The ‘CREEPER Act’ Would Ban Sales of Child Sex Dolls in U.S.


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Congressman Daniel M. Donovan, Jr. has introduced legislation to ban child sex dolls and robots, while some pedophilia experts are torn about whether they can help or harm. (Warning: Graphic content.)

– Anything that normalizes adult sexual attraction towards children will only worsen this epidemic, from Stop Abuse Campaign.


The Curbing Realistic Exploitative Electronic Pedophilic Robots (CREEPER) of 2017 (HR 4655, 115th Congress) updates the United States Code on  Importation or transportation of obscene matters (Section 1462 of title 18) to prohibit the importation or transportation of “any child sex doll.” It would apply to anyone who imports, takes or receives a doll in the U.S. Violators would be fined and/or imprisoned for up to five years for the first offense and imprisoned for up to 10 years for subsequent offenses.

The bill defines a “child sex doll” as an “anatomically-correct doll, mannequin, or robot, with the features of, or with features that resemble those of, a minor, intended for use in sexual acts.’’ The remainder, and bulk of the bill text, describes the motivation behind the bill’s introduction, which includes the assertion of a correlation between possession of materials and participation in the abuse of minors.

Child sex robot dolls that should never appear together are suddenly—and disturbingly—making headlines around the world every week, as is the debate surrounding their implementation or banishment to either curb or reinforce pedophilia. The Stop Abuse Campaign has launched a new campaign designed to grab your attention. “Children play with dolls,” it reads. “Sex abusers should not.”

Most recently: A 33-year-old Essex man was found not guilty of importing a 3-foot-tall child sex doll in the United Kingdom. Meanwhile, a case in Canada that began in 2013 with the intercepted “controlled delivery” of one such doll is still being prosecuted five years later.

These sex robots, which in and of itself were creepy enough, are now being morphed into child sex dolls for your every day pedophile. These child sex dolls are made to cry like real children and can also mimic child like behavior such as sadness and fear.

Unsurprisingly, heated controversy surrounds the subject, with some advocates suggesting child sex dolls could be used to deter the real-life fulfillment of pedophilic urges. Most notably, Juliet Grayson, chair of the Wales-based organization the Specialist Treatment Organization for the Prevention of Sexual Offending (StopSO), told The Independent that the prescription of child sex dolls might potentially curb assaults against human children. (?)

However, in an interview, Donovan shot down the notion that child sex dolls could be used to prevent abuse with a simple analogy.

“You don’t give an alcoholic a bottle of liquor to stop their addiction, so why would you provide a pedophile with a tool that would further normalize harmful actions?” Donovan asked. “Once a child sex abuser tires of practicing on a doll, it’s a small step to move on to an innocent child. This isn’t just speculation. Psychologists and researchers believe that these dolls reinforce, normalize, and encourage pedophilic behavior, potentially putting more children at risk to harm. It is absurd to argue that permitting sexual abuse against a realistic portrayal of a child somehow stops pedophiles from viewing real children as sexual outlets for their sick desires.”

“Let’s be clear, these dolls aren’t related to free speech. They are used to act out sick fantasies.”

— Rep. Dan Donovan (R-NY)

With both the AI revolution and the cultural awakening that’s been coined the post-Weinstein effect (sexual abuse allegations), there is an intense focus right now on the best way to protect our most vulnerable populations against sexual abuse. Incidentally, conversations about pedophilia that once were shrouded in darkness are now being brought into the light. For example: Is it possible for pedophiles to get help before offending? How does grooming of children happen? What is the extent of child sexual abuse online? Should there be preemptive imprisonment for pedophiles at risk of molesting a child?

Scientists warn sex robots could be so good humans stop mating

Could there be a danger of the same issue happening with the CREEPER Act?

 In the United Kingdom, where a similar ban exists to the one being introduced by the CREEPER Act, authorities seized 128 child sex dolls last year, and 85 percent of the men who imported them were found to also be in possession of child pornography. Child sex dolls are already here, with child sex robots hitting the market soon—causing heated legal, ethical, and scientific debate around the world.

“I support the CREEPER Act and helped Congressman Donovan’s team draft it,” Noel Sharkey, co-director of the Foundation for Responsible Robotics. “I believe that a ban on the general use of child-like sex robots is necessary because of the dangers that they may create. They could have a pernicious impact on society and potentially normalise sexual assault on minors. It would be relatively easy to make these as replicas of actual children from photographs. The way forward is to have international laws against them.”

– Repliee R1 is a copy of a real 4-year-old girl. Built at Osaka University, it has nine DC motors in its head, shows fear and tears up, prosthetic eyeballs, and silicone skin.

Still, the topic inspires a merry-go-round of researcher versus researcher. On the one end of the spectrum, legal scholars Maras and Shapiro dismiss the possibility of potential therapeutic use of child sex dolls, writing, “Scientific evidence contradicts these claims as nonsensical and irrational.” On the other end, noted pedophilia researcher and Sexual Abuse Editor in Chief Michael Seto disagrees that such definitive evidence exists yet.

“I don’t understand why the authors can be so confident in their opinions given the lack of research on this topic,” Seto explained in an email to The Daily Beast. “I conduct research on pedophilia and sexual offending against children and I am not aware of any research on the impacts of access to child sex dolls or robots. The study that is cited in the article discusses factors that are important in the treatment of identified sex offenders to reduce offending. I know this research, and it does not address the impact of child sex dolls or robots, which are relatively new inventions.”

In a passionate piece for The Hill, Donovan made his case for the CREEPER Act, which has 18 congressional co-sponsors, explaining, “During my 20 years as a prosecutor, I put away animals who played out their disgusting fantasies on innocent children. What I saw and heard was enough to make anybody sick. Now, as a legislator in Congress, I’m introducing a bill to ban the newest outlet for pedophiles: child sex dolls. These lifelike, anatomically accurate recreations of young children include ‘accessories’ such as false eyelashes, wigs, warming devices, and cleaning tools.”

Donovan said his work as a prosecutor is linked closely to this current legislation: “Every case has stayed with me—there is no situation where a child was hurt or victimized that doesn’t leave your thoughts. As a former DA and current legislator, but more importantly as a father, I will do everything possible to stop crimes against children.”

After moving through the proper committees, Donovan says, “I hope to see [the CREEPER Act] considered quickly on the House floor. We must protect our nation’s children. I know the American public want this done—there is more than 160,000 signatures on a petition supporting my legislation.”

Maras and Shapiro assert in their recent editorial that the introduction of the CREEPER Act is a “step in the right direction,” but they also advocate for additional prohibitions which would “criminalize the manufacture and possession of both child sex dolls and child sex robots,” such as when criminals “find ways to evade criminal sanction by, for example, creating these child sex dolls and sex robots themselves (for example, using a 3D printer).”

 – The culture of pedophilia isn’t going to be stopped by handing a pedophile a toy doll and telling them it’s normal.

Donovan responds, “Right now, the proliferation of these dolls is being pushed by manufacturers in international markets—not through 3D printers. We, of course, should be forward-looking to ensure that the law continues to keep up with technology—but my focus is stopping the ‘here and now.’ For example, ICE has already confiscated one of these dolls in the U.S. that was imported from abroad.”

Child sex dolls are already being imported into America?

“I have been in touch with ICE and know that a child sex doll was found during a bust,” explains Donovan. “While I can’t speak more on ongoing cases, I can say that this situation shows that these dolls are being shipped here now. The ability to obtain child sex dolls needs to be stopped immediately.”

Can the law even keep up with the technology?

“Writing legislation for technology we don’t yet know will exist in 10, 20-plus years time is a difficult task,” observes Emily C. Collins, a robotics researcher at the University of Liverpool and member of the Foundation for Responsible Robotics (FRR). “But it is not fruitless to attempt to do so… When a machine is built, the builders, in my opinion, should be asking, ‘How will this robot impact its users?’”

How will child sex dolls and robots affect their users? Are pedophiles who have purchased the child sex dolls in fact “virtuous”?

 – The doll that David Turner was charged over. Picture

Last year, 72-year-old David Turner, a church warden with local school oversight, was convicted of importing a child sex doll. In a landmark decision for this new form of sex crime against children, the judge ruled the importation of the item “obscene.” Authorities who later searched Turner’s home found two other child sex dolls and more than 34,000 child pornography images.

The pictures showed victims ages 3 to 16.









Text – H.R.4655 – 115th Congress (2017-2018): CREEPER Act of 2017 …

First Look: Curbing Realistic Exploitative Electronic Pedophilic Robots (CREEPER) Act of 2017 (HR 4655, 115th Congress)

18 US Code § 1462 – Importation or transportation of obscene matters

Petition · Ban Child Sex Dolls that encourage child sex abuse ..

Stop Abuse Campaign | One Child Is Too Many

StopSO UK Tackling Sexual Abuse

StopSO – Sexually Inappropriate Behaviour

Sex robot

Inside the sex robot factory where randy pervs can handpick every .

Sex robot inventor insists ‘I’m no pervert’ after doll shouts ‘I can take …

Sex doll WARNING as robot watchdog says UK must restrict and even .

Child sex dolls help catch previously unknown suspected paedophiles

Dolls Made to Cry Like Real Children

Pedophilic urges on the dolls

Paedophiles ‘could be prescribed child sex dolls’ to prevent real …

Sex robot SHOCK: AI bots will soon be able to ‘GIVE BIRTH to children …

Child Sex Robots Are Coming to America. Can We Stop Them Before ..

The Growing Danger of Child Sex Dolls – Fierce Advocate

custom-order child sex dolls

Adult sex dolls with these capabilities are already on the market

Frigid Farrah

Scientific evidence

Urges carried out on living children

Would child sex robots stop pedophilia — or promote it? – NBC News

ANDROIDS and Artificial Intelligence Research at the Osaka University

File:Repliee R1.jpg

repliee: our friend electric

Paedophile Shin Takagi who makes

Ex-school governor who imported child sex doll is jailed – BBC News

David Turner, from Ramsgate, jailed for having child sex doll

Charity responds to conviction of man who imported child sex doll .

Child sex doll imports expose previously unknown offenders | Society

Michael Seto

Sexual Abuse | SAGE Publications Inc

Outrage over push to give pedophiles ‘child sex dolls’ | New York Post

Child sex dolls and robots: exploring the legal challenges

‘Shadow’ Trade in Child Sex Dolls Should be Banned, Say Profs | The ..

Child sex robots ‘could be used to treat paedophiles who want to be …

Call for a ban on child sex robots – BBC News

Sex robots are being made for paedophiles and could encourage all ..

Child sex dolls, the newest outlet for pedophiles, must be banned

CREEPER Act would turn law-abiding Americans into sex offenders .


Scientists Calculate the Probability of Your Existence, Similar to Buddhism


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You’re one in 400 trillion, or pretty much a miracle!

To illustrate how precious each human being is, self-help author Mel Robbins said during a 2011 Ted Talk that the likelihood of you being born as you has been calculated at about one in 400 trillion.

Crazy. But also amazing!

This is the probability of you being born at the time you were born to your particular parents, with your particular genetic make-up.

Dr. Ali Binazir took it further. He attended the Ted Talk and wrote about it afterward, doing his own calculations on how likely your existence is. Dr. Binazir is an author and personal change specialist who studied at Harvard, received a medical degree from the University of California, and studied philosophy at Cambridge University.

He looked at the odds of your parents meeting, given how many men and women there are on Earth and how many people of the opposite sex your mother and father would have met in their first 25 years of life. Then he looked at the chances of them talking, of meeting again, of forming a long-term relationship, of having kids together, and of the right egg and the right sperm combining to make you. He goes further back to look at the probability of all your ancestors successfully mating, and of all the right sperm meeting all the right eggs to make each one of those ancestors.

He illustrates it this way: “It is the probability of 2 million people getting together each to play a game of dice with trillion-sided dice. They each roll the dice and they all come up with the exact same number—for example, 550,343,279,001.”

“A miracle is an event so unlikely as to be almost impossible. By that definition, I’ve just shown that you are a miracle,” he wrote. “Now go forth and feel and act like the miracle that you are.”

Buddhists have talked of the preciousness of this incarnation. Binazir recounted this Buddhist analogy: “Imagine there was one life preserver thrown somewhere in some ocean and there is exactly one turtle in all of these oceans, swimming underwater somewhere. The probability that you came about and exist today is the same as that turtle sticking its head out of the water—in the middle of that life preserver. On one try.”

Binazir decided to test the Buddhist understanding against the modern scientific understanding. He looked at the amount of water in the oceans, compared to the size of a life-preserver. He concluded that the chances of a turtle sticking its head out in the middle of the life preserver was about one in 700 trillion.

“One in 400 trillion vs one in 700 trillion? I gotta say, the two numbers are pretty darn close, for such a far-fetched notion from two completely different sources: old-time Buddhist scholars and present-day scientists.”

In the words of Dilgo Khyentse Rinpoche:
“Ask yourself how many of the billions of the inhabitants of the planet have any idea of how rare it is to have been born as a human being. How many of those who understand the rarity of human birth ever think of even using that chance to practice the Dharma? How many of those who think of practice actually do practice?
How many of those who start really continue? How many of those who practice continue and attain ultimate realization? Indeed those who attain ultimate realization compared to those who do not are as few as the stars you can see at daybreak. As long as you fail to recognize the true value of human existence, you will just fritter your life away in futile activity and distraction. When life comes all too soon to its inevitable end, you will not have achieved anything worthwhile at all. But once you really see the unique opportunity that human life can bring, you will definitely direct all your energy into reaping its true worth.”
At the end of our lives, are we going to wonder: “Did I have the courage to do more than just what came easily? Have I truly taken advantage of this precious human birth to cultivate wisdom and compassion, and to live in a way that is increasingly more free of greed, hatred and delusion? Did I have the courage to use this precious human birth to fully realize the Dhamma? ”
Once we realize the unique opportunity that being born human offers, we will surely want to direct all our energy toward fulfilling our highest potential as a human being.”

