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Page   1 - Duke Energy Employee Advocate

Washington - Page 30

"The master's finest tool was never the weapon that kept his slaves in submission. Nor
was it the one that he provided to the slaves to do his bidding. It is, and has always been,
one that will convince slaves they are free in a system of suppression." - Patrick Barry

Working on Overtime

Corporate Counsel – by Krysten Crawford - December 18, 2002

Big class actions are fueling efforts to rewrite federal salary rules

(12/17/02) - As a onetime union buster, Mark Thierman used to get death threats and was once chased down the freeway by labor toughs. So why, then, is the former corporate henchman now fashioning himself as a white knight to the workaday Joes he once battled? The answer: there's big money in wage-and-hour rules. Lawsuits accusing employers of cheating workers out of overtime have proliferated in recent years, and Thierman has emerged as a major player. "These [cases] are going to spread like crazy," the Reno, Nev., solo practitioner warns, "and I'm one of the guys who's going to do it."

Not if people like Tammy McCutchen can help it. McCutchen, a former in-house lawyer who is now a top official at the U.S. Department of Labor, hopes to slow the stampede to the courthouse. She wants to rewrite the federal rules that many employers use to determine which workers are ineligible for overtime pay. It's an ambitious undertaking and one that's been attempted, unsuccessfully, by every administration since Jimmy Carter's.

But McCutchen, with the full backing of her bosses, Labor Secretary Elaine Chao and Solicitor Eugene Scalia, is forging ahead anyway. In October she met with lawyers from both sides of the employer-employee divide to solicit feedback. At that meeting in Washington, D.C., where she came under heavy questioning, McCutchen, the administrator of the Labor Department's wage-and-hour division, promised to issue proposed regulations for public comment before the end of March. Under the most optimistic scenarios, new rules could be on the books by early 2004.

If she pulls this off -- and there are plenty of skeptics who say the politics are insurmountable -- the impact would be huge. Corporations claim that the federal rules, not overhauled since the 1950s, exposed them to enormous liability when some enterprising plaintiffs' lawyers tested a few cases several years ago and struck it rich. If the federal rules can be updated and clarified -- and, ideally, if states follow suit -- employers argue the playing field would at least be level.

Gary Meade, general counsel of the El Segundo, Calif.–based sporting goods chain Big 5 Corp., thinks there's something very wrong with the current system. Last year Big 5 settled a 4-month-old state class action by its employees for more than $2 million. Despite backing down, Meade says, "I still think to this day that we were OK" with how the company determined which workers were paid overtime and which weren't.

Big 5 got off easy. In July 2001, a month before the company was sued, a Bay Area jury socked Farmers Insurance Exchange with a $90 million verdict for not paying overtime to its California-based insurance adjusters. That verdict, the largest ever in overtime litigation, sparked a nationwide case, now pending, against Farmers and a slew of copycat lawsuits against other insurers.

Most wage-and-hour cases, like Big 5's, settle before trial, and the list of eye-popping payouts is long and growing: SBC Pacific Bell paid $62.8 million to get rid of Thierman's two cases. Starbucks Corp. shelled out $18 million this fall to settle another Thierman lawsuit. Perdue Farms Inc. is paying $20 million to rid itself of a Labor Department case and a private class action. Some Coca-Cola bottlers, Taco Bell Corp., U-Haul International Inc., Rite Aid Corp., and Shoney's Inc. have been on the hook for millions.


In the world of employment law, Anita Hill and sex harassment claims are out. Homer Simpson and time-punchers are in. The number of federal wage-and-hour cases filed last year exceeded, for the first time on record, the number of new federal employment discrimination cases combined, according to Department of Labor statistics. The reasons for the uptick are manifold, but it's clearly been fueled by a special provision in wage-and-hour law that allows plaintiffs to recover attorney fees.

Labor's McCutchen feels employers' pain. In the two years before she was plucked out of political obscurity to join the Bush administration in late 2001, McCutchen grappled with overtime issues as senior counsel for the Hershey Foods Corp. Every day she would field questions about whether any one of the company's 14,000 employees was due time and a half or not. Each time, she says, "I gave it my best guess," not knowing if her advice would stand up in court. "The level of confidence of an in-house lawyer [on wage-and-hour issues]," she estimates, "is probably the lowest of any issue."

It wasn't supposed to be this way. The intent behind the Fair Labor Standards Act of 1938 was simple enough: to establish a minimum wage and the 40-hour workweek in order to encourage employment and to discourage the growth of sweatshops. Section 541 of the law, commonly known as the "white-collar" exemptions, carved out categories of workers -- executive, administrative and professional -- who are ineligible for overtime pay primarily on the basis of their salary levels and job duties.

Complicating matters is a provision in the law that authorizes states to enact their own wage-and-hour statutes. The law deemed most favorable to employees prevails. That provision is a big problem in states like California, which has become the hotbed of wage-and-hour litigation because laws on its books make it much harder for employers to exempt workers from overtime. While any revisions are unlikely to affect California's rigid laws, they could prompt amendments by the roughly 30 states that have wage-and-hour laws that mirror federal statutes.

Taking a whack at the federal lawsuit explosion won't be easy. "It's a political football," says Ellen Kearns, an employment partner in the D.C. office of New York's Epstein Becker & Green and editor in chief of a Bureau of National Affairs publication on federal labor laws.

