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This Week in Scandals

Every week, we take stock of how the week unfolded for the stories we're tracking in Scandal Watch (see the right sidebar). Here is how we choose the scandals. Feel free to suggest additions.

U.S. Treasury Secretary Henry Paulson (Hyungwon Kang / Reuters)1. Market Crisis

Paulson's new $250 billion capital-purchase plan is garnering a lot of criticism. The main complaints? Responsible banks, and small banks, are being force fed the same medicine as irresponsible banks; the banks have no obligation to use the money to lend to one another (and it appears that they won't); the government is buying non-voting shares ($); and the plan probably won't crimp executive pay. Even the chief of the FDIC blasted the plan for failing to help homeowners ($).

Not all the vitriol is pointed at Paulson. The public flogging carries on for the usual cast of characters: SEC Chairman Chris Cox, Congress (which has enjoyed a cozy relationship with the financial industry), credit derivatives (JP Morgan's gift that keeps on giving), and the last decade of financial leadership in Washington. Meanwhile, those who warned of the crisis early on, like state whistleblowers and the ex-chief of the CFTC, enjoy some belated recognition.

Individual companies are taking the heat for some questionable practices too: Lehman approved $100 million in payouts to five top execs just three days before its collapse, and top officials at AIG ($) and Washington Mutual ignored early internal warnings about the coming crisis.

But people aren’t taking these allegations sitting down. San Diego is suing Wachovia, federal prosecutors have subpoenaed 12 Lehman execs, the New York attorney general is probing AIG's pay practices, and WaMu ($) has the FBI, IRS, SEC, FDIC and the U.S. attorney in Seattle on its heels.

2. Palin 'Troopergate'

The report (PDF) is out! The independent investigator found that Gov. Sarah Palin was within her rights to fire top cop Walter Monegan but did indeed abuse her power by pressuring him to fire her ex-brother-in-law. Palin's lawyers were quick to denounce the report while Palin somehow claimed it vindicated her.

Meanwhile, a second Troopergate investigation, conducted by the state's Personnel Board and requested by Palin in September, has widened its scope to include other ethics complaints against the governor.

3. Alaska!

Sen. Ted Stevens (R-AK) finally took the stand yesterday to defend himself against allegations that he knowingly lied on his disclosure forms about gifts from oil services company VECO. He and his wife testified that they were unaware of the free labor VECO Chairman Bill Allen donated to their home renovation.

The judge also demanded that Stevens turn over thousands of e-mails from his wife.

4. Tim Mahoney

Rep. Tim Mahoney's (D-FL) alleged $121,000 payoff to an ex-mistress has landed him on Scandal Watch...and in hot water in Washington. The FBI is reportedly investigating the matter, and Speaker Nancy Pelosi (D-CA) has called for an investigation by the House ethics committee. Mahoney claims he broke no laws, and his lawyer says that no campaign funds were used in the payoff.

Even more threatening to Mahoney's foundering career are the rumored details of a second affair. ABC News reports that Mahoney allegedly cheated on his wife and his mistress with a Florida county official while lobbying FEMA for a $3.4 million grant for her county.

Perhaps it's not surprising that an aide close to Mahoney's campaign says he may not continue with his re-election campaign.

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