The 'Smart Road' Scam

The ‘Smart Road’ Scam

A Whistleblower’s Odyssey in Exposing Big-Time Government Corruption

Cover graphic originally appeared in the article “The ‘Smart Road’ Scam” in the Fall 2008 issue of Regulation magazine. Reprinted with permission.

Library of Congress Cataloging-in-Publication Data is available.

ISBN: ISBN: In a time of universal deceit, telling the truth becomes a revolutionary act. — George Orwell

Contents

Introduction i

Prologue: The Players iii

1 A Foreshadowing 1

2 The Journey Starts 9

3 Marvin Raises a Ruckus 24

4 New Horizons 34

5 Key Image in a Jigsaw Puzzle 44

6 Bringing In the “Authorities” 57

7 Discovery of a Key Witness 70

8 Exactly What Does the “I” in “FBI” Stand For? 85

9 Engaging the USDOT Inspector General 99

10 Connecting with Congress 110

11 Stumbling onto a Million Dollar Ethics Problem 124

12 Smelling a Rat in the U.S. Ofﬁce of Govt. Ethics 137

13 Thwarting the OGE’s Attempted Coverup 148

14 Mr. Mineta’s Apparent Ethics Breach 161

15 Dinner with Mike Wallace 177 The ‘Smart Road’ Scam

16 Asking Congress to Help 188

17 Finding Sunlight 201

18 The Securities Law Enforcement Myth 219

19 The Homeland Security Connection 240

20 Pay-to-Play 259

21 Intimidating the Trade Press 277

22 “Recalling” an Email Message 298

23 The Hidden Payoff 306

24 The Union Connection 321

25 (Almost) Keeping Them Honest 340

26 The Revenue Sharing Swindle 362

27 Sustaining the “Culture of Corruption” 375

Epilogue 385

Sources and Notes 387

Frequently Used Acronyms 435

Index Introduction

ou’re probably not aware of it, but over the past decade many Yof our nation’s busiest roadways have been getting a whole lot smarter. In each state, thousands of traffic sensors keep track of traffic speeds and congestion levels. The data from these sensors helps public transportation agencies keep traffic flowing, and helps individual travelers avoid traffic tie-ups so that they use less fuel and get to where they’re going quicker. Such real-time traffic data lets agencies and travelers alike get more value out of our existing roadway infrastructure, and delays the need to build increasingly expensive new roads. However, many roadways are still not fully instrumented with such sensors, leading to what transportation experts for years have called the “traffic data gap.” This is the story about how one company, Traffic.com, set out to help fill that gap with taxpayer dollars, and in the process devised a scheme to control—and ultimately restrict—the most valuable real- time data in many of our nation’s most traffic-congested cities. It did so by gaming the political system through its inside connection to shady federal officials and the use of earmarks, political donations, and high-powered lobbyists. Its ultimate goal: to create a fed-

i The ‘Smart Road’ Scam eral monopoly for traffic data. It’s also the story of how one former government subcontractor decided to dig into how Traffic.com engineered that monopoly. In doing so, he discovered the key behind-the-scenes role that three consecutive Chairmen of the House Transportation and Infrastruc- ture Committee and four top Administration officials—including a Cabinet Secretary and Special Assistant to President Bush—played in this scam. Along the way, he also encountered an attemped coverup in the U.S. Office of Government Ethics—the very agency charged with ensuring an ethical and honest federal government! Notwithstanding the considerable amount of evidence pointing to ethical and legal wrongdoing, the “authorities”—including the Federal Bureau of Investigation (FBI) and the Securities and Ex- chance Commission (SEC)—just chose to sweep this whole matter under the rug. Thankfully, two non-profit government watchdog organizations chose not to look the other way, and continue to this day to unearth more details of the ‘smart road’ scam. Ultimately, the ‘Smart Road’ Scam is about how one extraordi- narily well-connected company used its political savvy and clout to make millions of dollars for its founders and early supporters, ultimately at the expense of the taxpayer and the public interest. It showcases one of the worst examples of “public service” by high- level “public servants” that one can possibly imagine.

ii Prologue: The Players

Group A: Wearing the Black Hats

Elmer Greinert “Bud” Shuster was a Congressman representing the 9th congressional district in Pennsylvania from 1972 to early 2001. When the Republican Party assumed control of Congress in the 1994 election, Cong. Shuster became the chairman of the powerful House Transportation and Infrastructure Committee, succeeding Cong. Nor- man Mineta, who became Ranking Minority Member until he resigned in 1995. During his tenure as Transportation Committee Chairman Cong. Shus- ter was sometimes referred to as the “king of pork” for his penchant for funding big earmarked transportation projects (called “pork”). Because of this proclivity he often battled with House Speaker Newt Gingrich, who was among those leading the effort to reign in government spending . Not surprisingly, one of Shuster’s own efforts to “bring home the bacon” was in his own backyard—a new, lightly used $270 million four-lane highway that runs right by his own son’s car dealership in his hometown of Altoona, PA . That roadway, ofﬁcially called the “Bud Shuster High- way,” is the only Interstate Highway in the country that goes by both a number and an individual’s name. (Incidentally, its number – I-99 – vio- lates the numbering convention for Interstate Highways.) Because trafﬁc is so light on this highway, some have dubbed it the “road to nowhere,”

iii The ‘Smart Road’ Scam paralleling the “bridge to nowhere” inserted as an earmark in the big highway bill by Shuster’s successor as Chairman of the Transportation Com- mittee Don Young (see below). The Bud Shuster highway received extra attention in the fall of 2007 on CNN after the collapse of the Minneapolis I-35 bridge, as an example of how wasteful government spending directed by powerful legislators like Shuster can starve more crucial funding for our nation’s transportation infrastructure. Shuster has long been under an ethical cloud. In 1998, his former Chief-of-Staff-turned-lobbyist, Ann Eppard (now deceased), was charged with “taking payoffs while working as a congressional aide and stealing from the campaign of the congressman for whom she was employed” according to the Washington Post. Of course the “congressman for whom she was employed” was Cong. Bud Shuster. In both 1996 and 2000, the non-profit Congressional Accountability Project, which was founded by Ralph Nader and run by Gary Ruskin, filed ethics complaints with the House Committee on Standards of Of- ficial Conduct, otherwise known as the House Ethics Committee. In Oc- tober 2000 the Ethics Committee issued a “letter of reproval” to Cong. Shuster , saying “By your actions you have brought discredit to the House of Representatives.” It would only get worse in a hurry. On October 15, 2000, 60 Minutes would run an expose about Shuster’s ethical problems, including his “relationship” with Eppard in which reporter Mike Wallace narrated video showing Cong. Shuster apparently hiding on the floor of the back seat of Ms. Eppard’s car. “She’d make several turns, and when she thought no one was watching, they’d both get out. She’d walk back home, while Shuster, here hiding under a baseball cap, would drive her car to Capitol Hill,” Wallace said. Shuster retired at the end of January 2001, shortly after being reelect- ed in November 2000. He cited unspecified health problems as a reason for his retirement, but the fact he was stripped of his Chairmanship of the Transportation and Infrastructure Committee because of term limit rules may have played a role, along with the battering he had received shortly before from both the House Ethics Committee and 60 Minutes.

iv Prologue: The Players

David Jannetta was a co-founder of Trafﬁc.com (originally called Argus Networks) in 1998, and served until January 23, 2007 as its President. Prior to that, Jannetta was the President of a consulting company bearing his name, and before that he served as Secretary of General Services for the Commonwealth of Pennsylvania, with responsibilities for capital construction, central purchasing, real estate and maintenance programs. In the 1980s Jannetta was the two-time mayor of Altoona, PA, the largest city in Pennsylvania’s 9th Congressional District. In that role, he was a political associate and ally of Bud Shuster, who served as the Congressman from the 9th district from 1973 through 2001. Jannetta, with assistance from Trafﬁc.com Vice President John Collins (see below), led the company’s effort to recruit many of the cities that participate in the earmarked Transportation Technology Innovation and Demonstration (TTID) program.

Don Young has been a Congressman from the State of Alaska—or rather the Congressman from the State of Alaska, as there’s only one— since 1973. Cong. Young assumed the Chairmanship of the House Trans- portation and Infrastructure Committee when his colleague, Cong. Bud Shuster, retired from Congress in late January 2001. He held that post until early 2007, when the Democratic party took over majority control of Congress after its success in the November 2006 election. In recent years, Young is probably best known as the “co-father” (along with Alaska Senator Ted Stevens) of the “Bridge to Nowhere”—a $233 million bridge that’s nearly as long as the Golden Gate Bridge and higher than the Brooklyn Bridge and that was meant to connect the city of Ketchikan, Alaska (population 8,000) to Gravina Island (population 50). In addition to his skill at bringing the “bacon” to his home state of Alaska, Young has played a key role in supporting other earmarked projects throughout the U.S. In fact, his leadership of the House Transporta- tion Committee is often credited as a major factor behind the inclusion of a record number of “pork projects” (6,371) in the big ($296 billion) transportation authorization bill in 2005, called SAFETEA-LU . Young inserted one of those earmarks—$10 million for a new interchange for Coconut Road in Naples, FL—apparently because a wealthy

v The ‘Smart Road’ Scam benefactor raised $40,000 on his behalf. However, the way he got the earmark inserted into SAFETEA-LU—secretly, after the bill had been voted on and passed—so rankled his Senate colleagues that they voted to ask the Justice Department to investigate whether or not a violation of federal law had occurred. Young was already under investigation by federal authorities—along with Alaska Senator Ted Stevens—as to whether or not he “took bribes, illegal gratuities or unreported gifts.” Over the years Young has played a pivotal role in sustaining the monopoly for Trafﬁc.com that his predecessor, Cong. Bud Shuster, originally helped put in place. In early 2001 Young wrote to then Transportation Secretary Mineta to urge that these earmarked funds not be used for any other purpose, which was being contemplated at the time. On July 29, 2005—exactly the same day that Utah Senator Orrin Hatch was issuing a press release entitled “Hatch Puts the Brakes on Trafﬁc.com”—Young was inserting language in the House record designed to starve funding from Hatch’s new provision in SAFETEA-LU designed to open up this earmarked program to competition.

Norman Mineta is currently Vice Chairman of the big international public relations firm Hill & Knowlton, a position he has held since August, 2006. He also serves on the Board of several different private sector companies, including AECOM Technology Corporation. From late January 2001 through early July 2006 Mr. Mineta was Secretary of Transportation in President George W. Bush’s Administration, having the distinction of being both the only Democrat in Mr. Bush’s Cabinet and the longest serving Secretary of Transportation in history. Mr. Mineta announced his resignation on June 23, 2006, approximately three months after the author filed a complaint to the FBI about his (and former Con- gressman Bud Shuster’s) role in creating and sustaining a government subsidized monopoly for a company called Traffic.com. Mr. Mineta never gave a specific reason for his resignation as Secretary of Transportation, and all that Presidential Press Secretary Tony Snow said at the time was that he resigned “because he wanted to.” Immediately prior to becoming Transportation Secretary, Mr. Mineta served as Commerce Secretary during the final six months of the Clinton

vi Prologue: The Players

Administration. From 1995 through mid-2001 Mr. Mineta was a Senior Vice President and director of Transportation Systems and Services for Lockheed-Martin IMS, a leader in deploying electronic toll-collection systems. While there Mr. Mineta worked closely with another Lockheed Martin Vice President, Michael P. Jackson (see below), who later went to work for Mr. Mineta as his second-in-command as Deputy Secretary of U.S. Department of Transportation. That situation, in which the top two executives of a huge federal department both came from the same company, was called “Unprecedented at DOT” in the June 2001 newsletter of the non-proﬁt Center for Public Integrity . Prior to joining Lockheed Martin IMS, Mr. Mineta had a long-time career as an elected public servant, having served as a Congressman representing “Silicon Valley” (the San Jose, CA area) for twenty years. From 1992 to 1994 he served as the Chairman of the U.S. House Public Works and Transportation Committee, a position he relinquished to Republican Congressman Bud Shuster after the Republican party took control of Con- gress in the 1994 election. He resigned from Congress mid-term on Oc- tober 10, 1995.

Michael P. Jackson, not to be confused with the entertainer Mi- chael Jackson, was recently Deputy Secretary and Chief Operating Of- ficer of the U.S. Department of Homeland Security (DHS). He unexpectedly announced his resignation from that post on September 24, 2007, telling DHS staff that “I am compelled to depart for financial reasons that I can no longer ignore.” Mr. Jackson announced his resignation from DHS almost exactly one month after the well-respected non-profit government watchdog Project on Government Oversight sent a detailed Freedom of Information Act request to DHS asking for email messages, meeting notes, and other documentation related to his connection with Traffic.com. Mr. Jackson had held that position since March, 2005. He currently serves as the founder/CEO of the consulting firm Firebreak Partners LLC, which consults on security technology projects. Prior to becoming DHS Deputy Secretary, Mr. Jackson was Execu- tive Vice President of AECOM, a government contractor. In that role he was responsible for AECOM government relations globally and served

vii The ‘Smart Road’ Scam as Chief Operating Officer of AECOM’s Government Services Group. From Jan. 2001 to July 2003 he served as Deputy Secretary and Chief Op- erating Officer of the U.S. Department of Transportation, serving directly under Secretary Mineta. Mr. Jackson led a special working group at the USDOT that created the Transportation Security Administration (TSA), which was transferred in early 2003 from USDOT to the then brand new U.S. Department of Homeland Security. Before assuming the position as USDOT Deputy Secretary in 2001, Mr. Jackson was Vice President and Chief Operating Officer for Lock- heed Martin IMS’s Transportation Systems and Services Group, working for Norman Mineta, who was Senior Vice President and the director of that group. From 1993 to 1997 Mr. Jackson was Senior Vice President at the American Trucking Associations (ATA), where (according to his official White House biography) he “managed intermodal, international and technology policy matters.” John Collins (who today is a Vice President for Traffic.com -- see below), was a fellow Senior Vice President at ATA at the time in charge of Governmental Affairs. During that period, Cong. Bud Shuster was Chairman of the House Transportation and Infrastruc- ture Committee. Mr. Jackson also worked for two earlier Presidents. In President George H. W. Bush’s Administration he was Special Assistant to the Pres- ident for Cabinet Liaison and later became Chief of Staff to Secretary of Transportation Andrew Card. He held several positions reporting to the Secretary of Education in the President Ronald Reagan’s Administration. Althought his official White House biography referred to him as “Mr. Jackson,” “Dr. Jackson” would be more accurate, since he received a Ph.D. with distinction from the Government Department at Georgetown University in 1985.

John Collins is Vice President for ITS and Counsel with Trafﬁc. com, a subsidiary of NAVTEQ (which itself is a subsidiary of Nokia). In this role (according to one online bio), he serves as “point person for the company on its traveler information deployment contract with USDOT and its state partners.”

viii Prologue: The Players

From 1999 through early 2001, Mr. Collins was President and CEO of the Intelligent Transportation Society of America (ITS America), a large trade association comprised of both public-sector (e.g., USDOT and state departments of transportation) and private-sector members. In his early career Mr. Collins, a lawyer, was an Assistant General Counsel at the United States Department of Transportation for seven years. In that position he was responsible for a $22-billion a year legislative program. Later, he joined the American Trucking Associations as Se- nior Vice President for Government Affairs, during the same period when Michael P. Jackson was Senior Vice President for Policy at the ATA. Dur- ing his (and Mr. Jackson’s) tenure as Senior VPs of the ATA, Pennsylvania Congressman Bud Shuster chaired the all powerful House Transportation and Infrastructure Committee.

Group B: Wearing the White Hats

Orrin Hatch has served as a Senator from the state of Utah since 1977. While a conservative Republican, Hatch often “crosses the aisle” to work with more liberal colleagues on legislation of common interest, such as generic drugs and nuclear power. As befits a legislator of his experience, Hatch serves as a senior member of five different Senate Committees, including the Judiciary Committee, where he also serves as the Ranking member of the Antitrust, Competition Policy, and Consumer Rights Subcommittee . An ardent proponent of open competition, Hatch strongly resonated with concerns expressed by Utah firm Wavetronix about the anticompetitive nature of the federal earmarked TTID program leading up to the passage of the huge SAFETEA-LU transportation authorization bill in 2005. He led the effort, supported by fellow Utah Senator Bob Bennett and a Congressional group led by New York Congressman Anthony Weiner, to add language in that bill to break up a monopoly for Traffic.com and open up the TTID program to competition. In early 2007, after discovering that Traffic.com’s monopoly was continuing unabated, Hatch pointedly asked Transportation Secretary Mary Peters to explain why the USDOT

ix The ‘Smart Road’ Scam was ignoring the new provisions in SAFETEA-LU. When neither of the USDOT’s responses addressed that central concern, Hatch formally wrote to USDOT Inspector General Calvin Scovel to request a review of the department’s administration of this earmarked program. Many people probably don’t know that Senator Hatch is a proliﬁc musician and songwriter, and offers nine different CDs of original music on his own commercial website.

Anthony Weiner is a Democratic Congressman from New York City, where he has represented New York’s 9th Congressional District since 1999. That district includes parts of south Brooklyn and south central Queens. From 1985 to 1991 he was an assistant to then Congressman—now Senator—Chuck Schumer. In 1991 he was elected to the New York City Counsel, at the time the youngest (at 27) individual to serve on that body. While on the City Counsel Weiner initiated programs to address “quality of life” concerns. For example, he initiated a program to put at-risk teens to work cleaning grafﬁti. (They were termed “Weiner’s Cleaners”.) In 2005, Cong. Weiner strongly supported Senator Orrin Hatch’s effort to add new language in the huge transportation authorization bill “SAFETEA-LU” designed to open up the TTID program to competition and shut down Trafﬁc.com’s monopoly. “By opening these services to competitive bidding, we are essentially untying the hands of states and localities. Now, companies will compete to provide the best services at the best price to taxpayers,” Weiner said at the time in a press release . An interesting subnote: After college, Weiner was a roommate of The Daily Show host Jon Stewart, and (as of March 2009) remains the only documented recipient of Stewart’s political campaign contributions.

Bill Allison is a Senior Fellow for the non-proﬁt Sunlight Founda- tion, which supports programs and technologies (particularly new Internet tools) to improve government transparency. He is a veteran investigative journalist and editor who worked for eight years for The Philadelphia Enquirer, the last two as a researcher for Pulitzer Prize winning reporters Donald L. Barlett and James B. Steele. Prior to joining the Sunlight Foun-

x Prologue: The Players dation Allison worked for the Center for Public Integrity for nine years, where he co-authored The Cheating of America with Charles Lewis, was senior editor of The Buying of the President 2000 and co-editor of the New York Times bestseller The Buying of the President 2004. Allison has been involved in digging into the details of the federally earmarked TTID program. He submitted multiple Freedom of Informa- tion Act (FOIA) requests, one of which (to the U.S. Department of Trans- portation) resulted in the acquisition of contracts, agreements, and correspondence that had never before been made public and that are widely referenced throughout this book. He also posted several new items about this scam on the Sunlight Foundation’s “Under the Inﬂuence” and “Real- Time Investigations” blogs.

Scott Amey is General Counsel for the non-profit watchdog Project on Government Oversight. Founded in 1981, POGO (which was then known as Project on Military Procurement) originally worked to expose outrageously overpriced military spending on items such as a $7,600 coffee maker and $436 hammer. In 1990, the organization expanded its charter to investigate waste, fraud, and abuse throughout the federal government. Amey, who currently directs POGO’s Contract Oversight investigations, joined POGO in 1993 as a Research Associate. He has testified before Congress and federal agency panels, submitted public comments on proposed regulations, and frequently authors reports, alerts, and blog postings and works with the media to alert the public about contracting issues. Amey and POGO have been investigating the Smart Road Scam since August 2006. Since then POGO has issued FOIA requests to the U.S. Dept. of Transportation, to the U.S. Office of Government Ethics, and to many state departments of transportation. Amey has also written on POGO’s behalf to Transportation Secretary Mary Peters and USDOT In- spector General Scovel, urging an investigation into possible federal ethics or legal violations involving the earmarked TTID program.

Ken Boehm is Chairman of the ethics watchdog National Legal

xi The ‘Smart Road’ Scam and Policy Center, headquartered in the DC suburb of Falls Church, Vir- ginia. NLPC, which Boehm co-founded in 1991, “promotes a single standard of ethics in public life through research, education and legal action” according to its website. Prior to 1994, Boehm served as Counsel to the Board of Directors of the Legal Services Corporation, the federal program tasked to provide legal assistance to the poor. In 1997, Boehm authored the Burton Amend- ment, which became law, that required the Legal Services Corporation and its grantees for the first time to disclose the identities of the parties they sue. Earlier he served as Chairman of Citizens for Reagan, Legisla- tive Director of Howard Jarvis’ American Tax Reduction Movement, and treasurer of one of the ten largest political action committees. Boehm also has considerable experience in the broadcast business. He spent five years as an award winning radio talk show host on Phila- delphia’s WWDB, was a commentator on National Public Radio, and has been interviewed on more than 500 radio and TV programs. A former prosecutor, Boehm has spearheaded investigations of both public and private sector malfeasance at the NLPC. His filing of a 500- page Complaint involving possible kickbacks from federal earmarks with the U.S. Attorney in DC led to the ongoing FBI investigation of Rep. Alan Mollohan (D-WV). In 2007 he filed a complaint against Senator Lisa Murkowski (R-AK) with the U.S. Senate Ethics Committee related to a “sweetheart land deal.” One day later Sen. Murkowski sold back land she had earlier acquired. Most recently, Boehm and the NLPC have helped expose several evasion of tax issues and a possibly improper junket to the Caribbean by House Ways and Means Committee Chairman Charles Rangel (D-NY). Boehm has advised the author since October 2006 about how and where to look for possible “financial smoking guns” related to the involvement of high-level public officials in the ‘Smart Road’ Scam.

xii 1

A Foreshadowing

Late May or early June, 2002

ometime in mid 2002, an event occurred that years later would take Son a whole lot more significance, but that I shrugged off at the time as just one of the routine quirks one encounters when working for a big federal bureaucracy like the U.S. Department of Transportation. At that point in time I was in my fifth year as a subcontractor to the USDOT. While I directly reported to a highly-regarded international engineering society—the Institute of Transportation Engineers, or “ITE” —on a day-to-day basis I really worked for two different but related parts of the USDOT, the Federal Highway Administration’s Office of Opera- tions and the USDOT’s ITS Joint Program Office , or “JPO”. My salary ultimately came from the ITE’s big task order with the USDOT, and was shared by these two groups in some formula that I neither knew nor cared about. So long as they paid my monthly invoice—as they had for four and half years at that point—I was perfectly happy. For years both the FHWA Office of Operations and JPO had been managed by the same person, Dr. Christine “Chris” Johnson. The DOT’s initiatives to deploy “intelligent transportation systems” (ITS)—next-generation computing and communication technologies for “smart cars and

1 The ‘Smart Road’ Scam smart highways”—were all collectively Chris’ baby, and everyone knew it. Strong-willed and demanding, she could be your best ally if you were helping her implement her vision of where things needed to go, but if you weren’t you were on your own, without financial or other support from the “feds.” I was one of the fortunate ones. In June 1997, through brainstorming sessions with ITE Executive Director Tom Brahms and former Maryland State Highway Administrator Hal Kassoff (who had just left the trade organization ITS America), I had come up with this idea of a website that would be shared by more than a dozen organizations and societies like ITE whose members all played some role – technical or managerial – in helping deploy ITS around our nation. I called this project the “ITS Co- operative Deployment Network,” or “ICDN” for short. That acronym would last seven years, to be replaced in 2004 by another one: NTOC, the “National Transportation Operations Coalition,” when the website would undergo a major facelift. But in mid-2002 this project—my own baby— was known as the ICDN. That June in 1997, the three of us – Tom, Hal, and myself – had pitched the concept of this shared ITS resource to Chris in her office, and the idea immediately resonated with her. Unsolicited proposals like ours almost never get accepted and funded by the U.S. Dept. of Transportation, but this one had hit a nerve. ITS had been promoted for years by the USDOT, but its rate of deployment had been glacial, in part because the grizzled senior managers from state and local transportation agencies who would ultimately make the call to deploy and maintain many of these technologies typically viewed ITS as “solutions in search of problems”—and they were often right. The ICDN would help to draw the practitioners from these agencies into a national dialogue that would help ensure that future ITS solutions would address real-world problems. Chris sensed that this new collaborative Internet environment would help her vision become a reality, and strongly agreed to support it. At that point in time I was a known quantity. I had consulted in the ITS field since late 1991, and had leveraged my previous experience as a senior manager in one of the first big multi-company research consortia in the U.S. into consulting projects for the ITS field, which itself involved

2 A Foreshadowing a huge and complicated collaboration. As a consultant, I had written the initial operating plan for the big trade organization called “ITS America” as well as initial plans for a new ITS Institute at the University of Minne- sota’s Center for Transportation Studies. As the Internet was transitioning from a mostly academic tool to a major worldwide communication platform, in 1995 I started what I had hoped would be a proﬁtable Internet-based e-magazine called ITS On- line. I had registered a coup of sorts when I managed to garner an interview with then brand new Speaker of the House Newt Gingrich for its inaugural issue. (Later that year Speaker Gingrich would become Time Magazine’s “Man of the Year,” and while he was extremely busy and dif- ﬁcult to corner, I had managed to do it.) ITS Online rapidly became one of the most popular ITS sites on the Internet, even surpassing ITS America’s own website in the number of daily visits.

Latest News for the ITS Community

My ﬁrst job in implementing the ICDN was to set up a then-novel website with twenty or so different looks – each one mirroring the look of the partner organization’s website but sharing common content. Once that was in place, my role was to make the website “dynamic” so that readers would want to visit it periodically to see what was new in the ITS ﬁeld. I did that in several different ways, including:

• I typically wrote two or three exclusive articles (to go along with other news and announcements) in each issue of the twice-monthly ICDN Newsletter that I both posted on the web and sent via email to 8,000 or so subscribers worldwide. Many of these exclusive pieces were long (up to 10 printed pages) question-and-answer sessions with movers and shakers in the ITS ﬁeld from either the public sector (FHWA or a state or local transportation agency) or innovative private-sector ITS ﬁrms. • I moderated the ITS Forum, a web-based bulletin board where ITS technologists and practitioners alike could either post their own questions/ challenges or help out their peers around the country. To get people to think about—and share their experiences—related to important challeng-

3 The ‘Smart Road’ Scam es they already had or would likely face, I posted a Question of the Month on the Forum that often drew from a handful to twenty or so responses.

It was in the former role as the author/editor of the ICDN Newslet- ter that I first came across many of the inside details of what I would years later call the “Traffic.com scandal.” In mid-2002 I and many other ITS professionals knew that something didn’t quite smell right about how Traffic.com had burst onto the ITS scene seemingly out of nowhere. Most of our early information about the shenanigans going on had come from the industry newsletter Inside ITS whose Editor, Mike Curran, was a long-time friend of mine. I had been quoted by Mike in Inside ITS several times over the years, including once when I had addressed a meeting of the ITS America Board of Directors about the vital need for the society to more directly engage state and local transportation professionals in the ITS movement. My short presentation had so incensed then ITS America President Dr. James Costantino at the time that he immediately cancelled my small consulting contract to help identify desirable characteristics of a then-emerging concept of public-private partnerships. Dr. Constantino, a control freak who I sometimes jokingly likened to a Mafia Don, told me in no uncertain terms that as a consultant to ITS America I had no right to address “his” Board of Directors even though my one-person consulting company was a full, dues-paying corporate member of the society. Nonetheless, Mike readily picked up on my comments to the Board for his newsletter, and six months or so later ITS America initiated a new local chapters program to foster greater involvement by state and local people. Unlike many of the “free” (advertising-supported) trade publications that covered the ITS field, the twice-monthly Inside ITS newsletter was expensive: $675 for an annual subscription. But the fact that its survival didn’t depend on ads meant that it could provide insight into developing news that might otherwise upset potential advertisers. Such was the case when Mike initially broke the story about Traffic.com’s shenanigans in the January 15, 2001 issue, a lead story entitled “Traffic.com claim to $50 million ITS earmark raises questions.” Here are some excerpts from that piece:

4 A Foreshadowing

That assumption [of an earlier 1999 task order] has raised questions about Trafﬁc.com, the award it received two years ago, use of highway rights-of-way, and federal impartiality and competition in the ITS market. A House Appropriations Committee source, who asks not to be identiﬁed, says the $50 million is an earmark sought by Bud Shuster, the chairman of the House Transportation Committee and representative from Pennsylvania. Almost two months after the bill was passed, a spokesman for the House Transportation Committee says the staff was unaware of the provision. “It sounds to me like one of those things that was thrown in at the very last minute during negotiations on the conference report,” he says. She [Dr. Christine Johnson] adds that the ITOP contract mechanism does not work that well for ITS. ITOP is a very effective procurement device for federal government purchases, she says, but ITS projects are generally partnerships between state and local government and the private sector. “The ITOP mechanism doesn’t make it easy to manage the project or handle the local part of the match,” she says.

Almost at the same time that Mike Curran was putting the content for his mid-January 2002 newsletter to bed, Traffic.com was issuing a press release claiming that “Chicago and Dallas have been selected as the next two markets for the deployment of the Digital Traffic Pulse SM Intelligent Transportation System (ITS).” Further, that release said that the USDOT had ultimately chosen these two cities to join Philadelphia and Pittsburgh in participating in this earmarked program. Little did I know then that this release, while very upbeat about the company’s progress and prospects, wasn’t quite accurate. That realization would come several months later. While at one of ITE’s big annual technical conferences I routinely attended, I heard through the grapevine that Dallas had, in fact, flatly turned down their earlier supposed “selection” by the USDOT to participate in the program. Since I already knew from my friend Mike Curran’s earlier coverage that something quite malodorous was going on with this program, I was intrigued.

5 The ‘Smart Road’ Scam

Years earlier I had developed a good relationship with the folks within the Texas Department of Transportation, or TxDOT for short, and particularly those in TxDOT’s Dallas District. For several years in the early 90s, I would drive my little red Miata each month from my home in Austin to Dallas to participate in monthly Traffic Management Team (TMT) meetings to gain a better understanding of transportation practitioners’ real issues. Afterwards, a bunch of us attendees would invariably migrate to the Outback saloon (a one-of-a-kind dive, not the restaurant chain) in Dal- las’ West End for a few cold beers, lots of peanuts, and candid conversation. A number of traffic engineers or managers from TxDOT’s Dallas District usually participated in both those meetings and the post-meeting libation. One of those individuals was Freddie Zoolander (not his real name), the Assistant Director of Transportation Operations for TxDOT’s Dallas District. Shortly after hearing about what almost seemed like TxDOT’s act of defiance against the “feds” in rejecting $2 million of “free” money available to the agency, I wanted to know why and called Freddie. As the Editor of a newsletter that reached a circulation of over 8,000 ITS professionals via email twice each month, I routinely conducted extensive interviews with leading transportation professionals about important breaking ITS topics. TxDOT’s flat out rejection of “fed money” for this earmarked program certainly qualified as both an interesting and timely topic, and Freddie readily agreed to be interviewed. Our discussion would be an eye-opener. Freddie explained that while the Intelligent Transportation Infrastructure Program (ITIP) sounded good on paper and seemingly would produce new and useful real-time traffic data for the local agency participants, once you drilled down beneath the sales pitch the program had severe problems. The biggest problem from Freddie’s viewpoint was the fact that the data usage and sharing provisions handcuffed the local partner in too many ways. Not only could the local agency partner not readily use the most valuable new data from the program, but after that new data was combined with the agency’s own data the whole set would effectively be off limits. From Freddie’s point of view, the terms were way too lopsided in favor of Traffic.com and against the best interest of the local public-sector partner and, ultimately, the trav-

6 A Foreshadowing eling public. TxDOT/Dallas’ decision to opt out of the program wasn’t even close. Immediately after the interview, I remember feeling a couple of different emotions:

1. Pride that my home-state transportation agency (TxDOT) had a sufﬁcient long-term vision to realize that this program would limit the agency’s future ability to inform travelers about travel conditions, and the cojones to tell the “feds” to keep their damn money, and 2. Excitement that this interview would be one of the best and most valuable I had ever conducted for the ICDN Newsletter.

“I could get ﬁred if you run that story”

My ebullience would be short-lived. While kicking around the latest “Question of the Month” for the ITS Forum with my boss/friend/advisor Shirley Blye (not her real name) from the JPO, I got blindsided. I happened to mention to Shirley that my latest newsletter would contain one of the best and most insightful interviews I had ever done about why Dallas decided to opt out of the ITIP program. Frankly, it never occurred to me that Shirley would care about this story one way or another, because she had always implicitly trusted my judgment. In several years of working together, Shirley had never even come close to ordering me either to run or not to run a particular story. While she wouldn’t do that in this case either, her reaction to my forthcoming interview was immediate. “Oh dear, I’ll be in big trouble if you run that story,” she told me. “I could get ﬁred.” Shirley never actually asked me not to run the interview with Freddie, only making it crystal clear that if I did so she’d be up to her ass in al- ligators. I was terribly disappointed by her reaction, of course, because I knew that the piece was both important and timely. However, Shirley was my friend and had long been one of the strongest supporters of my baby (the ICDN), so I reluctantly agreed not to run it. Swallowing my pride and more than a little embarrassed, I called Freddie to tell him about my USDOT boss’s sensitively to the interview, and that I had made the deci-

7 The ‘Smart Road’ Scam sion not to run it. I couldn’t tell if he was upset or relieved. I recall thinking at the time that Shirley’s angst about my interview probably had to do with the USDOT’s sometimes precarious relationship with the U.S. Congress, which routinely passes down language for numerous earmarked programs like ITIP for the USDOT to implement. I knew that Cong. Bud Shuster, who had put the original ITIP earmark into the big TEA-21 transportation bill, had “retired” early the previous year. But from Shirley’s strong and immediate reaction I could sense that Shuster wasn’t apparently the only inﬂuential person pushing this very troublesome program. I didn’t know at the time how right-on-the-mark that thought would be.

8 2

The Journey Starts

June 2005

ummer 2005 was a tumultuous and stressful but at the same time ex- Sciting time in my life. I was in the middle of my eighth year as a subcontractor to the U.S. Dept. of Transportation as the Editorial Director of the ICDN/NTOC. While my job paid well and I had gotten really good at it, at the same time I was longing for a new challenge. My self-image was also suffering. I’d always thought of myself as someone who wasn’t swayed by hype or bullshit, but who always searched for what Carl Ber- nstein (of Watergate fame) often calls “the best available version of the truth.” Unfortunately, more and more I had come to perceive myself as, in some sense, a “PR person,” a “pitch man” for the USDOT’s ITS initiatives. In recent years that had been driven home on several occasions when Shirley Blye had told me that Transportation Secretary Mineta’s press office had essentially put a “gag order” on the ability of any USDOT staff to talk to the press without first getting approval from the Secretary’s office. They considered me an exception to that rule, however, and FHWA or JPO staff were free to talk with me for articles/interviews for the ICDN Newsletter. Clearly, I was not viewed as press, but more as an in-house cheerleader for their initiatives. That made sense from the USDOT’s per-

9 The ‘Smart Road’ Scam spective, of course, because they felt that since they paid me I would only say good things about their activities.

Not Cut Out for Public Relations

The ironic thing is that in the early 1990s I had actually briefly tried to become a PR person but had failed miserably at that task. At the time I and my partner (a long-time public relations professional, who for years consulted for Texas Instruments) had formed a new PR venture. Our first client was a fledgling personal computer maker in Kansas City, MO that was marketing computers based on processor chips from MIPS Comput- ing rather that the industry standard Intel or AMD chips. Because of my previous background as an editor for two different electronics-industry publications (Electronic Engineering Times and VLSI Design), I had easily convinced the President of that company that since I knew what motivated high-tech reporters and editors because I used to be one, I could readily get coverage for his new computer in the trade press. It was a compelling marketing pitch, and he readily bought it and ponied up $15,000 for our initial effort to garner exposure for his new machine in the press. Unfortunately, it had all been downhill from there, because the Presi- dent had already laid out our pitch for us. “I want you to emphasize that our new computer runs the Dhrystone benchmark twice as fast as any other comparably priced machine,” he said. Unfortunately, I thought that pitch was just plain stupid. “That’s just an artificial benchmark that means very little to anyone – especially consumers,” I explained. “You need to emphasize benchmarks that show how well your machine does on real- world applications, like word processing or database applications.” “I appreciate your feedback,” he said, clearly annoyed. “But I’m the boss and the Dhrystone story is the message I want you to get across.” “I won’t pitch a storyline that I think is stupid,” I said, thinking he would appreciate bluntness and honesty from his newly-hired PR team. “Fine, then you’re not working for me,” was the immediate rejoinder. Game, set, match. The end of my promising but all too brief foray into public relations.

10 The Journey Starts

On the Personal Side: Diverging Paths

Ironically, in the summer of 2005 I and Pam, my wife and best friend of 13 years, were increasingly seeing life differently, with different priorities. I was getting really tired of the same old routine, of working at a job that paid well but for the past couple years had failed to recharge my batteries. I thought (and still think) that we’re put on this planet to make a positive difference, not just to toil away at some job we don’t like and collect our paycheck—no matter how substantial it might be. I also think that life should be an adventure, and adventure often involves risk. Pam, a retired school teacher, really liked the routine that she had evolved into, accompanying me on conference trips several times a year to major cities and most days gardening in the yard in the morning and then playing computer games and watching recorded TV shows from her in-home office. Along the lines of Barack Obama’s political mantra, I was aggressively pursuing “change,” and Pam didn’t want to change a thing—life to her was as close to perfect as it could get. Our marriage wouldn’t survive three more months. I was clearly going through a reevaluation of my life’s priorities, what astrologers often refer to as a “Saturn Return” that occurs with a lot of people every 29 years or so. While at almost 55 years of age I was over three years younger than the “usual” Saturn Return the second time around, the concept actually does actually ring true to me, even though I am naïve about astrological matters. (I know that my sign is Scorpio, but that’s about it.) In fact, I indeed went through a similar re-prioritization process when I was 29 years old and an engineer for Motorola in suburban Chicago. At the time I had tried but failed to convince top management that the company’s backwards policies were causing their best engineers to leave the company in droves. My efforts were not at all appreciated by the managers occupying the dozen bloated bureaucratic layers between me and the Office of Chief Executive Bob Galvin (the founder’s son), with whom I was communicating. Those slighted lower-level managers tried —and succeeded—in “killing the messenger” (me). Six months after the start of my first “Saturn Return” I was living in Southern California and working in an entirely different career as a technical journalist. When I

11 The ‘Smart Road’ Scam had left my Motorola job I taped a passage from Billy Joel’s hit song My Life to my desk lamp: “Sold the house, closed the shop, bought a ticket to the West Coast. Said he couldn’t go on the American way.” In my case those lyrics were right on the mark.

Re-engaging with the Trafﬁc.com Scandal

In the summer of 2005 much of my NTOC job had become repetitive and, as a result, boring. While I still thoroughly enjoyed interviewing and “dialoguing with” (on an NTOC forum) ITS “movers and shakers” around the country, the mechanics of creating web pages, manually deleting hundreds of bounce-backs from the twice-monthly newsletter mailings, and other repetitive website admin tasks were not recharging my batteries. As I’ve gotten older and realized that my time on this planet is finite and getting smaller, I’ve become less tolerant of tasks that are neither fun nor what I believe are important in the big scheme of things. I know that a lot of people just tolerate their jobs because “it’s a paycheck,” but I want a whole lot more out of life than that and am willing to try to get it. Like what often happens, in the Summer of 2005 an almost insignifi- cant event led to one thing after another, and before I knew it I began to seriously investigate what I would later characterize as the “Traffic.com scandal.” It started like this: as part of my monthly routine, every month for years I posted a “Question of the Month” on the web-based NTOC Talk- ing Operations Forum for which I also served as the moderator. That question (along with all other forum postings) was also sent out in an email digest the next day to the 1,000+ subscribers of the forum. On July 12, 2005 my Question of the Month was: “Aren’t Planners Already Taking Advantage of ITS Data?” I observed that transportation planners who had participated in a recent AASHTO-sponsored roundtable acknowledged that they were not taking advantage of the tons of traffic data that they were routinely collecting, and asked what could be done to remedy that situation. The question was very typical of the questions I regularly posted on the forum to expand the thinking of the forum’s audience, which included many of the movers and shakers in the transporta-

12 The Journey Starts tion field. As typically happened after I posted a Question-of-the-Month, several different people quickly chimed in, offering their own perspective and experience on the topic. Traffic.com Vice President John Collins, whom I had known for several years dating back to his days as President of ITS America in the late 1990s, added his own two-cents’ worth. John talked about the benefits to public agencies of participating in what he called the “FHWA funded ITIP program.” He made it all sound almost too good to be true. “There is no charge for the [planning] data for state and local public agency stakeholders,” he said. Clearly, John’s posting was a blatant sales pitch for the ITIP program. At the time Traffic.com, which was benefiting from a federally subsidized monopoly, was aggressively trying to recruit new cities to participate in the program. By then, of course, I was well aware of much of the political influence (by Bud Shuster and his associates) and other shenanigans that were going on in this program, both from the extensive coverage of this program in the Inside ITS newsletter over the years as well as my own discussions with both Federal Highway staff and state DOT folks. For example, I knew that Dallas and Chicago had been selected as the third and fourth cities (after Pittsburgh and Philadelphia) to participate in ITIP through funding in the original earmark in the big transportation authorization bill “TEA-21,” but had turned down the option to participate in the program. I also knew, from my extensive interview with TxDOT’s Freddie Zoolander back in mid-2002, precisely why Dallas had opted out of the program. So to counter what I perceived as John’s blatant sales pitch and try to inject some reality into the discussion, I challenged him on the forum. “John, I I noticed that you didn’t mention any services currently available in my home state of Texas,” I observed. “Are any of the big cities (particularly Dallas, Houston, or San Antonio) close to coming on board?” I then asked whether he had resolved the concern that had been expressed to me revolving around participants’ inability to use ITIP data for their own traveler information. “If my information is dated and you’ve solved this thorny issue, feel free to post how the ATIS data sharing arrangement now works on this Forum,” I offered.

13 The ‘Smart Road’ Scam

John Collins is a very accomplished marketing person, and he clearly saw my question as an opportunity to showcase his marketing skills. Af- ter thanking me for “the opportunity to respond to your question about the ITIP public/private partnership,” he proceeded to ignore my question altogether. Instead, he got right into his sales pitch, touting the fact that each agency could use ITIP data for “internal use” as well as for “non-commercial use” in the form of “basic traveler information to the public.” John stressed that “our contract with FHWA requires that the ITIP program be commercially self-supporting.” Of course, if that were really the case, the company would not have accepted the $2 million in public/ taxpayer funds for each of the 25 cities that had agreed to participate in the program. He went on to explain how the program was meant to “relieve the public partner” from ongoing costs and to “reduce the public agency’s risk to unanticipated costs.” He proceeded to list the 16 cities that had signed up for the program at that time, and observed that “these public/private partnerships demonstrate the merit of the program.” “We recognize that each potential partnership has its own issues,” he said, in a vague acknowledgement to my earlier very pointed question. “Under the reauthorized program, we look forward to working with eligible cities to see if together we can develop effective public/private partnerships,” he concluded. John’s response, frankly, got under my skin. In-between all the ﬂow- ery promotional language about the ITIP program were phrases that left an impression that I knew was misleading at best, an out-and-out lie at worst:

• Trafﬁc.com’s contract with FHWA for data services requires… • Our contract with FHWA requires…

John was clearly trying to leave the impression that the Federal High- way Administration was driving this program and was giving marching orders (via the wording in the “contract”) to Trafﬁc.com. However, I knew—through years of discussions with the feds and prospective state/ local transportation agencies such as TxDOT—that the truth was quite the

14 The Journey Starts opposite. Congressman Shuster’s team had literally shoved this program —and the terms of the contract—down the throats of the FHWA Office of Operations that I worked for. In effect, the Office of Operations had been dragged into supporting the ITIP program kicking and screaming. So, unable to leave well enough alone, I responded. “John, thanks very much for the info, but I didn’t see you address the essence of my original posting – that state DOTs are in a quandary,” I said. “They have to somehow keep your data separate from the other data that they have (for traveler information purposes), and many/most don’t have the IT staffs to do this. I’d appreciate it if you could illuminate how you are addressing that specific problem.” Even before John had the chance to respond to that message, I posted another. “John, you keep talking about ‘our contract with the FHWA requires’ but it was my understanding that this requirement was handed down to the FHWA through legislation, isn’t that right? I also understand (and please correct me if I’m wrong) that the legislation was sponsored by someone with a potential business connection with your firm. [Italics added] If I got this wrong, please let me know and I’ll be more than happy to correct the record here. The goal here is simply to put out the truth for everyone to see.” John clearly didn’t appreciate what he saw as my attack on his company that was playing out in the email in-boxes of a whole lot of people with a potential interest in the ITIP program. His next message was an attempt to try to talk with me on the side and, hopefully, to nip this negative publicity in the bud. “Hi Jerry, I’m sure you want postings on the site to be accurate,” he said. “I am surprised that you would publish unsubstantial allegations on your site – even more so that they would be yours. Please give me a call at your convenience.” I felt that I was on a roll. I had put out the facts and the truth about what I knew to be a big federal scam designed to only benefit one company (Traffic.com) at the expense of the local agency partners and, ultimately, the traveling public. I knew that John, a practicing lawyer, had actually used the wrong word—“unsubstantial”—in his posting. My reference to “someone with

15 The ‘Smart Road’ Scam a potential business connection with your ﬁrm” was clearly referring to Cong. Bud Shuster. If a Congressman of the stature of Bud Shuster was pushing earmarked legislation to create a monopoly for a company in which he or his family or associates had a “business connection,” that would be very “substantial” and almost certainly a violation of congressional ethics and probably federal law. John undoubtedly meant to say “unsubstantiated,” which I had to reluctantly admit was true, based on my somewhat limited knowledge of this scam at that point in time. So I removed the sentence referring to that business connection on the web version of that message, although the full and uncensored version went out via email to the forum’s 1,000 or so subscribers. John wanted to talk to me off-line, but I was having none of it. I felt that the whole ITS community needed to be aware of the many very counterproductive aspects of this program, and the NTOC Talks forum reached a lot of people and agencies that could be harmed by it. So I decided to keep pressing the issue. “John, you are indeed correct – I would like everything here to be absolutely accurate,” I assured him. “And I removed the ‘unsubstantial allegations’ about any kind of a business relationship from my earlier posting. However, wasn’t I correct that the FHWA requirement was handed down by legislation? If I’m incorrect, please correct it here. And no, I don’t want to call you on the phone. Let’s air the truth here for all to see.” Shortly after John posted the forum message referring to my “unsubstantial allegations” and asking me to call him, John sent me a private email with considerably more venom. “I think it is irresponsible of you to post unsubstantiated – and incorrect – ‘understandings’ on the site,” he said. “You would not let one vendor use the site to attack another and neither should you. I’m always happy to work with journalists to get the facts straight. In the meantime, we would appreciate a clariﬁcation of your posting policy and an apology.” John concluded his message with “I repeated your libelous statement below,” and attached a copy of my earlier posting from the Talking Opera- tions Forum. Clearly, John was bringing out the big legal artillery, threatening to sue me for libel for what he now correctly characterized as my unsubstan-

16 The Journey Starts tiated allegations. He probably thought that the threat of a lawsuit would sufficiently scare me so that I would back off my efforts to aggressively expose the truth about this program. I have heard from sources that similar threats by Traffic.com’s top management over the years have caused more than one manager in the FHWA’s Office of Operations to slink away and refrain from challenging the ITIP program. But I was having none of it. Then I got what I thought at the time was an ingenious idea—but first some background so that you can understand its genesis. In the early 1980s, when I was Western Editor of Electronic Engineering Times (my next job after being jettisoned from Motorola for telling the unwelcomed truth to top management), I came to know and respect a long-time electronics journalist by the name of Don C. Hoefler. Hoefler for years was the Electronic News reporter who covered the electronics explosion in northern California, and is credited with coining the term “Silicon Val- ley.” In his later years, Don would write and publish a newsletter called Microelectronics News that benefited from his long-time connections with the top people in many Silicon Valley companies. A nearly full collection of newsletters is available online from the Smithsonian Museum. Microelectronics News was part inside scoop about management changes and new strategic business connections, and part scandal sheet. In the latter category, Don would often document some of the shenanigans that company executives would invariably get into. I recall once, for example, when he reported that a senior executive from a Silicon Valley company had gotten caught trying to get reimbursed for the cost of a high- priced Japanese hooker on his expense report. Don told me that typically once per year he would get a letter threatening legal action from an attorney representing an executive who had faced the brunt of one of Don’s “inside scoops.” He confided that the surest way to scare off such action—assuming that what he had printed was true —was to print that threatening letter in his newsletter. He routinely made such letters page 4 in his newsletter. That way, he said, if someone went after him the entire microelectronics industry would see the melodrama play out on his pages. He said that the challenger invariably abandoned his legal action, realizing that any possible retribution would not be worth

17 The ‘Smart Road’ Scam the exposure and embarrassment. Recalling my conversation with Don a quarter century earlier, I saw a direct parallel between the threatening letters that Don would receive and the threatening email message that John Collins had sent me. So I decided to post John’s email message on the Talking Operations forum as a message from him for all to see. From my point of view, that was quite appropriate since he in fact was responding to my forum posting, and I wanted the ITS community to be aware of our entire dialogue on this issue. Then, for good measure, I responded to his “posting” and dared John to sue me. “John, first of all, please do not call or email any more. Anything you have to say to me should be posted on this Forum for all to see,” I replied. “Secondly, I removed the online reference to any business relationship – if you scroll back online to the earlier message you’ll see that I removed… that reference, which I agree is unsubstantiated.” “The other reference I made was a question – wasn’t the program you referred to enabled by legislation – either DOT or DOD legislation? If I’m wrong, please correct the record here. Indeed, I could be wrong (but it would be an honest mistake).” “Regarding suing me for libel – you, of course, are an attorney and I am not. But I’d like to make a couple points: 1. You wouldn’t get a heck of a lot of money. 2. Your company wouldn’t do much future business in the ITS area if you sued the person that is (arguably) the best known in the ITS field. After all, I did write the original program plan for ITS America and started ITS Online, which was in its day the most popular ITS site out there. 3. Again, I’m not an attorney, but my understanding was that the TRUTH was an absolute defense against libel/slander suits. Isn’t that correct? You’re an attorney, tell me where I am wrong.” “Honestly, I don’t think you want to sue me,” I concluded, adding “Where’s the payoff in it?” John never did sue me for libel—Don Hoefler’s advice had worked to a T. But Traffic.com President David Janetta, who had been copied on John’s letter that threatened me, saw this as an opportunity to get in his own two-cents’ worth. He in turn responded back to both John and me.

18 The Journey Starts

“Also might want to suggest that he take a Political Science 101 course so he learns how the legislative and executive branches of government work. Last I checked, Congress passes legislation that gives the departments their marching orders and funding (such as a HW bill to DOT).” [Note: “HW” in this context stands for “highway”.] In other words, Jannetta was saying that the way things worked, Con- gress could essentially shove earmarked programs like ITIP right down the throats of the USDOT by giving “the departments their marching orders and funding (such as HW bill to DOT).” In essence, he was corrobo- rating what I had already pieced together, that Congress (Cong. Bud Shus- ter and his allies) was giving the “marching orders” to USDOT for this program, not the other way around. Of course, Jannetta, as a long-time political crony of the former House Transportation Committee Chairman Bud Shuster, would surely know how the system worked. Starting to feel quite comfortable using the Don Hoefler approach modernized for the Internet, I proceeded to post Jannetta’s email message on the Talking Operations forum and then responded to it. “I admit that I’m an engineer and not a political scientist, so pardon my naivete,” I said. “But I seem to remember from grade school that the Executive and Legislative branches were considered ‘co-equal’ branches of government. Isn’t that still correct? As I’ve said to John, please correct me if I’m wrong. (Of course, something could have changed since I was in grade school -- that was a long time ago.)” I was sure that I was on the right side of this issue challenging Traf- fic.com, and especially posting these email messages on the Forum. I’ve since received feedback from several of my ITS colleagues who saw this give-and-take in the daily forum digest that they appreciated my efforts to expose this very counterproductive earmarked program to the light of day. Steve Lockwood, a consultant from Parsons Brinckerhoff (PB) Con- sult who often advised Jeff Paniati, the FHWA Associate Administrator now in charge of the Office of Operations after his predecessor, Dr. Chris Johnson, had earlier been “reassigned,” noticed all this dialogue and emailed me a simple question: Jerry: What was the original Traffic.com issue that got all of this

19 The ‘Smart Road’ Scam

started?

My response, which I copied to Paniati:

John Collins posted a plug for the ITIP program, and how the data helps Planners. I then pointed out that DOTs I’ve talked with say that it’s a real problem taking mobility.com’s data, because they have to segregate it from their other data (which handcuffs them, and makes it more difﬁcult to provide traveler information).

He then continued the discussion, I responded, etc., etc.

FYI -- at least as of a year or so ago, at least Dallas and Houston had explicitly turned down mobility.com’s proposal, in large part, for the very reasons I cited in my email message to John… I actually did an interview with Freddie Zoolander of TxDOT’s Dallas District about why they turned away the earmarked funds, but when I mentioned it to my contact at the JPO I was told that the article was very sensitive to the FHWA (which is managing the ITIP program). So I didn’t run that interview. I’ll try to ﬁnd the unpublished version of that discussion and send it to you and Jeff, as I’m sure it will help illuminate some of the issues from the state DOT perspective.

If you follow the discussion thread all the way to the end, you’ll see what mobility.com’s Jannetta thinks of the USDOT (he almost describes them as order takers, rather than partners with the U.S. Con- gress). I thought it was really a two way partnership (I guess I thought that’s how all the operations stuff ﬁnds its way into the legislative proposals). I guess Jannetta is saying that’s not how it works, that Congress simply dictates to the USDOT. Sounds kind of “old school cronyism” to me.

Is he right -- do I need to take “Political Science 101”? You’re an old hand at the political wars. Does Congress really give the USDOT

20 The Journey Starts

“marching orders”? I thought it was much more of a give-and-take than that.

Steve’s response:

Jerry: This whole thing is an unfortunate - but fortunately rare - anomaly. It suggests why PPP are so difﬁcult. Irrespective of the merits, I would suggest there is no gain in making any more public noise about it.

I couldn’t have disagreed more strongly. Making “public noise” was exactly what I was trying to do, to try to make sure that the details of this scam were fully out in the daylight and not just swept under the rug. The “gain” I was seeking wasn’t personal, it was to hopefully make enough key folks aware of the very lopsided nature of the program so that it would get modiﬁed to maximally beneﬁt the local partners and, ultimately, the traveling public. So I wrote back (again, copying Paniati):

I guess you and I differ quite substantially on this point. I think it’s ethically and morally responsible to “make more public noise about it,” particularly this arrangement with traffic.com. It’s actually sti- fling efforts to share data throughout the country. Their business model handcuffs state DOTs that sign up for it. Worse than that, there could be some financial shenanigans going on. (I’m not saying there is, just that there may be.)

Steve wrote back (but no CC to Paniati this time) with a helpful lead:

Jerry my only concern is the damage it might do to the whole program. I was talking to Tom Bulger of Government Affairs (key ITS lobbyist for ITS-A, MTC among others) who worked for Westwood One, ﬁghting this whole deal. He said he would be happy to talk to you. Give him a call.

I would soon contact Bulger and ﬁnd out that he had already been

21 The ‘Smart Road’ Scam

fighting this battle for years. I would also soon realize that at the same time I was rabblerousing about the problems with the ITIP program on the Talking Operations forum, many others were working the same side of the issue. In fact, some very powerful and influential legislators had recently put the finishing touches to new language in the big transportation bill “SAFETEA-LU” designed to shut down Traffic.com’s monopoly and open up this big earmarked program to competition. Unfortunately, that effort was doomed to failure. While many subscribers to the Talking Operations Forum were undoubtedly enjoying the lively give-and-take between me and John, my bosses at the USDOT clearly were not. In an email message to my immediate boss Shirley Blye on a different but related subject, I encouraged her to check out the latest discussion about the ITIP program on the forum, thinking that she would find it interesting, if not constructive. Her initial feedback to me:

I checked out the pot-stirring on the NTOC site. Wow!

Around this time I became aware that the just-passed big transportation bill (SAFETEA-LU) had contained a new provision (“Part 2”) designed to open up the ITIP program to competition. My email note to Shirley highlighted a press release issued by New York Congressman An- thony Weiner about that provision:

Did you see this one [included a web address]? Sounds an awful lot like Congress is starting to smarten up about trafﬁc.com.

Her response:

Yes, I had heard about the change -- but not about this Congressman leading the effort. Subject matter expert tells me that this change -- Phase 2 -- is unfunded. Phase 1’s uncommitted funds continue to be- long to Trafﬁc.com. Regardless, it’s an opening. I thought the words in the message board were vitriolic and indicative of the character of the people using them -- just a personal opinion.

22 The Journey Starts

By “the character of the people using them” my guess is that she was referring to Trafﬁc.com President David Jannetta and Vice President John Collins, who had long been pushing the management and staff of the FHWA Ofﬁce of Operations around. Twenty minutes later I received a much more terse email message from Shirley:

Well, I completely understand where you are coming from. However, could you see your way clear to stopping the pot-stirring, including not highlighting it in the digest? I agree that it’s good to get “issues” out there, but as the facilitators -- once the issue gets going -- I think we can step aside.

I recommend ending the trafﬁc.com string -- without comment -- and not drawing attention to it in the digest. How do you feel about that?

When Shirley called me on the phone about this matter, her words were much closer to “orders” than just a “recommendation.” My guess is that her superiors had told her to tell me in no uncertain terms to back off. I recall her emphasizing that “as the moderator, you really shouldn’t be posting these edgy posts.” She kept implying that my role as “moderator” should involve reviewing and approving (or rejecting) others’ posts, but that I shouldn’t myself be involved in what she called the “pot-stirring.” After she said nearly the same thing four or five times over the phone it started to sink into my dense brain that the problem indeed was that I was posting these messages as the forum’s moderator. I needed someone else to run point on this issue, and to continue to challenge both Traffic. com and the FHWA about it. But my quandary was that while I knew that a lot of people impacted by this program were likely saying “yeh Jerry, go get ‘em!” behind the scenes, these same folks were unwilling to put their own necks on the line to publicly challenge what they undoubtedly knew was a very nasty and counterproductive scam. Who would fill the void that I had been ordered to abandon?

23 3

Marvin Raises a Ruckus

ohn Collins’ attempt to intimidate me into submission through the threat Jof a libel suit only piqued my interest and made me want to find out more about what was going on. I certainly knew at that time that the ITIP program was really designed overwhelmingly to benefit a single company —at the expense of the local partner and traveling public—and that Traf- fic.com had engineered this whole monopoly through the extraordinary influence of Congressman Bud Shuster and his political connections. But what else was going on, and who else might be involved in it? More than ever I wanted to get to the bottom of what was really going on in this program and to let my colleagues in the ITS field know about it. But Shirley Blye had plainly told me to cease and desist from any more “pot-stirring” and to let others take over that role. I knew, however, that few if any others would be willing to rock that same boat. After all, there’s absolutely no percentage in pissing off someone in the Federal Highway Administration (which administers the ITIP program) for fear of losing out in future FHWA-funded projects. Federal dollars were then and still are, to a large degree, the lifeblood of the ITS industry. Ironically, while I was being funded by the FHWA I was challenging this FHWA- administered program. That didn’t bother me, because I knew that I was absolutely on the right side of this issue.

24 Marvin Raises a Ruckus

Shirley’s admonition to me that “as moderator, you really shouldn’t be posting these edgy issues” kept bouncing around in my head. I believed that the details about the lopsided nature of the ITIP program had to get out to the field, and particularly to state and local transportation professionals who worked in cities that were on Traffic.com’s prospect hit list. They absolutely needed to know what was really going on in this program, because I knew that they would be on the receiving end of a very slick marketing pitch by Traffic.com that would make the program sound almost too good to be true. As I mentioned earlier, John Collins was and is a masterful salesman. The logical question therefore was: if I can’t post these “edgy” messages as moderator of the Talking Operations Forum, who will? If I could entice somebody else to do so, I could obviously approve these messages as the moderator, that wouldn’t be a problem. But I knew that nobody would be willing to stick their necks out as I had been doing. My solution: to create a team of courageous alter egos who could continue to post questions about the more counterproductive aspects of the ITIP program and keep this issue in the spotlight. So I simply made up the names of my new “rabblerousing” team: Marvin Erbeny, Glen Duke, Michael Tenant, and Gerome Rademacher. For each member of my team, I set up an email account on either Yahoo Mail or Gmail. That way, if anyone wanted to respond via email to their forum posts they could, and no one would be the wiser. Frankly, I had (and still have) a little “twinge” of ethical concern about creating these fake personas. I pride myself at being honest, straightforward and ethical, yet here I was setting up fake identities for ITS professionals to carry on my fact-finding and rabblerousing. In the end I convinced myself that it was OK, because:

1. It was all for a very important cause, that is, investigating and helping “out” a scandal that I was ﬁnding was more egregious every day. 2. I would of course have preferred to use and was more than willing to use my own identity, but that path had been taken away from me by my superiors at USDOT. 3. On the Internet, it is extremely common for people to take part

25 The ‘Smart Road’ Scam in discussions on forums and blogs using nicknames and fake names (aliases).

On August 8, 2005 – the day before Shirley would tell me to back off – I posted yet another message on the Talking Operations forum to “stir the pot”:

Subject: Open Questions for Trafﬁc.com

I still haven’t heard any feedback on some of the issues that I posed last week in my dialogue with the President/Vice President of trafﬁc. com (if you missed the discussion, a link is provided below).

So, gentlemen, here are the questions again: 1. Are any Texas cities close to coming on board for your program? 2. Do you have any solution to the data-separation issue that I’ve heard from different public-sector agencies? I’d be glad to expand on what I called the “quandary,” if you’re unaware of the speciﬁcs of this situation. 3. Wasn’t the FHWA requirement you mentioned actually handed down to the FHWA through legislation? And if so, what legislation was it?

Thanks for your help.

Jerry

Two days later there was absolutely no response to this message, from either Trafﬁc.com or anyone else. So my new “team” went into action. “Glen Duke” was the ﬁrst to respond:

I’m not surprised that you haven’t received any responses to these questions, but it seems to me you’ve gotten to the heart of the matter.

After much sole searching, our urban area decided to leave the millions of dollars that had been earmarked to help pay for roadside

26 Marvin Raises a Ruckus

sensors on the table. On the surface the deal looked attractive -- the federal government would help us pay to improve the instrumentation of our roadways through dedicated funding. But once we started to figure out how the arrangement would really work, we realized that we didn’t have the capability to constantly separate out traffic.com’s data from our own and data from other sources. With that constraint we would essentially have two options: 1. We could choose not to integrate that data with our own (so it would have limited usefulness), or 2. We could integrate the traffic.com data with our own, but then we wouldn’t be able to share that complete data set with other traveler information sources (such as TV stations), who help get the word out to many travelers about traffic conditions.

In the end, we concluded that while the offered deal might seem almost like a “gift” on the surface, once you get into the details it invites questions that are difﬁcult to answer (at least they were for us).

Glen was really a proxy for Freddie Zoolander, echoing Freddie’s points. Glen’s posting drew an almost immediate response from a long- time friend of mine, Barry Drogin, who I’m quite sure didn’t know then (and probably won’t know until he reads this) that I was, in fact, Glen. Michael Tenant was the next team member to respond to my initial query, referencing New York Congressman Anthony Weiner’s recent press release:

You might ﬁnd this interesting. My representative (Anthony Weiner of Brooklyn/Queens, NY) put out a press release on July 29 that seems to address this issue, too. The press release talks about a “competitive bidding process for trafﬁc data collection.” It certainly seems to be related to the same issue, is it not?

Interestingly, Michael was actually a proxy for Evan Lemonides, a founder and executive with the innovative New York company called Me- troCommute that had worked with their Congressman (Rep. Weiner) to

27 The ‘Smart Road’ Scam support new language spearheaded by Senator Orrin Hatch to open up the ITIP program to competition. Even more amazingly, a short time later Evan would post his own message responding to my original query:

Sec. 5508 of TEA 21, on its way to the President, takes away the monopoly that traffic.com has had here and lets state DOTs make their own choices on how to spend this money, and how to use the data. It is important for all the DOTS in each congested area to know that if they wait 6 months, they will no longer be restricted to working with traffic.com (and the data restrictions they impose), to get this federal money. It is also important that the private sector know that this money is now open to the field. This section was the result of a public/private coalition (Congressman Weiner’s office included) that fought hard to open this process up. We have a copy of the language from the bill for anybody who wants to see it.

The third member of my new team, Gerome Rademacher, chimed in the following day:

We looked at the traffic.com offering, but chose not to sign up because of what we perceived to be a problem in accessing traffic.com’s traffic data for real-time applications. We understood that by contract DOTs would not have access to that data until it was 24 hours old, which makes it pretty much useless for either operations purposes or traveler information. Obviously this makes use of the traffic.com data for third-party management of real-time incident detection applications or even emergency evacuation a concern. It’s certainly possible that we misinterpreted their contract, and it’s been a while since we’ve talked with them. Does anybody know if they’ve resolved this issue? (At least it was an issue with us -- may not be an issue with other agencies.)

I had heard through the grapevine about yet another of the stiﬂing data usage restrictions in the ITIP program, and wanted to ﬁnd out if that restriction was true. That posting drew three responses. While none of

28 Marvin Raises a Ruckus them directly addressed the question I posed about the availability of old data, at least the community was discussing this issue, which I knew could only be a good thing. I was still holding back on using the last member of the new team, Marvin Erbeny. I had decided that Marvin would be my main proxy and the point man to “stir the pot” into the foreseeable future. Since at this point in time none of the details of the agreements in this publicly-funded program between the local agencies and Traffic.com—particularly the details of the data usage and sharing restrictions—had been made public by either FHWA or Traffic.com. It was vitally important that these details and their ramifications get out to the ITS community through the Talking Operations Forum. That would be Marvin’s initial task. He would ask innocent but pointed questions on the Forum in the hope that someone would actually provide answers. (Later, “Marv” would take on a much more important clandestine communications role in interfacing with key sources and the authorities.)

Marv’s ﬁrst posting was on August 21, 2005:

Subject: Clariﬁcation about the Trafﬁc.com Arrangement, Please

Long after I resigned in September 2005 as NTOC’s Editorial Direc- tor to pursue several exciting new high-tech ventures (see next chapter), Marv would still be at it, stirring the pot.

Subject: Does the trafﬁc.com Arrangement Under ITIP2 Still Affect Real-time Data on CMSs? [Jan. 2, 2006]

Subject: Do the Issues Remain with Trafﬁc.com’s Latest Arrangement under the TTID Program? [March 31, 2006]

Subject: More Details on the Atlanta/Las Vegas Agreements Please [June 13, 2006]

29 The ‘Smart Road’ Scam

Drawing a Response from the FHWA

The response to Marvin’s March 31, 2006 message from the Fed- eral Highway Administration’s contract officer’s technical representative (COTR) for the ITIP program, Brandy Meehan, was particularly interesting. The initial question – like most of Marvin’s questions – had to do with the local agency partner’s (in this case, Utah DOT’s) permissible use of the data from the program. Remember, at this point in time the FHWA had not made any of the agreements between Traffic.com and the local agencies (including the wording from its own Task Order with Traffic. com) public. That would only come much later when the non-profit government watchdog organization Sunlight Foundation would request those documents in a Freedom of Information Act request. Brandy’s initial response on the forum parroted the typical response that the agency was putting out about the program:

Data collected in the ITIP program can be freely used by public agencies for internal use and for free, basic traveler information. Beyond this requirement, it is left up to the public agency and ITIP contractor to work out other data sharing arrangements in a locally negotiated agreement.

However, neither Marvin nor Gerome were satisﬁed with this boiler- plate response. Marvin dug into the details further:

In addition to the original questions I raised (which are still on the table), your response triggered another basic question and several sub-questions: What exactly does “free, basic travel information” mean? Does it mean “real-time” information, or is that traveler information delayed (and, if so, by how long)? How does it differ from the more detailed traffic information that traffic.com sells? Can UDOT share this basic information with other (non-UDOT) traveler information sites and/or television stations? I’d appreciate some illumination of these issues by either UDOT or traffic.com folks.

30 Marvin Raises a Ruckus

Again -- many thanks for answering my questions as best you could! I hope that both UDOT and trafﬁc.com weigh in on these issues, which are vitally important to me and my peers around the country.

Gerome asked a related question, regarding where he might be able to review the actual language of the agreement:

Since the TTID program is a federal program and is spending public dollars, the details arrived at during the local agreement phase between UDOT and trafﬁc.com should be available for review, right? Can you point me to a website address where I can view those details? We’re one of the cities that was funded under Part 1 of the TTID but are considering possibly going to Part 2, which at least seems on paper to have some advantages. The details from the Utah arrangement will help us determine how real those beneﬁts may be.

Of course, my hope in posting these requests (long after I had left my NTOC job) was to get all of the information about these “locally negotiated agreements” fully into the spotlight, as they should have been for a publicly ﬁnanced program like TTID. Unfortunately, the Federal High- way Administration was not about to do so. After sitting on Marvin’s and Gerome’s questions for almost two weeks, Brandy sent private email messages to both “individuals.” Her message to Gerome:

Hi Gerome,

Please contact Richard Manser at UDOT to request a copy of the agreement. His email is [email protected]. If you wish to talk with me about these options, please call 202-366-6598.

Thanks!

Brandy

Her message to Marvin:

31 The ‘Smart Road’ Scam

Hi Marvin,

Please give me a call and we can talk more about how the ITIP program is structured. I think it will be easier than going back and forth over the NTOC.

Thank you!

Brandy

Marvin’s almost immediate reply:

Thanks for the note. The questions I raised have been asked not only by me but by many of my peers I’ve talked with at various conferences (ITS America Annual Meeting, ITE state chapter meeting, etc.) for some time now. You must be aware that the transportation community at large is asking these questions, not just me. I’d appreciate it if you would do your best to respond on the Talking Operations Forum. My understanding is that this type of issue is exactly what the Forum’s for, and by responding to these questions you’ll be providing answers to a wider audience of folks who need to know rather than just to me.

Brandy wasn’t buying Marvin’s request to publicly provide these details of the program by responding on the forum. Perhaps she was also starting to smell a rat when she responded:

Hi Marvin,

Thanks for your concern. Do you mind sending me your phone number?

Thank you!

Brandy

32 Marvin Raises a Ruckus

At that point I was facing a dilemma. Should Marvin come out of the closet? I wasn’t exactly sure where Brandy was coming from. I didn’t know Brandy personally, as I did many of the more senior people in the Office of Operations. Did she want to know more about Marvin’s identity just for herself, or had her managers in the FHWA Office of Operations asked her to try to find out who Marvin was and why he was stirring the pot? In the end I decided not to come out of the closet, because I didn’t want to lose the services of my number one online sleuth. Marvin would soon repay his continued survival in spades.

33 4

New Horizons

hrough the summer and into fall 2005, three different exciting high- Ttech (but non-transportation-related) opportunities would come seemingly out of nowhere. Because I was feeling really stale in the eighth year of my NTOC job, I would jump on all of them with both feet and ultimately resign from my NTOC position to pursue them. Ironically, the seeds of all three opportunities would arise out of chance meetings with three different and unconnected people during my same June trip to DC to participate in the semiannual meeting of the National Transportation Operations Coalition. During that trip I stayed, as usual, at the Capitol Hill Suites at C and 2nd Streets SE, just two blocks from the Capitol. During one evening stroll along the pubs and restaurants on nearby Pennsylvania Ave., I happened to run into a homeless man by the name of Conrad H. Cheek, Jr. selling dollar Street Sense newspapers along nearby Pennsylvania Ave. He and I started chatting, and he said that while he was homeless he was also an inventor and had invented a device he called a “portable universal cell phone charger,” or “PUCCER” for short. He told me that he had borrowed $500 from one of his regular customers to apply for a patent for his invention, and had paid off that loan dollar-by-dollar by staying out longer and selling extra newspapers.

34 New Horizons

Frankly, I thought that most of what he was telling me was b.s., but I told him that if he could prove that he had indeed invented such a device and submitted a patent application for it—and the device was promising —then I might be willing to help him commercialize his invention. To me the idea of helping out someone who was down on his luck and making a buck at the same time held great appeal. Conrad agreed to bring a copy of the first page of his patent application to the Hawk & Dove pub on Pennsylvania Ave. where I agreed to meet him later that evening. Over a pitcher of beer he gave me that copy and told me he would mail me the full application within a week or so. He also told me about his background, that he had been a medical industry technician but had become homeless a few years earlier after losing some inside political wars at the company he had worked for in Colorado. He said that he was married but had been estranged from his wife for over five years. He also told me that his father, Conrad H. Cheek Sr., had been a Tuskegee Airman in World War II. (The Tuskegee Airmen were a ground-breaking squadron of black fighter pilots who never lost a plane that they were escorting in the European theatre.) While Conrad’s story was fascinating, I still thought that it was probably mostly baloney. Amazingly, however, when I looked up the list of Tuskegee Airmen after I had returned home to Texas there was his dad’s (and hence his own) name on the list. And ten days later I received his full patent application in the mail. Several weeks later Conrad, the homeless inventor who gave chess lessons every Tuesday evening to inner city kids at a DC library along Penn. Ave., would be the subject of a feature story in the Washington Post’s Sunday magazine. Over the next nine months or so I would talk frequently with Conrad, and form a new corporation (called “PUCCER Enterprises, Inc.”) to commercialize his invention, a very clever device that utilized an automobile cigarette lighter socket, which enabled it to be a “universal” charger for any cellphone that was equipped with a car charge adapter. I was the President and CEO, and he was the Vice President and Chief Technology Officer. The corporation would purchase a cellphone and an inexpensive laptop computer for him to use so that we could readily communicate with each other. I would also fly him to Austin to work with my neighbor and

35 The ‘Smart Road’ Scam friend who’s a patent attorney to work on updating his patent application. (Conrad’s patent application had actually expired due to his non-response, but was within the time interval in which it could be “rejuvenated.”) Dur- ing his trip to Austin I also bought him some clothes (including an inexpensive suit and shoes), and a carry-on suitcase. Ever the optimist, I had every expectation that he would be needing those items soon. Unfortunately, this venture would not ultimately pan out. Six months or so later the patent ofﬁce informed us that each of the claims in his patent application had been denied because of previously patented inven- tions. Worse, despite his up-front assurance that he would just use the funds I was fronting him to pay for business-related expenses (including buying parts to make 20 or so PUCCER prototypes), I discovered that Conrad was using the funds to pay for decidedly non-business expenses, including his playtime with local hookers. I demanded that he return both the laptop and cellphone, but he refused, knowing I had little leverage to retrieve them at that point. Conrad was and is a very clever and inventive fellow, but completely lacks a moral/ethical compass. I would soon realize that others much higher up in Washington, DC’s pecking order would share a similar malady.

Out in Africa

Like the PUCCER venture, the second opportunity that presented itself in June, 2005, came about entirely by accident. After exiting the NTOC meeting in downtown Washington, DC, I needed to catch a taxi to Reagan National Airport to catch my ﬂight home. To this day, the streets in downtown DC—with its spokes and angled streets—is confusing to me, and I wasn’t sure where was the best place to catch a cab that would already be heading in the direction of National Airport. So I asked a nearby middle-aged black lady in a very colorful dress where was the best location to take a cab, and she politely pointed to the right spot. We chatted a little, and she told me her name, Rosemary Segero. I told Rosemary that I consulted in the area of intelligent transportation systems; she said she had a small humanitarian/consulting company that was trying to bring new business to Africa. (She was a Kenyan native, and had moved to DC a few

36 New Horizons years earlier after marrying a retired U.S. serviceman.) We exchanged business cards, I gave her some leftover Metro passes from my trip, and we waived goodbye. A couple weeks later Rosemary sent me a nice email note saying that she enjoyed our short chat and that I should consider bringing intelligent transportation systems to Africa. That weekend, I read an Op-Ed piece in our local newspaper (the Austin American-Statesman), written by Uni- versity of Texas Professor Gary Chapman, entitled “More foreign aid will pour into Africa, but is the money part of the problem?” I thought that piece was very relevant to Rosemary’s efforts, and FAXed her a copy. She and I talked and emailed fairly often in the coming weeks. She sent me a copy of an email message she had sent to Dell Computer Chair- man Michael Dell and President/CEO Kevin Rollins, urging Dell to put a computer manufacturing plant in Kenya. The letter used very poor Eng- lish, however, and I knew that the Dell executives would just toss it into the trash. My ﬁrst thought about the substance of her letter was that having Dell assemble computers in Africa would be a good thing. My second thought was that it would be an even better thing to start up an entirely home-grown computer company (not just an assembly plant) in Africa that would kick Dell’s ass there! (I have a competitive streak, as you might be able to tell.) I documented my thoughts about how we might set up such a venture. Rosemary was excited about it, and told me that she was plugged in to many of Africa’s senior leaders. I asked her which ones. “I know the Vice Presidents of many African nations, including Kenya and Tanzania,” she said, adding “and I know the President of Uganda.” “Then we need to put our venture in Uganda,” I told her, knowing that support from the top of the country would be essential to get by governmental red tape and to attract local investors. I set my rules for participating in a new Ugandan venture: “The President of Uganda has to personally support this effort, and they (Ugandan side) need to pay our travel expenses for the ﬁrst visit. That will show that the Ugandan side buys-in to this effort.” Rosemary understood and agreed. We continued our dialogue. I tried very hard to get my wife Pam excited about this venture, but she would have nothing to do with it. “You

37 The ‘Smart Road’ Scam don’t know how to start a computer company,” she would say time and time again, almost yelling. When someone tells me point blank that I don’t know how to do something that makes me want all the more to prove them wrong. The last straw was when Pam gave me an ultimatum: “If you go to Uganda, I’m going to divorce you. If you don’t, I won’t,” she said. That pretty much assured that I would be going, and that we would be splitting up. In September, Rosemary invited me to a special reception at the Hart Senate Office Building in DC where Uganda President Yoweri Museveni was talking, along with several other speakers, about Uganda’s efforts to fight AIDS. After his talk, as he was greeting audience members, Rose- mary told him in Swahili that she had been talking with me about a new computer venture in his country, and asked if he would like to know more about it. He said he did, and I handed him copies of several preliminary writeups . Our discussions would continue through the fall, and Rosemary was communicating frequently with Bishop Aaron Siribaleka, the leader of a non-governmental organization (NGO) there called the African Christian in Development (ACID) Trust. These discussions would also increasingly involve Professor Chapman, who in addition to being a teacher was also the Director of the 21st Century Project at the Univ. of Texas’ LBJ School of Public Affairs and had a long-time interest in helping Africa come into the computer age. In January, 2006, Professor Chapman, Rosemary Segero, and I all flew to Uganda at the request of Uganda President Museveni’s office to meet with the President and others for the purpose of brainstorming the creation of this new computer company. Bishop Siribaleka funded the trip, meeting that part of my requirement. Based largely on my earlier writeups to Rosemary about this venture, the Bishop had actually incorporated a new “Uganda Computer and Communications Company” (UCCC) prior to our arrival there. On the first day of our trip, he gave me a bound copy of all the incorporation documents and a proclamation signed by a number of high officials saying that henceforth the name of every computer made by the UCCC would start with “Jerry.” Unfortunately, the second part of my requirement – that President

38 New Horizons

Museveni be on board and support our nascent initiative – never quite came off. The appointed time slot for our scheduled meeting with the President, 7:30 pm on a Friday night, got scrubbed when his meetings were running late and an earlier meeting with a visiting UN team slid into our slot. His Excellency, as everyone addressed him, was also right in the middle of a heated Presidential campaign. We actually attended one of his rallies with Bishop Siribaleka in the hope that we would be able to meet with President Museveni afterward. Prof. Chapman and I were the only white people among the 25,000 or so participants. While we heard through the grapevine that President Museveni noticed us in the crowd —how could he not?—our highly anticipated meeting never happened. However, we did participate in seven of what I could best describe as “religious revival meetings” about our new venture, where Rosemary, Gary, and I all addressed the hundreds of interested Ugandan parents and their children about this computer initiative. While I’m sure few of the parents knew the first thing about computers, they knew that their kids could have a better life if they did. Bishop Siribaleka even made a short movie of our trip and these meetings, complete with a music score. I would work with Prof. Chapman and the Austin chip maker AMD on this nascent effort for many more months. While I wasn’t making any money from this effort, I had hopes that I would eventually benefit financially if we could create a successful computer venture there. In June, 2006, a number of Ugandans (including President Museveni’s computer advisor, Kin Kaliisa) attended the huge World Congress on Information Technology (WCIT) in Austin at Prof. Chapman’s special invitation and AMD’s expense, and we would have many more meetings and discussions while they were here. Unfortunately, that effort has stalled since then. AMD, which was working with a number of developing nations to build their low-cost and low-power Personal Information Communicator (PIC) in-country – and was interested in doing so in Uganda -- would soon abandon the PIC program. Kaliisa, who had promised assistance from the President’s office to get high-level Ugandan support for this new computer venture, never followed up after returning to Uganda. I still believe that the creation of a Ugandan computer company that

39 The ‘Smart Road’ Scam would design and manufacture computers tuned to the unique requirements of the African market could be a big winner. Getting these ma- chines to access the Internet could greatly help energize their economy by bringing their goods (particularly clothing and jewelry) to a worldwide market. Assuming that this company was majority Ugandan owned, its proﬁts would remain in the country where they could be used to help ﬁght malaria, AIDS, and other societal problems. Since 2006 I’ve had occasional email conversations with Bishop Siri- baleka. In the most recent message from him, in late June 2008, he said:

Praise God who has kept us alive and continous thinking in our plans. Thanks for my email and It’s good to hear that you still have interest in the Computer project that we discussed in 2005-2006.

He and I share the same vision, even if we might disagree in some ways about how to get there. We both still believe that technology could be a key in raising standards of living in that continent.

Sending digital music... legally

The third new technology venture I would pursue would be inspired by a chance meeting on the other end of my cab ride to National Airport in June 2005. With an hour-and-a-half to wait before my ﬂight, I wandered into the nearest airport bar and ordered a pint of the local amber beer. By choice, I sat on a barstool next to a pretty young Asian lady named Laura, rather than next to a bunch of other “old farts” like myself sitting further down the bar. We struck up a conversation. I told her about my job, and my chance meeting with a “homeless inventor” during my trip that I thought showed promise. Laura told me that she was going through a reassessment of her life, something she called her “Saturn Return,” and gave me the web address of her blog where I could ﬁnd out more about what she was going through. Coincidentally, she said that her natural father, like Conrad’s, had also been a Tuskeegee Airman during World War II. In his later years he was a pilot in the Vietnam War, and she was born on the island of Guam

40 New Horizons at the very end of that war. We exchanged business cards. Over the next several months Laura and I would communicate fairly regularly, mostly by email. I would tell her about the nascent PUCCER venture as well as my discussions about starting up a new computer venture in Uganda, which Laura found particularly interesting because she had a close friend who was originally from Uganda. At my suggestion, Laura even had lunch one day in DC with Rosemary Segero to discuss our venture, and I invited her to attend President Museveni’s reception that fall along with me, Rosemary, and two other friends of mine who had done volunteer work in Africa. I’m a big fan of the poetry (lyrics) in popular music, and thought that the lyrics of Duran Duran’s hit song “Come Undone”—which Laura was unfamiliar with—might have a special meaning to her, as she was going through her “Saturn Return” process and trying to sort out what’s important and to ﬁnd her place in the world. So I got onto the Internet and visited every website I knew about that sold digital music, including iTunes and MSN Music, with the intent of buying and sending her a copy of Come Undone. To my surprise, none of these sites would let me simply buy a song and send it as a gift to someone else over the Internet. They would only let buyers download digital songs themselves. Of course, I could download it and then email it to her, but that would violate copyright laws and probably wouldn’t work anyway because of what is called “digital rights management” that was appended to many digital songs back then. So I ended up buying a copy of the whole Duran Duran CD for her at BestBuy and mailing to her. “Necessity is the mother of invention,” as the old saying goes, and the frustration I had felt in simply trying to buy and send a single song over the Internet sparked my interest. Why couldn’t—or, at least, wasn’t—it being done? I concluded that the problem was that Apple, Microsoft, and other digital music vendors were still gun shy about letting people send or share digital music over the Internet because of all the legal trouble that the original Napster had gotten into. But it seemed to me that there was nothing inherently illegal about sending a digital song as a gift over the Internet.

41 The ‘Smart Road’ Scam

Over the next several weeks my thoughts about how to do this legally would coalesce. I would come up with a novel process that would completely separate the buyer of the digital songs from the recipient, something that none of the online music sellers were doing. I would then get together with a friend, neighbor, and “fellow techie” who already had three patents, to further refine our approach. (I had one patent from my work at Motorola years ago, but I hadn’t kept up with how the patenting process worked and he had.) We would soon submit a provisional patent application for our new method, and follow up with the more detailed “non-provisional” application a year later. I would also work with my patent attorney/neighbor/ friend to respond to the U.S. Patent Office’s office actions related to our invention. I would also get with the same web programmer I had worked with a year earlier to revamp the NTOC website to create a new e-commerce site for our new venture, “Deliverasong.com.” Deliverasong.com would debut during the 2007 South-by-Southwest music festival in Austin. I flew in Jeff, my programmer and partner from DC, and we spent a crazy several days at SXSW selectively telling people about our new site, networking, and listening to some great music. Our new Deliverasong.com site featured original music from a dozen or so very creative Austin singer/songwriters, headlined by my close friend and long-time Austin smooth jazz and blues singer Connie Jo Kirk. If we ultimately receive a patent for our method, one of the first potential licensees would almost certainly be Amazon.com, which entered the online digital music business last year in a big way with over 5 million different songs. Amazon.com lets you send virtually anything they sell to someone else as a gift – except for digital music. Our method would allow them to do so legally. The success of this venture rested on our ability to obtain a patent for our novel process, but that effort ultimately failed. Our application was for a “business method” patent, but the U.S. Patent and Trademark Office has almost entirely declined to approve such applications. After going around and around with the patent office for nearly three years—seeming to convince the patent examiner, only to have new objections to our invention—our application was ultimately rejected.

42 New Horizons

I knew going into this and the other two technology ventures that they were all high-risk and potentially high payoff. In the world of high-tech entrepreneurship absolutely nothing is certain, a fact of which I am more than ever painfully aware. However—quoting an old golf analogy—I didn’t “leave anything in the bag.”

Teddy Roosevelt’s Words of Wisdom

When I sometimes get down and wonder why I left my secure but routine NTOC position and went off after these three “new horizons” in the ﬁrst place, I get inspired by some words that President Teddy Roos- evelt uttered almost a century ago:

It is not the critic who counts: not the man who points out how the strong man stumbles or where the doer of deeds could have done better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood, who strives valiantly, who errs and comes up short again and again, because there is no effort without error or shortcoming, but who knows the great enthu- siasms, the great devotions, who spends himself for a worthy cause; who, at the best, knows, in the end, the triumph of high achievement, and who, at the worst, if he fails, at least he fails while daring greatly, so that his place shall never be with those cold and timid souls who knew neither victory nor defeat.

43 5

Key Image in a Jigsaw Puzzle

y plate was certainly full during the fall of 2005 as I was transition- Ming out of my role as NTOC Editorial Director to pursue several different high-tech ventures—and at the same time transitioning out of my 13-year marriage, which had unfortunately crashed and burned. How- ever, I couldn’t just let the whole Traffic.com mess go. John Collins’ effort to bully me into backing off from challenging the ITIP program just made me want to know more about what was going on with this program and what might be lurking below the surface. I also had a pretty good idea who from the ITS community besides Collins were right in the middle of this scandal and, frankly, I didn’t (and still don’t) want them to get away with it. I already knew that the program was a bad deal for the local transportation agency partners and ultimately the traveling public in the cities that signed up for it, but I suspected that there was much more to it than just that. I figured that a good place to start was with former Cong. Bud Shuster, the former Chairman of the House Transportation and Infrastructure Com- mittee and “king of pork.” Shuster had led the effort to get the earmark in place for Traffic.com in the big 1998 transportation authorization bill “TEA-21.” So I did a Google search on “Bud Shuster” and “ethics” and

44 Key Image in a Jigsaw Puzzle the first thing that appeared was a 1996 complaint by a fellow named Gary Ruskin to the House Ethics Committee, calling for an investigation into whether Shuster “violated criminal prohibitions against the acceptance of illegal gratuities, as well as House Rules.” Ruskin was the Director of a small non-profit organization called the “Congressional Accountability Project.” I would soon find out that Ruskin was a protégé of Ralph Nader, and that this organization was one of many similar public-interest non- profit organizations that Nader has spawned over the years. Four years later, on October 5, 2000, the House Ethics Committee would issue a report and “letter of reproval” about this matter, “mixing hard words with leniency,” according to a New York Times report at the time. ‘’By your actions you have brought discredit to the House of Rep- resentatives,’’ the committee said. A major part of the complaint (and investigation report) surrounded Cong. Shuster’s connection to his long- time former Chief of Staff-turned-lobbyist, Ann Eppard. ‘’They call it serious official misconduct, but they won’t punish it,’’ Ruskin was quoted as saying in the New York Times piece. Less than two weeks later Ruskin would write to the Ethics Committee again, asking the committee to reopen its ethics investigation into Shuster’s activities “based on new information about his conduct and other related materials.” It seemed clear that Eppard’s lobbying business had flourished because of her direct connection to one of the most powerful people in Con- gress, arguably the most powerful Congressperson because of the billions of dollars he could control through the transportation authorization process. If a company hired Eppard as its lobbyist it would clearly have an “in” with the most influential legislator with respect to transportation earmarks.

A Game Played by Both Sides of the Political Aisle

Of course, the game where associates of powerful legislators become ultra-successful lobbyists is well known. For some reason Pennsylvania’s politicians seem to be especially good at it, perhaps because the politicians there have been at it for a long time. Pennsylvania also has some

45 The ‘Smart Road’ Scam very senior federal legislators who are gatekeepers of billions of dollars of federal “pork.” Republican Shuster, of course, has significant influence over the spending of hundreds of billions of dollars as the Chairman of the House Transportation and Infrastructure Committee, but such gamesmanship is played equally well by legislators from both sides of the political aisle. Just west of Shuster’s 9th congressional district lies the 12th congressional district, represented by long-time Congressman Jack Murtha. While Murtha is best known in recent years as one of the earliest and most vocal opponents of the G.W. Bush Administration’s prosecution of the Iraq War, he and his brother, Robert C. “Kit” Murtha, for years were adept at playing the Democratic version of the Shuster-Eppard influence game. Murtha is now the Chairman of the very powerful chairman of the Defense Appropriations Subcommittee, having assumed that post (after being the Ranking Member of that Subcommittee) following the Demo- cratic Party’s takeover of the House of Representatives in the November 2006 election. In that role, he is one of the key gatekeepers of hundreds of millions of dollars of “pork’ and, in fact, has recently been in the news for providing millions of dollars of earmarked funding for Concurrent Technologies in his own district . While the conservative magazine The American Spectator ran one of the earliest in-depth looks at Cong. Murtha’s ethics issues, publications and organizations on both sides of the political aisle have railed against Murtha’s earmarking gamesmanship, particularly in the past two years. Shortly after the November 2006 Ken Boehm, the chairman of the conservative government corruption watchdog organization National Legal and Policy Center, was quoted in an editorial in the New York Post as warning that Murtha’s selection as the Democrats’ new House Majority Leader would “be a clear sign that the new Congress has no intention of ending the culture of corruption.” In that same piece, Melanie Sloane, the Executive Director of the liberal watchdog Citizens for Ethics and Responsibility in Washington (CREW) was quoted as saying ““Pelosi’s endorsement [of Murtha] suggests . . . that she was interested in the culture of corruption only as a campaign issue and has no real interest in reform.” CREW currently lists Murtha as one of the 22 most corrupt members of

46 Key Image in a Jigsaw Puzzle

Congress. Interestingly, the Democrats’ takeover of Congress in the Novem- ber 2006 national election was certainly due in some part to their party’s promise to clean up the “culture of corruption” in Washington, DC. Just after the election, when new House Speaker Nancy Pelosi was pushing an ethics reform proposal, Murtha was quoted by Roll Call as saying those reforms were “total crap.” It seems that once a legislator gets comfortable in yielding the power of the federal purse, any efforts to clean house and throttle back that power are only met with derision.

