US Lawmakers Seek To Unseal Records In Climate Fraud Case
(DOW JONES NEWSWIRES) -- By Ian Talley
WASHINGTON (Dow Jones)--U.S. legislators are seeking to open sealed documents in a case of multi-million-dollar climate fraud, according to a rare filing by House of Representatives' lawyers.
Two Republican legislators say the records could shed light on the potential challenges of policing a new, trillion-dollar commodities market that would be created under climate legislation that Congress is considering.
Reps. Joe Barton (R., Texas), ranking member of the Energy and Commerce Committee, and Greg Walden, (R., Ore.), ranking member of an oversight and investigations panel, have asked a federal district court in California to unseal all the closed records regarding the successful prosecution of Anne Masters Sholtz, a former California Institute of Technology economist, for fraud. The House Office of General Counsel is pursuing the matter for the lawmakers, without objection from the Department of Justice.
Fueled by recent Wall Street chicanery and the contribution of banks, brokers and hedge funds to the financial meltdown, lawmakers say the case of climate fraud could expose the very real weaknesses of a federal "cap-and-trade" system.
Congress is considering legislation that would set a declining cap on greenhouse gas emissions and create a market where companies can buy and sell emission rights.
The California case involves a nearly identical climate trading system called the Southern Californian Regional Clean Air Incentives Market, or Reclaim, designed to cut air pollution in the Los Angeles region. Sholtz, who helped design Reclaim, allegedly hustled New York Investment firm AG Clean Air out of more than $12 million between 1999 and 2001 by selling fake emission credits.
Sholtz was convicted on one count of fraud in 2005, receiving what the lawmakers say was a veritable slap on the hand for the felony -- a one-year house probation sentence. According to House investigators, there was an estimated $50 million to $80 million in claims against her in bankruptcy filings and the Environmental Protection Agency had received complaints that Sholtz had defrauded nine companies.
Barton said the case -- and the sealed documents -- could show that the federal authorities "may not understand how to stop a vastly more destructive, Bernie Madoff-version of Ms. Sholtz from taking advantage if the nationwide cap-and-trade system is approved." Madoff, who allegedly managed a $50 billion fraudulent hedge fund, has become an icon of Wall Street scams.
According to the filing made earlier this week, the sealed pleadings in the Sholtz case, "may provide insights into the Reclaim system's vulnerabilities to fraud that could be very valuable to the Congress."
A Republican aide said records currently publicly available from the Sholtz case indicate that the government had difficulty linking the actual economic losses from the cap-and-trade system to the fraud, complicating prosecution.
The fear of fraud and manipulation has prompted some lawmakers propose policies that would restrict trading of greenhouse gas emissions. But given the political sway of companies that want to participate in the cap-and-trade program and say that financial trading of emissions is vital to the success of the system, it's uncertain if those proposals will make much headway.
Rep. Walden is also fearful that many of the most exuberant, enthusiastic advocates of cap-and-trade are some of the same major institutional investors that were involved in the housing and commodity markets that failed in the past year...Cont'd...LINK