Tipster alleges in FBI document that girls were murdered, buried at Trump golf courses -- with Trump funding "underage sex parties" on his properties

Trump National Golf Club Bedminister (Golf Digest)

A tipster alleges in an FBI document that a body connected to the Jeffrey Epstein sex-trafficking network is buried at one of Donald Trump's golf courses. The tipster also claimed to have witnessed British television host Robin Leach strangle a girl during a sex party at a Trump golf course/resort.

In all, the FBI document includes allegations that girls were murdered on three separate occasions, with their bodies being disposed of on Trump property.

This is not the first time rumors have swirled of orgies, missing girls, and possible murders at Trump-owned facilities. But the latest allegations -- in the form of a tip to the FBI, with news reporting at Raw Story -- appear to provide the most solid information to surface so far of deeply alarming events that seem connected to the Epstein network and Trump facilities.

Under the headline 'Buried at the Trump Golf Course: Explosive FBI Interview unearthed in Epstein Files,"  Raw Story's Alexander Willis writes:

An explosive allegation against President Donald Trump and Jeffrey Epstein has surfaced in the U.S. Department of Justice (DOJ) recent release of 3.5 million files, including disturbing details about a body allegedly buried at one of Trump’s more than a dozen golf courses.

According to an FBI document released by the DOJ, the agency received a tip in June of 2021 from an individual whose name has been redacted, but is described as an alleged “victim,” a former member of the Sinaloa Cartel, and a close confidant of Epstein and Ghislaine Maxwell.

The individual was formally interviewed by an FBI agent, and accused Trump of being aware of and having funded “underage sex parties at the Donald Trump golf course.”

The new FBI information raises a host of questions, with the subject matter becoming extremely dark. Let's consider the following:

* Did Trump and Epstein collude in hosting sex parties involving adults and underage girls, perhaps joining forces to dispose of victims they felt had seen too much and might be inclined to talk?

* What does it mean when the tipster claims to be aware of Trump "having funded underage sex parties" at one of his golf courses? U.S. Sen. Ron Wyden (D-OR) has been conducting a "follow the money" probe for roughly four years, focusing on finances surrounding the Epstein network. Could Trump be connected to dubious financial transactions that benefited Epstein?

* Wyden has slammed the DOJ for its failure to properly investigate the Epstein network and its financing. He has gone so far as to lay out a trail -- featuring seven lines of inquiry -- for investigators to follow. Is a DOJ led by Trump sycophant Pam Bondi only going to obstruct any efforts to get at the truth? Would a Republican-controlled Congress be able and willing to lead an investigative effort?

* Do excavation procedures need to be launched at Trump golf courses, searching for signs of buried bodies? Should Trump and his allies be called to testify under oath about such procedures and possible financing of the Epstein network?

Speaking of investigations, the tipster provided his/her own lines of inquiry, according to the Raw Story report:

The individual went on to claim that they had “recordings of Trump, Epstein and Maxwell discussing marketing strategies for high profile sex parties,” according to the FBI official who drafted the document, their name also redacted. The individual claimed that in one of the recordings, Trump can be heard stating “he was aware of the underage sex parties.”

The tipster also told the FBI agent that they had personally witnessed Robin Leach – the British entertainment reporter and television host best known for “Lifestyles of the Rich and Famous” – “strangle a young girl during a sex party” at one of Trump’s golf courses or resorts.

“[They] claim she is buried behind the 19th hole at the Donald Trump Golf Course,” the report reads.

(Note: Golf courses generally have only 18 holes, so a reference to a "19th hole" is puzzling. Bars, lounges, and similar facilities where golfers socialize after their rounds have been known to be tagged with such names as "The 19th hole."  could the reference be to such a gathering place and not a golf hole that actually is playable?) Here are more details from Raw Story's Alexander Willis:

“[Redacted] is aware of three separate occasions in which girls were murdered and buried there. [Redacted] was told if [they] spoke about the incident [they] witnessed, [they] would end up in the hole as well.”

Due to the sheer volume of Epstein-related materials released by the DOJ, many of the documents contain unverified, uncorroborated allegations that do not constitute evidence, and do not establish wrongdoing. Trump is not facing any criminal charges or investigations related to the allegation.

Still Sniffing the Trail of a GOP Money Man

We have focused recently on the legal, financial, and political connections of Birmingham businessman William Cobb "Chip" Hazelrig, looking for clues about the real cause of my termination at the University of Alabama at Birmingham (UAB).

Our examination would not be complete without a reference to Dax Swatek.

Regular readers will recognize Swatek as our "Six Degrees of Kevin Bacon" character here at Legal Schnauzer. His father, William E. Swatek, is the Pelham, Alabama, attorney who filed a fraudulent lawsuit that started my legal "adventures." For good measure, Bill Swatek has a 30-year history of ethical sanctions from the Alabama State Bar, including a suspension of his license for acts of "dishonesty, fraud, misrepresentation, and deceit."

Dax Swatek has worked for a number of Republican luminaries, including Business Council of Alabama chairman Bill Canary, Governor Bob Riley, and U.S. Attorney Alice Martin. Through Canary, Swatek has connections to former Bush White House strategist Karl Rove.

Swatek also appears to have connections to Chip Hazelrig, whom we have identified as a "person of interest" in my termination for a couple of reasons:

* He has significant clout at UAB because of a $5 million donation, the largest individual gift in university history;

* He has political and financial connections to Bob and Rob Riley and Tuscaloosa businessman Robert Sigler, who is heavily involved in gaming enterprises.

So how is Hazelrig tied to Dax Swatek? Well, Swatek served as a consultant for the 2000 campaign of Republican Glenn Murdock for a seat on the Alabama Court of Civil Appeals. Hazelrig gave $10,000 to that campaign, which was the second largest donation given. (Murdock now is a member of the Alabama Supreme Court.)

Hazelrig later gave $10,000 to Bob Riley's 2002 campaign for governor and shared an interest with Riley's son, Rob Riley, in Sigler's firm Crimsonica.

Swatek has been a prominent member of Camp Riley throughout Bob Riley's governorship and served as manager of the Riley re-election campaign in 2006.

Chip Hazelrig has given at least $20,000 to a pair of campaigns that Dax Swatek was involved with.

