ProPublica: Articles and Investigations

Wyoming Bank Fails on Friday

2009-07-11T09:57:13-05:00

by Jake Bernstein, ProPublica - July 11, 2009 9:57 am EDT

Thermopolis, Wyoming advertises itself as the “home of the World’s Largest Mineral Hot Spring.” It is also now home of the first bank failure in the state since 1991. On Friday, the FIDC and state regulators shut down the Bank of Wyoming, located in Thermopolis. The failure is the 53rd of the year in the U.S. and will cost the FDIC’s insurance fund about $27 million.

Central Bank & Trust of Lander, Wyoming agreed to take on the deposits of the bank and approximately $55 million of its loans portfolio. The FDIC will try to sell the rest.

In October 2008, the FIDC issued a Cease and Desist Order against the Bank of Wyoming. It’s the strongest public enforcement action short of closing a bank in the agency’s arsenal. Here are some of the “unsafe and unsound” banking activities the regulators found and wanted stopped:

    (a) operating with management whose policies and practices are detrimental to the Bank and jeopardize the safety of its deposits;

    (b) operating with a board of directors which has failed to provide adequate supervision over and direction to the active management of the Bank;

    (c) operating with inadequate capital in relation to the kind and quality of assets held
    the Bank;

    (d) operating with an inadequate loan valuation reserve;

    (e) operating with a large volume of poor quality loans;

    (f) engaging in unsatisfactory lending and collection practices;

Board Takes No Public Action Against Some King/Drew Nurses

2009-07-11T01:04:13-05:00

by Charles Ornstein and Tracy Weber, ProPublica, and Maloy Moore, Los Angeles Times -

It is no secret that nurses played a central role in the collapse of Martin Luther King Jr./Drew Medical Center.

At the troubled hospital near Watts, registered nurses gave the wrong medications, ignored patients in distress, falsified records, slept on the job and turned down the alarms on critically ill patients' vital sign monitors.

From 2003 until the hospital closed in 2007, The Times ran dozens of articles detailing such lapses, government inspectors declared patients in immediate jeopardy, and Los Angeles County suspended or fired many of those involved. Yet, in some cases, California's Board of Registered Nursing has taken no public action, leaving the nurses free to work elsewhere. Those nurses include:

* Linda Ruttlen, who county health officials say brushed aside complaints from 43-year-old Edith Rodriguez in the emergency room in May 2007. Rodriguez writhed on the floor for 45 minutes before she died of a ruptured bowel. The incident made national headlines and, more than any other single event, precipitated the hospital's closure.Ruttlen unsuccessfully sued the county for defamation and wrongful termination. She said she was overwhelmed by a difficult caseload and never knew Rodriguez was on the floor. Her lawyer, Michael Harris, said she plans an appeal and has not been contacted by the nursing board.

* Virginia A. Williams, who was fired in April 2006 for allegedly supplying King/Drew employees with CPR certification cards without providing the training.

In 2007, a county hearing officer upheld Williams' dismissal, saying her actions could lead to an "employee's inability to administer CPR in a life-threatening situation at the hospital." In a recent interview Williams denied wrongdoing and said the county set her up. She said she hasn't spoken with anyone from the nursing board.

In other cases, the board ultimately took action, but only years later:

* Sarita Sungcheu was accused of sleeping while overseeing a patient's dialysis. Early one morning in 2005, intensive care nurses heard a King/Drew dialysis patient screaming, "Stop sleeping!" at Sungcheu, according to her county suspension letter. Sungcheu was roused two hours later by the dialysis machine alarm "as blood spurted from [the patient's] dislodged catheter needle," government health inspectors later wrote.

The board didn't file a public accusation against Sungcheu until this April, nearly four years after the incident.

In her resignation letter, Sungcheu said she was not sleeping and described the patient as "abusive, demanding and difficult." Her lawyer, Kenneth Drake, said she believes she has done nothing wrong.

* Wilma Walker was fired in June 2005 because she allegedly failed to check a critically ill patient's heart-rate monitor. She was accused of charting vital signs at a time when he was, in fact, dead. She was suspended the year before for giving an anti-cancer drug to a meningitis patient.

It took the board till September 2007 to file a public accusation against her. At a hearing, Walker admitted making mistakes but said she never knowingly put her patients in danger. A decision is pending.

Vesna Maras, formerly a county prosecutor assigned to review potential criminal cases against King/Drew nurses, said she was struck by the nursing board's lack of vigor. "I didn't get any sense of urgency from them whatsoever," she said.

Read Charles Ornstein and Tracy Weber's Pulitzer Prize-winning series for the Los Angeles Times on the troubles at King/Drew

Spencer Sullivan: His Body a Prison

2009-07-11T01:00:40-05:00

by Tracy Weber, ProPublica -

He was once the handsome entrepreneur in the fading newspaper article on his bedroom wall – a former nurse running a temporary nurse agency.

Today Spencer Sullivan, 48, spends his days in a wheelchair at his Laguna Hills home. In 2001, after neck surgery at UC San Francisco Medical Center, two doctors gave similar orders for powerful medications. Instead of questioning the duplication, a nurse gave Sullivan all of the drugs, then didn't check on him as required, state records allege. After suffering a brain injury, Sullivan was rendered quadriplegic.

In the chaotic months that followed, his brother Shane filed a complaint with the state Board of Registered Nursing. The family sued the hospital and eventually settled for $6 million. The case was again reported to the nursing board in 2005, this time by insurers, who attributed $2.4 million of the settlement to temporary nurse Rose McKenzie's actions.

"It's shocking how they never contact you. They never say the nurse was disciplined – nothing," said Sullivan's mother, Carol. "It just makes you wonder, is she out there somewhere taking her job so lightly?"

In April 2008 – 6 1/2 years after the brain injury – the board filed an accusation against McKenzie. She did not respond, and her license was revoked. She's now a nurse in Canada.

"It makes me sad what she did to me," Spencer Sullivan said. "It's like being in jail."

Click to see an audio slideshow about Sullivan

Dr. Iraj Zandi: Appalled By Delay

2009-07-11T00:29:40-05:00

by Tracy Weber, ProPublica -

In the midst of delicate eyelid surgery in April 2006, a patient who was supposed to be sedated yelled that the drugs weren't working.

Plastic surgeon Iraj Zandi turned to nurse Jennifer Bales: "Are you sure you gave me Demerol? Show me the bottle!"

Later, staffers checking the Fremont surgery center's drug locker found hairline cracks around the tops of vials of the painkiller. Bales, they later learned, had removed the drugs in all but two of the vials, then refilled them with saline, Zandi said. Any nurse would know the consequences for a patient: pain during surgery and possibly serious infection from unsterile saline, he said.

Zandi alerted police and reported Bales to California's Board of Registered Nursing. "They said, 'We can't stop her until we go through the process,' " he recalled. It was a frightening thought, he said: She could go to work anywhere.

Over months, Zandi and his staff relentlessly pushed for Bales' criminal conviction. In December 2006, Bales was found guilty of embezzlement for stealing drugs and hypodermic needles.

