Let the prosecutions begin -- Justice Department open criminal probe of Goldman Sachs

Word comes from New York that federal prosecutors have finally started the practically unconscionably delayed investigation into whether Goldman Sachs and other Wall Street traders should be held criminally liable for crashing the nation's housing market in 2006 and kicking off the global recession. Unnamed sources told the New York Times that the U.S. Securities and Exchange Commission, which last month filed a civil lawsuit accusing Goldman Sachs of fraud, referred its findings to the U.S. Justice Department. Goldman Sachs has denied the allegation in the fraud suit, which accuses the firm of defrauding investors in its Abacus 2007 AC1 collateralized debt obligations. According to the SEC, investors in the Abacus deals were not told that Goldman Sachs was simultaneously allowing other people to bet that the mortgage market would fall. When the market collapsed, Abacus investors lost millions but other investors enjoyed a windfall. One trader, hedge fund manager John Paulson earned more than $1 billion when value of bonds he helped select for Abacus investors crashed, the SEC alleged. Paulson has not been charged with any wrongdoing, the Times said. Of course, getting investigated is not the same as being charged, just as being charged is not the same as being guilty. In fact, two hedge fund managers at Bear Stearns were acquitted of criminal charges last year.

Obama avoids saying "genocide" when discussing massacre of Armenians

On the day Armenia has chosen to mark the mass killing of its people by Ottoman Turks at the end of World War I, U.S. President Barack Obama acknowledged "one of the worst atrocities of the 20th century," but didn't say the term "genocide." The careful choice of words was no accident -- Turkey is overly sensitive about what others think of it, and the United States is trying to keep Ankara engaged in the treacherous world of Middle East peacemaking, where it has been an asset . "On this solemn day of remembrance, we pause to recall that 95 years ago one of the worst atrocities of the 20th century began," Obama said in a statement issued Saturday by the White House, according to the Reuters international news service. "In that dark moment of history, 1.5 million Armenians were massacred or marched to their death in the final days of the Ottoman Empire." The remarks took on even more significance in light of Thursday's collapse of a deal to have Turkey and Armenia establish diplomatic relations and open their shared border for the first time. The deal, designed to ease tensions in the strategic south Caucasus region, apparently hung up over Turkey's demand that Armenia work out its differences with nearby Azerbaijan as a condition of the agreement, Reuters said. The region has taken on new strategic importance since the breakup of the Soviet Union because it is crossed by new pipelines shipping energy to Europe. Seen in this context, Obama's remarks were conciliatory towards Turkey, even if historically inaccurate. During his campaign for the U.S. presidency in 2008, Obama used the word "genocide" when describing the killings by the Ottoman Turks. Maybe diplomatic outreach really isn't as easy as he likes to describe it. Turkey, as we know, was angry and withdrew its ambassador to Washington in March after the House of Representative passed a nonbinding resolution that called the killings "genocide." The full body has not yet voted on the resolution and U.S. Secretary of State Hillary Clinton says the Obama administration opposes it, Reuters said.

South Korea wants international response to ship sinking

News from Seoul is that South Korea wants to wait for the international community act before it responds to a suspected attack on one of its ships by its arch enemy. Preliminary results from a South Korean military intelligence report put the blame on North Korea, its reclusive and impoverished Communist neighbor, according to a Reuters international news service report in the New York Times. The two countries have technically been at war since North Korea invaded South Korea in 1950; a 1953 armistice ended most fighting but ushered in a cold peace that has persisted since then despite occasional moves by both sides to ease tensions. North Korea's testing of nuclear weapons beginning in 2006 has heightened tensions again between the two countries and the United States, which has 28,000 soldiers in South Korea. The South Korean patrol ship, the Cheonan, sank last month with 46 aboard after an explosion, which Seoul blames on a North Korean torpedo. Pyongyang denies any responsibility for the sinking. South Korean President Lee Myung-bak told a group of visiting journalists on Friday that his country would wait until an international investigation of the incident was completed. "Just as the investigation is being conducted with international cooperation, we'll try to cooperate with the international community in taking necessary measures when the results are out," Lee said. The last pieces of the sunken ship are expected to be raised to the surface this week, Reuters said. But even if investigators determine that North Korea was responsible for the sinking, South Korea's options appear limited. A military attack on its neighbor would further heighten tensions and possibly get Russia and China involved, a replay of what happened during the Korean War. Plus, Lee faces tough local elections in June that got even tougher when citizens accused his government of being caught unprepared in the attack on the Cheonan. Lee infuriated the north earlier in the week by criticizing Pyongyang for spending money on a huge celebration to mark the birthday of Kim Il-sung, considered the founder of North Korea. Kim died in 1994.

