Arizona Eagletarian

Arizona Eagletarian

Thursday, March 27, 2014

ALEC exposure in Arizona: recent shenanigans

From ProgressNow Arizona
Hidden-Camera Investigation Shows ALEC Wining & Dining Arizona Politicians
PHOENIX – With a tip and assistance from ProgressNow Arizona, KPHO-TV 5 News aired an eye-opening hidden-camera investigation Tuesday night that reveals how the American Legislative Exchange Council (ALEC) wines and dines Arizona politicians to advance its right-wing corporate agenda.
KPHO investigative reporter Morgan Loew crashed a lavish back-room ALEC recruitment dinner attended by at least 17 Republican state legislators at one of the finest chop houses in Phoenix. ALEC is an out-of-state right-wing corporate bill mill that has wielded heavy influence in Arizona and at state legislatures around the country. The report – “Hidden cameras catch lobbyists and lawmakers wining and dining” – can be seen HERE. A highlight of the investigation was Senate Appropriations Chair and Tea Party hero Don Shooter of Yuma – who has faced ethical issues for allegedly intimidating a teacher at his grandson’s school and for padding his mileage expenses – strutting through the restaurant carrying a full bottle of bourbon shouting “as promised!” and then later telling a cameraman “hey, put that away!”
“For years Arizona has been one of the most wholly owned subsidiaries of ALEC. Now the public can finally see how the system really works,” said Robbie Sherwood, ProgressNow Arizona Executive Director, who tipped off KPHO and sat at the restaurant bar as lawmakers came and went. “ALEC has spread its right-wing agenda throughout the country by skirting ethics laws and taking politicians on lavish junkets, where the public and media are not allowed. That’s where corporate lobbyists craft model legislation for politicians, who dutifully return home and introduce it in state legislatures. The public and their constituents play no significant role. This week, Arizonans got a taste for how ALEC recruits and operates thanks to some excellent investigative reporting by KPHO News.”
In addition to Shooter and local ALEC chairwoman Rep. Debbie Lesko, Arizona lawmakers spotted at the dinner included Senate President Andy Biggs Reps. Eddie Farnsworth, John Kavanagh, Carl Seel, Brenda Barton, Bob Thorpe, David Livingston, J.D. Mesnard, Justin Olson, Michelle Ugenti, T.J. Shope, Adam Kwasman, Jeff Dial; and Senators Nancy Barto, Chester Crandell and Don Shooter. There were no Democratic lawmakers seen at the event.
Arizona has consistently had one of the highest participation rates in ALEC in the nation, with the majority of the Republican caucus counting themselves as members and attending luxurious out-of-town policy retreats each year. Those expense-paid retreats – where bills are written and shaped without public input -- have had profound results for ALEC’s corporate backers. 
Arizona Legislators have strongly backed several ALEC priorities, including the anti-immigrant Senate Bill 1070, efforts to undermine public schools through expansion of private-school vouchers and charter schools, expanding private prisons and numerous attacks on wage protection, workplace rights and retirement security.
In late December, a major expose by The Guardian revealed that ALEC is facing a membership and fundraising crisis. The downturn comes in the wake of dozens of corporations dropping their memberships in the wake of Trayvon Martin killing and scrutiny of “Stand Your Ground” laws, which ALEC helped spread around the country. ALEC even flirted with the idea of asking legislators to sign oaths of loyalty to ALEC over their constituents, but ultimately dropped the proposal.
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By the way, KPHO reporter Morgan Loew told me last night that the bills he refers to in his story are:
  • HB 2291 Empowerment Scholarship Account (massive) expansion 
  • HB 2476 one more attack on the right of workers to organize
  • SB 1267 the strike all amendment is the ALEC "ag-gag" bill 
  • HB 2509 the "Freedom to not be covered by health care insurance" bill
  • HB 2316 blocks Arizona from implementing Common Core education standards
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But really, ALEC's influence is not limited to legislation.

