[Clips] Intelligence Czar Can Waive SEC Rules

[R.A. Hettinga]

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  Delivered-To: rah at shipwright.com
  Delivered-To: clips at philodox.com
  Date: Sun, 28 May 2006 00:15:42 -0400
  To: Philodox Clips List <clips at philodox.com>
  From: "R.A. Hettinga" <rah at shipwright.com>
  Subject: [Clips] Intelligence Czar Can Waive SEC Rules
  Reply-To: rah at philodox.com
  Sender: clips-bounces at philodox.com

  <http://msnbc.msn.com/id/12952860/print/1/displaymode/1098/>

  - BusinessWeek Online - MSNBC.com

  Intelligence Czar Can Waive SEC Rules
  Now, the White House's top spymaster can cite national security to exempt
  businesses from reporting requirements

  By Dawn Kopecki

  Business Week

  Updated: 8:00 p.m. ET May 24, 2006

  President George W. Bush has bestowed on his intelligence czar, John
  Negroponte, broad authority, in the name of national security, to excuse
  publicly traded companies from their usual accounting and
  securities-disclosure obligations. Notice of the development came in a
  brief entry in the Federal Register, dated May 5, 2006, that was opaque to
  the untrained eye.

  Unbeknownst to almost all of Washington and the financial world, Bush and
  every other President since Jimmy Carter have had the authority to exempt
  companies working on certain top-secret defense projects from portions of
  the 1934 Securities Exchange Act. Administration officials told
  BusinessWeek that they believe this is the first time a President has ever
  delegated the authority to someone outside the Oval Office. It couldn't be
  immediately determined whether any company has received a waiver under this
  provision.

  The timing of Bush's move is intriguing. On the same day the President
  signed the memo, Porter Goss resigned as director of the Central
  Intelligence Agency amid criticism of ineffectiveness and poor morale at
  the agency. Only six days later, on May 11, USA Today reported that the
  National Security Agency had obtained millions of calling records of
  ordinary citizens provided by three major U.S. phone companies. Negroponte
  oversees both the CIA and NSA in his role as the administration's top
  intelligence official.

  FEW ANSWERS. White House spokeswoman Dana M. Perino said the timing of the
  May 5 Presidential memo had no significance. "There was nothing specific
  that prompted this memo," Perino said.

  In addition to refusing to explain why Bush decided to delegate this
  authority to Negroponte, the White House declined to say whether Bush or
  any other President has ever exercised the authority and allowed a company
  to avoid standard securities disclosure and accounting requirements. The
  White House wouldn't comment on whether Negroponte has granted such a
  waiver, and BusinessWeek so far hasn't identified any companies affected by
  the provision. Negroponte's office did not respond to requests for comment.

  Securities-law experts said they were unfamiliar with the May 5 memo and
  the underlying Presidential authority at issue. John C. Coffee, a
  securities-law professor at Columbia University, speculated that defense
  contractors might want to use such an exemption to mask secret assignments
  for the Pentagon or CIA. "What you might hide is investments: You've spent
  umpteen million dollars that comes out of your working capital to build a
  plant in Iraq," which the government wants to keep secret. "That's the kind
  of scenario that would be plausible," Coffee said.

  AUTHORITY GRANTED. William McLucas, the Securities & Exchange Commission's
  former enforcement chief, suggested that the ability to conceal financial
  information in the name of national security could lead some companies "to
  play fast and loose with their numbers." McLucas, a partner at the law firm
  Wilmer Cutler Pickering Hale & Dorr in Washington, added: "It could be that
  you have a bunch of books and records out there that no one knows about."

  The memo Bush signed on May 5, which was published seven days later in the
  Federal Register, had the unrevealing title "Assignment of Function
  Relating to Granting of Authority for Issuance of Certain Directives:
  Memorandum for the Director of National Intelligence." In the document,
  Bush addressed Negroponte, saying: "I hereby assign to you the function of
  the President under section 13[b][3][A] of the Securities Exchange Act of
  1934, as amended."

  A trip to the statute books showed that the amended version of the 1934 act
  states that "with respect to matters concerning the national security of
  the United States," the President or the head of an Executive Branch agency
  may exempt companies from certain critical legal obligations. These
  obligations include keeping accurate "books, records, and accounts" and
  maintaining "a system of internal accounting controls sufficient" to ensure
  the propriety of financial transactions and the preparation of financial
  statements in compliance with "generally accepted accounting principles."


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  R. A. Hettinga <mailto: rah at ibuc.com>
  The Internet Bearer Underwriting Corporation <http://www.ibuc.com/>
  44 Farquhar Street, Boston, MA 02131 USA
  "... however it may deserve respect for its usefulness and antiquity,
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-- 
-----------------
R. A. Hettinga <mailto: rah at ibuc.com>
The Internet Bearer Underwriting Corporation <http://www.ibuc.com/>
44 Farquhar Street, Boston, MA 02131 USA
"... however it may deserve respect for its usefulness and antiquity,
[predicting the end of the world] has not been found agreeable to
experience." -- Edward Gibbon, 'Decline and Fall of the Roman Empire'