More Google searching turned up more interesting information about Shuster and his questionable ethics. A report in the Washington Post back in the spring of 1998 went into that relationship in considerable depth. A caption from one photo in that piece said:

Lobbyist/fund-raiser Ann Eppard and House Transportation Commit- tee Chairman Bud Shuster (R-Pa.) have so intertwined their ofﬁcial, professional, political and personal lives that it is often hard to dis- cern one kind of activity from another.

Amazingly, I discovered that “60 Minutes” ran an expose about Shus- ter’s questionable ethics less than 10 days after the House Ethics Panel issued their ﬁndings. Not surprisingly, that expose focused on Shuster’s relationship with Eppard, and seemed to imply yet a more personal type of “intertwining.” According to a report on CNN following the airing of that piece, 60 Minutes showed video evidence that Shuster was trying very carefully to hide the fact that he was frequently staying all night at Eppard’s place. Quoting from that piece:

In a report broadcast Sunday, reporter Mike Wallace said the CBS-TV show observed Rep. Bud Shuster, R-Pa., on 11 occasions earlier this year lying on the back seat of Ann Eppard’s car as she drove out of her garage in the morning.

“She’d make several turns, and when she thought no one was watch-

47 The ‘Smart Road’ Scam

ing, they’d both get out. She’d walk back home, while Shuster, here hiding under a baseball cap, would drive her car to Capitol Hill,” Wallace said.

Interestingly, Congressman Shuster announced his retirement the day after being sworn in to serve for the 2001-2003 term . While he cited both his and his wife’s health issues as a primary reason for his retirement, the combination of a rebuke by the House Ethics Committee and an embarrassing expose on 60 Minutes, coupled with newly adopted term limits on committee chairmanships, undoubtedly all played a role in his decision. From further Google searches I found that Ann Eppard and “Ann Ep- pard Associates” had been one of the earliest registered lobbyists for Traf- fic.com, pulling in $65,000 in fees in 2001, according to data provided by the Center for Responsive Politics. Clearly, Traffic.com’s relationship with their patron, Bud Shuster, had not ended with the passage of the original earmark language in TEA-21 or his retirement at the end of January 2001. (I would later discover many more continued connections between Shuster and his associates and family and this scandal.) I felt then (and feel even more strongly today) that understanding Bud Shuster’s role in the “Traffic.com scandal” was pivotal to understanding its nitty-gritty details, and I wanted to know more. I had been communicating with my old friend Mike Curran, the Editor of Inside ITS, about my “interesting” dialogue with John Collins on the Talking Operations forum. So I called Mike frequently during the fall of 2005 to pick his brain both about Shuster’s role in this whole scam as well as where he thought I might look for more information. Mike said that one of his key sources for inside information about Shuster was Damon Chappie, a well-regarded investigative reporter for Roll Call. Over the years Chappie, whose often focused on public orrup- tion stories, had been investigating possible shenanigans by such high- profile individuals as House Speaker Gingrich, House Majority Leader Tom Delay, and Ohio Congressman James Trafficant. His investigations into the activities of all three lawmakers would help drive official probes into their activities. Unfortunately, Chappie would pass away on November 5, 2004 from

48 Key Image in a Jigsaw Puzzle numerous severe health problems he had contracted in recent years, including glaucoma, hepatitis, and HIV (contracted through a blood transfu- sion). At the time of his death he was only 40 years old.

The Original Earmark in TEA-21

If ﬁguring out how the Trafﬁc.com scandal was set up was analogous to solving a jigsaw puzzle, Bud Shuster’s picture increasingly seemed to be at the center of that puzzle. Shuster was clearly the driving force behind the vague but effective earmark language inserted into the big “TEA- 21” transportation authorization bill in 1998:

SEC. 5117. <> TRANSPORTATION TECHNOLOGY INNOVATION AND DEMONSTRATION PROGRAM.

(3) Intelligent transportation infrastructure.--

(A) In general.--The Secretary shall carry out a program to advance the deployment of an operational intelligent transportation infrastructure system for the measurement of various transportation system activities to aid in the transportation planning and analysis while making a signiﬁcant contribution to the ITS program under this title. This program shall be initiated in the 2 largest metropolitan areas in the Commonwealth of Pennsylvania. The program may locate its database at the facility authorized under paragraph (6). (B) Description.--The program under this section shall meet the following objectives: (i) Build an infrastructure of the measurement of various transportation system metrics to aid in planning, analysis, and maintenance of the Department of Transportation, including the buildout, maintenance, and operation of greater

49 The ‘Smart Road’ Scam

than 40 metropolitan area systems with a cost not to exceed $2,000,000 per metropolitan area. For the purposes of this demonstration initiative, a metropolitan area is defined as any area that has a population exceeding 300,000 and that meets several of the criteria established by the Secretary in conjunction with the intelligent vehicle highway systems corridors program. (ii) Provide private technology commercialization initiatives to generate revenues which will be shared with local departments of transportation. (iii) Collect data primarily through wireless transmission along with some shared wide area networks. (iv) Aggregate data into reports for multipoint data distribution techniques. (v) Utilize an advanced information system designed and monitored by an entity with experience with the Department of Transportation in the design and monitoring of high reliability, mission critical voice and data systems. (C) Eligibility.--In addition to the amounts made available under subparagraph (D), the program authorized under this paragraph shall be eligible for funding under sections 5207 and 5208 of this Act. (D) Funding.--Of the amounts made available for each of fiscal years 1998 through 2003 by section 5001(a)(2) of this Act, $1,700,000 per fiscal year shall be available to carry out this paragraph. (E) Federal share.--The Federal share of the cost of a program carried out under this paragraph shall be 80 percent of the cost of such program.

At ﬁrst glance, it might appear that this language was describing a

50 Key Image in a Jigsaw Puzzle program that really wasn’t a very egregious “earmark” at all, because the language was relatively benign. After all, it didn’t earmark the money for a specific contractor. While this language may have been intentionally vague—so as to de- flect any criticism that that this program was wired from the start for a particular contractor—it provided the initial framework for what would later turn into a monopoly for a single company (Traffic.com) by:

• Giving the Transportation Secretary the authority to carry out the program. • Specifying the ﬁrst two Pennsylvania cities that would receive funding from this program (Philadelphia and Pittsburgh). • Identifying the intention of the program to eventually expand to 40 big congested cities nationwide. • Specifying that federal funds of up to $2 million per city would make up 80% of the program’s funding, but failing to specify the source of the remaining 20%.

This authorizing language in TEA-21, in any case, was just the ﬁrst step in creating Trafﬁc.com’s monopoly. While it provided the starting point for what was then called the Intelligent Transportation Infrastructure Program (ITIP) , funding to expand the program nationwide and appropriate millions of dollars more in funding would require further clever political maneuvering in Congress.

Next Step: The Appropriations Process

The lead story in the January 15, 2001 issue of the industry newsletter Inside ITS, entitled “Traffic.com claim to $50 million ITS earmark raises questions,” first alerted the ITS community about the political gamesmanship that was going on behind the scenes. “If the $50 million goes to Traf- fic.com, it would be by far the largest amount of money ever given to a company under the federal ITS program. In fact, it could be the only money ever directly awarded to a company for deployment,” observed Inside ITS Editor Mike Curran.

51 The ‘Smart Road’ Scam

With the support of Shuster and his legislative allies and the company’s high-level lobbyists (according to the publication The Hill, the company has spent over $900,000 on lobbyists over the years), Trafﬁc.com was able to earmark an additional $50 million in funding for the ITIP program in the Fiscal Year 2001 Transportation Appropriations bill . Here’s the exact language in that bill, which was signed into law by President Clinton on October 23, 2000:

Sec. 378. Notwithstanding any other provision of law, in addition to amounts made available in this Act or any other Act, the following sums shall be made available from the Highway Trust Fund (other than the Mass Transit Account): $50,000,000 for the intelligent transportation infrastructure program as authorized by section 5117(b)(3) of Public Law 105-178;

While that language clearly appropriated sufﬁcient federal funds to support the participation of 25 additional big congested cities in the ITIP program (at $2 million per city), it still did not specify exactly where (or to whom) those funds were to be spent.

A Program Wired for Trafﬁc.com

The initial ITIP contracts for Philadelphia and Pittsburgh were largely awarded to Trafﬁc.com under the radar of the normal ITS procurement process. Virtually no details about how those awards came about—including where the original solicitation was posted, who responded, and what the selection criteria were—is publicly available through the US- DOT’s or FHWA’s websites, through the Federal Register’s website, or through Google searches. As of the Spring of 2009 none of this information has been provided either by the USDOT in response to Freedom of Information Act requests from two non-proﬁt government watchdog organizations, the Project on Government Oversight (POGO) and Sunlight Foundation. However, the story in the January 15, 2001 Inside ITS newsletter provides some insight into how the initial ITIP contracts for Philadelphia and

52 Key Image in a Jigsaw Puzzle

Pittsburgh were awarded to Traffic.com. Apparently, only two proposals were ever received, likely because the solicitation was not issued via the normal channels that ITS contractors would see, but rather through an In- formation Technology Omnibus Procurement (ITOP) process. (The ITOP process had never previously been used for an ITS procurement, and its use by the USDOT has since been abandoned under recommendations from the U.S. DOT Inspector General’s office.) A “selection committee” ultimately chose Traffic.com to be the primary vendor for that initial pilot deployment. Quoting from the Inside ITS piece:

Eng [Chung Eng, an ITS specialist in the DOT and the chair of the selection committee for the task order] says he was not contacted by Shuster or his office during the process. A number of representatives from Pennsylvania agencies, one from the New Jersey DOT and one from the Delaware Valley Planning Commission were on the selection committee because the program was going to start in their area. The fact that Traffic.com was based in Pennsylvania did not influence the committee, Eng says.

While the fact that Traffic.com was based on Pennsylvania may not in and of itself have influenced a committee comprised primarily of Penn- sylvania transportation agency people, it’s naïve at best to think that what Bud Shuster was pushing for had little influence. After all, as Chairman of the House Transportation and Infrastructure Committee he was the most powerful legislator on transportation issues in Congress. Support his desire to award the first ITIP contracts to Traffic.com and your own pet transportation project might well receive support from the individual who doled out millions of earmarked dollars in his home state. Go against his desire and your pet project might never see a dime of federal funds. It’s the old “you scratch my back and I’ll scratch yours” modus operandi that’s been going on since humanity began. In a part of his report subtitled “Connections,” Inside ITS Editor Mike Curran shared what several anonymous sources had told him about Shus- ter’s influence in Traffic.com’s selection:

53 The ‘Smart Road’ Scam

Trafﬁc.com obviously knows how to work the halls of Congress and has reportedly made that prowess a selling point in business meetings.

Two sources, who asked not to be identified, say [Traffic.com Presi- dent] Jannetta visited them several years ago. They say that Jannetta told them that the company was well connected and that a relative of Shuster was involved in the development of the traffic data project. They also say that Jannetta acknowledged that there was a process that the company would have to follow to be selected to receive the first earmarked funds. … Another two sources, who also asked to remain anonymous, say they met with Traffic.com executives before it was awarded the task order. “They told us they were definitely going to win the contract out of FHWA [Federal Highway Administration],” says one of the industry officials. “And they did.”

When “Competition” is a Dirty Word

Traffic.com clearly wanted to parlay their selection as the winning contractor for the pilot ITIP deployment in Philadelphia and Pittsburgh into a sole-source arrangement for the 25 new cities for which $50 million in funding was appropriated in the FY2001 transportation appropriations bill, but it encountered a roadblock. “We have determined that adding the $50 million contained in Section 378 to the existing $8 million contract implementing section 5117 (b)(3) would significantly change the scope of the contract and require recompetition,” Vincent F. Schimmoller, the FHWA’s Deputy Executive Director, said in a February 20, 2001 letter to Cong. Shuster’s Chief of Staff. The notion that the program would require “recompetition” was not, of course, quite what Traffic.com wanted to hear. So the company worked with its lobbyists and legislative backers to take another tack, adding language in the FY2002 Defense Appropriations bill that authorized the USDOT to extend the contract to “the same competitively selected con-

54 Key Image in a Jigsaw Puzzle sortium leader” selected for the earlier contract. These words essentially gave the USDOT the option to extend the original contract to 25 more cities on a sole-source basis, although it didn’t direct the USDOT to do so. In a letter to then Chairman of the House Transportation and Infrastruc- ture Committee Cong. Don Young on Feb. 5, 2002, USDOT Secretary Norman Mineta announced that he had exercised that option in Trafﬁc. com’s favor. On June 20, 2002 the FHWA formally signed the task order enabling Trafﬁc.com to be the sole-source provider for services under the ITIP program’s umbrella.

More Shuster Connections

Over time, I would ﬁnd additional facts that would make it clear that Bud Shuster still had many connections to Trafﬁc.com long after he resigned his Congressional seat in early 2001:

• Long-time Traffic.com President David Jannetta, as the former mayor of Altoona, the largest city in Cong. Shuster’s old congressional district, was an old political protégé. In a 1987 article in the New York Times, both individuals lamented President Reagan’s veto of the big transportation bill that delayed funding of what was later to become the “Bud Shuster Highway.” According to the Times, President Reagan included that stretch of highway in what he called a “budget busting” example of “pork barrel politics.” • Jack Schenendorf, the Chief of Staff for the House Transportation and Infrastructure Committee during Cong. Shuster’s tenure as Chairman of that committee, served on the Bush/Cheney Transition effort where he was Chief of the Transition Policy Team. Mr. Schenendort’s law firm, Covington and Burling, acted as the main counsel for Traffic.com’s initial public offering in early 2006. • Cong. Shuster’s son, Robert L. Shuster, was also a member of the transportation transition team. Quoting from the January 15, 2001 article in Inside ITS, “Robert Shuster, the son of the congressman and an attorney at Klett, Lieber, Rooney and Schorling in Harrisburg, Penn., has represented Traffic.com, which was previously called Argus Networks.”

55 The ‘Smart Road’ Scam

While I was unable to find records showing his relationship with the company that far back, I did find a disclosure showing that he was a registered lobbyist for Traffic.com in 2006. A Google search of SEC filings also showed that he was a key figure in a lease arrangement for the company in 2005. As recent as January 2008, “Robert Shuster Jr.” and an associate at Buchanan Ingersoll & Rooney PC registered as lobbyists for Traffic.com . Clearly, Cong. Bud Shuster’s son has long had a relationship with Traffic. com. • In 2001, several months after Cong. Shuster retired from Con- gress, his former Chief Counsel, Roger Nober, became counsel for US- DOT Deputy Secretary Michael P. Jackson. Mr. Nober, who according to his own words in an interview was the principal Transportation Com- mittee staff person responsible for drafting TEA-21, had been asked by USDOT Secretary Norman Mineta “to serve in a sort of senior capacity there as counsel to Michael Jackson at the time.” Mr. Jackson’s connection to the Traffic.com scandal would be increasingly apparent over time. He would unexpectedly resign as Deputy Secretary of the U.S. Depart- ment of Homeland Security (DHS) in the fall of 2007, one month after the non-profit Project on Government Oversight sent a very detailed Freedom of Information Act request to DHS asking for documents pertinent to his relationship with Traffic.com. This jigsaw puzzle was undoubtedly complex, but coming to understand that Bud Shuster’s smiling face was anchoring its center helped make the puzzle building a whole lot easier.

56 6

Bringing in the “Authorities”

ecember 2005 and on into January 2006 was a hectic time in my life. DOn December 23, I received a formal invitation from Ms. Amelia A. Kyambadde, the Personal Private Secretary to Uganda President Yoweri Museveni, to come to Uganda in mid-January to discuss the creation of a new computer manufacturing company with His Excellency. Of course, that short notice didn’t allow me any time at all to line up participants from AMD, who were very interested in this initiative. (AMD’s ofﬁces and plants were all furloughed until after New Years Day.) Thankfully, Univ. of Texas Professor Gary Chapman, with whom I had been discussing this venture over the previous six months, agreed to accompany me on very short notice. Our Ugandan trip was truly amazing, although we were never able to actually sit down face to face with President Museveni. However, we participated in numerous discussions about the creation of the new Ugan- da Computer and Communications Company (UCCC), including seven of what I could best describe as “religious revival meetings to discuss a computer company.” While religion and computers might sound like a strange mix, each meeting was jam packed with people who were interested in this new venture . We also saw some great native tribal Ugandan dancing, listened to some terriﬁc music (especially bongo drums), and ate

57 The ‘Smart Road’ Scam some stellar native food, although it should be noted that the good Prof. and I did come down with “Idi Amin’s Revenge” after one particularly appetizing meal. On returning to Austin on January 18, I once again settled into mul- titasking on several different initiatives simultaneously. I was frequently communicating with Rosemary Segero, Bishop Siribaleka, and Prof. Chapman about the Uganda project—particularly ironing out plans to bring a number of the Ugandans to Austin for a big international computer conference in June. I was continuing to further work with my neighbor and partner to develop our concept and plans for the Internet song delivery venture. And I was continuing to dig into the Traffic.com scam and to encourage selective members of the press to investigate it, too. At this point in time I knew that Traffic.com’s extraordinary political influence through Cong. Bud Shuster and his allies had led to their federally subsidized monopoly. I also knew, from my inside connections at the Federal Highway Administration, that the top managers of the U.S. DOT had been twisting arms in numerous Governor’s Mansions to get new cities to participate in this program. Finally, I knew that USDOT top management was continuing to pressure folks in my old department, the FHWA Office of Operations, to push this earmarked program. I also knew that some staff members had “gotten in big trouble” with top management, according to my FHWA inside source, for telling prospective state agency participants “buyer beware” about this earmarked program. Most recently, in studying the “red herring” that Traffic.com had issued as a lead up toward going public, I could see that there were plenty of places where equity in the company by high-level elected and appointed public officials might be hidden, including:

• Overseas venture capital funds, where the owners weren’t identified. • Early preferred stock issues, where the owners weren’t identified • Hundreds of thousands of low cost (penny to 25 cent) stock warrants, where the recipients were usually not identified.

At this point in time it was obvious to me that some serious shenanigans were going on, and that some very high-level “public servants” likely

58 Bringing in the “Authorities” had a big financial reason for setting up this earmarked program and, in the case of USDOT’s top management, pushing the staff to promote this program. I had tried to get the press interested in digging into this scam, and while they had expressed interest in it they were not (from what I could tell) actively pursuing it. I had sent an enormous amount of background information about what I was calling the “Traffic.com scandal” to James V. Grimaldi of the Washington Post, Gary Ruskin’s number one recommendation for an investigative reporter who might be willing to dig into this story. Yet James wasn’t actively pursuing it, and at one point told me in an email note “I am still interested in your tip, but still need a bit more time to digest.” James was asking for patience, but patience isn’t my strong suit. I knew that something very wrong was going on with this federal program, but the press apparently either didn’t share my concern or had bigger fish to fry. At this point I had been digging into this scam for well over six months without getting paid a dime from anybody, and wanted to hand off the investigative responsibility to somebody else who had both more clout and more resources than I, so that I could concentrate more fully on my new technology ventures. I decided to make my most compelling case to the FBI, in the expectation that they certainly would care if some very senior federal officials were “on the take.” So on February 23, 2006, I filled in our nation’s premiere law enforcement agency about the details of a big ongoing scam in the federal government. The FBI’s office for Central Texas is situated in the smoky looking “Echelon building complex” in North Austin, near the intersection of state route 183 (also called Research Boulevard) and route 360. Years earlier, when I had come to Austin to work as a senior manager for the research consortium called Microelectronic and Computer Technology Corpora- tion (MCC), my first office had been located in one of these buildings. While I remembered our MCC offices in these buildings as lushly appointed, the FBI’s office on the fourth floor of Echelon III is, typically, outfitted in government drab. Visitors enter the office after pressing a doorbell outside and waiting to get buzzed in. (I presume that there’s a camera outside the entry so that FBI staff can make sure they’re not going

59 The ‘Smart Road’ Scam to be overrun by the Mafia or other potential antagonists.) The reception area is relatively small, with various functional chairs and couches arranged for visitors waiting to be interviewed or, in my case, to bring a brand new hot tip to the FBI. To do so, I needed to check in with the receptionist who sits behind a bullet-proof glass window. “May I help you?” he asked. “Yeah, I’d like to give the FBI some information about a big federal scandal in Washington,” I said. He showed absolutely no expression—I couldn’t tell if the receptionist thought I was a concerned citizen or someone who had just escaped from the loony bin. I passed him my driver’s license as requested, and he told me to wait and that someone would be with me shortly. Perhaps 15 minutes later a tall, good-looking dark-haired young man came through the secure door into the lobby to address me. “I’m Special Agent Chris Thompson,” he said. “What can I do for you?” “I was a subcontractor to the federal government for over 7 years and would like to give the FBI details of a big federal scandal that involves a number of senior federal officials,” I said. We went into an adjacent room that was very plain, with just a table and a few surrounding chairs, and not even the obligatory photo of J. Edgar. “Tell me what you’ve got,” he said. Over the next 30 minutes or so I laid out the Traffic.com scam in detail, trying to give Special Agent (SA) Thompson an understanding of the essence of the scandal while avoiding the technical jargon and ubiquitous industry acronyms that can often obscure as much as they explain. Es- sentially I told him that—because his fingerprints were all over this scam —former Cong. Bud Shuster was undoubtedly involved in this scam and, from what I knew from my own experience and in talking with my contacts in the USDOT, Transportation Secretary Mineta was likely also right in the middle of it. I gave SA Thompson well over 100 pages of documentation to support my allegation, including copies of the Inside ITS articles, printouts of my Talking Operations forum messages showing the online tussle I’d had with John Collins, a copy of Senator Hatch’s “Hatch Puts the Brakes on

60 Bringing in the “Authorities”

Traffic.com” press release, copies of my recent email messages to James Grimaldi of the Washington Post, and a copy of Traffic.com’s “red herring” annotated in red to show where the possible financial interest in Traffic.com on the part of Shuster, Mineta and others might well be hidden. All in all, I thought that I made a cogent case that something very wrong was going on in DC that the FBI needed to look into pronto. Thompson was tracking my points all the way. When I showed him Sen. Hatch’s press release he said that he assumed that someone in the FBI was already investigating this matter, since a Senator was involved. He was particularly interested in the Washington Post’s possible investigation into this matter, but I told him that the reporter I had contacted, James Grimaldi, had told me that he was currently tied up with investigations related to shenanigans by lobbyist Jack Abramoff and Texas Congressman Tom Delay. SA Thompson inquired if I had contacted any press/media other than the Washington Post, and I told him that I had also suggested this story to 60 Minutes and CNN. All in all, I thought it was a good meeting. SA Thompson had been cordial and calm, but clearly interested in what I had to tell him. “We usually don’t get insiders telling us all these types of details,” he told me as I was leaving. “I’m sure that someone will get back to you in a couple weeks.” That would not turn out to be a very accurate prediction.

My Patience Wears Out

After waiting patiently for the call back from the FBI that never came, nearly three months later my patience had completely run out. So on May 8 I sent an email message to both Special Agent Thompson and Agent Ed- ward Cooper (whom Gary Ruskin had said was an FBI agent with “impec- cable integrity”), reiterating that I wanted to provide more details to the FBI about this scam and that right then there was a special opportunity to get some insider information about this scandal from the FHWA. (Brandy Meehan had just asked “Marvin Erbeny” for his phone number, and I ﬁg- ured this would be a excellent “in” for the FBI to talk with her.) Three days later Thompson would email me back.

61 The ‘Smart Road’ Scam

“I spoke to the supervisor here in Austin who received your complaint,” he said. “I was informed that since the person of interest resides/ works in Washington D.C., the matter was forwarded to [the] FBI Wash- ington Field Office. Any information you have in this matter should be directed to the supervisor for Public Corruption investigations, Washington FO.” He provided the address and phone number for that Field Office. I was relieved and recharged by SA Thompson’s response. The “person of interest” was clearly Transportation Secretary Mineta, and my complaint had been forwarded to the Public Corruption Unit at the FBI Field Office closest to where he lived and worked. It seemed certain that the FBI was taking my complaint seriously. I eagerly called the number of the DC Field Office that Thompson had provided. “Good afternoon, FBI Washington Field,” was the response from the lady on the other side of the line. “I would like to talk with someone in the Public Corruption unit,” I said. “With whom would you like to speak?” she asked. “I don’t know the names of the people there, but I was told by the Austin FBI office to contact that unit,” I said. “Sorry, but I have to know the name of the person you’re trying to reach,” was her retort. FBI or not, I was getting agitated by getting caught in a typical bureaucratic trap by someone who didn’t seem to care. “Can you please tell me your name?” I asked, thinking that I would report her unhelpfulness to a superior if I could ever get through to one. “Sorry, we don’t give out names. You should just note this date and time, and that you contacted the person on console 6,” she said. She said that she would leave a general message for that unit if I would like, and I reluctantly left my name and contact information. A return call would never come. Several days later—after no return call from the FBI’s Washington Field Office—I sent an email message to both Thompson and Cooper, informing them that I had indeed contacted that office and had left a message, but hadn’t received a call back. I also told them some information

62 Bringing in the “Authorities”

I had just learned from Mike Curran, that when he originally broke the story about the Traffic.com scandal back in January 2001, he had tried twice to inform the USDOT’s Inspector General’s office about it. They had expressed a strong interest in it and said that they would call him back, but never did. Mike told me that one of his contacts (a reporter by the name of Damon Chappie for Roll Call, who had worked with 60 Min- utes on their expose of Shuster in October 2000) had told him that “anything that goes to the IG goes to Shuster.” Through additional digging, I found that the IG’s Communication Director, Jeff Nelligan (who had left the agency shortly before Mike’s story broke), had earlier been Cong. Shuster’s Director of Communication. Nelligan would leave his position in the IG’s office for the position of managing director for public affairs for another government watchdog organization, the General Accounting Office . It seemed both perverse and brilliant, in some sense, that a senior staff member for someone universally regarded as one of the least ethical legislative dealmakers would later go to work for agencies that investigated potential legal and ethical violations. The pieces of the puzzle were slowly but steadily fitting together. After another week had passed with no response from either Thomp- son or Cooper—or the Washington Field Office (WFO), for that matter—I decided to call Thompson directly. I complained to him that while my allegations may have been forwarded to the WFO, I couldn’t reach anyone there to talk about them. He was very cordial and professional. “I was just the agent on complaint duty on the day you came in,” he explained. “I wrote up a detailed report about your allegation, and then passed it on to the appropriate person. I don’t know what happened with it after that.” He suggested that I call the FBI Austin main number and just ask to talk to the person in charge of public corruption, who would certainly know more details. I did so, but once again got connected to a “duty agent,” this time a fellow by the name of Richard Simmerly. “They’re not here today – we don’t have anybody in charge. But I can certainly check on it for you,” he said. I explained the history of my interaction with the FBI in Austin and DC, and gave him my contact info. A return call would never come.

63 The ‘Smart Road’ Scam

Two days later, I received a call from Edward Cooper of the Dept. of Justice, whom Gary Ruskin had strongly recommended earlier. “I don’t understand why your complaint was sent to the Public Cor- ruption Unit,” he said. At that point in time I still wasn’t quite sure what Cooper’s title was, or exactly where he worked within the FBI’s structure. Ruskin had told me that he was an agent in the FBI’s “Public Integrity Unit,” which I presumed was different from the Public Corruption Unit, but I couldn’t find any evidence that such a unit actually existed.) “You did the single most important thing by bringing this to the FBI’s attention,” Cooper said. “I don’t know what the protocol is, [but] I’m sure they will take the appropriate action. Why it’s taking so long I can’t understand.” He also told me that he knew that Michael Anderson was the supervisor of the Public Corruption Unit. I suggested to him that perhaps the FBI wasn’t eager to investigate this scandal because a very high-level Bush Administration official had been alleged (by me) to be right in the middle of it, but Cooper strongly dismissed my premise. “Plenty of agents would give their left arm for a highly charged issue like this,” he said. “I’m working on two big cases that will be breaking soon, but if I can come up for air next week I’ll see what I can do.” I would later learn that the Cong. William Jefferson case, in which Louisiana Cong. Jefferson was caught with $90,000 in bribe money in his freezer, was one of the cases that Agent Cooper was referring to. But at least I had a lead with a name attached, so I decided to rattle some FBI cages. I called the Washington Field Office and asked specifically for Michael Anderson. “What unit is he in?” the lady on the other end of the line asked. “Public Corruption.” She then put me through to that department. “Anderson’s at headquarters, not in the field office,” the next lady who answered said, and further told me that Doreen Hoyns was the Acting Supervisor in that unit, but she had stepped away from her desk. I left a message for Ms. Hoyns. At least I was starting to contact some real people who could tell me the status of my complaint. This was progress.

64 Bringing in the “Authorities”

Several days after my conversation with Agent Cooper, I sent him a note (copying SA Thompson) saying that I still had not heard anything back from the FBI’s Washington DC Field Office. Less than a half hour later Thompson wrote back, thanking me for my “diligence in collecting this information.” “As I indicated to you before, I am not in a position to assist as this alleged crime falls within a different FBI division and I do not work public corruption matters,” he wrote. He said that he had forwarded my earlier note and his response to the WFO Public Corruption unit. He then made a request that strongly indicated that he was feeling some serious angst from my continuing efforts to communicate with him. “Please direct any future correspondence through that office and do not copy me on any additional information,” he wrote. “If Washington requests that I communicate with you regarding evidence or information collection, I will do so.” Reading between the lines, it seemed to me that he was saying “I did what I was supposed to do and passed your information on, now don’t put me in the middle of this thing anymore.” Clearly, my complaint was a hot potato within the FBI. By June 1 I had still not heard back from the DC Field Office, despite Thompson’s help in forwarding several messages to that office and my own call into Ms. Hoyns. So I called Ms. Hoyns again. This time the voicemail message on her line came from a lady by the name of Carol Sniegowski. My message: “I thought this was Doreen Hoyns’ number. Please pass this message on to her and have her call me.” Finally, on June 2, almost three and a half months after my original complaint to the FBI, I received a call back from Dave Hanzal, a Special Agent for the FBI’s Washington Field Office Public Corruption Unit. SA Hanzal said that my Austin complaint had been referred to him to look into, and he proceeded to ask me some very basic questions about the scandal that I was alleging. I recall thinking at the time that his questions (and many more intelligent ones) had already been asked months earlier by SA Thompson and answered by me, and that if Hanzal had read Thompson’s summary he should have already known those answers. I also remember thinking that it seemed like my complaint about possible serious malfeasance on the part of some very high-level federal “public

65 The ‘Smart Road’ Scam servants” had been given to a wet-behind-the-ears FBI rookie. In other words, I was not at all impressed. After talking for 20 minutes or so, Special Agent Hanzal then said that I should FAX him any additional details I discovered related to the scandal I was alleging, and gave me the FBI’s incoming FAX number. He spe- ciﬁcally asked me to send him some basic background about it, including my latest summary, the April 2005 article in The Hill, and several pages from the Congressional Accountability Project’s earlier complaint against Cong. Shuster. Email would have been a much more convenient way to send this information than FAX, of course, but Hanzal declined to provide me with an email address. I understand that the FBI is still years behind the curve in their ability to fully leverage the Internet in their work. Later that same day I FAXed Hanzal the information that he had requested. Over the next two and a half months, as I was learning new details about the Trafﬁc.com scandal, I would FAX Hanzal additional information about:

• Who else from the ITS field was likely involved in this scandal, whom I knew from 14+ years of consulting in the ITS field, in addition to Shuster and Mineta • Other good sources of information about this scandal, including FHWA insiders. One of those insiders was Dr. Christine Johnson, the former Director of the FHWA Office of Operations that managed the TTID program. I found out from multiple sources (which she corroborated) that she had been “reassigned” by Secretary Mineta and Deputy Secre- tary Jackson from FHWA headquarters to a field position in Utah where she could no longer impact this program, after she saw through this scam and balked at signing the FHWA’s 2002 task order with Traffic.com that expanded the program from two to 27 cities. (More about that in the next chapter.) • Additional facts I had learned that corroborated my assertion that Mr. Mineta was definitely involved. • Where Shuster’s, Mineta’s, and others’ financial interests in the company might be hidden. Perhaps the most promising mechanism for that hidden interest was a big electrical union retirement fund called the

66 Bringing in the “Authorities”

National Electrical Beneﬁt Fund that had loaned tens of millions of dollars to Trafﬁc.com before the company went public, and had received not only a handsome repayment but nearly two million penny stock warrants in return. (Even after a three-for-one reverse split prior to going public, those warrants were worth well over $6 million.)

Mineta Resigns as Transportation Secretary

On Friday, June 23, 2006, Transportation Secretary Norman Mineta announced his resignation, effective in early July. While his resignation certainly didn’t surprise me—I had predicted it on my “Buda Rabblerous- er” blog two and a half months earlier—I found out about his resignation by accident as I was watching CNN. I immediately posted an “I told you so” announcement on my blog. Neither Mr. Mineta nor anyone else ever really gave a substantive reason for his resignation. President Bush’s Press Secretary Tony Snow said that he resigned “because he wanted to.” He clearly did not intend to retire, even at 75 years old, because a few weeks after his resignation he took a job as Vice Chairman of Hill & Knowlton, a major public relations ﬁrm. He also was clearly not at all tired of transportation issues, because he has since joined the Boards of other transportation-related companies and has consulted on several highly visible transportation projects, including a new proposed rail line from Washington, DC to Dulles Airport and a steel rail technology system in Oahu, Hawaii . He has also remained active in the self-named Mineta Transportation Institute at San Jose State University. The afternoon of June 23 I called Bob Jones [not his real name], a transportation consultant and long-time contact. I had rarely run across Bob in recent years, but had met him the previous fall on San Antonio’s beautiful Riverwalk for dinner and a chat about the Trafﬁc.com scam, my then-upcoming Uganda trip, and other matters. I knew that he was very well plugged in to the political machinations in DC, so I was interested in his “take” on Mineta’s resignation. “If you had to speculate, why do you suppose that Mr. Mineta resigned?” I asked.

67 The ‘Smart Road’ Scam

“My guess is that President Bush went to him and said something like ‘Norm, you’ve been a great member of the Bush team, and I really appreciate your hard work. But we have a really tough mid-year election coming up in November, and I need all Republican hands on board. I’m going to need a good Republican in the Transportation Secretary’s spot who can go out and solicit support for our candidates, and of course I would not expect you to do so. So for that reason I’m going to have to ask you to resign. Of course, to the press this will all appear to be your decision, and the Administration will say nothing but good things about your accomplishments while you were Secretary.’” If Bob’s hypothetical scenario was even close to what really happened, Mr. Mineta, as an old “pol,” would have immediately understood the political need for him to be replaced by a loyal Republican at that particular point in time. The story would have made perfect sense to him; after all, politics is politics. I thought that Bob’s scenario made perfect sense too, except for one thing: the upcoming election may not have been the driving force for a change at the top of the U.S. Department of Transportation. A credible complaint to the FBI might just have done the trick. On Sunday afternoon, June 25, I received a short email message from the Washington Post’s James Grimaldi. “What do you make of Mineta’s retirement?” he wanted to know. “I have no ﬁrst-hand knowledge of why he resigned,” I admitted, pointing out that the reasons cited in the press coverage about Mr. Mine- ta’s resignation so far had been extremely vague. “So I’m left with the situation that he didn’t retire and he didn’t quit because of health problems and he’s a workaholic and didn’t leave to ‘spend more time with my family’ or other standard answers when an executive resigns,” I said. “One could argue that my FBI complaint about Mineta, which went to the Public Corruption Unit in DC, was researched by the FBI and that they realize what I said was true, or at least credible (pending more investigative effort),” I went on. “I would think that my complaint would have naturally been conveyed to the FBI Director in the normal course of business, and then the FBI Director informed the Attorney General [then Al- berto Gonzales] about it. The Attorney General would have then informed

68 Bringing in the “Authorities”

President Bush, his longtime Texas friend and boss. Bush then could have consulted with others on his staff (Rove?) and then decided to ask Mineta to resign quietly, as much ‘under the radar’ as possible. Certainly a complaint about a Cabinet member that is at least credible and has major political implications would get attention up the line quickly, one would think…Obviously, this is all speculation, although this scenario certainly seems plausible to me.” The bottom line of what I was saying, of course, was that I thought that my allegation about Mr. Mineta’s possible involvement in the Trafﬁc. com scandal might very well have led to his resignation. No telling what the recent Pulitzer-prize winning investigative reporter for the Washington Post thought about that possibility.

69 7

Discovery of a Key Witness

fter I had finally made the connection with Special Agent Dave AHanzal of the FBI’s Washington, DC Field Office’s Public Corrup- tion Unit, I renewed my efforts to find new information about what had gone on under the radar related to the Traffic.com scandal. While I was disappointed that it appeared that my complaint had been handed off to a rookie, still the complaint was now being handled by exactly the right folks within the FBI. Certainly Hanzal’s supervisors would work with him closely and help him learn the ropes of how public officials can rig the system to profit themselves, which was almost certainly the case here. I was guardedly optimistic. I would continue to FAX Hanzal new details of the scandal that I would discover. In late June I FAXed him a list of individuals whom I thought had provided the technical vision for their scheme from day one. I suspected that Traffic.com Vice President John Collins and his fellow Senior VP from his days at the American Trucking Associations, former USDOT and then sitting Department of Homeland Security Deputy Secretary Michael P. Jackson, had provided the policy expertise to craft the original earmark language in TEA-21 and later legislation. However, somebody on the original brainstorming team must have had a technical vision for how this scam would work. I knew most of these individuals

70 Discovery of a Key Witness personally from my long participation in the ITS field. In fact, a number of individuals I suspected of playing key early roles had served on the Board of the Industry’s trade association, ITS America including Jackson (in a “non-officio role” as Deputy Secretary of Transportation) and Mi- neta (when he was an executive with Lockheed-Martin IMS). I suspect that ITSA’s Board meetings may have actually provided the setting and opportunity for these individuals to hatch their very clever scheme. I had a long-standing knowledge of the inner workings of ITS America, having consulted for the organization in its early days (and written its original operating plan) and participated in every one of its big annual meetings since 1992. In the summer of 2006 I was increasingly talking with Brian Hagen, the Senior Vice President for Wavetronix, which markets pole-mounted radar traffic detectors that competed against the ones that Traffic.com was installing in most cities that signed up for the ITIP program. Mike Cur- ran from Inside ITS had suggested I compare notes with Brian, who was a rich source of information. He was perhaps the most outspoken (at least, publicly outspoken) of anyone about the anti-competitive nature of the ITIP program. “These guys just had the government wire the mar- ketplace in their name,” he was quoted as saying in the lead story, aptly titled “’Monopoly’ Money for Pa. Company,” in the April 20, 2005 issue of The Hill. Brian and his team from Wavetronix had conveyed their strong objec- tion to the anticompetitive nature of the ITIP program to Utah Republican Senator Orrin Hatch, the state’s well-respected senior Senator, who immediately resonated with their concern. Hatch has long been a strong advocate of open competition, and (as of Spring 2009) serves as the Ranking Member of the Senate Judiciary Committee’s Antitrust, Competition Pol- icy and Consumer Rights Subcommittee. Through the summer of 2005, Hatch, supported by a group of Congressmen led by New York Congress- man Anthony Weiner, a Democrat, led the effort to add a new “Part II” to the authorizing language designed to open up the program to competition. According to the actual language in that bill (SAFETEA-LU):

In carrying out part II of the program, the Secretary shall award, on

71 The ‘Smart Road’ Scam

a competitive basis, contracts for the deployment of intelligent transportation infrastructure systems that have been accepted by the Sec- retary in congested areas, with the consent of the State transportation departments for the congested areas.

The program was also renamed in SAFETEA-LU to the Transporta- tion Technology Innovation and Demonstration (TTID) program, because of the many changes in the authorizing language. During one of my many discussions with Brian, he recounted the process that had led to the new “Part II” language. It had boiled down to a sometimes dicey negotiation between the legislative staffs of Senator Arlen Specter and Senator Hatch. Specter, of course, represented Penn- sylvania and back in the 2001 timeframe had played a key role in recruiting his Senate colleagues (particularly Virginia Senator John Warner) to appropriate millions of dollars of funds for the program. That was accomplished through a very circuitous route: new language in the FY2002 De- fense Appropriations bill to extend Traffic.com’s sole-source pilot project in Philadelphia and Pittsburgh nationwide to 25 more cities. Of course, that language had greatly expanded Traffic.com’s monopoly nationwide. I doubted whether Specter, unlike Cong. Shuster and others, had any direct financial relationship to the company. Specter was just doing what all Senators do all the time—promoting business for one of the state’s potential up-and-coming companies, this one headquartered in Wayne, PA. Senator Hatch was essentially doing the same thing, trying to open up federal business for Utah-based Wavetronix. The real difference, however, was that the most powerful of Traffic.com’s original legislative champions —Congressman Bud Shuster—had apparently put himself and his friends and associates in a position to make millions of dollars from early equity in the company. There were just too many connections to his former staff members, political associates (including his old political ally David Jannetta)—and even his own son, a registered lobbyist for the company in recent years—to ignore. To definitively prove that financial link, however, would require a comprehensive and detailed investigation by the authorities. Specter’s legislative assistants, of course, wanted to continue Traf-

72 Discovery of a Key Witness

fic.com’s monopoly and even expand it in SAFETEA-LU to new cities. Hatch and his legislative assistant Matt Sandgren, supported by his fellow Utah Senator Bob Bennett and a bipartisan group of representatives led by New York Congressman Anthony Weiner, were determined to add a new provision (called “Part II,” to distinguish it from the original sole-source provisions, which was called “Part I”) that would once and for all open up this earmarked program to competition. While Brian was not actually in the room where the deliberations between Specter’s and Hatch’s staffs were taking place, he was the closest thing possible to a participant, in real-time contact with Sandgren on his Blackberry as the negotiations were taking place. In the end, both sides got some of what they wanted, but Hatch appeared to be the big winner. Specter got new language in SAFETEA-LU that made 22 new cities eligible for program funding, which was important to Traffic.com because a number of the cities listed in the original earmark, including Dallas, Houston, Orlando, and New York City, had declined to participate. While $22 million in funds (to support 11 more cities) remained from the available funding, the number of eligible cities was dwindling. The approval of 22 new cities greatly increased the pool of potential cities that could participate. Hatch, on the other hand, got what he wanted: language written into the transportation bill for a new “Part II” that cities could choose that would completely open up the program to competition. In fact, Senator Hatch was so proud of that accomplishment that on the very same day that the SAFETEA-LU language was finalized (July 29, 2005) he issued a press release entitled “Hatch Puts the Brakes on Traffic.com.” On the House side, Congressman Weiner, who had strongly supported Hatch’s efforts, issued a similar release. Brian told me two interesting anecdotes about the effort leading up to the final negotiations that added a great deal of “texture” to my understanding of the process. Apparently, once Traffic.com got wind that Hatch was attempting to legislatively open up the ITIP program to competition, an executive from the company had called Senator Hatch and threatened him, saying that if he followed through in adding new open-competition language to SAFETEA-LU he would do everything in his power to make

73 The ‘Smart Road’ Scam sure that Hatch would never get elected as dog catcher—let alone Sena- tor—again. Apparently, threatening a senior Senator like Hatch isn’t the smartest thing to do because, Brian said, Hatch became more determined than ever to push back against Traffic.com’s monopoly. The second anecdote was even more astounding. In early July, 2006, Brian related details of one of his earlier meetings with Senator Hatch’s staff to discuss the anticompetitive nature of Traffic.com’s monopoly and what might be done to stop it. He happened to mention that a lady from the Federal Highway Administration had participated in one of those meetings, and that she said that she had gotten kicked out of FHWA Head- quarters back in 2002 because of her opposition to the sole-source arrangement with Traffic.com. I was immediately intrigued. “Do you recall her name?” I inquired. He thought for a moment. “I think her name was Chris,” he responded. “Are you talking about Dr. Christine Johnson, the former FHWA As- sociate Administrator and head of the Office of Operations?” “Yeah, that’s who it was.” Brian, who had only been involved in the ITS field a few years, didn’t realize the significance of what he had just told me, because he hadn’t known about Dr. Johnson’s long-time leadership in the field. But I knew that what he had just told me was monumental. Back in mid-2002, a lot of folks in the ITS field were speculating as to why the long-time head of the USDOT’s ITS efforts had abruptly left for a field position in Utah and had completely abandoned her “baby” (the federal ITS program). Brian was confirming that by her own admission, Dr. Johnson’s “reassignment” was a direct result of her decision to take a principled stand against what she had undoubtedly realized at the time was a big-time scam. I immediately sent off a FAX to Hanzal summarizing what Brian had told me about Dr. Johnson’s resistance to going along with this scam. (I would later learn additional details of her “reassignment” from completely independent sources.) I explained her long-time role in running the US- DOT’s ITS program—and in managing the department during the early years of the ITIP program—and urged him and the FBI to interview her about the details of her “reassignment” and the pressure to go along with

74 Discovery of a Key Witness this scam she had received from Secretary Mineta and Deputy Secretary Jackson. I concluded the FAX with “Of course, keep in mind that she may still be concerned that her career could be in jeopardy from talking with you.” I felt confident that the FBI would likewise realize that she was perhaps the key witness in this case and would certainly debrief her, and then the truth of all these shenanigans was sure to come out. It was now just over a year since I had challenged Traffic.com Vice President John Collins about Traffic.com’s monopoly on the Talking Op- erations Forum, and finding out about Dr. Johnson’s “reassignment” was the biggest breakthrough yet. Certainly, her inside knowledge about the political games that had gone on in the early years of this program—and especially her first-hand experience with the pressure that Mineta and Jackson had put on her—would help blow the lid off of this scandal. I wanted to let Dr. Johnson know that someone else knew the real reason she had been kicked out of FHWA headquarters back in mid-2002, and was on her side and trying to do something about it. But I wasn’t quite ready to come out of the closet yet. So I relied on good old Marvin Erbeny to fill that role, and “Marvin” proceeded to send Dr. Johnson an email message. “I’m the fellow that has been raising issues about Traffic.com’s monopoly on the Talking Operations Forum,” Marvin said, providing links to several of those messages. “I know that you have a personal history with traffic.com, and there are some new developments related to Traffic. com’s situation that I alluded to in the Google Finance posting. In fact, it’s possible that these developments may have helped influence some recent events at USDOT. [I was referring to Mr. Mineta’s unexpected and largely unexplained resignation.] I’d be glad to fill you in, particularly if you could shed additional insight into this scam.” Two days later, Dr. Johnson responded to Marv’s inquiry with a terse note: “I appreciate the information and find it interesting. I do have some history here and it is too painful to reopen. I wish you luck.” I immediately sent a FAX to Special Agent Hanzal, attaching both email messages. I now felt certain that he and the FBI would see Dr. Johnson’s brief but significant comment (“I do have some history here and it is too painful to reopen”) as, if not corroboration, at least a strong

75 The ‘Smart Road’ Scam indication that what I had told them a few days earlier was true. They would undoubtedly want to interview her now about what she knew about this scam. As was often the case, however, I was perhaps just a bit too optimistic. After not hearing anything back from Special Agent Hanzal, two weeks later I decided that Marvin needed to reinitiate contact with Dr. Johnson. “Ms. Johnson – I appreciate your honesty and understand that this is a very painful issue for you,” he said. “For your information, I made a complaint to the FBI about Traffic.com and Secretary Mineta back in Febru- ary, have since communicated multiple times with Special Agents in both the FBI’s Washington, DC Public Corruption and Public Integrity Units, and am quite certain that an active investigation is underway. I think that it is very possible that Secretary Mineta was asked to resign because of the preliminary findings from this investigation (although he may not actually be aware of my complaint or the investigation).” “Any information about how this scandal works that you might be able to send me that I could in turn send to the FBI would be helpful in speeding up this investigation,” Marvin wrote. “I’ve already provided a significant amount of information to the FBI, but additional corroborative information would be very helpful.” Dr. Johnson’s email reply, just an hour later: “I’m sure if the FBI want to talk to me they will.” Chris Johnson’s two very short notes to Marvin had validated if not confirmed what Brian Hagen had told me she had said at a meeting with Hatch’s staff in 2005, that she had seen through the Traffic.com scam back in 2002 and had stood on principle—and lost. I could certainly relate to her situation, as I had also stood on principle years ago in trying to get through to Motorola’s top management but lost, too. I felt that I knew at least a little about what she had gone through, although she was certainly in a much more senior position now than I had been in years ago. I would continue to send FAXes to Special Agent Hanzal over the summer of 2006. In one, I strongly recommended that he interview two consecutive Deputy Transportation Secretaries about this program. I knew and respected Mortimer Downey, the USDOT Deputy Secretary during most of the Clinton Administration (reporting to Transportation Secre-

76 Discovery of a Key Witness tary Rodney Slater) personally, having run into him many times over the years at ITS America annual meetings and other functions. I knew that Mr. Downey was Dr. Johnson’s mentor and had worked with her earlier when both were with the Port Authority of New York/New Jersey. I also knew that they had long worked together to develop the department’s ITS program. Surely, I thought, she would have shared with him the circumstances of her “reassignment” in mid-2002, even though at that point he had been working in the private sector (as the Chairman of the consulting arm of the huge Parsons Brincherhoff firm) for nearly two years. I also urged the FBI to interview Mr. Downey’s successor, Michael P. Jackson, who had worked for years as second in command to Norman Mi- neta as Vice President and Chief Operating Officer of Lockheed-Martin IMS, and had rejoined his old boss at the USDOT in early 2001. While I didn’t at all suspect that Mort Downey had participated in the Traffic.com scam, I strongly suspected that Jackson had. I had already found several pieces of circumstantial evidence indicating that Jackson was among the inner circle of those “public servants” who were enabling Traffic.com’s scam, possibly for personal financial gain. While I’ve since discovered many more connections, the key factors I knew about back in 2006 included: 1. His connection as a fellow Sr. Vice President of the American Trucking Associations to current Traffic.com Vice President John Collins when the original ITIP earmark language was going into TEA-21. Both Jackson and Collins had worked on policy/legislative issues, where they would have routinely come into contact with Cong. Bud Shuster, then the Chairman of the House Transportation and Infrastructure Committee. 2. I knew, from independent sources, that Jackson had clashed frequently with Chris Johnson when he was Deputy Secretary of Transpor- tation and that he was, in some sense, Secretary Mineta’s “enforcer.” (Mineta appeared adept at getting things done behind the scenes without leaving his fingerprints.)

Personal Peril?

Through the summer of 2006 I had discussed the details of this scan-

77 The ‘Smart Road’ Scam dal with two of my neighbors and friends in the rural community just south of Austin, TX where I live. Franz, a retired registered investment advisor, was particularly interested in the financial aspects of the Traffic. com scandal. As I explained to Franz what was involved in this scam and the efforts I had made to out it, he cautioned me to “look out for my back,” suggesting that the very high profile public servants whom I had alleged to the FBI and others were involved in this scam might come after me physically. He often joked about the dark-windowed limousine that he half expected would show up one day in my driveway. A similar thought had certainly crossed my mind. Franz suggested that I give him hardcopies of the many white papers and other documents I had collected about the scam, in case something happened to me. I was glad to do so. Stuart, another neighbor and friend, was a retired Secret Service agent who had worked on Lady Bird Johnson’s Secret Service detail for years. He was now working in a senior management role in the Transportation Security Administration (TSA), which was part of the U.S. Department of Homeland Security (DHS). I particularly wanted to talk to Stuart because I thought he might provide me with some insight into how to get the authorities—particularly the FBI—to more aggressively pursue and investigation. He, of course, had interfaced with the FBI numerous times over the years. He acknowledged what I had discovered from Google searches—that the FBI was among the most secretive and non-communicative investigative “authorities” of them all. Information would go in, but very little would come out, he said. His characterization gave me hope that, even though the FBI had not gotten back to me about all the information I was feeding them, they were nonetheless seriously investigating this scandal. In one discussion out front of Stuart’s house (I would sometimes run into him while biking around my neighborhood to get my morning exercise), he also expressed concern about my physical safety for blowing the whistle in a situation involving so many high-profile people. “Maybe I should get you a jacket,” he half joked. I knew that he was talking about a flack (i.e., bullet proof) jacket. Others were likewise expressing concern for my safety if I continued to blow the whistle. “My advice is: keep your head down,” said Mike

78 Discovery of a Key Witness

Freitas, the outgoing Director of the USDOT’s ITS Joint Program Ofﬁce, whom I had known casually for years. A fellow ITS consultant and close friend whom I had known for more than a dozen years wrote back after I had emailed him some particularly juicy new information I’d learned about the scandal: “Why am I not surprised. Be careful, when you get between a greedy man/corporation and millions of dollars, even death may not be too high a price. Be careful my friend and leave a trail.” I was (and am still) leaving a trail all over the place. I was documenting much of what I had discovered contemporaneously on my “Buda Rab- blerouser” blog. I was hosting detailed analyses and white papers on my old “ITS Online” website, and alerting folks about its availability via the NTOC’s Talking Operations forum and large emailings to hundreds of my former ITS colleagues.

The Key Witness

As further insurance that if something happened to me at least the information I had discovered would live on, I periodically gave my neighbor Stuart copies of my latest FAXes to the FBI. I would often discuss the content of these documents with him. One day I discussed with him the recent FAXes I had sent the FBI detailing what I and “Marvin” had learned about Chris Johnson’s “reassignment” back in mid-2002. “She’s absolutely a key witness in this whole situation,” Stuart observed. “You need to cut out all this clandestine “Marvin” stuff and talk to her directly, as Jerry Werner. Hopefully, she’ll then want to come forward and ﬁll the FBI in about what she knows.” I took his advice to heart. Finally, on September 25, I (not Marvin) sent an email message to Dr. Johnson with the subject “Marvin’s Real Identity.” “Chris, I hope all is well with you and your family,” I wrote. “I feel it’s time that I came ‘out of the closet.’ I’m the person who has posted a number of items on the Talking Operations Forum and elsewhere (and earlier communicated with you) under the pseudonym Marvin Erbeny.” I explained the reason that I had set up my pseudonym Marvin Erbeny

79 The ‘Smart Road’ Scam in the first place, after being ordered not to challenge John Collins any further on the Talking Operations Forum. “Everything that I told you in previous email messages as ‘Marvin’ is true,” I said. “I indeed contacted the FBI back in February and made a complaint about Mr. Mineta’s role in the scandal, and I have communicated many times since then with agents in the FBI’s Washington, DC Public Cor- ruption and Public Integrity units. I would be glad to send you copies of the information that I’ve sent the FBI. I think it’s very possible that Mr. Mineta resigned because of my complaint. By the way, a few weeks ago I told [Bob Jones] about the traffic.com scam and the fact that I went to the FBI about it, and he suggested a scenario that Mineta may not actually know that an FBI complaint was lodged about him (yet), but was told that they simply needed a Republican in that role with the tough mid-year election coming up. I think he might be right and that’s what happened, but of course I do not know.” “I’ve known about the traffic.com shenanigans and Bud Shuster’s involvement in it since 2001, but until last fall never put together the scandal’s “big picture,” including Mineta’s and, I believe, Deputy Secretary Jackson’s role in it. I put these pieces together in large part by talking to many people in both the public and private sector about it starting last fall. A lot of people know that the ITIP/TTID Program is a scam, and that there is (or was) continued support for it at a high level within USDOT, but most of these people don’t realize the breadth of this scandal,” I continued. “Along the way I found out more about the situation underlying your own transfer out to Utah from FHWA HQ in 2002, which filled in additional pieces of the traffic.com scandal for me.” I shared with her the fact that I had been providing details of this scandal to James Grimaldi of the Washington Post and a few others. I knew that Chris had already been burned once by standing on principle, and wanted to let her know that I knew how hard it would be for her to now talk to the press. “I understand that for you to talk to these members of the press ‘on the record’ will cause you concern about your career and possible repercussions from your higher ups at USDOT,” I said. “No matter what you do, I have decided that I will do whatever I can to expose this scandal, because it’s a big deal to a lot of people (not just

80 Discovery of a Key Witness you). I made a good living for a number of years (thanks in large part to your early support), and this is my way of giving back to the ITS community. The scam is also a prime example of what’s wrong in government, and if people don’t stand up against this kind of thing the abuses like this will just continue and get worse,” I said. “I just wanted you to know who “Marvin” was and to know my own motivation, to help you make your own decisions.” My concluding re- mark: “Sorry that I’ve put you in the hot seat.” Several hours later that afternoon I called Dr. Johnson’s number and left a message with her assistant that I’d like to talk with her further about the email message I had just sent her. At 4 pm the next day (Tuesday, Sept. 26, 2006), Chris Johnson called me back from the Atlanta Marriott, where she was attending a meeting. She did not dispute any of the detail about Mineta’s, Jackson’s, or others’ involvement in this scam that I had provided in my previous email message. Quite the contrary, her words confirmed that my assessment of their involvement had been right on. “You’re pursuing a noble cause,” she said. “I’ve tilted at a few windmills myself over the years, but sometimes you just have to accept that the world is not fair. I’ve had to learn that,” she said, adding “At the age I am, I can’t afford to buck the system.” We got into more specifics about the Traffic.com scandal. “I know John [Collins] for what he is. [My interpretation: she was implying that he was a “sleazebag.”] But this goes beyond John Collins just getting earmarked funds. Unless you know a whole lot more than I do, I wouldn’t pursue it any further.” I told her that at this point I probably did know more about many aspects of this scandal than she did, because I had been digging into the details of it for well over a year. I also told her in no uncertain terms that I was not about to drop my investigation. She then observed that this was a particularly tough time for me to be blowing the whistle, because former Federal Highway Administrator Mary Peters was in the process of being confirmed as Transportation Secretary. “Don’t take on the agency when they’re trying to confirm a Secretary,” was her straightforward advice. “The agency will take no prisoners – this isn’t good for you.” She characterized the USDOT as being in “lock tight mode.” “The agency gets real

81 The ‘Smart Road’ Scam antsy in these times,” she said, adding “I plead with you to let it relax for a while.” “Each of us finds our own piece of honesty in this life. That’s where I am. I’d like it to go away from my life.” She was essentially repeating what she had told “Marvin” earlier: “it is too painful to reopen.” Again, I indicated that I was going to continue to investigate and try to “out” this scandal. Chris said that she had always been fond of me (because of my ICDN project, which she always strongly promoted and supported), but that she especially owed a debt of gratitude to Transporta- tion Secretary designate Mary Peters. “Mary treated me very fairly, and I’d like to return the favor from one human being to another.” When Chris had been “reassigned” from FHWA headquarters back in mid-2002, Mary Peters had been Federal Highway Administrator, reporting to Secretary Mineta and his second-in-command, Deputy Secretary Jackson. Chris was essentially saying that Mary Peters had helped her to a soft landing in her current field position in Utah. (A few days later, Ken Boehm, the Chairman of the non-profit watchdog National Legal and Policy Center and a former prosecutor from whom I had sought assistance, would suggest that perhaps Mary Peters had played “good cop” to Mineta’s and Jackson’s “bad cop” during that whole episode.) I repeated what I had told Chris in my email message, that I strongly suspected that Secretary Mineta and Deputy Secretary Jackson had substantial hidden financial ties to Traffic.com’s success. I asked her if she thought anyone within the Federal Highway Administration may have had similar ties. “I never suspected what you are hinting at here, never,” she said. “However, I’m quite sure that nobody in my old department [the FHWA Office of Operations] has any ties like those to Traffic.com.” She specifically said that she believed that her former deputy and successor, Jeff Paniati, was “not a dishonest individual.” “Send Jeff your emails,” she advised. I would later find out from a completely different and independent source, that the catalyst for Dr. Christine Johnson’s “reassignment” had been her refusal to sign the task order between the Federal Highway Ad- ministration and Traffic.com in mid-2002 unless witnesses would attest that she was signing that task order under duress from her superiors. That

82 Discovery of a Key Witness task order was the key document that expanded the ITIP procurement (and Traffic.com’s monopoly) from two to 27 cities. On June 20, 2002, shortly after Dr. Johnson had been moved to a field position in Utah where she would not longer be able to negatively impact the ITIP program and Traffic.com’s monopoly, her former deputy Jeff Paniati signed that task order as “Acting Associate Administrator/Op- erations.” A few days after my September 2006 conversation with Chris John- son, I decided to follow her advice and fill Jeff in about the details of this scandal. I had known Jeff for years, and each month emailed him a summary of what I felt was the most interesting and insightful new content on the NTOC newsletter—particularly the NTOC/ICDN’s exclusive articles and interviews. “Jeff, I’d like to talk with you about an important but sensitive matter (not involving NTOC),” I said in an email message. “Last week, I talked with Chris Johnson about it, and she strongly suggested that I talk with you about it, as she has been out of the ITS loop for many years. Please call anytime (home office). Thanks.” I didn’t hear anything back from Jeff over the next several days, so I left a message for him on his home answering machine. He called me back the next day. I gave him a high-level summary of what I had found out about the ITIP program and Chris’ reassignment to Utah back in 2002. “Jeff, I want you to know that I’ve been providing details about this scam to the FBI since last February,” I said. “If they contact you and ask you questions about it, that will be the reason,” I said, giving him a heads- up. “That’s fine, we talk with the FBI all the time,” he said. He thanked me for providing this information to him, and hung up. I would continue to occasionally send Jeff new information about the scandal as I discovered it over the next months and years, but have never heard back from him since. Jeff Paniati’s career was clearly on the rise after his former boss was banished to Utah, out-of-sight and out-of-mind from Traffic.com’s perspective. In October, 2002, he would be promoted from “Acting As- sociate Administrator” to the real thing. He would later receive several

83 The ‘Smart Road’ Scam prestigious Executive Branch awards during both Mineta’s and Peters’ tenures as Transportation Secretary that are listed on his ofﬁcial FHWA biography:

Jeff has received numerous performance and honor awards including the Secretary’s Award for Meritorious Achievement in recognition of his outstanding contributions to the ITS program and to USDOT, the Secretary’s Gold Medal Award for leadership in advancing the strategic goals of USDOT, and the prestigious Presidential Rank Award for Meritorious Senior Professionals and Executives for exceptional long-term accomplishments and commitment to excellence in public service.

In April 2008, President Bush would accept Transportation Secretary Mary Peters’ recommendation and give the ﬁnal approval for Jeff Paniati’s promotion to Executive Director of the Federal Highway Administration, the highest civil service position in the FHWA and one of the few that is established in law and requires the approval of the President . It’s funny how big federal bureaucracies work, and particularly how one person’s career misfortune can be another’s opportunity.

84 8

Exactly What Does the “I” in “FBI” Stand For?

hroughout the summer and early fall of 2006, I continued to FAX Tnew information and the names and contact information for sources who could corroborate that information to Special Agent Hanzal. How- ever, I never received a single call back from him asking me to clarify or even challenge any of the information I had sent him. My information, it seemed, was going into a black hole. During this period I called Special Agent Hanzal several times and left messages for him to call me back to let me know the status of his investigation, but my calls were never returned. I was becoming increasingly frustrated. On September 8, after not receiving any feedback from the FBI for many months, I decided to try to contact the U.S. Department of Justice directly. I knew that this was a politically sensitive scandal, and wanted to contact someone who I felt had high ethics and was willing to pursue the truth irrespective of political pressure. Patrick Fitzgerald, the U.S. At- torney from the Northern District of Illinois, immediately came to mind. I knew that he was a Republican appointee, but that at the same time he was aggressively pursuing the truth in the “outing” of former CIA agent Val- erie Plame. So I called his ofﬁce and left a message for him, and received a return call later that morning from his assistant, Michelle Appling. I

85 The ‘Smart Road’ Scam briefly explained what the scandal I knew about entailed, and asked if Mr. Fitzgerald would be willing to review information about it. She said that he would, and suggested that I FAX background information to her. I immediately FAXed her my latest synopsis of the scandal and copies of the two email messages I had earlier received from FBI Austin Special Agent Thompson. On September 12 I FAXed her additional information that I had sent the FBI detailing issues I was encouraging the FBI to ask the SEC related to possible hidden ownership in Traffic.com on the part of Shuster, Mineta, Jackson, and others who I strongly suspected had a significant financial stake in the company. Much to my surprise and disappointment, on October 2 I received a package by mail from Mr. Fitzerald’s office, acknowledging receipt of my two earlier FAXes but returning all of the information I had sent, with a cover letter dated Sept. 26 saying “Copies of material provided by you indicate that this matter is being handled by the FBI Washington Field Of- fice. It is suggested that any information or questions you have should be directed to the Federal Bureau of Investigation at the following address...” I was again told to find out the status of my complaint from the FBI’s Washington Field Office—just as Austin SA Thompson had advised over four months earlier—but the WFO was neither confirming that they had received my information nor asking any followup questions related to this information I had sent them. Unlike what SA Thompson had told me back in February, no one from the FBI was “getting back to me.” The WFO’s lack of followup to me indicated that they were just sitting on this information and hoping that I and my complaint would finally just go away. By early October 2006—more than four months after Hanzal had first called me—I was fed up. After not receiving any further contact from the WFO for over four months, on October 6 I attempted to telephone Mi- chael Anderson, who I understood from my earlier discussion with Agent Cooper headed up the Public Corruptions Unit at the FBI. Mr. Anderson’s voice mail said that he would be out of town for several days, but that during his absence his calls would be taken for the first few days of his absence by Todd Radcliff, and the next few days by Tim Helonick (I’m not certain those are the correct spellings.) I called Mr. Radcliff and left a voice mail message for him. My goal was to find out the status of the

86 Exactly What Does the “I” in “FBI” Stand For?

FBI’s investigation into the allegations of wrongdoing I had made about Messrs. Mineta and Shuster. Mr. Radcliff called me back later that same day (October 6). I told him who I was and that I had made a complaint almost eight months earlier about Mr. Mineta’s and Mr. Shuster’s involvement in Trafﬁc.com. I asked him if he was aware of my complaint, and he said he was not. I told him that I had not received any feedback from the FBI (or follow up questions by them to me) since my discussion with SA Hanzal in early June, and said that I understood that Ms. Darlene Hoyns was Hanzal’s supervisor and that I was sending her a FAX with additional information about the scandal. (That FAX included new information I had discovered related to DHS Deputy Secretary Michael P. Jackson’s connections to this scandal.) I asked Mr. Radcliff if he would like me to FAX that same information to him, but he said that it was unnecessary because he knew Ms. Hoyns, she was just down the street from him, and he would talk with her about my complaint and then get back to me. He also informed me that the WFO actually conducted such investigations, and that his unit just provided general oversight and guidance. He never called me back. On October 17, after failing to receive a call back from Mr. Radcliff, I called several different FBI phone numbers in an attempt to determine the status of my complaint. I again called Mr. Radcliff and then left a followup message for him asking if he had in fact communicated with Doreen Hoyns as he had said he would. Mr. Radcliff’s voice mail message also said that callers could contact Pam Vanderberg if the issue was urgent, so I also called her number and left a message, asking for Mr. Radcliff’s FAX number or email address so that I could send him additional information about the Trafﬁc.com scandal. I never received a call back from either Mr. Radcliff or Ms. Vanderberg. Later that same day I tried to reach Michael Anderson again. His voicemail message described his position as “Unit Chief for the Public Corruption Unit.” I left a message for him saying that I had earlier left messages for Todd Radcliff (who, I assumed reported to Mr. Anderson) and that I wanted to know the status of my complaint. I also called Doreen Hoyns, who I understood from a discussion with the WFO from several months earlier was the Acting Chief of the FBI

87 The ‘Smart Road’ Scam

DC Field Office’s Public Corruption Unit and, presumably, Special Agent Dave Hanzal’s boss. Much to my amazement, she actually answered the phone on the second ring. I recall thinking that she was extremely friendly—almost overly so. “I’m not in that unit anymore,” she said. I sensed relief in her voice. I asked if she had received my recent FAXes (which I had sent to both her and Agent Hanzal), and she confirmed that Agent Hanzal had received them. She confirmed that Agent Hanzal’s supervisor now was Carol Sniegowski. I asked if she could give me Ms. Snie- gowski’s phone number, and she readily did so. Ditto for Special Agent Hanzal’s direct number. (He had only given me the general number of the Washington Field Office when I had spoken to him back in early June.) The next day (October 17) I called Ms. Sniegowski, whose voice mail message identified her as a “Supervisory Special Agent,” and left a message for her to call me back. I also called SA Hanzal and left a message, asking him to confirm: 1) that he received all the FAXes I had sent to date, and 2) that an investigation was underway. I also inquired as to why he had not gotten back to me with any followup questions since our sole discussion back on June 2. On the morning of October 18, Supervisory Special Agent Louis Velez from the FBI Headquarters Public Corruption Unit called me, returning my message of the previous day to Mr. Anderson. He asked me what my call was about, and I explained that I had gone to the FBI office in Austin in February and made a complaint about the Traffic.com scam and Mr. Mineta’s and Mr. Shuster’s involvement in it. I recounted my other contacts and attempted contacts with the FBI, including the fact that I had sent 19 or so FAXes of additional information about this scandal to SA Hanzal at that point in time. As I mentioned Austin SA Thompson’s and WFO SA Hanzal’s names, Velez looked them up in his internal FBI phonebook and verified that they were the individuals I said they were. SSA Velez explained to me that his unit in FBI headquarters provided oversight of the FBI’s 56 field offices. I asked if he wanted me to FAX or email him information about the scandal, including the synopsis, and he said that it wasn’t appropriate for everyone to send information about alleged crimes to them (FBI HQ Public Cor- ruption Unit), because they were not actually in charge of any investiga-

88 Exactly What Does the “I” in “FBI” Stand For? tions. That was the Washington Field Office’s role. However, Mr. Velez said that right after he got off the phone he would email Hanzal and his supervisor, Carol Sniegowski, asking for the status of my complaint (and, presumably, investigation) and to “reach out ASAP.” “They will respond [to headquarters],” he said. He said that WFO was extremely busy at that point in time. However, he said, if they didn’t contact me within a week I was to call him back. He said that he would also copy Ms. Sniegowski’s supervisor on his email message to her and Hanzal. The following day I received a call back from Supervisor Sniegowski from the WFO public corruption unit. She was not in a good mood. “We are in receipt of the information from the complaint that you gave to the Houston Field Office,” she said. “That’s incorrect,” I said, correcting her. “I gave that information to the Austin FBI office.” “You made your complaint in May, right” she asked. “No, I made it in February,” was my response. “I want you to know that we received your complaint, your information. If we want something from you we will call you,” she said. I asked if she had received all 19 FAXes I had sent up to that point in time, and she said that she didn’t know the number of FAXes but that I should stop FAXing information to them and instead mail information to Special Agent Hanzal. I pointed out that FAXing information was clearly a quicker way to send information than snail mail. “Don’t you want to get additional information as quickly as possible?” I inquired. “No” was her curt answer. I suggested that sending information by email would be much faster and more efficient. “I don’t care to receive emails,” she said. “Don’t you want to look into this scandal as soon as possible?” I asked. “I don’t care about the information coming in any quicker,” was her response. I asked her if she could tell me anything about what I assumed was the FBI’s ongoing investigation into this matter.

89 The ‘Smart Road’ Scam

“I’m not going to discuss an investigation with you,” she said. “Can’t you at least acknowledge that this appears to be a big federal scandal,” I asked, increasingly frustrated. “There’s scandal and there’s corruption. We care about it in terms of the laws that may have been broken,” she offered. “Can you at least tell me if you have interviewed or plan to interview Dr. Christine Johnson, who has a great deal of inside information about this scandal?” “We don’t need people to tell us who to interview,” was her immediate response. That answer, on its face, was patently ridiculous. If I hadn’t made my complaint to the FBI’s Austin office back in February the FBI Washing- ton Field Office would have had no clue who to talk to about this scam. Clearly, they needed whistleblowers like me telling them what was going on and who else might have valuable inside information. Frankly, as I talked to Ms. Sniegowski I was increasingly getting madder and madder – “pissed” would probably be a more accurate description. Here I was, a citizen with what FBI Special Agent Thompson had acknowledged was “inside information” about a major national scandal likely involving a number of high-level elected and appointed officials, and a supervisor in the FBI’s Public Corruption Unit was being just plain rude and doing her best to give me the brush off. I couldn’t help myself from blurting out: “Frankly, I’m amazed at your cavalier attitude about this whole matter.” My words lingered in the air for a few seconds. “That’s the most insulting thing that anyone has ever said to me,” was her response. And with that, our conversation was over. It was clear that Ms. Sniegowski was very upset that I had gone over her head to SSA Velez at FBI Headquarters. I was so amazed and disappointed by Ms. Sniegowski’s attitude that I immediately called SSA Velez at FBI headquarters. “I just got a call [from Ms. Sniegowski] about a half hour ago, and I can tell you it’s the most unsatisfying call I think I’ve ever gotten in my life,” I started out. “Ooh, why’s that… hit me with it.”

90 Exactly What Does the “I” in “FBI” Stand For?

I recounted my conversation with Supervisory Special Agent Carol Sniegowski. I emphasized her unwillingness to tell me anything about the status of their investigation into my charges, her snotty attitude, and her ridiculous assertion that the FBI didn’t need people to tell them who they should interview. “Let’s just nip this in the bud,” SSA Velez told me, and then gave me his FAX number. “Keep in mind that here in headquarters we have hundreds of things going on daily. I’m going to do my best to keep up with what I’m going to tell you to send me. I’m going to try to do that much for you. We normally don’t play it this way.” Essentially he was offering to be a go-between between me and the Washington Field Ofﬁce. I would send new information to him, which he would then forward on to them. “This way, if you come across something, you can always be assured that if you send it to me, I will make sure that they get it in their hands,” he said. “That way, they can’t complain that they’re too busy doing other things in terms of getting information or that you’re not being pushy with them or however they want to view it. If they get it from me, they have to take a look at it.” He added this caution: “Let’s not abuse the privilege, because we are extremely busy. Once you give me the initial bulk of the information, I’m going to let them make an assessment. They may or may not have the information you’re going to forward to me, but what she said has a grain of truth to it. Let them dictate the pace of the investigation, and let them dictate who and when they interview. But if you bring things to light, I will make sure I point it out to them.” Essentially, SSA Velez was saying that information coming from him in FBI headquarters would be taken more seriously by the investigative team than the same information coming from me, an unknown source. That all made perfect sense to me, and I readily agreed to follow his advice. “I will be talking to them [WFO] as I will be talking to my superiors about this. If you give me information that is relevant, I can guarantee that it’s going to get to them, alright?” It was more than alright. I believed that I now had an advocate in FBI headquarters who would make sure that the information I was send-

91 The ‘Smart Road’ Scam ing would no longer fall into what I strongly suspected had been a black hole. He had asked me to send him the entire set of FAXes that I had sent to the WFO at that point in time, and that he would make sure that they saw them. So the next day, October 31, I sent a complete set of FAXes to SSA Velez via Express Mail. Over the next three months I would send him nine more FAXes, and was certain that he would quickly pass them on to the Hanzal, Sniegowski, and possibly others on the investigative team. Many of those nine FAXes would provide evidence I had recently discovered about former two-time (Commerce in the Clinton Administra- tion, Transportation in the Bush Administration) Cabinet Secretary Mi- neta’s apparent violation of the federal Ethics in Government Act. (The reasons for my belief are explained in much greater detail in Chapters 11 through 14.) Ken Boehm, a former prosecutor and Chairman of the National Legal and Policy Center – a government fraud and corruption watchdog organization – had earlier recommended that I acquire and carefully review the Public Financial Disclosure Reports of any senior USDOT officials whom I suspected of collaborating with former Cong. Shuster in the Traffic.com scam. So I contacted the U.S. Office of Government Ethics (OGE), and requested all of the public financial disclosure reports available for Secre- tary Mineta, Deputy Secretary Jackson, and Assistant Secretary for Trans- portation Policy Emil Frankel, who I knew was also active in the ITS field and had given presentations at several of ITS America’s Annual Meetings over the years. In reviewing Mr. Mineta’s calendar year 2000 report with Mr. Boehm and talking to a senior official within the U.S. Office of Government Eth- ics (OGE) about it, it became clear that Mr. Mineta should have disclosed the details of his transaction in stock options in a company called Trimble Navigation (which had and has business connections with Traffic.com) while he was Secretary of Commerce in 2000, but failed to do so. In part A of that disclosure he had revealed that he made a capital gains income of up to $1 million on those stock options, but he had said that he had no reportable equity transactions at all in part B, where he was required to

92 Exactly What Does the “I” in “FBI” Stand For? provide more details. It’s a pretty good trick to make up to $1 million income from stock options without having any transactions. Further, the information Mr. Mineta had provided on two other financial disclosures around the same time (one on July 18, 2000, just prior to his confirmation as Commerce Secretary in the Clinton Administration, the other on January 23, 2001, just prior to his confirmation as Transporta- tion Secretary in the Bush Administration) provided valuable additional data points. Mr. Mineta’s calendar year 2000 disclosure turned out to be mostly a photocopy of the January 23 “Transportation New Entrant” disclosure except for two key pages, the cover sheet and the page where Mr. Mineta was required to disclose the details of his stock options transactions, but failed to do so. I would later work with the well-respected non-profit watchdog organization Project on Government Oversight to further dig into the details surrounding Mr. Mineta’s critical calendar year 2000 disclosure through POGO’s Freedom of Information Act (FOIA) request and later appeal. Taken all together, it appeared very likely that Mr. Mineta, who had served on the Board of Trimble for just 13 months when he was a Vice President for Lockheed-Martin IMS, had received many more stock options than he should have received by the company’s published policy for compensating directors. I believed then—and believe now more than ever—that Mr. Mineta very possibly received many extra stock options from the company than he should have received by the company’s published policy. If that was the case, he then likely failed to disclose those details on his public financial disclosure report—as required by law—because he knew that doing so would raise all kinds of red flags. Further, my detailed Google searches seemed to show that both the Commerce and Transportation Departments under Mr. Mineta’s leadership were espousing policies designed to benefit the GPS market in which Trimble Navigation was a market leader. I specifically knew of a USDOT program called “E-9-1-1” that the USDOT began shortly after Mineta’s arrival as Secretary that was really a communications initiative, not a transportation one. E-9-1-1 required cellphones to be “location-aware” so

93 The ‘Smart Road’ Scam that call centers receiving emergency calls from people using cellphones would know their location, as they have known the location of “landline” callers for years. The key technology needed to implement E-9-1- 1? GPS, Trimble Navigation’s bread and butter. Did the Transportation Department under Secretary Mineta’s leadership aggressively pursue the E-9-1-1 initiative largely to pay Trimble Navigation back for his earlier stock options windfall. If an investigation would find that to be true, that would be reprehensible and likely illegal behavior by a high-level “public servant.” My conclusion was that Trimble Navigation very possibly had, in effect, “bought themselves a Cabinet member.” They had very possibly paid him handsomely up-front with extra stock options so that he would be their advocate within the federal government. However, it was impossible to know from just his public financial disclosure reports exactly how many extra stock options they might have given him—especially since he failed to provide those details, as was required by law. Clearly, other federal “authorities” would have to collaborate with the FBI to get to the bottom of this matter. It was also very possible that Trimble may have violated Securities and Exchange Commission rules by not disclosing (that I could find) the compensation that they had specifically given Mr. Mineta in their proxy and other statements to shareholders. SEC investigators could certainly get to the bottom of that matter in short order. (More in Chapter 18.) It was also possible that Mr. Mineta may have disclosed the true number and value of those stock options in his calendar year 2000 income tax filing, assuming that he sold the underlying stock represented by those stock options through a national brokerage firm that would also have to disclose those details to the IRS. If those options and/or related shares had been redeemed by Trimble Navigation itself, the company would certainly be required to disclose that information to the SEC in some kind of “insider trading” disclosure. In any case, Mr. Mineta apparently had a big ethics problem, and the FBI, working with the SEC and IRS, would have little trouble getting to the bottom of it. I urged that collaboration in several of the FAXes about Mr. Mineta’s ethics problem I sent to SSA Velez in the fall of 2006.

94 Exactly What Does the “I” in “FBI” Stand For?

More than two months after sending Mr. Velez compelling evidence that Mr. Mineta had been “on the take” for Trimble Navigation, I still had received no feedback at all from Hanzal and company from the FBI Wash- ington Field Office. I knew the old saying that the “wheels of justice turn slowly,” but this was getting ridiculous. On January 23 and 24, 2007, I left voice mail messages for SA Velez, SSA Hanzal, and SSA Sniegowski (two messages) saying that I wanted to go over the details of my analyses of several of Mr. Mineta’s financial disclosures, including both the SEC disclosures (for insider trading) and the OGE public financial disclosure reports. The next day, SA Velez called me back from what he said was an off- site location, and I reiterated my desire to explain in detail what I believed Mr. Mineta’s financial disclosures showed and to encourage the FBI to work with both the SEC and IRS to get to the bottom of the matter. He acknowledged that he had passed on my previous FAXes to him to the WFO, and said that they (WFO) would decide what direction any possible investigation would take. He said that I was welcome to contact the WFO to express my interest in explaining these details to them and to try to impart a sense of urgency to them. On January 25, SA Hanzal telephoned me, he said, in response to my message to him as well as on behalf of his supervisor Ms. Sniegowski with whom I had left two voicemail requests to call me. I told him that I wanted to go over Mr. Mineta’s financial disclosures with him, and to point out where Mr. Mineta had apparently hid details of his transaction in Trimble Navigation stock options which—if true—would likely constitute a violation of federal ethics laws. I went over with him the information I had earlier FAXed to SSA Velez, and specifically pointed out the missing information in Mr. Mi- neta’s 2000 financial disclosure. I encouraged SA Hanzal to work with the SEC, OGE and IRS to get to the bottom of this matter. He would not tell me the status of any FBI investigation or whether or not the FBI was already working with these agencies. During this discussion I expressed a strong concern that the FBI appeared to be going very slow on this investigation. His comment: “You think everything should have been solved quickly, but I can’t give you a

95 The ‘Smart Road’ Scam timetable or the status. Investigations can go on for months or years.” He also said that he knew that I had recently been sending FAXes to “someone in the headquarters Public Corruption Unit” and asked if in the future I would just send these FAXes directly to him at the WFO. He also asked me to FAX him copies of the SEC Insider Trading Forms I had obtained regarding Mr. Mineta’s stock options with Trimble Navigation, which I FAXed to him directly. Hanzal had essentially asked me to take Supervisory Special Agent Velez out of the loop. I agreed to do so, because I assumed that Mr. Velez had served his intended purpose, which was to bring the WFO’s attention to bear on this scandal and its offshoot related to Mr. Mineta’s apparent ethics problem. Through July, 2007, I sent numerous FAXes to SA Hanzal about my new ﬁndings related to either the Trafﬁc.com scandal or to Mr. Mineta’s possible violation of the Ethics in Government Act. The topics covered by these FAXes included:

● Senator Hatch’s communication with Transportation Secretary Pe- ters in which Hatch asked why the USDOT was continuing to support a sole-source procurement arrangement with Traffic.com. ● My communication with investigators in the Dept. of Labor’s Employee Benefits Service Administration (EBSA), which investigates possible fraud involving big national pension funds. The huge National Electrical Benefit Fund, a retirement fund for members of the IBEW, had invested more in Traffic.com than in virtually any blue chip company, which is highly suspicious activity for a national pension fund that should be investing conservatively. The investigators in the EBSA’s Philadel- phia office agreed that this didn’t compute, interviewed the NEBF’s Board Members about this matter, and discovered that the NEBF made many millions of dollars of profit from this arrangement (including almost two million penny stock warrants whose ultimate owners were never disclosed). Their chief investigator on this matter, David Finizie, said that he could not dig further into this matter, including the possibility of kickbacks from the millions of dollars of profit to Cong. Shuster or his associates, without a more specific indication of wrongdoing on the pension fund’s part.

96 Exactly What Does the “I” in “FBI” Stand For?

Clearly, the FBI’s active investigation into this scandal would provide sufficient additional political cover for the EBSA to dig more deeply into possible shenanigans. ● Information I had recently learned about the USDOT’s agreement to waive the normal 20% local agency cash match for the TTID program, which was a key factor in greatly expanding Traffic.com’s monopoly. Had USDOT top management not done so, it’s unlikely that very many cities would have put their own matching funds ($500,000/city) into the ITIP/TTID program. ● Information that I learned from reviewing the many local agency agreements that the non-profit watchdog Sunlight Foundation had received from the FHWA, showing how lopsided this program was in ben- efitting Traffic.com at the expense of both the local agency partner’s and the public’s interest. ● A copy of the article that had just appeared in The Hill entitled “’Monopoly’ Continues for Pa. Company, says Hatch.” ● An information trail related to POGO’s FOIA request to the OGE related to Mr. Mineta’s CY2000 disclosure. The OGE’s initial response to that FOIA request had indicated that they had apparently lost that disclosure, but POGO’s subsequent appeal had resulted in it being “re-found.” I strongly urged the FBI to investigate these shenanigans in our government’s top ethics watchdog agency. (More details in Chapter 12.)

From my previous discussions with SA Hanzal and several supervisors in the FBI’s Public Corruption Unit, I fully expected that the FBI was actively investigating both of my main allegations:

● That several former senior elected and appointed officials (including Messrs. Shuster, Jackson, and Mineta) had possibly been collaborating to create Traffic.com’s monopoly, and that these individuals may have had a substantial hidden financial stake in the company’s success. ● That Mr. Mineta deliberately and fraudulently failed to disclose the details of his capital gains income in 2000 from Trimble Navigation stock options when he was Commerce Secretary in the Clinton Admin- istration, and that he then pushed numerous policies and initiatives spe-

97 The ‘Smart Road’ Scam cifically designed to benefit Trimble when he was both Commerce and Transportation Secretary. These types of activities involving undue influence—if proven by the authorities—would likely constitute a serious violation of the Ethics in Government Act. Therefore, I was quite surprised when I received a short letter on July 23, 2007 from Michael Anderson, the Chief of the FBI’s Public Corrup- tion Unit, in which he said that the FBI had apparently not ever even opened an investigation into this matter because they could not find a “federal violation.” Clearly, the information that I had sent the FBI in 30+ FAXes over more than a year had indicated a strong likelihood of at least two major violations of federal law (see above), for which the FBI was the most logical agency to coordinate an investigation that would prove or disprove these allegations. The fact that our nation’s premiere law enforcement agency didn’t even open an active investigation into such likely major federal fraud and corruption—and instead just swept this whole matter under the rug—is very troubling indeed. It doesn’t bode well for our nation’s future.

Had Alberto Gonzales Played a Role?

On August 27, 2007, just over a month after I received my surprising letter from FBI Public Corruption Unit Chief Anderson, Attorney General Alberto Gonzales—President Bush’s old Texas buddy—resigned . When I heard the news, I immediately wondered: had Mr. Gonzales been informed about my allegation of a scandal involving several of his high- level colleagues in the Bush Administration? Had he played a catalytic role behind the scenes in Transportation Secretary Mineta’s unexpected —and still largely unexplained—resignation a little more than a year earlier? Had he played any role in working with his direct subordinate, FBI Director Robert Mueller, to assign my complaint such a low priority that it would be delegated to a rookie special agent with very little “pull” in the agency? Unfortunately, we will probably never know.

