Monday, March 16
UT Ranked Among Most Corrupt
January 6 by FCD Administrator
Filed under Current, Guest Articles, Utah Gov't Corruption
A recent survey published in the New York Times as part of its article Which is the Most Corrupt State? Where researchers asked state house reporters to assess their subjects and ranked responses on a scale of 1 (clean) to 7 (crooked). Utah's State Officials ranked #15, among the most corrupt in the nation.!!
Top, Corruption, nation study, new york times, Obama, state house, Utah
Utah: Records Release Escalates Charges of Gov't Corruption
January 6 by FCD Administrator
Filed under Current, Principle 11, Utah Gov't Corruption
SALT LAKE CITY, January 6 - New evidence signals for the first time that prominent members of Utah Governor Jon Huntsman's Department of Commerce may be directly involved in illegal, and sometimes criminal activities.
On Monday January 5, Utah County businessman and talk radio host C. Rick Koerber announced that he will begin releasing to the public a mountain of evidence implicating several government employees and officers.
The evidence is in the form of secret audio recordings, photographs, recordings of telephone conversations and printed documents authored by Utah officials. Beginning Friday January 9 Koerber has announced his plan to publish in a series information releases including web links to audio files and. Pdf documents. Given the current climate and the behavior of these people I just decided that it wasn't worth letting things continue with business as usual, said Koerber. I think its best for everyone if the truth was revealed and everyone can see how things are done by some of Utah's top ranking bureaucrats.
A few key individuals seem to enjoy ruining the reputations of sincere, hard working men and women and its costing normal every day citizens their jobs, their retirement, and in some cases their life savings. I bet not a single one of them has ever created a real job and several of them seem to think they are above the law.
The evidence being released implicates several Department of Commerce personnel including Utah Securities Division Enforcement Director Michael Hines, Enforcement Analyst Jennifer Korb, Licensing examiner A. Gary Bowen, former Division Director Wayne Klien and former Division of Real Estate officer John Brown. Among the more then fifty recorded segments and documents in Koerber's possession government employees are revealed lying, admitting conspiracy, misstating the law, admitting coercion, threatening witnesses, leaking protected information, bragging about excessive power and discretion and in at least one instance possible violations of a federal court rule prohibiting certain disclosures related to a grand jury proceeding.
Koerber is part of a growing number of Utah businessmen turning to State lawmakers and to the courts in an effort to reign in the alleged abuses by appointees, staff and employees in Gov. Huntsman's Department of Commerce.
Henry S. Brock, a Utah based CPA associated with Americans for Civil Rights, is another local businessmen who is fed up with the Utah Department of Commerce and has created a laundry list of documented abuses on the ACR website where a petition is being circulated to pressure lawmakers to take action. Whether you are a doctor, contractor, realtor, or financial advisor, we all have similar concerns, writes Brock, who uses the recently released State Audit of one division inside the Department to call attention to what he calls widespread abuse.
In what is becoming increasingly discussed nationally, Utah's state officials, under Gov. Huntsman's tenure, are now ranked, according to a recent study published by the New York Times, as one of the top 15 most corrupt States in the union.
In December lawmakers approved a State audit of the Department's Division of Securities which uncovered an array of problems including impropriety, internal conflict, coercion, violations of due process, and numerous other failures in its official 43-page report released in July.
The audit only uncovered the tip of the iceberg claims Utah businessman James Claybourn. If you read the audit carefully you'll notice that it only looked at a few cases, and that it also describes the need for much further investigation.
Claybourn, Brock and Koerber are part of a growing business community increasingly disillusioned by the lack of attention and scrutiny being directed at the widely reported abuses by the Department which operates under the sole elective oversight of Huntsman and his appointee Department of Commerce Director Francine Giani.
Koerber hopes that by announcing the systematic release of the recordings and documents he's been gathering over the last several years that a more thorough investigation of the Department will be conducted and that the State legislature will not take only small, token efforts at reform.
Look, the situation in the Department of Commerce is out of control. They brag about being able to break the law, about ruining people's lives and they regularly demonize small businessmen who are supposed to be treated as innocent until proven guilty, extols Koerber.in today's financial climate bureaucrats should not be freely spreading lies and acting like they are above the law, forgetting that small businessmen and women are citizens deserving of equal protection under the law. It's just plain wrong.
In fact, the Department has had to drop fraud charges and issue public apologies in the past for erroneously accusing businessmen of fraud and misconduct using punitive premature media, for example its March 30 release related to Gary W. Teran and Carl A. Page of First Western Advisors.
The Department has been gaining a growing number of critics that extends beyond the business community. Over the last year, several government insiders, including at least one former Executive Director and one former Division of Securities Director, have suggested that a changing of the guard is urgently needed along with several substantial reforms.
The Utah legislature has also begun addressing the reported impropriety, however, several prominent Utahans, are concerned that the gravity of the situation is not being fully appreciated by lawmakers.
The bills [being proposed] are grossly inadequate and do not go far enough to protect the constitutional and civil rights of all licensees under the Department of Commerce, including the Division of Occupational and Professional Licensing, the Division of Real Estate, and the Division of Securities, says Brock. Regulators are not above the law, and are accountable for their acts in relation to the public trust reposed in themthe Legislative Auditor's Official Report said that employees within the agency themselves fear to speak-up due to reprisals, and the licensees are certainly fearful of retribution; hence, an unwillingness to speak out on legislation such as this.
I have no doubt there may be reprisals against me for speaking up. One disturbing example of such reprisals involves State Representative Carl Wimmer who began looking into potential abuses by Huntsman's Department in 2007. After learning of Wimmer's inquiry, then Securities Division Director Wayne Klein fired off an email to State Attorney General Mark Shurtleff suggesting that Wimmer should not be trusted and that his efforts be downplayed because he was an investor in one of the companies being investigated by Klien. Wimmer, however turned out not to be an investor in any company being investigated by the Division.
A government bureaucrat, trying to sabotage a State legislator to protect his territory - this is exactly what they do. Said Koerber. If you accuse them of wrong doing they line up a row of supposed victims of fraud-never mind that the story of fraud might be entirely made up by the regulators-and suggest that by attacking the government you are somehow harming or being insensitive to potential victims.