But it would be another year before the nursing board filed an accusation. The board's documents told Zandi something he hadn't known -- that several years before, Bales had allegedly pilfered drugs from a hospital. Bales failed to respond to the board's accusation, and her license was revoked in 2008.

Zandi's wife, Mitra Ara, who works at the practice, said she couldn't believe the board didn't act faster. "Somebody who takes away a painkiller from patients is capable of doing anything."

When Caregivers Harm: Problem Nurses Stay on the Job as Patients Suffer

2009-07-11T00:17:54-05:00

by Charles Ornstein and Tracy Weber, ProPublica, and Maloy Moore, Los Angeles Times -

He ignored the alarms on vital-sign monitors in the emergency room, shouted at co-workers and once hurled a thirsty patient's water jug against the wall, yelling, "How do you like your water now?" according to state records.

Murphy's fellow nurses at Kaiser Permanente Riverside Medical Center finally pleaded with their bosses for help. "They were afraid of him," a hospital spokesman said.

Under pressure, Murphy resigned in May 2005. Within days, Kaiser alerted California's Board of Registered Nursing: This nurse is dangerous.

But the board didn't stop Murphy from working elsewhere, nor did it take steps over the next two years to warn potential employers of the complaints against him. In the meantime, Murphy was accused of assaulting patients at two nearby hospitals, leading to convictions for battery and inflicting pain, board and court records show.

Even Murphy, who has since taken classes to curb his anger, was surprised the board didn't step in earlier.

"The nursing board is there to protect the public from me," he said in an interview.

The board charged with overseeing California's 350,000 registered nurses often takes years to act on complaints of egregious misconduct, leaving nurses accused of wrongdoing free to practice without restrictions, an investigation by The Times and the nonprofit news organization ProPublica found.

It's a high-stakes gamble that no one will be hurt as nurses with histories of drug abuse, negligence, violence and incompetence continue to provide care across the state. While the inquiries drag on, many nurses maintain spotless records. New employers and patients have no way of knowing the risks.

Reporters examined the case of every nurse who faced disciplinary action from 2002 to 2008 – more than 2,000 cases in all – as well as hundreds of pages of court, personnel and regulatory reports. They interviewed scores of nurses, patients, families, hospital officials, regulators and experts.

Among the findings:

* The board took more than three years, on average, to investigate and discipline errant nurses, according to its own statistics. In at least six other large states, the process typically takes a year or less.

"It's really discouraging that when you do report people . . . they don't take action," said Joan Jessop, a retired chief nursing officer in Los Angeles who filed multiple complaints with the board during her 43-year career. "What is so frightening to me is that these people will go on and do it to somebody else."

* The board failed to act against nurses whose misconduct already had been thoroughly documented and sanctioned by others. Reporters identified more than 120 nurses who were suspended or fired by employers , disciplined by another California licensing board or restricted from practice by other states – yet have blemish-free records with the nursing board.

* The board gave probation to hundreds of nurses – ordering monitoring and work restrictions – then failed to crack down as many landed in trouble again and again. One nurse given probation in 2005 missed 38 drug screens, tested positive for alcohol five times and was fired from a job before the board revoked his probation three years later.

* The board failed to use its authority to immediately stop potentially dangerous nurses from practicing. It obtained emergency suspensions of nurses' licenses just 29 times from 2002 to 2007. In contrast, Florida's nursing regulators, which oversee 40% fewer nurses, take such action more than 70 times each year.

In interviews last week, the board's leaders and other state officials defended its record. "We take what we do – protecting the public – very, very seriously," said Executive Officer Ruth Ann Terry.

Terry, at the helm for nearly 16 years and on staff for 25, acknowledged that the pace of the disciplinary process has "always been unacceptable" and said the system was being streamlined. But she blamed other parts of the state bureaucracy for delays and was vague about what changes would be made.

Later, the state Department of Consumer Affairs, which oversees the board, sent reporters a three-page list of "process improvements." Many were mundane or incremental adjustments – such as revising disciplinary guidelines or planning expert witness training. Others seemed more directly aimed at reducing delays: adding staff, meeting with investigators about stalled cases and using computer systems to better track complaints.

Patricia Harris, acting chief deputy director of the department, stood behind the board. "I think they do a good job," she said.

It's impossible to measure the number of nurses whose conduct endangers patients, but it is presumed to be a small fraction. The board disciplines several hundred a year.

But even a small number of troubled nurses can have wide impact. Registered nurses are required to perform or oversee complex treatment, and each can see dozens of patients a week.

Patients generally don't have a choice in which nurse they get. Most trust that, at minimum, the government wouldn't allow a nurse with known problems at their bedside.

In California, the board's vigilance is especially important. The state has among the fewest registered nurses per capita of any state, with an estimated 654 working nurses for every 100,000 residents, compared with 836 nationwide.

Putting even greater strain on the nursing supply is a unique state law that limits how many patients each hospital nurse can treat at one time.

With demand outstripping supply, nurses have readily jumped from one hospital to another, and employers have relied heavily on the board to screen out poor performers.

Despite its critical mission, the board faces little outside scrutiny or pressure to change its ways. Public board meetings, held five times a year, are filled with praise for staffers' efforts. During five meetings attended by reporters since November 2007, Terry never focused on the delays in discipline.

And board members – including both nurses and public appointees – never publicly challenged staffers or urged quicker action even though they review every disciplinary action. (Board President Susanne Phillips said such questions are often raised with staff privately.)

While the board tarries, nurses like Owen Jay Murphy Jr. keep working.

In 2006, more than a year after Kaiser warned the board about him, Murphy was employed at Riverside Community Hospital. There, according to a criminal investigator's affidavit, he forcibly grabbed the face of a patient whose arms were tied down.

"I was helpless," said Christy Ledebur, now 50. "Why would they have someone like that working in an emergency room?"

Ten days later, Murphy punched and elbowed another restrained patient in the face, the investigator's statement said.

"I don't even recall the first two hits," said Murphy, 41, adding that his stress and anger at the time clouded his memory. "They said I hit 'em three times."

Riverside Community fired him in July 2006 and immediately alerted the nursing board. He later pleaded no contest to misdemeanor charges in both incidents.

A month later, a patient at Arrowhead Regional Medical Center in Colton complained that Murphy had put her in a headlock and shoved her against the wall, leaving clumps of hair on the bed and floor, according to hospital officials and board records.

The board took its first public action in June 2007, ">filing a formal accusation detailing the administrative charges against Murphy.

The former Army medic said in an interview that he had been provoked in some cases by aggressive or mentally impaired patients. But he said he was a good nurse and confident that court-ordered anger management classes had taught him self-control.

Still awaiting his first board hearing, he works in the emergency room of Parkview Community Hospital in Riverside with an unrestricted license.

Racking up accusations

The Times and ProPublica found more than 60 nurses disciplined since 2002 who – like Murphy – were accused of committing serious misconduct or mistakes in at least three health facilities before the board took action.

