The Problems with Abengoa Solar

This is a rather long post from Marita Noon at http://dailycaller.com/ about a complicated subject: Abengoa Solar. The post covers the company’s connections to the Obama administration and the financial support that the administration has extended to this Spanish company.

After a public meeting on Tuesday, April 15 in Palm Desert, California, the California Energy Commission (CEC) will vote, on Wednesday, in Sacramento on whether or not to re-permit a 500-megawatt solar thermal project that has been on hold since December. At that time, the commission indicated that it would deny the proposed BrightSource Energy and Abengoa Solar project based on “visual impacts to a network of trails, petroglyphs and other tribal sites stretching across the desert in eastern Riverside County.”

Since December, the companies have done additional environmental impact studies and proposed mitigation. Apparently believing the votes are there, the companies have pushed for the commission to make a decision. Abengoa insiders have reported that the project is a go.

While the CEC is concerned about visual impacts, and local tribes worry about the project due to potential artifacts that may be present, American taxpayers should be opposed to the cronyism, abuse, mismanagement, and violations involved in one of the companies: Abengoa — which received $2.8 billion in taxpayer funding.

This report will expose one of the largest recipients of Obama’s green energy funding: Abengoa — which if not stopped, will get even more taxpayer dollars. On April 2, 2014, Secretary of Energy Ernest Moniz, said: “the department would probably throw open the door for new applications for renewable energy project loan guarantees during the second quarter of this year.”

Here’s a taste of what you’ll learn about Abengoa and how it operates:

  • Crony-connected, Stimulus-funded, Spanish-owned company builds/opens solar generating station—currently producing electricity.
  • Brings foreigners to U.S. to fill jobs from welders to administration to engineers to management—often working on tourist visas for as long as 9 months.
  • Many Americans, who do have jobs on the project, get fired so expats can have the jobs.
  • Health insurance fraud committed by putting expats on plans when they are not on payroll (expats on tourist visas were paid out of accounts payable).
  • American vendors/contractors payments are intentionally delayed while U.S. taxpayer funds are in Spain collecting interest—$70 million owned to U.S. vendors.

On October 7, 2013, a giant concentrated-solar plant opened near Gila Bend, AZ. The $2 Billion Solana Generating Station has 32,320 mirrors on 1900 acres (equivalent to 1400 football fields) making it the world’s largest parabolic trough array with thermal storage. The 280 MW generating station is one of the first solar plants that can store thermal power for six hours. The stored thermal power can be used at night or on cloudy days to produce the steam that turns the turbines and creates electricity.

Solana was made possible because of the 2009 stimulus bill and the loan guarantees and grants made available by the American Recovery and Reinvestment Act (ARRA). Plant owner, Abengoa, reports that Solana’s construction employed 2,000 people.

When selling ARRA to the American public, the president said it would create jobs. Abengoa employees, who contributed to this report, were grateful for the jobs. They believed in green energy generally and the project specifically. But that was in the beginning when the sun was shining on Solana and its parent Abengoa.

With the green energy failures (32 failed and 22 circling the drain) being widely exposed by both the mainstream media, through shows like 60 Minutes, and Republicans, who point to the failures in order to embarrass President Obama and stop future green energy spending, one would think that Solana’s success would be something the White House would want to use for a major PR campaign — with pictures of a triumphant Obama cutting the ribbon splashed across the front page of every major newspaper. At the least, you’d expect an appearance by Vice President Joe Biden. Earlier, the White House had promised one or the other would be there, but neither was present for Solana’s October opening.

With the president’s penchant for photo ops, it seems mysterious that the official White House photographer wasn’t present to capture, and capitalize on, the moment.

Why wasn’t Obama waving to the cameras on October 7? Because even though Solana is a technical success, it is still an embarrassing failure. When the details in this report are exposed, as he must have known they inevitably would  be, he didn’t want to be anywhere near the project—because, as this report exposes, Solana would have never happened without direct intervention from the President.

Abengoa

Abengoa is a renewable energy company headquartered in Seville, Spain. Its U.S. division received approximately $2.8 billion in stimulus loans (five times more than Solyndra) for two large solar projects (Arizona, Solana — $1.45 billion; and California, Mojave — $1.2 Billion), as well as one biofuel project (Kansas, Hugoton — $132 million), plus $818 million in treasury grants.

In addition to the $2.8 billion, Abengoa companies received $150 million from the U.S. Export-Import Bank for green jobs overseas and, more recently, $2 million from the SunShot initiative.

At the time the stimulus bill was passed, Spain was in the midst of its own financial crisis. Credit wasn’t available and Abengoa’s stock value had dropped. The House Oversight and Government Reform Committee’s March 2012 report states:

Abengoa’s prospects look dim due to its investments in Europe, particularly Spain, and suffer the risk of declining subsidies as Spain contends with its own declining credit quality and the potential need for a bailout of its own government in the coming months or years. Now that Germany and Spain cut back solar subsidies, this will undoubtedly harm the European renewable investments of Abengoa. Even if Abengoa investments initially appeared attractive to DOE, overinvestment in this single firm will likely cause substantial harm to the taxpayer.

The stimulus must have seemed like a lifesaver. Abengoa had the technological know how that the president’s green energy push needed — and the president was willing to pay for it. However, Abengoa had bad credit ratings from Fitch for each of the three projects the taxpayers funded: Solana — BB+; Mojave — BB; Hugoton—CCC. (Fitch describes the ratings this way: “BB: Speculative. ‘BB’ ratings indicate an elevated vulnerability to default risk, particularly in the event of adverse changes in business or economic conditions over time; however, business or financial flexibility exists which supports the servicing of financial commitments.” And “CCC: Substantial credit risk. Default is a real possibility.”)

While Abengoa didn’t have good credit, it did have, as Christine Lakatos has thoroughly documented, valuable connections.

Bill Richardson

Most people probably think of Richardson as the former governor of New Mexico or the self-appointed negotiator for issues between the U.S. and North Korea. But before either of those roles, Richardson was the Secretary of Energy under President Bill Clinton. After his two terms as governor, he ran for president against Obama and Hillary Clinton but he dropped out of the race early, and then, despite the Clinton connection, “delivered a forceful endorsement” for Obama and, according to the New York Times, urged “Democrats to unite behind his candidacy.” Richardson’s favor was rewarded with the nomination for Secretary of Commerce — until rumors of personal scandals kept him from passing the vetting. Unencumbered by full-time employment, Richardson sits on both the Abengoa International Advisory Board and serves as a member of the advisory committee for the Ex-Im Bank — from which Abengoa received $150 million.

Al Gore

In 2007, Gore’s UK-based Generation Investment Management (GIM) bought a stake in Abengoa. GIM was started in 2004 by Al Gore and several Goldman Sachs big wigs, including David Blood, Mark Ferguson, and Peter Harris. (Note: Goldman Sachs was a top Obama donor in 2008.) The Weekly Standard reports: “The Spanish company’s stock jumped in November 2007 when an investment fund headed by Gore announced it was acquiring a stake in the company.” In FrontPage Magazine, Daniel Greenfield added, “When Gore made the buy, the stock jumped, not because Gore is a serious investor, but because everyone knows that a Gore buy means that Abengoa can benefit from his political connections.”