In one of the audio recordings yet to be released by Koerber, Klien can be heard justifying his division's targeting of Koerber himself because of statements made about Klein on Koerber's his talk radio program and because of legislative scrutiny being brought on the Department by Rep. Wimmer and his colleague Rep. Jim Bird, pressure which Klein seems to attribute to Koerber.
KLEIN: Part of the problem is that I've been painted in a corner because you're client has gone on the radio and publicly accused us of stuff. He's got legislators out there trying to cut our powers because what we're doing as if he's entirely right in what he's doing and government is unfairly coming after him. So ordinarily we have more flexibility but where I've got public attacks coming in saying we're being accused of being unfair[interrupted].
Within a month of the announcement of last year's audit and amidst a storm of controversy Klein resigned from his position as Securities Director. But in commentary released after the release of the official audit, Audit Manager Tim Osterstock immediately preempted any suggestion that Klein's resignation would solve the problem. It's not just a director, it's an organization, Osterstock said.
One Department of Commerce insider, who requested to remain unnamed for fear of reprisal, confided about the Department and actions taken by Executive Director Francine Giani, You have no idea how crazy this place is. Its all about territory, power and egos. Once the audit came out Francine put on a happy face but things around here got put on lock down. Quite frankly, so long as Francine and people like Michael Hines have free reign, I would hate to be a business owner in Utah.
Regarding Koerber's January 5th announcement that these recordings will be released to the public, this same insider remarked, This is extraordinary evidence, I hope it starts to get the kind of attention it deserves.
Huntsman who has been Utah Governor since appointed Giani to her present position in and has remained silent since the scandal started brewing in 2007. Several businessmen, lawmakers, citizens organizations and government insiders now appear committed to making sure his Department doesn't escape legitimate scrutiny and reform.
Rogue Agency Arrests Utah Mom
September 8 by C. Rick Koerber
Imagine you're Annie Bradley, a married stay-at-home mother of eight. Two weeks before your 43rd birthday, its 9:00 pm and you're sitting down with your husband and two house guests discussing a very difficult topicthe sale of your home. Uncharacteristically, your seventeen year-old daughter interrupts the discussion with a stunned look on her face, informing you that police and federal agents are surrounding your house. An armed Sheriff's deputy has followed closely behind her and now stands before you asking, Are you Anna L. Bradley?
The scene in the Bradley's neighborhood Tuesday was much like something you might expect to see on the big screen, or read about in one of those hard to believe mystery novels. But for Annie, her husband Randy and their eight children, it was a very real nightmare.
I begged them not to take her, explains her husband. He couldn't understand why law enforcement was at his house in the middle of the night, demanding $10,000 cash for bail, or they were going to be taking his wife. At 9 o' clock in the evening, when banks and businesses are closed, it's close to impossible for an average family to come up with that kind of cash.
So, at approximately 9:41 pm, after local agents from the Utah County Sheriff's office, accompanied by at least two federal agents, had surreptitiously surrounded the family's home and afterwards made quite a scene for the neighborhood, law enforcement agents placed Annie Bradley under arrest, handcuffed her, and led her the long way across the front lawn, in front of inquiring neighbors, stunned house guests, her confused and bewildered husband, and perhaps most difficult, in front of her sobbing children.
When asked why they were doing this in the middle of the night, with so little opportunity for the Bradleys to even reach an attorney, one member of the Utah County Sheriff's department replied, Well, we don't usually deal with nice folks like you. Annie was booked into jail and held on $10,000 bail.
Annie Bradley's Arrest Photograph While the image of her arrest might seem dramatic, the facts surrounding her arrest are even more bizarre. Annie Bradley wasn't arrested, as it turns out, because she's suspected of committing some violent crime. The barrage of law enforcement officers didn't surround her house to execute an arrest warrant because she's suspected of some kind of drug involvement or some other dangerous crime. Annie Bradley was arrested because she and her husband have been caught up in a political battle related to the Utah Department of Commerce.
In February of this year that Utah Division of Securities Director Wayne Klein resigned under a cloud of suspicion for corruption and mismanagement. Randy and Annie Bradley were one of the cases originally overseen by Klein. Earlier this summer, on July 3rd, an independent audit of the Division was delivered to the State Legislature citing widespread abuses, mismanagement, miscarriages of justice and a government agency rife with internal conflict, lack of leadership and suffering serious internal divisions. But what does this have to do with Annie Bradley?
Well, let's start with the basics. A lifelong resident of Utah County, the last year and a half has been an exceptionally difficult time financially for Annie her family.in a situation becoming all too common in America today, with the mortgage market in shambles, and the credit industry in upheaval, Annie and her family are in the middle of an unplanned move. The guests in her home Tuesday night when she was arrested, were negotiating the purchase of several pieces of furniture to be sold along with their house.
The previous success of her husband's small business Race Holdings, LLCwhich had enabled the family to move from Springville just a year and a half ago into their dream home on the west side of Mapletonhas become a thing of the past. With no business income to speak of for most of the past year, the family has been living on food storage, modest financial reserves, and the hard work of the entire family to bring in whatever they can. Randy has recently taken a job working over six hours away from his family, in Montana.
The Bradleys however, are no strangers to hard work or sticking together. Generations of both sides of the family have made a living at hard work in Utah, with no troubles or run ins with the law and no questions about their integrity or reputation. What they are unable to comprehend however is in the midst of these difficult circumstances, why was Annie Bradley arrested, handcuffed and taken from her family in the middle of the night.
What would cause the Utah County Sheriff's office, in conjunction with Federal Agents, to surround the family's home as if they were conducting some kind of undercover sting operation? Why would law enforcement arrest a stay-at-home mother in the middle of the night when it's almost impossible for the family or friends to reach an attorney or to get access to cash for bail?
The charges made against Mrs. Bradley, according to the affidavits and other documents provided by the Utah Division of Securities allege that Annie was involved in committing securities fraud against her neighbor. The Bradleys dispute the charges. Annie Bradley never worked for her husband's business and was never an employee or manager of the company.
