Friday Movie Night - Infrastructure

 It's Friday Night! Party Time!   Time to relax, put your feet up on the couch, lay back, and watch some detailed videos on economic policy!

 

Remember all of that talk on shovel ready projects and infrastructure from the Stimulus? Remember it is estimated that only 3-5% is actually spent on infrastructure? Remember that our unemployment rate is 9.7% with no end in sight? Remember how these types of jobs, if given to Americans are above minimum wage and require skills? (See Probpublica, Eye on Stimulus for more details in addition to EP search)

 

$1.5 trillion to improve infrastructure

 

Reuter's Infrastructure Report

 

PBS has been keeping tabs on America's infrastructure in Blueprint for America. PBS (bastards!) have the video online but won't enable embedding. here is the link to watch the videos.

The 2008 documentary, America Betrayed, tells the tale of no-bid contracts, corruption and cronyism which hampers repairing America's crumbing infrastructure.

America Betrayed Trailer

 

Also, unfortunately not online, but very good, the History Channel is running a documentary, The Crumbling of America. (Link has schedule). If you have cable/satellite you might catch it.

Here is their trailer.

Meta: 

Comments

We'd/I'd like to say that

We'd/I'd like to say that what you are doing is a great service.

We are experiencing as a small business all the corruption you are speaking about -- thank you for providing a voice that we -- not being the media- have a hard time voicing to a significant enough audience -- so thank you.

A few additional comments.

1. Regarding tackling fraud and waste in the system. The biggest federal fraud is happening at the State level through -- a. the State awarding themselves federal funds to provide services that compete with private enterprise without consideration for price or quality; 2. State administrators awarding no-bid contracts that are eligible for Federal reimbursement to vendors without consideration of price or quality.

We have a 30 million dollar Federal Fraud complaint (complaint is public Northern Dist. NY 1:04-cv-1505 - in 2004 6 million actual fraud - parties despite suit are still continuing the fraud - amount currently estimated $10 million x 3 for FCA statutory penalties) sitting at DOJ where DOJ has not intervened. This is a case we might not have standing to bring on our own so the DOJ is willing to lose $30 million in this instance. We also identified $175 million in no-bid contracts going to one vendor whose agreement with NY is that this vendor will do everything to "maximize federal funding." So NY can offset its payment and obligations to the Federal taxpayer.

If Obama was really serious about cracking down on fraud, the first thing he would do is close the loophole in the current False Claims Act Law that does not allow a private person to bring an action for fraud against a state agency.

See, VERMONT AGENCY OF NATURAL RESOURCES V.UNITED STATES EX REL. STEVENS (98-1828) 529 U.S. 765 (2000), 162 F.3d 195, reversed.

Under the False Claims Act (FCA), a private person (the “relator”) may bring a qui tam civil action “in the name of the [Federal] Government,” 31 U.S.C. § 3730(b)(1), against “[a]ny person” who, inter alia, “knowingly presents … to … the … Government … a false or fraudulent claim for payment,” §3729(a). The relator receives a share of any proceeds from the action. §§3730(d)(1)—(2). Respondent Stevens brought such an action against petitioner state agency, alleging that it had submitted false claims to the Environmental Protection Agency in connection with federal grant programs the EPA administered. Petitioner moved to dismiss, arguing that a State (or state agency) is not a “person” subject to FCA liability and that a qui tam action in federal court against a State is barred by the Eleventh Amendment. The District Court denied the motion, and petitioner filed an interlocutory appeal. Respondent United States intervened in the appeal in support of respondent Stevens. The Second Circuit affirmed.
Held: A private individual may not bring suit in federal court on behalf of the United States against a State (or state agency) under the FCA. Pp. 4—21.

