Satyam’s Fraudulent “Maquiladora of the Mind”
Posted by Philip Mattera on January 8th, 2009
It was only a few years ago that a group of offshore outsourcing
companies based in India seemed poised to take over a large portion of
the U.S. economy. Business propagandists insisted that work ranging
from low-level data input to skilled professional work such as
financial analysis could be done faster and much cheaper by workers
hunched over computer terminals in cities such as Bangalore. The New York Times once described one of these offshoring companies as “a maquiladora of the mind.”
Among the most aggressive of the Indian firms was Satyam Computer
Services Ltd., which signed up blue-chip clients such as Ford Motor,
Merrill Lynch, Texas Instruments and Yahoo. In a 2004 report
I wrote for the U.S. high-tech workers organization WashTech, I found
that Satyam was also among the offshoring companies that were doing
work for state government agencies. It was hired, for example, as a
subcontractor by the U.S. company Healthaxis to develop a system for
handling applications for medical insurance services provided by the
Washington State Health Care Authority. As it turned out, Healthaxis’s
contract was terminated, allegedly because of late delivery and poor
quality in the work done by Satyam.
The Washington State fiasco may have been an early omen of things to come. Satyam has just admitted that for years it cooked its books and engaged in widespread financial wrongdoing. The revelation came in a letter
sent to the company’s board of directors by Satyam founder and chairman
B. Ramalinga Raju (photo), who simultaneously tendered his resignation.
Raju wrote that what started as “a marginal gap between actual
operating profit and the one reflected in the books” eventually
“attained unmanageable proportions” as the company grew. The fictitious
cash balance grew to more than US$1 billion. “It was like riding a
tiger,” Raju colorfully wrote, “not knowing how to get off without
While admitting that he engaged in very creative accounting, Raju
insisted he did not personally benefit from the fraud, denying for
instance that he had sold any of his shares in the company. I guess it
is meant to be some consolation that among his sins Raju is not guilty
of insider trading.
Apart from Raju, the party most on the hot seat is the company’s
auditor, PriceWaterhouseCoopers, whose Indian unit gave Satyam’s
financial reports a clean bill of health.
The Satyam scandal is being called India’s Enron. It should probably
also be called India’s Arthur Andersen as this seems to be another case
in which an auditor was either oblivious to widespread accounting
misconduct by one of its clients or complicit in it.
Some soul-searching is probably also in order for the many large
U.S. corporations that have not hesitated to take jobs away from
American workers and ship the work off to Indian companies such as
Satyam. The revelation that much of the work has been going to a
crooked company is all the more galling.
Dirt Diggers Digest is written by Philip Mattera, director of the Corporate Research Project, an affiliate of Good Jobs First.
Hemispheric Conference against Militarization Says No to Merida Initiative, U.S. Military Bases
Posted by Laura Carlsen on December 30th, 2008
Americas Policy Program, Center for International Policy
More than 800
representatives from organizations throughout the Americas made their
way to the northern city of La Esperanza, Honduras to take a strong
stand against the militarization of their nations and communities.
Following three days of workshops, the participants read their final
declaration in front of the gates of the U.S. Army Base at Palmerola,
Honduras, just hours from the conference site. The first demand on the list was to close down this and all U.S.
military bases in Latin America and the Caribbean. By the end of the
demonstration, the walls of the base sported hundreds of spray-painted
messages and demands that contrasted sharply with their prison-like
formally called the Soto Cano Air Base, brought back some very bad
memories among the hundreds of Central American participants. The U.S.
government installed the base in 1981 and used it to launch the illegal
contra operations against the Nicaraguan government. The base was also
used to airlift support to counterinsurgency operations in Guatemala and El Salvador and train U.S. forces
in counterinsurgency techniques during the dirty wars that left over
100,000 dead, and is now used as a base for the U.S.-sponsored "war on
The demilitarization conference also called for an immediate halt to the recently launched "Merida Initiative,"
the Bush administration's new Trojan horse for remilitarization of the
region. The resolution asserts that the measure "expands U.S. military
intervention and contributes to the militarization of our countries"
and representatives from the Central American nations and Mexico
included in the military aid package committed to a process of
monitoring the funds and defeating further appropriations.