Is Dax Swatek familiar with Chip Hazelrig? I would say there are at least 20,000 reasons to say the answer is yes.

And did Dax Swatek want to shut down this blog, which was writing unkind (and undeniably true) things about his daddy?

Well, let's consider the evidence.

On February 18, 2008, I wrote a post about the connections between Alice Martin and Dax Swatek, with a special emphasis on the sleazy way he had run her campaign. That post drew an anonymous comment that said: "Nut case yours is comong (sic)."

Gee, I wonder who sent that? And I wonder what he meant by "yours is coming?"

And a post dated April 14, 2008, drew an anonymous comment from someone claiming I was blogging at work, and that my employer (UAB) needed to know about it.

Gee, I wonder who sent that? Sounds like "yours is coming" was a reference to my job.

Never mind that on the date in question, a Monday, I was on vacation, nowhere near work. Pam Powell, my UAB supervisor, wrote me up on false charges of policy violations the very next day. And roughly a month later, I was fired, even though UAB's own internal investigation showed I had never blogged at work.

Sure sounds like someone contacted UAB doesn't it?

Who was that person? Well, our investigation is ongoing. But we are getting closer to the truth.

We also are learning a great deal about this Tuscaloosa-based company called Crimsonica, which has extensive ties to gaming, both domestically and abroad.

Crimsonica's tentacles go directly to the Bob Riley administration, and in a less direct way, they go toward UAB. Much more coming on that.

As for Chip Hazelrig, we will continue to examine his political and financial activities, including a most interesting lawsuit filed against Hazelrig's company, W&H Investments, by the heirs of Birmingham businessman Sloan Bashinsky.

We noted in a previous post that the Bashinsky estate is seeking a proper accounting of investments Bashinsky made in some 280 oil wells. Those investments apparently were made through Hazelrig's firm. Until his death in 2005, Bashinsky was best known as the man behind Golden Flake Potato Chips and other snacks. Now, some of his heirs are wondering where his money went.

Also, I should note that Chip Hazelrig is hardly the only person of interest we are following. In a recent post, we noted that we will examine at least three lines of inquiry regarding my unlawful termination at UAB--the Alice Martin line, the University of Alabama System line, and the UAB donor line.

The Alice Martin line, of course, deals with folks connected to the Bush Department of Justice. And the University of Alabama System line encompasses members of the Board of Trustees and the Chancellor's Office, who oversee UAB.

Interesting names and connections will continue to surface. Some of them might be of considerable interest to the Obama Justice Department come 2009.

The Palin Principle: Going After Someone's Job is Stupid

The report from an Alaska legislative panel about Sarah Palin's efforts to have her former brother-in-law fired as a state trooper is filled with fascinating information.

But here is a nugget that really jumps out: How in the world was having Trooper Mike Wooten fired going to make the Palin family safer?

Investigator Stephen Branchflower raises this issue in the report. "Assuming that Trooper Wooten was ever inclined to attack Governor Palin or a family member, logic dictates that getting him fired would accomplish nothing to eliminate the potential for harm to her or her family."

Branchflower seems to be saying that the Palins weren't really concerned about their safety; they were interested in vindictiveness. And that's a subject I have some firsthand experience with here at Legal Schnauzer. In fact, it's pretty clear that someone connected to my former employer, the University of Alabama at Birmingham (UAB), pulled the same stunt on me that the Palins tried to pull on Wooten.

So let's take a closer look at this business of going after someone's job.

From everything I've read, it appears that Trooper Wooten is not a particularly nice guy. With that in mind, here is the conversation Sarah Palin should have had with her sister: "Your ex-husband is a jerk, so get the best divorce attorney you can find and go after his sorry butt in court. But as governor, I can't get involved in your case.

"And by the way, try to develop better taste in men. Next time around, try to find a snowmobile champion like my guy Todd. And if he's not enough to satisfy ya, find yourself a dreamboat on the side like Brad Hanson. Whew, makes me sweat just thinking about him. Anyway, that's been my plan, and has it worked out for me? You betcha!"

What about the people who went after my job? Evidence suggests it was Alabama Republican operatives who have ties to Karl Rove (and also Governor Bob Riley and U.S. Attorney Alice Martin). And we established in a recent post that Rove and his acolytes aren't nearly as smart as they have been portrayed.

For example, what did the "mini Roves" hope to accomplish by costing me my job? Was it supposed to keep me from blogging? Actually, I now have more time for blogging. And more importantly, I have way more time to conduct research for my blog--because I wasn't conducting "research" at work, which was the bogus charge UAB trumped up. With more time on my hands, I've uncovered all kinds of information at our local courthouses and libraries that I never would have learned if I still had a job. This information provides important clues as to why I was terminated and who was behind it--and Legal Schnauzer readers will be learning about it in the days and weeks ahead.

So by firing me, the "mini Roves" gave me the time and the tools to help expose their schemes. Like I said, they aren't the sharpest knives in the drawer.

And here's another sign that the "mini Roves" are stupid: By going after my job, they came on my turf. I've worked at UAB for 19 years, so I have a pretty good idea how the place works, particularly in the areas of external affairs, development, alumni affairs, media relations, etc.

So when my supervisor (Pam Powell) and her supervisor (Dale Turnbough) start acting outside the norm for them, accusing me of things I haven't done, I know something is up. And it has to be driven by the two people in the chain of command above them--Vice President for Development, Alumni, and External Affairs Shirley Salloway Kahn and President Carol Garrison.

Let's follow the clues. If you scan the profile of Shirley Salloway Kahn at the link above, you will notice her primary interest--raising money. More than anything else, her job is to find people with money and get them to give some of it to UAB.

Folks in higher education like to talk about their high-minded "tripartite" mission--teaching, research, and service. But I've been around UAB for 19 years, and I know it's no different from any other organization--money talks. And when someone gives lots of money to UAB, they hold extraordinary influence over folks like Shirley Salloway Kahn--and Carol Garrison, for that matter.

So who has given lots of money to UAB recently? Well, to pick a project at random, let's consider the Hazelrig-Salter Radiation Oncology Facility, currently under construction on Birmingham's Southside.