Former top Bush administration official charged with contempt

Word from Washington that a former top Bush administration official has been charged with contempt of Congress for allegedly mistreating employees and deleting files from an office computer in 2006 is reassuring to those of us still waiting for the Obama government to fix the worst excesses of the previous administration. Federal prosecutors filed the criminal charge against Scott Bloch, the former head of the Office of Special Council, which ironically is responsible for protecting federal employees who report improper activities from retaliation, according to the Reuters international news service. Bloch had been under investigation for five years, and FBI agents seized his office computers and subpoenaed all 17 employees in a 2008 raid. Bloch resigned later that year. The charges apparently stem from Bloch's decision in 2006 to hire an outside contractor to purge a virus from his computer instead of using in-house technicians, and files mysteriously were deleted from his and other computers. The U.S. House of Representatives has been conducting its own investigation of that and of reports that Bloch had set up a separate office in Detroit to exile employees who displeased him. Bloch told the House Oversight Committee that he engaged the contractor to remove the virus. But documents filed by federal prosecutors in U.S. District Court on Thursday allege that Bloch "unlawfully and willfully withheld pertinent information from the committee" about the erasure. during an interview with the panel in March 2008, according to a criminal information filing by prosecutors in U.S. District Court. Such filings are typically used in plea agreements in which a defendant pleads guilty, Reuters said. Block's attorney, William Sullivan, would not confirm that a plea agreement was in place but told Reuters that was glad the investigation was over. Bloch had been appointed to a five-year term with the Office of Special Counsel in 2004 but ran into friction with the White House when he opened investigations into allegations that Bush adviser Karl Rove and other officials had used federal agencies for political activities, and whether laws were violated in the White House's firing of eight U.S. attorneys in 2006, Reuters said. Bloch had been a personnel lawyer at the Faith-Based and Community Initiatives office of the U.S. Justice Department before the appointment, Reuters said.

Elections in Sudan don't live up to Western standards

The United States and other Western nations didn't wait until the votes were completely counted in Sudan to begin questioning the validity of the results of the first multiparty election in the East African nation in 24 years. The U.S. State Department said Monday that the weekend balloting was "not a free and fair election," given wide reports of alleged fraud and boycotts by various groups. "It did not, broadly speaking, meet international standards," State Department spokesman P.J. Crowley said in Washington, according to the Reuters international news service. Sudan's president, Omar Hassan al-Bashir, and his National Congress Party are expected to easily win re-election and continue to dominate politics, at least in the northern portion of the insurgency-torn oil-producing nation still under the control of the government in Khartoum. But given that the election occurred at all, even flawed, was seen as a positive development by the West. The balloting fulfilled another portion of the 2005 peace deal that interrupted a 22-year civil war between Sudan's Muslim-dominated north and Christian and Animist groups in the south led by the Sudanese People's Liberation Army. The third and, perhaps, most important condition of the Comprehensive Peace Agreement is a vote on whether to permanently separate the northern and southern regions of Sudan by 2011, Reuters said. "I think we recognize that the election is a very important step" in carrying out the 2005 peace deal, Crowley said. "The United States will continue to work with the government in the north, the government in the south, as we move forward with ... the vitally important referenda that'll happen in January of next year." Initial polls indicate Bashir's party would receive as much as 90 percent of the vote in northern Sudan, Reuters said. In a separate statement, delegations from the United States, Britain and Norway -- guarantors of the peace deal, said the election suffered from poor preparation and other irregularities and called on the Khartoum government to fix these problems before the next round of voting. "We note initial assessments of the electoral process from independent observers, including the judgment that the elections failed to meet international standards," the three countries said in a statement. "We are reassured that voting passed reasonably peacefully, reportedly with significant participation, but share their serious concerns about weak logistical and technical preparations and reported irregularities in many parts of Sudan. Observers from the European Union and the Carter Center also said the elections did not meet international standards. Bashir still faces genocide charges filed last year by the International Criminal Court in The Hague over hundreds of thousands of killings in the Darfur region of eastern Sudan, where millions were displaced by conflict between the Khartoum government and ethnic rebel groups that was not related to the 22-year war between north and south.

