The Bureau of Land Management faced a crisis this spring. 

The agency protects and manages herds of wild horses that still roam the American West, rounding up thousands of them each year to keep populations stable.

But by March, government pens and pastures were nearly full. Efforts to find new storage space had fallen flat. So had most attempts to persuade members of the public to adopt horses. Without a way to relieve the pressure, the agency faced a gridlock that would invite lawsuits and potentially cause long-term damage to the range. 

So the BLM did something it has done increasingly over the last few years. It turned to a little-known Colorado livestock hauler named Tom Davis who was willing to buy hundreds of horses at a time, sight unseen, for $10 a head. 

---

The BLM has sold Davis at least 1,700 wild horses and burros since 2009, agency records show [1] -- 70 percent of the animals purchased through its sale program.

Like all buyers, Davis signs contracts promising that animals bought from the program will not be slaughtered and insists he finds them good homes.

But Davis is a longtime advocate of horse slaughter. By his own account, he has ducked Colorado law to move animals across state lines and will not say where they end up. He continues to buy wild horses for slaughter from Indian reservations, which are not protected by the same laws. And since 2010, he has been seeking investors for a slaughterhouse of his own.

"Hell, some of the finest meat you will ever eat is a fat yearling colt," he said. "What is wrong with taking all those BLM horses they got all fat and shiny and setting up a kill plant?"

Animal welfare advocates fear that horses bought by Davis are being sent to the killing floor. 

“The BLM says it protects wild horses,” said Laura Leigh, founder of the Nevada-based advocacy group Wild Horse Education, “but when they are selling to a guy like this you have to wonder.”

BLM officials say they carefully screen buyers and are adamant that no wild horses ever go to slaughter.

“We don’t feel compelled to sell to anybody we don’t feel good about,” agency spokesman Tom Gorey said. “We want the horses to be protected.”

Sally Spencer, who runs the wild horse sales program [2], said the agency has had no indication of problems with Davis and it would be unfair for the BLM to look more closely at him based on the volume of his purchases.

"It is no good to just stir up rumors,” she said. “We have never heard of him not being able to find homes. So people are innocent until proven guilty in the United States."

Some BLM employees say privately that wild horse program officials may not want to look too closely at Davis. The agency has more wild horses than it knows what to do with, they say, and Davis has become a relief valve for a federal program plagued by conflict and cost over-runs. 

"They are under a lot of pressure in Washington to make numbers,” said a BLM corral manager who did not want his name used because he feared retribution from the agency’s national office. “Maybe that is what this is about. They probably don't want to look too careful at this guy."

******

Wild horses embody the mythic West: Painted Indian war ponies and the cavalry mounts that chased them, pony express runners and the tough partners of cowboys.

At the turn of the 20th Century, they numbered in the millions, but most were rounded up, slaughtered, and used for pet food or fertilizer, until by 1970, there were only 17,000 left.

In 1971, Congress stepped in to save the remaining herds, passing a law [3] that declared wild horses “living symbols of the historic and pioneer spirit of the West” and made it a crime for anyone to harass or kill wild horses on most federal land. The law tasked the departments of Interior and Agriculture with protecting the animals still roaming the range.

In a sense, the Bureau of Land Management -- the part of the Interior Department assigned to oversee the wild horse program -- succeeded in this a bit too well. Protected horses naturally began to reproduce and by 1983 there were an estimated 65,000 horses and burros on the range, competing for resources with cattle and native wildlife.

In the name of maintaining a sustainable balance, the BLM began removing horses from the wild. It now rounds up about 9,400 horses a year, which has kept the wild population at around 35,000.

The captured horses are put up for adoption. Almost anyone can have one for as little as $125 as long as they sign a contract promising not to sell it to slaughter.

Adoptions kept pace with round ups until investigations in the late 1980s and 1990s showed that many adopters, including several BLM employees, had turned a quick profit by selling the horses to slaughterhouses. To discourage such re-sales, the BLM began holding the title of sale for a year. Today the agency says it visits almost every adopter for a “compliance check” within six months to make sure horses are well cared for.

The restrictions protected horses, but discouraged adoptions, a trend compounded more recently by a bad economy and soaring hay prices.

Today, only one in three captured horses finds a home. The rest go into a warren of tax payer-funded corrals, feed lots and pastures collectively known as “the holding system.” Since horses often live 20 years after being captured, the holding population has grown steadily for decades from 1,600 in 1989 to more than 47,000. There are now more wild horses living in captivity than in the wild.

For decades, government auditors [4] and wild horse welfare advocates have warned that the policy of capturing and storing horses is unsustainable and have pushed for the BLM to use fertility controls, introduce predators or expand wild horse territories, but the agency has made little progress toward these goals. In the first half of this year, for example, it treated fewer than half as many wild horses with a birth control drug than was planned. 

"I think they are caught in an old way of doing things,” said John Turner, an endocrinologist at University of Toledo who specializes in wild horse fertility control. “Once they round up the horses, I don't think they like to treat and release. They would rather remove them."

Driven by the cost of caring for unwanted wild horses, the annual price tag of the program has ballooned from $16 million in 1989 to $76 million today.

Cost pressures prompted Congress to pass a last-minute rider to a 2004 law directing the BLM to sell thousands of old or unadoptable wild horses for $10 a head without restrictions -- even for slaughter -- but the agency has not done so, fearing public outrage. 

Instead, since then, the BLM has been selling horses, but requiring buyers to sign contracts [5] saying they will  “not knowingly sell or transfer ownership of any listed wild horse and or burro to any person or organization with an intention to resell, trade, or give away the animal for processing into commercial products." Violating the agreement is a felony, but there are no compliance checks similar to those done when horses are adopted.

Even when priced at less than a few bales of hay, these horses had little appeal: Sales dropped [6] from 1,468 in 2005 to 351 in 2008.

To explore other options for reducing the number of horses in holding, top BLM officials gathered for weekly closed-door meetings from July to October 2008. According to meeting minutes obtained by the Conquistador Equine Rescue & Advocacy Program, they considered selling thousands of animals for slaughter and even large-scale euthanasia, but concluded such actions would enrage animal-welfare activists to the point they might "threaten the safety of our facilities and our employees."

No clear plan emerged.

As the wild horse program’s situation grew increasingly dire, a new option came knocking: Tom Davis.

******

Davis, 64, a plain-spoken man with a sun-beaten brow, makes his living hauling livestock, but says reselling wild horses now accounts for a substantial part of his income.

By his own account, he has worked around horses all his life -- on racetracks, on ranches, and even rounding up wild horses for slaughter before the 1971 law put a stop to the practice.

For most of that time, he has lived in the tiny town of La Jara, in Colorado’s mountain-ringed San Luis Valley, just down the road from Ken Salazar, the former U.S. Senator who now heads the Department of the Interior.

“When my dad was alive we farmed their land,” Davis said of the Salazar family. “I like them. I do business with them. I do quite a bit of trucking for Ken.”

(Salazar did not respond to repeated interview requests for this story.)

On a warm morning in May, Davis gave a rambling two-hour interview on the 13-acre spread of corrals and truck lots where he lives.

Leaning against the fence of a muddy corral where a half dozen horses nibbled hay, wearing dusty overalls, Davis gave a simple reason for becoming the BLM’s main buyer.

"I love wild horses to death,” he said. “It's like an addiction. For some it's drugs, for me it's horses."

According to BLM records, Davis first contacted the program in January 2008. Documents obtained from the agency show he filled out the application [7] to become a buyer over the phone, aided by Spencer, the BLM’s sales director, who wrote in his answers to questions on the form. (A BLM spokesman said in an email that agency employees often did this in the program’s early days, but no longer do.)

Under a question concerning Davis’ intended use of the animals, Spencer wrote “use for movies.” He later told other BLM employees he sold the horses to Mexican movie companies to use on film shoots.

Under a question about what type of horses Davis preferred, the application noted he would take males or females, so long as they were big.

At the bottom of the application, Spencer wrote that she and Davis had “Discussed goal of providing a good home and making sure none of the horses end up at slaughter plants.” A few weeks later, the BLM sent Davis 36 wild horses from its Cañon City, Colo., holding corral.

That was the only load the BLM sent Davis in 2008, records show. But in 2009 -- a few months after the meetings about the holding crisis and two weeks after Salazar became head of the Interior Department -- the agency started sending him truckload after truckload, from all over the West. Soon he was by far their biggest customer.

Davis bought 560 horses in 2009, another 332 animals in 2010, 599 more in 2011, and 239 in the first four months of 2012, agency records show. While most BLM buyers purchase one or two horses at a time, Davis averages 35 per purchase and has bought up to 240 at a time.

The animals came from the mountains of California and Wyoming, the mesas of Colorado and Utah, and the deserts of Nevada and Oregon. Many had lived for decades in the wild: Mature band stallions and resilient mares of every color descended from the first American horses.

Davis has paid the BLM a total of $17,630 for the animals, far less than BLM has expended to provide them – the agency estimates it costs $1,000 to roundup a wild horse and records show it has paid as much as $5,000 per truckload to ship them to Davis. Similar horses that are not acquired from the BLM and can legally be sold for slaughter fetch $300,000 to $600,000 on the open market, according to sales prices from regional livestock auctions.

Some BLM corral managers said in interviews they felt uneasy shipping so many horses to a single buyer, and one they knew so little about, but said such decisions weren’t up to them.

"That all happens in Washington," one said, echoing the comments of many. "We are just peons. We do what we are told."

Davis said BLM employees occasionally asked where his horses ended up, but said he tells them it’s “none of your damn business.”

"They never question me too hard. It makes 'em look good if they're movin' these horses, see?" he said. "Every horse I take from them saves them a lot of money. I’m doing them a favor. I’m doing the American people a favor."

******

So what happened to the wild horses Davis purchased from the BLM?

The agency can’t say for sure. It does not hold onto the titles of wild horses acquired through its sale program as it does with horses that are adopted. Officials also have no process for following up to make sure buyers use animals as they claim they will in applications.

In the interview at the ranch, Davis said he had found most of the mustangs “good homes” on properties mostly in the southeastern states.  Asked if he would provide records of these sales, he responded, “Ain’t no way in hell.”

Other people who find homes for rescue horses in the region say they rely heavily on advertising and web sites to connect with buyers. Davis does not appear to do so.

“I’ve never heard of him,” said David Hesse, who runs Mustang and Wild Horse Rescue of Georgia [8]. “If he said he is finding homes for that many old, untamed mustangs, I’m skeptical. The market is deader than dead. I have trouble finding homes for even the ones that are saddle-broken. Wild ones? No way.”

On some sales applications, Davis has said he sells horses to graze on land used for oil and gas drilling in Texas, but oil industry experts contacted for this story said they had never heard of such a practice.

According to brand inspection documents [9] required by Colorado when livestock is sold or shipped more than 75 miles, Davis and his wife say they have sent 765 animals with BLM wild horse brands to a sparsely populated stretch of arid brush country along the Mexico border in Kinney County, Texas. (The records do not give specific addresses where animals were sent, but identify small towns, such as Spofford, as their destination.)

It’s impossible to confirm that the horses actually arrived there or to know where they might have gone next, however, because Texas is one of the few Western states that do not require brand inspections when horses are moved or sold.

Just south of Kinney County is Eagle Pass, a border town that isthe only crossing for horses going to slaughter in Mexico for hundreds of miles.

There have been no horse slaughterhouses in the U.S. since 2007, when Congress barred funding for U.S. Department of Agriculture horse meat inspectors. Since then horse slaughter has been outsourced. A 2011 report by the General Accountability Office [10] found the export of horses for slaughter to Mexico shot up 660 percent after the ban.

In Eagle Pass, as at other crossings, slaughter horses are checked by USDA veterinarians. A  USDA spokeswoman refused to make veterinarians available for interviews, but confirmed that vets sometimes see wild horses bearing the BLM brand in slaughter export pens.

Brand documents leave almost 1,000 of Davis’s wild horses unaccounted for. That means they should still be within 75 miles of his residence -- if he has complied with state law.

Asked if this was the case, Davis first said the horses were still on 160 acres of land he leases from the state of Colorado. Then he said some had been shipped out of state without brand inspections, a misdemeanor punishable by up to 18 months in jail and a $1,000 fine.

"Since when is anything in this country done legal?" Davis said in a phone interview.

******

Had BLM officials inquired further about Davis, they might have found reason to question his plans for wild horses.

Davis is a vocal proponent of slaughtering wild horses in the holding system, which he considers a waste of resources. During the interview at his home, he said he would purchase far more horses if the BLM allowed him to resell them to so-called “kill buyers.”

“They are selling me mere hundreds now,” he said. “If they sold me 50,000, I guarantee I could do something with them. I would go to Canada. I would go to Mexico.”

Davis has close friends who export horses for slaughter, including Dennis Chavez, whose family runs one of largest export businesses in the southwest. In 1984, when Davis authored “Be Tough or be Gone [11],” a self-published book about a horseback ride he took from Mexico to Alaska, he dedicated it to Chavez’s father, Sonny Chavez.

Also, despite the obstacles that impede U.S. horse slaughterhouses, Davis said he has been trying to drum up investors to open a slaughter plant in Colorado.

He said he had approached pet food companies to buy the meat and asked Ken Salazar’s brother, John Salazar, who is the head of the Colorado Department of Agriculture, to help him get a grant to finance the business. John Salazar declined to help Davis, and so far the slaughterhouse venture has not gone forward.

“How can the BLM say with a straight face they are protecting wild horses when they deal with this guy?” said Leigh, of Wild Horse Education.

Animal welfare advocates have raised concerns about Davis’ purchases, but they say federal officials paid little attention.

In late 2010, the BLM rounded up 255 horses in the Adobe Town wild horse area [12] in Wyoming. A local loose knit group of advocates had been photographing the herd for years. After the round-up, group members called BLM officials, looking to adopt a few of the animals, particularly an old stallion they had named Grey Beard [13].

They were told that the horses had been claimed by an anonymous buyer who planned to resell them to large landowners looking for agricultural tax exemptions. The advocates tried to learn more about the buyer, but Spencer refused to give his name, citing privacy policies.

According to interviews and agency emails, group members told Spencer that anyone buying that many horses at once had to be a kill buyer.

Sandra Longley, one of the advocates, said in an email to another advocate that Spencer had assured her that the buyer in question had a long relationship with the BLM and was “above reproach.”

A BLM spokesman said Spencer did not recall the conversation.

According to BLM records, most of the horses were sold to Davis.

Warnings from advocates about Davis do not appear to have prompted the BLM to reconsider selling to him.In fact, internal agency email shows that officials actively turned to Davis to absorb freshly rounded-up horses so they wouldn’t end up in the overloaded holding system.

In January, the manager of the agency’s corral in Burns, Ore., emailed superiors in Washington, D.C., to ask what to do with 29 mares, almost all of which were pregnant. Spencer replied that Davis would take them.

In March, a corral manager emailed Spencer to say he had 92 “nice horses” just rounded up in High Rock, Calif., and to ask if Davis could take some of the geldings.

A day later Spencer replied, “Davis told me that if the geldings are in good shape he will be able to place them into good homes.”

“How many would Mr. Davis want to buy?” the corral manager asked Spencer. “And are there any specifics that he is looking for?”

“He said he’d be interested in all of them, no specifics,” Spencer replied.  

Spencer said in an interview she is under no pressure to approve buyers with questionable backgrounds and feels confident that “we do not sell to people we feel are going to do bad things to the horses.”

When asked about Davis, she said he had been thoroughly checked out and she had confidence in him. More generally, she said that if there were problems with a buyer, she would know.

“People watch where our horses go and the brands are very distinctive,” she said. “If things were going on, we would get a call.”

Davis’ most recent purchase was in April, when he bought 106 animals. Since then, the agency may have opened an inquiry into what he has done with horses bought from the BLM.  In June, an agency investigator contacted this reporter seeking information about him. This month, however, the BLM assistant special investigator in Santa Fe (the contact supplied by the agency on this matter) said he was "unable to confirm or deny" that the BLM is investigating Davis.

Animal welfare advocates say the agency’s reliance on Davis is just another indication of how the wild horse program and its overburdened holding system have been mismanaged.

“He is just a symptom of the train wreck that is the Wild Horse and Burro program,” said Ginger Kathrens, director of the horse advocacy group The Cloud Foundation, based in Colorado Springs. “They just warehouse more and more horses and create their own crisis. Then, after they run the program into the ground, they have to find ways out of it. It is a whole unnatural ridiculous system run amok. And who pays the ultimate price? Wild horses.”

This report, "All the Missing Horses," first appeared at ProPublica.org.

To contact Dave Philipps about this story, email him at horse@propublica.org.

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More than six years after Gulf Coast victims of Hurricane Katrina began experiencing adverse health effects while living in travel trailers provided by the federal government for temporary housing, a federal judge in New Orleans has given his final approval to a $42.6 million settlement of a class-action lawsuit alleging that the units emitted hazardous levels of the toxic chemical formaldehyde.

U.S. District Judge Kurt Engelhardt approved the deal Thursday after hearing from attorneys who brokered the agreement between the plaintiffs and more than two dozen manufacturers of mobile homes provided by the Federal Emergency Management Agency in the wake of Hurricanes Katrina and Rita.

Roughly 55,000 residents of Louisiana, Mississippi, Alabama and Texas will be eligible for shares of $37.5 million paid by more than two dozen manufacturers, the Associated Press reported. They also can get shares of a separate $5.1 million settlement with FEMA contractors that installed and maintained the units.

---

Dan Balhoff, a court-appointed special master, will determine the plaintiffs' awards, the AP said. Up to 48 percent of the total settlement money – or approximately $20,5 million -- will be deducted for attorneys' fees and costs, it said. Assuming the remainder is divided equally among 55,000 plaintiffs, the plaintiffs would receive about $4,020 apiece.

Payments are expected to go out late this year or early next year, the AP said.

Engelhardt presided over three trials for claims against FEMA trailer manufacturers and installers after he was picked in 2007 to oversee hundreds of consolidated lawsuits. The juries in all three trials sided with the companies and didn't award any damages.