Click on the link above and notice the folks who have given big bucks for this project. Then ask yourself this question: If one of those folks went to Dr. Kahn and said, "Shirley, I would be a whole lot happier about giving money if you would do backflips down I-65 at high noon," how would Dr. Kahn react? My guess? It would take her about two minutes to get on her gym suit and start stretching.

That brings us to three lines of inquiry we will be examining regarding my termination at UAB:

* The Alice Martin Line--Evidence will show that Alice Martin, U.S. attorney for the Northern District of Alabama, did UAB a favor by pretty much whitewashing massive research fraud at the university. And a settlement agreement in the case gives Martin extraordinary authority to reopen an inquiry on research fraud at any time. She has a proverbial gun cocked, loaded, and pointed at UAB's collective head. Would this cause UAB to return a favor for our corrupt federal crime fighter? Hmmm.

* The University of Alabama System Line--At least one member of the University of Alabama Board of Trustees, which oversees UAB, has reason to be extremely grateful to the U.S. Justice Department. That's because the DOJ chose to look the other way when his company was implicated in a major insurance fraud case a few years back in Pennsylvania. Also, a member of the University of Alabama System Office has connections to the Business Council of Alabama (BCA), the group headed by Bill Canary, of "my girls are going to take care of Don Siegelman" fame. Would either of these UA elites be willing to do a favor for the DOJ or the BCA? Hmmm.

* The UAB Donor Line--This is my favorite. And that's because I've unearthed a specific donor who seems to be an intriguing fellow. In addition to having given one of the largest individual gifts in the history of UAB, he has connections to Gov. Bob Riley and his son Rob Riley (shazam!), Riley confidant Dax Swatek (double shazam!!), and the gaming industry (triple shazam!!!). Heck, he even has ties to the oil industry (quadruple shazam!!!!).

And get this: Public records indicate the guy's personal and professional lives are trainwrecks. His driving record is, shall we say, "interesting." So much so that he's the defendant in a criminal case that is scheduled to be tried in less than two months. He recently went through a divorce that apparently was so juicy the file was sealed. And he and a business partner are defendants in a lawsuit that raises questions about whether they provided a proper accounting for the estate of one of Birmingham's most famed businessmen.

This donor might be a life-threatening menace behind the wheel of a vehicle, but would UAB's higher ups do him a favor on behalf of his political and business cronies? Hmmm.

Geez Louise, this donor alone will provide months of material here at Legal Schnauzer. I could even smell a book coming out of this. We're talking about a treasure trove for inquiring minds.

So hold onto your hats and ponder this question: Are some folks close to Sarah Palin wishing they had left Trooper Mike Wooten and his job alone? My guess is yes.

Will some folks in Alabama be wishing they had left Legal Schnauzer and his job alone? We'll find out.

Bernie Madoff might be long gone, but many of his tactics for financial fraud live on in the Deep South via Southern Company's scheme of cooking its books

Bernie Madoff died in prison in 2021, while serving a 150-year sentence for orchestrating the largest financial fraud in history. The disgraced financier's legacy, however, appears to live on through the accounting-fraud scheme at Southern Company, currently being exposed via online journalism. An examination of the firm's most recent Form 10-K annual report reveals that Southern Company's underhanded activities mirror those of Madoff in a number of respects. Longtime Alabama attorney and entrepreneur Donald Watkins conducted the review and publishes his findings today in an article at DonaldWatkins.com. The post, under the title "Southern Company’s Financial Statements Are Built on "Smoke and Mirrors," is Part 2 of a three-part investigative series that asks this question: Does the Southern Company fraud essentially represent the resurrection of Bernie Madoff? Watkins finds enough similarities to suggest the answer is yes:

Madoff’s fraud scheme was successful for so long because he created a front of respectability that attracted investors and he seduced state and federal regulators. It was all smoke and mirrors.

A review of the Southern Company’s 10-K for 2022 (and for prior years) suggests that the "dry bones" of Bernie Madoff's fraud scheme have been resurrected in the Southern Company’s cooked financial books and records. Yes, Madoff’s financial fraud has apparently risen from the dead, albeit in a slightly different form at the Southern Company.

Like Madoff, Southern Company presents an image of respectability--and profitability. But a review of key financial documents shows it is a mirage, unsupported by real numbers. Bernie Madoff pulled off such a magic trick for almost two decades before federal investigators finally started closing in. Writes Watkins:

Bernie Madoff was a New York financier who executed the largest financial fraud crime in history, via a sophisticated Ponzi scheme. Madoff defrauded thousands of investors out of at least $64.8 billion over the course of 17 years.

Bernie Madoff was polished and highly respected by the Wall Street crowd. At one time, Madoff was chairman of the NASDAQ stock exchange.

On December 10, 2008, Madoff's sons, Mark and Andrew, told federal authorities that their father had confessed to them that the asset-management unit of his wealth-management firm was a massive Ponzi scheme. The following day, agents from the Federal Bureau of Investigation (FBI) arrested Madoff and charged him with one count of securities fraud.

The U.S. Securities and Exchange Commission (SEC) had previously conducted multiple investigations into Madoff's business practices, but had not uncovered the massive fraud. In 2000, financial analyst Harry Markopolos filed a “whistleblower” complaint with the SEC that was ignored. It wasn’t until five years later, in 2005, that Markopolos was able to convince the SEC of Madoff’s financial crimes.

Madoff’s accounting firm, Friehling & Horowitz, failed to detect the decades-long fraud scheme, and so did Ernst & Young.

On March 12, 2009, Bernie Madoff pleaded guilty to 11 federal felonies and admitted to turning his wealth-management business into a massive Ponzi scheme. Madoff was sentenced to 150 years in prison and required to forfeit $170 billion. He passed away in prison on April 14, 2021.

Is history repeating itself? As happened in the Madoff case, Southern Company's accounting firm (Deloitte & Touche) failed to detect signs of fraud. How does such financial chicanery happen? Watkins explains:

There are three primary reasons why senior-management executives at public companies cook the books. First, in many cases, the compensation of corporate executives is directly tied to the financial performance of the company. As a result, they have a direct incentive to paint a rosy picture of the company's financial condition in order to meet established performance expectations and bolster their personal compensation.

Second, it is a relatively easy thing to do. The Financial Accounting Standards Board (FASB), which sets the GAAP standards, provides a significant amount of latitude and interpretation in accounting provisions and methods. For better or worse, these GAAP standards afford a significant amount of flexibility, making it feasible for corporate management to paint a particular picture of the financial condition of the company.

