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Stockman trial update: The prosecution abides

From Monday:

Best newspaper graphic ever

The second of two key government witnesses took the stand late Monday in Houston in the federal fraud trial of former U.S. Congressman Steve Stockman, telling jurors his main duty on the ex-lawmaker’s staff was to “just do what I’m told.”

[…]

On the stand Monday, [Jason] Posey told the jury he had previously pleaded guilty to wire fraud, mail fraud and money laundering.

Both [Thomas] Dodd and Posey knew Stockman through his work with the conservative Leadership Institute, an Arlington nonprofit that trains youth in grassroots organizing.

Posey, 47, who now works as a fry cook at Spuds in Tupelo, Miss., said he worked for Stockman on-and-off since his unsuccessful bid for re-election to the U.S. House of Representatives in 1996. He helped with Stockman’s failed campaign for Texas Railroad Commissioner in 1998 and lived among other volunteers in Stockman’s ramshackle campaign headquarters, a former motorcycle repair shop in Webster, during Stockman’s victorious 2012 campaign for the Congress.

Stockman then tapped him to be a congressional staffer in Washington. But when new employees were going around the room introducing themselves by their new titles at a preliminary staff meeting, Posey did not mention that he would be a liaison working on special projects.

Instead, he testified,“I stood and said, ‘I’m Jason Posey and I just do what I’m told.’”

He told the jury he knew nothing about Stockman’s major donors, although he helped the ex-congressman set up a failed charity, which Stockman later used to solicit donations, according to testimony from other witnesses.

See here for the last update. I don’t have anything to add to this, so let’s move on. From Tuesday:

After two and a half years dodging federal investigators by fleeing to Egypt, former congressional aide Jason Posey came to the painful realization that his boss, two-time Republican congressman Steve Stockman, was going to blame him for the elaborate fraud scheme they had orchestrated, he told a federal jury Tuesday.

“He told me, ‘You’re going to take the blame for everything’ and he was going to run for office,” Posey testified, adding that Stockman promised to look after him after Posey was convicted. “That was when I realized that I had been a complete fool for trusting Mr. Stockman and he never intended to keep his pledge.”

That pledge, according to Posey, was that if their questionable use of charitable donations came to light Stockman “would come clean about everything” and protect him and another devoted congressional staffer.

[…]

During Stockman’s successful 2012 campaign for the House of Representatives and his failed 2014 bid to unseat Texas Republican John Cornyn for Senate, Posey said he helped filter charitable donations to conservative 501c3 nonprofit groups. Posey testified he helped Stockman set up sham charities and associated bank accounts, which Stockman directed him to use to pay off campaign expenses and personal debts.

He wrote checks, set up bank accounts and moved the money, as Stockman told him, into shadowy charities, including one called the Egyptian American Friendship Society and another entitled Life Without Limits, supposedly dedicated to helping people recover from trauma, so the spending would look like it was coming from charitable groups, according to his testimony.

You really have to admire the dedication to these schemes. There’s no length Stockman (allaegedly) wouldn’t go to for the money. Imagine how much he could have gotten done if he’d applied that kind of work ethic to something productive.

And finally, from Wednesday, when the prosecution finished and the defense got started.

The prosecution ended its case by calling back to the stand FBI Special Agent Leanna Saler, to explain to the jury how Stockman used Bitcoin to forward funds to Posey who had fled to Egypt to avoid investigators and the purchases of so-called “burner phones” which were used to discuss an improper campaign donation, according to Posey’s testimony. Both were difficult for law enforcement to trace, Saler testified.

Defense lawyer Sean Buckley asked whether the Bitcoin transactions were charged in Stockman’s indictment. Saler said no. The ATM withdrawals Stockman made in Switzerland and Cairo were also not included in the charges, she testified.

Under further questioning from Buckley, the agent stated that the FBI never investigated the two mega-donors who gave Stockman the charitable contributions that were later diverted to pay personal and campaign editors.

After the government ended its presentation, Stockman’s lawyers called Callie Beck as their first witness to begin their defense of the charges. The court adjourned shortly after Beck’s testimony to await the expected arrival of another witness who Stockman’s lawyers said was flying in from the Republic of Congo to testify about the GOP lawmakers work shipping medicine to developing countries.

Beck was on the stand less than 10 minutes in all, detailing what she did during a summer program Stockman paid for with a charitable donation. She said the Summit, a two-week camp in Colorado run by a Christian organization, involved lectures and team building for youths before entering college.