Gore has extolled Abengoa for years, visiting “the largest solar platform in Europe” (operated by Abengoa) in October 2008 and delivering a high-powered speech at the company’s Spanish headquarters in October 2010.

GIM Advisory Board member Mario Molino also serves on Abengoa’s Advisory Committee.

Santiago Seage Medela, Chairman and Chief Executive Officer of Solar Business Unit at Abengoa SA

While Gore and Richardson may have the highest name recognition, Seage Medela may be the most important connection.

Abengoa’s website says this about Seage Medela: “Before joining Abengoa in 2005, Santiago was a partner with McKinsey & Company where he served clients in strategy, growth and corporate finance in several regions.”

What it doesn’t include is that McKinsey & Company (a 2008 Obama donor) is where Jonathan Silver started his career, and where Matt Rogers is an executive. Silver is important because he went on to become the executive director of the Department of Energy’s loan guarantee program and was directly involved in which loans got approved and which ones didn’t.

About Rogers, the McKinsey & Company website offers these details: “Matt recently rejoined McKinsey after serving as the Senior Adviser to the Secretary of Energy for Recovery Act Implementation. In this role, he had responsibility for managing the Department of Energy’s $35.2B in Recovery Act appropriations.

The Department of Energy funded more than 5,000 projects through the Recovery Act with a total project value approaching $100B. These projects focused on delivering near term job creation and on accelerating U.S. innovation in energy efficiency, efficient transportation, renewable energy, energy infrastructure, carbon capture, environmental clean-up, and basic and applied science.”

Seage Medela was one of a group of close confidants, including Al Gore, who worked together on projects involving Abengoa, Goldman Sachs, McKinsey & Co., and the U.S. Department of Energy’s loan guarantee program, and who were making decisions on who got the ARRA loan guarantees and who didn’t. As many were paid by one or more, a conflict of interest appears to be present.

There are other connections, but these three provide enough context for the crony corruption involved — despite Obama’s claim: “these are decisions, by the way, that are made by the Department of Energy; they have nothing to do with politics.”

While these connections are important, it was the direct involvement from the White House that got Abengoa the cash — and that involvement is documented in a series of emails released by the House Oversight Committee on October 31, 2012. Lakatos has read through the entire batch of 350+ emails exchanged between various decision makers including Silver and DOE Loan Program Credit Advisor James McCrea. She found several that clearly relate to Abengoa and show the direct influence from the White House and “POTUS” (President Of The United States). Reading through the applicable emails, reveals the pressure and growing intensity over approving the Abengoa loan — despite Secretary of Energy Steven Chu’s frequent claims that loans were made on the merits.

The loan guarantee was approved. Obama announced it in a July 3, 2010 speech. An industry report, without the benefit of the leaked emails, got it exactly right: “President Obama and DOE Secretary Steve Chu were busy this past weekend approving massive loan guarantees to solar projects in the U.S. as part of the federal stimulus.” The emails show that, yes, Obama and Chu, were “busy” — as were Silver and McCrea!

The report quotes Seage Medela as saying: “The loan guarantee process was started over a year and a half ago.” According to the CEO, “It has been a long process with lots of work with the DOE. It is expensive and not an easy process but the DOE has been very professional and they have invested enough time to do things very thoroughly.” Yet, the emails show that the approval was rushed and finally approved due to “WH intervention.”

Failure

Now, understanding the questionable history of Abengoa’s funding, it should come as no surprise to learn that it operates as if it is above the law — after all, it has friends in high places.

While the DOE looks the other way, Abengoa failed to meet its contractual obligations as spelled out in the federal loan guarantee, collected the taxpayers’ money while pinching U.S. contractors to gain higher profit and holding out on paying others (forcing smaller companies into bankruptcy), and committed insurance fraud — among other grievances.

In November 2012, a call was made to the Citizens’ Alliance for Responsible Energy. The caller had read the earlier exposé: “How Democrats Say ‘Crony Corruption’ in Spanish: ‘Abengoa’” (published in August 2012) — that outlined much of the cronyism involved in Abengoa receiving the $2.8 billion, combined, for the three projects. The caller told tales of abuse and mismanagement at the Abengoa biofuels project, Hugoton, in Kansas. He provided names and emails for others who could corroborate his story — but none of them responded to a request for information. The story was forgotten until a little more than a year later. On January 11, 2014, an email was received with the simple subject line: “Abengoa.” The body bore the request: “Please contact me about Abengoa. I would like to speak with you.” Had it not been for the contact a year earlier, the January email might have been overlooked.

The details the January whistleblower offered were startling — especially understanding the backstory on Abengoa. Someone with no history on the topic might have blown the whole thing off as merely a disgruntled former employee. But this time, many other former Abengoa staffers stepped up and confirmed the story or told a similar tale of rampant governmental and/or contractual violations.

Jobs for Americans

At the peak of the economic crisis, when President Obama was trying to sell the 2009 stimulus bill to a public worried about the growing national debt, his major pitch was about job creation, the fulfillment of his 2008 campaign promise: “I’ll invest $150 billion over the next decade in affordable, renewable sources of energy — wind power, and solar power, and the next generation of biofuels — an investment that will lead to new industries and 5 million new jobs that pay well and can’t be outsourced.”

The American jobs that “can’t be outsourced” theme was frequently repeated in the 2012 presidential campaigns. In a July 10 speech in Cedar Rapids, IA, Obama proclaimed: “As long as I’m president, I will keep fighting to make sure jobs are located here in the United States of America.”

Earlier, in 2010, San Diego’s Union Tribune reported this exchange with Sen. Charles Schumer (D-NY):

In a letter, Schumer asked Energy Secretary Steven Chu to reject requests for stimulus grants from companies that buy key components abroad.

“In all due respect, I remind the secretary there is a four-letter word associated with the stimulus — J-O-B-S,” Schumer told ABC News. “Very few jobs here, lots of jobs in China. That is not what I intended or any other legislator who voted for the stimulus intended.”

Chu responded on Facebook: “But manufacturers will not build plants here and grow their production capacity here unless there is domestic demand; and, until recently, that was not the case.”

The Union Tribune, and many other news outlets, listed numerous instances of companies that received stimulus funds for jobs overseas. But none addressed stimulus funds that went to foreign-owned companies, such as Abengoa, that created jobs in the U.S. — but for the company’s fellow countrymen rather than American citizens who were promised the jobs.

Local to Global Hiring

Abengoa’s ARRA loan guarantee stipulates “local to global hiring” — which means that a company receiving stimulus funds had to try to fill all the jobs with locals first. Companies had to prove that they’d posted the jobs locally. If the positions couldn’t be filled by locals, human resources could reach out to surrounding states, then from coast-to-coast, then globally.

The whistleblower reports that at Abengoa, time-and-time again, over a period of several years, foreigners (usually from Spain or Uruguay) were brought into the U.S. to fill routine jobs such as data entry — that could have easily been filled by locals. Even jobs as basic as “welder” were brought in from Spain.