In conclusion: “The odds that you exist at all are basically zero!”


* The impact that I want to have is I want to teach people how to discover the power that’s inside of them. To live fully in the open and share themselves, who they are…. I want to teach people how to live with more courage because courage is nothing more than the ability to do things that are uncertain…. The impact that I want to have is I want to teach people a simple way to discover the power that’s locked inside them and then to unleash it and go out and live the life they’ve always dream of.





How to stop screwing yourself over | Mel Robbins | TEDxSF – YouTube

Books – Mel Robbins

The 5 Second Rule: Transform Your Life With Everyday … – Mel Robbins

Mel Robbins

Dr. Ali Binazir, Happiness Engineer

Ali Binazir

The Preciousness of Our Human Life – Vipassana Metta Foundation

Tibetan Wheel of Life–re-incarnation –


In Hinduism, dharma is the religious and moral law governing individual conduct and is one of the four ends of life. In addition to the dharma that applies to everyone (sadharana dharma)—consisting of truthfulness, non-injury, and generosity, among other virtues—there is also a specific dharma (svadharma) to be followed according to one’s class, status, and station in life. Dharma constitutes the subject matter of the Dharma-sutras, religious manuals that are the earliest source of Hindu law, and in the course of time has been extended into lengthy compilations of law, the Dharma-shastra.

In Buddhism, dharma is the doctrine, the universal truth common to all individuals at all times, proclaimed by the Buddha. Dharma, the Buddha, and the sangha (community of believers) make up the Triratna, “Three Jewels,” to which Buddhists go for refuge. In Buddhist metaphysics the term in the plural (dharmas) is used to describe the interrelated elements that make up the empirical world.

In Jain philosophy, dharma, in addition to being commonly understood as moral virtue, also has the meaning—unique to Jainism—of an eternal “substance” (dravya), the medium that allows beings to move.

Dhamma – Access to Insight

Quotations on: Precious Human Life – View on Buddhism

Incarnation – Chinese Buddhist Encyclopedia

The Handbook of Tibetan Buddhist Symbols

A Basic Buddhism Guide: On Reincarnation

Tibetan Buddhism: what is reincarnation?

Rebirth (Buddhism)


The Meaning of Incarnation – Patheos

Waiting for a Miracle! – Lessons for Living


Coming into being?


Liespotting: Proven Techniques to Detect Deception


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The clues to truth and deception are everywhere… can you spot them?How much deceit do we encounter? On a given day, studies show, you may be lied to anywhere from 10 to 200 times. Now granted, many of those are white lies. Another study showed that strangers lied three times within the first 10 minutes of meeting each other.

Detecting lies, or “lie spotting,” is an essential skill for everyone to acquire, for both personal and professional reasons.

Liespotting reveals the sophisticated lie-detection methods of security experts and interrogators, and arms you with proven techniques to detect deception and build trust.

After an epiphany at her Harvard reunion, Pamela Meyer, a Certified Fraud Examiner, embarked on a three-year research adventure to discover how and why people deceive. She shares much of what she learned so fraud examiners can become liespotters.

You’re seated across from Stan in the interview room, and all you can think of are the immortal words of George Costanza’: “Just remember, it’s not a lie if you believe it.” You think Stan is about to tell you some big fibs about his possible involvement in a company embezzlement, but how will you tell? Pamela Meyer can help.

Meyer, a CFE and author of the bestselling book,Liespotting: Proven Techniques to Detect Deception,” can give you a holistic approach that will indicate if Stan is a believable liar, unbelievably lying or both. She can show how to watch for his telltale facial expressions and body language. She can teach you 10 questions to get him to tell you anything you want. And she can show you methods to parse Stan’s words. However, the methods she’ll give you aren’t parlor tricks. They’re part of a scientifically grounded system for ferreting out deception.

Meye says she accidentally walked into the world of deception detection five years ago when she attended her 20th year reunion at Harvard Business School.

“I took a workshop at this reunion with 350 of my classmates where a professor detailed his findings on how people behave when they are being deceptive,” she says. “What they do with their posture, their purses, their backpacks, their language structure, their smiles. I witnessed something you rarely see. For 45 minutes, 350 high-level, busy people were riveted. No one was tapping at their Blackberries. No one was running to the hall to start a conference call.

“People, who thought they had seen it all, were learning something completely new and useful,” Meyer says. “When I witnessed this unusual moment of executive silence, I knew I had happened onto something transformational.” She says she set out to immerse herself in learning techniques for spotting deception that intelligence, security, law enforcement and espionage agencies had developed and were using.

Eye opening! MUST WATCH VIDEO!

We’ve all heard that tales of cheating on school and college tests are rife. There have been instances where teachers have given students test answers in order to make themselves look good on their performance reviews. Mentors who should be teaching the opposite are sending a message that lying and cheating are acceptable.
Far from being a parlor game similar to, say, charades, where the object is to exclaim, “Gotcha,” deception detection is a serious branch of knowledge based on scientific data collected over the last six decades at prestigious universities conducting in-depth research projects, especially in psychology and physiology.
One result of the research is that most old myths about lying have been debunked. Liars do look you in the eye. They do not always stutter, stammer, blush or fidget.
Don’t conclude from this that liars are hard to spot and difficult to unmask. A trained lie spotter can get to the truth by learning about statement structure, facial micro-expressions, question formation and timing. I spent several years surveying the scientific findings in the vast and ever emerging body of knowledge on deception, and it is clear that deception detection is a modern skill that is easy to learn and helpful in navigating our complex world — especially if your professional responsibilities include hiring, interviewing, negotiating or managing.
Good liars are skilled at reading others well, putting them at ease, managing their own emotions and intuitively sensing how others perceive them.
We know from research that extroverts lie more than introverts, that men tell more “self-oriented” lies while women tell more “other-oriented” lies — usually to protect someone’s feelings — that married people lie less frequently to their partners than unmarried people do (but the lies they do tell tend to be “whoppers”). We also know that if you are perceived as a wrongdoer, others will feel less guilt in lying to you.
How do you tell if someone is lying? First, observe your subject’s normal behavior. This is called “baselining.” It helps provide a reference point for measuring changes later. Observe your subject’s posture, laugh, vocal quality. You’d better know if someone normally taps their foot all the time so you don’t make unjust accusations when you see foot-tapping in the middle of the meeting.
Then look for clusters of deceptive verbal and nonverbal behaviors. Consider these clusters red flags, not proof of deception.
Deceptive people might freeze their upper body when trying to remember their story, they might point their feet toward the door, lean toward an exit, shift their posture in significant ways or exhibit “post-interview relief” — that exaggerated exhale of relief and shift in posture when all the hard questions are over. Interrogators often falsely signal that an interview is over just to look for that post-interview relief.
Also, pay attention to your subject’s language. Scott Peterson famously slipped and used the past tense while claiming his murdered wife was alive, launching a nationwide search for her.
Lying has destroyed careers and convulsed countries. New York congressman and Internet flasher Anthony Weiner made a fool of himself issuing denials quickly contradicted by incontrovertible evidence. Former presidential candidate John Edwards has been charged with campaign finance violations connected to the cover-up of an extramarital affair. And then again, no one who lived through it will ever forget the media circus President Bill Clinton unleashed by lying during his second term in office about his sexual involvement with Monica Lewinsky.
Deceptive individuals might also use distancing language: “I did not have sexual relations with that woman … Miss Lewinsky” or repeat a hard question in its entirety. The most common verbal indicators are subtle. Someone might use lots of “qualifying language” when answering a hard question: “Well … to tell you the truth … as far as I know … to the best of my knowledge.” This renders the answer perceptual rather than factual and is often a red flag.
There’s no magic bullet for detecting lies, but developing skills to ferret out deception is possible.These skills will enhance anyone’s chances of avoiding victimization by scam artists in their professional and personal lives.

These techniques will also help you gain a lasting advantage in business and dramatically improve your personal relationships by learning to decode the body language, facial expressions, words and actions of everyone you encounter.








Pamela Meyer

Pamela Meyer Pamela Meyer is founder and CEO of Calibrate, a leading deception detection training company, and of social networking company Simpatico Networks. She holds an MBA from Harvard, an MA in Public Policy from Claremont Graduate School, and is a Certified Fraud Examiner. She has extensive training in the use of visual clues and psychology to detect deception.

Pamela Meyer discusses Liespotting and the current deception epidemic




10 Amazing Facts About the Human Face and How It Reveals Deception

Writing and talk do not prove me, I carry the plenum of proof and every thing else in my face —Walt Whitman, “Song of Myself”

The first rule in deception detection is to watch the face. Our faces reveal multitudes about what we are thinking, feeling, intending. A slack jaw hints that we’ve been surprised, flared nostrils suggest hostility. Drooping eyelids in… Learn More →



10 Ways Liars Use Words To Obscure the Truth

Lying is hard work. Daunting as it may seem to keep track of all the possible signs of deception—facial cues, gestures, leg movements—think of how difficult it is to be the deceiver. To tell a convincing lie, you must keep all the details of your story straight. And not only that, you must sell it with appropriate body language, while trying to avoid leaking any emotional clues that would g… Learn More →


10 Body Language “Tells” That Reveal Deception

It sounds hard to believe at first, but just 7% of how we communicate with each other is through words. Humans communicate primarily through body language. It’s been that way throughout our evolutionary history, and it remains so today. Recent studies have concluded that body language makes up about 65% of our interactions—the bulk of the 80% of communication that is deemed “nonverbal.”… Learn More →
Test Your Lie-Q


Most People Are No Better Than Chimpanzees at Detecting Lies

Since we hear as many as 200 lies a day, we live with a hidden problem most of us are unaware of. With training in the fundamentals of deception detection, we can significantly improve our liespotting skills. How much do you know about liespotting? Before you step into real-world situations that demand watchful eyes and ears, test your knowledge with our Lie-Q quiz. Take the Quiz →




  • Test Your Lie-Q

    Most people are no better than chimpanzees at detecting lies. How much do you know about liespotting? Take the Quiz →




Expert “Lie Spotter” Reveals Telltale Signs Of Deception

Don’t try lying to Pamela Meyer. She’s known internationally as an expert deception detector. Her TED talk on the subject is super popular, and she’s written a book called “Liespotting.” She also runs a company called Calibrate in Washington, D.C. … Read More

How To Spot a Liar: The NPR TED Radio Hour Interview

tedrhAre you a good liar? Or a Bad liar?

Listen to Pamela Meyer and Guy Raz discuss the future of honesty, how to spot a liar and how to take a quick test to determine if you are a good or a bad liar.

Listen here!

Read More

Is Chris Christie lying?

chris_lieLawrence O’Donnell asks Salon writer Amy Punt about her provocative new piece “5 Reasons Chris Christie Might Be Lying,” in which she applied lie detection techniques from the book “Liespotting” to Governor Christie’s press conference. // Read More

Pamela Meyer’s Ted Talk : How to Spot a Liar makes “top 20 most popular talks” list with over twelve million views.

Screen Shot 2014-01-21 at 2.50.46 PMThe 20 most popular TED Talks, as of this moment “As 2013 draws to a close, TED is deeply humbled to have posted 1600+ talks, each representing an idea worth spreading. So which ideas have had the most widespread impact? … Read More

Liespotting Ryan Braun

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Generation Win: Has our Drive to Win Replaced Sportmanship?

hufflogoWhat do a hard shove in an NBA playoff game, a wayward ball in The Masters golf tournament, and a high school soccer match in Utah have in common? Nike’s new slogan sums it up: Winning Takes Care of Everything. … Read More

New Research: Truth-telling dyads share memories; deceptive dyads work in parallel

DeceptionNew research shows for the first time that a pair of liars will recall events differently than truth-tellers, offering crucial clues for law enforcement and intelligence officers who operate in social settings. Read More

Cheating in High School and College: Why you should care

conference_on_cheatingThe Center for Leadership and Ethics at Virginia Military Institute is doing something brilliant: An ambitious and highly relevant conference on cheating. Two thousand participants will be discussing this critical topic, in small groups and in a larger forum. Pamela … Read More

Liespotting Herman Cain

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Pamela Meyer’s editorial and TED Talk on CNN

cnnsquareA glance at recent headlines indicates just how serious and pervasive deceit and lying are in daily life. Republican presidential candidate Herman Cain is busy trading allegations of sexual harassment with several women; each side accuses the other of lying. … Read More

Pamela Meyer speaks at TED Global

Pamela Meyer, bestselling authorDo gorillas lie?

They have been known to. Koko, the gorilla taught sign language, once blamed her pet kitten for ripping a sink out of the wall, but it’s us humans who are the true masters of the art. According to Pamela Meyer, a social media expert, we are living in a “post-truth society”. Those Facebook friends of yours, for example? Just how real are they? Lying, she says, is the bridge between reality and our fantasies, between who we are and who we want to be.