Under cross examination by Assistant U.S. Attorney Melissa Annis, Beck acknowledged she was not familiar with Freedom House, a housing and training program for Capitol Hill interns.

Yes of course I blogged about it when Stockman announced he would accept Bitcoin for his campaign. I mean, come on. The defense is expected to take just a couple of days, with the case wrapping up early next week. I can’t wait to see what this other witness has to say.

Bitcoin art

I confess, I kind of love this.

Bitcoin can be a work of art – literally.

Troy Fearnow, a resident of The Woodlands, is selling images designed to “store” bitcoin and other digital currencies, which are like digital cash. His goals are threefold: keeping currencies away from hackers, creating collectibles that can be saved, traded and fetch more money – and nourishing a broader conversation on digital money.

“This creates awareness. This creates discussion,” Fearnow said. “In addition, it’s rare that art has functional utility.”

He launched Cryptoart.com in late March, and it became his full-time gig about two months ago. He recently displayed artwork at the George R. Brown Convention Center during the unveiling of Houston’s first bitcoin ATM.

Cryptoart.com was born from Fearnow’s passion for bitcoin, a love of technology and his experience selling art online.

“I thought it’d be exciting to incorporate money, technology and art into a physical product,” he said.

Think of the artwork as a savings account, minus the interest. It’s a place to keep digital currency not needed on a day-to-day basis.

Here’s how it works. Each piece of art has a Quick Response – or QR – code in the bottom left corner. This QR code, using bitcoin as an example, is scanned with a smartphone to send bitcoins to a bitcoin address, which acts like an account to hold the currency. Most users have multiple bitcoin addresses.

[…]

Sheldon Weisfeld, the CEO of CoinVault ATM based in Houston, said the artwork found on Cryptoart.com can be a tool for educating people about bitcoin and other digital currencies.

“I think that what he’s doing is very unique in the whole evolution in the digital currency space,” Weisfeld said.

CoinVault ATM has seven bitcoin ATMs installed around the country, including the one recently unveiled at the convention center in Houston, and it’s working to add a few more. The majority of its ATMs allow users to convert cash to bitcoin and vice versa.

In general, Weisfeld said, people struggle to grasp the concept of digital currency because it’s intangible. Relating it to art gives consumers something tangible to associate with the currencies.

It’s also a way of getting the currency into offline storage and away from hackers or viruses. Weisfeld suggested other secure ways for storing a private key are on a jump drive or a printed piece of paper stored in a safe.

The cost of a Cryptoart ranges from $35 to $600 (and yes, Fearnow takes digital currencies for purchase as well) and by year’s end he expects that he will have sold 500 pieces of artwork. Some were purchased through Cryptoart.com, while others were sold through a soon-to-be-announced partnership with a bitcoin company.

We are well aware of the Bitcoin ATM. It would be totally awesome if you could use the Bitcoin ATM to deposit or withdraw a piece of Crypotart. Don’t ask me how that would work – I’m the big picture guy, not the details guy. I must say, I’m a little disappointed that Cryptoart.com has nothing to do with steganography, but I suppose that’s the way it is when one is producing for a mass audience. I don’t really have anything else to add here, I just like staying on top of local developments in the Bitcoin world.

Houston gets a Bitcoin ATM

Just what you were waiting for, I’m sure.

Houston unveiled its first bitcoin ATM on Wednesday, hoping to attract international travelers and more conventions to the George R. Brown Convention Center.

Bitcoin is like digital cash. And this ATM, on the downtown center’s second floor next to a Starbucks, allows users to convert cash to bitcoin and vice versa.

“Houston First always wants to be the first in offering amenities to its attendees and guests,” said Mark Goldberg, assistant general counsel for Houston First Corp., the quasi-public organization that manages the convention center. “With us now having this ATM machine … we’ve proven that we’re on the cutting edge of technology.”

Bitcoin is gaining momentum in Houston, although the adoption rate here lags behind Austin and Dallas, said Adam Richard, president of the Houston-based nonprofit Texas Coinitiative.

He predicts local awareness will continue rising as Apple Pay makes consumers more familiar with digital payments and as merchants begin offering incentives for people to pay with bitcoin.

“The interest keeps rising every week,” he said. “I’m excited to see where we’re going to be in a year from today.”