Those jobs were never even advertised and were often given to friends with no prior experience or to executive’s spouses. Yes, specialists were required for some positions and those might have fit the local-to-global requirement had they been brought in on the right visas.

Had the DOE audited Abengoa’s hiring practices, it would have been found in violation of the contract, but despite repeated attempts to bring the discrepancies to the attention of the DOE, it looked the other way.

For example, the mirror assembly required steel tubing and welded parts. American companies wanted to bid on the multi-million dollar contract. But, Abengoa wouldn’t even entertain bids. It owned a subsidiary in Mexico — Comensa — that guaranteed the contract. The parts were produced in Mexico where the environmental regulations are far more lax. Also, those dealing with assembly reported that the parts from Mexico were not as high quality as U.S. standards demand.

One source, an activities manager (like a site supervisor), revealed that not only did Abengoa give job preference to the expats, but Americans were actually fired to provide jobs for them.

When expats and Americans held similar jobs with comparable experience and/or education, the expats typically received nearly double pay. For example, Tanner Potterf, an activity manager at Abengoa’s Solana construction site, a U.S. citizen, was paid approximately $80K. Pelayo Domingo from Spain, also an activity manager at Solana, was paid $155K for the same basic job. U.S. taxpayers must have been paying dearly for this work if the company could afford to pay $155,000 for an activities manager when they could hire one for half as much.

Must be those well-paying jobs Obama talked about — just not for Americans.

One source reported: “There had been some discussion by management about bonuses at the end of the project, and there was speculation among the employees as to who would be receiving bonuses. About the same time, water cooler gossip indicated only activity managers and above would be receiving bonuses.”

A short time later at least two American activity manager job titles had been downgraded — without notification — from activity manager to field engineer. Job responsibilities did not change. The source says: “By this time I was one of only a few performing activity managers that wasn’t an expat.” He left the company before the bonuses would have been paid.

Additionally, the expats received benefits that the Americans didn’t get. An early-hire, one of the first Americans, reported that the benefits manual listed different benefits based on the country from which the employee hailed. Expats had company cars and company-provided baby formula (untaxed, of course). Plus, the expats, only, received automatic raises upon having children — as was a common practice in Uruguay. Needless to say, there were a lot of pregnancies — despite the fact that HR was told not to hire women with little kids as they’d not be able to work late.

Equal Employment Opportunity Act Violations

Sources confirm that CFO/COO Santiago Duran violated the Equal Employment Opportunity Act by directing HR not to schedule interviews with “old people” — anyone over 35 — and “no fat people.”

There was an American woman who applied for a job as financial analyst. She was qualified for the job and based on her resume Duran had an interview scheduled with her. When she showed up, she was overweight. Duran stormed into HR, berated the manager for sending him a “fat person,” and made it clear that she was not the kind of person he wanted in his office. Later, when Abengoa was opening up the Mojave project, the person in charge of hiring contacted HR and asked if there were any qualified applicants. The woman was contacted and asked if she was still looking for a job and asked if she’d relocate. The response? “Yes! I just need a job!” She is the kind of person ARRA was written for. She was hired and moved. Later, Duran was on site at Mojave and saw this woman. He was outraged. She is still working there today and according to her supervisor, is doing a great job.

Other sources reported having supervisors who only spoke Spanish. Another source talked about being given staffers who didn’t speak English.

About Those Visas

A certain number of work visas are allotted to companies wishing to bring in talent from outside the U.S. — a policy aimed at protecting American workers. Abengoa was bringing in so many expats it maxed out the allotment early each year. Abengoa brought hundreds of expats in to work on a “tourist visa” designed to allow future workers to investigate the area, house hunt, and check out the schools, etc. Yet, each day these “tourists,” using their ID cards, badged in each morning and left the site at a consistent time — as the security records show. These tourist/workers often worked without appropriate documentation, for as long as nine months. They were not on the payroll and were, instead, being paid out of accounts payable — thus paying no income taxes.

Sources confirmed that an American quality director did the herculean job of getting all three projects and the central office ISO (International Organization for Standardization) certified in time for Abengoa’s initial public offering. The quality director achieved ISO certification in 9 months instead of the usual 2-3 years. Once he completed the task, he was fired. Due to his excellent work, and the fact there were no documented performance issues in his file, HR was reluctant to sign off on his termination paperwork — but was ordered to anyway. His open position was never posted — allowing no Americans to apply — and he was replaced with an expat who had been working in the U.S. for nine months without the proper visa.

Apparently, the operations were so corrupt they didn’t trust any outsiders who might not play by their rules. Most everyone had to sign non-disclosure agreements. It has been reported that even the mirror design was stolen from an American company.

Despite repeated reports, the DOE didn’t seem interested in any of these violations. Even after receiving complaints from many Abengoa employees through the whistleblower hotline, the DOE gave Abengoa more money — a $2 million research grant.

After the whistleblower left the company, she again contacted the DOE, to no avail. She reached out to her senators: Jeff Flake (R-AZ) and John McCain (R-AZ). On May 1, 2013, Sen. Flake wrote a letter to Gregory H. Friedman, Inspector General at the DOE. Finally, something started to happen.

But, the wheels of government bureaucracy turn slowly. In mid January 2014, the Immigration and Customs Enforcement officers (ICE) swooped into Abengoa’s offices and confiscated cases of records — including hundreds of visa applications with Duran’s signature.

Shortly thereafter, it was announced that Duran was leaving to take a position in Uruguay. Despite having recently purchased a lavish home in the Phoenix area, he is no longer in the country. (Duran is the executive who, when the whistleblower brought employment violations to his attention, told her that they were “sick of the drama” and accused her of exaggeration.)

Four ICE investigators have been working full time on Abengoa since October 2013.

We’ll see how this all shakes out. Having sorted through the records at Solana, ICE clearly found items of interest. On March 30, 2014, a Sunday, they advised the whistleblower that they were moving on to the Mojave employment documentation.

A source, who was at Mojave, is skeptical about the ICE investigation. In great detail, he told them about immigration violations — yet, ICE agents never asked for names or dates.

Davis Bacon

While the DOE didn’t seem to care about the myriad violations mentioned here, it did regularly do Davis Bacon audits to guarantee that the prevailing union wages were paid — something that was important to the Obama administration. Sources were shocked that while investigating Davis Bacon compliance, there was no concern shown toward the number of foreigners on site — which was obvious as the majority were speaking Spanish.

Stacy Ford was the DOE loan portfolio manager who was on site quarterly. Her name, phone number, and email were printed on the required Davis Bacon posters at the site. The loan guarantee required the DOE contact info to be on the posters. Because of the prominence of her contact information, employees reached out to her with concerns about the visa situation and other issues. She turned them away saying that she only did Davis Bacon—but didn’t report the violations nor direct the employees to another contact.