Reform has been on the agency's agenda for more than a decade, and the closest any predecessor came to enacting change was during the waning days of the Carter administration. On the eve of Ronald Reagan's 1981 inauguration, the agency angered employers by pushing through a "midnight" order upping the minimum salary level that workers must earn to be ineligible for overtime. Under President Reagan the agency quickly stalled enforcement of the new regulation before it published, in 1985, its own "advanced notice" of proposed new rules. The effort stalled there.


McCutchen isn't fooling herself about the odds. But she thinks there's a window of opportunity before the 2004 presidential campaign, and the attendant political posturing, gets under way. For one thing, she thinks the various forces are aligned, at least when it comes to a willingness to compromise for the sake of reform. She says even her staff, many of them longtime liberals, is eager to modernize. Then there's that litigation overload, which, if nothing else, has focused the parties on the rules' obsolescence.

The way she sees it, corporations desperately want the agency to rewrite the so-called duties tests, which, under the 1954 regulations, spell out in mind-numbing detail the type of work an employee must perform in order to qualify as exempt. In return, she thinks employers are willing to give ground on a labor demand: an increase in the minimum weekly salary levels, which have topped out at $250 per week since 1975, that qualify workers for non-exempt status.

The challenge, for both tests, is finding a middle ground. Both sides agree that the salary threshold, which comes to $13,000 a year, is due for a hike. But they sharply disagree on how high it should go. Labor groups led by the AFL–CIO want to see the minimum yearly income raised to $43,000, which is the 1975 level in today's dollars.

Business groups, according to McCutchen, indicate that $25,000 is the most they can stomach financially. "That number [$43,000] is grossly excessive in our view," says James Coleman, general counsel to The National Council of Chain Restaurants, whose members have borne the brunt of the litigation crusade and, along with The National Restaurant Association, wield enough clout to doom any reform. But if salary levels go up, Coleman says it's only fair that the duties test be revamped too.

Problem is, plaintiffs' lawyers and labor groups oppose any revisions to the duties test. To them, the reason that wage-and-hour cases have mushroomed in recent years has less to do with a lack of clarity than with greedy companies shortchanging workers in the pursuit of higher profits.

M. Reid Estes Jr., a Nashville lawyer who's brought several high-profile wage-and-hour cases, says corporations are demanding change now because they're no longer getting away with hiring a hamburger flipper, slapping the word "manager" in his title, and declaring him exempt from overtime pay. "They don't make any effort to comply with the law," insists Estes, who's settled cases with a trio of Coca-Cola bottlers for $20.2 million and another with restaurant chain Shoney's Inc. for $18 million.

Management-side lawyers counter that the duties test doesn't reflect modern business practices. When the test was implemented in the 1950s, the U.S. was largely agrarian and industrial, and many of the job titles described in the rules -- such as "key punch" and "linotype" operator, "gang leader" and "promotion man" -- don't exist in today's service-driven economy.

"We're no longer just a white-or blue-collar workforce," says Timothy Bartl, the assistant general counsel of the pro-employer Labor Policy Association in Washington, D.C. "We're a 'gray-collar' workforce with a whole set of workers that just don't fall under the current system." As an example, Bartl says that an engineer with a two-year degree is likely eligible for overtime pay, while a colleague doing the same job who has a four-year degree isn't.

But Neil Ditchek, a staff attorney with the International Brotherhood of Teamsters in Washington, D.C., says employers are wrong to insist on more clarity. The Fair Labor Standards Act, he says, intended exceptions to overtime rules to be narrow and for the majority of workers to earn time and a half. The reason employers are up in arms, he says, is that private lawyers are now enforcing what the understaffed Labor Department hasn't been able to.


Neither industry nor labor groups, McCutchen said at press time in October, have yet to offer any viable solutions. A classic, and probably unworkable, example: Some company lawyers have proposed abolishing the duties test altogether in favor of a straight salary test. So, for instance, an employee who makes above, say, $70,000 a year would be automatically exempt.

Michael Faillace, a 17-year veteran of IBM's legal department who is now an employment compliance consultant in New York, suggests a slight variation: Workers who earn above $56,000 would be ineligible for overtime. Employees who make between $21,000 and $56,000 today would have to pass a partial duties test in order to be exempt from overtime. Everyone below $21,000 would automatically earn time and a half.

The ideas, variations of which have been floated before, have critics on both sides. Differences in cost of living between, for instance, New York and Toledo make that unfeasible, say plaintiffs' lawyers.

Employers aren't thrilled, either. "We would have a big problem" with abolishing the duties test in favor of a high salary threshold, says Coleman of The National Council of Chain Restaurants. In any event, says McCutchen, eliminating the duties test would likely require congressional approval.

The mixed reactions reflect McCutchen's fundamental challenge. "There is going to be serious opposition almost no matter how you approach it," adds Coleman. So McCutchen takes the cynics in stride. Whatever she proposes, she says, "if I get a little bit of screaming from both camps, then I'll think I probably found the right solution." Still, she knows the road ahead is long: "There is a lot of work to be done, and so many people have tried."

And, she doesn't need reminding, they've hit dead ends.