At least five employers reported Los Angeles nurse Carolyn Fay Thomas to the board for allegedly making medication errors and falsifying charts to hide her drug thefts.

And John Michael Jones racked up complaints from at least three hospitals for stealing and using drugs during work. Yet the board waited five years to revoke his license, even after he allegedly dozed off while performing CPR on a dying patient in 2002.

"I was high some of the times that I was working. Yes, I was," Jones, who denies falling asleep during CPR, said in an interview.

Several hospital administrators expressed shock when reporters told them that nurses they had turned in for dangerous failings went on to work at other facilities. No one tracks these nurses, who typically aren't required to tell the board where – or even if – they are working.

"There's got to be a better system than now to protect our patients and their safety," said Deborah Hankins, chief nursing officer at Bakersfield's San Joaquin Community Hospital, one of the hospitals that complained about Jones.

As it stands, complaints often take a circuitous route through several clogged bureaucracies: From the nursing board for initial assessment to the Department of Consumer Affairs for investigation, to the California attorney general's office for case filing and the state Office of Administrative Hearings for trial. Only then does the case go back to the board for a final decision.

Other California health licensing boards are also hampered by delays – but the registered nursing board stands out because of the sheer volume of licensees it regulates.

The biggest bottleneck occurs at the investigation stage, as Consumer Affairs staffers struggle to handle complaints against nurses as well as those against cosmetologists, acupuncturists and others. The nursing board must share a pool of fewer than 40 field investigators with up to 25 other licensing boards and bureaus. Some investigators handle up to 100 cases at a time.

All told, cases closed by the nursing board in fiscal 2008 took an average of 1,254 days. The pace surprised officials at other states' boards.

"I don't think it's ever to anybody's advantage to have a case open for three years," said Valerie Smith, associate director of Arizona's board, which typically takes 6 1/2 months from complaint to final resolution.

Nursing boards nationwide vary widely in how they investigate and discipline nurses. But many do it faster.

Officials from Arizona, Texas and Ohio say they handle almost everything within their own agencies, exercising tight control and questioning cases that take too long.

"Where there's the greatest risk, we want to take the fastest action," said Betsy Houchen, head of Ohio's board, which requires 95% of the most serious complaints to be investigated within five working days.

Boards with the fairest and quickest outcomes hire their own investigators, usually nurses themselves, as well as their own attorneys, according to a 2004 trade group report.

Terry could ask the state Legislature for broader authority or permission to hire her own investigators, but she said she has no plans to. Rather, she said, she intends to adhere to the "process that the state of California has set up in terms of protecting the public."

She said her staff had recently begun working with Consumer Affairs investigators to prioritize and expedite the handling of complaints.

It's not a new goal. In a 2002 report to the Legislature, the board said that "there has been a steady and unacceptable increase" in length of disciplinary cases and called for "strategies to expedite cases."

Current and former state attorneys say funding has been an issue – at times they've been asked to suspend work on nursing board cases to save money. But Phillips said the board, which is funded by licensing fees paid by nurses, has enough money. It hasn't raised its fees in 18 years.

There is no legal pressure for the board to act faster. Unlike with disciplinary cases against doctors, there's no statute of limitations on nurses. The delays make the pursuit of cases more difficult: Witnesses die. Records are purged. And former co-workers cannot be found.

Even nurses targeted by the board are frustrated by the slow pace. Kimberly Ann Garza received three years' probation in 2008 – 6 1/2 years after her bosses at a Central Valley hospital complained that she had failed to account for her patients' drugs.

At one point, the investigator went on medical leave and Garza's file sat for 11 months before a colleague took it over.

"If I'm such a danger and I'm such a liability, why were they not on top of this?" said Garza, who denied she stole drugs.

A girl questions why

Caitlin Greenwell grinned slyly as she sat before a special computer at her family's ranch home in Lafayette, about 10 miles east of Oakland. Her eyes darted around a keyboard on her screen, as a sensor tracked her gaze and allowed her to spell out words.

"Let's test my mom," she typed, then looked up with a devilish smile. "We will test my mom on math."

Julia Greenwell laughed. "In so many ways, she's typical," she said.

But the 9-year-old has begun questioning why she is trapped in a wheelchair, unable to control her limbs or speak, said her father, Steven. Caitlin, he said, is "very aware that things didn't go right and some were due to people not doing their jobs."

Like many aggrieved patients and their families, the Greenwells say they feel doubly victimized, first by nurses and then by the board itself. Steven Greenwell said he won't rest until the board disciplines Candyce Warren, the nurse he holds primarily responsible for Caitlin's injuries at birth.

In October 1999, Warren and the trainee she was overseeing missed crucial signs during Julia Greenwell's labor that the baby's condition was deteriorating, according to allegations in a 2000 lawsuit by the Greenwells against John Muir Medical Center in Walnut Creek.

Caitlin was deprived of oxygen and as a result has cerebral palsy, according to the suit, settled in 2003. A doctor paid a separate settlement.

Attorneys for the Greenwells said that Warren was responsible for the trainee, who had little experience reading fetal monitoring strips, and that both nurses tried to cover up their mistakes by altering the medical record.

Steven Greenwell lodged a complaint with the nursing board in June 2003 – waiting, as his attorney advised, until after the civil case was resolved. The board filed an accusation a year or so later. Then the case disappeared into the state's bureaucracy.

There was no word on the matter until 2008, when the board amended the charges against Warren to fault her handling of a different baby's distress back in 2002. That child was stillborn.

Still there was no resolution for the Greenwells and no explanation for the delays. "I kept calling the nursing board and getting nothing," Steven Greenwell said.

Greenwell said he also spent hours on the phone imploring a deputy attorney general to see the case through – only to learn recently that she had left her job.

Warren, who still works at John Muir, feels wronged by the board as well. She disputes the allegations and wants to clear her name but wouldn't discuss specifics while the case is pending. At least five hearings have been set, then put off, she said.

"What they are doing is torturing us," she said. "It's not right."

Multiple alleged lapses

In 2005, Los Angeles County officials fired Abbie Dickerson, a nurse at the publicly owned Olive View-UCLA Medical Center in Sylmar.

She had connected a patient's feeding tube so it leaked into a surgical wound, according to her Sept. 7 termination letter.

It wasn't Dickerson's first alleged lapse. She'd been written up four times for medication errors, according to the letter, which is on file with the county Civil Service Commission.

"Your unsatisfactory job performance and medical errors are no longer tolerable," the letter said. Dickerson's appeal to the commission was thrown out because she failed to show up for a hearing. She declined to comment.

California nursing regulators either didn't know about the allegations or didn't do anything about them – they wouldn't say. With a clean record, Dickerson is free to work anywhere in the state.

Hers is one of the 120 cases in which the board hasn't acted despite sanctions imposed by other agencies or employers that were based on clear evidence. Reporters easily found the cases through public records, and nothing prevents the board from getting the same information and acting on it. Cases like these "should be dealt with immediately," said Tricia West, who has been an expert witness both for the board and for nurses accused of wrongdoing.