As msnbc.com (now NBCNews.com) first reported in July 2006, residents of the trailers began complaining of headaches, nosebleeds and breathing difficulty shortly after moving into the trailers, which were trucked to the Gulf Coast by the tens of thousands after Katrina and Rita devastated the area in rapid succession in 2005.

Air quality tests of 44 FEMA trailers in early 2006 conducted by the Sierra Club found formaldehyde concentrations as high as 0.34 parts per million – a level nearly equal to what a professional embalmer would be exposed to on the job, according to one study of the chemical’s workplace effects.

And government tests on hundreds of trailers in Louisiana and Mississippi announced in 2008 found formaldehyde levels that were, on average, about five times what people are exposed to in most modern homes. 

FEMA, which isn't a party to the settlements, had long downplayed the health risks from formaldehyde exposure before those test results were announced.

It eventually began auctioning off the units as “scrap” — meaning they should not be used for human habitation — in October 2008, but some unscrupulous buyers apparently were able to dodge regulations and return them to the housing pool. 

Formaldehyde gas -- the airborne form of a chemical used in a wide variety of products, including composite wood and plywood panels in the travel trailers that FEMA purchased to house hurricane victims -- is considered a human carcinogen, or cancer-causing substance, by the International Agency for Research on Cancer and a probable human carcinogen by the EPA.

Gerald Meunier, a lead plaintiffs' attorney, told the AP that the deal provides residents with "somewhat modest" compensation but allows both sides to avoid the expense and risks of protracted litigation.

"Dollar amounts alone do not determine whether a settlement is fair and reasonable," he said.

Jim Percy, a lawyer for the trailer makers, said Engelhardt would have had to try cases individually or transfer suits to other jurisdictions if the settlement wasn't reached.

"It was not going to end quickly, and it was going to be even more monumental for all the parties concerned," he said.

But that doesn't mean the deal isn't a disappointment for many residents who blame their illnesses on the cramped trailers they occupied for months on end.

"We were told not to look for much," said Anthony Dixon, a New Orleans resident who says he developed asthma while living in a FEMA trailer for two years.

Dixon, 58, attended the hearing with his wife and mother to learn more about the deal.

"We're glad to get it over with," he added.

Engelhardt noted he received a letter from a woman whose 66-year-old mother, Agnes Mauldin, of Mississippi, died of leukemia in 2008 after living in a FEMA trailer. Mauldin's daughter, Lydia Greenlees, said the settlement offers "very little" for what her family considers to be a wrongful death case.

"I am saddened about the settlement in that I feel like it makes a mockery of my mother's life," Greenlees wrote. "I don't want anyone to think for one second that I view this settlement as a fair trade for my mother's life. I do not."

A group of companies that includes Gulf Stream Coach Inc., Forest River Inc., Vanguard LLC and Monaco Coach Corp. will pay $20 million of the $37.5 million settlement with the trailer makers.

Shaw Environmental Inc., Bechtel Corp., Fluor Enterprises Inc. and CH2M Hill Constructors Inc. are among the FEMA contractors that agreed to pay shares of the separate $5.1 million settlement.

Only a handful of formaldehyde-related claims are still pending, including some against FEMA by a group of Texas residents.

Mike Brunker is the projects editor for NBCNews.com; the Associated Press contributed to this article.

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Two figures at the center of an alleged $164 million real estate scam marketed out of South Florida have been indicted by a federal grand jury in San Francisco on mail fraud and conspiracy charges.

James B. Catledge, an investment guru who has a history of being a major Republican Party donor, and Canadian businessman Derek F.C. Elliott, are accused of fraudulently soliciting $91.3 million from investors to build a resort in the Dominican Republic that never opened.

Each man faces up to 20 years in prison, and a maximum fine that is twice the value of the property involved.

---

The six-page indictment announced Friday is a bare-bones document that, despite the enormous sums involved, provides few details about the scope of the alleged fraud, how many people were burned or the identities of victims.

The indictment grew out of an FBI investigation that began 2 1/2 years ago during a civil racketeering lawsuit in Miami federal court filed by 230 disgruntled investors in the ill-fated EMI Sun Village Resort and Spa.

Broward Bulldog.org reported in January 2010 that court-appointed special master Thomas Scott, a Miami lawyer and former federal judge and U.S. Attorney, had found evidence that Sun Village was actually a huge “Ponzi-style” scheme. He recommended that U.S and Canadian law enforcement investigate.

“The unassailable fact (is) that thousands of investors/owners and by extension their families in the U.S. and Canada, as well as other countries, have been financially destroyed,” Scott wrote in his 50-page report.

Indictment details
According to the indictment, Elliott was the president of various hospitality businesses in the Dominican Republic, including a pair of resorts. Catledge is a motivational speaker and the founder of several marketing companies that, among other things, sold investments in island resorts.

In 2005, the pair took out a 2005 bank loan to buy an old hotel near Santo Domingo they named the Sun Village Juan Dolio resort. They began renovations and recruited investors through Catledge’s Nevada-based sales and marketing companies Impact Inc. and Net Worth Solutions.

Sun Village marketed its Dominican properties out of an office in Doral in western Miami-Dade County. Money that flowed in was routed through an account at a Citibank branch in Tamarac, the Miami lawsuit said.

According to a statement released by prosecutors, Catledge and Elliott’s sales pitch “failed to tell investors that the full commissions being taken on their investment were approximately 44 percent, that the renovations were underfunded, that investors’ money was being used on other projects, and the returns they promised were unsupportable and could not be achieved.

The Miami special master’s report described Catledge as “the main architect of the Ponzi scheme.”

Catledge and Elliott diverted nearly $69 million from investors to commissions, other projects and to pay “guaranteed” interest to early investors, the indictment said.

‘Real estate secrets of the wealthy’
More details are contained in related, but non-criminal charges brought in May by the Securities and Exchange Commission against Catledge and Elliott. The principal allegation is that the men were involved in the fraudulent offering of unregistered investments for Juan Dolio and another Sun Village resort, Cofresi.

The SEC’s complaint contends the two men raised nearly $164 million selling timeshares and other ownership interests to approximately 1,200 investors between 2004 and 2009.  The complaint also stated the pair promised investors 5 to 12 percent annual returns, while also assuring that principal investments remained safe.

Catledge and Elliott used various sales materials to convince people to use their home equity and savings to invest in securities tied to the resorts, the SEC complaint said. One visual presentation was titled, “Real Estate Secrets of the Wealthy.”

Neither the indictment nor the SEC complaint details what happened to the millions that Catledge and Elliott allegedly siphoned away from investors.

The SEC, however, said Catledge set up a trust in the South Pacific’s Cook Islands where he funneled more than $15 million in commissions that bypassed his marketing company. He and his families were the only beneficiaries.

Court papers filed in the now-closed investor litigation in Miami say the money went to pay for the lavish lifestyle and gambling debts of the resorts’ developers.

The SEC complaint says that Elliott and his father, former Sunrise resident Frederick Elliott, originally purchased the Cofresi resort in 2003 and a year later needed additional funds to finish construction work. A mutual friend suggested they talk to Catledge, who could help them raise the capital they needed.

Net Worth sales associates soon began soliciting potential investors.

Both Juan Dolio and Cofresi were ultimately foreclosed. Investors were wiped out when both projects were sold at public auction in late 2009.

The Miami special master’s report blamed Elliott and his father for “mismanagement and/or essential theft of investor monies” that ultimately delivered “the fatal blows to the investors.”

Still, prosecutors or SEC attorneys have not accused Frederick Elliott of any wrongdoing.

The SEC’s complaint seeks disgorgement of all of Catledge and Derek Elliott’s allegedly ill-gotten gains. Also sought: fines and permanent injunctions against them and EMI Sun Village.

Big political donor
In 2008, while authorities contend the scam was in operation, Catledge contributed more than $100,000 to the Republican National Committee, John McCain’s presidential campaign and other Republican causes.

Catledge and his wife, Tiffany, also contributed to Mitt Romney’s 2008 presidential campaign before he dropped out of the race.

On May 28, 2008, Catledge and his wife attended what the Deseret News in Salt Lake City reported was a $70,000-a-couple dinner with President George W. Bush at Mitt and Ann Romney’s vacation home in Deer Valley, Utah.

In April 2010, the Catledges attended a California fundraiser for Republican gubernatorial candidate Meg Whitman. California records show Catledge gave $30,000 to Whitman’s unsuccessful bid.

Catledge has reported no contributions to federal candidates this election cycle.

Catledge’s attorney, Las Vegas celebrity lawyer David Chesnoff, was unavailable for comment. He previously said his client maintains his innocence.

“He categorically denies engaging in any criminal conduct,” Chesnoff said.

Romney’s 2012 presidential campaign did not respond to a request for comment.

Supporters of President Barack Obama and his various campaigns also have been linked to alleged wrongdoing, both criminal and civil.

Antoin "Tony" Rezko, a Chicago businessman and longtime Obama fundraiser, was convicted of fraud and bribery charges in 2008 in connection with an attempt to extort millions of dollars from businesses seeking to do business with Illinois state agencies. He was sentenced to 10 ½ years in prison.

In April, the Associated Press reported that Abake Assongba,  a major New York donor to Obama, had been accused in a civil lawsuit in Florida of defrauding a businessman and impersonating a bank official.

Despite last week’s indictment, neither Catledge nor Elliott have been arrested.

Catledge, 45, who lives in Rancho Santa Fe, California, received a summons and is due for arraignment Oct. 5, according to the U.S. Attorney’s Office in San Francisco.

No court date has been scheduled for Elliot, 42, who lives near Toronto. The spokesman declined comment when asked if prosecutors consider Elliott a fugitive.

BrowardBulldog.org is a Florida-based nonprofit, independent and nonpartisan news organization that seeks to provide authoritative reporting in the public interest while upholding high standards of fairness and accuracy.

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African American youth culture is steeped in alcohol. References to booze have long been rife in rap music, and Jay Z, Sean “P. Diddy” Combs and Ludacris are among the hip-hop luminaries who have promoted alcohol.

A new study puts some fresh data behind long-standing concerns about alcohol marketing to black kids. Young African Americans ages 12 to 20 see far more alcohol ads on television and in magazines than youths in general, according to the report published Thursday by the Center on Alcohol Marketing and Youth at the Johns Hopkins Bloomberg School of Public Health.

Researchers said two key factors are at play: Many alcohol ads specifically target African Americans and African American youth consume more media than youth overall. For example, African American youths watched 53 percent more television than youths in general in 2010, according to Nielsen data cited in the study.

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Frank Coleman, senior vice president of the Distilled Spirits Council of the United States, a leading trade group, said he hadn’t seen the study and couldn’t comment on it. But he said the industry does not target youth. “The beer, wine and spirits industry (is) totally opposed to underage drinking and spends millions of dollars a year fighting it,” Coleman said.

Despite the study findings, young blacks drink less than youths of other racial and ethnic groups. Researchers say this may be linked to factors such as poverty, social norms and religion that temper some of advertising’s impacts.

But African Americans who drink seem to suffer more serious consequences, said David Jernigan, director of the Center on Alcohol Marketing and Youth, perhaps because they tend to have less access to health care and substance abuse treatment, live in poorer neighborhoods and are incarcerated more frequently.

Alcohol consumption is linked to three leading causes of death among young African Americans – homicide, suicide and accidental injury. “There’s rationale for being extra careful,” said Jernigan, whose group receives funds from the Centers for Disease Control and Prevention and has put out dozens of reports on alcohol marketing to youths over the last decade.

Coleman said the Center on Alcohol Marketing and Youth’s research on the topic is flawed. It “has repeatedly issued press releases saying the industry’s advertising is increasingly targeting youth,” he said, even as statistics show that underage drinking is declining.

He pointed to a recent federal government survey showing that teenage drinking fell to a historic low in 2011, when 25.1 percent of 12 to 20-year olds reported using alcohol in the past month.

Jernigan’s study, however, stops short of claiming that advertisers are targeting black youth. “I can’t call it targeting because targeting implies intent and I can’t prove intent,” Jernigan said.

Marketers’ messages are increasingly reinforced by hip-hop culture, researchers at the University of California, Berkeley, reported last year. An analysis of rap lyrics showed 64 percent of the most popular songs released from 2002 to 2005 referenced alcohol. This marked a steep rise; an earlier analysis of rap songs from 1994 to 1997 showed 44 percent contained alcohol references.

Booze ads are also common in magazines read by black Americans, said Lorreen Pryor, president of the Black Youth Leadership Project in Sacramento, Calif. “You keep flipping the pages and the (alcohol ads) are back to back.”

The study comes amid efforts to ban alcohol advertising on public property in some cities. A Los Angeles coalition has asked the City Council to ban alcohol ads on property such as bus shelters; last year, the company that manages the city’s bus benches agreed to not sell alcohol ads. Boston recently stopped advertising booze on public transit and advocates hope to extend the ban in other public areas. Minority youth frequently use public transportation and this would help shield them from alcohol ads, said Bruce Lee Livingston, executive director of Alcohol Justice, an industry watchdog.

The new study suggests marketers are falling short on limiting youth exposure to alcohol ads. Young blacks saw 32 percent more booze ads in magazines and 17 percent more on television than youth overall in 2009, researchers found. While African American youth were exposed 26 percent fewer radio ads for alcohol than youth in general, they heard 32 percent more radio ads for hard liquor.

In magazines, African American youth were 92 percent more likely to see ads for “alcopops” -- cheap, sweet, fizzy alcohol drinks that are of particular concern to advocates because they appeal to youth.

Alcohol advertising in magazines, overall, declined by nearly 20 percent between 2003 and 2008, researchers found, likely due to a general decline in magazine advertising.

In contrast, cable television has seen a “major ramp up” in alcohol ads – particularly for hard liquor, Jernigan said. The four largest television networks -- ABC, CBS, Fox and NBC -- do not advertise distilled alcohol. But African American youth saw 20 percent more ads for hard liquor than youth overall. “TV is going in the wrong direction,” Jernigan said.

Members of the beer, wine and distilled spirits trade associations have agreed to avoid placing ads during TV programs with audiences made up of 28.4 percent or more people under age 21. Still, advocates say these voluntary standards are poorly enforced. “The self regulation pledge has not worked,” said Alcohol Justice’s Livingston, who would like to see government regulations.

While advertisers often say they can’t keep youth from seeing messages that are intended for adults, Jernigan isn’t buying it: “The industry knows quite precisely what they are doing.”

FairWarning is a nonprofit, online investigative news organization focused on safety and health issues.

More from Open Channel:

 

• Judge rejects ex-Penn State officials' bid to dismiss perjury charges
• How prosecutorial turf wars complicated money-laundering probe of bank
• Blind sheik terrorist will stay in US prison, White House says
• The real vote-fraud opportunity has arrived: casting your ballot by mail
• Solar panel startup to get $197 million from Uncle Sam
• Washington Post debunks claim that Obama skips security briefings
• Trillion-gallon loophole: lax rules for drillers who inject pollutants into Earth
• Officials see Iran, not outrage over film, behind cyber attacks on banks
• Investigation finds no evidence AG Holder knew of 'Fast and Furious' sting

Follow Open Channel from NBCNews.com on Twitter and Facebook

 

 

A judge in Pennsylvania on Wednesday rejected a bid by two former Penn State administrators to dismiss perjury charges against them arising from their testimony before a grand jury investigating child sex abuse allegations against former assistant football coach Jerry Sandusky.

In rejecting motions by former university Vice President Gary Schultz and ex-Athletic Director Tim Curley to dismiss the perjury counts against them, Dauphin County Judge Todd Hoover wrote that their contention that there is insufficient evidence to corroborate the charges will be more appropriately determined at trial. He also said prosecutors have given the defendants adequate information about which portions of their grand jury testimony are at the heart of the perjury charges.

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Hoover did not rule on a motion by the defendants to dismiss the other count against them -- failure to properly report suspected child abuse. The judge indicated that he will issue a separate ruling on that motion, in which Shultz and Curley argue that the statute of limitations has expired.

Read the judge's ruling

Schultz, the school's former vice president for business and finance, has retired. Curley, the athletic director, is on leave from the university. Their trial is scheduled to begin in Harrisburg with jury selection on Jan. 7.

A spokesman for the attorney general's office declined to comment. A spokeswoman for the defendants' lawyers did not immediately return messages seeking comment.

Related stories:

Penn State president, Paterno concealed facts about Sandusky sex abuse, report finds

Ex-Penn State president says he didn't protect Sandusky, was himself an abused child 

Sandusky, a former Penn State defensive coordinator under the late coaching legend Joe Paterno, was convicted in June on charges he sexually abused 10 boys, some on campus. He maintains his innocence. He's jailed awaiting sentencing next month.

The Associated Press contributed to this report.

More from Open Channel:

 

• How prosecutorial turf wars complicated money-laundering probe of bank
• Blind sheik terrorist will stay in US prison, White House says
• The real vote-fraud opportunity has arrived: casting your ballot by mail
• Solar panel startup to get $197 million from Uncle Sam
• Washington Post debunks claim that Obama skips security briefings
• Trillion-gallon loophole: lax rules for drillers who inject pollutants into Earth
• Officials see Iran, not outrage over film, behind cyber attacks on banks
• Investigation finds no evidence AG Holder knew of 'Fast and Furious' sting
• Benghazi emerges as key recruiting ground for al-Qaida

 

 

Follow Open Channel from NBCNews.com on Twitter and Facebook

 

In the second half of 2010, a senior federal prosecutor in West Virginia drafted an impassioned plea to his bosses in Washington to end infighting as multiple government agencies pursued a high-stakes investigation of HSBC Holdings Plc.

William Ihlenfeld II had been fighting a losing battle against fellow prosecutors in Washington and Brooklyn, who were jointly conducting a parallel probe into the British bank's controls over illicit transactions.

Ihlenfeld, the U.S. attorney in Wheeling, W. Va., said in the draft letter, a copy of which has been seen by Reuters, that there had been a breakdown in the relationship, and his office had been told to stand down in June 2010 by the Department of Justice, just as they were preparing to indict the bank for as many as 175 counts of money laundering.

An earlier mediation had failed. So for the first time in 30 years, Ihlenfeld said his office was seeking an arbitration of such a dispute.

