Taxes Driving U.S. Corporations to Shutter

No wants to change the tax code and no one wants to allow U.S. currency offshore to be repatriated so…

U.S. Stands to Lose Billions From Corporate Tax Inversions

One Estimate Puts Lost Tax Revenue at Close to $20 Billion Over a Decade

How much revenue does the U.S. Treasury stand to lose from corporate tax inversions? It is difficult to say precisely, but one estimate puts the figure at close to $20 billion. Calculating how much the U.S. Treasury would lose is nearly impossible because of a dearth of reliable tax data from companies’ public filings and the variables in how companies can structure their businesses, tax experts say. One way companies seek to reduce their U.S. tax bills by reincorporating overseas is to transfer pretax income from their U.S. operations to their foreign parent companies through intercompany debt, says corporate tax consultant Robert Willens. But it is difficult to know how large of an impact that will have for a given company because of limits on how much interest companies can deduct from their taxable income. There is also a risk that companies act too aggressively attract scrutiny from the Internal Revenue Service. Another variable is the cash many companies keep overseas to avoid U.S. taxes. The cash only becomes taxable once it is brought back to the U.S. to pay dividends to shareholders or is used for other purposes. But companies don’t always disclose how much cash they bring back home or when.

Some companies say they were never going to repatriate the cash anyway, so they aren’t depriving the U.S. tax base of revenue by moving out of the country. Report: 1 million corporations closed, 60,000 a year; taxes blamed America has lost 1 million corporations since their height during the Reagan era, in part driven out of business by the industrialized world’s highest corporate tax rate, according to a new report from the nonpartisan Tax Foundation. The just-issued research revealed that the number of traditional “C” corporations has fall to a “historically low level” and wiped out the corporate tax base, resulting in the federal government relying much more on individual income taxes to fund its operation. “There is now more net business income taxed under the individual income tax system than the traditional corporate tax code, a trend that does not appear to be stopping any time soon,” said the report provided to Secrets. It said that corporate closings have recently picked up steam and now 60,000 a year are shut down. A driver in the loss of traditional corporations has been the ever-rising corporate tax rate, an issue Washington has been ducking for years. The Tax Foundation said that many corporate titans have taken matters into their own hands by restructuring as “pass through” operations which allows profits to be taxed at lower individual rates. “More than 60 percent of U.S. business profits are now taxed under the individual income tax code rather than the corporate tax code, which explains why the U.S. collects a relatively small amount of tax revenue from corporations despite having the developed world’s highest corporate tax rate,” said the foundation. “Although this kind of do-it-yourself tax reform is beneficial to the overall economy because it lowers the tax burden on business investment, something is nevertheless lost,” said Tax Foundation Chief Economist William McBride in a statement. “Pass-through businesses do not offer the same ability to invite investment from thousands of shareholders or easily transfer shares. That means the decline of the traditional corporate sector represents an economic distortion that is hobbling American industrial capacity and job growth. No other developed country has such a distorted business sector,” he added.

Report: 1 million corporations closed, 60,000 a year; taxes blamed

America has lost 1 million corporations since their height during the Reagan era, in part driven out of business by the industrialized world’s highest corporate tax rate, according to a new report from the nonpartisan Tax Foundation.

The just-issued research revealed that the number of traditional “C” corporations has fall to a “historically low level” and wiped out the corporate tax base, resulting in the federal government relying much more on individual income taxes to fund its operation.

“There is now more net business income taxed under the individual income tax system than the traditional corporate tax code, a trend that does not appear to be stopping any time soon,” said the report provided to Secrets.

It said that corporate closings have recently picked up steam and now 60,000 a year are shut down.

A driver in the loss of traditional corporations has been the ever-rising corporate tax rate, an issue Washington has been ducking for years.

The Tax Foundation said that many corporate titans have taken matters into their own hands by restructuring as “pass through” operations which allows profits to be taxed at lower individual rates.

“More than 60 percent of U.S. business profits are now taxed under the individual income tax code rather than the corporate tax code, which explains why the U.S. collects a relatively small amount of tax revenue from corporations despite having the developed world’s highest corporate tax rate,” said the foundation.

“Although this kind of do-it-yourself tax reform is beneficial to the overall economy because it lowers the tax burden on business investment, something is nevertheless lost,” said Tax Foundation Chief Economist William McBride in a statement.

“Pass-through businesses do not offer the same ability to invite investment from thousands of shareholders or easily transfer shares. That means the decline of the traditional corporate sector represents an economic distortion that is hobbling American industrial capacity and job growth. No other developed country has such a distorted business sector,” he added.

Then comes Congress with threats:

The Senate’s chief tax writer, Ron Wyden, wants U.S. companies looking to move abroad for a lower tax bill to understand one thing: “[T]hey won’t profit from abandoning the U.S.”

The Democrat’s comments, made in a Wall Street Journal op-ed last week, came amidst a spate of proposed mergers between major American companies and foreign rivals that would end up in their reducing their U.S. tax bill.

The proposed merger that’s gotten the most attention of late: The so far unsuccessful bid by Pfizer (PFE) for British pharmaceutical maker AstraZeneca (AZN).

Today, a U.S. company can move to a more tax-friendly country in a process known as “inversion” if the foreign partner owns more than 20% of the stock in the merged entity, among other requirements.

Wyden wants to raise that threshold to at least 50%, and he would like to make such a provision retroactive to May 8, 2014.

 

Apprehended in U.S. from Terror States

Consider as you read below, how many we did not catch. Consider how many actually got a pass. Consider how many received visas from the State Department to come here under a green card.

Just consider Iraq, a worn torn country currently in a war. How many have been allowed into the United States and why? This is chilling only from 2013.