98 9

Engaging the USDOT Inspector General

n the fall of 2006 I was primarily spending my time on two different I“projects”: trying to make my fledgling Deliverasong.com venture a reality, and investigating and outing the Traffic.com scandal. The former held the possibility of a payoff down the road if my partners and I could actually gain a patent for our novel method of distributing digital music over the Internet. The latter was a “labor of love” that I just couldn’t give up quite yet, because I knew that if I did, a number of very high-profile crooks would get away with their scam. I wasn’t willing to let that happen. I had been talking with Jeff, a very sharp Internet/database programmer who had completely updated the NTOC’s website under my supervision a couple years earlier. Jeff agreed to develop our initial Deliverasong.com website at preferred programming fees in exchange for an equity stake in the venture. A functioning commercial website needed to be in place in time to show it off at the big upcoming “South by Southwest” (SXSW) music festival that would be held in mid-March, 2007. Jeff lives in DC, and as an added incentive I offered to fly him out to Austin to participate in the week-long SXSW festival. He readily agreed. To save time in developing our new website because time was so short, I decided to fly to Washington DC to meet with Jeff personally to iron out

99 The ‘Smart Road’ Scam initial details. Jeff readily agreed to meet with me as many evenings as it took to get our ducks in line for this new website. This trip would also provide a good opportunity for me to network with folks who could help investigate and expose the Traffic.com scandal, including the non- profit watchdog organizations I’d been talking with, key legislative staff members, and DC-based investigative reporters. That would let me get maximum advantage of this trip, because I couldn’t meet with Jeff during the day anyway. While in DC I stayed with my old college roommate and long-time best friend Jack and his wife Mary Kay out in the DC suburbs. Right before that trip, during the 2006 Christmas/New Years holiday, I stayed with my sister Judy and her husband Bill in Northern California. They are not only great hosts, but have been very supportive of my efforts to expose this scandal, even though sometimes I think that they think it’s a lost cause—that government corruption is just an unfortunate fact of life. My belief is that the people who know the details of this corruption need to come forward. If they don’t, such corruption will increasingly flourish and things will just get worse. My sister and brother-in-law at least tolerate my stance, and I think respect it. I might have given up long ago were it not for their support. During my visit with Bill and Judy, I filled them in about my recent efforts, especially to get the FBI to conduct a thorough investigation into this scam. I recounted my recent discussion with FBI Supervisory Special Agent Velez. They thought it was interesting, but didn’t necessarily mean that the FBI was actually taking my complaint seriously. The big conundrum was how to get the “authorities”—not only the FBI, but the SEC, too—to seriously investigate what I knew was a major ongoing federal scandal. Perhaps all of the FAXes I had sent the FBI with details about this scandal hadn’t resonated because Special Agent Hanzal and his supervisors found my discussion of “traffic data,” “pole-mounted sensors,” and “data-sharing restrictions” too technical or too esoteric. Hanzal had never asked me a single question about the nuts and bolts of this scam; perhaps he felt he didn’t know enough to even ask intelligent questions about it, as Austin FBI Special Agent Thompson had almost a year earlier. What if the FBI just didn’t have the smarts to actually understand this scandal. (Down deep I really didn’t believe that was the case,

100 Engaging the USDOT Inspector General but I was just leaving open the possibility.) Right after Christmas, I got a revelation: surely the Department of Transportation’s own “FBI,” the Office of Inspector General (OIG), would have the subject-matter interest and expertise to dig into this scandal. Un- covering and prosecuting transportation-related fraud and corruption is their main business, not a sideline as it surely was for the FBI. The OIG would also inherently understand the structure in the USDOT’s “modal administrations” like the Federal Highway Administration, and would already have connections within the USDOT and FHWA that they could exploit in investigating this scandal. The more I thought about it, the more I concluded that the OIG might well be the best investigative body to look into this scam. Mike Curran had earlier told me what Roll Call’s Damon Chappie had told him years ago: that Bud Shuster had “sources” if not his former staff members who were still loyal to him in the USDOT Inspector General’s office. I knew for a fact that Jeff Nelligan had transitioned from being Shuster’s communications director to a similar role in the OIG, and that Mike’s attempts to alert the OIG to the details of the Traffic.com scam had gone nowhere back in early 2001. I went to the USDOT Inspector General’s website to check out the watchdog agency further, and read the biography of Inspector General Calvin Scovel III, who had been sworn it just two months earlier. I was impressed. Mr. Scovel, a retired Brigadier General in the Marine Corps, had a long and distinguished career, most recently as a military judge and Judge Advocate General. Nothing in his bio suggested he had any connection to Shuster, Mineta, or even to any big transportation projects or initiatives. He had apparently been chosen because of his integrity, not because who he knew in the transportation field or in Congress. I was both impressed and hopeful. Because of Mike’s past failure to engage the OIG in this matter, I felt that just sending a complaint in to the OIG’s “hotline” would probably suffer the same fate. My experience in dealing with the FBI was a con- stant source of disillusionment and frustration, because clearly no one in the upper levels of the FBI had supported an investigation into the Traffic. com scandal—quite the opposite. But here the brand new top USDOT

101 The ‘Smart Road’ Scam watchdog—the Inspector General—appeared to have boatloads of integrity and none of the types of political connections that might have derailed Mike’s earlier efforts. I decided to follow an axiom that had served me well at times (and at other times, like at Motorola, had not worked quite so well): “It’s better to work your way down in an organization than up.” I decided to contact IG Scovel directly. For that I would once again rely on that courageous troublemaker and whistleblower, Marvin Erbeny. After calling the IG’s office and confirming Mr. Scovel’s email address ([email protected]), on De- cember 28, 2006, Marvin sent a very pointed message to the new IG. It started: “Dear Mr. Scovel, I am personally aware, through many years of experience, of a major scandal involving the former Chairman of the U.S. House of Representatives Transportation & Infrastructure Committee, Bud Shuster, and at least two very senior officials within the USDOT.” Marvin’s letter summarized the details of the scandal, and highlighted the April 2005 article in The Hill (“Monopoly Money for Pa. Company”). “Keep in mind that that article is just the ‘tip of the iceberg,’” Marvin wrote. “That article does not mention the involvement of these senior USDOT officials, which I discovered through extensive research as well as numerous discussions with people in both the public and private sector who have knowledge of this scandal…” Marvin held absolutely nothing back in this message. “I am concerned about how truly independent the USDOT OIG would be in investigating this scandal,” he wrote. “I am aware that in the past, at least one other person attempted to make the OIG aware of this scandal, but their complaint was not pursued by the OIG. One very possible reason is that former associates of Mr. Shuster, who worked in the OIG at the time, effectively shelved these complaints and thus curtailed any possible investigation… I suspect (although have no way of knowing for sure) that others who may have been loyal to Mr. Shuster also worked in the OIG at the time and, if so, these individuals may still work for the OIG. If that is the case, it immediately brings up the age-old question: ‘who will guard the guards?’” Marvin concluded the message with: “I have reviewed your online bio and believe that you are a person of high integrity who brings the very

102 Engaging the USDOT Inspector General real possibility of objective and honest oversight to the OIG. The fact that you come to the USDOT OIG from the outside also means that you do not have longstanding ties with individuals who may be involved in this scandal. I hope that is the case and that you will be interested in investigating this scam and getting to the bottom of any possible fraud and corruption involving these senior USDOT ofﬁcials.” Over the next few days and on into the new year I checked Marvin’s Gmail account for any kind of acknowledgement or response to his very pointed letter to IG Scovel. Nothing. On January 3 I ﬂew from Bill and Judy’s in Northern California back to Austin, and began preparing for my trip to DC in a few days. My bright idea to get the IG to investigate this scandal seemed like yet another dead end.

The OIG Discovers Marvin’s True Identity

Late afternoon on Tuesday, January 9, 2007, my American Airlines flight arrived at Reagan/Washington National Airport right on time. As I arrived in the terminal, I powered up my cellphone, which a minute or two later began to simultaneously chirp and vibrate. Someone had left me a voicemail message. “This is Special Agent Malik Freeman from the U.S. Department of Transportation’s Office of Inspector General,” the caller said. “I’d like to meet with you to discuss the Traffic.com matter with you. Please call me to set up a suitable time.” I was flabbergasted! Special Agent Freeman had called Jerry Wer- ner, not Marvin Erbeny, whose email message had spawned his response. How had that happened? How had the IG’s office figured out that Marvin Erbeny was really Jerry Werner? Who had told them? How did they even get my cellphone number, which I rarely gave out? When I got settled in my old roommate Jack’s place out in the DC burbs, I got online to Marvin Erbeny’s Gmail account, and there was a message from Freeman. “Mr. Erbeny, First of all, on behalf of the Inspec- tor General Calvin Scovel III, U.S. Department of Transportation, Office of Inspector General, I look forward to meeting with you at your earliest convenience to discuss this matter.”

103 The ‘Smart Road’ Scam

“I am a Special Agent in the Washington Field Office and I have been assigned to this matter. I am also a commissioned officer in the U.S. Army,” he went on. “That is why you are receiving this email from my us.army.mil account. I contacted you on Tuesday, January 9, 2007 at approximately 1:00PM in order to set up a face to face meeting to discuss the TRAFFIC.COM matter with you on behalf of Mr. Scovel.” The next morning I would call Special Agent Freeman, and we arranged to meet the following Friday at 3 pm at the OIG’s offices near the L’Enfant Plaza Metro station.

(Seemingly) Receptive Authorities

While I took part in a number of very useful meetings and visits on this trip (see next chapter), I was especially anxious to share what I knew about the Traffic.com scandal with the OIG’s investigators. For the very first time the “authorities” were seeking me out to learn more about this scandal, a big difference from what I had experienced in trying to work with the FBI. (Of course, the letter to me from Mr. Anderson, the Chief of the FBI’s Public Corruption Unit, would not come for six more months or so, and I was still sending FAXes to FBI Special Agent Hanzal.) Anticipating that I’d be talking to a whole lot of folks about the Traf- fic.com scam on this trip, I had brought with me a full briefcase of information, including copies of press reports about the Traffic.com scam, copies of my latest summary of the scandal, and copies of Mr. Mineta’s cy2000 financial disclosure in which he had clearly failed to provide details of his capital gains income of up to a million dollars. On Thursday night, I burned a CD for OIG Special Agent Freeman containing all of the FAXes that I had sent earlier to the FBI. That would greatly help him rapidly come up the learning curve. Despite—or perhaps because of—the frenzy of activity that week, Friday afternoon came around quickly. Just before 3 pm I arrived at Free- man’s building, a nondescript office setting a few blocks from the Federal Highway Administration’s huge “Nassif” building that sits right above the L’Enfant Plaza Metro station. I signed in at the guard’s desk. A few minutes later Special Agent Freeman arrived and escorted me back to the IG’s

104 Engaging the USDOT Inspector General offices. We sat in a plain room with a large TV monitor in a mobile rack toward the back wall, and a white board on the front wall. The room was outfitted with typical government-issued, no-frills furniture: a plain table and several functional office chairs. With the oversize monitor looming over my left shoulder, I wondered to myself if our discussion was being secretly video recorded, for later playback and dissection. I couldn’t immediately spot any cameras in the ceiling. Shortly after exchanging pleasantries, Freeman’s boss, a petite black lady whose name I forgot to write down, entered the room. She was particularly sensitive to the part of “Marvin’s” message to Inspector Gen- eral Scovel that had implied the OIG’s integrity had been compromised because of former Congressman Bud Shuster’s inside connections there. “We’ve confirmed what you said about [former OIG Director of Com- munications] Jeff Nelligan, but haven’t found any other people here who used to be on Shuster’s staff,” she said. I imagined that Marvin’s earlier assertion had caused a whole lot of personnel records to be examined with a box full of fine-tooth combs. Freeman asked me to summarize how the scandal worked. Since I was—finally—working with “authorities” who specifically had a background in transportation issues, I went into a lot of detail about what I call Traffic.com’s very clever “data lock scheme” that is a very counterproductive result of Traffic.com’s monopoly from a public interest perspective. Freddie Zoolander from TxDOT’s Austin district had first explained the downsides of that scheme when I had interviewed him way back in mid-2002. In essence, Traffic.com effectively owned the most valuable taxpayer-subsidized data, and had effectively prevented or “locked out” its use by both their local agency partner and its commercial competitors in the traveler information business. Clearly, traffic data paid for by the taxpaying public should be widely available to the public, I asserted, but that was not the case in most of the cities that participated in this very troubling earmarked program. Freeman asked a number of questions about how traffic data is collected and used, and I gave him a mini-tutorial. I suggested that a diagram might enhance his understanding, and he urged me to draw it on their

105 The ‘Smart Road’ Scam white board. I would later turn this tutorial into one of many white papers I’ve written that describe various details of this scandal. The diagram in the “data lock scheme” white paper is a direct descendent of the one initially drawn on the OIG’s white board. Interestingly, months later I would come across a PowerPoint presentation on the web by Traffic.com Vice President John Collins that included an almost identical diagram. Clearly, John and I were both talking about the same thing, but our respective “slants” were undoubtedly quite different. I gave Freeman the CD containing the full set of FAXes I had sent to the FBI, and particularly emphasized the information I had just learned two months earlier about Mr. Mineta’s failure to disclose his up to $1 million in capital gains income in Trimble Navigation stock options. I brought with me hardcopies of all of his financial disclosures that the U.S. Office of Government Ethics had sent me, and Freeman made copies of each of them. I showed him specifically where Mr. Mineta had marked “none” on his calendar year 2000 disclosure, where he should have provided details of his Trimble stock options transaction. (Much more in Chapters 11 through 14.) Toward the end of our nearly two-hour meeting, Freeman’s supervisor asked me how high up in the USDOT I thought the scandal went, and I told her that it was possible that even Secretary Peters was involved in it, since she had been a long-time protégé of former Secretary Mineta’s and had played an important role in relocating Dr. Christine Johnson back in mid-2002. She just nodded her head in acknowledgement. As Special Agent Freeman was escorting me out of the OIG’s offices and back to the front lobby, I heard him exhale loudly through pursed lips. Without saying a word, he was conveying that what I was alleging was a big deal, and that he would have his hands full with an investigation that could reach all the way to the top of the USDOT Secretary’s office. As I departed, I expressed optimism that he would be able to get to the bottom of this scandal. “I’m the low man on the totem pole,” he responded. “I just do what they tell me.”

106 Engaging the USDOT Inspector General

Expectations of a Real Investigation This Time

Over the next year I would send 59 email messages to Special Agent Freeman with new information that I discovered about both the Traffic. com scam and Mr. Mineta’s apparent ethics violation. Between January and June, 2007, he would reply via 10 email messages, generally acknowledging receipt of the information I was sending him. On a couple occasions he asked to arrange a time when we could talk further about specific details. On January 22, after I sent him a note about POGO’s Freedom of Information Act request to the U.S. Office of Government Ethics to acquire early copies of Mr. Mineta’s CY2000 financial disclosure that we then believed at the time existed (see Chapter 12), he was very interested in knowing more about what I had learned in studying Mr. Mineta’s disclosures. On January 24 I walked him through the significance of those disclosures step by step while he reviewed the copies he had made during my visit to him at the OIG’s offices. I also told him about new information I had just learned from a long-time friend and contact in the Federal Highway Administration about the possibility that the USDOT’s “E-9-1- 1” initiative was part of Secretary Mineta’s payback to Trimble Naviga- tion for the extra stock options they may have given him. Special Agent Freeman was clearly engaged. On February 26, I called Special Agent Freeman to tell him about the U.S. Office of Government Ethics’ strange response to POGO’s recent Freedom of Information Act request. Apparently, the OGE had lost all versions of Mr. Mineta’s key calendar year 2000 financial disclosure, including the one they had sent me four months earlier and that Freeman had copied during my January visit. I said that I strongly suspected that some major shenanigans were going on at OGE, but Freeman didn’t seem very eager to investigate them. “I don’t know if we have any jurisdiction over OGE,” he said. I also mentioned that the USDOT’s Ethics Officer, a “Wil- liam Register,” had signed and approved all of former Secretary Mineta’s disclosures, so that even if the OGE had destroyed the key cy2000 disclosure (implied in the OGE’s letter) that Register might still have it. “Sure, I know Bill Register,” Freeman said when I mentioned Register’s name. “He’s been here for a while. I haven’t ever heard anything unethical about

107 The ‘Smart Road’ Scam him.” For a brief moment I got the uncomfortable feeling from Freeman’s comment that the OIG might be pretty cozy with the very individuals within the Office of the Secretary of Transportation (OST) to whom they needed to ask some hard questions about the malfeasance I was alleging. An arms-length relationship between the OIG and the agency they were monitoring would have been both more appropriate and more reassuring. During this conversation I also filled Freeman in about the key financial role that the National Electrical Benefit Fund (NEBF) had played before Traffic.com went public. I told him that it was highly unusual for a fiscally conservative national pension fund to invest so much of its members’ hard-earned money in a high-risk, high-tech startup like Traffic.com. I also said that I strongly suspected that the NEBF connection was one way that Shuster, Mineta, and others had secretly profited from their support for Traffic.com. I informed him that I had contacted Jeffrey Hinman, the Deputy Director for Criminal Enforcement for the Dept. of Labor’s Employee Benefits Security Administration (EBSA), which investigated union pension fraud. I had passed on Freeman’s name and contact information to Hinman, in the hopes that the two investigative agencies would collaborate in getting to the bottom of this scandal. My last phone conversation with Special Agent Freeman was on March 6, 2007, when I called him to fill him in about POGO’s FOIA appeal to the U.S. Office of Government Ethics, asking for their records related to the possible destruction of Mr. Mineta’s key cy2000 financial disclosure. (We knew that the OGE should not have destroyed Mr. Mi- neta’s cy2000 disclosure, but wanted to see precisely what their records would show.) In that conversation I expressed frustration that the OIG’s ongoing investigation into the whole Traffic.com scam seemed to be going at a snail’s pace. SA Freeman’s response: “It takes time, Jerry.” My last email message from Special Agent Freeman was on June 18, 2007, when he responded positively to my offer to send him a CD containing all of the documents, including legislative correspondence and agreements between Traffic.com and state DOTs, that the non-profit Sunlight Foundation had recently obtained from its Freedom of Information Act request to the FHWA. On July 23, 2007, Michael J. Anderson, the Unit Chief of the FBI’s

108 Engaging the USDOT Inspector General

Public Corruption Unit, would write me a letter saying that both the FBI, the Inspector General’s Office, and the DC U.S. Attorney’s office had all agreed that they could not find sufficient justification to investigate my allegations. “Based on what you reported, the FBI contacted the Depart- ment of Transportation, Office of Inspector General (DOT/OIG),” Mr. Anderson wrote. “Together with DOT/OIG, we reviewed and discussed your allegations with the Washington, DC, United States Attorney’s Of- fice. No federal violation was identified.” It was abundantly clear that multiple federal laws had likely been violated, and that I had provided more than enough circumstantial evidence to warrant a full-scale investigation into these shenenigans by the FBI, OIG, SEC, EBSA, and IRS. I did not have access to Mr. Mineta’s 2000 tax return, for example, which would show how many stock options in Trimble Navigation he had sold (or, at least, said that he had sold) to account for the income of up to $1 million he had reported on his public financial disclosure report. The OIG or the FBI, as the lead investigators, could undoubtedly ask the IRS to produce that return. However, they were unwilling to open an investigation to get to the bottom of my allegation. The authorities were refusing to open an investigation because they didn’t have definitive proof of a federal violation, yet the purpose of such an investigation would be to identify such proof. It was clearly a “Catch 22.” After I received Mr. Anderson’s letter, I thought back to OIG Spe- cial Agent Freeman’s last comment to me when I had visited with him in Washington, DC the previous January. “I just do what they tell me,” he had said. Had “they” told him not to conduct an in-depth investigation into these matters? Had his disinclination to follow the trail of former Sec- retary Mineta’s possible wrongdoing to the U.S. Office of Government Ethics played into that directive? Had the fact that the Inspector General’s Office reported to Secretary of Transportation Mary Peters—and she was clearly a participant in the Traffic.com scandal at some level—influenced what “they” had instructed Freeman to do? The likely short answer to all three questions: “Yes.”

109 10

Connecting with Congress

oth the days and evenings of my trip to Washington, DC in January, B2007 were jam-packed with meetings. During the day I was meeting with a wide array of individuals representing organizations (such as congressional committees, newspapers, and non-profit watchdog organizations) that I had hoped to convince to look further into the Traffic.com matter. On the congressional side, I had been talking from time-to-time with Utah Senator Hatch’s legislative assistant, Matt Sandgren, since the previous March, particularly about the fact that Utah DOT had recently signed up to participate in the TTID program. It was particularly ironic that while Utah’s senior Senator had strongly fought to do away with Traffic. com’s monopoly back in 2005, two years later his home state’s transportation agency would sign up to participate in the TTID program to further extend the reach of that monopoly. Sandgren was Sen. Hatch’s point staff person who had participated in the last minute negotiations with Senator Specter’s staff, resulting in the new “Part II” language for the TTID program intended (by Hatch, Cong. Weiner, and other legislators) to break up Traffic.com’s monopoly. I wanted to fill him in about what had actually happened since the passage of SAFETEA-LU.

110 Connecting with Congress

Our meeting was short and to the point. “I know from your press release back in July 2005 that you and Senator Hatch believe that you ‘put the brakes on Traffic.com,’ but that didn’t happen in reality,” I informed him. “Every one of the TTID contracts that have been signed since the passage of SAFETEA-LU were awarded under ‘Part I,’ which continued Traffic.com’s monopoly. Not one of these awards was done competitively under the new ‘Part II.’” “Can you send me some proof of what you’re saying?” he asked. “If what you’re telling me is true, it would probably call for a letter from the Senator to Transportation Secretary Peters, asking what’s going on. “Be glad to,” I replied. Over the next week or so I would send Matt more details—mostly borrowed from the FHWA’s own website—and suggest a number of questions that Sen. Hatch might want to ask Secretary Peters. Some of that information would find its way into the Senator’s January 23 letter to Secretary Peters. In the following almost two years I would interface with Senator Hatch’s staff—including five different legislative assistants—many times, and would always find them concerned, straightforward, and courageous in continuing to challenge Traffic.com’s monopoly.

Seeking Oversight from the House Oversight Committee

I had also scheduled visits with both majority (Republican, soon to be Democratic) and minority (Democratic, soon to be Republican) staff members from the House Oversight and Government Reform committee. The Oversight Committee is “the main investigative committee in the U.S. House of Representatives,” according to its website, and has “jurisdiction to investigate any federal program and any matter with federal policy implications.” The TTID program was one of a new breed of so- called “public/private partnerships,” and the very painful lessons learned from this program could help mold policy that would avoid similar scams in future ppp’s. I felt sure that this program was exactly the type of federal program-gone-wrong that the Oversight Committee would want to investigate and expose. While the House Transportation and Infrastructure Committee had

111 The ‘Smart Road’ Scam

“normal oversight” responsibility over the earmarked TTID program, I was skeptical that committee would want to really dig into the details of this program, because three consecutive committee chairmen (Mineta, Shuster, and Young) had all played prominent roles in setting up Traffic. com’s monopoly. In fact, Cong. Young—who had entered a statement in the July 29, 2005 U.S. House record designed to starve funding for Hatch’s new, open-competition “Part II”—was still Chairman of that committee at the time of my DC trip. I was contacting the Oversight Committee for an even more relevant reason: Mr. Mineta’s very suspicious calendar year 2000 public financial disclosure report in which he failed to disclose the details of his stock options transactions that had led to up to $1 million in profit. In preparation for my trip I had written a new white paper entitled “Former USDOT Sec- retary Norman Mineta’s Public Financial Disclosure Reports for 2000 and 2001: Inconsistencies and Missing or Suspicious Information,” which I intended to provide to Oversight Committee staff. It was clear that no one within the U.S. Office of Government Ethics had carefully analyzed these disclosures, because if they had they would have discovered the same red flags I was raising. Since the Oversight and Government Re- form Committee had direct oversight responsibility for OGE and, hence, the financial disclosure process, I felt sure that I was contacting the right committee. In recent years the Oversight Committee has investigated such wide- ranging topics as steroids in baseball, the “outing” of CIA operative Val- erie Plame, the “friendly fire” incident in Afganistan involving former NFL star Pat Tilman, the White House’s loss (and possible destruction) of millions of email messages, and Iraq reconstruction fraud. With the Democratic takeover of Congress in the November 2006 election, the Chairmanship of the Committee was passing from Cong. Tom Davis (R-VA) to Cong. Henry Waxman (D-CA). As the ranking member of the committee, Waxman over the years had gained a reputation as a bulldog who would try to hold the Administration’s feet to the fire on any number of issues. However, as ranking minority member he had little influence over the committee’s agenda, and in particular which instances of potential government corruption they would pursue.

112 Connecting with Congress

That had all changed with the November 2006 election. With the change in control of the House passing from the Republican Party to the Democratic Party, anticipation was high that Waxman would much more aggressively pursue alleged government corruption than had his predecessor, Cong. Davis. Echoing that sentiment, the day following the Novem- ber election Time Magazine called Waxman “The Scariest Guy in Wash- ington.” I had earlier contacted the Oversight Committee in late October, 2006, and purposely contacted both the Republican and Democratic staffs to inform them about what was going with this earmarked program. After all, the ethical issues (and potential lawbreaking) I had identified was “bipartisan” in that both Republicans (Shuster, Young, Jackson) and Democrats (Mineta, Jannetta) were involved. While I expected the Democratic side would be more likely to want to investigate this matter since it had flourished in the Executive Branch during the Bush Administration, I wanted to play it exactly down the middle. I could care less which side would pursue it, after all—as Ken Boehm from the conservative National Legal and Policy Center and the former Chairman of the “Citizens for Reagan” committee had told me earlier—“corruption is absolutely non-partisan.” My pitch to both sides in my initial phone calls was the same. “I’d like to make the Committee aware of a big ongoing scandal in the U.S. Department of Transportation that involves a number of high-level elected and appointed officials,” I said. “One of those officials, former Trans- portation Secretary Mineta, also failed to provide required information about his stock options income on a public financial disclosure report.” I asked the person who answered the phone to transfer me to a committee staff person who was involved in investigating allegations of government corruption and ethical wrongdoing. For the Democratic side, my call was transferred to Dave Rapallo. For the Republican side, Anne Marie Turner. I left voice mail messages for both. A day or so later Margaret Daum, a staff attorney for the Waxman side of the committee returned my call to Rapallo, and I gave her a short verbal summary of the scandal, emphasizing Shuster’s and Mineta’s roles in it. She asked me to send her additional information about it, and I emailed her my latest synopsis, several white papers, and previous press reports

113 The ‘Smart Road’ Scam about it. “Thanks Jerry, I’ll review and get back to you,” was her email response. She never did get back to me to discuss the substance of what I had sent her. Surprisingly, I was having somewhat better luck with the Repub- lican side of the committee. At least my contact there, Counsel Anne Marie Turner, was more communicative than Ms. Daum. After sending her background information on both the scandal and Mr. Mineta’s ethics problem, on Nov. 17 she wrote back: “Jerry - thank you for your emails. I will review this information and get back to you. I hope you have a nice holiday. Anne Marie.” Ms. Turner actually did get back to me, less than an hour later. Her response: “Jerry - With regard to the traffic.com scandal, the Committee will not be able to conduct an investigation. I have reviewed your concerns regarding Secretary Mineta’s Financial Disclosure Reports. I am working on locating the appropriate contact for you. Thanks, Anne Marie Turner.” While I was disappointed that Anne Marie had punted on having the committee look into the whole Traffic.com matter, at least she was up front about it. Plus, she was working to find an appropriate contact regarding Mr. Mineta’s financial disclosure matter, which was progress. Three days later, Anne Marie would provide more information. “Jerry - I have reviewed your three-pager on Secretary Mineta’s 2000 and 2001 public financial disclosure reports and the two additional emails regarding your conversations with Tom Zorn at the Office of Govern- ment Ethics (OGE),” she wrote. “Government Reform has jurisdiction over OGE and Chairman Tom Davis has long advocated a reform to the appointments process for federal officials. Specifically, Chairman Davis supported reform of the financial disclosure process, which currently requires elaborate documentation of financial information, but does little to identify actual conflicts of interest that may face an official in public office. Since becoming Chairman in 2003, Davis has worked with OGE to draft legislation to re-work the financial disclosure process for the federal government. Up to this point, however, there has not been sufficient support on Capitol Hill to enact any real reforms to the financial disclosure process. For example, Chairman Davis’ most recent effort to reform the financial disclosure process was converted into an ‘OGE reporting

114 Connecting with Congress requirement’ by the Senate during conference.” “You have made it clear that you support changes to the financial disclosure process,” she continued. “I would recommend reaching out to your Representative to express support for these changes. Once Congress is back in session in 2007, you could also reach out to the new Chairman for Government Reform, Henry Waxman. I am unaware of Mr. Wax- man’s position on this issue. I hope this information is helpful. Thank you, Anne Marie Turner.” Despite the tepid response from the Democratic side of the Oversight Committee and the Republican side’s stated unwillingness to dig into the Traffic.com scandal, I still felt that there was a chance to convince the committee to look into this matter, so I planned to meet with staffers from both sides during my trip. If they met me in person, surely they would realize that I wasn’t some kind of flake or crazy conspiracy theorist. My meeting with Ms. Daum in DC was brief and to the point. I gave her the “in a nutshell” description of how Traffic.com’s monopoly had been set up and who was involved, and handed her copies of my latest synopsis, information about Mr. Mineta’s financial disclosure, and other supporting documents. I again urged her to have the new Democratic majority put this matter on the committee’s agenda, but she demurred, saying that perhaps it might get there in a few months but that the committee already had a full plate of issues – particularly related to Iraq reconstruction – over the near term.

Informing a Financial Disclosure Expert

On the Republican side, Ann Marie Turner had hooked me up with Mason Alinger, the Deputy Legislative Director whom she said was responsible for the “ﬁnancial disclosures issue.” I met with Mason in one of the committee’s small conference rooms and laid out what I was increasingly sure was former Commerce/Transportation Secretary Mineta’s fraudulently incomplete calendar year 2000 disclosure. I went through all of the inconsistencies explained in my earlier white paper that I had sent Anne Marie, and that I assumed she had forwarded to him, and both showed and gave him copies of the actual ﬁnancial disclosures in ques-

115 The ‘Smart Road’ Scam tion. Basically, I outlined how Mr. Mineta had apparently cleverly avoid- ed disclosing the truth about the true size of his transactions in Trimble Navigation stock options. Alinger was paying rapt attention as I recounted my investigation. When I showed him that Mr. Mineta’s calendar 2000 report was, except for two pages, an exact photocopy of his Transportation ‘new entrant’ report submitted almost a year and a half earlier—including all of the same (original) approval signatures—Alinger smiled and chuckled, as if to say “Ah ha! Very clever!” I felt in some sense as if I was giving him a tutorial on some ingenious ways he might not already have been aware of that federal ofﬁcials were using to circumvent the intent of the ﬁnan- cial disclosure process. Frankly, I was a little put off by the fact that he mostly found it all amusing, and didn’t outwardly express any of the same outrage I felt that a recent Cabinet Secretary may have violated federal ethics laws. I guess that when you work in the government you see these kinds of shenanigans all the time and essentially become desensitized and apathetic, telling yourself, “that’s just the way it is.”

A Conﬁrmation Snow Job

During our discussion, Alinger mentioned that Mr. Mineta would have submitted even more detailed financial disclosures in conjunction with his Cabinet Secretary confirmation hearings in 2000 and 2001, and that these disclosures might well help shed light on my allegations. After I returned home following this trip, I informed both FBI Special Agent Hanzal and OIG Special Agent Freeman what Alinger had told me, and urged them to acquire Mr. Mineta’s more detailed financial disclosures. I also searched the Internet to find either transcripts of his two Cabinet confirmation hearings or, better yet, copies of the more detailed financial disclosures that Alinger had implied were part and parcel of those hearings. The good news was that both of Mr. Mineta’s confirmation hearings had been conducted by the same Senate Commerce, Science, and Trans- portation Committee. So January 16, 2007—just after returning to Austin —I called that committee and asked Margaret Spring, the Committee’s Assistant Staff Director, about the availability of more detailed financial

116 Connecting with Congress disclosures than the ones Mr. Mineta had filed with the OGE. Ms. Spring said that she was new on the job, but would check into it and get back to me. A couple days later she called to let me know that the OGE’s “new entrant” reports were, in fact, the financial disclosures used in the confirmation process. Mason Alinger, one of our government’s leading experts on the financial disclosure process, had apparently been mistaken. The Library of Congress’ excellent Thomas online archive lists both Mr. Mineta’s July 17, 2000 Secretary of Commerce confirmation hearing (Nom. No. PN1140-106), as well as his January 24, 2001 Secretary of Transportation confirmation hearing (Nom. No. PN104-107). However, only the latter listing links to a hearing transcript. That transcript reads almost like a group testimonial to Mr. Mineta’s past achievements (which are many), rather than an objective and rigorous questioning of the individual who would soon be CEO of a Department of Transportation with over 50,000 employees and an annual budget in the tens of billions of dollars. Just prior to that hearing, the Acting General Counsel of the U.S. Dept. of Transportation, Rosalind A. Knapp, sent a two-page letter to Commit- tee Chairman Sen. John McCain intended to address any perceived conflicts of interest. That letter said that Mr. Mineta served on Trimble Nav- igation’s Board of Directors, along with several others, until July 2000. “Secretary Mineta has agreed, if confirmed, not to participate until July 2001 in any particular matters involving specific parties in which any of the following organizations is a party or represents a party, unless his participation is authorized pursuant to the regulations of the Office of Gov- ernment Ethics,” Ms. Knapp wrote, and listed Trimble Navigation along with four other organizations. She concluded “I find that no conflict of interest will arise as a result of Norman Y. Mineta being confirmed as the Secretary of Transportation.” Amazingly, even though Mr. Mineta served on the Board of Direc- tors for NYSE listed Trimble Navigation just seven months earlier and reported a capital gains income of up to $1 million from Trimble Stock options on the New Entrant disclosure he had filed with the OGE the day before, the word “Trimble” was not brought up once in his confirmation hearing, according to the hearing’s 116 page transcript. In section A,

117 The ‘Smart Road’ Scam entitled “Biographical and Financial Information Requested of Depart- ment/Agency Nominees,” Mr. Mineta listed well over a dozen business relationships, but not his Trimble ties. While Mr. Mineta could certainly claim that on January 24, 2001 he no longer had a formal business relationship with the company, many of the relationships he did include (e.g., Santa Clara County Council) clearly appeared to be in his past. Perhaps he could argue that there “is no business relationship with Trimble Navi- gation,” taking a cue what his former boss President Clinton had once said, “that depends on what ‘is is’”. However, it seems clear that for full disclosure Mr. Mineta should have listed his recent business relationship with Trimble and let the Senate nomination panel decide whether or not it was relevant. Mr. Mineta’s response to item 3. in Section C (“Potential Conﬂicts of Interest”) is even more telling:

3. Describe any business relationship, dealing, or ﬁnancial transactions which you have had during the last 10 years, whether for yourself, on behalf of a client, or acting as an agent, that in any way constitute or result in a possible conﬂict of interest in the position to which you have been nominated.

His response:

During the past 10 years, I have had no clients and only three employ- ers. I do not anticipate any conflict of interest being created by any of my past activities. I will disqualify myself from participating in matters concerning Lockheed Martin or organizations with which I have served, as provided in ethics regulations. Charitably speaking, that answer was either “disingeneous” or a “misrepresentation.” Less charitably, it was an out-and-out deliberate failure to disclose vital information. He had failed to disclose that he had recently served on the Board of Directors of a company that just six months earlier had awarded him a sufficient number of stock options that he had claimed a “capital gains income” on his OGE financial disclosure of up to one million dollars.

118 Connecting with Congress

Not only did he fail to disclose that “potential conﬂict of interest,” but location technology and GPS—Trimble Navigation’s bread-and-butter business—were clearly impacted by federal policies and initiatives pursued by the Transportation Department. Just seven months earlier the company very possibly gave him substantial extra stock options beyond what it should have provided according to its published policy for compensating directors. The “potential conﬂict of interest” was both huge and obvious. Yet Mr. Mineta failed to disclose it in his hearing before the Senate Commerce, Science, and Transportation Committee, likely hoping that no one would notice, and no one did. Such details were not appropriate for a political “love-in.”

Exactly What’s a Senate Conﬁrmation Hearing For Anyway?

According to the U.S. Department of Transportation’s own magazine, Public Roads:

On January 24, the Senate Commerce, Science and Transportation Committee approved Mineta’s nomination and sent it forward for unanimous approval by the entire U.S Senate even before Mineta’s conﬁrmation hearing concluded.

In other words, the confirmation hearing was only for show, because the committee had already approved his nomination and passed it on to the full Senate. It was a done deal. Is it any surprise that the Senators on the Committee who were tasked with carefully analyzing his fitness to serve as USDOT CEO just glossed over his financial details and didn’t spot his huge conflict of interest involving Trimble Navigation?

Contacting the DC Press

During the few days I spent in Austin preparing for my January 2007 trip to DC, I set up appointments with several members of the press who had expressed interest in the Trafﬁc.com shenanigans. James Grimaldi of the Washington Post was my ﬁrst contact, but he said he was still swamped

119 The ‘Smart Road’ Scam with stories related to Abramoff and Delay. In the spirit of balance and bipartisanship, I contacted Tony Blankley, the Editorial Page Manager for the conservative Washington Times. My note to Blankley started out “We met back in 1995 when you were the Communications Director for Speaker Gingrich. If you recall, you helped arrange for my interview with Speaker Gingrich for a brand new Internet publication called ‘ITS Online’ that I was starting up at the time.” Blankley forwarded my note to Brendan Conway, an Editorial Writer for the Times. I met with him at Union Station, but Brendan expressed little desire in learning more about the whole Traffic.com mess. During preparations for my trip I also contacted Daniel Zwerdling, an award-winning investigative reporter for National Public Radio. Zw- erdling had earlier covered both technology and government corruption stories, including such high-profile stories as the alarming rise in post traumatic stress disorder among servicemen returning from Iraq and Af- ghanistan, and the space shuttle Challenger disaster. It seemed from his bio that he was a journalistic “muckraker” in the best sense of the word. I asked if he’d have the time to meet with me in DC the following week. “Sorry, but I’m swamped for several months on a big project,” he said. “Can you suggest any other DC-based investigative reporters who you think might have an interest in this scandal?” I inquired. Zwerdling thought for a few seconds. “You know, James Ridgeway over at Mother Jones is a very good investigative reporter. He only recently went there. Before that he was with the Village Voice for many years. I know that Mother Jones has a reputation as being an ultra-liberal magazine, but I’ve read his stuff for years and he’s really good!” With that strong recommendation I checked out Ridgeway’s background on the Internet and was duly impressed. His article in The New Republic in the mid-60s about General Motors’ dirty tricks and snoop- ing into Ralph Nader’s background made both him and Nader nationally known, and helped propel Nader’s then-new book, Unsafe at Any Speed, into a bestseller. I called Ridgeway and gave him a quick rundown of the Traffic.com matter. “I’d be glad to get together with you in DC next week and fill you

120 Connecting with Congress in further,” I offered. “Sure, just give me a holler when you’re in the neighborhood,” he responded. We set a tentative time for me to come by his office. After I got lost in trying to find his office, we wound up meeting at a Starbucks instead, midway between the nearest Metro stop and his office. Over coffee, I told him what I had learned about the shenanigans in the USDOT, and provided him with written background information. “So what else are you doing these days, besides being a rabblerouser?” he asked. I filled him in about my several new technology ventures, but he was most intrigued by the Ugandan project. “Now that’s really interesting,” he said. I would later send him a copy of a short video that Bishop Sirib- aleka had made of our trip to Uganda the previous January.

Hogging the Road

Ten months after our meeting in DC Jim Ridgeway would write a long piece for Mother Jones focusing on how Traffic.com had used its extraordinary legislative influence to set up a monopoly that was clearly not in the public’s interest, entitled “Hogging the Road.” The piece was subtitled “How a company called Traffic.com landed an exclusive government contract worth millions to gather data on the nation’s highways—and then sold the information back to us.”

However, Ridgeway was definitely interested in the Traffic.com story, and he gave me what turned out to be a very important lead. He had just co-authored a story for Mother Jones magazine about the USDOT’s aggressive push to privatize tollroads, called “The Highwaymen.” He had interviewed Rep. Peter DeFazio (D-OR), the new Chairman of the House Transportation & Infrastructure Committee’s Subcommittee on Highways, Transit, and Pipelines, for that piece. DeFazio was strongly critical of the USDOT’s tollroad privatization efforts in Ridgeway’s article. One paragraph in that piece seemed to be equally relevant to the privatization of real-time traffic information, which was happening in the TTID Program:

121 The ‘Smart Road’ Scam

DeFazio’s take harkens back to Eisenhower and his vision of a national highway system as vital to economic development, commerce, and even national security. “It’s a scam, basically,” he says. “And you lose control of your transportation infrastructure. It means you fragment the system ultimately. It just does not make sense for an in- tegrated national transportation system.”

In the 25 big cities that had signed up for the TTID program—because of Traffic.com’s monopoly—the federal government, the local transportation agency partner, and even the broader commercial traveler information market had “lost control” of taxpayer-funded traffic data. I figured that Cong. DeFazio would immediately see the parallel. “DeFazio is absolutely livid about how the Transportation Depart- ment is ‘privatizing’ everything,” Ridgeway told me. “I’d try to meet with him while you’re here, if I were you.”

Mr. Smith Goes to Washington

Later that afternoon I called Cong. DeFazio’s office, introduced myself, and told his assistant that I wanted to try to meet with him about yet another very counterproductive “public/private partnership” in our nation’s transportation system that he needed to be aware of. Unfortunately, I was told, he had no time slots available the rest of the week. However, I should contact them before my next trip, and maybe they could fit me in then. I was disappointed about an apparently lost opportunity. As luck would have it, the next morning, as I happened to be sitting in the Rayburn House Office Building’s cafeteria having a cup of coffee prior to my meeting with Margaret Daum from the House Oversight Committee, who should walk into the cafeteria other than Congressman DeFazio! I went up to him as he was picking out a croissant and gave him a quick oral summary of the Traffic.com matter and asked if he would like to know more about it. He was very receptive, and said that I should provide additional information to his legislative assistant, Kathy Dedrick, who would review it and then brief him about it.

122 Connecting with Congress

Following my meeting with Margaret, I stopped by DeFazio’s office to meet with Kathy. When I walked in the door, the first thing that greeted me was a big poster from the classic Frank Capra movie “Mr. Smith Goes to Washington.” It turns out that Rep. DeFazio won an award of the same name back in 2000 from the non-profit watchdog Taxpayers for Common Sense. My number one favorite movie of all time is Frank Capra’s “It’s a Wonderful Life,” so I had an eerie sense that this whole episode with DeFazio was foretelling. Somehow, Victor Hugo’s classic saying came to mind: “There’s nothing more powerful than an idea whose time has come.” Getting this very repugnant scandal exposed to the light of day was an idea whose time was coming very soon, I thought.

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Stumbling onto a Million Dollar Ethics Problem

y October 2006 I had come across several additional signs that for- Bmer USDOT (and current DHS) Deputy Secretary Michael P. Jack- son was connected with Cong. Bud Shuster and his Traffic.com team. First, I had discovered through studying the online bios of both Jackson and Traffic.com Vice President John Collins that both had been Senior Vice Presidents of the American Trucking Associations (ATA) in 1997, during the period when many individuals and organizations were working on the language for the forthcoming TEA-21 transportation authorization bill. Mr. Collins was Senior Vice President for Governmental Affairs at ATA and Mr. Jackson was Senior Vice President for Policy Matters at ATA. During this timeframe Cong. Bud Shuster was the Chairman of the U.S. House Transportation and Infrastructure Committee. While the ITIP earmark language in TEA-21 had largely been inserted under the ITS community’s radar, it would later come to light during the appropriations process that Shuster had long been its leading proponent. I would later find a quotation from an article in the New York Times in June, 1997 that clearly indicated that Collins was well plugged in to Shus- ter: “Mr. Collins assured him [ATA CEO Donohue] that the chairman of the Transportation Committee, Representative Bud Shuster of Pennsylva- nia, was at that moment writing a hot letter to Mr. Archer, whose commit-

124 Stumbling onto a Million Dollar Ethics Problem tee is in charge of tax writing.” It seemed certain that John Collins would not have known what Cong. Shuster was doing “at that moment” had he not been in the Congressman’s inner circle. Taken altogether, those facts suggested that both Jackson and Collins at least had the opportunity to work with Cong. Shuster on the language of the original ITIP earmark. After all, that’s the kind of thing that both individuals did for a living, working on “policy matters” and “governmental affairs,” respectively. The fact that Collins joined Traffic.com in a Vice President’s position several years later added additional credence to the theory that the three had collaborated to put the ITIP earmark into TEA-21. Another data point: A long-time friend and contact who had been a senior manager for several non-profit DC-based transportation organizations and close associate of Dr. Christine Johnson’s told me that Dr. John- son had complained that Deputy Secretary designate Michael P. Jackson was barking orders at her when he was still with Lockheed-Martin. She thought that it was inappropriate for a private-sector person to issue orders to a senior public official, he said. It seemed logical that the nascent Traf- fic.com monopoly could have been one of the areas in which he had been doling out those orders. Since I knew that Jackson was Mr. Mineta’s second-in-command both at Lockheed-Martin and USDOT, it made further sense that the “orders” he was conveying could have come from Mineta. Yet another data point: I also discovered a possible link between a registered lobbyist for Traffic.com by the name of Mark Holman and Dep- uty Secretary Jackson. Holman, a Principal with the lobbying firm Blank Rome Government Relations, had formally been the Chief of staff for then Pennsylvania Governor Tom Ridge, who later became the first Homeland Security Secretary. Mr. Holman was a registered lobbyist for Traffic.com (Mobility Technologies) in 2001, when Mr. Jackson was Deputy Secretary of the USDOT, and in 2005, when Mr. Jackson was Deputy Secretary of DHS. In between those stints, Mr. Holman had served as a Deputy As- sistant to President George W. Bush for Homeland Security . I knew that Traffic.com had long been courting homeland security business. Their “data lock scheme” meant that they had nearly exclusive use of the most valuable real-time traffic data in 25 of our nation’s biggest

125 The ‘Smart Road’ Scam and most congested cities. That put the company in the cat bird’s seat in getting DHS funds to help evacuate citizens in these big cities from either man-made or terrorist incidents. Traffic.com President David Jannetta had even testified before Congress about the “opportunities to utilize its Traffic Pulse data collection infrastructure to enhance homeland security,” according to the company’s September 11, 2002, press release. It made perfect sense that a very high-level lobbyist like Holman would lobby the top people in both agencies, which included Secretary Mineta and Deputy Secretary Jackson at USDOT and, later, Deputy Sec- retary Jackson at DHS.

Scouring Financial Disclosures

In early October, 2006, I ﬁrst came upon the website for the non- proﬁt government watchdog organization National Legal and Policy Cen- ter. In contrast to most other such watchdog organizations I had come across—which most people would probably consider “progressive”—the NLPC was decidedly conservative. The organization’s co-founder and Chairman, Ken Boehm, had earlier been the Chairman of the Citizens for Reagan Committee. While conservative, that didn’t mean that the NLPC was only investigating Democrats and laying off Republicans, however—they had investigated malfeasance by individuals from both parties. Further, their code of ethics had been adopted from the writings of former Illinois Demo- cratic Senator Paul Douglas, perhaps best known as the author of early “truth in lending” laws. Being a home-grown “Illini” who grew up in Kankakee, IL, went to school at the Univ. of Illinois, and worked in the suburbs of Chicago until mid-1979, I knew that Sen. Douglas was universally respected as a legislator of uncommon integrity. That was certainly a plus for the NLPC in my mind. So I sent an email message to NLPC using the form on their website, saying that I was a former long-time government subcontractor and knew a lot about some possible fraud and corruption in a big earmarked program administered by the USDOT. Shortly thereafter I received an email reply from Ken Boehm:

126 Stumbling onto a Million Dollar Ethics Problem

“I’d very much like to discuss this further with you at your convenience,” he said. “My own sense is that the earmarking process has gotten so out of control in the past year, that the potential for corruption has been enormous.” He offered in his message to help however he could, so I immediately called NLPC and Ken answered. I told him that I had been digging into a big federal scam for a little over a year at that point, and gave him a brief oral synopsis of it. He said he was extremely busy on 40 different investigations, but willingly offered me his time and advice, particularly on where to look for possible financial “smoking guns,” that is, places where some current or former high-level officials may have hidden their financial connection to Traffic.com. I have talked with Ken many times since that call in the fall of 2006, and he has been unfailingly helpful, encouraging and supportive. Ken’s initial advice: “You need to acquire the Public Financial Dis- closure Reports for anybody in DOT management whom you suspect is involved in this matter, and then study every detail of their disclosures.” His enthusiasm for digging into and exposing corruption was conta- geous—I vividly recall his exhortation during one of our early conversations: “let the games begin!” Ken knew what he was talking about. Starting in May 2005 he had sifted through the financial disclosures of West Virginia Democratic Con- gressman Allan Mollohan, and had found that those disclosures had sharp- ly differed from thousands of pages of related financial records. Based on his painstaking research, on January 28, 2006 the NLPC filed a 500-page complaint with the office of the U.S. Attorney for the District of Columbia “detailing hundreds of ethics law violations,” according to an NLPC press release. “The bottom line is Mollohan got very wealthy in a four year period. His account of his finances during this period is demonstrably false,” Boehm was quoted as saying in that release. “The fact that he earmarked well over $100 million in tax dollars to groups associated with his business partner is about as big a red flag as one can imagine.” Ironically, at the time the NLPC would deliver that complaint to the U.S. Attorney, Cong. Mollohan was the Ranking Member of the House

127 The ‘Smart Road’ Scam

Committee on Standards of Ofﬁcial Conduct—popularly known as the Ethics Committee. It clearly seemed—if the NLPC’s allegations were proven—that this was a classic case of the fox guarding the henhouse. Cong. Mollohan would shortly step down from that Ethics Committee post. A Justice Department investigation into Cong. Mollohan’s alleged misdeeds is still ongoing as of mid-2008.

Financial Disclosure 101

It turns out that all senior Executive Branch executives must file a Form SF-278 “Public Financial Disclosure Report” each year that they are in government service. These documents are filed with the U.S. Office of Government Ethics and, after being reviewed and signed off by OGE staff, are made available to the public upon request free of charge. The OGE is required to keep these disclosures on file and make them available to the public for six years from the date of receipt. After that time the OGE can and does destroy what they consider to be outdated disclosures. There are actually three different flavors of SF-278 reports, an “incumbent” report for sitting officials, a “new entrant, nominee, or candidate” report for those who have yet to be confirmed, and a “termination” report for those who have finished their government service. The “incumbent” and “new entrant” reports are almost identical, except that Schedule B, which covers their transactions in stocks, bonds, and other securities, is not required for “new entrant” reports. The rationale is that since nominees for senior federal positions have not (yet) served, whatever transactions they might have had up until that point in time was their own private business. Once they began serving, however, they needed to report each and every transaction to discourage any conflicts of interest. This distinction between incumbent and new entrant reports would soon loom large. On October 19, 2006 I requested all of the available Public Financial Disclosure Reports for USDOT Secretary Norman Mineta, USDOT (and later DHS) Deputy Secretary Michael P. Jackson, former USDOT Deputy Secretary Mortimer Downey, and Assistant Secretary for Transportation Policy Emil Frankel. I had heard each individual talk at least once at

128 Stumbling onto a Million Dollar Ethics Problem either ITS America or Transportation Research Board Annual meetings over the years, and knew that they all were deeply involved in ITS issues and projects like the ITIP program. Former Deputy Secretary Downey was the only one of the four I knew personally, having said “hi” to him in passing many times at such major conferences over the years. I also knew that he was Dr. Christine Johnson’s long-time mentor, both at USDOT and earlier. While I didn’t at all suspect that he was involved in the Traffic. com scam, I still wanted to peruse his disclosures, only one of which (termination report) was still available in the fall of 2006. In early November a big brown envelope arrived from OGE, containing all of the disclosures I had requested, along with a copy of my FAXed request and the business card for Denise M. Shelton, whose title was “Ethics Assistant.” For several hours I thumbed through these reports, looking for something unusual or out of place. Assistant Secretary Frankel’s disclosures were the most complex, because he had vast asset holdings and sources of income. The other individuals’ disclosures were simpler. Most entries do not require exact dollar amounts, but rather a range. One range for Income on Schedule A, “Assets and Income,” was particularly broad: $100,001-$1,000,000. In other words, an income from some source of just over $100,000 would receive a checkmark in the exact same slot as one just under one million dollars. It seemed a little hard to tell what was going on with a disclosure range that broad. Mr. Mineta’s calendar year 2000 report, dated April 19, 2002, was the only disclosure that caught my eye, because it appeared to be almost entirely an exact photocopy of his new entrant disclosure filed 15 months earlier on January 23, 2001, just prior to his Senate confirmation hearing as Transportation Secretary. Closer inspection showed that only two pages were different, the cover/signoff page, and page 7, which contained Schedule B, Part I: Transactions. That new page 7 had a stamp from the U.S. Department of Transportation General Counsel’s office, dated April 18, 2002 (see Figure 11-1 below), and there was a big “X” in the box identified as “None” (see Figure 11-2). In other words, Mr. Mineta had said, in a sworn statement, that he had no reportable transactions during calendar year 2000, when he had been Commerce Secretary in the Clinton

129 The ‘Smart Road’ Scam

Administration from late July through the end of the year. It was clear from the small printing on the right margin and the fact that the page was of much poorer quality than the one it had replaced in the new entrant ﬁling that it had been FAXed over to OGE from the USDOT General Counsel’s ofﬁce.

Figure 11-1: This stamp identiﬁed the source of the new page 7

Figure 11-2: Top portion of page 7 in Mr. Mineta’s CY2000 ﬁnancial disclosure

The new page 7 accounted for the slight changes to the cover/signoff page. Apparently someone in the OGE had used white-out to uncheck the “new entrant” designation and to change the OGE approval date (although the original signatures remained). Under the OGE’s signoff signature was also a small “BY TFZ” mark. I would soon discover that those initials were for Thomas F. Zorn, Deputy Associate Director for Financial Dis- closures at OGE. I showed both disclosures (CY2000 and Transportation new entrant) to my friend and neighbor Franz, the retired registered investment advi-

130 Stumbling onto a Million Dollar Ethics Problem sor who I knew to be a financial whiz. He immediately saw that something was amiss. “There’s something not quite kosher going on here,” he observed. Franz was focusing on the fact that the U.S.’ flagship ethics agency had clearly failed to carefully review Mr. Mineta’s CY2000 disclosure. That fact was obvious because the signatures had simply been photocopied from another disclosure made 15 months earlier (see Figure 11-3 below). While the date attributed to Amy L. Comstock’s signature had been changed to April 19, 2002, the signature itself was an exact du- plicate of the one from Jan. 23, 2001 – Ms. Comstock had apparently never reviewed the latest disclosure. The original date had simply been whited out and replaced by a new date stamp showing “APR 19 2002.” Only the scrawled “BY TFZ” and two new 2002 date stamps on the page indicated that anyone at the OGE had even seen the CY2000 disclosure. Clearly, the U.S.’ top ethics agency had incredibly lax standards on its own approval of financial disclosures from top government officials.

Figure 11-3: The signatures on Mr. Mineta’s CY2000 ﬁnancial disclosure were simply copied from a disclosure made 15 months earlier.

The amazing thing was that, even with the new page 7 and slightly modiﬁed title page, the content of the Transportation new entrant and CY2000 disclosures were virtually identical. The page 7 from the new entrant disclosure, ﬁled in January 2001, had been entirely blank, showing no transactions at all. The page 7 from the CY2000 disclosure also showed no transactions; the only other substantive difference was the “X” checkmark signifying no transactions. Why had Mr. Mineta gone to all the trouble to send in a new page that, like the original one, showed no transactions at all?

131 The ‘Smart Road’ Scam

The reason, I would soon realize, was that the new entrant disclosure had not required him to disclose any transactions, per the OGE’s rules for nominees described earlier. But this was a unique situation: not only was he a new nominee for a Cabinet position in January 2001, but he was also an outgoing Cabinet member from the previous (Clinton) Administration. For that reason, he was required to submit a CY2000 disclosure covering any transactions that might have occurred while he was Commerce Secre- tary in the second half of 2000. There was another really strange thing about Mr. Mineta’s CY2000 disclosure. In Schedule A, “Assets and Income,” he had listed a type “Capital Gains” income from “Trimble Navigation Ltd. Stock Options” in 2000 of between “$100,001 and $1,000,000” (see Figure 11-4 below). “Capital gains,” of course, implied that he had sold securities (stock options and, ultimately, the underlying stock) for a proﬁt of up to $1 million. Yet on the same disclosure he marked “none” on the “Transactions” page. In other words, he was saying that he had no reportable transactions in any type of securities, including stock options and stocks.

Figure 11-4: Mr. Mineta’s capital gains income of up to $1 million in Trimble Navigation stock options

How could that be? How does one make a capital gains income (prof-

132 Stumbling onto a Million Dollar Ethics Problem it) of up to $1 million from stock options without either selling the options outright or exercising the options and then selling the underlying stock? It made no sense. To try to understand what was going on, I called the OGE, and received a call back from Deputy Associate Director for Financial Disclo- sures Tom Zorn, the very same “TFZ” who had initialed Mr. Mineta’s disclosure in question. I questioned Mr. Zorn about what information needed to be included in such disclosures, and found him to be quite helpful. I specifically mentioned former USDOT Secretary Mineta’s disclosure in my discussion with him and said that I had been sending information to the FBI about what I knew was major fraud and corruption in a major program managed by the USDOT. Mr. Zorn said that he regularly worked with the FBI and encouraged me to pass along his contact information to the FBI agents whom I had been working with, and I did so. Mr. Zorn explained that while an annual report, such as Mr. Mineta’s CY2000 disclosure, required Schedule B to be filled out, that schedule only needed to account for transactions that had occurred while the individual was in government service. Any transactions that had occurred prior to government service were not required. Mr. Zorn called that the “reporting gap.” Mr. Mineta was confirmed as Secretary of Commerce in the Clinton Administration on July 21, 2000, according to the Com- merce Department’s website, so only transactions that had occurred after that point in time were required to be included in his CY2000 financial disclosure. Therefore, assuming he was truthful in saying that he had no transactions reportable to OGE for 2000, that meant that the transactions that had resulted in his capital gains income of up to $1 million that year must have occurred prior to July 21. Interestingly, Mr. Mineta actually remained on Trimble Navigation’s Board of Directors for three days after being sworn in as Secretary of Commerce on July 21, 2000, according to a news release issued about a month later by Trimble Navigation. Since he joined the Trimble Board of Directors in June, 1999, that meant that during the entire year of 2000 he was either on the Board of Trimble Navigation or Commerce Secretary or both (for three days). That fact would soon turn out to be very important.

133 The ‘Smart Road’ Scam

Another Possibility: Insider Trading

Years earlier, I had perused a number of the “insider trading” websites that disclose details of stock purchases or sales by people affiliated with public companies, and I knew that board members were considered “insiders.” However, I didn’t know exactly how insiders were required to disclose these transactions. So I called the SEC’s toll-free information line, and left a message for the Office of Investor Information and Advocacy. A day later I received a return call, and eventually got routed to someone who knew about which forms insiders at publicly held companies like Trimble Navigation were required to file with the SEC. The bottom line is that there are actually three forms that could be used, depending on the circumstances: a) Form 3, “Initial Statement of Ownership,” b) Form 4, “Statement of Changes in Beneficial Ownership,” and c) Form 5, “Annual Statement of Changes in Beneficial Ownership.” If Mr. Mineta had exercised his options in Trimble Navigation while he was still on Trimble’s Board, then he had to file some combination of these three forms to let the SEC know that an “insider” was changing his equity ownership in the company. Over the past five years, SEC filings have been done electronically rather than by paper, which makes searching for and identifying records a snap. You can find literally hundreds of SEC Form 3, 4, and 5 disclosures for Trimble Navigation via Edgar, the SEC’s powerful online search engine. However, the oldest electronically available disclosure is dated July 18, 2003, long after Mr. Mineta had served on Trimble’s Board for 13 months during 1999 and 2000. Prior to July 2003 these disclosures were made in paper form, and are not available on the web. After getting a mini-tutorial on insider disclosures and finding out that I couldn’t readily find Mr. Mineta’s own disclosures from the Internet, I again called the SEC’s information line and eventually got transferred to their library. Through a combination of asking and begging, I convinced the librarian—a fellow named Robert—to search the SEC’s internal database (provided by Thomson Financial, a division of Reuters, under contract to the SEC) to run a search for me for all insider trading disclosures for Mr. Mineta related to Trimble Navigation. He did so and FAXed me

134 Stumbling onto a Million Dollar Ethics Problem the results, which showed only two ﬁlings for Mr. Mineta, both in mid 1999, around the time that he joined the Trimble Board of Directors (see Figure 11-5).

Figure 11-5: Cover sheet showing the results of the SEC’s insider trading search for “mineta” and “TRMB”

The Form 3 attached to the SEC’s FAX, “Initial Statement of Ben- eficial Ownership of Securities,” showed that Mr. Mineta had become a Director of Trimble Navigation but listed no securities at all in his possession, meaning that when he joined the Board he had zero equity interest in the company. Form 4, filed a little over a month later, showed that on 6/2/99 he had been granted a stock option for 15,000 shares at an exercise price of $12.437 per share (see Figure 11-6). That option would fully mature three years later, on June 2, 2002. According to Trimble Navigation’s corporate SEC filings, that was the standard stock option offered to Trimble Navigation’s Board members, 15,000 shares vested over 3 years, or 1/36th for each month that the person served on the Board. Those were the only two “insider trading” disclosures that the SEC’s librarian found. If Mr. Mineta had exercised his vested options for his 13 months of service on Trimble’s Board (13/36 times 15,000 = 5,417 shares) while still on the company’s Board, he would have been required to file an insider trading disclosure. But he didn’t file one.

135 The ‘Smart Road’ Scam

Figure 11-6: The stock option awarded to Mr. Mineta shortly after he joined Trimble Navigation’s Board of Directors

Since he was either on the Board of Trimble Navigation or Commerce Secretary for the entire year of 2000, by law he had to disclose the details of his exercise of Trimble Navigation stock options either on an SEC Form 3, 4, or 5 (through July 24, 2000) or on his OGE Personal Financial Disclosure report (from July 21 through the end of the year). But he hadn’t disclosed those details either place. What the heck was going on? Something was clearly wrong with this picture. I would soon find that the U.S. Office of Government Ethics, our government’s flagship ethics watchdog agency, would be much less than useless in getting to the bottom of this conundrum.

136 12

Smelling a Rat in the U.S. Ofﬁce of Government Ethics

t seemed most likely that Mr. Mineta had exercised his stock options Iin Trimble Navigation after he left their Board on July 24, 2000, since he hadn’t ﬁled any SEC insider trading disclosures indicating that he had done so while he was still on the Board. Published company policy required former Board members to exercise their vested options within 30 days of leaving the Board, which for him meant by August 23, 2000. If he had exercised those options within that 30 day period, he was required by law (the Ethics in Government Act of 1978) to disclose the details on Schedule B of his CY2000 disclosure. That Act had been enacted by Congress following the Watergate debacle, in an attempt to restore ethics and honesty to our federal government. However, Mr. Mineta had marked “None” on Schedule B, meaning that he had no reportable transactions during the time when he served as Commerce Secretary, which included that entire 30 day period. Something was clearly wrong with that picture. It turns out that Schedule B (Transactions) of Form SF 278 has a ﬁner granularity than Schedule A (Assets/Income). For the same $100,001- $1,000,000 range where Mr. Mineta had indicated his capital gains income in Trimble Navigation stock options, Schedule B had three ranges: $100,001-$250,000, $250,001-$500,000, and $500,001-$1,000,000.

137 The ‘Smart Road’ Scam

I had computed the range of capital gains income that Mr. Mineta could have received from the vested shares from his stock option, which totaled 5,417 shares (13/36 x 5,000), as well as the few additional vested shares he might have received from a new 5,000 share option that the company could award Board members each year on the anniversary of their service. (Since that second award had never been reported on an SEC Form 3, 4, or 5, it likely did not happen. Nonetheless, I assumed that it had so as to compute the maximum capital gains income that Mr. Mineta could have achieved.) Using the range of stock prices provided by the “Historical Stock Lookup” on Trimble’s website for the 30 days immediately following his resignation from the Trimble Board, and taking into account his original option strike price ($12.437) and a new strike price for the (unsubstantiated) 5,000 share option, I calculated that the maximum capital gains income he could have made would be $112,344. That figure assumed that he had exercised his options and sold the stock at the very peak of the stock’s price during the 30 days following his departure from the Board. If he had exercised his option(s) most other days during that period, his income would have been well under $100,000. So why had Mr. Mineta not just put a checkmark on Schedule B in the $100,001-$250,000 column for his stock options transaction and been done with it? After all, his capital gains income—at best—just barely got into that range. Nobody—least of all I—would challenge his right to exercise stock options he had duly earned as a member of Trimble’s Board. Was it conceivable that his actual capital gains income had been much greater than the maximum profit I had calculated, so that his check mark would have had to appear in either the $250,001-$500,000 or $500,000- $1,000,000 slot? A checkmark in either of those slots would have clearly raised red flags if anyone was looking closely, because there was no way that his stock options, awarded per the company’s published policy for compensating directors, could have resulted in an income even remotely near $250,000. If he had received significantly more stock options than was company policy, Schedule A’s broad 10:1 range wouldn’t pose a problem, unless his capital gains income had exceeded $1 million, nearly ten times what

138 Smelling a Rat in the U.S. Ofﬁce of Government Ethics

I calculated his maximum legitimate income to be. However, Schedule B’s much finer granularity would have clearly posed a problem. Could that have possibly been the reason he marked “None” on Schedule B, because to identify the actual size of his stock options transaction would have invited a whole lot of unwanted scrutiny? The possibility was both troubling and intriguing. The filing date on Mr. Mineta’s CY2000 disclosure was another red flag. Annual financial disclosures are due into the OGE by May 15 for the previous year, so his CY2000 disclosure should have been filed by May 15, 2001. However, the CY2000 disclosure that OGE had sent me was dated April 19, 2002, more than eleven months tardy. Surely, an agency whose charter was to keep close tabs on the financial dealings of top federal officials wouldn’t tolerate those officials missing filing deadlines by almost a year. In one of my conversations with Tom Zorn from the OGE I asked how Mr. Mineta’s calendar 2000 disclosure could have possibly been dated April 19, 2002, when it had been due almost a year earlier. “It’s very possible that it’s an amended version,” he said. “These disclosures are amended all the time.” In other words, he was suggesting that Mr. Mineta may well have filed his original CY2000 disclosure on time, then for whatever reason he had later amended it to the version that the OGE had sent me. That brought up an interesting possibility: what if he had initially disclosed the details of his Trimble stock options transaction, but then later amended his return to mark “None” after he realized he could get in big trouble for disclosing the true size of his transaction? “Do you keep earlier versions of these financial disclosures?” I asked Zorn. “We keep a file as part of our work product that would likely include any earlier versions than the latest report we make available to the public,” he answered. “Do you provide that initial version to the public?” “No. However, you can try to obtain it through a Freedom of Informa- tion Act request,” he said. That sounded like the beginnings of a plan.

139 The ‘Smart Road’ Scam

Digging Further Into the OGE’s Filings

Since August 2006 I had also been working with another well-respected non-profit watchdog organization, the Project on Government Oversight (POGO). POGO, which has been around over 25 years, started out as the Project on Military Procurement. In its early days it worked to expose outrageously overpriced military spending, such as the $7,600 coffee maker and the $436 hammer. In recent years POGO has worked hard to expose all kinds of different government corruption, often working with whistleblowers from the agencies involved. Their objective, according to their website, is to “expose corruption and other misconduct in order to achieve a more accountable federal government.” They do that job exceedingly well. In early August 2006 I had sent information about the fraud and corruption I knew about involving the TTID program to POGO via the form on their website, and I immediately received an email reply from the organization’s General Counsel, Scott Amey. He asked me to send him my latest synopsis of the Traffic.com scam and concluded his message with “I look forward to working with you!” I would send him a bunch of background info about the scandal. When I talked to Scott several days later he told me that the information I sent had “passed the sniff test” and that POGO would help investigate this matter. He then assigned my case to Michael Smallberg, POGO’s research associate. Working with Michael, on October 20, 2006 POGO sent a Freedom of Information Act (FOIA) request to the Federal Highway Administration, asking for “All contract files associated with the Intelligent Transportation Infrastructure Program (ITIP), established under the Transportation Eq- uity Act for the 21st Century (TEA-21). At this point in time, none of the contracts or agreements associated with this taxpayer-financed earmarked program had ever been made public, despite the fact that “Marvin” and his “friends” had tried very hard to do so via their postings on the NTOC’s Talking Operations Forum. Since I had already worked with POGO and Michael on one FOIA request, I hoped that they would be willing to issue a second—a request to

140 Smelling a Rat in the U.S. Office of Government Ethics the U.S. Office of Government Ethics for Mr. Mineta’s original and any other earlier CY2000 financial disclosures than the one OGE had sent me the previous November. Mr. Zorn had suggested the possibility that these earlier disclosures existed and, if so, we wanted to see if he might have divulged details of his Trimble stock options transactions and then later tried to cover up that information. Michael, working under the guidance of Scott, agreed to do so. On January 17, 2007, POGO issued a FOIA request to OGE, asking for:

…the original Year End Public Financial Disclosure Report (OGE SF 278 Form) from Calendar Year 2000 for former Secretary of Com- merce Norman Y. Mineta, filed sometime in early 2001. Specifically, please provide all copies – including but not limited to the original copy – of Mr. Mineta’s Schedule B filings, which can be found on page 7 of the Report. If the Schedule B filing was amended multiple times prior to the existence of the latest version that OGE provides upon request (which is dated April 18, 2002), please provide copies of each of these versions.

On February 12, 2007, William E. Gressman, an OGE FOIA Ofﬁcer, responded to POGO’s FOIA request with a short letter .

This is the response of the Office of Government Ethics (OGE) to your January 17, 2007 Freedom of Information Act request, in which you sought a copy of the original calendar year (CY) 2000 annual report of former Commerce Department and Transportation Department Secretary Norman Y. Mineta. You also specifically asked for any other (amended) copies of Schedule B of that report. Our file review has not located any such other copies or versions of that schedule or the CY 2000 report itself.

The wording of that last sentence stood out. “Our ﬁle review has not located any such other copies or versions of that schedule or the CY 2000 report itself.” (Emphasis added.) This sentence was certainly poorly worded, but splitting it into its separable components it seemed to be say-

141 The ‘Smart Road’ Scam ing:

1. “Our ﬁle review has not located any such other copies or versions of that schedule,” and 2. “Our ﬁle review has not located the CY 2000 report itself.”

By that interpretation, Mr. Gressman was saying that he couldn’t even ﬁnd the CY2000 disclosure that the OGE had sent me just two and a half months earlier. I was starting to smell a rat.

The next paragraph in his letter was even more poorly worded and confusing:

Please note that copies of SF278 reports are available to the public for six years after receipt pursuant to the special access procedures of Section 105 of the Ethics in Government Act, 5 U.S.A. app., § 105, and 5 C.F.R. § 2634.603 of OGE’s regulations, not the FOIA. A copy of a blank OGE Form 201 Ethics Act access form is enclosed so that you can request a copy of the CY 2000 annual report of the former Secretary on ﬁle here at OGE.

The first part of the paragraph, “please note that copies of SF278 reports are available to the public for six years after receipt…” seemed to be offering an explanation of why the OGE could not find Mr. Mineta’s CY2000 disclosure. It seemed to be suggesting—without actually coming out and saying it—that since POGO had requested a report covering finances in 2000 report and it was already 2007, that the report was too old and OGE had already destroyed it. However, the second part of the paragraph invited POGO to “request a copy of the CY 2000 annual report of the former Secretary on file here at OGE,” which suggested that the report existed. But if it had existed, why had Mr. Gressman not just attached it to the letter? Clearly, different interpretations of that sloppily worded letter were possible:

142 Smelling a Rat in the U.S. Ofﬁce of Government Ethics

1. That the OGE could not longer ﬁnd any versions of Mr. Mineta’s CY2000 disclosure because the agency had destroyed them, or 2. That the OGE could not ﬁnd any earlier versions of Mr. Mineta’s CY2000 disclosure than the April 18, 2002 version that had been mentioned in POGO’s FOIA request.

Friends and associates to whom I showed OGE’s FOIA response letter suggested that its imprecision was just due to typical sloppiness on the part of some government agency bureaucrat (Gressman), but I wasn’t convinced. What if this letter’s wording wasn’t due to sloppiness at all, but had been carefully crafted to leave an impression that the CY2000 disclosure had been destroyed, while also providing plausibility for an alternate interpretation? I was particularly concerned because of the three financial disclosures that Mr. Mineta had filed pertaining to his 2000 finances (Commerce new entrant, Transportation new entrant, and calendar year 2000 disclosure), he was required to disclose the details of his Trimble stock transactions on only one, the CY2000 disclosure that covered the period of time in 2000 that he was Commerce Secretary. If that report had been destroyed—even though the six year deadline for its destruction was over a year from then, April 19, 2008—he would effectively be off the hook if he, in fact, had something to hide. I needed to definitively find out if OGE had destroyed that disclosure, as I strongly suspected they had. So on the morning of February 23, 2007, I called Denise Shelton, the OGE Ethics Assistant who had sent me the big package of disclosures the previous November and whom I had found very pleasant and helpful on several past phone calls. I started out by asking Denise if she had any record at all of Mr. Mineta’s CY2000 report. (Note: these comments are transcribed from the actual conversation, which I legally recorded at the time; after-the-fact observations are shown in brackets []):

Shelton: “We did not receive that Commerce one in 2001, we received it in 2000, July of 2000.” Werner: “No, that’s a new entrant one, though.”

143 The ‘Smart Road’ Scam

Shelton: “Yes, but he didn’t file.. There was no annual after that—it’s not in the system, anyway. Because he went to the Department of Trans- portation.” Werner: “Yeah, but there has to be an annual one for the year 2000 when he was Commerce Secretary. That’s a requirement, isn’t it?” Shelton: “He was confirmed July 2000. I don’t know where… what happened to it. [laughter]. Hold on one second.” Werner: “Maybe it was misplaced or something.” [I actually doubted that the reason would be so innocent.] Shelton: “Oh, there’s a note in the comments, say he was confirmed as Secretary of Transportation in January 2001.” Werner: “Yeah, that’s true.” Shelton: “So he didn’t file a 2001 annual for…” Werner: “2000 annual.” Shelton: “I mean a 2000.” Werner: “He had to. He was the Commerce Secretary in 2000.” Shelton: “Yes, we had his nominee report that he filed in 2000 for Secretary of Commerce. But I have nothing else in my system behind that Commerce for an annual report that he filed, and I’m not sure if it’s because he… his nominee report… I don’t know how it goes. But anyway, the next thing that I have is his nominee report in 2001 for Department of Transportation Secretary.” Werner: “But you don’t have a 2000 annual?” Shelton: “No.” Werner: “But you have a Commerce new entrant?” Shelton: “No, I have nothing for Commerce, because that’s past the six years and it’s been destroyed. It’s just showing still on the system, because they haven’t deleted it from the system yet. So I know that we received one back in 2000, but it’s been destroyed, because I’ve destroyed the six year old stuff already. The only thing I’m going to have for Mineta now is his nominee report when he came on for Department of Transporta- tion, and that was back in January of 2001. That’s the earliest report I’m going to have for him.” Werner: “The 2000 annual one would have been filed in January 2001, also.” [I was assuming back then that he had filed his Transportation New

144 Smelling a Rat in the U.S. Ofﬁce of Government Ethics

Entrant and Calendar Year 2000 disclosures at the same time, since the CY2000 that OGE had sent me was virtually identical to the former.] Shelton: “His 2001 annual?” Werner: “His 2000 annual.” Shelton: “I don’t have a 2000 annual.” Werner: “My question is why not?” Shelton: “We destroy them six years after we receive them here in OGE.” Werner: “Yeah, but it may not be six years yet.” [Of course, I knew that it had not been six years yet – the CY2000 report that OGE had sent me less than four months earlier was dated April 19, 2002.] Shelton: “By what I’m going by what I see in my system, it’s been six years. Because we received it in 2000, that nominee report.” Werner: “I’m not talking about the nominee, I’m talking about…” Shelton: “I don’t have a 2001 behind that.” [I was starting to realize that Denise described disclosures by the year in which they were ﬁled, while I was describing them in terms of the period of time they covered. To her, a report covering calendar year 2000 was a 2001 report, since it was supposed to be ﬁled in 2001.] Werner: “I’m talking about a 2000 annual report.” Shelton: “I don’t have a 2000 annual.” [She was now using my report-dating terminology.] Werner: “Could you see if you ever had one? Maybe it’s gone now or something.” [From Mr. Gressman’s FOIA response letter to POGO, I strongly suspected it had been destroyed.] Shelton: “It may be gone, but I won’t have no way of checking if they’ve gotten rid of it.” Werner: “Who gets rid of those, can you tell me that?” [Who were “they”?] Shelton: “I destroy them.” [As the comic strip character Pogo was famous for saying, “We have met the enemy and he is us.”] Werner: “Do you recall destroying those recently?” Shelton: “Yes I do. I have a list right here of the 2000s that I destroyed.” Werner: “Do you have a list on there that you destroyed the 2000

145 The ‘Smart Road’ Scam

Mineta one? Shelton: “Let me see what this says. (long delay) Norman Mineta’s Department of Commerce. I received July 18, 2000. Yes, it’s been destroyed.” Werner: “That’s the new entrant one. I’m talking about the annual one.” Shelton: “I don’t have anything else after that.” Werner: “OK, and you keep those records of which ones have been destroyed, right? Shelton: “I don’t keep the records, I keep a list that I go by. I run the list, and those are the ones that I pull and destroy.” [By “records,” she thought I meant the actual reports. I was just talking about a log of what reports had been destroyed.] Werner: “So you maintain that list?” Shelton: “Yes” Werner: “And you have no record of a calendar year 2000 one?” Shelton: “Not of an annual for Commerce. Is that what you’re looking for?” Werner: “Yeah” Shelton: “And not for Transportation.” Werner: “Right. It wouldn’t be for Transportation, because he wasn’t Transportation Secretary until January 2001. But he should have had a 2000 annual Commerce report. And you don’t show any record or any record of removing it?” Shelton: “Let me see what this note says… I don’t know [reads aloud] ‘Secretary Mineta is required to ﬁle a 2001 report due to his tenure as Sec- retary of Commerce during 2000’… I don’t know what happened. Maybe he didn’t. I don’t know what happened to it. I don’t have it.” Werner: “OK. Thanks very much.”

I had grilled Denise, who continued to be very cooperative and helpful, almost like a prosecutor, to make sure what the facts were in this matter. The bottom line: she didn’t have any versions of Mr. Mineta’s CY2000 disclosure, she could ﬁnd no record of it in the OGE’s “system,” and she had no record of ever having personally destroyed it. From her

146 Smelling a Rat in the U.S. Office of Government Ethics perspective, that report had never existed. Yet I had received it from her four months earlier, and Special Agent Malik Freeman from the USDOT Inspector General’s office had made a copy of it for his files when I had visited the OIG’s offices just over a month earlier. I don’t have the most sensitive nose in the world, but the essence du rodent was unmistakable.

147 13

Thwarting the OGE’s Attempted Coverup

hat afternoon on the day of my conversation with Denise Shelton of Tthe U.S. Office of Government Ethics (Feb. 23, 2007), I emailed Mi- chael Smallberg of POGO to fill him in about what she had said. “I had a conversation with Denise Shelton of the Office of Government Ethics this morning concerning the availability of Mr. Mineta’s CY 2000 Public Financial Disclosure Report that just confirmed my strong suspicion that someone there removed this [Mr. Mineta’s CY2000] report from their system,” I said. I then summarized the highlights of my conversation with Denise, and concluded my message with: “Please let me know what the next step is after you have a chance to talk with Scott. This is getting pretty interesting...” In communicating with Scott Amey, POGO’s General Counsel, for nearly two years now, I’ve come to realize three things:

1. That Scott is extremely busy, handling POGO’s legal affairs, working on POGO’s key projects (e.g., their Federal Contractor Miscon- duct Database), and supporting whistleblowers like myself, 2. That Scott’s misconduct “sniffer” is very discerning (he was the one who had said that the information I had sent him about the Trafﬁc.com scandal had “passed the sniff test”), and

148 Thwarting the OGE’s Attempted Coverup

3. That Scott won’t shy away from a ﬁght.

I suspect that Scott knew that the OGE’s response to POGO’s FOIA request was, at best, vague and poorly worded, and at worst indicated that something more sinister was going on. When you’ve been involved in investigating as much government corruption as he and POGO have over the years, after the while you undoubtedly realize that corruption can take many different clever forms. The FOIA process includes the right to appeal the initial response to your request if you feel it is inadequate. Typically, the original FOIA requester is allowed between 30 and 60 days to file an appeal, which often goes to someone higher in the responding agency’s chain of command than the “FOIA officer” who provided the initial response. After I filled Scott in about what Denise Shelton had said, he was more than willing to appeal the OGE’s initial response to a higher authority. So on March 12, 2007, Scott sent a letter on POGO stationary to Mar- ilyn Glynn, the OGE’s General Council. Right up front, the letter made it clear that POGO didn’t buy the OGE’s initial FOIA response one bit, particularly the seeming attempt to say that they no longer had any copy of Mr. Mineta’s CY2000 disclosure. “This letter appeals the OGE’s non- responsive finding and provides the following information so that another search can be conducted,” Scott wrote. “I was perplexed that you can no longer find any copies of Mr. Mi- neta’s calendar year 2000 disclosures,” Amey wrote. “Mr. Jerry Werner, with whom POGO has been working since the fall of 2006, contacted Ms. Denise Shelton on February 23, 2007. I understand that Ms. Shelton told Mr. Werner that she keeps a log of which old (more than six years from receipt) reports she destroys, and said she had no record of ever destroying Mr. Mineta’s calendar year 2000 report. Further, she told Mr. Werner that the calendar year 2000 report was not anywhere ‘in the system.’ It appears to have disappeared.” The letter went on to say that I had already received a copy of the CY2000 report, which we had assumed was an amended version because it was dated almost a full year after the report had been due in to OGE. “To help us sort out this situation,” Scott concluded, “I request the

149 The ‘Smart Road’ Scam following information from the OGE:

1. Copies of Ms. Shelton’s log book for the past six months, showing which ﬁnancial disclosures had been destroyed during that period. (That log will presumably show, as she indicated, that she destroyed Mr. Mineta’s New Entrant disclosure that was more than six years old but that she did not destroy his calendar year 2000 report.) 2. An explanation as to how Ms. Shelton could ﬁnd no record at all of Mr. Mineta’s calendar year 2000 disclosure, especially since Mr. Werner received a copy of the latest version of it last fall (see Attachment C).”

On April 12, 2007, Ms. Glynn responded to Scott’s FOIA appeal letter with a four page letter of her own. “As we stated in OGE’s initial response letter of February 12, 2007, that report (copy enclosed) remains on file here and copies can be obtained in accordance with the public access procedures of the Ethics in Government Act,” she replied. Actually, that earlier poorly-worded letter had seemingly implied that the report was no longer available because of the six-year disclosure requirement, which had been confirmed when Denise Shelton couldn’t get her hands on that report and could find no record that it even existed. At least the OGE was now officially acknowledging that they still had Mr. Mineta’s CY2000 disclosure on file. They had magically rediscovered it, which certainly was progress. Interestingly, Ms. Glynn included a copy of that report with her latest letter, something the OGE had failed to do in their initial response to POGO’s FOIA request, which was an additional indication at that time that it was no longer available. Ms. Glynn confirmed that the April 19 report I had received in late November was the only version of Mr. Mineta’s CY2000 disclosure in existence. “Our additional file review has still not located any such earlier copies or versions either of that report or schedule,” she said. As I read that sentence, I had a mental image of a bunch of government bureaucrats in white shirts and blouses sitting around a conference table, staring at the contents of a file folder and scratching their heads in bewilderment. “In

150 Thwarting the OGE’s Attempted Coverup fact, the SF278 CY 2000 report for Secretary Mineta stamped signed by OGE on April 19, 2002 is the original and only version of that report,” she said definitively, which suggested that the “additional file review” she mentioned that “has still not located any such earlier copies or versions” had finally been called off. “The source of the confusion is that, before being nominated in early 2001 to the position of Secretary of Transportation, Mr. Mineta had served more than 60 days during the year 2000 as Secretary of Commerce,” she continued. Thus, an annual SF 278 report should have been filed by May 15, 2001, covering CY 2000. In January 2001, Mr. Mineta filed a nominee SF 278 report covering CY 2000 for the Transportation Secretary position. Until April 2002, neither the Transportation Department, the Commerce Department, nor OGE realized that no CY 2000 annual form had been filed.” The beginning of this paragraph (“The source of confusion…”) clearly tried to imply that both POGO and I had somehow gotten confused by this whole matter, as if our collective grey matter was insufficient to grasp the nuances of this situation. But the substance of that paragraph logically led to a different conclusion. Our nation’s premiere ethics watchdog agency had failed to notice that one of our highest ranking government officials, a Cabinet member, had not filed a required annual financial disclosure until almost a year after it had been due. It was an astonishing admission of the OGE’s incompetence, but the picture of that incompetence would only become clearer with the OGE General Counsel’s continued explanation. “In April 2002, to help facilitate the preparation of the required annual SF 278 report in coordination with the Department of Transportation, OGE’s Deputy Associate Director for Financial Disclosures had a photocopy made of Mr. Mineta’s January 2001 nominee SF 278 report for the Transportation Secretary position. This photocopy served as the basis for his annual report for CY 2000. This was possible because the nominee report covered, except for Schedule B, the entire year 2000 reporting period. The Ethics Act does not require nominees to complete Schedule B of the SF 278. On April 18, 2002, the OGE also obtained via FAX from the Transportation Department (which in turn had conferred with Secretary Mineta) a new, completed Schedule

151 The ‘Smart Road’ Scam

B for the Secretary. Next, OGE marked over the photocopy of the nominee report cover sheet with pen, correction and regular tape, and new date stamps in order to: (i) change the reporting status box from nominee to incumbent (for CY 2000); (ii) stamp a new OGE receipt date (April 18, 2002); and (iii) stamp a new OGE signature date (April 19, 2002), accompanied with the legend “by TFZ”, the Deputy’s initials. With those changes and the substitution of the FAXed completed Schedule B covering 2000, the marked over photocopy has served here at OGE as former Secretary Mineta’s CY 2000 incumbent SF 278 report.” A footnote to this paragraph acknowledged that at least the OGE’s General Counsel recognized how incredibly lax this procedure that almost completely bypassed the normal approval process had been: “OGE staff have been instructed that they are no longer to employ such procedures and must obtain a full submission from each filed.” That sounded to me like a tipoff that many other financial disclosures may have also bypassed scrutiny by the agency. I wondered what financial shenanigans might be lurking behind those disclosures, as well. Ms. Glynn was clearly implying that my “friend” Tom “TFZ” Zorn was to blame for “such procedures.” As of mid-2008 he no longer is listed on the OGE’s staff listing, and I wonder if he got bureaucratically thrown under the bus for this undoubtedly embarrassing episode. At the beginning of this process, POGO and I had given the OGE the benefit of the doubt, assuming all along that they had been doing their job and had acquired the financial disclosures of a Cabinet member by the due date. If that had been the case, the logical conclusion would have been that Mr. Mineta’s financial disclosure dated April 19, 2002 was an amended version. It turned out instead that the “source of confusion” as Ms. Glynn put it was the agency’s incredible incompetence. Ms. Glynn’s letter continued its subtle condescension. “According to your appeal letter, there apparently was some misunderstanding about the continued availability of Mr. Mineta’s CY 2000 report when Mr. Jer- ry Werner, with whom you indicate your organization has been working since last fall, contacted an OGE staff member this past February. The impression was left that OGE could not find any record of Mr. Mineta’s CY 2000 SF 278 Public Financial Disclosure report on file here. This is

152 Thwarting the OGE’s Attempted Coverup not correct, and we apologize for the confusion.” I had not been the least bit confused, nor had I come to some mistaken “impression.” I had repeatedly grilled the long-time OGE staff person who sends out public financial disclosure reports to the public, Ethics As- sistant Denise Shelton. She, in turn, had repeatedly told me that she could find no record at all that Mr. Mineta’s CY2000 disclosure had ever existed. The inevitable conclusion: someone at OGE had very likely tried to help Mr. Mineta out by entirely removing any trace of the one disclosure on which he was required by law to disclose the details of his Trimble stock options transactions from their system. That effort had succeeded up to that point, but then POGO’s FOIA appeal letter had called OGE on these shenanigans, and then the key financial disclosure magically reappeared. With apologies to Lewis Carroll, the world renowned author of Alice in Wonderland, and the screenwriters of the first Matrix movie, this rabbit hole would go a whole lot deeper.

A Second Call to Denise

After Ms. Glynn had written to POGO and asserted that Mr. Mineta’s CY2000 financial disclosure was in OGE’s records as it had supposedly been all along, I wanted to independently confirm that fact. So on April 26, 2007, I FAXed in another request to OGE for three of Mr. Mineta’s reports, the now infamous CY2000 one, his Commerce termination report, and his Transportation termination report. That afternoon, I called Denise Shelton to see if she had received my request. “Hi Denise, this is Jerry Werner.” “How are you doing, Mr. Werner?” We had talked enough times that she was getting to know me, and we exchanged pleasantries. I asked if she had received my FAX request for Mr. Mineta’s disclosures, and she confirmed she had, but was very busy. I mentioned that I had requested “Mr. Mineta’s calendar year 2000 report, which I understand you probably have now.” She wasn’t sure, and said she’d have to check. I pressed her again to see if she had his calendar year 2000 disclosure.

153 The ‘Smart Road’ Scam

Shelton: “I’m really not sure, because I don’t have the folder in front of me. But… actually, 2000 stuff should be destroyed.” Werner: “But that one, I think, actually was ﬁled in 2002, so it shouldn’t have been destroyed yet, I don’t think.” Of course, I knew for sure that it shouldn’t have been destroyed. Shelton: “2002? You don’t mean for Transportation?” Werner: “No, that was for Commerce.” Shelton: “I have one thing in the system for Commerce, and I’m not sure if it’s in that folder or not. I have to pull that folder, because they haven’t destroyed ‘em online yet. But I have destroyed some records, and I’m not sure if I have that. I don’t have the folder. I have to go search the folder, but I won’t be able to ﬁll the request today, anyway. It probably’ll be sometime tomorrow. I can call you back and let you know what I have.” Werner: “OK. And you keep a record of the ones you destroy, right, the old ones?” I expected her to repeat what she had told me back in Feb- ruary, that she kept a list of the records that she had destroyed. Shelton: “No, I really don’t keep a record. I don’t have a book, I don’t have …. Sometimes we run a report from the computer, but it’s not a log that I keep.” Werner: “I thought you did?” She had told me two months earlier that she maintained a list of those records she destroyed. Shelton: “No, I don’t keep a log for that. I got in trouble—I don’t know who said I kept a book or what, but I’m not saying. And this is off the record between me and you.” [JW laughter] Shelton: “You understand what I’m saying?” Werner: “I do. Well, if you’d just let me know about which ones you have tomorrow.” Shelton: “Sure, I’ll give you a call tomorrow, OK? Werner: “OK” Shelton: “Alright. You have a good evening. Bye bye.”

I knew exactly what she was saying. She had been reprimanded by a superior for telling someone—me—that she kept a record of the destroyed

154 Thwarting the OGE’s Attempted Coverup

financial disclosures, and it had come back to bite her. Denise may have suspected that I was the person who had gotten her into trouble for saying she kept that record, but she clearly felt no ill will towards me. Clearly, POGO’s FOIA appeal letter asking for copies of her report destruction log had upset one of her bosses there—perhaps the very person who was apparently trying to help Mr. Mineta out by losing all traces of the critical financial disclosure. If I hadn’t known about the existence of Denise’s destruction list, Mr. Mineta’s CY2000 disclosure might today be history, out of sight and out of mind. But POGO’s insistence on seeing the records of which disclosures she had destroyed, I’m convinced, made someone at OGE realize that they couldn’t continue this charade, so the disclosure in question was magically resurrected. I don’t in any way want to leave the impression that Denise is anything but a very helpful and competent employee at the Office of Govern- ment Ethics. The shenanigans surrounding Mr. Mineta’s lost and then found CY2000 financial disclosure were almost certainly orchestrated at a higher level within OGE. And those shenanigans weren’t nearly over yet!

The CRP’s Woes

The website of the non-profit Center for Responsive Politics says that CRP is “the nation’s premier research group tracking money in U.S. politics and its effect on elections and public policy.” CRP has been around only a year or two less than POGO, and its work is very complementary to both POGO’s efforts to investigate and expose corruption, the Sunlight Foundation’s efforts to leverage the Internet to make government more transparent and accountable, and the NLPC’s efforts to investigate malfeasance on the part of certain “public servants.” Over the past 2+ years I’ve asked for help from all four organizations, and they have all been more than willing to do what they could within their own sphere of expertise. CRP’s website is a vast and impressive repository of all kinds of records documenting the influence of money on elections and policymak- ing. You can find out which companies are hiring which lobbyists to try to persuade which legislators to do their bidding, and you can also find

155 The ‘Smart Road’ Scam out which companies are contributing to legislators’ reelection campaigns and political action committees (PACs). Since I started investigating the Traffic.com scandal I have utilized CRP’s website many times to find out which lobbyists Traffic.com has hired over the years, and how much money the company’s executives have contributed to key legislators in an effort to sustain and grow their ongoing federally subsidized monopoly. CRP is also a repository of public financial disclosure reports, and particularly the very SF278 reports that I was receiving from the U.S. Office of Government Ethics. As one might expect, a repository of Mr. Mineta’s disclosures is available. CRP, unlike OGE, does not destroy disclosures that are older than six years from the submission date. A quick perusal of the available disclosures on their website shows disclosures dating back to the mid-1990s or even earlier. CRP acquires its disclosures from the OGE, scans them, and then makes them available online in PDF format for immediate viewing and downloading. I became aware of CRP’s financial disclosure repository just after my trip to DC in mid-January 2007, about two and a half months after Denise had sent me the big initial packet of Mr. Mineta’s and other USDOT officials’ financial disclosures. Interestingly, CRP’s repository as of mid- January 2007, like the OGE’s files, included just two of the three disclosures that Mr. Mineta had filed related to his 2000 finances. However, one of those two disclosures was different than one of the OGE’s disclosures. Table 13-1 below shows the composition of each repository’s holdings of Mr. Mineta’s 2000 financial disclosures as of January 2007.