The neighbor, Mrs. Wendy Hendry, who owns and manages her own real estate related investment company loaned $30,000 to Race Holdings, LLC in June. The loan from Mrs. Hendry's company to Mr. Bradley's company, was a high interest loan charging 36% annual interest. According to banking records the entire loan plus interest and fees was repaid in full by Race Holdings in November. No subsequent business was transacted between the parties. Annie Bradley had nothing to do with it.
So what were the grounds upon which to make such a dramatic arrest of Mrs. Bradley? Apparently, Annie was arrested as part of a legal strategy related to another case being investigated by Securities Division Enforcement Director Michael Hines under the direction of his superior Ms. Francine Giani the Executive Director of the Utah Department of Commerce. Their plan was evidently to increase pressure on Annie's husband, Annie's friends and some of her husband's former business associates related to another case.
Substantiating the chain of events is a reputable and prominent Utah County securities attorney who has represented clients and worked directly with the Utah Division of Securities for more than a decade. FCD has obtained multiple audio recordings substantiating the shocking reality behind Mrs. Bradley's arrest, but has been asked not to reveal the identity of this attorney for fear of reprisal and other consequences from the Utah Government.
Apparently Mr. Hines believed that Randy would do just about anything to keep his wife out of jail.in the recordings obtained by FCD it is revealed that Mr. Hines' intention was a strategic decision to implicate Mrs. Bradley regardless of her actual involvement in any suspected wrongdoing, in order to bring pressure on her husband to turn State's evidence.
Hines reportedly explained, We have to put maximum pressure on peopleand if Mr. Bradley can't provide me information that would help me then we are going to charge them both The information that would help is for Randy to say contrary to that whole affidavit basically, to say he received misrepresentations.
Annie and her Husband Randy Bradley.
In the same conversation Annie and Randy were told that if Randy wasn't able to provide the information he was looking for, Hines intended to follow through with his threat to put Annie in jail. At one point in the conversation Mr. Bradley can be heard asking,
What if there isn't any information? I would have to commit perjury to say that. The formal audit released to the public after several complaints about these kinds of abuses, explains that obtaining cooperation or even false confessions under the threat of jail time is a Division Tactic where investigators attempt to coerce cooperation by intimidating and threatening that the person would be arrested.
At one point in the recordings it is revealed that in an earlier conversation with Hines, prior to her company even being repaid, Mrs. Hendry was uncomfortable with Mr. Hines agenda, insisting;
We don't care about the money. Let's just rip up the promissory note. Even though Annie was not involved, even though her neighbor apparently did not want to complain against the Bradleys, and even though Race Holdings, LLC did in fact repay the full amount of the loan in question as per the written agreement, Michael Hines had another objective and it required that the case proceed against Annie.
According to Hines, he could charge Annie with a crime based solely on one conversation she had with her neighbor in church one Sunday. Evidently, during a short stretch of time in mid when her husband's business had fallen behind on monthly payments Mrs. Hendry approached Annie looking for re-assurance that the debt would be paid.in defense of her husband, Annie reportedly replied, My husband is an honest man, and he will repay this debt no matter what.
Annie Bradley, targeted by Michael Hines That statement, innocently made by a spouse, in a Sunday church meeting, according to Hines, constitutes an inappropriate statement or omission of material facts, and therefore constitutes fraud.
The Bradleys are confused as to how Annie's statement could be considered fraudulent, especially since her husband later did exactly as she had suggested, ensuring that his business repaid the very high interest loan, plus all interest and fees, as agreed. The Hendrys profited, according to FCD calculations, in excess of $10,000 in six months and received a full recovery of principal prior to the note's maturity.
Answering the question of how such a situation could be construed as fraud, Utah Securities regulator A. Gary Bowen provided a rather lengthy but insightful explanation.
He explains:
People do not understand the nuance of securities regulation. Most attorneys do notwe can go after these people and we have been just overwhelmed by the filings, you get into my office I've got them practically stacked up to the ceiling and I'm not making this up and I've got them stacked all over the floor so we're pursuing them
I'm going to recommend you look at section 61-1-1 which is entitled Fraud Unlawful' and you're going to discover a definition of fraud that your average attorney is going to be totally clueless aboutthe nuance that the average attorney doesn't get, whose competent in real estate, competent in corporate or business law, competent in contract law, is the mere omission of a material fact do you know what the implication of fraud is, criminal prosecution, time in jail!
Mr. Bowen who according to his own representations has been charged with advising Utah citizens and business owners about how to avoid breaking the law for more than ten years, later admits that its impossible to pin down what might be construed as fraud if the government wants to press charges. He continues, "If you look at our definitions section, I've been working for this for years and read it a number of times but it really sunk into me here this summer when I was reading it and talking to someone like you, you go in and read the definition actually under 61-1-13 of fraud, and its one of those things that you say, well, what does that mean? The answer is, I don't know.
With a definition like this, its no wonder that Utah has become known by some as the fraud capitals of the West. Mr. Bowen's advise boils down to a simple axiom. If the government thinks it is fraud, its fraud.
Even experienced attorneys, according to Mr. Bowen, can't understand what the enlightened public servants in the Department of Commerce might allege. Or, in short, all Utahans should be very careful when discussing their spouse's integrity in church on Sunday.
As 2008 rolled around, the Bradleys lived with the daily uncertainty and fear of being charged with fraud as a result of Mr. Hines strategy. It didn't seem to matter that both parties agreed the loan had been satisfied and that Annie Bradley had nothing to do with it, other than being married to the business owner.
At one point Randy reveals that the stress became unbearable. I came close to considering saying whatever Mr. Hines wanted me to say if it meant it would keep my wife out of jail. I decided against it, but I couldn't trust Hines anyway if he was willing to build another case based upon a lie.
Former Director Wayne Klein resigned.
But this past February things started to look brighter from the Bradley's perspective, when Utah Securities Director Wayne Klein was forced to resign because of scrutiny being placed on the Securities Division for its alleged abuses. The Bradleys along with many small business owners in Utah hoped a new Director would be more just in his oversight of the Division and more effective at reigning in employees like Hines.