WASHINGTON—Two Iraqi citizens living in Bowling Green, Kentucky who admitted using improvised explosive devices (IEDs) against U.S. soldiers in Iraq and who attempted to send weapons and money to al Qaeda in Iraq (AQI) for the purpose of killing U.S. soldiers were sentenced today to serve federal prison terms by Senior Judge Thomas B. Russell in U.S. District Court for the Western District of Kentucky.

The sentences was announced Lisa Monaco, Assistant Attorney General for National Security; David J. Hale, U.S. Attorney for the Western District of Kentucky; and Perrye K. Turner, Special Agent in Charge of the FBI Louisville Division.

Mohanad Shareef Hammadi, 25, a former resident of Iraq, was sentenced to life in federal prison, and Waad Ramadan Alwan, 31, a former resident of Iraq, was sentenced to 40 years in federal prison, followed by a life term of supervised release. Both defendants had pleaded guilty to federal terrorism charges.

Iraqi Refugee Processing

Part of the humanitarian mission of the USRAP is to provide resettlement opportunities to especially vulnerable Iraqi refugees. Since large-scale Iraqi refugee processing was announced in February 2007, DHS and DOS have worked cooperatively to increase the number of Iraqi refugees admitted to the United States as part of the worldwide commitment. DHS and DOS have worked closely to expand processing capacity for Iraqi refugee applicants while ensuring the highest level of security. In support of these efforts, USCIS currently deploys approximately 55 officers per quarter to the Middle East to conduct refugee processing circuit rides. Since the inception of the program in 2007, 203,321 Iraqi nationals have been referred to the USRAP for resettlement to the United States. USCIS has interviewed 142,670 Iraqi refugee applicants; approved 119,202 for resettlement and, 84,902 Iraqi refugees have arrived in the United States.

Does Customs and Border Patrol coordinate with ICE, then DHS then the FBI? Well take a look at the FBI homepage on terrorism.

(CNSNews.com) – The Department of Homeland Security’s Customs and Border Protection reports that in fiscal year 2014 (Oct. 1 through Sept. 30) agents apprehended 1,191 individuals from 12 of the 14 countries that DHS and the State Department have considered as countries that have problems with terrorism.

In December, CBP released its apprehension statistics for 2014, which show that of the 486,651 apprehensions, 257,473 were from countries “other than Mexico.” Of those apprehended from countries “other than Mexico,” CBP provided CNSNews.com the countries of origin of those taken into custody.

Of those from countries “other than Mexico,” 1,191 were from 12 countries – Iran, Sudan, Cuba and Syria (state sponsors of terror), and Afghanistan, Algeria, Lebanon, Libya, Nigeria, Iraq, Pakistan, Saudi Arabia, Somalia and Yemen (“countries of interest”) – designated by the federal government to have terrorist links.

The breakdown of the apprehension of individuals from 12 countries designated as “countries of interest” is as follows, according to CBP: Afghanistan (4); Algeria (3); Cuba (1,061); Iran (4); Iraq (7); Lebanon (10); Nigeria (29); Pakistan (31); Saudi Arabia (16); Somalia (6); Syria (14); and Yemen (6).

As CNSNews.com reported in 2010, following the failed attempt to bring down Northwest Flight 253 on Dec. 25, the Transportation Safety Administration (TSA) announced enhanced airport screening for people traveling through or from 14 “countries of interest.” TSA did not specify which nations it considered “countries of interest.”

“TSA is mandating that every individual flying into the U.S. from anywhere in the world who holds a passport issued by or is traveling from or through nations that are state sponsors of terrorism or other countries of interest will be required to go through enhanced screening,” the TSA said.

“TSA directed the increased use of enhanced screening technologies and mandates threat-based and random screening for majority passengers on U.S. bound international flights,” it added.

But a Jan. 4, 2010 New York Times report, citing Obama administration officials, identified them as Afghanistan, Algeria, Lebanon, Libya, Nigeria, Iraq, Pakistan, Saudi Arabia, Somalia and Yemen. The other four – Iran, Sudan, Syria and Cuba – were identified as state sponsors of terrorism by the State Department.

A Jan. 4, 2010 report in USA Today, citing the TSA as the source, described the full list of nations whose citizens would be targeted for enhanced security checks as “14 countries with terrorism problems.”

 

General Shelton Slams Iran

The summary below translates into a few questions. Why does Secretary of State John Kerry continue to legitimize Iran and to bring the country on equal footing globally as they are a rogue nation? The next question, will the White House continue to ignore Iran’s history of terrorism?

Iran is a dangerous ‘ally’ in Syria and Iraq

At the dawn of 2015, the U.S. has yet to articulate a comprehensive foreign-policy strategy to counter the influence and territorial gains of Islamic State, the terrorist group that emerged last year — and poses a dangerous and vexing threat to stability across the Middle East and North Africa. By the Pentagon’s admission, we neither understand the underlying ideology of the merciless group nor have a grasp of all the players in the region who have aggravated the crisis.

Indeed, the fog of war seems to have muddied Iran’s role in this dark chapter of regional affairs. Is Tehran an ally or a nemesis in the fight against Islamic State? At least initially, the U.S. believed that Iran could play a constructive role in combating a mutual adversary. Secretary of State John F. Kerry, touting the age-old axiom “the enemy of my enemy is my friend,” suggested that Iran could be part of the solution.

The only trouble is that Iran is a major part of the challenges we face.