Third, it is unlikely that cooking the company's financial books and records will be detected by investors due to the relationship between the independent auditor and the corporate client. In the U.S., the Big Four accounting firms and a host of smaller regional accounting firms dominate the corporate auditing environment. While these entities are touted as independent auditors, the firms have a direct conflict of interest because they are compensated, often quite significantly, by the very companies that they audit. As a result, the auditors may be tempted to bend the accounting rules to portray the financial condition of the company in a manner that will keep the client happy -- and keep its business.

Also, Watkins reports, dubious financial tactics can become entrenched, even at a seemingly reputable company:

As noted in Part 1, "How the Southern Company Cooked its Books in a Massive $27-Billion Accounting-Fraud Scheme," the two main drivers of the Southern Company’s accounting-fraud schemes were: (a) the desire to pump up and maintain the company’s stock prices within the range of Wall Street forecasts and expectations, and (b) the need to meet or exceed the earnings per share expectations of Wall Street analysts for the company’s utilities and power industry sector.

Like Bernie Madoff's scheme, the Southern Company engaged in creative accounting, a/k/a accounting fraud or "cooking the books," for many years. The company created a financial mirage to prop up its stock prices and pay consistent, regular earnings per share. This mirage was essential to lure new investors (i.e., common and preferred shareholders) and retain existing common-stock shareholders.

The company needed creative accounting to pull off the fraud scheme because: (a) dividends were consistently and regularly paid from new investments and debt obligations, as opposed to retained earnings, and (b) the company's dividend-funding technique is not expected to change until sometime after 2025.

Led by CEO Tom Fanning, CFO Daniel S. Tucker, and former General Counsel/Chief Compliance Officer/Chief of Staff to the CEO/Executive Vice President James Y. "Jim" Kerr, II, as well as the CEOs and CFOs of its affiliates, the Southern Company created an attractive financial mirage for 2022.

The mirage conned the investing public, Wall Street, the SEC, and Deloitte & Touche into believing that a business enterprise with consolidated revenues of $59 billion in 2022 that is saddled with $55.2 billion in long-term debt and $7.6 billion in credit lines was profitable enough to pay its 1,090,000,000 shareholders of record a reported earnings per share of $3.28 for 2022 on outstanding common shares held by 99,521 shareholders, when it was not. See, K-10, at pp. II-1 and 7.

This kind of Bernie Madoff mirage has been successfully embedded in 10-Qs and 10-Ks filed by the Southern Company, year-after-year since 2017.

In truth, the Southern Company, which is a monopolistic business with captive customers, is leveraged to the hilt and more broke than the “Ten Commandments.” For this reason, the 10-K for 2022 and accompanying investor documents allocate as much focus on discussing “Potential Future Earnings” as they do in fairly and accurately presenting actual revenues and expenses for 2022. This is another characteristic of a Bernie Madoff-type fraud scheme.

Yet, no one on the Southern Company’s board of directors, or at Deloitte & Touche, or at the SEC cared enough about protecting the investing public to take a deep dive into how a publicly traded company that is awash in debt can maintain its high stock price and pay consistent dividends within the range forecast by Wall Street analysts, absent an accounting-fraud scheme.

Even financial analysts, however, can be slow to catch on:

For 2022, 13 Wall Street analysts offered 12-month price forecasts for the Southern Company that established a median target of $72.00, with a high estimate of $79.00 and a low estimate of $57.00. The median estimate represented a +5.28% increase from the 2021 price of $68.39. Not surprisingly, the Southern Company hit the forecasted target with a price per of $71.41 at the end of 2022. See, 10-K, at p. II-54.

The reported book value was $27.93 per share, representing an overly inflated market-to-book value ratio of 256%. Cooking the books is a fairly common occurrence for a financially stressed company that must inflate the market value of its stock in order to constantly borrow money to stay afloat.

The market capitalization (or "market cap") for the Southern Company at the end of 2022, based upon $71.41 per share and the company's sophisticated accounting-fraud scheme, was $76.81 billion. Institutional lenders consider market cap, among other factors evidencing creditworthiness, in determining how much debt to extend to a publicly traded company.

The current consensus among 17 polled investment analysts was to “Hold” stock in Southern Company, as of December 31, 2022. This rating had held steady since March of 2022, when it was unchanged from a “Hold” rating. Of the analysts polled, seven had a “Buy” recommendation, none had an “Outperform” rating, six had a “Hold” rating, one had an “Underperform” rating, and four had a “Sell” rating.

Consider the earnings forecast for 2022:

The analyst forecast for the 1st Quarter of 2022 earnings per share ranged from $0.87 to $0.95, with a consensus estimate of $0.91. Reported earnings were $0.97 and exceeded analyst expectations by +6.59%.

The analyst forecast for the 2nd Quarter of 2022 earnings per share ranged from $0.80 to $0.88, with a consensus estimate of $0.84. Reported earnings were $1.07 and exceeded analyst expectations by +27.38%.

The analyst forecast for the 3rd Quarter of 2022 earnings per share ranged from $1.25 to $1.35, with a consensus estimate of $1.33. Reported earnings were $1.31, which was lower than analyst expectations by -1.5%.

The analyst forecasts for the 4th Quarter of 2022 earnings per share ranged from $0.23 to $0.26, with a consensus estimate of $0.24. Reported earnings (on February 16, 2023) were $0.26, which exceeded analyst expectations by 8.33%.

Did Southern Company try to clear up matters by pitching the truth? No, says Watkins, it responded with more smoke and mirrors:

Instead of highlighting the truth about the Southern Company’s dire financial condition, the 10-K and February 16, 2023, Fourth Quarter 2022 PowerPoint Presentation focused on creating an illusion of profitability. The company repeatedly highlighted its “[r]egular, predictable and sustainable EPS and dividend growth*,” in the PowerPoint document. Of course, the asterisk leads the investor to this fine print disclaimer: “* Future dividends are subject to approval of the Southern Company Board of Directors and depend on earnings, financial condition and other factors.”