At the end of March 2014, it was revealed that Abengoa’s Mojave project was four months behind in its Davis Bacon reporting. The Davis Bacon Act requires that applicable companies submit a weekly certified payroll report to the prime contractor. In the case of Mojave, the Abengoa-owned company, Abacus, is supposed to do the reporting to the prime contractor, which is another Abengoa-owned company, Abeinesa. In this case the fox is guarding the henhouse. The Department of Labor has been notified and at the time of this writing, nothing appears to have been done about the violations.

Insurance Fraud

Abengoa employees’ health insurance is covered by BlueCross BlueShield of Arizona — a healthcare plan that is for “employees” and specified dependents. Employees are defined as being on the company payroll. Yet, over a period of several years, hundreds of people who were not on the payroll were enrolled in violation of the plan. These were the expats who were in the country and working on tourist visas and being paid through accounts receivable.

Because Abengoa broke the BlueCross BlueShield contract, BlueCross BlueShield could terminate the entire contract and hurt all legal employees — Americans and expats alike. This could result in all paid claims having to be reimbursed by either the company or the individuals. Or, due to plan violations, the IRS could remove the tax-free benefit status and every employee could owe taxes on the benefits they received.

The tourist-visa expats could have been covered on travel insurance.

ICE officials have met with BlueCross BlueShield. Sources report that the investigation is “continuing to move forward.”

Local Vendors

A project the size of Solana, and the upcoming Mojave, doesn’t happen without the support of dozens of local contractors — contractors who pay their employees while waiting for the funds to come to them from Abengoa. The Arizona Republic reported that construction of the Solana Generating Station “included about 400 contractors.” Many of them were “mom and pop” operations that almost went bankrupt.

Many of the contractors have subcontractors. As a result of nonpayment, at least eight contractors have filed construction liens. One of those contractors is one of Arizona’s biggest construction companies, Kitchell. According to the Arizona Republic, “because Kitchell has not been paid, its subcontractors have not been paid.” One of those subcontractors is Interstate Mechanical Corporation (IMCOR) — which pulled all of its employees off the job in January 2013 for nonpayment. Bob Karber, an attorney representing IMCOR, said “It would be an understatement to say the lack of payment is causing a significant financial burden on IMCOR.”

In another case, at Mojave, three different bids came in for land preparation. One company proposed a unique technique and had the lowest bid. Instead of going with the innovative company, Abengoa took the proposal and gave it to the other companies asking them to rebid using the competitor’s design.

A former employee talked about Abengoa’s method of paying its vendors that it called PPB (Pay Per Bank) — which is such a convoluted system, Abengoa gave the managers official course classes on the subject to explain the purpose. Simply put, by putting very tight complex rules on the way they shall be invoiced allows them to make excuses not to pay the invoices for as long as six months or more. The terms were intentionally hidden in the fine print and Abengoa management viewed the delays as the contractors fault because they were too stupid to read the whole contract.

There was a woman employed at the Solana project who proudly referred to herself as Tammy the Rejecter. Her job was to reject invoices for just about anything imaginable. If a vendor messed up an invoice, they would have to wait a whole month just to be able to resubmit for payment.

The Spanish management thought that Americans were stupid because they had not yet figured out this system of delayed payments. Remember, this was in the midst of Spain’s banking crisis. This allowed Abengoa to collect interest on the funds and use the U.S. taxpayer dollars to fund foreign operations. The money was then tied up and unavailable when it was needed to pay U.S. contractors.

The Arizona Republic reached out to Abengoa officials in Arizona and Spain for comment on the claims disputes but they did not respond. A New York public relations firm, speaking on behalf of Abengoa, provided the following: “In a project as big as Solana, there is always a chance that incidents arise and lead to situations such as this or there are some sort of disputes,” it said. “Abengoa always acts thoroughly in accordance with the law and is working towards their resolution.” Yet, the combined total liens on the Solana and Mojave projects are close to $70 million.

A similar story caused the Davis Bacon compliance issues at the Mojave project. Hundreds of unpaid workers walked off the job. In a panic to get people to complete the project, the Abengoa-owned company Abacus — which was originally a project management company — suddenly became a construction company, too. Abacus had to quickly hire hundreds of replacement workers and the rush to hire made it impossible to do all of the Davis Bacon documentation. All of this happened concurrent with ICE dropping subpoenas and the payroll manager handling Davis Bacon-certified payrolls quitting with no notice.

Conclusion

This Abengoa story has been years in the making. You might be wondering, why now — especially when the ultimate project has been a technical success? The Solano Generating Station is a success in that it is producing power — albeit at a much higher cost than electricity generated from conventional sources. But it has taken advantage of American workers in the process. In the course of researching this report, Tanner Potterf said: “While I, too, am grateful for the employment I had during my time with Abeinsa EPC [an Abengoa Company], it was a miserable two years.”

We were contacted in January 2014. It takes time to research the story and corroborate the details. Lakatos, my cohort in Obama’s Green Energy Crony Corruption Scandal, posted an earlier version of the story in her blog on March 30. Since then, she’s been contacted by engineers reaching out to discuss OSHA (Occupational Safety and Health Act) concerns. Apparently major systems for California’s Mojave project were designed in Spain by engineers who are not familiar with California’s safety standards or California’s earthquakes. An American engineer reported that the errors will cost the state of California $10-15 million to repair if an earthquake hits the plant. When concerns were brought up, he was told not to discuss the flaws with anyone — they’d take care of the problems. But they never did.

In validating the details here, additional sources have come forward. Most don’t want to be quoted by name because of litigation in which they are involved or due to severance terms they signed. Yet, they are willing to testify in Congress about the abuses they endured and the fraud perpetrated on American taxpayers. They are outraged that this could happen here. One specifically stated: “I am an Independent and a staunch supporter of the renewable energy sector, however, I was deeply concerned by what I saw at Abengoa, which is why I’m willing to put my two cents towards the accuracy of your reporting which, in my view, barely scratches the surface. It’s a story that needs to be told.”

But, even worse, if this is not exposed, it could continue. On April 2, 2014, the current Secretary of Energy Ernest Moniz, according to the National Journal, said: “the department would probably throw open the door for new applications for renewable energy project loan guarantees during the second quarter of this year [now], a somewhat more precise forecast than his previous estimate of ‘relatively soon.’”

During Moniz’s May 16, 2013 confirmation hearing, Sen. Flake stated: “I do not believe the loan guarantee program is prudent or effective. If, however, the Department of Energy continues down that path, what will you do to enhance the Department’s oversight of these loan programs?” He asked: “Relatedly, what if anything would you recommend the Department do to protect local contractors and subcontractors when performing work for entities that receive federal backing?”

Moniz replied: “If confirmed, I will make the monitoring and oversight of the Loan Program’s portfolio of loan guarantees a top priority. … I look forward to getting a better understanding of the mechanics of the Loan Program Office to understand what can and should be done to protect local contractors and subcontractors.”

