located in underground sources of drinking water. Three smaller companies reported using a limited volume of products containing diesel in coalbed methane wells but did not provide information on the proximity of these wells to drinking water sources.
Here are the firms named in the report:
- Basic Energy Services 204,013
- BJ Services 11,555,538
- Complete 4,625
- Frac Tech 159,371
- Halliburton 7,207,216
- Key Energy Services 1,641,213
- RPC 4,314,110
- Sanjel 3,641,270
- Schlumberger 443,689
- Superior 833,431
- Trican 92,537
- Weatherford 2,105,062
Once known as the "Wild West of Trading," the Forex market faces new rules designed to protect retail FX investors -- check out the Bloomberg TV video below.
Speaking of which, Bernie Madoff whistleblower Harry Markopolos told me last year that he believes FX fraud is the next big scandal to come. Essentially, he says that banks handling foreign currency transactions on the FX market for public employee pension funds look back at the previous trading day and buy at the highs and sell at the lows, pocketing the difference.
“So they're giving you a false train ticket and taking 1 to 1 1/2 percent a trade... that's a direct loss to the states, and it’s also a direct loss to the private party pension funds and not only that but the international pension funds of other nations so this is global.â€
This type of fraud pads the profits of major banks, claims Markopolos.
“The banks that are doing it, it's 25-33% of their bottom line net income per year, so it's like being addicted to heroin, they can't afford to pull the needle out because their share prices will collapse. It's also a case of false financial statement reporting -- when a quarter to a third of your net income is fraud-based, and you're not telling shareholders that, then you have a Sarbanes-Oxley issue. So hopefully you'll be hearing a lot more about those cases this year.â€
Amid President Obama's call in the "State of the Union" for an expansion of intercity passenger rail, a battle is brewing over the regulation of the industry.
The industry which has been deregulated since 1980 -- and its allies in Congress, including House Transportation and Infrastructure Committee Chairman John Mica (R-Fla.) -- are fighting to keep it that way, urging the Surface Transportation Board not to to grant competitive access to other rail carriers for long-distance shipments and to toughen its policies on railroad cargo exemptions.
At the same time, some lawmakers, including Sen. Jay Rockefeller (D-W.Va.), are pushing to end the limited antitrust exemption enjoyed by railroads, reports Rail Resource.
- Huh? In Canada, a raw milk dairy has rebranded the leche as cosmetics to skirt its prohibition under the country's tough food laws. "Disparaged as a “sneaky†way of skirting laws against the sale of raw milk, it’s the latest development in a national campaign that sets public health concerns against consumers who want pure unpasteurized product," reports the Toronto Globe & Mail.
- Today, the Senate considers legislation reauthorizing the Federal Aviation Administration; this afternoon Majority Leader Harry Reid (D-Nev.) and Sen. Chuck Schumer (D-N.Y.) hold a conference call to tout its impact on job creation.
- EPA proposed tight restrictions on using people as test subjects in pesticide research.
- The FDA has extended until 23 February the deadline for stakeholders to submit comments on the agency's plans to create a user fee programme for the generic drugs industry.
- The CFTC is seeking comments on proposed rules implementing a whistleblower program that includes incentives and prohibits retaliation against whistleblowers. Go there if you've got something to say.
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First Posted: 01/31/11 10:18 AM ET Updated: 05/25/11 07:30 PM ET