Islamic State, also known by the acronym ISIS, rose out of the sectarian conflict that exploded in Iraq in 2004, shortly after the U.S.-led occupation. Iran immediately backed Shiite Muslim militant factions with training, money, weapons and intelligence, sparking a vicious Sunni Muslim militant counter-reaction that nourished Al Qaeda and, later, ISIS. The rise to power of Nouri Maliki, an inept and corrupt Shiite prime minister with strong ties to Tehran, sealed Iraq’s fate not only as a breeding ground for Sunni extremism, but as an Iranian satellite state.

Iran now has more than 7,000 Revolutionary Guards and elite Quds Force members in Iraq, according to the National Council of Resistance of Iran, an Iranian opposition organization. The killing of Iranian military advisor Hamid Taqavi, a brigadier general in the Revolutionary Guard, in December in Samarra put an exclamation point on the scope and significance of the Revolutionary Guard’s presence in Iraq. As the most senior commander of the Quds Force to die abroad since the Iran-Iraq war ended 26 years ago, Taqavi played a key role in Tehran’s training and control of Shiite militias in Iraq.

Amnesty International has pointed to the presence of Iran’s proxy militias in Iraq as a key source of instability and sectarian conflict there. In an October report called “Absolute Impunity, Militia Rule in Iraq,” Amnesty found that the growing power of Shiite militias has contributed to a “deterioration in security and an atmosphere of lawlessness” and that the Shiites “are ruthlessly targeting Sunni civilians … under the guise of fighting terrorism, in an apparent bid to punish Sunnis for the rise of the ISIS and for its heinous crimes.”

Iranian clerics’ paranoia over domestic discontent has made meddling in regional countries, Iraq in particular, a cornerstone of Tehran’s foreign policy and survival strategy. Speaking at Taqavi’s funeral, top Iranian security official Ali Shamkhani said, “Taqavi and people like him gave their blood in Samarra so that we do not give our blood in Tehran.”

Iran’s reasons for “fighting” ISIS diverge considerably from U.S. objectives. Whereas we seek a stable and nonsectarian government in Iraq, the mullahs’ interests are best served by the ascension of a subordinate Shiite leadership, enabling them to use the neighbor to the west as a springboard for their regional hegemonic, anti-Western designs. The Iranian government sees an opening in the turmoil in Iraq for consolidating its grip on that country, weakened by the ouster of Prime Minister Maliki.

Iran’s role in the civil war in Syria is following a similar dynamic: Through its proxy Hezbollah — the Shiite Muslim political and paramilitary organization — Iran has served as Syrian President Bashar Assad’s battering ram against his people, killing and enraging Sunnis and fueling ISIS’ exponential growth.

Aiding and abetting Iran’s destructive role in Iraq or Syria would be a strategic mistake for the U.S. that only exacerbates a profound crisis. It is a dangerous irony to even consider allying with Iran — which the U.S. State Department still considers the world’s most active state sponsor of terrorism — to fight the terrorism inspired by ISIS.

Iranian opposition leader Maryam Rajavi, who is well versed in the agenda and ambitions of Tehran’s mullahs, rightly describes a potential Western alliance with Iran against ISIS as akin to “jumping from the frying pan into the fire.” The eviction of the Iranian government from the region, especially from Syria and Iraq, must be part of the U.S. strategy for countering ISIS and resolving the sectarian divides that drive extremism throughout the region, Rajavi says.

She’s right. The U.S. must think beyond ISIS to what kind of region will be left in its smoldering wake. As the U.S. weighs its policy options, any scenario that leaves Iran in control of large swaths of the region must be rejected outright.
Gen. Hugh Shelton served as the 14th chairman of the Joint Chiefs of Staff.

 

The Fallout of Qatar’s Reputation

Qatar has had a long history of funding terrorism and taking in combatants as free refugees such as the Taliban 5. Qatar is denying funding terrorism and the Pentagon is playing stupid on the matter at the behest of the U.S. State Department all for the sake of nefarious diplomacy.

What is more, since the Arab Spring and the power shift in Egypt, al Sissi has moved to terminate the Muslim Brotherhood footprint once based in Cairo. Additionally, Egypt has moved to terminate al Jazeera media in Egypt.

Pressure has been applied to Qatar by several Gulf States recently including the United Arab Emirates as well as Saudi Arabia. Some pressure has also been applied by the U.S. Treasury which tracks terror funding.

Now comes the leader of Hamas.

Hamas leader Mashaal said deported from Qatar

Reconciling with key Arab countries against Brotherhood, Doha boots political chief; Israel welcomes news, Hamas denies it

Qatar has deported Hamas political leader Khaled Mashaal after hosting him for the past three years, Israel’s Foreign Ministry said Tuesday.

The move, first reported by a Turkish newspaper on Sunday, was swiftly denied by an official from the Islamist group.

According to a report in left-wing Turkish newspaper Aydınlık, Qatar has faced significant pressure from Saudi Arabia and the United Arab Emirates to deport Mashaal, amid a diplomatic reconciliation process currently underway between the small Gulf state and the Arab world.

According to CNN, citing a Hamas-run news agency, Mashaal and other Muslim Brotherhood members were most likely to head to Turkey.

On December 20, Egyptian President Abdel Fattah el-Sissi met with Sheikh Mohammad bin Abdul Rahman, a special envoy of Qatari leader Sheikh Tamim bin Hamad al-Thani. The meeting apparently ended the longstanding enmity between the two states over Qatar’s support for Hamas and the Muslim Brotherhood.

In a written message Tuesday, Israel’s Foreign Ministry congratulated Qatar for its decision to deport Mashaal.

“The Foreign Ministry, led by minister Avigdor Liberman, has advanced various moves to cause Qatar to carry out this step and stop aiding Hamas, directly and indirectly. To this end, minister Liberman and the ministry’s professional staff have acted in overt and covert tracks with Qatar and other states. We expect the Turkish government to now follow suit,” the Foreign Ministry’s message read.