Even when a registered nurse loses a license with another of California's professional boards, the nursing board does not always act promptly.

In more than a dozen cases, individuals were able to care for patients as registered nurses after they had been severely sanctioned – or even had their license revoked – by the Board of Vocational Nursing and Psychiatric Technicians.

Both boards use the same pool of investigators and fall under the Department of Consumer Affairs. But the department has no central database that can be searched for all the professional licenses belonging to an individual.

Lynn Teehee lost her LVN license in 2006 following allegations that she had improperly inserted a feeding tube into a patient, then ignored his cries of pain as his abdomen was flooded. The man died two days later of septic shock, records show. Her license was revoked after she failed to respond to the allegations.

The registered nursing board filed its charges two years after the LVN board acted – and later put Teehee on probation.

Percy Randall Wade surrendered his vocational nursing license in 2003 after being accused of failing to account for missing narcotics. Then, while working under his registered nursing license, he billed San Quentin State Prison $161,000 for work he didn't do. He was convicted of felony grand theft in 2006.

A year and a half later, the registered nursing board filed an accusation against him, citing both incidents. He was given four years' probation in March.

The problem extends beyond the vocational nursing board. Dorothy Wilson (also known as Dorothy Bauer) is licensed as both a registered nurse anesthetist and a podiatrist. In 1999, the California Board of Podiatric Medicine put her on five years' probation for repeated acts of negligence.

The following year, as a nurse handling anesthesia during a breast enlargement operation, Wilson did not notice that the patient had stopped breathing, according to filings in a subsequent malpractice suit against Wilson and the surgeon.

Mary Lopez, then 32, was deprived of oxygen, went into a coma and suffered brain damage, according to the pleadings. Lopez's attorney filed a complaint with the nursing board in April 2002, alleging that Wilson had over-sedated Lopez, then altered records to cover up the error.

A judge found Wilson at fault and ordered her in August 2002 to pay Lopez $779,000, although the case was settled for a lower, undisclosed amount on appeal, said Wilson's attorney, Michael Khouri.

The nursing board did not file an accusation against Wilson until December 2007. Wilson's lawyer said in court papers that any injury to Lopez resulted from wrongdoing by the surgeon, not his client.

As for Lopez, she had to relearn her ABCs, her numbers, even how to walk. A clerical worker, she requires notes to remind her each day how to do her job and when to pick up her children.

"I'm not 100% who I was," she said. "She took that away from me."

Data not demanded

The nursing board says it can't act on cases it doesn't know about. But it's not set up to find out what it needs to know, The Times and ProPublica found.

Most states require hospitals to report nurses who have been fired or suspended for harming a patient or other serious misconduct. So, for that matter, does California's vocational nursing board.

Not the registered nursing board.

Heidi Goodman, the board's assistant executive officer, told The Times in 2007 that the board could be overwhelmed if such reports were mandated. "We have to work within existing resources," she said. "You get the flood. What are you going to do about it?"

The board also largely shuts itself off from information about nurses licensed in California who get in trouble elsewhere.

It is not part of a national compact of 23 state nursing boards that share information about nurses who are under investigation or have been disciplined.

And unlike 35 states, California does not put the names of all its registered nurses into an industry database. So if a California-licensed nurse gets in trouble in another state, that state may not know to notify California.

Terry said last week that the board would consider requiring California hospitals to report errant nurses – a proposal that has come up before but never gained traction. She also said the board wants to arrange a one-time computer sweep of other states' actions to determine which of them involve California nurses.

Until recently, the state did not even ask nurses renewing their licenses whether they had been disciplined elsewhere or convicted of crimes. It only began doing so after The Times and ProPublica highlighted the loopholes last fall.

This spotty oversight has allowed some nurses suspended or barred from practice in other states free to care for patients in California.

One of those nurses, Sandra Corrine Taylor, had her license revoked by Oklahoma and Texas. A third state, Idaho, took away her license as a lesser-skilled nurse.

Among her alleged offenses: verbal and physical abuse of nursing home patients, medication errors and lying about her academic credentials, according to records from the other state boards. Taylor could not be reached.

Perhaps the most telling sign of dysfunction is when other states act against nurses for crimes and misdeeds committed in California before California's own board does. Often it appeared they simply had better information and acted on it quicker.

David Miranda was fired by a Pasadena hospital in 2003 for testing positive for drugs on the job, then convicted in Los Angeles in 2005 of illegal gun possession. Citing those incidents, Arizona's nursing board denied him a license in 2006.

Based in part on Arizona's action, California's board gave Miranda probation in November 2007. Just last month the board moved to pull his license after he failed two drug tests.

Given a second chance

More than half the nurses who respond to allegations from the board are handed a second chance. Each year, California places at least 110 nurses on probation, warning that if they get in trouble again, their licenses may be yanked.

In reality, such action seldom happens quickly, if at all, according to a review of hundreds of nurse disciplinary records.

Just five board monitors oversee about 470 nurses on probation. Often nurses must undergo physical and mental exams, take drug tests, submit to workplace monitoring and attend rehabilitation or support groups.

But when they don't meet some – or any – of those requirements, years often pass before the board tries to revoke their probation.

At times the punishment for violating probation is more probation.

One nurse was put on three years' probation in 1996 for stealing drugs from a Sacramento hospital. After she ignored numerous requirements, her probation was extended three more years in 1999, according to board documents. Finally in 2003, after she relapsed, skipped drug tests, was convicted of possessing codeine and Valium without a prescription, got a job without permission and missed support group meetings, her license was revoked.

But last year, the board found the nurse had "demonstrated sufficient rehabilitation" and gave her license back – with probation.

Carolyn Claeys, now 61, was put on probation in July 2005. The home healthcare nurse had showed up for work drunk and had stolen drugs from a former patient's house, according to her board disciplinary record.

At the time, Claeys also had three criminal convictions: two for drunk driving and one for petty theft.

Nursing board documents describe what happened next:

Less than four months into her nursing board probation, Claeys was convicted of a DUI.Four months after that, she was fired from a nursing home for stealing drugs. She tested positive for drugs three times between November 2005 and March 2006 and missed 12 required drug tests.

Any of these violations would have been grounds for the board to revoke her probation. But the board took no action – at least none that could be found in public records.

In July 2006, Claeys was found passed out, high on drugs, in the Santa Cruz apartment of Dorothy "Jeanie" Rising, who had died of cancer the previous day. Claeys, one of her caregivers, admitted to authorities that she'd stolen Rising's painkillers and injected them.

Five months later, the board filed a petition to revoke Claeys' probation. She didn't contest the charges, and her license was later revoked.

In an interview, Claeys acknowledged that she was "an impaired nurse." But she said she'd waited until Rising was dead to steal the drugs.

"It wasn't that horrific," she said, "as opposed to if I had been sitting right there when I was there with her: 'Here, one for you, one for me.' "

Terry said that adding probation staff should help. "You won't find that happening any more," she said of such cases.

As for other improvements, she cautioned that they would take time.