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"We have made several offers to amicably settle this dispute by dividing the investigation in a way that guaranteed the two investigations would never interfere with each other," Ihlenfeld wrote in the letter addressed to Gary Grindler, then the acting deputy attorney general. "Despite our best effort, all of our offers have been categorically rejected. None of our proposals has even induced a counter-offer.

"As a general proposition, there is no reason why the professionals from different DOJ components cannot work together for the common good. This particular situation is no exception."

It is not clear whether Ihlenfeld ultimately sent the letter or whether the Department of Justice agreed to arbitrate the dispute. But the draft provides a rare insight into the secret world of prosecutors, and sheds new light on a large and complex U.S. investigation that some two years later may lead to a settlement of more than $1 billion with HSBC.

At least 11 different U.S. departments, offices and regulators -- largely comprising the two competing groups -- as well as the U.S. Senate have probed HSBC for money-laundering lapses in investigations that date back to at least 2007.

Ihlenfeld's letter, other Department of Justice documents, regulatory filings and interviews with those close to the HSBC prosecution show how multiple -- and sometimes overlapping -- inquiries have slowed the prosecution and added to costs, as well as led to rancor within the department and between different government agencies.

They also underscore the problems the government faces in policing global banks such as HSBC that can enable a wide range of illicit transactions -- from small-time fraud to laundering of tens of billions of dollars for drug cartels and countries that are the subject of U.S. sanctions, such as Iran.

At one point, for example, a U.S. prosecutor in West Virginia was forced to explain to HSBC that dual Justice Department probes were not duplicative, according to a letter from the prosecutor to the bank's lawyer.

Such strife among different government agencies has surfaced in other complex investigations. In August, New York State bank regulator Benjamin Lawsky drew the ire of federal agencies when he independently pursued a $340 million settlement with another British bank, Standard Chartered Plc, rather than being part of an ongoing federal probe.

It is all at least partially due to a heightened effort by U.S. and state regulators to crack down on money laundering. Besides HSBC and Standard Chartered, a series of global banks, including JPMorgan Chase & Co and Citigroup Inc., have faced investigations into lapses related to money laundering.

A Department of Justice spokesman said in an emailed statement that the department continues to "aggressively pursue" the HSBC probe "in coordination with its internal components and external partners."

"Financial investigations, by their nature, are complex and time consuming," spokesman Dean Boyd wrote. "The department's track record in bringing successful enforcement actions in the banking industry speaks for itself, and has had a significant, positive impact on banking industry practices."

Spokespeople for the federal prosecutors in Brooklyn and West Virginia, as well as the other government agencies mentioned in this article declined to comment.

An HSBC spokesman also declined comment.

Parallel probes
Prosecutors in Ihlenfeld's office had been working since at least December 2008 on the case, which originated with an investigation of a local doctor's use of HSBC accounts to move $3 million tied to Medicare fraud, according to the letter.

But as the investigators looked deeper, they realized the case was merely "the tip of the iceberg", Ihlenfeld wrote.

Prosecutors in West Virginia had been working with two units of the Treasury Department -- the Internal Revenue Service's Criminal Investigation arm and the Financial Crimes Enforcement Network (Fincen), which enforces anti-money laundering laws.

Brooklyn prosecutors, meanwhile, had aligned with the more powerful Washington-based Asset Forfeiture and Money Laundering Section of the Department of Justice. Investigators in that enterprise also included the Drug Enforcement Administration and the Immigration and Customs Enforcement, a unit of the Department of Homeland Security.

The Asset Forfeiture unit had the power to veto any proposed money laundering indictment or settlement with HSBC, according to the letter.

Ihlenfeld touted the support of his own team, the IRS and Fincen, describing the agencies' investigators as "the best of the best when it comes to paper cases."

He also wrote that his office was much further along in the investigation, arguing that his group had devoted well over 5,543 hours to the investigation.

In one swipe at Brooklyn prosecutors, Ihlenfeld wrote that they did not realize that HSBC operated a bulk cash processing center "within walking distance" of their offices until West Virginia prosecutors pointed it out to them during the mediation.

He wrote that on March 24, 2010, the top prosecutor in Brooklyn had said that their investigation was "just starting".

"Even if DOJ's budget was unlimited, it would be wasteful for" the competing group to replicate what was already a successful investigation, he wrote.

In the end, Ihlenfeld did not win the battle. Prosecutors, including those in Washington, now oversee the probe, which is still ongoing.

For HSBC, after more than five years of investigation, a final settlement may be approaching. The bank has already set aside $700 million to cover those costs, and said in a regulatory filing in July that they could be "significantly higher." 

More from Open Channel:

• Blind sheik terrorist will stay in US prison, White House says
• The real vote-fraud opportunity has arrived: casting your ballot by mail
• Solar panel startup to get $197 million from Uncle Sam
• Washington Post debunks claim that Obama skips security briefings
• Trillion-gallon loophole: lax rules for drillers who inject pollutants into Earth
• Officials see Iran, not outrage over film, behind cyber attacks on banks
• Investigation finds no evidence AG Holder knew of 'Fast and Furious' sting
• Benghazi emerges as key recruiting ground for al-Qaida
• Richer communities get more EPA funds to clean toxic brownfields

Follow Open Channel from NBCNews.com on Twitter and Facebook

 

The blind sheik who supported the 1993 World Trade Center bombing and other terror plots that targeted New York landmarks will stay in a U.S. prison, Obama administration officials said Tuesday.  

"There is absolutely no plan to release or transfer the blind  sheik,” said National Security Staff spokeswoman Bernadette Meehan. "Reports saying otherwise are completely and unequivocally false."

The strong denial came after some Republicans raised concerns that Egyptian leaders may be pressing the Obama administration to free Sheik Omar Abdel Rahman.  

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More stories from NBCNewYork.com

Former U.S. Attorney General Michael Mukasey raised concerns in an op-ed in the Wall Street Journal on Tuesday. Mukasey claimed there is circumstantial evidence a secret deal is under way as a goodwill gesture to the new Egyptian government. 

Mukasey added it may be time for Congress to make clear that any such release would be a "gross betrayal of public trust that would justify removal from high office."

Abdul Rahman is currently serving a life sentence in a federal prison hospital in North Carolina. He was convicted in 1995 for his role in supporting a plot to bomb the United Nations, the Holland and Lincoln tunnels and assassinate then-Sen. Alfonse D’Amato, R-N.Y., and current Assemblyman Dov Hikind, D-N.Y. 

A Justice Department spokesman said Tuesday, "The blind sheik will serve the rest of his life in a federal prison serving time for terrorism … and those who suggest otherwise are badly misinformed."

Rep. Peter King, R-N.Y., sent a letter earlier this month to the State and Justice departments saying such a release would be "a sign of weakness and a lack of resolve by the United States and its president."
  
On the day he was set to take office in June, Egyptian President Mohammed Morsi told a cheering crowd in Cairo that he would press the Obama administration to free the blind sheik.
  
"“I see signs for Omar Abdel Rahman and detainees pictures," Morsi said. "It is my duty and I will make all efforts to have them free, including Omar Abdel Rahman." 
 
New York Sens. Charles Schumer and Kirsten Gillibrand, both Democrats, condemned Morsi comments at the time. 

"Sheik Rahman is a terrorist who planned to kill innocent Americans. Rest assured he will stay right where he belongs -- in jail for the rest of his life," Schumer said in June.

Gillibrand reiterated on Tuesday that any move to release the sheik would trigger a firestorm of opposition.

“If there is any attempt in the future to free this convicted terrorist it will be met with swift condemnation and action to stop it,” she said.

Reports of Egyptian calls to free Sheik Rahman come three years after Scottish authorities set free a Libyan terrorist convicted for killing 270 people in the 1988 bombing of Pan Am Flight 103. The release of Abdel Basset al-Megrahi, who died in May, sparked outrage among the victims’ families.  

More from Open Channel:

• The real vote-fraud opportunity has arrived: casting your ballot by mail
• Solar panel startup to get $197 million from Uncle Sam
• Washington Post debunks claim that Obama skips security briefings
• Trillion-gallon loophole: lax rules for drillers who inject pollutants into Earth
• Officials see Iran, not outrage over film, behind cyber attacks on banks
• Investigation finds no evidence AG Holder knew of 'Fast and Furious' sting
• Benghazi emerges as key recruiting ground for al-Qaida
• Richer communities get more EPA funds to clean toxic brownfields
• Skulduggery at sea: Iran uses tankers off Malaysia to evade oil embargo
• Dead Gitmo detainee had waged long legal battle for freedom

Follow Open Channel from NBCNews.com on Twitter and Facebook

From a continuing  series of articles, Who Can Vote?, a News21 investigation of voting rights in America. Read the full series.

By Sarah Jane Capper and Michael Ciaglo
News21

In the partisan controversies over changes in voter eligibility and voter ID requirements, the growth of mail voting and no-excuse absentee voting have received little attention. While voter-impersonation fraud at the polls is nearly unheard of, both sides in the voter fraud debate acknowledge that absentee ballots are susceptible to fraud.

Early voting has begun, and more Americans than ever are expected to vote by mail this fall in the presidential, state and local elections. A gradual loosening of absentee voting laws in many states, especially in the West, and universal mail voting in Oregon and Washington have contributed to a significant shift in how Americans vote.

In 1972, less than 5 percent of American voters used absentee ballots, according to census data. By 2010, almost 16 percent of votes cast in the 2010 general election were absentee ballots, and nearly 5 percent more were mail ballots, according to the U.S. Election Assistance Commission's Election Administration and Voting Survey. If in-person early voters are counted, nearly 30 percent of the voters in 2010 did not go to the polls on Election Day.

"By 2016, casting a ballot in a traditional polling place will be a choice rather than a requirement," said Doug Chapin, a University of Minnesota researcher and director of the Program for Excellence in Election Administration. "There will still be people who go to the polling place because it's familiar, it's convenient, it's traditional. I think there will be fewer of those places."

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More susceptible to fraud
Election fraud is rare, but it usually involves absentee or mail ballots, said Paul Gronke, a Reed College political scientist, who directs the Early Voting Information Center in Oregon. He cites what he calls a classic example of election fraud, a local official stealing votes by filling out absentee ballots. That was the case in Lincoln County, W.Va., where the sheriff and clerk pleaded guilty to distributing absentee ballots to unqualified voters and helping mark them during a 2010 Democratic primary.

Curtis Gans, director of the Center for the Study of the American Electorate, said vote-buying and bribery could occur more easily with mail voting and absentee voting. At a polling place, someone who bribed voters would have no way to verify that the bribe worked. A person who bribes mail voters could watch as they mark ballots or even mark ballots for them.

Gans also points to the potential to influence voters in gatherings that some call ballot-signing parties. A caregiver could mark a dependent's ballot.

"All the other types of fraud are essentially hard to do and easy to defend against," Gans said. "This isn't."

Putting a ballot inside an envelope and sealing it inside another envelope for mailing stirs skepticism, though. Election officials, political scientists and voters have concerns. They doubt that mailed ballots can be secure. They question whether forces beyond voters' control — smudges that disqualify ballots and breakdowns in keeping track of ballots, for example — will disallow votes. And some want to preserve Election Day traditions.

Gronke said that he hasn't seen evidence that bribes and coercion increase when voters use the mail. And ballot parties can allow people to discuss and make informed choices, he said, without pressuring their vote.

Those who have argued for stronger election security also say the mail could allow coercion by an abusive spouse; Gronke said he sees little evidence of that.

A Western phenomenon
Changes have occurred gradually to absentee voting, which began as a service to Union and Confederate soldiers during the Civil War and spread to civilians state by state.

Few paid attention when California extended absentee voting to anyone on request in 1978. The Los Angeles Times referred to a "little-noticed law" that eliminated the need to list a reason to get an absentee ballot. In the 2010 election, 40.3 percent of Californians voted absentee, according to Election Assistance Commission data.

Now, 27 states and the District of Columbia offer no-excuse absentee voting, according to the National Conference of State Legislatures. Many states have dropped notary and witness requirements for all absentee voters. Some have permanent absentee lists to automatically send ballots to voters in every election, a de facto vote-by-mail system.

Most states have opted for a mixture, offering some combination of no-excuse absentee voting, early voting, mail voting and Election Day voting. These categories often blur and overlap. A voter might drop off a ballot in person instead of mailing it, for example.

"It has to do almost entirely with voter convenience," said Jennifer Drage Bowser, a senior fellow at the National Conference of State Legislatures. "The more options there are outside the traditional polling place, the more voters like it."

The Obama campaign in 2008 received 59 percent of the early votes nationwide, according to a Washington Post-ABC News tracking poll. The Post reported, "For years, the profile of the early voter closely conformed to the characteristics of Republicans: older, white, more ideological and better informed about politics. ... But Obama turned the conventional wisdom on its head in 2008, drawing out vast numbers of African Americans to vote early in person, especially in southeastern states such as Florida. Many were organized by church to vote on the final Sunday before Election Day."

Western states have the highest levels of absentee voting, according to the Election Administration and Voting Survey. Those levels reached almost 70 percent in Colorado and 61 percent in Arizona, according to the survey. In 13 states, more than 20 percent of voters used absentee ballots.

All Washington and Oregon elections are conducted statewide by mail. In Washington, each county still maintains at least one voting center. In Oregon, each County Elections Office provides privacy booths for those who want to vote in person or need assistance.

Oregon approved a test of vote-by-mail in 1981, and about 40 percent of Oregon voters used absentee ballots in the 1994 federal election. By the next year Oregon statewide elections with candidates were by mail, and in 1998 the state voted for all elections to be by mail. Washington, where absentee voting was similarly popular, tested voting by mail and used it in all but one county until the state adopted all-mail ballots in 2011.

A generation of voters in Oregon has never set foot inside a voting booth.

Jessica Hall, 32, has 2-year-old twins and runs a home business. She always has voted by mail; Oregon switched shortly before her 18th birthday. She makes better decisions, Hall said, than if she had to stand in a long line outside a polling place. In the evening, when her children are asleep, Hall sits quietly and reads her ballot, then votes.

"Without vote-by-mail, I would be less likely to vote. I don't have time," Hall said. "There's no way my kids would allow me to stand in line and do that."

North Dakota counties can decide whether any of their elections should be conducted by mail. Eighteen other states allow vote-by-mail in some cases — uncontested Arkansas primaries with no other ballot measures, for example.

Resistance in the East
East of the Mississippi, the mail is more likely to be a back-up option for those who can't get to the polls on Election Day. That's the case in 15 states, including New York, Pennsylvania and Virginia, according to the National Conference of State Legislatures.

Jan Leighley, a political scientist at American University, offered culture and population density as possible explanations for the low popularity of absentee/mail voting in the East. Eastern and Midwestern states tend to have more established, formal political parties — a culture resistant to changing voting modes, Leighley said. In widely dispersed populations in Western states, voters and election officials have more to gain by using mail, Leighley said. They wouldn't have to pay to operate scarcely used polling places, and voters wouldn't have to travel as far to cast a ballot.

New Jersey has allowed mail ballots on request since 2005, but fewer people are using them than expected, said Robert Giles, director of the New Jersey Division of Elections.

About 5 percent of New Jersey votes were by mail in 2010, compared with about 4 percent in 2005, according to a report from the elections division.

"Going to the polls, I think it's ingrained in our society," Giles said about the slow growth of mail voting in his state. "For some people, there's a social aspect. They see the same election board workers every time they vote, and it offers a sense of community."

Weighing the benefits
Voting by mail is transforming American elections, said John Fortier, a political scientist of the Washington, D.C., Bipartisan Policy Center.

"It's not something we've fully thought out all the consequences of, and we certainly haven't had one big national debate over it," said Fortier, author of "Absentee and Early Voting: Trends, Promises and Perils."

Proponents say the mail offers voters time to weigh choices and flexibility for their busy schedules, even more so than early in-person voting. It reverses how elections work, said Phil Keisling, former Oregon secretary of state and director of the Center for Public Service at Portland State University. "The default is bringing the ballot to the voter, not forcing the voter to go to the ballot," Keisling said.

Mail benefits outweigh potential fraud, supporters said.

"If you try to literally kill everything in your body that may kill you, you will definitely die," Keisling said. "If you try to wring every possibility of mischief and fraud out of a voting system, you will cramp it down so hard that very few people will end up voting."

Some see mail as a step backward from the Help America Vote Act of 2002. Charles Stewart, a political scientist at the Massachusetts Institute of Technology, said the law mandated improved voting equipment. That improved technology made vote counts more accurate, he said, leading to 1 million more votes being counted. Mail ballot procedures have not been improved, Stewart said, estimating that errors such as pencil smudges, errant marks or breakdowns in keeping track of ballots can mean up to 7.6 million mail votes could go uncounted. Machines prevent voters from casting errant ballots, he said. "The two sides of that equation just don't balance out," Stewart said. "Many more ballots are sent out than come back."

Mail voters could base their decisions on different information than those who go to the polls, Gans said. And voting before Election Day leaves open the prospect for voters to turn in their ballots, then see a stock market crash or terrorist attack and wish they could change their votes, Gans said.

A longer window until voting time, however, means people can vote more carefully and make better-informed decisions, Keisling said.

The mail also means campaigns can't count on a final push the week before an election to sway voters, because many already will have cast ballots. Plus, the mail makes election-night results less reliable, Chapin said, because absentee ballots must be counted, and there are enough of them to change the election results.

The more immediate future of the mail and voting depends largely on cost, Chapin said. One could think it makes little sense to keep a lot of polling places open on Election Day when more people are voting by mail or early. States might move entirely to the mail, as Oregon and Washington, or scale back Election Day voting.

"If it costs me a lot of money to get just a few voters in person," Chapin said, "then I'm going to reduce my investment there and spend money elsewhere."

Discuss this series of stories on the Facebook page for Open Channel, the NBC News investigative blog.

Or send feedback to News21.

News21 is a program of the Carnegie Corporation of New York and the John S. and James L. Knight Foundation that is helping to change the way journalism is taught in the U.S. and train a new generation of journalists capable of reshaping the news industry. It is headquartered at the Walter Cronkite School of Journalism and Mass Communication at Arizona State University. Since 2006, nearly 500 top journalism students in the U.S. have participated in the landmark national initiative.