Moniz was confirmed more than a year ago. But he has failed to look into Abengoa — despite numerous desperate pleas from its American employees. Instead, he is now ready to “throw open the doors” to welcome in more corruption. Moniz may have meant what he said in his confirmation hearing, but he has now been in DC long enough to have fallen under the spell that believes it can stop climate change regardless of the cost to American taxpayers and the increased cost of electricity to consumers. Or, perhaps he doesn’t want to look into the promised “monitoring and oversight” because he knows what he will find and it won’t be good for the Obama Administration.

Abengoa is just one stimulus-funds recipient. There are thousands of projects that U.S. taxpayers have funded. Instead of throwing open the doors, such programs have got to stop until a complete examination of abuse, mismanagement, and contract violations are conducted by the DOE, ICE, and the Department of Labor.

Unless something is done, corruption such as Abengoa’s standard operating procedure could continue and the American taxpayer will be left carrying the load.

The author of Energy Freedom, Marita Noon serves as the executive director for Energy Makes America Great Inc. and the companion educational organization, the Citizens’ Alliance for Responsible Energy (CARE). Together they work to educate the public and influence policy makers regarding energy, its role in freedom, and the American way of life. Combining energy, news, politics, and, the environment through public events, speaking engagements, and media, the organizations’ combined efforts serve as America’s voice for energy.

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The IRS Inquisition: One Patriot’s Experience

Catherine EngelbrechtNot all waste, fraud and abuse in the Federal government includes monetary damages, tax fraud or theft. Some abuse is perpetrated upon the citizens of the United States by its own government.

Using the incredible powers of government, American citizens are being targeted and punished by their own government

One such experience of an American patriot deserves to be recounted in her own words. Catherine Engelbrecht is the founder of True the Vote and the King Street Patriots. She and her husband operate Engelbrecht Manufacturing in Rosenberg, Texas.

Earlier this year Engelbrecht recounted to the House Oversight and Government Reforms Sub-Committee on Regulatory Affairs her singular experience with the IRS Inquisition. This video is compelling.

In the past several weeks it has been revealed through emails that Elijah Cummings, the Ranking Member of the Committee, had a hand in IRS targeting of True the Vote.

It was also revealed that former IRS official, Lois Lerner, improperly fed Elijah Cummings’ staff tax information on True the Vote via email correspondence.

Engelbrecht responded in a blistering letter entitled, “No More Lies, Mr. Cummings; Tell America the Truth“:

Washington is reeling as Rep. Elijah Cummings’ (D-MD) true role in the IRS abuse scandal has come to light. Emails released by the House Government Oversight and Reform Committee, of which Cummings is the ranking member, show Cummings and his staff communicating with Lois Lerner while the IRS targeted True the Vote for abuse.

“Today’s committee action reveals what we knew all along. Partisan politics and the weaponization of government against opponents of this administration is real and continues,” said True the Vote president Catherine Engelbrecht. “Elijah Cummings has blocked the IRS abuse investigation all along. We now see clearly that two branches of government have colluded to target and silence private citizens.

“America has come to a tipping point,” Engelbrecht said. “No more lies. No more cover-ups. No more collusion. Enough is enough. Finally, we have a chance for the rule of law to be re-established, thanks to the bold efforts of Chairman Issa and Rep. Jordan.”

Engelbrecht added, “We filed an ethics complaint against Rep. Cummings in February. Today we’re amending that filing to include this latest revelation. As I have said in my testimony before Congress; I will not retreat, I will not surrender, I will not be intimidated. I will not ask Rep. Cummings, Lois Lerner, Barack Obama, or anyone else, for permission to exercise my constitutional rights.

Anyone with common sense could see the moment that Elijah Cummings put on a big acting performance at Lois Lerner’s testimony (where she plead the Fifth – again) that the Democrat was attempting to hide something from the public, while shifting attention onto Republicans by vilifying them. Now we know why.

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The Worst ObamaCare State Exchanges: Maryland

Maryland Health Connection logoIt’s no coincidence that the two largest state exchange disasters occurred in the bluest of the blue states. In our last post we discussed the on-going financial disaster in Oregon with the Cover Oregon exchange. This one comes complete with a federal investigation to find out where the money went.

The Cover Oregon exchange was forced into enrolling individuals by hand with paper forms. Cover Oregon attempted to be all things to all people with a comprehensive site that lacked the time required and more importantly, the expertise necessary for success.

The state of Maryland spent at least $125.5 million on their site, Maryland Health Connection, with very little to show for it. Maryland’s goal was to enroll 150,000 through their online exchange but by the end of the enrollment period less than 50,000 enrolled.

Governor Martin O’Malley recently said:

We still have stuck applications. We still wrestle with it every day. The clock was ticking, and we have been changing the flat tires on this rolling car for the last five, going on six months now. And it has gotten better with every new fix applied to it, [but it is] still not working as it was supposed to work.

But the spending on Maryland’s defective online exchange hasn’t ended. A report by Maryland analysts last month found that the state’s exchange could cost the Maryland $30.5 million because the state is unable to determine whether people remain eligible for Medicaid due to problems with the exchange.

The board of the Maryland exchange voted to changing the system and adopting technology from the Connecticut exchange, Access Health CT. The state will employ the consulting firm of Deloitte for the overhaul. Some have estimated the additional cost at $40 to $50 million.

But the hits keep coming for Maryland and its embattled Governor, Martin O’Malley. Rep. Andy Harris, Maryland’s only Republican congressman, recently announced that the inspector general of the Department of Health and Human Services had agreed to review the state health exchange after requesting an investigation in February.

And last month, Maryland’s health exchange board voted to fire the state’s prime information technology contractor, Noridian Healthcare Solutions.

Meanwhile, Maryland had more people lose their insurance coverage, 73,000, than enrolled for coverage on the state exchange.

Maryland Attorney General and gubernatorial candidate Douglas F. Gansler has called on the Governor to appoint a special counsel to investigate the state’s online health insurance exchange.

Marylanders have waited more than six months for answers about why the exchange failed, how much was spent, and who was at fault. A thorough, independent investigation is essential to getting health care reform done right in Maryland.

O’Malley immediately rejected the call by Gansler. His spokeswoman, Nina Smith, said: “We’re not going to waste time responding to attacks from political campaigns.”

Smith pointed out that Maryland had met its initial enrollment target. A statement that is belied by the facts. Like other blue states and the Federal government, Maryland lumped the exchange enrollments with the enrollment in the Medicaid program.

As O’Malley sees his chances to be the Democrat Presidential candidate in 2016 sinking, he seems to be trying to tailor the facts to his political agenda.

Gansler has sought for months to pin blame for the exchange’s problems on Lt. Gov. Anthony G. Brown (D), a rival for the Democratic gubernatorial nomination in June, whom O’Malley has endorsed. Brown was tasked by O’Malley with overseeing implementation of federal health-care reform in Maryland.

 

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The Worst ObamaCare State Exchanges: Cover Oregon

Cover OregonThe Obama administration hoped that the majority of states would set up their own exchanges, thus absolving the Federal government of the onerous task. But if wishes were horses we would all be riding.

Instead, only fourteen states and the District of Columbia will take on the task themselves for 2014. The rest opted for a complete Federal takeover or a state/federal partnership.