In case you don't know how it works. Many state agencies act as a funnel for federal funds. For instance each state agency is responsible for the distribution and reimbursement of federal funds for different programs. For instance the State Department of Health is generally responsible for the distribution of Medicare and Medicaid, Department of Environmental Protection would be for EPA or green clean up, Office of Children & Families - Temporary Assistance for Needy Families, Food Stamps, social services block grants, child welfare. So these State agencies are the gatekeepers for billions in federal reimbursements. These State agencies award grants to preferred vendors pursuant to no bid contracts -- there's no audit or oversight over these contracts. In NYC Department of Education alone there are ** billion no-bid contracts. The papers only reported 340 million, but a Columbia journalist found **billion (I can't disclose how much) and I could provide her direct contact. This is NYC department of education alone.

We found one vendor with $175 million in no-bid. There are others. There are about 14 agencies and 14 shadow agencies. Then the agencies set up sub-agencies i.e. mental hygiene research inc which then gets money for research and the money from the Federal government moves about like a 3-card monty game where you have to guess which state account the money is getting kicked back into. NYS has "ghost employees" where the State agency gives a private vendor a contract and in payback the private vendor pays for State employees expenses.

NY just got caught in a $500 million fraud scheme. This is not the first time NY has scammed the Feds out of hundreds of millions. The Feds are supposed to charge a penalty to disincentivize the frauder from continuing the fraud. In fact NY has a settlement agreement that if they misbilled the feds again they would be subject to trebel.

If NY is just fined, what it owes -- where's the disincentive. It would make sense for NY to defraud as much as possible. If 10% of the fraud is uncovered and NY only has to pay back 10% it's worth it for NY (and other states) to continue the fraud.

We're on a gag order from our attorney so keep us anonymous for the time being or clear it with us first. You're welcome to use the case -- it's public, and if you want the back up for the $175 million in no-bids or the billions in NYC DOE no bids -- that information is public as well, and we can show you where it is.
Thanks.

thanks for sharing this

The maze of ins and outs on no-bid contracts, fraud and waste seems to be clearly established pattern of "doing business", but I don't know all of the ins and outs.

EP is a community economics blog. That means anyone can create an account and write, as long as it's well cited, fact based, talking about something involving $$, which no-bid contract corruption does.

One thing I will note is when any of these cases gets busted, the NY attorney general or the DOJ goes after them (a rare occurrence) the final fine, even with exorbitant legal costs is still way below, say a 2% "fee" for doing fraudulent business.

I'm thinking of the pre-IPO start up period where "select" customers were given "preferred shares" of Pre-IPO stock that magically sky rocketed which they immediately dumped...
I think the fine for that vs. the profits was in the 1% or so "fee" range. Spitzer settled it, Citigroup was one who was fined.

We had Obama's new "CIO" literally have brazen fraud in D.C. city contracts for I.T., yet he made it to the Obama administration. Shake head, if brazen corruption/fraud is happening right under someone's nose, how exactly does that quality them to be national I.T. procurement officer?

If someone go do a flash or map or graphic on precisely how the no-bid fraud works in just one state, I think that would help people understand this shell game.

The MSM never covers anything meaningful, they get the details wrong or gloss over if they even do, but most of the time it's meaningless outrage du jour, such as Palin, or Heckler or Rev. Wright, or pick a diversion to go on and on about 24/7 for days.

Too Much Infrastructure

The problem with America is that it has too much infrastructure, and that it is crumbling is a benefit.

Cities are raped by having to constantly rebuild and repair and fix structures that are often redundant. They are sold on "one more bridge" or a "new tunnel" that will solve all traffic jams (in the same way that light rail is sold as a panacea) only to see it fail. Then they wait a generation until everyone forgets, and start up the process again.

There is, however, a desparate need for one type of infrastructure. Exubian, rural and suburban highways. With sprawl, many people are forced into driving on what were once country roads that now serve as thoroughfares. While the Liberal Urban Planners drained all the capital into building and rebuilding the tiny 10 square blocks of urban downtowns, the places where most Americans live and work in the 21st centuries, the vast sprawl between the coasts, was left high and dry.