Mineta Disclosure Date CRP OGE Commerce New Entrant Disclosure 7/18/2000 X Transp. New Entrant Disclosure 1/23/2001 X X Calendar Year 2000 Disclosure 4/19/2002 X

Table 13-1: Between them, in Jan. 2007 the two repositories (CRP and OGE) contained all three of Mr. Mineta’s disclosuresthat referred to his 2000 ﬁnances.

156 Thwarting the OGE’s Attempted Coverup

Amazingly, CRP had not yet acquired Mr. Mineta’s key CY2000 disclosure that was the only one of the three for which he was required by the Ethics in Government Act to provide equity transaction details on Sched- ule B. CRP had, however, acquired his older Commerce new entrant disclosure that Denise had already destroyed by the time I first contacted OGE the previous October. I quickly downloaded it and printed it out. That disclosure would provide key additional circumstantial evidence suggesting that Mr. Mineta had received considerably more stock options than he should have received by Trimble’s own published policy for compensating directors. (More on that in the next chapter.) In mid-January 2007 I called CRP to let them know that they were missing a key financial disclosure that they might want to acquire from OGE. I was routed to CRP’s Personal Finances Researcher Dan Auble who, according to his short online bio, was responsible for “maintaining the Center’s newly created database tracking the personal finances of members of Congress, the president and other federal officials.” I had a nice chat with Dan, gave him some general background about why I had been looking into Mr. Mineta’s finances, and encouraged him to acquire Mineta’s CY2000 disclosure. He said he would do so. Little did I know how incredibly difficult it would be for CRP to acquire that disclosure. I would keep Dan informed of my progress to try to get to the bottom of Mr. Mineta’s undisclosed transaction in Trimble Navigation stock options. On April 20, 2007, I shared with him the OGE’s response to POGO’s FOIA appeal in which they talked about POGO’s and my “confusion.” Dan still had not received Mr. Mineta’s CY 2000 disclosure from OGE. In mid-July 2007, after noting that CRP still didn’t offer Mr. Mineta’s CY2000 disclosure online, I wrote to Dan to let him know that I had received Mr. Mineta’s “termination report.” Dan said that OGE had sent him Mineta’s Transportation new entrant disclosure that was almost—but significantly not quite—the same thing as the CY2000 disclosure, and he had re-requested the correct one. He wrote me back, saying “I actually just had a long conversation with Denise earlier this week and she tracked down the particular version of the report that we were discussing. So, pre-

157 The ‘Smart Road’ Scam sumably, I should have it soon. I will also request that termination report as well. This experience really makes me wonder what else is lurking over there that a straightforward request using the regular process is not turning up. Thanks again for bringing all this to my attention.” Lurking, indeed. Dan may have presumed that he would acquire that disclosure “soon,” but it would continue to be amazingly elusive. By Sept. 6, 2007 I again noticed that CRP didn’t have the key Mineta CY2000 disclosure online, and I both emailed and called Dan. He said that—astoundingly—he was still having problems getting the correct disclosure from OGE, even though he had thought back in July that Denise Shelton had located the correct one. OGE had told him that they were inundated with disclosure requests and had hired another person, Irene Houston, to assist Denise with filling those requests. However, OGE still couldn’t seem to find the correct Mineta disclosure. I had earlier emailed him a copy of the disclosure that I had received from OGE, but I knew that he wanted one from the official source, not a second-hand one. I offered to ask Scott Amey to scan and send the copy that Ms. Glynn had attached to her FOIA appeal response, and Scott immediately did so. While POGO was certainly a respected organization (especially in the eyes of one of their peer watchdog organizations, CRP), I knew that Dan really wanted to get the report directly from the original source, OGE. On November 2 I called Dan again, and once again he said that he had not been able to acquire the correct disclosure. He had specifically told OGE that the disclosure he wanted was the one for calendar year 2000 that was dated April 19, 2002, but they had incorrectly sent him the cy2002 disclosure instead. I laughed at the seemingly transparent effort on the part of OGE not to send him the correct disclosure and felt kind of bad that while I saw the humor in the situation, Dan was just getting increasingly frustrated. He even said that he might have to file a Freedom of Information Act request to acquire the correct disclosure, an amazing circumstance since CRP had received thousands of financial disclosures from OGE over the years, and was undoubtedly one of the ethics agency’s best “customers.” I thought that this was all so funny that I posted an item about it on my blog, entitled “Will You Take This One? No? How about That One?”

158 Thwarting the OGE’s Attempted Coverup

It started off:

This is starting to get really funny. The Center for Responsive Politics has been trying for months now to get a copy of former USDOT Sec- retary Norman Mineta’s calendar year 2000 Public Financial Disclo- sure report. If you recall, that’s the only one of the three disclosures he filed related to his 2000 finances where he was required to provide the details of his profit of up to $1 million in stock options in a company (Trimble Navigation) that has ties to Traffic.com.” [Trimble Navigation has long had a multi-million dollar business relationship with NAVTEQ, Traffic.com’s parent.]

I concluded my blog posting with:

Clearly, Mr. Mineta would like this disclosure to just fade into the sunset, at which time he’ll likely breath a big sigh of relief. I am more and more certain that someone in OGE is trying their best to help him out and to not send it to CRP, where it will live on indeﬁnitely.

Dan at CRP, who manages the acquisition and archiving of these reports, is very frustrated at his inability to acquire the correct disclosure and I certainly understand his frustration. However, I still think that it’s pretty funny how hard Mr. Mineta’s friends are working not to send the correct disclosure to the CRP.

A message for the slimy bastards in the OGE: It won’t work!

Perseverance Finally Pays Off

The ﬁrst week of December, 2007, Dan at the CRP ﬁnally received a copy of Mr. Mineta’s CY2000 disclosure from OGE and uploaded it to their website. I was relieved that the disclosure would now live on at CRP, a well know and trusted archivist for such disclosures. I posted an item on my “Buda Rabblerouser” blog—“Some Good News for the Truth (but Bad News for Former USDOT Secretary Mineta)”—thanking Dan for his

159 The ‘Smart Road’ Scam persistence. It had taken almost ten months of CRP’s relentless prodding and OGE’s seeming abject incompetence for the all-important disclosure to finally show up in CRP’s snail mail mailbox. To this day I still have a strong continuing suspicion that someone in our nation’s flagship ethics agency first tried very hard to lose that disclosure, only to re-find it after receiving POGO’s strongly worded FOIA appeal letter. Then, that same person likely did his or her best to foil Denise’s and Irene’s efforts to get their hands on the correct disclosure so that they could fill CRP’s request. Thankfully, those efforts were thwarted by both POGO’s and CRP’s persistence. In the end, the “guys in the white hats” had prevailed. That key cy2000 disclosure is now safely tucked away in the CRP’s financial disclosure database and readily available on its website for all to see. And neither the FBI nor the OIG nor the SEC have ever offered an explanation for how Mr. Mineta could have put a big “X” on page seven saying that he had no reportable equity transactions in 2000, when he revealed elsewhere that he made a capital gains income of up to a million dollars in stock options that year.

160 14

Mr. Mineta’s Apparent Ethics Breach

rom the moment I stumbled upon the irregularities in Mr. Mineta’s Fcalendar year 2000 Public Financial Disclosure report in the fall of 2006, I began to suspect that something very unethical (and possibly illegal) was at play. From my subsequent investigations into the details of both SEC insider trading disclosures and OGE ﬁnancial disclosures, I knew that he should have disclosed the details of his transactions in Trim- ble Navigation stock options with at least one of those federal watchdog agencies. But he hadn’t, and the key question was: Why not? The pieces of the puzzle—the circumstantial evidence, if you will—would slowly but steadily ﬁt together starting in early 2007 to create a compelling case that he had violated the federal ethics disclosure laws big-time. Here are the key facts that I learned over time related to his income from Trimble Navigation stock options:

1. The missing information on Mr. Mineta’s CY2000 Public Fi- nancial Disclosure report. I’ve described this evidence in detail in the previous chapters. In summary: it’s likely that Mr. Mineta should have provided details of his transactions in Trimble Navigation stock options while U.S. Commerce Secretary on his CY2000 OGE ﬁnancial disclosure, but he failed to do so. While it’s conceivable that those transac-

161 The ‘Smart Road’ Scam tions occurred while he was still on Trimble’s Board, Mr. Mineta would certainly have had to disclose that information on SEC “insider trading” forms. Because no new insider trading forms were filed, it seems clear that the Trimble transactions occurred while he was Commerce Secretary. So why did he not disclose the details of his stock options transaction on the CY2000 financial disclosure? 2. The biggest potential capital gains income Mr. Mineta should have realized from his vested Trimble Navigation stock options. Ac- cording to my analysis of his vested stock options per the company’s policy for compensating Directors, the largest capital gains income he could have received—assuming he exercised his option at the very top stock price in the 30 days after he stepped down from Trimble’s Board—was $112,344. So why did he say he had no transactions on Schedule B of his CY2000 disclosure, instead of simply identifying the amount of the transaction as being in the “$100,001-$250,000” range? 3. The valuation of Mr. Mineta’s Trimble stock options as reported on his Commerce New Entrant Financial Disclosure. On page 4 of Schedule A of Mr. Mineta’s Commerce New Entrant Disclosure, filed with OGE on July 17, 2000, Mr. Mineta reported the value of his stock options as between $500,000 and $1,000,000. However, on that very day the valuation of his vested options in the company was $154,716, a far cry from the half million dollar threshold for that category. Had he even been fully vested in his entire 15,000-share stock option—contrary to the company’s published compensation policy—the value of that option would still have been well under $500,000 (actually, $428,445.) So where did the $500K - $1M valuation come from? Had he received other stock options separately, in addition to his compensation as a Board member? 4. The “C. Trimble Nonstatutory Stock Option Plan.” In searching through Trimble Navigation’s own SEC filings, I noticed a filing of the “C. Trimble Nonstatutory Stock Option Plan” on July 24, 2001, the one year anniversary of Mr. Mineta’s departure from Trimble’s Board. This stock option plan, named for Charles Trimble, Trimble Navigation’s founder and long-time CEO, was designed to ultimately provide 40,000 shares of “non-statutory” stock to Mr. Trimble. Since that stock was “nonstatutory,” it was apparently exempt from normal SEC reporting require-

162 Mr. Mineta’s Apparent Ethics Breach ments. The more I dug into the details of this plan, the stranger it seemed to be. For one thing, even though the filing was dated July 24, 2001, the plan had actually started to accrue options back in the fall of 1999, a few months after Mr. Mineta had joined Trimble’s Board. For another, the SEC had taken issue with the plan in several respects, particularly expressing a concern about the possibility of “private placement securities” being offered in other than a normal “registered offering.” Elsewhere in the disclosure there was wording to the effect that these shares could not be transferred unless “registration is not required in the opinion of counsel satisfactory to the Company.” But what if the company’s top outside Counsel, a long-time associate of Charles Trimble’s and fellow Board Member with Mr. Mineta by the name of John B. Goodrich, had “the opinion” that these shares could be transferred to Mr. Mineta with no problem? I calculated the value of the vested shares in this plan as $430,987 on the day of Mr. Mineta’s Commerce New Entrant disclosure. Had Mr. Trimble transferred the vested shares in this plan under the SEC’s radar to Mr. Mineta, with the concurrence of his long-time Counsel Mr. Goodrich? Had those shares, added to Mr. Mineta’s compensation as a Board member, accounted for the valuation of his Trimble Stock options holdings at between $500K and $1M on his Commerce New Entrant Fi- nancial Disclosure? 5. Mr. Mineta’s unexplained substantial change in assets from 2000 to 2001. In comparing Mr. Mineta’s calendar year 2000 financial disclosure with his CY2001 one, I found an interesting anomaly: the disclosed value of many of his listed assets had bumped up into a higher range. In one case, the value of the asset had gone from the range of $50,001-$100,000 to $100,001-$250,000, a substantial jump. In two other cases the asset had gone from $15,001-$50,000 to $50,001-$100,000, and there were several increases in smaller ranges (see Table 14-1 below). It seemed clear that he had come into some sort of financial windfall during 2001, but he only listed one reportable transaction on Schedule B (“Part I: Transactions”) of his CY2001 financial disclosure, the sale of stock in a consulting firm in Rockville, MD in the $15,001-$50,000 range that had resulted in a zero capital gain.

163 The ‘Smart Road’ Scam

Asset 2000 Value 2001 Value Lockheed Martin $15,001 - $50,000 $50,001 - $100,000 Common Stock LM Supplemental $1,001 - $15,000 $15,001 - $50,000 Savings Plan: Com- mon Stock LM Supplemental $1,001 - $15,000 $15,001 - $50,000 Savings Plan: Stable Value Fund Union Bank of CA $15,001 - $50,000 $50,001 - $100,000 Common LM Capital Accum. $1,001 - $15,000 $15,001 - $50,000 Plan (401K): LM Common LM Capital Accum. $1,001 - $15,000 $15,001 - $50,000 Plan (401K): Stable Value Fund Wright Pattman $50,001 - $100,000 $100,001 - $250,000 Congressional Fed- eral Credit Union

Table 14-1: A number of Mr. Mineta’s assets inexplicably jumped from 2000 to 2001

The only explanation I could think of for how these assets could rise so substantially in the absence of any reported significant financial transactions was that these transactions must have occurred in one of the “reporting gaps” that OGE’s Tom Zorn had told me about earlier. One such gap occurred in the few days after Mr. Mineta resigned as Secretary of Commerce in the Clinton Administration (January 19, 2001) and before he was sworn in as Transportation Secretary in the Bush Administration (January 25, 2001). Since he was not a government official during that period, he would not have to disclose any transactions that happened then on Schedule B of his Transportation new entrant disclosure (which was

164 Mr. Mineta’s Apparent Ethics Breach simply blank). For the same reason, perhaps he would not have to disclose those transactions a year later on his CY2001 disclosure either, that only showed one transaction. Had some substantial transactions occurred in this “reporting gap” just before Mr. Mineta was sworn in as Transpor- tation Secretary? If so, were Trimble Navigation stock options or stock involved? Taken altogether, it seemed certain that something ﬁshy was going on here. Mr. Mineta had failed to disclose how many Trimble Navigation stock options he had exercised, perhaps because he had received a whole lot more than would just be due to his 13 month stint on Trimble’s Board. Several non-exclusive possibilities came to mind:

1. The company had decided to fully vest all of his 15,000 share option, as thanks for his service. While that was certainly possible, both they and he would have had to make SEC ﬁlings to that effect, and no such ﬁlings existed. 2. The company had managed to transfer the vested stock from the “C. Trimble Nonstatutory Stock Option Plan” to Mr. Mineta, to comple- ment his stock option for his service on the Board. Because of the “nonstatutory” nature of those shares, perhaps they could be transferred to him away from the scrutiny of SEC disclosure. 3. The company had simply given him extra fully vested stock options as thanks for his service.

Of course, if Trimble had given Mr. Mineta substantial extra stock options under the table (and the SEC’s radar) beyond those he had legiti- mately earned as a Board Member, that could explain why he might want to hide the actual number on Schedule B. After all, a substantial extra award would invite questions about why Trimble Navigation would give extra stock options to someone who was leaving their Board of Directors after serving for only 13 months. If they had in fact done so, the obvious question would be: what did they get in return? As the pieces of the puzzle continued to ﬁt into place, the answer to that question would become increasingly apparent.

165 The ‘Smart Road’ Scam

The Critical Importance of U.S. Technology Policy

In digging into Trimble Navigation’s own financial and SEC disclosures for some hint at specifically why the company would want one of their own supporters in a position to influence federal policies on their behalf, I found a passage in Trimble’s 1998 Annual Report that identified the crucial role that the company believed federal policies played in the health of the overall GPS market. It said:

…there can be no assurance that the U.S. government will remain committed to the operation and maintenance of GPS satellites over a long period of time, or that the policies of the U.S. Government for the use of GPS without charge will remain unchanged…

Because of ever-increasing commercial applications of GPS, other U.S. Government agencies may become involved in the administration or the regulation of the use of GPS signals. Any of the forego- ing factors could affect the willingness of buyers of the Company’s products to select GPS-based systems instead of products based on competing technologies. Any resulting change in market demand for GPS products would have a material adverse effect on the Company’s ﬁnancial results.

This report was written while Trimble founder Charles R. Trimble was still President and CEO of the company. As this passage indicates, he believed that the “policies of the U.S. Government” had a direct impact on the company’s future ﬁnancial fortunes. Having a strong proponent and ally of the company in the Cabinet who could promote policies and programs beneﬁcial to the company’s GPS business would, indeed, help assuage the company’s concerns about uncertain U.S. Government policies. On June 1, 1999, just a few months after this report would be mailed to Trimble’s shareholders, future Commerce and Transportation Secretary Norman Mineta would join the company’s Board of Directors.

166 Mr. Mineta’s Apparent Ethics Breach

The E-911 Piece to the Puzzle

In early 2007, I called Fred (not his real name), an FHWA field ITS engineer whom I had known many years. He was the individual who had earlier shared with me the fact that some staff members in the FHWA Of- fice of Operations, for whom I worked, had “gotten in big trouble” with top USDOT management for advising prospective state agency participants in the ITIP program “buyer beware.” Of course, I also knew that the department’s long-time boss, Dr. Christine Johnson, had gotten into the ultimate trouble when she had pushed back against the ITIP program in mid-2002 and had subsequently been reassigned by her bosses. Back in the fall of 2005 when I had had my run-in with John Collins on the Talking Operations forum, Fred emailed me and encouraged me to dig further into the details of the ITIP program. “You may want to try and stick your nose into this one as the results could prove quite interesting,” he said at the time. “I think this one would be quite educational to a lot of folks.” I agreed, of course, especially since my own education about this program had started three years earlier via my ill-fated interview of TxDOT’s Freddie Zoolander. Since the fall of 2005 I have called Fred every three or four months to find out if anything new was happening in the FHWA with regard to the ITIP/TTID program and Traffic.com’s ongoing monopoly. At times he has shared some very interesting information and insight. My conversation with him in early 2007 would be one of those times. I told him about how I happened to stumble upon Mr. Mineta’s failure to disclose the details of his transactions in Trimble stock options. “If they did give him a lot of extra stock options than he should have received, the question is: what did he do for them in return?” I wondered aloud. “Did he push any particular programs for their benefit while Trans- portation Secretary?” Fred responded immediately with a single word: “E-911!” I hadn’t thought of that connection before, but the more I mulled it over the more sense it made. Shortly after the Bush/Mineta regime took control of the USDOT in early 2001, the USDOT’s ITS Joint Program Office for whom I worked (along with the FHWA Office of Operations)

167 The ‘Smart Road’ Scam instituted several new “major initiatives.” Perhaps the most visible new initiative was the Secretary’s “Enhanced 911” or “E-911” initiative that began in early 2002. The intent of the E-911 initiative was to accelerate the ability of public safety agencies who receive 911 calls from cellphone callers to identify the location of those callers in much the same way that telecom providers can identify the exact street address of landline 911 callers. According to a statement to a congressional hearing by two USDOT/ Federal Highway Administration executives in March 2002, the E-911 program was a “Secretarial initiative,” meaning that it had been put in place by the USDOT Secretary’s (Mineta’s) office. E-911, of course, was not specifically a transportation initiative; it was a telecommunication initiative with broad public safety implications, and not just for people who happen to be driving on our nation’s roads. Typically, the Federal Communications Commission takes the lead in promoting and nurturing such new telecommunications services that have a broad public benefit. In this case, however, Transportation Secretary Mineta played the lead role and the FCC played a lesser supporting role. In fact, former Federal Communications Commission (FCC) official Dale N. Hatfield termed the DOT’s Wireless E-911 Initiative “perhaps the most visible” of all Federal activities related to wireless E-911 implementation in a 2002 report to the FCC. Location technology (including GPS) was and is a major technologi- cal component to adding “location awareness” to cellular phone calls. A major new federal initiative to promote and accelerate the availability of E-911 would clearly benefit those companies who serve the location technology/GPS market, and Trimble was and is one of the largest companies that would benefit from such aggressiveness. It stood to reason that Mr. Mineta was pushing E-911, at least in part, because it was good for the location technology market and, by inference, one of its most prominent suppliers, Trimble Navigation. At this point in time I strongly suspected, based on considerable circumstantial evidence, that Trimble Navigation had given Mr. Mineta a significant number of extra stock options under the table. Pushing E-911 was one way (of several, it would turn out) that he could repay their generosity.

168 Mr. Mineta’s Apparent Ethics Breach

Interestingly, I’d learn another piece of the E-911 puzzle from a completely different source almost a year later. In December 2007 I would have a phone conversation with George (not his real name), a senior FHWA manager whom I’d known for years. I filled him in about the latest developments in my investigation into the Traffic.com scandal, as well as what I had learned about the roles that both Mineta and Jackson had played in it. “I think Jackson is probably the kingpin in all this stuff. I think that Mineta is certainly aware of it and involved in it, but I think Jackson is one of the original brainstormers of it,” I suggested. That assertion was driven by my educated guess that Jackson and his co-ATA-Senior Vice President and current Traffic.com Vice President John Collins had worked with Cong. Bud Shuster on the language for the original ITIP earmark in TEA-21 back in 1997-98. “It’s the kind of dirty pool that Jackson would do,” George blurted out. “I remember when there was a political decision that they wanted money for E-911... [that was the] reason behind why E-911 would be a DOT initiative. Jackson went to the Joint Program Office and said ‘you’re going to give me $7 million’.” That comment had come out of the blue, unprompted. I proceeded to tell George what I had found about Mr. Mineta’s likely windfall from Trimble Navigation stock options and that I had already found out from another FHWA source that E-911 was likely one of the key ways he was paying their generosity back. Unlike in Mineta’s case, I had no hint of a direct connection between Jackson and Trimble, but Jackson was the US- DOT’s COO to Mineta’s CEO, and was almost certainly carrying Mineta’s water in diverting existing JPO funds to push E-911. Dr. Christine Johnson, of course, was the Director of the ITS Joint Program Office when Jackson had demanded that she redirect $7 million of her current program funding to the new E-911 initiative. That demand had likely added to the friction between the two that would come to a head in mid-2002 when she was unceremoniously booted out of FHWA headquarters.

169 The ‘Smart Road’ Scam

Searching for Evidence Online

After Fred, the FHWA ITS field engineer, tipped me off about the E-911 connection to Trimble Navigation, I spent several hours performing Google searches to find additional evidence that Mr. Mineta had supported location-technology related efforts as Transportation Secretary. I easily found a number of references suggesting that had happened (in addition to finding more details about E-911), including:

• USDOT’s report about the vulnerability of parts of the transportation infrastructure that relied on GPS. That report would have the net effect of focusing attention (and federal dollars) on beeﬁng up the underlying GPS systems. • USDOT’s plans to expand the use of GPS • Reports of the USDOT’s efforts to modernize the GPS system

The USDOT’s focus on location technology and GPS clearly benefited the GPS industry in general, and Trimble Navigation in particular. To what extent was this driven by Mr. Mineta’s desire to repay the financial windfall he had possibly received from the company? It sure seemed that there was a connection. How could there not be, I reasoned, if he had received, say, a half million dollars worth of extra Trimble Navigation stock options? On January 25, 2007, the day after I talked over the phone with Fred, I sent a FAX to FBI Supervisory Special Agent Velez that summarized what I had learned from both that conversation and my Internet search, entitled “Mr. Mineta’s Possible Promotion of E9-1-1 and GPS to Benefit Trimble Navigation.” My concluding remarks in that FAX were:

I am very concerned that the WFO [FBI Washington Field Ofﬁce] is deliberately “slow boating” this investigation to avoid a confronta- tion with the Administration, for whom the results of this investigation could be embarrassing. In other words, I believe that the apparently anemic nature of this investigation points out the difﬁculty of the FBI, as part of the Executive Branch, to vigorously pursue an investigation

170 Mr. Mineta’s Apparent Ethics Breach

of wrongdoing within the Executive Branch.

I hope that my concern is unfounded. However, the fact that not once has anybody from the WFO ever taken the initiative in 11 months to ask me to explain any of the details (including technical details) of this scandal seems to say that the FBI is, indeed, “slow-boating” this investigation. As we discussed yesterday, I wanted to explain the details of the very suspicious elements in Mr. Mineta’s ﬁnancial disclosures, and we agreed that I should contact the WFO and talk to them. So in the past two days I have left multiple messages for SA Hanzal and Supervisory SA Sniegowski, saying that I would like to discuss this information which, I believe, could contain a “ﬁnancial smoking gun” related to Mr. Mineta’s potential wrongdoing. However, I have not yet received a return call from either individual.

I hope that my concerns are not true, and that the FBI is, indeed, actively pursuing this investigation.

It turns out that my concerns were, in fact, well founded. As I would learn six months later in the letter from FBI Public Corruption Unit chief Anderson, the FBI was not actively pursuing this investigation at all. All the information I was digging up and sending them was just going into a black hole.

More Details of a Possible Quid Pro Quo

By the time I sent that FAX to FBI Supervisory Special Agent Velez in late January 2007, I had identiﬁed numerous examples of where Mr. Mineta had initiated or supported efforts to increase the federal government’s—and particularly the USDOT’s—support for GPS and location technologies. It sure seemed like his support for GPS and location technologies was the “quid” to Trimble’s “quo” (their likely unreported gift to him of a substantial number of extra stock options). But that gift—if it in fact happened, as I strongly suspected it had— had occurred right around the time that he became Commerce Secretary

171 The ‘Smart Road’ Scam in the Clinton Administration, not Transportation Secretary in the Bush Administration. Surely Trimble had no idea in mid-2000 that Mr. Mineta would become Transportation Secretary in a new Administration (and a Republican one, at that) six months later. So why would they want one of their own company’s cheerleaders as Commerce Secretary? That was an open question, and I frankly hadn’t spent much time dwelling on it. Until, that is, I happened to cross paths with Louie (not his real name), a salesman for an ITS company who had earlier worked for Trimble Navigation when Mineta had been on the company’s Board. I would connect with Louie through Jack (also a pseudonym), a transportation consultant I had run into many times at conferences over the years. Jack was yet another of my long-time friends in the ITS industry who, like Fred the FHWA ITS ﬁeld engineer, expressed appreciation for my earlier rabblerousing on the NTOC’s Talking Operations forum. Right after I posted John Collins’ email threat to sue me for libel on the forum, Jack sent me a very supportive email message:

Looks like you stirred up a hornet’s nest in Pittsburgh! Those Mobility Technology guys are really sensitive! I noticed that they did NOT get a requested $25M add-on to their already embarrassing ITOP contract - FHWA ﬁnally wised up and decided they better compete this work... this whole deal has smelled to high heaven from the beginning and there are a lot of angry agencies who refuse to buckle under to this federally-sanctioned MoTech “hijacking”...

Keep the chin up...you’re doing a great job!

Ever since that time, I’ve touched base with Jack every few months to fill him in about the latest developments in my saga to investigate and out this scandal. In one of those conversations in late June 2007 Jack happened to mention to me that he had recently come across a salesman at an ITS conference by the name of Louie who had been “pretty knowledgeable” about the whole Traffic.com scam. As I was always looking for more insight into the whole Traffic.com scam, I called Louie on the phone the next day. I filled him in about the

172 Mr. Mineta’s Apparent Ethics Breach latest developments I was aware of, and emailed him some background information. I talked with him several times the next couple weeks, and continued to share more and more with him about how high up in US- DOT I was ﬁnding that the Trafﬁc.com scandal went. When I told him about my discovery months earlier related to Mr. Mineta’s connection with Trimble Navigation, much to my surprise Louie said that he had been a salesman for Trimble Navigation during the period in 1999 and 2000 when Mineta had served on the Board. Louie said that the overriding issue back then had been the potential catastrophic impact of ultra wide band (UWB) technology on Trimble’s GPS-based business. UWB and GPS were competing candidates for broad federal support. Louie suggested that the company might have asked Mr. Mineta to, as he put it, “help secure GPS against bandwidth incursions from UWB.” As a graduate electrical engineer who out of college had worked for Motorola’s Communications Division in Schaumburg, IL, I conceptually understood exactly what he was saying.

Trimble Navigation’s Inside Man

After again spending several hours reviewing “hits” from extensive Google searches, I was becoming more and more sure that Louie’s tip was the missing link as to why Trimble Navigation would want their own guy as Commerce Secretary. It turns out that a major function within the Commerce Department, the National Telecommunications & Informa- tion Administration (NTIA), serves as “the President’s principal adviser on telecommunications and information policy,” according to the NTIA’s website. In that role, the NTIA is the key player in setting the federal government’s commitment toward GPS that Trimble had expressed serious concerns about in their 1998 Annual Report. In fact, at the time Mr. Mineta was conﬁrmed as Commerce Secretary the NTIA already had an effort underway to evaluate the impact on UWB on other federal government telecommunications systems and policies, including GPS. It made sense that Trimble would want somebody “on their side” who would have ultimate authority over the NTIA to ensure that effort would continue. Hopefully, he could even make the NTIA’s efforts to raise red ﬂags about

173 The ‘Smart Road’ Scam the potential for UWB to interfere with federal GPS systems a higher priority. That effort, in turn, would thus help retard the federal government’s approval and adoption of UWB, which would be good for the GPS industry as a whole and good for Trimble in particular. In looking into Trimble Navigation’s lobbying efforts in 2000 and 2001 via the Center for Responsive Politics’ excellent Influence and Lob- bying database, I found that the company hired a lobbyist by the name of Capitol Coalitions both years to lobby the Department of Commerce on this issue. In fact, the Department of Commerce was the first listed “House(s) of Congress and Federal Agencies Contacted,” on Capitol Co- alitions’ 2000 year end report. The specific lobbying issues listed on that report: “Legislative and regulatory matters pertaining to global positioning systems goods and services, particularly issues relating to spectrum allocation.” That reference clearly included the “spectrum allocation” issues associated with UWB’s threat to the GPS market. Mr. Mineta clearly fulfilled the role of shining the spotlight on UWB’s threat to GPS well. I would find many citations on the web when Mr. Mineta was both Commerce and Transportation Secretary suggesting that those agencies were carrying the GPS industry’s (and Trimble’s) water on this issue. A footnote to the Executive Summary of an NTIA report issued in January 2001, just as the Clinton Administration would transition to the Bush Administration, said:

In addition, because of widespread concern, both the Interagency Government Executive Board, which oversees the development of the Global Positioning System (GPS), and the Federal Aviation Adminis- tration (FAA), have funded NTIA to conduct a related series of studies assessing UWB impact on GPS receivers.

Clearly by that reference, the Commerce Department was already working with the USDOT (FAA) to raise the awareness of this “widespread concern” about UWB’s potential to interfere with GPS signals. But my Internet research also showed that the Department of Transportation also addressed the UWB-GPS conﬂict during Mr. Mineta’s tenure there. That issue was particularly hot in 2001-2002, shortly after Mr. Mineta

174 Mr. Mineta’s Apparent Ethics Breach became Transportation Secretary. Two items I had found on the web were particularly revealing:

• In early January 2002, the publication RCR Wireless News published a story containing the following passage: “Last July, Transportation Sec- retary Norman Mineta and former NASA Administrator Daniel Goldin wrote Evans to voice concerns about UWB interference to government GPS communications. In a roundabout way, the identical letters spoke to the divisiveness the issue has created in the Bush administration. ‘Given the unprecedented nature of what the FCC is considering and the critical importance of GPS and other services that would be affected, I believe it’s critical that the administration speak with a clear single voice on this matter,’ the two Bush officials stated.” Clearly, Transportation Secretary Mineta was assuming a lead role on this issue. • A report a few days later in Telecommunications Report/Wireless would bring this issue into even greater focus. “Charles Trimble, chair of the U.S. GPS Industry Council, credited the DoT and FAA with per- suading the FCC to delay the proceeding. ‘This was a positive move,’ he said, adding that there wasn’t a consensus on which bands should be off limits to UWB devices.” That was the same Charles Trimble, of course, who had founded Trimble Navigation, set up the “C. Trimble Nonstatu- tory Stock Option Plan” designed to accumulate options under the radar of the SEC, and whose company was an active participant in the Mineta Transportation Institute at San Jose State University I had found numerous citations showing where the Commerce and then Transportation Department’s efforts under Mr. Mineta’s leadership had raised a very visible red flag about the impact of UWB on GPS technology, ultimately in GPS’ (and Trimble’s) favor. I summarized my findings in a white paper that I immediately FAXed off to FBI Special Agent Hanzal.

How to Get the “Authorities” to Investigate?

All in all, I had found numerous documented facts that strongly suggested:

175 The ‘Smart Road’ Scam

1. That Mr. Mineta had likely received a substantial (but, as yet, un- determined) amount of additional Trimble Navigation stock options under the table, and 2. That through his leadership, both the Commerce and Transporta- tion Departments had aggressively pursued policies and initiatives that would ultimately beneﬁt Trimble Navigation.

While the circumstantial evidence that something was amiss was clearly compelling, of course I could not determine exactly how many extra undisclosed stock options Mr. Mineta might have received from the company. That would require the involvement of both the SEC (to dig deeper into both his and the company’s disclosures) and the IRS (to look into his income tax return for 2000, and possibly 2001). If it could be definitively shown that he had, in fact, received a substantial number of extra stock options, the “rest of the story” as the late Paul Harvey might say would likely fall into place quickly. The bottom line: I had discovered a significant amount of evidence that strongly suggested Mr. Mineta was “on the take” for Trimble Naviga- tion. I had sent it to the FBI and to the USDOT’s Inspector General’s office. Separately, I had filed reports of possible wrongdoing with both the SEC (multiple reports) and IRS. The FBI refused to even open an investigation, claiming that they could not identify a potential “federal violation” anywhere in all this compelling circumstantial evidence. They, and by association the OIG’s investigative division, simply swept this whole matter under the rug. I’ve never heard back from either the SEC or IRS. What does one have to do to get the “authorities” to investigate almost certain major federal fraud and corruption on the part of senior Adminis- tration officials? In light of the apparent desire by the Executive Branch not to investigate major fraud and corruption within its own ranks, was there some way to force the authorities to investigate these shenanigans? I would continue to try to find answers to those questions.

176 15

Dinner with Mike Wallace

ince the fall of 2005, I have contacted numerous members of both Sprint and TV news organizations to alert them about the Trafﬁc.com scandal and Mr. Mineta’s related ethics problem. Those efforts have born fruit to some extent in specialized and regional publications. Some of the more notable examples include:

• Jim Ridgeway’s November 1, 2007 article in Mother Jones: “Hog- ging the Road: How a company called Traffic.com landed an exclusive government contract worth millions to gather data on the nation’s highways—and then sold the information back to us.” • The lead story in the October 29, 2007 issue of the Urban Transpor- tation Monitor newsletter, “Government Watchdog, Congressional Lead- ers Outraged that Fed Program Gives Unfair Advantage to Traffic.com.” • Multiple stories in The Hill, including: “’Monopoly’ Continues for Pa. Company, says Hatch” (June 26, 2007) and “Weiner calls for hearings, IG probe on traffic program” (Oct. 19, 2007) • “New Federally Funded Road Sensors Won’t Feed Details to Geor- gia’s 511” in the August 17, 2007 issue of the Atlanta Journal-Constitu- tion. • A terrific Op-Ed piece in the Atlanta Journal-Constitution, “Sensors

177 The ‘Smart Road’ Scam and Insensibility: State is asked to pay for trafﬁc info taxpayers already funded.”

For the most part, however, the stories that have appeared in the press about the Trafﬁc.com scandal so far have focused on what I consider the “low-hanging fruit” related to this scandal, either: • The raw deal that this earmarked program has perpetrated on both the local DOTs that signed up for the program, as well as the taxpaying public. • The interesting and breaking political aspects of this story, and particularly that a well-respected conservative Republican Senator (Or- rin Hatch) would take the lead in asking for an investigation to look into shenanigans in a Republican Administration.

The amazing thing to me is that none of the news organizations I contacted—particularly the big national newspapers-of-record like the New York Times and Washington Post—have pursued what I believe is the overriding good government story here: the unethical and possibly illegal roles that at least four current or recent top Administration officials have provably played in this scandal. If you believe (as I do) in the old axiom “follow the money,” you would strongly suspect that at least some of these individuals have substantially profited from their efforts. When I first began to contact the press in the fall of 2005, I believed that it was just a matter of “planting the seed” in the mind of a top investigative reporter like James Grimaldi of the Washington Post, who in early 2006 won a Pulitzer prize, along with his Post colleagues Susan Schmidt and Jeffrey Smith, for their work in uncovering the Abramoff scandal. I was sure that if I could convince an investigative reporter of what I knew was major wrongdoing on the part of some very high-level officials, that reporter would then relentlessly pursue this story, turning over rocks and records until all of the “smoking guns” were fully exposed. That was my mental image of how the investigative reporting process worked, forged in part from my remembrances of Woodward and Bernstein’s efforts to expose the Watergate scandal featured in the movie “All the President’s Men” back in 1976.

178 Dinner with Mike Wallace

While that vision in my minds eye might have been on-the-money thirty years earlier, I would come to realize that it was way off the mark now. Today, the notion of gumshoe reporters who devote months to investigating and tracking down leads is almost entirely an illusion from a bygone era or, in my case, a pipedream. Declining newspaper budgets for investigative reporting staffs, combined with the competitive pressures of cable TV and other news outlets to just put new spins on the same old news stories, have decimated the ability of our press and news media to be watchdogs over big-time government fraud and corruption. We all pay the price.

Connecting with the “Insider”

In late August 2006, just after I had first contacted the Project on Gov- ernment Oversight (POGO) about the Traffic.com scandal and POGO’s General Counsel Scott Amey had told me that my information had passed his “sniff test,” I did a lot of poking around POGO’s website. I came upon their “Good Government Hall of Fame” that listed some of the country’s most courageous whistleblowers and muckrakers. These individuals’ selfless efforts, while often causing personal hardship, had undoubtedly made a positive difference in the level of ethics and transparency in our federal government. I knew from personal experience that a whole lot more needed to be done. One immediately recognizable member of this august Hall of Fame was Dr. Jeffrey Wigand, the former executive and chief of research at Brown & Williamson Tobacco Company. Wigand went public back in the mid-1990s about the fact that the tobacco industry well knew that nicotine in cigarettes was addictive and killed its users as well as innocent bystand- ers, despite testimony before Congress by the CEO’s of the seven major tobacco companies that it was not addictive. As the head of research for one of the top tobacco companies Wigand knew that testimony was false, and that his company’s top management actually believed that it was in the “nicotine delivery business” for which tar was the negative baggage. “If we hook ‘em young, we hook ‘em for life,” was the operating phi- losophy. Effectively, he blew the whistle on the entire industry’s lies and

179 The ‘Smart Road’ Scam deceptions about the true health effects of smoking addiction leading to illness. His experiences in doing so, and the repercussions to his own life and livelihood that came from a well-financed smear campaign by the tobacco industry, were the subject of an expose in Vanity Fair magazine, a story on 60 Minutes moderated by Mike Wallace, and—later—a popular movie (“The Insider”) based on that 60 Minutes new piece that was nominated for seven Academy Awards. I knew all about Dr. Wigand’s experiences in working with 60 Min- utes from seeing “The Insider” years ago. In the fall of 2000, of course, 60 Minutes and Mike Wallace had also aired the story about former Con- gressman Bud Shuster’s ethics problems, so I knew that Mike was connected to both stories. Perhaps Dr. Wigand, whom Mike Wallace had interviewed for the 60 Minutes piece, might find Shuster’s more recent “ventures” involving the Traffic.com scandal interesting. If so, he might just be willing to help get 60 Minutes involved. It was worth a shot. So in late August, 2006, I sent him an email message to tell him about my scandal in the hopes that he might be willing to help get its details in front of the 60 Minutes folks he knew.

Jeff,

I noticed that you’re listed in the Project on Government Oversight’s “Good Government Hall of Fame.” Congratulations on that. I am personally aware of a major scandal within the U.S. Dept. of Trans- portation (I consulted for them for seven years) that involves millions of dollars and corrupt public ofﬁcials, have informed them about it, and they’re planning to conduct an investigation into it. I’ve been a whistle blower before (but always internally, trying to tell top management in organizations about problems far below them), but this is the ﬁrst time I’ve ever gone “external,” so to speak. FYI -- I’ve also talked to the Washington Post, NY Times, ABC News and others about this scandal, and I’m pretty sure that at least one of them is looking into it. I also sent a couple emails to 60 Minutes, but no one ever got back to me.

180 Dinner with Mike Wallace

Keep your eye open for news about a scandal involving the company “Trafﬁc.com” and the former Secretary of Transportation Norman Mineta. (If you want to get a sense of what it’s about, check out the article “Monopoly Money for Pa. Company” in the April 2005 issue of The Hill, which is only the tip of the iceberg.) By the way, I gave a complaint to the FBI in February about Secretary Mineta’s role in it and subsequently talked to agents in both the FBI’s Public Integrity and Public Corruption units. He resigned with little fanfare and no apparent reason in early July. I’m not saying that my complaint was the reason, but who knows?

From one rabblerouser to another, keep up the good ﬁght. As you well know, it gets lonely out on a limb sometimes, but knowing deep down that you’re right and might just improve things provides motivation to keep going.

I never heard a response back from Dr. Wigand from that note, but re-reading it two years later I realize that I shouldn’t have expected a response, since I neither asked for one nor asked for any speciﬁc help on his part.

Connecting Redux

On Saturday morning, March 3, 2007, I happened to be surﬁng through the movie channels on cable TV (I’m a big movie buff, particularly of older black and white movies where storyline and acting—not special effects —dominate), when I stumbled upon “The Insider.” There was Russell Crowe, who did such a realistic portrait of the mannerisms of a scientiﬁc geek like Dr. Wigand that he had been nominated for an Acad- emy Award for that role. (I can call Dr. Wigand a “geek” because I’m a computer geek myself.) The movie also featured Al Pacino in the role of Lowell Bergman, the 60 Minutes Producer who fought hard against long odds and CBS management’s resistance to air the Wigand piece. Seeing “The Insider” gave me pause. I was disappointed that I never heard anything back from Dr. Wigand after emailing him almost seven

181 The ‘Smart Road’ Scam months earlier, but I’m not one to give up easily. (And, as I noted above, I really hadn’t asked him to do anything in that earlier message anyway.) I still thought that he could be a good contact. Lying in my bed watching the movie, I turned on my laptop computer (literally resting on my lap, in true geek style) and directed my web browser to his website. I noticed that he had founded a non-profit foundation called “Smoke-Free Kids,” and the foundation’s phone number was shown. I called that number, and who should answer but Dr. Wigand himself. “Dr. Wigand, my name is Jerry Werner. Do you remember, I sent you an email message last August with some details about a big scandal I know about in the U.S. Department of Transportation?” “I do remember that,” he said. “I sent it around to some reporters I know. Did you ever hear back from them?” “No, I never did,” I said. We chatted a while longer, and he said I should feel free to send him additional details about the Traffic.com scandal. I emailed him over a dozen documents, including white papers I’d written about the technical details of the Traffic.com scandal, and copies of Faxes I had sent to the FBI about Mr. Mineta’s serious ethics problem and an apparent cover-up within the Office of Government Ethics. He said he would once again pass along my information to some investigative reporters he knew. In early April I would call Dr. Wigand again, to let him know that I still had not heard anything back from those reporters, or from a contact he knew in the Department of Labor who he said might be interested in the role that a big union pension fund (the National Electrical Benefit Fund) may have played in providing a hidden financial payoff to Bud Shuster and his associates. He told me that he was going to be in New York City that coming weekend, and would be having Easter dinner with his old friend Mike Wallace. “Email me the latest information you have about your scandal, and I’ll give it all to Mike in a packet when I see him,” he offered. I readily accepted his offer. “Again, thanks very much for your help in getting this information to 60 Minutes,” I said in an email message. “I believe that this scandal is every bit as important as the piece they ran last Sunday about the drug

182 Dinner with Mike Wallace lobby’s role in pushing the senior prescription drug program, and the politicians and legislative staff members who were effectively bought off by the drug industry. In the case of the Traffic.com scandal, both elected and appointed officials from both parties are involved, including some very senior people in the current Administration. Thankfully, there are also “good guys” from both parties (Senator Hatch, Rep. Weiner and others) who have been trying to shut down the Traffic.com monopoly.” Easter Sunday in 2007 fell on April 8. On early Friday afternoon, April 20, I would call Dr. Wigand again to see if he had followed through with his offer. “I passed it along to Mike Wallace like I told you I would,” he said. “I can’t guarantee what happens after I give it to him. It goes into whatever system they use to choose whatever they’re going to do.” I told him that I had learned some new information about the scandal, and asked if he would still be willing to forward it on to Mike. “If you email me, I’ll just print it off and send it off to them. That’s what I promised to do for you last time. You have to understand the caveat that I don’t control what 60 Minutes investigates and what they’re going to do and what they’re not going to do. At least, you’ve got somebody who’s in the system.” “The latest thing is very clearly a cover-up of financial information in the U.S. Office of Government Ethics,” I said. “It keeps getting deeper and deeper. If they would dig into it they would find that it’s a big story.” “I’ll pass it on,” he repeated. “Have you thought about sending it in to Lowell Bergman at the Center for Investigative Reporting at U.C. Berke- ley? He does all the Frontline stuff. I’ll send it off to him, also. He does a lot of investigative things about drug cartels, CIA, FBI, and that stuff.” “Sometimes the problem is that when you have 33 people being killed, nobody’s interested in anything else but reporting on that for six months,” he offered. “It’s pretty amazing,” I agreed. “Then you have the coal miners, and it keeps on going on. So this stuff may not ever bubble up.” I knew that the scandal I knew about would definitely never bubble up if I didn’t keep pushing it.

183 The ‘Smart Road’ Scam

“Anyway, everything you’ve given me and sent to me in the files I have printed out and handed personally to Mr. Wallace two weeks ago,” Wigand said. “I’ll send you some more stuff this afternoon. I appreciate your help, I really do,” I said. “OK. You got it.” Dr. Wigand was absolutely true to his word, and had passed on a whole bunch of information to Mike Wallace in person. After all he had gone through—the family issues, the threats, the attempted smearing of his own reputation—he was still fighting the good fight.

Following the Insider’s Advice

Al Pacino played Lowell Bergman, the former 60 Minutes producer for the Dr. Jeffrey Wigand/tobacco industry segment that aired back in February 1999. Bergman, Mike Wallace’s long-time producer, now has two roles : 1) a three-quarter-time position as a U.C. Berkeley Professor and head of the university’s Investigative Reporting Program, and 2) a consultant to Frontline, the Center for Investigative Reporting, and the brand new investigative reporting organization Propublica. On April 20, 2007, acting on the tip from Dr. Wigand, I called the Center for Investigative Reporting and was connected to James Sandler, a CIR investigative reporter. I filled him in over the phone about the details of both the Traffic.com scandal and Mr. Mineta’s ethics issue, and he urged me to send him whatever backgrounders and white papers I could. I sent him five documents that did a good job of summarizing the pertinent issues. Later that afternoon I sent him more information about the clear cover-up on Mr. Mineta’s behalf by the Office of Government Ethics. I felt sure that a major ethical breach by primary federal ethics watchdog agency would tweak his interest. James sent me a quick reply: “Jerry, thank you for these. I will try to have a look this weekend or early next week.” The next day, April 21, I sent a message to Prof. Bergman via the form on his website. I mentioned that I had been communicating with Dr. Wigand since the previous August, and that he had recently suggested

184 Dinner with Mike Wallace

I contact Bergman about the scandal. I gave him the highlights of what was going on, and said that just the day before I had sent a whole lot of background information about it to James Sandler. His quick but terse reply: “I am swamped. Please communicate with Mr. Sandler and I will talk with him. tx. lb.” The following month I would send James another note with late- breaking information about the scandal. His response: “I am not sure this is something I can devote time to at the moment. I am in the throws of another story. Although a colleague at the CBS Evening News may want to have a look, if you allow me to pass it along. I left a message today with Scott Amey on another matter so I will ask him about this as well.” I replied to James and said that, of course, it was fine with me if he passed along my information to his CBS contact. However, I never heard anything back from James Sandler, Lowell Bergman, or anyone else at the Center for Investigative Reporting. Nor did I hear anything back from James’ unnamed CBS News colleague. My guess is that these investigative reporters considered this $56 million scandal “chicken feed” compared to stories about how hundreds of millions if not billions of dollars had gone down the tubes because of fraud and corruption in prosecuting the Iraq War and in “reconstructing” Iraq. They also probably found this scandal complicated, which it admittedly was. At a high level, however, it was amazingly simple and straightforward: a number of senior trusted “public servants”—including the former Chairman of the House Transportation Committee, a recent Transportation Secretary, and the sitting Homeland Security Deparment Deputy Secretary—had all collaborated for years to create and nurture a federal monopoly that had very possibly paid them back millions of dollars through some combination of offshore venture capital funds, penny stock warrants, and kickbacks from a big union pension fund that made tens of millions of dollars from this venture. If what I was alleging could be proven to be true, it would be among the worst breaches of public integrity and ethics in recent memory. Whatever the investigative reporters’ reasons for choosing not to pursue the Traffic.com scandal, I was sure that details of collusion on the part of (at least) four senior officials in the Bush Administration and three

185 The ‘Smart Road’ Scam consecutive Chairmen of the House Transportation Committee would ultimately be big news. This wasn’t the way that government was supposed to work. I and my cohorts, several non-profit government watchdog organizations, had unearthed a vast amount of detail about how this scam worked. I hoped that—sooner or later—the press would realize that this scandal was the “poster child” of federal corruption. It had it all: political contributions for legislative favors (“pay-to-play”), the use of lobbyists with deep ties to the Administration, the creation of equity ownership schemes designed to evade the SEC’s oversight, and—most intriguing of all—the very real possibility that several very high-level “public servants” had made millions of dollars under the table. Watergate had started out as just the story of a break-in at the Dem- ocratic Party’s offices in the Watergate complex, and the original story never involved all that much money. But the investigative trail led to the discovery of major legal and ethics transgressions on the part of a large group of senior government officials, which ultimately took down Richard Nixon’s Presidency. In many ways, I knew that the Traffic.com scandal was in the same league. I’ve continued to occasionally send information about the Traffic.com scandal to Dr. Wigand from time-to-time, but I think he did everything to help me that he could back in the spring of 2007. The ultimate decision on whether or not to pursue the Traffic.com scandal, of course, rested with the news organizations themselves.

Ignoring the Real Heroes

I know that Russell Crowe is a ﬁne actor. I’ve appreciated his work in many movies in addition to “The Insider,” including “Gladiator” and “A Beautiful Mind.” I think that you get a sense of the quality of an actor as a person by the roles that he or she chooses. Jimmy Stewart had as much integrity in real life as he displayed in front of the lens. My sense is that Russell Crowe is the same way, with a bit of volatility thrown in for good measure. But there’s something wrong with both our society and our world when Russell Crowe makes $15 or $20 million playing a hero in a movie

186 Dinner with Mike Wallace based on real events, while the real-life hero he portrayed has to go from a $400,000/year executive job to start all over as a rookie teacher earning $30,000/year. This situation is all the more unfortunate when the hero deliberately took that fall because he wouldn’t compromise his integrity on a matter impacting the health of millions of people. We ought to treat our heroes a whole lot better.

187 16

Asking Congress to Help

n the fall of 2006, Anne-Marie Turner, a Counsel for the Republican Iside of the House Government Reform Committee, had recommended that I “reach out” to my representative to support needed improvements in the ﬁnancial disclosure process. At the same time, I wanted to solicit support from my own congressman to get to the bottom of the shenanigans I had discovered in the USDOT. Interestingly, while the minor redistricting that had happened in Texas leading up to the November 2006 national election had only a minute overall impact in my state, it had a big impact on my little hometown of Buda (near Austin), which moved from District 21 to District 25 even though it stayed in exactly the same place on the AAA map. That meant that my representative would be changing from long-time Republican Congressman Lamar Smith to long-time Democratic Congressman Lloyd Doggett. Coincidentally, Smith had been the Chairman of the House Ethics Committee when that committee had issued only a mild “letter of reproval” of Cong. Bud Shuster for his ethics problems back in October 2000. Gary Ruskin, the former head of the Congressional Accountability Project who had brought the complaint to the Ethics Committee, was exceedingly critical of Cong. Smith. In a piece he wrote for the Baltimore Sun called

188 Asking Congress to Help

“Enabling Corruption” back in January 2005, Ruskin said :

Perhaps worse, Speaker Dennis Hastert wants to replace the current chairman of the House ethics committee, Colorado Republican Joel Heﬂey, with Lamar Smith of Texas, who is notoriously soft on corruption. Mr. Smith is famous in ethics circles for being chairman of the only ethics committee ever to have asked a federal judge to grant limited immunity to the target of an investigation, GOP Rep. Bud Shus- ter of Pennsylvania, who was chairman of the House Committee on Transportation Infrastructure.

I had contacted Smith’s office earlier in 2006 and left a message for his lead staff person on ethics issues to call me back, but my call was never returned. I was much more hopeful that Doggett, a persistent critic of the Bush Administration, would be more open to information about a major scandal there. I had actually worked with Cong. Doggett’s office in April 2006, even though he wasn’t even my congressman back then. I had needed help in getting visas approved for several Ugandans who wanted to come to Aus- tin to attend the World Congress on Information Technology (see Chapter 4). His office had helped expedite those requests, so I was hopeful that he would also help a new constituent get to the bottom of some big-time shenanigans in the USDOT. On November 20, 2006, I called Cong. Doggett’s office to set up an appointment to meet with him. His receptionist said that Mr. Doggett’s District Director was in charge of his appointment schedule, and that I should FAX a request to his attention. So I sent a FAX to that person containing my latest synopsis of the scandal, and a copy of an email message to me from Anne Marie Turner in which she had said: “You have made it clear that you support changes to the financial disclosure process. I would recommend reaching out to your Representative to express support for these changes.” That’s exactly what I was doing. As I said on the FAX cover sheet:

I have been talking with representatives of both the majority and mi-

189 The ‘Smart Road’ Scam

nority side of the House Committee on Government Reform about a major federal scandal in the U.S. Dept. of Transportation, for whom I consulted as a subcontractor for seven years through the fall of 2005. A synopsis of this scandal is attached.

In my communication with Committee staff, I have pointed out many of the holes in the current system of ﬁnancial reporting, which I know ﬁrst-hand. Anne Marie Turner on Chairman Davis’ staff suggested that I meet with my own Representative (see copy of her email message below), who as of January will be Rep. Doggett.

I would like to meet with Rep. Doggett to ﬁll him in about both this scandal and some ideas about reforming the ﬁnancial reporting procedures to help avoid such ethical problems in the future.

Please let me know his availability to meet in Austin. My schedule is ﬂexible over the next few weeks.

After leaving numerous phone messages for Cong. Doggett’s District Director, James Paver, I finally arranged to meet Mr. Paver at Doggett’s office in downtown Austin on December 15. I provided him with a brief verbal summary of the Traffic.com scandal, along with copies of the entire set of 26 FAXes that I had sent to the FBI at that point in time and past articles and other supporting information about the Traffic.com scandal. He said that he would review all this information and then get back to me about setting up a meeting with Cong. Doggett. He never called me back. During my January 2007 trip to DC, I stopped by my new Congress- man’s office in the Cannon House Office Building and asked if I could speak with him about a big scandal in the U.S. Dept. of Transportation that I had inside knowledge about. He was not available, but his Legislative Assistant Michelle Levy-Benitez was, and came out to the front waiting room to meet me. I explained what the scandal involved and handed her my synopsis and several articles in the press about it. I told her that I had been advised by Ms. Turner that I needed to meet with my Congressman

190 Asking Congress to Help especially about tightening up the ﬁnancial disclosure process, and asked for her help in setting up a meeting with the good Congressman. She said that she would review the materials I left with her and then give me a call. I never heard back from her.

Turning a Deaf Ear

After returning to Buda from my very busy trip to DC in January 2007 I redoubled my efforts to solicit Congress’ help to investigate this scandal. During my meeting with him in DC, Matt Sandgren, Senator Hatch’s legislative assistant, had suggested that Senator Hatch would inquire of Transportation Secretary Mary Peters why Traffic.com’s monopoly was still going full bore after Hatch had specifically added the new “Part II” language to SAFETEA-LU to open up the program to competition. Sand- gren asked if I could suggest some questions for the Senator to ask Ms. Peters about the USDOT’s administration of the TTID program, and I was happy to send him several. On January 27, 2007 Senator Hatch sent that letter, asking four very specific questions about Traffic.com’s continuing monopoly. Hatch’s staff was clearly interested in getting to the bottom of why the USDOT was continuing to support that monopoly. So, too, was New York Cong. Anthony Weiner’s staff. Weiner had strongly supported Hatch’s efforts back in mid-2005 to create the new, supposedly open competition “Part II” in SAFETEA-LU, and remained committed to shutting down Traffic.com’s monopoly. Except for Sen. Hatch’s and Cong. Weiner’s staffs, however, I was finding it tough going to find anyone else (including my own Congressman) who would be willing to get involved in this matter. I knew from reading its recent history and effort in Bud Shuster’s case that the House Ethics Committee was basically timid and toothless, but thought that perhaps the Senate’s Ethics Committee would have more guts. For one thing, Senators’ six year terms of office might insulate them somewhat from the repercussions of taking hard stances on controversial ethics matters. If I could get some Senator on the Ethics Committee to say, “you’re right, something smells here” and to formally request an in-

191 The ‘Smart Road’ Scam vestigation into the fraud and corruption within the USDOT I was alleging, things might finally get moving. It was at least worth a shot. As luck would have it, my own Senator, Texas Senator John Cornyn, is the Vice Chairman and Ranking Member of the Senate Select Com- mittee on Ethics, which means that he is the top person on the committee from the minority (Republican) side. So I called Senator Cornyn’s office in DC, and got transferred to his staff member Landon Bell. I told Landon that I was a Texan, and had inside information about a big ongoing scandal in the Dept. of Transportation. I said that very little information about the big earmarked TTID program had ever been made public, despite the fact that the program was financed through public dollars. I also told him about Mr. Mineta’s ethics problem involving Trimble Navigation. I emailed him a number of supporting documents, including a summary of the scandal and copies of the two Freedom of Information Act requests that POGO had issued so far, one to the FHWA for copies of the agreements and documents associated with the TTID program, and one to the OGE for Mr. Mineta’s initial CY2000 financial disclosure (see Chapters 11 and 12). “Senator Cornyn is very concerned about the issue of transparency in government,” Landon told me. On February 5, after not hearing back from Landon or anyone else in Sen. Cornyn’s office, I called Landon. He told me that he had read the information I had sent him, and had forwarded it to another person on the Senator’s staff, Keith Franks. During this conversation I told Landon that I was asking for my Sen- ator’s help in pursuing an investigation into this scandal, and specifically his help in contacting both the FBI and USDOT Inspector General’s office to let them know that the Senator believed this was an important issue and to urge them to conduct a thorough investigation. I also told Landon that I was urging my Senator and his staff to address some of the “reporting gaps” and other problems with the current financial reporting scheme. “We have your phone number,” he said. “We should be able to get back to you and let you know if we could help you one way or another.” I’m quite sure that Landon was fully “able to get back” to me, but neither he, Keith, nor anyone else in Senator Cornyn’s office ever did.

192 Asking Congress to Help

A Snowball’s Chance in Hell

By virtue of the Democrats ultra-slim majority in the Senate following the November 2006 election, Democratic Sen. Barbara Boxer became the Chairman of the Senate Select Committee on Ethics, Sen. Cornyn’s counterpart on the majority side. The times I had seen her over the years on the news or on C-SPAN I had come to appreciate her blunt and often outspoken style. To me, her brusque personal demeanor seems much more like that of a New Yorker than a laid back Californian. I strongly suspected that she had more “balls” than any of her counterparts—male or female—on the impotent House Ethics Committee, which meant that perhaps she would be willing to get to the bottom of some serious government corruption. The tricky part, of course, was that she was bound to know former California Congressman Norman Mineta well, so I didn’t know how open she might be to someone’s (my) allegation that Mr. Mineta was involved in some serious misdeeds. I decided to tell her just like another “New Yorker” might—straight on. On January 24, 2007, I called Sen. Boxer’s ofﬁce in DC and talked to her assistant, Cerin Lindgrensavage. I gave Ms. Lindgrensavage a very quick summary of the shenanigans in the USDOT, and said that I would appreciate the Senator’s help in getting to the bottom of it. She suggested that I FAX supporting information to her (Cerin’s) attention, and said that she would then share the information with Sen. Boxer. My FAX cover sheet started off:

I would like to speak to Senator Boxer because: 1. She is a leader in ensuring an ethical government 2. She is on the Senate Commerce, Science, and Transportation Committee

Specifically, I would like her assistance in reviewing the detailed financial disclosure of Mr. Norman Mineta that was submitted in conjunction with his confirmation hearing for Commerce Secretary (in the Clinton Administration) in 2000.

193 The ‘Smart Road’ Scam

My FAX included my latest summary of the Trafﬁc.com scandal and POGO’s brand new FOIA request to the OGE for Mr. Mineta’s initial CY2000 disclosure. In the cover sheet, I mentioned that I had been communicating with the FBI’s Public Corruption Unit about this matter, and urged her or her staff to touch base with Supervisory Special Agent Lou- is Velez of the FBI’s Public Corruption Unit, and provided Mr. Velez’s phone number. I never heard back from Cerin or anyone else from Sen. Boxer’s of- ﬁce. A week or so later in searching the Internet I noticed an announcement in big bold letters from BusinessWire:

Political, Community and Business Leaders Gather for a Hometown Celebration to Honor Norman Y. Mineta

The announcement described an upcoming (February 24, 2007) trib- ute to Norman Mineta at the San Jose Fairmont Hotel. “The event will focus on Mr. Mineta’s extraordinary life, including his early years in internment, his ﬁrst years in his family’s insurance business, his rise to power as a city council member and mayor of San Jose, his years in the U.S. Congress, and his service as Secretary of Commerce under President Bill Clinton and Secretary of Transportation under Presi- dent George W. Bush,” it said. “A long list of political and business leaders, as well as ordinary citizens, has worked to organize the February 24 event,” the announcement continued. The “political leaders” on that organizational committee included former President Bill Clinton and Vice President Al Gore. It also included both of California’s Senators, Sen. Diane Feinstein and the very same Sen. Barbara Boxer to whom I had just FAXed information accusing Norman Mineta of major corruption and ethical lapses. I knew then that my FAX had a snowball’s chance in hell of resonat- ing with the Senator. She certainly didn’t want to hear about how Mr. Mineta had strayed off the ethics reservation. After all, the upcoming gala was all about celebrating his “extraordinary life.” Pushing federal policies for a California high-tech company that had likely paid him handsomely

194 Asking Congress to Help under the table and colluding with his old associate Bud Shuster to create a federally subsidized monopoly didn’t quite ﬁt that image.

Dogging Doggett—to No Avail

Through the spring of 2007, as I would learn new details of both the Traffic.com scandal and Mr. Mineta’s ethics problem, I continued to try to set up a face-to-face meeting with my own Congressman, Lloyd Doggett. I particularly wanted to fill him in about the games that the U.S. Office of Government Ethics was playing in apparently losing Mr. Mineta’s all- important CY2000 disclosure, only to re-find it after POGO’s FOIA appeal. I considered Rep. Doggett a trusted legislator to whom I could tell everything I knew and suspected about the fraud and corruption I had discovered. He was my backstop, someone who I knew might be surprised by what I had learned, but would insist on getting to the bottom of it and cleaning up the system. And as a colleague of fellow Democrat and Chairman of the House Oversight and Government Reform Committee Henry Waxman, he would undoubtedly encourage Waxman to have the Committee investigate these matters, too, especially since that committee had direct oversight responsibility for the Office of Government Ethics. I may not have cornered the market on naiveté, but I had more than an abundant supply. Every week or two, I would leave a message for James Paver, Cong. Doggett’s District Director in Austin, asking how progress was coming in setting up my meeting with my Congressman. I figured that Cong. Doggett must just be deluged with similar requests, so in early May I decided to ratchet up my request a notch to try to get near the front of the line, and personally talked to Cong. Doggett’s Chief of Staff, Michael Mucchetti. He said he would do what he could, but I never heard back from him. Finally, on May 29, Rep. Doggett responded personally in a letter. “Thank you for contacting me again about our shared concern for the transparency of our government,” he wrote. “I know that you have already met with my district director in Austin and my staff in Washington. You have also contacted several people in the Bush Administration and

195 The ‘Smart Road’ Scam others in Congress.” “If you have not already done so, you should contact either of our Texas Senators, to see if they may be of assistance,” he concluded, signing it with a friendly “Lloyd.” My interpretation of the letter? It was simply a variation of the “here’s your hat – what’s your hurry” kiss-off letter. Not only was there no offer to help, but there was no offer to at least meet with me in Austin when it might be convenient to him. He was just blowing me off, and I was not amused. A few days later, on June 6, I wrote back to my congressman by both normal (snail) mail and email:

Dear Congressman Doggett:

Thank you for your letter of May 29, in which you said that you share my concern about transparency in government. I am pleased that this is an issue that’s important to you. However, I am very surprised and disappointed that after many meetings, calls and emails to key people on your staff, including your Chief of Staff Michael Mucchetti, District Director James Paver, and Legislative Assistant Michelle Levy-Benitez, that your staff has been unable or unwilling to set up a meeting in Austin so that I can personally explain the details of a big ongoing scandal in the current Administration to you, and to answer any questions you might have about it. This scandal illustrates the lack of transparency in our Federal Government in spades.

Congressman Doggett, I voted for you in the last election and have always believed that you were a person of integrity and honesty who stood up for what is right and fought against cronyism and government fraud and corruption. Yet your and your staff’s unwillingness to want to understand more about this major ongoing scandal and some of the lessons-learned related to improving government transparency is of great concern.

You suggest that I contact our Texas Senators. For your information,

196 Asking Congress to Help back in January I contacted Senator Cornyn’s office about this scandal, because he is not only my Senator but also the ranking member of the Senate Ethics Committee that I thought would be interested in investigating a major federal breach of ethics. The person I talked with on Senator Cornyn’s staff, Landon Bell, said virtually the same thing that you said to me in your May 29 letter: “Senator Cornyn is very concerned about the issue of transparency in government.” However, I never heard a thing back from the Senator’s office, just as I never heard back from the individuals within your office to whom I spoke. In Senator Cornyn’s’ case I am not terribly surprised, as I know that the Senator has long and close ties to the Bush Administration, and that this scandal is likely very embarrassing to the Bush Administration.

In addition to answering any questions you might have about this major ongoing scandal, I would like to discuss possible improvements in the ﬁnancial reporting process for Cabinet Secretaries that would greatly increase transparency in government and help eliminate fraud and corruption.

Since the beginning of this year I have been in close contact with the non-profit Washington, DC-based Sunlight Foundation, which has issued several Freedom of Information Act requests related to this scandal and continues to help investigate it. The Sunlight Foundation is spearheading several very important new projects that would leverage the Internet to provide greatly increased transparency in government. As this is a topic that you are very concerned about, in addition to meeting with me in Austin I would like to encourage you to meet with representatives of the Sunlight Foundation in Washington, DC to find out more about these new initiatives. At that meeting you could potentially kill two birds with one stone, because Bill Allison, the Sunlight Foundation’s Senior Fellow and chief investigator, is very knowledgeable about the details of the Traffic.com scandal and could tell you more about his foundation’s efforts to dig into it.

Therefore, I am formally requesting two meetings with you, at your

197 The ‘Smart Road’ Scam

convenience: First, a meeting in Austin where I can ﬁll you in about both this scandal and lessons-learned from it that can help us improve the transparency of the federal government, and secondly, a meeting between you and senior people from the Sunlight Foundation in Washington, DC to discuss several of their new initiatives designed to improve transparency in government as well as their own efforts to help investigate the ongoing Trafﬁc.com scandal.

I look forward to your response.

For good measure, I copied Ellen Miller, the Sunlight Foundation’s Executive Director, and Bill Allison, a Senior Fellow there and frequent contact, on my communication to Cong. Doggett. On June 14, a little over a week later, I received an email message from Congressman Doggett, responding to my request to meet with him and to set up a meeting for him in DC with the Sunlight Foundation.

Dear Jerry, I recently received your letter regarding the very serious allegations that you have outlined in your previous messages. My ofﬁce has already met with you on two occasions in December of 2006 and January of this year. In your messages you note that both the United States Department of Transportation Inspector General and the Federal Bureau of Investigation Public Corruption Unit have been informed of these allegations. I cannot offer additional law enforcement remedy through an in-person meeting, but you may want to consider continuing to seek the assistance of investigative reporters.

I am also aware of the Sunlight Foundation and would be eager to receive any additional materials on its work that you would like to forward for my review. Sincerely, Lloyd Doggett.

My interpretation of his latest letter? Yet another blowoff, with a twist that either demonstrated insincerity or the fact that he was “old-school.” He had asked to receive “materials” on the Sunlight Foundation’s work. However, since their work is mostly about using the Internet to improve

198 Asking Congress to Help transparency and ethics in our government, one can read virtually all the “materials” one wants just by visiting their website. Was Cong. Doggett uncomfortable poking around the Sunlight Foundation’s website himself and learning about the many initiatives they supported? Or was his expressed “concern for the transparency of our government” just a hoax, and Cong. Doggett was just about as committed to open government as Landon Bell had said Senator Cornyn was? Frankly, I was astounded that my own Congressman was absolutely refusing to meet with a constituent who clearly knew details of government malfeasance and wanted to offer ideas for eliminating such corruption in the future. I understood that a meeting with Senator Cornyn would be a longshot—especially because of his affinity with the Bush Admin- istration—but I couldn’t even arrange a meeting with my own Congress- man! I could only guess about why Cong. Doggett was refusing to meet with me. The excuse that he would not be able to “offer additional law enforcement remedy through an in-person meeting” didn’t ring true, because a major reason I said I wanted to meet with him was to explain the holes in the current financial reporting system I had discovered in digging into Mr. Mineta’s disclosures. The remedy for that problem would be legislative—enacting better and tougher disclosure laws with fewer loopholes. Was Cong. Doggett worried that he might personally be impacted by new disclosure laws? I had never heard a hint that he was involved in anything unethical. Or was he concerned that if he actively pushed an investigation into his former long-time congressional colleague Nor- man Mineta’s alleged unethical activities that he might be ostracized—or worse—by his current Democratic colleagues? I had no clue, and only knew for sure that for whatever reason my own representative wanted no part of this business. My sense was that I was messing around the edges of what is often called the “culture of corruption” in Congress (more in Chapter 27). Two clichés specifically came to mind:

• “See no evil, hear no evil, speak no evil.”

199 The ‘Smart Road’ Scam

• “You watch my back and I’ll watch yours.”

Amazingly, it wasn’t a Democrat at all who wanted to get to the bottom of these shenanigans in the Bush Administration, it was a Republican and a conservative Republican at that, Sen. Orrin Hatch. While my own Congressman was advising me who else I might want to talk with—all the while refusing to talk with me himself—Sen. Hatch and his staff were steadfastly trying to get to the bottom of this matter. Open and free competition was more than just a slogan to Hatch and his staff, it was something they were willing to fight for, no matter where that fight needed to take place. I’d learned an important lesson: that integrity and courage were absolutely independent of party affiliation or political persuasion. Sen. Hatch, at first glance the least likely person to challenge possible wrongdoing in a Republican Administration, was not backing off an inch. My admiration for the Senator and his staff would only grow in the coming months.

200 17

Finding Sunlight

fter returning to Austin following my very productive trip to DC in AJanuary 2007 (see Chapters 9 and 10), I was reenergized to continue to both dig into and out the whole Traffic.com scandal. In poking around the Internet looking for avenues to do that, I came across the website for the Sunlight Foundation, whose stated objective was “using the revolutionary power of the Internet to make information about Congress and the federal government more meaningfully accessible to citizens using new Internet-based tools to dramatically improve the transparency of our federal government.” The Traffic.com scandal needed a whole lot more “transparency”—after all, none of the contracts and agreements for the underlying earmarked TTID program had ever been made public by the USDOT. So the Sunlight Foundation seemed to be a potentially useful ally. Although I had been communicating with both the Project on Govern- ment Oversight and the National Legal and Policy Center before I even heard about the Sunlight Foundation, those two watchdogs understandably considered the Traffic.com scandal to be one of many other cases of possible government corruption they were pursuing, and therefore could only devote a small amount of time to this matter. I had by now spent almost a year and a half of my own time (without receiving a penny from

201 The ‘Smart Road’ Scam anyone) trying to get the press and the authorities to investigate the Traf- ﬁc.com scandal, and was impatient to move things along faster. The more help I could get the better, so I decided to contact the folks at the Sunlight Foundation. The Sunlight Foundation’s name was borrowed from former Supreme Court Justice Louis Brandeis, who a long time ago said: “A little sunlight is the best disinfectant.” Their notion is that the Internet can provide that “sunlight,” and I’m in what a former colleague of mine used to call violent agreement with their objective. A relatively new watchdog organization formed in 2006, the foundation currently supports (or has in the past supported) numerous projects utilizing the Internet to improve government accountability and transparency, including:

• PublicMarkup.Org – “An Experiment to Open Bills to Public, Online Review.” • Where Are They Now? – “Former Congressional Staffers head through the Revolving Door on to K Street” • Earmark Watch – “Bringing Citizen Oversight to Congressional Spending” • Party Time! “From the early hours of the morning until late in the evening, politicians are partying. Sunlight’s Party Time can help you ﬁnd out who is partying, where and when.”

The Sunlight Foundation is quite different from many other watchdog organizations (see box, “Competition and the Non-Proﬁt Govern- ment Watchdogs”) in that it not only has its own investigations but helps fund numerous projects led by or in collaboration with other non-proﬁt organizations, such as the Center for Responsive Politics, the Citizens for Responsibility and Ethics in Washington (CREW), MAPLight.org, and POGO.

Competition among the Non-Proﬁt Government Watchdogs

One of the things I have learned in working with several non-proﬁt government watchdog organizations—and asking for help from many

202 Finding Sunlight more—is that even though these organizations are invariably on the same “good government” side of almost every issue, they also often compete against one another for public attention and, ultimately, funding. These non-profit watchdog organizations are invariably financed through contributions from both foundations and individual donors, which means that funding is a continuing challenge. If not finite, the pool of available funds from these contributors is at least relatively inelastic. Many foundations undoubtedly have fixed budgets to support such good government work. Thus, these non-profits often find themselves in the position of competing against each other for funding in what is essentially a zero-sum game. If my experience is any indication, that competition, while quite understandable, also tends to prevent collaborations among these watchdogs in which each organization’s specific strengths and expertise might be brought to bear for a greater good in a particular case of corruption—like the Traffic.com scandal. It’s understandable that each watchdog organization would want to get maximal public exposure for its role in exposing some major governmental scandal. After all, having a reputation as the watchdog that brought down a major scam or scandal can directly translate into increased funding. Sharing the limelight with other similar organizations, conversely, is likely not perceived by many watchdogs as the optimal way to position themselves to potential contributors. From a whistleblower’s standpoint, however, this competition makes things much more difficult. A whistleblower who is trying to expose corruption desperately needs help from any watchdog organization willing to pitch in. However, because some watchdog organizations are likely driven by their perceived need to maximize their own exposure in the limelight, they may not be interested in working (and sharing credit) with other similar organizations. From my experience, it’s an unfortunate reality. A case in point: during my trip to DC in January 2007 I met over coffee in Union Station with the Research Director for one of the better-known DC-based watchdog organizations. (That organization will remain name- less. After all, they do very good work and my intent is not to criticize them, but just to explain the dynamics at play here.) After I gave him a

203 The ‘Smart Road’ Scam snapshot of the Traffic.com scandal, he told me “Wow—you’re really going to keep me busy on this one!” He sounded excited and ready to really start digging into the details. However, when I then told him that I had also contacted the Project on Government Oversight, which had issued a FOIA request several months earlier, his interest disappeared altogether. A week later he wouldn’t even return my phone calls or email messages. The irony is that while I suspect that most watchdog organizations would probably prefer to “go it alone” in investigating and exposing government shenanigans, these organizations are almost always stretched so thin that they have little time to devote to any particular scandal. The whistleblower is therefore caught in a kind of “Catch 22”: watchdogs may be more interested in helping out if they know they are the sole organization he or she has contacted, yet any one organization will likely have very little available time and resources to devote to the whistleblower’s cause. From my point of view, each of these organizations has a valuable and potentially complementary role to play in investigating and exposing government corruption, because they each have a somewhat different focus. POGO investigates and exposes corruption, and frequently works with whistleblowers who bring that corruption to their attention. The Sunlight Foundation primarily works to support and deploy new Inter- net-based tools to improve government transparency. The National Legal and Policy Center supports several projects that investigate and expose corruption within several different areas, including government, private industry, and organized labor. Thankfully, POGO, the Sunlight Founda- tion, and the NLPC have all continued to support my effort to get to the bottom of the Traffic.com scandal. While there is undoubtedly overlap in their respective roles, each organization has a unique and valuable role to play; roles for which our government’s official built-in watchdog organizations—like the U.S. Of- fice of Government Ethics (OGE), the Office of Special Counsel (OSC), and the House Committee on Standards of Official Conduct (the “Ethics Committee)—are failing miserably.

On the afternoon of January 23, 2007, I called the Sunlight Foundation and spoke with their CEO, Ellen Miller. According to her impressive on-

204 Finding Sunlight line bio, prior to co-founding the Sunlight Foundation Ms. Miller was “the founder of two prominent Washington-based organizations in the field of money and politics—the Center for Responsive Politics and Public Cam- paign”—and is a “nationally recognized expert on campaign finance and ethics issues.” I explained to her that I had worked as a subcontractor to the USDOT for nearly eight years and knew the details of some big-time shenanigans there. Many of those details, I explained, I had discovered through exhaustive Internet searches, so I was absolutely certain that her foundation was on the right track in leveraging the power of the Internet to forestall governmental misdeeds. She was very receptive, asked me to send her some background information about the scandal, and said that she would pass it on to Bill Allison, a Sunlight Foundation Senior Fellow and experienced investigator, who would get back to me. At this point in time I was quite used to having investigative authorities, congressional staffs, and even the press tell me that they were very interested in this scandal and would get back to me after reviewing the information I sent them, but then I’d never hear back. The Sunlight Foun- dation was a notable exception: Ms. Miller almost immediately responded by email, “Thanks for all this. Bill will be back in touch after he digests it.” A little over a week later Bill Allison sent me this message. “First, my extreme apologies for not getting back to you sooner or returning your calls,” he said. “I’ve been swamped with something else I was working on. Though I read everything when you first sent it, I’d still like to reread everything before we talk (I’ll do that this afternoon). Is there a convenient time I can reach you by phone tomorrow or Friday? Best, Bill.” Bill and I would soon connect by phone, and as of the spring of 2009 I still talk with him – or try to talk with him, as he’s very busy and sometimes travels for weeks on end – periodically. I have asked him to help out in many more ways than I know he has available time to provide. Sometimes I have left either voicemail or email messages for him multiple times in one week. I have pestered him, bugged him, asked for his advice and help, and generally hassled him for assistance. Through it all he has never stopped being helpful, insightful, and—most of all—patient and supportive. His efforts have unearthed an enormous amount of infor-

205 The ‘Smart Road’ Scam mation about the very secretive TTID program that is financed by more than $50 million in taxpayer dollars. He is definitely one of the individuals wearing the white hats in this mess. Although I’ve never met Bill or POGO’s Scott Amey or the NLPC’s Ken Boehm in person, I consider all of them good friends because of the help and encouragement they’ve given me, while asking for nothing in return. Bill Allison, as an experienced researcher, investigative journalist, and author, is a terrific resource for any whistleblower. Here’s his bio from the Sunlight Foundation’s website:

Bill Allison is a Senior Fellow at the Sunlight Foundation. A veteran investigative journalist and editor for nonproﬁt media, Bill worked for the Center for Public Integrity for nine years, where he co-authored The Cheating of America with Charles Lewis, was senior editor of The Buying of the President 2000 and co-editor of the New York Times bestseller The Buying of the President 2004. He edited projects on topics ranging from the role of international arms smugglers and private military companies in failing states around the world to the rise of section 527 organizations in American politics. Prior to joining the Center, Bill worked for eight years for The Philadelphia Inquirer—the last two as researcher for Pulitzer Prize winning reporters Donald L. Barlett and James B. Steele.

In early February 2007, shortly after I first touched base with him, Bill started to dig into the details of the Traffic.com scandal in earnest. He noticed early on that much of the paperwork he could find on the TTID program said that Signal Corp. was the contractor, not Traffic.com. It turns out that Signal Corp. was initially pre-qualified through what was then called an ITOP (Information Technology Ominibus Procurement) program initiative. ITOP was a brand new and untried ITS procurement approach in 1999 (when the initial pilot ITIP award was made to Traffic.com), and bypassed the FHWA’s normal solicitation practices. The USDOT backed away from using ITOP at all in mid-2002, based on strong recommendations from an audit by the USDOT Inspector General’s Office. Signal Corp. was, in effect, just an administrative front company han-

206 Finding Sunlight dling the federal billing and bookkeeping for the TTID program, but does not directly perform any of the program’s primary tasks. While theoretically a subcontractor to Signal Corp., Traffic.com is really the main contractor, calls all the program’s shots, and receives all but a small amount of the program’s federal funding that Signal Corp. takes off the top for its minor accounting role. After reviewing the background information about the Traffic.com scandal I provided him and doing his own research over the Internet, Bill posted a nice introductory item about it on the Sunlight Foundation’s “Un- der the Influence” blog, entitled “Tracking Contractors and Lobbyists, and a Congressional Intervention.” His piece highlighted the role that political influence (particularly on the part of former Cong. Bud Shuster) played in the TTID program and cited as one of his main sources the front page article back on April, 20 2005 in The Hill, entitled “’Monopoly’ Money for Pa. Company.” Bill was particularly interested in finding out the role that lobbyists had played in the program’s award to Traffic.com. “We suspect that, when lobbyists are hired to influence federal contracting decisions, there is the possibility that procurement decisions will be made, not on the basis of who makes the best mousetrap, but rather on the basis of who has the better connections,” he said in his blog piece. It turns out that Bill had already been spending significant effort investigating agencies’ compliance with federal regulations requiring companies to submit “SF-LLL” (“Disclosure of Lobbying Activities”) disclosures. These disclosures are to be submitted to the agency whenever a company pays or agree to pay lobbyists to influence federal agencies or members of Congress or their staffs in connection with “a covered federal action,” which includes federal contracts, grants, or cooperative agreements. Of course, the TTID program was definitely well within that definition of a “covered federal action.” Bill noted in the Under the Influence blog that he had just submitted a Freedom of Information Act (FOIA) request to the USDOT for SF-LLL reports, contracts, agreements, and other documents associated with the TTID program. “So far, we’ve sent [SF-LLL] requests to Defense, the General Servic- es Agency, the Coast Guard, the Department of Veterans Affairs, and now

207 The ‘Smart Road’ Scam

Transportation,” he observed in his blog posting. “Ideally, in the future, contracting databases might include a notation saying that for a particular contract, a form SF-LLL had been ﬁled – allowing the taxpaying public, at a glance, to distinguish between contracts awarded through the routine appropriations process, and those awarded in part because a company hired a lobbyist to inﬂuence someone in government to award the contract.” It sure sounded to me like a good way to leverage the Internet to help the public keep track of the role that lobbyists were playing in determining who received taxpayers’ money.

A Curious Denial from the USDOT Secretary’s Ofﬁce

The USDOT’s initial (March 9, 2007) response to the Sunlight Foundation’s FOIA request for contract documents and SF-LLL lobbyist disclosures associated with the TTID program contended that no such documents existed within the DOT. “A search of records in the Office of the Secretary has failed to reveal documents that are responsive to your request,” stated FOIA Officer Kathy Ray. “I have been informed that DOT’s ITOP II contracts have been transferred to the General Services Administration (GSA),” she said, and provided contact information for the GSA. The concluding paragraph in Ms. Ray’s letter included the obligatory language about filing an appeal. “If you are dissatisfied with this response, you may appeal it by writing to Rosalind A. Knapp, Deputy General Counsel, U.S. Department of Transportation, Washington, DC 20590.” Interestingly, a few months later Ms. Knapp would take on a much different and higher-profile role in this whole matter, by responding to Utah Senator Orrin Hatch’s letter to Transportation Secretary Mary Peters that pointedly asked why the USDOT was continuing to support Traffic. com’s monopoly. Bill soon sent off substantially the same FOIA request to the General Services Administration he had earlier sent to the USDOT, per Ms. Ray’s instructions. A week or so later I called the GSA to find out exactly what role they may have played in overseeing the TTID program. I knew, of

208 Finding Sunlight course, that they played little or no role in the day-to-day technical management of the program (after all, the “contractor officer’s technical representative,” or “COTR,” worked in the FHWA Office of Operations), but I wanted to verify that from the horse’s mouth. I was also curious about what ongoing role, if any, that GSA was actually playing in the TTID program. In early April 2007 I called the GSA’s ITOP “information line” and eventually got hooked up with Paul Martin, a GSA supervisor responsible for providing ITOP guidance. He told me in no uncertain terms that GSA essentially played no role at all in either overseeing or managing the TTID contract. The only connection was that Signal/Traffic.com’s contract with the FHWA had come under the high-level umbrella of the federal government’s broad ITOP contract, but that contract had nothing at all to do with the details of individual ITOP programs, such as the TTID program. Ironically, Bill Allison’s latest FOIA request to the GSA had been forwarded to Martin, and he in turn had just sent it over to the USDOT for a response. The USDOT had clearly tried to pass the buck by telling the Sunlight Foundation that it needed to send the TTID FOIA request to the GSA instead, but the buck had been passed right back.

A Very Pointed FOIA Appeal

Only a relatively small percentage of FOIA requests that are not completely ﬁlled by the responding federal agency are ever appealed by their requestors. According to a report by the U.S. Department of Transporta- tion for ﬁscal year 2006, of 8,758 total initial FOIA requests disposed of in FY2006, only 39% resulted in “total grants,” while 26% resulted in “partial grants,” 3% resulted in “denials,” and 32% resulted in no information because of “other reasons for non-disclosure.” In other words, 61% of the time, the submitter did not receive everything that was requested, and just over one-third of the time he or she didn’t receive anything at all—as in the case of the Sunlight Foundation’s initial FOIA request to the USDOT. Yet the department received only 106 appeals of initial FOIA requests during FY2006, representing only 2% of those requests that were

209 The ‘Smart Road’ Scam not completely filled. My guess is that this appeal rate is so low because most people just write off a less than satisfactory response to the fact that the “bureaucracy” has failed them yet again, and believe that there’s not much they can do about it. But when I first read Ms. Ray’s response to Bill’s FOIA request I only saw red. After all, for nearly eight years I had worked for and with the folks in the FHWA Office of Operations that managed the TTID program. I absolutely knew that the USDOT, not the GSA, was managing this program. Ms. Ray seemingly hadn’t tried very hard to find out which modal administration within the USDOT was managing this program. Conversely, perhaps someone within the Secretary’s Of- fice who knew about the program had “informed” her that GSA had taken over, so as to send the Sunlight Foundation off on a wild goose chase. I told Bill in no uncertain terms that the FHWA was managing the TTID program, based on both my own knowledge as well as my recent discussion with the GSA, and I asked Bill if he would be willing to appeal the USDOT’s response. He readily agreed, and I provided him with specifics about which department (FHWA Office of Operations) administered the TTID program for the USDOT, as well as the names and titles of key players there, most of whom I knew personally. The Sunlight Foundation’s FOIA appeal letter took no prisoners. “We find your response to our FOIA request to be non-responsive,’” the letter stated emphatically. “Your brief letter only addresses your failure to find any SF-LLL (“Disclosure of Lobbying Activity”) forms with the Office of Secretary, but such filings are only a small part of the information we requested in our February 8 FOIA request, and our request was not limited to just the Secretary’s office but covered the entire department including the FHWA, which helps manage and provide technical guidance for the TTID program that the contract in question supports.” The letter went on to list all the various types of documents that were covered in the original FOIA request, and made it clear that the Sunlight Foundation knew that the USDOT so far had not tried very hard to be responsive. “The U.S. DOT’s response to our original FOIA request seems to imply that the department no longer has any management or oversight responsibility for the contract that we inquired about, but nothing could be

210 Finding Sunlight further from the truth,” Bill said. “I understand that the ITOP II mechanism, which is under the purview of the GSA, is used to provide the funding mechanism and other support for information technology (IT) programs, such as the Transportation Technology and Demonstration (TTID) program that is supported by the contract at issue. However, it is very clear from our current knowledge of the TTID initiative, recent discussions with individuals within the U.S. DOT, and the FHWA’s own website (http://ops.fhwa.dot.gov/travelinfo/ttidprogram/ttidprogram.htm), that much of the management and oversight of this contract remains with the USDOT and Federal Highway Administration (FHWA) and is ongoing. Therefore, undoubtedly a signiﬁcant number of documents within the U.S. DOT (including the Ofﬁce of the Secretary and Federal Highway Administration) are covered by our FOIA request.” Ken Boehm from the NLPC had earlier shared some of his insight into the FOIA process with me, and what stuck in my mind was that further legal remedies—including going to federal court—were always available if the appeal process still didn’t result in a satisfactory response. I mentioned this option to Bill, and he agreed to include both a carrot and a stick in the concluding paragraph of the Sunlight Foundation’s FOIA appeal letter:

I hope that this information is helpful in enabling the USDOT to go back and this time provide a complete response to our FOIA request. We hope and expect that your response to this appeal will be thorough and timely, and view this as an excellent opportunity for the U.S. Dept. of Transportation to resolve this matter. Please be advised that we reserve our right to appeal this request in federal court if your response is unsatisfactory.

I don’t know if it was the threat of further legal action, the inclusion of speciﬁc names and locations of people in the FHWA who manage the TTID program, or just the USDOT’s desire to ﬁnally be more responsive that did the trick, but that appeal letter surely got the USDOT’s attention. Over the next year or so that FOIA request would result in hundreds of pages of contracts, agreements, letters, email messages, and other docu-

211 The ‘Smart Road’ Scam ments that up until then had never been made public, and more documents that were promised are yet to be delivered. Those documents helped provide considerable insight into the lopsided nature of the TTID program, and the political inﬂuence and gamesmanship that has gone on behind the scenes for years to create and sustain Trafﬁc.com’s monopoly. In a real sense, this one FOIA request and its subsequent appeal have turned out to be the “gift that keeps on giving.”