The Merida Initiative was announced by President Bush
as a "counter-narcotics, counter-terrorism, and border security"
cooperation initiative in October 2007. The model extends the Bush
administration's infamous national security strategy of 2002 to impose
it as the U.S.-led security model for the hemisphere. The approach
relies on huge defense contracts to U.S. corporations, and military and
police deployment to deal with issues ranging from drug trafficking to
illegal immigration and seeks to extend U.S. military hegemony in
foreign lands. It has been proven in Colombia
and other areas where it has been applied to have the effect of
increasing violence, failing to decrease drug flows, and leading to
extensive human rights violations.
Among the 14
resolutions of the conference, three others reject aspects of the
Initiative: the repeal of anti-terrorist laws that criminalize social
protest and are a direct result of U.S. pressure to impose the
disastrous Bush counter-terrorism paradigm; the demand to replace the
militarized "war on drugs" model with measures of citizen
participation, community heath, etc.; and the demand for full respect
for the rights of migrants.
Although on the
surface, Latin America is experiencing a period of relative calm after
the brutality of the military dictatorships and the dirty wars,
grassroots movement leaders from all over the continent described a
context of increasing aggression. The indigenous and farm organizations
that occupy territories coveted by transnational corporations have
become targets of forced displacement. Social movements that protest
privatization and free trade agreements have been dubbed terrorists and
attacked and imprisoned under new anti-terrorist laws that are a poor
legal facade for outright repression. The use of the military troops in
counter-narcotic activities has become commonplace and often hides
other agendas of the powerful. Police forces have come to deal with
youth as if being young itself were a crime.
In viewing the
threats of militarization in their societies, participants use a
broader definition than just the presence of army bases and troops.
"Militarism," states the Campaign for Demilitarization of the Americas,
is " the daily presence of the military logic in our society, in our
economic forms, in our social links, and in the logic of gender
domination and the supposed natural superiority of men over women."
Using this concept, the conference covered the profound need to change
the educational system and social norms, to work from within
communities, as well as making demands for changes in the external
conditions that affect them.
Despite days of
testimonies that sometimes included tears and anger, delegates to the
conference expressed hope above all else. Ecuador's new constitution
and decision to kick out the U.S. army base at Manta was cited as proof
plans for action and an encouraging consensus emerged: the breadth of
the challenge can be overwhelming but the dream of lasting peace
provides an irresistible light at the end of the tunnel.
concludes on this note: "... through these campaigns and actions on the
grassroots level, organized within each nation and throughout the
continent, we can reach a day not long from now when we fulfill the
dream of living free of violence, exclusion, and war."
Originally posted on October 17, 2008. Read the full declaration:
Popular Uprising Against Barrick Gold in Tanzania sparked by killing of local
Posted by Sakura Saunders on December 14th, 2008
Why would "criminals" set fire to millions worth in mine equipment?
How was it that these "intruders" had an estimated 3,000 - 4,000 people backing them up?
In what appears to be a spontaneous civilian movement against Barrick Gold, the world's largest gold miner, thousands of people invaded Barrick`s
North Mara Gold Mine this week in Tarime District and destroyed equipment worth
$15 million. Locals say that the uprising was sparked by the killing of a local, identified as Mang'weina Mwita Mang'weina. According to a Barrick Public Relations officer (as reported by the Tanzanian Guardian newspaper), "the intruders stoned the security personnel relentlessly until they
overpowered them. The guards abandoned their posts and retreated to
Barrick implies that "high levels of crime" are the cause of this
recent outbreak, recent reports suggest a different picture.
Allan Cedillo Lissner, a photojournalist who recently documented mine life near the North Mara mine, explains:
Ongoing conflict between the mine
and local communities has created a climate of fear for those who live
nearby. Since the mine opened in 2002, the Mwita family say that they
live in a state of constant anxiety because they have been repeatedly
harassed and intimidated by the mine's private security forces and by
government police. There have been several deadly confrontations in
the area and every time there are problems at the mine, the Mwita
family say their compound is the first place the police come looking.