And it’s a cooperative act. You can only be lied to if you agree to it. Strangers lie three times within the first 10 minutes of meeting. But then again, according to Meyer, married couples lie to each other once in every 10 interaction…

Read More

Seven Big Lies About Lying – Huffington Post

hufflogoIf Edith Wharton lived in the Age of Innocence, surely we now live in the Age of Deception…. Read More

Deception Experts take on Rep. Anthony Weiner

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More to a Smile Than Lips and Teeth

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Wary Investors Turn to Lie Pro’s

Wall Street JournalWhen screening a fund manager, investors like to see experience and a consistent record or returns. Elizabeth Prial, however, looks for dilated pupils and uneven breathing.Ms. Prial, a psychologist and former Federal Bureau of Investigation agent, has spent most of her career looking for lies in the statements of mafia hitmen and terrorists. Now, she is on the hunt for the next Bernard Madoff, selling her deception-detection skills to institutional investors and others with large pools of money who want to know if prospective fund managers are telling the truth. Read More

Liespotting Challenge Archive

This post is part of the Liespotting Challenge series.

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Liespotting Lance Armstrong Part 2: Expert Analysis

video-thumbCIA Veteran Regretfully Suggests Lance Armstrong is Lying: We asked Liespotters worldwide to comment on this video clip of Lance denying use of unauthorized substances. The team at was very impressed with the response from readers. But Phil Houston, expert deception detector takes it much further. He says Lance displays over 25 deceptive indicators in just a few minutes. Take another look at the video, then read Phil’s fascinating analysis. Read More

Pamela Meyer: How to spot a liar | TED Summaries


Pamela Meyer – Bloomberg

Association of Certified Fraud Examiners

Read Pamela Meyer’s Q&A on deception from FRAUD … – Calibrate

Probing the Body Language of a Fraudster | Accounting Today

Simpatico Networks Announces Investment from ZelnickMedia … – ZMC

How to spot a liar – Ted Talk by Pamela Meyer (Transcript)

Detect Deception – LaSorsa …

Elusive liars – Fraud Magazine

Can You Learn To Spot A Liar? : NPR

How to spot a lie – CNN –

Annotated captions of Pamela Meyer: How to spot a liar in English .


Ending Corporate Governance


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We The People Revoking Our Plutocracy

Nowadays, although more and more of us understand the fact that we live, not in a democratic republic (as we were taught in school), but under a plutocracy, most still suffer from what Richard Grossman and Ward Morehouse call the “colonization of our minds,” (1, 2) the corollary of which is the “TINA” (There is no alternative) phenomenon. The fact is, there are alternatives to this evermore distintegrative “way of life.” But in order to change this society so the seventh generation yet unborn may, once more, have the opportunity to live their lives to the fullest, each one of us must transform our own conditioned thinking from that of programmed consumer into liberated citizen.

Today, people forget that U.S. corporations, or corpses,” as this ratitor thinks of them, were extremely limited in their powers and influence prior to the Civil War. We have much to re-learn regarding the facts of how citizens, at the time of the revolution of 1776 and afterwards, gave state legislatures the power to control the “crown corporations” they had had painful, personal experience of and suffered under, from the likes of the original American “Crown colonies” — which were company’s — of the King of England, as well as the Hudson’s Bay Company and the East India Companies of Europe.

In the detailed and highly recommendable 32-page booklet, Taking Care of Business, Citizenship and the Charter of Incorporation, the authors lay out how citizens, in the early days of this system of governance, constitutionalized the legal standing of “We The People” as a fundamental mechanism for controlling and limiting the destructive influence created by unbridled and unlimited concentrations of wealth:

When we look at the history of our states, we learn that citizens intentionally defined corporations through charters–the certificates of incorporation. In exchange for the charter, a corporation was obligated to obey all laws, to serve the common good, and to cause no harm. Early state legislators wrote charter laws and actual charters to limit corporate authority, and to ensure that when a corporation caused harm, they could revoke its charter. .

Our right to charter corporations is as crucial to self-government as our right to vote. Both are basic franchises, essential tools of liberty. . .

The colonists did not make a revolution over a tax on tea. They fought for many reasons, but chiefly to create a nation where citizens were the government and ruled corporations…

They knew that English kings chartered the East India Company, the Hudson’s Bay Company and many American colonies in order to control property and commerce. Kings appointed governors and judges, dispatched soldiers, dictated taxes, investments, production, labor and markets. . .

Having thrown off English rule, the revolutionaries did not give governors, judges or generals the authority to charter corporations. Citizens made certain that legislators issued charters, one at a time and for a limited number of years. They kept a tight hold on corporations by spelling out rules each business had to follow, by holding business owners liable for harms or injuries, and by revoking charters.

But throughout the 1800s, especially after the Civil War, “under pressure from industrialists and bankers, a handful of 19th century judges gave corporations more rights in property than human beings enjoyed in their persons.” (Ibid):

The biggest blow to citizen constitutional authority came in 1886. The US Supreme Court ruled in Santa Clara County v. Southern Pacific Railroad, that a private corporation was a “natural person” under the US Constitution, sheltered by the 14th Amendment [(even though that amendment had been written and ratified in 1868 to protect the rights of freed slaves)  [3] , which requires due process in the criminal prosecution of “persons.” Following this ruling, huge, wealthy corporations were allowed to compete on “equal terms” with neighborhood businesses and individuals. “There was no history, logic or reason given to support that view,” Supreme Court Justice William O. Douglas wrote 60 years later. [4]

Once corporations were legally defined as “natural persons,” they automatically were endowed with the same “Bill of Rights” as human beings, and so came to possess and then exploit with devastating consequences, the same “rights” of the freedom of speech, and the ability to participate in elections and lobby elected officials.

It is essential to understand how corporations prior to the Civil War were legislatively defined, so we may better appreciate what we can discover and make use of today, using the sections still present in our state constitutions — as well as reinstating and strengthening in favor of nature, citizens, and communities, many sections that have been repealed by corporate groups seeking to make incorporation laws more “corporate friendly” — to overthrow corporate authority, and reinstate the authority of we the sovereign people. Up to the mid-1800s,


  • Corporations had limited duration, 10 years, 20 years, 30 years — they were not given forever, like corporate charters are given today.
  • The amount of land a corporation could own was limited.
  • The amount of capitalization a corporation could have was limited.
  • The corporation had to be chartered for a specific purpose — not for everything, or anything.
  • The internal governance was very different —shareholders had a lot more rights than they have today, for major decisions such as mergers; sometimes they had to have unanimous shareholder consent.
  • There were no limitations protections on liability — managers, directors, and shareholders were liable for all debts and harms and in some states, doubly or triply liable.
  • The states reserved the right to amend the charters, or to revoke them — even for no reason at all. [5]

Today, is it critical for all of us to “examine the fundamental difference over what is a decision for the civil society that needs to be conducted in an open way, through the constitutionalized process, and what are decisions that are the private domain of the corporation?”  [6]

Ward Morehouse, speaking in Palo Alto this past January 29th, spoke of “The Seven Challenges” we face in order to get out of the mess we are currently in:

  • I think the first challenge we have to come to grips with is how to overcome this colonization of our minds and to recognize that there are alternatives to a society dominated by giant corporations.
  • Our second challenge involves taking a lesson from the play book of the corporations who … have spent the last century or more consolidating their power and insulating themselves from meaningful democratic control. And we need therefore to try to change a body of legal doctrine rather than fight case after case after case of corporate transgression.
  • Our third challenge is to resist the temptation for co-optation and accommodation and not to accept as “victories” those which leave corporate power unchallenged and intact.
  • Our fourth challenge is to recognize the myth of American democracy and to overcome the plutocracy with which we live. All societies have myths about themselves. Ours is no exception.
  • The fifth is to understand that we will never win in this struggle if we play by their rules because they wrote the rules.
  • Our sixth is to determine how we know when we really have won in the struggle against corporate power, and I would submit to you that we only really win when there is a fundamental shift in power from corporations back to the people where it was in the first place, and should be again. . . .
  • The seventh challenge is to take to heart the big lessons of 20th century history, and not to be discouraged by the challenges that indeed do confront us. It was said no where better or more eloquently than by Howard Zinn in one of his recent books, when he wrote that, “[t]he struggle for justice should never be abandoned because of the apparent overwhelming power of those who have the guns and the money, and who seem invincible in their determination to hold onto it. That apparent power has again and again proved vulnerable to human qualities less measurable than bombs and dollars: moral fervor, ingenuity, courage, patience. Whether by blacks in Alabama and South Africa, peasants in El Salvador, Nicaragua, and Viet Nam, or workers and intellectuals in Poland, Hungary and the Soviet Union itself. No cold calculation of the balance of power need deter people who are persuaded that their cause is just.”  [7]

He then went on to discuss,

One of Clinton’s throwaway lines in his speech [when he said] “The era of big government is over”. . . And you will recall that there was a round of applause on both sides of the isle. I would submit to you that, the era of the Giant Corporation is over and that it is time for us to take the offensive in the struggle to establish democratic control over corporations. Here is an eleven-point program for doing just that:

  1. We can start by revoking the charters of especially harmful corporations who have inflicted mass harm on innocent people. As Richard indicated, there are provisions for the revocation of charters in 49 of the 50 states. They have some provisions similar to that in the New York Business Corporation Law, Section 1101, which specifies that corporations that act contrary to the public policy of the state are subject to dissolution.
  2. We can recharter corporations to limit their powers and make them entities subordinate to the sovereign people. For example by granting charters (as used to be the case) for limited time periods, requiring that there be a conscious, deliberate act of approval by communities and workers for corporations to continue beyond the initial time in which they have been chartered. For making corporate managers and directors liable for the harms done by corporations.
  3. We can address what I think is a fundamental obstacle to democratic control over corporations, which is their sheer size. I think many of you are well aware that the largest corporations today are larger than most nation-states. General Motors has gross income greater than the gross domestic product of Denmark. So we need to reduce the size of corporations by breaking them into smaller units with less power to undermine democratic institutions.For those of you who think this is a wild flight-of-fancy, I would remind you that as an issue in public policy, this has historical precedence in the Public Utility Holding Company Act of 1935 which did just that: it said certain public utility companies will divest themselves because they may not be larger than a given set of criteria determined through a democratic process.
  4. We need to establish effective worker and community control over production units in order to protect the “reliance interest,” an important, if not fully developed, legal doctrine which workers and communities acquire over time in the actions, the activities, and indeed the assets of corporations.This could be done in a variety of ways including prohibitions in the charter of the corporation in the future, prohibitions for the hiring of replacement workers (scabs in other words), requiring independent health and safety audits by experts chosen by workers in the affected communities, and so on.
  5. We can initiate referendum campaigns, or take action through state legislatures and the courts, to end constitutional protections for corporate persons. As Richard indicated, we are, in a certain sense, in the belly of the beast here in Santa Clara County, because that is where all this terrible mischief of corporations being persons before the law, began.
  6. We can prohibit corporations from making campaign contributions to candidates in any elections, and from lobbying any local, state, and federal government bodies. And if you think this is off-the-wall, you should be aware that in the state of Wisconsin, up until a few decades ago, it was a felony for corporations to make political contributions.
  7. We can stop subsidy abuse and extortion by corporations through which large corporations rake off billions of dollars from the public treasury. Please let us not call it “corporate welfare.” Welfare should be a positive concept. This is extortion and subsidy abuse and we need to stop it.
  8. We need to launch campaigns to cap salaries of corporate executives, and tie them to a ratio of average compensation for production workers (say, five or ten to one). I’ll return to this subject in a moment, as the reality is much different today as all of you know.
  9. We can encourage worker and community-owned and -controlled cooperatives and other alternatives to conventional limited liability profit-making corporations. They need not be the only game in town, in fact they are not the only game in town. But we need to work hard to expand alternative types of enterprises that will subject themselves to genuine democratic control.
  10. We can prepare model state corporation codes based on the principle of citizen sovereignty, and begin the campaign for their adoption, state-by-state.
  11. (and I’m sorry Richard didn’t have more opportunity to talk about this important subject, but perhaps we can explore it further in the discussion) We can invigorate, from the grassroots up, a national debate on the relationship between public property and private property — including future value — and the rights of natural persons, communities, and other species when they are in conflict with those corporations. This whole subject of how we define property rights is at the heart of much of the accumulation and codification of corporate power.

So there is an eleven-point agenda to get you started on this challenging task. A Canadian friend of ours, who has given a lot of thought to how we develop a dynamic for dealing with corporations and corporate power, has suggested that we need to follow what he calls “the 5 D’s of Action:” We need first to define corporate power, then to dissect it, then to denounce it, then to disrupt it, and finally to dismantle it. And I would submit to you that that is the challenge before all of us. [8]

Under the form of ownership, known to us today as “the corporation,” the legal act of incorporation creates a `person’ or `corpus.’ For over the past 100 years these legal entities have been exercising more and more of their powers to recreate the circumstances of their own existence. This is exactly what the first citizens of this country feared the most, and attempted to prevent the occurence of by defining the subordinate nature of such legal ficticious entities to that of flesh-and-blood human beings. They implemented this through the legal mechanism of charters — the certificates of incorporation.

Richard Grossman drove home this point in Palo Alto when he said,

In most states a lot of the language from the early days, that reflected the subordinate nature of corporations is still on the books (including California). Some of that language is gone. But we still have the authority, in California, and other states, to define the corporations through their charters; we still have the authority to amend the charters; we still have the authority to revoke the charters — the language is there. We still have the authority to rewrite the state corporation codes in order to order corporate executives to do what the sovereign people want to do. A sovereign people do not negotiate with subordinate legal fictions. We instruct them. We define them. We don’t regulate them about the edges so they can poison here and poison there, but not more than the acceptable amount. We say, You can’t operate if you poison. That is what a sovereign people should do. And you may say, given the power of corporations, this could not be possible.

I happened to look up the California Constitution of 1879, which was the constitution that you had when you joined the Union. Article 12, which runs several pages, is called “Corporations.” There are 24 sections in Article 12 defining the corporation. 20 of them have been repealed, the last set in 1972. I’d like to close by reading you some of the sections of your constitution from 1879 that have been repealed.

