Political Impasse Forces Japan to Delay Spending

The cabinet approved a delay, through November, of 5 trillion yen ($63 billion) in public spending, most of that in tax grants for local governments and aid for universities. It was the first time since World War II that the government had delayed scheduled spending in the middle of a fiscal year, government officials said. Spending on health care, social welfare, the police and firefighters and other vital services were not affected.

The ruling Democratic Party had tried to head off a delay by trying to secure support for a bond issuance bill that would finance about 40 percent of its 92 trillion yen ($117 billion) budget for this fiscal year. But a spat with the main opposition Liberal Democratic Party over the timing of the next general election — one in which the Democrats were expected to fare poorly — prevented that bill from passing before the end of Parliament’s current session on Saturday.

The government was expected to seek a fresh compromise at a special parliamentary session, probably in October.

Addressing the nation Friday, Prime Minister Yoshihiko Noda lashed out at the opposition for holding public services hostage.

“We are being forced to delay spending to the last minute while trying to protect public livelihoods,” Mr. Noda said. “I hope the opposition shares this sense of crisis.”

Japan has been forced to rely more on government bonds to finance its spending as a weak economy depresses tax revenue and social welfare expenditures surge to support a rapidly aging population. Servicing its public debt — which is more than twice the size of its economy — has also pressured Japan’s finances, though the finance ministry says it can meet its debt obligations without the bond issuance bill.

But Japan’s central bank has already been forced to act, pumping about 2 trillion yen ($25 billion) into the market to meet an expected jump in demand as local governments face delays in getting their tax grants.

The delay also cast a shadow over Japan’s economic recovery from its earthquake and tsunami disaster. Some economists warned that the economy could shrink in the third quarter as the slowing global economy took a toll on exports and as subsidies on fuel-efficient vehicles ended.

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Horne defends delay in ceding 1 Fiesta case

Attorney General Tom Horne did not recuse his office from handling a Fiesta Bowl investigation involving powerful political allies until after one of his deputies recommended misdemeanor charges against them, documents obtained by The Arizona Republic show.

Horne said Wednesday he had no knowledge that charges had been drafted in the cases and transferred the cases immediately last fall after learning they involved lobbyist Kevin DeMenna and a political-consulting and lobbying firm, HighGround. No HighGround employees were specifically identified in a draft indictment drawn up by Horne's office.

"I don't have any motives here other than to avoid being involved with people whom I knew," Horne said.

HighGround's founder and president is noted GOP strategist Chuck Coughlin, a close adviser to Gov. Jan Brewer whose firm assisted with the attorney general's 2010 campaign. DeMenna has had a professional relationship with Horne since the attorney general served in the Arizona Legislature from 1997 to 2001. DeMenna also is a key fundraiser for the Republican Party.

Though Horne said he handed over the investigation of HighGround and DeMenna to Maricopa County Attorney Bill Montgomery as soon as he became aware they were involved, documents show Horne was informed months earlier the case involved several lobbyists.

A Maricopa County Attorney's Office memo obtained by The Republic shows Horne was present at a late April 2011 meeting where the investigation of the Fiesta Bowl lobbyists was discussed. Earlier that month, he was questioned by The Arizona Republic about his relationship with lobbyists and whether that could influence his investigation. Those events occurred roughly six months before he turned the lobbyist investigation over in October to Montgomery's office.

During that same April 2011 meeting, Horne withdrew from another Fiesta Bowl-related investigation involving state legislators who took tickets and accepted free trips to out-of-state college football games, citing a conflict of interest. But he wanted his office to investigate Fiesta Bowl lobbyists, according to a Maricopa County Attorney's Office memo.

Horne's position regarding the lobbyists changed last fall, when he declared a conflict of interest. On Oct.24, his office sent an assistant attorney general's research documents and charging recommendations regarding the lobbyist cases to Montgomery. By then, Montgomery was well into his investigation of the referred case regarding lawmakers who had received Fiesta Bowl gifts.

In December, Montgomery announced he would not prosecute legislators or lobbyists, citing vagueness in state laws and the lack of "evidence leading to criminal liability." When asked recently about his decision not to prosecute the lobbyists, Montgomery said there was no reasonable likelihood of convicting DeMenna or HighGround.

The lobbyists said Montgomery's decision was correct because they and their firms did nothing illegal. DeMenna said he was unaware until he was recently contacted by The Republic that he had been identified for charging by a prosecutor in the Attorney General's Office.