Even “Part II” Was Wired for Trafﬁc.com

Time permitting, Bill continued to dig into various aspects of the Traffic.com scandal after the FOIA appeal letter had been sent off, and a particular part of the federal government’s solicitation caught his eye. On February 28, 2007, the FHWA would issue a “Presolicitation Notice” for the very first supposedly open-competition “Part II” solicitation for Dal- las/Ft. Worth’s participation in the TTID program. However, that notice seemed to be a setup intended to bring even “Part II” business to Traffic. com. Some of its more remarkable elements included:

• A significant portion of this solicitation talking about the “IN- CUMBENT contractor” Mobility Technologies (Traffic.com) seemed to suggest that MT should receive this follow-on contract. In fact, no other potential contractor was mentioned at all in this notice. This wording was particularly telling: “Mobility Technologies, Inc. IS eligible to COMPETE for the follow-on project announced in this Pre-Solicitation Notice. Mobility Technologies Inc.’s point of contact is Mr. John Collins, who can be reached at the following e-mail address: JCollins@Traffic. com.” It almost seemed like my old friend John Collins had actually written this presolicitation notice, and just given it to the FHWA to post on FedBizOpps. • The notice deliberately tried to discourage any requests through the FOIA process for copies of the contract documents that Mobility Technologies had signed with either the FHWA or local DOT partner. “[FOIA] requests for copies of Mobility Technologies, Inc.’s INCUM- BENT contract documents are unlikely to be fruitful for organizations

212 Finding Sunlight wishing to compete for this FOLLOW-ON project,” the statement read. Reasons cited to discourage such a FOIA request included the fact that the FHWA would redact pricing and stafﬁng data, the fact that the FHWA was slow in responding to FOIA requests anyway, and—most incredibly—this statement:

(c) any attempt, by an offeror submitting a proposal for this follow-on project, to respond to the INCUMBENT contract’s Statement of Work would almost certainly call into serious question the offeror’s grasp of, and commitment to attaining, the technical objectives of this follow-on project.

• The presolicitation notice was clearly worded so that only Traf- fic.com would qualify as a vendor, a trick that is often used to steer a federal contract to one particular company while appearing to provide an open competition. One way of doing this is to provide staffing requirements that only the target company specifically meets, such as this wording from the notice:

The Program Manager SHALL possess a Master degree in one of the following disciplines: Engineering, Physics, or Computer Sciences. The Program Manager shall possess at least 10 years of experience in the research, development and application of systems engineering, systems integration or software development, and shall possess at least five years of experience in managing a group of engineers in this field; but that five years of managerial experience could overlap with, or be contained within, the 10 years of research and development experience.

Once I brought these details to his attention, Bill Allison immediately agreed that the language in this presolicitation notice was pretty strange. He then called the listed contracting officer, Robert Robel, to find out the reasons for this language, and especially the part that discouraged respon- dents from asking for the earlier Traffic.com contract documents through the FOIA process. Bill posted a synopsis of the issue and his discussion

213 The ‘Smart Road’ Scam with Robel in a blog piece entitled “FHWA Discouraging FOIA Requests from potential contracts?” on the Sunlight Foundation’s “Real-Time In- vestigations” blog. Here’s an excerpt:

Curious, I called Bob Robel, a contracting officer at the Department of Transportation and the point of contact for this particular presolicitation notice, and asked whether this was standard language from the FHWA. He told me it wasn’t, and explained that the passage means that companies seeking the follow-on contract shouldn’t wait around for their FOIA response to be filled if they want to win this business. “The program office wrote that just to tell people that the new effort is similar to the one undertaken by Mobility Technologies,” he said, adding that the contract is “available if you want it, but I’m not sure it would be helpful. If you wanted to obtain that you certainly could, but it takes time. [The notice is] trying to tell you that you shouldn’t wait around.”

I suggested that some of the language seemed to be a little tougher, particularly the bit saying, “any attempt, by an offeror submitting a proposal for this follow-on project, to respond to the INCUMBENT contract’s Statement of Work would almost certainly call into serious question the offeror’s grasp of, and commitment to attaining, the technical objectives of this follow-on project.”

Robel said that the passage on FOIA had been written by the FHWA Ofﬁce of Operations; I asked him who speciﬁcally, and he told me he couldn’t tell me.

Lobbying Disclosures that Are Never Actually Disclosed

Bill also questioned USDOT contracting ofﬁcer Robel about the availability of the SF-LLL lobbying disclosures, the same disclosures he was bird-dogging at a number of different federal agencies. In particular, Bill wanted to get copies of the SF-LLL disclosures associated with the TTID program, which he had speciﬁcally included in the Sunlight Foundation’s

214 Finding Sunlight

FOIA request to the USDOT. Amazingly, Robel’s response was that while the USDOT apparently did acquire such disclosures, it deliberately did not disclose them to the public, or even through the FOIA process. Bill was so astounded by that response that he posted an item about it on the Sunlight Foundation’s “Real-Time Investigations” blog, appropriately titled “SF-LLL Update: Not for public inspection?” His conclusion left no doubt as to what he thought about the USDOT’s policy:

Robel told me that SF-LLLs are not available for public inspection—that they’re “kept in a secure place so that no one has access to them.” Yet if one looks on the form itself, on box 11, it clearly reads, “This information will be available for public inspection.”

This raises a number of interesting questions; one thing I want to do is to look through solicitation notices from other federal agencies listed on FedBizOpps that mention SF-LLLs, contact the contract ofﬁcers, and see if they handle the forms the same way Robel says Transporta- tion handles them — keeping them in a secure place so that no one has access to them.

The whole purpose of making lobbyist disclosures publicly available is to help ensure that federal contracts are awarded on the basis of merit and capability, rather than political influence. Yet the USDOT’s policy was to keep these disclosures “in a secure place so that no one has access to them.” This policy, of course, completely nullifies the intent of having such disclosures in the first place. Perhaps the USDOT’s policy on lobbyist disclosures should not have come as a surprise. After all, neither Traffic.com’s contracts with the FHWA nor any of the twenty plus agreements it had signed with mostly state DOTs had ever been made public by the FHWA. And in a recent solicitation on FedBizOpps, the department had tried very hard to discourage anyone from requesting these contract documents through the FOIA process. This earmarked program was spending over $50 million of the public’s money, yet the public wasn’t entitled to know either how Traffic.com

215 The ‘Smart Road’ Scam happened to wind up the beneﬁciary of a federally subsidized monopoly, or whether the details of the program were truly in the public’s interest. It’s not the way our government should operate.

TxDOT Turns Down Trafﬁc.com... Again!

While some unidentified staff person from the Office of Operations had passed the language for the TTID Program Part II presolicitation notice along to Mr. Robel, that language was so specific to Traffic.com’s existing TTID contracts and staffing that it seemed to almost come directly from the company itself. Traffic.com Vice President John Collins’ possible hand in writing that notice, for example, could have accounted for the gratuitous inclusion of his name and contact information in its text. Traffic.com didn’t just want to be the only contractor for the sole- source TTID Part I contracts, they wanted to be the contractor for all of the TTID contracts. How better to win the first-ever “open competition” award than to write the requirements yourself so that only you can meet them? In the end, the Texas Department of Transportation’s Dallas District would turn down the supposedly “free” TTID money for the second time in five years (see Chapter 2). The same issues that Freddie Zoolander had told me were problematic back in mid-2002 were still deal breakers. On Sept. 11, 2007, the FHWA would issue an official cancellation of the Dallas/Ft. Worth solicitation, months after TxDOT’s refusal to play along had made that solicitation moot anyway. Excerpting from that announcement:

The Federal Highway Administration (FHWA) is CANCELLING the subject Solicitation. All interested parties are notiﬁed that no further action will be taken on this Request For Proposals (RFP).

FHWA will expand the program’s Solicitation by adding an additional metropolitan area. As a result, the prospective award of a Firm-Fixed- Price Contract will be made for a total of two metropolitan areas. It is anticipated that a new RFP soliciting proposals for two cities, will

216 Finding Sunlight

subsequently be issued on this Electronic Posting System. Interested parties are encouraged to monitor FedBusOpps for a Synopsis, which will provide more information concerning the expanded TTID Pro- gram and the new Solicitation.

There’s an old saying that if you find yourself in possession of a bunch of lemons, the best thing you can do is make lemonade, and the FHWA decided to follow that age-old adage. If they couldn’t convince stubborn Dallas to sign up this program, they came up with the idea that they would team Dallas with another congested Texas city and sell it as a “twofer.” Ironically, the follow-on solicitation would pair Dallas and Austin, my own home base. I don’t know if my conversations with my TxDOT friends in both cities and subsequent emailing to them of a number of white papers related to the TTID program had any impact at all, but TxDOT once again declined to participate in the TTID program. The FHWA was having an awfully hard time even giving away (through waiving the normal 20% local agency cash match) this program in Texas, and I was hearing through the grapevine that they were having similar troubles in other states. (Denver, too, had apparently also declined to participate in Part II.) The truth was slowly but surely getting around about this program, despite Traffic.com’s slick marketing pitch and the USDOT’s encouragement to state DOTs to sign up for it. I suspected that my continuing efforts to inform the ITS community about this very counterproductive and lopsided federal program was having an impact. I initially heard through the grapevine that after Dallas and Austin had declined to participate in Part II, the FHWA was next encouraging Minneapolis and New York/Northern New Jersey to become the first cities to participate under Part II. Their status would soon be reflected on the FHWA’s TTID program web pages. So, as I had done earlier with my TxDOT friends, I contacted long-time transportation decisionmakers I knew in those cities and filled them in about what was going on with this federal program. For whatever reason, Part II solicitations for those latest candidate cities were never issued. In early 2008, the FHWA called off the TTID Part II program that had never taken root anyway, citing the following reason:

217 The ‘Smart Road’ Scam

The Fiscal Year 2008 Omnibus Appropriations Bill, signed into law December 26, 2007, rescinded the remaining unobligated TTID Pro- gram funding. As a result, further deployment under Part 2 cannot be pursued.

My guess is that certain FHWA staff members were breathing sighs of relief that they could blame Congress for the ofﬁcial demise of Part II of the TTID program, not the fact that cities were declining to participate left and right because the truth about this very sleazy and counterproductive program was getting around.

218 18

The Securities Law Enforcement Myth

A Reassuring Image – Too Bad It Isn’t True

here’s an urban myth floating around about the role that the Securi- Tties and Exchange Commission plays in ensuring ethics and honesty in the American free enterprise system. Somehow, a lot of people (and I would put myself in that camp back in the days before I first contacted the SEC about the Traffic.com shenanigans) have this image of a hard- nosed federal investigative agency that pours through SEC filings, roots out corporate malfeasance, and ultimately protects investors from corporate fraud. We all got a strong indication that it wasn’t quite true when one of the largest corporations in America, Enron, imploded back in December 2001. The Commission’s role as “the primary overseer and regulator of the U.S. securities markets” failed miserably in the Enron debacle. It would turn out that while the financial disclosures that the company was filing with the SEC provided unmistakable clues of the internal fraud that was running rampant, no one within the regulatory agency noticed those hints until Enron was in the throes of its sudden and catastrophic collapse. In an October 7, 2002 statement from the Senate Committee on Homeland Security and Government Affairs, Committee Chairman Sen.

219 The ‘Smart Road’ Scam

Joe Lieberman was very critical of the agency’s failure to prevent Enron’s collapse.

• “At the SEC, the search for fraud was largely left to others - the private auditors and boards of directors, which, as we now know, were either doodling at their desks, or engaging in conflicts of interest that made it very unlikely they would ever bark at their corporations’ fraud or crimes,” Lieberman said. • “As is well known by now, the SEC failed to review Enron’s annual reports in the years leading up to its collapse,” Lieberman stressed. “Had it done so, a number of red flags would have been raised.” • “The SEC must review more filings and find better ways to identify the high risk ones,” Lieberman continued. “The Commission must step up its efforts to root out financial fraud by using better technology and a more vigilant staff to pro-actively look for fraud and not rely entirely on others to do this.”

It’s undoubtedly true that the SEC simply doesn’t have nearly a large enough staff to routinely conduct comprehensive reviews of the SEC ﬁl- ings from the thousands of publicly traded U.S. companies. But certainly when the SEC knows about (or has been alerted to) major corporate fraud, it then will then diligently investigate possible malfeasance, right? Guess again.

The Sorry Case of SEC Investigator Gary Aguirre

It seems that the career managers within the SEC’s Enforcement Divi- sion, who provide the agency’s direction about which cases are investigated and how aggressively they are pursued, tread lightly when it comes to investigating individuals who are connected to high-level officials in the Administration. That deficiency was never more obvious than in the sorry case of former SEC investigator Gary Aguirre. Aguirre’s story, by three-time Pulitzer Prize winning reporter Walt Bogdanich and assistant business/financial editor Gretchen Morgenson, would initially be featured on the front page of the June 23, 2006 New

220 The Securities Law Enforcement Myth

York Times. Evidence Aguirre had accumulated in his nearly year-long investigation in 2004 and 2005 suggested that John Mack, a former CEO of Pequot Capital Management, may have provided inside information about a corporate buyout to his long-time friend Arthur J. Samberg, the current CEO of that big hedge fund. Pequot, in turn, had likely made millions of dollars of proﬁt from this inside information. The Times story would go into some length about the reasons Aguirre contended that the SEC had backed off of the investigation. Excerpting from that story:

In the letter [to Senator Chuck Hagel, the Republican chairman of the Senate Subcommittee on Securities and Investment, and Senator Christopher J. Dodd, the panel’s ranking Democrat], Mr. Aguirre said the investigation was halted last summer when SEC ofﬁcials, bowing to political considerations, stopped him from taking testimony from the person he identiﬁed only as a former head of an investment bank.

Government officials with knowledge of the allegations say he was referring to John J. Mack, chief executive of Morgan Stanley, who was being considered to run the investment firm at the time and who had previously been chief executive of Credit Suisse First Boston. Mr. Mack, a long-time acquaintance of Pequot’s founder and a major fund-raiser for President Bush, was chairman of Pequot briefly during June 2005; his family foundation has invested in Pequot funds, public records show.

Aguirre felt that he was at the point in his investigation to question Mack under oath to get to the bottom of the matter. However, his bosses in the SEC Enforcement Division—up to and including Linda Thomsen, the SEC’s Director of Enforcement—failed to support his effort to interview Mack. When he persisted in his aggressive tack, he was summarily ﬁred by his superiors, shortly after receiving a very positive performance review and a raise from those same individuals. A few weeks before the Times piece would appear, on May 30, 2006, Aguirre had sent an 18-page letter to Senator Chuck Hagel, the Republi- can chairman of the Senate Subcommittee on Securities and Investment,

221 The ‘Smart Road’ Scam and Senator Chris Dodd, the subcommittee’s ranking member, detailing the events that had led to his dismissal. Quoting from that letter:

The illegal flow of insider information from investment banks to hedge funds was the primary focus of the hedge fund investigation I headed. Senior SEC officials halted the investigation, as I was told, because the suspected tipper had powerful political connections. Indeed, he does at the highest level. When I raised the propriety of that decision with the most senior Enforcement officials, they fired me. When I ap- prised Chairman Cox of these events, he did not lift a finger.

Ultimately, Aguirre’s aggressive efforts to fully investigate the Pequot case would be vindicated by an August 3, 2007 report by the Senate Fi- nance and Judiciary Committees summarizing the ﬁndings of their investigation into the Pequot matter. According to the New York Times story about those Senate ﬁndings (also by Bogdanich and Morgenson):

But after Mr. Aguirre’s investigation was under way, the report said, lawyers for both Mr. Samberg and Morgan Stanley’s board, which was then considering hiring Mr. Mack as chief executive, received access to high-level SEC enforcement ofﬁcials — outside the presence of Mr. Aguirre, who was leading the Pequot inquiry. After these contacts, the scope of the Pequot investigation narrowed and Mr. Aguirre was barred from interviewing Mr. Mack.

The Times story went into more detail about these seemingly improper contacts:

For example, on June 26, 2005, Linda Thomsen, the director of enforcement, spoke by telephone about the Pequot case to Mary Jo White, a lawyer at Debevoise & Plimpton, who was representing the Morgan Stanley board and was concerned about Mr. Mack’s possible involvement, the report said.

Ms. Thomsen said she had told Ms. White nothing about the case

222 The Securities Law Enforcement Myth

during the call. But according to Ms. White’s account of that conversation, Ms. Thomsen disclosed that subpoenaed e-mail messages showed that there was “smoke there” though “surely not ﬁre.”

The SEC’s Inspector General – Finally – Vindicates Aguirre!

On October 5, 2008, perhaps one of the last stories about Aguirre’s saga appeared in the New York Times. Bogdanich had acquired a copy of the IG’s 191-page report in which SEC Inspector General H. David Kotz said he had found evidence that “raised serious questions about the impartiality and fairness” of the SEC’s investigation of possible insider trading at Pequot Capital Management. “The inspector general primarily sided with Mr. Aguirre’s version of events, accusing enforcement ofﬁcials of failing ‘in numerous respects’ to properly manage him and for allowing ‘inappropriate reasons to factor into its decision to terminate him,’” Bogdanich reported. Of course, the IG’s vindication of Aguirre’s aggressiveness in pursuing the truth in the Pequot case came way too late to save the government career for the former SEC investigator. In November 2008, Aguirre was back in San Diego starting up a new law ﬁrm. In a key conclusion in the IG’s report, Inspector General Kotz recommended possible disciplinary action against several of Mr. Aguirre’s supervisors, including SEC director of enforcement Linda Thomsen. Ms. Thomsen was criticized for providing “relevant information” about the commission’s evidence against Mr. John J. Mack, a long-time close friend of Pequot Management founder, Arthur J. Samburg, to Morgan Stanley’s counsel, Mary Jo White, a former United States attorney. At the time, Mr. Mack was being considered to be Morgan Stanley’s new chief executive, a position he later assumed in June 2005.

Yet Another Investigation Failure

Ms. Thomsen headed the very same SEC Division of Enforcement to whom I would send a dozen email messages explaining likely serious malfeasance on the part of two public companies, Trafﬁc.com and Trim-

223 The ‘Smart Road’ Scam ble Navigation, and recent Bush Administration Cabinet member Norman Mineta. My email messages all urged the agency to fully investigate these allegations, which were supported by a considerable amount of veriﬁable evidence. The allegation that was the most straightforward and likely easiest to prove concerned a ﬁnancial payout under the SEC’s radar by Trimble Navigation to former Transportation Secretary Norman Mineta that Mineta failed to disclose on his Public Financial Disclosure Report as is required by law. This allegation was supported by a compelling amount of circumstantial evidence suggesting that Mr. Mineta had violated federal false statements laws—the very same laws for which Alaska Senator Ted Stevens would be indicted on July 29, 2008. According to former SEC investigator Gary Aguirre, the SEC’s En- forcement Division had a short while earlier backed off from its investigation into the Pequot matter because of high-level connections between a high-level Wall Street executive, Mr. Mack, and the Bush Administra- tion. My allegations weren’t just about individuals with connections to the Administration, but individuals who were either currently or very recently in senior positions in the Administration.

Trafﬁc.com Goes Public

On August 1, 2005, Traffic.com announced that it had filed a registration statement on Form S-1 with the SEC for a proposed initial public offering (IPO) of its common stock. It would subsequently amend and modify that preliminary registration statement many times before the company would complete its public offering (at $12/share) on February 28, 2006. I printed out the most recent Form S-1/A (“A” as in “amendment”) in late January 2006. The stock market had been a hobby of mine in my younger years, and in years gone by I had studied many IPO Red Her- rings, as these preliminary registration statements are commonly called. Yet Traffic.com’s huge (228 page) filing seemed unusually complex, and hundreds of additional filings by the company were available online. It seemed as if the company was trying to deluge the SEC with so much

224 The Securities Law Enforcement Myth paperwork that the agency would never be able to sift through it all to try to figure out what was really going on. After all, Traffic.com was just one little startup company among hundreds that filed similar disclosures every year, and the SEC had limited resources and almost certainly bigger fish to fry. The more I studied these disclosures and particularly the company’s original S-1 filing, the more suspicious I became. The S-1 referred to many different series of preferred stock issues—all the way up to Series F. Yet the owners of these preferred series—particularly the early series —were not fully disclosed. In several cases I came across wording that would refer to these shareholders in a generic sense, without revealing their actual identity. Here’s an example:

In August 2005 the Company issued a warrant to purchase 66,666 shares of common stock to settle a dispute with an investor concerning the conversion of its Series A preferred stock warrant and cancelled its previously issued warrant to purchase 20,000 shares of common stock.

Who was that individual who now owned warrants to purchase stock worth almost $800,000 at the company’s initial public offering? Could it possibly have been Bob Shuster, Bud’s son and a long-time lobbyist for the company? Could it have been Michael P. Jackson, the DHS Deputy Secretary (and former Transportation Deputy Secretary) who had unexpectedly resigned almost exactly one month after the Project on Govern- ment Oversight sent a very detailed FOIA request to DHS about his connection to Traffic.com? Associated with the company’s S-1 filing were 26 items each described as an “Instrument Defining the Rights of Security Holders,” which detailed huge grants of warrants—some approaching a million warrants. These warrants enabled their holders to purchase stock in the company at a pre-set price, often as low as a penny per share. The big national electrical union pension fund, the National Electrical Benefit Fund (NEBF), received 350,000 warrants priced at a penny each. (See Sidebar, “The NEBF’s Fi- nancial Connection to Traffic.com.”) The venture fund TL Ventures III

225 The ‘Smart Road’ Scam

Offshore, L.P. received penny warrants for over 122,000 shares of stock. Even though Trafﬁc.com’s stock would undergo a three-one-reverse split prior to the IPO, these warrants still collectively represented a value of many millions of dollars, since the company went public at $12/share.

The NEBF Connection

Of all the possible ways that the behind-the-scenes supporters of Traf- fic.com’s monopoly might have been compensated under the radar for their efforts, the huge union pension fund called the National Electrical Benefit Fund (NEBF) seems one of the most likely. (Much more detail in Chapter 19.) In addition to receiving hundreds of thousands of penny stock warrants in Traffic.com, the NEBF had many other types of equity interest in the company, too. Just one footnote in the red herring’s table of “Principle and Selling Stockholders” would explain the NEBF’s large equity interest in the company, as well as the complexity of that relationship:

Includes 1,840,094 shares of Series E convertible preferred stock, 334,832 shares of Series F convertible preferred stock and 475,000 shares of common stock issuable on the exercise of warrants by owned by National Electrical Benefit Fund and managed by Columbia Part- ners, LLC, Investment Management. According to information from Columbia Partners, LLC, Investment Management, Jason Crist and Christopher Doherty of Columbia Partners, LLC, Investment Man- agement and Columbia Partners, LLC, Investment Management could be deemed to have shared voting and dispositive power of the shares held by National Electric Benefit Fund; however each person disclaims beneficial ownership of all shares except to the extent of his or her indirect pecuniary interest therein.

The NEBF was also the “senior secured lender” that had provided tens of millions of dollars of ﬁnancing for Trafﬁc.com’s operations during the early years of the company’s existence. Those loans would be paid back from the proceeds of the IPO. (As explained in the Use of Proceeds

226 The Securities Law Enforcement Myth section in the Offering Summary, one use was to “Repay Senior Credit Facility,” which meant pay back the NEBF. Had the NEBF shared its financial windfall through any of their equity connections to the company—or their profit as a “senior secured lender” —with the high-level “public servants” who had served as chearleaders and facilitators behind the scenes for Traffic.com’s monopoly? None of the S-1 disclosures filed with the SEC provided sufficient detail to tell. It would clearly take a collaborative investigation by several different agencies—including the SEC and Dept. of Labor’s Employee Benefits Ser- vices Administration (EBSA)—to figure out what really had gone on.

The FBI Dis-Connection

I annotated with a red pen areas in the text of my printed copy of Traffic.com’s red herring that suggested where that hidden equity might be found. I took that annotated text, along with copies of articles about Traffic.com’s monopoly and other supporting materials, with me to the FBI’s Austin office on February 23, 2006, and gave the whole package to Special Agent Chris Thompson (see Chapter 6). SA Thompson’s comment that the FBI didn’t usually have insiders like me give them this much information and that the agency would likely get back with me soon left me hopeful. Surely, the FBI would take all of this information seriously. Since I had provided them with an annotated version of Traffic.com’s red herring, I assumed that the FBI would work with the Securities and Exchange Commission as necessary to ferret out whether or not a number of high-level current or former public servants had a hidden financial interest in Traffic.com. Surely the SEC had both experience in finding fraud that was hidden in company disclosures, as well as ready access to all of Traffic.com’s filings. It seemed obvious that the FBI would collaborate with the SEC to get to the bottom of the Traffic.com scandal. However, Special Agent Hanzal was giving me absolutely no clue whether or not that was happening. As my neighbor Stuart, the former Secret Service Agent, had told me, while a lot of information could go into the FBI, very little would ever come out. Common sense suggested that the FBI was likely collaborating with the SEC, but I had no way of being sure.

227 The ‘Smart Road’ Scam

So on Sept. 12, 2006 I sent a FAX to FBI Special Agent Hanzal entitled Questions for the SEC about Traffic.com to make the strongest case I could for that collaboration. “Attached is a writeup that includes questions that I suggest the FBI pass on to the Securities and Exchange Com- mission about possible hidden ownership in the company by some individuals whom I earlier suggested to the FBI were involved in the traffic. com scandal,” I wrote. “Those individuals include Mr. Mineta, the former Secretary of the U.S. Dept. of Transportation, and Mr. Jackson, the former Deputy Secretary of the U.S. Dept. of Transportation and current Deputy Secretary of the Department of Homeland Security. I hope that you have already contacted the SEC and that an active investigation is underway. If so, those investigators will likely have already asked these questions, but since I have no way to know I’d like to pass them on anyway.” The attached writeup would summarize many of my earlier verbal comments to FBI Special Agent Chris Thompson, as well as include additional information I had learned since that discussion. One of the things that I had noticed was that—at least in the case of the NEBF’s warrants—those warrants and the resulting stock they represented would not be registered with the SEC or any state regulatory agencies. That meant that the warrants could be exercised and the stock sold completely under the SEC’s radar. I concluded that writeup with: “In summary, I strongly suspect that the information in the Registration Statement was designed by Traffic. com to be almost impenetrable. Certainly, the enormous number of trusts involved (including offshore trusts) makes it difficult to find out who really owns what. However, there are certainly ample clues that an experienced SEC investigator should and could pursue.”

“Be assured that the matter you have raised is being given careful consideration”

While I fully expected that the FBI had asked the SEC to look into the very real possibility that some very high-level officials had hidden equity stakes in Traffic.com, I was still receiving absolutely no feedback from the FBI’s Public Corruption Unit. So I figured it certainly couldn’t hurt

228 The Securities Law Enforcement Myth to send information directly to the SEC’s Enforcement Division, which might well speed up the investigative process. On Nov. 6, 2006, I would send the ﬁrst (of twelve) tips to the SEC’s Enforcement Division by email, using guidance described on the SEC Enforcement Division’s website. This message included copies of three FAXes I had recently sent to the FBI including the Sept. 12 one, and a copy of the guidance I had sent to the FBI about questions they should ask the SEC to investigate. The key issues I raised in the Nov. 6 FAX to the SEC included details about:

• Hidden ownership by elected/appointed ofﬁcials who will fraudulently proﬁt. • Incomplete disclosure of the competitiveness of their business in their Prospectus.

The following day I would receive an “autoresponse” reply from the SEC’s Enforcement Division, with a subject of “Delivery Notification / Enforcement Complaint Response”: “We appreciate your taking the time to write to us,” it said. “You can rest assured that an attorney in the Of- fice of Internet Enforcement will review your e-mail promptly… We are always interested in hearing from members of the public, and you may be assured that the matter you have raised is being given careful consideration in view of the Commission’s overall enforcement responsibilities under the federal securities laws.” Encouraging words that leave the tipster with a feeling of accomplishment, while in reality meaning nothing. Unfortunately, I didn’t realize that at the time. I was still operating under the naïve and mistaken assumption that our government’s celebrated official watchdogs – including the SEC and the FBI – would take a serious complaint about big-time governmental and corporate malfeasance seriously.

Sending Information Off into a Black Hole

As I would learn new things about the Trafﬁc.com scandal I would send additional information to [email protected], always receiving

229 The ‘Smart Road’ Scam the pleasant “your can rest assured” response in my email inbox a day or two later. On November 18, 2006 I would pass along information to the SEC’s Enforcement Division I had received from one of Traffic.com’s competitors, strongly indicating that Traffic.com insiders had leaked inside information about the forthcoming acquisition of the company by NAVTEQ, and that had caused the company’s stock to rise 31% in the seven trading days (through Nov. 3) prior to the announcement of the acquisition. On January 22, 2007 as I was getting ready to send the SEC details of Mr. Mineta’s failure to disclose his Trimble Navigation stock options on his CY2000 public financial disclosure report, I decided to first call the Enforcement Division to give them a heads up that this information was coming. My call was transferred an investigator by the name of Sam Bezek, a pleasant enough fellow who immediately seemed to sense that Trimble had likely played games with these stock options. I figured that he might have some particular expertise in that topic, since the SEC had been in the news back in 2006 for investigating a number of cases in Sili- con Valley where company executives had improperly (and, a jury would later decide, illegally) backdated stock options. (See Sidebar, “The Wil- son Sonsini (et al) Connection.”) Bezek from the SEC expressed a strong interest in the matters I was explaining to him, gave me his email address, and urged me to send him all the background information I could. I would copy my future messages to “[email protected]” to him, and send him additional supporting information. While I repeatedly offered to answer any questions he might have about these scams, I never heard back from him until more than a year later, when he would send me what seemed to be a form letter response (see below).

The Wilson Sonsini (et al) Connection

Back in mid-2006, news began to emerge in the mainstream press about ﬁnancial shenanigans by high-tech companies in Silicon Valley (Northern California), involving improper (and likely illegal) backdating of stock options. By changing the issue date of those options to a different

230 The Securities Law Enforcement Myth date in which the strike price for the stock was considerably lower, these options would be worth more money (in many cases, much more money) to their owners than the original award. According to a July 22, 2006 article in the New York Times, at that time over 80 companies were being investigated by the SEC for backdating their options. Quoting from the Times piece:

While the scandal is chiefly affecting technology’s midsize companies, it is also raising a cloud over some of the most powerful institutions in the Valley, including the law firm of Wilson Sonsini Goodrich & Rosati and its highest- profile partner, Larry W. Sonsini.

Wilson Sonsini, based in Palo Alto, represents, or at least represented, at least half the Silicon Valley technology companies implicated in the backdated-options scandal, according to The Recorder, a law publication in San Francisco.

And the connection between Brocade and Wilson Sonsini is even deeper; Mr. Sonsini is a former member of the Brocade board, which granted Gregory L. Reyes, the company’s chief executive until early last year, the sole authority to award stock options. The practice was legal, but suggests a lack of checks and balances at a company where an insider headed what court ﬁlings have termed a compensation “committee of one.”

A follow-on article in the New York Times in the summer of 2007 brought news that a federal jury in San Francisco found Gregory L. Reyes, the former Chief Executive of Brocade Communications Systems, guilty of ten counts of conspiracy and fraud. Three months earlier Brocade had paid $7 million to settle accusations of civil fraud in connection with backdated stock options. Larry Wilson, Wilson Sonsini et al’s CEO who also served on the Bro- cade Communications Board of Directors, was not found directly culpable in this matter. Quoting from the Post piece:

231 The ‘Smart Road’ Scam

Meanwhile, Mr. Reyes appeared to backpedal during the trial about raising the issue of whether Larry W. Sonsini, the powerful Silicon Valley lawyer who runs Wilson Sonsini Goodrich & Rosati, had properly advised the company on its stock option policies.

Neither side called on Mr. Sonsini to testify in the case.

Interestingly, while conducting additional research for the initial draft of The ‘Smart Road’ Scam, it happened to click in my brain that one of Mr. Sonsini’s former Senior Partners in the company, John B. Goodrich—the “Goodrich” in Wilson Sonsini Goodrich & Rosati—may have played a big role in setting up yet another options scam. This one, which I had been digging into for well over 18 months, had almost certainly enriched former Trimble Navigation Board Member and future Commerce/Trans- portation Secretary Norman Mineta (see Chapter 14). In fact, Mr. Go- odrich has served on Trimble Navigation’s Board of Directors since 1981, and is the Chairman of Trimble’s Compensation Committee. Clearly, with his law firm’s stock options expertise and his own unique position on Trimble’s Board—perhaps heading his own compensation “committee of one”—Mr. Goodrich was in a perfect position to implement a customized stock options scheme for his fellow Board Member Mr. Mineta that would bypass SEC scrutiny. Mr. Goodrich retired from Wilson Sonsini et al in 2002, but remains on Trimble Navigation’s Board of Directors to this day. In digging around Wilson Sonsini’s website I identified a Partner by the name of Jared L. Kopel who also works with Trimble, among other Silicon Valley firms, and whose expertise includes “Securities and Exchange Commission (SEC) defense work.” Could Mr. Kopel’s advice have led to Trimble’s blow off of the SEC’s concerns about the C. Trimble Nonstatutory Stock Option Plan’s use of “private placement securities” rather than normal securities issued through a registered offering? Had Mr. Goodrich worked with Mr. Kopel to set up that plan, which Goodrich could then approve as the Chairman of Trimble’s Compensation Committee? I actually started to feel a little sympathy for the overworked and relatively underpaid investigators in the SEC’s Enforcement Division.

232 The Securities Law Enforcement Myth

The few who had been assigned to investigate and prosecute burgeon- ing options fraud were up against a powerhouse Silicon Valley law ﬁrm with over 600 employees, many of whom were undoubtedly experts in both “SEC defense work” and creative options plans that skirted—if not crossed—the legal line. It didn’t seem like a very fair contest.

On January 22, 2007 I would lay out the case to the SEC Enforce- ment Division that Mr. Mineta had received a substantial amount of extra Trimble Navigation stock options under the table, because he had failed to disclose the details of his stock options transactions while Commerce Secretary, as required by law. On January 23, 2007 I would provide the SEC Enforcement Division with copies of three earlier FAXes I had sent to the FBI with more evidence relative to the two key issues I had raised in my initial (Nov. 6) tip related to the potential hidden financial interest of some high-level public officials and Traffic.com’s incomplete competitive disclosure in the Pro- spectus they issued prior to their IPO. On January 28, 2007 I would send the SEC Enforcement Division information about the “C. Trimble Nonstatutory Stock Option Plan” that I suspected had been the mechanism used to give Mr. Mineta extra stock options under the SEC’s radar. On February 15, 2007 I would encourage the SEC Enforcement Di- vision to investigate both the ownership of the offshore venture funds, as well as the exercise of warrants issued to the NEBF and other entities. “I strongly believe that this information will be key to finding the ‘financial smoking guns’ on the part of several current or former elected and appointed officials,” I said in the message. On February 22, 2007 I would pass along to the SEC Enforcement Division copies of email messages that Bill Allison of the Sunlight Foun- dation had sent me, summarizing his research into the NEBF’s connection to Traffic.com (see Chapter 19). On July 11, 2007 I would send the SEC Enforcement Division a copy of my new white paper, “More on the Mineta/Trimble Connection: Mr. Mineta’s Activities as both Commerce Secretary and Transportation Sec-

233 The ‘Smart Road’ Scam retary Related to Ultra Wide Band (UWB) Technology.” While evidence I had sent earlier showed a likely connection between Mr. Mineta’s leadership of the Transportation Dept. and Trimble Navigation, the latest white paper showed the all-important link to his short stint as Commerce Secre- tary in 2000. “I trust that the SEC is actively investigating this matter to answer that fundamental question, and is working with the FBI, as well. The very integrity of our federal government is at stake,” I concluded in that message. On November 28, 2007 I would send the SEC’s Enforcement Divi- sion information about the latest developments, including Sen. Hatch’s and Cong. Weiner’s requests for the USDOT Inspector General to investigate Traffic.com’s monopoly, POGO’s letter to Transportation Secretary Peters urging an investigation, and recent press reports in the Atlanta Jour- nal-Constitution, The Hill, and Mother Jones. On January 31, 2008 I would inform the SEC’s Enforcement Divi- sion that the USDOT IG had formally announced that it was conducting an audit into the TTID program, as requested by Sen. Hatch and Cong. Weiner. “I encourage you to make contact with the USDOT OIG team and to share any information with them that you can,” I said in the message. On March 18, 2008 I would send the SEC’s Enforcement Division three new white papers I had recently written that contained many more documentable facts about Mr. Mineta’s apparent violation of the Ethics in Government Act (see Chapters 11 through 14). “The SEC’s investigation into this matter will be vitally important, as I believe that both Mr. Mineta and Trimble Navigation failed to disclose the details of a likely “under the table” stock options transfer to a recent Board member that should have been disclosed on normal SEC filings,” I said in the message. “Hopefully, the SEC’s expertise in investigating this type of financial fraud will enable you to get to the bottom of this matter in short order.” On January 14, 2009 I would alert the SEC that I was writing The ‘Smart Road’ Scam and attached draft copies of this chapter and Chapter 23 (“The Hidden Payoff”). Just like clockwork, within a day or two of sending each message I would receive the very upbeat auto response from the SEC’s Enforcement

234 The Securities Law Enforcement Myth

Division, thanking me for sending the information. Yet I would never receive any calls from the SEC questioning either the facts I had sent or the larger allegations. I would also never receive a call back from SEC investigator Bezek, even though he had expressed a strong interest in the matter and encouraged me to send all the information I could to the En- forcement Division.

Going All the Way to the Top

Because I hadn’t received any feedback from the SEC’s Enforcement Division, in mid-February 2008 I decided to once again follow a strategy that over the years had sometimes worked like a charm and at other times gotten me into a whole lot of hot water: directly contacting the person at the top. At that time the Chairman of the SEC was Christopher Cox, a former legislator appointed to the SEC’s top spot on June 2, 2005. Prior to that appointment, Cox had served for 17 years as a Republican Con- gressman from California. I knew very little about Cox, but a news piece in the Washington Post at the time of his appointment characterized him as “pro-business” and suggested that he might reverse the Commission’s recent focus on stepped-up enforcement. Nonetheless, I felt I had nothing to lose to rattle the SEC’s cage a bit by contacting the top guy. After all, I had long believed that the quickest way to get something done in a hierarchical organization was to work your down from the top, rather than trying to scratch your way up from the bottom. So on February 15, 2008 I called the SEC and asked to talk with Chair- man Cox. I explained to his assistant that I wanted to make the Chairman aware of a complaint that involved some very high-level individuals in the Bush Administration. She said that I should send information about my complaint to her via the email address chairmanofﬁ[email protected], and that she would personally make sure that Chairman Cox saw my message. I was impressed by her professionalism. “Chairman Cox, I wanted you to be personally aware of possible wrongdoing in the U.S. Dept. of Transportation that could involve recent senior management of that department,” I wrote. “In particular, this scam involves a federal earmarked program called the Transportation Technolo-

235 The ‘Smart Road’ Scam gy Innovation and Demonstration (TTID) program in which findings from the SEC’s own investigation could be vitally important.” I provided a brief history of the TTID program, including Sen. Hatch’s and Cong. Wiener’s requests for an investigation into it, and the ongoing audit by the USDOT Inspector General’s office. “I have submitted numerous details about possible malfeasance involving Traffic.com to the SEC’s enforcement division that careful scrutiny of the company’s SEC filings would likely help resolve,” I stressed. “I have also urged the SEC to fully investigate the possibility that former USDOT Secretary Mineta may have fraudulently failed to provide details on his cy2000 Public Fi- nancial Disclosure report because he was trying to hide the fact that he received many more stock options in Trimble than he should have as a Board member for just 13 months. A careful review of both his and Trim- ble Navigation’s SEC filings would undoubtedly be invaluable in getting to the bottom of this matter one way or another. I am sending this message to you so that you can help ensure that this investigation receives the priority that it deserves within the SEC.” About two weeks later I received a response—but not from Chairman Cox. In a letter dated February 25, 2008, my old friend and Senior Coun- sel in the SEC’s Division of Enforcement Samuel J. Bezek would—finally—respond back to me:

Dear Mr. Werner:

I am in receipt of your most recent complaint that you sent to Chair- man Christopher Cox of the Securities and Exchange Commission.

We are extremely grateful to you, as we are to all members of the public who bring information to our attention regarding possible violations of the federal securities laws. Such information is of great benefit to us in fulfilling our responsibilities. Please also be advised that it is the Commission’s policy generally to conduct inquiries on a confidential basis. This is done to protect the integrity of an investigation from premature disclosure and to protect the personal privacy of persons with respect to whom unfounded charges may be made.

236 The Securities Law Enforcement Myth

Thus, subject to applicable provisions of the Freedom of Information Act, as amended, the existence of an investigation is generally not disclosed unless it is made a matter of the public record in proceedings instituted before the Commission or in the courts. However, your concern in this matter is noted, and we assure you that the information supplied by you will be considered carefully in accordance with the Commission’s responsibilities under the federal securities laws.

Although the Commission is always eager to be of assistance to investors, we are not authorized under the federal securities laws to advise or directly assist individuals in connection with the assertion of their personal rights or claims. Thank you again for providing this information to us.

The SEC’s response to my direct communication to Chairman Chris- topher Cox was almost certainly a form letter. The tipoff was where it said “Although the Commission is always eager to be of service to investors...” I never even remotely intimated that I was an investor in Trafﬁc. com or Trimble Navigation (and I never have been), so that reference was particularly off-the-mark. In my mind’s eye, I could picture Mr. Bezek’s boss telling him “Let’s send form letter No. 313 to Mr. Werner—that should get him off our back!”

An Inevitable Conclusion

The only conclusion I could draw from Mr. Bezek’s letter and the earlier one I had received from Michael Anderson, the Chief of the FBI’s Public Corruption Unit, is that the individuals in the Executive Branch who are ultimately responsible for ensuring that our government is honest and ethical will do everything they can to avoid investigating major fraud and corruption involving high-level ofﬁcials in their own branch. The likely reason? Because these individuals’ chain of command inevitably leads to senior political Administration appointees who absolutely don’t want news of more scandals getting out. Perhaps I should not have been surprised that the SEC would just look the other way.

237 The ‘Smart Road’ Scam

The SEC’s inaction notwithstanding, the Commission was still the only federal authority who could definitively put the matters I had raised to rest. Had entities or individuals who had collectively received warrants representing millions of shares of Traffic.com stock doled out some portion of those warrants to individuals, such as Bud Shuster or Michael P. Jackson, who had played key roles behind the scenes in setting up and sustaining Traffic.com’s monopoly? Who would ever know? How would anyone other than the SEC’s own investigators be able to resolve these questions, with so many SEC disclosures that in some cases disclosed so little? I used to think that career executives in the big federal bureaucracies, as opposed to political appointees, helped ensure that their agencies remained ethical and honest, because they weren’t overtly pursuing political agendas that might obscure what is truly in the public interest. But the flipside is that these career executives are by definition concerned about their career growth. Investigating corruption against the desires of your boss—be he or she a political-appointee or a higher level career executive—could very likely be a career-stunting, if not career-ending, exercise. SEC investigator Gary Aguirre had learned that lesson the hard way. Most individuals who work in such bureaucracies probably conclude that it’s just better not to open such a can of worms in the first place. Unfortunately, as I’m writing this chapter yet another huge financial scandal highlighting the SEC’s incompetence is playing out on the front pages of major national newspapers. Bernard Madoff, who managed the Fairfield Greenwich fund whose assets had grown over the years to a reported $50 billion, had recently admitted to his sons that the hedge fund was in reality a huge Ponzi scheme. The fund’s impressive steady annual income over the years had been a mirage, funded by new deposits rather than income from the fund’s real assets. The repercussions of the fund’s collapse was still reverberating throughout the international financial community. It turns out that Harry Markopolis, who once managed a rival hedge fund, had been trying since 1999 to get the SEC to investigate shenanigans underlying what Markopolis knew were Madoff’s unachieveable financial

238 The Securities Law Enforcement Myth results. “I was just the boy who cried wolf,” Markopolis was quoted as saying in the Wall Street Journal. For whatever, reason, the SEC had just looked the other way, almost ensuring that the fund’s later collapse would leave many of its investors (including numerous charitable organizations) in financial ruins. I was also crying wolf to the same regulatory agency about the fraudulent activities of several high-level public officials related to two publicly traded companies (Traffic.com and Trimble Navigation). So far, perhaps predictably, the Commission had refused to investigate those shenenigans that I had so exhaustively documented. The authorities’ unwillingness to enforce federal securities laws is a very sad state of affairs that doesn’t at all bode well for our future.

Addendum

On January 9, 2009, the Securities and Exchange Commission announced that SEC Enforcement Director Linda Thomsen was leaving the Commission to return to the private sector. The agency’s press release put as positive a spin on that development as possible, touting “the many precedent-setting enforcement actions led by Ms. Thomsen.” The press was less kind. An article in the Associated Press pointed out that Ms. Thomsen’s decision to leave followed on the heals of what it called her “angry dressing-down before Congress over the agency’s failure to detect a massive alleged fraud scheme.”

239 19

The Homeland Security Connection

ver the past three years I’ve come to understand many of the nu- Oances of Traffic.com’s very clever modus operandi. The technology leaders of the company (several of whom I know or know of through my 14+ years of experience in the ITS field) early on realized that accurate and comprehensive real-time traffic data was the necessary foundation of the traveler information business. The less data you have, the more your advice to travelers will be based on guesswork or extrapolation; the more you have, the more accurate and reliable that advice will be. Over time, customers will certainly come to value the difference. Armed with that appreciation of the intrinsic value of the underlying real-time traffic data stream, the company then used its extraordinary political connections (with Shuster, Mineta, et al), strategically placed political donations (e.g., for Cong. Don Young), and high-level lobbyists to engineer their federal monopoly, one result of which is what I call their “data lock scheme.” In a nutshell, this scheme enables the company to effectively “own” and control the most valuable publicly subsidized traffic data from the TTID program in many of our nation’s largest and most traffic congested cities. Since the early to mid-2000s, the company has routinely used the impact of its data-lock scheme as a marketing tool, especially to convince

240 The Homeland Security Connection radio and TV stations in big cities to use Trafﬁc.com, rather than other long-time providers Westwood One and Clear Channel, as their traveler information provider. Here’s an excerpt from a 2003 press release announcing that the Illinois Tollway system in Chicago had signed up to participate in the ITIP program:

Trafﬁc congestion costs every Chicagoan over $500 annually in wast- ed time and fuel consumption. Trafﬁc Pulse provides Chicago-area travelers on the Illinois Tollway and other expressways information through Mobility’s advanced data collection, integration and distribution technologies that were successfully implemented in Philadel- phia and Pittsburgh.

The free Trafﬁc Pulse Web site is available to the public starting today at www.Mobility Technologies. Access to Trafﬁc Pulse updates also is available via television and radio reports from WMAQ-TV NBC5, WFLD-TV Fox 32, Tribune CLTV and FM radio stations WCCQ, WDEK/WKIE/WKIF, WDRV/WWDV, WFMT, WLEY, WKQX, WLUP, WMVP, WNND, WNWI, and ONDA.

“Mobility’s advanced data collection” capability, of course, was referring to the pole-mounted detectors that were installed as a key element of the ITIP program. The data from those detectors, although subsidized from taxpayer dollars, was effectively owned and controlled—“locked”— by Traffic.com. Practically speaking, neither Westwood One nor Clear Channel nor any of a number of innovative smaller traveler information companies could access it. While Traffic.com’s 2003 press release touted the fact that “Traffic Pulse provides Chicago-area travelers on the Illinois Tollway and other expressways information through Mobility’s advanced data collection, integration and distribution technologies,” that statement would turn out to be very misleading, if not outright wrong. Not long after signing up for the ITIP program, Traffic.com’s local DOT partner, the Illinois Tollway Authority, would find out that it could not use ITIP data to provide one of the most useful types of traveler information—travel times—to “Chicago-

241 The ‘Smart Road’ Scam area travelers.” Excerpting from a FHWA-sponsored study, “Real-time Traveler Information Services Business Models: State of the Practice Re- view”:

On the other hand, some agencies who entered into ITIP contracts in order to take advantage of external funding to kick-start or otherwise enhance its traveler information program have found the restrictions on the ITIP data limiting. In the case of the Illinois Tollway, for instance, the ITIP agreement prohibited the posting of ITIP travel times on the agency’s DMS. In response, the Tollway developed a program to calculate its own travel times, without the ITIP sensors. As a result, the travel times on the DMS and the Trafﬁc.com Web site would differ slightly.

Because the publicly subsidized data from the ITIP program was not available to the Illinois Tollway Authority to use to provide travel times to the public, the agency had to separately and redundantly come up with their own program to do so using data from other sources. In other words, because of the very lopsided nature of the ITIP program public dollars had to be spent twice for the same purpose, providing travel times for people using the Illinois Tollway. The Metropolitan Transportation Commission (MTC) in the San Francisco Bay Area, long a public sector leader in provider traveler information to its constituents, expressed a similar concern that they cannot use publicly subsidized data from the TTID program for providing guidance via its 511 “national travel information telephone number.” “With respect to trafﬁc data, the California Department of Transportation (DOT) has real-time data on their freeways provided by trafﬁc.com that is not available to 511,” observed Melanie Crotty, MTC’s Director of Travel Co- ordination and Information, on Feb. 12, 2008. Her remarks were included in the “overarching comments” section in feedback to the USDOT on its interim guidance for data exchange formats for the Real-Time System Management Information Program. “It would be valuable if there were a federal requirement that service information (including real-time data) from public transportation providers (e.g. transit agencies and DOTs) be

242 The Homeland Security Connection shared with 511 service providers,” she concluded. [Editor’s note: Cali- fornia DOT, also known as “Caltrans,” was the public sector entity that signed the TTID agreements with Trafﬁc.com on behalf of the cities of San Francisco and San Jose, CA.] Similar limitations in the Atlanta area would prompt an Editorial Board member for the Atlanta Journal-Constitution to call the TTID program “highway robbery” and “one of the oldest con games in the book,” and he was absolutely right.

Another Opportunity to Exploit the “Data Lock Scheme”: DHS

Traffic.com had used its extraordinary political clout with and within the U.S. Department of Transportation to engineer their data-lock scheme to give the company virtually exclusive rights to publicly subsidized data. However, the company’s executives early-on realized that its preferred access to real-time traffic data could translate into big bucks in another big federal agency, the U.S. Department of Homeland Security. Having sat in numerous meetings in recent years with representatives from large transportation consulting firms, I knew that these firms saw DHS as a potential gold mine for new business. After all, the huge new federal department had an enormous budget but, in contrast to the US- DOT, few formal procedures and even less oversight. These firms saw DHS as a potential big-time mother load of federal business. As these consulting firms were trying to figure out how to tap into this rich new source of federal dollars, Traffic.com was already way ahead of the game. Repeating the strategy it had successfully used to create a federally subsidized monopoly within the USDOT, the company would once again try to use its “inside/outside influence game” to try to tap into DHS’ money stream.

A Brief History of DHS

The Department of Homeland Security, which was created on March 1, 2003, grew out of the “Ofﬁce of Homeland Security” that had been created as a direct result of the Sept. 11, 2001 terrorist incidents in New

243 The ‘Smart Road’ Scam

York, Washington, and Philadelphia. Of its many components, the department encompasses two that are each possible customers of Trafﬁc.com’s “advanced data collection, integration and distribution technologies”: the Transportation Security Administration (TSA) and the Federal Emergen- cy Management Agency (FEMA). The former entity plays a major role in helping people evacuate from terrorist incidents, and the later plays a similar role related to natural disasters. Here are brief descriptions of both entities from DHS’ website:

The Transportation Security Administration (TSA) protects the nation’s transportation systems to ensure freedom of movement for people and commerce.

The Federal Emergency Management Agency (FEMA) prepares the nation for hazards, manages Federal response and recovery efforts following any national incident, and administers the National Flood Insurance Program.

Interestingly, former USDOT Deputy Secretary Michael P. Jackson— former Secretary Mineta’s right hand man at both Lockheed-Martin IMS and USDOT—played a key management role in creating TSA following the 9/11 terrorist incidents. “His tenure was particularly focused on DOT’s response to the terrorist attacks, including standing up the new Transportation Security Administration,” said his ofﬁcial biography on whitehouse.gov. That was the same Michael P. Jackson who led the effort to reassign Dr. Christine Johnson when she balked at expanding Trafﬁc. com’s monopoly from two to 27 cities in mid-2002, and to whom Cong. Bud Shuster’s former general counsel, Roger Nober, worked shortly after he (Jackson) arrived at USDOT.

An Early Vision of DHS Business

Even before the formal creation of DHS in March 2003, Traffic.com saw a payoff for its “data lock” on real-time traffic data in homeland security applications. On September 10, 2002, Traffic.com’s President and

244 The Homeland Security Connection co-founder David Jannetta ﬁrst publicly disclosed the company’s plans to pursue homeland security business in testimony at a “Hearing on Intel- ligent Transportation Systems” before the U.S. House Transportation and Infrastructure Committee’s Subcommittee on Highways and Transit . Interestingly, Cong. Bill Shuster, Bud Shuster’s son and successor as the representative from Pennsylvania’s 9th congressional district, would introduce Jannetta at that hearing. “Welcome to all the panelists today, but especially welcome to former Secretary of the General Services for the State of Pennsylvania, Mr. Jannetta, and point out more importantly to me the former mayor of Altoona, Pennsylvania, which is near and dear to my heart and home to the horseshoe curve on the wall there. It is good to have you with us.” Here’s an excerpt from Jannetta’s prepared testimony:

Because of the reliability of our system, we are developing ways to leverage our existing ITS infrastructure to enhance homeland security efforts in our deployment areas. In Pennsylvania, under the leadership of Governor Mark Schweiker and his Ofﬁce of Homeland Security, we are discussing a potential partnership to develop a project to demonstrate the capabilities of our system to provide the tools and technology to increase the ability of state agencies to respond to potential threats. Responding to the charge of the President and the Governor to get the private sector engaged as a key homeland security partner, we are working with our private sector partners Veridian, M/A-Com, and communication service partners to develop a robust system that can be quickly implemented to improve homeland security. We are also working closely with the International Brotherhood of Electrical Workers (IBEW) to ensure the highest quality installation of our innovative technology.

The very next day, Trafﬁc.com issued a press release entitled “Con- gress Requested to Create National ‘Infostructure’ Program for ITS, Homeland Security by Mobility Technologies Executive.” In that press release, the company touted the advantages it had gained for its “Digital Trafﬁc Pulse ITS network” through the TTID program. “Working with

245 The ‘Smart Road’ Scam the U.S. Department of Transportation and state and local transportation agencies under TEA-21’s public-private partnership structure, Mobility is working to deploy its Digital Traffic Pulse (SM) ITS sensor network in 21 cities, which have applied to USDOT under the current appropriation. Each deployment integrates publicly available data with Mobility’s Traf- fic Pulse (SM) information to create a seamless infostructure,” Jannetta was quoted as saying. “Mr. Jannetta also testified about opportunities to utilize its Traffic Pulse data collection infrastructure to enhance homeland security,” the press release continued. Clearly, having exclusive use of the most valuable real-time traffic data in many big cities through the company’s data lock scheme put it in the catbird’s seat to get new DHS business to help citizens evacuate from those cities in the event of a terrorist incident or natural disaster. After all, comprehensive real-time data about travel speeds and times on possible evacuation routes was essential to providing accurate guidance to help citizens get out of harm’s way. Through its brilliant but ethically challenged data-lock scheme, Traffic.com had put itself in the premiere competitive position to provide such services.

The Role of Top Advisors of DHS Secretary Tom Ridge

On October 8, 2001—less than one month after the 9/11 terrorist incidents—Pennsylvania Governor Tom Ridge was sworn in as the first ever Director of the Office of Homeland Security. In making the announcement in the East Room of the White House, President George W. Bush said that among Director Ridge’s assigned tasks was to “strengthen and help protect our transportation systems.” Ridge immediately resigned as Governor of Pennsylvania to assume this new cabinet-level post. Later, on January 24, 2003, Mr. Ridge was sworn in as the first ever Secretary of the Department of Homeland Security . In an article in The American Prospect on December 18, 2005 entitled “Security for Sale,” writer Sarah Posner observed that, despite all the hoopla about the new Department of Homeland Security, DHS was reverting to the age-old influence game that had long been played in other federal government departments. “Less than three years later, the brief

246 The Homeland Security Connection but uninspiring history of DHS proves how little has actually changed in Washington, where the institutional cultivation of influence peddling, cronyism, and waste continues to thrive unimpeded,” she wrote. “The corporate exploitation of the new department became inevitable even before it was founded, during the first dark days after 9-11, when Tom Ridge was appointed to direct the White House Office of Homeland Security,” Posner continued. “With the former Pennsylvania governor came three aides who had no apparent experience in the field of homeland security but a keen understanding of the business of politics. Mark Hol- man, who was appointed deputy assistant to the president in the Office of Homeland Security, had been Ridge’s chief of staff for 18 years, both in Congress and later in the Pennsylvania statehouse. Ashley Davis, a former lobbyist who had worked on Ridge’s gubernatorial campaigns, the Bush-Cheney campaign, the Florida recount, and the Republican Nation- al Convention in 2000, became Ridge’s special assistant. Joining them was Carl Buchholtz, the former general counsel to Ridge’s gubernatorial campaigns and a partner in the Philadelphia-based law and lobbying firm Blank Rome LLP, who took a year away from the firm to help the White House plan the DHS. Blank Rome’s chairman, David Girard-diCarlo, a former Ridge fundraiser and Bush Pioneer in 2000, is among Ridge’s closest friends.” The so-called “revolving door” between government service and lobbying the government was never more apparent than in Mark Holman’s case. In December 2000 Holman resigned as Governor Ridge’s long-time Chief of Staff to become a “public policy advisor” for the law/lobbying firm Blank Rome LLP, whose Chairman Mr. Girard-diCarlo had those deep financial ties to President Bush’s 2000 campaign. According to the Philadelphia Business Journal, “Girard-diCarlo was at one point said to have been tapped by President Bush as a secretary of transportation nominee, but he declined the position for personal reasons.” On March 6, 2001, less than two months after the new Mineta regime would take over control of the U.S. Dept. of Transportation, Mark A. Holman would register as a lobbyist for Traffic.com. The only “Spe- cific lobbying issue (current and anticipated)” listed on the registration: “Transportation Funding.” At this point in time, while funds had been

247 The ‘Smart Road’ Scam appropriated for the pilot ITIP program deployments in Philadelphia and Pittsburgh, Traffic.com’s grand plan of extending the program nationwide to 40 cities (according to the language in the big 1998 transportation bill, TEA-21) was still a pipedream unless millions of new dollars could be appropriated by Congress for that purpose. In late 2000, Traffic.com had been successful in earmarking an additional $50 million in funding for the ITIP program in the Fiscal Year 2001 Transportation Appropriations bill. Those funds would make 25 additional big congested U.S. cities eligible for this program, at typically $2 million in federal funds per city. However, while the company understandably wanted to be the sole- source provider for those additional funds, it encountered a roadblock in the form of a letter dated February 20, 2001, from Federal Highway Administration Deputy Director Vincent F. Schimmoller to Cong. Bud Shuster’s chief of staff, Darrell Wilson. In that letter Schimmoller said that the FHWA’s analysis of the language in the FY2001 transportation authorization bill concluded that adding $50 million to the existing sole- source contract would “significantly change the scope of the contract and require recompetition.” The notion that the program would require “recompetition” was not, of course, quite what Traffic.com wanted to hear. Two weeks later the company’s newly registered lobbyist, Mark Holman, would begin to work with the company’s legislative backers to take another tack. Working with Pennsylvania Senator Arlen Specter, Virginia Senator John Warner and others, the company succeeded in adding language in the FY2002 Defense Appropriations bill that authorized the USDOT to extend the contract to “the same competitively selected consortium leader” selected for the earlier contract. These words essentially gave the USDOT the option to extend the original contract to 25 more cities on a sole-source basis. In early 2002, USDOT Secretary Norman Mineta exercised that option, and in June, 2002 the FHWA formally signed the task order enabling Traffic.com to be the sole-source provider for services under the ITIP program’s umbrella. Mr. Holman had done his job. Even though the ITIP program had absolutely nothing to do with defense and inserting these words into a defense appropriations bill bypassed the normal transpor-

248 The Homeland Security Connection tation appropriations process, Traffic.com’s end-around worked out just fine. Mr. Mineta, the long-time former member and Chairman of the House Public Works and Transportation Committee, apparently wasn’t at all concerned by that jurisdictional anomaly. On October 29, 2001, despite having what Ms. Posner would later characterize in The American Prospect as “no apparent experience in the field of homeland security,” Holman would become a Special Assistant to President George W. Bush for Homeland Security in the brand new White House Office of Homeland Security. He would continue in that role through December 2002. Walking back through the omnipresent revolving door, Holman would rejoin Blank Rome in early 2003, and on March 1, 2003 his name would surface once again as a registered lobbyist for Traffic.com (Mobility Tech- nologies), along with another former staff member of Governor Ridge’s, Ashley E. Davis. The 2003 year-end lobbying report would disclose that Traffic.com paid $60,000 in lobbying fees during the second half of 2003, covering the issue of “Meeting regarding intelligent transportation systems.” The Department of Homeland Security was listed as the first “House(s) of Congress and Federal Agencies contacted,” followed by the Department of Transportation. Clearly, the company was trying very hard to get its foot in the door for funding from DHS, leveraging the company’s “data lock scheme” as President David Jannetta had alluded to in his congressional testimony the previous fall. Additional lobbyist disclosures covering both 2004 and 2005 showed that Holman and Davis would continue their work on behalf of Traffic.com. Blank Rome et al would file a “termination report” for their lobbying activities on behalf of Traffic.com effective June 1, 2006.

A Second Well-Connected Lobbyist

Blank Rome Government Relations was just one of several well-connected lobbying ﬁrms that Trafﬁc.com would utilize to set up its monopoly and gain federal business. (According to a June 2007 article in The Hill, the company has spent over $900,000 on lobbyists since 2000.) On June 28, 2004, Hill Solutions LLC in the company’s home town of Wayne, PA

249 The ‘Smart Road’ Scam would file a lobbying disclosure showing that three of the firm’s employees, including Partner Jack Tomarchio, would be lobbying both the House and Senate on Traffic.com’s behalf. The disclosure listed “transportation and security sensors” as the specific lobbying issue the firm would be assisting Traffic.com with, a reference to the pole-mounted traffic sensors that were used in the cities that signed up for the TTID program. A mid- year 2004 report would further disclose that the lobbying firm received $60,000 in fees for the first six months of 2004. A 2005 disclosure would show that Tomarchio and three others would continue their lobbying activities on behalf of the company through the first half of 2005. In mid-October 2005, Hill Solutions would be absorbed into a much larger law firm, Buchanan Ingersoll PC. According to a news report in citybizlist Philadelphia, “The eight-person group, led by founding partners Jack Thomas Tomarchio and Eric J. Weinberg, has particular strength in the homeland security and national defense sectors, and will be joining the firm’s federal and state government relations practices. Tomarchio and Weinberg will also serve as co-chairs of Buchanan Ingersoll’s Na- tional Security practice group.” A Buchanan Ingersoll lobbyist disclosure effective October 12, 2005 lists both Tomarchio and Weinberg, along with their former Hill Solutions colleague Mark Lenker, once again as lobbyists for Traffic.com under the new company’s banner. Interestingly, Cong. Bud Shuster’s other son Rob- ert L. “Bob” Shuster would join Tomarchio et al at Buchanan Ingersoll the following July, with Buchanan Ingersoll’s merger with Robert Shuster’s long-time firm, Klett Rooney Lieber & Schorling. Lobbyist disclosures show that Shuster was a registered lobbyist for Traffic.com while at Klett Rooney going back to 2004, and as far back as January 15, 2001 Inside ITS had reported that Robert Shuster had represented the company . As myriad lobbying disclosures verified, the company’s lobbyist connections were truly amazing, with connections to senior White House officials and the long-time direct participation by former House Trans- portation and Infrastructure Committee Chairman Cong. Bud Shuster’s own son. That extraordinary influence would continue to pay off for the company in spades.

250 The Homeland Security Connection

The USDOT’s Former Second-in-Command Lands at DHS

After playing a key role in helping the Transportation Security Ad- ministration get off the ground, USDOT Deputy Secretary Michael P. Jackson would leave the Department in August 2003 and walk through the revolving door to join the government contractor AECOM Technol- ogy Corporation as Senior Vice President. According to Jackson’s official government biography, in his new role “he was responsible for AECOM government relations globally and served as Chief Operating Officer of AECOM’s Government Services Group.” Clearly, someone with as many connections as he to Republican Administrations dating back to the Rea- gan Administration was tailor made to handle government relations with yet another Republican Administration. After all, many of these folks were his long-time friends and associates. Jackson’s AECOM career would be relatively brief, and the famous “revolving door” would spin once again. On March 10, 2005, Jackson would return to the public sector and be confirmed by the U.S. Senate to serve as Deputy Secretary of the Department of Homeland Security (DHS). In this role, according to his official White House biography, he served as “DHS’ chief operating officer, with responsibility for managing day-to-day operations.” It was a very similar role to the one he had played several years earlier as Deputy Secretary of the Department of Transporta- tion, reporting to Secretary Norman Mineta.

Mineta Joins AECOM’s Board of Directors

In June 2007—less than a year after resigning as Secretary of Trans- portation—Norman Mineta would be invited to join the Board of Direc- tors of AECOM Corporation, the same company for whom his long-time second in command, Michael P. Jackson, had worked as Senior Vice Pres- ident in 2003-2005. Was Mr. Mineta’s appointment to AECOM’s Board just an amazing coincidence? Or had Mr. Jackson’s earlier relationship with the company paved the way?

On January 9, 2006, President George Bush would appoint former

251 The ‘Smart Road’ Scam

Traffic.com lobbyist Jack Tomarchio to the newly created position as Deputy Director of Intelligence for the U.S. Dept. of Homeland Security, according to an article in the Legal Intelligencer as well as Tomarchio’s biography on the ATS Corporation’s website. In that role, among other tasks, Tomarchio would be responsible for serving as “primary liaison to state and local governments.” This position would be formally described elsewhere as “Principal Deputy Assistant Secretary of Homeland Security for Intelligence and Analysis.” It would seem logical that DHS Deputy Secretary Michael P. Jackson, as the department’s Chief Operating Of- ficer, had played at least some role—if not the primary role—in defining and approving the creation of this new senior departmental position. Since President Bush made the appointment, it seemed clear that another Traffic.com lobbyist, former Special Presidential Assistant Mark Holman, had also played a key role. In that new role, one of Tomarchio’s main responsibilities was to create DHS partnerships with state and local governments in establishing numerous “fusion centers.” An October 2007 report by the U.S. General Account Office (GAO) provides a concise description of the purpose of these fusion centers, specifically the West Virginia one:

The vision for the fusion center is to prevent, deter, and disrupt ter- rorism and criminal activity, enabling a safe and secure environment for the citizens of West Virginia. The fusion center will adopt an all- crimes, all-hazards, and counterterrorism scope of operations but plans to tailor each depending on the stakeholders in the center. For example, the West Virginia Public Broadcasting System will be represented in the fusion center to help gather and manage information. However, if there is an evacuation event, it will also disseminate the information directly to the public as public service announcements through television and radio stations.

From Trafﬁc.com’s perspective, the key phrase in this description is “evacuation event.” As the GAO report explained, these fusion centers would be responsible for helping evacuation through the dissemination of information through public service announcements on radio and televi-

252 The Homeland Security Connection sion stations. Of course, accurate data about current traffic conditions— particularly which roadways were passable and which were already log- jams—would play an enormous role in helping citizens quickly evacuate from either terrorist or natural events (e.g., hurricanes). For twenty-seven of the U.S. biggest and most vulnerable cities, Traffic.com’s data lock scheme meant that it had ready access to more publicly-subsidized traffic data than any of its would-be competitors. The company had already forged many relationships with radio and TV stations, the most lucrative part of its business. Getting chosen as DHS’ preferred traffic information provider to assist with “evacuation events” would both cement and likely expand those existing relationships and provide opportunities for new ones. What a great stroke of luck for Traffic.com that the Department of Homeland Security’s Chief Operating Officer already knew a whole lot about the company’s history and its vision! In fact, years earlier when Jackson was COO of the Dept. of Transportation he demonstrated his strong support for the company’s vision by taking the lead in reassigning an FHWA department head, Dr. Christine Johnson, when she had balked at extending Traffic.com’s monopoly nationwide. Even more fortunate was the fact that their former lobbyist, DHS’ newly installed Principal Deputy Assistant Secretary of Homeland Se- curity for Intelligence and Analysis, would clearly have a major say in recommending and selecting services to help fusion centers respond to the all-important “evacuation events.” His influence could clearly lead to some very lucrative business with the department. More astounding yet was the fact that one of the company’s longstanding lobbyists was not only connected to the executive suite at DHS from the beginning, but to the highest levels at the White House, as well. It seemed almost like the “perfect storm” of factors that would in- exorably lead to new and very profitable departmental business, perhaps what is often called “public/private partnerships” in today’s government vernacular. If only the Project on Government Oversight hadn’t intervened.

253 The ‘Smart Road’ Scam

Not by Happenstance

I didn’t think for one minute that Traffic.com’s “perfect storm” to get DHS business had happened by pure serendipity. After all, for years the company had carefully orchestrated every possible factor to arrive at its federally subsidized monopoly and super-effective “data lock scheme.” It always came down to their extraordinary political connections and ability to push the necessary political levers in Congress and all the way to the White House. Can’t get the FHWA to dedicate the $50 million called out in a transportation appropriations bill on a sole-source basis for the company? Pull strings to get language inserted into an unrelated defense appropriations bill—that will do the trick. Can’t sufficiently pressure the manager of the FHWA department that administers this earmarked program to go along with the program? Send her packing out to the boon- docks, both physically and organizationally. Everything that Traffic.com’s political machinery did had a purpose, and it was absolutely clear that the company had deliberately arranged this “perfect storm” to win some very big DHS awards. The key player in this effort was Deputy Secretary Jackson, of course, who I strongly suspected had been in on the Traffic.com monopoly/scam since the very beginning, along with Bob and Bud Shuster, Dave Jannetta, John Collins, and other Shuster cronies. However, the recent insertion of former company lobbyist Jack Tomarchio into a senior DHS position was a stroke of genius. Presumably, Tomarchio would now be in a position to recommend new business for Traffic.com, and Jackson would clearly be in a position to approve it. Both ends of the process were covered by company loyalists. I couldn’t help but admire the company’s strategy, but had to remind myself that it had all been orchestrated by unscrupulous “public servants,” at least some of whom would almost certainly make millions of dollars under the table. Both Mark Holman’s background and his lobbyist disclosures strongly suggested that he had been regularly communicating with DHS Deputy Secretary Jackson about ways to increase Traffic.com’s business. Clearly, Holman was a guy who only interfaced with the top people in the federal government, and Jackson was right there at the top of DHS, reporting only

254 The Homeland Security Connection to Secretary Michael Chertoff, DHS’s Chief Executive Officer. Chertoff seemed to spend much of his time trying to improve the department’s public image that had been badly tarnished after Hurrican Katrina (he was frequently interviewed by the talking heads on TV news programs) and taking part in Cabinet-level discussions. Meanwhile, Jackson, as Chief Operating Officer, was running the department on a day-to-day basis un- derneath the media’s glare, and would likely have the final say on department arrangements with vendors like Traffic.com. It seemed almost certain that Deputy Secretary Jackson and lobbyist Holman had met to discuss Traffic.com’s role in facilitating evacuations from incidents. After all, Blank Rome’s lobbyist disclosure dating all the way back to 2003 (before Jackson joined the department) listed DHS as the top federal agency contacted, and the firm continued to provide lobbying services at DHS on behalf of Traffic.com through the first half of 2006. Tomarchio would have logically been involved in at least some of these meetings, too. There would undoubtedly be a trail of appointment calendar entries, meeting notes, and email messages. I mentioned this likelihood to POGO General Counsel Scott Amey, and he readily agreed to send a Freedom of Information Act (FOIA) request to DHS for those materials. So on August 24, 2007, Scott sent a very detailed FOIA request to two different departments within DHS, asking for several things including:

• A copy of the DHS’ conflict of interest policy governing employment and post-employment practices that pertained to Deputy Secretary Michael P. Jackson and Deputy Director of the Office of Intelligence & Analysis Jack Tomarchio. • A copy of any/all records by Messrs. Jackson and Tomarchio, including memorialized verbal communications, reports, documents, memoran- dums, statements, notes, transcripts, email messages, proposals, and/or agreements to or from Traffic.com (also known as Mobility Technologies and Argus Networks) or its parent, NAVTEQ. That request also covered any communication with a long list of “Traffic.com employees or representatives.” • A copy of Messrs. Jackson and Tomarchio appointment calendars

255 The ‘Smart Road’ Scam from the inception of their employment with DHS to the present. • A copy of Messrs. Jackson’s and Tomarchio’s phone log register- ing calls to and from Trafﬁc.com (also known as Mobility Technologies and Argus Networks) or its parent, NAVTEQ, from the inception of their employment with DHS to the present.

Government rules call for federal departments to respond to FOIA requests like this one within a certain time period – say, 20 days – but that response can be as simple as simply acknowledging receipt of the request and promising to fill it as soon as possible. POGO received two such acknowledgements almost immediately, but the substantive response would come many months later. On October 2, Scott sent me a short note with the message, “did you hear that Jackson resigned?” His message included a link to an article that same day in the Federal Times with the title “Lawmaker seeks more detail on DHS deputy secretary resignation.” Apparently, Jackson’s resignation announcement on September 24—exacly one month after POGO’s very detailed FOIA request—had caught House Homeland Security Commit- tee Chairman Cong. Bennie Thompson completely by surprise, because DHS Secretary Chertoff had recently assured Thompson that “no senior leadership would be leaving.” What if Jackson had resigned so that both he and his records would be long gone by the time that DHS got around to filling FOIA’s request? I quickly wrote back to Scott: “Wouldn’t it be especially interesting if POGO’s FOIA request on August 24 (which made it clear that Jackson is potentially involved in some wrongdoing) had something to do with his resignation?” Two weeks later I stressed that point more strongly in another message to Scott. “Mr. Jackson’s last day on the job, according to press reports, is October 26. Would it be useful to put DHS on notice that they need to make sure he doesn’t remove information responsive to this FOIA request when he leaves? I’m concerned that if they respond in a month or two they’ll say, ‘Sorry, but we couldn’t find that information’ and that they won’t have any legal way to get that information back from Jackson, if in fact he even keeps it. If POGO can at least be on record now of being

256 The Homeland Security Connection concerned about that possibility, perhaps that would have some usefulness down the road.” Scott agreed, and a short time later wrote back “Done — I emailed them today to put them on notice.” Our shared concern would turn out to be both prescient and predic- tive. On June 26, 2008 in a letter to Scott Amey, Vania T. Lockett, Associ- ate Director, Disclosure & FOIA Operations for the U.S. Department of Homeland Security, reported that DHS could find absolutely no records that were responsive to POGO’s earlier and very comprehensive FOIA request. DHS had searched both the Designated Agency Ethics Author- ity (DAEA) and Office of General Counsel (OGC) and “no responsive records were located.” It wasn’t at all clear that the FOIA officer had actually asked Jackson or Tomarchio for their responsive records, or if searches of the department’s email archives had been conducted.

Tomarchio Departs

Some time between May 27, 2008, when he was interviewed by the Texas A&M University Integrative Center for Homeland Security, and August 18, 2008, when he joined the Board of ATS Corporation, Jack Tomarchio resigned as Principle Deputy Under Secretary of the U.S. De- partment of Homeland Security. Shortly before, on April 17, 2008, Tomarchio had testiﬁed before the Senate Committee on Homeland Security and Government Affairs’ Ad Hoc Subcommittee on State, Local, and Private Sector Preparedness and Integration on the topic of “Focus on Fusion Centers: A Progress Re- port.” “Secretary Chertoff, Under Secretary Allen and I are also committed to providing fusion centers with all the tools they need to succeed in our collective mission to prevent, protect, and respond to any threat or hazard America faces,” he told the Senate Subcommittee at the time. There was no indication in his testimony that their “collective mission” was nearly complete, which would have at least partly explained his resignation a few short weeks later.

257 The ‘Smart Road’ Scam

POGO Appeals DHS’ Response

On August 25, 2008, POGO aggressively appealed DHS’ response to POGO’s FOIA request, which had said that the department couldn’t find any “responsive records” related to Jackson’s and Tomarchio’s connection to Traffic.com. “Surely any letters between these officials and Traf- fic.com would have been documented in emails or elsewhere, unless they were deleted or destroyed,” wrote POGO General Counsel Amey. “We know that Traffic.com engaged a lobbyist by the name of Mark Holman to lobby DHS on the company’s behalf,” Scott continued. “Mr. Holman, a former Special Assistant to President Bush for Homeland Se- curity, almost certainly lobbied Mr. Jackson as Chief Operating Office of DHS. Mr. Tomarchio, a senior executive within DHS, had earlier been a registered lobbyist for Traffic.com himself and was very likely also involved in those discussions. Given this information, we are confident that records of interactions between these individuals exist.” In addition to repeating his earlier request for several different types of materials (email messages, meeting notes, calendar entries, etc.), Amey wanted to know more about the search process that DHS had used. “In addition to the original items, we request that DHS explain how the original search for responsive records was conducted, along with similar information about any subsequent search,” he wrote. “These individuals (Jackson and Tomarchio) may be involved in unethical activities, and if the original search consisted of requests to these individuals for any responsive records, their responses may not have been completely candid for obvious reasons.” Seven months later, DHS had still not responded to POGO’s appeal letter. Also unanswered was whether or not the watchdog’s aggressive pursuit of information about Traffic.com’s connection to two very senior DHS executives had anything to do with their unexpected departures.

258 20

Pay-to-Play

n July 17, 1997, as legislators and their staffs were right in the mid- Odle of crafting language for the big new transportation authorization bill that would later be known as “TEA-21,” Pennsylvania Democratic Congressman Robert A. Borski sent a letter to fellow Pennsylvania Cong. Bud Shuster, the Chairman of the House Transportation and Infrastructure Committee on which Borski served. “Dear Bud,” he wrote, writing over the typed words “Chairman Shuster.” “I am writing to respectfully request your support for the attached legislation which provides federal funding for an Intelligent Transportation System (ITS) initiative and associated research program. The language will allow the Secretary of Transporta- tion to carry out a program to advance and expedite the development of an operational ITI [sic] system for the measurement of various transportation system metrics.” “The legislation I am submitting provides for the mainstreaming of ITS with limited federal funds by requesting the private sector to develop a system which can be deployed to more than 40 metropolitan areas across the nation at a cost not to exceed $2,000,000 per area,” Borski continued. His short (slightly over one page) letter read very much like a sales pitch for the newly conceived ITIP program, saying that the legislation would “dramatically improve existing ITS infrastructures” and promote

259 The ‘Smart Road’ Scam

“increased operational efficiency and capacity of our national highway system.” Borski’s letter concluded with “Thank you for your support of this essential legislation.” As is often the case with sales pitches, the “product” didn’t quite live up to its hype. In his letter, Borski touted the creation of a “commercially viable operating ITS system, capable of feeding data into a national transportation system data base for use by all federal agencies.” While that sounded good on paper, in practice “federal agencies” don’t actually operate our nation’s highways—even “federal highways.” That task is left mostly up to state departments of transportation, who in almost all cases cannot use the truly useful traffic data from the ITIP program to provide guidance to their constituents via their own 511 systems, dynamic message signs, Internet sites or other ways to get the word out about traffic conditions. That fact, combined with the inability of other commercial traveler information providers to access the publicly subsidized data from this program, meant that the promise of “increased operational efficiency and capacity” was little more than a bad joke. With the advantage of hindsight, Borski’s letter invites some interesting questions. How did Cong. Borski get involved in promoting this program in the first place, since Traffic.com’s founder and President Da- vid Jannetta, the former Mayor of the largest city in Bud Shuster’s 9th Congressional District (Altoona), was Shuster’s long-time associate, not Borski’s? Had Shuster perhaps asked his fellow Pennsylvania Congress- man and long-time Transportation Committee colleague to send this letter as “political cover,” to make it seem that Shuster was not actually the wizard behind the curtain?

Play… then Pay

The January 15, 2001 story in Inside ITS, “Traffic.com claim to $50 million ITS earmark raises questions,” made very clear that Chairman Shuster was in fact the key person pushing the earmarked ITIP program that became the basis for Traffic.com’s later monopoly. “A House Ap- propriations Committee source, who asks not to be identified, says the $50 million is an earmark sought by Bud Shuster, the chairman of the

260 Pay-to-Play

House Transportation Committee and representative from Pennsylvania,” reported Inside ITS Editor Mike Curran. “Almost two months after the [FY01 Transportation Appropriations] bill was passed, a spokesman for the House Transportation Committee says the staff was unaware of the provision. ‘It sounds to me like one of those things that was thrown in at the very last minute during negotiations on the conference report,’ he says.” Despite Cong. Shuster’s best efforts to dedicate $50 million solely to Traffic.com in the FY2001 Transportation Appropriations Bill, the US- DOT was clearly proceeding slowly. “The DOT, however, has been very cautious since the appropriations bill was passed,” Curran reported. “Jeff Paniati, the deputy director of the ITS Joint Program Office (JPO), says, ‘We are still in the process of trying to understand the congressional intent of that provision.’” The fact that the USDOT was dragging its feet on dedicating that $50 million earmark to Traffic.com quickly found its way back to Shuster. On January 17, 2001, Shuster’s Chief of Staff Darryl Wilson would write to outgoing Transportation Secretary Rodney Slater to “clarify the intent” of the language in the FY2001 transportation appropriations bill. Slater would only hold that high office for three more days, soon passing the baton to the new regime headed by incoming Transportation Secretary Norman Mineta. “This provision was included at the request of Congressman Bud Shuster, Chairman of the House Transportation and Infrastructure Com- mittee,” Wilson wrote. “The intent of this language was to ensure that these funds were used to carry out the project which has already received initial funding by the DOT, expressly the project specified under section 5117(b)(3) and which had already been funded by DOT in Pittsburgh and Philadelphia. In no way was this intended that DOT conduct a competition for the awarding of funds.” Wilson was—as forcefully as he could—conveying the wishes of his boss, Chairman Shuster, that the whole $50 million was earmarked for just one company, Traffic.com. Not coincidentally, that was the same company co-founded and headed by Shuster’s old political buddy, former Altoona Mayor Dave Jannetta.

261 The ‘Smart Road’ Scam

Unfortunately for Shuster, the Federal Highway Administration was seeing things differently. “After a thorough review, we have concluded that the legislative language in Section 378 [of the FY2001 transportation authorization bill] does not meet the legal requirements necessary to direct the funds to the existing project,” replied FHWA Deputy Director Vince Shimmoller in his response to Wilson on February 20, 2001. Shimmoller said that the FHWA’s analysis had concluded that “adding the $50 million contained in Section 378 to the existing $8 million contract implementing section 5117(b)(3) would significantly change the scope of the contract and require recompetition.” Interestingly, Shimmoller’s letter would go to Bud Shuster’s Chief of Staff Wilson almost three weeks after Shuster retired from Congress on January 31, 2001, following the disastrous fall 2000 expose on 60 Min- utes and Shuster’s rebuke from the House Ethics Committee. (Wilson would later go through his own revolving door to become Assistant Vice President of Government Affairs for the big railway Norfolk Southern Corp. Showing that his connection to the Shuster family continues even in recent times, in December 2007 he would contribute $1,000 to the “Bill Shuster for Congress” committee on behalf of Norfolk Southern.) Even after his retirement, Bud Shuster’s legislative comrades would continue to champion Traffic.com’s case and put pressure on the USDOT to reverse its stance and devote the $50 million earmark solely to Traffic. com. Alaska Cong. Don Young, Shuster’s successor as Chairman of the House Transportation and Infrastructure Committee, would play a particularly vocal role on the company’s behalf. Young was not only in the most powerful position in Congress related to transportation issues, but was widely known as someone who could be readily recruited to champion a cause—for a price. (See Sidebar, “The Coin-Operated Politician.”)

The “Coin-Operated Politician”

One of my advisors from a DC-based government watchdog organization once characterized Alaska Congressman Don Young as a “coin-operated politician.” The more I learn about Cong. Young’s behavior, the more I see how well that shoe ﬁts.

262 Pay-to-Play

Unlike the case of his predecessor as Chairman of the House Trans- portation and Infrastructure Committee, Bud Shuster, no evidence I have discovered suggests that Cong. Young was one of Traffic.com’s early supporters. Young seems much more pragmatic than visionary: grease his palm, and he’ll be right there alongside, pushing your cause. Young’s modus operandi was never more evident than in the case of the Coconut Road interchange off of Interstate 75 near Fort Myers, Florida. In 2006, Lee County, FL, transportation planners discovered that the $10 million in funding in SAFETEA-LU they had thought was designated to widen I-75 was instead earmarked to study an interchange off of I-75 at Coconut Road. On June 6, 2007, the New York Times would break the strange story that an Alaska politician, Cong. Don Young, had in fact played the lead role in diverting those federal funds to Coconut Road. “It is no secret that campaign contributions sometimes lead to lucrative official favors. Rarely, though, are the tradeoffs quite as obvious as in the twisted case of Coconut Road,” said Times reporter David D. Kirkpatrick. “The Coconut Road money is a boon, however, to Daniel J. Aronoff, a real estate developer who helped raise $40,000 for Mr. Young at the nearby Hyatt Coconut Point hotel days before he introduced the measure,” the Times reported. “Mr. Aronoff owns as much as 4,000 acres along Coconut Road. The $10 million in federal money would pay for the first steps to connect the road to Interstate 75, multiplying the value of Mr. Aronoff’s land.” Coming on the heels of the very negative exposure of Cong. Young’s role in promoting the Alaskan “Bridge to Nowhere,” the Coconut Road PR fiasco further tarnished Young’s already sullied reputation. But the carnage wasn’t over yet. Further investigations would reveal that Young had added the Coconut Road earmark after both the House and Senate had voted on the final SAFETEA-LU language to be sent to President Bush for his signature. Inserting a little $10 million earmark for a friend into a multi-billion dollar transportation bill loaded with thousands of earmarks and “pork” is one thing. Violating congressional protocol and ethics by doing so after everyone has agreed to the final language in that bill is quite another.

263 The ‘Smart Road’ Scam

In mid April 2008, the U.S. Senate “took the unusual step of asking the Justice Department to investigate Rep. Young’s Coconut Road earmark,” said an article by Erika Bolstad in the April 18 edition of the An- chorage Daily News. On a bipartisan basis, the Senate voted 64 to 28 to ask the Justice Department to intervene. The ADN quoted Senate Major- ity Leader Harry Reid (D-NV)—admittedly one to take a partisan shot if it so presented itself—as saying that Young’s earmark had spotlighted “the corruption that permeated the Congress in recent years.” Ka-ching!

On March 26, 2001, Young would write to new Transportation Secre- tary Mineta expressly to get the USDOT to reverse its earlier decision. “I write concerning an issue that has arisen regarding one portion of Section 378 of the Department of Transportation and Related Agencies Appropria- tions Act of 2001, P.L. 106-346,” Young wrote. “In the provision in question, Congress earmarked $50 million for ‘the intelligent transportation system infrastructure program’ as authorized by Section 5117(b) of PL 105-178’ (TEA-21). This provision was added at the request of the [sic] Chairman Shuster of the Transportation and Infrastructure Committee. The intent of this provision was clear, that the funds were earmarked for the same exact purpose as were the funds authorized by Section 5117(b) of TEA-21. The intent of Section 5117(b) of TEA-21 is even clearer. That provision provided funding for the deployment of a particular intelligent transportation system. A company named Trafﬁc.com was the successful bidder for this program. The additional funding provided in Section 378 of PL 106-346 was to supplement the deployment in additional metropolitan areas of that exact same intelligent transportation system.” “It has come to my attention that the agency within the Department of Transportation responsible for implementing these provisions, the Joint Program Ofﬁce, believe that the funds made available by Section 378 of P.L. 106-346 should be available to be allocated to other intelligent transportation system projects,” Young continued. “This is directly contrary to the language and intent of Section 378. A similar view has been expressed to the Department by Senator Warner and by former Congressman Shuster’s Chief of Staff.”

264 Pay-to-Play

“I urge you to honor the express language of Section 378 and the clear intent of Congress and provide the additional funding to the project awarded the funding made available in Section 5117(b) of TEA 21,” Young concluded. In this letter, which came just four weeks after FHWA Deputy Direc- tor Schimoller had concluded that the nationwide ITIP expansion would require “recompetition,” Young was strongly advocating that the $50 million in new funds should be allocated only to the “exact same intelligent transportation system.” Translation: the funds should be allocated to Traf- fic.com on a sole-source basis. It was almost as if Chairman Young were acting as a political clone of his predecessor, Bud Shuster, pushing Traffic. com’s interests to the USDOT. Had Young taken up the cause because of his friendship with his long- time Transportation and Infrastructure Committee colleague? Surely that friendship might have played some role. However, a check on Traffic. com’s political contributions would provide an even more plausible reason. A little more than a month after Young’s letter to Secretary Mineta, four individuals who either worked for or were connected to Traffic.com would on the very same day contribute funds to Young’s reelection campaign fund or “Midnight Sun” political action committee (PAC). On April 30, 2001:

• Brian T. Malewicz, listed as “Traffic.com/Executive,” gave $1,000 to “Alaskans for Don Young.” • Michael D. Burns, also listed as “Traffic.com/Executive,” gave $1,000 to Alaskans for Don Young. • John Collins, Traffic.com’s Vice President, gave $500 to Alaskans for Don Young. • B. Michael Schaul, listed as “ESCEM Group Ltd./Executive,” gave $500 to Alaskans for Don Young. Schaul was identified in the Jan. 15, 2001 article in Inside ITS as a “passive shareholder in Traffic.com” who acknowledged that he “consults with [Traffic.com President David] Jan- netta from time to time.”

In a seeming reversal of the phrase “pay-to-play” that’s often used

265 The ‘Smart Road’ Scam to describe the influence of money on politics, Young appeared to have gotten “paid” only after first coming through on behalf of the company. Perhaps the company’s executives had not trusted Young sufficiently to “pay” up front.

An (Almost) Immediate Payoff?