As I read these I urge you to think about how, in those years, there were people who came together, as we are coming together today, who had concerns about the banking corporations and the railroad corporations and the insurance corporations — many of whom had come from other states, and other territories — and when they said, as we are going to form our own constitution and our own state, we have to preserve our political authority over this fiction. They were strong enough and mobilized enough and educated enough to force these articles to be put into their constitution despite the power of the railroad magnates and the other magnates here who are honored all over San Francisco and California. . .I’ll close by suggesting that just those sections alone — and there is more in your Constitution of 1879 — reinforce the concept that people of other eras, over 100 years ago, understood the vital importance that the fiction of the corporation was the subordinate entity to the sovereign people. If we are going to have pretense to a democracy, we cannot give political rights and powers to a private entity. We cannot let that private entity get so strong that it rewrites the laws, that it shapes the culture, that it shapes the education.

As people are looking into the histories of their states they are finding very similar histories. Although it may be difficult to imagine a country that’s not dominated by giant corporations, other people before us have imagined that, and they’ve taken big steps toward that, and there is no reason why we can’t continue that struggle. Because they also left us many important mechanisms that we can use. [9]

The reason the ratitor uses the term “corpses”, is to convey the idea that although these entities are in fact seen by people today as being like and having the same qualities as that of human persons (the language people use is a “dead” giveaway: corporate “arms” reaching into our lives, `cutting off corporations at their “knees”‘, etc.), they are not living persons — they are, more accurately, like dead bodies that have not been given a proper burial.

May we all be inspired, with gobs of creativity and enthusiasm, to carry us forward in our collective endeavor to re-establish a form of self-governance, and a manifestation of we the sovereign people, that was begun on this continent over 200 years ago when those people were inspired by the democratic forms of participatory governance that had been conducted by the Hau de no sau nee (A Basic Call to Consciousness – traditional Six nations council at Onondaga), since before Columbus bumped into the Bahama Islands and mistook the Arawak people for “Indians.”





  • plutocracy, n. 1. government by the wealthy 2. a government or state in which the wealthy rule 3.a group of wealthy people who control or influence a government 4.a controlling class of rich men – plutocrat.
  • plutocrat, n. 1. a member of a wealthy ruling class; hence, 2. a person whose wealth gives him control or great influence. 3. [Colloq.], any wealthy person







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Antimatter -The most EXPENSIVE Material in the world


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One gram of Antimatter cost about $62.5 trillion making it the world most expensive material. To make just 1 gram of Antimatter, all of mankind will have to work for about a year without rest. NASA estimated that 1 gram of antimatter would cost $62.5 trillion, but today it cost $90 trillion.

What Is Antimatter?

Everyone knows that the whole world is made of matter, the stars the planets, water, rocks, me and you, we are all made of matter. But what’s antimatter? Antimatter is a material composed of antiparticles. Every particle we know has an antiparticle that is identical to its particle but with the opposite charge. That means an antiproton, is the antiparticle of the proton, and the positron or antielectron is the antiparticle of the electron, and so on … Since matter and antimatter have opposite charge, the antielectron would be positively charged because the electron is negatively charged, and the same for all particles, proton is positive while antiproton is negative.

What happen when matter and antimatter meet?

Let’s simplify it to basic mathematics. The equation x2 = 4 has two solutions: +2 and -2, and when they meet they disappear leaving a 0. The same is for matter and antimatter, they have the same mass and the same properties but with different charges, and when they meet they annihilate leaving a burst of light caused by the energy of E=mc2

History of Antimatter

The British physicist Paul Dirac first predicted the presence of antimatter when he was trying to combine the theory of relativity with quantum mechanics. And in August 2, 1932 Caltech physicist Carl Anderson discovered the positron, which is the antiparticle of electron (antielectron), it was the first particle of antimatter to be identified, for which he won the Nobel Prize for Physics in 1936

How Carl Anderson discovered the positron?

Carl Anderson built a cloud chamber, his goal was to know the composition of cosmic rays (Cosmic rays are high-energy radiation that can produce secondary particles when it meets the earth atmosphere). So Anderson placed a magnet, to know charge of particle that pass in, and he placed a lead plate to slow down the particle that pass  through, so he was able to take a photograph of the tracks taken by cosmic ray particles. The curve of the trajectory indicated that the particle was positively charged, but it was less massive than a proton, it is positively charged but it cannot be a proton, so what is that particle? Physicists thought  they discovered a new particle, a positively charged electron and gave it the name” positron.”  But Anderson realized that the positron is the same as electron but with opposite charge, and he knew it was an antiparticle that Paul Dirac had predicted in 1931.

Why Do We Need To Create Antimatter?

Maybe you would like to create antimatter because it would make you very rich, with $90 trillion for every gram of antimatter, but scientists are creating antimatter to study it, because we won’t find antimatter around us, so we have to create it in order to study it. And of course for the many useful things antimatter can do.

Strange Uses Of Antimatter!

Antimatter have some strange uses, it could be very helpful, but it is hard to conserve a particle of antimatter, because when it will meet with its twin matter particle they will both annihilate leaving a burst of light and energy. And the challenge become harder when dealing with a ton of antimatter, because the larger the number of antimatter is, the bigger the annihilation, and the explosion could be very dangerous. Wait a second, an explosion, yes, when matter and antimatter meet they will disappear because of their opposite charge, and everything left is energy that can be used to make bombs even more dangerous than atomic bombs.

So let’s start with the uses of Antimatter: 

  1. Weapons: why would we use antimatter as a weapon? The advantage is that when matter and antimatter meets, nothing left, 100% of the collision goes into energy this means that the whole sum of their mass energy equivalent (E = mc2) is released as energy, compared to most efficient fusion weapons they only release 7-10% of energy, so antimatter is the big deal. Thus 1 gram of antimatter reacting with 1 gram of matter, produce the energy of three times the bomb dropped on Hiroshima. The U.S. Air Force started to study the physics of antimatter in the Cold War, and maybe planning to use antimatter as a destructive weapon in the future.
  2. Medical: antimatter can be used for bad things like war but it can also cure cancer. The reaction of matter and antimatter is used as a medicine, specifically in Positron emission tomography (PET).
  3. Fuel : Antimatter could be used to fuel rockets for  interstellar travel , because the energy density of antimatter is very higher than ordinary fuel . That means that the first human to land on mars could be on an spaceship powered by antimatter.

How To Create Antimatter?

Based on E=mc2 it would need 25 million billion kWh to make only one gram of antimatter, so in the whole history of CERN‘s antimatter it only made less than 10 nanograms. Antimatter is the most expensive material in the world because it need  lot of energy to be created and a lot of work, as said before all of mankind will have to work for about a year without rest to make 1 gram of antimatter.

Scientists create antimatter by transforming energy into mass. They put a lot of energy into a very small space, matter-antimatter pairs are produced, each particle and it’s antiparticle are created into pairs, like proton–antiproton pair. What if you want to create a specific particle-antiparticle pair, like proton-antiproton or electron-positron? The energy you put into that small space should be equivalent to the mass of the particle you want to create, so if you want to create proton-antiproton pairs you have to put more energy than if you want to create electron-positron pairs, because protons are heavier than electron. After creating the particle-antiparticle scientists at the laboratory separate the matter from the antimatter using magnetic fields and take 1 antiproton particle and 1 positron (antielectron) particle, they combine them to make 1 antihydrogen atoms.

The Only Place Where Antimatter Would Live!

It is very hard to trap a single particle of antimatter, thus, scientists are still doing research to find a new technique to trap antimatter for a longer time, but for now here is how they conserve it:

Antimatter may be very useful in the future, for fueling spaceships and curing cancer, but antimatter can be used as a destructive weapon as making bombs with antimatter-matter reaction, and you would know from my previous posts that when we create antimatter it will annihilate in a tiny fraction of seconds leaving energy and a burst of light, because the whole universe we live in is made of matter, and when matter and antimatter meets they will disappear because they have opposite charge (+ and – is neutral thus a zero), so why would we spend $62.5 trillion on 1 gram of something that will disappear in the moment it is created? In fact, we can trap antimatter and conserve it for a couple of seconds before it annihilate with ordinary matter, but this is done in large laboratories like CERN. It is hard to keep something away from matter, when everything is made of matter, thus you cannot trap the antimatter particle in a fancy container, you can’t let the antimatter particle touch the air, because air is made of matter. So how to keep that antimatter particle away from matter? Scientists used a magnetic field to hold the antimatter particle and trap it, it’s energy that trap the antimatter we conserve in a magnetic bottle that is shaped like a bathtub. On 26 April 2011 ALPHA was able to trap 309 anti-hydrogen atoms for 16 minutes, but the good news is that it is getting better with technology development and new techniques.

Artistic representation of ALPHA magnetic trap













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The Pentagons Defense Logistics Agency has lost track of where it spent over $800 million of taxpayers dollars


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A damning outside review finds that the Defense Logistics Agency has lost track of where it spent the money. Just like they lost Trillions in Iraq and Afghanistan.

One of the Pentagon’s largest agencies can’t account for hundreds of millions of dollars’ worth of spending, a leading accounting firm says in an internal audit obtained by POLITICO that arrives just as President Donald Trump is proposing a boost in the military budget.

Ernst & Young found that the Defense Logistics Agency failed to properly document more than $800 million in construction projects, just one of a series of examples where it lacks a paper trail for millions of dollars in property and equipment. Across the board, its financial management is so weak that its leaders and oversight bodies have no reliable way to track the huge sums it’s responsible for, the firm warned in its initial audit of the massive Pentagon purchasing agent.

The audit raises new questions about whether the Defense Department can responsibly manage its $700 billion annual budget — let alone the additional billions that Trump plans to propose this month. The department has never undergone a full audit despite a congressional mandate — and to some lawmakers, the messy state of the Defense Logistics Agency’s books indicates one may never even be possible.

“If you can’t follow the money, you aren’t going to be able to do an audit,” said Sen. Chuck Grassley, an Iowa Republican and senior member of the Budget and Finance committees, who has pushed successive administrations to clean up the Pentagon’s notoriously wasteful and disorganized accounting system.

The $40 billion-a-year logistics agency is a test case in how unachievable that task may be. The DLA serves as the Walmart of the military, with 25,000 employees who process roughly 100,000 orders a day on behalf of the Army, Navy, Air Force, Marine Corps and a host of other federal agencies — for everything from poultry to pharmaceuticals, precious metals and aircraft parts.

But as the auditors found, the agency often has little solid evidence for where much of that money is going. That bodes ill for ever getting a handle on spending at the Defense Department as a whole, which has a combined $2.2 trillion in assets.

In one part of the audit, completed in mid-December, Ernst & Young found that misstatements in the agency’s books totaled at least $465 million for construction projects it financed for the Army Corps of Engineers and other agencies. For construction projects designated as still “in progress,” meanwhile, it didn’t have sufficient documentation — or any documentation at all — for another $384 million worth of spending.

The agency also couldn’t produce supporting evidence for many items that are documented in some form — including records for $100 million worth of assets in the computer systems that conduct the agency’s day-to-day business.

“The documentation, such as the evidence demonstrating that the asset was tested and accepted, is not retained or available,” it said.

The report, which covers the fiscal year that ended Sept. 30, 2016, also found that $46 million in computer assets were “inappropriately recorded” as belonging to the Defense Logistics Agency. It also warned that the agency cannot reconcile balances from its general ledger with the Treasury Department.

The agency maintains it will overcome its many hurdles to ultimately get a clean audit.

“The initial audit has provided us with a valuable independent view of our current financial operations,” Army Lt. Gen. Darrell Williams, the agency’s director, wrote in response to Ernst & Young’s findings. “We are committed to resolving the material weaknesses and strengthening internal controls around DLA’s operations.”

In a statement to Politico, the agency also maintained it was not surprised by the conclusions.

Image result for Pentagon's Defense Logistics Agency (DLA)

“DLA is the first of its size and complexity in the Department of Defense to undergo an audit so we did not anticipate achieving a ‘clean’ audit opinion in the initial cycles,” it explained. “The key is to use auditor feedback to focus our remediation efforts and corrective action plans, and maximize the value from the audits. That’s what we’re doing now.”

Indeed, the Trump administration insists it can accomplish what previous ones could not.

“Beginning in 2018, our audits will occur annually, with reports issued Nov. 15,” the Pentagon’s top budget official, David Norquist, told Congress last month.

That Pentagon-wide effort, which will require an army of about 1,200 auditors across the department, will also be expensive — to the tune of nearly $1 billion.

Norquist said it will cost an estimated $367 million to carry out the audits — including the cost of hiring independent accounting firms like Ernst & Young — and an additional $551 million to go back and fix broken accounting systems that are crucial to better financial management.

“It is important that the Congress and the American people have confidence in DoD’s management of every taxpayer dollar,” Norquist said.

But there is little evidence the logistics arm of the military will be able to account for what it has spent anytime soon.

“Ernst & Young could not obtain sufficient, competent evidential matter to support the reported amounts within the DLA financial statements,” the Pentagon’s inspector general, the internal watchdog that ordered the outside review, concluded in issuing the report to DLA.

The accounting firm itself went further, asserting that the gaping holes uncovered in bookkeeping procedures and oversight strongly suggest there are more.

“We cannot determine the effect of the lack of sufficient appropriate audit evidence on DLA’s financial statements as a whole,” its report concludes.

A spokeswoman for Ernst & Young declined to respond to questions, referring to the Pentagon.

Grassley — who was fiercely critical when a clean audit opinion of the Marine Corps had to be pulled in 2015 for “bogus conclusions” — has repeatedly charged that “keeping track of the people’s money may not be in the Pentagon’s DNA.”

