Thursday, February 14, 2008

Francine's Domain - Scandal Brewing in Utah Government

FreeCapitalist News Item - February 14, 2008 10:55am -

In Utah right now there is a scandal brewing. The scandal penetrates the highest reaches of the Utah government. The question is, "Where will the buck stop?" as the evidence rolls out that an entire section of Government is in need of a major overhaul.

Steven Oberbeck of the Salt Lake Tribune, quoting Chuck Newton of the Financial Planning Association of Utah, reported yesterday that there have been enough "shocking actions" in recent years that he believes its highly likely that "some government officials may eventually be criminally prosecuted."

Mr. Oberbeck's report in the Salt Lake Tribune touches just the tip of the iceberg. The Department of Commerce is ultimately under the direction of Utah Governor Jon Huntsman, Jr. (R) - a politically ambitious McCain backer who has little tolerance for scandal given the import of this year's election and his political future. Huntsman is the one who appointed the highly controversial Francine Giani as the State's Executive Director over the Department. Ms. Giani is not an attorney, has no legal background and did not have any substantial experience in executive level positions. Yet, she currently holds Utah's highest regulatory position over business activities in the State.

Since Ms. Giani's appointment, the Department of Commerce has been the subject of a surprising degree of scrutiny. Many legislative leaders on both sides of the political isle have expressed "disgust" at how the Department's activities have been and are being carried out by Giani and her associates. One legislator, Utah Representative Jim Bird (R-West Jordan) recently uncovered an alarming complaint.
"Ms. Giani allegedly was made aware of illegal activities taking place within the division and responded by telling employees that she didn't care if the actions of the division were legal or not - but that employees were to perform the jobs without question."
Some Utahans are hoping that the current controversy will allow the public to clearly separate “lip-service giving do-gooders” in government positions from authentic leaders who care about civil liberties, small business and simple concepts such as fairness. At the core of this issue the question is, “How far up the chain does the corruption go?”

In recent years the State has behaved with little concern for small business owners who find themselves entangled in the Department of Commerce's web of scandal and corruption. One of the State’s highest elected officials recently commented:
“Francine Giani is the single greatest threat to small business and personal liberty in the State of Utah.”
It’s easy to give lip service to the idea that small businesses are “too heavily regulated” but when corrupt and over zealous regulators systematically engage in the type of behavior now being uncovered in Utah, it's time for change at the highest levels.

For the small businessman, the lifeblood of the local economy, abusive behavior by regulators can be a matter of life or death for their business - which means a loss of jobs for Utahns at a time of huge economic uncertainty.

As news of the present scandal spreads, residents are anxiously awaiting the Governor's response to the Giani controversy. Sources suggest the Governor feels conflicted given that he and Giani are reportedly "good friends."

Warning over forty years ago former Fed Chairman Alan Greenspan observed,
“The world of [regulation] is reminiscent of Alice’s Wonderland: everything seemingly is, yet apparently isn’t, simultaneously…It is a world in which the law is so vague that businessmen have no way of knowing whether specific actions will be declared illegal until they hear the judge’s verdict – after the fact.” (Greenspan, Alan. Later Chairman of the Federal Reserve. Paper given at the Antitrust Seminar of the National Association of Business Economists, Cleveland, September 25, 1961.)
Quiet whisperings have become all too common in Salt Lake City among government employees, elected officials, and community leaders about this rogue agency stealthily persecuting small businesses. Over the last 12-15 months Ms. Giani’s commissars in the State’s Division of Securities have come under the most serious scrutiny.

Allegations of corruption, incompetence, mismanagement and "too many unfair prosecutions"under a cloud of controversy are growing relentlessly frequent and more substantial. Last week, apparently in an effort quell the unraveling of her department - Giani reportedly pressured Securities Director Wayne Klein to resign
"They obviously haven't told me the results of the audit but I've heard words like [the division is in] 'disarray' and the 'deeper we [the auditors] go, the deeper we need to go,' " (Representative Bird testimony last week during the Utah Legislature's meeting of the House Business and Labor Committee.)
Klein's resignation, however, is not likely to insulate Ms. Giani (or several other employees involved in this mismanagement such as Securities Enforcement head Mr. Michael Hines who is also suspected of official wrongdoing in the Department) from the political and legal fallout yet to come. Apparently hoping this will all blow over quickly, Ms. Giani has tried to appear disconnected recently asserting, absurdly, of Klein;
“He has been a good director, and in terms of his background in the securities industry, there is no one better.”
Utahns can only hope Ms. Giani is simply posturing here. Wayne Klein is not only personally vindictive but has a fairly well known reputation in the legal community from his previous positions both in the Utah Attorney General's office as well as with the State of Idaho for being a loose cannon, an unjust prosector, and having contempt for legal restrictions on his own activities.