Mr. Snow Not Pure as Snow

Public Citizen – Press Release – December 13, 2002

Public Citizen Seeks Government Records on Treasury Secretary Nominee

CSX Executive's Involvement in Questionable Corporate Practices Raises Serious Doubts About His Suitability for Cabinet Post

WASHINGTON, D.C. - Concerned about the prospect of a corporate executive involved in questionable business practices joining the Bush Cabinet, Public Citizen today filed records requests to obtain information about loans, stock sales, safety compliance and other matters involving John W. Snow, the Treasury Secretary nominee who for years headed CSX Corp.

The requests, filed with the Securities and Exchange Commission (SEC) and the Federal Railroad Administration (FRA), are an attempt to learn more about Snow's policies as chairman and chief executive officer of CSX.

"As head of CSX, Mr. Snow apparently was involved in some of the same questionable practices that have come under scrutiny recently and even been outlawed by Congress," said Joan Claybrook, Public Citizen president. "We question whether a top corporate executive who abused his position by benefiting from insider deals will be a good public servant. We are filing this request so that before Congress votes on Mr. Snow, the public record can be clear and complete as to his ethical and safety performance as CEO of a major transportation company."

In the request to the SEC, filed under the Freedom of Information Act, Public Citizen seeks all records concerning loans from CSX to Snow and the forgiveness of those loans, sales of CSX stock by Snow, any SEC investigation into CSX matters, and all transactions between CSX and members of the company's compensation committee. From the FRA, Public Citizen seeks all records concerning Snow's role as a CSX executive, Snow's involvement with the company's lack of compliance with federal track safety standards, any enforcement actions against CSX since 1991, and Snow's role in the negotiation and implementation of an April 2000 Safety Compliance Agreement between the company and the FRA, which came about after an FRA review of CSX tracks uncovered a number of safety problems.

Snow has been a beneficiary of many of the questionable corporate practices that came to light after the Enron scandal, according to news reports. CSX loaned Snow $24.5 million to purchase company stock valued at $32.3 million, but after the stock price dropped, the company forgave the loan. During his tenure, Snow received more than $50 million in compensation over 12 years even though profits fell and the stock didn't do as well as the average U.S. company. Last year, he made $10.1 million in cash and stock grants and received stock options valued at $8 million. According to a Corporate Library survey, Snow is the third highest-paid chief executive among 37 transportation company CEOs.

Further, according to media reports, Snow sold 120,000 shares of CSX stock this year, less than a month before the company announced that its third-quarter outlook was not as rosy as it had first predicted. The stock price dropped, but Snow dumped the stock just in time to avoid losing approximately $750,000.

Additionally, Snow served on five other corporate boards, including NationsBank, where he helped set compensation for one of CSX's outside directors.

"It would appear that Mr. Snow misused his position as CEO to gain benefits available to few others," Claybrook said. "How many CSX workers were able to obtain multimillion-dollar loans for stock purchases and have the loans forgiven?"

Treasury ‘Assault on Workers’

USA Today – by Christine Dugas – December 12, 2002

(12/10/02) - Worker advocates expect employees to complain loudly about new Bush administration proposals in support of a controversial type of pension plan.

In a long-anticipated 75-page document, the Treasury Department on Tuesday said that so-called cash-balance pension plans do not discriminate against older workers. The proposed rules also address conversions of traditional pensions to cash-balance plans. (Background: Young workers gain most)

Critics say they don't do enough to protect benefits that workers have accrued. Under the proposed rules, it still would be possible for workers to reach a plateau for several years after a conversion without earning new benefits, says David Certner, AARP's director of legislative affairs.

William Sweetnam, benefits tax counsel at the Treasury Department, says the proposed guidelines would give employers flexibility without hurting workers. They are now subject to a 90-day comment period.

Worker and retiree representatives — including AARP, the Pension Rights Center and the Coalition for Retirement Security — say they expect a flood of worker comments and protests.

"I think there will be a rekindling of the kind of protests that occurred two or three years ago," says Karen Friedman at the Pension Rights Center.

IBM's conversion to a cash-balance plan was the focus of worker opposition in 1999 that resulted in congressional hearings and lawsuits. Near the same time, the IRS stopped issuing approvals for new cash-balance plans.

Rep. Bernie Sanders, I-Vt., was swamped by calls from irate IBM workers in 1999. He calls the proposed rules an "assault on workers."

But they are good news for employers. The move "breaks a 14-year logjam that created legal uncertainty and misguided lawsuits for large employers," said the ERISA Industry Committee, an industry group.

Companies have been abandoning traditional pensions in favor of less expensive cash-balance and 401(k) plans. They argue that cash-balance plans are a better fit for today's workers. They provide portable benefits that accrue evenly over a working career. By contrast, traditional pension benefits start low and snowball in later years.

By law, employers can reduce future benefits, but benefits that already have been earned are protected. Yet, by evening out the accrual of benefits in midcareer, longtime workers who started out with low benefits are deprived of the big bang at the end of their careers that they were promised. Worker advocates say that's not fair.

Kathi Cooper agrees. She has worked at IBM for 24 years and is lead plaintiff in the pension lawsuit. Many IBM workers accepted lower pay than the industry standard because the benefits were so good, and they feel betrayed, Cooper says.

Countless baby boomers "are now in the same boat," she says.

The Treasury’s Dastardly Deed

Bloomberg News – December 12, 2002

(12/11/02) - WASHINGTON -- The U.S. Treasury Department proposed rules allowing companies to revamp their traditional pension plans to save money, a change that critics contend would hurt older workers.