Toyota agrees to pay $16 million fine to U.S. regulators

So, what's up with Toyota? News that the Japanese automaker had agreed to pay a $16.4 million fine to U.S. regulators over sticky gas pedals in millions of its cars is Toyota Motor Corp. appears almost outrageously integral and honest, but that only makes things even weirder. Can anyone remember another time when a large, multinational corporation did the selfless thing in favor of its customers? Then again, can anyone remember another high-profile industrial company that so quickly ruined a sterling reputation it had earned over the years with high-quality products? Maybe Toyota's decision to pay the fine and focus instead on fixing millions of its cars and compensating victims really is an act of corporate contrition, and not a calculated attempt to limit future liability like we've all come to expect from U.S. companies. Then again, Toyota's present liabilities are bad enough. Legal experts say Toyota already could be facing $10 billion in damage claims, according to the New York Times. The U.S. fine was imposed to punish Toyota for failing to inform federal safety regulators for months about the sticky accelerator problem, even though it already had enough reports about the problem from car owners in Europe and Canada to have started fixing vehicles there, the Times said. "We did not try to hide the defect to avoid dealing with a safety problem," Toyota said in a written statement, even though that appears to be exactly what happened. Toyota said it had made a "good faith" effort to fix the problems but agreed to pay the penalty anyway to avoid a long legal fight. U.S. Transportation Secretary Ray LaHood said Toyota had put consumers at risk by failing to report the defective accelerator pedal problem and that U.S. officials would continue with their investigation, the Times said.

Goldman Sachs charges could be first of many

News that the U.S. Securities and Exchange Commission had filed civil charges against Wall Street trading giant Goldman Sachs and one of its officers is a signal that the Obama administration is continuing to pursue its investigation of the financial collapse that thrust the country, and the world, into the worst economic crisis since the 1930s. The lawsuit, which accuses the bank of devising and selling an investment product that was secretly designed to fail, could be the first of a series of government actions to punish companies and executives who behaved boorishly and prevent them from doing so again. It should, of course, be clear to everyone by now that this crisis was not caused by some uncontrollable and unexplainable economic forces but by human greed and regulatory inattention, and that the former is likely impossible to remedy but the latter is not. So it is at least reassuring that the White House is still pressing the case for tighter regulation of Wall Street. Of course, Goldman Sachs denies that it did anything wrong in designing and promoting a line of investment products to bet against the housing market, including one called "Abacus" that lost more than $1 billion, according to the New York Times. In a written statement, Goldman Sachs called the accusations “completely unfounded" and pledged to “vigorously contest them and defend the firm and its reputation.” But Robert Khuzami, director of the SEC enforcement division, said in his own statement that Goldman Sachs designed the investment products to fail and even allowed a hedge fund manager who stood to earn billions of dollars if they failed to help choose what to invest in. "Goldman (Sachs) wrongly permitted a client that was betting against the mortgage market to heavily influence which mortgage securities to include in an investment portfolio,” Khuzami said. That client, a prominent hedge fund manager identified in the lawsuit as John Paulson, made nearly $4 billion in 2007, the Times said. The SEC suit also named Fabrice Tourre, a Goldman Sachs vice president who helped create and sell the investment products, the Times said. Then again, the lawsuit filed by the SEC is a civil complaint, meaning that if it is successful, and there really is no way at this point of knowing whether the government is correct, the defendants can only be forced to pay back their ill-gotten gains and possible monetary penalties. What everybody in the country is waiting for -- Wall Street excepted, no doubt -- is when the criminal complaints that carry the likelihood of prison time will be filed.