But a Hamas official, Izzat al-Rishq, denied reports that Mashaal was in fact deported.

“There is no truth to reports by certain media concerning the departure of Khaled Mashaal from Qatar,” Rishq wrote on his Facebook page Tuesday afternoon.

According to Arab media reports, the deal between Egypt and Qatar included the closing of anti-Sissi Qatari news channel Al-Jazeera Mubasher Misr on December 22; the extradition of Egyptian Muslim Brotherhood members from Qatar to Egypt; and a halt to Qatar’s funding of the Muslim Brotherhood.

If true, Mashaal’s departure from Qatar would mark the end of Hamas’s political presence in the Arab world. Expelled from Jordan in August 1999 and choosing to break ties with the Assad regime in Syria in January 2012, Mashaal has struggled — and failed — to foster political patrons in the tumultuous Arab Middle East.

Appearing before a gathering of Turkish Prime Minister Recep Tayyip Erdogan’s Justice and Development Party in Konya December 27, Mashaal congratulated the people of Turkey “for having [Prime Minister Ahmet] Davutoğlu and President Recep Tayyip Erdoğan” as heads of state, adding that “a strong Turkey means a strong Palestine … Inshallah, God is with us and with you on the road to victory.”

Qatar: “Worst” on Counterterroism in the Middle East?

On Sunday, WikiLeaks revealed a State Department cable last December that labeled Qatar, the tiny, oil-rich Gulf nation, as the Middle East’s “worst” participant in counterterrorism efforts, the New York Times reports. According to the cable, Qatari security was “hesitant to act against known terrorists out of concern for appearing to be aligned with the U.S. and provoking reprisals.”

Another cable from December 2009 stressed increased counterterrorism efforts as a talking point for the Emir’s January 2010 visit.

The details offered in these cables are particularly strange when compared with a 2008 Congressional Research Service report for Congress.

The U.S. State Department called Qatar’s terrorism support since 9/11 “significant,” according to the CRS report. Since the attacks, Qatar established both a Combating Terrorism Law and the Qatar Authority for Charitable Activities (QACA) in March of 2004. The QACA was meant to monitor the operations of all Qatari charity organizations and ostensibly make sure the charities weren’t funneling cash to terrorist organizations. But there was an asterisk: The Emir could stop the QACA from overseeing a particular organization’s activities whenever he wants.

“U.S. concerns regarding alleged material support for terrorist groups by some Qataris, including members of the royal family, have been balanced over time by Qatar’s counterterrorism and efforts and its broader, long-term commitment to host and support U.S. military forces being used in ongoing operations in Iraq, Afghanistan and the global war on terrorism,” wrote Christopher M. Blanchard, the Middle East affairs analyst who authored the CRS report.

So what changed between 2008 and 2009?

Probably not much. The discrepancy in rhetoric is likely more an issue of what the United States is willing to say in public, and in private.

“Keeping U.S. basing rights in Qatar and ensuring the stable flow of oil and LNG gas [liquefied natural gas] are both more important than Qatar’s willingness to deal seriously with its citizens involvement in terrorism,” says Toby Jones, an assistant Middle East history professor at Rutgers University. “The cost of [the United States] pressuring them publicly to take counterterrorism seriously, it seems, might come at too high an economic cost.”

But U.S. officials may have reason to be suspicious of Qatar. Members of the royal family reportedly hosted Khalid Shaikh Mohammed, the 9/11 mastermind, in the late ’90s and may have helped him evade U.S. capture. In 2005, officials discovered another link between Qatar and al Qaeda: Qatar paid al Qaeda (and some speculate it may still be paying) millions of dollars each year so al Qaeda wouldn’t attack it. Qatar struck the deal before the 2003 Iraq invasion and renewed it in March of 2005, when an Egyptian suicide bomber attacked a theater in Doha. Many believed the bomber was part of al Qaeda. “We’re not sure that the attack was carried out by al Qaeda, but we ratified our agreement just to be on the safe side,” a Qatari official said at the time. “We are a soft target and prefer to pay to secure our national and economical interests. We are not the only ones doing so.”

It’s true: Qatar is one of many nations that have allegedly funded Islamic movements to save their own citizens, and that funding was another topic of discussion slated for last January’s meeting. “Officials should make known USG concerns about the financial support to Hamas by Qatari charitable organizations and our concerns about the moral support Hamas receives from Yousef Al-Qaradawi,” the December, 2009 cable said. “It is also essential to stress that high-level Qatari political support is needed, if financial flows to terrorists are to stop.”

But in a region rife with secret terrorist ties and illicit deals, it may seem strange that the only nation to host a U.S. military base could earn the dubious-least-valuable player title.

Yet America’s chummy relationship with Qatar is a key reason for Doha’s hesitancy to comply with every U.S. demand and its apparent eagerness to appease threatening countries and organizations. That relationship is, partly, what makes Qatar such a ready target.

Because it hosts the Al Udeid airbase and Camp As Sayliyah, a pre-positioning facility of U.S. military equipment, Qatar is at greater risk of terrorist attacks than neighboring countries, whose ties to the U.S. are less tangible. Notably, Qatar pays for the upkeep of the American military bases in its borders; the U.S. pays no rent, and no utilities.