[…]

The downtown convention center’s ATM charges a 5 percent fee based on the real-time market rate for bitcoin. A user can create an account at the ATM. Then, each time the ATM is used, a text is sent to the user’s phone with a six-digit authentication code. This number needs to be typed in to the ATM, for security purposes, before any transactions can be made.

Weisfeld said he believed this ATM would help attract business to the convention center.

“The bitcoin community is the world’s largest loyalty population,” he said. “People that have bitcoin around the world have a tendency to want to do business in places that will do business in bitcoin. So we see the George R. Brown Convention Center establishing a first that is going to bring conventions to Houston.”

These types of ATMs can also be a draw for international travelers. Michael Cargill, who installed a CoinVault ATM at his Central Texas Gun Works in Austin in March, said visitors from other countries come in to exchange their virtual currency for U.S. dollars.

“We’re keeping up with technology,” he said. “A lot of gun stores are still on fax machines.”

Well okay then. I’m still not convinced that Bitcoin is going to go the distance, but certainly there are people who use it now. I rather doubt there are that many people who base their travel or business location decisions on the presence or absence of a Bitcoin ATM, but I will readily concede that a large international city like Houston ought to have one. So good on Houston First for making this happen.

FEC approves Bitcoin for campaign contributions

It’s the right call.

The Federal Election Commission on Thursday voted to allow political committees to accept Bitcoin donations and outlined the ways that the virtual currency can be used by federally regulated campaigns.

Responding to a request from a political action committee, the commissioners unanimously approved an advisory opinion that defined Bitcoins, which allows for online transactions without going through a bank or other third party, as “money or anything of value” — in essence, cash or an in-kind contribution.

They also imposed some restrictions, ruling that Bitcoin donations will be capped at a cash equivalent of $100 per person per cycle, with the value determined at the time of the donation, and that a complete accounting of name, address and employer must accompany the donation.

Committees can liquidate a Bitcoin contribution immediately, or they can choose to keep it as an investment, in the same way they do with stocks and bonds. Since the value of the virtual currency can fluctuate suddenly, the opportunity for a windfall is real, but is growing rarer as it stabilizes.

The opinion also allows committees to buy Bitcoins on the open market, but prohibits them from using the coins to pay for goods or services. They must be liquidated into United States currency before being spent.

See here for the background, and here for the FEC opinion. I don’t see this as being a big deal – I still think Bitcoin is a lot of sound and fury – but I see no reason not to treat Bitcoin as something of value that can be given to and used by a PAC. Better to allow it and regulate it than to ignore it and hope it goes away.

FEC ponders Bitcoin donations

For those of you that might want to make political contributions via Bitcoin.

The Federal Election Commission appears poised to rule on whether and how campaigns and PACs can accept bitcoins as political contributions. The news comes as Attorney General Greg Abbott’s campaign for governor announced Wednesday that he will accept contributions made in bitcoin.

Two draft advisory opinions have been posted to the FEC website for public comment ahead of the commission’s April 23 meeting.

The first draft, posted Tuesday, would broadly authorize the use of bitcoins not as cash donations, but as in-kind donations, much as stocks and bonds and similar instruments are accepted today. They also could be used to pay campaign bills, provided vendors would accept the novel currency. They could also be deposited into the PAC’s bitcoin digital wallet and kept their to be spent or sold later. The PAC could also use cash to buy additional bitcoins itself, but those coins could only be treated as investments and not as means to pay bills or otherwise transferred. It would also require that the identity of the donor would have to be known and recorded before the donation could be accepted.

But a second draft posted Wednesday contains language that would greatly restrict the use of bitcoins. The bitcoins could be accepted but would have to be converted to cash before they could be exchanged for anything of value, and the cash would have to be deposited in the PACs contribution account. The second draft would also impose a $100 maximum value on how much the bitcoins any one donor gives to a campaign during any one election cycle.

The advisory opinion was requested by Make Your Laws PAC. For the full record of the case, see here.

You can see the two draft opinions here. As we know, Congressman and performance artist Steve Stockman had asked the FEC for an opinion about Bitcoin donations; I wonder how much, if anything, he wound up collecting in Bitcoin. As I’ve said before, I don’t have any problem with this. I doubt it will amount to much, but as long as disclosure requirements are met I don’t see any good reason to treat Bitcoin as anything unusual.

Regulating Bitcoin in Texas

Bitcoin regulations. We have ’em.