Let’s take a look at the state exchanges that are in the news right now because of their problems. These two states are Oregon and Maryland.

Both are deep-blue states with Democrat governors: John Kitzhaber in Oregon and Martin O’Malley in Maryland. In both states Barack Obama defeated Mitt Romney by double digits: 11% in Oregon and 25% in Maryland.

Today, we’ll look at Oregon and on Wednesday Maryland.

In Oregon, “Bottom line: we are on track to launch” ranks right up there with “If you like your health care plan, you can keep it.” The latter was repeatedly said by Barack Obama during his 2012 reelection campaign.

But who said the former? For those of us who live outside the Pacific Northwest, it was Rocky King who offered it in a Power Point Presentation. King was the then-Executive Director of Cover Oregon.

King made the presentation two weeks before Cover Oregon was set to go live on October 1, 2013 and he must have known that it was a lie when he made the statement.

Six months after the official launch date the website is still not functioning properly. As many as 500 people were hired or reassigned by the state after the website failure in order to process healthcare paper applications.

The Cover Oregon failure is perhaps the biggest IT failure in U.S. history. The Federal exchange despite its failures at least is now running with a modicum of success. No such luck for Cover Oregon.

The closest estimate of the cost of this spectacular failure is $200 million. No one appears to know the exact figure since generally accepted business practices were not rigorously followed.

The lead developer on the project was software giant Oracle in what many consider a non-competitive process. Although many companies began the process, only Oracle was left standing. Almost all of those that dropped out of consideration did so when the size and scope of the process became clear.

Most of the funds for the exchange came from the Federal government in grants that totaled $305 million. The Government Accountability Office announced in early March 2014 that it was launching an investigation to determine where and how federal money was spent.

When the exchange failed to work on October 1st, everyone associated with it expressed shock. They shouldn’t have. They were warned starting in November 2011, almost two years before the launch.

Officials of Cover Oregon and the Governor were on the distribution list of warnings. However, members of the Oregon legislature were conveniently left off the list. Instead, they were given periodic updates by Rocky King, updates that painted a rosy picture of the progress.

Part of the problem with the Oregon exchange was its breathtaking scope. Rather than building the site incrementally, Cover Oregon officials chose to build a site that virtually every Oregonian would use.

They planned that Oregonians could register for just about any welfare and public assistance benefit including Medicaid eligibility, payments, and enrollment; food stamps; temporary assistance for needy families; and the supplemental nutritional assistance program. It was a clearly impossible task.

The Cover Oregon site was fated to fail when Carolyn Lawson, Oregon Health Authority chief information officer, eliminated the position of system integrator before one was even hired. It was like erecting a building without a general contractor.

Lawson has since resigned from her position and left the state, returning to California. She has since filed notice that she is considering suing the state for wrongful discharge, defamation and other charges.

Meanwhile, Governor Kitzhaber ordered a report on the failure of the exchange. He then picked the company, First Data, who were tasked with investigation. Kitzhaber crafted the questions to be asked and reportedly identified who was to be interviewed.

When the report was released nothing new was in it. The First Data report did clarify what had previously been the subject of speculation. Progress reports for the Cover Oregon website effort were often modified, changed, or altered seemingly to create a misleading impression that a fully functioning website would meet the launch date.

According to a report by prepared by Deloitte Development, the Cover Oregon health insurance exchange is so bug-ridden and far from completion that it would take nearly two more years and more than $40 million to finish if the state sticks with its original plan using technology developed by Oracle Corp.

Meanwhile, Kitzhaber is up for reelection in November and undoubtedly his opponent will hammer him on this debacle. Currently, six candidates are vying for the Republican nomination.

Ironically, in late August 2013, Modern Healthcare magazine named Kitzhaber the second-most influential person in American healthcare. No doubt magazine editors thought the accolade would be complimentary.

Next up: how Maryland has already wasted at least $125.5 million on a site that doesn’t really work and their plan to spend another $30 to $50 million more.

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Some Big Ticket Waste Items in the Federal Government

Cut up the Government Credit CardLike the poor, it seems that government waste, fraud and abuse will be with us always. As soon as we plug up one hole that is leaking millions and billions of dollars three more appear.

The Federal government has an army of Inspectors General but sometimes it seems that we’re looking in the wrong spots. Cutting some silly grant for teaching shrimp to workout on a treadmill or a study on duck penises just won’t cut really big bucks from the Federal budget. Instead, the waste fighters must start going after the big ticket items.

One of the big ticket items that could do with some reforming is the disability insurance system. In recent years it has become a kind of shadow welfare system. Something like 14 million people are now receiving disability payments. And it’s a number that is growing. In the last 15 years the number of people receiving disability benefits has doubled.

Abuses abound with some doctors appointing themselves as arbiters of who ought to get federal support, finding people disabled or not based on their job prospects, according to This American Life’s report from March 2013.

According to a Hamilton Project proposal by Jeffrey Liebman and Jack Smalligan, disability insurance reform could save $10-$20 billion over 10 years.  One of the biggest obstacles is a resistance to the up-front spending needed to realize these savings: such an expenditure would be on-budget, while the savings for the Social Security system would be categorized as mandatory spending.

Again, Congress needs the political will to make the changes needed to reform the system. Resisting the impulse to help those who seem sympathetic and moving forward with reform will take a great deal of fortitude. No one wants to be called a mean person, most especially a politician.

Another big ticket item is the rent that the Federal government pays to landlords all over the country. Recent reports have suggested that Federal departments have overpaid on their space and rented too much of it.

Every year the federal government spends $4.2 billion renting office space. Some agencies rent instead of own because they operate in critical locations with specific security or workplace needs.

In a recent report the Department of the Interior’s inspector general found that Bureau of Indian Affairs had done both at a cost of $32 million in waste.

Another glaring example of waste: when Health and Human Services’ lease expires on its Rockville, Md., building, the agency will have paid rent on a private building for 60 years rather than owning it.

The Environmental Protection Agency in Seattle is renewing a lease that will keep it in its building for 50 years. And the Department of Commerce in Alexandria, Va., pays $60 million year in rent.

Renting rather than owning its space sometimes creates a whole new set of issues when it comes to renovating space that it does not own. The Consumer Financial Protection Bureau in D.C. recently told Congress it plans to spend $95 million to renovate the building it’s renting from another agency.

The State Department just spent $80 million renovating office space for a lease that’s up in five years. It has an option to buy, but if it can’t come up with the money, chances are the landlord will think about that when it’s time to renegotiate the rent.

Then, of course, we have the thousands of buildings that are sitting vacant or being under-utilized. Rep. Jason Chaffetz, R-Utah, who sits on the Committee on Government Oversight and Reform has introduced legislation to help get rid of thousands of government buildings that are sitting vacant or unused.

“When you see these departments and agencies leasing a building and then investing millions and millions of dollars to retrofit them for their specific need, it just sort of drives you nuts,” he says, “At the same time that we’ve got 77,000-plus buildings that are under-utilized.”

Chaffetz says federal agencies like the General Services Administration have been unable to account for all the buildings the government owns so it’s hard to know if they can be of use.