The new pension rules are intended to help companies avoid age discrimination complaints when they convert defined-benefit pensions into so-called cash-balance accounts. Companies that have made the change, such as Xerox Corp. and Cigna Corp., say cash-balance plans also help them attract younger workers.

``The proposed regulations would provide long-needed guidance on significant questions about cash-balance plans,'' said Pam Olson, assistant Treasury secretary for tax policy.

Debate over such plans has pitted businesses against labor groups and senior citizen advocates since 1999, when the Internal Revenue Service stopped approving pension plan conversions. Protests were raised over proposed changes at companies such as International Business Machines Inc. and AT&T Corp.

In traditional defined-benefit plans, employees are awarded fixed retirement payments, which are skewed to reflect earnings in the last years of a worker's career. In cash-balance plans, benefits are accrued more evenly over the time a worker is employed and are portable from job to job. In recent years, defined-benefit pensions have been supplemented or replaced by employee 401(k) retirement savings plans.

Advocates, such as the American Benefits Council, say cash-balance plans better serve a mobile work force, in which workers often change jobs.

``These plans respond to the different type of employee demographic that we have today,'' said John Scott, director of retirement policy for the council, whose members include AT&T, McDonald's Corp. and Georgia-Pacific Corp.

Supporters of the cash-balance plans, such as U.S. Rep. Sam Johnson, R-Texas, also have argued that the rules might encourage more companies to offer pensions.

Critics, including the AARP, the Pension Rights Center and some members of Congress, say veteran workers may lose benefits they had been expecting when an employer makes the conversion.

``We're outraged,'' said Joel Barkin, a spokesman for U.S. Rep. Bernard Sanders, I-Vt. ``We think it's been conclusively determined that this is an age discrimination practice and they are allowing it to go on.''

AARP, the biggest lobbying group for retirees, estimated that conversions to cash-balance plans have cost workers $200 million in promised benefits.

The number of companies offering pension plans dropped 70 percent since 1995, as more employees were set up with 401(k) savings plans. Those allow workers to contribute a pre-tax portion of their salary to an account, with the company often adding an additional amount. Benefits in such accounts aren't guaranteed.

Norman Stein, a law professor and pensions expert at the University of Alabama, said most companies want to convert to cash-balance plans to save money.

``Traditional benefit plans are far more expensive with older workers than they are with younger workers,'' Stein said. ``Older employees in traditional plans can be very expensive.''

The new rules are subject to a 90-day public comment period, after which they will be made final and the IRS may begin reviewing conversions. While IRS approval assures a company can take advantage of tax breaks afforded pension plans, some companies have been able to convert their plans without the agency's review.

Sanders, who has sponsored legislation to prevent the IRS from approving any pension plan conversions, said Treasury's regulations don't address his concerns.

They ``are a direct assault on the retirement plans of millions of American workers and cannot be allowed to stand,'' he said in a statement. ``The bottom line is that companies should not be able to pull the rug out from under their employees, especially those closest to retirement who get hurt the worst by these plans.''

Some companies, such as IBM and Eastman Kodak Co., met worker complaints by offering both tradition and cash-benefit plans, giving employees a choice of participating in one or the other.

'Celebrating' the NAFTA Failure

Public Citizen – Press Release – December 11, 2002

Facts Cloud Attempt to "Celebrate" NAFTA 10th Anniversary Signing Ceremony

Statement of Lori Wallach, Director of Public Citizen's Global Trade Watch, on the Woodrow Wilson International Center Conference Celebrating the 10th Anniversary of the Signing of the North American Free Trade Agreement

Despite three million U.S. jobs eliminated due to trade deals since 1994 and the creation of a massive new U.S. trade deficit with Mexico since the North American Free Trade Agreement (NAFTA), the Bush administration is desperate to declare NAFTA a success. The eliminated jobs (which include 1.7 million U.S. manufacturing jobs) and the surging $450 billion U.S. trade deficit make you wonder what outcomes would be necessary for NAFTA proponents to stop misrepresenting the mess that has been spawned by this agreement.

Spin from corporations and the Bush administration cannot drown out the chants of "Down with NAFTA" being heard in Mexico. More than three million Mexicans who rely on farm income are aware of NAFTA's next stage, which will come on Jan. 1: the elimination of agriculture tariffs that threaten to wipe out the livelihood of millions of Mexican farmers. But the discord in Mexico runs even deeper.

Given that half of Mexico's population lives on $5 a day 10 years after the signing of NAFTA, it needs to be acknowledged that NAFTA is not working for most people. During the eight years NAFTA has been in effect, the gulf between Mexico's rich and poor has grown, and eight million middle class Mexicans who celebrated NAFTA in 1994 have slipped into poverty.

In Brazil, 10 million people voted against a plebiscite on the proposed Free Trade Area of the Americas (FTAA), a 31-nation NAFTA expansion. And more than 50 million Brazilians elected Luiz Inacio Lula da Silva, who ran on an anti-FTAA platform. Likewise, Ecuadorians elected Lucio Gutierrez, who also opposes the FTAA. This shows that broad-based opposition to the NAFTA model is spreading throughout the hemisphere.

Bush Caters to Corporations – by Kristen Gerencher – December 10, 2002

Treasury to pitch OK on switch to cash-balance plans

SAN FRANCISCO (CBS.MW) - Despite heightened concern for retirement security in the wake of Enron, the U.S. Treasury is expected to propose regulations Tuesday that would allow companies to switch workers into controversial "cash balance" plans.