During police operations the family scatters in fear to hide in the
bush, "like fugitives," for weeks at a time waiting for the situation
to calm down. They used to farm and raise livestock, "but now there are
no pastures because the mine has almost taken the whole land ... we
have no sources of income and we are living only through God's wishes.
... We had never experienced poverty before the mine came here." They
say they would like to be relocated, but the application process has
been complicated, and they feel the amount of compensation they have
been offered is "candy."
Evans Rubara, an investigative journalist from
Tanzania, blames this action on angry locals from the North Mara area
who are opposed to Barrick's presence there. "This comes one week after
Barrick threatened to leave the country based on claims that they
weren't making profit," comments Evans after explaining that Barrick
does not report profit to avoid taxes in the country. "This is a sign
to both the government of Tanzania and the International community
(especially Canada) that poor and marginalized people also get tired of
oppression, and that they would like Barrick to leave."
Only one week prior, Barrick's African Region Vice President, Gareth Taylor threatened
to leave Tanzania due to high operating costs, claiming that the company did not make profits there. Barrick's Toronto office
quickly denied this report, stating that "the company will work with
the government to ensure
the country's legislation remains 'competitive with other
jurisdictions so that Tanzanians can continue to benefit from
Interestingly, Taylors threat came shortly after he attended a workshop to launch the Extractive Industries Transparency Initiative (EITI) in Dar es Salaam.
One thing is clear, though; these reports of hundreds, backed by thousands, of villagers attacking mine infrastructure reflects a resentment that goes beyond mere criminal
action. And this surge in violence should be examined in the context of
the on-going exploitation and repressive environment surrounding the
James Bond Takes on the Corporate Water Privateers
Posted by Jeff Conant on December 10th, 2008
Back in the good old days of the Cold War, everybody’s favorite secret agent, James Bond, fought villains like Dr. No, an evil scientist out to sabotage U.S. missile tests, and Mr. Big, a Soviet agent using pirate treasure to finance espionage in America. But as Bond’s friend Mathis tells him in Quantum of Solace, released this month, “When one is young, it’s easy to tell the difference between right and wrong. As one gets older, the villains and heroes get all mixed up.”
The reference is to a shady new Bond villain, agent of the Quantum organization – one Dominic Greene. In public, Greene is a leading environmentalist whose organization, Greene Planet, buys up large tracts of land for ecological preserves. But behind the scenes, Greene has another agenda. As he says to his co-conspirators, “This is the most valuable resource in the world and we need to control as much of it as we can.”
The film makes a number of plays on the assumption that the resource in question is oil – but oil is so…twentieth century.
By the time Bond has pursued Greene from Italy to Haiti, from Haiti to Austria, and crash-landed his plane in a sinkhole in the high, barren desert of Bolivia, we make the discovery that this vital resource is – surprise! – water.
Colluding with Greene is a cast of evil characters taken straight from the history books. We have General Medrano, the ex-dictator of Bolivia, to whom Greene says, “You want your country back? My organization can give it to you.” We have the U.S. Ambassador, myopically sticking to the familiar program: “Okay, we do nothing to stop a coup, and you give us a lease to any oil you find.” And we have the British foreign office, continually wrangling with M15, Bond’s spy agency. When Bond’s boss, M, tells him that Greene is not an environmentalist but a villain, the Foreign Minister says, “If we refused to do business with villains, we’d have almost no one to trade with.” Ain’t it the truth.
The fact that Quantum of Solace makes water the villain’s object of greed, replacing oil, gold, diamonds, and mutually assured destruction, is telling of the point we’ve reached. More telling still is the fact that our villain’s cover has him acting as an environmentalist, the ultimate corporate greenwasher. The fact that the action winds up in Bolivia – the country where, in real life, both Bechtel and Suez have tried and failed to take control of community water resources during and shortly after the reign of former-dictator-turned-neoliberal President Hugo Banzer – brings the plot frighteningly close to reality. The privatization of water in Bolivia back in 2000, and the massive popular response that turned out rural water stewards and urban ratepayers to riot for months until the multinational transgressor was ousted, was the spark that set social movements worldwide on red alert. Since then, numerous private water companies have been refused contracts on the grounds that popular movements, and, increasingly, governments, recognize the need to treat water as a human right and a public good – not a commodity.
