D.C. & Capitol Hill Politics Intertwine MLB Ownership

By Diane M. Grassi

For those of you who do not care about politics and for those of you who do not care about Major League Baseball (MLB), the two are about to be permanently joined at the hip due to the location of the Washington Nationals Baseball club and Major League’s Baseball hunt for its first owner of the team, which is expected to be announced over the next week or so.

MLB Commissioner, Bud Selig, has been promising for over a year now to sell the Washington Nationals, formerly the Montreal Expos, to an owner who agrees to pay MLB $450 million for the club. The Nationals have been collectively owned by the 29 other MLB teams since February 15, 2002, when the Expos’ then- owner, Jeffrey Loria, sold the team for $120 million. Then after three seasons, the club was relocated to Washington, D.C. and renamed the Washington Nationals in 2005.

But the history of negotiations goes back to Bud Selig’s placating Baltimore Orioles owner, Peter Angelos, who refused to budge on allowing another Major League franchise to exist within a 100-mile radius of Baltimore. The details of what Selig whispered into Angelos’ ear to allow the relocation to go forward have never been confirmed, but all Nationals’ fans need do is to try to find a game broadcast on TV. Mostly, they will be unsuccessful, as Angelos, who controls the Mid-Atlantic Sports Network (MASN), and Comcast Broadcasting are still quibbling about the TV airing rights of Nationals’ games. Only a handful of Nationals’ games are now broadcast in D.C., with 90% of the revenue going to Angelos. MASN was put together by MLB in order for the Nationals deal to go forward, but seeing the games on TV remains a continuing problem for fans.

Without a TV and broadcast partner, it will be up to the new owner to try and secure broadcasting rights for the Nationals, including broadcast revenue. But before that can even be addressed, Selig must finish his evaluation of what were originally eight different groups bidding on the team, and now pared down to the last two or three contenders, depending upon which newspaper or sports pundit to which you happen to listen.

After months and months of negotiations with the D.C. City Council to solidify a lease for the new stadium, expected to be ready for the 2008 MLB season, the Commissioner decided not to include the new ownership in the lease deal. But in the meantime, the cost of the stadium over the past year has risen from an estimated $537 million to $611 million. And it has just been revealed that the cost may be $10 million more if the city wishes to meet state-of-the-art environmentally friendly building standards.

But all potential ownership right now has to worry about is being politically correct and to make all kinds of promises to MLB as well as to Washington, D.C. lawmakers, in order to secure the team. The Nationals are now going to be used by MLB as the poster child for recruiting the black community back to baseball. However, the way it is being done will probably fall on deaf ears to the very ones MLB is supposedly trying to reach.

Where is this all going? Well, believe it or not Bud Selig wants to include in his legacy as being the MLB Commissioner who reinvigorated African-American athletes back into baseball, by insisting on an African-American owned team, and one which must have ties directly to Washington, D.C.

But whether the ties are to the Washington, D.C. residential community or are ties to the White House and Capitol Hill, is in question, as the list of investors looks more like a group of political action committees rather than potential baseball team owners. Look beneath the surface and you will find that campaigning for owning a baseball team in D.C. mirrors that of running for political office.

Bud Selig has made it clear: white rich guys need not apply. However, the idea that rich black guys will attract black children and young men to become interested in baseball is short-sighted. For black community leaders do not need to buy a $450 million baseball team to show devotion to their community and stir baseball interest. Such money could have been spent developing city recreation areas, better developing Little Leagues, building parks with baseball diamonds by creating more open space, encouraging physical fitness in the public schools and buying blocks of tickets for D.C. children to attend MLB games on a regular basis in Baltimore or in Washington, D.C.

Just like most American voters do not care about who the personnel is at the White House, but rather the White House’s public policy issues, the Washington D.C. black community will not increase their interest in MLB because a group of politically powerful and connected rich African-American males own stock in the team. And like disconnect on Capitol Hill between the U.S. Congress and its constituents, there is a potential disconnect between team investors or board members and the very fans they are expected to enlighten.

For example, the supposed three remaining groups of team bidders are the Lerner-Kasten Group, the Smulyan Group and the Malek-Zients Group. Although all are not quite perfect enough for Selig, however, who MLB insiders have said he requires a group which has significant black American investment as well as local ties to Washington, D.C. Although each group commands business savvy and are politically connected, it has weighed on Selig in his making up his mind.

