A report yesterday in The Deal that said the Justice Department was close to approving the controversial merger between Ticketmaster and Live Nation is “not true”, a person familiar with the matter told Main Justice.

Reuters reported that the Antitrust Division has a litigation team that has been “preparing the case” for months, and could decide to take the deal to court.

Another person familiar with the merger speculated that the companies leaked selective information ahead of a shareholder vote on the deal scheduled for Friday.

We’ll get more to you as the story develops.

The Justice Department is set to approve Ticketmaster Entertainment Inc.’s proposed $720 million purchase of Live Nation Inc., according to a story in The Deal, a mergers & acquisition news service.

The deal between the ticket giant and the concert promoter prompted a year-long review by the Justice Department’s Antitrust Division. Staff attorneys, according to The Deal, were “unenthused” about pursuing the case.

Critics of the deal, including a coalition under the name ticketdisaster.org, urged antitrust regulators to block the merger, citing  the combined firm’s “unprecedented control” over ticket prices and access. The merger would result in higher fees for consumers, critics said.

Attorneys for Ticketmaster and Live Nation did not respond to requests for comment.

The Justice Department’s Antitrust Division came out swinging in an administrative filing yesterday, objecting to a proposed alliance — known as Oneworld – between American Airlines, Inc. and British Airways PLC, and suggesting that the Transportation Department should take a tougher stance than it has on recent similar alliances.

Justice stopped short of rejecting the airlines’ application, which asks for permission to jointly schedule and price flights without running afoul of any antitrust laws. Instead DOJ suggested conditions the Transportation Department (DOT) should impose before approving the deal, including forcing the airlines to give up some slots and take certain routes out of any grant of immunity.

DOT has ultimate authority over approving such applications, and the Justice Department’s role is only advisory.

The two departments argued over a similar application earlier this year by Continental Airlines, which sought to join the Star Alliance. Then the Transportation Department brushed aside most of DOJ’s concerns and approved the deal.

Observers say the Justice Department’s new filing takes a stronger stand. Justice “vigorously waded into this dispute by not only taking on the Oneworld Alliance but taking a swipe at the Star Alliance,” said Kenneth Quinn, a partner at Pillsbury Winthrop Shaw Pittman. who co-heads the firm’s aviation group.

“The Justice Department is taking a strong pro-consumer stand that will not be lightly ignored by DOT.”

In addition, Sens. Herb Kohl (D-Wis.) and Orrin Hatch (R-Utah) had previously sent letters to Transportation Secretary Ray LaHood urging his agency to consider and give “substantial deference” to Justice Department views before signing off on any proposed airline deals.

Lawmakers also have threatened to move authority over airline alliances from the Transportation Department to DOJ.

The Justice filing in the Continental-Star Alliance agreement came after DOT had already given its preliminary approval, but in the Oneworld case, DOJ weighed in first; the Transportation Department has yet to issue a decision. In an order today, the Transportation Department said it would accept comments on the filing until Jan. 11.

Highlights of DOJ Filing. The Justice Department filing focused on competition on nonstop routes between American’s hubs in Chicago, Miami and Dallas and British Airways’ hub in London. Fares on those flights could increase by 15 percent if the agreement was implemented without changes, the filing said.

“Fares paid by nonstop passengers in markets with only one nonstop competitor are 15 percent higher than fares paid by nonstop passengers in markets with two nonstop competitors,” the filing said.

The filing also singled out concentration at Heathrow Airport in London, the popular British Airways hub where slots are notoriously difficult to get, and asked that the two airlines give up some slots in order to mitigate anti-competitive effects of the agreement.

The alliance between British Airways and American Airlines does have the benefit of following an open skies agreement negotiated between the United States and the U.K., said Jim Weiss, a partner at K&L Gates who previously worked in the Antitrust Division, which makes antitrust regulators more amenable to approving the deal. The carrot of antitrust immunity has been used to foster liberalization in international aviation. 

An American Airlines spokesman said the airline “disagrees” with the Justice Department’s conclusions, and “expects that the U.S. Department of Transportation will approve our alliance in a timely manner.”

Previous Request. The airlines applied for antitrust immunity twice before, in 1997 and 2001, in order to enter into a similar alliance.

DOJ argued against those applications and said any deal would reduce competition on routes where the two airlines overlapped. The first application was rejected because of separate policy developments.

After the 2001 application, DOJ asked the airlines to divest certain slots on overlapping flights to encourage new competition, but the airlines withdrew their application before DOT ruled on the alliance.

The sale of a unit of Diebold Inc. that makes voting machines to its larger competitor, Election Systems and Software, is coming under increased scrutiny from both governmental and private entities as new details emerge.

We reported last month that the Justice Department was investigating the merger over concerns that it would be anticompetitive.