"The (state) prosecutor in this case was wrong," Coughlin said. "We complied with the law. There is confusion about this law in some circles. Not here. Not here at HighGround."

According to Coughlin, it was the duty of the Fiesta Bowl's primary lobbyist to report the expenditures for which HighGround was later questioned. Coughlin said he reported those expenditures to the person he considered the bowl's primary lobbyist, Gary Husk.

Portions of the state's draft indictments, obtained by The Republic through a formal request to Montgomery's office, alleged HighGround and DeMenna, as lobbyists, knowingly failed to report expenditures benefiting lawmakers during out-of-state trips paid for by the bowl from 2002 to 2004 and 2007. The penalty for such misdemeanor violations is a fine of up to $20,000 for a business, and up to six months in jail or a $2,500 fine for an individual.

The records indicate Horne took a much different approach in waiting so long to declare a conflict of interest in the lobbyist cases, as opposed to the early declaration of conflict in the elected officials' cases.

"Attorney General Horne has been inconsistent on when he does and when he doesn't have a conflict of interest," said former U.S. Attorney Paul Charlton, who has tangled with Horne's office over legal matters involving the state Independent Redistricting Commission. "A more careful attorney general would have decided that (conflict-of-interest) fact far earlier."

Horne spokeswoman Amy Rezzonico said the office conflicted itself out of the investigation involving Fiesta Bowl lobbyists as soon as Horne became aware of involvement of HighGround and DeMenna, and the charging decision ultimately was up to Montgomery.

"The timing is not suspect," Rezzonico said. "At the time it became personal knowledge for Tom Horne is when we conflicted off. ? It was nothing more than when the information was delivered to him."

But records and news reports indicate Horne knew his office was investigating HighGround and other lobbyists about six months before he declared the conflict of interest.

An April7, 2011, Arizona Republic story said HighGround employees were contributors to Horne's 2010 campaign. That story also said HighGround principals hosted a fundraiser Horne held at Rezzonico's home on March28, 2011, the same day the Fiesta Bowl turned over to the Attorney General's Office details of an internal investigation of wrongdoing at the bowl. That Fiesta Bowl report mentions HighGround or Coughlin 39 times.

Horne was asked about a potential conflict of interest with lobbyists, according to the April7, 2011, story. He responded then that campaign contributions do not "have anything to do with investigating criminal activity."

Records obtained from Montgomery's office also indicate that on April27, 2011, Horne attended a meeting with prosecutors in his office and Montgomery regarding the Fiesta Bowl investigation.

Horne said Wednesday he had "no memory" of that April meeting. When a Maricopa County Attorney's Office memo was read to him over the phone noting his attendance, Horne then said he may have attended. However, he added, his focus at the time was not on HighGround or DeMenna. Instead, it was on Husk, who remains under investigation by Horne's office but has denied any wrongdoing and has not been charged.

The memo, written by County Attorney's Office detective Mark Stribling, makes clear Horne made reference to a group of lobbyists.

"AG Tom Horne again stated that he intends to retain jurisdiction of all matters including those involving lobbyists," the memo says.

An April 28, 2011, Arizona Republic story also raised questions about Horne's relationship with Fiesta Bowl lobbyists, including HighGround. At that time, Horne dismissed insinuations from the Democratic Party chairman that his office could not be impartial in its investigation of the lobbyists, saying it was his job to be nonpartisan.

Attorney General's Office investigation

The Attorney General's Office, under a previous administration, had been investigating the Fiesta Bowl since summer 2010 to determine whether bowl employees had illegally been reimbursed for making campaign contributions to politicians.

The state investigation ramped up after the bowl in March 2011 -- a few months after Horne took office -- released its own investigative report. That report alleged widespread financial mismanagement, disclosed that gifts had been given to elected officials and concluded employees had been reimbursed for making campaign contributions.

In early April 2011, the chairman of the Arizona Democratic Party publicly questioned Horne's integrity in investigating the Fiesta Bowl, accusing the Republican attorney general of being too cozy with lobbyists at the center of the probe. One of the lobbying firms identified at that time was HighGround.

Horne brushed aside the criticism and allowed his office to continue the investigation of Fiesta Bowl lobbyists. That same month, however, he asked Montgomery to investigate the elected officials who had received gifts or traveled at the bowl's expense, citing a conflict of interest because some of the politicians could be his clients as attorney general.