The move, designed to save employers money by phasing out traditional fixed pension plans, would end a four-year IRS freeze on transitions to cash-balance plans that began after IBM attempted a contentious switch.

Critics such as the AARP say switching to cash-balance plans, which share features of fixed pensions and 401(k)s, shortchanges older workers. First, it forces them out of traditional accounts funded on their experience level. It then moves them into a new plan where the employer contribution ignores their length of service, giving them insufficient funds before they retire.

Karen Friedman, director of policy strategies for the Pension Rights Center in Washington, said she hasn't seen the proposals yet, but that any move to lift the moratorium is premature.

"We think this is the wrong approach," she said. "The reason there's a moratorium is because there's an understanding that cash balance conversions hurt older workers by depriving them of up to 50 percent of their expected benefits."

In traditional defined benefit pension plans, employers pay workers' retirement benefits based on salary and years of service. In cash balance plans, employers contribute a percentage of a worker's pay plus interest every year, independent of seniority.

Political hot potato

Rep. George Miller (D-Calif.), a ranking member of the House Education and Workforce Committee, said the Bush administration's expected move puts corporate interests ahead of working families.

"The Administration and the Republican congressional leadership pushed a pension bill through Congress this year that would have done next to nothing to address the pension scandals that have decimated the retirement security of millions of American workers," Miller said in a statement.

"Now, just in time for the holidays, they are quietly proposing to allow massive changes in pensions that will make the Enron collapse look minor in comparison."

As many as 700 large companies have adopted cash balance plans since they were allowed under the first Bush Administration 11 years ago, according to Miller's office, which contends that more than 8 million employees and retirees have lost $334 billion in benefits after their traditional plans were shifted to cash balance pension plans.

In defense of cash balance plans

Still, not everyone agrees that cash balance plan designs harm older workers.

Many older workers may find them useful because, unlike traditional defined benefit plans, they're structured assuming that people will work longer and change jobs more frequently, said John Scott, director of retirement policy at the American Benefits Council, a trade group of large employers that sponsors retirement and health benefits.

"We would dispute that this has been a negative development for workers," he said, noting that the number of defined benefit plans dropped to less than 60,000 today from 175,000 in 1983. "These cash-balance plan designs represent the only source of growth for defined-benefit pension plans."

What's more, some companies protect vulnerable employees who may be close to retirement by allowing them to choose between the old and new plan, or by adding credits in the new plan to make up for the amount they lose in the transition, Scott said. "A lot of employers do try to make provisions for workers who might be adversely affected."

But most companies don't take the extra precautions, and while cash balance plans may better reflect job trends for younger workers, older workers typically lose out, Congressman Bernard Sanders (I-Vermont) said.

"You've worked at a company for 20, 30 years, you're entitled to a certain benefit and they pull the rug out from under you," Sanders said, pointing to recent court decisions against Xerox, Georgia Pacific and Bank of Boston for slashing pensions during cash balance conversions.

"If the IRS is able to get away with doing this, future actions like what these companies did will be held legal and appropriate and that's wrong," he said.

The Treasury is expected to announce the proposed rule changes Tuesday morning, beginning a 90-day comment period.

Two More Join Unemployment Line

Wall Street Journal – December 8, 2002

WASHINGTON -- Treasury Secretary Paul O'Neill, whose outspokenness often landed him in hot water, announced his resignation Friday in a shakeup of President Bush's economic team amid concern about the ailing economy.

Lawrence Lindsey, head of the White House's National Economic Council, also resigned, a senior White House official said.

Although there have been persistent rumors that President Bush might shake up his economic team, Mr. O'Neill's resignation came as a surprise in Washington, where such major moves are often telegraphed in leaks or news stories.

The changes come as concern has increased at the White House that the lagging economy could be a political problem in President Bush's re-election campaign. The unemployment rate rose to 6% on Friday, the highest in nearly nine years.

In a prepared statement Friday, White House spokesman Ari Fleischer praised the two officials, saying President Bush "very much appreciates" their service and that they both "served the president ably and well in leading the nation from a period of recession to a period of growth."

However, Mr. Fleischer also said that Mr. Bush wasn't happy with the state of the economy. "When you look at the data, the data continues to be mixed on the economy," he said. "The president looks at the economy and believes it has been bumping along."

Mr. Fleischer said Mr. Lindsey will return to the private sector and predicted Messrs. O'Neill and Lindsey would leave office before the end of the year.

A former Alcoa Inc. chief executive and White House budget director, Mr. O'Neill has been a controversial Treasury secretary almost from the start. More than most cabinet officers, he spoke his mind with little apparent regard for the effect his comments had on the markets or whether they conveyed the policy of the Bush administration.

Mr. O'Neill has said in the past few weeks, though, that he had interests beyond his current post -- including ways to reduce the nation's spending on health care.

There was no immediate word from the White House on how quickly President Bush would replace Mr. O'Neill.

"I hereby resign my position as secretary of the Treasury," Mr. O'Neill wrote in a letter to President Bush. "It has been a privilege to serve the nation during these challenging times. I thank you for that opportunity. I wish you every success as you provide leadership and inspiration for America and for the world."