Because the Southern Company does NOT generate enough annual operating cash flow to cover its annual operating expenses (absent new investments and heavy borrowing), and because the company will NOT be profitable for years to come, the company also pitched these three additional dividend statements (on the PowerPoints “Value Proposition” page) to unsuspecting shareholders and new investors:

(a) For 75 years, the company has paid a dividend equal to or greater than the previous year. This self-serving promotional claim is repeated in the 10-K, at p. II-1;

(b) Dividends are supported by premier state-regulated utilities and energy infrastructure under long-term contracts; and

(c) The company has had 21 consecutive annual dividend increases since 2002.

The 10-K fails to explicitly state that dividends are Not paid from retained earnings or corporate profits, as the company has not been profitable in years. They are financed by debt.

What is more, the Southern Company packaged its consolidated financial numbers in a way that projected a financial picture for 2022 that is rosy enough to support the illusion of profitability.

One almost expects to learn, at some point, that David Copperfield has been operating behind a curtain. A more down-to-earth tactic actually is in play. It's called "Cover Your Ass (CYA) language, writes Watkins:

The 10-K quickly disclaims that while the “Financial Condition and Results of Operations is a combined presentation" to project this illusion of profitability, the "information contained [in the 10-K] relating to any individual Registrant is filed by such Registrant on its own behalf and each Registrant makes no representation as to information related to the other Registrants.” See, 10-K, at p. II-2.

In other words, none of the six companies listed in the 10-K, including the Southern Company, vouches for the integrity of the financial statements of the other companies in this joint SEC filing. This disclaimer speaks volumes.

Functionally, this disclaimer obfuscates the Southern Company's well-known and fungible financial practice of robbing Peter (its affiliates) to pay Paul (their parent company). It also attempts to isolate and contain potential criminal liability to the signatory parties in those business units where specific acts of fraud occurred, even though CEO Tom Fanning and General Counsel Jim Kerr micro-managed all of the company's affiliates with an iron fist.

An investor must dig real deep into the 10-K to ascertain just how financially strapped the Southern Company was in 2022 and will be for 2023 through 2025.

Here is the Southern Company’s "Cover-Your-Ass" (CYA) language in the 10-K on this point:

“Operating cash flows only provide a substantial portion of the Registrants' cash needs.….. For the three-year period from 2023 through 2025, projected stock dividends, capital expenditures, and debt maturities are expected to exceed operating cash flows for each of Southern Company, the traditional electric operating companies, and Southern Company Gas. Southern Company plans to finance future cash needs in excess of its operating cash flows through one or more of the following: accessing borrowings from financial institutions, issuing debt and hybrid securities in the capital markets, and/or through its stock plans. Each Subsidiary Registrant plans to finance its future cash needs in excess of its operating cash flows primarily through external securities issuances, borrowings from financial institutions, and equity contributions from Southern Company.” See, 10-K, at p. II-53-54.

Essentially, this statement is an adaptation of the CYA language Bernie Madoff used in his investment documents. Is this "fig leaf" CYA statement enough to save the Southern Company's signatory officials from exposure for Sarbanes-Oxley accounting fraud? In my humble opinion, probably not -- unless the criminal case is "fixed."

Does Southern Company say anything about mismanagement on costly projects? Not one word:

While the fact of the construction costs and amount of cost overruns at the Kemper coal-gasification plant are disclosed in the 10-K, neither the 10-K, nor any related document, disclosed the fact that Tom Fanning, Daniel Tucker, James Kerr, and the Southern Company board of directors actually mismanaged the Kemper project, which is being demolished after the company spent more than $7 billion building it. This internal mismanagement assessment of a $7 billion project is a "material" fact and it was documented in the "Homewood Notes" by reference to "Money going to [Southern Company Services] to prop up bad decisions by SO."

Likewise, while the fact of the construction costs and amount of cost overruns at the Vogtle Units 3 and 4 are disclosed in the 10-K, neither the 10-K, nor any related document, disclosed the fact that Tom Fanning, Daniel Tucker, James Kerr, and Southern Company board of directors actually mismanaged the costs associated with the construction of Vogtle project, which has now exceeded the projected construction budget by $21 billion. Again, this internal mismanagement assessment of a $21-billion cost overrun is a “material” fact and it was documented in the "Homewood Notes" by reference to "Money going to [Southern Company Services] to prop up bad decisions by SO."

Whether maintained on-site or off-site, the "Homewood Notes" were made by agents of the company and they were germane to the annual audit for each year, from 2017 to 2022. This is particularly true in light of the fact that: (a) the "Homewood Notes" specifically reference the Southern Company's board-level Audit Committee and Committee member Johnny Johns, and (b) criticized the Audit Committee's performance with respect to the Kemper and Vogtle construction projects.

The "Homewood Notes" are part of thousands of Southern Company emails and other documents that are highly relevant to an accounting-fraud inquiry and associated criminal activities. This reservoir of corporate documents is probative of the Southern Company's intent to defraud.

Was the Southern Company's treasure trove of internal documents assessing executive mismanagement in the amount of $27 billion deliberately withheld from Deloitte & Touche during the auditing process for 2022? Apparently so. Deloitte does NOT mention these internal corporate documents anywhere in any 10-K filed between 2017 and 2022.

Would the disclosure of a documented internal assessment of $27 billion in executive mismanagement with respect to two major construction projects, together with "insider" criticism of the board's Audit Committee, influence the decisions of end-users of the financial statements? Of course, it would. This is why the company's documented assessment of mismanagement was parked off-site and suppressed indefinitely.

Did Southern Company senior-management executives in the Atlanta headquarters know that fellow senior-management executives and two longtime key vendors (one of whom still works for the company) prepared and maintained a cache of internal documents regarding: (a) Tom Fanning's, Daniel Tucker's, Jim Kerr's, and the board of directors' mismanagement of Kemper and Vogtle projects, (b) strong criticism of the board's Audit Committee and Committee member Johnny Johns, and (c) a plan to alert the "PSC" (Public Service Commission) and two other government officials about the Southern Company's mismanagement of $27 billion in corporate funds, via an anonymous complaint? Yes.

When individuals get into financial trouble, it often is viewed through a "micro" lens as "failure to live within their means." But something similar can happen with corporations, as Watkins describes:

Like Bernie Madoff in his day, the Southern Company did not live within its financial means (or cash flows) in 2022. At this moment, senior management executives at the company are looking for new money to plug the "Hole" in their financial-fraud scheme.