Lying, by any person during a proceeding under Sate Securities Laws is a 3rd degree felony. While Randy decided against going along with the enticements of Hines, Audit Manager Tim Osterstock's performance audit of the Division clearly documents that the Division had been engaging in deceptive practices, evidently believing that government employees are exempt from the requirements of the law.
The division has, at times, violated the terms of its settlement agreements.in one case, the division agreed to not publicize the action or commence further administrative actions and then violated both terms of the agreement. The person accused told us he felt compelled to plead guilty to a lesser criminal charge rather than place his business in jeopardy defending a greater charge. The division agreed to not seek additional charges but nevertheless pursued an administrative action. The respondent then signed the settlement agreement after the division agreed to not publicize it. However, the day the settlement was signed, the division publicized the information on its web page and also published the information in its newsletter the following month.
The audit also revealed that the Division made false allegations against innocent businessmen as part of its coercive tactics, obtained false confessions and false settlements by threatening citizens with arrest and jail time, and that the State of Utah had been violating its own legal settlements with impunity while Department employees escaped criminal investigation for such activity that clearly violates State law.
With this information now public, the Bradleys anxiously waited for the government to take action to reform the Department. They also continued to correspond regularly through their attorney with the Division of Securities and specifically with Securities Division attorney Scott Davis who works for the Utah Attorney General's office.
Mr. Davis corresponded multiple times with the Bradleys about resolving the civil concerns raised by the Division, but never informed the Bradleys that they were in eminent danger of being arrested or criminally charged. Things seemed to be looking better for the Bradleys, and they were hopeful they could soon put this troubling ordeal behind them.
Then, out of the blue, new rumors began circulating of the Bradley's pending arrest. The rumors came from the most unusual of places. For some unexplainable reason in early August of this year, Mr. Hines called Ron Hendry and explained that the Bradleys were being charged criminally and would soon be arrested.
I didn't know what to make of it, said Randy about the phone call from Hines to Hendry. Mr. Hendry subsequently began sharing the information with other Bradley neighbors including their religious leaders.
Although the Hendrys had profited handsomely from their transaction with Race Holdings, Mr. Hines, in very questionable legal territory, evidently had some reason for giving them a heads up. As it turns out, Hines had told the Hendreys that they were witnesses, as victims, in the now criminal case against both Randy and Annie.
Hines, according to Ron Hendry, had been in contact with them seven our eight times throughout the months of June and July. During this same time, the Bradleys unsuspectingly continued to hope things were getting closer to being resolved.
When Randy received a surprise phone call from his local Bishop asking about his pending arrest, he wasn't sure if Ron Hendry was just spreading gossip, or if the strange collaboration between he and Hines were actually fact. So, through their attorney the Bradleys went straight to the government. They contacted Scott Davis of the Utah Attorney General's office. Randy explains,
I thought we were working things out. Through our attorney we were in regular communication with the State. They are the ones who postponed our last meeting. Through our attorney we contacted the Attorney General's office and Scott Davis, the man we were told was the attorney for the Division and he acted surprised and claimed he knew nothing about any criminal charges. He acted completely embarrassed and didn't seem to know what Michael Hines was up to.
Huntsman Appointee, Executive Director of the Utah Department of Commerce, Francine Giani Seeking to defend herself and her Department, once the audit was released, Francine Giani publicly insisted that her Department had taken all necessary corrective action. However, one of the major indictments in the audit was that Giani's staff was repeatedly in violation of Utah State law related to how the State's lawyers from the Attorney General's office were being ignored as the Division pursued its own agenda.
The audit reads in part, [S]taff from the AG's office are assigned to represent the division. Securities law states The attorney general shall advise and represent the division and its staff in all matters, administrative or judicial, requiring legal counsel or services in the exercise or defense of the division's power or the performance of its duties (Utah Code 61-1-21.5). There have been conflicts with both how the former director utilized the attorneys representing the division and the level of authority the attorneys should have in defining division activities.in some cases, it appears the former director assumed the role of the attorney.
Despite the Attorney General's office claiming that they knew nothing about criminal charges or arrest warrants, to the shock of Annie, Randy, and their attorney, such warrants were indeed issued. Randy was arrested on August 29.
After Randy's arrest he worried that his wife would be next. Through their Attorney, the Bradleys made an agreement with prosecutors that with Randy voluntarily returning from his job in Montana, surrendering to the Utah County Sheriff's office, and providing the required $10,000 bail, the warrant for Annie's arrest would be withdrawn. A few short days later however, local and federal agents were surrounding the Bradley's home and in almost no time, Annie was in jail.
I told them that we had already taken care of things, says Randy. I begged them not to take her. I explained that the prosecutor had agreed to release the warrant for Annie's arrest since I cooperated and posted $10,000 bail. The Deputy told me that he believed me, but since I had nothing to prove it, there was nothing he could do. I wasn't angry at the Sheriff's office, they were professional and doing what they were supposed to do. But, who is going to stop Michael Hines from ruining people's lives while he does whatever he wants? That is what makes me so angry. He doesn't care about my wife, my kids, or our family.
Annie and Her Two Daughters
So, how and why was Annie arrested so dramatically this past Tuesday night, even after the prosecutors had agreed to release the warrent for her arrest? Why didn't the government follow the usual procedure when dealing with reputable citizens, not charged with violent crime, having no past criminal history, and just deliver a Summons to Appear? Evidently, that wouldn't work for Mr. Hines strategy.
Annie Bradley was arrested because Randy and Annie had the courage to resist Mr. Hines for almost a year. That, evidently, is just not acceptable to the State of Utah, Department of Commerce. It's not just the Bradleys who have had to make this tough choice. The pattern of unjust enforcement by the Division of Securities is revealed unmistakingly in the formal audit results, but Ms. Giani and her boss Utah Governor Jon Huntsman Jr., have neglected to address the gravity of the situation. Certainly, Ms. Giani and the new Securities Director Keith Woodwell have failed to reign in Hines and others engaged in the abusive practices.
The actual truth related to Annie Bradley's arrest might have never come to light except that a number of individuals, attorneys, businessmen and even Department of Commerce employees have grown weary of this unchecked abuse and have begun using audio recording's to try and help document this behavior.