It makes one wonder, in light of all the information that is now coming out, how Mr. Klein was appointed with the approval of the Governor and the legislature in the first place. According to Ms. Giani's recent statements to the press, Klein is precisely is the "type" of regulator she strives to appoint in her department. Yet, Klein is quite simply a commissar (listen to the Free Capitalist radio broadcast archives from August 31, 2007 for elaboration). Specifically, he has increasingly become an embarrassment to government and legal professionals. He and his staff routinely fail to demonstrate even basic familiarity with the A-B-C’s of securities law. Reportedly, his own agenda is more important than the letter of the law and he is known to stammer and hesitate when trying to describe even the most basic federal standards for simple concepts such as what constitutes an accredited investor.

One of Klein's former government employers recently remarked that he, and a number of other government officials are not surprised at the recent discoveries about Klein and Giani's philosophy of government.
“Mr. Klein is the worst kind of loose cannon. He’s often going after someone who’s offended him, regardless of the law. He’s really only effective if someone with very strong supervisory skills watches his every move and Francine is not that capable.”
Securities attorneys in Utah should not only be alarmed and offended at Ms. Giani's defense of Klein, especially given his track record, but extremely diligent in working to ensure that there is serious reform in the Department. With Ms. Giani still at the helm she’ll likely just pick another “Wayne Klein” to run the Division. As reported by a notable Salt Lake City attorney recently,
"It has become common practice in Utah for knowledgeable, reputable, and highly educated attorneys to have to grovel to Giani, Klein (and their heretofore behind the scenes bulldog Mr. Michael Hines, Director of Enforcement in the Division of Securities). None of whom have shown much if any appreciation for the details of the law. It's embarrassing."
In 2007 a group of private citizens and business owners, fed up with the egregious behavior of an entire section of state government, began a private investigation on their own to look into the State's activities. So far, the investigation has uncovered a remarkable cache of written documents and audio recording.

The evidence includes recordings and transcripts of private meetings, official and unofficial conferences, lunch meetings, early morning meetings (as early as 6:30am at the home of one resident) and late night investigative activities (with government workers showing up to the homes of some
"witnesses" as late as 10:00pm).

The mounting evidence shows a disturbing pattern of Giani, Klein, and Hines each engaging in deception, incompetence, misstatement of the law, and abuse of the legal processes. Perhaps even more telling, the evidence is beginning to show a growing rift in the Department of Commerce between those public servants who want to carry out the legitimate duties of the Department and those like Hines who reportedly remarked recently that he hopes to retire by "writing a book" about one of the cases he's currently investigating.

The Salt Lake Tribune recently reported that it is precisely this internal rift between real public servants and self-serving bureaucrats that brought about the legislative audit working to uncover the details of this brewing scandal.
“After hearing from several division staff members who expressed concerns about how the agency was being run, Rep. Jim Bird, R-West Jordan, late last year requested that the Legislative Auditor General's Office audit the division."
This kind of situation makes for a very unfriendly business environment and is embarrassing to everyone in government. With a formal audit underway, it appears Ms. Giani is simply buying herself time to try and get out from under the explosive details now coming to light. Consider a few embarrassing examples of the work being conducted by Ms. Cruella and her henchmen.
  1. Wrongful Accusation of Criminal Behavior against Utah Citizens.

  2. Misuse of the Courts and Legal Process.

  3. Lying to Government Officials.

  4. General Incompetence when it comes to explaining rudiments of the law.

  5. Defaming Members of the Legislature who scrutinize the Department.

  6. Punishing Citizens with Evidence Against the Department for their Political Activity.

  7. Demanding "prior restraints" on Utah Citizens' free speech, in an attempt to silence
    criticism of the Department's methods in public or in the courts.

  8. Government employees lying to the public in order to "create" causes for investigation.

  9. Disseminating confidential information obtained during investigations to private sector colleagues to enrich their business efforts.

  10. Offering jobs and/or job referrals to witnesses who are willing to lie or distort the truth to defend the Department.
This kind of behavior is precisely what Ronald Reagan warned America about as early as 1964 when he deplored:
“It is time we realized that socialism can come without overt seizure of property or nationalization of private business. It matters little that you hold the title to your property or business if government can dictate policy and procedure and holds life and death power over your business. The machinery of this power already exists. Lowell Mason, former anti-trust law enforcer for the Federal Trade Commission, has written "American business is being harassed, bled and even blackjacked under a preposterous crazy quilt system of laws." There are so many that the government literally can find some charge to bring against any concern it chooses to prosecute.” (Reagan, Ronald, A Time for Choosing, Speech given October 27, 1964)
Legislation has recently passed the Utah House of Representatives that would rein in the powers of the division and its director in an effort to secure more just handling of the Department's responsibilities. However, as reported on FreeCapitalist Radio Monday February 12, 2008 this attempt to “rein in” the powers of Ms. Giani and her flying monkeys is being received about as well as the “Wicked Witch of the West” receiving Dorothy and her ruby slippers.