He remains deeply doubtful about the prospects going forward given what is being uncovered.

“I think the odds of a successful DoD audit down the road are zero,” Grassley said in an interview. “The feeder systems can’t provide data. They are doomed to failure before they ever get started.”

But he said he supports the continuing effort even if a full, clean audit of the Pentagon can never be done. It is widely viewed as the only way to improve the management of such huge sums of taxpayer dollars.

“Each audit report will help DLA build a better financial reporting foundation and provide a stepping stone towards a clean audit opinion of our financial statements,” the agency maintains. “The findings also improve our internal controls, which helps to improve the quality of cost and logistics data used for decision-making.”

I’d be surprised if the true figure for lost funds are not in the hundreds of billions of dollars. When it comes to the Army, there is no ceiling for funds so it all becomes like using monopoly money.







Defense Logistics Agency

Financial Statement Audit Readiness |

Department of Defense |

GAO-17-283R, Financial Audit: Fiscal Years 2016 and 2015 …

Financial Statement Audit Readiness |

The Nation’s Combat Logistics Support Agency


‘How do you buy $7 billion of stuff you don’t need?’

Defense Logistics Agency > DispositionServices > Offers ..

Defense – LibGuides – Youngstown State University

Government Documents


Pentagon agency can’t account for hundreds of millions in spending ..

Is it a headquarters if it does real work? Why not all Defense overhead …

NTIS | Home

The Full Text of the Nunes Memo


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– Photo: House Intelligence Committee Chair Devin Nunes briefs reporters at the U.S. Capitol in Washington.

On Friday, the House Intelligence Committee, which is chaired by Republican Representative Devin Nunes, released a four-page memo alleging surveillance abuses by the FBI. Earlier this week, Republicans on the committee voted to make the document public. The classified document has drawn criticism from Democratic lawmakers, who argue it is misleading, as well as from law enforcement officials. In a rare statement, the FBI warned against the document’s release, saying it had “grave concerns” about its accuracy. Despite pushback from officials, the White House approved the release of the memo Friday. Below, read the memo in full.

January 18, 2018

To: HPSCI Majority Members

From: HPSCI Majority Staff

Subject: Foreign Intelligence Surveillance Act Abuses at the Department of Justice and the Federal Bureau of Investigation


This memorandum provides Members an update on significant facts relating to the Committee’s ongoing investigation into the Department of Justice (DOJ) and Federal Bureau of Investigation (FBI) and their use of the Foreign Intelligence Surveillance Act (FISA) during the 2016 presidential election cycle. Our findings, which are detailed below, 1) raise concerns with the legitimacy and legality of certain DOJ and FBI interactions with the Foreign Intelligence Surveillance Court (FISC), and 2) represent a troubling breakdown of legal processes established to protect the American people from abuses related to the FISA process.

Investigation UpdateOn October 21, 2016, DOJ and FBI sought and received a FISA probable cause order (not under Title VII) authorizing electronic surveillance on Carter Page from the FISC. Page is a U.S. citizen who served as a volunteer advisor to the Trump presidential campaign. Consistent with requirements under FISA, the application had to be first certified by the Director or Deputy Director of the FBI. It then required the approval of the Attorney General, Deputy Attorney General (DAG), or the Senate-confirmed Assistant Attorney General for the National Security Division.

The FBI and DOJ obtained one initial FISA warrant targeting Carter Page and three FISA renewals from the FISC. As required by statute (50 U.S.C. §,1805(d)(l)), a FISA order on an American citizen must be renewed by the FISC every 90 days and each renewal requires a separate finding of probable cause. Then-Director James Comey signed three FISA applications in question on behalf of the FBI, and Deputy Director Andrew McCabe signed one. Then-DAG Sally Yates, then-Acting DAG Dana Boente, and DAG Rod Rosenstein each signed one or more FISA applications on behalf of DOJ.

Due to the sensitive nature of foreign intelligence activity, FISA submissions (including renewals) before the FISC are classified. As such, the public’s confidence in the integrity of the FISA process depends on the court’s ability to hold the government to the highest standard—particularly as it relates to surveillance of American citizens. However, the FISC’s rigor in protecting the rights of Americans, which is reinforced by 90-day renewals of surveillance orders, is necessarily dependent on the government’s production to the court of all material and relevant facts. This should include information potentially favorable to the target of the FISA application that is known by the government. In the case of Carter Page, the government had at least four independent opportunities before the FISC to accurately provide an accounting of the relevant facts. However, our findings indicate that, as described below, material and relevant information was omitted.

1) The “dossier” compiled by Christopher Steele (Steele dossier) on behalf of the Democratic National Committee (DNC) and the Hillary Clinton campaign formed an essential part of the Carter Page FISA application. Steele was a longtime FBI source who was paid over $160,000 by the DNC and Clinton campaign, via the law firm Perkins Coie and research firm Fusion GPS, to obtain derogatory information on Donald Trump’s ties to Russia.a) Neither the initial application in October 2016, nor any of the renewals, disclose or reference the role of the DNC, Clinton campaign, or any party/campaign in funding Steele’s efforts, even though the political origins of the Steele dossier were then known to senior DOJ and FBI officials.

b) The initial FISA application notes Steele was working for a named U.S. person, but does not name Fusion GPS and principal Glenn Simpson, who was paid by a U.S. law firm (Perkins Coie) representing the DNC (even though it was known by DOJ at the time that political actors were involved with the Steele dossier). The application does not mention Steele was ultimately working on behalf of—and paid by—the DNC and Clinton campaign, or that the FBI had separately authorized payment to Steele for the same information.

2) The Carter Page FISA application also cited extensively a September 23, 2016, Yahoo News article by Michael Isikoff, which focuses on Page’s July 2016 trip to Moscow. This article does not corroborate the Steele dossier because it is derived from information leaked by Steele himself to Yahoo News. The Page FISA application incorrectly assesses that Steele did not directly provide information to Yahoo News. Steele has admitted in British court filings that he met with Yahoo News—and several other outlets—in September 2016 at the direction of Fusion GPS. Perkins Coie was aware of Steele’s initial media contacts because they hosted at least one meeting in Washington D.C. in 2016 with Steele and Fusion GPS where this matter was discussed.

a) Steele was suspended and then terminated as an FBI source for what the FBI defines as the most serious of violations—an unauthorized disclosure to the media of his relationship with the FBI in an October 30, 2016, Mother Jones article by David Corn. Steele should have been terminated for his previous undisclosed contacts with Yahoo and other outlets in September—before the Page application was submitted to the FISC in October—but Steele improperly concealed from and lied to the FBI about those contacts.b) Steele’s numerous encounters with the media violated the cardinal rule of source handling—maintaining confidentiality—and demonstrated that Steele had become a less than reliable source for the FBI.

3) Before and after Steele was terminated as a source, he maintained contact with DOJ via then-Associate Deputy Attorney General Bruce Ohr, a senior DOJ official who worked closely with Deputy Attorneys General Yates and later Rosenstein. Shortly after the election, the FBI began interviewing Ohr, documenting his communications with Steele. For example, in September 2016, Steele admitted to Ohr his feelings against then-candidate Trump when Steele said he “was desperate that Donald Trump not get elected and was passionate about him not being president.” This clear evidence of Steele’s bias was recorded by Ohr at the time and subsequently in official FBI files—but not reflected in any of the Page FISA applications.

a) During this same time period, Ohr’s wife was employed by Fusion GPS to assist in the cultivation of opposition research on Trump. Ohr later provided the FBI with all of his wife’s opposition research, paid for by the DNC and Clinton campaign via Fusion GPS. The Ohrs’ relationship with Steele and Fusion GPS was inexplicably concealed from the FISC.4) According to the head of the FBI’s counterintelligence division, Assistant Director Bill Priestap, corroboration of the Steele dossier was in its “infancy” at the time of the initial Page FISA application. After Steele was terminated, a source validation report conducted by an independent unit within FBI assessed Steele’s reporting as only minimally corroborated. Yet, in early January 2017, Director Comey briefed President-elect Trump on a summary of the Steele dossier, even though it was—according to his June 2017 testimony—“salacious and unverified.” While the FISA application relied on Steele’s past record of credible reporting on other unrelated matters, it ignored or concealed his anti-Trump financial and ideological motivations. Furthermore, Deputy Director McCabe testified before the Committee in December 2017 that no surveillance warrant would have been sought from the FISC without the Steele dossier information.

5) The Page FISA application also mentions information regarding fellow Trump campaign advisor George Papadopoulos, but there is no evidence of any cooperation or conspiracy between Page and Papadopoulos. The Papadopoulos information triggered the opening of an FBI counterintelligence investigation in late July 2016 by FBI agent Pete Strzok. Strzok was reassigned by the Special Counsel’s Office to FBI Human Resources for improper text messages with his mistress, FBI Attorney Lisa Page (no known relation to Carter Page), where they both demonstrated a clear bias against Trump and in favor of Clinton, whom Strzok had also investigated. The Strzok/Lisa Page texts also reflect extensive discussions about the investigation, orchestrating leaks to the media, and include a meeting with Deputy Director McCabe to discuss an “insurance” policy against President Trump’s election.








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Warrantless Surveillance of Americans’ by the Secret Court


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Congress Renews FISA Section 702’s Warrantless Mass Surveillance

 – Photo: The House of Representatives passed FISA Amendments Reauthorization Act of 2017 on January 11th by a vote of 256-164. The Senate passed the bill on January 18th by a vote of 65-34-1. President Donald Trump signed the six year reauthorization of FISA Section 702 on January 19th, the same day it was originally set to expire

Congress missed a historic opportunity to reform an unconstitutional surveillance law, instead passing a version that makes it worse. Both Democrats and Republicans deserve sharp criticism for continuing to allow the NSA to engage in mass, warrantless spying.

After passing a temporary extension in December, both the United States Senate and United States House of Representatives passed a six year reauthorization of a controversial section of the Foreign Intelligence Surveillance Act (FISA). The section, Section 702, authorizes much of the warrantless global mass surveillance conducted by the United States intelligence community, which was exposed by whistleblower Edward Snowden. Section 702 was not added to FISA until an amendment was passed in 2008. The temporary extension was set to expire on January 19th and just days before that deadline passed a bipartisan group of five Senators attempted to filibuster the legislation, which is known as the FISA Amendments Reauthorization Act of 2017. The bipartisan group of Senators included three Democratic Senators, Senator Ron Wyden of Oregon, Senator Elizabeth Warren of Massachusetts, and Senator Patrick Leahy of Vermont, and two Republican Senators, Senator Rand Paul of Kentucky and Senator Steve Daines of Montana.

With the help of 21 Democrats, the U.S. Senate passed the Foreign Intelligence Surveillance Act (FISA) Amendments Reauthorization Act of 2017 last month, a bill that critics argue expands the government’s ability to spy on digital communications without a warrant.

The legislation focused specifically on Section 702 of the Foreign Intelligence Surveillance Act, which was initially passed as part of the FISA Amendments Act of 2008. 

Section 702 is supposed to do exactly what its name promises: collection of foreign intelligence from non-Americans located outside the United States. As the law is written, the intelligence community cannot use Section 702 programs to target Americans, who are protected by the Fourth Amendment’s prohibition on unreasonable searches and seizures. But the law gives the intelligence community space to target foreign intelligence in ways that inherently and intentionally sweep in Americans’ communications.

The Senate vote is notable for the number of Democrats who supported the bill:

(Screen shot via the U.S. Senate roll call)

Numerous Democrats also helped shut down debate on the legislation earlier this past month, ensuring it would come a vote. California Sen. Dianne Feinstein, an early advocate of reforming the FISA reauthorization, switched sides during the debate and voted in favor of ending the debate to modify the bill.

This split in the Democratic Party may be an ominous signal of what’s to come in the November midterm elections, as progressive members of the party did not mince words when voicing their strong opposition to the bill:

“Rubber-stamping this awful #FISA #Section702 bill is a dereliction of of the oversight duty of Congress.

— Ron Wyden (@RonWyden) January 18, 2018

Warrantless Surveillance Under Section 702 of FISA

Under Section 702 of the Foreign Intelligence Surveillance Act (FISA), the U.S. government engages in mass, warrantless surveillance of Americans’ and foreigners’ phone calls, text messages, emails, and other electronic communications. Information collected under the law without a warrant can be used to prosecute and imprison people, even for crimes that have nothing to do with national security. Given our nation’s history of abusing its surveillance authorities, and the secrecy surrounding the program, we should be concerned that Section 702 is and will be used to disproportionately target disfavored groups, whether minority communities, political activists, or even journalists.

Section 702 governs the domestic interception of foreigners’ communications, when the targets are believed to be outside the United States. Although externally directed, this statute is being used by agencies to monitor, collect, and search U.S. citizens’ communications for foreign intelligence and criminal activity. Congress had an opportunity to amend section 702 to safeguard U.S. national security, protect citizens, and comply with the Constitution, but they failed to do so.

“The #FISA702 bill you signed is much WORSE than the FISA law allegedly abused during the election. The FISA law you mention requires probable cause and a warrant. #FISA702 authorizes unconstitutional, warrantless spying on Americans. Your action puts everyone’s privacy at risk,” Rep. Amash tweeted in response to the President’s tweet. Just a few months into his term as President, Trump’s administration came out strongly against reforming FISA.