The recordings obtained by FCD are a collection from multiple sources, and cover a multitude of cases. These recordings, and hopefully others yet to be provided to FCD by interested citizens, are beginning to serve as a powerful tool to provide critical insight and political leverage to address this rogue government agency reeling from criticisms, rife with internal conflict and desperate to cover-up its own current and past misdeeds.
Nevertheless, some bureaucrats can't seem to understand how persecuting small businessmen in Utah (and their wives) is the same as persecuting normal families. Some government officials can't seem to understand how unjust it is to have a government agency justify their supposed administration of justice with lies, cover-ups, excessive force, coercion and deceit.
Annie Bradley's arrest is one more revelation in a series of events alerting Utahan's to the very real consequences of a corrupt government agency, the conduct of malicious bureaucrats and an incompetent government appointeeFrancine Gianiwho seems more worried about the appearance of protecting investors than she is about following Utah's laws and protecting all Utah citizen's civil rights.
The Bradleys have now had to come up with $20,000 cash bail so that they could continue remain free to take care of their family while continuing their fight against a corrupt government investigation. This amount pales in comparison to the mounting legal costs they're incurring in a legal circus that could last many more months if not years.
But, instead of heaping added difficulty on their heads, the State of Utah should be issuing the Bradleys a sincere apology as part of its first step to clean up the seriously damaged reputation of the Utah Government. We should all be grateful for families like the Bradley's that stand up to corruption, that work constantly to provide a good life for their children, that conduct an honest business, and do all they caneven if they're late on paymentsto always pay their personal and business debts as agreed. This has probably been the most difficult emotional thing that has ever happened in our lives, but we're going make it through, says Randy, soberly. Annie has said that if this is what it takes so that someone will finally put a stop to people like Michael Hines, its okay, I'm okay with it.
In the face of America's current economic difficulties it seems like the Executive Branch of Utah's government has somehow forgotten the virtue of families like the Bradleys and the responsibility to protect all Utah citizens equally. It is, after all, small businessmen and women, along with their families, who regularly take risks and assume responsibilities that creates more jobs, deliver more services, and add more value to our community than any government appointee and her bureaucrats.
Despite Mrs. Giani's public assurances, there is an obvious problem in the Utah Department of Commerce. Evidently this problem extends all the way to the head of the Executive Branch into the office of Governor Jon Huntsman. Despite calls by numerous state legislators for the removal of Ms. Giani and several of her remaining staff; and despite the multitude of problems revealed in the recent performance audit of her Department; and finally despite even the personal appeals made directly to him from Utah's own Attorney General for her firing, Governor Jon Huntsman (who is the only elective oversight provided by State law over Francine Giani) seems to share the philosophy of Giani and Hines, namely, that innocent people being wrongly accused is simply a price Utahans should get used to paying if they expect the government to do its job.
That's an interesting theory of government. No matter how nice, pleasant or polite Governor Jon Huntsman, Jr. Comes across there is no mistaking that he was not elected to simply look good in office. Hard decisions sometimes have to be made, and in this case, when dealing with the Department of Commerce, the direct action that needs to be taken just isn't that hard to discern.
Tyranny, at any level, only works for so long. What is happening in the Utah Department of Commerce is wickedness; there is no way to skirt around the issue. A full audit of all divisions within her stewardship will reveal even more succinctly that it is time for leadership in the Governor's office, in the legislature, and in the judiciary in dealing with abuses like the Giani's absurd, forceful, and dramatic arrest of Annie Bradley.
This problem will come to a head and the unjust, and in some cases criminal, activity of government bureaucrats along with the startling incompetence of executive management in the Department of Commerce will ultimately cost some politicians and employees their jobs. Someone with courage will ultimately step forward to address and correct the very serious problems.
In the mean time however, the dirty politics and renegade operations of the Utah Department of Commerce will ensure that more Utah families like the Bradleys will be trying to explain to their small children why mommy or daddy was dragged away in handcuffs, in the middle of the night.
It just doesn't seem like America.
ALPINE, UT | July 4 | A much anticipated legislative audit of the Utah Department of Commerce, whose sole elected oversight is Utah Governor Jon M. Huntsman, Jr. (R), reveals corruption, coercion, secrecy, retaliation, incompetence, abuse of power and miscarriages of justice.
Allegations of serious wrong doing in the Utah government were first reported by FreeCapitalist Radio on August 31 and the brewing scandal was subsequently reported on FreeCapitalist Daily on February 14)
The official audit report, released July 3 reveals at least two dozen serious problems in Utah's most powerful bureaucracy which is headed by Francine Giani, Executive Director of the Department of Commerce, who as according to the official audit's findings, been in charge of the department during the period of its most serious violations.
Ms. Giani immediately sought to reassure the public that changes are already implemented to solve the problems addressed, except for one she is quoted to have said in the local Salt Lake Tribune, which will have to wait until the 2009 legislative session to address.
Interestingly, at least ten major allegations of wrongdoing in her department remain unaddressed by Ms. Giani and the Division of Securities including the following revealed by the audit -
1. Regular practices by the division of knowingly making false allegations of criminal activity by Utah businesses thereby harming businesses and investors.
2. Use of intimidation and coercion by the enforcement division to obtain false confessions and false settlements from defendants.
3. Intentionally deceptive practices whereby Ms. Giani's staff pressures defendants into settlement agreements in order to obtain confessions, with the State intentionally violating the terms of the settlement agreement afterwards, with legal impunity.
4. Ms. Giani's own personal and departmental actions, according to the audit, which violated written department policy to the detriment of employees and the administration of department duties.
5. The practice of using fraudulent and falsified signatures on documents by the Division Director to hide internal conflicts of interest and miscarriages of justice.
6. The unreliability and lack of credibility of information related to the Division of Securities, and the Department of Commerce's actual performance, in official government reports made to other agencies and to the public, according to the audit.
7. Ms. Giani's personal interference with justice and engaging in known conflicts of interest within administrative proceedings.
8. Department employees fears of ongoing retaliation by Ms. Giani and her associates for cooperating with the audit.
9. The Department's failure to adhere to or respect district court authority.
10. The division's financial impropriety and mishandling/improper accounting of funds paid to the division as fines from defendants in administrative cases in an apparent effort to benefit the division.