Last week, Florida’s Attorney General, Bill McCollum, said his office was also studying the sale to see if it concentrated too much power in one company.

This weekend, an election watchdog group, Black Box Voting, released a letter it sent to DOJ outlining its concerns about the deal.

The newly combined firm would control around 75 percent of the market for voting machines, according to Black Box, which argues that the merger “will put a single company in a position to shut down federal elections at will.”

According to Black Box, the merger raises concerns that, for large parts of the country, one company would control information about who is eligible to vote, which absentee ballots are accepted, and how votes are counted. Local election officials are also locked in to purchase software and service fees, the letter says.

The letter also raises questions about who owns the privately-held companies, and the companies’ ties to individuals who had previously been convicted of bid-rigging and unfair trade practices.

A rival voting-machine manufacturer, Hart InterCivic, has filed suit in federal court in Delaware in order to stop the deal.

The firms’ public relations strategy in announcing the $5 million sale also raised eyebrows. The companies waited until the deal had closed to make a formal announcement and sidestepped federal antitrust reporting procedures that require the parties in a transaction that meets a threshold size to alert regulatory agencies of their intentions, then wait 30 days to proceed.

Eileen Regen Larence, Grace Chung Becker and Joseph Rich testified on the GAO report on the Civil Rights Division on Thursday (Photo by Ryan J. Reilly / Main Justice).

A newly released government report by the Government Accountability Office (GAO) on the Justice Department’s Civil Rights Division from 2001 to 2007 confirms the mass exodus of career attorneys from the division during the Bush administration and shows several areas where enforcement of civil rights law declined.

And, according to Assistant Attorney General Tom Perez, between 2003 and 2007 more than 70 percent of the division’s attorneys left, “leading to a significant depletion of capabilities and institutional knowledge.” Perez made the remarks in prepared testimony before a House Judiciary subcommittee on Thursday.

The GAO report was also released at the hearing, where Eileen Regen Larence, director of GAO’s homeland security and justice division, answered questions from the House Judiciary subcommittee on the Constitution, Civil Rights and Civil Liberties.

While the GAO report does not mention the division’s overall attrition rate, which was compiled for an Obama DOJ transition team report that hasn’t been released publicly, it did demonstrate that a large number of employees in different sections left each year.

• The Employment Section l0st 23 percent of its staff in 2003, 35 percent in 2004 and 22 percent in 2005.
• In the Voting Section, 31 percent of the staff left in 2005, and 21 percent departed in 2007.
• For the Special Litigation section, the attrition rate was 31 percent in 2005, 24 percent in 2006 and 18 percent in 2007.

Perez also said the GAO report provides backing for his analysis that there has been a decline in enforcement in several areas during the Bush administration compared with the previous Clinton administration. Those areas include housing discrimination, job discrimination and disability rights.

The report identifies cases where the recommendations of career DOJ attorneys were overruled by George W. Bush political appointees.  The investigators could not pin down the exact number of instances, however, because the division doesn’t maintain electronic records explaining why cases were closed.

Joseph Rich, who worked for the division for 37 years and served as Voting Section chief from 1999 until he left the Justice Department in 2005, said the report confirms his own research and information. Rich testified before the committee on Thursday and cited a 2007 report he helped edit for the liberal-leaning Center for American Progress entitled “The Erosion of Rights,”

By interviewing Voting Section attorneys about 51 of the 345 matters closed in a six-year time frame, the GAO was able to identify three matters in which the Bush-run division had not approved the recommendation of career Voting Section lawyers.

Regarding one of the cases mentioned by the GAO, Rich testified that division political leadership denied a Voting Section recommendation to investigate a case on behalf of Wind River Reservation in Fremont County, Wyo.

It involved a possible violation of Section 2 of the Voting Rights Act based on the county’s use of an at-large election system, which makes it more difficult for minority candidates to win even if they constitute a majority in parts of the jurisdiction. Officials told the Voting Section not to investigate it because it was their belief that there were a large number of Republicans in  the area, according to Rich. According to Rich, after the Justice Department declined to act, the American Civil Liberties Union later filed a lawsuit against the Fremont County jurisdiction. DOJ eventually signed on to the complaint and a court found in favor of the ACLU.

However, in response to questions from the New York Times about the GAO report, Rich said that he believes that Michael Mukasey — who was Attorney General at the end of President Bush’s tenure –  and his team improved the enforcement and hiring practices in the division.

Perez also said that Mukasey began the process of depoliticizing the hiring process in the Civil Rights Division, a process he pledged to complete as the division finalizes new rules to “ensure that the very best candidates for the job are selected through a process that is conducted fairly, transparently, and without any consideration of the candidates’ political views.”