"It's not going to happen overnight," Terry said.

See our database of sanctioned nurses

Doug Smith, The Times’ director of database reporting, contributed to this report.

New Evidence Surfaces in Post-Katrina Crimes

2009-07-10T17:33:51-05:00

by A.C. Thompson, ProPublica -

Television news reports are casting new light on the violence that flourished in New Orleans in the anarchic days after Hurricane Katrina in 2005.

The reports -- broadcast Thursday by WTAE TV in Pittsburgh and WDSU in New Orleans -- focus on two unsolved crimes: the near-fatal shooting of Donnell Herrington, who was allegedly attacked by a group of white vigilantes in the Algiers Point neighborhood, and the murder of Henry Glover, whose charred remains were discovered on a Mississippi River levee. Both victims are African American.

At the center of the news reports is a disturbing and grisly amateur video shot by a pair of private investigators in September 2005 and obtained recently by WTAE journalist Jim Parsons. (Full disclosure: This reporter was interviewed for the WTAE and WDSU stories.)

The private detectives, Mike Orsini and Istvan Balogh, are Pennsylvanians who traveled to New Orleans to volunteer in the wake of the storm. Orsini is a former police officer, while Balogh is an ex-corrections officer. They spent nearly two weeks camped out in Algiers Point, a middle class, largely white enclave nestled on the west bank of the Mississippi River.

On the video, a former Algiers Point resident talks calmly about shooting people. That man, Paul Gleeson claimed that he and his fellow gunmen shot 38 people and said that the victims were looters. Asked if any of the shooting victims died, Gleeson replied, "Who cares? I don't (expletive) know. Who cares? What does it (expletive) matter?"

The Algiers Point shootings, which have prompted an intensifying civil rights probe by the Federal Bureau of Investigation, were exposed late last year in stories published by The Nation and ProPublica. While the neighborhood gunmen say that they were simply defending the community against thieves, other witnesses say that the group targeted black men and spewed racial epithets.

Orsini and Balogh say that they saw as many as five corpses lying around the neighborhood, which did not flood and suffered only minor wind damage. Orsini told WTAE, "Nobody took care of these bodies, and these were all individuals who had been shot." The men videotaped one of the corpses, which was lying beneath a sheet of corrugated metal.

Orsini and Balogh have turned over their video over to the FBI.

In an off-camera interview with WTAE, Gleeson’s ex-wife, Nicole Geraci said that she didn’t believe Gleeson was capable of murder. Just how credible Gleeson’s claims are may be difficult to determine: Gleeson, an Irish citizen, was deported several years ago.

Another Algiers Point local, Cathy Carmack, told WTAE that the Algiers Point gunmen instructed her to not talk about the violence: "They told me to keep my (expletive) mouth shut and I'd be afraid. I mean, I don't want them coming after me."

The statements of Gleeson and Carmack further suggest that Herrington, who was shot on Sept. 2, 2005, while walking through Algiers Point, was the victim of an organized group. Herrington, who at the time was employed as an armored car driver, was on his way to an evacuation zone established by rescue agencies when he was attacked. He says that his assailants opened fire on him for no reason, and yelled, “Get that nigger!”

The video footage gathered by Orsini and Balogh also contains evidence of the slaying of Glover, a 31-year-old father of four who died after being shot in early September 2005.

The footage shows Glover’s scorched remains -- bone shards, ashes, and a skull -- as they lay inside an incinerated car on a Mississippi River levee.

Witnesses have linked the death to the New Orleans Police Department. Glover was shot by an unknown assailant near a shopping mall on the west bank of the Mississippi River. After the shooting, he was rescued by a stranger, William Tanner, who loaded the wounded man into his car and drove to a nearby elementary school where police officers had set up a command post. Tanner hoped that the officers could aid Glover or rush him to the nearest hospital.

Instead, according to Tanner and another witness, Glover’s brother Edward King, police personnel at the school failed to offer the bleeding man any medical assistance, allowing him to die in the back seat of Tanner’s white Chevrolet Malibu. Police then seized the car and Glover’s lifeless body, the witnesses say.

Glover’s burnt remains were later discovered in Tanner’s incinerated Chevy, which was dumped on a levee not far from an NOPD station.

The New Orleans Times-Picayune reported in June that federal agents are examining the possibility that NOPD officers were actually involved in shooting Glover; a federal grand jury has been hearing testimony on the matter for several weeks.

While Orsini and Balogh’s video is grainy and shaky, it clearly shows a large hole in Glover’s skull, which, according to forensic pathologists, could be evidence of violence -- a gunshot or other physical trauma -- or a product of the intense heat to which the body was subjected to.

The video is significant in part because it appears that Glover’s skull never made it to the temporary autopsy lab in St. Gabriel, La., where his body fragments were examined in October 2005. There’s no mention of it in the autopsy report, and Dr. Kevin Whaley, a forensic pathologist who examined Glover’s remains, said that he didn’t recall seeing a skull. “We probably only had 15 percent of him,” Whaley told us last year.

And that raises more ugly questions: Did somebody steal the skull in an attempt to hide evidence of a crime? Or did someone take it as a souvenir of Katrina?

A.C. Thompson's original reporting on New Orleans was supported by the Investigative Fund at The Nation Institute, ProPublica, the Center for Investigative Reporting and New America Media.

Will Obama Clean Up Government Secrecy Labeling?

2009-07-10T15:20:49-05:00

by Jennifer LaFleur, ProPublica -

Not available national technical information service. High-temperature superconductivity pilot center information. Business confidential. Census confidential.

These are among the more than 100 special designations federal agencies apply to information that is not officially classified but in their view requires special handling.

The special markings on government records often mean that agencies withhold unclassified information from the public, Congress and even other government agencies, according to a report (PDF) released this week by OMB Watch, a group that promotes transparency in government.

"Only by sharing information can we make greater use of the information," said Sean Moulton, director of federal information policy for OMB Watch. "If one person knows it, and it's locked in a file cabinet, it's useless, even to the government."

The OMB report follows a recent executive order from President Barack Obama aimed at bringing order to what critics say has become a confusing and inefficient system for deciding what government records truly need protection.

These special designations are not new. Government agencies have employed them for decades. But after Sept. 11, 2001, new categories were created and existing categories were applied more broadly, Moulton said.

In 2003, for example, the Federal Energy Regulatory Commission created a new category called Critical Energy Infrastructure Information. That halted the release of information about dam safety and other potential risks in communities.

Shortly after it formed, the Department of Homeland Security wrote rules on "critical infrastructure information" that protected information submitted by companies to the federal government.

And in a March 2006 report, the Government Accountability Office found 57 categories for "sensitive but unclassified" terrorism-related information, 16 of which belonged to one agency.

Most of the 26 agencies interviewed by the GAO reported no internal system for training staff in using special records designations or how to handle records that had special labels.

But now, under an administration that says it is committed to transparency, open-government advocates say the proliferation of special markings needs to be addressed.