In their own words, these executives say that they must: (a) access their $7.6 billion in credit lines, (b) issue new debt and hybrid securities in the capital markets, and/or (c) increase the Southern Company’s outstanding shares of stock to keep the company afloat during 2023, 2024, and 2025.

In addition to these non-cash-flow-generating measures for pumping desperately needed cash into the company, the Southern Company has linked its ability to keep the company's head above water to potential future earnings that are mostly derived from bringing Vogtle 3 in-service by May or June 2023 and Vogtle 4 in-service by late 4th Quarter of 2023 to the end of the 1st quarter of 2024.

The company's recent secret plan to spinoff Alabama Power to NextEra Energy was shelved after our publication of "Southern Company Reportedly Seeks a Spinoff of Alabama Power." The spinoff was intended to (a) provide the Southern Company with much needed liquidity and (b) afford it an opportunity to off-load a significant portion of the multi-year accounting fraud.

Additionally, the Nuclear Regulatory Commission (NRC) issued the Southern Company (D/B/A Georgia Power Company and Southern Nuclear Operating Company) a combined “Owner/Operator” license 11 years ago. Yet, Vogtle Units 3 and 4 are NOT in-service today. Furthermore, formal complaints were filed on February 3, 2023, that challenged the Southern Company’s "fitness" to hold this combined license, in light of the company's documented racketeering history. An unfavorable outcome for the Southern Company on this complaint would be devastating to the company and its affiliate, Georgia Power.

Like Bernie Madoff, the Southern Company is now resorting to old-fashioned "street hustling" for new investors and additional liquidity, via creative debt financing.

Simply put, the Southern Company cannot live within its financial means (or operating cash flows) for the next three years, or so. It is within this financially suffocating paradigm that the company touts its earnings per share and dividend payment history, just like Bernie Madoff did.

As a matter of policy and practice, SEC-registered public companies do not pay consistent, regular shareholder dividends from borrowed money. Such a practice misleads investors and fosters an illusion that a company in this circumstance is profitable enough to pay dividends from retained earnings.

Where was Deloitte & Touche when all of this was going on? It apparently was gorging on massive fees for its "professional services. Writes Watkins:

Rather than fulfilling its independent accounting role on behalf of shareholders, potential investors, regulators, lenders, and other stakeholders to look for evidence of accounting fraud in a public company that cannot live within its means, Deloitte & Touche abdicated this proactive role in exchange for $17 million by simply looking the other way.

Buying into the Southern Company’s goal to become profitable sometime after 2025, Deloitte & Touche devoted half of its four-page “REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM” to explaining why the auditing firm was comfortable with the cost overruns debacle at Vogtle. See, II-72-75.

Lastly, the only discussion of “Credit Risk” in the 10-K centers on the Southern Company’s and affiliates’ exposure for concentrations of credit risk with counterparties to energy-related and interest rate derivative contracts. See, 10-K, at p. II-69.

However, there is no discussion in the 10-K about whether the Southern Company and its affiliates will have the capacity to service their debts when due in a scenario where: (a) annual operating revenues continue to fall way short of the amount needed to cover operating expenses and (b) borrowing is impaired due to the detection by third-parties and government regulators of a multi-year accounting fraud scheme.

Deloitte was not alone in failing at its oversight function:

As was the case with Bernie Madoff’s fraud scheme, the SEC has been asleep at the wheel in the Southern Company's accounting-fraud case. The commission has been seduced into complacency and inaction by the Southern Company’s ranking and status in the utilities and power industry and its thin veneer of respectability.

The SEC has ignored General Counsel/Chief Compliance Officer/Chief of Staff/Executive Vice President Jim Kerr's demonstrated insensitivity to the environmental protection needs and life-threatening living situation of the Southern Company's captive black customers in Birmingham, Alabama, as recorded on an audiotape in 2018 and first made public in 2020.

Senior-management personnel from the SEC’s Atlanta Regional Office have reportedly busied themselves by enjoying the perks that the Southern Company and its affiliates routinely make available to public officials (e.g., tickets to sporting events and concerts in venues around the nation, wining and dining in restaurants and bars, free out-of-town luxury getaways, and other unreported snuggling with mega-Registrants)

It does not appear that the SEC gives the Southern Company’s 10-Qs and 10-Ks more than a cursory glance. If it does, the SEC has ignored the company's accounting fraud for years, just like the Commission did in Bernie Madoff’s case.

Stay tuned for Part 3, Why the FBI Must Raid the Executive Offices of the Southern Company!

Michael Flynn memo from Mueller investigators suggests Jeff Sessions and other members of Trump Transition Team could be in "deep trouble"

Donald Trump and Jeff Sessions

Recent soul-rattling developments in the Robert Mueller investigation produced headlines over the weekend such as "Trump implicated in two felonies." That is big news, of course, and it came from Mueller's court filing last Friday on former Trump attorney and fixer Michael Cohen. If you have strong ties to Alabama, as we do, the most intriguing news might have come three days earlier when Mueller released filings about former Trump National Security Advisor Michael Flynn. The Flynn sentencing memo suggests the Mueller probe could be taking a south-bound turn, in the direction of former Trump attorney general and U.S. Sen. Jeff Sessions (R-AL).

An article at lawandcrime.com -- titled "Here is what could be under some of those redactions in the Flynn memo" -- points a finger heavily in Sessions' direction. According to reporter Ronn Blitzer, much of the hidden material clearly refers to members of the Trump Transition Team, and that gets into Sessions territory. Prominent members of the Transition Team included Sessions and his former chief of staff, Rick Dearborn, along with Michael Flynn. Blitzer writes:

The release of the heavily redacted sentencing memo that Special Counsel Robert Mueller‘s office filed in the case of Michael Flynn has had the political world abuzz, not just over what was revealed in the memo, but what was not. Pages worth of text were blacked out, leaving people to guess what they’re about, but a look at context—and not-too-distant history—may shed some light on the mystery.

Page 3 of the memo’s addendum includes the following sentence: “The Defendant assisted the SCO’s investigation on a range of issues, including interactions between officials in the Presidential Transition Team and Russia, [REDACTED].”