LOS ANGELES - A tiny solar company named SoloPower will flip the switch on production at a U.S. factory Thursday, a major step toward allowing it to tap a $197 million government loan guarantee awarded under the same controversial program that supported failed panel maker Solyndra.

SoloPower has initiated a strategy to differentiate it from struggling commodity players in the solar panel industry. Still, there are several similarities between SoloPower and Solyndra - which became a lightning rod in the U.S. Presidential campaign this year after taking in more than $500 million in government loans and then filing for bankruptcy.

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Like Solyndra, SoloPower is a Silicon Valley start-up and uses the same non-traditional raw material in its solar panels. And, like its now-defunct peer, SoloPower is one of just four U.S. panel manufacturers to clinch loan guarantees under the Department of Energy's $35 billion program to support emerging clean energy technologies. The DOE payments to SoloPower will come on top of the $56.5 million SoloPower has collected in loans, tax credits and incentives from the state of Oregon and the city of Portland, where its first factory will be located.

And, perhaps most importantly, SoloPower is entering the market at a time of cutthroat competition from cheaper solar products made in China.

Though global demand for photovoltaic solar installations is expected to grow about 8 percent this year, rapid expansion of panel manufacturing in Asia in recent years - combined with a pullback in government incentives in key European markets - has left a glut of solar panels in the market, sending prices down 30 percent this year alone.

Companies that make those panels are now struggling to survive. Even the world's largest solar panel maker, China's Suntech Power Holdings Inc, warned on Friday that it may be delisted by the New York Stock Exchange because its share price, which reached $90 in 2008, is now less than $1. Debt-heavy Suntech has also been hurt since it said in July that its partner in a solar development fund might have defrauded it with a bogus collateral pledge of hundreds of millions of German bonds.

Political pressure
These struggles have heaped political pressure on the sector. Republicans, intent on taking back the White House in November's election, are using Solyndra and other U.S. Department of Energy loan failures to brand the Obama administration's green incentives a waste of public money and fountain of cronyism. Solyndra, for instance, was backed by George Kaiser, a major fundraiser for Obama.

As the failures accumulate, Obama is under pressure to show better results for the program.

Earlier this month, the Republican-controlled U.S. House of Representatives passed a "No More Solyndras" bill that would phase out the program for energy loans. It is highly unlikely to be taken up by the U.S. Senate or signed by Obama.

SoloPower says the comparisons to Solyndra are unwarranted.

The San Jose, California company's lightweight, flexible solar panels have a unique advantage, Chief Executive Tim Harris said in an interview. They are pointed squarely at commercial and industrial rooftops that can't support traditional panels, according to Harris, who said half of the buildings in the world can't bear the weight of heavy, rigid panels made with silicon. This includes many of the buildings that house warehouses and big box retailers, Harris said. In addition, he said SoloPower panels are commanding a price premium in a market that has become increasingly commoditized.

"We have way more demand than we have capacity at a very substantial premium price," Harris said in an interview. He declined to specify the premium SoloPower is able to charge, but said his company's product is best suited for markets such as Japan, Italy and Korea, which have high electricity prices and favorable incentives for rooftop systems.

The company has been able to raise more than $200 million in venture funding from investors including Crosslink Capital, Hudson Clean Energy Partners, Convexa Capital Ventures and Firsthand Capital Management.

"Before one dollar of the DOE loan is relied upon it will be demonstrable that this is a company that absolutely can manufacture a product that there will be verifiable demand for," said John Cavalier, a managing partner with Hudson Clean Energy Partners, which invested in SoloPower. "I don't think anyone will question the wisdom of making a loan of this nature to this company."

But some in the industry are skeptical of SoloPower's ability to succeed without having to lower its prices to compete with cheaper products from Asia.

"They are flexible and lightweight. Is anyone willing to pay a price premium for that? I would lean toward saying no," said Matt Feinstein, a solar industry analyst with Lux Research, a research and advisory firm that specializes in emerging technologies. "They have to compete head-to-head with the Chinese."

Lighter, less efficient
SoloPower must have its first production line up and running and meet other undisclosed milestones before it can begin to draw down funds from its U.S. Department of Energy loan guarantee. Harris expects that to happen later this year or early next year. Funds from the loan guarantee will pay for construction of the rest of the Portland, Oregon factory, which is expected to be completed in 2014. DOE spokesman Damien LaVera would not provide details on the terms of SoloPower's loan guarantee and said the company's technology was not similar to Solyndra's, but would not elaborate.

Once completed, the plant will produce 400 megawatts of solar panels annually and employ about 400 people. There are 60 people working there currently.

SoloPower will be profitable once the first line is up and running producing panels, Harris said. Many solar companies, meanwhile, have been losing money as they scramble to cut costs as quickly as the prices on their products are falling.

Solyndra, for its part, drew down 99 percent of its $535 million loan guarantee without turning a profit.

Some project developers, bankers and others are wary of newer "thin film" solar technologies like SoloPower's that are less efficient than traditional panels at transforming the sun's light into electricity.

Thin film, a broad term for solar panels that don't use silicon as their raw material, became a darling of investors five years ago when solar-grade silicon prices soared to $500 a kilogram. Thin film makers argued that despite their shortcomings in efficiency, they could deliver far cheaper solar power than their silicon-reliant rivals. Today, however, an influx of capacity from Asia has driven spot prices for polysilicon to about $20 per kg, raising questions about the need to fund alternatives to silicon-based panels.

"SoloPower is going to have to deal with the industry perception right now that thin film is a dying technology," said GTM Research solar analyst MJ Shiao. "A start-up thin film manufacturer makes a lot of developers uneasy."

But SoloPower's Harris disputed that view, saying his company already has more orders than it can fill. "There is a pipeline of projects that are about ready to go that are just waiting for this lightweight module. If you want to put solar on, we're the only choice," he said. "It would be impossible to start a factory today unless you had a unique product."

Cheap competition
Like Solyndra, SoloPower's panels use copper indium gallium selenide, or CIGS, as their raw material. CIGS panels have long held the promise of being cheaper than polysilicon-based panels while delivering efficiencies that are higher than other thin film technologies such as cadmium telluride, the raw material used by U.S. solar heavyweight First Solar Inc. The drastic drop in the price of traditional panels over the last few years, however, has kept CIGS manufacturers from delivering on that promise on a commercial scale.

In the last year, CIGS solar companies HelioVolt and Ascent Solar Technologies Inc have sold stakes to South Korean conglomerate SK Group and TFG Radiant Group, respectively. Another, Miasole, has cut staff and said publicly that it is searching for a partner. Rival Nanosolar earlier this month said its chief executive left after just eight months.

Though Solyndra is the best known solar failure of the last year, it was far from the only one. GTM Research estimates that the United States produced 281 megawatts of PV modules in the first half of 2012, compared with 561 MW in the first half of 2011. That's a big reason why a string of manufacturers in both the United States and Europe have closed their doors in the face of competition from increasingly cheap Chinese panels.

First Solar, for example, postponed indefinitely its plans for a second U.S. factory in Arizona because of the weak market conditions. Start-ups are being hit too. Of the four companies that received loan guarantees for photovoltaic solar manufacturing, two - Solyndra and Abound Solar - have filed for bankruptcy. SoloPower and Lexington, Massachusetts-based 1366 Technologies Inc, which received a $150 million loan guarantee, remain. 1366 also has yet to draw down funds from its loan guarantee.

Even the Chinese manufacturers, whose products are the cheapest in the world, are losing money and struggling with ballooning inventories. One of the biggest Chinese solar companies, LDK Solar Co Ltd, said earlier this month that it was looking to raise cash and may sell a strategic stake.

For its part, SoloPower has hired Macquarie Capital to help it explore partnership opportunities. Such a deal could include giving distribution rights to a European or Asian partner in return for a stake in the company. SoloPower is not up for sale, however, Harris said.

In fact, the company could even pursue an initial public offering next year, Cavalier of Hudson Clean Energy Partners said.

"If the capital markets come back next year, I think we will be able to articulate the value that we offer to potential IPO investors," he said.

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By Abrahm Lustgarten
ProPublica

On a cold, overcast afternoon in January 2003, two tanker trucks backed up to an injection well site in a pasture outside Rosharon, Texas. There, under a steel shed, they began to unload thousands of gallons of wastewater for burial deep beneath the earth.

The waste – the byproduct of oil and gas drilling – was described in regulatory documents as a benign mixture of salt and water. But as the liquid rushed from the trucks, it released a billowing vapor of far more volatile materials, including benzene and other flammable hydrocarbons.

The truck engines, left to idle by their drivers, sucked the fumes from the air, revving into a high-pitched whine. Before anyone could react, one of the trucks backfired, releasing a spark that ignited the invisible cloud.

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Fifteen-foot-high flames enveloped the steel shed and tankers. Two workers died, and four were rushed to the hospital with burns over much of their bodies. A third worker died six weeks later.

What happened that day at Rosharon was the result of a significant breakdown in the nation's efforts to regulate the handling of toxic waste, a ProPublica investigation shows.

The site at Rosharon is what is known as a "Class 2" well. Such wells are subject to looser rules and less scrutiny than others designed for hazardous materials. Had the chemicals the workers were disposing of that day come from a factory or a refinery, it would have been illegal to pour them into that well. But regulatory concessions won by the energy industry over the last three decades made it legal to dump similar substances into the Rosharon site – as long as they came from drilling.

Injection wells have proliferated over the last 60 years, in large part because they are the cheapest, most expedient way to manage hundreds of billions of gallons of industrial waste generated in the U.S. each year. Yet the dangers of injection are well known: In accidents dating back to the 1960s, toxic materials have bubbled up to the surface or escaped, contaminating aquifers that store supplies of drinking water.

There are now more than 150,000 Class 2 wells in 33 states, into which oil and gas drillers have injected at least 10 trillion gallons of fluid.  The numbers have increased rapidly in recent years, driven by expanding use of hydraulic fracturing to reach previously inaccessible resources.

ProPublica analyzed records summarizing more than 220,000 well inspections conducted between late 2007 and late 2010, including more than 194,000 for Class 2 wells. We also reviewed federal audits of state oversight programs, interviewed dozens of experts and explored court documents, case files, and the evolution of underground disposal law over the past 30 years.

Our examination shows that, amid growing use of Class 2 wells, fundamental safeguards are sometimes being ignored or circumvented. State and federal regulators often do little to confirm what pollutants go into wells for drilling waste. They rely heavily on an honor system in which companies are supposed to report what they are pumping into the earth, whether their wells are structurally sound, and whether they have violated any rules. 

More than 1,000 times in the three-year period examined, operators pumped waste into Class 2 wells at pressure levels they knew could fracture rock and lead to leaks. In at least 140 cases, companies injected waste illegally or without a permit.

In several instances, records show, operators did not meet requirements to identify old or abandoned wells near injection sites until waste flooded back up to the surface, or found ways to cheat on tests meant to make sure wells aren't leaking.

"The program is basically a paper tiger," said Mario Salazar, a former senior technical advisor to the Environmental Protection Agency who worked with its injection regulation program for 25 years. While wells that handle hazardous waste from other industries have been held to increasingly tough standards, Salazar said, Class 2 wells remain a gaping hole in the system. "There are not enough people to look at how these wells are drilled … to witness whether what they tell you they will do is in fact what they are doing."

Thanks in part to legislative measures and rulemaking dating back to the late 1970s, material from oil and gas drilling is defined as nonhazardous, no matter what it contains. Oversight of Class 2 wells is often relegated to overstretched, understaffed state oil and gas agencies, which have to balance encouraging energy production with protecting the environment. In some areas, funding for enforcement has dropped even as drilling activity has surged, leading to more wells and more waste overseen by fewer inspectors.

"Class 2 wells constitute a serious problem," said John Apps, a leading geoscientist and injection expert who works with the U.S. Department of Energy's Lawrence Berkeley National Laboratory. "The risk to water? I think it's high, partially because of the enormous number of these wells and the fact that they are not regulated with the same degree of conscientiousness."

In response to questions about the adequacy of oversight, the EPA, which holds primary regulatory authority over injection wells, reissued a statement it supplied to ProPublica for an earlier article in June.

"Underground injection has been and continues to be a viable technique for subsurface storage and disposal of fluids when properly done," a spokesperson wrote. "EPA recognizes that more can be done to enhance drinking water safeguards and, along with states and tribes, will work to improve the efficiency of the underground injection control program."

Some at the EPA and at the Department of Justice, which prosecutes environmental crimes, say the system's blind spots suggest that many more violations likely go undiscovered – at least until they mushroom into a crisis.

That's what happened at Rosharon.

The accident prompted the EPA to examine what else had been dumped at the site, ultimately exposing a scheme by a company that was not involved in the explosion, Texas Oil and Gathering, to pass off deadly chemicals from a petroleum refining plant as saltwater from drilling.  

The switch saved the company substantial fees by allowing it to dispose of the material in a Class 2 well, instead of a more stringently controlled well for hazardous waste, federal investigators said.

Texas Oil and Gathering's owner and operations manager were convicted of conspiring to dump illegal waste and violating the Safe Drinking Water Act. Both declined to comment for this article.

Texas officials acknowledged that they had not looked beyond the paperwork submitted by the operators using the well. The delivery trucks weren't inspected; the wastewater was not sampled.

"Staff had no reason to believe at the time that such testing was necessary at this facility,'' Ramona Nye, a spokeswoman for the Railroad Commission of Texas, which regulates the oil and gas industry activity in the state, wrote in an email. "The likelihood of unpermitted material being disposed of is low.''

William Miller, the EPA's chief investigator on the case, points out that the only reason anyone was held accountable for injection-related violations was because the site blew up.

"If you can get the stuff down the well how is anyone ever going to know what it was?" said Miller, who retired from the EPA in 2011. "There is no way to recover it. It's an easy way to commit a crime and not have any evidence left of it afterwards."

States and industry resist environmental protections
One reason that Texas Oil and Gathering was able to dump toxic waste for years without getting caught is that environmental regulations governing how the oil and gas industry disposes of material underground were weakened almost as soon as they were written.

A series of injection accidents beginning in the 1960s – involving pesticide waste in Colorado, dioxins in Beaumont, Texas, and drilling waste that spread for miles through a drinking water aquifer in Arkansas – prompted lawmakers to impose tougher rules on injection wells.

Wells were divided into classes, depending on the source of the waste they handled. Class 1 wells for chemical, pharmaceutical and other industrial wastes, along with Class 2 wells for the oil and gas industry, were subjected to tough controls under the Safe Drinking Water Act of 1974. From the start, the EPA says, oil and gas waste was treated as less toxic than waste from other industries, but all such material was seen as dangerous to drinking water.

Companies drilling the wells were required to do geological modeling to ensure that surrounding rock layers would not allow waste to escape through fissures or fault lines. They also were required to check for the presence of other wells that could be a conduit for contamination.  The EPA set baseline standards and mandated periodic inspections for defects. In many cases, states oversaw their implementation.

The ink had barely dried on the new regulations when the oil and gas industry – aided by sympathetic state regulators who thought their existing oversight was sufficient – began arguing that its waste should be treated differently.

Industry officials lobbied for state oil and gas agencies, some of which already had rules in place, to oversee Class 2 wells, not federal or local environmental officials. Some argued state energy regulators had greater expertise in well construction and regional geology.

In 1980, California Rep. Henry Waxman sponsored a measure that allowed the EPA to delegate authority to oversee Class 2 injection to state oil and gas regulators, even if the rules they applied varied from the Safe Drinking Water Act and federal guidelines.

A few years later, Dick Stamets, New Mexico's chief oil and gas regulator at the time, told a crowd of state regulators and industry representatives that the Waxman amendment was a biblical deliverance from oppressive federal oversight for the drilling industry.

In the late 1980s, the EPA moved to impose more stringent measures on injection wells after Congress banned injection of "hazardous" waste. The new rules barred underground dumping unless companies could prove the chemicals weren't a health threat. To earn permission to inject the waste,  companies would have to conduct exhaustive scientific reviews to dispose of hazardous materials, proving their waste wouldn't migrate underground for at least 10,000 years.

The energy industry moved preemptively to shield itself from these changes, too. The Safe Drinking Water Act prohibited the EPA from interfering with the economics of the oil and gas industry unless there was an imminent threat to health or the environment. The industry argued that its waste was mostly harmless brine and that testing and inspecting hundreds of thousands of wells for waste that would qualify as "hazardous" would delay drillers or cost them a fortune.  

"It would have been crippling to U.S. oil and gas production," said Lee Fuller, vice president of government relations for the Independent Petroleum Association of America. Fuller was a former staff member for the Senate Environment and Public Works Committee, whose ranking member at the time, the late Texas Sen. Lloyd Bentsen, led the fight against the hazardous waste rule. "So yes, the industry was very aggressively seeking some mechanism to address those consequences."

Bentsen had won the industry a temporary reprieve in 1980 by persuading Congress to redefine any substance that resulted from drilling – or "producing" – an oil or gas well as "non-hazardous," regardless of its chemical makeup, pending EPA study.  In 1988, the EPA made it permanent, handing oil and gas companies a landmark exemption.  From then on, benzene from the fertilizer industry was considered hazardous, threatening health and underground water supplies; benzene derived from wells for the oil and gas industry was not.

The effect was that the largest waste stream headed for underground injection, that from the oil and gas industry, was exempted from one of the most effective parts of environmental rules governing hazardous waste disposal.  

"A blanket exemption without any sense of what the actual chemistry of these wastewaters is, is very concerning," said Briana Mordick, a geologist at the Natural Resources Defense Council.  

Other protections also began to unravel, widening the gap between Class 1 and Class 2 well regulations. Both regulators and the industry regularly refer to drilling waste as "salt water" even though, according to a 2002 EPA internal training document obtained by ProPublica, "on any given day, the injectate of a Class II-D well has the potential to contain hazardous concentrations of solvents, acids, and other… hazardous wastes."

Once the wastes were defined as nonhazardous, there was little pfor holding Class 2 wells to the same rules as other waste being injected deep underground.

