Friday, November 30, 2007

The Shag Fund Spinners Think You Are Dumb

The story originally broken by Politico, which Talking Points Memo has titled the Shag Fund, has Rudy Giuliani in a pickle. This is a direct attack at the Mayor on issues which the Republican base pay attention too. The Mayor was boffing a mistress on the side while he was still married, and using taxpayer funds to pay for the trips and sundry expenses to do it... as well as having the taxpayers pay for the cops to chauffeur the mistress around town and so on.

But the part that caught my attention today was the disclosure that the city of New York prepaid an American Express account $400,000.00 for travel expenses incurred by the mayor. The AMEX account was billed to the Assigned Counsel Administrative Office, who are responsible for providing lawyers to indigent defendants. The permutations and smokescreens associated with this type of accounting fairly cry out for an auditor to take a fine tooth comb to the books. This type of accounting gimmick is the very definition of money laundering.

Giuliani's spokesman put the following spin on this AMEX prepayment revelation: "[I]t's fiscally responsible to anticipate predictable expenses and prepay them." With logic like this, the Giuliani camp must think whoever listens to them is dumb, or just not paying attention. They must be counting on the penchant of many Americans to roll their eyes and tune out once numbers and economic theories are the topic.

If this AMEX prepayment is really an example of fiscal responsibility by a Giuliani administration, the nation is in deep budgetary doo doo if he is ever elected President. Giuliani's money laundering cost the city thousands of dollars because of this gimmick. Rather than the city keeping that money in interest bearing accounts, and paying from those accounts when the bills came due, they gave AMEX that money. So taxpayer dollars were used to enrich AMEX, who certainly did draw interest on that money, and applied the funds as they were spent by the Mayor during his little extramarital excursions. In fact AMEX wound up refunding $298,000 after Giuliani left office, which reinforces what a great deal this was for AMEX. Just imagine some kindly billionaire depositing $400k in your bank account with the understanding that it is not your money, but the interest that accrues from that money is yours to keep. That is a sweet deal no matter how you slice it.

Calling this "fiscally responsible" is precisely the opposite of the truth. The Shag Fund tells us a good deal about Giuliani's commitment to family values, but we also are learning about his very careless manner in dealing with fiscal concerns.

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