On the day the Senate voted to pass the FISA Amendments Reauthorization Act of 2017, it was revealed that a top secret document outlining serious abuses of FISA that occurred was shown to members of Congress and could be released later this month. On the same day President Donald Trump has signed the FISA reauthorization bill into law, Representative Matt Gaetz of Florida’s 1st District went on television and mentioned the abuse of FISA. The document is alleged to be a House Intelligence Committee Memo which highlights abuse of FISA warrants. Trump seemingly meant to point out that spying on his presidential campaign was unrelated to Section 702, but as Representative Justin Amash of Michigan pointed out on Twitter, Section 702 surveillance is even worse, as it allows the NSA to collect huge amounts of internet traffic on people who are not even suspected of being involved in a crime.

Section 702 of FISA will remain law until at least December of 2023, when Congress will either reauthorize it or will allow the section of the law to expire. FISA was originally passed in 1978 in the wake of revelations of wrongdoing by the US intelligence community. Many have called the secret Foreign Intelligence Surveillance Court (FISC), with secret interpretations of law, secret rulings, and secret general warrants to be unconstitutional. Many supporters of FISA claim that the law only captures surveillance on foreign suspects, but the fact is that the NSA is capturing the contents of Americans electronic communications and even diverts American internet traffic overseas in order to get around prohibitions on domestic spying.

Legislators in both the House of Representatives and in the Senate tried to amend FISA to reform the law and work towards restoring the privacy rights that are supposed to be guaranteed and protected by the 4th amendment of the United States Constitution. One piece of legislation designed to reform FISA that lawmakers tried to pass in Congress was the Uniting and Strengthening America by Reforming and Improving the Government’s High-Tech Surveillance Act of 2017, better known as the ‘USA RIGHTS Act.’

Numerous advocacy groups also expressed outrage in response to the Senate vote.

Many civil liberties and privacy rights organizations supported the USA RIGHTS Act and the bill received support from groups across the political spectrum, such as the American Civil Liberties Union (ACLU), FreedomWorks, Restore the Fourth, Campaign for Liberty, and the National Association for the Advancement of Colored People (NAACP). The USA Rights Act failed to pass in both the Senate and the House of Representatives. The bipartisan filibuster in the Senate was crushed when Senators voted to end the debate with a motion for closure.

“Congress abdicated its responsibility to ensure that our intelligence agencies respect the Fourth Amendment,” Neema Singh Guliani, legislative counsel for the American Civil Liberties Union, said. “Instead of instituting much needed reforms, lawmakers voted to give the Trump administration broad powers to spy on Americans and foreigners at home and abroad without a warrant. No president should have this power, much less one who has endorsed policies designed to unfairly target critics, immigrants, and minority communities.”

“Nevertheless, the fight over this authority is far from over,” Singh continues. “The ACLU is currently challenging warrantless surveillance under Section 702 and will continue to fight this unlawful surveillance in the courts. We will use every tool at our disposal to stop the continued abuse of these spying powers.”








Report on Activities Under Section 702 of the FISA Amendments Act of ..

Foreign Intelligence Surveillance Act (FISA)

Full text of “FISA Act sec 702” – Internet Archive

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FISA Section 702 | U.S. House of Representatives

50 U.S. Code § 1881a – Procedures for targeting certain persons ..

FBI complaints about memo release don’t mention bureau’s shady past

NSA Illegal Surveillance of Americans — Obama Administration Abuse ..

NSA warrantless surveillance (2001–07)

United States Foreign Intelligence Surveillance Court (FISC)

NSA Surveillance | American Civil Liberties Union

Electronic Frontier Foundation (EFF):

The EFF expanded upon FISA’s infringement on the 14th Amendment in a series of tweets last month, shortly after the Senate vote. Read the full thread here.

Legislative priority

House memo states disputed dossier was key to FBI’s FISA warrant to .

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Oppose S. 139 and Support the USA RIGHTS Amendment

Senate passes FISA Section 702 reauthorization – CNNPolitics

Text – S.2010 – 115th Congress (2017-2018): FISA Amendments …

Foreign Intelligence Surveillance Act of 1978 Amendments Act of 2008 …

USA RIGHTS Act: Reforming and Reauthorizing Surveillance Under …

Bipartisan Coalition Introduces USA RIGHTS Act to Reform Secretive ..

Unlike the USA Liberty Act, the USA RIGHTS Act could actually end ..

Foreign Policy Research Institute

Ellison on FISA Amendments Reauthorization Act of 2017 .

Statement by the President on FISA Amendments Reauthorization Act .

FISA Amendments Reauthorization Act of 2017 (HR 4478) – GovTrack

“Uniting and Strengthening America by Reforming and Improving the …

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Under Trump’s SEC, Wall Street Secrecy Expands as Enforcement Shrinks


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Photo: Jay Clayton is Donald Trump’s pick to head the Securities and Exchange Commission. Credit: Trump

Late last October, several hundred handsomely suited financiers gathered in the ballroom of a luxury Marriott, just two blocks down Pennsylvania Avenue from the Trump International Hotel. Lisa Kidd Hunt, the new chair of the Securities Industry and Financial Markets Association (SIFMA), practically glowed as she addressed the crowd of bankers, brokers, and other money managers.

“There has never been a better time to be in this industry!” she declared. The economy was strong, she said, there was “real movement on regulatory and tax reform,” and the United States boasts “the best capital markets system in the world.” The audience had every reason to feel elated. The stock market was setting records, and Donald Trump’s pick to regulate the industry — one of his most significant decisions as president from the perspective of those in the room — couldn’t have been better. Jay Clayton was a familiar face, having spent his career as a lawyer representing large Wall Street firms, and he was about to take the stage.

1. The SEC 180

Since winning Senate approval as chair of the Securities and Exchange Commission (SEC) in May, Clayton had talked tough about protecting small investors. But he had already given Wall Street any number of gifts, from easing up on enforcement of major firms to easing the rules for companies seeking to go public. In remarks last July at the elite Economic Club of New York, Clayton had acknowledged how “burdensome” some disclosures are to generate and openly invited companies to request exemptions. “I … assure you that SEC staff is placing a high priority on responding with timely guidance,” he said.

There was bonhomie in the air, then, when Clayton stepped on stage. Clayton and Timothy Scheve, the Wall Street executive charged with interviewing him on that October day, were fast friends. Only minutes into their chat, the two were chortling that they had landed on the same side of a bitter regulatory controversy: whether all financial advisers must serve a client’s best interests. The Department of Labor had spent years fighting to require this “fiduciary standard” for advisers overseeing retirement accounts, but the SEC had authority to create its own rules. The adoption of less onerous SEC rules could have ripple effects on the Labor Department’s strict ones.

Clayton suggested that mom and pop investors should continue to have a choice between hiring fiduciary advisers and stockbrokers, who are not fiduciaries, spurring Scheve, the CEO of Janney Montgomery Scott, a large financial services firm, to jump in with his approval. “We would agree with you!” he said enthusiastically. There was a burst of relieved laughter from the audience, followed by Clayton’s sly response: “I’m not just saying that because I’m here.” Goldman Sachs Building in lower Manhattan, at 200 West Street. (Photo by Timothy Fadek/Corbis via Getty Images)Photo: Goldman Sachs Building in lower Manhattan, at 200 West Street.

Clayton is a man Wall Street itself might have picked to run its most important federal regulator. Except for the two years that Clayton clerked for a federal judge after graduating law school, he has worked his entire adult life at Sullivan & Cromwell, an elite law firm based in downtown Manhattan that includes many of the country’s largest publicly traded companies as clients. Its sleek Washington, D.C., offices overlook the Washington Monument, where the firm’s attorneys assist banks and other large firms in their business before the Federal Reserve, the Consumer Financial Protection Bureau, and the SEC. Clayton, who made $7.6 million in his last year at Sullivan & Cromwell, Clayton has represented Wall Street clients including Goldman Sachs, Morgan Stanley, Lehman Brothers, and Deutsche Bank, on everything from acquisitions to initial public offerings. Each of the firms has run afoul of the SEC. So have Volkswagen and Valeant Pharmaceuticals, two other well-known Clayton clients. Both were under SEC investigation at the time of his appointment. Disclosure forms Clayton filed with the government’s ethics office indicated two additional clients under government investigation at the time, both of which he could not name because the investigations had not yet been made public.

Clayton has promised to recuse himself for one year from decisions on enforcement actions against clients of his former firm. But Sens. Elizabeth Warren and Sherrod Brown were among those expressing skepticism that Clayton could properly manage his conflicts. “I’m concerned that you may need to recuse yourself too often at a time when we need a strong, independent SEC chair on the front line of enforcement,” Brown, the top Democrat on the Senate Banking Committee, said at Clayton’s confirmation hearing.” Already in his first seven months in office, Clayton was listed as present but “not participating” 23 times. Many of those cases involved big names, including UBS, Wells Fargo, and JPMorgan Chase. (An SEC spokesperson said Clayton was not available for an interview for this story. The spokesperson did not respond to subsequent questions sent by email.)

Former President Barack Obama had been criticized by progressives for putting an attorney from another top corporate law firm in charge of the SEC. But at least that pick, Mary Jo White, had worked as a federal prosecutor for nine years. As chair, White advocated a “broken windows” approach to securities markets, which meant the agency pursued even small infractions. In October, SEC Commissioner Michael Piwowar, a Republican appointee, described the current direction of the agency as “such a complete change from the past few years that you could appropriately call it ‘SEC 180.’ WASHINGTON, DC - MARCH 23: Jay Claton is sworn in before the Senate Banking Committee during his confirmation hearing to be chairman of the Securities and Exchange Commission in the Dirksen Senate Office Building on Capitol Hill March 23, 2017 in Washington, DC. Nominated by U.S. President Donald Trump to lead the SEC, Clayton was questioned by senators about his years representing large banks like Goldman Sachs, Barclays, Deutsche Bank and other Wall Street companies. (Photo by Chip Somodevilla/Getty Images)Photo: Jay Clayton being sworn in before the Senate Banking Committee during his confirmation hearing to be chairman of the Securities and Exchange Commission in the Dirksen Senate Office Building on Capitol Hill March 23, 2017 in Washington, DC.

2. Shirts and Skins

Jay Clayton’s rise to SEC chair began with a client call late in November 2016, shortly after Trump’s election. How, the client asked, could the incoming administration cut back on Wall Street regulations? In response, the Wall Street Journal reported, Clayton “dashed off” an email laying out his ideas for making it easier for businesses to raise money without so many rules imposed by government. Such deregulatory discourse is in the DNA of a firm like Sullivan & Cromwell, where lawyers dispatch lengthy letters to regulators seeking everything from exemptions from punishment to the insertion of industry-friendly language in new rules. The client shared the email with Trump advisers, who were apparently so impressed that they asked Clayton if there was any administration job that might interest him. By late December, according to the Journal, Clayton was in Mar-a-Lago meeting with the president-elect to discuss the SEC chairpersonship. His appointment was announced a week later, on January 4.

A Sullivan & Cromwell lifer, Clayton had never served in government prior to his swearing-in last May. But he was a top partner at one of a small universe of corporate law firms that, for a long time, have served as a feeder system for government, says Donald C. Langevoort, who teaches securities regulation at Georgetown Law. “When you look at who was in senior staff — whether in the Obama administration, the Bush or Clinton administration or now under Trump — it’s really pick and choose from 20 big law firms that represent big publicly traded companies that have interactions with the SEC,” Langevoort said. Jones Day is likely the biggest single feeder firm for the Trump administration, as the alma mater of White House counsel Don McGahn and Solicitor General Noel Francisco, among others, but Sullivan & Cromwell is competing for second place, with alums placed prominently in the White House, the Treasury, and the Solicitor General’s office. These include Brent McIntosh, general counsel to the Treasury; Jed Doty, associate counsel to the president; and Jeffrey Wall, the principal deputy solicitor general. A former Sullivan lawyer, Sean Memon, serves as Clayton’s deputy chief of staff and a former Sullivan partner, Steven Peikin, was named the agency’s co-director of enforcement.

Founded in 1879, Sullivan & Cromwell was the firm J.P. Morgan turned to when creating U.S. Steel, and its client list back then included one of the more notorious robber barons of the day, E. H. Harriman, whom President Teddy Roosevelt dubbed an “enemy of the Republic.” One Sullivan & Cromwell partner, John Foster Dulles , a future secretary of state, helped negotiate the Treaty of Versailles after World War I. Another, his brother Allen Dulles, would go on to lead the CIA. After the 1929 crash, John Foster Dulles tried convincing federal officials that there was no need to write new laws restricting businesses, according to “A Law Unto Itself,” a 1988 history of Sullivan & Cromwell. When Dulles lost that argument, another partner at the firm helped to write both the Securities Act of 1933 and the Securities Exchange Act of 1934.

The 2008 financial crisis again put a spotlight on the central role Sullivan & Cromwell and other large corporate law firms play at the intersection of business, politics, and the economy. In June 2008, Clayton had hitched a ride to Korea on a private Gulfstream jet with top executives of his client, Lehman Brothers, in a futile attempt to raise money to save the storied investment bank, according to Andrew Ross Sorkin’s “Too Big to Fail.” When Lehman went bankrupt that September — the largest bankruptcy in U.S. history — Clayton simply switched sides. According to Sorkin, only hours after the bankruptcy, Clayton sat down with a team from Barclays Bank in a New York conference room and said, “I’m switching from shirts to skins.” Lawyers for Lehman’s creditors weren’t amused. They ended up “furious about Lehman’s deal with Barclays, suggesting it was paying far too little” for Lehman’s investment banking business, Sorkin wrote.

Throughout the crisis, Clayton was a go-to lawyer for some of Wall Street’s biggest investment banks. He advised Goldman in its negotiations with the government over $10 billion in federal TARP bailout dollars and in its efforts to raise another $5 billion from Warren Buffet. Clayton also represented Bear Stearns in its crisis-related fire sale to JPMorgan Chase.