Jeff Smulyan, former owner of the Seattle Mariners, heads a group of prominent Washington, D.C.- based African- Americans such as former Washington Redskins, Art Monk, Calvin Hill and Charles Mann; former U.S. Attorney Eric Holder; Radio One President, Alfred Liggins; and local banker, Dwight Bush. Smulyan also owns Emmis Broadcasting which could prove useful in negotiations of broadcast rights for the Nationals. But the knock against Smulyan is that he has been dubbed by D.C. politicians as an “outsider” as he does not presently live in the D.C. area. Yet, Smulyan black investors would comprise a 45% interest in the team.

The Lerner Group, headed by real estate developer, Ted Lerner, just this past week joined with Stan Kasten, who had been separately bidding on the team. Kasten brings with him a 17-year career as the former President of the Atlanta Braves. He also remains a friend of Selig’s. Ted Lerner has developed numerous shopping malls in the D.C. area and supposedly played a role in wooing the Expos to D.C. He brought aboard several local African-American investors, albeit a little later than the other groups. For that he has been criticized by the D.C. City Council, including MLB. His group includes Rodney Slater, former Secretary of Transportation under President Bill Clinton; Doyle Mitchell, CEO of Industrial Bank, N.A., locally owned in the D.C. area; CBS NFL broadcaster, James Brown; and BET executive Paxton Baker.

And the Fred Malek-Jeffrey Zients contingent offers the most political capital of all the groups. But if one is not looking to wind up on Capitol Hill, it could be argued that these are politicians and not community leaders for the inner city of Washington, D.C. The investors include former Secretary of State, Colin Powell; Howard University President H. Patrick Swigert; Vernon F. Jordan, former legal counsel to President Clinton; Anthony A. Lewis, Chairman Elect of the D.C. Chamber of Commerce and President of Verizon Communications in, D.C.; and local businessman, George Haywood. Malek was a major figure in the Republican Party for over 30 years, working in the Nixon Whitehouse, was an associate of former President George H.W. Bush, and was instrumental in securing President George W. Bush’s previous ownership of the Texas Rangers.

Selig’s ultimate decision comes down to a mix of power brokers, media moguls and financial investors which hardly represent the interests of the middle and working class residents of the D.C. metro area. These particular African-Americans may prove to be no more connected to the D.C. black community’s interest than the white collaborators who initially landed the Nationals there.

In sum, these following figures perhaps should prove more meaningful to the Commissioner of MLB than the head count of African-Americans on a Board of Directors: in 2005 there were a total of seven minority club managers in MLB, which fell to five after Lloyd McClendon of the Pittsburgh Pirates and Tony Pena of the Kansas City Royals were let go. Ken Williams of the Chicago White Sox remains the only African-American General Manager in the game. And in the past thirty years, MLB lost more than two thirds of its black players. In 1975, nearly 30% of all MLB players were black. Today, black players total less than 10% while Latino players are over 30% and Asian players total about 3%.

Instead of making it appear as though MLB is doing something to re-introduce baseball to black America by changing the color in the boardroom, they need to start from the ground up, rather than from the top down. That starts by promoting more black coaches to managers from the minor leagues on up to the Major Leagues. As it has proven over the past decade, MLB has vastly increased its dedication to recruiting players from Latin America and more recently the Far East.

But if MLB expects to continue to be referred to as America’s Pastime, it will need to do a far better job of recruiting right here at home, where there still remain a ton of great athletes from the black community. But they will not find them on Capitol Hill or in ivory towers, but rather in their very own backyards.

CHINA SOLE MANUFACTURER OF MATERIAL FOR U.S. MISSILES

By Diane M. Grassi

It was in his 2003 State of the Union Address that President George W. Bush expressed his administration’s objective to “strengthen global treaties banning the production and shipment of missile technologies.” It was thereafter, between 2003 and 2004, in which the Committee on Foreign Investments in the United States (CFIUS) allowed the last manufacturer in the U.S. that provided a key element instrumental in cruise missile guidance, to be relocated to the Peoples’ Republic of China.

During this week’s U.S. visit of China President, Hu Jintao, and his meetings with President Bush and his advisors, it would be apropos to revisit a strategic corporate deal which occurred over a period of several years. With its finality in 2004, the U.S. now remains totally dependent upon China for key rare earth metals and their production necessary in the manufacture of the most crucial of U.S. military warfare.