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ObamaCare: Numbers to know and numbers to show

The ObamaCare NumbersPresident Obama accompanied by his sidekick, Joe Biden, spiked the football in the Rose Garden when he announced that 7.1 people had enrolled in his signature health insurance scam, the Affordable Care Act.

But just saying the magic number doesn’t stop the questions about the composition and validity of the enrollees. Remember that there are numbers to know and numbers to show. And despite the numbers that the administration is showing us, we still don’t have the full story.

First and foremost, ObamaCare was touted as the way to insure all of the uninsured across America. That number has fluctuated from 30 million to as high as 50 million, depending on who you’re counting.

To force the uninsured to sign up a fine was built into the law, either $95 or 1% of your taxable income, whichever is greater. For those who meet the income standard generous subsidies were available, paid for by your fellow taxpayers.

Given all of these conditions only 7.1 million people signed up for coverage. And the administration really doesn’t know or isn’t telling how many of those already had insurance that was cancelled due to Obamacare. Some observers say that perhaps a third of the enrollees were previously ensured.

Then we have the whole question about how many have paid for their coverage. Anyone can enroll but the truth is that until they pay they don’t count. Some insurance sources say that as many as 10% to 20% have not paid.

Then we have the people who pay a couple of months but then drop the coverage due to its expense. The fact that 7.1 million enrolled doesn’t really tells us how many are legitimate users of the system.

The Obama administration and their state allies have spent hundreds of millions of dollars in implementation costs. According to data compiled The Associated Press in mid-2013 from federal and state sources, at least $700 million will be spent on the national marketing campaign.

The state marketing campaigns are a mixed bag in terms of spending per capita. Mostly it divides along political lines with red states spending less and blue states more.

AP research from all 50 states shows the amount of government spending will range from a low of 46 cents per capita in Wisconsin, which has ceded responsibility for its health insurance exchange to the federal government, to $9.23 per capita in West Virginia, which opted for a state-federal partnership.

About $4.8 million in public money will be spent trying to sign up New Jersey’s 1.3 million uninsured, for example, compared to the nearly $28 million spent reaching out to Washington state’s much smaller 960,000.

The states that opted for a state-run exchange are finding that the costs were either exorbitant, wasted or both.

Maryland is one glaring example of an exchange that cost $125.5 million and now is considered unusable. For their money Maryland enrolled slightly under 50,000 people which translates to a cost of $2,500 per person.  Of those, we don’t know how many actually paid their first month’s premium.

Maryland is now looking to scrap their site and start over using technology used for Connecticut’s insurance exchange. Maryland doesn’t know how much the new exchange will cost but they do know that their defective site will cost them $30.5 million for eligibility payments.

Oregon is considered Obamacare’s biggest technological disaster, costing taxpayers $170 million so far. Politico notes that Oregon’s online insurance exchange is the only state-run site where applicants still can’t buy coverage online. Instead, residents have been forced to fill out paper applications or go through call centers.

In all the Obama administration gave states at least $4.4 billion in taxpayer dollars to set up their own ObamaCare websites.

Until the administration comes clean on the breakdown of the enrollees ObamaCare will continue to generate editorials and media stories with rampant speculation.

Maybe, it’s time for the House Oversight Committee to ignore the President’s carping and conduct a full and through investigation of the program using their power to subpoena relevant documents.

 

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Barack Obama’s War on Energy

Offshore Drilling RigThe recent troubles in Ukraine have once more brought America’s dysfunctional energy policies to the forefront. Since the end of the 1973 Arab oil embargo the United States has struggled over creating a coherent energy policy.

As a nation we have zigzagged down the road when it comes to an energy policy. With each change of administration the country has lurched from all-out production to turning off the spigot.

The Democrats backed by environmental groups have attempted to throttle the exploration and production of fossil fuels on land and in the seas. They have infiltrated the Department of the Interior and the Environmental Protection Agency (EPA) with true believers who are trying to eliminate the use of fossil fuels.

The Republicans, on the other hand, have tried to exploit this country’s rich natural resources. They have approved more drilling and expedited the building of pipelines, refinery additions and power plants.

We are now faced with a President who has very little real world experience when it comes to energy production. He has gone out of his way to shut down coal production in this country by allowing the EPA to publish new regulations on the building of power plants that preclude their use of coal.

In his State of the Union Address, Obama promised the following:

But if Congress won’t act soon to protect future generations, I will. I will direct my Cabinet to come up with executive actions we can take, now and in the future, to reduce pollution, prepare our communities for the consequences of climate change, and speed the transition to more sustainable sources of energy.

The signature component of President Obama’s “energy transformation agenda” is the EPA’s war on coal. Under Obama, the EPA is working to kill coal-fired electricity generation in America through a series of onerous regulations imposed by administrative fiat.

EPA is pursuing regulations that will effectively ban new coal-fired capacity by requiring new coal plants to employ carbon capture and sequestration technology that is not commercially available.

This is a de facto ban on America’s largest source of electricity. President Obama has also promised to impose similar emission regulations on existing power plants, which EPA is expected to propose later this year. The end result will be widespread unemployment in the coalfields of America and through-the-roof electricity bills for consumers.

Meanwhile, the Keystone XL pipeline remains in limbo. It has now been on the drawing board for five years with no approval in sight. It is a rallying point for the extreme environmental lobby who have put a great deal of pressure on the White House to deny approval to it.

A March 2013 report issued by the nonpartisan Congressional Research Services found the following:

  • “All of the increased production from FY2007 to FY2012 took place on non-federal lands…”
  • For natural gas production in the U.S. since 2007 …production on federal lands (onshore and offshore) fell by about 33% and production on non-federal lands grew by 40%.”
  • Because of declines in oil production on federal lands in FY2011 and FY2012, production is now below FY2007 production levels.
  • The average daily production of natural gas on federal lands decreased by 8% from FY2011 to FY2012 and by 23% from FY2008 to FY2012.
  • The average time to process an Application for Permits to Drill (APD) on federal land increased 41% from 2006 to 2011, from 218 days in 2006 to 307 in 2011.
  • “A more efficient permitting process may be an added incentive for the industry to invest in developing federal resources, which may allow for some oil and gas to come onstream sooner, but in general, the regulatory framework for developing resources on federal lands will likely remain more involved and time-consuming than that on private land.”

The U.S. Energy Information Administration estimates that the United States will be the world’s top producer of petroleum and natural gas hydrocarbons in 2013, surpassing Russia and Saudi Arabia.

For the United States and Russia, total petroleum and natural gas hydrocarbon production, in energy content terms, is almost evenly split between petroleum and natural gas. Saudi Arabia’s production, on the other hand, heavily favors petroleum.

Yet, with our plentiful bounty of natural gas the federal government has made no effort to encourage its use for trucks and cars. The ideal vehicle for exploiting natural gas would have been the 2009 stimulus act. Instead, the Democrats gave politically-motivated handouts to favored constituencies like Big Labor and seniors.