One of Clayton’s more senior colleagues, H. Rodgin (“Rodge”) Cohen — in the news recently for his role in protecting Harvey Weinstein — was even more of a central player. Cohen, according to Sorkin, “had the ear of virtually all the banking CEOs and regulators in the country” and was so linked to powerful government officials that Tim Geithner, then the head of the New York Fed, “often relied on him to understand the Federal Reserve’s own powers.” A 2009 New York Times profile of Cohen quoted Henry Paulson, who was Treasury secretary during the panicky early days of the crisis, saying that during the interminable crisis-related meetings, “every time I looked up, it seemed Rodge was in the room.”

“Rodge worked through Treasury and the Fed,” said a Senate staffer who wrote portions of Dodd-Frank, “and it’s not like he needed to have a scheduled conversation to get Geithner or [Fed Chair Ben] Bernanke on the phone.” Michael Barr, who served as assistant Treasury secretary for financial institutions in 2009 and 2010, was a key architect of Dodd-Frank. “Rodgin was able to call people in Treasury and express his views because we knew he was a thoughtful guy who wasn’t going to come in guns blazing,” Barr said. “People trusted him to be a total straight shooter.” (Cohen did not respond to a request for comment.)

For his part, Cohen saw nothing wrong with the coziness of the relationship between the banks, regulators, and lawmakers. “The country’s economy seems to perform better when there is more cooperation and collaboration … between the banking industry and the government,” Cohen said in 2016. “And when that cooperation and collaboration is reduced, the industry’s ability to serve its customers and its performance are reduced.” He called the idea of regulatory capture, that regulators often end up deeply under the sway of the very industries they regulate, “fatuous.” Clayton has echoed Cohen in urging business and regulators to work together, and often refers to the disclosures the SEC requires as burdensome.” U.S. Securities and Exchange Commission building, Friday, June 19, 2015, in Washington. (AP Photo/Andrew Harnik)Photo: U.S. Securities and Exchange Commission building, Friday, June 19, 2015, in Washington.

3. Golden Years

The 1933 and 1934 laws that created the SEC came in the wake of a collapse in investor confidence after the 1929 Stock Market Crash. The laws enshrined the idea that when a company sells stock to the public, it must tell the truth about its business and the risks involved. The laws also dictate that the people who sell and trade securities must treat investors fairly.

The SEC’s most impressive period — its “golden years” of tough enforcement and investor protectionwere in the 1970s and early 1980s, says Georgetown’s Langevoort. That was a time, he says, when politicians on both sides of the aisle in Congress were protective of the SEC “and gave it room to be more aggressive.”

It also was a time when career professionals passionate about the SEC’s mission were setting the agenda, says Robert Plaze, a private sector lawyer who previously spent nearly 30 years at the SEC, most recently as deputy director of its investment management division. “The agency is so much more politicized than it was when I started,” Plaze says. “In the old days, commissioners would come and go, but the place was largely run by staff.”

That era ended during the Carter administration, he says, and it never came back.

Today, the agency, which is run by a five-member commission made up of both Republican and Democratic presidential appointees, occasionally suffers from the same partisanship that has defined Congress in recent years. Commissioners often vote unanimously, but disputes have broken along party lines on everything from regulations to enforcement settlements. Neither party can have more than three commissioners — Hester Peirce, a Republican, and Robert Jackson, a Democrat, were recently sworn in to fill two vacant seats — so it’s the chair, also a voting commissioner, who sets the tone. “I do think more and more that chairmen of these independent agencies believe that they bring to the job this sense of playing on the same team,” says Plaze. “It’s dancing with the one who brung you.” WASHINGTON, DC - JUNE 13: Sen. Richard Shelby (R-AL) (R-AL) speaks during a Senate Commerce, Justice, Science, and Related Agencies Subcommittee hearing on the Justice Department's proposed FY18 budget on Capitol Hill on June 13, 2017 in Washington, D.C. (Photo by Zach Gibson/Getty Images)Photo: Sen. Richard Shelby (R-AL) speaks during a Senate Commerce, Justice, Science, and Related Agencies Subcommittee hearing on the Justice Department’s proposed FY18 budget on Capitol Hill on June 13, 2017 in Washington, D.C.

In March, the public got its first glimpse into Clayton’s world with the release of his mandatory government disclosure document, which detailed Clayton’s blue-chip roster of clients and his vast personal wealth.

The Ivy-League Clayton, who received his undergraduate and law degrees at the University of Pennsylvania, the president’s alma mater, is married to Gretchen Butler Clayton, who at the time of his financial disclosure was still a vice president at Goldman Sachs. There, at this SEC-regulated firm, she had worked as a wealth manager, an elite specialization that involves providing financial advice to some of the world’s wealthiest families and individuals. She stepped down on May 2, the day her husband was confirmed as commissioner, a Goldman spokesperson said.

The couple’s holdings are, if nothing else, elaborate — unimaginably so compared to the holdings of the average investors that Clayton claims to represent. A single-spaced accounting of their assets runs more than 30 pages and includes hundreds of investments. The list includes mutual fund investments and retirement accounts, along with pages listing ownership of stocks in individual publicly traded companies (including a raft of technology firms, including Facebook, Microsoft, and Alphabet), and so many bank and money market accounts, it’s dizzying. They have up to $500,000 in “U.S. bank account #1” and as much as $250,000 in cash in “U.S. bank account #5.” Millions more are stashed in a dozen-plus money market accounts. Then there are the choice investment opportunities only open to the very wealthy and well-connected: venture capital funds, real estate trusts, and private equity investments of all shapes and sizes.

The Claytons own a place in Ocean City, a beach community in southern New Jersey, that Clayton valued at $1 million to $5 million; a rental property there worth more than $1 million; and another property in Philadelphia, worth up to $5 million. And that doesn’t include their 3,000-square-foot loft apartment on Hudson Street, in Manhattan’s Tribeca, which they bought for around $3.2 million in 2006, according to city records. All told, the couple has a net worth of more than $50 million.

In a letter to the SEC’s ethics officer, Clayton said that if confirmed, he would withdraw as a partner at Sullivan & Cromwell, and he and his wife would sell most of their assets. One exception was a firm called WMB Holdings, held by his wife and children through a series of family trusts. Among other services, WMB, which is regulated by the SEC, helps corporate clients with regulatory compliance. The family’s stake in that company alone generates more than $4 million in dividends per year.

At a rally last March, on the eve of Clayton’s confirmation hearing, Sen. Bernie Sanders called Clayton “the embodiment of the greed that nearly destroyed the economy.”

At Clayton’s confirmation hearing the next day, Warren and Brown questioned him aggressively on his conflicts of interest, with Brown noting that Clayton had spent his career “protecting some of the biggest names in Wall Street.” But Republicans on the committee kept changing the subject, offering up softball questions about the workings of the capital markets. Alabama Sen. Richard Shelby even took a swipe at Brown, when he noted that although Clayton had risen “from modest means to the pinnacle of his profession … some will seek to minimize your accomplishments and impugn your motivation and ability to serve.” Shelby’s gentility appears to have been richly rewarded. Hester Peirce, a former Shelby aide, has been sworn in as a commissioner at the SEC; William D. Duhnke III was plucked by Clayton from his post as staff director for the Senate Rules Committee, which Shelby chairs, to be chair of the SEC’s Public Company Accounting Oversight Board (PCAOB); and Shelby Begany Telle, who also staffed the Senate Rules Committee, is now Clayton’s confidential assistant.

The Senate confirmed Clayton by a vote of 61 to 37, with nine Democrats voting in favor. Sen. Catherine Cortez Masto issued a statement saying she had voted no because of Clayton’s “long career representing companies regulated by the SEC.” Clayton, she said, had not fully responded to her requests to disclose all of his current and former clients. Jay Clayton, chairman of U.S. Securities and Exchange Commission (SEC) nominee for President Donald Trump, right, shakes hands with Senator Elizabeth Warren, a Democrat from Massachusetts, after testifying during a Senate Banking Committee confirmation hearing in Washington, D.C., U.S., on Thursday, March 23, 2017. Trump tapped Clayton to lead the SEC in January, saying the Sullivan & Cromwell partner would ensure that financial companies thrive and create jobs, while still playing by the rules. Photographer: Zach Gibson/Bloomberg via Getty ImagesPhoto: Jay Clayton, chairman of U.S. Securities and Exchange Commission (SEC) nominee for President Donald Trump, right, shakes hands with Sen. Elizabeth Warren, a Democrat from Massachusetts, after testifying during a Senate Banking Committee confirmation hearing in Washington, D.C., U.S., on Thursday, March 23, 2017.

4. Stockholm Syndrome

From the start, Clayton won over potential critics with a well-rehearsed narrative about looking after the small investor and a relaxed, approachable style. In his July speech at the Economic Club, where he laid out his vision for the SEC, he said his analysis “starts and ends” with the interests of Main Street investors, “or, as I say when I walk the halls of the agency, how does what we propose to do affect the long-term interests of Mr. and Ms. 401(k)?” He said his enforcement priorities will be to “root out fraud and shady practices in the markets, particularly in areas where Main Street investors are most exposed,” “sinister behaviors that strike at Americans’ vulnerabilities,” such as “pump-and-dump scammers, those who prey on retirees, and increasingly, those who use new technologies to lie, cheat, and steal.”

This kind of talk has won over even staunch investor advocates like Joseph Borg, a securities commissioner in Alabama and president of the North American Securities Administrators Association, an alliance of state securities regulators known for its small-investor focus. “Any time he wants to work for the retail investor, we are right here with him, he said. Borg is known as an uncompromising enforcer whenever he believes people in his state are getting ripped off. He unearthed the penny-stock fraud scams of Jordan Belfort, the infamous Wolf of Wall Street who ran a Long Island brokerage firm that fleeced thousands of investors of more than $100 million. So it’s no small matter that Borg likes what he hears from Clayton about pursuing those who prey on everyday investors. “I think he’s sincere,” Borg said. “That’s the first time I’ve given that assessment of an SEC chair in a long time.”

Bill Singer, a former regulator and Wall Street lawyer who represents both investors and brokers in lawsuits, praises Clayton for having taken preemptive measures to crack down on shoddy operators and outright fraudsters, including those who pitch initial coin offerings, where startups sell virtual currencies directly to the public, bypassing the usual regulations for IPOs. By those measures, Clayton has been “the best SEC chair of my career,” Singer said.

But Singer concedes that Clayton’s work to cast a light on bottom-feeders may be “a calculated diversion … so the same light is not on the larger firms,” such as Goldman Sachs or Morgan Stanley.

At his confirmation hearing, Clayton openly expressed reservations about slapping companies with big penalties. After all, he said, “shareholders do bear those costs, and we have to keep that in mind.”

And Clayton’s new co-director of enforcement, Steven Peikin, has signaled that he would reduce its emphasis on White’s stated goal — however rarely attained — of getting lawbreakers to admit wrongdoing in settlements. When SEC targets settle cases without admitting guilt, “I don’t think most people in the world say, ‘Boy, they really got away with that,’” Peikin said at an October securities conference. Actually, the agency has been widely criticized for exactly that, with scholars and judges noting that bad behavior won’t change unless wrongdoers are subject to the accountability that comes with admitting that they broke the law.

Peikin has estimated that budget cuts will reduce the SEC’s enforcement ranks by 100 people over the next year to 1,300, resulting in more selective enforcement — a significant loss in the eyes of Luis Aguilar, a former SEC commissioner. “The fewer people in enforcement, the fewer cases you can bring,” he says. “It’s simple math.” Clayton asked Congress in September to lift the agency’s hiring freeze and allow him to recruit people with skills in cybersecurity, retail investor fraud, and investment adviser oversight. (He did not take the opportunity to say anything specific about preventing the kinds of abuses by big banks that led to the financial crisis.)

Stephanie Avakian, Peikin’s co-director of enforcement, said in a speech in October that “the premise that there is a trade-off between Wall Street and Main Street enforcement is a false one.” Yet, already there are signs that Clayton’s team is directing the agency’s enforcement resources at smaller players rather than large, marquee firms.

Clayton’s agency has brought a number of cases alleging fraud against purveyors of initial coin offerings, lesser-known auditors, and even stockbrokers who churn customers’ accounts. A December press release from the SEC drew attention to charges against two auditors at a small firm in Newport Beach, California, for ignoring red flags in their reviews of penny-stock companies, those whose stocks typically trade below $5 a share, which each ultimately paid $15,000 in penalties. Another press release, from September, focused on charges levied against broker Laurence M. Torres for making unauthorized trades and churning his clients’ accounts. The broker agreed to pay back more than $250,000 to his customers, plus a $160,000 fine.

Yet no press release was issued on September 1, when the SEC forged a settlement with a former Merrill Lynch executive, whom the SEC had accused of “knowingly” helping Merrill dodge requirements to keep sufficient cash in a customer reserve account. He placed “billions of dollars” of customer money at risk to free up more money to trade Merrill’s money, the SEC said. But William Tirrell, who was in charge of regulatory reporting at Merrill and, for years, was an active SIFMA member, paid no fine at all. He wasn’t forced to admit any wrongdoing, only required to agree not to violate securities laws in the future.

By contrast, Merrill’s settlement of its portion of the same case with the SEC under White’s leadership in 2016 involved a $415 million fine. Reacting to the lenient September settlement with Tirrell, a lawyer who represents small investors joked in a blog post, “I want HIS lawyer!”

“I’m nervous about someone from Sullivan & Cromwell, who was an attorney for megabanks, being at the SEC,” said Bartlett Naylor, financial policy advocate at Public Citizen, an advocacy group. “Whether it’s Stockholm syndrome or cultural capture, I worry that there is not an appetite to arrest bad conduct at the highest level.”