These serious, and yet un-addressed revelations brought forth by the legislative audit also reveal that high level staff and employees in the department have engaged in activity that is classified by Utah Statute as unlawful suggesting that individuals who are guilty of such conduct are guilty of a third degree felony. There has, as of this date, been no indication by the Utah government of whether or not criminal charges will be filed against any employee of the Department of Commerce or the Securities Division as a result of these findings.
The Audit Manager Mr. Tim Osterstock warned against interpreting the audit findings as only an indictment of the division's former director stating, It's not just a director, its an organization.
While the Utah news media has reported on the audit -
See Audit Criticises Utah Division of Securities - Deseret News
See Audit Blasts Securities Division - Daily Herald
SeeAudit Rebukes Investor Monitor - Salt Lake Tribune
The Utah Governor's office, who selects and appoints Ms. Giani and is the only directly elected oversight over the Department of Commerce, has yet to comment on the findings or recommendations by the Utah Legislative Auditor General.
The only response from the executive branch of the Utah Government so far is Ms. Giani's statement attached to the audit wherein she suggests that the most troubling aspect about the audit was not the findings of fact but that the audit didn't interview Utah investors.
Ms. Giani is reported to have responded, oddly out of context saying, It would have been nice to hear from the other side, to hear from victims who received money, and thinks the things the division does are good. The audit report itself states its purpose was not to review the legal issues of any of the cases instead focusing on potential victims of the government's own handling of its responsibilities. These victims were indeed interviewed at length by the audit staff. Additionally, the audit revealed that Ms. Giani's own staff believes she and her administration are not trustworthy, are not fair in carrying out its duties and that changing the Division Director will not improve the situation.
The audit repeatedly indicts former Division Director Wayne Klein of wrongdoing, maliciousness, incompetence, and even at one point - engaging in systematic document fraud.
Mr. Klein was hired by Ms. Giani in 2005 and she repeatedly said in public statements that she believed he would be vindicated in the audit results. Ms. Giani's predictions were inaccurate.
In February of this year Ms. Giani defended Klein at the time of his resignation, claiming, he is one of the most knowledgeable, competent, and highly regarded people in the field who she was sorry to see step down. While Ms. Giani reported to the media in February that she felt the controversy resulting in his resignation was a mischaracterization of how her department operates suggesting that the complaints about her, Klein, and her department were motivated by disgruntled defendants.
However, the audit reveals that staff in her own department regularly substantiate the most serious complaints about internal malfeasance and that Ms. Giani had personal knowledge of several incidents of wrongdoing by Mr. Klein, including his efforts to disobey her written policy statements in a letter addressed to him specifically, prior to making such statements.
Former director Klein issued a statement in response to the audit wherein he states the indictments made by the audit are, akin to trying to evaluate the performance of a police department by interviewing only those people the agency had put in jail.
Ironically, Mr. Klein who's department does not have the legal authority to make criminal charges or put defendants in jail, is most directly indicted for an example case where he personally and repeatedly sought to prosecute a Utah business that had had Mr. Klein's charges of wrongdoing dismissed by both an administrative law judge and a district court.
Against the advice of the Utah Attorney General's office, according to the audit, Klein relieved the government's attorney and acted on his own, likely outside of the law and clearly against government policy, to continue to try and punish the defending business. Both Klein and Giani continue to show a lack of appreciation for the fact that Utah business owners and operators also have civil rights that are, according to the audit, being violated by this rogue department.
Most of the defendants in cases brought by the Utah department are against Utah citizens who the government is legally charged to include in their protection without arbitrary, personally vindictive, subjective judgments of bureaucrats such as those revealed by the official audit.
MRFC Principle:
Action Items
1.interview a local businessman about the effect regulation has on his/her business.
2.interview a local businessman about any knowledge he/she might have about unjust regulatory action.
3. Write a letter to the editor about your findings, related to the effect of unjust bureaucratic interference in business.
4. Contact the Utah Attorney General and (if you are a Utah citizen) and demand that if criminal activity has occurred in the department, specifically material misrepresentation of facts by Government employees during the course of official action - that formal charges be brought, just like they would be against businessmen consistent with Utah Statute 61-1-16.
5. Write a letter to Utah Governor Jon M. Huntsman (R) demanding that Francine Giani be removed from office.
6. Sign the petition (that will be listed on the FreeCapitalist.com website) demanding that Utah Governor Jon M. Huntsman rectify the corruption and malfeasance that has taken lpace under his Department of Commerce, now beginning to be revealed by actions such as the recent audit, and pardon all businessmen who have plead guilty to any felony violation of State Law, where no judicial proceeding was initiated and where it was done as part of a settlement agreement with the Department of Commerce Division of Securities, give that the audit has show that the Department has shown disregard for its agreements, used coercion to get them, lied or misrepresented material facts to distort the power of its investigation and done so to pressure individuals who were protesting their innocence but who wanted to protect their business from the malicious behavior identified by the auditors.in granting a pardon the governor does not have to grant relief from the requirements that such businessmen obey the law, only that they not live for the rest of their lives as felons - being wrongfully accused under a system that committed felony violations of the law to obtain such confessions without due process, any involvement of the judiciary, and likely in violation of the Utah citizen's right to equal protection under the law.
7. Write a letter to your local legislators (if you are in Utah) demanding that action be taken to reform the Utah Department of Commerce.
For your information the FreeCapitalist Project is working to put together draft legislation that will accomplish the following -
a) Place the Entire Department of Commerce under the direction of the Utah Lieutenant Governor. This is consistent with how other stats oversee bureaucratic matters such as these, it adds a layer of elective oversight so the citizens of Utah have a way to vote their displeasure if corruption continues.