Sworn in Jan. 20, 2001, Mr. O'Neill is expected to leave office within the next few weeks. During his time as treasury secretary, Mr. O'Neill's blunt- speaking style served as a lightning rod for detractors and sometimes could even make his supporters wince.

He is the first member of President Bush's cabinet to leave.

Mr. O'Neill's two years at Treasury were peppered with controversy. Mr. O'Neill, who left his job as chairman of Alcoa, the world's biggest aluminum maker, to take the cabinet post, touched off a furor when he said he would keep nearly $100 million worth of stock in the company. Under fire by critics about potential conflicts of interest, he eventually reversed course and sold the stock.

As the president's chief economic spokesman, he was frequently criticized as being either too enthusiastic about the economy's prospects and the stock market, or too ho-hum.

When Wall Street reopened after the Sept. 11, 2001, terrorist attacks, Mr. O'Neill turned into an economic cheerleader, predicting on Sept. 17 that the Dow Jones industrial average could be approaching all-time highs within 12 to 18 months. As the stock market melted down that day, Mr. O'Neill declared that "the people who sold will be sorry that they did it."

He also pooh-poohed the notion that the economy could be headed into a recession. Following the first trading day after the Dow Jones index in the spring of 2001 suffered its worst week of declines in 11 years, Mr. O'Neill offered this comment to millions of investors: "Markets go up and markets go down."

From the beginning, he suffered in comparison to one of his predecessors, Robert Rubin, who held the post under President Clinton and was highly thought of on Wall Street.

Early in his term, Mr. O'Neill's mixed comments on the U.S. dollar rattled currency markets and perplexed currency traders. He described traders as people who "sit in front of a flickering green screen" all day and were "not the sort of people you would want to help you think about complex questions."

The Associated Press and Alex Keto of Dow Jones Newswires contributed to this article.

Rewarding Political Hacks – December 7, 2002

The WasteBasket: A Bulletin on Wasteful Government Spending

(12/6/02 - Vol. VII No. 49) - The Bush administration's decision to restore a policy of rewarding top salary political appointees with cash bonuses of up to $25,000 is an eyebrow-raiser. It has got to make the majority of hard-working taxpayers wonder whether or not the current government officials are playing with a full deck.

Doling out cash bonuses to senior political officials was a long-standing bipartisan practice that was prohibited in 1994 after the first President Bush took advantage of the system. On his way out of the door of the Oval Office, he handed out big bonuses to appointees. The biggest concern was that such a policy is highly subject to abuse where appointed officials who toe the political line are favored over career civil servants.

According to the White House, this is an effort to create a more results-oriented government. On the one hand, it makes sense that the administration would want to reward senior officials that go above and beyond the call of duty by contributing to government effectiveness or efficiency and hopefully saving federal tax dollars. However, the Justice department's policy of rewarding officials who "contribute directly to achieving the President's and the Attorney General's national goals and objectives" looks more like a litmus test of loyalty than anything else.

About 2100 political appointees, many of whom earn salaries between $115,000 and $140,000 are now eligible to receive these cash bonuses of $10,000 or more. Although the decision was initially made in March, it was kept under wraps until this week when it was publicized on the heels of the administration's decision to cut by 25 percent the pay increase for 1.8 million federal employees.

Although this policy change will not result in any additional outlay of taxpayer dollars, decisions like this affect the way that hard-working Americans view government. Let's get real! The government is in financial disarray with rapidly growing budget deficits and most agencies are incapable of passing a simple audit. Floating a boat of cash bonuses across this sea of budgetary red ink is as stupid as giving Enron accountants a cash bonus right after their company filed for Chapter 11.

Stuffing the Christmas stockings of the political elite sends the wrong message to taxpayers. Political appointees are most often given their positions as a reward for helping to get their boss elected. Moreover, the prestige and connections that come with political appointments typically reap even greater rewards when officials move on to the private sector. Further rewarding political lackeys with cash bonuses reeks of cronyism.

Ex-Prosecutor Tells of FBI Ties

New York Times – by Fox Butterfield – December 7, 2002

BOSTON, Dec. 5 — A former United States attorney in Boston told a Congressional committee today that he knew that some gangland informers were committing murders and that their F.B.I. handlers had become personally involved with them. But he said he took no action because he was intimidated by the bureau.

"It would have precipitated World War III if I had tried to do anything about F.B.I. informants," said the witness, Jeremiah T. O'Sullivan, who was in charge of the New England Organized Crime Strike Force and then United States attorney here in the 1970's and 80's

In fact, Mr. O'Sullivan said, he once tried to sidestep the Federal Bureau of Investigation by setting up an electronic bug with the help of the Massachusetts state police in the headquarters of James Bulger, known as Whitey, the leader of the powerful Winter Hill gang. But the surveillance was soon compromised, Mr. O'Sullivan said, most likely by an F.B.I. agent who tipped off Mr. Bulger. Mr. Bulger had been recruited as an F.B.I. informer.

After the bug was compromised, Mr. O'Sullivan told members of the House Committee on Government Reform, the special agent in charge of the F.B.I.'s Boston office, Lawrence Sarhatt, called him into his office. "He yelled at me, cursed at me," Mr. O'Sullivan said of the F.B.I. official. "He told me I should never have cooperated with the state police."