Scholars have found that SEC enforcement actions in general have declined under Clayton, as have the size of fines. In a study released in November, Urska Velikonja, a professor of law at Georgetown University, found that the median fine in settled cases at the SEC was about $110,000 between 2007 and 2013, but in the SEC’s most recent fiscal year, which ended September 30, that number had dropped by more than a third to about $70,000. The cases brought against entities, as opposed to individuals, have “changed quite substantially,” she wrote, dropping from 47 percent in the first half of the year, before Clayton became chair, to 34 percent in the second half of the fiscal year, during which Clayton was chair for five of the six months.

Wall Street law firms have noticed the trend. One of them, Paul, Weiss, Rifkind, Wharton & Garrison, published a note in October anticipating that the agency’s more selective approach to enforcement, and reduced emphasis on admissions of guilt, “could potentially lead toward a changed dynamic in negotiating enforcement resolutions.” Traders work on the floor at the closing bell of the Dow Industrial Average at the New York Stock Exchange on January 17, 2018 in New York. Wall Street roared upwards on Wednesday, with investor enthusiasm sending all three major stock indices to record finishes, and the Dow to its first close above 26,000. / AFP PHOTO / Bryan R. Smith (Photo credit should read BRYAN R. SMITH/AFP/Getty Images)Photo: Traders work on the floor at the closing bell of the New York Stock Exchange on January 17, 2018 in New York.

5. Ask Us for Relief

In keeping with his stated focus on “Mr. and Ms. 401(k),” Clayton has made several friendly gestures to average investors. He said in July that he plans to implement recommendations created by his predecessor to make disclosures more readable and that investors should have access to a searchable database of advisers who have been barred or suspended for federal securities law violations. In December, the SEC issued a bulletin with guidance for the public about how to participate in the agency’s tortuous rule-making process. And Clayton has pushed back against the securities industry by backing a controversial plan that would allow the SEC to analyze massive amounts of data on individual trades in order to pinpoint potential wrongdoing.

Yet at the same time, the SEC appears to be backsliding on other core agency tenets, by dramatically reducing disclosure requirements for major firms seeking to go public and publicly expressing reservations about the Department of Labor’s robust fiduciary rule. In July, in his Economic Club speech, Clayton said that the SEC’s version of the rule, which Dodd-Frank requires the agency to develop, would need to be “carefully constructed” so that it does not deprive Main Street investors of “affordable investment advice,” which to Wall Street is code for maintaining a system in which brokers are free from fiduciary requirements. Then in October, the agency released a proposal that, if adopted, would give companies more leeway in deciding what information they share with investors. Lynn Turner, former chief accountant at the agency, said that the SEC has suggested that companies might be allowed to make some decisions about what is included in their disclosures based on what is important — or “material” — from management’s point of view, as opposed to what is material to the investor. Should that be allowed, investors might as well use the required quarterly and annual filings “to light the Yuletide log,” Turner said.

SEC Commissioner Kara Stein, a Democrat, raised additional concerns in an October 11 statement. The proposed rule would potentially eliminate “critical information” about financial performance and prospects by cutting back on management’s analysis of its businesses. She also questioned the section of the proposal that said companies should be allowed to redact sensitive information from publicly filed business contracts without having SEC staff first review the redaction’s.

Later that month, the agency granted exemptions from securities laws so that investment managers would not have to apply strict new European regulations demanding transparency in the way they charge U.S. customers for research. In the U.S., brokerage firms are permitted to bundle their charges for trading commissions and research reports in a single charge. Critics say the bundling of costs keeps investors from knowing what they are actually paying for their trades and leads to higher commissions, but the SEC sided with U.S. brokerage firms. Stein blasted that decision, too, saying that it “may be costly to investors” and that the SEC’s allocation of 900 days to “study” the issue was “simply unreasonable.”

In Clayton’s remarks at the Economic Club in July, his first speech as SEC chair, he spoke repeatedly about the urgency of making public capital markets more attractive. He noted that the number of publicly listed companies has declined by nearly half over the past two decades and blamed the skyrocketing costs of compliance on disclosure rules. That emphasis has already led to a dramatic erosion in disclosure requirements. Weeks earlier, when Clayton had been in office for less than two months, the SEC announced that it would expand disclosure exemptions created by the 2012 JOBS Act that eased the path for emerging companies to go public. That law waived many public disclosures for firms with revenues under $1 billion a year; now any company going public, however large, can withhold certain details of its finances and strategies when selling shares through an IPO.

This idea of less disclosure is an “unfortunate trend,” says David S. Fink, a Michigan-based lawyer. In 2016, Fink sued Ally Financial, the giant bank and auto lender, for failure to disclose enough about financial problems it was confronting at the time of its 2014 IPO — a stock offering Clayton had handled while at Sullivan & Cromwell.

“We either do or don’t believe in the benefits of free markets,” Fink said. “People who pretend to be advocates for free and open markets and then promote measures that allow less transparency are not supporting capitalism; they are simply supporting large economic institutions at the expense of small investors.” (Fink declined to discuss Clayton’s role in Ally while the case is unresolved.)

Other tests of Clayton’s tolerance for corporate secrecy lie ahead. It has been widely reported that Spotify, the music streaming service, will go public sometime in the first quarter of the year. Toward that end, the company has sought permission from the SEC to pursue a “direct listing” on the New York Stock Exchange that would circumvent many of the traditional IPO filings that require companies to submit to the scrutiny of auditors, who weigh in on the value of a stock and help set its price. Allowing a direct listing would be a “significant decision” by the SEC, said Benjamin Edwards, a securities law expert and associate professor of law at the University of Nevada, Las Vegas. “Investors should be cautious” about buying shares without the customary due diligence, he said. The agency has yet to publicly comment on the Spotify request.

The SEC will also face a big test if companies — as they have done in the past — ask the agency for permission to include a provision in a public offering that bars their shareholders from suing them. Such “mandatory arbitration” clauses have become common in consumer contracts, employment contracts, and customer agreements with brokers, and have garnered notoriety in recent months because of their role in keeping workplace sexual harassment complaints private. Historically, the SEC has pushed back on such requests, as it did in 2012 when the Carlyle Group, a private equity firm, tried to include an arbitration clause in its IPO documents.

After objections from the SEC, and a flurry of bad press, Carlyle withdrew the provision. In recent months, however, two top SEC officials have raised the possibility that companies may test the waters with a new round of arbitration proposals.

At a Q&A during an appearance at the Heritage Foundation in July, Republican Commissioner Michael S. Piwowar suggested that companies seeking to avoid shareholder lawsuits “can come to us to ask for relief to put in mandatory arbitration,” adding that he would “encourage” companies to do so. Two months later, Clayton’s director of corporation finance, William Hinman, told a gathering of the Council of Institutional Investors that laws have changed since the Carlyle flap, and the SEC would have to analyze developments “to see if we would take the same position” today. Turner, the former SEC accountant, was in the audience that day and said people in the room “were floored” when Hinman suggested that the SEC would consider allowing mandatory arbitration clauses without even soliciting public comment. “I don’t know how the chairman and his staff can say they are concerned about retail investors and then screw them over with those types of moves,” he added.

Andy Green, managing director for economic policy at the Center for American Progress, a liberal think tank, says a green light for public companies to bar shareholder lawsuits “would potentially be the single biggest undermining of the strength of the U.S. capital markets that the SEC could let happen.” UNITED STATES - OCTOBER 4: SEC Chairman Jay Clayton testifies during the House Financial Services Committee hearing on "Examining the SEC's Agenda, Operations, and Budget" on Wednesday, Oct. 4, 2017.(Photo By Bill Clark/CQ Roll Call) (CQ Roll Call via AP Images)Photo: SEC Chairman Jay Clayton testifies during the House Financial Services Committee hearing on “Examining the SEC’s Agenda, Operations, and Budget” on Wednesday, Oct. 4, 2017.

In his mission to prune regulations in order to encourage more companies to go public, Clayton’s stated goal is to give small investors more chances to participate in potentially lucrative investment opportunities. Yet when the agency announced in June that companies of any size could begin to use the disclosure exemptions given to emerging firms in the JOBS Act, it looked more like a gift to corporations, which could begin filing some IPO documents on a confidential basis and pare back on the information they disclosed to the public.

There is little evidence that Main Street investors have benefited substantially from IPOs, says Mary E. Barth, a professor of accounting at Stanford University, because brokerage firms save their allocations of hot IPO shares for big institutional investors and very wealthy individuals. “Most people can’t get shares,” she says.

Barth co-authored a paper with Wayne R. Landsman of the University of North Carolina and Daniel J. Taylor of the University of Pennsylvania that raises serious questions as to whether you can cut back on IPO disclosure requirements without shortchanging investors. The professors looked at 158 companies that went public using the scaled-back reporting requirements of the JOBS Actand compared their IPO prices to 218 similar companies that had gone public prior to the act.

The professors found that JOBS companies, unable to reassure investors with detailed company information, were forced to lower their offering prices 7.1 percent, on average, when compared to a sample of firms that went public before the new law, which were obligated to report extensive financial information. And Barth says that rather than help small investors, these lower prices gave an advantage to moneyed institutions that — unlike everyday investors — had the means to evaluate a company on their own. Small investors tended to stay away, Barth said. “There is no evidence in our paper that suggests Mr. and Mrs. 401(k) are better off because of this,” she says.

A speaker at a law seminar in New York last November sharply laid out the disadvantage to investors of insufficient disclosures when he explained how hard it is for investors to find current, reliable information about penny-stock issuers. These stocks, he said, have “a conspicuous lack of transparency” since so many are not required to disclose current audited financials or other key information. “The shortage or absence of this critical information makes it at best very difficult for investors to evaluate the potential risks and rewards of such investments,” he said.

That speaker was Jay Clayton.

Top photo: Jay Clayton, chairman of the U.S. Securities and Exchange Commission (SEC), listens to a question during an interview at the Securities Industry And Financial Markets Association (SIFMA) annual meting in Washington, D.C., U.S., on Tuesday, Oct. 24, 2017.








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The Man From Sullivan & Cromwell

Securities and Exchange Commission

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William Hinman

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Virginia assembly bills seek to curb the state’s school-to-prison pipeline


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Virginia schools referred students to law enforcement at nearly three times the national rate.

Ryan Turk was an eighth-grader in Prince William County when a misunderstanding with a school resource officer over a 65-cent carton of milk escalated to theft charges.

The incident happened in May 2016 when Turk said he forgot his carton of milk that came with his school-issued free lunch. The police said Turk tried to “conceal” the carton of milk. When Turk separated himself from the resource officer, the incident ended with a suspension from school and a summons to juvenile court

A year ago, the charges against Turk were dropped, but he remains a prime example of what critics call the School-to-Prison Pipeline – a trend to charge students as criminals for what might once have been detention-worthy transgressions. According to a 2015 study by the Center for Public Integrity, Virginia charges students more often than any other state.

This trend has triggered a push in the General Assembly to reform criminal justice across the board. One of the latest and most vocal opponents of the pipeline is Del. Jennifer Carroll Foy, a Democrat from Prince William County.

Carroll Foy, who won an open House seat in November, spoke about the problem at an NAACP reception in Richmond last week.

“We send more students from the classroom to the courtroom than any other state in the country,” Carroll Foy said. “Now we lock them up early, and we lock them up at large.”

Carroll Foy plans to sponsor more than 10 criminal justice reform bills this legislative session. They include House Bill 113, which would raise the threshold for grand larceny in Virginia from $200 to $1,000.

Virginia’s threshold for that felony crime is one of the lowest in the country and hasn’t changed since 1980. As a result, someone accused of stealing a cellphone or bicycle can be charged with a felony.

Increasing the threshold might protect children who make bad decisions and prevent them from becoming convicted felons, Carroll Foy said.

“The punishment should fit the crime,” she said. “Felonies should be reserved for some of the most egregious crimes in the commonwealth of Virginia, and that’s not happening.”

Carroll Foy is carrying legislation that might address cases like that of Ryan Turk, who initially was charged with a misdemeanor after the altercation at Graham Park Middle School in the town of Triangle in Prince William County.

She has introduced HB 445, which would eliminate the requirement for principals to report certain misdemeanor incidents to police.

 Carroll Foy is not the only one concerned about the “school-to-prison pipeline.” So is the advocacy group Voices for Virginia’s Children.

Allison Gilbreath, the organization’s policy analyst, said other bills before the General Assembly seek to disrupt the pipeline.

For example, HB296, sponsored by Del. Dickie Bell, R-Staunton, and Senate Bill 170, by Sen. William Stanley, R-Franklin, would prohibit suspending or expelling students in preschool through third grade except for drug offenses, firearm offenses or certain criminal acts.

“One in five kids who are suspended in our public schools are pre-K through fifth grade,” Gilbreath said. “We want to really focus on the underlying problems that they’re experiencing.”

This story was produced by Virginia Commonwealth University’s Capital News Service.











LIS > Bill Tracking > HB296 > 2018 session

LIS > Bill Tracking > HB1911 > 2017 session

Virginia general assembly


Voices for Virginia’s Children

Dismantling the School to Prison Pipeline | Lisa Elkins Goodman

Locating the School-to-Prison Pipeline

Public School Students – Prisoners of the State | Lisa’s leaks ..

Education | Lisa’s leaks – ‘Madness in the Magnolias’ | Page 3

School to Prison Pipeline’

Virginia tops nation in sending students to cops, courts: Where does your state rank?

Virginia governor asks how to reverse schools’ staggering rate of referrals to cops and courts

The full series: Criminalizing Kids