The “pay-to-play” connection involving Congressman Borski and Traffic.com was even more obvious. On April 19, 2001, Traffic.com Pres- ident David Jannetta would contribute $1,000 to the “Borski for Congress Committee,” according to federal records. On the very next day, Cong. Robert A. Borski would write to Transportation Secretary Mineta urging that the $50 million appropriations earmark go directly to Traffic.com. “I urge you to work with existing tools that have been provided to USDOT and quickly award task orders to build out a national interoper- able traveler information system as provided under Section 5117(b)(3) of TEA-21,” he wrote. The key phrase here was “existing tools”: Borski was in effect asking the USDOT to extend its existing contract with Traffic. com in Philadelphia and Pittsburgh nationwide, notwithstanding the fact that the FHWA had earlier said that the new funds would require “recompetition.” Cong. Borski was even more specific in the next paragraph. “It is time for the Department to use its authority under the Information Tech- nology Omnibus Procurement process to award the next task order to the existing team and get on with this deployment,” he emphatically stated. It’s truly amazing how quickly a well placed $1,000 political donation can result in a very strongly worded letter to a Cabinet Secretary demanding that the cornerstone of our free enterprise system, competition, go right out the window. To put an exclamation point on Traffic.com’s appreciation, Mark DeNino, Traffic.com’s Board Chairman, gave $500 to the Borski for Con- gress Committee on May 24, 2001, just over a month after Borski’s letter to Secretary Mineta. The disclosure form didn’t mention that connection, however, instead listing Mr. DeNino as Managing Director of TL Ventures, which collectively through many different partnerships held a

266 Pay-to-Play majority equity interest in Trafﬁc.com.

Bringing in the Heavyweights

Despite these very pointed letters from legislators to Transportation Secretaries Slater and Mineta demanding that the USDOT dedicate the $50 million earmark solely to Traffic.com, the Federal Highway Administra- tion was hanging tough. FHWA Deputy Director Schimmoller’s contention that without more explicit congressional guidance the ITIP program’s national expansion required “recompetition” remained the FHWA’s official stance. Behind the scenes during the Spring and Summer of 2001, Traffic. com was working hard to come up with a legislative way to lock in their sole-source arrangement and take that decision away from the FHWA altogether. Mr. Schimmoller’s conclusion that the program required recompetition had put their vision and future plans in severe jeopardy. Just over two weeks after receiving Schimmoller’s very distressing letter, the company would hire two lobbying heavyweights. On March 6, Pennsylvania Governor Tom Ridge’s former long-time Chief-of-Staff- turned-lobbyist Mark A. Holman with Blank Rome Comisky & McCau- ley LLP, would register as Traffic.com’s lobbyist. The sole “Specific lobbying issue (current and anticipated)” listed on his registration form: “Transportation Funding.” The very same day, Traffic.com would reach out to another lobbying firm, Winston & Strawn, located just a half mile away from Blank Rome and, like Blank Rome, just a block off of “K Street” famously known as the hotbed of political influence—and corruption—in Washington, DC. On March 6, James H. Burnley from Winston and Strawn would also register as a lobbyist for the company, to address the issue of “Legislation and appropriations affecting traffic congestion mitigation.” Burnley, who had served as Secretary of Transportation in the Reagan Administration from 1987 to 1989 and Deputy Secretary for four years before that, was clearly a Washington lobbying heavyweight on transportation matters. Winston & Strawn would disclose lobbying receipts of $60,000 for their activities through June 30, 2001. The 2001 first half report would list

267 The ‘Smart Road’ Scam the sole “specific lobbying issues” as “Transportation Appropriations,” and the “Houses of Congress and Federal Agencies contacted” included the House, Senate, and USDOT. Three additional Winston & Strawn staffers were listed on that disclosure along with Burnley. The company’s work for Traffic.com would wind down in the second half of 2001, as evi- denced by its billings of only $20,000. Apparently, Mr. Burnley and his colleagues had done what Traffic.com asked of them.

The Specter Connection

My search of the Federal Election Committee (FEC) political contributions database would identify the following facts:

• On July 17, 2001, Robert Shuster, with the firm of Klett Lieber Rooney Schorling in Camp Hill, PA and former Cong. Bud Shuster’s son, contributed $500 to “Citizens for Arlen Specter.” Specter, of course, was the Senior Senator from the great state of Pennsylvania. • Four months later, on Nov. 21, 2001, Robert Shuster contributed an additional $250 to the same reelection campaign fund. • On September 13, 2001, Kelly Shuster, listed as a “homemaker” from Camp Hill PA, likewise contributed $500 to “Citizens for Arlen Specter.” A $1,000 contribution six months later from “Kelly H. Shuster” of Camp Hill, PA to Texas Senator John Cornyn would describe her employer as “Government Solutions Group LLC.” According to a business entity search on the Pennsylvania Secretary of State’s website, “Govern- ment Solutions Group LLC” was founded on 5/2/2000 by President Rob- ert L. Shuster . That was the same Robert L. Shuster, of course, who was both Bud Shuster’s son and a long-time registered lobbyist for Traffic.com with Klett Lieber et al. • Also on September 13, 2001, Traffic.com founder David Jannetta, filing on behalf of “The Jannetta Company,” contributed $500 to “Citizens for Arlen Specter.” • Also on September 13, 2001, Brian Malewicz, whose employer was listed as “Mobility.com,” contributed $500 to “Citizens for Arlen Spec- ter.” Malewicz was one of the major early stockholders in Traffic.com,

268 Pay-to-Play and the General Partner of an entity called “Convergence Capital LP” that held over 5% of the company’s stock at the time of its initial public offering (more information in Chapter 23, “Hidden Payoff.”) • Also on September 13, 2001, Trafﬁc.com co-founder Michael D. Burns, whose employer was listed as “Mobility.com,” contributed $500 to “Citizens for Arlen Specter.

Around the same time that “Citizens for Arlen Specter” was tally- ing these contributions, Senator Specter himself was working hard behind the scenes to remedy the FHWA’s reluctance to devote the $50 million ITIP earmark solely to Trafﬁc.com. On December 7, 2001, Specter’s amendment (S.AMDT.2443) to the FY2002 Defense Appropriations Act (H.R.3338) whose purpose was to “expedite the deployment of the intelligent transportation infrastructure system” was offered by his colleague, Alaska Senator Ted Stevens. That amendment was agreed to by a voice vote. The lead story in the January 1, 2002 issue of Inside ITS newsletter “Mobility Technologies puts claim for $50 million into defense bill,” detailed the consequence of Sen. Specter’s efforts. “As this issue goes to press and ﬁscal year (FY) 2002 appropriations wrap up, Mobility Tech- nologies in Wayne, Pa., is seeking to include an amendment that would give Congressional backing to its claim on a $50 million ITS earmark in FY 2001 appropriations,” wrote Editor Mike Curran. “The amendment, introduced by Senator Arlen Specter of Pennsylvania and included in the Senate Transportation Appropriations Bill, was deleted in the House-Sen- ate conference committee. Specter subsequently was able to insert it into the FY 02 Senate defense appropriations. The House and Senate have yet to meet in conference on the defense bill as this issue goes to press.” “Specter said the amendment is meant to ‘clarify congressional intent’ behind the $50 million earmark. Throughout the past year, the Department of Transportation has said that it was attempting to discover the legislative intent of the FY 01 earmark,” Curran reported. “Mobility has claimed the $50 million earmark as follow-on funding for the original award. Specter backs that up. ‘The intent of the TEA-21 ITS provision was to eventually expand this program beyond Philadelphia

269 The ‘Smart Road’ Scam and Pittsburgh and award the next phase of the contract to the same team that won the first phase,’ he said.” It certainly wasn’t to anyone’s surprise that Pennsylvania’s Senior Senator would want to award a $50 million federal earmark on a sole- source basis to a Pennsylvania company. After all, Senators routinely go to bat to help their in-state companies get federal business. It probably didn’t hurt, though, that Traffic.com’s President, registered lobbyist (and principal legislative backer’s son), and registered lobbyist’s wife had all made financial contributions to the good Senator’s cause around the same time that his amendment to provide $50 million in sole-source funding to the company was being inserted into a huge Defense appropriations bill.

Exercising Authority

On January 10, 2002, President George W. Bush would sign the FY2002 Defense Appropriations Act at a ceremony at the Pentagon. Sec- tion 1101 of that bill—seemingly out of place because it had absolutely nothing to do with funding our nation’s defense—would amend Section 5117(b)(3) of the 1998 transportation authorization bill TEA-21. Among other changes, the primary change would be to give the USDOT the authority to extend Trafﬁc.com’s original contract for Philadelphia and Pitts- burgh for “Follow-on Deployment” awards to 25 additional cities nationwide. Here’s the actual language:

(C) FOLLOW-ON DEPLOYMENT- (i) After an intelligent transportation infrastructure system deployed in an initial deployment area pursuant to a contract entered into under the program under this paragraph has received system acceptance, the Department of Transportation has the authority to extend the original contract that was competitively awarded for the deployment of the system in the follow-on deployment areas under the contract, using the same asset ownership, maintenance, ﬁxed price contract, and revenue sharing model, and the same competitively selected consortium leader, as were used for the deployment in that initial deployment area under

270 Pay-to-Play

the program.

Neither that bill nor Congress actually directed the USDOT to extend the original ITIP contract nationwide, and the USDOT presumably could have still chosen to “recompete” that expansion. However, Transporta- tion Secretary Mineta quickly acted on Traffic.com’s behalf to extend the original pilot contract for Philadelphia and Pittsburgh. That extension would provide the underpinning for Traffic.com’s very counterproductive monopoly that would become painfully apparent several years later. On February 5, 2002, Transportation Secretary Norman Mineta wrote to Congressman Don Young, finally responding to Young’s earlier letter on March 26, 2001 that had urged the USDOT to earmark all $50 million to Traffic.com. “New language has been introduced in the FY2002 Defense Appropriations Act that further clarifies congressional intent with regard to the follow-on deployment of the Intelligent Transportation In- frastructure program,” Mineta wrote. “I have decided to exercise this authority [provided by language in the FY2002 Defense Appropriations Act] and facilitate the full expansion of the Intelligent Transportation In- frastructure Program by amending the existing Information Technology Omnibus Procurement contract with the team of Signal Corporation and Mobility Technologies (formerly Traffic.com).” The next day he sent nearly the identical letter to Congressman Rob- ert Borski.

Greasing the Wheels

Following the passage of the FY2002 Defense Appropriations Act and Secretary Mineta’s decision that Traffic.com would be the sole-source provider of services for the ITIP program, things finally began to move ahead on Traffic.com’s plans to give the ITIP program a national footprint. On June 20, 2002, shortly after the long-time head of the USDOT’s ITS program, Dr. Christine Johnson, was reassigned to an FHWA field post in Utah, Acting Associate Administrator for Operations Jeff Paniati signed the task order that would let the $50 million in federal earmarked funding flow to Traffic.com through its administrative partner Signal Corp. The

271 The ‘Smart Road’ Scam next step in the process was the most time-consuming on Trafﬁc.com’s part: recruiting mostly state transportation agencies representing the big cities called out in TEA-21 to participate in the ITIP program. Over the next almost three years—through the Spring of 2005—the following cities/entities in order would sign agreements with Trafﬁc.com to participate in the ITIP program:

• Virginia (statewide agreement with Virginia DOT) • Chicago (Illinois Tollway Authority) • Boston (Mass. Highway Admin.) • Providence (Rhode Island DOT) • San Diego (San Diego Assoc. of Govts.) • Tampa (Florida DOT District 7) • Washington, DC (DC Dept. of Transportation) • Los Angeles (Caltrans District 8) • San Francisco (Caltrans District 4) • Phoenix (Maricopa County DOT) • St. Louis (Missouri DOT) • Detroit (Michigan DOT) • Oklahoma City (Oklahoma DOT) • Seattle (City of Seattle DOT)

During this same time period, according to FEC records, a number of executives, lobbyists, and other inﬂuential individuals with connections to Trafﬁc.com would continue to give generously to the Chairman of the House Transportation & Infrastructure Committee, Alaska Congressman Don Young.

• On July 22, 2003, Robert L. Shuster from Klett Lieber & Schorling, Bud Shuster’s son and a long-time lobbyist for Trafﬁc.com, would give $500 to Alaskans for Don Young. • On February 2, 2004, Trafﬁc.com’s registered Lobbyist C. J. Zane from Blank Rome LLP and Cong. Young’s former long-time Chief of Staff would give $500 to Alaskans for Don Young. • On May 12, 2004, Robert L. Shuster from Klett Lieber et al would

272 Pay-to-Play give $1,000 to Alaskans for Don Young. • Also On May 12, 2004, Traffic.com President David Jannetta would give $1,000 to Alaskans for Don Young • On May 28, 2004, Traffic.com’s registered Lobbyist C. J. Zane from Blank Rome LLP would give $250 to Alaskans for Don Young. • On August 30, 2004, Robert L. Shuster from Klett Lieber et al would give $2,500 to Don Young’s leadership PAC, “Midnight Sun.” Shuster is a registered lobbyist (at Klett et al) for Traffic.com during this period. • Also on August 30, 2004, Traffic.com’s registered lobbyist C.J. Zane of Blank Rome LLP would give $300 to Don Young’s leadership PAC, “Midnight Sun.” Zane too is registered as a lobbyist for Traffic. com. • On Sept. 22, 2004, Traffic.com’s registered lobbyist C. J. Zane from Blank Rome LLP would give $500 to Alaskans for Don Young. • On March 4, 2005, Traffic.com President David Jannetta would give $500 to Alaskans for Don Young. • Also on March 4, 2005, Traffic.com’s registered lobbyist C. J. Zane from Blank Rome LLP would give $300 to Alaskans for Don Young.

Far from being just “donations,” those contributions surely had a purpose and would soon pay off big-time.

Hatching a Big Payoff

As the final details of the forthcoming big transportation authorization bill (SAFETEA-LU) were being ironed out in early 2005, a number of companies would go to their elected representatives and complain about the federally mandated monopoly for Traffic.com. The lead story in the April 20, 2005 issue of The Hill, “Monopoly Money for Pa. Company,” helped put this issue on the political map. Among the most vocal opponents of Traffic.com’s monopoly was Lindon, Utah based Wavetronix LLC, which complained to Utah Senator Hatch. In New York, Internet traveler information provider Metrocommute complained to their own Congressman, Rep. Anthony Weiner. Wavetronix’ complaint would resonate strongly with Senator Hatch, a

273 The ‘Smart Road’ Scam long-time advocate of free markets and open competition. Hatch would take the lead on the Senate side to add new “Part II” legislation to SAFE- TEA-LU designed to open up the old ITIP program to competition. At the same time, the ITIP program was renamed to the Transportation Technol- ogy Innovation and Demonstration (TTID) program. At one point Cong. Weiner led a group of eleven Congressmen who all signed a letter to the four top legislative leaders of both the House and Senate Transportation Committees, urging adoption of the Senate’s (that is, Hatch’s) version of the language so as to open up the TTID program to competition. Senator Hatch’s staff would play a lead role in the negotiations with Senator Specter’s staff to add this new “Part II” language to the final version of SAFETEA-LU to be sent to both the House and Senate for passage. (See more details about this negotiation process in Chapter 7.) On July 29, 2005, both the House and Senate passed the final language ironed out for SAFETEA-LU, and the bill was moved on to President Bush for his signature. On that same day, Hatch’s office issued a press release titled “Hatch Puts the Brakes on Traffic.com.” Here’s an excerpt:

The multi-year transportation bill set to pass Congress includes a provision sponsored by Sen. Orrin Hatch (R-Utah) that levels the playing field for small businesses in Utah to compete for federal money to collect traffic data. “One large company should not have a monopoly on traffic data collection,” Hatch said. “Commuters should benefit from the innovative solutions coming from small businesses in Utah and in other states, not funnel millions of dollars each year to a company that doesn’t have to compete for the money.”

Hatch’s provision opens the doors for qualified companies, including Lindon, Utah-based Wavetronix, to receive Federal funding to help collect real-time data on traffic conditions. Currently, a Pennsylva- nia-based company, Traffic.com, has sole discretion over the funds to develop infrastructure to collect traffic data. Hatch altered the program to allow state departments of transportation to access these funds without requiring them to work with Traffic.com.

274 Pay-to-Play

On that same day, Cong. Anthony Weiner of New York issued a similar press release announcing the demise of Traffic.com’s monopoly, entitled “Federal Highway Legislation Creates Competitive Bidding Process for Traffic Data Collection: Traffic.com Loses Monopoly.” Cong. Weiner was quoted as follows:

“As technology advances, it is crucial that states and localities are given a full array of options to best serve their communities. By opening these services to competitive bidding, we are essentially untying the hands of states and localities. Now, companies will compete to provide the best services at the best price to taxpayers. Drivers, pas- sengers, and all taxpayers win.”

Unfortunately, the celebrations by Senator Hatch, Cong. Weiner and their staffs would be premature. On the very same day they were heralding their hard-won success in breaking up Trafﬁc.com’s monopoly, Cong Don Young was making a statement for the U.S. House record intentionally designed to undercut Senator Hatch’s new “Part II” provisions in SAFETEA-LU. “I believe it was the conferees intent that all of the existing $54 million that has been provided for the current contracting team would be used to carry out the existing contract to deploy the current highway congestion information system under Part I,” Young stated, adding “I believe it was our intention that Part I funds would stay in Part I.” Young concluded his statement with a directive: “Because there is a 180-day clock running for areas to consent to participate in the program, I respectfully urge that USDOT quickly get implementing guidance to the ﬁeld that is consistent with this intent.” On its face, Chairman Young’s statement that it was the “conferees intent” to apply all of the funds to the sole-source Part I of the TTID program was, if not an outright lie, a gross misrepresentation. Sen. Or- rin Hatch was one of the House-Senate “conferees” to whom Young was referring, and certainly Hatch had no intention of making the remaining $22 million in funds for the TTID program off-limits to the new “Part II” provision that he had worked so hard to implement in SAFETEA-LU.

275 The ‘Smart Road’ Scam

By effectively restricting the $22 million in remaining TTID program funds for Part I only, Young was effectively starving funding for any city that wanted to participate in this new and open competition Part II. True to form, all eleven city agreements signed following the passage of SAF- ETEA-LU and approved by the USDOT would be with Traffic.com under the original sole-source (monopoly) provisions of the law. Once again, one of Traffic.com’s influential legislative benefactors had succeeded in sustaining the company’s monopoly. In digging through online databases of political contributions, a size- able contribution to Cong. Young shortly before his July 29 House speech on Traffic.com’s behalf caught my eye. On May 24, 2005, the political action committee (PAC) for Traffic.com lobbyist Blank Rome would give a whopping $5,000 contribution to Young. When I mentioned this contribution to one of my advisors from a DC-based non-profit government watchdog, he said that contributions by lobbyist PACs to legislators on behalf of their clients were often sneaky ways to hide the actual sources of those funds. I had no illusion that Blank Rome PAC’s $5,000 contribution was designed solely to curry Young’s favor on Traffic.com’s behalf. After all, the company’s “Senior Legislative Advisor” C.J. Zane undoubtedly had many transportation clients wanting to exploit the considerable influence that Cong. Young’s long-time former Chief of Staff had with the Congressman. Perhaps to underscore the Traffic.com/Zane connection, however, on August 22, 2005 – less than a month after Cong. Young directed the US- DOT in his House speech to preserve Traffic.com’s monopoly – C.J. Zane would give $1,100 to Don Young’s leadership PAC, “Midnight Sun.” Young had certainly “played” like a fine street musician and, to continue the analogy, the tips had followed.

276 21

Intimidating the Trade Press

o most people, the “trade press”—encompassing thousands of maga- Tzines and newspapers that cover specialized fields or specific consumer interests—is not that different from the “regular press,” which includes daily newspapers and weekly news magazines. Each purports to share the latest newsworthy developments with their readers. For sure, by focusing their editorial coverage on the latest developments in home furnishings, computer technology, or sports cars, trade newspapers and magazines cover a much narrower swath of “news” than do their general newspaper or news magazine counterparts. Nonetheless, to most readers both types of publications seem part of the same news coverage con- tinuum. I know about the trade press from an insider’s perspective. For five years, starting in 1979, I was an editor/reporter for the electronics trade press in Silicon Valley, CA. I started my trade journalism career as West- ern Editor of Electronic Engineering Times newspaper, finishing it as Edi- tor-in-Chief of the monthly chip design magazine VLSI Design. (“VLSI” stands for “very large scale integration,” which refers to big, complicated semiconductor chips.) Many trade publications, like the two that I directly worked for, are free to “qualified subscribers,” code language for subscribers whose pro-

277 The ‘Smart Road’ Scam

ﬁles ﬁt that of preferred customers of the companies who might want to advertise in the publication’s pages. Such publications’ entire revenue streams (except, perhaps, a small amount of money derived from selling mailing lists) typically come from advertisers. Daily newspapers, by contrast, get a substantial fraction of their overall revenue from subscription fees and daily issue sales.

Trade Publications: A Blurring of Church and State

In an ideal world, there would be zero influence on a publication’s editorial content by its advertisers. To be sure, that’s true for a lot of general news publications. In a typical daily newspaper, for example, page 8 might contain a story about the devastation from a hurricane that had recently reached landfall, while the ads on that page features home furnishings and a summer apparel clearance sale. No connection at all. Completely separating the editorial content “side of the house” with the advertising side ensures a publication’s editorial integrity. That separation ensures that reporters can cover whatever stories the publication’s Editor-in-Chief feels are important to its readers without considering how such stories might impact advertising, pro or con. Editorial integrity can exist only when the reporters and editors are completely insulated from influence by the folks on the ad side of the house. That influence can be in the form of pressure to cover certain stories that might please advertisers or, conversely, pressure to back off from stories that would criticize current or potential advertisers. Such separation is rarely the case with trade publications, however. Because a particular publication’s editorial content is almost certainly focused (i.e., narrow), the list of candidate advertisers is likely to be correspondingly small. The publication can only succeed financially if it can convince prospective advertisers that the same readers who are interested in its articles will also be interested in the company’s products. Thus—in contrast to a typical daily newspaper—the editorial content and the advertisements almost always focus on the same things. Far from separating editorial from advertising—“church” from “state” -- trade publications often try to leverage their editorial content to sell ad-

278 Intimidating the Trade Press vertisements. In my own editorial career, more than once an advertising salesperson wanted to know what new products I might be writing about in an upcoming issue, so that he could contact the companies ahead of time and say “you need to advertise in our upcoming issue to maximize the beneﬁt from Jerry’s editorial coverage of your new product.” I would typically tell him that what I was writing about was none of his damn business, and that he just needed to do his job and I would do mine. There’s a similar rationale behind any trade publication’s editorial calendar, which often lists the topics the publication will cover up to a year in advance. Such calendars aren’t really created to beneﬁt its readers or reporters, they’re designed to give companies an added incentive to advertise in issues that they know will cover their own products and markets. There are myriad other ways that the editorial content of trade publications is used to sell ads. For example, issues of trade magazines that offer “bonus distribution” at major industry conferences often contain product announcements as an added incentive for companies to advertise. Advertising placement is yet another example of the symbiotic relationship between content and advertisements. Have you ever noticed an ad about a new product that’s imbedded within an article describing that same product? That relationship almost surely didn’t happen by accident. In fact, the advertiser likely had to pay a premium of 25% or more over the normal ad rate for the ad’s “preferred placement” location. Some trade publications even explicitly connect editorial and advertising, by letting companies “contribute” a short article about their new product if they pay for an advertisement. Such articles are really “adver- torials” (combining aspects of both advertisements and editorial content), and almost always read like blatant sales pitches. So the next time you see a really complimentary story about some new product in a trade journal, think twice about how truly objective the article you’re reading might be.

Like thousands of other ﬁelds, the intelligent transportation systems (ITS) ﬁeld has its own specialized trade publications. One of the most popular and visually compelling is a bi-monthly magazine published in

279 The ‘Smart Road’ Scam the United Kingdom called Trafﬁc Technology International, or TTI for short. From the publication’s self-description:

Trafﬁc Technology International is the only globally distributed publication dedicated to all areas of advanced trafﬁc management systems and intelligent transportation systems for the roads and highways sector.

Although published in the UK, 51% of TTI’s 18,500 subscribers re- side in North America, with 32% in Europe and 17% in the rest of the world. Started in 1993, TTI is one of the most widely read and best-known publications covering the ITS and transportation operations fields. Be- cause of its international focus, it often alerts its readers to new developments elsewhere that may not have yet taken root in the reader’s home country. So in some sense it helps pollinate the ITS field with good ideas from elsewhere. To be sure, the U.S. not only doesn’t have a monopoly on good ideas, but foreign countries (especially European ones) are sometimes much faster in utilizing new ITS technologies to improve their citizens’ mobility than we in the U.S. are. I had often run into the editorial/publishing staff of TTI at the big ITS America Annual Meetings I attended since 1992, either in the press room or at the magazine’s booth in the conference’s trade show, where it dis- tributes thousands of copies of its latest issue. I knew Kevin Borras, the magazine’s Editor from April 1999 through early 2006, quite well. An accomplished author and writer (Kevin co-wrote a sitcom that came in third in the UK’s National Sitcom Trials in 2007), Kevin has many connections among the top transportation people in the U.S. I knew that Kevin would certainly be interested in knowing details of the Traffic.com scam and might even be willing to publish something about it in TTI. However, by the time I got around to thinking about using the trade press to expose the Traffic.com mess, Kevin had left TTI for another publishing venture.

280 Intimidating the Trade Press

Reconnecting with an Old Friend

In mid-July 2007, I called Peter Samuel, an old friend and former colleague in the transportation press who for over ten years has published Tollroadsnews.com and its print predecessor, Tollroads Newsletter. Years ago, in the early days of Tollroads Newsletter, I knew that Peter was also the U.S. correspondent for ITS International magazine, another UK-based magazine and Traffic Technology International’s arch competitor. A transplanted Aussie with an engaging “down under” accent and dev- ilish sense of humor, Peter has been observing and covering the ITS field so long that, like me, he knows where many of the bodies have been bur- ied along the way. In the 1997-1998 timeframe, he particularly focused on the goings-on involving the ITS America trade group, including the firing of the society’s Executive Vice President Hal Kassoff by ITSA Presi- dent Dr. James Costantino and a lawsuit by the society’s former Director of Communications, Jonathan Slevin. Because I believed that several of ITS America’s Board Members from that era had likely been involved in brainstorming the ITIP program prior to the passage of TEA-21, I thought Peter might be particularly interested in knowing more about what I had discovered about this scam. He was. I also thought that he might be interested in writing a piece about it for TollRoadsnews.com. I followed up by emailing Peter several white papers and news reports about the Traffic.com fiasco clearly showing that former Cong. Bud Shus- ter was right in the middle of it. “Many thanks Jerry, and likewise good to be in touch again,” he wrote back. “I got a real bug about Bud Shuster when he was organizing his crimes out of his Capitol Hill offices... He had a whole market in earmarks operating. He set prices and if members and lobbyists didn’t meet his prices not only did they not get stuff for their area but they got vilified.” In checking out TollroadsNews.com’s archive on the web, I discovered Peter’s past highly critical coverage of Cong. Bud Shuster’s political gamesmanship in his newsletter:

• In a piece called “Snakeoil Sales: This Bud” on October 21, 1997, he called Shuster a “shameless pork-barreler, who is happy to be accused

281 The ‘Smart Road’ Scam of using his power as Chairman of the Surface Transportation subcommittee of the US House of Reps to do favors for his local constituents in central Pennsylvania. Usually bridges and highways are named by others to commemorate the dead, but this all-too-alive politician has indecently named the major highway in his district after himself.” • In a short piece called “Too Many Buds” on May 15, 1999, Peter’s outrageous sense of humor and biting sarcasm were on full display. “We thought at first it just had to be a legpull. ‘Bud Shuster - IRF’s Man of the Year,’” Peter wrote. “This is for Capitol Hill’s most brazen hustler! This is the guy who had a telephone team of staffers set up making offers of ‘pork’ for each congressional district to buy votes for TEA21. His campaign manager even days of the month/independent lobbyist odd days is only free pending an appeal on an embezzlement conviction. These are people who really think ethics is something invented by their enemies as harassment and the law is something they are ten miles above. As for the IRF someone there clearly had... a lot too many buds. 1999 is shaping up as the year of Sick Joke Awards. After Bud, the Nobel Peace prize has to go to Slobodan Milosevic, Jerry Springer will get the Pulitzer from fellow journos, and the Family Man of the Year award is going to Bill Clinton.” • In a piece called “No Justice” on April 13, 2001 , Peter really laid into Shuster. “Life just isn’t fair,” he wrote. “Rep James Traficant, a colorful character in a collection of gray politicians has the freddies on his back. No doubt the guy is something of a rogue but he has been indicted on racketeering charges while just across the border in Pennsylvania a far bigger fish, Bud Shuster, was allowed to quietly retire a free man. Trafi- cant according to the indictment turned his congressional office into “a criminal enterprise” on the basis that he solicited money (‘bribes’) in return for legislative favors. Four specific bribes are hung on Traficant. Just four! They’d do that before 10 am on a slow Monday morning with half the guys sleeping in at Shuster’s office. The Shuster criminal enterprise must have done many thousands of bribes and extortions.”

Peter told me that a story about Trafﬁc.com’s monopoly was not appropriate for his own newsletter, which focused exclusively on tollroad issues. However, he thought it was very appropriate for Trafﬁc Technology

282 Intimidating the Trade Press

International magazine, for which he was a regular contributor. He suggested that since I knew the intimate details that I should write the initial draft, and then he (as my co-author) would “fine tune” it and submit it to Nick Bradley, TTI’s Editor. I readily agreed. In early September 2007, Peter sent a proposal for our article about the Traffic.com scam to Nick. He pitched this storyline: “A US ITS program to promote availability of traffic data that ends up blocking it.” “This situation has the potential to seriously damage the image of ITS and reduce legislative support for the broader ITS program,” Peter wrote, concluding “It should get a lot of attention!” In early November, Nick responded very positively to Peter’s proposal and gave the story the go-ahead. We were right up against the deadline for TTI’s January/February 2008 issue, Nick said, and we needed to get the manuscript to them in just over two weeks. We agreed that the timeframe was tight, but doable. On November 8 I sent a draft of our article to Peter. My draft was too long (at 3,000 words), and read more like a white paper (which it later became) than a pithy news story. Peter’s task was to tighten it and give it “punch” in his inimitable style, which I both envied and appreciated. He accomplished both tasks right on deadline, and we shipped off our manuscript to TTI in the “nick of time” (pun intended). The working title: “Traffic.com causes trouble for USDOT – traffic data program gone bad.” Nick liked our initial draft, but at the same time was concerned about running such a hard-edged article that didn’t mince words. “Great stuff Peter... is this going to get me sued?” he asked. Peter did his best to assuage those concerns. “No, absolutely not, Nick. These guys have all kinds of investigators and congressmen onto them and it won’t be long before the general press picks up on it. They are keeping their heads right down. Besides everything we say is backed up by documents. Jerry has become a real expert in this. I’ve known the guy for years and he is very thorough.” Peter’s assurances seemed to satisfy Nick. Traffic Technology International magazine also hosts the traffictechnologytoday.com blog, which lets the publication deliver timely news to

283 The ‘Smart Road’ Scam its readers. Nick asked us to send them a shorter 500-word version of our piece for publication on that blog, essentially a “teaser” for the full article that would come later. Peter worked up that shorter version and, after incorporating my tweaks, sent it off to web editor Richard Scrase for posting on the magazine’s blog. On November 30, 2007, “Traffic.com or Traffic.con” appeared on the traffictechnologytoday.com blog (See Figure 21-1). Richard had come up with that catchy title for our piece, which both Peter and I thought was very clever. (We were disappointed that we hadn’t thought of it first.) In 500 words, the blog piece captured the key points from our larger piece, and was especially critical of the USDOT’s willingness to go along with the TTID monopoly/scam. “USDOT was being pulled in two separate directions between supporters of competition and supporters of monopoly. But it went with the monopolists, a choice that it may now be regretting,” it concluded.

Figure 21-1: Our initial blog piece had a very catchy title

Prompted by the appearance of “Traffic.com or Traffic.con” on TTI’s blog, “George,” a long-time friend and contact in the Federal Highway Administration, shot me a short email message several days later. “Hi Jerry,” he wrote, “How are you doing? What are you up to these days?” I would talk with him a few days later, after a snowstorm had paralyzed DC and kept him and his FHWA colleagues at home. During our long chat I filled George in about what was going on in the Traffic.com matter.

284 Intimidating the Trade Press

Unprompted, he shared with me the fact that shortly after the Mineta team was in place in the Secretary’s office, USDOT DOT Deputy Secretary Michael Jackson had demanded that the ITS Joint Program Office (JPO) divert $7 million of its existing program funding to Secretary Mineta’s new “E-911” initiative. That would turn out to be yet another important piece of the puzzle (see Chapter 14). Meanwhile, our main article for Traffic Technology International magazine was slipping into the next issue, because of soft advertising in the December/January issue. (A typical trade publication maintains an editorial/advertising ratio of 40%/60%, so that the less advertising it sells for a particular issue, the less editorial content it is able to include.) “Just to let you know, your article is going in the February/March issue... more room in this issue...,” Nick informed us in early January. Around this same time I was sending Nick photographs related to our story—of Traffic.com’s pole-mounted radar detectors, for example—that I had captured off the web. TTI’s widespread use of color photographs and artwork makes the magazine very graphically appealing, helping it stand apart from competitors that by comparison seem like stuffy schol- arly journals. The story about Traffic.com’s very counterproductive monopoly did not exactly lend itself to interesting graphics. After all, how many ways can you dress up a radar detector mounted on a pole in order to draw the magazine’s readers to the story? And how can you graphically depict real-time traffic data—or, more precisely, the lack of data—in a fresh and appealing way? The good news was that TTI often created custom artwork for their stories, so that they didn’t just rely on boring stock photos of computer or communication hardware. Our story was begging for special artwork, and Nick asked me if I had any ideas for it. The first thing that came to mind was the old analogy of a small fish getting eaten up by a big fish that in turn is devoured by a gigantic fish. In this case, Traffic.com had earlier been acquired by the much larger NAVTEQ, which was in the process of getting acquired by giant cell phone maker Nokia. I thought that the analogy fit, and Nick agreed. “I love the idea for the illustration - you have saved me a great deal of trouble,” he wrote back in an email message in early January, add-

285 The ‘Smart Road’ Scam ing “This article isn’t going to get me in trouble, is it?” “Nick, I suspect that you might drop off Traffic.com’s Christmas card mailing list for a while, but a whole lot of folks (including virtually all of the other traveler information companies and the state/local DOTs who signed up for this very one-sided program) will be very pleased that the word about this scam is finally getting out there,” I replied. “Everything in the piece that Peter and I wrote is absolutely true and factual, and fully documented. This article will be very timely. The USDOT Inspector General’s office is expected to shortly announce that it is conducting a comprehensive investigation (audit) into this program...” “I presume that you didn’t get in any trouble with the ‘Traffic.com or Traffic.con?’ blog posting, right?” I asked. “You might find it interesting that I got a call from an old friend of mine from the USDOT who saw that piece, and had a long conversation with him. He even independently corroborated a key part of this scam.” “Running this piece in TTI will ultimately perform a big service to commercial traveler information providers, to state/local transportation agencies and, ultimately, to the traveling public,” I concluded, hoping that I had convinced Nick that publishing the story was both the right and noble thing to do. TTI’s concerns would persist, and on January 17, Nick passed on the bad news. “The article that you wrote and we had designed with the illustration you suggested was reviewed by our legal department yesterday afternoon, and was brought to the attention of our MD [managing director] in the magazines division. I have since been told not to run the article for reasons and Richard was asked to remove it from the website,” he wrote. “I then suggested that we send the article to Traffic.com first and let them have a right to respond, which we publish alongside the article. But the chances are that an injunction would be imposed. And who would we send it to at Traffic.com? I am very sorry, but my hands are tied on this. What are your suggestions? Is there any way that the article can be toned down? All the best and kind regards. Nick.” I responded immediately. “Since I don’t know what particular passag- es and parts your legal beagles were concerned about in the piece, I don’t know what to ‘tone down,’” I wrote, my frustration clearly showing. “The

286 Intimidating the Trade Press article is entirely factual and the points it makes are fully documented, so I’m not quite sure how to change it.” “If TTI chooses not to run it, that’s your loss. It’s an important topic to many of your readers in the U.S., and one that will undoubtedly gain more attention over time. The USDOT Inspector General’s office is expected to announce a comprehensive audit of this very counterproductive TTID program next week, so this article in the Feb/Mar would be very timely. It would also help TTI gain editorial credibility with your readers, who will realize that you cover topics of importance to the field and not just promotional articles and ‘puff pieces.’ (I’m not at all suggesting you do, just that this article would make it clear that TTI is willing to dig into important real-world issues with its coverage.)” A short time later, Peter also weighed in. “I think corporate lawyers have a legitimate role in keeping you out of legal trouble and making sure your columns are not used to libel people,” he wrote Nick. “But I am alarmed if they give advice based on ignorance of the facts, and an unwarranted estimate of the likelihood of lawsuits. That seriously di- minishes your ability to produce a respected and authoritative magazine. Who wants to read or work for a magazine that seems to be afraid of controversy?” “Please pass this on up the line and also the fact that I have made my living in journalism since 1964, worked for dailies, weeklies, monthlies, magazines, newspapers, newsletters, now websites etc first in Australia (where libel law is similar to the UK) and since 1980 in the US. In 43 years of journalism I have been threatened with law suits about ten times, sued or deposed three times, and never successfully.” We had made our case as forcefully as we could. Nick Bradley clearly wanted to run our piece, but was up against his managers, who would have the final say. For sure, this type of hard news story was rarely covered by the trade press. Despite the pressure TTI’s editors felt from their management, they clearly wanted to get out the word about the whole Traffic.com mess to their readers. The USDOT IG’s announcement of its audit of the TTID program would come on January 29. After I sent Nick and Richard a note about that announcement, Richard wrote back: “We will cover this on the

287 The ‘Smart Road’ Scam website. Like you, I am saddened that we have been asked to take down the original piece, but I hope we can draw attention to the dispute in our news pages.” On February 4 a replacement to the now removed “Traffic. com or Traffic.con?” news piece—entited “US TTID program faces audit”—appeared on the Traffictechnologytoday.com blog (See Figure 21- 2). I was even quoted in that news piece: “USDOT’s professed intention that traffic data under TTID be used to provide advanced traveler information to the public is being crippled by contract restrictions that limit the most useful local data collected under the programs to internal agency use,” says ITS consultant Jerry Werner, a former editorial director of the National Transportation Operations Coalition. “This prevents local metro authorities or state DOTs from providing feeds to variable message signs or 511 telephone services.”

Figure 21-2: The replacement news story on the Trafﬁctechnologyto- day.com blog wasn’t nearly as eye-catching

Nick hadn’t given up on the main article for the magazine, either. On March 7 he wrote: “Perhaps all is not lost with the article. I found the business card of a certain David L. Janetta, president at Traffic.com. I think the only way that I will get it past my MD is to say that we have sent it to Traffic.com and they have a right to respond. But then there is always the chance that Traffic.com will issue an injunction on us not to publish the article, which means we are back to Square One.” Two days later Nick would email me a preliminary layout of our article (see Figure 21-3), complete with artwork showing the little fish pro-

288 Intimidating the Trade Press gressively being eaten by the bigger ﬁsh. Nick had chosen the title “All About the Big Fish?” with a subtitle of “How a State-Enforced Monopoly is Rocking the ITS Industry.” “An ITS program in the USA is coming under serious scrutiny. Allegations of foul play in favor of one company are rife, and competitors are questioning the administration of USDOT’s entire trafﬁc data program,” explained a summary on the title page.

Figure 3: TTI’s preliminary layout of our article was breathtaking

TTI’s mock-up of our piece was breathtaking. In large part because of Peter’s skill at going for the jugular, it absolutely took no prisoners. “Clearly, the USDOT’s traffic data program has been corrupted, and serious house-cleaning is in order” was both the summary and a pull-quote that Nick had selected on page four. Frankly, as a former trade press editor I could understand how Nick’s MP might get some heartburn about the piece. At the same time, I knew that our story was true and, if broadly circulated to the ITS community, could lead to improved mobility for millions of Americans. I readily agreed to go along with Nick’s idea of sending it to Traffic. com for their feedback, since that appeared to be the only way that TTI would ever publish our scathing story. I told Nick that Dave Jannetta had retired as Traffic.com’s long-time President the previous year, and suggested that he send the preliminary layout to my old friend John Collins,

289 The ‘Smart Road’ Scam who remained a Vice President there. He did so via email on March 18. On April 8 Nick sent me an email message saying that he had just received a letter with Trafﬁc.com’s feedback on our draft article via FAX. He immediately FAXed it to me. The letter was from Lawrence M. Ka- plan, Trafﬁc.com’s General Counsel.

Thank you for your email to John Collins dated March 18, 2006, seeking Trafﬁc.com’s input on the proposed article entitled ‘How a State- Enforced Monopoly is Rocking the ITS Industry.’ We appreciate the courtesy that you have extended to Trafﬁc.com, as well as your wise hesitation to publish the article.

Trafﬁc.com disagrees with many aspects of the article and believes that it unfairly characterizes the referenced ITS program and related activities and takes undue liberties by, among other things, connecting unrelated events or information to support unfounded statements. Additionally, despite the fact checking that you mentioned, the article is riddled with glaring fact errors. For example:

• The article states that a June 2001 ﬁling in the Federal Register said that one company was “to get a lock on federal grants”. There is no such statement in the Federal Register…

• The article states that, “[i]n all but three of the agreements, the USDOT has waived the 20% local match.” This is not true. The match was not waived. The program allows for the local match to be made by either state agencies or private industry. This is expressly permitted in FHWA programs as you can see in Table 2.1 provided by the FHWA at http://www.fhwa.dot.gov/innovativeﬁnance/ifp/Inno- man.htm. In those cases where the state agency did not provide the local match, it was provided by Trafﬁc.com as permitted under the program.

• The article states that former Congressman Shuster’s Congressional district included the Pennsylvania Transportation Institute at Penn-

290 Intimidating the Trade Press sylvania State University. Pennsylvania State University is located in State College, Pennsylvania in the 5th Congressional District. Con- gressman Shuster represented the 9th Congressional District…

• The article states that the SAFETEA-LU statute includes language, as cited in the article, added by Senator Hatch. This is not true. No such language is in the law and, while Senator Hatch had proposed language, it was not the language adopted. (See attached legislation that Senator Hatch introduced that was not adopted by Congress.)

• The article states that “IG [USDOT Inspector General] staff have been assigned to conduct a comprehensive audit of the [TTID] program, both pre- and post-SAFETEA-LU.” This is not true. A copy of the IG’s letter to the Federal Highway Administration is enclosed herewith. It clearly indicates that the audit is limited to two speciﬁc items, as reproduced below:

The objectives of this audit are to assess: (1) whether the TTID has met the statutory goals of building a trafﬁc measurement infrastructure, providing commercial revenue generating initiatives, and aggregating and reporting surveillance data, and (2) whether the Federal Highway Administration (FHWA) has met the competitive procurement requirements in Part II, which were intended to expand the number of ﬁrms providing surveillance services.

Obviously, with so many easily verifiable errors, we have serious doubts about the validity of all the research the authors did or did not do in preparing this article. As I am sure that you can appreciate, a false article like this has the potential for causing substantial injury to Traffic.com. We strongly hope that a reputable publication like Traffic Technology International, and a reputable publisher like UKIP Media & Events, would not want to be associated with such an inaccurate and distorted article. We therefore request, in light of these issues, you not publish the article. Thank you again for contacting Traffic.

291 The ‘Smart Road’ Scam

com. Please contact John Collins or me if we can be of any further assistance.

It had taken Traffic.com almost three weeks to craft this two page letter. I could guess that Kaplan, John Collins, and others at Traffic.com had spent countless hours looking at our article through a microscope in an effort to find anything about which they could complain. In the end they had identified five items that they characterized as “glaring fact errors.” I quickly wrote back to Nick to let him know that of the five “glaring fact errors” they cited, only one—the absolutely inconsequential reference to the location of the Pennsylvania Transportation Institute at Pennsylva- nia State University that I had already planned to excise in the final version—was valid. Kaplan’s contentions about the four more substantive items were all grossly misleading, some to the point of being outright lies. Taken one-by-one:

• RE: the June 2001 Federal Register filing. The exact language in the June 1, 2001 Federal Register notice that Traffic.com referred to said “the U.S. DOT is seeking applications from State and/or local transportation agencies interested in forming a public-private partnership, with a private partner preselected by the U.S. DOT, to participate in the In- telligent Transportation Infrastructure Program.” (Emphasis added.) In other words, one company was chosen to provide these services on a sole- source basis. Clearly, the company (Traffic.com) that was “preselected” had a “lock on federal grants.” “We can certainly tweak this language, but the intent of this announcement (i.e., a lock by Traffic.com) is very clear and unambiguous,” I wrote to Nick. • RE: the local match argument. In fact, from the local agency perspective, the normal 20% local agency cash match for ITS earmarked programs was waived in this program in all but three of the 25 agreements signed with Traffic.com. The ITS manager from one state that joined the ITIP program even told me that his agency would not have participated had the local match not been “waived.” In fact, the October 19, 2005 Federal Register Notice that governs the most recent eleven agreements in this program stipulates that “For the purposes of this program, this match-

292 Intimidating the Trade Press ing share must consist of a cash contribution to the project.” Yet none of those eleven agreements (http://www.itsonline.com/ttid/agreement_sum- mary_v1.html) included that cash match. Instead, Traffic.com’s own investment in their own system/hardware for their own business, called a “non-Federal match,” was substituted for the normal local agency match. “Their contention that the local match was not waived in this program is pure baloney,” I told Nick, and attached a white paper I had written on this topic that went into much greater detail. • Re: Language Added by Senator Hatch. Until I read Kaplan’s letter, I had not been aware of Senators Hatch and Bennett’s letter to their colleagues, proposing an amendment to SAFETEA-LU that would open up the TTID program to competition. I immediately called my contact on Senator Hatch’s staff, Legislative Assistant Lance Walker. Lance confirmed what I already knew but hadn’t yet put into words, that the actual language that Hatch and his staff had added to create “Part II” of the TTID program in SAFETEA-LU had been added through the so-called “House-Senate conference” process, not the amendment process. So while it was true that the precise language in Hatch’s amendment had not been adopted, he in fact did lead the effort to add the “Part II” language in SAFETEA-LU when his Legislative Assistant Matt Sandgren ironed out that language with Senator Hatch’s staff in the conference process (more detail in Chapter 7). Kaplan’s contention that Senator Hatch’s language was “not the language adopted,” was an out-and-out lie. • RE: The USDOT IG’s Audit being both Pre-SAFETEA-LU and Post-SAFETEA-LU. Lance had told me that on two earlier occasions, as far back as the previous November, the Office of the Inspector General’s (OIG’s) Legislative Counsel Nathan Richmond had confirmed to him that their audit would cover both the Pre-SAFETEA-LU and Post-SAFETEA- LU time periods. This was important because many of the factors enabling Traffic.com’s monopoly (such as the USDOT’s decision to waive the normal local agency cash match) were implemented in the early days of the program, prior to SAFETEA-LU. The FY2002 Defense Appropria- tions bill that gave Secretary Mineta the authority to authorize $50 million to Traffic.com on a sole-source basis had been very clear that the identical contract terms for Philadelphia and Pittsburgh were to be followed for

293 The ‘Smart Road’ Scam the following 25 cities, and an audit covering the “pre-SAFETEA-LU” period would allow the OIG to find out if that strict requirement had been followed. Key open questions were: 1) whether Traffic.com’s task order with FHWA for Philadelphia and Pittsburgh required an actual local agency cash match, and 2) whether Traffic.com was required to provide revenue-sharing funds directly back to the local DOT partner and FHWA. Both had been suggested in an early Traffic.com press release . A “pre- SAFETEA-LU” audit would also let the OIG fully investigate the nature of Traffic.com’s original “competitive award” for the two pilot cities, which numerous sources had told me had been “wired” by Bud Shuster for Traffic.com from the start. “So the bottom line is that out of five so-called ‘glaring fact errors,’ one (about Penn State) is indeed an error but inconsequential, and the other four contentions in the piece are absolutely true,” I said in my email note to Nick Bradley. “From my point of view, the fact that the draft fared as well as it did against a detailed analysis from the legal staff of a company that clearly doesn’t want the word to get out about this scam is a very positive sign.” In a real sense, I took Traffic.com’s ineffective attempt to discredit our article as both vindication and validation. After nearly three weeks of analysis, they had only found one minor error and had to resort to falsehoods and misrepresentations to even claim that it contained more substantive problems. I offered to send TTI a revised draft that would eliminate any possible complaint that the company might make about those five points. “Hi Jerry,” Nick wrote back. “If you can revise the document to take account of all of their comments, I will send it to them one more time, and explain that I think we have addressed their concerns, and that if they have any further concerns, please get back to me. However, I must warn you that my MD is even less convinced after their fax than he was in the first place - and it simply comes down to the fact that he doesn’t want to get the magazine into anyone’s bad books - he’s actually less concerned about potential legal action. This is sadly a feature of commercial publishing. I’ll look forward to the revision and sending it back to them - but I fear the end result will probably be that we won’t run the article. All the

294 Intimidating the Trade Press best. Nick.” We indeed sent a revised manuscript to Nick, but the signs weren’t good. His comment that his MP “doesn’t want to get the magazine into anyone’s bad books” exactly squared with my experience in the trade press. Such publications are driven by advertising, which almost always trumps the desire to get the whole truth out to their readers.

A Nagging Concern is Proven Unfounded

While I knew that Mr. Kaplan’s contention that the OIG’s audit would not cover the “pre-SAFETEA-LU” timeframe was off base, nonetheless the certainly of his statement (“This is not true”) troubled me. Had Traf- fic.com used their long-time connections to USDOT Secretary’s office and high-powered suite of lobbyists to narrow the scope of the OIG’s audit? Was OIG Legislative Counsel Nathan Richmond, who had twice assured Hatch’s Legislative Assistant Lance Walker that the audit would indeed go back to the beginning of the earmarked program, misinformed? I shared my concern with Lance, who agreed for the third time to seek confirmation from the OIG about the scope of its audit. On April 23, Lance informed me that OIG Program Manager Joe Marchowski had confirmed in writing that the audit would go all the way back to TEA-21 (1998) which, depending on where you sat, was either very good or very bad news.

Finding Someone (Else) to Publish Our Article

After receiving Nick’s comment “I fear the end result will probably be that we won’t run the article,” Peter and I started considering alternate magazines that might be willing to publish it. It was unlikely that any other transportation trade publications would run it, for the same reasons that TTI was (apparently) not going to do so. Peter took the lead in identifying a suitable alternate publisher for our piece, and a few days later forwarded it to a long-time contact and friend at the Libertarian Cato Institute. Their response from Regulation magazine, one of Institute’s ﬂagship publications was immediate—and

295 The ‘Smart Road’ Scam positive. “PVD [Peter Van Doren, Cato Institute Senior Fellow and Reg- ulation’s Editor] is pleased with the submission and has slugged it for the fall issue,” Firey quickly wrote back. “I’ll take a spin through it later this summer and make any edits necessary to conform it to Reg’s style rules, and send them to you for a ﬁnal OK.” It was that simple. No concern about antagonizing potential advertisers or possible legal action for publishing it. No criticism that the piece was too narrowly focused. Our article was really about how the free enterprise system had been subverted by one company with, as we said, “extraordinary political connections.” The Cato Institute, whose slogan is “Committed to Individual Liberty, Free Markets, and Peace,” cared deeply about such matters.

Figure 21-4: Our article, along with a catchy graphic, was ﬁnally published in Regulation magazine

In late September 2008 the fall issue of Regulation was mailed out to its subscribers, and a few days later the issue—including our piece, “The ‘Smart Road’ Scam”—went up on the web (see Figure 21-4). On October 1, before we even knew it was out, one of Peter’s TollRoadsNews.com

296 Intimidating the Trade Press readers sent him a note. “I read with dismay your article “The ‘Smart Road’ Scam” about the monopolization of road use data,” he said. “What a racket! More evidence that roads are too important to be left to government!” This reader was undoubtedly a proponent of privately operated tollroads. The following day a well-known transportation consultant sent Peter a note. “Very interesting piece Peter. I hope it will get picked up more broadly. But don’t expect a Xmas card from the ops office.” That comment was referring to the FHWA Office of Operations, which had been my employer for eight years. I knew that I had dropped off their Christmas card list some time back. Separately, I received a note from “Louie,” the ITS and former Trim- ble Navigation salesman who had earlier told me why Trimble Navigation had likely wanted one of their own team players, former board member Norman Mineta, as Commerce and Later Transportation Secretary (see Chapter 14). Louie had received a copy of our article from yet another source. “Your article is making the rounds,” he said. Our piece describing “The ‘Smart Road” Scam” had nailed this issue, but I wasn’t just going to hope that it would somehow find its way into the offices of folks who could do something about this scam. On October 2, I emailed a copy of it to over 400 of my recent ITS colleagues, including nearly 100 in the Federal Highway Administration. The next day I sent a copy of it to the primary legislative assistant handling transportation issues for seventy two of the seventy four members of the House Transportation and Infrastructure Committee, leaving out only the LA’s for Pennsylvania Cong. Bill Shuster (Bud Shuster’s son) and Alaska Cong. Don Young for obvious reasons. A week later Brian Waldrip, Committee Ranking Member Cong. John L. Mica’s Legislative Director, would send me a short note. “Thanks Jer- ry…Interesting work. Also, I have shared it with the T&I Committee.” So despite my own effort to keep it out of their hands, Congressmen Bill Shuster and Don Young were likely now aware of our piece, too. The word was getting around slowly but surely, despite Traffic.com’s best efforts to head it off at the press.

297 22

“Recalling” an Email Message

n early February, 2008, my long-time friend and transportation con- Isultant “Jack” sent me an email message out of the blue. “Jerry,” he said, “Check out this newsletter and then the recall (I am forwarding that also…). Hmmmm…!” Pasted into his message was a copy of the trade group ITS America’s brand new weekly “e-newsletter” highlighting news of interest to ITSA’s members, a diversity of public sector organizations (including many state DOTs) and private-sector companies, including trafﬁc data and traveler information companies.

From: Sabrina Quirarte [mailto:[email protected]] Sent: Monday, February 04, 2008 1:45 PM To: Sabrina Quirarte Subject: A Message from ITS America’s President and CEO

The following message is being sent to you on behalf of ITS America President and CEO Scott Belcher. ... ITS America is the leading advocate for technologies that improve the safety, security and efﬁciency of the nation’s transportation system.

Figure 22-1: The message from ITS America’s new President at ﬁrst glance seemed routine.

298 “Recalling” an Email Message

“The following message is being sent to you on behalf of ITS Ameri- ca President and CEO Scott Belcher,” began the e-newsletter, which was sent by Sabrina Quirarte, the society’s Director of Communications (see Figure 22-1). Belcher, a seasoned trade organization executive with no previous background in the ITS ﬁeld, had recently been appointed the society’s new President, replacing Neil Schuster, no relation (that I knew of) to his phonetic namesake, Bud Shuster. With a title of “Week That Was, February 4, 2008,” the e-newsletter provided an update on the upcoming ITSA Annual meeting, upcoming ITS World Congress meetings (which the society co-sponsored with its counterparts in Europe and Asia), descriptions of three new corporate members, information about the society’s recent “ITS Champion Award” to Cong. Rush Holt, and a Call for Abstracts for the upcoming Rural ITS Conference. The tail end of the newsletter, in a section labeled “MISC,” was all about the USDOT Ofﬁce of Inspector General’s recent announcement of its new TTID program audit.

I also want to make you aware of one of the latest announcements from the U.S. Department of Transportation. An audit of the Trans- portation Technology Innovation Demonstration (TTID) Program was launched last week. The TTID was designed to help ease trafﬁc congestion in U.S. cities by assisting in the deployment of a transportation surveillance infrastructure and providing trafﬁc data from sensors to government transportation agencies. The sensor information is also provided to the public to aid travelers and commercial highway users.

According to SAFETEA-LU, the TTID program should: build and integrate an infrastructure of measurement; provide commercial initiatives to generate revenues for reinvestment in the intelligent transportation infrastructure; and aggregate data into reports for distribution. The objectives of this audit are to assess: (1) whether the TTID has met the statutory goals of building a trafﬁc measurement infrastructure, providing commercial revenue generation initiatives,

299 The ‘Smart Road’ Scam

and aggregating and reporting surveillance data; and (2) whether the Federal Highway Administration (FHWA) has met the competitive procurement requirements in Part II, which were intended to expand the number of ﬁrms providing surveillance services. For a copy of the memorandum, visit http://www.oig.dot.gov/StreamFile?ﬁle=/data/ pdfdocs/TTID.pdf.

It Hits the Fan

My guess is that either Mr. Belcher or Ms. Quirarte had seen the OIG’s announcement in the Industry & Member News section of the society’s website, and thought, rightfully so, that this was important industry news that impacted many of ITS America’s member organizations. So—not knowing the sordid history of this controversial program—they routinely included it in his weekly news update to members. Then all hell apparently broke loose! It’s clear that in short order Mr. Belcher found out how explosive the OIG’s announcement was. Just three minutes later, Ms. Quirarte sent out a short follow-on message to those same recipients, entitled “Recall: A Message from ITS America’s President and CEO.” The terse message (See Figure 22-2.) contained just a single sentence: “Sabrina Quirarte would like to recall the message, ‘A Message from ITS America’s President and CEO’.”

From: Sabrina Quirarte [mailto:[email protected]] Sent: Monday, February 04, 2008 1:48 PM To: Sabrina Quirarte Subject: Recall: A Message from ITS America’s President and CEO

Sabrina Quirarte would like to recall the message, “A Message from ITS Ameri- ca’s President and CEO”.

Figure 2: Oops! ITS America’s attempt to “recall” its message just three minutes earlier probably had the opposite impact from what was hoped.

300 “Recalling” an Email Message

Under a very restrictive set of conditions, Microsoft Outlook actually lets senders “recall” messages they didn’t mean to send or didn’t realize would get them in big trouble. Ironically, however, this follow-on message to the society’s members mostly just focused a big spotlight on the OIG’s announcement for a whole lot of folks who might not have otherwise paid much attention to it. I immediately asked Jack if the latest weekly e-newsletter posted on ITSA’s website and available only to members contained the same announcement about the OIG’s audit that was in Mr. Belcher’s ill-fated message, and he said that it did not. ITS America’s publicly viewable Industry & Member News web page likewise had no mention at all of the OIG’s announcement, even though it would undoubtedly be big news to many members. Any previous mention of the OIG’s audit had magically disappeared from the society’s website. Clearly, the announcement about the TTID program’s audit was not positive news to NAVTEQ, Traffic.com’s parent. NAVTEQ, one of two international suppliers (along with Tele Atlas) of the map databases that underpin many ITS products, was one of the very early and most influential members of the society. The company’s Senior Vice President for Government and Industry Relations, Harry Voccola, had earlier served as a Board member and Chairman of the Board of ITS America (see sidebar, “The Voccola Connections”). Likewise, Traffic.com separately had also been highly visible in the society. Traffic.com’s former President, David Jannetta, also served as a Board Member for several years, and its current Vice President, John Collins, was ITS America’s former President and CEO for several years.

The Voccola Connections

Internet searches reveal some interesting apparent historical connections between NAVTEQ’s long-time Senior Vice President Harry Voccola and Trafﬁc.com—particularly to individuals who likely played important roles in creating and sustaining Trafﬁc.com’s monopoly over the years.

1. The Lockheed Martin connection. Prior to joining NAVTEQ in

301 The ‘Smart Road’ Scam

1995, Voccola was “senior vice president and GM of Lockheed’s Trans- portation Systems and Services Unit, working closely with government transportation agencies at the federal, state and local levels,” according to a recent bio. In that role, he was responsible for implementing several toll collection systems. This was the same part of Lockheed Martin that both former Transportation Secretary Norman Mineta and former Deputy Transportation Secretary Michael P. Jackson would lead as Vice Presi- dents starting in 1995. 2. The ITS America connection. Voccola served on the ITS Ameri- ca Board of Directors for several years dating at least back to 1995, and as Chairman of the Board of ITS America in 1997/98. That, of course, was the period in time when the original language for Traffic.com’s earmark was being inserted into the big TEA-21 transportation authorization bill. During nearly the entire period when Voccola was on the Board of ITS America, then Lockheed Vice President Norman Mineta also served on the same Board. 3. The John Collins connection. When ITS America’s first Presi- dent, Dr. James Costantino, resigned under duress in September 1997, Costantino “authorized Chairman Harry Voccola to retain a professional recruiting firm and to establish a board committee to begin the search for a successor,” according to a news item in the USDOT’s own Public Roads magazine. “The search is expected to take from four to six months or more,” the piece reported. In the end, the board search committee headed by Voccola would select future Traffic.com Vice President John Collins as the society’s new President and CEO. 4. The connection to NAVTEQ’s acquisition of Traffic.com. As a NAVTEQ Senior Vice President and long-time ITS industry leader, Voc- cola likely had significant influence over NAVTEQ’s acquisition of Traf- fic.com, which was announced in early November 2006 and consummated in March, 2007. 5. The Robert Denaro Connection. Voccola also served on the Board of ITS America in 2002 and 2003 along with Robert Denaro. Den- aro, a long-time executive in several ITS businesses (including Rand Mc- Nally and Motorola), would join NAVTEQ in October 2002 as Vice Presi- dent and General Manager of its North American Business Solutions Unit.

302 “Recalling” an Email Message

Denaro, as an ITS industry leader like Voccola, likely also had inﬂuence over NAVTEQ’s acquisition of Trafﬁc.com in 2007. Denaro was also active for years in the location technology business, and “launched Trimble Navigation’s Fleet Management and Vehicle Tracking Division,” according to the story in Directions Magazine. That was the same Trimble Navi- gation, of course, that has close business ties with NAVTEQ and on whose Board of Directors Norman Mineta served for 13 months in 1999-2000.

My guess is that Mr. Belcher almost immediately discovered after Ms. Quirarte sent out the weekly email briefing that NAVTEQ would be royally pissed off that he would spread around this negative audit news, and franticly tried to recall what was otherwise a routine email message to his members. It would be fascinating to know exactly what transpired in the scant three minutes between the original emailing and the recall. In any case, the whole episode was undoubtedly quite embarrassing to ITS America and made ITS America’s new President look pretty foolish. Rightfully so. It’s very unfortunate if a trade association that ostensibly exists to serve its members deliberately keeps important news from those members. After all, this announcement was important news to many different ITS America member organizations—including traveler information companies that couldn’t access publicly-subsidized real-time data because of Traffic.com’s monopoly, consulting companies, and state/ local transportation agencies that either already participated in the TTID program or were currently being recruited to participate by Traffic.com.

Falling on Deaf Ears

Despite my disgust at ITS America’s attempt to withhold this important news from its members, I decided to cut their new President, Mr. Belcher, a little slack. So on February 7, I sent him what I hoped he would interpret as a friendly message. I started it off by mentioning that a long- time friend of mine who worked for one of ITS America’s members had shared his ill-fated e-newsletter with me, as well as the society’s attempted recall.

303 The ‘Smart Road’ Scam

“I know that you are relatively new to the ITS field and likely don’t know the history of this program,” I said, and recounted my own background in the field dating back to 1991. “In a nutshell, the TTID program was originally set up through political influence, particularly the influence of the then Chairman of the House Transportation Committee, Cong. Bud Shuster. Cong. Shuster’s fingerprints are all over this program. His long-time former Chief of Staff, Ann Eppard, was the company’s first registered lobbyist, and his son, Robert L. Shuster, more recently was a registered lobbyist for the company. The long-time President of the company, David Jannetta, was not a transportation person at all, he was a political associate of Mr. Shuster’s and the two-time mayor of the largest city in Congressman Shuster’s old district, Altoona.” “This earmarked program largely works against the public interest and only for the interest of Traffic.com. I have put together a white paper that traces much of the history of this program which I think you will find informative,” I informed Mr. Belcher. I provided a link to my white paper, which had been the first draft of what became the article we proposed to Traffic Technology International magazine. “I hope you will interpret this message the way it is meant -- helpful and supportive,” I continued. “Feel free to contact me if you would like to discuss any of the details or history of the TTID program further. I would also be glad to share my ideas with you about how ITS America might help define a next-generation program that avoids the serious problems in the TTID program and truly does serve both the public interest and the interest of commercial traveler information providers. Thank you. Wel- come to the ‘exciting’ world of ITS!” My comment about the “’exciting’ world of ITS” was given tongue- in-cheek, as I strongly suspected that he had found the ITS field more “exciting” than he had ever bargained for. I never received any response from Mr. Belcher, not even an acknowledgement that he had received my message. I was apparently telling him things that he just didn’t want to hear. Even though he was theoretically the Chief Executive Officer of a major trade organization, I knew that in reality he had many bosses, with NAVTEQ at the top of the list. I didn’t pay his salary or give him his bonus, they did.

304 “Recalling” an Email Message

A little over a month later, on March 14, 2008, I sent Belcher a follow on message that described a new web page I had put together that linked to numerous news and blog reports about the TTID program and Traffic. com’s monopoly. It was a longshot, but I was hoping that he might want to learn more about the history of this troubled program. After all, with its diverse membership base, ITS America was theoretically in a perfect position to help implement a replacement program that would be in many of its members’ interests, rather than just NAVTEQ/Traffic.com’s. “I hope that you and ITS America will have the integrity and courage to make your membership fully aware of this issue, and especially the USDOT Inspector General’s new audit of the TTID program,” I said. “It would be very helpful to both the ITS field and the traveling public if you would encourage your members who are impacted by this program to communicate their experiences with the OIG, NAVTEQ’s sensitivity notwithstanding.” I was wasting my time.

305 23

The Hidden Payoff

“Follow the money. Always follow the money.”

Deep Throat to Washington Post reporter Bob Woodward in the movie, “All the President’s Men”

“If we follow the money, we’re going to get to the truth and I think the truth will not be very nice.”

Senator Richard Shelby (R-AL) in an interview on CNN

t’s clear that for many years a number of high-level elected and ap- Ipointed officials, including Bud Shuster, Don Young, Norman Mineta, and Michael P. Jackson, went to extraordinary lengths to create and maintain a federally subsidized monopoly for Traffic.com. The fundamental question: why did they do it? If you believe that the answer may well lie in the above sage advice to “follow the money,” the next logical question is: where is/was the financial payoff? In Cong. Young’s case, numerous public disclosures suggest a clear

306 The Hidden Payoff case of money buying influence, as is chronicled in Chapter 20 (especially in the sidebar, “The Coin-Operated Politician”). Contribute to Cong. Young’s cause, and he will use his considerable influence to get you what you want. It seems that straightforward. However, the possible financial payoff for the other high-profile “public servants” involved in the Traffic.com scandal—Cong. Bud Shus- ter, former Transportation Secretary Mineta, and former DHS/USDOT Deputy Transportation Secretary Jackson—is not so black-and-white as in Cong. Young’s case. These individuals all played pivotal roles in creating and sustaining Traffic.com’s monopoly. However, their financial connections—if they can be shown to exist—likely lie largely under the radar of normal public disclosure. Proving or disproving these connections will ultimately require comprehensive investigations by the “authorities” who have access to records that the public cannot see.

Candidates for the Hidden Payoff

Let me summarize the role that each of these individuals has played in this scam that suggests they may have done so for a substantial hidden ﬁnancial payoff:

• Bud Shuster has clearly been involved in this scam from day one. He led the effort to insert Traffic.com’s initial earmark into the big TEA- 21 transportation bill way back in 1998. Traffic.com’s co-founder Dave Jannetta, was an old political crony of Shuster’s as Mayor of Altoona, the largest city in Shuster’s old congressional district. Ann Eppard, Shuster’s long-time Chief of Staff, was the company’s first registered lobbyist. His son, Robert L. Shuster, has been a registered lobbyist for the company for years, and still is today. Shuster’s former Chief of Staff on the Transporta- tion and Infrastructure Committee, Jack Schenendorf, is a senior executive with the law firm that brought Traffic.com public. The connections go on and on, and strongly suggest that Shuster and his close associates and family may have had a significant financial incentive to support Traffic. com’s monopoly over many years. • Former Transportation Secretary Norman Mineta was the con-

307 The ‘Smart Road’ Scam summate “inside man” who quietly put the underpinning for Traffic. com’s monopoly in place. Despite the fact that the Federal Highway Administration wanted to openly compete the ITIP program’s expansion from a two-city pilot project to a national program, Mineta took the opportunity to continue the sole-source arrangement for Traffic.com. That opportunity presented itself after Traffic.com engineered an amazing legislative maneuver in the FY2002 Defense Appropriations bill, led by their in-state Senator (Specter), to give the Transportation Department the authority—but clearly not a directive—to award 25 new city contracts on a sole-source basis. Mineta exercised that authority on behalf of Traffic. com, as he explained in letters to Congressmen Don Young and Robert Borski. Mineta would continue to support Traffic.com’s monopoly behind the scenes. He clearly directed the reassignment of Dr. Christine Johnson, the FHWA manager whose department managed the ITIP program and who saw through this scam early-on, to a field position in which she could no longer threaten Traffic.com’s monopoly. After the passage of SAFETEA-LU in August, 2005, the Mineta-led USDOT simply ig- nored the new “Part II” provisions Senator Hatch had put into the bill to break up Traffic.com’s ongoing monopoly. Mr. Mineta’s own failure to disclose the details of his capital gains income from Trimble Navigation stock options of up to $1 million—as is required by federal law—suggests that he unethically received money “under the radar” for another company. If true, that scenario strongly suggested that he may have been similarly involved with Traffic.com. • Former DHS and USDOT Deputy Secretary Michael P. Jackson was the “inside enforcer.” Jackson, along with current-day Traffic.com Vice President John Collins, almost certainly had working relationships with then House Transportation and Infrastructure Committee Chairman Cong. Bud Shuster when they were both Senior Vice Presidents for the American Trucking Associations around the time the big TEA-21 bill was being finalized. Because of that early connection, it’s very possible that Jackson was one of the original team of brainstormers who came up with the concept for this earmarked program in the first place. While Jackson only served as USDOT Deputy Secretary and Chief Operating Officer two years, those were key years when the program was transition-

308 The Hidden Payoff ing under his leadership from a small pilot project in Pennsylvania to a nationwide initiative. The underpinning for much of what would later become evident as Traffic.com’s monopoly was put into place in these early years. Jackson’s most obvious effort to support that monopoly occurred in mid-2002, when he played the role as “enforcer” in reassigning FHWA Associate Administrator Dr. Christine Johnson to Utah, after Johnson saw through the scam and refused to go along with it. Years later Jackson would return to “government service” as Deputy Secretary of the Department of Homeland Security, a role in which he was once again in a position to help Traffic.com get lucrative federal business. As Chief Operating Officer of a second big federal department, Jackson likely approved (if not spearheaded) DHS’ hiring of a former Traffic.com lobbyist, Jack Tomarchio, in a role that would have significant influence over new DHS business for the company. Traffic.com also hired two very high- level lobbyists who, according to public disclosures, would naturally have interfaced with Jackson because of both his position at DHS as well as his longstanding knowledge of the company’s focus. Jackson’s unexpected retirement as DHS Deputy Secretary in the fall of 2007—shortly after DHS received a very detailed FOIA request from the Project on Govern- ment Oversight (POGO) asking for materials related to his connection with the company—suggests that he wanted to be long gone by the time DHS officials got around to trying to fulfill that request. • Current Transportation Secretary Mary Peters, who continued the USDOT’s support for Traffic.com’s monopoly long after both Mi- neta and Jackson had departed, failed to adequately explain why she was doing so to Senator Orrin Hatch. As Federal Highway Administra- tor in 2002 reporting to Secretary Mineta and Deputy Secretary Jackson, Peters also played a key inside role in reassigning Dr. Christine Johnson to the FHWA field management position where she remains today. By that action, Peters too played a supporting role in creating the necessary underpinning for Traffic.com’s monopoly. When Ms. Peters returned as Secretary of Transportation (following Mr. Mineta’s unexpected resignation) in 2006, under her leadership the department continued to ignore the congressional mandate in SAFETEA-LU to open up the TTID program to competition. When Senator Hatch challenged her in two very pointed let-

309 The ‘Smart Road’ Scam ters in 2007 to explain why the USDOT was still supporting Trafﬁc.com’s monopoly, she (and Acting USDOT General Counsel Knapp, on her behalf) failed to answer that fundamental question. That failure led Senator Hatch, Cong. Weiner, and POGO all to formally request an investigation into the USDOT’s administration of this troubled program.

In Going Public: A Whole Bunch of New Clues

On August 30, 2005, Traffic.com, Inc. began to set in motion the process for it to “go public” so that there would be a market for the company’s stock on NASDAQ. Filing a Form S-1 Registration Statement—often described as a “preliminary prospectus”—with the Securities and Exchange Commission was the required first step. This initial S-1 filing is typically called “preliminary” because it often omits key financial information, such as the stock’s issue price and the number of shares that will be ten- dered. Over the following months, as the company finalizes the details of its initial public offering (IPO) with its underwriters and major prospective investors, those details are ironed out and included in final prospectus issued in conjunction with the IPO. Traffic.com went public on January 25, 2006, offering 6.55 million shares to investors at $12/share. A final prospectus for the IPO was filed with the SEC that same day. The offering raised nearly $74 million dollars for the company, after accounting for the underwriters’ take (See Fig- ure 23-1). Immediately following the IPO, according to the prospectus, 19,308,239 shares of the company’s common stock would be outstanding, which meant that over 12.75 million shares were held by the company’s founders, senior executives and other early investors in the company (including venture capital entities). In addition, stock options and warrants that were “in-the-money” accounted for another 3.71 million shares of common stock. Taken altogether, on the day of the IPO these early investors collectively owned over $197 million worth of equity in the company.

310 The Hidden Payoff

Figure 23-1: The 6.55 million shares Trafﬁc.com offered in its IPO was only a third of the total shares outstanding.

The key question was how much of that equity—if any—was owned by key high-level elected and appointed officials who had worked for years to help set up Traffic.com’s monopoly and sustain it through a serious Congressional challenge led by Utah Senator Orrin Hatch? In essence, these officials had made Traffic.com’s IPO possible. I knew that such equity would not just be sitting out in plain view, because these officials would get into a whole lot of trouble if it could be proven that they had a financial interest in a company for which they helped create a federal monopoly. Savvy judges and juries would undoubtedly see a cause and effect. Our nation’s securities laws, as enforced by the Securities and Ex- change Commission, were designed to inhibit if not prevent such shenanigans. However, the SEC does not possibly have sufficient resources to routinely examine the thousands of pages of SEC disclosures associated with an IPO, such as Traffic.com’s initial public offering in January 2006. They would likely do so only if they had some indication of possible malfeasance. Over many months following the company’s IPO I laid out a significant amount of circumstantial evidence suggesting such malfeasance but, so far, the agency had just swept my complaint under the rug. (For more about the SEC’s failure to investigate this matter, see Chapter 18.) In late January, 2006, I printed out Traffic.com’s S-1 filing and carefully scrutinized it for clues about where an equity interest on the part of

311 The ‘Smart Road’ Scam

Shuster, Mineta, Jackson or others might be hidden. I didn’t believe for one minute that these individuals were going out of their way to exert their considerable influence on Traffic.com’s behalf without getting compensated handsomely in some way for their efforts. In searching through the labyrinth of SEC filings for hours upon hours, I came to the conclusion that there were many places where that equity could be hidden, but it would take the SEC’s expert investigators—“forensic accountants,” if you will—to determine for sure what, if anything, unethical or illegal had transpired. Nonetheless, even a non-accountant like myself could see a number of places where it seemed plausible that such a stake in the company’s success could be hidden. I noted in red on my printout those places where Bud Shuster’s and Norman Mineta’s equity in Traffic.com might be hidden, and gave that annotated printout to Special Agent Chris Thompson on February 23, 2006 at the time of my original complaint to the FBI (see Chapter 6). Over the following months and years—as I would learn new “pieces of the puzzle” and continue to dig into Traffic.com’s voluminous SEC filings—the possible mechanisms for that hidden payoff would become increasingly evident:

1. Early Preferred Stock Issues Whose Owners Weren’t Identiﬁed

Many of Trafﬁc.com’s early equity holders held preferred stock that was converted to common stock at the time of the initial public offering. While the company’s prospectus and related SEC disclosures went into considerable detail about the Series E, Series E-1, and Series F convertible preferred stock, it only obliquely mentioned the earlier Series A through D preferred stock issues. Note 10 (“Redeemable Convertible Preferred Stock”) to the prospectus’ “Consolidated Financial Statements” section alluded to these early preferred stock issues without going into very much detail. Each of these early issues were ultimately converted into either common stock or cash, as follows:

• 873,671 shares of Series A preferred stock were exchanged for

312 The Hidden Payoff

291,223 shares of common stock (worth $3.49 million at the time of the IPO) • The 4,824,563 outstanding shares of Series B preferred stock were exchanged for 321,637 shares of common stock (worth $3.86 million at the time of the IPO) • 1,315,789 outstanding shares of Series C preferred stock were exchanged for 438,596 shares of common stock (worth $5.26 million at the time of the IPO) • The company itself repurchased 2,595,585 shares of Series D preferred stock for $9.4 million

Taken altogether, the four early series of preferred stock were worth over $22 million at the time of Trafﬁc.com’s initial public offering in Jan- uary 2006. Since these preferred stock series had all been issued in the early years of the company’s existence before it went public, information about who owned these shares was never publicly disclosed at the time and was only vaguely described in the public disclosures associated with the company’s S-1 ﬁling on August 30, 2005. Had Bud or Bob Shuster, Norman Mineta, Michael P. Jackson, or Mary Peters owned any of this early preferred stock, perhaps through their participation in a third-party “capital management” shell entity that would hide this equity from the public? It was an intriguing question.

2. Hiding Possible Ownership in Third-Party “Shell” Entities

Several such third-party entities held a significant equity stake in Traf- fic.com at the time of its IPO, but it was very difficult if not impossible from the company’s SEC filings to identify the actual names of the individuals who were represented by those entities. One such entity was/is called “Convergence Capital, L.P.” The table on page 81 of Traffic.com’s prospectus dated January 25, 2006 listed Con- vergence Capital, L.P. as one of the “Principal and Selling Stockholders” holding an equity stake in the company of 5% or greater (See Figure 23- 2).

313 The ‘Smart Road’ Scam

Shares Percent Ownership (Prior to Offering) Entities Affiliated with TL 7,614,321 55.30 Ventures Entities Affiliated with PA 902,432 6.87 Early Stage Partners, L.P. National Electrical Ben- 883,306 6.68 efit Fund Convergence Capital, L.P. 706,875 5.35 ICG Holdings, Inc. 700,936 5.33

Figure 23-2: The “5% Stockholders” in the company included several venture funds and limited partnerships, including Convergence Capital L.P.

While the description in the prospectus associated with that table said that it identified “each person who is known by us to beneficially own more than 5% of our common stock,” that statement was not factually correct. While “Convergence Capital L.P.” was shown as a 5% stockholder with a stake of 706,875 shares (5.35%) in the company, that entity was not, of course, a “person.” In fact, it served to obscure the actual identities of the “persons” who collectively held a significant stake in the company. Two individuals listed as “Executive Officers and Directors” in this table, President David Jannetta and Chief Operating Officer Chris Rothey, were financially linked to Convergence Capital. According to Notes 4 and 5 on page 82 of the prospectus, the bulk of each individual’s holdings were held by a combination of Convergence Capital, L.P. and Conver- gence Capital II, L.P. Because Convergence Capital’s equity holdings on behalf of Jannetta and Rothey far exceeded its own listed stake in the company, it’s clear that the 706,875 shares CC held did not include these individual’s holdings. So who were the “persons” actually holding those shares?

314 The Hidden Payoff

At first glance, note 15 in the prospectus (page 84) seemed to provide the answer. “According to information provided by Convergence Capi- tal L.P., the general partner of Convergence Capital L.P. is Convergence Capital Management, whose members include Brenda Wilson, David Jan- netta and Christopher Rothey,” it said. (Brenda Wilson was the wife of Michael Burns, one of Traffic.com’s early principal stockholders.) How- ever, limited partnerships like this one typically involve both “general partners” who call the shots, as well as “limited partners” who are passive investors. Identifying some of the general partners was a start, but who else was a general partner, and who were the limited partners? Neither the prospectus nor any of the other SEC filings I studied provided the answers. By having the limited partners and any remaining general partners remain anonymous behind the limited partnership’s shell, their identities remained secret. Since the company’s SEC filings did not provide complete answers to those ownership questions, I decided to take a different tack. Lim- ited partnerships, like corporations, are required to register with at least one state in order to gain the desired legal protection. Since Conver- gence Capital, L.P. presumably operated in Pennsylvania (where Traffic. com was headquartered), perhaps the Pennsylvania Secretary of State’s records would identify the individuals who were associated with it. It was worth a shot. A search on the PA Secy. Of State’s website showed three entities containing the word sequence “Convergence Capital”:

• Convergence Capital, L.P., created on March 29, 2000 • Convergence Capital Management, a so-called “ﬁctitious name,” created on April 15, 2002 • Convergence Capital II, L.P., created on July 16, 2003

That was the good news. The bad news was that precious little information was available identifying who was behind the various Convergence Capital legal shells. The only partner listed for Convergence Capital, L.P. was general partner “Convergence Capital Management.” According to its ﬁctitious name ﬁling, general partner Convergence

315 The ‘Smart Road’ Scam

Capital Management was synonymous with Brian Malewicz, another early major stockholder in Traffic.com and one of the many financial contributors to politicians whose favors the company had sought over the years (see Chapter 20, “Pay-to-Play”). While Brenda Wilson, David Jannetta and Christopher Rothey were all described in Traffic.com’s prospectus as general partners of Convergence Capital, L.P., no one had so informed the Pennsylvania Secretary of State, who thought that Brian Malewicz was the only general partner. It was all very strange. The Secretary of State’s trail of information related to Convergence Capital II, L.P. was even more of a dead end. Its general partner was listed as “TJC PARTNERS,” which was not identified anywhere else in the Secy. of State’s computer records, not even as a fictitious name. A Google search of “TJC Partners” resulted in only eight hits, none of which was even remotely connected to Convergence Capital or Traffic.com. The disclosure of Convergence Capital as a major stockholder in Traf- fic.com had seemingly met the letter if not the spirit of our securities laws, while hiding the identity of individuals who had a substantial stake in the company but didn’t want anyone else to know it. It was all a big legal sleight of hand, quite appropriate for a high-tech company that the press had at one time called Traffic.con.

3. Out of Sight and Out of Mind in Offshore Venture Capital Funds

While information about who’s involved in limited partnerships in the U.S. can be difficult to come by, it’s virtually impossible to identify the players of similar overseas entities. That fact, of course, is precisely why such entities are created in the first place. Their raison d’etre is to shield information from U.S. regulators and the general public, and they do that exceedingly well. Three such overseas entities, all sharing the words “TL Ventures III Offshore,” appeared prominently in Traffic.com’s prospectus. Chartered in the Cayman Islands, the three TL Ventures III Offshore entities were just a small subset of the many legal entities listed in the prospectus under the umbrella of TL Ventures, which collectively owned over 55% of the stock in Traffic.com just prior to its IPO, and retained an almost 36% stake

316 The Hidden Payoff afterwards. According to the prospectus, TL Ventures III Offshore L.P. owned over 800,000 shares of common stock and Series E/E-1 convertible preferred stock at the time of the IPO, collectively worth almost $10 million. As in the case of Convergence Capital L.P., the company’s SEC disclosures identified the names of some individuals (Robert E. Keith, Jr., Gary J. Anderson, Mark J. DeNino and Christopher Moller) associated with the venture fund’s general partner, but it’s not clear that those names comprised the complete list. More importantly, none of the limited partners in these offshore funds were identified anywhere in any SEC filings I found. As if being chartered out-of-sight and out-of-mind in the Cayman Islands was not enough, the three offshore entities themselves were involved in a strange nesting relationship: TL Ventures III Offshore Ltd. was a general partner of TL Ventures III Offshore Partners L.P., which in turn was the general partner of TL Ventures III Offshore L.P. It seemed like yet another effort to hide what was really going on behind layers of intermediary legal entities. It seemed highly plausible that any number of individuals, including Traffic.com’s lobbyists, the two former Chairmen of the House Transpor- tation & Infrastructure Committee and their relatives, or even current or recent USDOT senior managers could have held (and might still hold) a substantial equity stake in Traffic.com through these offshore entities. If they kept the proceeds of the sale of their respective equity holdings in the company in the Cayman Islands, presumably no one—not the IRS, the SEC, or especially the U.S. Office of Government Ethics (OGE)—would ever know how that financial connection may have influenced their behavior. These Cayman Island shell entities were clearly out of sight and out of mind.

4. Stock Issued to Helpful Non-Employees

One of the literally hundreds of different documents and exhibits Traf- ﬁc.com ﬁled with the SEC laid out the mechanism the company could use—if it so chose—to enrich anyone who did a big-time favor for the

317 The ‘Smart Road’ Scam company. Exhibit 10.2 associated with Traffic.com’s Form S-1 filing on August 30, 2005 described Traffic.com’s “1999 Non-Employees’ Stock Plan” that had been in effect since May 11, 2000. Stated right up front, the purpose of the plan was to provide “a means to attract and retain highly qualified persons to serve as non-employee directors, advisers, and con- sultants, as well as other persons providing services to the Company in a non-employee capacity, and to enable such persons to acquire a pro- prietary interest in the Company, thereby promoting a closer identity of interests between such persons and the Company’s stockholders” (emphasis added). Interpreted another way, this plan provided a way for Traffic.com to significantly repay key individuals (perhaps even Con- gressmen and senior USDOT officials) for their invaluable assistance. A committee appointed by Traffic.com’s Board administered the plan. That committee could select people for whom to grant awards, and determine the parameters of awards to be granted to recipients, including the size of the awards and the exercise price, in the case of stock options or warrants. 546,000 shares were initially made available under the plan. In addition to providing grants to non-employee Directors, the committee could award what were called “other grants.” “From time to time, the Committee may grant an Option to any person who is performing services for or on behalf of the Company,” Exhibit 10.2 explained. A section entitled “Receipt of Shares or Deferred Shares in Lieu of Fees” was particularly revealing:

Any person selected by the Committee for participation in the Plan by reason of providing services to or on behalf of the Company may, if speciﬁcally authorized by the Committee in writing to do so, elect to receive payment for their services in the form of Shares or Deferred Shares in lieu of cash payment of such fees for services rendered at any time prior to the time such fees are earned…

Payment of Fees in the Form of Shares. At any date on which fees are payable to a Participant who has elected to receive such fees in the form of Shares, the Company will issue to such Participant, or to a designated third party for the account of such Participant, a number

318 The Hidden Payoff

of Shares having an aggregate Fair Market Value at that date equal to the fees…

One could easily argue that Bud Shuster, Norman Mineta, and Michael P. Jackson, in particular, had performed invaluable “services for or on behalf of the Company” that entitled them to receive a substantial portion of the more than half million shares of stock reserved under this plan. The fact that this plan allowed payment to a “designated third party for the account of such Participant” made such payback even easier to hide. This provision clearly enabled these shares to be deposited on the recipient’s behalf in a U.S. limited partnership like Convergence Capital L.P. or even in one of TL Ventures’ more secretive offshore entities Had any of that, in fact, happened? Only a thorough audit of the company’s books by conscientious and experienced SEC investigators would deﬁnitively provide the answer.

5. Equity Ownership Via Ultra-Low-Cost Stock Warrants

According to Traffic.com’s prospectus, at the time of its IPO nearly 1.7 million warrants were outstanding that enabled their holders to purchase common stock in the company at an average exercise price of approximately $1.50 per share. At the IPO price of $12/share, those warrants collectively represented a profit to their holders of over $17.5 million. While the average exercise price was $1.50 per share, the exercise price for a number of these warrants—those granted to the big National Electrical Benefit Fund (NEBF) electrical union retirement fund, for example—were as low as three cents per share. Since these warrants were often issued to “business entities” like the NEBF, venture capital entities, and limited partnerships, the actual names of the individuals holding and ultimately exercising them were often not disclosed to the SEC. Could the NEBF, for example, have passed along some of its hundreds of thousands of ultra-low-cost warrants to key officials who had greased the skids for Traffic.com? It seemed quite possible.

319 The ‘Smart Road’ Scam

Conclusion

Clearly, there were many different and clever ways that Traffic.com could have financially rewarded Bud Shuster and his friends and associates for their long-standing help in setting up and sustaining Traffic.com’s monopoly. In virtually all cases, neither the SEC nor the public would be the wiser. Some of these ways involved hiding equity for such individuals in either third-party shell entities (where only the general partners were identified) or in offshore trusts (whose clear purpose was to avoid U.S. financial disclosure laws). Other ways involved sharing ultra-low-cost stock warrants or giving pre-approved stock to non-employee “friends” who had performed valuable services for the company. In virtually all of these cases, while the company may not have been required to identify the recipients of such equity stakes by name, their names would almost certainly surface through an aggressive audit by the SEC. Had this hidden payoff actually occurred, using one or more of the mechanisms I had identified? Only a thorough investigation by the authorities could definitively answer this question one way or another. The Cayman Islands venture fund and ultra-low-cost warrants issued to the huge National Electrical Benefit Fund seemed especially tailor- made for some nefarious purpose. In fact, the union connection over time would emerge as one of the most likely avenues for the hidden payoff.

320 24

The Union Connection

raffic.com has long had an especially close connection with the Inter- Tnational Brotherhood of Electrical Workers (IBEW) union. Of course, electricians are required to install Traffic.com’s pole-mounted radar traffic detectors, but that involves conventional electrical work that accounts for a small fraction of Traffic.com’s overall expenditures of millions of dollars in the TTID program. Nonetheless, the IBEW has long been in- timately involved with Traffic.com—the phrase “in bed with” comes to mind—since the company’s early days. That relationship has impacted the company on several different levels, at least some of which have not (yet) been fully revealed. That close connection first became publicly evident in Traffic.com President David Jannetta’s testimony in a hearing on “Intelligent Trans- portation Systems” before a key U.S. House subcommittee on September 10, 2002. In that testimony, Jannetta thanked Congress for “the wisdom of this subcommittee in creating a program for a commercial ITS infrastructure in TEA-21.” Of course, that collective “wisdom” was almost entirely due to a single individual, then House Transportation and Infra- structure Committee Chairman Bud Shuster, Jannetta’s long-time political ally. However, that distinction was likely lost in the September hearing, especially among new members of the subcommittee who had not taken

321 The ‘Smart Road’ Scam part in the “pork fest” associated with the TEA-21 transportation bill. In addition to thanking the subcommittee members for their “wisdom,” that fall Jannetta was lobbying Congress to further extend Traffic. com’s sole source arrangement through the creation of a new buzzword that was floating around ITS circles back then: a “national infostructure.” “We urge the ITIP program be part of the backbone of the INFOstruc- ture,” Jannetta said. “Thank you for the opportunity to appear before you today to explain how your enabling legislation is already benefiting public agencies and the public and how it is possible to have a true public/private partnership that works!” he concluded. This, of course, was very early in the national deployment of the ITIP program (only two cities, Philadelphia and Pittsburgh, were fully operational at that point in time), and the widespread knowledge of the very counterproductive nature of Traffic.com’s “data lock scheme” wouldn’t come until years later. What was especially interesting about Jannetta’s testimony, however, wasn’t his gratuitous compliment to Congress to convince them to continue to support a federally subsidized monopoly designed to benefit his company, but the reference to the IBEW that seemingly came out of the blue. “We are also working closely with the International Brotherhood of Electrical Workers (IBEW) to ensure the highest quality installation of our innovative technology,” Jannetta said. Why had Jannetta stressed that point in his testimony? After all, that comment was unrelated to his main point that Congress needed to further expand the ITIP program nationwide into a new “national infostructure.” Was he just trying to connect with these subcommittee members who were pro-union, probably mostly Democrats? Or was there a deeper significance behind his plug for the IBEW?

Cultivating Key Legislative Connections

Former Altoona, PA mayor Jannetta was one of the original founders of Trafﬁc.com in October 1998, when it was originally called Argus Net- works, Inc. Other early founders of the company included Secretary Brian J. Sisko, Treasurer Andrew Maunder, and Vice President Christopher M.