Today, for example, Class 1 wells for hazardous waste are tested for pressure continuously and are supposed to be inspected for cracks and leaks every 12 months. Oil and gas wells – though the goal is to inspect their sites annually – have to be tested only once every five years.

Injection wells are known to cause earthquakes, so Class 1 wells usually have rigorous seismic and geologic siting requirements. Often, Class 2 wells do not. An EPA staff member might spend an entire year reviewing an application for a new hazardous waste well. Class 2 wells are often permitted in bulk, meaning hundreds can be green-lighted in a matter of days.

Where Class 1 hazardous waste is injected, companies have to inspect a two-mile radius for old wells, making sure contaminants will have no avenue to shoot back up into drinking water aquifers or to the surface. The minimum standard for oil and gas companies is to inspect within 400 yards, even though it is widely believed, according to internal EPA memorandums obtained by ProPublica, that such a rule is arbitrarily defined, runs against "much existing evidence" and "may not afford adequate protection" of drinking water.

EPA officials acknowledge that their Class 1 regulations represent the best practices to keep water safe and that the risk of a Class 2 well leaking is no different than the risk of a Class 1 well leaking. The contrast in regulations reflects "varying legal authorities, not varying levels of confidence," an agency spokeswoman wrote in an email, referring to the mandate not to let environmental rules interfere with the nation's drilling progress.

State injection regulators counter that much drilling-related waste is put in the same geologic formations that produce oil and gas, in which contaminants like benzene naturally occur. The water close to these wells is often already undrinkable, they say, so lesser protections make sense.

According to the EPA's most recent inventory, the number of Class 2 wells is near an all-time high.  

Oklahoma, Texas, Kansas and California use tens of thousands of Class 2 wells to push out oil and gas or dispose of fracking fluids and "produced" water, as the waste derived from drilling is called. In North Dakota, injection permits have increased tenfold, with more wells being permitted in one month – September 2011 –than is typical in an entire year. New Mexico issued twice as many permits last year as it did in 2007. Ohio injected twice as much waste in 2011 as it did in 2006 and is evaluating applications for dozens of new injection sites. largely for waste exported by Pennsylvania and New York, where such wells are deemed unsafe.

As much as 70 percent of the waste destined for Class 2 facilities would be considered toxic if it were not for the loopholes in the law, according to Wilma Subra, a chemist and activist who sits on the board of STRONGER, a partnership of oil and gas industry representatives and state regulators aimed at bolstering state standards.

Recently, Stark Concerned Citizens, an anti-drilling group, asked Ohio regulators why radioactive materials such as radium weren't identified or disclosed when injected into Class 2 wells.

"The law allows it," Tom Tomastik, a geologist with Ohio's Department of Natural Resources and a national expert on injection well regulation, replied in a Sept. 17 email. "It does not matter what is in it. As long as it comes from the oil and gas field it can be injected."

Well operators game the safety tests
When Carl Weller showed up, shovel in hand, at a Kentucky farm field dotted with injection wells in June 2007, he was acting on a tip.  Weller, a contracted EPA injection inspector, was an expert in testing for what regulators call "mechanical integrity," using air pressure to check if wells have leaks or cracks. 

Such tests are among the only ways to know whether cement and steel well structures are intact, preventing brine and other chemicals from reaching drinking water.

Using his shovel, Weller dug around the top of a well, unearthing the steel tubing near the surface. A few inches down, he came across an apparatus he had never seen before: A section of high-pressure tubing ran out of the well bore and connected to a three-foot-long section of steel pipe, sealed at both ends. The apparatus appeared designed to divert air pumped into the well into the pipe instead, making the well test as if it were airtight. 

"The only reason that I know of that that device would be installed would be to perform a false mechanical integrity test, more than likely because the well itself would not pass," Weller testified in 2009 as part of a case against the well's operator. The EPA did not make Weller available to comment for this article.

When EPA inspectors kept digging, they found the buried devices on 10 more wells.

The case stunned regulators. Weller had been inspecting the site's injection wells, which were used to enhance the recovery of oil, for the better part of a decade, certifying them as safe.  After the EPA's discoveries, workers at the company that operated the wells, Roseclare Oil, accused its manager, Daniel Lewis, of having conspired to cheat the tests for much of that time.  

In 2009, Lewis was convicted of a felony charge for gaming the safety tests on Roseclare's wells and was sentenced to 3 years probation and a $5,000 fine. He maintains his innocence, saying the wells were rigged by his father, who ran the company's local operations until his death, but said such practices were typical in Kentucky's oil and gas industry. "I'd say it's pretty common," said Lewis, whose probation was commuted in 2011.  "But it's not something people go around talking about either."

From Lewis' perspective, injection well operators sometimes have little choice but to try to fool inspectors. Many wells are decades old and were drilled before the current regulations were written. Some are decrepit, their cement aging and cracked. They also can't be easily – or cheaply – repaired.

Lewis, who is now a part-owner of Roseclare and continues to run its operations, said that before wells were due for EPA inspections he would pretest them himself. If one failed, he'd enter problem-solving mode, prepping the site for the EPA's arrival. Two of his employees testified that he ordered them to fabricate and install the diverters.

"You go and work in it and try to get it to hold and it won't hold," Lewis said of the wells. "What are you going to do? It's kind of a 'Don't ask, don't tell.'"

Randy Ream, the Assistant U.S. Attorney for Kentucky's Western District who prosecuted the case against Lewis, called his scheme unusually elaborate but agreed that efforts to get around the rules for injection wells are common. Sometimes, he said, they result in the contamination of private drinking water wells.

"We have people who have constructed wells that are not certified injection wells, or we have people who will put their brine in a tank and carry it over and put it in somebody else's well," Ream said.  "One guy, he's got oil coming out of his shower head."

"There is just so much brine," Ream added, "and you have to get rid of it."

So many wells, so few inspectors
One obstacle to more effective enforcement in Kentucky and elsewhere, Ream said, is that regulators cannot always keep up with well tests and inspections.

According to EPA records, Kentucky has 3,403 Class 2 wells, which are supposed to be tested for mechanical integrity once every five years. But since 2007, an average of just 253 wells a year have been tested, less than half as many as there should have been to remain on schedule.

A spokeswoman for the EPA's regional office in Atlanta said in an email that only half of Kentucky's injection wells are actively used and only active wells can be tested. She said mechanical integrity tests are performed on each well every 36 months, but did not address the discrepancy between this schedule and the number of tests reflected in EPA data.

The EPA employs just six people to check its wells across the southeast, not just in Kentucky, but in Tennessee and Florida, too. Those same people are also responsible for working with state inspection programs in North and South Carolina, Georgia, Alabama and Mississippi, which have their own inspection staffs.

Most states aim to visit injection sites at least once a year, and some meet or exceed that schedule, EPA records show. Ohio, for example, recently added staff dedicated exclusively to injection oversight and visits its active injection sites every 12 weeks. (Ohio also insists that Class 2 wells meet many of the more stringent testing and permitting regulations it uses for Class 1 hazardous waste wells.)

"Ohio's [rules] are based on what we felt we needed to develop to continue to alleviate any concerns," said Tomastik, of Ohio's Department of Natural Resources. "Obviously without regulatory presence in the field, the operator is not concerned about operating within the requirements."

But understaffing seems to be endemic across drilling states, especially where state regulatory agencies are responsible for checking both producing oil and gas wells and injection wells for waste or to enhance production.

In Montana, EPA auditors noted that inspectors are choosing which wells to inspect and have a "significant" workload.  In North Dakota, EPA auditors also noted the pressures of "exponential" growth and an "increasing workload." 

To meet the goal of inspecting each well annually, Texas inspectors would have to visit eight wells a day, every day, including Sundays and Christmas. That's after Texas' Railroad Commission hired 65 staffers last year to help inspect the state's 428,000 wells.

Nye, the commission's spokeswoman, said the state had sufficient funding and inspected each of its commercial disposal wells twice last year.

"The Commission has a stringent and comprehensive review process for these wells," Nye wrote in an email.  "Railroad Commission staff work diligently to ensure saltwater disposal wells are not and will not be a problem."

But inspectors don't check on private disposal wells, which are far more numerous, with the same regularity. Nor do they keep a schedule for when officials should conduct such visits.

Other states are struggling under similar burdens. In Wyoming, inspectors would also have to check eight wells a day for each well to be checked once a year – a pace possible if wells are clustered together, experts said, but otherwise difficult to achieve. In West Virginia and Kansas, inspectors would have to check seven wells per day.  

Visiting injection wells often ranks low among inspectors' priorities unless there is an accident or spill, according to a 2007 Texas auditor's report. The most urgent responsibility for regulators, beyond responding to emergencies, is typically overseeing the development of new oil and gas wells.

The result is that several years can pass between inspections of many injection well sites. In 2010, state regulators visited less than half of the Class 2 sites that a federal well inventory shows they were responsible for monitoring, ProPublica's analysis showed.  EPA inspectors checked on such wells even less frequently, visiting less than one-quarter of the sites under their jurisdiction in 2010.

"I don't give a darn whether you have federal regulations, or a squeaky clean permitting system," said Bill Bryson, a member of the Kansas Geological Survey and the former head of Kansas' oil and gas commission. "If you don't have somebody going out and looking at the wells it doesn't do any good, and if you don't have the right people looking … it doesn't do any good either."

Much of the problem with oversight comes down to money, critics say. In some states, budgets and staff for oil and gas agencies have dropped relative to the number of new wells being drilled over the last nine years.

Kansas employs about the same number of inspectors as it did in 2003, even though it drills four times as many new wells. New drilling has nearly doubled in Louisiana over the same period, but the state's enforcement staff has remained static and its oil and gas budget has increased modestly. In Illinois, drilling has nearly doubled, while the number of enforcement staff has been reduced.  

Since the Underground Injection Control program is run under a federal mandate, states rely partly on money from the EPA to fund oversight and enforcement. Federal dollars make up 20 percent of Texas' budget, for example. But in the last 22 years, the EPA's annual operating budget for injection has remained about the same: $10 million. Taking inflation into account, funding has dropped at least 40 percent from 1990 to 2012, though the regulations for all well classes have only grown more complex.

"The UIC program has been flat funded for years," said Dan Jarvis, the field operations manager for Utah's Division of Oil, Gas and Mining.  "With more manpower, obviously you put them on the ground and you're going to have better compliance. Our field people are some of the greatest guys going, but they are overworked."

The EPA declined to disclose the operating budget for regional offices that monitor waste wells under federal jurisdiction or oversee state injection programs. Documents show, however, that in 2011 the agency suspended its travel budget for visits to some of the states that have the largest injection programs, including Louisiana, Texas and Oklahoma.

"Do you think we are doing more now than we were doing 30 years ago? No, there is no money," said Salazar, the former EPA injection expert. "There are not enough people to know what is going on. It is the ideal storm for industry. Less and less people, more and more things that the EPA has to do."

Ultimately, much of the responsibility for meeting EPA standards falls to companies themselves. Some operators routinely exceed the minimum requirements of injection regulations, says Hughbert Collier, who runs a Texas environmental engineering firm that consults with injection well operators. They conduct their own integrity tests every year and make sure employees visit well sites once a month.

But operators inclined to cut corners have little to hold them back.

"What most people would be surprised about is that regulators don't have real good control over everything that goes on in the regulated community," said Miller, the former EPA criminal investigator in Texas. "Most of our environmental law requires self-reporting and that requires honest people."

When violations are identified – such as the 140 times waste was illegally injected and noted in the regulatory reports – the consequences can be minimal, and only in rare cases do transgressions rise to the level of criminal prosecution. In the three years of national data reviewed by ProPublica, which included more than 24,000 formal notices of violations, only one case was referred to criminal investigators.

Usually, violations result in citations or informal warnings. If operators do not address violations, then modest fines may be levied; in some cases, wells are temporarily shut down. There is no central source of information on the size of fines, but an audit of Louisiana's injection program provides a glimpse: In 2011, the state collected an average of $158 for each violation.

After three deaths, two federal worker safety investigations and a criminal prosecution, few injection sites nationwide received as much regulatory scrutiny as those in Rosharon, Texas.  Yet, despite all the attention, the wells there later failed on the most basic level.  

On Feb. 17, 2010, thousands of gallons of waste that had been deposited into these wells gurgled to the surface in what the Railroad Commission described as a "breakout." Materials injected far below the earth had managed to migrate back up to the surface, perhaps through an old well missed by regulators.  

As of this June, investigators were still analyzing whether the chemicals injected underneath the site had reached water supplies.

Jesse Nankin contributed research for this report.

By Robert Windrem and Jim Miklaszewski
NBC News

National security officials told NBC News that the continuing cyber attacks this week that slowed the websites of JPMorgan Chase and Bank of America are being carried out by the government of Iran. One of those sources said the claim by hackers that the attacks were prompted by the online video mocking the Prophet Muhammad is just a cover story.

A group of purported hackers in the Middle East has claimed credit for problems at the websites of both banks, citing the online video mocking the founder of Islam. One security source called that statement "a cover" for the Iranian government's operations.

The attack is described by one source, a former U.S. official familiar with the attacks, as being "significant and ongoing" and looking to cause "functional and significant damage." Also, one source suggested the attacks were in response to U.S. sanctions on Iranian banks.

The consumer banking website of Bank of America was unavailable to some customers on Tuesday, and JPMorgan Chase on Wednesday had the same problems, which multiple sources linked to a denial-of-service attack, in which a website is bogged down by a large number of requests. A Chase spokesman said Wednesday that the consumer site was intermittently unavailable to some customers, but did not acknowledge then that there was an attack. On Thursday, Chase said slowness continued but was resolved by late afternoon Eastern Time. Bank of America acknowledged on Tuesday that its site had experienced slowness, but would not say what caused it.

Senior U.S. officials acknowledge that Iranian attacks have been the subject of intense interest by U.S. intelligence for several weeks. Last week, the Joint Chiefs of Staff's Intelligence Directorate, known as J-2, confirmed continuing Iranian cyber attacks against U.S. financial institutions in a report described as "highly classified." The report was posted on internal classified U.S. government sites last Friday, September 14.

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Because of the level of classification, the officials refused to provide or confirm any specifics on these attacks. However, one official noted that Iran's uranium enrichment program had been the target of the STUXNET worm in 2010. The worm was reportedly developed by the U.S. and Israel. "The Iranians are very familiar with the environment,” quipped the official.

 

A conservative website, FreeBeacon.com, initially reported on the Pentagon analysis, quoting it as saying,  “Iran’s cyber aggression should be viewed as a component, alongside efforts like support for terrorism, to the larger covert war Tehran is waging against the west.” U.S officials did not deny the FreeBeacon report when queried by NBC News.

A financial services industry group,  the Financial Services Information Sharing and Analysis Center, warned U.S. banks, brokerages and insurers late Wednesday to be on heightened alert for cyber attacks. FS-ISAC also raised its raised the cyber threat level to "high" from "elevated" in an advisory to members, citing "recent credible intelligence regarding the potential" for cyber attacks as its reason for the move.

The former head of cyber-security for the White House testified Thursday that “we were waiting for something like this from Iran.”  Frank Cilluffo, who served as Special Assistant to the President for Homeland Security under President George W. Bush, is currently an associate vice president at George Washington University and heads the Homeland Security Policy Institute. Cilluffo testified in a previously scheduled appearance before the U.S. House of Representatives’ Committee on Homeland Security, saying “the government of Iran and its terrorist proxies are serious concerns in the cyber context. What Iran may lack in capability, it makes up for in intent.  They do not need highly sophisticated capabilities—just intent and cash—as there exists an arms bazaar of cyber weapons, allowing Iran to buy or rent the tools they need or seek.”

The statement by the purported Muslim hackers, posted on Tuesday on Pastebin, an online bulletin board, reads in full: "In the name of Allah the companionate the merciful. My soul is devoted to you Dear Prophet of Allah. Dear Muslim youths, Muslims Nations and are noblemen. When Arab nations rose against their corrupt regimes (those who support Zionist regime) at the other hand when, Crucify infidels are terrified and they are no more supporting human rights. United States of America with the help of Zionist Regime made a Sacrilegious movie insulting all the religions not only Islam. All the Muslims worldwide must unify and Stand against the action, Muslims must do whatever is necessary to stop spreading this movie. We will attack them for this insult with all we have. All the Muslim youths who are active in the Cyber world will attack to American and Zionist Web bases as much as needed such that they say that they are sorry about that insult. We, Cyber fighters of Izz ad-din Al qassam will attack the Bank of America and New York Stock Exchange for the first step. These Targets are properties of American-Zionist Capitalists. This attack will be started today at 2 pm. GMT. This attack will continue till the Erasing of that nasty movie. Beware this attack can vary in type. Down with modern infidels. Allah is the Greatest. Allah is the Greatest."

There was no report of an attack on the New York Stock Exchange.

Also on Thursday, the U.S. disclosed that it has  bought $70,000 worth of air time on seven Pakistani television channels to air an ad which shows President Barack Obama and Secretary of State Hillary Clinton denouncing the anti-Islamic video. In the ad, President Obama says, "Since our founding the United States has been a nation that respects all faiths. We reject all efforts to denigrate religious beliefs of others." Clinton appears after Obama and says, "Let me state very clearly that the United States has absolutely nothing to do with this video. We absolutely reject its contents. America's commitment to religious tolerance goes back to the very beginning of our nation."

Pakistan was added Wednesday to the State Department's list of countries to which Americans should avoid travel, joining Lebanon and Tunisia, following protests across the Middle East and North Africa and the attack on the U.S. consulate in Benghazi, Libya, in which American Ambassador Chris Stevens was killed. 

Robert Windrem is a senior investigative correspondent for NBC News. Jim  Miklaszewski is the chief Pentagon correspondent for NBC News. Patti Domm, executive news editor at CNBC and CNBC.com, contributed to this report.

Analysis: 'Manufactured outrage' behind Middle East protests

 

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A long-awaited report on the U.S. government’s controversial gun-trafficking operation known as “Fast and Furious” released Wednesday found no evidence that Attorney General Eric Holder knew of the botched effort to trace the flow of guns to Mexico’s drug cartels prior to its public unraveling in January 2011. 