"With the F.B.I, if you go against them, they will try to get you," Mr. O'Sullivan said. "They'll cause major administrative problems for me, as a prosecutor." Mr. O'Sullivan was actually superior in rank inside the Justice Department to the Boston F.B.I. agents.

The Committee on Government Reform, led by Representative Dan Burton, Republican of Indiana, has been investigating how F.B.I. agents in Boston became corrupted by recruiting underworld informers in their war on the Mafia starting in the 1960's. Some of the gangsters, notably Mr. Bulger and his deputy, Steven Flemmi, regularly entertained their F.B.I. handlers or gave them gifts, and the F.B.I. agents often provided them with confidential information about government investigations against them or names of other mobsters informing on them, according to court testimony.

One of these F.B.I. agents, John J. Connolly Jr., was sentenced to 10 years in prison in September for racketeering and obstructing of justice. Prosecutors said Mr. Connolly essentially became a member of Mr. Bulger's gang.

Mr. Bulger has been indicted in racketeering and involvement in 22 murders. But he disappeared in 1995 after Mr. Connolly tipped him off to the secret indictment, according to testimony at Mr. Connolly's trial. Mr. Bulger remains a fugitive and is on the F.B.I.'s Ten Most Wanted List.

In separate testimony today, a Tulsa homicide detective, Mike Huff, said the Tulsa County District Attorney has been investigating a former Boston F.B.I. agent and is close to indicting him for his involvement in the murder of a Tulsa multimillionaire businessman, Roger Wheeler, on orders from Mr. Bulger.

Sergeant Huff told the committee there was strong evidence that H. Paul Rico, Mr. Connolly's predecessor in recruiting members of the Winter Hill gang as F.B.I. informers, had provided critical information used in Mr. Wheeler's killing. Mr. Rico was subpoenaed by the committee last year and refused to testify, taking his Fifth Amendment right against self-incrimination.

Mr. Wheeler, then the chairman of the Telex Corporation, was shot once between the eyes as he got in his car after playing golf at the Southern Hills Country Club in 1981.

He was killed because he had learned that Mr. Bulger's gang was skimming money from one of his businesses, World Jai Alai, which ran gambling operations in Hartford and Miami, according to testimony by the man who shot him, John Martorano. Mr. Rico was in charge of security for World Jai Alai at the time of the killing.

Sergeant Huff, who has investigated Mr. Wheeler's murder for 21 years, said, "The F.B.I. and the U.S. Attorney's office in Boston did not help us with the investigation."

"We were lied to," Sargeant Huff said. "They had targeted the Wheeler case to not get solved."

As a result, even though the F.B.I. in Boston knew Mr. Bulger was involved in the killing, the information was not provided to the Tulsa police. "The F.B.I. didn't want the embarrassment and Connolly didn't want his house of cards to fall," Sergeant Huff said.

David Wheeler, a son of Mr. Wheeler, also testified, saying, "Forgotten in all of this are the people the agents are supposed to serve — people like my father."

A question hanging over the hearing today was whether Whitey Bulger's brother, William M. Bulger, the president of the University of Massachusetts and the former president of the State Senate, will testify on Friday. William Bulger has said very little over the years about his older brother, insisting he knows nothing about his criminal career.

But the committee has issued a subpoena for him to appear. Steven Lynch, a Democratic representative on the committee who lives in South Boston, the Bulgers' neighborhood, said it was unclear whether Mr. Bulger would appear at all, or appear and plead his Fifth Amendment right against compelled self-incrimination, or try to fight testifying on some procedural grounds.

One person listening to the testimony today, in the Suffolk County Courthouse, was Joseph Salvatti. In 1967 Mr. Salvatti was sentenced to life in prison for a murder actually committed by an F.B.I. informer, and the bureau allowed Mr. Salvatti and three other men to be wrongly convicted, with the knowledge of J. Edgar Hoover.

"It's hard to sit listening, knowing the F.B.I. and the U.S. Attorney's office are lying, said Mr. Salvatti, who had his sentence commuted after serving 30 years in prison. "The bottom line is, they don't care."

Bush Favors Dirty Air

Boston Globe – by Robert Schlesinger - December 3, 2002

(11/23/02) - WASHINGTON - The Bush administration on Friday relaxed clean air rules that limit emissions from utilities, refineries and manufacturers and mandate when they must upgrade pollution-control equipment.

The administration proposed additional rule changes that, if adopted, would further ease federal restrictions on the largest polluters.

The announcement spurred Massachusetts and several Northeastern states downwind from major polluters to threaten lawsuits to block the new rules.

The new rules and proposed changes also prompted howls of outrage from environmentalists and calls from Democratic lawmakers for Christie Whitman, administrator of the Environmental Protection Agency, to resign.

But Whitman, in a statement, defended the new rules and the proposed changes to a program called New Source Review, or NSR.

She added, "The steps we are taking today recognize that some aspects of the NSR program have deterred companies from implementing projects that would increase energy efficiency and decrease air pollution."

Duke Energy, which was sued by the Clinton-administration Environmental Protection Agency over interpretation of the same rules, said it welcomed Friday's announcement.

"We're encouraged that the EPA is taking action to clarify New Source Review," said Duke spokesman Randy Wheeless. "We welcome any effort to clarify the rules."

The EPA's lawsuit against Duke, filed in 2000, claims the utility broke the rules in upgrading its eight coal-fired power plants without installing new pollution controls. Duke says the work was routine maintenance.