Texas will not treat Bitcoin and other virtual currencies as legal money, according to a new memo from the Texas Department of Banking. Yet some companies that deal in Bitcoin transactions could draw state oversight, even if they are based outside of Texas.

Texas Banking Commissioner Charles Cooper issued a memo this month outlining the agency’s policies involving virtual currencies like Bitcoin.

“At this point a cryptocurrency like Bitcoin is best viewed like a speculative investment, not as money,” Cooper said in a statement.

In his memo, Cooper provided reasoning that echoed the IRS. Last month, the federal agency announced that, for tax purposes, it would treat Bitcoin as property instead of currency because no government recognizes the virtual currency as legal tender.

“Because neither centralized virtual currencies nor cryptocurrencies are coin and paper money issued by the government of a country, they cannot be considered currencies under the statute,” Cooper’s memo reads.

While Texas does not have a state income tax, the state’s Department of Banking does regulate certain financial transactions and license financial institutions. An exchange of Bitcoin for U.S. dollars between two parties would not draw the agency’s interest, according to the memo.

But some third-party Bitcoin exchanges are already drawing state scrutiny because of the way they handle transactions involving U.S. currency and Bitcoin, according to Daniel Wood, assistant general counsel at the Department of Banking. Cooper’s memo states that such exchanges are involved in “money transmission” because they act as an “escrow-like intermediary” that holds onto a buyer’s funds “until it determines that the terms of the sale have been satisfied before remitting the funds to the seller.”

Such exchanges do not need to be based in Texas to fall under the state’s regulations, Wood said. “If they do business with Texas consumers, we can force them to get a Texas license,” he added.

I’ll admit, I had no idea there was a Texas Department of Banking. I don’t know what effect this will have, but I suppose it’s good to be one of the pioneers in setting this sort of regulatory framework. I personally think that Bitcoin is more toy than currency, though I could see it maybe being useful for campaign contributions. Assuming all disclosure and other requirements are met, of course. What do you think about this?

Stockman and Bitcoin

Somehow, this doesn’t surprise me.

U.S. Rep. Steve Stockman, a Friendswood Republican with a history of flouting campaign finance laws, entered a new legal gray area this week when he announced his campaign can now accept donations in Bitcoin, a private virtual currency.

Stockman, who is challenging U.S. Sen. John Cornyn of Texas in this year’s Republican primary, was attending an event promoting the NYC Bitcoin Center in New York’s financial district earlier this week when he told a reporter with Business Insider that his campaign could now accept Bitcoin donations. Stockman appeared to confirm the report by posting it on Facebook and Twitter.

Stockman isn’t the first politician to embrace Bitcoin, though he may be the first elected official to do so. Among the legal concerns about Bitcoin campaign donations is that the virtual currency makes it easier to make donations anonymously; federal campaign finance laws require candidates to reveal the names of their contributions. Few businesses currently accept Bitcoin though acceptance has been growing over the last year.

A spokesman with the Federal Elections Commission could not say whether Bitcoin donations are legal. In November, the FEC considered whether to explicitly allow federal candidates and political action committees to accept Bitcoin donations as in-kind donations. The committee deadlocked, 3-3. The commission has not taken up the issue since the November vote, a spokesman said.

Whether Stockman has actually received any Bitcoin donations is unclear. As of Friday morning, his campaign website’s donation page made no mention of Bitcoin. However, in a photo that has circulated online since Tuesday, Stockman is seen at the NYC Bitcoin Center event holding a poster with a scannable QR code on it. The code is a link to a Bitcoin account, but it is not clear if the account is Stockman’s campaign fund. Since Tuesday, the account has received Bitcoin payments worth more than $200.

When asked about the QR code in the photo in an email, NYC Bitcoin Center spokesman Hamdan Azhar wrote back, “Congressman Stockman’s office would probably be best suited to address your question.” A Stockman spokesman has not responded to inquiries about the QR code or whether the campaign has received any Bitcoin donations.

Fine by me if he wants to do that. He can collect Bitcoins, gold bullion, or live chickens as far as I’m concerned, as long as he meets the disclosure requirements. Given that this is Steve Stockman we’re talking about, I don’t have a whole lot of faith in that. But as a matter of philosophy I have no problems with this. As with contributing via text messages, I welcome these innovations as long as proper disclosure is made and all other relevant campaign finance laws are followed. I doubt Bitcoin donations will make any difference to Stockman’s campaign, but hey, a guy can dream if he wants to.