The report by the Justice Department’s Inspector General Michael Horowitz said there is "no evidence that ... Holder was informed about Operation Fast and Furious, or learned about the tactics employed by ATF in the investigation" before Congress began pressing him for information about it in early 2011.

---

The inspector general did determine that the acting deputy attorney general, Gary Grindler, received a briefing about the ill-fated gun-tracing operation in March 2010, but that the briefing "failed to alert Grindler to problems in the investigation." 

The report also concluded that the operation was "seriously flawed and supervised irresponsibly" by federal officials in Arizona, who allowed it to continue in hopes of scoring a big case against a gun-trafficking organization despite obvious problems. 

No one in Arizona, at ATF headquarters in Washington or at the Justice Department acted to end the operation until two weapons that were allowed to flow into Mexico were found at the scene of a shootout where a federal border agent, Brian Terry, was killed in December 2010.

"Fast and Furious" was an attempt to trace the flow of guns from the US into Mexico.  ATF agents were instructed to allow suspected gun runners for the Mexican cartels to take guns into Mexico, because local ATF officials and local prosecutors believed they could then follow the weapons to the cartel higher-ups in Mexico.  It didn't work that way, and roughly 2,000 guns were lost, most of them AK-47-type rifles, the report said.

Even after two of the trafficked guns showed up at the scene of Terry's death, senior ATF leaders did little to find out what went wrong.  Instead, the report said, Kenneth Melson, then the acting ATF director, seemed more concern that agents were leaking information to the news media about the botched operation.

Read the full report

Holder, in a statement issued immediately after the report's release, said its "key conclusions are consistent with what I, and other Justice Department officials, have said for many months now," that senior Justice Department officials were unaware of the "flawed strategy and tactics" that dated back to the administration of George W. Bush and made no effort to "cover up information or mislead Congress about it."

Holder also announced that Melson, who was transferred out of the top job at the ATF last year, was retiring, effective immediately. A second Justice Department official, former Deputy Assistant Attorney General Jason Weinstein, has resigned. The report said Weinstein failed to tell Attorney General Holder about problems with the Fast and Furious operation. 

In all, 14 current federal employees were singled out in the report for potential disciplinary action.

The report's publication seemed to do little to end the bitter rivalry between Holder and Rep. Darrel Issa, the California Republican who was among the first to question the Fast and Furious operation.

 "It is unfortunate that some were so quick to make baseless accusations before they possessed the facts about these operations -- accusations that turned out to be without foundation and that have caused a great deal of unnecessary harm and confusion," Holder said in his statement.  

"I hope today's report acts as a reminder of the dangers of adopting as fact unsubstantiated conclusions before an investigation of the circumstances is completed," he said. 

In his own statement, Issa said, "Contrary to the denials of the attorney general and his political defenders in Congress, the investigation found that information in wiretap applications approved by senior Justice Department officials in Washington did contain red flags showing reckless tactics and faults Attorney General Eric Holder’s inner circle for their conduct.

 "It’s time for President Obama to step in and provide accountability for officials at both the Department of Justice and ATF who failed to do their jobs," Issa said.

Politically charged partisan dispute
The operation has become a politically charged partisan dispute heading into the November elections, with congressional Republicans charging that the Obama administration has withheld documents that would show the involvement of senior government officials, including Holder.

On June 28, the Republican-led House of Representatives voted to hold Holder in contempt of Congress for failing to disclose internal Justice Department documents in response to a subpoena – the first time that sanction has been imposed on a sitting member of a president’s Cabinet.

The department’s inspector general spent more than a year investigating the so-called “gun-walking” scandal  – in which agents of the federal Bureau of Alcohol, Tobacco, Firearms and Explosives, commonly known by the ATF acronym, in Arizona allow suspected gun runners to take guns into Mexico. The Fast and Furious operation was part of a broader initiative known as Project Gunrunner. 

Local ATF officials and local prosecutors believed they could then follow the weapons to the cartel higher-ups in Mexico.  It didn't work that way. Thousands of guns were lost and only lower-level straw buyers of the weapons were ever arrested. 

Two of the weapons turned up at the scene of a shootout where a federal border agent, Brian Terry, was killed on Dec. 14, 2010, near the Mexico border, though those guns were never tied directly to his death. 

A Mexican legislator, Humberto Benitez Trevino, claimed last year that weapons that crossed the border during the attempted sting have been linked to the deaths or wounding of at least 150 Mexican civilians, but did not provide any supporting documentation or say how that number was calculated.

Pete Williams is NBC News justice correspondent; NBC News Projects Editor Mike Brunker also contributed to this report.

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For years, the United States has been concerned about al-Qaida's recruiting along a coastal highway in eastern Libya. The stretch of highway, extending from Derna in the east, through Benghazi — the scene of the attack on a U.S. consulate that killed U.S. Ambassador Christopher Stevens and three other Americans last week — to Ajdabiya in the southwest, has earned a reputation as a breeding ground not just for Libya's indigenous Islamists, but also for al-Qaida central on the Afghan-Pakistan border.

Counterterrorism experts inside and outside the U.S. government argue that it is not an exaggeration to suggest that the region around Benghazi has become a crucial wellspring for al-Qaida that rivals even its historic breeding ground — Saudi Arabia.

The area has produced many members of the terrorist organization's leadership, supplanting or at least complementing Saudi and Egyptian roles.

---

Following Tuesday's deadly attack, U.S. and Libyan officials are trying to determine what role homegrown radical Islamists played in the violence. Many U.S. and Libyan officials now believe the attack was planned, possibly by Libyan jihadists who have returned to their old stomping grounds after having traveled the Islamic world in recent years.

"Libya, like many other countries, has areas with a history of extremism that the government is trying to counter," a U.S. counterterrorism official told NBC News on condition of anonymity, referring to the Benghazi region.

'Prolific incubator for local extremists'
Evan Kohlmann, a U.S. Justice Department consultant on al-Qaida and an NBC News analyst, said Benghazi's reputation as a hotbed of Islamic militancy was cemented long ago.

"For more than two decades, a slice of eastern Libya near Benghazi, dominated by conservative bastions like the town of Derna, has served as a prolific incubator for local extremists, a surprising number of whom have surfaced as high-profile foreign combatants in conflicts ranging from Afghanistan, Bosnia, Chechnya, Iraq and now Syria," he said.

"Several of these combatants have taken leading roles in front-line paramilitary organizations, including al-Qaida," Kohlmann added.

An NBC News analysis of known al-Qaida leaders bears that out, indicating that the nearly 300-mile corridor between the desert and the Mediterranean Sea has produced more senior al-Qaida members than anywhere else in the Islamic world over the past seven years.

The attack on the Libyan consulate, as it happened

Among them: al-Qaida's last two seconds-in-command, as well as its international operations director (the No. 3 position in al-Qaida leadership) and its military commander — No. 4 in the hierarchy and a position typically held by some of its more charismatic propagandists. Each became a high-value target for the United States, and their deaths or captures have been trumpeted by U.S. intelligence and counterterrorism agencies.

"Leadership in al-Qaida circles tends to go in waves as colleagues bring with them established friends because of established trust," said Michael E. Leiter, former director of the National Counter Terrorism Center and now an NBC News analyst.

"For the longest time, it was what was colloquially known as the Egyptian Mafia, but gradually this group was decimated by strikes. The Libyans did rise to prominence based on a couple of charismatic leaders and the influx of the Libyan Islamic Fighting Group ranks. And there is undoubtedly a strong current of the most extreme forms of Salafism in some parts of Libya that had served as a breeding ground for such al-Qaida foot soldiers and leaders," Leiter said.

Ambassador Rice: Benghazi attack began spontaneously

The close ties between al-Qaida Central in Pakistan and the Libyans were cemented in 2007 when the Libyan Islamic Fighting Group, a radical group formed to overthrow Libyan dictator Moammar Gadhafi, broke apart, leading several leaders to join al-Qaida at the same time others were denouncing the violence of Osama bin Laden's operations.

A December 2007 report (.pdf) on foreign fighters in Iraq, produced by the Countering Terrorism Center at the U.S. Military Academy pointed out the significance of the Libyan recruiting to the rise of al-Qaida in Iraq, the local branch of the broader terror group, during the height of the Iraqi civil war.

Libyan fighters stream into Iraq
Starting in November 2007, the center analyzed nearly 700 records of foreign nationals who entered Iraq from August 2006 to August 2007. The data came from personnel records seized from al-Qaida in Iraq, which had jihadists fill out questionnaires as they arrived in Iraq.

Anti-US protests erupt in Kabul as Western missions tighten security

Of 591 records that included the countries of origin of the fighters, Libya was the second most common after Saudi Arabia — 18.8 percent (112) of the fighters reported that they hailed from Libya. And of that number, a staggering 90 percent came from the Derna-Benghazi-Ajdabiyah corridor.

The most common cities that the fighters called home were Derna, Libya, and Riyadh, Saudi Arabia, with 52 and 51 fighters respectively. Derna, with a population just more than over 80,000 compared to Riyadh's 4.3 million, has far and away the most fighters per-capita in the records.

In fact, one out of every 1,000 residents of the 300-mile corridor from Derna to Ajdabiya wound up in Iraq during that single year.

Darna's importance to the jihadist presence inside Libya was underscored earlier this year when a series of bombings was attributed to a battle for power among rival jihadist groups. There were also rumors that Ayman al-Zawahiri, al-Qaida's leader following the death of bin Laden, had dispatched a commander to Derna.

Roger Cressey, former deputy director of the National Security Council's Counter Terrorism Division, said the attack on the U.S. Consulate is likely to raise awareness of how important this region has become to al-Qaida.

"Given the presence of al-Qaida-influenced extremists in the area, this corridor will become a priority for U.S. counterterrorism," said Cressey, now an NBC News analyst. "It will join Pakistan, Yemen and Somalia."

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By Gwyneth Shaw, Connecticut Health Investigative Team,
Beverly Ford, New England Center for Investigative Reporting,
and Evelyn Larrubia, Investigative News Network

In Oak Creek, Wis., a fence slashed with holes surrounds a barren 300-acre complex of buckling former factories where the soil and groundwater are polluted with arsenic and other chemicals.

Asbestos sprayed for almost six miles from a shuttered textile mill in Sprague, Conn., when children trying to free a canoe set it on fire.

A toxic cocktail of volatile organic compounds, petroleum, hydrocarbons and metals lies alongside the banks of Massachusetts’s Malden River.

Despite about $1.5 billion in federal grants and loans doled out by the Environmental Protection Agency over 19 years, hundreds of thousands of abandoned and polluted properties known as “brownfields” continue to mar communities across the country. Some sites are contaminating groundwater, while at others the toxins’ impact on the communities is unknown.

The shortcomings are due to limited funds, a lack of federal oversight, seemingly endless waits for approvals, and dense bureaucratic processes. These issues make it difficult for poor and sparsely populated neighborhoods to compete against larger and middle-class communities that have the means to figure them out, an investigation by six nonprofit newsrooms has found.

 

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In a written response, the EPA said its Brownfields Program “is not intended to address all of the brownfield sites in the U.S.”

 

The agency defines a brownfield as “real property, the expansion, redevelopment, or reuse of which may be complicated by the presence or potential presence of a hazardous substance, pollutant, or contaminant.” The stated goals of its Brownfields Program are to fund the cleanup of contamination, to improve the quality of life of blighted communities and to provide economic stimulus.

But an investigation by nonprofit newsrooms across the country, coordinated by the Investigative News Network, found problems in every community examined.

Among the findings:

● In Connecticut, only 19 brownfields properties have been completely cleaned up and certified since 1994, despite close to $60 million in brownfield-related grants and loans by the Environmental Protection Agency. These costs include $12 million aimed directly at removing or containing pollutants. Millions more have been spent by the state. Even some projects with ready developers languish because of gaps in grant cycles.

● In Massachusetts, most of the cleanup funds have gone to former mill towns in suburban areas, where developers are eager to build, rather than to minority urban communities. The “licensed site professionals” who monitor the cleanups are paid by developers, eliciting criticism about potential ethical conflicts and lack of oversight. The state takes a closer look at sites only if a problem is detected in paperwork, a rare occurrence, critics claim.

● In Wisconsin, which boasts a well-regarded program, the state brownfields chief says it will take decades to clean up the thousands of contaminated sites, whose ranks have grown during the recession.

What’s more, the EPA doesn’t know how many of these abandoned properties across the country exist, where they are, or how many have been cleaned up. Its public database is riddled with errors and omissions, the Wisconsin Center for Investigative Journalism discovered.

High-ranking EPA officials declined to grant interviews for this article. The agency ultimately supplied written responses, many of which did not address underlying questions or criticisms, but rather repeated that the agency “provides funding and technical assistance” to others who assess, clean and redevelop brownfield sites.

Justin Hollander, an associate professor in urban planning and environmental policy and planning at Tufts University and author of several books on brownfields, said the investigation’s findings support what he’s long thought: that the program’s emphasis on developer-blessed projects is misguided.

“What we need is a new model,” he said. “In cases where the money is spent and the site is remediated and rebuilt, that's a good thing, but it happens to so few sites that most people who live near brownfields have not seen the benefits."

In national surveys by the U.S. Conference of Mayors, partly funded by the EPA, the most frequently reported impediment to brownfield redevelopment has been a lack of cleanup funds.

The EPA reports that it denies two out of three requests for funding.

Lack of monitoring
Even in those cases where it has provided grants or loans for cleanups, the EPA does not know how well the contamination has been remediated.

That’s because the EPA’s brownfields program merely hands out grants and loans. The federal government has not established standards for brownfields cleanups. The EPA also does not verify that the work was done, according to a 2011 report by its Office of Inspector General. The Inspector General audited 35 cases and found that in none of them did the EPA require the documentation to prove that cleanups met environmental standards.

“This occurred because the Agency does not have management controls requiring EPA to conduct oversight” to assure that the reports meet documentation requirements, according to the report. “Consequently, decisions about uses of redeveloped or reused brownfields properties may be based on improper assessments. Ultimately, threats to human health and the environment could go unrecognized.”

The Inspector General also questioned EPA’s ability to step in for long-term oversight of land that’s been cleaned, especially when states or the new owners aren’t prepared to do the job themselves. 

In a follow-up report, the Inspector General said the agency promised to start training recipients and its own staff to better conduct “due diligence” in these areas by the end of this year. The agency declined to address questions about the criticisms for this story.

EPA officials rely on states to set and enforce environmental standards in brownfields cleanups. Some increasingly cash-strapped states are relying on the developers themselves to hire consultants to verify that the properties were cleaned up.

In Connecticut, for instance, licensed environmental contractors provide the primary oversight for 80 percent of brownfields redevelopment projects. The state checks up on paper, but rarely in person.

In Massachusetts, the Department of Environmental Protection previously inspected brownfields cleanups, but because of budget cuts it mostly reviews paperwork filed by consultants hired by the developers.

Environmentalists in Connecticut worry that this system is “by and for” the contractors, said Roger Reynolds, senior attorney for the Connecticut Fund for the Environment.

“Carrots and sticks have to be part of every incentive system,” he said. “Hopefully, you can do 90 percent of it with carrots, but you’ve got to have the sticks.”

Plastic vapor barriers and other soil containment measures are all that states require in some types of redevelopment.

But sometimes, such efforts fail or the science changes. New York’s Department of Environmental Conservation reopened hundreds of Superfund, brownfield, and other sites that had been remediated to investigate potential new threats from vapor intrusion, something that had not been considered at the time of the “cleanups.”  The reviews are ongoing, but the agency has already found mitigation will be necessary at more than 70 sites.

Investors in Michigan were horrified to learn that trichloroethylene remained in the soil under the condominium they’d purchased, which was built at the site of an abandoned factory, court records show. The soil had been covered up, rather than removed. “The site later turned out to be seriously contaminated,” read an October 2011 ruling from the Michigan Court of Appeals. (Frank and Tonya Alfieri successfully sued their real estate agent for failing to disclose the pollution.)

Program began in 1993
The EPA began its brownfields program with a $200,000 demonstration project to encourage redevelopment in Cleveland, Ohio, in 1993, followed by two grants for the same amount to Richmond, Va., and Bridgeport, Conn., in 1994, according to EPA documents. By 1995, it had received more than 100 applications for cities competing for funds.

In a report to the U.S. Senate Subcommittee on Superfund, Toxics and Environmental Health last October, program director David R. Lloyd said the program has awarded about 2,000 grants for environmental testing, “made more than 24,500 acres ready for reuse,” created more than 72,000 jobs, and  “leveraged more than $17.5 billion in economic development” through grants and low-interest revolving loans.

“EPA will continue to implement the Brownfields Program to protect human health and the environment, enhance public participation in local decision making, build safe and sustainable communities through public and private partnerships,” he said, “and demonstrate that environmental cleanup can be accomplished in a way that promotes economic redevelopment.”

The EPA Brownfields Program’s budget must be approved by Congress. The $167 million appropriated last fiscal year went to grants for projects, grants to states, municipalities and tribes, loans and administrative overhead.

Developers and state and local officials said the grants are a valuable piece in the patchwork of federal and state funds they must pull together to pay for redevelopment in blighted areas. States have developed their own programs, some supplementing EPA funds with state or municipal money or special taxes.

But each EPA brownfields cleanup grant is so small – typically capped at $200,000 – that the program’s ability to influence what kinds of projects go forward is limited. In many cases, the grants are a bonus or seed, depending on what point in the process they arrive. Since its inception, the EPA’s brownfields program has funded fewer than 900 cleanups across the country, according to its latest report.

The agency is supposed to give additional consideration to communities that struggle the most.

Federal law states that in weighing grant proposals, among the factors the EPA should consider is “the extent to which a grant will meet the needs of a community that has an inability to draw on other sources of funding for environmental remediation and subsequent redevelopment of the area in which a brownfield site is located because of the small population or low income of the community.”

In worksheets that EPA officials use to evaluate grant applications, “community need” makes up 15 out of a maximum 107 points. How much sway a community’s poverty level had in any individual grant is impossible to know because the agency won’t provide the information publicly.