So while countries like Saudi Arabia and the emirate of Abu Dhabi have aligned themselves strongly with the U.S. counterterrorism strategy because they rely somewhat on U.S. power and protection, Qatar has no such dependence. “[Qatar isn’t] fully behind the United States in the same way that Abu Dhabi clearly is,” explains Dr. Christopher Davidson, a United Nations and Middle East Policy Council expert on the Gulf monarchies, and a professor at Durham University in England. “This explains why there’s been some criticism of Qatar not being tight enough on counterterrorism. ”

Beyond Qatar’s alleged funding of al Qaeda and its ties to Hamas and Iran, it has also tried to bolster its reputation by allowing money to flow freely through the country, no questions asked. Implementing more scrutiny would likely anger terrorist groups and put Qatar at greater risk.

“If the funding is cut, or if the Qatari authorities listen to America and try to tighten things up so money can’t flow as easily, then you have the real risk of jihad coming home to Qatar,” Davidson explains. “The smaller Gulf states have never really faced a stage of serious terror attacks like Saudi Arabia has, but they all certainly live in fear of that.”

 

 

 

Eric Holder’s Clemency Problem(s)

Last April, Attorney General at the Department of Justice in cadence with the Obama doctrine announced  broader criteria for non-violent offenders serving sentences for narcotic crimes. This announcement set the table for the release of up to 200,000 criminals and the sentencing judges were never consulted nor were the police officers as part of the debate prior to this decision.

Almost a year later, Eric Holder’s ‘Smart on Crime’ operation has received thousands of applications for clemency and few cases have either been reviewed or granted. Questions are numerous most of all was this a ploy? It seems the Justice Department has turned to the ACLU. Another outsourcing operation to a complicit organization.

Obama’s drug-sentencing quagmire

Justice Department turns to ACLU, others to prepare thousands of commutation requests.

President Barack Obama’s sweeping plan to commute the sentences of nonviolent drug offenders who were caught up in the disparities in laws governing crack and powder cocaine is lagging, burdened by vague guidelines, lack of Justice Department resources and the unusual decision to invite advocacy groups like the ACLU to help screen applications, according to lawyers close to the process.

In the year since the Justice Department encouraged inmates to apply to cut short their sentences, more than 25,000 prisoners have come forward. But when Obama announced his annual commutations last month, only eight were given. That reflects deeper problems in the government’s process for reviewing sentences and determining which ones are, indeed, overly long because of the crack-powder distinction, according to those familiar with the system.

The differing treatment of what would otherwise be identical cocaine-related offenses is often attributed to racial bias, as federal lawmakers chose to take a far sterner approach to controlling the types of illegal drugs sold in inner-city America rather than in white-collar precincts. Obama has long decried the “unfair system” that often sent African-American drug criminals to jail for longer terms than their white counterparts.

“Because of a disparity in the law that is now recognized as unjust, they remain in prison, separated from their families and their communities, at a cost of millions of taxpayer dollars each year,” Obama declared in 2013.

But after vowing to review the sentences of potentially thousands of nonviolent offenders, Obama’s Justice Department has yet to make much progress, as inmates anxiously await decisions. Lawyers involved in the process say they are wrestling with the huge flood of applications and struggling to determine which judge-ordered sentences may have been influenced by the crack-powder disparity, amid a three- or even four-tier review process and the ever-present fear of releasing a prisoner who might go on to commit a violent crime.

“The resources are woefully inadequate to address this number of applications,” one lawyer involved in the process said. “It’s an enormous undertaking that was announced with great fanfare and promises being made without much consideration about the resources needed to get the promises fulfilled.”

With too few government lawyers available to handle the applications, the Obama administration has turned to private lawyers and groups to prepare the petitions. Four organizations — the American Civil Liberties Union, Families Against Mandatory Minimums, the National Association of Criminal Defense Lawyers and the American Bar Association — stepped up to form a consortium known as Clemency Project 2014 and to recruit more than 1,500 lawyers to handle the cases on a pro bono basis.

While any prisoner can submit a commutation request directly to the Justice Department, some lawyers claim that the close coordination between the Clemency Project and the administration suggests that prisoners going through the project will have a faster, inside track. The attorneys say comments from project organizers have reinforced that impression.

Administration officials insist the outside groups have no official role. All applications will be reviewed by Justice Department lawyers before recommendations are sent to the White House, they say. However, officials acknowledge that trained attorneys can help prisoners submit “well-prepared” applications that will speed processing by the relatively small staff at the department’s Office of the Pardon Attorney.

But even with the controversial assistance from outside groups, so far only a trickle of applications has been submitted by those organizations to the Justice Department, sources said. None of those were among the eight approved by Obama last month, all of which came from thousands of petitions already on file with the Justice Department.

“So many people are expecting a lot,” said Doug Berman, a prominent criminal-sentencing specialist and law professor at Ohio State University. “I just think we’re making it much too hard, too proceduralized and, until the president starts vindicating that work with lots of [positive] outcomes, I remain kind of cynical and frustrated.”

With so many thousands of petitions pending, the tiny number of commutations announced during the Christmas season prompted a new round of skepticism about the administration’s capacity to ease onerous drug sentencing

“This is paltry,” said one lawyer familiar with the process. “It is very disappointing.”

“I’d be shocked if it skyrockets to 100 before [Obama] leaves office,” another added.

Obama’s aides say it’s too soon to begin to take stock of a clemency effort that was only formally announced in April, although Justice Department officials first discussed the plan publicly last January.

White House Counsel Neil Eggleston said the rate of commutations is likely to pick up from the eight granted this year. “I would anticipate an uptick of that number,” he said.

The White House lawyer also said the Justice Department is on the verge of working through a significant volume of cases: “I’m confident in the next short period of time their activity is going to ramp up.”

However, officials declined to discuss any numerical goals for the clemency drive or to provide any details on increased staffing to accommodate the clemency effort. In addition, the administration would not commit to having all the applications processed by the time the president leaves office.