If only the water movement had a few organizers with the physique, the gadgets, and the, er, style of Bond.
While we have many great documentaries telling the story of the global water wars, including this year’s Flow and Blue Gold, one is forced to wonder if 007 does a greater service to the water movement than even our most highly talented documentarians. After all, who better than Hollywood to characterize the greenwashing corporate water profiteers as straight up evil, sans the need to justify the hyperbole?
Matieu Amalric, the actor who played Dominic Greene, wanted to wear make-up for the role, but director Marc Forster “wanted Greene not to look grotesque, but to symbolize the hidden evils in society.” Similarly, the original screenplay had Greene having some “hidden power.” But in the final cut, the director seems to have decided that corporate power was power enough.
One wonders if Dominic Greene – had he not died drinking motor oil to quench his thirst in the Bolivian desert – might give the keynote speech at the upcoming World Water Forum in Istanbul (WWF). After all, the World Water Council (WWC) that puts on the forum is presided over by Loïc Fauchon, a former executive at one of the French subsidiaries of Suez, the world’s largest private water corporation.
As we learn from the WWF website, “One of the benefits of joining the WWC is the Council's ability to influence decisions related to world water management that affect organizations, business, and communities.” Perhaps their secret meetings will also be attended by executives of the Worldwide Fund for Nature, whose recent partnership with Coca-Cola aims to help the global soft-drink giant become “the most efficient company in the world in terms of water use,” with “every drop of water it uses…returned to the earth or compensated for through conservation and recycling programs.” And, with this blending of fact and fiction, it would hardly be surprising to find Greene’s signature on the CEO Water Mandate, which has companies with such devastating environmental track records as Dow Chemical, Shell Oil, Unilever, and Nestlé pledging to “help address the water challenge faced by the world today.”
When M, Bond’s overweening boss at M15, finds out about Quantum, she demands, “What the hell is this organization, Bond? How can they be everywhere and we know nothing about them?”
Well, my darling M, the answer is simple: like transnational corporations, and like the large NGO’s that work with the private sector to reform its practices and green its reputation, and like the International Finance Institutions whose interests are increasingly endangering the United Nations’ mandate to defend and protect human rights, they can be everywhere because their particular form of villainy works best when hidden in plain sight.
Thankfully, the world’s water is safe, because, behind the scenes, secret agent 007 is on the job.
Well, not true. But countless people and organizations worldwide, from the Red Vida to the African Water Network, from the People’s Health Movement to the Reclaiming Public Water Network, are vigilant in the defense of the human right to water. With the recent placement of water warrior Father Miguel D’Escoto, a Nicaraguan liberation theologian, in the presidential seat at the UN General Assembly, and his selection of Maude Barlow as a senior advisor on water, we are witnessing a tidal change in the highest levels of international cooperation.
They may not have the brutal take-no-prisoners attitude or the classy cocktail swagger of Mister Bond, but they represent a lot of people, and they’re on the right side.
So, corporate evil-doers, and your greenwashing NGO henchmen, beware. The forces of good are on the loose.
Originally posted at Food & Water Watch:
Public Ownership -- But No Public Control
Posted by Rob Weissman on October 21st, 2008
Originally posted Tuesday, October 14. 2008 -- It is an extraordinary time. On Friday, the Washington Post ran a front-page story titled, "The End of American Capitalism?" Today, the banner headline is, "U.S. Forces Nine Major Banks to Accept Partial Nationalization."
There's no question that this morning's announcement from the Treasury
Department, Federal Reserve and Federal Deposit Insurance Corporation
(FDIC) is remarkable.
It was also necessary.
Over the next several months, we're going to see a lot more moves like
this. Government interventions in the economy that seemed unfathomable
a few months ago are going to become the norm, as it quickly becomes
apparent that, as Margaret Thatcher once said in a very different
context, there is no alternative.
because the U.S. and global economic problems are deep and pervasive.