322 The Union Connection

Rothey. (Rothey would later become the company’s Chief Operating Of- ﬁcer, a position he retains as of spring 2009.) Jannetta, as the former mayor of the largest city in Cong Bud Shus- ter’s old district, clearly had long political ties to Shuster. He seemed eager to build on that connection starting on Jan. 30, 1997, when as a self-described “Development Consultant” he donated $1,000 to the “Bud Shuster for Congress Committee,” according to data provided by the Fed- eral Elections Commission. Later that same year, on October 10, Jannetta would give an additional $250 to the same Shuster reelection fund. Interestingly, on that very same day (October 10, 2007) as Jannetta’s second contribution, another individual from the same small (pop ap- prox. 9,000) Harrisburg suburb of Mechanicsburg, PA would donate to Shuster’s cause, as well. B. Michael Schaul, listed as an “Entrepreneur,” would give $500 to the Bud Shuster for Congress Committee. Schaul’s special connection to Jannetta, Shuster, and Trafﬁc.com would be revealed in the lead story in the Jan. 15, 2001 issue of the Inside ITS newsletter:

Another two sources, who also asked to remain anonymous, say they met with Traffic.com executives before it was awarded the task order. “They told us they were definitely going to win the contract out of FHWA [Federal Highway Administration],” says one of the industry officials. “And they did.”

The sources say that Trafﬁc.com executives said that the contract would be worth $100 million — the full federal and state funds for 40 metropolitan areas.

Further, they say that the Trafﬁc.com executives told them that they could effect federal legislation to beneﬁt transportation companies in exchange for shares of ownership for certain entities. The sources say The ESCEM Group was singled out as an important shareholder “because they were the ones that make the language happen,” referring to federal legislative language.

323 The ‘Smart Road’ Scam

The ESCEM Group rebuts this allegation. “I don’t know why they would have said that, to be honest with you,” says B. Michael Schaul, the president and managing director of The ESCEM Group in Har- risburg. The ﬁrm does not do any work in Washington, he says.

Schaul reports that he has been the sole owner of The ESCEM Group, which he describes as a holding company, since he bought out the interest of the law ﬁrm of Eckert, Seamans, Cherin and Mellot in the early 1990s. “I’ve certainly known Congressman Shuster but I’m not related to him or to any of his family. Nor do they have any ownership in any of my business interests,” he says.

The ESCEM Group is a passive shareholder in Trafﬁc.com and Schaul consults with Jannetta from time to time, he says.

Jannetta is also puzzled by the allegation. “They [The ESCEM Group] have never lobbied for us and haven’t done anything for us in the last couple of years,” he says.

Jannetta’s contention that Schaul and the ESCEM Group hadn’t done anything for Traffic.com “in the last couple of years” may have been true as far as it went (taking a “couple years” to mean back to late 1998/early 1999), but that statement was certainly misleading at best. For years Schaul had been a major contributor to both of Traffic.com’s legislative champions, Cong. Bud Shuster and Pennsylvania Senator Arlen Specter, and thus was in a perfect position to curry both politicians’ support for the fledgling company’s scheme. Prior to Traffic.com’s founding in 1998, Schaul had been a major contributor to both Cong. Bud Shuster and his son Robert L. “Bob” Shuster, the same Bob Shuster who ran for Congress in a neighboring district to his father’s in 1996 and later become a long-time registered lobbyist for Traffic.com:

• On Nov. 22, 1995, B. Michael Schaul (listed as “Self-Employed) contributed $1,000 to the Bud Shuster for Congress Committee

324 The Union Connection

• On Oct. 31, 1996, B. Michael Schaul (listed as “Self-Employed) contributed $1,000 to the Bud Shuster for Congress Committee • On Jan. 30, 1996, B. Michael Schaul (listed as “Self-Employed) contributed $500 to the Bob Shuster for Congress Committee • On April 1, 1996, B. Michael Schaul (listed as “Self-Employed) contributed $500 to the Bob Shuster for Congress Committee

Schaul was clearly using his own political connections, which he had cultivated for years through generous contributions to key Pennsylvania legislators—particularly Bud Shuster—to help Jannetta and his associates get the original ITIP earmark language inserted into the big TEA-21 transportation bill, which was enacted on June 22, 1998. Following the passage of TEA-21, FEC records would show yet another amazing “coincidence” between Jannetta’s and Schaul’s political contributions. On the very same day (December 16, 1998) that Schaul contributed $250 to “Citizens for Arlen Specter,” Jannetta would give the very same amount to the good Senator. Schaul may have described himself as a “passive shareholder” in the company, but his and his consulting client Dave Jannetta’s “investments” in Sen. Specter’s political career would pay off big-time for the company years later. (See Chapter 20, “Pay-to-Play.”)

Leveraging Old Union Ties

Getting influential politicians to support the company’s long-term vision (and ultimately its federally mandated monopoly) was a crucial early priority, and once that was largely accomplished the next task was to get the company’s business up and running. For that, Traffic.com needed both equity investors as well as sources for ongoing operating funds. T.L. Ven- tures had been an early backer and partner of the company, and invested millions of dollars in the company through myriad venture funds (including untraceable offshore funds—see Chapter 23, “The Hidden Payoff.”) While T.L. Ventures in aggregate would become the biggest single equity holder in the company at the time of its public offering, another substantial early investor in the company, the huge National Electrical Benefit Fund

325 The ‘Smart Road’ Scam

(NEBF), would also play a vital but much less publicly visible role. The NEBF is inextricably connected to the IBEW, by virtue of the fact that it provides retirement benefits for over 100,000 IBEW retirees. (For more detail, see sidebar: What Exactly Is the NEBF?) Jannetta’s remarks to Congress in 2002 about “working closely with the International Brotherhood of Electrical Workers (IBEW) to ensure the highest quality installation of our innovative technology,” almost certainly derived from his seven plus years of managing contracts with the union when he served as Secretary of General Services for the Commonwealth of Pennsylvania from December 1987 through January 1995. In that role, he was responsible for “construction, central purchasing, real estate and maintenance programs,” according to his recent biography. On January 25, 2006, Traffic.com went public, offering just over six and a half million shares of stock and raising almost $74 million. Among its many benefits to the company and its creditors and shareholders, that IPO:

1. Created a public market for the company’s almost 20 million shares of common stock, letting early equity holders “cash out” if they chose to, and 2. Allowed the company to repay its “senior secured credit facility,” according to the company’s Prospectus issued by WR Hambrecht and Com- pany .

The NEBF beneﬁted ﬁnancially on both accounts. According to the Prospectus, the company owned 883,306 shares of stock at the time of the IPO, worth almost $10.6 million. It also was the lender of record for the “senior secured credit facility,” and was repaid a whopping $37.5 million from the IPO proceeds. In other words, just over half of all the funds raised from the IPO were simply used to repay a huge loan from the national union pension fund. The Prospectus went into some detail about the “senior secured lending facility,” but at the same time raised some intriguing questions. The stated interest rate for that facility of 6.316% came with a caveat: “the amount actually required to satisfy our repayment obligation is based

326 The Union Connection

What Exactly Is the NEBF?

The National Electrical Benefit Fund (NEBF) may be one of the largest financial entities that you’ve never heard of. Managing investments exceeding $11.39 billion for over 481,000 participants (data as of Dec. 31, 2006), the NEBF is a multi-employer, defined benefit pension plan that provides retirement benefits and related benefits to employees in the electrical industry. In other words, it’s a big national pension fund for retired members of the International Brotherhood of Electrical Workers (IBEW) union. Oversight for the NEBF is provided by a 28-person “National Em- ployees Benefit Board,” most of whom are affiliated with either the IBEW or the National Electrical Contractors Association (NECA). As is often the case with financial entities that have limited outside oversight, the NEBF has not been immune to fraud and corruption. Inter- estingly, one of the three non-profit watchdog organizations I was working with, the National Legal and Policy Center (NLCP), had years earlier chronicled those shenanigans via the NLCP’s “Organized Labor Account- ability Project” project. In May 1999 the project’s monthly Union Cor- ruption Update newsletter described a lawsuit by the U.S. Dept. of Labor related to a scam involving real estate loans and investments in Florida that had lost the pension fund millions of dollars. The USDOL ultimately filed suit against two IBEW officials serving as trustees of the NEBF for enter- ing into questionable business arrangements. Both officials later agreed to pay hundreds of thousands of dollars in penalties for their actions, and the union itself had to reimburse its pension fund nearly $5 million. Had Traffic.com founder Dave Jannetta’s connections to top people in the IBEW led to other financial shenanigans with the union’s multi-billion dollar pension fund? It is an intriguing question, and another reason an investigation is needed. upon our lender’s achieving an internal rate of return of 15% on the date of repayment.” What exactly was the difference between a normal interest rate and an “internal rate of return”? 15% interest was an exorbitant rate for a conventional business loan at that time, especially in the 2002-2004 timeframe when the prime rate hovered below 5%. A loan would earn

327 The ‘Smart Road’ Scam

15% interest only if it were considered ultra-high-risk. But wouldn’t such a loan be out of bounds for a huge national pension fund that intrinsically had to be careful and conservative with its members’ funds? The NEBF’s huge loan to Trafﬁc.com and related equity stake in the company didn’t seem ﬁscally prudent. A passage on page 132 of the 184 page Prospectus was even more interesting:

In April 2004, the Company further amended certain terms of its credit facility. The amendment removed the escalating borrowing rates provisions of the agreement in favor of a deﬁned borrowing rate of 15%, lowered its minimum cash balance requirement from $3.6 million to $3.0 million, and established a three-month trailing net loss covenant. This interest rate reduction was retroactive to the inception of the facility in April 2002 and resulted in a cumulative adjust- ment to interest expense of $3.8 million. In addition, the Intelligent Transportation System, or digital sensor network, contract covenant was amended, and now requires the Company to have contracts to build out its Intelligent Transportation Systems network in 17 cities in March 2006, and 19 cities in March 2007.

In other words, the continued availability of the huge “senior secured credit facility” hinged on the company’s success in recruiting cities to participate in the ITIP program, which in turn enabled the company to totally control the new traffic data generated in those cities. Remarkably, this one paragraph essentially highlighted the importance of Traffic.com’s data- lock scheme to its overall growth plan, at least to the huge electrical union retirement fund that was its largest lender and one of its biggest stockholders. In a real sense, creating a monopoly for traffic data was a prerequisite for obtaining monopoly money from the NEBF, pun intended. The above paragraph from the Prospectus also made the connection between the IBEW (through the NEBF) and Traffic.com co-founder David Jannetta even clearer. After all, he was the lead person responsible for recruiting cities to participate in the ITIP program, and the individual who almost always signed the agreements with those cities on Traffic.com’s

328 The Union Connection behalf. Other top executives in the company took lead roles in managing other parts of the company’s key tasks, for example, in developing Trafﬁc.com’s systems and software and marketing their trafﬁc products to radio and TV stations. But Jannetta was the lead guy on the ITIP part of the plan, and had very likely convinced his old friends in the IBEW how important it was for numerous cities to participate so that the company’s monopoly would pay off.

Engaging the Dept. of Labor’s Watchdogs

Over the years, Traffic.com had granted the NEBF warrants to purchase over two million shares of stock, often as low as a penny per share. These warrants meant that the pension fund would not only make a handsome rate of return on its over $30 million in loans to the startup, but would wind up with millions of dollars worth of equity in the company once it went public. (Many of these warrants were exercised prior to the company’s IPO.) An obvious question was how much money did the NEBF ultimately make, taking the loan payoff and value of the various types of stock (common, series E preferred, series F preferred) into account? A related, but in many ways more important question: Did they share their financial windfall with any others—particularly the “public servants” whose help had been critical in putting the underpinning for Traffic.com’s monopoly in place? Over the years, the NEBF had received millions of warrants for Traffic.com’s stock at ridiculously low strike prices. In March 2003, it received a warrant to purchase 1,840,094 shares of Series E convertible preferred stock at an exercise price of $0.01 per share. According to the company’s Prospectus, NEBF exercised this warrant in December 2003. In April 2005 it received another warrant for 350,000 shares of the company’s common stock, also at a strike price of a penny per share. While this award was converted to 116,667 shares at 3 cents/share with the company’s one-for-three reverse split shortly before its IPO, it still represented a pure profit to the big pension fund of almost $1.4 million at the time of the IPO. Had the company shared some of the nearly two million stock war-

329 The ‘Smart Road’ Scam rants it received back in 2003 with its key supporters, including Bud and Bob Shuster, Norman Mineta, and Michael P. Jackson, by giving them each a small fraction of its holdings in the form of a kickback? If they did so, who would ever know? I suggested this possibility in one of my periodic discussions with Ken Boehm, the Chairman of the non-profit watchdog National Legal and Policy Center. Ken told me about the NEBF’s shenanigans that the NLPC had chronicled in their May 1999 Union Corruption Update. He explained that a particular unit of the Department of Labor, the Employee Benefits Security Administration (EBSA), was responsible for overseeing big national pension funds like the NEBF, ultimately to ensure benefits to hundreds of thousands of retired electrical union members. Further, he said, such pension plans are required to annually file a Form 5500 report detailing their financial condition, including the status of their investments. He encouraged me to take a look at the NEBF’s Form 5500 filings both before and after Traffic.com’s IPO, to see if all of the NEBF’s loans and its equity stake in Traffic.com were fully accounted for. In perusing the EBSA’s website, I came upon the name of Jeffrey Hin- man, the Deputy Director for Criminal Enforcement at the EBSA and the top department official tasked with investigating the financial dealings of major national pensions like the NEBF. On February 15, 2007 I left a voicemail message for Mr. Hinman, informing him I knew details of possible big-time fraud involving the huge national pension fund, and had been providing information about it to the FBI’s Public Corruption Unit. The following morning he called me back, and I gave him a brief overview of the Traffic.com scandal and what I thought could be the pension fund’s connection to Traffic.com’s founders—particularly David Jannetta. Mr. Hinman was very interested in knowing about possible malfeasance on the part of the fund’s executives, and asked me to send him additional information as well as the names and contact information for the FBI agents with whom I had been communicating. He said that he would follow up with the FBI. I immediately emailed him contact information for Supervisory Special Agents Velez and Sniegowski and Special Agent Hanzal, along with several background documents about the scandal, including a brand new white paper entitled

330 The Union Connection

“The Connection between the National Electrical Benefit Fund (NEBF) and the Traffic.com Scandal.” On February 21 he responded. “Jerry - I’ve received them and have spoken with our field office in Philadelphia,” he said, adding “Once I have a full discussion with our field office I will contact you.” His diligence in responding (as contrasted with the FBI’s and SEC’s non-response) was encouraging.

A Big Beneﬁt for Trafﬁc.com’s “Friends”

In creating that brand new white paper about the NEBF’s connection to Trafﬁc.com for the EBSA, I came across some very interesting but suggestive wording in the Prospectus issued by Hambrecht & Company, under the heading of “Authorized but Unissued Capital Stock”:

The Delaware General Corporation Law does not require stockholder approval for any issuance of authorized shares. These additional shares may be used for a variety of corporate purposes, including future public offerings, to raise additional capital or to facilitate ac- quisitions.

One of the effects of the existence of unissued and unreserved common stock or preferred stock may be to enable our board of directors to issue shares to persons friendly to current management, which issuance could render more difﬁcult or discourage an attempt to obtain control of our company by means of a merger, tender offer, proxy contest or otherwise, and thereby protect the continuity of our management and possibly deprive the stockholders of opportunities to sell their shares of common stock at prices higher than prevailing market prices.

Former Cong. Bud Shuster and his son Bob, Transportation Secretary Norman Mineta, and DOT Deputy Secretary Michael P. Jackson were all “persons friendly to current management,” weren’t they? This passage in the Prospectus essentially gave Trafﬁc.com’s Board carte blanche authority to give any of these individuals (or anyone else “friendly” to the company) common stock without requiring either the approval of or notice

331 The ‘Smart Road’ Scam to the company’s shareholders. Clearly, such disbursements were completely under the SEC’s radar. “That seems like an open-ended invitation to commit a fraud,” I concluded in my white paper.

A Risky Investment for a Conservative Pension Fund

Unfortunately, the USDOL doesn’t make those Form 5500 annual disclosures available online, and being in central Texas and not Washing- ton, DC, I couldn’t conveniently check them out at the EBSA’s reading room in DC. So I called Bill Allison of the Sunlight Foundation to fill him in about the NEBF’s connection to Traffic.com, and ask him if he might be willing to help dig into it. I shot him an email note following my conversation with Hinman, filling in the details. “Who knows if this is going anywhere—I remain skeptical that the Executive Branch will or even can actively pursue a scandal in the Executive Branch, especially in this Administration,” I said. “So I think we need to keep poking around to see what turns up.” The next day (Feb. 17, 2007), Bill wrote back. He said that he had tracked down the reading room where Form 5500s were available for public inspection. “The office is the EBSA Public Disclosure Room at the main Labor office (200 Constitution Avenue NW), Room N-1513,” he wrote. “And yes, it’s the glory of government disclosure—if you don’t go to the office, you have to file a FOIA request to get them.” Yet another example of how “non-transparent” our federal government really is. Bill said he would try to check it out the following Tuesday. The following Wednesday Bill shot me a summary of his findings so far. The 2002 Form 5500 showed a loan with a par value of $19 million for “Mobility Technologies Inc.” at an interest rate of 7%. No warrants or stock holdings of any kind were listed for the company. The 2000 report showed no connection to Traffic.com at all, and the 2001 report was unavailable. The 2004 disclosure showed how the loan had “morphed” in the inter- vening years. The par value had grown to just over $25.5 million, while the interest rate had dropped to 6.316%. Again, no warrant or stock holdings of any kind in Traffic.com were listed.

332 The Union Connection

By 2005 the par value of the loan had increased to $29.4 million, while the interest rate stayed the same as the previous year (6.316%). The current value of that loan was shown at just under $35.8 million. For the first time, the NEBF’s considerable equity stake in Traffic.com was revealed, with 1,840,094 shares of series E preferred stock (cost: $18,404, current value: “$7,360,376), 334,832 shares of series F preferred stock (cost: $1,004,496, current value: $1,004,496), and warrants to purchase 350,000 shares of common stock (current value: $325,018). The Form 5500 disclosures were just a start, but clearly showed that millions of shares of stock and tens of millions of dollars of loans were involved. Had any of these funds been diverted to individuals who were “friendly” to both Traffic.com and the NEBF? It would take an experienced auditor to dig into the details of the NEBF’s holdings in Traffic.com to make sure that all of the various equity instruments (preferred stock, warrants) disclosed on Traffic.com’s books were fully accounted for on the NEBF’s books. Clearly, the EBSA working with the SEC could find out if any financial shenanigans were involved—if they really wanted to find out. Later that same day Bill Allison shot me another email note, subject “One other thing…”:

The Trafﬁc.com (and Mobility Technologies) investments are surprisingly big -- I say that because this is a group with a ton of money and $29 million doesn’t seem so much when you’re managing $13.9 billion (that’s 2/10s of a percentage point). But if you look at the individual investments, it’s a different picture.

If you look at the cost of investments made in corporate debt, for example (and this is well-diversiﬁed fund, with blue chips, big ho- tels, some tech ﬁrms, etc. etc.), the only ones in the same ballpark as the $29 million on the 2005 form are $9.6 million for an American Express issue, $8.3 million for AICCO, one $11.8 million and one $12.8 million in General Electric bonds, $9.6 million in something listed as Gracechurch Card, $49.9 million in the International Bank for Reconstruction & Development (I’m sure there’s a story there...),

333 The ‘Smart Road’ Scam

$19.6 million in Ibiquity Digital Corporation, and $25 million in MTM Technologies. There are pages and pages of these, most of them somewhere in the $500,000 to $2 million range; I’m sure there are a few companies (General Motors, for example) where if you’d add up all the various bond issues, you’d get to $10 or $15 million, and there may be something like $30 million total from General Electric divided over ten different bond issues, but Trafﬁc.com, MTM, Ibiquity and the IBRD seem to be the real outliers.

Wonder if MTM and Ibiquity have contracts...

It turned out that the companies Bill had identified as the “real outliers”—Traffic.com, MTM, and Ibiquity—shared a common financial connection: all had been recommended to the NEBF by a private investment advisory company called Columbia Partners LLC in Washington, DC. Columbia Partners was also identified in Traffic.com’s Prospectus as the agent and manager for the NEBF’s substantial equity stake in Traffic. com. The bottom line: Bill had found that a huge national union pension fund that should be investing conservatively so as to preserve its members’ precious pensions and other retirement benefits had invested more in Traffic.com and two other high-risk, high-tech startups than in virtually any blue chip company like American Express. On its face this situation seemed very curious, and suggested that some shenanigans might be going on. However, once again it would take the “authorities”—particularly the EBSA and SEC—to get to the bottom of this matter.

The EBSA Starts an Investigation…

I would occasionally send Mr. Hinman information about new developments related to the NEBF’s possible connection to the Trafﬁc. com scandal. In late March 2007 I sent him copies of Bill Allison’s two email messages summarizing what he had found from his analysis of the NEBF’s Form 5500s. In late July I sent him additional information about

334 The Union Connection the individuals whom I strongly suspected had been among the “hidden founders” of Traffic.com. I also provided links to news articles about the Traffic.com scandal in The Hill and National Journal, and Bill Allison’s two new blog postings on the Sunlight Foundation’s “Real-Time Investi- gations” blog. I concluded my note with “I know that you can’t disclose details of an ongoing investigation, but I would greatly appreciate it if you would just let me know in very vague general terms what’s happening (if anything) at your end.” After not receiving any response for several more weeks, in late Au- gust, 2007 I left a voicemail message for Hinman, asking if he could provide me with a brief status report for any investigation the EBSA was conducting into the matters I had informed him about. Hinman returned my call the following day. He said that the EBSA’s Philadelphia office had indeed been looking into my complaint, and that he would have the senior investigator on the case, David Finizie, call me and give me an update. Finizie called a few days later, in early September. In his professional but curt “nothing but the facts” manner, he informed me that the EBSA had taken my complaint seriously, and had in fact conducted a preliminary investigation. He told me that they had asked a number of senior NEBF officials under oath if they were aware of any shenanigans involving their investment in Traffic.com, and the answers universally came back “no.” He also told me that his investigation found that the NEBF made a “shit- load of money” from their Traffic.com loan and equity stake. However, he said, absent more specifics about who might have either provided or received kickbacks, he didn’t have sufficient justification to dig further into the NEBF’s financial records. I was disappointed about the NEBF’s self-imposed roadblock, but appreciated receiving the status report, however short. I was more determined than ever to provide greater specifics about the individuals who might have profited under the table from the NEBF connection. In an email message in mid-November, I sent both Hinman and Finizie a link to my new white paper that traced the legislative history of the ITIP/TTID program and Traffic.com’s monopoly, and reiterated my belief that Shus- ter, Jackson, and others may have received kickbacks from the NEBF. I would continue to occasionally communicate with both individuals, and

335 The ‘Smart Road’ Scam urge them to work with the audit team from the USDOT Inspector Gen- eral’s Ofﬁce who were looking into the TTID program and Trafﬁc.com’s monopoly. However, I would never hear anything more from the EBSA’s investigators.

The IBEW’s Surprise Role

Starting in early April 2008, I began to send periodic email messages containing new information I had discovered about the Traffic.com scandal to a group of over 400 of my former ITS colleagues, including virtually all of the ITS experts in the Federal Highway Administration and key people within state DOTs and the private sector. I initially started sending these emailings after ITS America’s President Belcher had tried to recall his own email message informing his constituents about the US- DOT Inspector General’s audit (see Chapter 22, “’Recalling’ an Email Message.”) I wasn’t at all sure that the FHWA’s own ITS experts even knew about this audit—after all, the FHWA Office of Operations was undoubtedly embarrassed about this whole matter and had not mentioned a thing about the audit on its own website. At least some of the ITS experts within the FHWA would know first-hand about the pressure and influence that Messrs. Mineta and Jackson had exerted for years on Traffic.com’s behalf, and I wanted to at least give them the opportunity to tell the IG’s audit team what they knew. In subsequent messages to this group, I provided information about Mineta’s and Jackson’s connections to Traffic.com, Mr. Mineta’s failure to disclose his financial windfall in Trimble Navigation stock options to the U.S. Office of Government Ethics, and POGO’s letter to the Inspector General urging that the IG’s audit team conduct a thorough audit rather than just a surface review. I also offered to share draft chapters of my developing expose (then called “Outing Traffic.com”) with anyone who would provide useful feedback. A handful of individuals accepted my offer. Out of left field one of my old colleagues (who will remain anonymous, for obvious reasons) passed along an interesting tip. He said that he knew that the IBEW had actively lobbied states to sign up for the ITIP pro-

336 The Union Connection gram, and urged me to send Freedom of Information Act (FOIA) requests to the departments of transportation that had already agreed to participate, in the chance that those requests would elicit such communication. So starting in mid-September 2008, I issued FOIA requests to a dozen or so agencies that had signed up for the ITIP program and whose websites provided instructions for FOIA requests. Amazingly, less than a week later I would get a “hit” from the Michi- gan Department of Transportation (“MDOT”), conﬁrming that hot tip (see Figure 24-1). On November 3, 2003, Jeff Radjewski, the Business Man- ager/Financial Secretary for IBEW Local 58 and Charles Kerszykowski, the Business Manager/Financial Secretary for IBEW Local 17, jointly wrote to Gloria Jeff, MDOT’s Director, urging MDOT to participate in the ITIP program.

Figure 24-1. The IBEW wrote directly to MDOT Director Gloria Jeff in November, 2003, urging the agency to participate in the ITIP program. The pivotal question? Exactly why did they do so?

337 The ‘Smart Road’ Scam

“The International Brotherhood of Electrical Workers has been extremely supportive of funding at the federal level for the Intelligent Trans- portation Infrastructure program,” Radjewski and Kerszykowski wrote. “It is our understanding that $2 million in federal funding is now available to bring this important technology to the Detroit area, but requires a local match of $500,000. The IBEW is hopeful that the Michigan Department of Transportation will help make this project a reality.” “This infusion of federal monies will create a state of the art highway congestion alert and safety system,” they continued. “Moreover, it will also provide a greatly needed boost to southeast Michigan’s economy. The project will offer immediate job opportunities for electrical workers, many of whom are facing work shortages due to the economic down- turn.” “We are confident that we do not need to convince you of the positive impacts of this technology or of Michigan’s need for additional jobs, but finding the required match is no doubt difficult considering the current budget picture. If the IBEW or our thousands of members in Michigan can be of any assistance to you in this task, we would urge you to contact us. We will be happy to meet with you or with other elected and appointed officials if you believe it would be helpful in bringing this needed infusion of federal transportation funding into southeast Michigan. Thank you for your assistance in moving this project forward.” That letter was intriguing on two counts:

1. It implied that the ITIP program would make a signiﬁcant impact on the job picture in southeast Michigan, but in reality the work involved for the electrical union’s members was both small and short-lived. Once the pole-mounted radar trafﬁc detectors were installed and linked to the network, the bulk of their job would be over. 2. The union was seemingly offering to provide at least a portion of the “local match” of $500,000 that MDOT would otherwise need to come up with.

MDOT’s response nine days later by Tony Kratoﬁl, P.E., the Deputy Region Engineer, was pleasant but noncommittal. “…before we invest in

338 The Union Connection the expansion of the ITS system with ITIP, we feel it is prudent to complete this [ITS] strategic planning effort,” Kratofil concluded. Nine months later, on August 4, 2004, MDOT would indeed sign an agreement with Traffic.com to participate in the ITIP program. It would turn out that the IBEW’s generous offer to help come up with the local agency match was unnecessary, as the agreement would stipulate that the “balance of funding” beyond the $2 million in federal funds—in other words, the $500,000 “non-federal match”—would come from “private sector partners.” That contribution from the “private sector partners” was pure fiction, of course, since it didn’t involve any new funds in the program to match the federal dollars. Traffic.com was simply given credit for its own investment in its own profit making business. I heard through the grapevine from a well-placed source that MDOT would never have agreed to participate in the program had the normal local agency cash match not been “waived” in favor of this substitute “match” that really wasn’t any kind of match at all As of early November 2008, none of the other DOT’s I had sent FOIA requests to had discovered similar correspondence. I suspect that years earlier other IBEW locals had sent similar letters to other state DOT directors, but these letters had long ago been either tossed or filed away where no one would ever think to look.

Conclusion

The key question was whether the International Brotherhood of Elec- trical Workers Union was urging participation in the ITIP program out of a sincere desire for more local jobs for its members—however few and temporary those jobs might be—or was a much more compelling (and lucrative) incentive at play? Only the authorities, who had access to data and sources I didn’t, would be able to deﬁnitively answer that central question.

339 25

(Almost) Keeping Them Honest

NN’s popular evening news program, hosted by Anderson Cooper Cand appropriately titled “Anderson Cooper 360” or “AC360,” features a recurring segment called “Keeping Them Honest.” “Them” refers to the powers-that-be, whether high-level elected and appointed government officials or corporate executives. The notion is there are plenty of serious shenanigans around that require CNN’s investigative news teams to expose to the light of day in order to “keep them honest.” Indeed, such exposure is more important than ever these days, in part because of the rapid decline of investigative journalism as more and more daily newspapers become financially stressed. Woodward’s and Bernstein’s successors are an endangered species if there ever was one. CNN’s “Special Investigative Unit” that feeds stories to AC360 and other network programs seems a reminder of an earlier time, when television news programs not only had the resources but the mandate to tell their viewers what was going on in the real world. Often, such stories would involve influential but ethically-challenged politicians, greedy corporate executives, or both.

340 (Almost) Keeping Them Honest

Early Efforts to Engage CNN

Starting in early 2006 I began to send tips about the Traffic.com scandal to CNN’s tip line, but never heard back. From my own experience, I’ve come to the conclusion that such tip lines are a super long shot at best, a total waste of time at worst. Cable TV news stations undoubtedly receive hundreds if not thousands of tips a day, and it must be nearly impossible to tell the pork loin from the baloney. My experience with using these tip lines suggests that the tips are typically filtered by a junior-level staff member (possibly even an unpaid intern) with the responsibility of forwarding the rare hot tips to the appropriate department. Such junior staffers are probably looking more for “sexy” stories involving Hollywood types than intricate cases of political malfeasance. While these staffers undoubtedly knew of Michael Jackson’s travails, the chances were one in a thousand that they would know the first thing about Michael P. Jackson, the former Deputy Secre- tary of both the Departments of Transportation and Homeland Security. Michael P., of course, had played a prominent role in the long-running federal scandal that I knew about. I’ve also learned over time that the on-air reporters (particularly big- name reporters or anchors) often do little of the legwork behind investigative pieces. Such work is more often performed by what are called “producers.” Check out the credits some time for a major news segment on 60 Minutes, and you’ll see the names of a bevy of producers, senior producers, and executive producers. Although their titles don’t provide much of a clue about what they do, these are really the investigative journalists behind most TV news stories. The on-air talent may influence an investigative piece around the margins, but such individuals mostly just read stories off teleprompters that were largely investigated and written by the team of producers. Dan Rather may have ultimately taken the fall at CBS for a supposedly inaccurate story about President George W. Bush’s military service during the Vietnam War, but his long-time producer Mary Mapes was most directly responsible for its content.

341 The ‘Smart Road’ Scam

“Up to My Eyeballs” in the Same Planted Story That Everybody Else is Covering

My attempt in mid-2008 to engage CNN’s investigative staff was not my first contact with the network. In late August, 2006, after watching one of the frequent news reports on CNN by Andrea Koppel, CNN’s top Capitol Hill Correspondent, I got the notion that Andrea might be intrigued by the big ongoing scandal in the Bush Administration involving Traf- fic.com that had largely been created on Capitol Hill. After all, Andrea was the daughter of acclaimed TV newsman Ted Koppel, the long-time host and chief correspondent for ABC TV’s Nightline program. Surely Andrea, having witnessed her dad’s unrelenting pursuit of serious news growing up, would quickly see that a scandal involving no fewer than four senior people in the Bush Administration (Mineta, Jackson, Peters, and Holman) and three consecutive Chairmen of the House Transportation & Infrastructure Committee (Mineta, Shuster, and Young) was big news. I was hoping that she would want to be the person to break that news wide open. After all, wasn’t that the ultimate prize for a reporter? So on August 30, 2006 I sent Andrea an email note, alerting her about the Traffic.com scandal. “I enjoy your newscasts on CNN, and feel that you always seem to cut through to what’s really going on,” I started my message. I proceeded to summarize the scandal, and highlighted the roles that Shuster, Mineta, Jackson and others played in it. “I would be willing to give you comments on the record if we can first discuss and mutually agree to the parameters of those comments,” I concluded, adding “my goal is not personal exposure but rather to expose this scandal to the light of day.” Andrea responded almost immediately. “Dear Jerry, yes I’d be very interested in learning more about this story,” she said. I won’t be able to do the reading you recommended until tomorrow but in the meantime please feel free to forward any additional information you think I’d find helpful!” “For a lay person such as myself—why should folks care if traveler information is NOT shared in a widespread manner?? Kind regards, An- drea.”

342 (Almost) Keeping Them Honest

I proceeded to answer her question which, frankly, I found disconcert- ing. Wasn’t it obvious that the better informed the traveling public was about current traffic conditions, the more easily they would be able to get where they wanted to go on time and the more effective our roadways would be? I explained that Traffic.com’s “data lock scheme” actually limited the availability of taxpayer-subsidized real-time information about traffic conditions in many of our nation’s most traffic congested cities where travelers needed it the most. The substantial negative impact of their data monopoly was, it seemed to me, obvious. Andrea apparently either didn’t understand the subtleties of my explanation or, if she did understand them, was just so used to political malfeasance that she didn’t find this scandal any big deal. However, it was also possible that because I had alleged that so many senior officials from both political stripes were involved in this scandal, she figured she would get in a lot of trouble with her sources on Capitol Hill if she exposed it. After all, a Capitol Hill correspondent without Capitol Hill sources with which to correspond would be dead in the water. Over the next 4 plus months I would send Andrea a dozen more email messages with much of the same information I was sending the FBI’s Public Corruption Unit. Those messages included more details about how the scandal worked, information about DHS Deputy Secretary Jackson’s likely role in it, and new details I was discovering about recently departed Transportation Secretary Mineta’s failure to disclose details of his up to $1 million income from Trimble Navigation stock options while a Cabinet Secretary. Despite my best efforts, I would only receive a single response back from Andrea. On January 8, 2007, as I was lining up meetings for my trip to Washington DC (see Chapters 9 and 10), I shot her a quick note. I wanted to tell her that I was going to be in DC at the end of the week and that I would like to meet with her to provide more details of this scandal. I also mentioned that I had recently discovered a smoking gun related to former Secretary Mineta’s financial disclosure. Her response, sent from her Blackberry, was almost instantaneous. “Hi Jerry—Would love to get together but I’m afraid I’ll be up to my eyeballs with the first 100 hours agenda of the new Dem majority. CNN

343 The ‘Smart Road’ Scam is determined to cover every twist and turn. But keep me posted on the developments in your investigation! All the best – Andrea Koppel, Capi- tol Hill Correspondent, CNN Washington.” I was simultaneously disappointed and, frankly, insulted. I was offering to share evidence I had discovered of what I knew was a major federal scandal, and she instead was pursuing a story that had essentially been planted by new Speaker of the House Nancy Pelosi about the new Democratic majority’s “100-hours agenda.” My evidence might lead to an exclusive blockbuster for CNN, while the story she wanted to pursue would be just another version of the same story that every member of the alphabet soup of TV news outlets (ABC, NBC, CBS, MSNBC, FOX, etc.) was pursuing, as well. “My story” involved fraud and corruption on the part of some very high-level “public servants” who were supporting a scheme that negatively impacted the mobility of millions of Americans; “Nancy’s story” was little more than public relations that in the end amounted to nothing. (Congress only passed “low-hanging fruit,” rather than any legislation of consequence, in those first 100 days after the Democratic Party assumed control of Congress after the November 2006 election.) In February 2008, Andrea Koppel left CNN to become Senior Vice President and Director of Communications for M+R Strategic Services, which provides public and media relations services to leading nonprofit organizations working on behalf of the public interest. When I learned of her transition from correspondent to PR executive, I couldn’t help but think that while her title and employer may have changed, she was still largely fulfilling the same role at M+R that she had at CNN—what is commonly called advocacy journalism. I had tried to engage someone who I thought wanted to pursue investigative journalism, but had missed the mark.

Coming at CNN from All Angles

While discouraged by the results of my earlier efforts to get CNN to look into the Trafﬁc.com scandal, I continued to explore possible ways to get the television news network to expose this scandal. By mid 2008,

344 (Almost) Keeping Them Honest

I had largely concluded that sending tips off into the ozone via a news organization’s tip line was a failed strategy. Instead, I had decided to directly contact key people in a news organization’s hierarchy. On June 26, 2008, after performing several Google searches, I located the name and email address of David Doss, Executive Producer of CNN’s Anderson Cooper 360. I sent Doss a detailed email message, summarizing what I believed were the key points in all the fraud and corruption in the USDOT that I had discovered. “I know that AC360 likes to ‘Keep ‘em Honest’ and frequently exposes wasteful federal earmarked programs, so I would like to give you the opportunity to get a scoop on a big ongoing scandal that involves a number of senior officials in the Bush Administration… and negatively impacts the mobility of millions of Americans,” I said. I then highlighted several of what I thought could be important news hooks for a CNN piece. I concluded my message with “This scandal is absolutely bipartisan – both Republicans and Democrats are right in the middle of it, and both Republicans and Democrats – led by Senator Orrin Hatch – are trying to shut it down.” Since I didn’t exactly know what aspect of the scandal—either the traveler’s mobility angle or the high-level federal official malfeasance angle—would most resonate with CNN, I included information about both. Later that evening, I received a response from Doss. “Thanks Jerry – A very thorough note – I am forwarding this to our investigative team to ask them to assess if this is for us….You will hear from us if we proceed! All best. David.” David’s response was encouraging, and things with CNN would seemingly fall into place quickly. The next morning, June 27, I received a phone call from Drew Griffin, a CNN investigative correspondent to whom Doss had communicated, who said that he was very interested in the Traffic.com story. I proceeded to send him additional background information about it, including copies of two email messages I had recently sent to 400+ of my former ITS colleagues explaining the connection of the scandal to Shuster, Mineta, Jackson, and others. I also provided details of our ill-fated article about this scandal that Peter Samuel and I had hoped to publish in Transportation Technology International magazine. (For more

345 The ‘Smart Road’ Scam details about that, see Chapter 22). I figured that I might as well lay out the entire story of the Traffic.com scandal as best I could. Later that same Friday afternoon (June 27), Drew sent me a short note. “Jerry – thanks for all this info. I have assigned a producer and will get working on it. No need to send more until we call you again. (Swamped.) thanks. Drew.” That producer would turn out to be David Fitzpatrick, an Emmy Award winning senior producer for CNN’s special investigations unit. On Mon- day morning (June 30), Fitzpatrick would call me to introduce himself. It was clear to me from my conversation with him that he was most interested in how an earmarked TTID program could lead to a program that was clearly not in the public’s interest. So for his additional background information I emailed him a copy of my white paper describing Traffic. com’s troublesome data-lock scheme. He thanked me in a return message and said he would contact me further that same day.

The On-Camera Interview

Later that afternoon he sent another message. “Jerry: Drew Grif- ﬁn, as it happens, will be in Dallas on another story this week,” he said. “Could you be available Thursday morning in Buda for an on camera interview with Drew that would begin around 10:00 am? If so, please shoot me directions. I have left a voicemail to this same effect. Best, df.” I was truly amazed. After literally years of encouraging and cajoling the press to cover this scandal, it had taken just a few days to go from unsolicited email message to a CNN Executive Producer to an appointment for an on-camera interview with a top investigative correspondent for the longest-established cable TV news channel. I readily agreed to the on-camera interview, and forwarded instructions for how to get to my place out in the country just south of Austin in the little town of Buda, TX. Drew Grifﬁn’s own plans would change dramatically in the next few days. On July 2, former Colombian Presidential candidate Ingrid Betan- court and three Americans who had all been held hostage for years have been rescued from by the leftist guerrilla group known as FARC. The

346 (Almost) Keeping Them Honest three Americans were expected to arrive via helicopter to Brooke Army Medical Center in San Antonio late that night for what was called a “re- integration,” and Griffin had been sent to San Antonio to report on their arrival. I was concerned that Griffin’s last minute assignment could extend into early Thursday morning and might scuttle our scheduled 10:00 am interview, but that was not the case. Around 10:30 pm I called Drew’s cellphone number to see if anything had changed, and he assured me that our discussion would happen as planned. Early the next morning I received an email note from Griffin. “Jerry - - Photographer Dave Roberson will be arriving about 9:30 am. I’ll be right behind him. We’d like to set up the interview in an ‘office style’ setting in your house. Thanks and see you soon. Drew.” Earlier that week I had told my friend and neighbor Franz, the retired registered investment advisor, that CNN wanted to interview me about the Traffic.com story. I called Franz to invite him over to my house to watch the interview. I also had an ulterior motive—I wanted him to photograph it. He was very excited and came right over. Sure enough, right on time, CNN contract cameraman Dave Roberson (who lived in a neighboring community in Southwest Austin) arrived in his van, filled with video cameras, huge tripods, and associated recording and communications equipment. (He told me that his investment in the equipment in his van was well over a quarter of a million dollars.) As he had said he would be, Drew was right behind Dave. Dave quickly set up an impromptu recording studio in my home office (see Figure 25-1.) It was clear that both Dave and Drew were consummate professionals who had done this sort of thing countless times before. As newbies, both Franz and I found the whole process exciting and intriguing. At the same time, I also felt stressed about the possibility of my bald head and radio looks appearing on a nationwide TV news program. Would I come off as credible? My knowledge that it was all for a righteous cause helped calm my nerves and rapid heartbeat. CNN’s coverage of the Traf- fic.com scandal would, once and for all, give it the public exposure this big ongoing federal scandal desperately needed. While Dave was tweaking his equipment, Franz and I carried on a

347 The ‘Smart Road’ Scam casual conversation with Drew. It turns out that for years he has made a specialty of news stories highlighting earmarked programs that are bad deals for taxpayers and the public. He told us that on multiple occasions the negative exposure he had given to such programs had literally caused them to shut down and go away a few months later. I was certain that the TTID program in its current form needed to suffer that same fate.

Figure 25-1. Dave Roberson (in background) took just a few minutes to expertly transform my home ofﬁce into an impromptu newsroom.

Once Dave had finished all the adjustments on his equipment, Drew and I sat on chairs in the center of my office and the interview began (see Figure 25-2). I thought it went quite well. Drew had a good grasp of the political gamesmanship that had resulted in Traffic.com’s monopoly, of how the monopoly had profited the company, and of the counterproduc-

348 (Almost) Keeping Them Honest tive aspects of Traffic.com’s data lock scheme. Either Dave Roberson or Drew Griffin left behind a copy of an email message to Roberson from producer Dave Fitzpatrick that had laid out the news hook that Fitzpatrick had chosen for CNN. “Hi Dave,” Fitzpatrick wrote. “I need a crew in Buda, TX on THURS- DAY JULY 3 for an interview that will be conducted by Drew Griffin, the CNN investigative correspondent. It is with a guy named Jerry Werner, who is a former Department of Transportation employee who has some fascinating things to say about a government “earmark” – essentially a no bid contract – to an outfit called Traffic.com that has resulted in a huge payday for them, but of course taxpayers getting stuck.” Except for the part about me being a “former Department of Transpor- tation employee” instead of a subcontractor, Dave Fitzpatrick had done an accurate job of summarizing the scam in a few concise words.

Figure 25-2: Drew Grifﬁn asked me several straightforward questions about the Smart Road Scam.

349 The ‘Smart Road’ Scam

The interview lasted perhaps 5 minutes at most, and Drew’s questions were very straightforward. Clearly, he had read the background information I had sent CNN and had been briefed well by his producer, Dave Fitzpatrick. I would guess that Drew was following the time-proven approach he had used in exposing many other earmarked programs that were primarily designed to line someone’s pockets rather than to serve the public interest. Most of my remarks just served to validate Drew’s own observations about the folly of the TTID program. In one of my answers I stressed the key role that Cong. Don “Bridge to Nowhere” Young had played in creating Traffic.com’s monopoly by undercutting Senator Hatch’s efforts to open up the TTID program to competition. (After the interview, Drew told me that he found Young’s connection particularly interesting, and asked me to send more information about it to his producer Dave Fitzpat- rick.) I took exception to only one of Drew’s on-camera questions, about whether an earmarked program like this one was a colossal waste of taxpayer dollars or not. He had apparently concluded that any federal funding for specialized ITS projects like this one was a total boondoggle. I disagreed, saying that the problem with the TTID program was that it had been created for the wrong reason—to financial benefit just one company, at the expense of the traveling public. That fundamental problem could be solved, I asserted, if this program were replaced with a new initiative designed from the outset to benefit the public and support the broader traveler information market. Because I had disagreed with the basic premise of his question, I wondered whether or not that question and answer would find its way into the news piece that (I thought) CNN would be airing soon. Once the interview was over, Drew said that he wanted to get some video of us talking as we were walking out of my house, for inclusion in the news piece. Such coverage is often referred to as “B-roll” footage. So Dave Roberson took several video shots of Drew and me walking and talking on the sidewalk in front of my house (see Figure 25-3). The video recordings of our interview and the B-roll footage done, Drew didn’t waste any time heading off to his next reporting assignment.

350 (Almost) Keeping Them Honest

After Franz and I exchanged good-byes with Drew and Dave, we had every expectation that the news of the Trafﬁc.com scandal was ready to “pop” via a segment on one of the U.S.’ most watched television news programs.

Figure 25-3. Following the interview, CNN made a couple outside video shots of Drew and I chatting together for the “B-roll.”

“Our story will likely be on the air next week some time”

Later that same day I sent a note to producer Dave Fitzpatrick, saying that I thought the interview had gone well. I also provided the details of Cong. Don Young’s role in setting up Trafﬁc.com’s monopoly that Drew had asked me to send Dave. Early the following week Drew interviewed my friend and Sunlight Foundation Senior Fellow Bill Allison on-camera about the Trafﬁc.com scandal. (See Chapter 17, “Finding Sunlight.”) A few days later Drew also interviewed Senator Hatch about it. I could only conclude that CNN’s

351 The ‘Smart Road’ Scam considerable investment in both time and resources to this story meant that it was in the bag. On Thursday July 10, a week after our discussion in Buda, Drew sent me a short note from his Blackberry. “Jerry. I just realized my thank you’s to you and my photographer got criss crossed, so my thanks to u is electronic. Great meeting u and great story. Drew.” I was more convinced than ever that this story would break in the near future, and I couldn’t wait. The next day, Dave Fitzpatrick emailed me a list of political contributors to Cong. Don Young’s cause that he had found on the Center for Responsive Politics’ website, along with the note: “Jerry: These are some names to Don Young’s Political Action Committee. Anyone here ring a bell with any traffic.com connections? Thanks, df.” “The one that jumps right out at me is C.J. Zane, who was Don Young’s Chief of staff for 8 years,” I replied. “He was likely one of Traffic.com’s key lobbyists who got Young to do what they wanted, and available documentation shows that connection.” (See Chapter 20, “Pay-to-Play,” for more information.) Fitzpatrick was clearly tracking down the important political connections related to this story, which was an excellent sign. On July 23, I sent Dave Fitzpatrick a heads-up about the Project on Government Oversight’s letter to DOT Inspector General Scovel, urging the IG’s office to conduct a thorough audit of the TTID program back to the earmarked programs inception, when the underpinning for Traffic. com’s monopoly was first put in place. POGO’s concern, expressed by their General Counsel Scott Amey, was that the government watchdog was going to conduct “a more limited audit into whether or not some narrow aspect of the statutory language may have been satisfied.” That concern was based on a report Sen. Hatch’s Legislative Assistant had given me following the recent briefing about the audit’s status he had received from the OIG’s team. His clear impression was that the OIG’s audit team was pursuing a very narrow set of issues. Fitzpatrick replied just two hours later: “Hi Jerry. Thanks so much. Our story will likely be on the air next week some time.” In the popular vernacular, the news was all good.

352 (Almost) Keeping Them Honest

Some Very Carefully Worded Answers to CNN’s Questions

It turns out that the story did not, in fact, air the following week (or the week after that or the week after that). On Monday, July 28, Dave Fitz- patrick forwarded an email message to me that he had received nearly two weeks earlier from Traffic.com’s outside Public Relations counsel, Bob Richter, President of Richter Media. Dave had sent off a number of questions to Traffic.com to get the company’s take on several of the key issues involved in CNN’s story. His questions had apparently been forwarded on to Richter for his reply. “FYI – these are the official responses from Navteq Jerry. Very carefully worded, I presume,” Dave’s note said. Indeed, Dave was right on the money. Richter’s responses were all carefully worded, using some combination of:

• Flowery PR language, extolling the virtues of the company and its programs, or • Half-truths, designed to make the company’s efforts look better than they truly were, or • Outright lies

Dave asked me to comment on Navteq’s responses. In a nutshell, here are CNN’s questions, key elements of Richter’s responses, and my corresponding rebuttals:

CNN’s Question 1: History of trafﬁc.com -- when did it begin? What were the ground rules under which the $50 million federal earmark was awarded?

• Richter’s response: Touted that Trafﬁc.com had agreed to “provide local and state governments with access to all the data collected using the federal funds for use in their internal operations.” Contended that it had “created a system that provided consumers with broad access to trafﬁc data to meet the requirement to provide private technology commercialization initiatives.”

353 The ‘Smart Road’ Scam

• My analysis: Almost every aspect of Trafﬁc.com’s answer was misleading. “For use in their internal operations” was code language for “can’t use the data to provide traveler information to the public. The TTID program was actually designed to only primarily help a single company’s “commercialization initiative” at the expense of much of the rest of the traveler information market. “Also, you’ll note that he never actually answered your question about how the $50 million earmark came about, or particularly how Trafﬁc.com ‘gamed’ the political system to get it in place,” I told Fitzpatrick.

CNN’s Question 2: After the original construction of the solar panel collection points, how much has Navteq/trafﬁc.com invested in up- grades?

• Richter’s response: Traffic.com had contributed $92.8 million to create and sustain traffic operations and tens of millions of additional funds. “With the exception of 511 services, NAVTEQ/Traffic.com is now making these combined capabilities available to DOTs for free,” Richter contended. • My analysis: “That’s so misleading as to really be a lie,” I told Fitz- patrick. “The DOT’s cannot use the most valuable information from this publicly financed program to provide their own traveler information on roadway message signs, their 511 ‘national traveler information system,’ or even to provide travel times or detailed traffic speeds on their own websites.”

CNN’s Question 3: As you know, there’s been some pointed criticism from some members of Congress, claiming in effect that trafﬁc.com has been awarded a monopoly on data that is very proﬁtable.

• Richter’s response: Traffic.com has yet to make any profit on traffic data. The original award to Signal Corp. (with Traffic.com participating as a subcontractor) was fully competitive. Also there is no monopoly, but rather “a thriving, competitive traffic collection industry.”

354 (Almost) Keeping Them Honest

• My analysis: Once again I explained how Richter’s responses were misleading to the point of being untrue. I pointed out that their primary profit-making business is in selling traveler information, not selling raw traffic data per se. I explained how Traffic.com’s monopoly negatively impacted traveler information on three different levels: 1. Innovative traffic sensor companies like Wavetronix and Speed- Info were largely locked out of business in the many of the cities that had signed up to participate in the TTID program; 2. Both large (Westwood One/Clear Channel) and innovative small (TrafficGauge) commercial traveler information providers were negatively impacted, because they could not access the TTID program’s publicly subsidized traffic data in 27 big cities; and 3. The local public-sector transportation agency was typically prevented from using the most useful TTID data for their own traveler information services (such as on roadway message signs or 511).

CNN’s Question 4: Can local or state agencies access all of the data collected by your sensors? Or are there restrictions in place?

• Richter’s response: “Local and state agencies have access to all the sensor data.” We also provide some additional data collected solely at NAVTEQ expense that further enriches this trafﬁc data. Local and state agencies can use any and all of the data in their internal operations to op- timize state trafﬁc information systems. • My analysis: “Very misleading – really a lie,” I told Fitzgerald. “The relevant issue isn’t ‘access,’ whatever that means, it’s ‘use.’ Local and state agencies cannot use the most valuable real-time data for their own traveler information purposes, such as 511 or providing travel times on their own roadway message signs.”

CNN’s Question 5: Business competitors in Utah and Washington State claim trafﬁc.com has a huge unfair advantage--a big government contract that essentially got your business started. What do you say?

355 The ‘Smart Road’ Scam

• Richter’s response: The process for selecting Traffic.com was open to any pre-qualified bidder and their subcontractors. “We are not clear on why the competitors did not participate,” he said. • My analysis: “Very misleading,” I said. “First off, they utilized a GSA scheme that had never before been used for an ITS program like this one and that was outside of the normal USDOT procurement processes. Sec- ondly, they only ‘won’ a small pilot program award, but then used their extraordinary political influence to turn it into a nationwide sole-source procurement (e.g., monopoly).” “Boy, is this disingenuous,” I said, in response to Richter’s statement that Traffic.com wasn’t clear why its competitors didn’t participate in the original solicitation.

CNN’s Question 6: Do you have a general ﬁgure on how much trafﬁc. com has spent on lobbying in the past two to three years?

• Richter’s response: Since NAVTEQ has been involved, we have spent less than $25,000 on federal lobbying. • My analysis: “Very misleading, and typical of all their answers,” I told Fitzpatrick. “All of the ‘heavy lifting’ of their lobbyists happened long before NAVTEQ acquired Trafﬁc.com in 2007. According to The Hill, the company spent over $900K in lobbyist fees through the early years of the program.

The next day after I emailed my analysis of Traffic.com’s answers to CNN’s questions to Dave Fitzpatrick, I called him. “Did you have any follow-up questions you wanted to ask me about my analysis of Mr. Richter’s very misleading responses?” I asked. “It makes perfect sense to me,” he said. Since he apparently now saw through what he had earlier characterized as Traffic.com’s “carefully worded” responses, I felt that the final hurdle in getting the news story on AC360 had surely been surmounted. Nothing related to my efforts to “out” this scandal has ever been that easy, though, and it wouldn’t be in this case either. Dave said that he would be taking a well-deserved vacation in the next couple days, which meant that he wouldn’t be able to put the final touches on the Traffic.com

356 (Almost) Keeping Them Honest story until mid-August at the earliest. On August 18, I sent a note to Dave Fitzpatrick, starting off with “Hope you had a great vacation.” I had earlier sent him a copy of Peter Samuel’s and my ill-fated article for Trafﬁc Technology International magazine (see Chapter 21, “Intimidating the Trade Press”). So I wanted to let him know that a version of that same article (titled “The ‘Smart Road’ Scam”) would be appearing shortly in Regulation magazine. My real purpose, however, was to try to keep our story on CNN’s front burner. Three days later, Dave responded. “Jerry: so sorry for the long delay in replying,” he said. “Yes, I’m back and have been snowed with other things. A couple of things are now holding us up before we go to air:

• Did the original contract from DOT say that the data collected with the $50 million be made available free to users? • Trafﬁc.com’s answers to my email questions say that local transit authorities already have this data and need not pay extra. I know that is probably wrong but I need speciﬁcs on why it is wrong.

“Please forgive me if this sounds like old news to you but I want to get this on tv and I have to satisfy my bosses.” I immediately wrote back with answers. The first question seemed to be the most important. I’m sure that Dave wanted the story line to be as simple as: the USDOT required the company to make all the data available free to users, but they didn’t do so—a cut-and-dried case of a contract violation. Unfortunately, it wasn’t that simple, and I told him so. The reason that the contract did not require data to be freely available to users was that this scheme had been conceived and written into law by Traffic. com and its legislative supporters (Shuster et. al.), who wanted Traffic. com to effectively own and control the most valuable data. The USDOT had not set the program’s data usage requirements, Traffic.com had. I told Dave so in so many words. The second question was much less nuanced and more straightforward. The big issue wasn’t whether or not the local authorities had the data; it was whether or not they could use the data. The bottom line: they could not use the most valuable data from this program without pay-

357 The ‘Smart Road’ Scam ing a substantial added fee. The op-ed piece the previous fall in the At- lanta Journal-Constitution had been right on the mark when it called the TTID program “highway robbery” and “one of the oldest con games in the book.” I again called Dave the following day to make sure he understood my answers, and he said that he did. By this time (late August 2008), however, the political conventions were right around the corner and politics was dominating cable TV news coverage. A week after my last conversation with Dave Fitzpatrick, Sena- tor John McCain would choose Alaska Governor Sarah Palin as his running mate. For weeks leading up to the November election, numerous reporters were scrambling to get the scoop about Gov. Palin’s life and views. In early September, Drew Griffin would fly to Alaska to conduct an exclusive interview with Gov. Palin’s brother-in-law, Alaska Trouper Mike Wooten. Persistent rumors suggested that Palin had inappropriately tried to get Wooten fired. A few weeks later Griffin would score a one-on- one interview with Gov. Palin herself . Over the next couple months Drew Griffin would work on a number of different stories, some related to the election and its aftermath and some not. He reported stories related to the group ACORN’s controversial efforts to get out the vote by low-income voters, stories about the financial bailout, and a story about credit card “rate-jacking.” But no story about, as Dave Fitzpatrick described it, Traffic.com’s involvement in a scheme about “taxpayers getting stuck.” For most of those stories, Drew worked with a producer other than Dave Fitzpatrick. From a search of CNN’s website, I found reference to stories Dave worked on about the “fat cats” involved in the stock market’s precipitous slide, and a very interesting story involving a government whistleblower. It turned out that an auditor by the name of Bobby Max- well had described the “cult of corruption” within the small agency he worked for that was part of the U.S. Interior Department. The names and specific issues were different, of course, but there were still clear similarities between Maxwell’s observations within the Interior Department and mine within the Transportation Department. We were both trying to expose instances of where industry officials had influenced

358 (Almost) Keeping Them Honest government to do their bidding—ultimately to the detriment of the public interest. “Maxwell, a registered independent, said the shift in attitude at the agency began about seven or eight years ago, about the time the Bush Administration came into power. He said he was discouraged from aggressively auditing oil companies,” said to a web version of the story attributed to Fitzpatrick and Dan Simon. The Traffic.com scandal, of course, had also flourished during the Bush Administration with the federal government’s push for so-called public-private partnerships. It was possible that because of Transporta- tion Secretary Peters’ role in the Traffic.com scandal that the USDOT Sec- retary’s office was likewise discouraging the USDOT Inspector General’s office from conducting an aggressive and wide-ranging audit of the TTID program. The similarity in our stories made me wonder why what investigative correspondent Drew Griffin had described as a “great story” had not (yet) appeared anywhere on CNN, least of all on Anderson Cooper’s marquis news program. Online research into Navteq/Traffic.com’s outside public relations council Bob Richter provided a possible clue. Although I had never heard of Bob Richter’s firm Richter Media, his own bio touted his experience as a “storyteller” who regularly worked with both print and television media. “In the broadcast area, Bob has sealed airtime on outlets such as NBC Nightly News, CNN, Fox, New York One, Bloomberg, NBC News, Inside Edition, CBS Marketwatch, CNBC’s Power Lunch, NPR’s On the Media, and Charlie Rose,” it said. Had Richter gone beyond just the email note I had seen and personally contacted Drew Griffin’s or Dave Fitzpatrick’s higher ups at CNN? After all, that’s what high-level PR people did. I thought back to Dave’s comments to me: “Please forgive me if this sounds like old news to you but I want to get this on tv and I have to satisfy my bosses.” Had his “bosses” been swayed by Richter’s considerable storytelling skills into believing that this was just a story about a Texas troublemaker (me) out to get his client? That, of course, would be a very different slant than the true story about a whistleblower who was trying to expose wrongdoing in a big on-

359 The ‘Smart Road’ Scam going federal program that negatively affected the mobility of millions of U.S. citizens. Or had Richter, on behalf of Traffic.com, possibly even threatened legal action should CNN run the story, much like what had happened to derail our article in Traffic Technology International magazine? Of course, I had no way of knowing if Richter in fact was responsible for scuttling (or, at least, putting on ice) the Traffic.com story on CNN, or if some other dynamic was at play. If he had been responsible, however, it would be one more example of how the company’s considerable influence had maintained the status quo—a very lopsided and ultimately counterproductive federal monopoly.

Conclusion

The implications of CNN’s failure to run the Traffic.com story were much broader and more significant than just this one scandal or federal agency. Most Americans who watch the evening news or TV news magazines like AC360 probably trust that reporters are objectively pursuing the most important stories that they can find. But what if a whole lot of stories like the Traffic.com scandal never saw the light of day because high-level PR people like Bob Richter were using their connections with executives in the news business to throttle such coverage? How many stories involving topics much more critical and fundamental to our basic freedoms than mobility—national security, for example—had been tabled because of some government contractor’s influence with the very “bosses” who ran the news organizations? In America we routinely praise the virtues of our press freedom that is guaranteed by the First Amendment to the Constitution. But what good is freedom of the press if the press is unwilling to pursue the really tough and important stories involving governmental and corporate corruption, instead just joining the herd in covering planted stories like the Democrats’ supposed accomplishments in their first 100 days in power? The press can only safeguard our freedoms and free enterprise system if it is willing to investigate and expose stories like the very one I was trying so hard to get out.

360 (Almost) Keeping Them Honest

Epilogue

On January 5, 2009, I called Dave Fitzpatrick to see if there was still a chance that Trafﬁc.com piece would air on Anderson Cooper 360. I assumed that the window for the story had come and gone—since the interviews were over ﬁve months old at this point—but was pleasantly surprised by Fitzpatrick’s report. He said that the chances it would air were still good, but that CNN had gotten caught up in stories about the Middle East War and collapsing economy. “Believe it or not, though, we haven’t forgotten you,” he said, adding that the piece had been completed and was in what is termed a “bank” of completed news stories waiting in line. He said that he hoped it would air within the “next couple of weeks.” Three months later, still no “keeping them honest” story on CNN. Persistence and patience were the watchwords.

361 26

The Revenue Sharing Swindle

o prospective state and local agency participants, the idea of revenue- Tsharing was undoubtedly one of the TTID program’s most appealing aspects. After all, the main private-sector partner in this public/private partnership, Trafﬁc.com, had agreed to share a portion of its revenues from the sale and marketing of information based on TTID data to other private sector organizations. Since in most cases the local agency partner was not required to put any of its own funds into this partnership, this revenue-sharing kickback would be a real bonus. Virtually all of the agreements that state and local transportation agencies signed with Trafﬁc.com from 2002 to present include the same sliding scale showing what percentage of revenues was to be shared with the local agency partner:

(1) 0% for REVENUE up to $250,000 (2) 5% for REVENUE between $250,001 and $1,000,000 (3) 10% for REVENUE above $1,000,000

On-air (radio/TV) trafﬁc reports are a very lucrative market, and Traf- ﬁc.com routinely markets its travel reports to numerous radio and TV stations and other related private sector customers (e.g., XM Satellite Radio),

362 The Revenue Sharing Swindle so such revenue sharing could result in a considerable amount of dollars shared back with the local agency partner. As if to underscore how much money is potentially involved, these agreements typically provide a sam- ple revenue-sharing calculation:

For example, if annual REVENUE is $1,500,000, the share reinvested in the PROJECT will be $87,500, calculated as follows:

(1) from $0 to $250,000, = $250,000 x 0% = $ 0 (2) from $250,001 to $1,000,000 = $750,000 x 5% = $37,500 (3) from $1,000,000 to $1,500,000 = $500,000 x 10% = $50,000 TOTAL = $87,500

Important Early Clues

Early on in my investigation of the “’smart road’ scam,” I discovered that the FY2002 Defense Appropriations Act played a key role in direct- ing $50 million of the program’s funding to Traffic.com for the TTID program’s nationwide expansion. (See sidebar, “How Did Defense Leg- islation Help Create Traffic.com’s Monopoly?”) That Act very emphatically required that the contracts for these new cities include the very same terms used for those initial deployments—and specifically the same “revenue-sharing model.” Here are the very specific requirements that were spelled out in the FY2002 Defense Appropriations Act (emphasis added):

(C) FOLLOW-ON DEPLOYMENT.(i) After an intelligent transportation infrastructure system deployed in an initial deployment area pursuant to a contract entered into under the program under this paragraph has received system acceptance, the Department of Trans- portation has the authority to extend the original contract that was competitively awarded for the deployment of the system in the follow-on deployment areas under the contract, using the same asset ownership, maintenance, ﬁxed price contract, and revenue sharing model, and the same competitively selected consortium leader, as

363 The ‘Smart Road’ Scam

were used for the deployment in that initial deployment area under the program.

How Did Defense Legislation Help Create Trafﬁc.com’s Monopoly?

Surprisingly, language inserted into a defense appropriations bill—not a transportation appropriations bill—helped ensure that the bulk of federal funding ($50 million) for the Transportation Technology Innovation and Demonstration program would go solely to Traffic.com on a sole-source basis. The key legislation: The Fiscal Year 2002 Defense Appropriations Act. In fact, the FY2001 Transportation Appropriations Act had appropriated $50 million to expand the TTID program to 25 new cities. However, the language in that bill did not specifically say where those funds had to be spent. After the Federal Highway Administration’s Deputy Executive Direc- tor ruled in early 2001 that the program’s $50 million expansion would “require recompetition,” Traffic.com’s lobbyists and legislative supporters went to work. They devised a clever legislative trick that would enable a sole-source procurement for Traffic.com that completely bypassed the normal transportation appropriations process. Language in the unrelated FY02 Defense Appropriations Act gave the USDOT the option to extend the original small pilot program in Philadelphia and Pittsburgh nationwide solely to the same supplier (Traffic.com), and in early Febru- ary 2002 Transportation Secretary Norman Mineta announced that he was exercising that option. During the transportation reauthorization process in 2005, numerous companies who competed against Traffic.com in various markets complained to their legislators that the TTID program had created a monopoly for Traffic.com—and they were absolutely right.

In other words, the FY2002 Defense Appropriations Act very speciﬁ- cally and emphatically required that the same “revenue sharing model” used for those initial deployments in Pittsburgh and Philadelphia was to be followed for the later agreements.

364 The Revenue Sharing Swindle

But what was that original revenue-sharing model? As a result of the Sunlight Foundation’s Freedom of Information Act request for all TTID program contract documents and Senior Fellow Bill Allison’s persistence (see Chapter 17, “Finding Sunlight”), we had received copies of a June 2002 FHWA task order and most of the agreements that Traffic.com signed with state and local agencies representing the participating cities. Those agreements typically spelled out further details of the revenue-sharing provisions, and constituted the other part of the “contract.” However, despite Bill’s persistence, the Sunlight Foundation never received a copy of the “contract” for Pittsburgh and Philadelphia, consisting of the initial task order and an agreement with PennDOT, both likely signed sometime in the 1998-2000 timeframe. Since I didn’t have access to the initial TTID contract, I could only guess as to how much money was supposed to go to the state/local agency partner (PennDOT). But I had an excellent clue: On June 7, 2001, Traffic. com issued a press release in which it stated “The company also presented a check in the amount of $33,610.64 to the U.S. Department of Trans- portation (USDOT) and the Pennsylvania Department of Transportation (PennDOT), partners with Mobility Technologies in a unique public-private cooperative.” If Traffic.com could write a revenue-sharing check to the agency partner in the amount of $33K for just the first year of operation for one of the less populated cities (Pittsburgh), I reasoned, the total amount of shared revenue for 25 cities over the life of the program (at least 10 years) could be substantial. Using that initial check size as a (lowball) yardstick, I made a quick estimate:

$33K/yr x 10 yrs/city x 25 cities = $8.25 million

However, the total ﬁgure over the life of the program would likely be much larger, because:

1. Many of the cities represented much larger markets for Traffic.com’s traffic information than Pittsburgh, and 2. Over time as Traffic.com’s own portfolio of offerings grew, the revenue

365 The ‘Smart Road’ Scam would correspondingly grow. 3. For gross revenues over $1 million, the shared-revenue percentage would double (from 5% to 10%).

It seemed feasible, taking the growth of Trafﬁc.com’s business into account, that the total amount of revenue sharing for all 25 cities could easily reach $15 or $20 million or more.

What the Contract for the Follow-on Deployments Showed

That June 2002 task order between the FHWA and Signal Corpora- tion, which listed Mobility Technologies, Inc. (Trafﬁc.com) as the “critical subcontractor,” applied to all of the city agreements that followed the initial deployments in Pittsburgh and Philadelphia. It included the following revenue-sharing provisions:

(D) REVENUE SHARING

In the event that the Contractor performs marketing activities or receives revenues from the sale/marketing of information obtained under this task order to other private sector organizations, the Govern- ment shall not be liable for any additional costs (i.e., in excess of the amounts provided under this task order) resulting from this marketing effort (e.g., marketing costs, advertising, operations, distribution, liability costs, etc.). The Government and the Contractor agree that such revenues will be shared by the Contractor with U.S. DOT and the affected state and local agencies in accordance with the following formula/arrangement per metropolitan area:

• 0% for gross revenue up to $250,000 • 5% for gross revenue between $250,000 and $1M • 10% for gross revenue above $1M

Those provisions seemed more designed to limit the federal government’s liability than to provide speciﬁc details of the revenue-sharing

366 The Revenue Sharing Swindle program in each state, such as who would receive those funds and what they would be used for. Those details were left to the second part of the “contract,” the agreements that state and local agencies would sign with Traffic.com. I immediately noticed quite a variation in what was typically item 15 in these agreements, “Revenue Share Reinvestment.” Only six city agreements (for Baltimore, Indianapolis, Norfolk, Providence, San Diego, and Tampa) called for direct payments to the state/local agency partner. At least eighteen of these agreements (representing Atlanta, Boston, Chi- cago, Cincinnati, Columbus, Detroit, Las Vegas, Los Angeles, Oklahoma City, Phoenix, Raleigh, Sacramento, Salt Lake City, San Francisco, San Jose, Seattle, St. Louis, and Washington, DC) called for no revenue-sharing payments back to the local partner at all. Instead, Traffic.com retained these revenue-sharing funds to spend as it wanted—ostensibly after consultation with the agency partner. For at least eighteen cities that had signed up for the TTID program, the promise of revenue-sharing seemed little more than a bookkeeping trick. While some of those eighteen agreements specifically called for the deployment of new traffic sensors, others permitted a very wide range of eligible expenditures. The August 2004 agreement for the City of Detroit between Traffic.com and the Michigan Dept. of Transportation was typical of several other agreements:

15 (d) MOBILITY TECHNOLOGIES, after consultation with the STATE, shall invest the amount of the REVENUE share escrowed exclusively for needs and activities related to the PROJECT. Examples of acceptable expenditures include, but are not limited to, operation and maintenance of existing ITS equipment as described above in this paragraph, defrayal of costs related to integration of legacy and new SYSTEMS and DATA SERVICES, DATA, and installation of additional sensors and different technologies for the PROJECT.

In other words, Trafﬁc.com could use these “REVENUE share” funds to install additional trafﬁc sensors or for normal business expenses like “operation and maintenance of existing ITS equipment.”

367 The ‘Smart Road’ Scam

While a whole lot of money seemed to be involved in these revenue- sharing provisions, that was only speculation until I could carefully scru- tinize the original contract for Pittsburgh and Philadelphia. The key question: Had the contracts for the 25 follow-on TTID deployments actually followed the terms of the initial contract, as was required by law?

Acquiring the Initial TTID Contract through Serendipity!

As the old saying goes, sometimes it’s better to be lucky than to be good. After two years of working with both the Sunlight Foundation and Project on Government Oversight to acquire the original TTID program contract for Pittsburgh and Philadelphia, I ultimately corralled both parts of that contract from totally different sources. The elusive agreement that PennDOT signed with Traffic.com magically surfaced while I attended the ITS World Congress in November 2008 in New York City. During a meeting with the Vice President for one of Traffic.com’s biggest competitors in the radio/TV traveler information business, I described the frustration I felt in my quest to obtain the original Pennsylvania agreement. Amaz- ingly, he had come across a copy of the Traffic.com/PennDOT agreement in the course of responding to an earlier federal solicitation, and readily provided a copy to me. Meanwhile, I had been urging Lance Walker, Sen. Hatch’s Legislative Assistant, to see if he could acquire the FHWA’s original task order with Signal Corp. from the U.S. DOT Inspector General’s office, with whom Lance had been communicating about the IG’s ongoing TTID program audit. Instead, Lance requested that task order through the Senate’s normal channels, the USDOT’s Office of Congressional Affairs. That request eventually filtered down to Jimmy Chu, the same FHWA Office of Opera- tions staff member who had been providing information to Bill Allison in response to the Sunlight Foundation’s earlier Freedom of Information Act request. Chu sent a copy of the 71-page ITOP (Information Technology Omnibus Procurement) umbrella contract under which the TTID program was funded to Lance, who promptly forwarded it on to me. Over the previous two years I had already received that same high- level ITOP contract from several different sources, and knew that it didn’t

368 The Revenue Sharing Swindle contain any of the specific requirements for the TTID program (including the revenue-sharing provisions). Hence, it was essentially useless. Those details were provided in the task order, but Jimmy Chu and the FHWA had steadfastly failed to provide that document first to the Sunlight Founda- tion, then to the Project on Government Oversight, and now to Senator Hatch’s office. The more difficult that task order was to procure, the more I suspected that it might contain information that Traffic.com—and perhaps even the FHWA—didn’t want out. I conveyed my suspicion to Lance, and urged him to specifically ask the Congressional liaison office to produce the task order covering the initial TTID deployment in Pennsylvania. Lance did so, and two and a half months later (Jan. 9) finally received the long-sought-after task order from the FHWA. He promptly faxed all 50 pages to me.

The Revenue-Sharing Provisions in the Philadelphia and Pittsburgh “Contract”

After over two years of trying, I had now acquired both components of the “contract” that provided details of the revenue-sharing provisions for Philadelphia and Pittsburgh speciﬁcally cited in the FY02 Defense Appropriations Bill:

1. Task order No. T990021 to Contract DTOS59-96-D-00421 between Signal Corp. and the Federal Highway Administration, dated 12/18/98. Argus Networks, Inc. (a previous name for Traffic.com) was listed on page 7 of that task order as a “critical subcontractor” for this task order. (Over the years, the vast majority of funding for this project has passed through Signal Corp. to Traffic.com.) 2. The “Agreement for Intelligent Transportation System Inte- grated Surveillance and Data Management Infrastructure,” dated 11/13/99, between the Pennsylvania Dept. of Transportation (PennDOT) and Traffic.com.

Section 7(F) of the task order described “Revenue Sharing” as follows

369 The ‘Smart Road’ Scam

(emphasis added):

(F) REVENUE SHARING

In the event that the Contractor performs marketing activities or receives revenues from the sale/marketing of information obtained under this task order to other private sector organizations, the Govern- ment shall not be liable for any additional costs (i.e., in excess of the amounts provided in Section G, “Contract Administration Data,” (D) Appropriation Data) resulting from this marketing effort (e.g., marketing costs, advertising, operations, distribution, liability costs, etc). The Government and the Contractor agree that such revenues will be shared by the Contractor with the affected State Department of Trans- portation in accordance with the following formula/arrangement per metropolitan area: • 0% for gross revenue up to $250,000 • 5% for gross revenue between $250,000 and $1M • 10% for gross revenue above $1M

The wording for the revenue-sharing provisions of this initial task order was nearly identical to that of the later (June 2002) document. The only substantive difference I noted was that the original task order said that funds were to be shared “with the affected State Department of Trans- portation” and the language in the later task order was changed ever so slightly, to “with U.S. DOT and the affected state and local agencies.” The details of the revenue-sharing arrangement were left to items 16 (a) through (e) of the agreement between PennDOT (“the affected State Department of Transportation” in Pennsylvania) and Trafﬁc.com for the “initial deployment area” of Philadelphia and Pittsburgh. Here are some of the key elements of those provisions (emphasis added):

16a: Trafﬁc.com shall share any revenue in accordance with the following formula established by the FHWA, which shall be applied separately for each metropolitan area and which shall not be subject to periodic renegotiation by the parties:

370 The Revenue Sharing Swindle

(1) 0% for gross revenue up to $250,000 (2) 5% for gross revenue between $250,000 and $1,000,000 (3) 10% for gross revenue above $1,000,000

16b: Trafﬁc.com will pay the COMMONWEALTH its share of the revenue annually, on the basis of TRAFFIC.COM’s ﬁscal year, which runs from January 1 to December 31, on or before May 1 of each year. Supporting documentation demonstrating how the COMMON- WEALTH’s share of the revenue was calculated shall accompany the payment.

16c: …TRAFFIC.COM shall make such deposits on or before May 1 of each year, and shall furnish the supporting documentation described above in Paragraph (b) to the Commonwealth…

16e: The COMMONWEALTH shall expend the revenues received exclusively for needs and activities related to either the PA Project or other ITS-related activities or equipment interconnected with or interrelated to the PA Project within the Philadelphia and Pittsburgh metropolitan areas. Examples of acceptable expenditures include, but are not limited to, operating and maintaining the existing ITS equipment as described above in this subparagraph, defrayal of costs related to integration of legacy and new systems and data, installation of additional sensors and different technologies to the PA Project. The COMMONWEALTH shall consult with TRAFFIC.COM concerning potential expenditures; provided, however, that the ultimate determi- nation about expenditures shall rest with the COMMONWEALTH.

Note that these provisions stipulated that:

1. Trafﬁc.com was required to make annual revenue-sharing payments to PennDOT, accompanied by supporting documentation. 2. While PennDOT agreed to consult with Trafﬁc.com, PennDOT solely determined how those shared-revenues were to be spent, so long as they are used for “either the PA Project or other ITS-related activities or

371 The ‘Smart Road’ Scam equipment interconnected with or interrelated to the PA Project within the Philadelphia and Pittsburgh metropolitan areas.” 3. A wide range of expenditures were eligible for those revenue-sharing funds. 4. There was absolutely no requirement that these funds be spent with Traffic.com. PennDOT could have any contractor/supplier—not just Traffic.com—install “additional sensors” or “different technologies.” In fact, having someone other than Traffic.com install such sensors would be advantageous to the agency, because the agency would then have full use of the data that these additional sensors provide, rather than the limited use of the data from the TTID program’s sensors.

Trafﬁc.com’s own June 7, 2001 press release (described earlier) showed that—at least initially—the company provided revenue-sharing payments back to PennDOT. A quick calculation showed that Trafﬁc. com’s $33,610.64 payment to PennDOT and the USDOT corresponded to gross revenues available for revenue-sharing of $922,212.80, using the following formula:

($922.212.80 - $250,000.00) x (.05) = $33,610.64

This revenue-sharing payment to PennDOT only covered the early deployment for one city, Pittsburgh, since the purpose of that press release was to announce that Traffic.com’s “Digital Traffic Pulse(SM) sensor network” was just then coming online in Philadelphia. In summary, the federal law (FY2002 Defense Appropriations Act) that provided $50 million to Traffic.com for the nationwide expansion of the TTID program contractually required that the same revenue-sharing provisions used for the initial deployment area (in Philadelphia and Pitts- burgh) be continued in all future city contracts. The initial “contract” (consisting of both a task order and agreement) for those cities stipulated an annual payment to PennDOT, according to a set formula. At least initially, Traffic.com made such a payment to PennDOT, which could solely determine how to spend those revenues in a wide variety of ways. There was absolutely no requirement that the shared funds be provided

372 The Revenue Sharing Swindle back to Trafﬁc.com. For most of the follow-on contracts, however, these revenue-sharing funds were not provided back to the state/local agency partner. Instead, Trafﬁc.com retained those funds in what can only be described as a multi-million dollar swindle.

How Much Money Was Swindled?

Providing a definitive answer to that question would require a comprehensive audit of Traffic.com’s annual revenue-sharing statements for each city, which (as described in almost all of the agreements with its local partners) were to be made available for the partners’ review. Again, however, one publicly-disclosed data point (from Traffic. com’s 2001 press release) provides a useful sense of the magnitude of revenue-sharing funds that Traffic.com will avoid paying over the life of the program. Assuming that the Pittsburgh revenue-sharing payment ($33K+) is typical of the annual payments for an “average” city participating in the TTID program, and that the program runs for an average of 10 years from inception, a rough estimate of lost revenue-sharing funds would be:

18 cities x $33K/yr x 10 years = $5.94 million

Keep in mind that this estimate, like the earlier one for all 25 cities, is extremely conservative (i.e., low), because:

(1) The $33K figure represented only the initial year of operation in Pitts- burgh, and commercial revenues have likely grown substantially in subsequent years. (2) The gross revenue amount for Pittsburgh, for which Traffic.com paid $33K+ to PennDOT, was just under $1 million. According to the provisions of virtually all of the city agreements, the revenue share doubles (from 5% to 10%) for revenues over $1 million. Therefore, the shared revenue from larger cities (e.g., Los Angeles, Detroit) and/or cities in which Traffic.com is more commercially successful will be substantially greater than Pittsburgh’s initial amount.

373 The ‘Smart Road’ Scam

Taking those factors into account, it’s conceivable that the actual amount of lost (or swindled) revenue-sharing funds could easily exceed $10 million or even $15 million over the life of the program. Annual au- dits would be required to determine the exact amount of funds involved over the life of the TTID program. In any case it’s certain that over the life of the TTID program millions of dollars of program-related gross revenue that Traffic.com by law was required to share with its state/local DOT partners will never actually be shared. Since the agreements for the TTID program typically last 10 years and Traffic.com’s revenues have clearly grown significantly since the initial TTID deployment in Pittsburgh, the most lucrative years for this revenue-sharing arrangement are yet to come.

Summary

Federal law that funded the Transportation Technology Innovation and Demonstration (TTID) program required that the sole contractor (Traffic. com) share gross revenues from the program with the state/local agency partner in each city. However, the vast majority of the contracts for these cities were carefully worded so that such revenue-sharing never actually takes place, and Traffic.com simply retains any “shared revenue” for its own business purposes, such as operations and maintenance. Many millions of dollars of shared revenue from this “public-private partnership” will not in fact be shared with this program’s public-sector partners. This is a substantial breach of both federal law and the public’s trust. As a public/private partnership, both public and private partners should share in the TTID program’s success. In a time of extremely tight budgets, funds that are shared with state/local agency partners are extremely valuable—especially when the state/local partners have the authority to decide how to spend those funds for maximum benefit. The TTID program’s state/local partners should have had full discretion to spend those shared revenues on a wide variety of eligible expenses, including the installation of new detectors whose data they could fully use and share. But most of these agency partners, victims of a very clever swindle, would never get the chance.

374 27

Sustaining the “Culture of Corruption”

hroughout the previous 26 chapters I’ve laid out, in intricate detail, Thow a group of individuals used their expertise in gaming our political system to enrich themselves and their friends and associates. Much of this enrichment was accomplished through the creation and maintenance, via earmarks and the influence of key legislators and lobbyists, of a federally-subsidized monopoly for the company Traffic.com. Through my investigation—aided by three non-profit government watchdog organizations—I accidentally discovered that Norman Mineta, a former Cabinet member in both the Clinton and Bush Administrations, apparently violated federal ethics/false claims laws. Mr. Mineta failed to disclose the details of his capital gains income of up to $1 million from stock options in a company (Trimble Navigation) while a sitting Cabi- net member, as is required by federal ethics laws. These are the same laws for which Alaska Sen. Ted Stevens was convicted in 2008 on several felony counts. Further investigation suggested that both the Commerce and Transportation Departments under Secretary Mineta’s leadership supported specific policies and programs that would benefit the GPS market in which Trimble Navigation was a leader. The built-in system of checks-and-balances in our federal government (Executive vs. Legislative Branch, Democrat vs. Republican, House vs.

375 The ‘Smart Road’ Scam

Senate) is supposed to help ensure integrity in our legislative process. But if fraud and corruption do occur, numerous federal watchdog agencies (FBI, SEC, Inspector Generals, etc.) are supposed to investigate and prosecute wrongdoing. Congress itself is supposed to perform an invaluable oversight role, too. That’s the way the system is supposed to work but, as I learned from personal experience over several years, not the way it really works. In reality, unethical, dishonest “public servants” can get away scot-free, and the “authorities” (particularly the SEC) only step in after the fact—if they step in at all. So why don’t these checks and balances work? The answers are root- ed in what is often called the culture of corruption in Washington, DC. Most people undoubtedly have a visceral understanding of many aspects of the culture of corruption from their own experiences. They know that such clichés as “you scratch my back and I’ll scratch yours” are root- ed in real human behavior. Countless books have described the culture of corruption in different settings and contexts. The ‘Smart Road’ Scam describes that culture throughout; the efforts by unscrupulous and unethical high-level “public servants” to set up a monopoly so that they and their associates can cash in, and the authorities’ unwillingness to open up active investigations into clear violations of federal ethics laws. If one just scans selected pages of this book, one might come to the conclusion that the scam described here can’t possibly be true? How could three consecutive Chairmen of the House Transportation and Infra- structure Committee – Norman Mineta, Bud Shuster, and Don Young – all play pivotal roles in The ‘Smart Road’ Scam? The answer lies in our federal legislative process, and the fact that career legislators build up friendships and loyalties that often serve themselves (and their own pocketbooks) ﬁrst, and our nation’s citizens a distant second.

376 Sustaining the “Culture of Corruption”

The Downsides of Congressional Camaraderie

Figure 27-1: House Transportation Committee Chairman Bud Shuster, left, speaks with Reps. James Oberstar and Nick Rahall. (Ray Lustig/Washington Post)

As is thoroughly documented in this book, three consecutive Chair- men of the U.S. House Transportation and Infrastructure Committee, Norman Mineta (1993-1995), Bud Shuster (1995-2001), and Don Young (2001-2007), all played pivotal roles in creating and sustaining Traffic. com’s monopoly. Shuster and his close associates, of course, spearheaded the original earmark in the Transportation Equity Act for the 21st Century (“TEA-21”) that led to Traffic.com’s initial pilot project in Philadelphia and Pittsburgh. He also pushed hard legislatively to expand the program nationwide on a sole-source basis. Following Shuster’s retirement from Congress in early 2001 after being reprimanded by the House Ethics Committee and outed by 60 Min- utes, Cong Don Young readily took up Traffic.com’s cause and helped lead—along with Pennsylvania’s Senior Senator Arlen Specter and other friendly legislators—the conversion of this obscure Pennsylvania pilot program into a nationwide monopoly for Traffic.com. Not coincidentally, the record shows that Traffic.com regularly contributed to both Cong. Young’s and Senator Specter’s political campaigns all during this period. (See Chapter 20, “Pay-to-Play”.) Young and Specter essentially operated

377 The ‘Smart Road’ Scam as a tag team to undercut the new provision Senator Hatch inserted in SAFETEA-LU that was designed to open up the TTID program to competition: Specter made sure that the monopoly language (Part 1) remained in the bill, and Young directed all remaining funds to Part 1, effectively starving Hatch’s new Part 2 provisions. Mineta’s support for Traffic.com’s monopoly, while almost entirely behind-the-scenes, was perhaps most important of all. As Secretary of Transportation, he was the chief executive officer of the huge federal department that administered this earmarked program. In early 2002 he exercised an option to expand Traffic.com’s small sole-source contract in Philadelphia and Pittsburgh to 25 new cities nationwide. That option was enabled—but not mandated—by language Traffic.com’s legislative supporters inserted into an unrelated Defense appropriations bill. Mineta, along with his Deputy Secretary Michael P. Jackson, also made a key management change critical to the success of Traffic.com’s then nascent monopoly when they reassigned a senior FHWA manager, Dr. Christine Johnson, to a field position in Utah after she balked at going along with Traffic.com’s self-serving scheme. Mineta was and is a Democrat, and Shuster and Young were and are both Republicans. So why over a many year period would they all find themselves on the same side of an effort to create and nurture a very counterproductive federal monopoly? The answer lies in the camaraderie and bipartisanship that has been built up over the years in the House Transportation and Infrastructure Committee, which determines where billions of dollars are spent each year on our nation’s transportation infrastructure. An article in the March 9, 2002 issue of the National Journal, which contrasted the styles of Transportation and Infrastructure Committee Chairman Don Young with that of his predecessor Bud Shuster, emphasized the “bipartisanship” long exhibited in that committee:

As Young tackles the difﬁcult task of restoring these highway funds, transportation experts have already noticed some similarities between himand Shuster. They note, for instance, that Young has run the committee in the same bipartisan manner that Shuster did; after all,

378 Sustaining the “Culture of Corruption”

as the saying goes, there’s no such thing as a Democratic or a Re- publican bridge. Earlier, there were questions about whether Young would embrace bipartisanship, given that he came from the mudsling- ing Resources Committee. Young admits that the more congenial tone at Transportation has been good for him: “It has given me more of a willingness to go to work in the morning than I had during the con- stant war at Resources.”

While most people would consider camaraderie and bipartisanship positive and welcome attributes, ironically they can set the stage for fraud and corruption. It works like this: each congressperson has his or her own pet transportation projects, and quickly learns that support for others’ pet projects is almost always reciprocated. Over time, this mutual support environment leads to lasting friendships with those from both political parties. The classic phrase “you scratch my back and I’ll scratch yours” was tailor made for this environment. The notion of bipartisan cooperation has become almost a mantra among Committee members. Transportation Secretary candidate Mineta, during his Senate confirmation hearing in January 2001, repeated that mantra. “There are no Democratic or Republican highways, no such thing as a Republican or Democratic traffic congestion,” he said at the time. The camaraderie built up over years of mutual support runs deep. On the very same day in October 2000 that Cong. Bud Shuster was being reprimanded by the House Ethics Committee, then Ranking Member James Oberstar (D-MN) was offering heartfelt sympathy and support for his demonstrably less-than-ethical colleague. (See sidebar, “Bud Shuster’s ‘Ordeal’”) Bud Shuster’s close relationship with Ranking Member Oberstar apparently paid off – for Traffic.com! Around the time that Cong. Ober- star was commiserating with his old friend Bud Shuster, he was working behind the scenes to get an unusual procurement mechanism (called the Information Technology Ominibus Procurement, or “ITOP”) approved for use by Traffic.com’s earmark in TEA-21. ITOP enabled the pilot ITIP deployment for Philadelphia and Pittsburgh (as well as later deployment

379 The ‘Smart Road’ Scam

Bud Shuster’s “Ordeal”

Perhaps nothing epitomizes the “culture of corruption” that exists in Congress—and the unhealthy juxtaposition of ethics and loyalty that regularly occurs—than a discussion that took place on the House floor on October 5, 2000. On that day, the House Ethics Committee was issuing a strongly worded “letter of reproval” to Cong. Bud Shuster, asserting that the Congressman’s unethical actions over several years “brought discredit to the House of Representatives.” Exercising a point of personal privilege, Cong. Bud Shuster thanked the Ethics Committee for “concluding what has been a 4-year nightmare to myself and my family.” “4 years, 1 month, and 31 days ago, a group associated with Ralph Nader filed an ethics complaint against me,” Shuster said. Of course, that “group” was the non-profit Congressional Accountability Project, co- founded by Ralph Nader and run by Gary Ruskin. In multiple filings to the Ethics Committee, Ruskin and CAP had painstakingly documented how “pay-to-play” worked in Cong. Shuster’s world: “pay” a healthy consulting fee to Shuster’s long-time former Chief-of-Staff-turned-lobbyist Ann Eppard and you could lock in tens of millions of dollars of Congressional support for your own transportation project. It was literally that simple. While one might have expected some contrition on Shuster’s part, that was not the case, as he only acknowledged that his actions involved “appearances of improprieties.” “I am very pleased that the committee dismissed the wild and inaccurate charges originally filed by the Nader group,” he stated triumphantly. “I am very pleased that not a single allegation, not a scintilla of evidence, not a hint of any of this referred to any actions that I took that influenced my activities as chairman of my committee.” On this day in October, 2000, Bud Shuster clearly just wanted his “nightmare” to come to an end. “I accept the findings to stop the hemor- rhaging of legal fees and to put this behind us,” he said. “…perhaps most significantly, as a result of the tremendous support I have received, our Committee on Transportation and Infrastructure has been able to be an effective committee.” That support was clearly evident when, at the conclusion of Shus-

380 Sustaining the “Culture of Corruption” ter’s remarks, the Ranking Democratic Member of the Committee, Cong. James Oberstar of Minnesota, asked for Cong. Shuster to yield the ﬂoor, which he gladly did. “Mr. Speaker, the apologia pro vita sua we have just heard from the gentlemen in the well is and represents one of the most intensely personal moments in this body; one of the most human experiences we engage in,” Oberstar said. “None of us, unless we stand in that well, as the gentleman has just done, can understand the pain and the difﬁculty, but also the strength of character it takes to deliver the statement the gentleman has just made, and to say ‘I accept the judgment.’ But it is characteristic of the gentleman to do so.” “The gentleman has led the committee throughout all this ordeal with dignity and effectiveness. I know how pained the gentleman is over this report, but I am proud of this moment that he has taken to address his colleagues and to address the country and to address this institution, and I thank the gentleman.” Oberstar made no direct reference to the numerous ethical violations alleged against Mr. Shuster that had caused the Ethics Committee to conduct a multi-year investigation and ultimately to conclude that his activities had brought “discredit to the House of Representatives.” Quite to the contrary, the Minnesota Congressman was extolling Shuster’s “strength of character” in surviving the ethics complaint. It was as if the ethical charges lodged against the Chairman were just a minor annoyance that came with the territory. The bipartisan camaraderie that had built up in the Transportation Committee as members supporting each others’ pet transportation projects completely trumped numerous documented cases of “pay-to-play” in Shuster’s case. After all, that’s the way that Congress—particularly the Transportation and Infrastructure Committee—worked. As a result of the Democratic Party’s victory in the November 2006 mid-year election, the party assumed control of the U.S. House of Repre- sentatives. Cong. Oberstar became Chairman of the House Transportation and Infrastructure Committee, succeeding Alaska Cong. Don Young. Once again, a Shuster protégé was running the Committee.