At his year-end news conference, Obama didn’t directly reference his commutation drive, but he did signal a desire to make reducing the number of federal prisoners part of his legacy.

“This is the first time in 40 years where the federal prison population and the crime rate have gone down at the same time, which indicates the degree to which it is possible for us to think smarter about who we are incarcerating, how long, how we deal with nonviolent offenders, how we deal with drug offenders,” Obama said. “We can do a better job and save money by initiating some of these reforms.”

Outsourcing a presidential prerogative?

Obama’s drive to increase the number of presidential commutations has been fueled in part by his view that recent legislation reining in overly long drug sentences unwisely neglected to reduce the sentences of prisoners already serving long terms, current and former officials say.

But the relatively small Office of the Pardon Attorney wasn’t prepared to handle such a high volume of cases, so officials encouraged the groups forming the Clemency Project to recruit and train private attorneys to prepare applications. The organizations have instituted their own screening effort to try to determine if prisoners meet the criteria and to make sure the private lawyers spend time on meritorious cases.

Still, the involvement of advocacy groups is unusual and, to some, inappropriate. Some conservatives have complained that routing applications for early release through these organizations amounts to Obama abdicating responsibility for managing the clemency process.

“The question is, can the president outsource his clemency and pardon authority? And that’s what he seems to be doing here. It’s another case where the president, it appears, is abusing his authority,” said Tom Fitton of Judicial Watch. “These groups don’t share a concern for public safety.”

Some liberal-leaning lawyers and clemency advocates have their own complaints. They say the private consortium has taken on an outsize, quasi-official role in the process and has an inherent conflict of interest: Project organizers want to get the strongest possible applications to the Justice Department, which may mean abandoning prisoners whose cases fall into a gray area.

“It bothers me that you have a group of private citizens who have an under-the-table deal with the deputy attorney general to help him do his job and the promise is, ‘We’re going to put your guys at the front of the list,’” one lawyer involved said. “Instead of dealing with a process that’s already opaque and bureaucratic and too slow, they’ve added this additional layer that’s even more opaque and bureaucratic and too slow.”

A Justice Department official denied that applications by the Clemency Project will receive special treatment.

“We’re not giving Clemency Project 2014 any special priority,” said the official, who asked not to be named. “This is not to say applications coming from the Clemency Project might not possibly be of better quality,” the official added, alluding to officials’ hope that the project can help prisoners make their best case for early release.

In June, Judicial Watch filed a Freedom of Information Act lawsuit demanding correspondence between the outside groups and DOJ, hoping to expose backdoor deals between the Clemency Project and the government. A judge has given the department until February to respond.

In addition, sources told POLITICO that questions were also raised inside the project about whether its work with the Justice Department might fall under a sunshine law governing official advisory panels, which could require the groups to open their work to the public. However, DOJ lawyers who looked into the matter concluded the law does not apply.

Indeed, the Justice Department denies there is any official relationship between the consortium and the department. “They are not an advisory committee at all,” a Justice official said. “The Clemency Project is completely separate from us.”

Despite those assurances, the DOJ has clearly coordinated with the project. The Bureau of Prisons, which is under the Justice Department, sent roughly 200,000 federal inmates a survey last year that told prisoners they had the option to release their data to the project, “a group of experienced criminal defense and non-profit lawyers.” The survey included several messages from the project, such as “PLEASE BE PATIENT AS THE PROJECT WILL BE HEARING FROM MANY PRISONERS.”

The Justice Department also told prisoners that public defenders would prepare some commutation petitions, but those plans were upended in July when a legal opinion issued by the federal court system declared there was no authority for defenders on the federal payroll to represent prisoners in clemency proceedings.

In addition, attorneys inside and outside the project say it has been hamstrung by a fairly mundane problem: protracted delays in getting basic paperwork from courts such as probation reports and judges’ detailed explanations for why prisoners received particular sentences — documents readily available only to government lawyers or the defense attorneys assigned to a case.

“That’s sort of the sticky wicket in the process,” Clemency Project manager Cynthia Roseberry acknowledged in an interview. “The clog in the system is waiting for that data to come back.”

Few details on the reboot

Although the Justice Department has said it boosted staffing for the pardon attorney’s office in recent months to deal with the growing onslaught of applications it is already receiving directly from many inmates plus the wave expected from the Clemency Project, a spokeswoman declined to provide specifics.

However, a source familiar with the operation told POLITICO the small office roughly doubled in size last year, going from about six lawyers to about a dozen, with a roughly equal number of support staff. The official assigned to take over the office in April, Deborah Leff, has attempted to ramp up the work but “they aren’t giving her the resources she needs,” the source said.

Asked about the claim, a Justice official said: “We feel we have plenty of bodies to deal with the incoming.”

However, Justice Department officials declined repeated requests for an interview with Leff.

Just how many applications the Clemency Project has submitted to the Justice Department remains a mystery. An ACLU lawyer said the number submitted by the group so far was probably not even in the dozens.

A DOJ spokeswoman declined to say precisely how many petitions the project had submitted, as did officials from the groups involved, citing privacy concerns.

“I think it’s going well on the whole,” the ACLU’s Ezekiel Edwards maintained. “I think we are meeting what is, granted, a massive challenge, which is not to say that everyone involved, the federal government and our clemency project, could not use more resources so we could get through cases faster.”

Project officials said about 5,000 applications are being worked on at the moment by pro bono attorneys.

Despite having enlisted large law firms and some law schools to help, the Clemency Project’s Roseberry couldn’t say when screening would be complete: “That’s a difficult question for me to answer.”