In its report this week, OMB Watch points out that many of the designations are applied inconsistently within and across agencies. And the lack of specific definitions for categories leads to decisions about disclosure being made by individual workers.

Some moves already have been made toward fixing the jumble of agency markings.

In May 2008, President George W. Bush issued a memorandum to federal agencies to standardize markings for information considered "sensitive but unclassified." It created a new framework, called Controlled Unclassified Information (CUI), to protect terrorism-related information but allow agencies to share information.

The memo did not address many other special designations agencies use.

Obama's executive order on May 27 called for a new task force to review special designations: "These imperatives include protecting legitimate security, law enforcement, and privacy issues as well as civil liberties ... ensuring that the handling and dissemination of information is not restricted unless there is a compelling need."

The recommendations of the task force, which Obama said should include "a broad range of agencies from both inside and outside the information sharing environment," are due back to the administration in late August.

In its report, OMB Watch recommends that a new policy reduce the number of labels used to control information and reduce the amount of information being categorized. It also encourages the administration to keep public disclosure in mind when it develops processes for handing CUI and calls for protecting whistleblowers who "disclose CUI records to uncover waste, fraud, and abuse."

Steven Aftergood, director of the Project on Government Secrecy at the Federation of American Scientists, said he worries that a comprehensive revamp of the system might restrict more information. Aftergood favors a more limited approach.

"Let's take it a step at a time and see what happens," he said.

Ask the Newsroom: Nurses Investigation

2009-07-10T13:26:16-05:00

by ProPublica, ProPublica -

Do you have a question about our in-depth investigation into California's oversight of health professionals? Fill out the form below, or send an email to QandA@propublica.org. Charles Ornstein and Tracy Weber will be answering these questions throughout the week. Check back on propublica.org for updates.

Veronica Glaubach: Joy of Birth, Then Tragedy

2009-07-10T10:42:22-05:00

by Charles Ornstein, ProPublica -

Veronica Glaubach told her father to wait until the week after she gave birth before flying to California from Buenos Aires to meet the baby. When the infant was a day old, however, Roberto Glaubach was told to come immediately.

Veronica was brain-dead.

The cause of her 2002 death was complications from pre-eclampsia, a relatively common condition in pregnancy that can be fatal if not treated promptly.

Roberto Glaubach has spent years and more than $100,000 seeking to hold someone responsible. He has made 20 trips to California and sent letter after letter. In one missive to the state Board of Registered Nursing, he attached Veronica's photo: "The face of a human being who some irresponsible and little-prepared nurses killed at 28 years of age," he wrote.

In 2005, state hospital regulators faulted three nurses for not telling doctors of Veronica's high blood pressure or assessing her for pre-eclampsia. Glaubach also obtained a $550,000 legal settlement for his granddaughter after suing the hospital and two doctors.

Five years after Veronica's death, the nursing board weighed in, saying in a letter to Glaubach that an outside expert found the treatment "within the standards of care" under state law.

"The board appreciates the profound depth of your loss. However, any further review of this matter would not result in a different opinion."

"I was astonished," Glaubach said. "My loss is for the rest of my life."

Gov’t Foreclosure Program: Who Are The Holdouts?

2009-07-10T10:33:04-05:00

by Emily Witt, ProPublica - July 10, 2009 10:33 am EDT

Most of the biggest mortgage servicers in the country have signed up for the government’s foreclosure program, helping it cover what the Treasury Department says is more than 80 percent of home loans. The program pays participating servicers to modify loans.

We were curious as to why some of the top servicers were holding out, so we asked them. Some said they were considering joining. Others would not comment.

Among those not participating are three of the 10 largest servicers in the country and the second-biggest servicer of subprime loans, according to National Mortgage News.

Those servicers are under no obligation to offer modifications for loans not owned or guaranteed by Fannie Mae or Freddie Mac. They also are not bound by the mortgage debt-to-income ratio prescribed by Making Home Affordable, which limits monthly mortgage payments to no more than 31 percent of a homeowner’s income. The Treasury has said that more than 270,000 loan modifications have been offered so far, but servicers have been slow to ramp up.

Mortgage servicers contacted by ProPublica were reluctant to address their reasons for not signing on.

SunTrust Mortgage Inc., with more than $150 billion in loans, is the holdout with the largest servicing volume. Hugh Suhr, a spokesman, said the company was still considering whether to join the modification program.

HSBC, one of the top five servicers of subprime loans, told us it was “considering the related financial, operational and customer impacts” of Making Home Affordable for customers with bank-owned loans.

A spokeswoman for American Home Mortgage Servicing Inc., which according to National Mortgage News is the second-largest servicer of subprime loans, with a subprime portfolio topping $100 billion, said it anticipates finalizing an agreement with the government “soon.”

“Soon” was also the word used by a spokeswoman for Litton Loan Servicing, who said that’s when the company hopes “it can formalize its participation in the Treasury program.”

Three servicers—HomEq, PHH and Flagstar Mortgage – would not comment.

Meanwhile, homeowner advocates are getting impatient. “At some point President Obama has to stop begging, pleading and bribing the servicers and require them to do it,” said Bruce Marks, CEO of the Neighborhood Assistance Corporation of America, a nonprofit advocacy organization that helps homeowners refinance.

ACORN Housing, a nonprofit organization that offers HUD-certified counseling assistance, recently organized a campaign against four non-participants it lambasted as “The Home Wrecker 4.” One of its targets, OneWest (formerly IndyMac), announced last week that it intended to formalize an agreement with Making Home Affordable.

Transportation Secretary Wants Stim Funding to Help Hardest Hit Areas

2009-07-10T10:20:26-05:00

by Amanda Michel, ProPublica - July 10, 2009 10:20 am EDT

Today’s round-up of stimulus coverage:

In response to recent news reports—such as the Wall Street Journal‘s “Some Hard-Hit States Get Less Stimulus”—Transportation Secretary Ray LaHood yesterday requested that states redirect stimulus funds to the most economically depressed areas in the country. States have already obligated almost the majority of their funds to specific projects, so just how will they shift focus? LaHood asked them to use funds they’ve saved because project bids are coming in below estimate. But they were required to obligate 50 percent of their state-controlled funds by the end of last month. So states may have already repurposed the “extra” funds. The remaining 50 percent of transportation funds must be obligated by March 1, 2010. We’ll keep watch to see if a higher percentage of the remaining money is spent in economically-troubled areas.

Most economists queried in the Wall Street Journal‘s latest survey are opposed to a second stimulus. The Journal‘s Phil Izzo and Kelsey Hubbard discuss the survey’s results in this video. Warren Buffett playfully disagrees. Warren Buffett, the billionaire behind Berkshire Hathaway, said on ABC’s “Good Morning America” that the first stimulus was the equivalent of “half a tablet of Viagra and then having also a bunch of candy mixed in.”

The Republicans have upped the ante in the war over the stimulus by dusting off an old talking point—the salt marsh harvest mouse. During the congressional debate the GOP portrayed the critter as a cause célèbre for House Speaker Nancy Pelosi. But the mouse was nowhere in the bill and never championed during the debate. Instead, it was on a list of several animals native to Bay Area wetlands being restored with stimulus money. Politifact has more.