The Obama administration is now in a box of Vladimir Putin’s making. He controls the flow of natural gas that heats the homes and businesses of our European allies. He can use it as a threat for their good behavior. And the United States can’t do anything to stop him.

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A Gusher of Overpayments

A gusher of overpaymentsThe Federal government is wasting money in every department but the really big waste is coming from a gusher in overpayments.

According to a report from National Review Online the Centers for Medicare and Medicaid sent over $100 billion to the wrong recipients in 2012.

jason-vero-imp-Chart-small

Medicare fee-for-service, Medicare Advantage, and Medicaid top the chart and combine for $61.9 billion in improper spending, which should surprise no one given their sheer size.

What is really worrisome is the relatively high rates of errors for the top three plus the Medicare Prescription Drug Benefit the average is 7.5%. That means that we are wasting that amount by paying improper benefits.

The other worrisome part of the overpayments issue is that the Office of Management and Budget has been reporting these types of wasteful numbers for years. Yet, there doesn’t seem to be the political will to rein in the waste, fraud and abuse.

With the Affordable Care Act, we will be seeing a higher rate of spending in the medical sector. Can we expect to see an even higher volume of overpayments in the future? Without a doubt.

However, we’re also seeing high levels of overpayments from other social welfare programs. The Earned Income Tax Credit with an total overpayments of $12.6 billion has the highest rate of overpayments at 22.7%.

Unemployment Insurance with $10.3 billion in overpayments is tied with Medicare Advantage with an 11.4% improper payments rate. The National School Lunch Program despite its $1.6 billion in overpayments has a relatively high rate of improper payments at 15.5%.

These levels of waste, fraud and abuse only stoke the anger of fiscal conservatives whose immediate response is to cut some of these programs. The United States must have a social safety net but waste should have no place in them.

The supporters of these programs seem bent on loosening the qualifications for benefits. These types of political actions only serve the opponents of the programs.

 

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Caution: Government Waste Ahead

Government Waste Ahead signLost in the spotlighting of waste, fraud and abuse at the federal level, we sometimes forget that it also occurs at the state and local level. And some of the things that occur at these levels of government are doozies.

Let’s start with the city of Detroit which has often been a target of ridicule by the national press and also by this writer. Detroit is the city that keeps on giving. This latest example shows just how stupid bureaucracies can be.

The city is paying $32 to issue and process a $30 parking violation, and it hasn’t adjusted rates since 2001. On top of that, about half of Detroit’s 3,404 parking meters are not operating properly at any given time, says Emergency Manager Kevyn Orr’s spokesman, Bill Nowling.

“It’s another example of the old, antiquated system and processes the city has that creates impediments for anyone trying to do their job,” Nowling said.

Rather than fix the parking meters, the city is considering increases in its parking tickets. Now, there’s an idea whose time has come. Haven’t these guys ever heard of the law of diminishing returns. And these are the people who replaced the incompetents?

This type of incompetency is not confined to this side of the Atlantic. Here’s a story from the United Kingdom that may be hard to beat. The government created a new boondoggle program, but managed to make it so convoluted that no households have signed up for the handouts.

Here are some laughable excerpts from the Telegraph:

The Green Deal encourages homeowners to take out a loan to make their house more energy-efficient. …households have had since October 1 to have their home assessed for the scheme prior to its launch. However Greg Barker, the climate change minister, has admitted that “no assessments have yet been lodged” on the Government’s official register by homeowners. Luciana Berger, the shadow climate change minister, described the Green Deal as a “shambles” and said its launch is “lying in tatters”. The Coalition hopes that owners of up to 14 million draughty homes will sign up to the scheme. …In an effort to kick-start interest, DECC last month announced a £125 million ‘cashback’ scheme, offering homes up to £1,000 if they sign up as ‘early adopters’. Ms Berger said that homeowners are being put off by the Deal’s complicated finance arrangements.

Boy, even the ObamaCare rollout went better than this disaster.

Then, of course, we have and oldie but a goodie from Germany. The German government decided to solve the prostitution problem and their fiscal problem with one novel solution.

Their latest scheme is a plan that requires streetwalkers to put money in parking meters in exchange for a slip of paper that entitles them to ply their trade for a specified period of time.

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The Postal Service is running on empty

Running on emptyThe latest proposals from both houses of Congress should illustrate to the American taxpayers the inane reasons why the Congress won’t free the Postal Service from its grasping clutches.

In all of the history of the American Republic until 1971, the Post Office was a political department that the parties used to reward their friends and punish their enemies.

Postmaster positions were the main means of the political patronage that the President used to reward supporters. The Postmaster General was very often a political adviser to the President and had very little to do with the actual running of the department.

Then in 1971 the Post Office became the United States Postal Service. The service became an independent agency of the United States. What exactly did that mean? It meant that the new Postal Service was still under the collective thumbs of Congress.

With 574,000 employees the Postal Service is the third-largest employer in the United States behind the federal government and Wal-Mart. But the service still cannot run its operations in a business-like way.

They simply can’t close little-used post offices without the approval of Congress. In 2011, the management proposed the closure of both post offices and mail processing centers. The outcry from Congress, the unions and the public forced them to modify their closures to a point where nothing was closed.

Senators and representatives acted as if the closures would mean the end of the Republic. When Postal Service management proposed ending Saturday mail delivery, Sen. Bernie Sanders (I-VT) is leading the opposition.

Yet the Postal Service is under constant and vicious attack. Why? The answer is simple. There are very powerful and wealthy special interests who want to privatize or dismember virtually every function that government now performs, whether it is Social Security, Medicare, public education or the Postal Service. They see an opportunity for Wall Street and corporate America to make billions in profits out of these services, and couldn’t care less how privatization or a degradation of services affects ordinary Americans.

The fact is that the USPS as it stands today is costing the American taxpayers billions of dollars a year.

The Postal Accountability and Enhancement Act of 2006 (PAEA), which obligates the USPS to fund the present value of earned retirement obligations within a ten-year time span – a requirement that raises the US Postal Service to the same level that US corporations operate.

In 2012, the USPS had its third straight year of operational losses, which amounted to $4.8 billion. Frank Todisco, chief actuary for the Government Accountability Office, told a House committee last week that the agency had $100 billion in debt and unfunded health benefit liabilities at the end of the last fiscal year.

Darrel Issa (R-CA) has a plan but he needs to get his fellow Republicans to support it.

Much of what I have to do is to get my fellow Republicans to swallow the pills of five-day delivery — going to the curb for delivery, right-sizing the size of the post office, quite candidly changing their medical retirement system to make it streamline with the rest of the workforce in America, by putting them on Medicare and out of a very expensive private program that you and I pay for.

Meanwhile, the kick-the-can-down-the road-crowd over in the Senate have their own plan. Their proposal would move to five-day delivery after 2017, keep all processing facilities open for at least two more years, and allow the U.S. Postal Service to recover overpayments into the federal pension system.

Here’s a promise. Neither house of Congress will come up with a workable solution to the problem until the Postal Service misses a payroll check for its employees. Then, and only then, might we see some action. But don’t expect people like Bernie Sanders to go along willingly.

 

 

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