Yesterday, prominent local law firm Snell & Wilmer issued a legal alert, first published on the Washington Legal Foundation's Legal Pulse website. The alert ties in with ALEC legislation. [For readers not interested in reading the entire alert, I provide a brief summary below it.] The alert, by the way, is posted here pursuant to Fair Use Doctrine.
It has long been assumed that under the U.S. Supreme Court’s decision Upjohn Co. v. United States, reports generated during an internal investigation undertaken at the direction, and under the supervision, of corporate attorneys are protected from discovery by the attorney-client privilege. It came as a significant surprise then that the U.S. District Court for the District of Columbia recently held that the privilege does not apply when an investigation is conducted pursuant to a legal requirement, and not purely for the purpose of obtaining legal advice. Unless reversed, this decision could pose a significant new dilemma for regulated companies, and especially for government contractors, that perform internal investigations to determine whether “credible evidence” of actual wrongdoing exists.
The decision in United States of America ex rel. Harry Barko v. Halliburton Company, et al. is the latest in a long-running False Claims Act (FCA) suit against Halliburton and its former subsidiary, Kellogg, Brown & Root (KBR). In the course of pre-trial discovery, the relator sought the production of reports created by KBR in the course of conducting internal investigations into alleged violations of the company’s Code of Business Conduct (COBC). KBR objected to the production of the COBC reports, contending they were protected from discovery by the attorney-client privilege and work-product doctrine. On the relator’s motion to compel, the court rejected KBR’s argument that Upjohn was dispositive of the issue, and ordered that the reports be produced. The court reasoned that because the KBR investigators who prepared the reports were not lawyers, and because the subject investigations were done pursuant to legal requirements and corporate policy, and not solely for the purpose of obtaining legal advice, the reports were not privileged.
More specifically, the court explained that the KBR case could be distinguished from Upjohn because while the internal investigation at issue in Upjohn was conducted only after company attorneys conferred with outside counsel, KBR’s COBC investigations were routine compliance investigations required by law and corporate policy. As such, held the court, the COBC investigative reports did not meet Upjohn’s “but for” test because the investigations would have been conducted regardless of whether legal advice was sought, and the COBC investigations “resulted from the Defendants [sic] need to comply with government regulations.”
U.S. ex rel. Barko is important in that it not only contradicts Upjohn, but is counter to a string of more recent cases in which similarly conducted internal investigations were held to be privileged. By ruling that investigations conducted pursuant to legal requirements are not privileged, even if conducted at the direction of legal counsel, and even if at least in part for the purpose of legal advice, the decision seems to completely abrogate the rule that has guided corporate investigations for more than three decades. If upheld, this decision could deprive most federal government contractors of the benefits of the attorney-client privilege when conducting internal investigations because virtually all contractors are subject to legally or contractually required internal controls and investigations obligations.
This decision, however, would appear to go beyond the government contracting context, affecting most publicly traded companies as well by depriving such companies of the benefits of the attorney-client privilege when conducting internal investigations. This is because Sarbanes-Oxley and other laws require publicly traded companies to maintain a system of internal controls and a mechanism for conducting internal investigations. Moreover, the U.S. Sentencing Guidelines provide for an offense level reduction where a corporate defendant establishes standards and procedures to prevent and detect criminal conduct. Thus, this decision, which seems to penalize companies that actually follow legally imposed investigatory requirements, will undoubtedly have a chilling effect on corporate efforts to detect internal wrongdoing. This cannot be in line with Congress’s intent or the desire of governmental agencies to have companies investigate wrongdoing thoroughly and provide concise voluntary disclosures as appropriate.
In response to this decision, KBR has petitioned the D.C. Circuit Court of Appeals for a writ of mandamus directing the district court to vacate its order. But, until and unless the district court’s decision is reversed, public companies, and especially government contractors, must choose between ignoring internal investigation requirements imposed by federal statutes/regulations/contracts, or following these requirements, knowing that the attorney-client privilege may not apply to any internal investigation conducted pursuant to thereto. Either choice is fraught with peril. This new reality might be very good for qui tam plaintiffs, but it presents an unenviable dilemma for companies intent on following the law.
The bottom line, at least for now, is that all government contractors and other companies subject to internal investigation requirements should review and revise existing policies and procedures for handling internal investigations to ensure such investigations fall under Upjohn decision and not the KBR decision.
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WLF says about itself,
WLF is more committed than ever to continuous advocacy for a sound free market economy, a reasonable legal system, competent and accountable government, and a strong national defense.
Free market economy, of course, is code for "we want the government to keep its paws off of Big Business." Reasonable legal system? Reasonable according to whom? Might it only be reasonable when we win?

Competent government accountable to Big Money, of course. And that strong national defense? Well, that's how taxpayers keep defense contractors, notably in this case -- "Halliburton and its former subsidiary, Kellogg, Brown & Root (KBR)" -- in business.

The alert ties in with ALEC and the Arizona Legislature by way of Polluter Protection legislation. Case in point is HB2485 from 2013, otherwise known as "Health and Safety Audit Privilege". Privilege, or the right not to have to disclose bad things they find out when they actually pay attention to what's going on at Palo Verde Nuclear Generating Station, was signed into law on April 29.

As the legal alert points out, normally attorney-client privilege -- including in-house counsel -- precludes disclosure of the findings in an internal corporate investigation. You know, to find out and document whether or not the company is in compliance with applicable laws, rules and regulations. God forbid any corporation would be held accountable for health and safety (environmental) laws and rules.

Qui tam refers to whistle-blowers that may collect a percentage of any amount a court or government agency might impose as a fine on a corporation found to have violated applicable legal requirements.

But really, Snell and Wilmer's legal eagles seem to present a false dilemma. Can a corporation's only rational alternative to vulnerability to a qui tam situation be to refuse to pay attention, document or investigate whether the company is doing what it's supposed to be doing? That might seem rational to an MBA, but it doesn't to me.

If corporations are people, and they fail to control bodily functions, will they be compelled to obtain appropriate medical (psychiatric) intervention?

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My intent in including the legal alert and discussion of HB2485 was to show the subtle but genuine significance of the impact of ALEC's influence on public policy in Arizona. In most cases, in 2014, the problem in Arizona is almost exclusively with Republican lawmakers. In other states, and in Congress, the problem is not as limited to just the one political party. In Arizona, however, "it is what it is."

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