Murky criteria

Adding to the challenge facing the hundreds of lawyers recruited to prepare early release applications are the vague and often complicated criteria for determining who’s eligible. Some of the guidelines the Obama administration laid out in April are straightforward, such as a requirement to have served at least 10 years in prison. Several others sound simple but aren’t, lawyers say.

To receive a commutation through the program, prisoners have to be “low-level” and “non-violent.” Yet, at least one prisoner who won a commutation from Obama a year ago — former Southern University football star Clarence Aaron — was deemed a “mid-level manager” of a drug operation, contributing to his original life sentence. There are also questions about whether an inmate can be considered “non-violent” if he or she had a gun while dealing drugs, had brandished a firearm but didn’t use it or had some record of violence as a juvenile — as many people serving long drug-related prison terms do.

Perhaps the most tricky criterion is that prisoners must show they would likely have received a substantially shorter sentence if they were sentenced under today’s laws. Sentences for some drug crimes tend to be shorter than a decade or two ago, due to an Obama administration-backed change in federal sentencing guidelines last year; a 2010 law Obama signed dialing back punishment for crack cocaine offenses; and a 2005 Supreme Court decision that gave judges more leeway to hand down sentences outside the guidelines.

For some prisoners, that’s an easy bar to get over. If a sentencing judge said explicitly at the time of sentencing or since then that he or she would have given a shorter sentence but was effectively forced to give a longer one, that convict could get a commutation.

But short of that, even Clemency Project organizers acknowledge that it is very difficult to say definitively that a prisoner “would likely have received” a shorter sentence today.

“Ask anyone who practices with the federal sentencing guidelines every day; it’s not an easy area of the law,” Edwards said.

A drive inspired by presidential frustration

The president’s power to pardon federal criminals or reduce their sentences is, in theory, a check on the vagaries of the justice system. But early in his presidency, Obama was struck by the seemingly trivial nature of many of the pardon cases that the Justice Department sent his way, current and former administration officials said. One case that crystallized the president’s concerns involved a Pennsylvania man convicted nearly 50 years ago for making fake dimes out of pennies in order to trick vending machines, a former official said; the man wanted the conviction expunged so he could buy a gun in his home state, which bars felons from owning firearms.

Obama granted that pardon in 2010, but it led to renewed discussions within the White House about broadening the commutation process to address bigger injustices in sentencing.

For a couple of years, some Obama aides tried to coax more recommendations for commutations out of the pardon attorney’s office. After that effort met with little success, the White House shifted course, pressing for a more systematic approach. The result was a plan finalized at the end of 2013 to lay down criteria for a broader clemency effort.

Last January, Attorney General Eric Holder began hinting about the changes and raising expectations for the effort. Speaking at the University of Virginia, he said there were probably thousands of prisoners in the federal system serving longer sentences than necessary.

“We put in place some pretty draconian sentencing measures, where people who were not engaged in the violent distribution of drugs ended up with 10, 20, 30 [years or] lifetime sentences,” Holder said. “It seems to me that some people are serving sentences that are far too long.”

Alluding to the political risks inherent in offering commutations, the attorney general also suggested that expanding clemency was a good second-term project for Obama.

Holder told an interviewer that the president, having raised the issue of sentencing disparities in his first term, would be “more willing” to look at broadening commutations in his second.

Despite Holder’s public backing for the clemency effort, he was not the driving force behind it. Holder has been hesitant to wade into such matters in part because of the political clobbering he took when, as deputy attorney general under President Bill Clinton, he failed to oppose Clinton’s pardon of the politically connected financier Marc Rich, current and former administration officials said.

“That was the most intense, most searing experience I’ve ever had as a lawyer,” Holder said at his confirmation hearing in 2009.

This time, Holder let Deputy Attorney General Jim Cole lay out the criteria for the commutations and announce the replacement of Ronald Rodgers, who had served as pardon attorney since 2008 and was viewed by clemency advocates as exceedingly conservative in his recommendations, among other shortcomings.

Cole called for fast action on Obama’s request for more deserving clemency cases.

“We are launching this clemency initiative in order to quickly and effectively identify appropriate candidates,” declared the deputy attorney general, whose office has generally had the final say on clemency recommendations sent to the president. “This is an issue that takes some time to work up, and we’ve been working on it for quite a while.”

For his part, Holder has continued to discuss the clemency idea, framing it in part as a way to combat racial unfairness in the justice system.

“It’s a civil rights issue and one that I’m determined to confront as long as I’m attorney general,” Holder said in a September interview with Yahoo News, expressing his hope that over the next months “we’ll start to see decisions being made.”

Asked about a report that thousands of drug convicts could be granted early release, Holder did not argue with the premise but offered no estimate of his own.

Obama has said little publicly about his clemency effort, but he has stressed the importance of a fair process.

“There are a lot of individuals in prisons in the United States who have committed crimes who would love to be released early,” Obama told Israel’s Channel 2 television last year in discussing a possible commutation for convicted spy Jonathan Pollard. “I’ve got to make sure that every individual is treated fairly and equally.”

Political risks and fallout

In a sign of the remarkable changes in the political climate on law and order, a project that would have generated a huge uproar from tough-on-crime Republicans a couple of decades ago has not produced major pushback from Congress. White House and Justice Department officials attribute the muted reaction in part to a growing realization among Republican leaders that the cost of locking people up for decades has become crushing.

Indeed, the Bureau of Prisons now accounts for roughly one-third of the Justice Department’s budget and that, in tight budgetary times, is beginning to put the squeeze on law enforcement agencies, like the FBI. Less fear about crime and changing attitudes about the drug war have also served to reduce public demands for severe prison terms.