The next paragraph is under the subheading Interactions Between the Transition Team and Russia. The last three lines or so of that paragraph are blacked out with redactions.

Clearly, some of this hidden information has to do with members of the Trump transition team. Now, as Law and Crime Network legal analyst Linda Kenney Baden said in a segment Wednesday afternoon, “When you give substantial cooperation or substantial assistance, you’re not giving it to get the person that’s underneath you, you’re getting the person that’s above you.”

Who on the Transition Team was most likely to have had interactions with Russian officials -- and was high-level enough that Flynn would have known about them? Blitzer provides insight:

In that same segment, former federal prosecutor Gene Rossi named one person who was on that transition team who fits the bill.

“That filing is incredibly telling. There are a lot of red flags and loud gongs that suggest that the president of the United States and other senior officials are in deep trouble, including former Attorney General Jeff Sessions.”

In a separate statement to Law and Crime, Rossi specified that he was referring to the question of, “Did Sessions lie and omit contacts with the Russians that Flynn knows about[?]”

The now-former Attorney General had recused himself from the Russia investigation due to his connection with the Trump campaign, but recall that he was also accused of covering up his own contacts with Russia. During his Attorney General confirmation hearing, Sessions said he did not have any contacts with Russian officials. It later came out that he had meetings with Russian Ambassador Sergey Kislyak during the campaign. Sessions later said that the meetings were in the context of his role as a Senator, and had nothing to do with the Trump campaign. Former officials said otherwise, telling the Washington Post that intelligence revealed that Sessions and Kislyak discussed Trump’s policies on Russia and U.S.-Russia relationships under a Trump administration.

If Flynn told Mueller’s office about other communications that Sessions may have had during the transition period, that would certainly fit the bill for a higher-level official’s conduct that Mueller would not want public at this time.

USA Today, in a piece titled "Michael Flynn re-emerges as a major witness in Robert Mueller inquiry -- and at least two others," also says the Flynn documents have ominous tones for members of the Transition Team. Write Kevin Johnson and Bart Jansen:

Mueller's conclusions, legal analysts said, probably served as a blunt warning to members of the administration who worked closely with the national security adviser and were consulted on his Russian contacts, specifically involving Russian Ambassador Sergey Kislyak. 

Flynn's cooperation was secured last year as part of his guilty plea to lying to the FBI in part about his pre-inaugural contacts with Kislyak related to sanctions imposed by the Obama administration for Russia's interference in the 2016 campaign. 

"The message that this sends, given Flynn's central role in the transition (to the Trump administration), is that if transition members are not fully lawyered-up yet, they should do so now," said Ilene Jaroslaw, a former federal prosecutor who once worked closely with Mueller's top aides in the Brooklyn U.S. Attorney's Office. "This document, even though it is heavily redacted, speaks louder than any public statement or press conference could ever accomplish."

Obama Advisors Feared a Coup if the Administration Prosecuted War Crimes

Barack Obama

Advisors for President-Elect Barack Obama feared the new administration would face a coup if it prosecuted Bush-era war crimes, according to a new report out this morning.

Christopher Edley Jr., law dean at the University of California and a high-ranking member of the Obama transition team, made the revelation during a 9/11 forum at his law school on September 2. Andrew Kreig, director of the D.C.-based Justice Integrity Project, reports that Edley's comments were in response to questions from Susan Harman, a long-time California peace advocate.

Edley apparently tried to justify Obama's "look forward, not backwards" policy toward Bush-era lawbreaking. Instead, Kreig writes, Edley revealed the Obama team's weakness in the face of Republican thuggery:

Edley's rationale implies that Obama and his team fear the military/national security forces that he is supposed be commanding--and that Republicans have intimidated him right from the start of his presidency even though voters in 2008 rejected Republicans by the largest combined presidential-congressional mandate in recent U.S. history. Edley responded to our request for additional information by providing a description of the transition team's fears, which we present below as an exclusive email interview. Among his important points is that transition officials, not Obama, agreed that he faced the possibility of a coup.

In their prepared remarks, speakers at the Cal law school, known as Boalt Hall, repeatedly called for accountability and support for the rule of law. Based on the Obama administration's record on justice issues, Harman said she found the comments "surreal."

Christopher Edley

Former Bush Justice Department official John C. Yoo, known as the "torture memo lawyer," serves as a faculty member at Boalt Hall, perhaps making the occasion seem even more surreal.

Harman decided to ask some tough questions--and she received news-making answers. Reports Kreig:

Edley responded that Obama’s team feared that leadership in the U.S. armed forces, the CIA and NSA might “revolt” if the new Obama administration prosecuted war crimes by U.S. authorities and lower-ranking personnel. Also, Edley told Harman that his fellow decision-makers on Obama's team feared that a prosecution inquiry could lead to Republican efforts to thwart the Obama agenda in Congress.

Harman shared this account by email and Google Groups with our Justice Integrity Project and others. Among recipients was David Swanson, an antiwar activist who since last January has been organizing a grassroots effort to replace Obama on the Democratic 2012 ticket.

Here is Harman's account of what transpired on September 2:

I said I was overwhelmed by the surreality of Yoo being on the law faculty . . . when he was singlehandedly responsible for the three worst policies of the Bush Administration. They all burbled about academic freedom and the McCarthy era, and said it isn’t their job to prosecute him. Duh.

Then Dean Chris Edley volunteered that he’d been party to very high-level discussions during Obama’s transition about prosecuting the criminals. He said they decided against it. I asked why. Two reasons: 1) it was thought that the CIA, NSA, and military would revolt, and 2) it was thought the Repugnants would retaliate by blocking every piece of legislation they tried to move (which, of course, they’ve done anyhow).

Afterwards I told him that CIA friends confirmed that Obama would have been in danger, but I added that he bent over backwards to protect the criminals, and gave as an example the DOJ’s defense (state secrets) of Jeppesen (the rendition arm of Boeing) a few days after his inauguration.

He shrugged and said they will never be prosecuted, and that sometimes politics trumps rule of law.

“It must not," I said.

“It shouldn’t," he said, and walked off.

This is the Dean of the Berkeley School of Law.

Kreig sought a response from Edley, who confirmed the comments that Harman reported. Here are several points Edley made in his written reply:

Thanks for the opportunity.