For example, after Bird's HB83 passed the Utah House, Giani defender Utah Senator Curt Bramble (R-Provo), apparently in an effort to help Giani and the Governor's office stall the brewing controversy, strategically stalled the legislation from being considered by the State Senate indefinitely.

Reminiscent of something behind the iron curtain in the 1980s the outgoing commissar Klein remarked to the attorneys of a Utah citizen recently, who was cooperating with State legislators in their attempts to get to the bottom of the abuses going on in the Department that: because of his political activities the Division was “forced” to take tougher action. In a similar case Klein justified:

“Part of the problem is that I’ve been painted in a corner because your client has gone on the radio and publicly accused us of stuff. He’s got legislators out there trying to cut our powers because what we’re doing as if he’s entirely right in what he’s doing and government is unfairly coming after him. So ordinarily we have more flexibility but where I’ve got public attacks coming in saying we’re being accused of being unfair…[interrupted].”
Ayn Rand also famously warned us of situations like the present scandal brewing in Utah under Ms. Giani's watch.
“This means that a businessman has no way of knowing in advance whether the action he takes is legal or illegal, whether he is guilty or innocent. It means that a businessman has to live under the threat of a sudden, unpredictable disaster, taking the risk of losing everything he owns or being sentenced to jail, with his career, his reputation, his property, his fortune, the achievement of his whole lifetime left at the mercy of any ambitious young bureaucrat who, for any reason, public or private,may choose to start proceedings against him…It is a form of persecution practiced only in dictatorships and forbidden in every civilized code of law. It is specifically forbidden by the United States Constitution. It is not supposed to exist in the United States and it is not applied to anyone-except to businessmen.”(Rand, Ayn. Capitalism: The Unknown Ideal, pg. 50 – from a speech given at the Ford Hall Forum, Boston, on Dec. 17, 1961)
The official audit of Ms. Giani and her staff is still under way. Potential legal action is reportedly pending against the State from private parties alleging damages in the hundreds of millions. Additional complaints are coming in from victims of the Department’s abusive handling methods including complaints against the Division of Real Estate, Licensing, Securities, and Consumer Protection. Transcripts and audio recordings of Commerce employees lying about Utah businessmen and their activities and other highly problematic behavior on the part of government employees are being delivered to government officials and media outlets.

In the mean time, Utah citizens (the real Ma’s & Pa’s Mr. Hines is so fond of talking about while he pursues his agenda) are getting tired of being scammed by the so-called “scam busters.” Some investors have recently been told according to evidence obtained through recorded conversations that (consistent with what has been reported about Giani's style of administration) if citizens want the State to help them they have to be willing to distort the truth and cooperate with the State’s agenda - independent of the facts involved. One local businessman recently complained,
"For more than two years now the Department of Commerce has been after me. They have come at me from every angle, from the Real Estate division, the Securities Division, Consumer protection etc. Every time, I've been able to demonstrate that they have no evidence against me and that I and my associates have done nothing wrong. Yet, the government continues to make horrible allegations, publicly bad mouth me and my colleagues and even accuse me of being a criminal to legislatures, business colleagues, and some of my closest associates. All of this so that Francine Giani, Wayne Klein, and Michael Hines can "look" like they're doing their job. They've got all my clients in an uproar, they've told this story about what my business "really is," all truth be damned, and their efforts have cost dozens of real Utahans their jobs and as essentially bankrupt me and my partners to the tune of millions of dollars. All this and not one charge filed, not one official action taken, and not one person in government responsible. There's not even a forum where I can defend my case, I simply have to wait until these very powerful men and women are done playing politics with me, my investors, my customers, and my business. Maybe I'll get an apology like Mr. Teran received from the Department, after they've succeeded in destroying my company."
While the citizens of the State wait for the Governor to weigh in on the issue, thank goodness for good legislators and government leaders who don’t hesitate to reach for the pail of water when the Wicked Witch comes around.

On a side note, sources suggest that Ms. Giani may already be preparing for her exit, vying for a position as an investigative journalist (Geraldo watch out!) back at Utah’s local Channel 2, KUTV along side consumer watchdog Bill Gephart. If it’s true, it’s likely that Ms. Giani can serve the people of Utah better there – for certainly there’s a role for consumer watchdogs. If she does return to the media perhaps she’ll feel less burdened, being freed from sticky things like State law, due process, fairness, etc.

Its time for Utahns (including our Governor) to get past the old cliché of Utah being among the “scam” capitals of the world, and start taking a closer look at the corrupt bureaucrats irresponsibly promoting that myth to the detriment of good people in a good state working hard to do many good things.

Once again scandal is brewing in Utah. This time it's the government in need of systematic reform. Perhaps Mitt would accept an invitation to come save the day in Salt Lake City one more time.

Stay tuned...

1 comment:

dr.brian said...

I look forward to seeing how this plays out. May Justice prevail and down with the commisars!