The American worker may be strong, as John McCain would have it, but
the "fundamentals" of the U.S. and world economy are not. The
underlying problem is a deflating U.S. housing market that still has
much more to go. And underlying that problem are the intertwined
problems of U.S. consumer over-reliance on debt, national and global
wealth inequality of historic proportions, and massive global trade
Although it was enabled by deregulation, the financial meltdown merely
reflects these more profound underlying problems. It is, one might say,
Nonetheless, the financial crisis was -- and conceivably still might be -- by itself enough to crash the global economy.
Today, following the lead of the Great Britain, the United States has announced
what has emerged as the consensus favored financial proposal among
economists of diverse political ideologies. The United States will buy
$250 billion in new shares in banks (the so-called "equity injection").
This is aimed at boosting confidence in the banks, and giving them new
capital to loan. The new equity will enable them to loan roughly 10
times more than would the Treasury's earlier (and still developing)
plan to buy up troubled assets. The FDIC will offer new insurance
programs for bank small business and other bank deposits, to stem bank
runs. The FDIC will provide new, temporary insurance for interbank
loans, intended to overcome the crisis of confidence between banks.
And, the Federal Reserve will if necessary purchase commercial paper
from business -- the 3-month loans they use to finance day-to-day
operations. This move is intended to overcome the unwillingness of
money market funds and others to extend credit.
But while aggressive by the standards of two months ago, the most
high-profile of these moves -- government acquisition of shares in the
private banking system -- is a strange kind of "partial
nationalization," if it should be called that at all.
Treasury Secretary Henry Paulson effectively compelled the leading U.S.
banks to accept participation in the program. And, at first blush, he
may have done an OK job of protecting taxpayer monetary interests. The
U.S. government will buy preferred shares in the banks, paying a 5
percent dividend for the first three years, and 9 percent thereafter.
The government also obtains warrants, giving it the right to purchase
shares in the future, if the banks' share price increase.
But the Treasury proposal specifies
that the government shares in the banks will be non-voting. And there
appear to be only the most minimal requirements imposed on
So, the government may be obtaining a modest ownership stake in the banks, but no control over their operations.
In keeping with the terms of the $700 billion bailout legislation,
under which the bank share purchase plan is being carried out, the
Treasury Department has announced guidelines
for executive compensation for participating banks. These are
laughable. The most important rule prohibits incentive compensation
arrangements that "encourage unnecessary and excessive risks that
threaten the value of the financial institution." Gosh, do we need to
throw $250 billion at the banks to persuade executives not to adopt
incentive schemes that threaten their own institutions?
The banks reportedly will not be able to increase dividends, but will
be able to maintain them at current levels. Really? The banks are
bleeding hundreds of billions of dollars -- with more to come -- and
they are taking money out to pay shareholders? The banks are not obligated to lend with the money they are getting. The banks are not obligated to re-negotiate mortgage terms with borrowers -- even though a staggering one in six homeowners owe more than the value of their homes.
"The government's role will be limited and temporary," President Bush said in announcing today's package. "These measures are not intended to take over the free market, but to preserve it."
But it makes no sense to talk about the free market in such
circumstances. And these measures are almost certain to be followed by
more in the financial sector -- not to mention the rest of economy --
because the banks still have huge and growing losses for which they
have not accounted.
If the U.S. and other governments are to take expanded roles in the
world economy -- as they must, and will -- then the public must demand
something more than efforts to preserve the current system. The current
system brought on the financial meltdown and the worsening global
recession. As the government intervenes in the economy on behalf of the
public, it must reshape economic institutions to advance broad public
objectives, not the parochial concerns of the Wall Street and corporate
Robert Weissman is managing director of the Multinational Monitor.
Getting Wall Street Pay Reform Right
Posted by Robert Weissman on September 30th, 2008
There's mounting talk on Capitol
Hill that a Wall Street bailout will include some limits on executive
compensation, as well as contradictory reports about whether a deal on
controlling executive pay has already been reached.
Four days ago, such a move seemed very unlikely. But the pushback from
Congress -- from both Democrats and Republicans -- has been
surprisingly robust, thanks in considerable part to a surge of outrage
from the public.
Will restrictions on CEO pay just be a symbolic retribution, as some have charged?
The answer is, it depends.