For roughly the next seven months, from April to October 2011, Assistant Attorney General Todd Lawson and special investigators worked on the Fiesta Bowl case. During that time, indictments were drafted against HighGround and DeMenna, and cases also were built against current and former Fiesta Bowl employees who were subsequently charged with crimes.

The Attorney General's Office declined to allow Lawson to comment for this story.

A state prosecutor since May 2000 who specializes in white-collar fraud cases, Lawson recommended one misdemeanor charge against HighGround and three misdemeanor charges against DeMenna. To support his recommendations, Lawson wrote lengthy memos and provided dozens of pages of documentation.

Rezzonico said the assistant attorney general's recommendations regarding HighGround and DeMenna never were vetted by supervisors, and she said it is common for prosecutors to draft indictments that are never taken to a grand jury.

Recommendations for the Legislature

Montgomery, also a Republican, concluded last December that he could not prove criminal intent because of inconsistent state laws, vague reporting requirements for elected officials and lobbyists, and insufficient Fiesta Bowl records to support a prosecution.

However, Montgomery did compile a set of recommendations for the Arizona Legislature to consider to clear up what he called confusion in the law, and he suggested a ban or strict limits on the value of gifts lawmakers could receive.

The GOP-controlled Legislature has not adopted any of Montgomery's suggestions. Additional reform proposals from the Arizona Secretary of State's Office, which governs lobbyist and candidate disclosures, also have not been passed.

The governor supports changes that provide for greater clarity and transparency regarding gifts and interactions with lobbyists, according to a written statement provided to The Republic.

In discussing questions raised in the records received by the newspaper, Montgomery said there may have been a "technical violation of the law." But he reiterated that there was not a reasonable likelihood of conviction.

In Montgomery's analysis, state law is not clear enough in delineating when lobbyists must report their spending on public officials. That leads to questions about whether a conviction is possible.

"One prosecutor's approach to a statute may not be consistent with how another prosecuting agency would approach the issue or agree with the interpretation of a statute," Montgomery said. He declined to disclose what his office's own prosecutors and investigators recommended in regards to charging the lobbyists.

"It doesn't matter. It was my decision," Montgomery said. "I am the only one to be held accountable for that."

Charlton, a former U.S. attorney, agreed that a supervisor may override a line prosecutor's recommendation if there is disagreement over the likelihood of success.

Laws on lobbyists disclosing expenditures

Coughlin and DeMenna said in interviews that neither they nor their firms acted illegally, and that they were not required to make disclosures because they were contractors or consultants, not primary lobbyists for the Fiesta Bowl.

"I can't imagine the basis for a (charging) recommendation," DeMenna said. "I'm a big fan of disclosure and overfiling. But I'm not sure what we would have had to appropriately file."

Coughlin said his firm was not required to report because it was not the "designated lobbyist" for the Fiesta Bowl. As a hired lobbyist, he said, HighGround was only required to report its expenditures on lawmakers to the Fiesta Bowl's primary lobbyist. Had he also reported it, he said, the spending would have been doubly reported.

Coughlin said that Lawson was mistaken in his interpretation alleging violations of lobbyist-disclosure laws, and he suggested that partisan considerations were to blame: Lawson, the assistant attorney general who recommended charges, has been active in the Democratic Party.

Lawson was directed by Rezzonico not to discuss the matter with The Republic.

Amy Chan, the state elections director, said anyone registered as a lobbyist with the Secretary of State's Office has an obligation to report expenditures or anything of value provided to public officials. Both HighGround and DeMenna were registered lobbyists for the bowl when they made the expenditures, according to records from the Secretary of State's Office.

Chan told Coughlin as much in an e-mail exchange Wednesday. In that e-mail, which Coughlin copied to The Republic, Chan also told Coughlin, "I would not expend resources chasing this type of reporting down and asking lobbyists to amend prior reports."

A campaign-finance expert who represented the state said that Arizona laws are clear on what lobbyists must disclose.

"When a lobbyist makes an expenditure for a legislator or a state employee, the lobbyist has to disclose that expenditure," said Jim Barton, who formerly represented the Citizens Clean Elections Commission, the Secretary of State's Office and the Independent Redistricting Commission.

Though Montgomery chose not to prosecute lawmakers or lobbyists citing statutory vagueness, Lawson's investigative analysis concluded that the state campaign-finance laws would permit successful prosecution of bowl employees who made campaign contributions that were reimbursed. The Attorney General's Office pursued those charges.