When asked by the Investigative News Network for score sheets through a public records request, the EPA produced documents that were so heavily redacted that they might as well have been blank. It said the narrative assessments by its staff are part of the “deliberative process” and thus not public record.

The agency did not answer questions about how many of its grants go to poor neighborhoods.

Urban policy experts and state officials say that the EPA and state programs function less as environmental protection programs than building programs. Projects must find willing developers, investors or other grants before the agency will award a cleanup grant.

“The brownfields projects, at the end of the day, are real estate transactions and real estate projects, and if the development has no likelihood of success, that process will likely not result in a cleanup,” said Graham Stevens, brownfields coordinator for Connecticut’s Department of Energy and Environmental Protection.

Municipalities point out that one huge benefit of these redevelopments is that they return idle land to the tax rolls, generating revenue for the communities.

Hollander, the Tufts University professor and author, said that the program will never clean up enough properties to make a significant difference, because it’s too expensive.

“The problem is just so massive that using the [developer-driven] model to deal with all the brownfields would bankrupt the federal government,” he said.

Hollander said communities would be better served if federal money was spent creating parks, bird sanctuaries and other green spaces where plants can be used to clean up the soil, instead of multi-million dollar developments.

“When you look at the amount of money spent to subsidize the development of a shopping mall on a former brownfield, you can create a safer soil in hundreds of other locations that would be a better use of that money,” he said.

Poor are more likely to be hurt, less likely to be helped
The EPA says that 450,000 to 1 million brownfields properties lie fallow across the country, an estimate it attributes to the U.S. Conference of Mayors. EPA officials said the agency doesn’t “spend any time counting” polluted parcels.

Many communities have not inventoried their properties, and the EPA said it doesn’t know where they all are. Its public database contains about 17,000 records, generally only those that EPA has funded for assessments or cleanups, and the data are provided by the grant-seekers.

Since 1995, the EPA has awarded more than twice as much in grants for assessments than cleanups -- $480 million compared to $158 million, according to Lloyd’s 2011 testimony to a Senate subcommittee. It has given out an additional $400 million in loans, the agency said, but those must be paid back. It’s also given $508 million directly to states and tribes over the years and handed out another $37 million for job training, the agency said.

Assessment and cleanup grants are capped at $200,000, with some room for exceptions.

Impoverished neighborhoods are naturally less appealing to developers, and are more likely to be the site of particularly noxious sites to begin with, said Daniel Faber, director of Northeastern University’s Environmental Justice Research Collaborative.

“Generally, communities with less economic power are usually targeted for the disposal of hazardous waste” and other unwanted businesses, Faber said. Often, a business may abandon a poorer neighborhood, leaving behind a legacy of toxins and pollutants.

As a result, poor Americans are both more likely to live with polluted sites and less likely to be able to attract a means to turn them around, despite the existence of the brownfields program.

Dozens of severely polluted, low-income communities across the country have never received grants, a computer analysis of EPA data for the Investigative News Network by a Duke University professor showed.

By contrast, some savvy communities have had no problem getting repeated grants.

Coralville, Iowa, has a brownfields coordinator on staff working on its $40 million Iowa River Landing District development, which will ultimately include townhouses, hotels, a theater, an arena and medical clinic at the site of a former truck stop, warehouses and scrap yard.

The town of 19,000 residents is squarely middle class, situated near the University of Iowa, with 14 percent living below the poverty line, according to the 2010 census. Since 1999, Coralville has received $1.9 million in grants -- the most of any city in the state -- from the EPA to conduct 109 site assessments and seven cleanups.

“I always joke when we’re hiring a new coordinator around grant-writing time that there’s no pressure on you, but everyone before you has gotten the grant,” City Engineer Dan Holderness said.

And the number of brownfields in America continues to grow.

In Massachusetts, officials said, 1,200 new spots of contamination are discovered annually.

In a 2011 grant application for federal funding, the Wisconsin Department of Natural Resources said the recent recession has caused a “startling” number of plant closings.

It is, the report said, “an entirely new generation of brownfields.”

Kate Golden, Wisconsin Center for Investigative Journalism; MacKenzie Elmer, Iowa Center for Public Affairs Journalism; and Jake Mooney, City Limits, contributed to this article. The national map was produced by Kate Golden, Wisconsin Center for Investigative Journalism.

 

LABUAN, Malaysia -- Iran is using a little-known port off the East Malaysia coast to hide millions of barrels of oil from Western sanctions, according to shipping data, industry sources and officials.

A Reuters examination of shipping movements and interviews shows how Iranian crude is shipped to the area and loaded on to empty vessels at night to await potential Asian buyers. Storing the oil on hired tankers operating under the Panamanian flag in the calm waters off the tax-haven port of Labuan -- an offshore financial center about the size of Manhattan -- means Iran can keep its fleet active and ensure the flow of oil money into its struggling economy.

At least two large oil tankers have been unloaded this way in recent weeks and several more Iranian vessels were steaming toward Asia, according to Reuters Freight Fundamentals, which tracks the movement of the global tanker fleet. One was destined for a Chinese port, while three others, carrying as much as 6 million barrels of crude or fuel oil, were sailing to unknown destinations.

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Iran would like to shift more oil to what is effectively a mobile storage depot off Malaysia's coast over the next few months, said an industry source familiar with Iran's planning who didn't want to be identified due to the sensitivity of the matter. But it is struggling to find shipowners willing to offer vessels for storage.

While not illegal, the dead-of-night transfer of oil in the South China Sea illustrates the lengths to which Iran will go to keep exporting its oil to skirt Western sanctions aimed at pressuring Tehran's suspected pursuit of nuclear weapons. A European Union oil embargo has virtually halted access around the world to insurance for Iranian crude and oil products.

Doing business with Iran's oil industry carries reputational and financial risk and the threat of losing insurance coverage.

No-man’s land
Less than 6.2 miles from the coast of Borneo, Labuan is sheltered from typhoons and is typically used to park unwanted ships rather than store expensive oil. People in the industry say this makes it an ideal place to blend or rebrand oil as non-Iranian and resell it under the radar of sanctions enforcers in Washington or Brussels.

"Labuan is like a no-man's land. There's no reason to be paying attention to Labuan," said a Singapore-based source familiar with floating storage operations in Southeast Asia.

Related story

Iran sanctions exceed expectations, but still don't change Tehran's behavior

The insurer of one of the storage ships that took oil from an Iranian tanker said it had been informed of the transfer by the British government on Aug. 16, and was looking into the matter.

With fewer customers, Iran has cut its oil output and almost halved exports from around 2 million barrels per day last year. The Labuan scheme means Iran can use its own tankers to move, rather than store, its oil. In April, shipping sources said more than half of Iran's tanker fleet was anchored in the Gulf just holding some 33 million barrels of oil - worth around $3 billion at today's prices.

Malaysian and Iranian officials did not respond to requests for comment for this article.

China, India, Japan and South Korea, which together buy over half of OPEC member Iran's crude exports, have all imported less this year, winning waivers from U.S. sanctions. Those waivers are up for renewal later this year, so buyers are careful not to be seen to be increasing imports from Iran again.

‘In the dark of night’
Last month, the Lantana, a tanker operated by the National Iranian Tanker Co. (NITC), transferred its cargo of around 1 million barrels of crude oil to the Titan Ruchira, a floating storage vessel, off the tiny tropical island of Pulau Kuraman near Labuan, port and shipping industry officials said. Around Aug. 10, another Iranian tanker, the Motion, discharged as much as 2 million barrels of fuel oil onto the Titan Tulshyan in the same area, said the officials.

The two ships are among 58 Iranian-owned vessels blacklisted by Washington in July for assisting in Iran's oil trade. Those measures bar U.S. companies and Americans from doing business with the ships.

"Our vessels are there and, as we understand it, there are no issues," a source familiar with NITC tanker chartering told Reuters.

A third NITC tanker, the Justice, had been heading for Labuan, but shipping data shows it changed course and should arrive at the Chinese port of Dalian on Sept. 17. Another tanker, the Pioneer, had been expected in Labuan early this month, but has anchored off the southwest Malaysian coast.

"That (Lantana) operation took place literally in the dark of night. They didn't even use a proper operator with experience to carry out the STS (ship-to-ship transfer)," said an East Malaysian-based shipping source. "The authorities were aware only after the fact."

Iran declined to sell the stored crude to a Chinese trader who offered $54 a barrel - only around half the price of Iran's cheapest heavy crudes - said a source familiar with those discussions.

Complex web
The two Titan vessels are owned by offshore companies linked to Singapore-based Tulshyan Group, which hired them out in 2010 to Hong Kong-based Titan Petrochemicals under a five-year bare boat charter -- an arrangement where Tulshyan has no staff managing or operating the vessel. Tulshyan, which shares a Singapore office with Titan, said it was not aware that the cargo on its ships was Iranian.

Titan, battling a shipping industry downturn caused by a glut of tankers, high bunker fuel prices and a shaky global economy, has struggled to meet charter payments to Tulshyan, according to a person familiar with the matter. Heavy with debt and with five straight years of losses, Titan is being sold to Chinese oil trader Guangdong Zhenrong Energy Co Ltd., whose parent, Zhuhai Zhenrong, is blacklisted by the United States as the biggest supplier of refined petroleum products to Iran.

Titan hired out the two tankers to Glammarine, a little-known shipping company that only recently registered in Labuan. Glammarine took the two ships under a six-month charter, with Titan's crews running the vessels' day-to-day operations and Glammarine taking responsibility for finding the cargo and paying for use of the ships.

"This was the first business we've done with Glammarine ... (and) there were no red flags raised (about them)," Titan director Augustine Cheong told Reuters in Singapore. "The due diligence we took was to check if they are legally incorporated. And it's on a time charter, so we have our own crew on board and can see if they're doing something wrong." Cheong said Titan would drop the charter to Glammarine if the oil was found to be Iranian.

Glammarine officials declined to comment. A visit to a listed Labuan address for Glammarine given in business registry documents found a rundown building in a neighborhood once used to house workers at a now defunct milk factory. The premises were closed.

Paper trail
Glammarine agreed to let a company called Account International Safe Oil use the Titan Ruchira and Titan Tulshyan to store 4 million barrels of Iranian oil, shipping sources said. Account International is not registered in Malaysia or Hong Kong, and Reuters was unable to find an address for the company or contact staff for comment. Buyers of Iranian oil in China, India and Japan said they had not heard of the company.

A Middle East industry source familiar with the company said Account International was an affiliate of the National Iranian Oil Co. A second source based in East Malaysia said the firm had business links to HK Intertrade, a Hong Kong-based firm sanctioned by the United States in July for operating as a front company for Iran.

"HK Intertrade purchases oil from NIOC and resells it to companies like Account," another southeast Asia-based shipping industry source said.

The ships' managers from Titan were not aware that the crude and fuel oil transferred from the Lantana and Motion were from Iran, Cheong said. "We requested BL (bill of lading) documents. We were told the cargo was from India ... and we believed they were ex-NITC tankers," he added. "We only operate the ships as the ship manager. We don't own the cargo."

A source familiar with the operations of the Titan Ruchira said the cargo was declared as Iranian to port officials in nearby Sabah. Customs officials in Sabah did not respond to Reuters emails. But in signed shipping documents seen by Reuters, Account International listed the 1 million barrels of crude oil unloaded by the Lantana as Indian.

India, though, doesn't allow the export of domestically produced crude. Nor did the Lantana call in at India on its journey to Malaysia that began at Iran's crude export hub at Kharg Island, according to Reuters Freight Fundamentals and industry sources in both India and the Middle East.

Account International also indicated on shipping documents seen by Reuters that the fuel oil on the Motion was from Fujairah, a major transhipment and storage hub in the United Arab Emirates. Shipping data shows the Motion did stop in Fujairah, but began its trip in Iran.

Insurance risk
The Titan Ruchira is insured by the North of England P&I Association, which said it was looking into the matter after being informed of the transfer off Labuan by London last month.

Western insurers underwrite around 90 percent of the world's tanker fleet, and are currently barred from covering ships carrying Iranian oil.

"There is a risk ... a vessel providing storage services for Iranian oil would breach European sanctions laws," said Mike Salthouse, director with North Insurance Management, which acts as manager for the North of England P&I Association. "I say a risk because sanctions as currently drafted appear to target the insurance of the transportation of Iranian oil and not the provision of insurance to facilities storing such products."

The insurer declined further comment on its investigations.

The Titan Tulsyhan is among some 7,000 vessels covered by Gard, the world's second-largest marine insurer.

"Gard takes very seriously any suggestion that it is in breach of any international sanctions and is conducting an investigation," it said in a response to Reuters queries. "Gard can, and will, withdraw any insurance cover if it believes sanctions are being breached."

Rakesh Tulshyan, head of the Tulshyan Group that owns the two Titan vessels, said that if there is "concrete evidence that it's Iranian oil", he will seek to have it removed from his vessels.

 

"Because of my reputation, I would rather not do any business with links to sanctioned countries," he told Reuters.

Reporting by Luke Pachymuthu in Labuan, Malaysia; Randy Fabi and Manash Goswami in Singapore, Nidhi Verma in New DelhiI, and Jonathan Saul in London.

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On the 11^th anniversary of the worst terrorist attack on U.S. soil, there is mounting evidence that the Bush administration received more intelligence warnings than previously known prior to the Sept. 11 attacks that killed nearly 3,000.

Kurt Eichenwald, a former New York Times reporter, wrote in an op-ed piece in Tuesday’s newspaper about a number of previously unknown warnings relayed to the White House by U.S. intelligence in the weeks and months prior to the attacks.  Eichenwald wrote of  the warnings in his new book, “500 Days: Secrets and Lies in the Terror Wars.”

And former US intelligence officials say there were even more warnings, pointing to a little noticed section of George Tenet’s memoir, “At the Center of the Storm.”

---

In it, Tenet describes a July 10, 2001, meeting at the White House in the office of Condoleezza Rice, then President George W. Bush’s national security adviser. The meeting was not discussed in the 9-11 Commission’s final report on the attacks, although Tenet wrote that he provided information on it to the commission.

What’s critical to understanding the difference between this meeting and others, says one former senior U.S. intelligence official who spoke with NBC News on condition of anonymity, is that the intelligence provided that day was fresh, some of it having been collected the previous day. And other intelligence and national security officials, also speaking on condition of anonymity, say the briefings make clear that, while Bush administration officials understood the nature of the threat, they didn’t understand its magnitude and urgency.

“This intelligence delivered on July 10 was specific and was generated within 24 hours of the meeting,” said the first official, who pointed out the text in the Tenet memoir.

Tenet wrote about how after being briefed by his counterterrorism team on July 10 -- two months prior to the attacks -- “I picked up the big white secure phone on the left side of my desk -- the one with a direct line to Condi Rice -- and told her that I needed to see her immediately to provide an update on the al-Qaida threat.”

Tenet said he could not recall another time in his seven years as director of the CIA that he sought such an urgent meeting at the White House. Rice agreed to the meeting immediately, and 15 minutes later, he was in Rice’s office.

An analyst handed out the briefing packages Tenet had just seen and began to speak.  “His opening line got everyone’s attention,” Tenet wrote, “in part because it left no room for misunderstanding: ‘There will be a significant terrorist attack in the coming weeks or months!'”

The team laid out in a series of slides its concerns, based on intelligence that included information “from the past 24 hours.” 

Citing his notes on the briefing, Tenet wrote, “A chart displayed seven specific  pieces of intelligence gathered over the past twenty-four hours, all of them predicting an imminent attack. Among the items: Islamic extremists were traveling to Afghanistan in greater numbers, and there had been significant departures of extremist families from Yemen. Other signs pointed to new threats against U.S. interests in Lebanon, Morocco, and Mauritania.”

A second chart followed, listing a summation of the most chilling comments by al-Qaida. According to Tenet, they were:

• A mid-June statement from Osama bin Laden to trainees that there will be an attack in the near future.

• Information that talked about moving toward decisive acts.

• Late June information that cited a “big event” that was forthcoming.

• “Two separate bits of information collected only a few days before our meeting in which people were predicting a stunning turn of events in the weeks ahead.”

Another slide detailed how Chechen Islamic terrorist leader Ibn Kattab had  promised some “very big news” to his troops.

There were more details, as laid out by one of Tenet’s top analysts, known in the book as “Rich B.”  Tenet recounts his aide telling Rice and others, “The attack will be ‘spectacular.’ and designed to inflict mass casualties against U.S. facilities and interests. ‘Attack preparations have been made,’ he said. ‘Multiple and simultaneous attacks are possible, and they will occur with little or no warning. Al-Qaida is waiting us out and looking for vulnerability.”

Rice, Tenet wrote, reacted positively to the briefing and asked her counter terrorism adviser, Richard Clarke, if he agreed with the assessment. Clarke said he did, and Tenet said he and his aides left the meeting feeling that Rice understood the threat.  However, he wrote, the White House never followed up on the presidential finding that Tenet had been asking for since March, authorizing broader covert action against al-Qaida.  That finding was signed by President Bush on Sept. 17, six days after the attacks.

Roger Cressey, who was Clarke’s deputy and is now an NBC News counter terrorism analyst, says one thing that is missing from Tenet’s description of the events is that the intelligence pointed to overseas attacks. although CIA did tell officials that they couldn’t discount an attack on the US homeland.

 “Everything we had (from US intelligence) pointed overseas, specifically to the Gulf,” he said. “There was no actionable intelligence that pointed to the homeland. What we did know, and what we told domestic agencies, was there was "a disturbance in the force” and we were very worried about an attack.

Still, Cressey remains critical of the lack of a response going back to the first week of the administration, saying the counterterrorism team at the National Security Council and experts elsewhere in the government were “butting our  heads against the wall” in an effort to get a meaningful response from the White House.

Would action by the White House have helped? Like Eichenwald, Cressey says he isn’t sure, but notes that when similar intelligence pointed to attacks on Jan. 1, 2000, “Sandy Berger (Rice’s predecessor) and (President Bill) Clinton went to battle stations.”  Did warnings prior to the millennium help thwart a number of attacks back then? Cressey believes they did.

One intelligence official also noted that after the interception of the July intelligence, there was little conversation on the al-Qaida communications network prior to Sept. 11. It wasn’t until much later U.S. intelligence understood why: With the plans and operational personnel in place, the plotters were simply waiting for an opportune time to strike.