1. You can read about the Miller Institute at http://www.law.berkeley.edu/1194.htm. The faculty cochairs of it are me and Prof. David Caron, who also happens to be Honorary President of the American Society of International Law. I don't know why Ms. Harman thinks Professor Yoo has received a "promotion" or special position.

2. I didn't hear anyone burbling. I think the panelists, along with me, were perfectly cogent and articulate. I've also written about it to my students and alumni several times. Ms. Harman strongly disagrees. She did not specifically engage our points about academic freedom, including the McCarthy era precedents. Those examples are especially important to Californians for whom the ugliness of that era had special significance for Hollywood and state universities. Remember, too, that Berkeley was the home of the Free Speech Movement.

3. Ms. Harman accurately conveyed the substance of my comment about the Obama Transition. I'd add three points: I never discussed these matters with the President Elect; the summary offered by one of the senior national security folks was, "We don't want to engage in a witch hunt," to which I replied, "Neither do I, but I also care about the Rule of Law and, whether or not there ultimately are prosecutions, the question of whether laws were broken and where the lines should be drawn deserve to be aired"; that discussion as a whole was brief.

4. My point about politics is simple and non-controversial to people trained in law. I was not referring to politics trumping Law in the sense of President Nixon thinking he could do anything he wanted with respect to the Watergate scandal. I was referring to what every first year law student learns about prosecutorial discretion and the political accountability of prosecutors, which the "system" assumes will be a check on prosecutorial abuses more often than a source of them.

5. A frustrating thing to me about these discussions is that non-academics don't seem particularly to appreciate the fragility and importance of academic freedom. A university isn't equipped or competent to do a factual investigation of what took place at DOJ or in secret White House meetings. Nor should it make judgments about what faculty do outside of their professorial duties when there is no evident impermissible impact on their teaching. (For Professor Yoo, there is none.) The right forum investigating and punishing alleged crimes is in the criminal justice system, not a research university. Our job is already tough enough.

6. Finally, another frustrating thing is that advocates are often fierce in their belief that they know what the law is, and they know when someone else's view is extreme. Your typical law professor is, I think, far more humble. We tend to see multiple sides to important issues, and lots of gray. Even if we are convinced of something, we work hard to understand the counterarguments, just to be sure. If there aren't any, then MAYBE one could characterize the other position as extreme. My guess is that Professor Yoo's constitutional theories and statutory interpretation would win at least three votes among current justices of the U.S. Supreme Court. I don't like it, but that's my reading of the caselaw. Does 3 out of 9 make it extreme? If so, then a lot of my heroes are or were "extreme."

It doesn't take long for Jessica Medeiros Garrison's rant against Legal Schnauzer to start springing leaks

Jessica Garrison and Luther Strange
(From marieclaire.com)

How long does it take for Jessica Medeiros Garrison's public-relations assault on Legal Schnauzer to show that it has a disconnect with the truth? The answer is one paragraph--specifically, three sentences.

We've already shown that Garrison's claim that I stalked her is laughably untrue--in fact, Garrison presents zero evidence that I've ever been anywhere near her house and admits that on one occasion she was convinced a boogeyman (me, I guess) was outside only to discover it was cops doing a drive by. Her assertion that I reported Alabama Attorney General Luther Strange is the father of her child can be proven false with a simple search on my blog.

You have to read down into the Garrison piece a ways to discover the stalking and "Lutha as baby daddy" fables. But the nuttiness starts right at the top. Consider the lead on Garrison's piece, which was told to a marieclaire.com writer named Liz Welch, who apparently is incapable of asking a few questions to determine if anything Garrison says is true. Ms. Welch also must not have been capable of sending me an e-mail or calling me and allowing me to respond to Garrison's wacky tales.

Perhaps Welch was afraid I would present a number of facts that would run contrary to the point of her juicy piece--and facts were not supposed to get in the way of this "good story." Here is how Garrison/Welch start their tall tale, in Garrison's voice:

​My saga started in July 2013. A friend texted me, asking, "Do you know this guy, Roger Shuler?" I didn't, but quickly learned he was the political blogger behind the website Legal Schnauzer and author of a new post that would forever change my life: "AG Luther Strange Has a Messy Extra-Marital Affair with Ex-Campaign Aide Jessica Garrison."

A reasonable assumption here seems to be that the friend was not asking if Garrison knew me personally; the question seems to be: Did she know of me? And Garrison's answer was no. Well, I've got evidence to show this is false.

It appears the friend's inquiry was triggered by my first post about Garrison's affair with Luther Strange, and that post was dated July 17, 2013. Garrison gives the impression that she was baffled as to who I was or what I was working on. But e-mail records show she had every reason to know who I was and why I had contacted here. That's because I sent her an e-mail on July 12, 2013, informing her of my investigation on the alleged affair and asking for an interview on the topic.

Here are the contents of that e-mail:

Ms. Garrison:

I am a journalist in Birmingham, reporting on justice/legal issues at a number of Web sites, including the blog Legal Schnauzer. I've received reports from multiple sources that you and Luther Strange had an affair that culminated with your divorce and his election as attorney general of Alabama. I have been researching this matter for several months, and I'm at the point where the stories are ready for publication. I would like to give you an opportunity to respond to questions and ask that we schedule a time for an interview, either via phone or in person.

My plan is to begin running the articles in the next few days, so I ask that you respond to this request by 5 p.m. on Tuesday, July 16.

Thank you,

Roger Shuler

legalschnauzer.blogspot.com
(205) 991-7438

Roughly five days before the inquiry from her friend, Garrison knew exactly who I was and why I was contacting her. So Garrison either has a horrifically bad memory--in which case, marieclaire.com should not be running her story--or she is lying.

Garrison chose not to respond to my interview request, and it's her right to do that. But you will notice that she had every opportunity, before publication, to state that the affair story was inaccurate and answer questions on the subject. But it wasn't until a couple of months later that she chose to file a lawsuit, publicly proclaiming the affair story to be false and defamatory--when she earlier had passed on an opportunity to make pretty much the same declaration.

The careful reader--for example, one who has followed the Garrison/Strange story here at Legal Schnauzer--has every reason to doubt Garrison's veracity from the opening lines of the Marie Claire article.

In terms of accurate reporting, the story only goes downhill from there.