This year, it obtained guilty pleas from five current or former Fiesta Bowl employees who engaged in a campaign-finance conspiracy. The U.S. Attorney's Office, meanwhile, obtained a guilty plea to a federal conspiracy charge from another former employee.

Copyright 2012 The Arizona Republic|azcentral.com. All rights reserved.For more information about reprints & permissions, visit our FAQ's. To report corrections and clarifications, contact Standards Editor Brent Jones. For publication consideration in the newspaper, send comments to letters@usatoday.com. Include name, phone number, city and state for verification. To view our corrections, go to corrections.usatoday.com.

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Delay Medicare eligibility: Coburn and Lieberman (AP)

By DAVID ESPO, AP Special Correspondent David Espo, Ap Special Correspondent – Tue Jun 28, 5:24 pm ET

WASHINGTON – Two Senate rebels jumped into Congress' cut-the-deficit competition on Tuesday, proposing to raise the age of Medicare eligibility to 67 and increase monthly premiums for millions of current beneficiaries.

"We can't save Medicare as we know it," said Sen. Joseph Lieberman, I-Conn., who authored the plan with Republican Sen. Tom Coburn of Oklahoma. "We can only save Medicare if we change it," he added in an apparent jab at President Barack Obama and congressional Democrats.

Democrats reacted with criticism of the proposal, which Coburn said was designed to rescue the financially imperiled program and help the nation confront a "wall of debt." Republicans betrayed no sign of support either.

If nothing else, the response underscored the difficulty of legislative free-lancing at a time the Obama administration and congressional leaders are struggling to negotiate a compromise that cuts future deficits and clears the way for an increase in the nation's $14.3 trillion debt.

Without a debt limit increase by Aug. 2, Treasury Secretary Timothy Geithner has warned, the government could default, risking calamity for the U.S. economy and serious effects worldwide.

Republicans walked out of bipartisan talks last week but nevertheless said negotiations had been fruitful. In the days since, Obama has stepped up his personal involvement in the effort.

After meeting separately with the Senate's Republican and Democratic leaders on Monday, he invited the Democratic leadership to a White House meeting on Wednesday.

In the earlier talks, led by Vice President Joe Biden, key lawmakers had outlined a series of proposals to cut several hundred billion dollars over the next decade.

Other proposed cuts were on the table, including nearly $1 trillion from the assumed end of the wars in Iraq and Afghanistan. Officials familiar with the negotiations say Republicans are reluctant to count that money toward any agreement, saying they want more tangible cuts in domestic programs before agreeing to vote for an increased debt limit.

Also in the way of an agreement is a partisan dispute over taxes, which Republicans don't want raised, and Medicare benefits, which Democrats don't want cut.

Lieberman and Coburn were not nearly as reluctant, including both in their prescription for Medicare.

"Nobody's going to like this plan, we understand that," said Lieberman, who was the Democratic vice presidential candidate in 2000 but is now an independent who regularly picks spots to challenge his former party.

His statement that Medicare can't be saved in its current form seemed a direct rebuttal to Obama, who said earlier this year that a House Republican proposal would "end Medicare as we know it" — something he vowed would not happen while he was in the White House.

Coburn is a conservative Republican. But he challenged his party orthodoxy earlier this year when he said he was willing to include higher revenues as part of any deficit-reduction deal.

The plan the two men outlined includes a gradual increase over the next five years in the monthly premium that seniors pay for doctor and other non-hospital services. Aides said it would translate into a monthly increase of $15 to $20 initially.

The age of eligibility would rise gradually from 65 to 67.

For the first time, better-off seniors would be charged more money for Medicare Part A, which covers hospital care.

The same group already pays more for doctor visits as well as for prescription drug coverage and, under the plan, would face even higher monthly premiums.

A major source of savings would come from making sure seniors pay out of pocket for at least a portion of their care. To accomplish that, Lieberman and Coburn proposed barring insurance companies from selling Medigap policies that offer first-dollar coverage.

The plan by Lieberman and Coburn would preserve Medicare as a government program, unlike a House GOP proposal that would require millions of future beneficiaries to purchase coverage from private insurance companies.

Additionally, the plan includes a $7,500 limit on out-of-pocket costs for doctor or hospital coverage, a provision designed to protect seniors who face potentially catastrophic costs.

According to the most recent report by the Medicare trustees, the giant program's insurance fund is projected to run out of money in 2024, five years earlier than last year's estimate.

___

Associated Press writer Ricardo Alonso-Zaldivar contributed to this story.

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