The CFIUS decision in January 2006, regarding the approval of the Dubai Ports World Company, to take over port operations of the six largest East Coast ports in the U.S., not only raised many U.S. Congressional eyebrows but set off a strew of newly proposed legislation, to include more transparency between CFIUS and the U.S. Congress. But CFIUS has long had a precedent of approving such business transactions, and the ports deal was only the latest of such. As the deal approval became known to the public via AP reporter, Ted Bridis, in February 2006, apparently even he was more in the loop than the lawmakers on Capitol Hill. However, there have been close to 2,000 other deals approved by CFIUS since its inception in 1988, many of which should have involved and concerned the U.S. Congress much sooner.

It is the lack of accountability of the secret CFIUS committee, presided over by the Secretary of the Treasury, which has only of late concerned the U.S. Congress, and with its machinations just recently disclosed to the public. And it was the Dubai Ports deal which exposed the seemingly arbitrary fashion, and unanswerability to any other branch of government which was disturbing. For the decisions CFIUS makes ultimately becomes the responsibility of the U.S. federal government, while possibly compromising its best interests, including U.S. national security.

As it is, the Department of Defense has problems procuring necessary equipment and manufacture of parts from foreign entities, where national security must be weighed over acquisition of parts from offshore. Yet at the same time, the U.S. government has pushed the concept of global trade, often in direct conflict with the protection and national security of the U.S.

Producing powdered neodymium-iron-boron permanent magnets is critical to enabling control of aircraft and more specifically cruise missiles guidance systems as well as the Joint Direct Attack Munition or JDAM bomb, used prominently in the 2003 bombing of Baghdad, which preceded arrival of U.S. ground troops there. Magnequench UG, although still headquartered in Indianapolis, IN, is the sole provider of specialized magnets for military aircraft systems. But it closed down its manufacturing arm permanently in 2004 and finished relocating operations to China at that time, with its operations now solely controlled by Chinese companies with direct ties to the Chinese government.

Magnequench magnets are produced from a unique patented process of sintering specialty metals. They are used by various electronics and aviation companies, but Magnequench’s primary client is the Pentagon, leaving the U.S. in a rather precarious position with China. Enjoying 85% ownership of the world’s market of rare earth metals, required for its magnet production, Magnequench’s factories are now located in Batou, China. It is there that the world’s only operating rare earth mine exists. Thus, China now owns a monopoly on the manufacture of missile magnets which the U.S. military is dependent upon for its most sophisticated technology and weaponry.

Magnequench’s relocation culminated following several years of what started out as a General Motors subsidiary company in 1986. General Motors was responsible for the development of the manufacture of a permanent magnet material in the early 1980’s and began its production in 1987. In 1995, Magnequench’s majority interest was purchased from General Motors by the Sextant Group, which was comprised of two Chinese companies, San Huan New Material and the China National Non-Ferrous Metals Import and Export Corporation. It is reported that few in the industry or in the federal government knew which companies formed Sextant at that time.

Three years later, after commitment from Magnequench CEO, Archibald Cox, Jr., that its two Indiana-based plants would not be shuttered, its assembly line for magnets in Anderson, IN was shipped to China. In 2000, GA Powders, a subsidiary of Magnequench, originally a Department of Energy project, was relocated from Idaho Falls, ID to Tianjin, China. And in 2004 Magnequench’s other Indiana plant in Valparaiso, IN, responsible for production of elements of the JDAM bomb was shut down and shipped to China. Although there was an “agreement with GM” from Cox that the plant would remain in Anderson, IN according to Clyde South, a negotiator for the United Auto Workers Local 662, Magnequench proceeded to eliminate all of its domestic manufacturing jobs anyway.

Under the 1988 Exxon-Florio Amendment to the Defense Production Act, President Bush could have ordered San Huan New Materials to divest its holdings in Magnequench, as it manufactured a strategic asset. The President was pressed to do so by Congressman Even Bayh and Congressman Pete Visclosky, both of Indiana in 2003, but the President chose not to intercede. In 1990, however, President George H.W. Bush ordered China’s government-owned National Aerospace and Export Company to divest its interest in Mamco Manufacturing of Seattle, WA. At that time it was feared that China would use Mamco to acquire its jet fighter technology.