The suit is still open in federal court and, Wheeless said, won't be affected by Friday's announcement.

N.C. legislators this year passed a measure requiring sharp pollution reductions from coal-fired plants.

Duke expects to spend $1.5 billion on its plants by 2013, Wheeless said, reducing sulfur dioxide 70 percent and nitrogen oxides 33 percent below current federal standards.

Critics condemned the new and proposed rules, saying they favored industry over public health.

"This administration has been pretty consistent here when it comes to environmental matters, in terms of whose interests they put first," said Tom Reilly, the Massachusetts attorney general. "They clearly put (first) the interests of the power plants."

Reilly said Massachusetts would join a lawsuit planned by New York state to overturn the new rules.

New Source Review refers to a section of the Clean Air Act that governs when polluters must upgrade their emissions-reduction technology.

The original law did not require coal-fired power plants in operation at that time to upgrade, unless they underwent major expansions or modifications. In that case, they were required to invest in the best available pollution controls.

The requirement had gone largely unenforced until the mid-1990s, when the Clinton administration started vigorously imposing it, bringing lawsuits against dozens of plants across the country.

Under the new rules, industry will be able to:

- Avoid triggering a New Source Review if their plant has undergone such a review by the EPA in the past 10 years.

- Use any two-year period in the past decade as a baseline for measuring increases in their pollution level.

- Exempt any new kind of pollution that results from controls on different emissions.

- Calculate levels of emissions from an entire plant rather than for each source of pollution at a particular location.

"They're not a sweeping change," said David Wooley, a lawyer with the Clean Air Task Force.

But Wooley and other environmental advocates called the other rules proposed Friday more disturbing. Those proposals face a public hearing before final action from the EPA.

For years, industry has argued that routine maintenance and upkeep of the plants -- exempted from New Source Review in the law -- have been regarded illegally as upgrades in the plants.

The proposed rule would define "routine maintenance," putting two definitions forward for discussion. The first would allow a certain amount of money to be spent annually on upkeep, while the second would allow plants to replace specific parts with the equivalent new ones.

Environmental advocates argue the rules would amount to a permanent grandfather clause for the plants, allowing them to function indefinitely without having to reduce their pollution.

Additional reporting by the Charlotte Observer

Edwards Blasts Bush on Dirty Air

New World 'Odor' – by Bridget Gibson – December 1, 2002

"The master's finest tool was never the weapon that kept his slaves in submission. Nor was it the one that he provided to the slaves to do his bidding. It is, and has always been, one that will convince slaves they are free in a system of suppression." - Patrick Barry

(11/27/02) - Futuristic fiction writers have long tried to envision a world in which no one can make even ordinary motions that are not tracked and watched and catalogued by some shadowy "Big Brother" government. What those writers could not have known is how or why such an intrusive monster would manifest itself into our American society without so much as a blink from most of the citizenry.

The Bush administration now brings the second half of its tenure to a thunderous applause of flag waving patriotism with the unveiling of the "Total Information Awareness" program. This wonderful new product line will undoubtedly become a household name in a very short while with its astounding powers to snoop and pry into the most mundane of corners. Santa's list merely consisted of whether you were naughty or nice, but John Poindexter wants his list to have all of the details.

Details from all of your communications (telephone calls, emails and internet web searches), banking, credit card purchases, prescriptions, gun purchases, fertilizer purchases, fuel purchases, school records, medical records, travel history and driver's license applications will be catalogued and available to government officials and be placed in a supercomputer data bank for analysis and threat assessment purposes.

Will Act II be for the Internal Revenue Service to be placed in the loop for "investigative" purposes also? Will Act III be for the continued privatization of our government and the placement of well-positioned corporations into the loop to better "market" and put their "new" products into your homes?

Even those of you that read these words and believe that our government has the right to remove your privacy and open your curtains and peer into your home and personal activities should take heed. I was raised with the words of my parents ringing in my ears: "You should live your life as though any moment of it could be printed on the front page of newspaper." Well, thus far my life has not drawn that type of attention, but why would I want anyone knowing all of my habits?

Gone are the carefree days when a search warrant was a necessary invitation for the police to come into your home. I have bid farewell to the 4th Amendment of the Bill of Rights! With a longing look over my shoulder at the past and future as we knew it, I must bravely understand that all my words of dissent may become fodder for the "data analysts" that will then piece together my grocery habits and attempt to discern my allegiance to the new Fuhrer, George Bush.

I am certain that many of you reading my words today will think that I have gone over the top. I could only wish that were so. Our new "Big Brother" comes complete with one of the spookiest of the Iran-Contra spooks at its head: John Poindexter.

For those with short memories, I can only say that our nation's inability to learn from its own history has doomed us to repeat our worst mistakes. The Reagan Era White House e-mail problems began with the Iran Contra scandal and the fact that shortly before hearings on the scandal were to begin, two figures at the center of the scandal, North and Admiral John Poindexter, secretly deleted thousands of e-mail messages related to the scandal. A backup taping system saved the messages and more than seven million others created during the Reagan presidency. John Poindexter was tried and found guilty of lying to Congress and was subsequently released from prison on a legal technicality.

I cannot trust the current administration to safeguard our Constitution and am witnessing the savaging of our Bill of Rights. I can only ask that you, my fellow citizens, take heed and bear witness to speak out through all of our differences and help stop the madness.

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