381 The ‘Smart Road’ Scam after the program expanded nationally) to bypass the normal USDOT procurement process. Quoting from the lead story in the January 15. 2001 issue of the Inside ITS newsletter:

Unlike other ITS projects, which go through the JPO, a demonstration initiative for the infrastructure program became a task order project under the DOT Information Technology Omnibus Procure- ment (ITOP) program. This program assigns tasks to preapproved large contractors.

Chung Eng, an ITS specialist in the DOT and the chair of the selection committee for the task order, says the ITOP mechanism was used after several congressmen, including James Oberstar of Minnesota, the ranking Democrat on the Transportation Committee, sent memos clarifying their intent for the program. Congress was interested in using a single U.S. DOT procurement mechanism rather than multiple procurement mechanisms at the state level, he says.

Eng says he was not contacted by Shuster or his ofﬁce during the process.

Shuster had apparently enlisted the aid of several of his colleagues (including Ranking Member Oberstar) to act as proxies on his behalf to lay the groundwork for using this obscure procurement mechanism for the initial award for Traffic.com’s pilot deployment. Since this procurement did not go through the normal ITS procurement channels, many of Traf- fic.com’s competitors didn’t even know that a new “competition” was in process, which Traffic.com therefore easily “won.” With friends in high places willing to work on his behalf to pressure the USDOT to use this mechanism, Shuster was able to keep his personal fingerprints off of this initial phase of setting up Traffic.com’s monopoly. That was the way that things were (and are) done in Congress. As if to underscore the strength of the lifelong friendship between Cong. Oberstar and Cong. Shuster, in November 2007 Shuster, along with former Transportation Secretary Mineta, were invited participants at the

382 Sustaining the “Culture of Corruption” annual James L. Oberstar Forum at the University of Minnesota in Min- neapolis. “It was a privilege and pleasure to have worked with, in a learning experience, to work with Bud Shuster, who led us fearlessly through a very difﬁcult period—a time in which we made massive investments in surface transportation,” Oberstar said at the time. Indeed, Cong. Oberstar had long been singing Cong. Shuster’s prais- es. Quoting from a Washington Post news piece back in March 1998 about the passage of the big transportation authorization bill TEA-21 (that contained the original earmark for the ‘smart road’ scam):

Rep. James L. Oberstar (Minn.), the ranking Democrat on the Trans- portation Committee, praised Shuster’s skill and persistence in over- coming leadership resistance and dubbed the bill the “Bud E. Shuster Transportation for All Eternity Act.”

In that same piece, Cong. Ray LaHood of Illinois, also a member of the Transportation and Infrastructure Committee, likewise marveled at Chairman Shuster’s legislative skills:

“Shuster knows how to work the system,” said Rep. Ray LaHood (R- Ill.), a member of the committee. “He’s at the pinnacle of his power right now. And I think he goes into the conference with the Senate with an awful lot of clout and inﬂuence.”

In another Washington Post article the previous fall, LaHood had lav- ished praise on Transportation Committee Chairman Shuster:

“He’s got backbone. He’s got guts,” said Rep. Ray LaHood (R-Ill.), a member of the committee. “And he’s not afraid to go up against any member or leaders.”

LaHood Conﬁrmed as Transportation Secretary

On January 22, 2009, retired Illinois Republican Congressman Ray

383 The ‘Smart Road’ Scam

LaHood was conﬁrmed by the U.S. Senate as Transportation Secretary in the Obama Administration. And the top transportation leaders in both the Legislative and Execu- tive branches were former colleagues of retired Congressman Bud Shus- ter, one of the chief architects of The ‘Smart Road’ Scam. It was business as usual.

384 Epilogue

s I was putting the ﬁnal touches to The ‘Smart Road’ Scam, I came Aacross this ominous new story from FOX News.

House Kills Effort to Investigate Lobbyist-Lawmaker Ties

The proposal would have forced the House Ethics Committee to launch a probe into ties between the source and timing of campaign contributions by lobbyists and subsequent legislator requests for special projects or earmarks.

By Mosheh Oinounou

FOXNews.com

Wednesday, February 25, 2009

The House voted Wednesday to kill a resolution calling for an ethics investigation into potential quid pro quo between lobbyist campaign donations and lawmakers.

Rep. Jeff Flake, R-Ariz., sponsored the proposal that would have forced the House Ethics Committee to launch a probe into ties between the source and timing of campaign contributions by lobbyists and subsequent legislator requests for special projects or earmarks.

385 The ‘Smart Road’ Scam

While open-ended, Flake’s resolution was a direct response to the ongoing federal investigation into the PMA Group, a lobbying company accused of making fraudulent donations to lawmakers using names of people who did not exist.

The ﬁrm, which has contributed millions to politicians in the last decade, has close ties to senior Democratic appropriators including Reps. John Murtha D-Pa., and Pete Visclosky, D-Ind. The FBI raided PMA’s headquarters in November and is investigating the group’s founder and president, Paul Magliochetti, a former Murtha aide.

“Whereas numerous press reports and editorials have alleged several cases of inﬂuence peddling between members of Congress and outside interests seeking federal funding --the House of Representa- tives should respond to such claims and demonstrate integrity in its proceedings,” the resolution read.

The House decided to set aside the proposal by a mostly party-line 226-182 vote, though 17 Democrats joined Republicans in support of considering the measure.

The vote came just after the House approved a $410 billion spending to fund the government this year, which also contained $8.8 million on projects sought by client of the PMA lobbying group.

“Our own ethics committee may say that’s OK. The Department of Justice may see it another way,” Flake said following the vote. “Until we bring our Ethics Committee guidelines in line with the Justice De- partment, our members are exposed.”

Asked why he voted with the majority to table the resolution, Murtha said, “no comment.”

386 Sources and Notes

early all of the information in this expose comes from one of four Ndifferent sources:

1. My personal experience in digging into the ‘smart road’ scam while a subcontractor to the U.S. Department of Transportation and afterwards.

2. Exhaustive Internet searches for publicly available evidence, using both Google searches as well as speciﬁc site searches (e.g., the Congres- sional “Thomas” data repository).

3. Information provided to the non-proﬁt government watchdogs Project on Government Oversight and Sunlight Foundation in response to their many Freedom of Information Act (FOIA) requests to the U.S. DOT and other federal and state agencies.

4. Personal discussions and telephone conversations that I had with key players in this scam, including FBI agents and supervisors and staff members from the U.S. Ofﬁce of Government Ethics (OGE). In some cases (where noted) I legally recorded these conversations so that I could capture the exact substance of the conversation. (Since Texas, DC, and Virginia all legally allow one-party-consent telephone recordings, these recordings were in all cases perfectly legal.)

387 The ‘Smart Road’ Scam

Prologue iii Because of this proclivity: “Gingrich Tried to Reign In Ally On Big Spending for Highways,” New York Times, Sept. 18, 1997, http://query. nytimes.com/gst/fullpage.html?res=9E00EED91038F93BA2575AC0A9 61958260 iii Not surprisingly: “King of the Roads,” National Journal, Sept. 23, 2000, http://www.accessmylibrary.com/coms2/summary_0286- 28442587_ITM iii Because trafﬁc is so light: “Unchecked pork-barrel ethics pave road to hell,” Electronic Engineering Times, October 23, 2000, http://www. eetimes.com/op/showArticle.jhtml?articleID=18304813 iii The Bud Shuster Highway received: “CNN Highlights Retired Re- publican Congressman’s Pork in Anti-Earmark Segment,” CNN, August 8, 2007, http://newsbusters.org/blogs/matthew-balan/2007/08/08/cnn- highlights-retired-republican-congressman-s-pork-anti-earmark-seg iv In 1998, his former Chief : “Lobbyist Prospers as Charges Loom,” Washington Post, April 10, 1999, http://www.washingtonpost.com/wp- srv/politics/special/highway/stories/eppard041099.htm iv In both 1996: Letter dated September 5, 1996 to the House Ethics Committee entitled “RE: Ethics Complaint Against Representative Bud Shuster and Call for Investigation into Possible Violations of Criminal Law and House Rules,” http://www.congressproject.org/ethics/shuster. html iv In both 1996 and 2000: Letter dated October 16, 2000 to the House Ethics Committee entitled “RE: Request to Re-Open the Ethics Investi- gation of Representative E. G. “Bud” Shuster,” http://www.congressproject.org/ethics/shusethlet2000.html

388 Sources and Notes iv In October 2000: “Congressman Draws Rebuke But No Penalty,” New York Times, October 6, 2000, http://query.nytimes.com/gst/fullpage. html?res=9501EEDA173CF935A35753C1A9669C8B63 iv She’d walk back home: “‘60 Minutes’ report takes aim at Pennsyl- vania congressman,” CNN.com, October 16, 2000, http://archives.cnn. com/2000/ALLPOLITICS/stories/10/16/shuster.ethics.ap/index.html v In recent years: “A bridge to Nowhere,” Salon.com, August 9, 2005, http://dir.salon.com/story/news/feature/2005/08/09/bridges/ v In fact, his leadership: “Don Young Embodies What’s Wrong With the GOP,” Wall Street Journal, June 6, 2008, http://online.wsj.com/article/SB121270989481150353.html?mod=opinion_main_commentaries vi However, the way: “Justice asked to probe Young earmark,” An- chorage Daily News, April 18, 2008, http://www.adn.com/front/story/379679.html vi Young was already under: “Paper reports Young’s Veco ties investigated in federal probe,” Anchorage Daily News, July 25, 2007, http:// dwb.adn.com/news/politics/fbi/story/9162143p-9077780c.html vi He also serves: “Norman Mineta, Former U.S. Secretary of Trans- portation and U.S. Secretary of Commerce, Joins AECOM Board of Directors,” AECOM press release, June 11, 2007, http://pr.aecom. com/phoenix.zhtml?c=211994&p=irol-newsArticle&ID=1013591&high light= vi Mr. Mineta never gave: “Mineta to quit as Transportation Secretary,” New York Times, June 23, 2006, http://www.nytimes. com/2006/06/23/washington/23cnd-mineta.html vii From 1995 through: “Smart Highways – as states work to make highways less congested and costly, integrators ﬁnd new proﬁt opportu-

389 The ‘Smart Road’ Scam nities,” Washington Technology, July 11, 1996, http://www.washington- technology.com/print/11_7/10111-1.html vii That situation: The Public I – an Investigative Report of the Center for Public Integrity, June 2001, http://www.publicintegrity.org/assets/ pdf/pi_2001_06.pdf vii He unexpectedly announced: “No. 2 Homeland Security Official Resigns,” CBS News/AP, Sept. 24, 2007, http://www.cbsnews.com/stories/2007/09/24/national/main3291619.shtml vii Mr. Jackson announced: A copy of that letter is online at: http:// www.itsonline.com/pogo_dhs_comm/pogo_dhs_foia_aug24_07.doc vii In that role: From Mr. Jackson’s official biography at http://www. whitehouse.gov/government/m_jackson-bio.html viii In this role: From a bio of Mr. Collins at http://www.netcaucus. org/events/2001/wp/ ix While a conservative: For more on the Hatch-Waxman Act see http://en.wikipedia.org/wiki/Hatch-Waxman_Act ix While a conservative: Sens. Hatch and Reid Push for Thorium Nu- clear Fuel Cycle (Hatch press release), Oct. 2, 2008, http://hatch.senate. gov/public/index.cfm?FuseAction=PressReleases.Detail&PressRelease_ id=bf8479e9-1b78-be3e-e031-1635aee6efa9&Month=10&Year=2008 ix As befitting a: Website for the Antitrust Subcommittee: http://judiciary.senate.gov/about/subcommittees/antitrust.cfm x Now companies will: “Federal Highway Legislation Creates Com- petitive Bidding Process for Traffic Data Collection: Traffic.com Loses Monopoly,” July 29, 2005 press release from Cong. Anthony Weiner, http://www.house.gov/list/press/ny09_weiner/052907traffic.html

390 Sources and Notes x An interesting subnote: See Stewart’s political donations record on “Newsmeat” at: http://www.newsmeat.com/celebrity_political_dona- tions/Jon_Stewart.php

Chapter 1

1 While I directly: FHWA Ofﬁce of Operations website: http://www. ops.fhwa.dot.gov

1 While I directly: JPO’s website: http://www.its.dot.gov

2 In June, 1997: “Trouble in Lobby: Kassoff Zapped at ITS America,” tollroadsnews.com, April 26, 1997, http://www.tollroadsnews.com/ node/2019

3 I had registered: “Newt Gingrich on Intelligent Transportation Systems,” as reprinted in Government Technology, May 1, 1995, http:// www.govtech.com/gt/95914?id=&story_pg=1

3 (Later that year: See: http://www.time.com/time/covers/0,16641,19951225,00.html

4 In mid-2002 I: Trafﬁc.com has changed its name several times over the years, earlier names including Argus Networks and Mobility Tech- nologies. To avoid confusion, I will usually refer to the company simply as Trafﬁc.com.

4 Dr. Costantino, a “control freak”: “Trouble at Trade Group: Intell- moniker and Firing Create Tensions,” tollroadsnews.com, June 28, 1997, http://www.tollroadsnews.com/node/1880

5 Almost at the same time: “Mobility Technologies will Partner with Chicago and Dallas to Deploy Intelligent Transportation Sys- tem,” Trafﬁc.com press release, Jan. 7, 2002, http://web.archive.org/ web/20051215153345/http://corporate.trafﬁc.com/press/january_07_ 2002.html

6 One of those individuals: Not his real name, but similar phonetically.

391 The ‘Smart Road’ Scam

7 While kicking around: Not her real name, but similar phonetically.

Chapter 2

9 I’d always thought: “Carl Bernstein Laments U.S.’s ‘idiot Culture’,” MSNBC.com, Nov. 2, 2007, http://www.msnbc.msn.com/id/21595196/

11 I was clearly: More information here: http://www.saturnreturn.net

14 Trafﬁc.com’s contract: By “contract,” John Collins was really referring to the June 2002 Task Order that the FHWA signed with Trafﬁc. com. Events preceding that signing, I would later discover, would add a big new piece to the puzzle.

17 A nearly full collection: “Don C. Hoeﬂer – Coined the term ‘Sili- con Valley,’” April 1986 Smithsonian obituary, http://smithsonianchips. si.edu/schreiner/hoeﬂer.htm

18 But Traffic.com President: Jannetta is just one (of many) of Cong. Shuster’s connections to Traffic.com. Years before he started Traffic. com he was the two-time mayor of Altoona, PA, the largest city in Con- gressman Shuster’s old district.

19 Last I checked: “HW” in this context stands for “highway” as in “highway bill,” the big transportation authorization bill that Congress passes every seven years or so.

19 Steve Lockwood: I would soon find out that Dr. Johnson’s “reassignment” had occurred because she saw through the Traffic.com scam and balked at signing the FHWA’s Task Order with Traffic.com that expanded the program from 2 to 27 cities.

21 It suggests why: “PPP” in this context stands for “public-private partnerships”

21 I was talking to: MTC refers to the Metropolitan Transportation Commission in the San Francisco Bay Area, a “metropolitan planning organization” that is also a long-time leader among public agencies in

392 Sources and Notes providing traveler information.

Chapter 4

34 During one evening stroll: Conrad’s picture available online at: http://www.streetsense.org/vendors.jsp

35 Several weeks later: “Shelf Life,” Washington Post Sunday Maga- zine, July 31, 2005, http://www.washingtonpost.com/wp-dyn/content/article/2005/07/26/AR2005072601841.html

37 That weekend, I read: A reprint of Prof. Chapman’s editorial is online at: http://www.utexas.edu/lbj/news/summer2005/chapman_africa. html

38 In September: “Uganda’s Leader Beats Drum on AIDS,” Washing- ton Post, September 30, 2005, http://www.washingtonpost.com/wp-dyn/ content/article/2005/09/29/AR2005092902225.html

38 He said he did: When I pulled these documents out of my suit jacket pocket and began to hand them to President Museveni, a number of hands of grabbed my wrist, preventing me from giving these documents to him. Afterward I realized that these hands belonged to security people—perhaps both Ugandan and U.S. It turns out that heads of state can get killed if certain deadly powders are sprinkled on paper documents, something that never occurred to me.

Chapter 5

44 So I did a Google: RE: Ethics Complaint Against Representative Bud Shuster and Call for Investigation into Possible Violations of Crimi- nal Law and House Rules, Sept. 5, 1996, http://www.congressproject. org/ethics/shuster.html

45 Four Years Later: “Congressman Draws Rebuke but No Penalty,” Oct. 6, 2000, New York Times, http://query.nytimes.com/gst/fullpage. html?res=9501EEDA173CF935A35753C1A9669C8B63

393 The ‘Smart Road’ Scam

45 A Major Part of the Complaint: Lobbyist Prospers as Charges Loom, April 10, 1999, Washington Post, http://www.washingtonpost. com/wp-srv/politics/special/highway/stories/eppard041099.htm

45 Less than two weeks later Ruskin: Request to Re-Open the Eth- ics Investigation of Representative E. G. “Bud” Shuster, Oct. 16, 2000, http://www.congressproject.org/ethics/shusethlet2000.html

46 While Murtha is best known: “Lobbying allegations cloud Murtha’s bid for House majority leader,” Pittsburgh Post-Gazette, Nov. 16, 2006, http://www.post-gazette.com/pg/06320/738810-84.stm

46 While Murtha is best known: “Trading Votes for Pork Across the House Aisle,” New York Times, Oct. 2, 2006, http://www.nytimes. com/2006/10/02/washington/02murtha.html?_r=1&scp=3&sq=%22Jack %20Murtha%22%20brother&st=cse&oref=slogin

46 In that role, he: Meet Congress’ “‘King of Pork,” CBS Evening News, April 4, 2008, http://www.cbsnews.com/stories/2008/04/04/as- signment_america/main3994689.shtml

46 While the conservative magazine: “Murky Jack Murtha,” The American Spectator, February 2, 2006, http://www.spectator.org/dsp_ar- ticle.asp?art_id=9359

46 Shortly after the November: “Ms. Pelosi and Mr. Payoff,” New York Post, Nov. 16, 2006, http://www.nypost.com/seven/11162006/post- opinion/editorials/ms__pelosi__mr__payoff_editorials_.htm

46 CREW currently lists Murtha: Beyond Delay, Citizens for Ethics and Responsibility in Washington, http://www.beyonddelay.org/summa- ries/murtha.php

47 Just after the election: Murtha: Ethics Reform “Total Crap,” Paul Blumenthal, Sunlight Foundation blog, Nov. 15, 2006, http://blog.sunlightfoundation.com/2006/11/15/murtha-ethics-reform-total-crap/

47 A report in the Washington Post: “Easy Street: the Bud Shuster In-

394 Sources and Notes terchange,” Washington Post, April 5, 1998, http://www.washingtonpost. com/wp-srv/politics/special/highway/stories/hwy040598a.htm

47 According to a report on CNN: “‘60 Minutes’ report takes aim at Pennsylvania congressman,” CNN, Oct. 16, 2000, http://archives.cnn. com/2000/ALLPOLITICS/stories/10/16/shuster.ethics.ap/index.html

48 Interestingly, Congressman Shuster: “Pennsylvania Rep. Shuster Retiring,” Brotherhood of Locomotive Engineers, http://www.ble.org/pr/ archive/headline010501a.html

48 From further Google searches: Lobbying report is online at: http://www.opensecrets.org/lobby/clientsum.php?lname=Trafﬁc. com&year=2001

51 While it provided the starting point: Renamed the Transportation Technology Innovation and Demonstration (TTID) program in 2005 in the big “SAFETEA-LU” transportation authorization bill

51 The lead story in: Available on the web at: http://www.itsonline. com/trfc/articles/insideITS_jan15_01.doc

52 With the support of Shuster: “‘Monopoly’ Continues for Pa. Com- pany,” The Hill, June 26, 2007, http://www.itsonline.com/trfc/articles/ Monopoly_continues_for_Pa_company.pdf

52 With the support of Shuster: FY01 Transportation Appropriations bill available online at: http://frwebgate.access.gpo.gov/cgi-bin/getdoc. cgi?dbname=106_cong_public_laws&docid=f:publ346.106

52 However, the story in the January: “Trafﬁc.com claim to $50 million ITS earmark raises questions,” Inside ITS, January 15, 2001, http:// www.itsonline.com/trfc/articles/insideITS_jan15_01.doc

54 “We have determined: Available online at: http://www.itsonline. com/trfc/letters/fhwa_letter_feb20_01.pdf

54 So the company worked with: FY02 appropriations bill language

395 The ‘Smart Road’ Scam available online at: http://www.asm.org/ASM/ﬁles/LEFTMARGIN- HEADERLIST/DOWNLOADFILENAME/0000000568/HR3338127[1]. pdf

55 In a letter to then Chairman: Available online at: http://www.itsonline.com/trfc/letters/mineta_feb5_02.pdf

55 On June 20, 2002: Available online at: http://www.itsonline.com/ trfc/contracts_agreements/Procurement_Request.pdf

55 In a 1987 article: “Veto Perils Altoona Dream of Economy Come- back,” New York Times, March 31, 1987, http://query.nytimes.com/gst/ fullpage.html?res=9B0DEFDC153CF932A05750C0A961948260&sec= &spon=&pagewant ed=1

55 Jack Schenendorf, the Chief: Mr. Schenendorf’s bio is located here: http://www.transportationfortomorrow.org/about/bio_schenendorf. aspx

55 Mr. Schenendorf” law ﬁrm: Trafﬁc.com’s IPO offering document is online at: http://www.secinfo.com/dVut2.vKq.a.htm

55 Cong. Shuster’s son, Robert L. Shuster: Robert L. Shuster’s bio is located here: http://www.buchananingersoll.com/professionals. php?PeopleID=463

56 While I was unable to ﬁnd records: Mr. Shuster’s 2006 lobbyist disclosure online at: http://www.itsonline.com/trfc_lobbyists/shuster_ robt_2006.pdf

56 A Google search: The lease arrangement was described in this SEC ﬁling: http://www.secinfo.com/dVut2.zWXa.g.htm

56 As recently as January 2008: Mr. Shuster’s 2008 lobbyist disclosure online at: http://www.itsonline.com/trfc_lobbyists/shuster_robt_ 2008.pdf

56 Mr. Nober, who according to: “The Business of Government Hour,”

396 Sources and Notes

Oct. 29, 2003, http://www.businessofgovernment.org/main/interviews/ bios/roger_nober_frt.asp

56 This jigsaw puzzle was undoubtedly: Former Cong. Bud Shuster’s photo is online at: http://www.tfhrc.gov/pubrds/novdec01/images/ bud001d.jpg

Chapter 6

57 While religion and computers: Pictures of our trip, including several of these “revival meetings,” are available here: http://www.kodakgallery.com/Slideshow.jsp?Uc=qnyzl03. vaeu13n&Uy=ox4gs8&Upost_signin=Slideshow.jsp%3Fmode%3Dfrom share&Ux=0&mode=fromshare&conn_speed=1

63 Nelligan would leave his position: These positions are shown in Jeff Nelligan’s “Linked-In” Internet page, http://www.linkedin.com/ pub/4/765/827

64 I would later learn that: “Nigerian link led to FBI raid in corruption case,” International Herald Tribune, June 8, 2006, http://www.iht. com/articles/2006/06/07/news/raid.php

67 On Friday, June 23: “Transportation Secretary Mineta Resigns,” CNN.com, June 23, 2006, http://www.cnn.com/2006/POLITICS/06/23/ mineta.resigns/index.html

67 While his resignation: “Prediction: USDOT Secretary of Transpor- tation Mineta Will Resign,” Buda Rabblerouser blog, April 10, 2006, http://budarabble.blogspot.com/search?q=low+public+approval

67 I immediately posted: “Mineta Resigns,” Buda Rabblerouser blog, June 23, 2006, http://budarabble.blogspot.com/search?q=CNN+that+Nor man+Mineta

67 Neither Mr. Mineta nor: “Transportation Secretary Mineta Resign- ing,” Associated Press (via National Public Radio), June 23, 2006, http:// www.npr.org/templates/story/story.php?storyId=5506710

397 The ‘Smart Road’ Scam

67 He also was clearly not: “Added Clout Sought for Lobbying Ef- fort,” Washington Post, August 29, 2007, http://www.washingtonpost. com/wp-dyn/content/article/2007/08/28/AR2007082801326.html

67 He also was clearly not: “Secretary Mineta Testiﬁes in Favor of Rail,” April 17, 2008, KHON2-TV (Honolulu), http://www.khon2.com/ home/ticker/17837824.html

67 The afternoon of June 23: Not his real name, which I have changed to protect his identity.

69 No telling what the recent: “The 2006 Pulitzer Prize Winners,” http://www.pulitzer.org/citation/2006,Investigative+Reporting

Chapter 7

71 Hatch has long been a strong: More information about Sen. Hatch’s role with the Antitrust Subcommittee is here: http://judiciary. senate.gov/subcommittees/110/antitrust110.cfm

73 In fact, Senator Hatch: Press release, “Hatch Puts the Brakes on Trafﬁc.com,” July 29, 2005, http://hatch.senate.gov/public/index.cfm?Fu seAction=PressReleases.Detail&PressRelease_id=9e462118-bfaa-428b- 952a-d6512ea9f9c7&Month=7&Year=2005

73 On the House side: Press release, “Federal Highway Legislation Creates Competitive Bidding Process for Traffic Data Collection: Traffic. com Loses Monony,” July 29, 2005, http://www.house.gov/list/press/ ny09_weiner/052907traffic.html

74 Back in mid-2002: “Close of an Era: Joint Program Ofﬁce in Transi- tion with Departure of Johnson,” IV Source, May 19, 2002, http://iv- source.net/archivep/2002/may/020519_JPOJohnson.html

75 “I know that you have: Google Finance thread available online at: http://ﬁnance.google.com/group/google.ﬁnance.704040/browse_thread/ thread/ce3bb04cbccc570f

398 Sources and Notes

80 By the way, a few weeks ago: Not his real name, which has been changed to protect his identity

83 On June 20, 2002, shortly: Available online at: http://www.itsonline.com/ttid/Procurement%20Request.pdf

83 He would later receive: Mr. Paniati’s ofﬁcial bio is available online at: http://www.fhwa.dot.gov/exdir.htm

84 In April 2008, President Bush: “New FHWA executive director,” Roads & Bridges, April 11, 2008, http://www.roadsbridges.com/New- FHWA-executive-director-NewsPiece15683

Chapter 8

86 Much to my surprise and: Copy of that letter is available online at: http://www.itsonline.com/ttid_letters/ﬁtzgerald_letter_sep26_06.pdf

98 Therefore, I was quite surprised: Available online at: http://www. itsonline.com/ttid_fbi/fbi_anderson_jul23_07.pdf

98 On October 27, 2007, just over: “Embattled Attorney General Resigns,” New York Times, August 27, 2007, http://www.nytimes. com/2007/08/27/washington/27cnd-gonzales.html

Chapter 9

101 I went to the USDOT Inspector General’s: Gen. Scovel’s bio is online at: http://www.oig.dot.gov/about.jsp

101 Because of Mike’s past failure: The OIG’s hotline is online at: http://www.oig.dot.gov/Hotline

106 The diagram in the “data lock scheme”: This white paper is online at: http://www.itsonline.com/ttid/datalock_scheme.pdf

106 Interestingly, months later: Diagram is on page 3 of this presenta-

399 The ‘Smart Road’ Scam tion: http://appnew.outreach.psu.edu/programs/tesc2006/presentations/ 1B_Collins.pdf

108 On July 23, 2007, Michael: Mr. Anderson’s letter to me is available online at: http://www.itsonline.com/ttid_fbi/fbi_anderson_jul23_ 07.pdf

Chapter 10

111 I know from your press release: “Hatch Put the Brakes on Trafﬁc. com,” July 29, 2005, http://hatch.senate.gov/public/index.cfm?FuseActi on=PressReleases.Detail&PressRelease_id=9e462118-bfaa-428b-952a- d6512ea9f9c7&Month=7&Year=2005

111 Some of that information: Letter available online at: http://www. itsonline.com/trfc/hatch_letter_jan23_07.pdf

112 In fact. Cong. Young: Cong. Young’s congressional statement available online at: http://www.itsonline.com/trfc/donyoung_jul29_ 05.pdf

112 I had written a new white paper: White paper available online at: http://www.itsonline.com/ttid/mineta_disclosures_analysis.doc

113 Echoing that sentiment: “The Scariest Guy in Washington,” Time, November 27, 2006, http://www.time.com/time/magazine/article/0,9171,1562974,00.html

115 I went through all of the inconsistencies: White paper available online at: http://www.itsonline.com/ttid/mineta_disclosures_analysis.doc

117 The Library of Congress’ excellent: Thomas available online at: http://www.thomas.gov/home/nomis.html

117 However, only the latter listing: Hearing transcript available on the web at: http://frwebgate.access.gpo.gov/cgi-bin/getdoc. cgi?dbname=107_senate_hearings&docid=f:92791.pdf

400 Sources and Notes

117 Just prior to that hearing: The last page of this letter, which is the source for the quotations, is included as the last page (page 17) of Mr. Mineta’s “New Entrant” Public Financial Disclosure Report dated Jan. 23, 2001 and available online from the Center for Public Integrity here: http://pfds.opensecrets.org/N00001701_2000.pdf

119 According to the U.S. Department: “Mineta Sworn in as 14th U.S. Transportation Secretary,” Public Roads, Jan/Feb 2001, http://www. tfhrc.gov/pubrds/janfeb01/along.htm

120 During preparations for my trip: Dan Zwerdling’s bio is online at: http://www.npr.org/templates/story/story.php?storyId=4173096

120 With that strong recommendation: Ridgeway’s bio on Wikipedia is online at: http://en.wikipedia.org/wiki/James_Ridgeway

121 Ten months after our meeting: “Hogging the Road,” Mother Jones (online edition), Nov. 1, 2007, http://www.motherjones.com/washing- ton_dispatch/2007/11/hogging-the-road.html

121 He had just co-authored a story: “The Highwaymen,” Mother Jones, Jan./Feb. 2207, http://www.motherjones.com/news/feature/2007/01/highwaymen.html

Chapter 11

124 Mr. Collins was Senior Vice President: This reference shows that afﬁliation: http://epw.senate.gov/105th/collins.htm

124 Mr. Collins was Senior Vice President: Jackson’s ofﬁcial government biography here: http://www.whitehouse.gov/government/m_jack- son-bio.html

124 While the ITIP earmark language: “Trafﬁc.com claim to $50 million ITS earmark raises questions,” Inside ITS newsletter, Jan. 15, 2001, http://www.itsonline.com/trfc/articles/insideITS_jan15_01.doc

124 I would later ﬁnd a quotation: “Master Persuader will Run the

401 The ‘Smart Road’ Scam

Leading Business Lobby,” New York Times, June 24, 1997, http://query. nytimes.com/gst/fullpage.html?res=9B04E2DB1631F937A15755C0A96 1958260&scp=1&sq=%22Master+Persuader+Will+Run%22&st=nyt

125 Mr. Holman was a registered lobbyist: Lobbyist registration available online here: http://www.itsonline.com/trfc_lobbyists/holman_ 2001.pdf

125 Mr. Holman was a registered lobbyist: Lobbyist registration available online here: http://www.itsonline.com/trfc_lobbyists/holman_ 2005.pdf

125 In between those stints: “Gov. Ridge Names Deputy Director for Homeland Security” (Press Release), October 29, 2001, http://www. whitehouse.gov/news/releases/2001/10/20011029-6.html

126 Trafﬁc.com President David Janetta: “Congress Requested to Create National ‘Infostructure’ Program for ITS, Homeland Security” (press release on BusinessWire), Sept. 11, 2002, http://www.thefreeli- brary.com/Congress+Requested+to+Create+National+’Infostructure’+Pr ogram+For...-a091323176

126 The organization’s co-founder and: Ken Boehm’s bio is online at: http://www.nlpc.org/about.asp?view=boehm

126 Further, their code of ethics: Available online at: http://www.nlpc. org/view.asp?action=viewArticle&aid=210

126 Further, their code of ethics: A good bio of Sen. Paul Douglas is on Wikipedia at: http://en.wikipedia.org/wiki/Paul_Douglas

127 Based on his painstaking research: “NLPC Complaint Alleges Ranking House Ethics Committee Member Hid Assets and Funded Busi- ness Partner’s Groups with Millions in Earmarks” (Press Release), April 7, 2006, http://www.nlpc.org/view.asp?action=viewArticle&aid=1346

128 Cong. Mollohan would shortly: “Democrat Leaves Ethics Panel,” Washington Post, April 22, 2006, http://www.washingtonpost.com/wp-

402 Sources and Notes dyn/content/article/2006/04/21/AR2006042101376.html

128 A Justice Department Investigation: “Audit questions Canaan Valley Institute grant spending,” Charleston Daily Mail, May 21, 2008, http://www.dailymail.com/News/statenews/200805210305

133 Mr. Mineta was conﬁrmed: Listing of “Secretaries” and their tenures, from the U.S. Dept. of Commerce’s website at: http://www.commerce.gov/About_Us/Secretaries/index.htm

133 Interestingly, Mr. Mineta actually: “Trimble Aligns Resources to Exploit Key Strategic Markets” (News Release), August 23, 2000, http:// www.trimble.com/news/release.aspx?id=082300a

134 Years earlier I had perused: See an example here: http://www. secform4.com

134 However, the oldest electronically available: The actual search results are online at: http://www.sec.gov/cgi-bin/browse-edgar?action=g etcompany&CIK=0000864749&type=&dateb=&owner=only&start=300 &count=100

Chapter 12

137 The Act had been enacted: More information on the Ethics in Goverment Act is available at: http://www.answers.com/topic/ethics-in- government-act

138 Using the range of stock prices: http://investor.trimble.com/stock- lookup.cfm

138 Using the range of stock prices: I would later write four separate white papers detailing my analysis of Mr. Mineta’s stock options transaction. This one goes into detail about his potential maximum proﬁt: http:// www.itsonline.com/mineta/mineta_disclosures_signif_may3_07.pdf

138 That ﬁgure assumed: Trimble had a 2:1 stock split after I originally performed this calculation, so the ﬁgures on the Historical Stock

403 The ‘Smart Road’ Scam

Lookup page need to be doubled for an apples-to-apples analysis.

141 On January 17, 2007, POGO: Letter available online at: http:// www.itsonline.com/ttid_letters/pogo_oge_foia.doc

141 On February 12, 2007, William E. Gressman: Letter available online at: http://www.itsonline.com/oge_foia_response_to_pogo.pdf

145 Shelton: “I destroy them.”: Wikipedia entry for “Pogo (comic strip character)”: http://en.wikipedia.org/wiki/Pogo_(comics)#.22We_ have_met_the_enemy.....22

Chapter 13

149 So on March 12, 2007, Scott: FOIA appeal letter available online at: http://www.itsonline.com/ttid_letters/pogo_oge_appeal.pdf

150 On April 7, 2007, Ms. Glynn: FOIA appeal response letter available online at: http://www.itsonline.com/ttid_letters/oge_foia_appeal_re- sponse.pdf

155 The website for the non-proﬁt: CRP’s website address: http:// www.opensecrets.org/about/index.php

156 As one might expect: Web page for Mr. Mineta’s disclosures: http://www.opensecrets.org/pfds/candlook.php?txtName=MIneta

158 I thought that this was all so funny: Blog posting at: http://budarabble.blogspot.com/search?q=%22Will+You+Take+This+One%3F%22

159 I posted an item on my: Blog posting at: http://budarabble. blogspot.com/search?q=%22Some+Good+News+for+the+Truth%22

Chapter 14

162 According to my analysis: “Signiﬁcance of Mr. Mineta’s Financial Disclosures in 1999-2000” (white paper), http://www.itsonline.com/mineta/mineta_disclosures_signif_may3_07.pdf

404 Sources and Notes

162 On page 4 of Schedule A: Mr. Mineta’s Commerce New Entrant ﬁnancial disclosure is available from the Center for Responsive Politics at: http://pfds.opensecrets.org/N00001701_2000_Nom.pdf

162 However, on that very day: “Further Insight from Mr. Mineta’s Commerce ‘New Entrant’ Financial Disclosure in 2000” (white paper): http://www.itsonline.com/mineta/mineta_commerce_disclosure.doc

162 In searching through Trimble: Trimble’s SEC filing for the “C. Trimble Nonstatutory Stock Option Plan” is available online here: http:// investor.trimble.com/secfiling.cfm?filingID=1056359-01-500015

167 In early 2007 I called Fred: Not his real ﬁrst name, which I have changed because he remains with the FHWA and continues to be a good inside source of information.

168 According to a statement to a congressional: Statement on Re- authorization of the Federal Surface Transportation Research Program Before the Committee on Environment and Public Works, United States Senate, March 15, 2002, http://www.fhwa.dot.gov/reauthorization/ rmrt10.htm

168 In fact, former Federal Communications: Hatﬁeld’s 2002 report to the FCC is available online at: http://www.locatemodelcities.org/library/HatﬁeldReport.pdf

169 In December 2007 I would: Not his real name, to protect his identity. The quotes attributed to George and me are taken verbatim from a recording of our conversation.

170 USDOT’s report about the: “DOT Releases Report Assessing Vul- nerability Of Transportation Infrastructure Relying on Global Positioning System” (USDOT Press Release), Sept. 10, 2001, http://www.navcen. uscg.gov/gps/geninfo/pressrelease.htm

170 USDOT’s plans to expand: “DOT, Defense set plan to expand use of GPS,” Government Computer News, April 15, 2002, http://www.gcn. com/print/21_8/18414-1.html

405 The ‘Smart Road’ Scam

170 Reports of the USDOT’s efforts: “GPS and Galileo Reach Signal Agreement,” GPS World, May 1, 2004, http://www.gpsworld.com/gpsworld/article/articleDetail.jsp?id=86656

172 Until, that is, I happened: Not his real name, to protect his privacy and his business.

172 I would connect with Louie: Also not his real name, for the same reasons as above.

173 It turns out that a major: http://www.ntia.doc.gov/aboutntia/ aboutntia.htm

174 In fact, the Department of Commerce: Capitol Coalition’s report is accessible at: http://www.opensecrets.org/lobby/client_reports. php?year=2000&lname=Trimble+Navigation

174 A footnote to the Executive Summary: “Assessment of Compat- ibility between Ultra Wideband Devices and Selected Federal Systems,” January 2001, http://www.ntia.doc.gov/osmhome/reports/uwb/uwb.pdf

175 In early January 2002 the publication RCR: “DoD Attempts to Thwart UWB Plans,” RCR Wireless News, Jan. 7, 2002, http://aerorﬁ. org/articles.html?id=29

175 A report a few days later in: “FCC Plans February Ruling on Ul- trawideband Devices,” Telecommunications Reports/Wireless, Jan. 11, 2002, http://www.tr.com/newsletters/trwn/wir011102.pdf

175 That was the same Charles Trimble: Trimble’s CEO Steve Berglund – Charles Trimble’s successor – is listed second on a panel to discuss “transportation needs of Silicon Valley” in a June 2000 seminar with then USDOT Transportation Secretary Rodney Slater, see: http:// transweb.sjsu.edu/mtiportal/research/publications/summary/f0002.html

175 I summarized my ﬁndings: “More on the Mineta/Trimble Connec- tion: Mr. Mineta’s Activities as both Commerce Secretary and Transpor- tation Secretary Related to Ultra Wide Band (UWB) Technology” (white

406 Sources and Notes paper), July 10, 2007, http://www.itsonline.com/mineta/ mineta_uwb_ jul10_07.doc Chapter 15

177 Jim Ridgeway’s November: Available online at: http://www.motherjones.com/washington_dispatch/2007/11/hogging-the-road.html

177 The lead story in the October: Available online at: http://www. itsonline.com/trfc/articles/urban_tx_mon_oct26_07.pdf

177 Multiple stories in The Hill: First reference available online at: http://thehill.com/business--lobby/monopoly-continues-for-pa.-company-says-hatch-2007-06-26.html

177 Multiple stories in The Hill: Second reference available online at: http://thehill.com/the-executive/weiner-calls-for-hearings-ig-probe-on- trafﬁc-program-2007-10-19.html

177 “New Federally Funded Road: Available online at: http://www. itsonline.com/trfc/articles/New_Federally_Funded_cox_aug17_07.pdf

177 A terriﬁc Op-Ed piece: Available online at: http://www.itsonline. com/trfc/articles/sensors_and_insensibility_ajc.pdf

179 I came upon their “Good Government: Hall of Fame online at: http://www.pogo.org/halloffame/

180 His experiences in doing so: “The Man Who Knew Too Much,” Vanity Fair, May 1996, http://www.mariebrenner.com/PDF/TheMan- WhoKnewTooMuch.pdf

182 Lying in my bed watching: Dr. Wigand’s personal website is at: http://www.jeffreywigand.com

184 Bergman, Mike Wallace’s long-time: Prof. Bergman’s bio is on the web here: http://journalism.berkeley.edu/faculty/bergman/

184 Bergman, Mike Wallace’s long-time: Frontline’s website is at:

407 The ‘Smart Road’ Scam http://www.pbs.org/wgbh/pages/frontline/

184 Bergman, Mike Wallace’s long-time: CIR’s website is at: http:// centerforinvestigativereporting.org

184 Bergman, Mike Wallace’s long-time: Propublica’s website is at: http://www.propublica.org

Chapter 16

188 Coincidentally, Smith had been: http://ethics.house.gov/Media/ PDF/Press%20Statement%20Shusterend.pdf

188 In a piece he wrote for the Baltimore Sun: “Enabling Corruption” by Gary Ruskin, originally published in the Baltimore Sun, Jan. 7, 2005, and reprinted in the CommonDreams.org news center, http://www.commondreams.org/views05/0107-29.htm

191 On January 27, 2007, Senator Hatch: Available online at: http:// www.itsonline.com/trfc/hatch_letter_jan23_07.pdf

194 A week or so later in searching: Announcement available online at: http://www.allbusiness.com/services/business-services/3973862- 1.html

195 Finally, on May 29, Rep. Doggett: Letter available online at: http://www.itsonline.com/ttid_letters/doggett_letter_may29_07.pdf

198 On June 14, a little over a week later: Letter available online at: http://www.itsonline.com/ttid_letters/ doggett_email_jun_14_07.pdf

Chapter 17

202 A relatively new watchdog organization: Complete list of projects that the Sunlight Foundation supports is available online at: http://sunlightfoundation.com/projects/

202 PublicMarkup.org: Available online at:http://publicmarkup.org

408 Sources and Notes

202 Where Are They Now?: Available online at:http://wherearethey- now.sunlightprojects.org

202 Earmark Watch: Available online at: http://earmarkwatch.org

202 Party Time!: Available online at: http://www.politicalpartytime.org

204 On the afternoon of January 23: Ms. Miller’s bio available online at: http://www.sunlightfoundation.com/people/emiller/

206 Here’s his bio from: Bill Allison’s bio available online at: http:// www.sunlightfoundation.com/people/ballison/

206 The USDOT backed away: “DOT Curbs ITOP Buys,” Fed- eral Computer Week, June 10, 2002, http://www.fcw.com/print/8_22/ news/76905-1.html

207 After reviewing the background: Available online at: http://blog. sunlightfoundation.com/2007/02/09/tracking-contractors-and-lobbyists- and-a/

207 His piece highlighted the role: The Hill piece available online at: http://www.itsonline.com/trfc/articles/monopoly_money_apr20_05.pdf

208 The USDOT’s initial (March 9: Letter available online at: http:// www.itsonline.com/ttid_foia/sunlight_FOIA_response_mar9_07.pdf

208 Bill soon sent off substantially: GSA FOIA request available online at: http://www.itsonline.com/ttid_foia/sunlight_gsaFOIA_mar21_ 07.doc

209 According to a report by the U.S.: “U.S. Dept. of Transportation Freedom of Information Act (FOIA) Report, Fiscal Year 2006,” http:// www.dot.gov/foia/reports/2006annualreport.htm#secxii

210 The Sunlight Foundation’s FOIA: Appeal letter available online at: http://www.itsonline.com/ttid_foia/sunlight_FOIA_Appeal_apr6_ 07.doc

409 The ‘Smart Road’ Scam

212 On February 29, 2007: Available online at: https://www.fbo.gov/ index?tab=core&s=opportunity&mode=form&id=a8d1144a468c7f74a9 b2bda7e0ccaf3a

213 Bill posted a synopsis of the issue: Blog posting available online at: http://realtime.sunlightprojects.org/2007/07/09/fhwa-discouraging- foia-requests-from-potential-contractors/

215 Bill was so astounded by that response: Blog posting available online at: http://realtime.sunlightprojects.org/2007/07/09/sf-lll-update- not-for-public-inspection/

216 On September 11, 2007, the FHWA: Announcement available online at: https://www.fbo.gov/index?s=opportunity&mode=form&id=0 12fefba1e4ab23d956e97e325727346&tab=core&_cview=0

217 In early 2008, the FHWA: Available on the web at: http://ops. fhwa.dot.gov/travelinfo/ttidprogram/ttidprogram.htm

Chapter 18

219 The Commission’s role as “the primary: From the agency’s description of “What We Do” at: http://www.sec.gov/about/whatwedo. shtml

219 It would turn out: “Senate report blasts SEC Enron oversight,” USA Today, Oct. 6, 2002, http://www.usatoday.com/money/industries/ banking/2002-10-06-sec_x.htm

219 In October 7, 2002 statement: Financial Oversight of Enron: The SEC and Private Sector Watchdogs, Oct. 7, 2002, Senate Committee on Homeland Security and Governmental Affairs, http://hsgac.senate. gov/public/index.cfm?Fuseaction=PressReleases.View&PressRelease_ id=c27bc628-bf89-4656-a0cc-9bb828f3fd36&Afﬁliation=R

220 Aguirre’s story, by three time: “S.E.C. Is Reported to Be Exam- ining a Big Hedge Fund,” New York Times, June 23, 2006, http://www. nytimes.com/2006/06/23/business/23fund.html

410 Sources and Notes

221 Aguirre had sent an 18-page: Aguirre’s letter available online at: http://www.faulkingtruth.com/Files/aguirre_congress0623.pdf

222 According to the New York Times story: “Report Says S.E.C. Erred on Pequot,” New York Times, August 4, 2007, http://www.nytimes. com/2007/08/04/business/04pequot.html?scp=2&sq=Aguirre%20Mack &st=cse

223 On October 5, 2008, perhaps one: “Impartiality of S.E.C. is Questioned,” New York Times, October 6, 2008, http://www.nytimes. com/2008/10/07/business/07pequot.html?scp=4&sq=Bogdanich&st=nyt

223 In November 2008, Aguirre: Website address: http://www.aguir- relawﬁrm.com/

224 This allegation was supported: The indictment is available online at: http://graphics8.nytimes.com/packages/pdf/washington/ 20080729stevensindictment.pdf?scp=3&sq=%22Ted%20Stevens%22% 20indicted&st=cse

224 On August 1, 2005, Trafﬁc.com: Available from BusinessWire here: http://ﬁndarticles.com/p/articles/mi_m0EIN/is_/ai_n14938855

224 It would subsequently amend: “Trafﬁc.com Completes Public Of- fering,” BusinessWire, Feb. 28, 2006, http://ﬁndarticles.com/p/articles/ mi_m0EIN/is_/ai_n26775287

224 Yet Trafﬁc.com’s huge (228 page): Jan. 20, 2006 amended version available online at: http://www.secinfo.com/dVut2.vKq.htm

225 Here’s an example: From the bottom of page F-33 of this particularly S-1 disclosure: http://bioportfolio.brand.edgar-online.com/EFX_dll/ EDGARpro.dll?FetchFilingHTML1?ID=4112500&SessionID=C4aiWW fPE61chm7

225 Could it have been Michael P.: “Lawmaker seeks more detail on DHS deputy secretary resignation,” Federal Times, October 2, 2007, http://www.federaltimes.com/index.php?S=3079658

411 The ‘Smart Road’ Scam

225 Could it have been Michael P.: FOIA request Available online at: http://www.itsonline.com/pogo_dhs_comm/pogo_dhs_foia_aug24_ 07.doc

225 Associated with the company’s S-1: Available online at: http:// www.secinfo.com/dVut2.zWXa.c.htm#1stPage

228 The attached writeup would summarize: Available online at: http://www.itsonline.com/ttid_letters/questions_for_the_sec_sep12_ 06.doc

229 On Nov. 6, 2006, I would send: Complaint guidance available online at: http://www.sec.gov/complaint.shtml

231 According to a July 22, 2006: “Silicon Valley Firms Scrutinized on Stock Option Policies,” New York Times, July 22, 2006, http://www. nytimes.com/2006/07/22/business/22options.html?_r=2&oref=slogin&o ref=login

231 A follow-on article in the New York Times: “Ex-Brocade Chief Convicted in Backdating Case,” New York Times, August 8, 2007, http:// www.nytimes.com/2007/08/08/business/08brocade.html

232 In fact, Mr. Goodrich has served: Mr. Goodrich’s bio is online at: http://www.trimble.com/jgoodrich.shtml

232 In digging around Wilson Sonsini’s: Mr. Kopel’s bio is online at: http://www.wsgr.com/WSGR/DBIndex.aspx?SectionName=attorneys/ bios/283.htm

233 On July 11, 2007 I would send: White paper available online at: http://www.itsonline.com/mineta/mineta_uwb_jul10_07.doc

234 On March 18, 2008 I would: All four white papers related to Mr. Mineta’s ethics problem are online at: http://www.itsonline.com/ethics/

235 I knew very little about Cox: “President Names Cox as New SEC Chair,” Washington Post, June 3, 2005, http://www.washingtonpost.com/

412 Sources and Notes wp-dyn/content/article/2005/06/02/AR2005060200641.html

236 In a letter dated February 25, 2008: SEC’s letter available online at: http://www.itsonline.com/ttid_letters/sec_feb25_08.pdf

239 “I was just the boy who cried wolf,”: “Madoff Misled SEC in ’06, Got Off,” Wall Street Journal, December 18, 2008, http://online. wsj.com/article/SB122956182184616625.html?mod=special_page_cam- paign2008_mostpop

Chapter 19

240 Armed with that appreciation: For more details of the data-lock scheme, see this white paper: http://www.itsonline.com/ttid/datalock_ scheme.pdf

241 Here’s an excerpt from a 2003 press release: “Illinois Tollway Partners With Mobility Technologies To Help Chicago-Area Motorists Improve Travel Plans” (press release), December 15, 2003, http://web. archive.org/web/20051215153319/http://corporate.trafﬁc.com/press/de- cember_15_2003.html

242 In the case of the Illinois Tollway: “DMS” stands for “dynamic message signs,” the large lit signs along roadways that provide information about road closures, “Amber alerts” or, in this case, travel times.

242 The Metropolitan Transportation Commission: More background on 511 online at: http://ops.fhwa.dot.gov/511/about511/history. htm

242 “With respect to trafﬁc data: “Publication of Interim Guidance on the Information Sharing Speciﬁcations and Data Exchange Formats for the Real-Time System Management Information Program,” Feb. 12, 2008, http://www.regulations.gov/fdmspublic/ContentViewer?objectId=0 9000064803acab0&disposition=attachment&contentType=msw8

243 Similar limitations in the Atlanta: “Sensors and insensibility:

413 The ‘Smart Road’ Scam state is asked to pay for trafﬁc info taxpayers already funded,” Atlanta Journal-Constitution, Aug. 29, 2007, http://www.itsonline.com/trfc/articles/sensors_and_insensibility_ajc.pdf

244 Here are brief descriptions of both: More detail about these and other DHS components is available online at: http://www.dhs.gov/ xabout/structure/#1

244 “His tenure was particularly focused: Jackson’s bio is online at: http://georgewbush-whitehouse.archives.gov/government/m_jackson- bio.html

244 On September 10, 2002, Trafﬁc.com’s President: Intelligent Transportation Systems Hearing No. 107-94 before the Subcommittee on Highways and Transportation of U.S. House Committee on Transpor- tation and Infrastructure, Sept. 10, 2002

245 The very next day, Trafﬁc.com: Press release located online at: http://ﬁndarticles.com/p/articles/mi_m0EIN/is_2002_Sept_11/ai_ 91323176

246 In making the announcement in the East: “Gov. Ridge Sworn-In to Lead Homeland Security” (press release), October 8, 2001, http://georgewbush-whitehouse.archives.gov/news/releases/2001/10/20011008-3.html

246 Later, on January 24, 2003, Mr. Ridge: “Ridge Sworn in as Secretary of Homeland Security” (press release), January 24, 2003, http://georgewbush-whitehouse.archives.gov/news/releases/2003/01/20030124-5.html

246 In an article in The American Prospect: “Security for Sale: The Department of Homeland Security has a section on its Web site labeled ‘Open for Business.’ It certainly is.” The American Prospect, Dec. 18, 2005, http://www.prospect.org/cs/articles?articleId=10750

247 On March 6, 2001, less than two: Copy of the lobbying registra-

414 Sources and Notes tion ﬁled with the U.S. Senate available online at: http://www.itsonline. com/trfc_lobbyists/holman_2001.pdf

248 In late 2000, Trafﬁc.com had been successful: FY01 Transpor- tation Appropriations Act available online at: http://frwebgate.access. gpo.gov/cgi-bin/getdoc.cgi?dbname=106_cong_public_laws&docid=f: publ346.106

248 However, while the company understandably: Letter available online at: http://www.itsonline.com/trfc/letters/fhwa_letter_feb20_01.pdf

248 Working with Pennsylvania Senator Arlen: Search for “5117” in this online document: http://www.asm.org/ASM/ﬁles/LEFT- MARGINHEADERLIST/DOWNLOADFILENAME/0000000568/ HR3338127%5B1%5D.pdf

248 In early 2002, USDOT Secretary Norman Mineta: Mineta’s letter to Cong. Don Young available online at: http://www.itsonline. com/trfc/letters/mineta_feb5_02.pdf

248 In early 2002, USDOT Secretary Norman Mineta: Task Order available online at: http://www.itsonline.com/trfc/contracts_agreements/ Procurement_Request.pdf

249 On October 29, 2001, despite: Announcement available online at: http://georgewbush-whitehouse.archives.gov/news/releases/2001/10/20011029-6.html

249 Walking back through the omnipresent: Available online at: http://www.itsonline.com/trfc_lobbyists/blank_rome_2003_registration. pdf

249 The 2003 year-end lobbying: Available online at: http://www. itsonline.com/trfc_lobbyists/blank_rome_2003_year_end.pdf

249 Additional lobbyist disclosures covering: Available online at: http://www.itsonline.com/trfc_lobbyists/blank_rome_2004_year_end.pdf

415 The ‘Smart Road’ Scam

249 Additional lobbyist disclosures covering: Available online at: http://www.itsonline.com/trfc_lobbyists/blank_rome_2005_ﬁrst_half.pdf

249 Blank Rome et al would ﬁle: Available online at: http://www. itsonline.com/trfc_lobbyists/blank_rome_2006_termination.pdf

249 (According to a June 2007 article: “‘Monopoly’ continues for Pa. company, says Hatch,” The Hill, June 27, 2007, http://thehill.com/business--lobby/monopoly-continues-for-pa.-company-says-hatch-2007-06- 26.html

249 On June 28, 2004, Hill Solutions LLC: Available online at: http:// www.itsonline.com/trfc_lobbyists/hill_solns_2004_registration.pdf

250 A mid-year 2004 report: Available online at: http://www.itsonline. com/trfc_lobbyists/hill_solns_2004_ﬁrst_half.pdf

250 A 2005 disclosure would show: Available online at: http://www. itsonline.com/trfc_lobbyists/hill_solns_2005_ﬁrst_half.pdf

250 According to a news report in citybizlist: “Buchanan Ingersoll Announces Combination with Lobbying Firm Hill Solutions,” citybizlist Philadelphia, October 12, 2005, http://philly.citybizlist.com/lstg/lstgDe- tail.aspx?id=2319

250 A Buchanan Ingersoll lobbyist disclosure: Available online at: http://www.itsonline.com/trfc_lobbyists/buchanan_regist_2005.pdf

250 Interestingly, Cong. Bud Shuster’s: “Buchanan Ingersoll, Klett Rooney plan to join forces July 1,” Pittsburgh Post-Gazette, June 14, 2006, http://www.post-gazette.com/pg/06165/697960-28.stm

250 Lobbyist disclosures show that Shuster: Available online at: http://www.itsonline.com/trfc_lobbyists/klett_2004_regist.pdf

250 Lobbyist disclosures show that Shuster: “Trafﬁc.com claim to $50 million ITS earmark raises questions,” Inside ITS newsletter, Jan.

416 Sources and Notes

15, 2001, http://www.itsonline.com/trfc/articles/insideITS_jan15_01.doc

251 In 2007—less than a year: “Norman Mineta, Former U.S. Secre- tary of Transportation and Former U.S. Secretary of Commerce, Joins AECOM Board of Directors” (AECOM Press Release), June 11, 2007, http://pr.aecom.com/phoenix.zhtml?c=211994&p=irol-newsArticle&ID= 1013591&highlight=

251 On January 9, 2006, President George Bush: “Buchanan Lawyer Leaves for Key Homeland Security Position,” The Legal Intelligencer, January 4, 2006, http://www.law.com/jsp/article.jsp?id=1136282710611

251 On January 9, 2006, President George Bush: Tomarchio’s biography available online at: http://www.atsva.com/about-us/board-of-directors/jack-tomarchio.cfm

252 In that role, among other tasks: “Tomarchio Takes Homeland Security Post,” Pittsburgh Business Times, January 3, 2006, http://www. bizjournals.com/pittsburgh/stories/2006/01/02/daily4.html

252 This position would be formally described: http://www.atsva. com/about-us/board-of-directors/jack-tomarchio.cfm

252 An October 2007 report by the U.S. General: “Homeland Secu- rity: Federal Efforts Are Helping to Alleviate Some Challenges Encoun- tered by State and Local Information Fusion Centers,” October 2007, http://www.gao.gov/new.items/d0835.pdf

255 So on August 24, 2007, Scott: Letter available online at: http:// www.itsonline.com/pogo_dhs_comm/pogo_dhs_foia_aug24_07.doc

256 POGO received two such acknowledgements: Available online at: http://www.itsonline.com/pogo_dhs_comm/dhs_foia_ack1.pdf and here: http://www.itsonline.com/pogo_dhs_comm/dhs_foia_ack2.pdf

256 His message included a link to an article: “Lawmaker seeks more detail on DHS deputy secretary resignation,” Federal Times, Oct. 2,

417 The ‘Smart Road’ Scam

2007, http://federaltimes.com/index.php?S=3079658

257 On June 26, 2008 in a letter: Letter available online at: http:// www.itsonline.com/pogo_dhs_comm/dhs_foia_response_jun26_08.pdf

257 It wasn’t at all clear that: A search of DHS email archives would be fruitful only if Jackson and Tomarchio had communicated with Traf- ﬁc.com or its lobbyists using their own departmental email accounts. Others in the Administration had gotten into trouble with ethics watchdog groups by using non-governmental email accounts to bypass normal governmental scrutiny. See “Inside the Bush E-mail Scandal” in the April 13, 2007 issue of Time Magazine at: http://www.time.com/time/nation/article/0,8599,1610414,00.html

257 Some time between May 27, 2008: Interview online at: http:// homelandsecurity.tamu.edu/outreach/ichs-weekly-radio-programs/homeland-security-inside-and-out/audio-matrix/federal-other-federal-departments

257 Some time between May 27, 2008: “ATS Corporation Appoints Jack Tomarchio to Board of Directors,” BusinessWire (via Reuters), August 18, 2008, http://www.reuters.com/article/pressRelease/ idUS195603+18-Aug-2008+BW20080818

257 Shortly before, on April 17, 2008, Tomarchio: Testimony available online at: http://www.dhs.gov/xnews/testimony/testimony_ 1208459749044.shtm

258 “Surely any letters between these ofﬁcials: FOIA appeal letter available online at: http://www.itsonline.com/pogo_dhs_comm/FOIA_ Trafﬁc_Appeal.doc

Chapter 20

259 On July 17, 1997, as legislators: A copy of this letter is available online at: http://www.itsonline.com/trfc/letters/jul_17_97_borski_to_ shuster.pdf

418 Sources and Notes

260 The January 15, 2001 story in Inside ITS: Available online at: http://www.itsonline.com/trfc/articles/insideITS_jan15_01.doc

261 On January 17, 2001, Shuster’s Chief: A copy of this letter is available online at: http://www.itsonline.com/trfc/letters/jan_17_01_wil- son_slater.pdf

262 “After a thorough review, we have concluded: A copy of that letter is available online at: http://www.itsonline.com/trfc/letters/fhwa_let- ter_feb20_01.pdf

262 (Wilson would later go through: More information online at: http://www.nscorp.com/nscportal/nscorp/Community/ Government%20Relations/contacts.html?leaf=Government%20Relation s%20Contacts

263 On June 6, 2007, the New York Times: “Campaign Funds for Alas- kan; Road Aid to Florida,” New York Times, June 7, 2007, http://www. nytimes.com/2007/06/07/washington/07earmark.html

264 In mid April 2008, the U.S. Senate: “Justice asked to probe Young earmark,” Anchorage Daily News, April 18, 2007, http://www.adn.com/ news/politics/fbi/young/story/379679.html

264 On March 26, 2001, Young would write: A copy of that letter is available online at: http://www.itsonline.com/trfc/letters/mar_26_01_ young_to_mineta.pdf

266 On April 19, 2001, Trafﬁc.com President: Borski’s contribution shown at: http://www.campaignmoney.com/political/contributions/david- jannetta.asp?cycle=02

266 On the very next day, Cong.: Copy of letter available online at: http://www.itsonline.com/trfc/letters/apr_20_01_borski_to_mineta.pdf

267 The sole “Speciﬁc lobbying issue: Copy of the lobbying registration ﬁled with the U.S. Senate available online at: http://www.itsonline. com/trfc_lobbyists/holman_2001.pdf

419 The ‘Smart Road’ Scam

267 On March 6, James H. Burnley: Mr. Burnley’s lobbying disclosure available online at: http://www.itsonline.com/trfc_lobbyists/win- ston_strawn_2001_registration.pdf

267 Burnley, who had served as Secretary: Mr. Burnley’s biography with Venable LLP, his employer after Winston & Strawn, is online at: http://www.venable.com/professionals.cfm?action=view&attorney_ id=418

267 The 2001 ﬁrst half report: Disclosure available online at: http:// www.itsonline.com/trfc_lobbyists/winston_strawn_2001_ﬁrst_half.pdf

268 The company’s work for Trafﬁc.com: Disclosure available online at: http://www.itsonline.com/trfc_lobbyists/ winston_strawn_2001_sec- ond_half.pdf

268 My search of the Federal Election Committee: FEC Advanced Search form available online at: http://www.fec.gov/ﬁnance/disclosure/ advindsea.shtml

268 According to a business entity search: Search available online at: http://www.corporations.state.pa.us/corp/soskb/Corp.asp?1846167

268 Also on September 13, 2001, Brian: More info online at: http:// www.campaignmoney.com/political/contributions/brian-malewicz. asp?cycle=02

269 That amendment was agreed to: A copy of the web page from the Library of Congress’ “Thomas.gov” online resource shows this detail – see: http://www.itsonline.com/ttid/specter_amendment_from_thomas. pdf

270 On January 10, 2002, President George: “Bush Signs Defense Bill Into Law During Pentagon Ceremony,” DefenseLink (U.S. Dept. of Defense), Jan. 10, 2002, http://www.defenselink.mil/news/newsarticle. aspx?id=43865

270 Section 1101 of that bill: Excerpted online at: http://www.itsonline.

420 Sources and Notes com/ttid/sec3338_related_agcy_as_signed.pdf

271 On February 5, 2002, Transportation Secretary: Copy of letter available online at: http://www.itsonline.com/trfc/letters/mineta_feb5_ 02.pdf

271 The next day he sent nearly: Copy of letter available online at: http://www.itsonline.com/trfc/letters/feb_6_02_mineta_to_borski.pdf

271 On June 20, 2002, shortly after: Task order available online at: http://www.itsonline.com/trfc/contracts_agreements/Procurement_Re- quest.pdf

272 Over the next almost three years: Links to all of these agreements are available online at: http://www.itsonline.com/ttid/ttid_agreements. html

273 The lead story in the April 20, 2005: “Monopoly Money for Pa. Company,” The Hill, April 20, 2005, http://www.itsonline.com/trfc/articles/monopoly_money_apr20_05.pdf

274 At one point Cong. Weiner led: Copy of that letter available online at: http://www.itsonline.com/trfc/letters/weiner_letter_jun20_05.pdf

274 On that same day, Hatch’s ofﬁce issued: Press release available on Sen. Hatch’s website online at: http://hatch.senate.gov/public/index. cfm?FuseAction=PressReleases.Detail&PressRelease_id=9e462118- bfaa-428b-952a-d6512ea9f9c7&Month=7&Year=2005

275 On that same day, Cong. Anthony: Available on the House website online at: http://www.house.gov/list/press/ny09_weiner/ 052907trafﬁc.html

275 On the very same day they were heralding: Speech of Hon. Don Young of Alaska in the House of Representatives, Congressional Record – Extension of Remarks, July 29, 2005, http://www.itsonline.com/trfc/ donyoung_jul29_05.pdf

421 The ‘Smart Road’ Scam

Chapter 21

280 From the publication’s self-description: http://www.ukipme. com/downloads/pdfs/trafﬁcmedia.pdf

281 In the 1997-1998 timeframe: “Trouble at Trade Group: Intelli- moniker & ﬁring create tensions,” Tollroads Newsletter, June 1997, http://www.tollroadsnews.com/node/1880

281 In the 1997-1998 timeframe: “ITS America: Association Head Sued,” Tollroads Newsletter, July 1997, http://www.tollroadsnews.com/ node/2985

281 In a piece called “Snakeoil Sales: Available online at: http://www. tollroadsnews.com/node/2086

282 In a short piece called “Too Many Buds”: Available online at: http://www.tollroadsnews.com/node/2279

282 “We thought at ﬁrst it just: “IRF” stands for “International Road Federation,” and Cong. Bud Shuster shows up as the 1999 “IRF Man of the Year” at: http://irfnews.pmhclients.com/awards/moy-recipients

282 In a piece called “No Justice”: Available online at: http://www. tollroadsnews.com/node/2925

283 On November 8 I sent a draft: “The U.S. TTID Program: When Politics, Competition, and the Public Interest Collide” (white paper), available online at: http://www.itsonline.com/ttid/ttid_whitepaper.pdf

284 On November 30, 2007, “Traffic.com or Traffic.con”: Archived version of that news piece available online at: http://www.itsonline.com/ tti/traffictechnologytoday_blog_nov30_07.pdf

284 Prompted by the appearance of: Not his real ﬁrst name, which I have changed to protect his identity. More detail about this conversation with George is provided in Chapter 14.

422 Sources and Notes

287 The USDOT IG’s announcement: Announcement available online at: http://www.oig.dot.gov/StreamFile?ﬁle=/data/pdfdocs/TTID.pdf

288 On February 4 a replacement: Available online at: http://www. trafﬁctechnologytoday.com/news.php?NewsID=3313

288 Two days later Nick would email: Preliminary layout vailable online at: http://www.itsonline.com/tti/tti_article_layout.pdf

290 He immediately FAXed it to me: A copy of that FAX is available online at: http://www.itsonline.com/tti/trfc_tti_apr8_08.pdf

293 “Their contention that the local match: “How the USDOT’s Waiving of the Local Agency Match for the ITIP/TTID Program Fur- ther Enabled Trafﬁc.com’s Monopoly” (white paper), January 18, 2008, http://www.itsonline.com/ttid/ itip_local_match_analysis_v1c.doc

294 Both had been suggested in: “Mobility Technologies Launches ‘Digital Trafﬁc Pulse’ Network in Philadelphia” (press release), June 7, 2001, http://web.archive.org/web/20051215154213/http://corporate.traf- ﬁc.com/press/june7_2001.html

296 In late September 2008 the fall issue: “The ‘Smart Road’ Scam,” Regulation, Fall 2008, http://www.cato.org/pubs/regulation/regv31n3/ v31n3-noted.pdf#page=1

Chapter 22

298 In early February, 2008, my long-time friend: Not his real name, which was changed to protect his identity (see Chapter 14)

299 The tail end of the newsletter: Newsletter available online at: http://www.itsonline.com/ttid/emails/quirarte_email_feb4_08v1.doc

300 Just three minutes later: The recall message is online at: http:// www.itsonline.com/ttid/emails/quirarte_email_feb4_08v1.doc

301 Under only a very restrictive set: Recalling a message in Outlook

423 The ‘Smart Road’ Scam only works if the recipients are on the same Microsoft Exchange server as the sender (see http://www.archivum.info/microsoft.public.exchange. misc/2006-04/msg00188.html). Therefore, if Ms. Quirarte’s attempt to recall this message worked at all, it would have recalled it only within ITS America’s ofﬁces.

301 Prior to joining NAVTEQ in 1995: “Harry Voccola Biography” associated with an August 11-15, 2008 seminar from Management Brief- ing Seminars, http://mbs.cargroup.org/2008/content/view/151/

302 Voccola served on the ITS America: List of 1995 ITSA Board Members is shown here: http://ntl.bts.gov/lib/jpodocs/edldocs1/1070/ mmbrs.pdf

302 During nearly the entire period: See page 11 of Mr. Mineta’s CY2000 Public Financial Disclosure Report, available online at: http:// pfds.opensecrets.org/N00001701_2000_2.pdf

302 When ITS America’s ﬁrst President: See “ITS America’s Presi- dent to Depart” in the January/February 1998 issue of Pubic Roads, http://www.tfhrc.gov/pubrds/janpr/along.htm

302 Voccola also served on the Board: According to ITS America’s 2002 Annual Report, available online at: http://www.itsa.org/itsa/ﬁles/ pdf/ITSA%202002%20Annual%20Report.pdf

302 Voccola also served on the Board: According to ITS America’s 2003 Annual Report, available online at: http://www.itsa.org/itsa/ﬁles/ pdf/ITSA%202003%20Annual%20Report.pdf

302 Denaro, a long-time executive: “Navigation Technologies Wel- comes New Vice President, General Manager of North America Business Solutions Unit,” October 1, 2002, http://www.directionsmag.com/press. releases/index.php?duty=Show&id=5675

304 I provided a link: http://www.itsonline.com/ttid/ttid_white_paper. pdf

424 Sources and Notes

305 A little over a month later: “Selective Press (and Blog) Reports about the TTID Program/Trafﬁc.com Monopoly, in Reverse Chronologi- cal Order” (white paper), http://www.itsonline.com/ttid/ttid_press_cov- erage.pdf

Chapter 23

306 Deep Throat to Washington Post: http://www.dailyscript.com/ scripts/all_the_presidents_men.html

306 Senator Richard Shelby: Sen Shelby’s interview by CNN an- chor Paula Zahn on Nov. 25, 2002, http://edition.cnn.com/TRAN- SCRIPTS/0211/25/lt.03.html

310 Filing a Form S-1 Registration Statement: Available online at: http://www.sec.gov/Archives/edgar/data/1097503/000104746905022277 /a2162262zs-1.htm

310 Traffic.com went public: “Traffic.com’s IPO hits the gas,” Mar- ketWatch.com, January 25, 2006, http://www.marketwatch.com/news/ story/trafficcom-ipo-rises-debut/story.aspx?guid=%7BE217B3B5-1497- 49AA-A9F4-15C1EF935D15%7D

310 Traffic.com went public: “Traffic.com Announces Pricing of Ini- tial Public Offering” (company press release), January 25, 2006, http:// corporate.traffic.com/news/press_releases/Release_PricingIPO.htm

310 A ﬁnal prospectus for the IPO: Prospectus available online at: http://www.secinfo.com/dVut2.vqp.htm

315 A search on the PA Secy. Of State’s: Actual display on the Penn- sylvania Secretary of State’s website available at: http://www.corporations.state.pa.us/corp/soskb/SearchResults.asp?FormName=CorpNameS earch&Words=Starting&SearchStr=Convergence+Capital

316 Chartered in the Cayman Islands: See page 7 of this document: http://google.brand.edgar-online.com/EFX_dll/EDGARpro.dll?FetchFili ngHTML1?SessionID=YM_Mj2bI2E4Zd2B&ID=4953874

425 The ‘Smart Road’ Scam

318 Exhibit 10.2 associated with Trafﬁc.com’s: Available online at: http://www.secinfo.com/dVut2.zWXa.h.htm

319 While the average exercise price: Many of these early warrants were actually granted at a penny per share, but a one-for-three reverse stock split just prior to Trafﬁc.com’s IPO reduced the number of shares granted by one-third, and increased the exercise price by three times.

Chapter 24

321 That close connection ﬁrst became: Available online at: http:// www.itsonline.com/ttid/jannetta_testimony_sep10_02.pdf

322 This, of course, was very early: See this white paper: http://www. itsonline.com/ttid/datalock_scheme.pdf

322 Former Altoona, PA mayor Jannetta: The company was originally called Argus Networks, Inc. but has operated under several different names over the years. In 1999 it officially changed Traffic.com, but shortly later did business as Mobility Technologies. Later, it changed its name back to Traffic.com. All of these changes make tracking the company’s political donations and lobbyist connections challenging, to say the least.

323 He seemed eager to build: Available online at: http://www.city- data.com/elec2/98/elec-MECHANICSBURG-PA-98.html

323 Schaul’s special connection: Available from the I95 Corridor Coalition’s website at: http://www.i95coalition.org/PDF/Meetings/CIM/ CIM-DV-02-01-01-addendum.htm

325 Schaul was clearly using: Background on TEA-21 online at: http:// www.fhwa.dot.gov/tea21/

326 In that role, he was responsible: From David Jannetta’s bio at: http://alpnetworks.com/gln_c_mgmnt.html#DJ

326 Allowed the company to repay: Available online at: http://www.

426 Sources and Notes wrhambrecht.com/ind/auctions/openipo/trfc/trfc20060125.pdf

327 Oversight for the NEBF is provided: Board members shown online at: http://www.nebf.com/nebf/about/overview/beneﬁtboard.aspx

327 In May 1999 the project’s monthly Union: Available online at: http://www.nlpc.org/olap/UCU/02_11.htm

327 Both ofﬁcials later agreed to pay: Summarized online at: http:// www.nlpc.org/olap/UCU2/04_21.htm

328 After all, he was the lead person: Copies of these agreements are available through links in this white paper: http://www.itsonline.com/ ttid/ttid_agreements.html

329 According to the company’s Prospectus, NEBF: On page 89 of the Prospectus located online at: http://www.wrhambrecht.com/ind/auctions/openipo/trfc/trfc20060125.pdf

329 While this award was converted: On page 93 of the Prospectus described above.

330 In perusing the EBSA’s website: http://www.dol.gov/ebsa/

330 I immediately emailed him: White paper vailable online at: http:// www.itsonline.com/ttid/NEBF_connections_feb16_07.doc

331 In creating that brand new white paper: Bottom of page 91 of this document: http://www.wrhambrecht.com/ind/auctions/openipo/trfc/ trfc20060125.pdf

334 It turned out that the companies Bill: Columbia Partners’ website online at: http://www.columbiaptrs.com/main.php

334 It turned out that the companies Bill: All three companies are listed on Columbia Partners’ web page entitled “Private Capital Manage- ment Portfolio Companies” at: http://www.columbiaptrs.com/private- capital/portfolio.php

427 The ‘Smart Road’ Scam

335 I also provided links to news: “‘Monopoly’ continues for Pa. company,” says Hatch, The Hill, June 26, 2007, http://thehill.com/business--lobby/monopoly-continues-for-pa.-company-says-hatch-2007-06- 26.html

335 I also provided links to news: “Senator pans federal contract for trafﬁc information site,” National Journal’s Technology Daily, July 23, 2007, http://www.itsonline.com/trfc/articles/senator_pans_federal_con- tract_prtver.pdf

335 I also provided links to news: Blog postings available online at: http://realtime.sunlightprojects.org/2007/07/09/sf-lll-update-not-for-public-inspection/ and here: http://realtime.sunlightprojects.org/2007/07/09/ fhwa-discouraging-foia-requests-from-potential-contractors/

335 In an email message in mid-November: “The U.S. TTID Pro- gram: When Politics, Competition, and the Public Interest Collide” (white paper), http://www.itsonline.com/ttid/ttid_whitepaper.pdf

337 On November 3, 2003, Jeff Radjewski: Copy of letter online at: http://www.itsonline.com/ttid_letters/ibew_to_mdot_nov3_03.pdf

338 MDOT’s response nine days later by Tony: Copy of letter online at: http://www.itsonline.com/ttid_letters/mdot_to_ibew_nov12_03.pdf

339 Nine months later, on August 4, 2004: Available online at: http:// www.itsonline.com/ttid/Detroit%20ITIP%20080404.pdf

Chapter 25

341 Dan Rather may have ultimately taken: “Panel Finds CBS News Rushed Report on Bush’s Guard Record,” New York Times, Jan. 10, 2005, http://www.nytimes.com/2005/01/10/business/media/10cnd-cbs. html?sq=”dan%20rather”%20”mary%20mapes”&st=cse&adxnnl=1&scp =14&adxnnlx=1229713422-BN+KEsgDknAodp2Di+W8tw

344 In February 2008, Andrea Koppel: Ms. Koppel’s position is described at: http://www.mrss.com/senior-staff.html

428 Sources and Notes

344 When I learned of her transition: As deﬁned in Wikipedia at: http://en.wikipedia.org/wiki/Advocacy_journalism

344 When I learned of her transition: As deﬁned in Wikipedia at: http://en.wikipedia.org/wiki/Investigative_Journalism

345 The next morning, June 27: Drew Grifﬁn’s bio is online at: http:// edition.cnn.com/CNN/anchors_reporters/grifﬁn.drew.html

346 That producer would turn out to be: See 2006 Emmy Awards online at: http://www.emmyonline.org/mediacenter/news_28th_win- ners_data_list.html

347 The three Americans were expected: Grifﬁn was expected to report on this development live for AC360 later that night, and was earlier interviewed about these developments on Larry King’s show. A transcript of those comments is available here: http://transcripts.cnn. com/TRANSCRIPTS/0807/02/lkl.01.html

348 It turns out that for years he: See “Pelosi’s House Brushes Off CNN’s Questions on Earmarks,” NewsBusters, June 20, 2007, http:// newsbusters.org/node/13603

350 Such coverage is often referred to: Explanation of “B-roll” from Wikipedia: http://en.wikipedia.org/wiki/B-roll

352 The next day, Dave Fitzpatrick emailed me: http://www.opensecrets.org

352 On July 23, I sent Dave Fitzpatrick: Letter available online here: http://www.pogo.org/pogo-ﬁles/letters/contract-oversight/co-cfc- 20080724.html

353 In a nutshell, here are CNN’s questions: The full set of questions and responses I sent to Dave Fitzpatrick is online at: http://www.itsonline.com/ttid/cnn_feedback_jul28_08.doc

357 So I wanted to let him know: “The ‘Smart Road’ Scam,” Regula-

429 The ‘Smart Road’ Scam tion, Fall 2008, http://www.cato.org/pubs/regulation/regv31n3/v31n3- noted.pdf#page=1

358 The op-ed piece the previous fall: “Sensors and insensibility: State is asked to pay for trafﬁc info that taxpayers already funded,” Atlanta Journal-Constitution, August 29, 2007, http://www.itsonline. com/trfc/articles/sensors_and_insensibility_ajc.pdf

358 In early September, Drew Grifﬁn would ﬂy: “Trouper in Palin Probe Tells His Side,” CNN, Sept. 5, 2008, http://edition.cnn.com/2008/ POLITICS/09/05/palin.trooper/index.html

358 A few weeks later Grifﬁn would score: Excerpts from Palin Interview with CNN, CNN, Oct. 21, 2008, http://edition.cnn.com/2008/ POLITICS/10/21/palin.sitroom.transcript/index.html

358 He reported stories related to the group ACORN’s: “Catholic Church Cuts Off Acorn Funding,” CNN, Nov. 16, 2008, http://edition. cnn.com/2008/POLITICS/11/13/acorn.catholics/index.html

358 He reported stories related to the group ACORN’s: Citing bailout, union wants to organize bank workers, CNN, Dec. 8, 2008, http:// edition.cnn.com/2008/POLITICS/11/13/acorn.catholics/index.html

358 He reported stories related to the group ACORN’s: Credit card holders livid about “rate-jacking”, CNN, Dec. 18, 2008, http://www.cnn. com/2008/US/12/17/credit.card.rates/index.html

358 From a search of CNN’s website: “Wall Street: Fall of the fat cats,” CNN, Oct. 17, 2008, http://edition.cnn.com/2008/US/10/17/siu. wall.street/index.html

358 From a search of CNN’s website: “Whistleblower: Oil watchdog agency ‘cult of corruption,’” CNN, Oct. 14, 2008, http://www.cnn. com/2008/US/10/14/oil.whistleblower/index.html

359 Although I had never heard of Bob: Bio available on Richter Media’s website at: http://www.richtermedia.com/proﬁle/bios/bob

430 Sources and Notes

Chapter 26

362 To prospective state and local: The TTID program was originally called the Intelligent Transportation Infrastructure Program (ITIP). For convenience, it will be referred to as the TTID program throughout this chapter.

363 As if to underscore how much: Excerpted from the Detroit agreement, which is available online here: http://www.itsonline.com/ttid/ Detroit%20ITIP%20080404.pdf

363 Here are the very speciﬁc requirements: Search for “5117” on this web page: http://www.asm.org/ASM/ﬁles/LEFTMAR- GINHEADERLIST/DOWNLOADFILENAME/0000000568/ HR3338127%5b1%5d.pdf

364 After the Federal Highway Administration’s Deputy: Copy of letter from FHWA Deputy Executive Director Vincent Schimmoller to Darrell Wilson, Cong. Bud Shuster’s Chief of Staff, is available online at: http://www.itsonline.com/trfc/letters/fhwa_letter_feb20_01.pdf

364 They devised a clever legislative trick: Much more about the legislative history of the TTID program is in the white paper “The U.S. TTID Program: When Politics, Competition, and the Public Interest Col- lide,” available online at: http://www.itsonline.com/ttid/ttid_whitepaper. pdf

364 Language in the unrelated FY02 Defense: See Mr. Mineta’s letter to Cong. Don Young, then Chairman of the House Transportation & Infrastructure Committee, here: http://www.itsonline.com/trfc/letters/mi- neta_feb5_02.pdf

365 Those agreements typically spelled out: Available online at: http://www.itsonline.com/ttid/ttid_agreements.html

365 But I had an excellent clue: This press release is no longer available from Trafﬁc.com’s own website, but was captured from the web archive (“Wayback machine”) and can be seen online at: http://web.

431 The ‘Smart Road’ Scam

archive.org/web/20051215154213/http://corporate.trafﬁc.com/press/ june7_2001.html

366 That June 2002 task order: Available online at: http://www.itsonline.com/ttid/Procurement%20Request.pdf

367 The August 2004 agreement: Detroit agreement available online at: http://www.itsonline.com/ttid/Detroit%20ITIP%20080404.pdf

368 Meanwhile, I had been urging Lance: The IG’s audit announcement is online at: http://www.oig.dot.gov/StreamFile?ﬁle=/data/pdfdocs/ TTID.pdf

368 Chu sent a copy of the 71-page ITOP: Available online at: http:// www.itsonline.com/ttid/ITOP%20contract%20DTTS59-99-D-00445. DOC

369 Task order No. T990021: Available online at: http://www.itsonline. com/ttid/itip_orig_task_order.pdf

370 The details of the revenue-sharing arrangement: Available online at: http://www.itsonline.com/ttid/itip_penndot_agreement.pdf

Chapter 27

377 (Ray Lustig/Washington Post): Photo comes from the article “House Panel Approves Highway Bill,” Washington Post, March 25, 1998, http://www.washingtonpost.org/wp-srv/politics/special/highway/ stories/hwy032598.htm

378 An article in the March 9, 2002: CONGRESS: “The Glare in Don Young’s Rearview Mirror,” National Journal, March 9, 2002, http:// lobby.la.psu.edu/_107th/125_SMART_Growth/News_Stories/National_ Journal_03092002.htm

379 “There are no Democratic or Republican highways: “THE 43rd PRESIDENT: THE CHOICES -- Man in the News/Norman Yoshio Mineta; A Clinton Holdover, a Reagan Veteran and a Departing Senator,”

432 Sources and Notes

New York Times, Jan. 3, 2001, http://query.nytimes.com/gst/fullpage. html?res=9B04E1DD103BF930A35752C0A9679C8B63&sec=&spon= &pagewanted=all

380 On that day, the House Ethics Committee: That committee is of- ﬁcially called the Committee on Standards of Ofﬁcial Conduct

381 Cong. Oberstar became Chairman: “House Democrats Pick Oberstar to Chair T&I Committee in 110th Congress” (Cong. Oberstar Press Release), Dec. 7, 2006, http://www.oberstar.house.gov/index. asp?Type=B_PR&SEC={15B8640F-6770-48F9-8095-8EA6BEEC7471} &DE={32AA36DB-E617-49DB-AC32-CB8F20B0FC85}

382 Quoting from the lead story in: “Trafﬁc.com claim to $50 million ITS earmark raises questions,” Inside ITS, January 15, 2001, http://www. i95coalition.org/PDF/Meetings/CIM/CIM-DV-02-01-01-addendum.htm

382 As if to underscore the strength: More information is available from the Univ. of Minnesota’s website at: http://www.cts.umn.edu/ Events/OberstarForum/2007/

383 “It was a privilege and pleasure: Cong. Oberstar’s speech is available on C-SPAN’s website at: http://www.c-spanarchives.org/library/index.php?main_page=product_video_info&products_id=201396- 2&highlight=Oberstar

383 Quoting from a Washington Post news piece: “House Panel Ap- proves Highway Bill,” Washington Post, March 25, 1998, http://www. washingtonpost.org/wp-srv/politics/special/highway/stories/hwy032598. htm

383 On January 22, 2009, retired Illinois: “Senate Conﬁrms 2 More in Cabinet,” Washington Post, January 23, 2009, http://www.washingtonpost.com/wp-dyn/content/article/2009/01/22/AR2009012203883.html

Epilogue

385 As I was putting the ﬁnal touches: “House Kills Effort to Investi-

433 The ‘Smart Road’ Scam gate Lobbyist-Lawmaker Ties,” Foxnews.com, http://www.foxnews.com/ politics/2009/02/25/house-kills-effort-investigate-lobbyist-lawmaker-ties/

434 Frequently Used Acronoyms

COTR – Contract Ofﬁcer’s Technical Representative (the government employee who coordinates a federal project on a day-to-day basis)

DHS – Department of Homeland Security

EBSA – Employee Beneﬁts Services Administration (part of the U.S. Dept. of Labor)

FHWA – Federal Highway Administration (one of the “modal administrations” within the U.S. Dept. of Transportation)

FOIA – Freedom of Information Act Request

GSA – General Services Administration

IBEW – International Brotherhood of Electrical Workers

IG – Inspector General (also see “OIG”)

IPO – Initial Public Offering

435 The ‘Smart Road’ Scam

ITIP – Intelligent Transportation Infrastructure Program (the earmarked program initially called out in TEA-21 and later renamed to “TTID” in SAFETEA-LU)

ITOP – Information Technology Omnibus Procurement (GSA program for procuring IT services)

ITS – Intelligent Transportation Systems (describes a wide range of computing and communication technologies to make travel on our nation’s roadways more safe, efﬁcient, and convenient)

ITS America – Intelligent Transportation Society of America (a large trade association)

JPO (or “ITS JPO”) – Joint Program Ofﬁce (an ofﬁce within the USDOT that coordinates the government’s ITS efforts)

MTC – Metropolitan Transportation Commission (public-sector entity that coordinates transportation system enhancement – including ITS deployment – in the San Francisco Bay Area)

NEBF – National Electrical Benefit Fund (huge national defined benefits/ pension program for retired members of the IBEW)

NLPC – National Legal and Policy Center (non-proﬁt, DC-area government ethics watchdog organization)

OGE – U.S. Ofﬁce of Government Ethics (federal agency that is supposed to ensure that elected and appointed ofﬁcials behave in an ethical fashion)

OIG – Ofﬁce of the Inspector General

POGO – Project On Government Oversight (non-proﬁt, DC-based government watchdog organization)

436 Frequently Used Acronyms

PPP – Public-private partnership

SAFETEA-LU – Safe, Accountable, Flexible, Efﬁcient Transportation Equity Act (the big transportation authorization bill enacted in 2005) SEC – Securities and Exchange Commission

TEA-21 – Transportation Equity Act for the 21st Century (the big transportation authorization bill enacted in 1998)

TTID – Transportation Technology Innovation and Demonstration Pro- gram (latest name for the ITIP program called out in SAFETEA-LU)

TxDOT – Texas Department of Transportation

USDOT – U.S. Department of Transportation

UWB – Ultra Wideband technology

437