Meaningful limits not just on CEO pay, but also on the Wall Street
bonus culture, could significantly affect the way the financial sector
does business. Some CEO pay proposals, by contrast, would extract a
pound of flesh from some executives but have little impact on incentive
There are at least five reasons why it is important to address executive compensation as part of the bailout legislation.
First, there should be some penalty for executives who led their
companies -- and the global financial system -- to the brink of ruin.
You shouldn't be rewarded for failure. And while reducing pay packages
to seven digits may feel really nasty given Wall Street's culture of
preposterous excess, in the real world, a couple million bucks is still
a lot of money to make in a year.
Second, if the public is going to subsidize Wall Street to the tune of
hundreds of billions of dollars, the point is to keep the financial
system going -- not to keep Wall Street going the way it was. Funneling
public funds for exorbitant executive compensation would be a criminal
appropriation of public funds.
Third, the Wall Street salary structure has helped set the standard for
CEO pay across the economy, and helped establish a culture where
executives consider outlandish pay packages the norm. This culture, in
turn, has contributed to staggering wealth and income inequality, at
great cost to the nation. We need, it might be said, an end to the
culture of hyper-wealth.
Fourth, as Dean Baker of the Center for Economic and Policy Research
says, the bailout package must be, to some extent, "punitive." If the
financial firms and their executives do not have to give something up
for the bailout, then there's no disincentive to engage in unreasonably
risky behavior in the future. This is what is meant by "moral hazard."
If Wall Street says the financial system is on the brink of collapse,
and the government must step in with what may be the biggest taxpayer
bailout in history, says Baker, then Wall Street leaders have to show
they mean it. If they are not willing to cut their pay for a few years
to a couple of million dollars an annum, how serious do they really
think the problem is?
Finally, and most importantly, financial sector compensation systems
need to be changed so they don't incentivize risky, short-term behavior.
There are two ways to think about how the financial sector let itself
develop such a huge exposure to a transparently bubble housing market.
One is that the financial wizards actually believed all the hype they
were spreading. They believed new financial instruments eliminated
risk, or spread it so effectively that downside risks were minimal; and
they believed the idea that something had fundamentally changed in the
housing market, and skyrocketing home prices would never return to
Another way to think about it is: Wall Street players knew they were
speculating in a bubble economy. But the riches to be made while the
bubble was growing were extraordinary. No one could know for sure when
the bubble would pop. And Wall Street bonuses are paid on a yearly
basis. If your firm does well, and you did well for the firm, you get
an extravagant bonus. This is not an extra few thousand dollars to buy
fancy Christmas gifts. Wall Street bonuses
can be 10 or 20 times base salary, and commonly represent as much as
four fifths of employees' pay. In this context, it makes sense to take huge risks. The payoffs from benefiting from a bubble are dramatic, and there's no reward for staying out.
Both of these explanations may be true to some degree, but the
compensation incentives explanation is almost certainly a significant
part of the story.
Different ideas about how to limit executive pay would address the
multiple rationales for compensation reforms to varying degrees.
A two-year cap on executive salaries would help achieve the first four
objectives, but by itself wouldn't get to the crucial issue of
One idea in particular to be wary of is "say on pay" proposals,
which would afford shareholders the right to a non-binding vote on CEO
pay compensation packages. These proposals would go some way to address
the disconnect between executive and shareholder interests, reducing
the ability of top executives to rely on crony boards of directors and
conflicted compensation consultants to implement outrageous pay
packages. But while they might increase executive accountability to
shareholders, they wouldn't direct executives away from market-driven
short-term decision making. Shareholders tend to be forgiving of
outlandish salaries so long as they are making money, too, and -- worse
-- they actually tend to have more of a short-term mentality than the
executives. So "say on pay" is not a good way to address the multiple
executive compensation-related goals that should be met in the bailout
The ideal provisions on executive compensation would set tough limits
on top pay, but would also insist on long-term changes in the bonus
culture for executives and traders. Not only should bonuses be more
modest, they should be linked to long-term, not year-long, performance.
That would completely change the incentive to knowingly participate in
a financial bubble (or, more generously, take on excessive risk),
because you would know that the eventual popping of the bubble would
wipe out your bonus.