It’s always the little things ... In June Sen. Judd Gregg, R-N.H., filed legislation to “prohibit the use of stimulus funds for signs that advertise taxpayer spending,” according to Foster’s Daily Democrat, in Dover, N.H. Since then, the American Recovery and Reinvestment Act signs planted near construction sites have become a symbol of which critics say is the waste to a $787 billion spending package. The federal government recommends—but doesn’t mandate—that states post these signs. How much are we paying for them? Previously I cited a back-of-the-envelope tally by the Atlantic‘s Christina Davidson—she calculated an estimate of $6 million assuming that signs cost $300 a piece. ABC News dug deeper, finding that “the signs cost $500 apiece in Maryland and New Hampshire, $1,700 in Georgia, $2,000 in Pennsylvania and New York, and $3,000 per project in New Jersey.” So, how much are we paying? ABC News reports, “New York alone is spending about $1 million on signs.” You can read more at ABC News. Of course, one possible rejoinder to the sign critics: What exactly is wrong with spending money on signs if that ultimately employs people, too?

American Indian and Alaskan communities have been awarded $90 million in stimulus funds for tribal water projects, the AP reports.

Finally, this morning U.S. Rep. John L. Mica, R-Fla., a ranking member of the Committee on Transportation and Infrastructure, is holding a press conference to—as his office puts it—“talk about the failure of the stimulus to create jobs and get transportation dollars spent out in the states.”

Obama Admin to Mortgage Servicers: Do More (Please)

2009-07-10T09:16:00-05:00

by Paul Kiel, ProPublica - July 10, 2009 9:16 am EDT

If you’ve been following our coverage of the Obama administration’s foreclosure-prevention program, you know that it’s been slow going. Mortgage servicers are overwhelmed, and borrowers are frustrated. The administration has been increasingly outspoken about its own frustration with servicers, and on Thursday, according to the Washington Post and The Wall Street Journal, Treasury Secretary Timothy Geithner and HUD Secretary Shaun Donovan took that frustration one step further with a letter to the servicers participating in the program.

You can read the letter here (PDF). The servicers should “devote substantially more resources to the program,” the letter said, including beefing up staffing and training. A few of the largest servicers defended their performance so far to the Post.

Our survey of major servicers participating in the program last week showed that many had purposely concentrated on the most delinquent borrowers first before modifying loans for other customers who might not be in imminent danger of foreclosure.

Other links this morning:
Bank Stock Warrants Undervalued, Panel Says (NYT) & here’s the Congressional Oversight Panel’s report
J.P. Morgan to Send TARP Warrants to Market (WSJ)
AIG Seeks Clearance For More Bonuses (WaPo)
With Sale of Its Good Assets, G.M. Tries for a Fresh Start (NYT)
Citigroup Shakes Up Leaders to Pacify U.S. (WSJ)
FDIC Said to be Unwilling to Back CIT Debt on Risk (Bloomberg)
Fed Role Protecting Consumers Debated (WaPo)

Gov Web Sites Still Offer Conflicting Numbers on Stimulus Spending

2009-07-09T15:23:49-05:00

by Christopher Flavelle, ProPublica - July 9, 2009 3:23 pm EDT

Last month, we noted that tracking stimulus spending at federal agencies was a job worthy of Sherlock Holmes. Different agencies count their stimulus spending in different ways, while the government’s catchall site Recovery.gov appears to use out-of-date and even contradictory information.

The latest example is stimulus spending at the Social Security Administration. On Wednesday, we noticed that the SSA, unlike most federal agencies, doesn’t post on its Web site the total amount of money awarded to it under the stimulus bill. After several phone calls, we were told that the total amount was $1.09 billion.

But when we cross-referenced that number with the figures posted on Recovery.gov, we noticed a slight difference: According to Recovery.gov, the SSA has already paid out $13.014 billion in stimulus bucks—some 13 times more than the SSA told us it had been awarded under the bill.

When asked about the discrepancy, Dorothy Clark, an SSA spokeswoman, suggested that Recovery.gov may have included in its calculations $13 billion in one-time $250 payments to Social Security beneficiaries. The SSA didn’t include the $13 billion in its own calculations, Clark explained, because the money in fact came from the Treasury Department, not the SSA—regardless of what Recovery.gov might say.

Clark didn’t know where Recovery.gov gets its numbers. So we gave them a ring. “Whatever information we have comes from the agency [in question],” said Ed Pound, director of communications for the Recovery Transparency and Accountability Board, which runs Recovery.gov. “We got this from them.” Asked whether the $13 billion in payments ought to be listed under the Treasury Department’s spending, Pound said that payment “is listed under SSA. If that needs to be refined in some way, they should be doing it. That’s their job.”

(ProPublica called the Treasury Department to get its reaction, but we got no response.)

Given the uncertainty around the figures on Recovery.gov, ProPublica asked the SSA whether it could provide its own version of how much stimulus money the agency has not just been allocated but actually paid out—a figure available (though apparently not accurate) on Recovery.gov.

Clark, however, responded that the SSA would not provide those numbers. She said that ProPublica was welcome to file a request under the Freedom of Information Act—a time-consuming process, and one that usually requires paying a fee. We’ve filed the FOIA, and we’ll post the figures once we obtain them.

Today’s Stimulus Debate: City vs. Country

2009-07-09T10:47:28-05:00

by Amanda Michel, ProPublica - July 9, 2009 10:47 am EDT

July 10: This post has been corrected.

Today’s roundup of stimulus coverage:

We’ve heard this story before: America’s metropolitan areas are losing out to its rural areas when it comes to getting stimulus dollars. What we didn’t know is by how much. “The 100 largest metropolitan areas are getting less than half the money from the biggest pot of transportation stimulus money” and they “contribute three-quarters of the nation’s economic activity,” according to today’s New York Times. The Times tells you that this trend will continue. That may or may not be the case. States had a June 29 deadline to obligate, or decide how to spend, 50 percent of their transportation money. But my colleagues here at ProPublica discovered that there’s more than one way to meet the deadline. By June 30, they found, “13 (states) still hadn’t obligated 50 percent of their total highway funds ... Nevada, for one, had committed only 35 percent.” It turns out that states had to obligate only the money controlled by the state governments, not the funds transferred to big cities and urban areas. So cities may not have fully reported their spending projects yet; we’ve put in a call to the U.S. Conference of Mayors to ask about it.

On Wednesday, we noted that the now-simmering debate over whether the stimulus has created jobs is creating factions in Congress. As concerns grow over the stimulus’s impact, Democratic governors are being pulled into the fray. Pennsylvania Gov. Edward Rendell appeared on Capitol Hill for a hearing before the House oversight committee and found himself getting quizzed by Rep. Jason Chaffetz, R-Utah, over just how many jobs the stimulus had created in Pennsylvania. Rendell’s answer? “A couple of thousand.” (Remember: Pennsylvania has spent nearly $1 billion in stimulus money). The Philadelphia Inquirer has the full exchange.

