An appeals court has ruled that Apple is not entitled to subpoena information from a blog’s email service provider in order to uncover the identity of  Apple employees who allegedly leaked secret  information to several blogs about Asteroid, a firewire interface for GarageBand that Apple was developing. The decision against Apple has implications beyond the facts of this case. It was a major victory for bloggers, webmasters, and email service providers.

The decision is also a victory for anyone who uses email, because it means that litigants in a civil lawsuit can’t subpoena your email from your service provider.

 

WHEN THE ENRON CORPORATION scandal broke in late 2001, the mortgage banking industry braced for a problem. Enron, it seemed, had used special-purpose vehicles (SPVs) to achieve off-balance-sheet treatment. So do many mortgage companies. Would the regulators rush in to stop the use of SPVs by honest companies for legitimate purposes, or would they understand the difference between legitimate and abusive SPVs? Would the mortgage industry’s honorable participants lose this valuable tool of risk management because of what the Enron gang did?

To their credit, the Securities and Exchange Commission (SEC) and the Federal Accounting Standards Board (FASB) took the time to evaluate the SPV terrain before treading in with revised rules. And the revisions that have been promulgated and proposed to date do not run roughshod over this terrain. FASB Interpretation No. 46R (dealing with which entities must be consolidated for financial reporting) and the proposed revisions to FASB Statement 140 (tinkering with the requirements for treatment as a qualified special-purpose entity), both issued in 2003, reflect a nuanced understanding that there are legitimate transactions that use SPVs and that that should be accounted for as sales, moving assets off-balance-sheet. If FASB Interpretation No. 46R and the FAS 140 proposal move the goal posts, it is as much a response to changes in market practice as it is to changed sensibilities post-Enron.


Yet there are now two other phenomena–also accounting-related, and also an outgrowth of the Enron after-math–that have the potential to be more insidious for financial managers at mortgage companies.

You’re on your own

The first problem derives from the Sarbanes-Oxley Act of mid-2002, and the resulting changes in the accounting firms’ view of their own roles. That is an unwillingness, or inability, on the part of the accounting firm that audits a company to provide advisory services about structuring transactions. Where audit firms used to seek out opportunities to serve as consultants, helping to design transactions for intended accounting treatment, those firms now are wary of being too close to the company during the planning stages of a transaction.

At a Dec. 1, 2004, meeting of the FASB’s Small Business Advisory Committee, the chief executive officer of a top accounting firm himself is reported to have complained about auditors’ "inability to give answers." He blamed pressure from the SEC and the Public Accounting Oversight Board, and recognized that there’s now a sort of "Catch-22" situation, in which the fallout is the ability to conduct complicated transactions at all. Some audit firms are going so far as to say, in effect, "Please go to our competitors for …


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Alphonso Jackson says deal was scuttled after contractor admits not liking Bush

Posted by Brooke Shelby Biggs on May 17th, 2006


Secretary of Housing and Urban Development Alphonso Jackson may think he’s Steven Colbert, but his blunt brand of "humor" is a little too, er, observational for a laugh.

The secretary was at a forum in Dallas earlier this month and told this hilarious story of an advertising contractor who had just been selected to receive a contract from HUD:

    "He had made every effort to get a contract with HUD for 10 years. He made a heck of a proposal and was on the (General Services Administration) list, so we selected him. He came to see me and thank me for selecting him. Then he said something … he said, ‘I have a problem with your president.’

    "I said, ‘What do you mean?’ He said, ‘I don’t like President Bush.’ I thought to myself, ‘Brother, you have a disconnect — the president is elected, I was selected. You wouldn’t be getting the contract unless I was sitting here. If you have a problem with the president, don’t tell the secretary.’

    "He didn’t get the contract. Why should I reward someone who doesn’t like the president, so they can use funds to try to campaign against the president? Logic says they don’t get the contract. That’s the way I believe."

Jackson later said the conversation had never happened, that it was a joke, and that political leanings do not figure into the contract award system. Qualifications and competitiveness of bids are the only criteria, he insists.

He needs to work on his delivery.

At the center of a federal inquiry into Representative Alan B. Mollohan, Democrat of West Virginia, is his real estate investment with a bankrupt distant cousin who touted his connections to one of Mr. Mollohan’s nonprofit organizations to win work, including a federal contract in his district.

The relative, Joseph L. Jarvis Jr., faced $1 million debts in a personal bankruptcy case when he partnered with Mr. Mollohan in 1996, a few years after his aerospace company failed to fulfill its federal contracts and also filed for bankruptcy.

The 1995 West Virginia deal in Mr. Mollohan’s district eventually soured too, and Mr. Jarvis walked away owing Mr. Mollohan’s nonprofit group $67,681.63 in rent.

Still, Mr. Jarvis, Mr. Mollohan and their wives enjoyed a lucrative real estate partnership managing condominium rentals at the Remington, a 52-unit building that bills itself as "Washington’s best kept secret." The couples own 27 Remington condos, which have more than tripled in value, to $8 million, over the decade.

Mr. Mollohan stepped down last month as the top Democrat on the House ethics committee amid an F.B.I. investigation into his personal finances and his handling of special federal appropriations known as earmarks. The Federal Bureau of Investigation has subpoenaed papers from the Remington partnership.

The inquiry was prompted by a 500-page complaint from a conservative Washington group accusing Mr. Mollohan of failing to properly report the Remington investment and questioning whether his relationship with Mr. Jarvis — whose lengthy list of creditors included the congressman’s father and the federal government — was appropriate.

The Remington is one of three of Mr. Mollohan’s real estate deals under scrutiny. The others are $2 million in beach property in North Carolina that he bought with the director of another earmark-dependent nonprofit he created, and a $900,000 farm purchased with a friend whose company got several federal contracts based on his earmarks.

Mr. Mollohan refused repeated requests to discuss the Remington and Mr. Jarvis, with a spokesman saying he was still compiling "documents necessary to answer questions" about his real estate transactions. Among the issues are why Mr. Mollohan and his wife borrowed $2.3 million from a bank on the same day in 1999 that they and the Jarvises loaned the partnership the same amount — both using the condominiums as collateral — and why these loans were not listed on the congressman’s financial disclosure forms.

Mr. Jarvis and his wife, Rosemary, also declined to comment.

There is no evidence that Mr. Mollohan, first elected in 1982 and now a senior member of the House Appropriations Committee, intervened to help Mr. Jarvis procure the $1 million subcontract in West Virginia from the Energy Department in 1995.

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