In addition to this particular example of guidance missile manufacture, the acquisition of titanium is also becoming a problem for the military in procuring spare parts and for its manufacture of its aviation vehicles. The Pentagon continues to have conflicts with the Congress on waiving the Berry Amendment. Enacted in 1941 and updated in 1972, it requires that specialty metals, including rare earth metals, titanium and super alloys, be manufactured in the U.S. for its weapons systems, unless otherwise unattainable. But as more and more American companies relocate offshore, the lines drawn become less and less clear.

And while not appropriate to put the blame of the offshoring of strategic assets on any particular President or branch of government at this time, it is appropriate, however, to see how various factions of the three branches of government, along with the loosening of corporate and industry regulations over the years, have cumulatively jeopardized the interests of the U.S. It is important that lawmakers therefore not become hawkish over the observance of our laws only when it becomes convenient to win political capital, but to how best serve the interests of the U.S. For the ramifications of business as usual when it comes to strategic assets could do irreparable future harm to America’s most vital asset, that being the American people.

Deficit Reduction Act Requires Proof of Citizenship for Medicaid

By Diane M. Grassi

In the midst of numerous proposals before the Senate regarding legislation concerning the legalization of illegal aliens has arisen a little known provision of the recently signed 2005 Deficit Reduction Act. On February 8, 2006, President George Bush executed a bill into law which now requires recipients of Medicaid benefits to provide either an original birth certificate or passport in order to apply for or to continue to receive their health care benefits, commencing July 1, 2006.

The Medicaid program, available to American citizens who fall into a specified low income bracket, provides health care to adults and children, as well as the elderly and those in nursing homes. While much hand wringing and spin continues in the U.S. Congress regarding how to best deal with the status of illegal aliens, which directly impacts costs of U.S. government entitlement programs, this new requirement has yet to be discussed. As the result of the newly passed Massachusetts universal health care plan, which will include the Medicaid program, the new provision was just publicly revealed.

However, the present requirements for Medicaid require no such documents, relying only upon a signature of the applicant to certify whether or not they are an American citizen. And as a result of the unaccountability for Medicaid fraud abuse over the past several decades, the U.S. government may be penalizing the vast majority of law abiding citizens, according to numerous patient advocates. But the issue is more about the continuing lack of enforcement of U.S. immigration law rather than an attempt to cut down on Medicaid fraud.

According to Families USA, a consumer advocacy organization, the disabled, the mentally ill, the homeless, the elderly and the chronically ill will unfairly suffer as the result of this new proviso, as they would have difficulty accessing copies of birth certificates, and would be far less likely to own a U.S. passport. Therefore, they will be unfairly denied necessary health care beginning as early as July 1st. Meanwhile, hospital emergency rooms may still not turn away any person of any status nor may they ask the legal status of any patient, according to the Emergency Medical Treatment and Labor Act of 1985.

While patient advocates may be correct regarding the most vulnerable being put at risk, on balance it would seem that without addressing social services’ access requirements across the board, with respect to illegal aliens, it does seem quite unfair to put this burden only upon Medicaid recipients at this late date in 2006. Furthermore, there are no set mechanisms yet in place nor systems between federal and state governments for enforcement of the law. Such a sweeping change should require administrative oversight by the Center for Medicaid and Medicare and require necessary outreach to patients for this purpose well ahead of such changes.

But perhaps for those desperately trying to get copies of their birth certificates at this time, there could be some breathing room as another debate brews relative to the validity of the law itself, based upon the U.S. Constitution. When President Bush signed S. 1932 on February 8th, according to House Speaker of the U.S. House of Representatives, Dennis Hastert, the President actually signed a different version of the bill than the House of Representatives actually passed.

Representative Henry Waxman (D-CA) on March 30, 2006 stated, “I have learned that the Speaker of the House advised the White House of the differences between the House-passed bill and the bill presented to the President before the President signed the legislation.” Representative Waxman is now calling for a Resolution of Inquiry which requests all documents relative to the 2005 Deficit Reduction Act which the President signed on February 8th. So far the White House has failed to respond.

