--- ![](https://mail.citywatchla.com/images/stories/Dec-2018/101o.png) [ LOS ANGELES ](https://mail.citywatchla.com/index.php?option=com_content&view=category&id=312) # How Corruption Begets Corruptionism December 17 2018 Written by Richard Lee Abrams. [](https://www.addtoany.com/share) CORRUPTION WATCH-Corruption means the system itself is more or less okay, but that certain people cheat. It can be as simple as a bank manager who embezzles funds or as complex as Accounting Control Fraud where the company’s executives loot the corporation into bankruptcy. Enron corporation is well known example of Accounting Control Fraud where the officers reported non-existent income towards profits and denied the existence of losses. It does not take a math genius to figure out that consistent lies about high income while concealing huge losses will destroy the company. The perps do not intend the corporation to survive, instead they plan to loot it into insolvency as happened during the Savings and Loan Scandals of the 1980s. Economist William K. Black named such a criminal enterprise [“Accounting Control Fraud.”](http://www.richardmbowen.com/william-black-tells-the-ugly-truth/) **Accounting Control Fraud Applied to Government** From the crooks’ perspective, the biggest drawback of Accounting Control Fraud \[ACF\] is that private entitles do run out of money and go bankrupt. This aspect was true in the first modern ACF, Equity Funding, in the early 1970s, during the Savings and Loan Scandals of the 1980s and during Securitized Mortgages Frauds resulting in the Crash of 2008. The ability to steal is greater than the companies’ ability to generate income. Because governments have taxpayers, they have become the best targets for Accounting Control Fraud. **The Great Myth of Supply and Demand** The folly of Supply and Demand is that people naively think that if others will pay $20K for something, then that thing must be worth $20K. The reliability of prices set by Supply and Demand is only as valid as the Price System which produces the price. People who think that jewelry made from cubic zirconia contains diamonds will pay diamond prices, but their false belief does not turn cubic zirconia into diamonds. Similarly, in Los Angeles, people are paying hundreds of thousands of dollars too much for homes based on the false belief that because other people are paying similar prices, the home must be worth than exorbitant amount. **The City of Los Angeles is Pristine Corruptionism** The City of Los Angeles is small enough for a few mega crooks to dominate and yet powerful enough to compel a bailout by the federal government. Thus, the City borrows billions of dollars to subsidize developer cronies so that when the projects go bankrupt, the city is on the hook for repaying all the loans. For example, when the private Grand Avenue Project, in which the city “invested” $197 million becomes insolvent, the Wall Street firm which put up the money for Grand Ave will look to the City for repayment. If the City is also bankrupt because it owes hundreds of billions of dollars more than it can repay, that’s OK because the federal government will bail out the city. Of course, the City will be only be a conduit to pay off Wall Street. Since the real beneficiaries of the LA Bailout will be Wall Street, Dem and GOP Congressmen from across the nation will support the bailout. **Why Is This Scam Corruptionism?** The City Council operates according to a vote trading agreement whereby each councilmember is obligated to vote “Yes” on every project another councilmember places on the city council agenda. This reciprocal voting is the definition of vote trading which California Penal Code § 86 expressly criminalized. In December 2016, Judge Richard Fruin, however, ruled that the City Council’s conduct is “non-judiciable,” which is legalese for “above the law.” In brief, the system itself is corrupt and that is the difference between a few corrupt individuals ripping off the system and corruptionism where the government is itself is corrupt. No matter how honest a city councilmember may want to be, he or she is trapped in corruptionism and has no choice but to participate in the criminal vote trading system. **The Ramifications of Corruptionism** Residential and office density always increase land value. A 6,000 square foot lot with a single-family home is worth less money than the same lot with 20 apartments. A developer will pay more for a single-family home knowing that he can tear it down for apartments than a family can afford to pay to live in the home. Since all councilmembers must vote Yes for whatever project a corrupt councilmember places on the city council agenda, the developer only has to bribe one councilmember to guarantee that his project will be approved no matter how many laws it violates. The city itself benefits it since 20 apartments pay higher property taxes than a single-family home and that gives the mayor and city council members more money to subsidize their buddies. As the old TV commercial used to say about margarine, “It’s not nice to fool mother nature.” The laws of economics operate slowly, but they do operate. The Big One which Angelenos need to fear is the crash of Corruptionism. **We See the Fault Lines, but Ignore Them** Family Millennials are moving away because LA has the highest housing costs in the nation. The excessive density brought upon us by Manhattanization has resulted in the worse traffic congestion in the entire world. The destruction of the rent-controlled homes of 60,000 Angelenos has given us the worst homeless crisis in the country. Increasingly, the homeless are turning violent and the general economic strain on every one of increasing corruptionism is destroying our future tax base. While it is likely that the Feds will bail out the city when the crash does hit, businesses will leave a city that is ruled by Congress. **Complexity Induces Somnolence** While times look good, even the thieves are lulled asleep. Judges who take out extra mortgages on their homes and other investment properties on which they do not have to make any mortgage payments foresee no problem. Later they discover, that the unseen spigot from which money flows into their mortgage payments can be turned off. One problem of hubris is that the high and mighty do not see how Corruptionism snares them. While the Wall Street bankers who destroyed the economy in 2008 only became wealthier, everyone else suffered. Did Wall Street care that the backlash of the Rust Belt put Trump into the White House? No, not until his trade policies upset the global markets on which they depend. In less than one month, stocks have lost the gains of a year. The myopia of Corruptionism focuses on how much can be stolen now. Ask Judge Richard Fruin whether he worried about the future of Los Angeles when he legitimized the criminal enterprise that runs the Los Angeles City Council. The fact that our day of reckoning has not yet arrived does not mean that we are immune from the disaster Corruptionism brings. *(Richard Lee Abrams is a Los Angeles attorney and a CityWatch contributor. He can be reached at:* *****. Abrams’ views are his own and do not necessarily reflect the views of CityWatch.) 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