B) Eliminate the Director position in the Department of Commerce. The position is a purely bureaucratic position. It costs Utah tax payers between $75,000 and $100,00o to pay Ms. Giani or her replacement, and there are no requirements that the position even require a person be competent in the law to oversee all of the regulations and regulatory agencies affecting Utah businesses. If the Department is placed under the direction of the Lieutenant Governor this provides a check against unqualified or incompetent service - having an election every four years rather than the enormous effort and years of politicking that is involved in getting an audit done, and political changes made by the legislature and the executive. Additionally, the legislature and the courts are already having an extremely difficult time getting Ms. Giani (who is unelected and essentially unaccountable) to be responsive where Utah has an excellent tradition of electing responsive Lieutenant Governors who are given too little respect, too little authority, and too little opportunity to make effective influence in our government.
C) Does NOT Convert the existing advisory board over the securities division to a commission (as is recommended by the audit - the audit itself suggests the problems in the Department of Commerce are systemic and leadership has been lacking for years) but instead creates a commission over the entire department that has full authority to scrutinize, review, overturn, approve or deny all administrative actions taken by the Department of Commerce or its divisions including any recommendations for criminal charges - adding an element of due process and fairness to the bureaucratic nightmare that currently exists in Utah's Department of Commerce. This commission could also replace other redudent division specific commissions and further reduce bureaucracy and cost.
D) Transfer all criminal investigation and all investigations that have or reasonably are expected to have a criminal element to the case to the Utah Attorney General's office ensuring a higher degree of professionalism and fairness in administering justice. Unelected bureaucrats are using coercision, deception and unfair practices to threaten businesses, citizens, and professionals with jail and other egregious consequence, according to the audit, including focusing more on punishment than on compliance with the law which behavior has not check in the Utah government.By placing te most serious investigations (involving suspected criminal behavior) under the Attorney General's office a more well trained, and more strictly operated department is properly in charge where there is also appropriate judicial and voter oversight.
Weak-minded politicians and territory jealous appointees and bureaucrats want to implement small token changes here or there - but only a serious reform of Utah's regulatory environment will solve the problem of governmental abuse and ineffective enforcement and administration of the law. If Utah wants a reputation for being both good for business and eliminating the idea of being a fraud center in America it will take courageous leadership, public pressure, and well thought out changes on the large level outlined above. It can be done, if Utahans want a more accountable, less corrupt and more effective government.
ALPINE, UT | 14 February | In Utah right now there is a scandal brewing. The scandal penetrates the highest reaches of the Utah government. The question is, Where will the buck stop? As the evidence rolls out that an entire section of Government is in need of a major overhaul. Steven Oberbeck of the Salt Lake Tribune, quoting Chuck Newton of the Financial Planning Association of Utah, reported yesterday that there have been enough shocking actions in recent years that he believes its highly likely that some government officials may eventually be criminally prosecuted. Mr. Oberbeck's report in the Salt Lake Tribune touches just the tip of the iceberg. The Department of Commerce is ultimately under the direction of Utah Governor Jon Huntsman, Jr. (R) - a politically ambitious McCain backer who has little tolerance for scandal given the import of this year's election and his political future. Huntsman is the one who appointed the highly controversial Francine Giani as the State's Executive Director over the Department. Ms. Giani is not an attorney, has no legal background and did not have any substantial experience in executive level positions. Yet, she currently holds Utah's highest regulatory position over business activities in the State. Since Ms. Giani's appointment, the Department of Commerce has been the subject of a surprising degree of scrutiny. Many legislative leaders on both sides of the political isle have expressed disgust at how the Department's activities have been and are being carried out by Giani and her associates. One legislator, Utah Representative Jim Bird (R-West Jordan) recently uncovered an alarming complaint.
Ms. Giani allegedly was made aware of illegal activities taking place within the division and responded by telling employees that she didn't care if the actions of the division were legal or not - but that employees were to perform the jobs without question.
Some Utahans are hoping that the current controversy will allow the public to clearly separate lip-service giving do-gooders in government positions from authentic leaders who care about civil liberties, small business and simple concepts such as fairness. At the core of this issue the question is, How far up the chain does the corruption go? In recent years the State has behaved with little concern for small business owners who find themselves entangled in the Department of Commerce's web of scandal and corruption. One of the State's highest elected officials recently commented:
Francine Giani is the single greatest threat to small business and personal liberty in the State of Utah.
It's easy to give lip service to the idea that small businesses are too heavily regulated but when corrupt and over zealous regulators systematically engage in the type of behavior now being uncovered in Utah, it's time for change at the highest levels. For the small businessman, the lifeblood of the local economy, abusive behavior by regulators can be a matter of life or death for their business - which means a loss of jobs for Utahns at a time of huge economic uncertainty. As news of the present scandal spreads, residents are anxiously awaiting the Governor's response to the Giani controversy. Sources suggest the Governor feels conflicted given that he and Giani are reportedly good friends. Warning over forty years ago former Fed Chairman Alan Greenspan observed, The world of [regulation] is reminiscent of Alice's Wonderland: everything seemingly is, yet apparently isn't, simultaneouslyIt is a world in which the law is so vague that businessmen have no way of knowing whether specific actions will be declared illegal until they hear the judge's verdict after the fact. (Greenspan, Alan. Later Chairman of the Federal Reserve. Paper given at the Antitrust Seminar of the National Association of Business Economists, Cleveland, September 25,1961.)
Quiet whisperings have become all too common in Salt Lake City among government employees, elected officials, and community leaders about this rogue agency stealthily persecuting small businesses.
Over the last 12-15 months Ms. Giani's commissars in the State's Division of Securities have come under the most serious scrutiny. Allegations of corruption, incompetence, mismanagement and too many unfair prosecutionsunder a cloud of controversy are growing relentlessly frequent and more substantial. Last week, apparently in an effort quell the unraveling of her department - Giani reportedly pressured Securities Director Wayne Klein to resign They obviously haven't told me the results of the audit but I've heard words like [the division is in] disarray' and the deeper we [the auditors] go, the deeper we need to go, ' (Representative Bird testimony last week during the Utah Legislature's meeting of the House Business and Labor Committee.) Klein's resignation, however, is not likely to insulate Ms. Giani (or several other employees involved in this mismanagement such as Securities Enforcement head Mr. Michael Hines who is also suspected of official wrongdoing in the Department) from the political and legal fallout yet to come. Apparently hoping this will all blow over quickly, Ms. Giani has tried to appear disconnected recently asserting, absurdly, of Klein; He has been a good director, and in terms of his background in the securities industry, there is no one better.