The former acting Assistant Attorney General for the Civil Rights Division, Grace Chung Becker, who served under Mukasey from the spring of 2008 until the end of the Bush administration, also testified Thursday, in defense of the Bush administration. Becker, who failed to win Senate confirmation in the spring of 2008 amid doubts from Democrats about her commitment to enforcing anti-discrimination laws protecting minorities, said the division under her leadership helped non-English speakers obtain ballots in their own language and stepped up prosecution of human trafficking cases.

Case Management Problems

In a separate but related issue, another GAO report also publicly released at Thursday’s hearing  said that compiling data on the division’s activities under the Bush administration proved difficult because of the current case management system.

Despite what GAO characterized as the obvious need to track data on the racial, gender, national origin and sexual orientation groups covered by the statutes that the Civil Rights Division enforces, the current case management system, which was begun in 2000 under the Clinton administration, does not track these “protected class” categories, according to the GAO report.

DOJ officials said the division has not required sections to enter this data into the system since it was implemented. The computer software includes fields for collecting data on protected classes, but in the vast majority of cases the field has been left blank.

Officials in the Employment Litigation Section, Housing and Civil Enforcement Section, Voting Section and Special Litigation Section reported they resorted to using WordPerfect (described by the GAO report as an “ancillary data system”) because it was much easier to search and compile data.

The report made several recommendations for the Civil Rights Division:

• Conduct annual assessments of the system.
• Require sections of the division to record data on protected class to strengthen its ability to account for its enforcement efforts.
• Determine how sections should be required to record data explaining the reasons for closing matters in the system.

Perez said he concurs with the three recommendations regarding case management, and that the department is working to implement those new procedures.

The DOJ believes that “the distribution of information across different case management systems makes it difficult and costly to generate department-level reports that support decision making,” according to the GAO report.

A planned implementation of a new Litigation Case Management System (LCMS) “will enable greater and more effective collaboration and information management,” according to the report. But that project began in March 2006 is now nearly two years behind schedule and over budget.

The DOJ is now uncertain whether the system ever will be implemented in six of the litigating components including the Civil Rights Division. That could mean the Division will need to rely on the old and flawed Interactive Case Management System (ICM), which has been in place since 2000.

While Justice Department guidance encourages each office within DOJ to conduct assessments of electronic data systems, the division has not conducted an assessment since 2006. It also lacks documentation of prior assessments. The report concludes the division lacks information on the performance of ICM and whether it is meeting users’ needs.

Thomas Perez before the Senate Health, Education and Labor Committee Thursday (Photo by Main Justice).

Tom Perez, the Justice Department’s Assistant Attorney General for Civil Rights, told senators Thursday a bill to prevent employers from discriminating against people on the basis of sexual orientation creates a “level playing field.â€�

Perez testified in support of the Employment Non-Discrimination Act (S. 1584)  before the Senate Committee on Health, Education, Labor, and Pensions.

The ENDA legislation has been proposed many times in the past, but this is the first time since 2002 it’s had a hearing in the Senate.

Perez disputed critics who say the bill would create a quota system for employers. That’s  a “quintessential red herringâ€� and “just dead wrong,” Perez said.

The Civil Rights Division regularly receive letters from individuals complaining of sexual orientation and gender identity discrimination in employment, Perez testified.

“We cannot in good conscience stand by and watch unjustifiable discrimination against lesbian, gay, bisexual and transgender individuals occur in the workplace without redress,” said Perez. “We have come too far in our struggle for ’equal justice under the law’ to remain silent or stoic.”

“The testimony of the Obama administration’s top civil rights law enforcement official adds to the momentum that is building behind this bill, and there’s no reason ENDA can’t be on the president’s desk for signature during this Congress,� said Christopher Anders, American Civil Liberties Union senior legislative counsel.

Anders told Main Justice after the hearing that Perez gave a terrific statement that served as “a very enthusiastic endorsement from him on behalf of the Obama administration. It’s terrific to se this sort of support for it.”

The bill has the support of at least two Republicans, Maine Sens. Susan Collins and Olympia Snowe, who co-sponsored the legislation.

Sen Al Franken (D-Minn.) said he appreciated the parallel that Perez drew between the modern gay rights movement and the civil rights movement, and said there is a generational gap when it comes to the issue of gay rights. Franken said his children didn’t see the difference between being gay and being left handed.

“I’m ambidextrous,â€� offered Perez.

“I’m not going to touch that one,â€� joked Franken.

Senior Counsel to the Deputy Attorney General Jennifer Shasky testified Thursday morning at a Senate Homeland Security Committee hearing on a bill to increase corporate transparency.

The bill, sponsored by Sen. Carl Levin (D-Mich.), would require businesses to fully report who controls a company. The aim is to give law enforcement additional tools to combat money laundering and track terrorist financing.

“It is important to recognize that the worst actors seek to exploit our lack of corporate transparency,” Shasky told the committee, detailing instances of criminals using lax reporting requirements  to run arms and drug trafficking networks through shell companies.