“They laid low because they were waiting for Congress to come back in session,” the official said.

The reason, he said: United Flight 93 was headed for the U.S. Capitol, where Congress was in session, when passengers overpowered the hijackers, causing the plane to crash in a field near Shanksville, Pa.  

Robert Windrem is a senior investigative producer for NBC News.

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The Guantanamo detainee found dead in his prison cell last weekend had been cleared for  release three years ago by an Obama administration task force that concluded that his detention was no longer necessary, NBC News has learned. 

The disclosure that the detainee, Adnan Farhan Abdul Latif, a 32-year-old Yemeni citizen, had been approved for repatriation could raise new questions about the handling of his case and those of scores of others held in Gitmo who also have been cleared for release. Instead, the detainees remain stuck in legal limbo in the U.S. prison for suspected terrorists with no prospect for getting out any time soon.  

A special Obama administration task force review found in 2009 that Latif, who had been held at Gitmo since early 2002 and had waged a long legal battle for his freedom, could be released, a conclusion that could only be reached by a unanimous vote of all U.S. intelligence agencies. 

---

That finding was buttressed a year later when U.S. Judge Henry Kennedy ruled that the U.S. government's initial evidence that Latif had links to al-Qaida and the Taliban was "unconvincing."  Despite both findings, the Obama administration appealed the ruling --  because it did not want to return him to Yemen, a country it viewed as too unstable. 

That stance provoked criticism from human rights groups. At the time of Latif's death, Amnesty International was about to launch an international campaign calling for his freedom, according to David Remes, who headed a legal team that represented Latif. 

"Adnan spent more than ten years in Guantanamo-- nearly a third of his life -- but like most Guantanamo detainees, he was never charged with a crime or accused of violating any law," Remes said in a statement released Tuesday. 

He  "endured great suffering at Guantanamo -- physical and spiritual -- and lived in constant torment" but "could see no end to his confinement,"  it said.  "However he died, Adman's death is a reminder of the injustice of Guantanamo and the urgency of closing the prison." 

Remes told NBC News Tuesday that Latif had been “in despair” over his plight and had told him he would take any opportunity he could to commit suicide. He also said that Latif had been heavily sedated by guards there.

In a statement on its website Tuesday, Amnesty International USA called Latif’s death, “a tragic reminder of the numbing cruelty of the USA’s indefinite detention regime at its Guantánamo Bay detention facility, and the urgent need to resolve the detentions.” 

Latif's death is the ninth at Gitmo since the U.S. prison for terrorists opened in January 2002 and the third since last year. The case is now the subject of an investigation by the Naval Criminal Investigative Service. Military officials say that Latif, who had no serious medical problems, was found unconscious and unresponsive in his cell at Camp 5 on Saturday afternoon. After efforts to revive him failed, he was rushed to a hospital at the base and pronounced dead. An autopsy was conducted on Sunday, but the results have not yet been released.

Military officials say that Latif had been a disciplinary problem: He had been on a hunger strike that he ended in June and recently had hurled a "cocktail" of food and bodily fluids at guards, causing him to be placed in a special disciplinary cell in Camp 5, where he was isolated from other detainees.

But Remes said that Latif had ample grievances. Pentagon officials had first recommended he be released from Gitmo as early as 2004, but he was caught up in seemingly endless legal battles over the status of detainees. He was brought to the prison in early 2002 after being turned over to Pakistani police to the U.S. military following the invasion of Afghanistan. Latif had said he suffered from brain injuries as a result of an auto accident in Yemen and had gone to Pakistan for free medical help.

U.S. military officials originally claimed that he had been encouraged to leave Yemen by an al-Qaida facilitator named “Abu Khalud” and had received military training at a camp in Afghanistan. But Judge Kennedy noted in his ruling that there was no corroborated evidence that Latif ever met Khalud and that Defense Department officials had previously concluded that Latif  “is not known to have participated in combatant/terrorist training.”

In letters from Gitmo, Latif repeatedly asserted his innocence.  “This prison is a piece of hell that kills everything, the spirit, the body, and kicks away all the symptoms of health from them,” he wrote in one letter that was widely cited by human rights advocates.

Noting President Barack Obama's one-time pledge to close Gitmo, Remes said: "The only detainees who have been released from Gitmo in the last two years have been in caskets."

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Are economic sanctions successful if the Iranian economy crashes but the regime continues developing its nuclear program? That is the dichotomy now playing out inside the Islamic state, according to new data on the Iranian economy and its nuclear program.

The latest data on the quantitative success of the sanctions comes from an economics research firm, the Rhodium Group of New York. In a paper published last week, Rhodium said that customs data from around the world show both Iranian oil exports and revenues have dropped precipitously.

“As customs data for the month of July rolls in, we’re getting a clearer picture of Iranian exports the first month after new U.S. and EU sanctions formally took effect,” states the report. “And it’s not a pretty one for Tehran.”

---

Specifically, the report states that the “best guess” on Iranian oil exports in July is no greater than 940,000 barrels per day, down from 1.7 million barrels per day  in June and 2.8 million barrels a day a year ago. Oil revenue dropped even more sharply, from $9.8 billion in July 2011 to $2.9 billion a year later. The disparity between the drop in oil sales and the decline in revenues was partly attributable to tumbling oil prices; even the value China’s oil imports dropped 28 percent from June to July. 

But Trevor Houser, the author of the report and a former senior adviser to the Obama State Department, says the success of the sanctions is surprising even to those who thought them up. “The July decline in Iranian oil exports and revenue is greater than anyone imagined would occur when U.S. sanctions were signed into law at the beginning of the year,” said Houser, a partner at Rhodium Group.  

Iran's currency hits fresh low against dollar as sanctions bite

U.S. and international sanctions -- mainly imposed by the European Union -- constrain a broad range commerce with Iran. They encompass the oil embargo, restrictions on the Iranian banking sector and its ability to carry out international transactions, the importation of industrial and construction equipment, and even luxury goods.

One of the most crippling has been a ban by SWIFT, the international financial clearinghouse, on Iranian funds transfers. Officials say the SWIFT sanctions have been particularly effective in limiting Iranian imports of all sorts of goods, even food supplies. The sanctions are so broad that the U.S. Treasury Department has exhaustive documentation on what is permitted, what is not, as well as licensing requirements.

At the same time, the International Atomic Energy Agency’s quarterly report on Iran’s nuclear program shows while Iranian oil revenue was declining, there was a simultaneous and dramatic increase in the number of centrifuges at Iran’s once-secret Fordow nuclear site. Iran in fact more than doubled the number of installed centrifuges -- from 1,064 to 2,140 -- in May, the IAEA reported.

Iran test-fires missile with new guidance system

The centrifuges, which are not the latest models that Iran possesses, have not been turned on, but U.S. officials call the speedup “troubling” if not a “game changer.” The Iranians also have increased their stockpile of highly enriched uranium, indicating that they have been getting better at the enrichment process.

Finally, at a military nuclear site named Parchin, which the IAEA wants to inspect, crucial buildings had been demolished and earth removed, the IAEA reported. Western diplomats see this as part of a cover-up by Iran of illicit nuclear-linked tests.

'Economic warfare'
So while the shipping data show the sanctions are a quantitative success – causing a rapid deterioration of Iran’s oil-driven economy – the IAEA data suggest no qualitative success. Iran continues to install new centrifuges and enrich more uranium, while refusing to permit IAEA inspections of Parchin.

“The challenge is it (the embargo) doesn’t seem to have much of an impact,” on Iran’s behavior, Houser admits.

CNBC: Iran oil revenue shrinks as sanctions sting

That doesn’t mean sanctions should be abandoned, says Mark Wallace, a former U.S. ambassador to the United Nations who runs an activist group, United Against Nuclear Iran, that’s engaged in shaming Western companies into abandoning business in Iran.

"Sanctions are clearly having an impact, but we can do much more and must,” said Wallace, who advocates “economic warfare” against Iran. “Importantly, the most robust sanctions in history can only prevent Iran from going nuclear if they are part of a larger strategy that includes thoughtful military planning and rigorous diplomatic activity."

Iranians feel the pain of sanctions: 'Everything has doubled in price'

Wallace points to victories big and small. He notes that in the last few days, a Russian firm decided to stop verifying safety and environmental standards for one of Iran's biggest shipping groups, making it more difficult for it to operate internationally.

It’s not surprising that economic sanctions don’t produce an immediate effect, says David Albright, founder and president of the Institute for Science and International Security (ISIS), which monitors nuclear proliferation. They take time.

“It’s a sticky thing with sanctions,” said Albright. “Nothing happens and then suddenly something big happens. It’s hard to predict what's going to happen over next six months as the sanctions tighten.

“The other part of the story (that Iran continues to make progress on its nuclear program) is true, which is why it’s all immensely frustrating to countries. It argues that ways have to be found to delay Iran from making progress on its nuclear program, because in a sense you need more time for sanctions and that means more covert actions,” like the Stuxnet virus and attacks on Iranian scientists. The former is believed to have been a joint U.S.-Israeli sabotage operation, while the latter is said to be an Israeli secret service initiative.

Israel tells US time is running out for peaceful end to Iran nuclear dispute

Albright also says that the sanctions have to be accompanied by a threat of military action if Iran continues on what the U.S., Israel and other Western nations believe is a path to nuclear weapons.

“The part of it is that it has to be clear in Iran's mind is that the United States will strike militarily to stop them,” he said.  

Iran: 'We can manage this'
Iran’s response has been that it will never give up its “legitimate” right to develop nuclear energy, while steadfastly denying it is working on a nuclear weapons program.

Privately, Iranian officials dismiss the effect sanctions have on Iran’s nuclear policies. They say the effects of the Iran-Iraq War that ravaged the country for eight years in the 1980s -- a war in which the United States covertly supported Saddam Hussein’s regime – were far worse.

 “If we could manage that, we can manage this,” said one official, speaking with NBC News on condition of anonymity.

Asked to estimate the chances that sanctions will lead to Iran ending its uranium program, the official replied, “Zero.”

Other Iranian officials say the sanctions are part of a “secret war” led by the U.S. and Israel that also includes the assassination of Iranian nuclear scientists, infections of Iranian computer networks, drone overflights and even U.S. Special Forces insertions within Iran’s borders.

Iran: We can destroy US bases 'minutes after an attack'

In the face of such provocations, one suggested, how long can Iran decline to respond?

Reprisals could already be under way. Israel has accused Iran of planning or carrying out recent attacks on its diplomatic personnel in Azerbaijan, India and Thailand, as well as orchestrating a bombing that killed four Israeli students on vacation in Bulgaria.

The Iranians strongly deny any role in those plots.

Robert Windrem is a senior investigative producer for NBC News.

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A small Florida publishing company says the million-record database of Apple gadget identifiers released last week by the hacker group Anonymous was stolen from its servers two weeks ago.  The admission, delivered by the company’s CEO exclusively to NBC News, contradicts Anonymous' claim that the hacker group stole the data from an FBI agent's laptop in March.

Anonymous’ accusations garnered attention because they suggested that the FBI was using the unique gadget identifiers -- called UDIDs -- to engage in high-level spying on American citizens via their iPhones, iPads, and iPod Touch devices. The FBI denied the claim, last week, and when asked to comment for this story, referred to last week’s denial.

---

Paul DeHart, CEO of the Blue Toad publishing company, told NBC News that technicians at his firm downloaded the data released by Anonymous and compared it to the company's own database. The analysis found a 98 percent correlation between the two datasets. 

"That's 100 percent confidence level, it's our data," DeHart said. "As soon as we found out we were involved and victimized, we approached the appropriate law enforcement officials, and we began to take steps to come forward, clear the record and take responsibility for this.”

DeHart said an outside researcher named David Schuetz contacted his company last week and suggested the data might have come from Blue Toad. The company's forensic analysis then showed it had been stolen "in the past two weeks." He declined to provide further details, citing an ongoing investigation.

 “I had no idea the impact this would ultimately cause,” DeHart continued. “We're pretty apologetic to the people who relied on us to keep this information secure."

DeHart said he could not rule out the possibility that the data stolen from his company’s servers was shared with others, and eventually made its way onto an FBI computer.  He also said that he doesn’t know who took the data.

The discovery of the theft casts serious doubt on Anonymous’ claims that the data came from the FBI, and was pilfered in March.

"Timing-wise, (their) story doesn't make sense," he said.

Both Apple and the FBI were quick to deny that they were conspiring to use UDIDs to track U.S. citizens; the FBI said it never had the data, and Apple said in a statement it had never given the data to the FBI.

"As an app developer, BlueToad would have access to a user's device information such as UDID, device name and type," Apple spokeswoman Trudy Mullter told NBC News on Monday. "Developers do not have access to users' account information, passwords or credit card information, unless a user specifically elects to provide that information to the developer."

Blue Toad is a little-known privately held company, but its technology touches millions of users around the world.  It provides private-label digital edition and app-building services to 6,000 different publishers, and serves 100 million page views each month, DeHart said. He declined to discuss business partners, but said the list of clients includes household names.

DeHart said his firm would not be contacting individual consumers to notify them that their information had been compromised, instead leaving it up to individual publishers to contact readers as they see fit.

Schuetz, the researcher who discovered the source of the data, told NBC News that he was able to determine that Blue Toad was the source of the leak by tying together clues within the leaked data. In addition to the UDIDs, the data leaked by Anonymous also included the name given to each gadget by its owner.

“I spent most of Tuesday evening obsessing over this,” said Schuetz, who works for the Intrepidus Group, a New York-based mobile device security consulting firm.

Schuetz said that after pouring over the information, he found numerous devices within the data which had names that included the phrase Blue Toad or variations of that, such as “Blue Toad support.”  Some of the gadgets’ names also suggested they belonged to various departments within Blue Toad and were shared among multiple employees

“What I was seeing was that there were-- of the million devices that were in there --  there were a few devices that showed up multiple times with themes that were related to Blue Toad,” he said. “By the time I was done, late Tuesday night, I think I had 19 devices that … all belonged to Blue Toad.,” he said.  He contacted the company soon after.

The UDID -- which stands for Unique Device Identifier -- is present on Apple iPads, iPods and iPhones, and is similar to a serial number. During the past year, researchers have found that many app developers have used the UDID to help keep track of their users, storing the data in various databases and often associating it with other personal information. When matched with other information, the UDID can be used to track users' app usage, social media usage or location. It could also be used to "push" potentially dangerous applications onto users' Apple gadgets.

There is debate about how dangerous the release of the UDID data is without the other information. DeHart said he knew of no practical malicious use for the leaked data.

"Honestly, the UDID information by itself isn't harmful, as far as we know," he said.  "I can’t say anything is impossible, but the reality is, to push notifications to a device, you need certain keys, certain Apple credentials. You have to have a developer’s account with Apple. … So there are lots of processes in place, measures to keep the average ‘anybody’ from being able to take UDIDs and begin doing something with that information."

There is no way for users to check to see if their UDID information has been collected by Blue Toad, DeHart said.  He recommended that concerned Apple users visit websites that have created search engines where users can see if their UDID is in the data dump, such as this one.  But he said consumers should not overreact to news of the leak.

“I would hate to suggest that they need to go out and begin clearing off their device or removing or deleting apps-- just because of the concern that this,” he said. "Check one of these sites to see if your UDID was part of the database dump.  And if it is, use your own personal discretion on what you think is appropriate.  … One of the best things you could do at the moment is go in and upgrade that app if there's an upgrade available for it.”

Updating is important because, seeing the potential privacy issues, Apple earlier this year advised developers to discontinue use of the UDID to track users.  Blue Toad no longer uses UDIDs in its software, DeHart said, and updated versions of its software don’t collect it.

Aldo Cortesi, a security researcher who has been crusading against use of UDIDs for some time, disagreed with DeHart and said the release of the data represents a great risk to users. Cortesi has previously used UDIDs to log into consumers’ gaming accounts, access contact lists, and connect the ID numbers to real identities. He was then able to hijack device owners’ Twitter and Facebook accounts.

“The concern is that there may be a UDID-related problem out there of the kind I've described, which could now be exploited at a massive scale, by someone armed with a million UDIDs,” he told NBC News. “The type of information I was able to access would have been very valuable to scammers and identity thieves, for instance. With mischievous entities like Antisec and Anonymous about, you can even envision a massive public dump of users' private information, just for  the hell of it. We just don't know what the full impact might be.”

Users who are concerned their UDID might be in the leaked list really don’t have any good options for dealing with the issue – generally, the UDID cannot be changed in the way a user might change a password after that had been stolen by hackers.

“There's nothing you can do.  The UDID is permanently burned into the device,” Schuetz said.

He was measured in his assessment of the risk, saying the UDID was only one piece of information hackers might need to attack users.

“A journey of 1,000 miles starts with one step,” he said. “This could be the first step to a thousand- mile hack on a million different people.”

The hacker group Anonymous announced release of the data on Sept. 3 from its Twitter account, giving instructions on how to obtain the database. The instructions were accompanied by a statement accusing the FBI of using UDIDs to track Americans; in fact, the writer of the message said the data was being released exclusively to call attention FBI surveillance. Those statements drew the most attention after the release.

"Why exposing this personal data? ... We have learnt it seems quite clear nobody pays attention if you just come and say 'hey, FBI is using your device details and info and who the f&&& knows what the hell are they experimenting with that', well sorry, but nobody will care," says the Anonymous writer, in typical broken English. "So without even being sure if the current choice will guarantee that people will pay attention to this F&&& shouted 'F&&& FBI IS USING YOUR DEVICE INFO FOR A TRACKING PEOPLE PROJECT OR SOME S&&& well at least it seems our best bet."

Schuetz, who discovered the source of the leaked data, said he couldn’t say conclusively if Anonymous claims about the FBI were false or true.

“It does raise questions,” he said. “I think people need to question what they see online, whether it comes from Anonymous or from a news organization or from a politician or from a corporation.  You need to not take things at face value right away and jump straight to what you think it says.  Somebody says, ‘Oh, this came from the FBI, everybody believes it. Well, let’s think about (it).” 

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