Weekend Reflections: US Federal Court Orders Records Unsealed In Obama Cap-And-Trade Fraud Case!

By Ian Talley, Of DOW JONES NEWSWIRES WASHINGTON -(Dow Jones)- U.S. legislators have obtained a court order unsealing documents in a case involving a multi-million-dollar cap-and-trade fraud. Republican legislators say the records–due to be opened to the public in early January–could shed light on the potential challenges of policing a new, trillion-dollar commodities market that would be created under climate legislation that Congress is considering.

In a rare filing by House lawyers, Reps. Joe Barton (R., Texas) and Greg Walden (R., Ore.), the ranking members respectively of the Energy Committee and the Oversight Subcommittee, asked a federal district court in California to unseal all the closed records regarding the successful prosecution for fraud of Anne Masters Sholtz, a former California Institute of Technology economist. Lawmakers say Sholtz’s case could expose the weaknesses of a federal cap-and- trade system because it involved the same market mechanism meant to cut emissions.

In particular, said one Republican aide, the case may shed light on the challenges of prosecuting fraud in such a system. Sholtz, who helped design a small California cap-and-trade program, allegedly hustled New York Investment firm AG Clean Air out of more than $12 million between 1999 and 2001 by selling fake emission credits. Despite an estimated $50 million to $80 million in claims against her in bankruptcy filings and nine complaints, she pleaded guilty to one of six counts of wire fraud in 2005

. Sholtz received what the lawmakers say was a veritable slap on the wrist for the felony–a sentence of five years probation with one year of home detention. “Did they not have enough proof? Did they have good leads, but faced practical difficulties? Were there witness, evidence, strategic problems? These are the questions that we hope to answer with the unsealed documents,” the Republican aide said. -By Ian Talley, Dow Jones Newswires; (202) 862-9285; ian.talley@dowjones.com;

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DESPITE FEDERAL COURT RULING, OBAMA AUTHORIZES 3 MARXISTS TO CONTROL FCC INTERNET MARSHALING

WASHINGTON—Federal telecommunications regulators approved new rules Tuesday that would for the first time give the federal government formal authority to regulate Internet traffic, although how much or for how long remained unclear.

The FCC has approved rules that would give the federal government authority to regulate Internet traffic and prevent broadband providers from selectively blocking web traffic. WSJ’s Amy Schatz explains what the new rules really mean.

A divided Federal Communications Commission approved a proposal by Chairman Julius Genachowski to give the FCC power to prevent broadband providers from selectively blocking web traffic.

The rules will go into effect early next year, but legal challenges or action by Congress could block the FCC’s action. Senate Minority Leader Mitch McConnell (R., Ky.) on Tuesday called the FCC’s action “flawed” and said lawmakers would “have an opportunity in the new Congress to push back against new rules and regulations.”

Editors’ Deep Dive: Net Neutrality Debate Heating Up

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The new FCC rules, for example, would prevent a broadband provider, such as Comcast Corp., AT&T, Inc. or Verizon Communications Inc., from hobbling access to an online video service, such as Netflix, that competes with its own video services.

The rules would also require Internet providers to give subscribers more information on Internet speeds and service. Broadly, the rules would prohibit Internet providers from “unreasonably discriminating” against rivals’ Internet traffic or services on wired or wireless networks.

The rules would allow phone and cable companies to offer faster, priority delivery services to Internet companies willing to pay extra. But the FCC proposal contains language suggesting the agency would try to discourage creation of such high-speed toll lanes.

Companies that operate mobile wireless networks would have fewer rules to contend with. Phone companies wouldn’t be able to block legal websites from consumers. They also can’t block mobile voice or video-conferencing applications. Wireless providers would be allowed to block other applications, however, that they say could take up too much bandwidth on wireless networks.

The five-member Federal Communications Commission board approved the new rules on a 3-2 vote, with the agency’s two Republican members rejecting the measure.

“For the first time, we’ll have enforceable rules of the road to preserve Internet freedom and openness,” FCC Chairman Julius Genachowski said Tuesday morning. He said the rules offered “a strong and sensible framework—one that protects Internet freedom and openness and promotes robust innovation and investment.”

Republicans at the FCC and on Capitol Hill blasted the FCC’s new rules, saying that they could stifle new investments in broadband networks and are unnecessary since there have been few complaints about Internet providers blocking or slowing web traffic.

The FCC’s action “is not motivated by a tangible competitive harm or market failure,” said Commissioner Meredith Attwell Baker, a Republican, who said she couldn’t support the rule because the agency was intervening to regulate the Internet “because it wants to, not because it needs to.”

At the same time, advocates of strong net-neutrality rules complained that Mr. Genachowski’s proposal didn’t go far enough, a sentiment echoed Tuesday by the agency’s other two Democrats.

Specifically, the two Democratic FCC commissioners wanted the same rules to apply to both wireless and wireline broadband networks. However, they agreed to approve the rules anyway, saying that passing Mr. Genachowski’s proposal was better than nothing.

“In my book, today’s action could, and should, have gone further,” said Democratic Commissioner Michael Copps.

Big phone and cable companies have expressed qualified support for the compromise, but they have said there was no real need for government regulation of web traffic.

Although this is the first time the FCC has passed formal rules on “net neutrality,” or the idea that Internet providers can’t deliberately block or slow web traffic, it is not the first time the agency has tried to act as an Internet traffic cop.

In 2007 the agency sanctioned Comcast for deliberately slowing the web traffic of some subscribers who were downloading large files over peer-to-peer networks. Comcast sued and in April, a federal appeals court sided with the cable giant, saying that the FCC didn’t have clear authority to enforce net neutrality.

The rules passed Tuesday are also likely to be legally challenged, and it isn’t clear if they will be upheld. Congress has never given the FCC explicit authority to regulate Internet lines, so the agency is using older rules to justify its authority.

Write to Amy Schatz at Amy.Schatz@wsj.com

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