The Justice Department has warned that international criminal networks are gaining strength. Last month in Singapore, Deputy Attorney General David Ogden told representatives of Interpol, the international crime-tracking agency, that partner countries needed to enact stronger asset forfeiture and money-laundering laws.

In the Senate hearing, Shasky told Sen. Claire McCaskill (D-Mo.) that “there’s no question” the use of shell companies to evade law enforcement has grown.

In a recent training session with 75 investigators, Shasky said, she asked how many had hit dead ends because the trail led to a U.S. shell company. “It was darn near every hand” that went up, she said.

Shasky argued for several changes to the bill, including requiring filers to provide photo identification, easing restrictions to track transfers of ownership,  and provide civil and criminal liabilities for those who don’t comply with the new regulations.

She responded to questions from at-times skeptical senators worried about the burden the bill might place on small businesses, the costs states might incur, and how a “beneficial owner”, or those who benefit from and control a company, might be defined.

Shasky proposed that states not be required to verify the information, and that information only be available to law enforcement after a subpoena had been issued.

The Treasury Department’s Assistant Secretary for Terrorist Financing David Cohen also testified that existing laws had stymied investigations. We ”have seen some exploitation of that vulnerability,” he said.

Levin, in his opening statement, said: “We require people to provide more information to obtain a drivers license or a bank account than to acquire a U.S. corporation.�

The hearing was briefly interrupted by “Code Pink� activists who held handmade signs about healthcare reform in the back of the room.

The Justice Department is investigating the controversial sale of a Diebold Incorporated unit that makes voting machines to its larger competitor, Election Systems and Software, according to two people familiar with the matter.

The sale, announced in September, has raised concerns from voting-rights groups and Sen. Chuck Schumer (D-N.Y.), who urged DOJ to investigate in a letter to Attorney General Eric Holder. Last week, the New York Times proposed that the Antitrust Division try to block the sale.

Another voting-machine manufacturer, Hart InterCivic, filed its own suit asking a federal judge in Delaware to stop the deal. ES&S controls 68% of the market for voting machines with the Diebold purchase, the complaint alleges.

Hart Intercivic’s complaint also accuses Diebold and ES&S of engaging in other anti-competitive behavior, including raising prices on services once customers had already signed on to a bid.

The Schumer-chaired Senate Rules and Administration Committee, which has an oversight role on federal elections, is conducting its own review of the deal.

The $5 million sale also raised eyebrows for the firms’ public relations strategy. The companies waited until the deal had closed to make a formal announcement, and sidestepped federal antitrust reporting requirements that require the parties of a transaction that meets a threshold size to alert the Justice Department and the Federal Trade Commission of their intentions, then wait 30 days to proceed.

The mechanics of voting have been subject to heightened scrutiny since the 2000 Florida election stalemate and the infamous hanging chads it produced.

Diebold has been the target of criticism over the reliability of its touch-screen machines and over a chief executive who was a top fundraiser for George W. Bush’s 2004 campaign. Diebold posted a third-quarter loss today based on a $31.4 million loss on the sale.

A spokeswoman for the Justice Department declined to comment, and attorneys for Diebold, ES&S and Hart InterCivic did not respond to requests for comment.

Photo by Ryan J. Reilly / Main Justice

Break out the auto pen – the Department of Justice has some mail to answer.

The White House has told the office of the DOJ Executive Secretariat, which handles Justice Department correspondence, to prepare for a deluge of citizen mail, Main Justice has learned.

There are about 25,000 pieces of backlogged mail from citizens, which the White House is sorting by issue and re-routing to several different agencies. The Justice Department is expecting 2,000 to 3,000 pieces of mail, which the White House has labeled as a priority, according to a person familiar with the situation.

Department of Justice employees are expected to respond to the letters within ten days of receiving the mail, which should start arriving in the next few weeks. The mail, which will mostly be answered with pre-written form letters, could date back to January.

Such mail backlogged have occurred in the past with changes in administrations. A Justice Department spokesperson did not respond to requests for comment.

As rumors about Google’s upcoming clash with the Justice Department’s Antitrust Division swirl, Google has opted to continue its charm offensive, reports the New York Times.

The task of convincing journalists, professors, lobbyists, and Congressional staffers of Google’s harmlessness largely falls to Google’s Senior Competition Counsel Dana Wagner, formerly an antitrust lawyer with the Department of Justice.  His money line: “competition is a click away.”

For those of you keeping track, Google is currently the subject of three antitrust-related inquiries:

• Collusion between technology companies to not steal employees away from each other (DOJ)
• The Google Books settlement (DOJ)
• Shared members on the boards of Apple and Google (FCC)

You can read the full NYT article, detailing Wagner’s charm (as well as some of Google’s arguments) here.