Another indication of the huge shift on the issue: Even Bill Clinton, whose White House unabashedly pushed for longer sentences for drug offenders as part of its centrist strategy to triangulate against Democrats and Republicans, now agrees that the effort to put people behind bars for lengthy terms went too far.

“Some of it was unnecessary,” Clinton said in little-noticed comments to mayors and police chiefs in Arkansas in November. “The problem is we took a shotgun to it and just sent everybody to jail for too long.”

He added, “Anybody who’s been in law enforcement for a long period of time is partly responsible for the mess we’ve got, and I’ll take my fair share.”

Still, there are skeptics and even critics of Obama’s clemency drive. Rumbles of discontent have emerged from prominent Republicans such as House Judiciary Committee Chairman Bob Goodlatte of Virginia and incoming Senate Judiciary Committee Chairman Chuck Grassley of Iowa. And a few lawmakers have attacked the program directly.

“Isn’t it true that the prosecutor, the jury and judge who were actually handling that case would have had a much better opportunity to determine that sentence than someone in your office, five years down the road or 10 years down the road?” Rep. Randy Forbes (R-Va.) asked Holder at an April hearing.

The attorney general parried: “Well, except that the jury and the judge’s hands were tied at that time by the sentencing guidelines or by mandatory minimums that were tied to the amounts [of drugs] involved as opposed to the conduct that a particular person engaged in. And that is the wrong that we are trying to address.”

Some Republicans have linked the clemency scheme to Obama’s other executive actions in areas like immigration, arguing that he is again taking a power traditionally used sparingly and invoking it instead to make broad changes that should be accomplished by passing a law.

Even some supporters of sentence reductions say achieving them through presidential commutations is politically provocative — though clearly within Obama’s essentially unfettered constitutional power to grant executive clemency.

“This is the one power the framers left in there and preserved that was a king’s power,” said Berman, the sentencing expert. “We let the president be kinglike in this way.”

An alternative path considered and abandoned

In the earliest months of the Obama presidency, top White House officials considered a plan to grant commutations to hundreds or thousands of drug convicts in a way that might have been more efficient.

Then-White House Counsel Greg Craig championed a proposal to set up a blue-ribbon commission or independent agency — likely chaired by Republican and Democratic governors who’d granted a substantial number of commutations — to take over the clemency vetting process.

Craig has said the pardon process needs to be taken out of the Justice Department because of a perceived or actual conflict in having a department charged with prosecuting individuals also decide when the punishment imposed in such cases went too far.

“We cannot improve or strengthen the exercise of this power without taking it out of the Department of Justice,” the former White House counsel said in a 2012 speech. “There is, in DOJ, an institutional interest in preserving convictions and in preserving sentences.”

Craig’s idea was actively considered by officials in various agencies in early 2009 but faced bureaucratic resistance and questions about funding. It essentially died later that year when Craig resigned after finding himself at odds with White House chief of staff Rahm Emanuel and other key aides over other issues.

Many sentencing-reform advocates still contend that a commission, or another approach that directly involves having judges resentence prisoners under existing law, would be preferable to the one the White House eventually settled on: attempting to massively scale up the commutation system while having most of the legwork being done by outside lawyers.

There are several historical precedents for a clemency board. In 1974, President Gerald Ford set up a panel including figures like Democratic heavyweight Vernon Jordan and Notre Dame University President Father Theodore Hesburgh to wade through more than 21,000 applications for clemency from Vietnam War draft-dodgers. About two-thirds of the requests were granted in a year.

One benefit of the blue-ribbon panel approach, in the view of clemency advocates, is that it may insulate Obama from the political fallout of releasing a convict who ends up returning to crime or — in the worst case — committing a violent act. Nearly all current and former officials interviewed for this story mentioned the fear of a so-called “Willie Horton” — a Massachusetts prisoner granted early release (technically a furlough) who later committed rape and armed robbery. That series of events was used to great effect in Vice President George H.W. Bush’s campaign to defeat Massachusetts Gov. Michael Dukakis in the 1988 presidential race.

If high numbers of prisoners have their sentences commuted, at least some ex-prisoners will inevitably re-offend, said Julie Stewart of Families Against Mandatory Minimums. However, most have been in jail so long they’re unlikely to be violent, she argued.

“They’re letting them out in their 40s, 50s and 60s, when their criminal years have mostly aged out of them,” Stewart said.

Quieting some critics

One benefit to the administration of its current approach of working with outside groups is that it could mute criticism from advocates wrapped up in the effort — at least as long as there seems to be a prospect of a meaningful wave of commutations.

“They’ve co-opted all the people who would usually be critics,” said one lawyer close to the project. “You have that dynamic in play, and I’m not sure that’s a good thing.”

The Clemency Project groups insist their involvement hasn’t silenced them.

“We’re not shy about criticizing and litigating where necessary,” the ACLU’s Edwards said. “In terms of what [the administration is] trying to do on clemency, we’re incredibly encouraged. In no way does that mean we cease to discuss publicly our criticism of areas of the criminal justice system we think are deeply flawed.”

Underscoring that point, Stewart — despite her group’s involvement in the Clemency Project — called the eight commutations announced last month disappointingly small.

“Of course it’s disappointing there weren’t more commutations,” she said. “There should always be more, whether there’s any commutation initiative announced or not. It was paltry. Period.”

Stewart said she’s confident more commutations are on the way, though she added that it would be a “miracle” if 100 to 200 people win early release before Obama leaves office — numbers far lower than the thousands advocates contend are deserving.

“I think they’ve made enough noise about the clemency initiative that the White House means to stick to it,” Stewart said. Referring to the eight drug-case commutations Obama granted last month, she added: “It would be unbelievably embarrassing if they only did this.”