Whether or not Representative Waxman truly cares about the Constitution or is doing that which is politically expedient for himself, is of concern. Firstly, the discrepancy in the Senate Bill signed was different in substance from the House Bill. It impacts some $2 billion in spending for “durable medical equipment” such as wheelchairs and oxygen for those in the Medicare program, which provides health care to the elderly and the disabled. At issue, is the length of leases for durable medical equipment which was 36 months in the House version and 13 months in the Senate version.

During transmission of the final bill to the President, the Senate Clerk made a change to the legislation. It no longer contained the Senate amendment which provided for 36 months for oxygen equipment. The Senate Clerk upon learning of the mistake advised House Republican leaders in January 2006, well before the date of February 8, 2006, the date the President signed the bill. The error failed to be corrected. But according to Article I, Section 7 of the U.S. Constitution, both the House and the Senate must include the same substance and version of a bill which is required for presentation for signature by the President.

So the entirety of the law has been put in jeopardy and could eventually wind up in the Supreme Court, as there exists precedent. In the case of Field v. Clark, 143 US 649 (1892) the Court wrote that the burden would be to prove that the House Speaker and President were deliberate and purposely signing the wrong bill. That in fact is what Waxman contends, when on March 15, 2006 he wrote a letter to then White House Chief of Staff, Andrew Card, “seeking information on the President’s knowledge of the bill’s constitutional infirmity.”

While Waxman’s inquiry provides interesting fare for a Constitutional Law class, the scope of the 2005 Deficit Reduction Act is perhaps getting lost. The new Medicaid documents requirement being served up as a tightening of immigration law enforcement is almost laughable. And those patients in wheel chairs and those patients requiring oxygen will most likely not be notified of a cap on their benefits until after that period of 13 months expires. Previous to the 2005 law, wheelchairs and oxygen and durable medical equipment were provided patients indefinitely.

If indeed the President made an error, it should be addressed if anything, to give clarity to the Medicaid and Medicare patients it impacts. And furthermore, should Representative Waxman pursue the legality of the new law, that he would take the approach that it was a procedural oversight which should be either amended appropriately or pursued in the present session of Congress. But it will require the cooperation of both the Congress and the Executive branch of government, keeping in mind the most vulnerable of U.S. citizens. For there must be some measures of government which transcend politics.

IRS PROPOSAL ALLOWS INCOME TAX INFO TO BE SOLD

By Diane M. Grassi


The date of April 15th is a date not necessarily fondly referred to by a good many Americans, because it is representative of more anxiety than delight. Nor does the Internal Revenue Service (IRS) elicit terms of endearment even for those who might enjoy an income tax refund upon filing their tax returns each year. But it is specifically the preparation of tax filing which has become ever more complex over the years which continues to lead many filers to third party tax preparers, such as accounting firms and tax preparation services. In order to adequately abide by requirements in the convoluted IRS Code, trust has been extended to tax professionals by many taxpayers in order to avoid the risk of mistakes being made.

Also of concern to taxpayers is not only that their income tax preparation be filed correctly and lawfully, but that the handling of filers’ most sacred and valuable information is protected from theft, misuse, or abuse. Therefore, the latest proposed changes to the IRS Code as published in the Federal Register on December 8, 2005, has rallied consumer protection advocates and members of the United States Congress to take issue with such change to Section 7216-3 of the IRS Code. But the recommended changes only came to light to not only the public but to members of Congress, just three weeks before a public hearing on these new rules at the offices of the IRS, which took place on April 4, 2006.

Unfortunately, the period allowed for submitting public comments for the hearing was closed on March 8, 2006 at the same time that the proposed changes were discovered by consumer advocacy organizations and not lawmakers. Disconcerting is the way in which the proposed changes have been drafted and the arguably surreptitious way in which such changes were made as part of an overhaul of the Code, not amended since 1974. Supposedly, the redraft is an effort to modernize the Code with rules relevant to electronic business transmissions and the advent of technology since the 1970’s.

The new language will require all taxpayers using a third party tax preparation service to specifically sign documentation which provides for the selling of tax information data to outside marketers, database brokers or financial institutions. Further, signed documentation would be required in order to allow such U.S. tax preparer to offshore such tax work, such as specifically to India. But the interpretation of the actual language in the new proposed Code, including the risks in taxpayers unknowingly signing such papers unaware of their implications, is what has raised doubts. Of concern, is whether the taxpayer will be appropriately warned about what it is they are actually signing, when overwhelmed by a bevy of papers to execute.