Also up for debate was the just-released Government Accountability Office report. Among the report’s central findings are that states are not using stimulus money to innovate or build new infrastructure, but are using it to plug budgetary gaps. Get ProPublica’s lowdown on the GAO report here. For more on how stimulus money is propping up state budgets, check out this piece in today’s Wall Street Journal.

So, is the White House for or against a second stimulus? While at a conference in Singapore on Monday, a White House economic adviser said, “We should be planning on a contingency basis for a second round of stimulus.” On Wednesday, Marc Ambinder at The Atlantic got ahold of two administration officials who told him that “the president will wait at least six months before deciding whether to support a second stimulus package.” Nevertheless, on Wednesday, Rob Nabors, the deputy director of the Office of Management and Budget, denied that the administration is considering a second stimulus. Today, U.S. News & World Report published “Top Obama Aides: Second Stimulus ‘Might Eventually Be Needed.’” Looks like time will tell if this stimulus is working and whether another is in the works.

In advance of his trip to Saratoga County, N.Y., Vice President Joe Biden got a not-so-warm welcome message from former New York Gov. George Pataki. Appearing on CNBC’s “Squawk Box,” Pataki warned the administration against a second stimulus, saying, “When something didn’t work the first time, you shouldn’t do it a second time.”

Over at The Stash, Noam Scheiber looks at a recent analysis by a Goldman Sachs research team stating that we’ve felt about 40 percent of the stimulus’s benefits.

The National Endowment for the Arts has awarded its stimulus grants to hundreds of orchestras, theater troupes, museums and literary foundations. Check out these articles from the Detroit Free Press and the Kansas City Business Journal on how in-state cultural groups will use the money. This should make for some good political theater, too. In Act 1, Republicans will mock stimulus dollars being spent on ballet and sculpture gardens. In Act 2, artists will argue that their jobs are just as important as those of construction workers and bankers. In Act 3? ... That act has yet to be written. Stay tuned.

Rea Hederman, a senior policy analyst at the Heritage Foundation, a conservative think tank, calls for Congress to “repeal the remaining wasteful spending from the first (stimulus) bill and focus on policy proposals to encourage capital formulation and reduce taxes on successful companies both large and small.”

Staff writer Michael Grabell contributed to this report.

Correction: An earlier version of this post incorrectly cited the Philadelphia Enquirer. In fact, the newspaper is called the Philadelphia Inquirer.

Treasury to Use Up to $30 Billion to Buy Toxic Assets

2009-07-09T09:45:47-05:00

by Paul Kiel, ProPublica - July 9, 2009 9:45 am EDT

On Wednesday, the Treasury Department announced that nine asset managers (see the list below) had been picked to partner with the government to buy older, hard-to-value mortgage-backed securities. Up to $30 billion in taxpayer money will go toward the effort. The fund managers will raise up to $10 billion, which will be matched by up to $10 billion in TARP money, with $20 billion more available from the TARP as cheap financing to boost the size of the buys.

Originally conceived as the whole purpose of the TARP, then a major portion ($100 billion) of the TARP, the purchase of troubled assets was presented yesterday by Treasury officials as a modest intervention. Things aren’t at the crisis point they were last September, the Treasury said, and banks have been able to raise large amounts of private capital over the past couple of months. But the market for these troubled securities remains sluggish. So the Treasury is just trying to “jump-start” the market, a senior Treasury official told reporters on a conference call Wednesday, adding that the approximately $40 billion in purchasing power created through the program would have a “significant impact.” But the Treasury said it could ramp up the program if the economy deteriorates. The fund managers could start buying securities as soon as next month.

Because the Treasury has scaled back its estimate of how much in TARP money will be used for these toxic security purchases, we’re changing our accounting for how much of the $700 billion bailout remains. With that adjustment ($100 billion down to $30 billion), about $209 billion of the TARP money remains uncommitted.

The fund managers:

AllianceBernstein LP and its sub-advisers, Greenfield Partners LLC and Rialto Capital Management LLC.
Angelo, Gordon & Co. LP and GE Capital Real Estate.
BlackRock Inc.
Invesco Ltd.
Marathon Asset Management LP.
Oaktree Capital Management LP.
RLJ Western Asset Management LP.
The TCW Group Inc.
Wellington Management Company LLP.

Other links this morning:
Keeping Toxic Asset Prices Secret (NYT)
White House Ponders Bernanke’s Future (WSJ)
Exit Package for Ousted GM CEO in Works (WSJ)
Rep. Frank Introduces U.S. Consumer Agency Bill (Reuters)

GAO Slams Flimsy Auditing Rules for Stimulus Dollars

2009-07-08T15:24:35-05:00

by Christopher Flavelle, ProPublica - July 8, 2009 3:24 pm EDT

July 8: This post has been corrected.

Fresh on the heels of last week’s dreadful unemployment numbers, which raised new questions about whether the stimulus package is working, the Government Accountability Office this morning released a series of reports (PDF) about how effectively states and municipalities are using the stimulus money. One issue the GAO sounds the alarm on: weak auditing rules.

In notably blunt language, the GAO states that the federal audit reporting deadline, which instructs agencies to begin audits of their stimulus spending no more than nine months after the end of the fiscal year, “is too late to provide audit results in time for the audited entity to take action on deficiencies noted in Recovery Act programs. Moreover, current guidance does not achieve the level of accountability needed to effectively respond to Recovery Act risks.”

Translation: In the GAO’s opinion, the system for making sure that stimulus dollars are spent properly simply isn’t up to snuff. The report goes on to note that state auditors — whose job is to make sure that public dollars are appropriately spent — don’t have the funding to exercise their own responsibilities under the stimulus bill, something that ProPublica wrote about back in May. (We’ve called the GAO for more details on its concerns, and we’ll update the piece as soon as it responds.)

The GAO reported that “significant questions have been raised about the reliability of the data on www.USAspending.gov,” which is mandated by law to track financial information about who gets federal funds. The GAO points out that because the numbers on the site come from those receiving funds, the quality of their data can’t easily be verified. (Of course, as ProPublica has reported before, verifying numbers associated with the stimulus package is never easy.)

This report is a red flag for the Office of Management and Budget, which has responsibility for fixing that process. The GAO notes that it warned the OMB in April that the state-level audit process for stimulus money wasn’t good enough. (ProPublica highlighted the report.) While the OMB took steps to respond to the criticisms, the GAO notes, “These actions do not sufficiently address the risks.”

The OMB responded to today’s reports from the GAO by noting that it has “already taken and is planning actions” to address the shortcomings with its auditing process. For example, according to the report, the OMB said that it plans to issue additional stimulus auditing guidelines later this month. The GAO retorted that the OMB has “not yet completed critical guidance in these areas.”

Correction: An earlier version of this post inaccurately stated that the deadline for states to begin audits of their stimulus spending is at least six months after the end of the fiscal year. In fact, the deadline is nine months after the end of the fiscal year.