Utahns can only hope Ms. Giani is simply posturing here. Wayne Klein is not only personally vindictive but has a fairly well known reputation in the legal community from his previous positions both in the Utah Attorney General's office as well as with the State of Idaho for being a loose cannon, an unjust prosector, and having contempt for legal restrictions on his own activities. It makes one wonder, in light of all the information that is now coming out, how Mr. Klein was appointed with the approval of the Governor and the legislature in the first place. According to Ms. Giani's recent statements to the press, Klein is precisely is the type of regulator she strives to appoint in her department. Yet, Klein is quite simply a commissar (listen to the Free Capitalist radio broadcast archives from August 31 for elaboration). Specifically, he has increasingly become an embarrassment to government and legal professionals. He and his staff routinely fail to demonstrate even basic familiarity with the A-B-C's of securities law. Reportedly, his own agenda is more important than the letter of the law and he is known to stammer and hesitate when trying to describe even the most basic federal standards for simple concepts such as what constitutes an accredited investor. One of Klein's former government employers recently remarked that he, and a number of other government officials are not surprised at the recent discoveries about Klein and Giani's philosophy of government. Mr. Klein is the worst kind of loose cannon. He's often going after someone who's offended him, regardless of the law. He's really only effective if someone with very strong supervisory skills watches his every move and Francine is not that capable.
Securities attorneys in Utah should not only be alarmed and offended at Ms. Giani's defense of Klein, especially given his track record, but extremely diligent in working to ensure that there is serious reform in the Department. With Ms. Giani still at the helm she'll likely just pick another Wayne Klein to run the Division. As reported by a notable Salt Lake City attorney recently,
It has become common practice in Utah for knowledgeable, reputable, and highly educated attorneys to have to grovel to Giani, Klein (and their heretofore behind the scenes bulldog Mr. Michael Hines, Director of Enforcement in the Division of Securities). None of whom have shown much if any appreciation for the details of the law. It's embarrassing.
In 2007 a group of private citizens and business owners, fed up with the egregious behavior of an entire section of state government, began a private investigation on their own to look into the State's activities. So far, the investigation has uncovered a remarkable cache of written documents and audio recording. The evidence includes recordings and transcripts of private meetings, official and unofficial conferences, lunch meetings, early morning meetings (as early as 6:30am at the home of one resident) and late night investigative activities (with government workers showing up to the homes of some witnesses as late as 10:00pm). The mounting evidence shows a disturbing pattern of Giani, Klein, and Hines each engaging in deception, incompetence, misstatement of the law, and abuse of the legal processes. Perhaps even more telling, the evidence is beginning to show a growing rift in the Department of Commerce between those public servants who want to carry out the legitimate duties of the Department and those like Hines who reportedly remarked recently that he hopes to retire by writing a book about one of the cases he's currently investigating. The Salt Lake Tribune recently reported that it is precisely this internal rift between real public servants and self-serving bureaucrats that brought about the legislative audit working to uncover the details of this brewing scandal.
After hearing from several division staff members who expressed concerns about how the agency was being run, Rep. Jim Bird, R-West Jordan, late last year requested that the Legislative Auditor General's Office audit the division. This kind of situation makes for a very unfriendly business environment and is embarrassing to everyone in government. With a formal audit underway, it appears Ms. Giani is simply buying herself time to try and get out from under the explosive details now coming to light. Consider a few embarrassing examples of the work being conducted by Ms. Cruella and her henchmen.
1. Wrongful Accusation of Criminal Behavior against Utah Citizens.
2. Misuse of the Courts and Legal Process.
3. Lying to Government Officials.
4. General Incompetence when it comes to explaining rudiments of the law.
5. Defaming Members of the Legislature who scrutinize the Department.
6. Punishing Citizens with Evidence Against the Department for their Political Activity.
7. Demanding prior restraints on Utah Citizens' free speech, in an attempt to silencecriticism of the Department's methods in public or in the courts.
8. Government employees lying to the public in order to create causes for investigation.
9. Disseminating confidential information obtained during investigations to private sector colleagues to enrich their business efforts.
10. Offering jobs and/or job referrals to witnesses who are willing to lie or distort the truth to defend the Department.
This kind of behavior is precisely what Ronald Reagan warned America about as early as 1964 when he deplored:
It is time we realized that socialism can come without overt seizure of property or nationalization of private business. It matters little that you hold the title to your property or business if government can dictate policy and procedure and holds life and death power over your business. The machinery of this power already exists. Lowell Mason, former anti-trust law enforcer for the Federal Trade Commission, has written American business is being harassed, bled and even blackjacked under a preposterous crazy quilt system of laws. There are so many that the government literally can find some charge to bring against any concern it chooses to prosecute. (Reagan, Ronald, A Time for Choosing, Speech given October 27,1964) Legislation has recently passed the Utah House of Representatives that would rein in the powers of the division and its director in an effort to secure more just handling of the Department's responsibilities.
However, as reported on FreeCapitalist Radio Monday February 12 this attempt to rein in the powers of Ms. Giani and her flying monkeys is being received about as well as the Wicked Witch of the West receiving Dorothy and her ruby slippers. For example, after Bird's HB83 passed the Utah House, Giani defender Utah Senator Curt Bramble (R-Provo), apparently in an effort to help Giani and the Governor's office stall the brewing controversy, strategically stalled the legislation from being considered by the State Senate indefinitely.
Reminiscent of something behind the iron curtain in the 1980s the outgoing commissar Klein remarked to the attorneys of a Utah citizen recently, who was cooperating with State legislators in their attempts to get to the bottom of the abuses going on in the Department that: because of his political activities the Division was forced to take tougher action.in a similar case Klein justified: Part of the problem is that I've been painted in a corner because your client has gone on the radio and publicly accused us of stuff. He's got legislators out there trying to cut our powers because what we're doing as if he's entirely right in what he's doing and government is unfairly coming after him. So ordinarily we have more flexibility but where I've got public attacks coming in saying we're being accused of being unfair[interrupted]. Ayn Rand also famously warned us of situations lik
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