According to IRS Commissioner, Mark Everson, the proposed changes actually improve the safeguards of taxpayer information and are “not significant.” But upon closer examination, they increase the chances of identity theft and fraud not only throughout the U.S. but across the globe in India, where prevention of security breaches rely largely on an honor code rather than dictated by law. Thus, a U.S. tax return, far greater and detailed than any other personal financial document, becomes ripe for the picking.

Although the basis for the IRS proposed code changes is the use of electronic transmissions and new software technologies in the tax filing system, selling information and offshoring tax preparation do not have a direct bearing upon the mechanics of tax filing. The IRS also argues that the 1974 Code, or our present tax law, already provides for tax preparers to profit off of a tax client’s information by selling it. But that information specifically refers to an “affiliated” company of the tax preparer only. With the new changes, tax preparers would be permitted to sell tax information to any third party, affiliated or not.

However, there is a “warning” printed on the consent form for third party permission which clearly states: “Once your tax return information is disclosed to a third party per your consent, we have no control over what that third party does with your tax return information. If the third party uses or discloses your tax return information for purposes other than the purpose for which you authorized the disclosure, under federal tax law, we are not responsible for that subsequent use or disclosure, and federal tax law may not protect you from that disclosure.”

Thus, any third party may sell such information to any other third party business without disclosure to the taxpayer nor any accountability on the part of the tax preparer or the IRS, once initial consent is given. The term length of said consent would supposedly be limited to one year. But without accountability mechanisms in place, unenforcement of the term will remain.

How the IRS can argue that such new rule changes would allow for better privacy controls is dubious at best. With respect to privacy controls in India, there is even less scrutiny, as the arm of U.S. law does not extend to any tax preparation in India nor any offshore locality. Steven Ladd, CEO of Copanion, Inc., and a Certified Public Accountant for over 25 years, testified at the IRS Public Hearing on April 4th. He stated, “Security flaws in offshore tax preparation encourage cyber terrorism by those who would victimize every family in our country.” Ladd, who operates an accounting firm in New Hampshire, went to Bangalore, India in pursuit of offshoring his own tax preparation business, in order to save on overall costs.

After spending over 60 hours with several large and small firms there, Ladd was “Shocked at the lack of adequate security present at all of them.” He said, “Offshore tax preparers (including data entry workers, accountants, supervisors, IT staff, consultants and owners can see the taxpayer’s name, address, Social Security number, date of birth, phone number, wages, mutual fund broker, bank and bank accounts with their routing numbers. It is the ultimate pot of gold for an identity thief. 1040’s are like an exposed wallet just waiting to be lifted by a career pickpocket." And Ladd specifically proposes adding a warning related to tax preparation outsourced outside of the U.S.

Bankrate.com, a consumer magazine, researched data brokers Choice Point and DocuSearch and the worth of various pieces of data contained in a U.S. tax return: education history $12.00; credit history $9.00; worker’s compensation record $18.00; bankruptcy information $26.50; military record $35.00; Social Security number $8.00; date of birth $2.00; address $.50; phone number $.25. And how much other information will potentially be sold from a 1040 form has not been addressed. Not only does a taxpayer enjoy no compensation for the information, advocacy organizations have further warnings. Non-trained tax preparers, unfamiliar with the new rules, or those who gain commission or remuneration for having clients sign off on allowing third party use and offshoring of their information, may potentially exploit the taxpayer.

A letter in March 2006 to IRS Commissioner Everson from 47 state attorneys general stated, “There is simply too much at risk for American taxpayers, particularly with respect to the ongoing scourge of identity theft, to increase the likelihood that their most personal information will be stolen or misused.” Senator Barack Obama (D-IL), as well Senator Charles Schumer (D-NY) and other members of Congress, plan on introducing legislation which would ban the sale of tax return information to third party companies, should the new rules be approved. But the law is thus far silent on the offshoring of tax preparation in the future for those filers who prepare their returns themselves.

What does remain clear, however, are the uncertainties with controlling information once taxpayers give consent to either allow their information to be sold to data brokers, marketers or financial institutions or any third party on the open market, without limitation, and/or be offshored. More importantly in the long term, is whether the public trust in the sanctity of the U.S. income tax system will suffer and be irrevocably lost.