Four days ago, forcing Wall Street to change its incentive structure
seemed pie in the sky. Today, thanks to the public uproar, it seems
eminently achievable -- if Members of Congress seize the opportunity.
Robert Weissman is managing director of the Multinational Monitor.
The Dangers in Outsourcing the Bailout
Posted by Philip Mattera on September 30th, 2008
Originally posted at Dirt Digger's Digest on September 23, 2008 -- A number of leading Democrats and Republicans expressed strong
misgivings last Monday about the autocratic plan for bailing out Wall
Street that Treasury Secretary Henry Paulson wants to ram through
Congress. It remains to be seen whether this is mere posturing or
Critics are focusing on vital issues such as cost and oversight, but
a lot less attention is being paid to the mechanics of Paulson’s
proposal – specifically, the question of who would carry out the
federal government’s purchase of $700 billion in “troubled” securities
from banks. As I noted in my post a week ago Sunday, the draft legislation
circulated over the weekend includes a provision that seems to allow
Treasury to contract out the process. Treasury then put out a fact sheet
making it quite clear it intends to use private asset managers to
manage and dispose of the assets it acquires, though the document does
not specifically allude to the purchasing. Paulson himself referred to the use of “professional asset managers” during an appearance on one of the Sunday morning talk shows.
It amazes me that there is not more outrage over this aspect of the
plan. Paulson seems to be leaving open the possibility that the same
firms that are being bailed out could be hired to run the bailout. This
would mean that institutions receiving a monumental giveaway of
taxpayer money could turn around and earn yet more by acting as the
government’s brokers. Aside from the unseemliness of this arrangement,
this would be an egregious conflict of interest.
The alternative proposal
floated by Senator Chris Dodd, which accepts Paulson’s language on
contracting out, includes a section on conflict of interest. But rather
than stating what the rules should be, the draft leaves it up to the
Treasury Secretary to do so. There were reports last Monday night that Treasury would go along with the inclusion of a conflict-of-interest provision.
Paulson’s approach to the Big Bailout, particularly the insistence
that there be no punitive measures for the banks, shows he is not the
right party to oversee ethical issues. Paulson apparently can’t help
himself. He still has the mindset of a man who spent more than 30 years
working on Wall Street, at Goldman Sachs. He is a living example of the
perils of the reverse revolving door: the appointment of a
private-sector figure to a key policymaking position affecting his or
her former industry.
The weak conflict-of-interest provisions Paulson is likely to impose
would probably not address the inherent contradiction in having
for-profit money managers running the bailout program. Even if Treasury
chooses managers whose firms are not getting bailed out, there is still
the danger that they will use their inside knowledge to benefit their
non-governmental clients (and themselves) or will collude with buyers
to the detriment of the public.
A Reuters story of last Monday reported that a leading contender for a federal
money management role is Laurence Fink and his firm BlackRock, which
was involved in managing the portfolio of Bear Stearns when that firm
was sold to JPMorgan Chase as part of an earlier bailout. Last March,
BlackRock, which is 49-percent owned by Merrill Lynch (now part of Bank
of America), announced
it was forming a venture to “acquire and restructure distressed
residential mortgage loans.” Will Paulson see that as a conflict of
interest – or more likely as a credential?
Letting financial firms that have profited from the mortgage crisis
manage the bailout gives the impression that we are permanently in the
grip of Big Money. To Paulson’s way of thinking, that’s not a problem,
but it could make a bad plan much worse.
Dirt Diggers Digest is written by Philip Mattera, director of the Corporate Research Project, an affiliate of Good Jobs First.
The Financial Re-Regulatory Agenda
Posted by Robert Weissman on September 23rd, 2008
As the Federal Reserve and
Treasury Department careen from one financial meltdown to another,
desperately trying to hold together the financial system -- and with
it, the U.S. and global economy -- there are few voices denying that
Wall Street has suffered from "excesses" over the past several years.
The current crisis is the culmination of a quarter century's
deregulation. Even as the Fed and Treasury scramble to contain the
damage, there must be a simultaneous effort to reconstruct a regulatory
system to prevent future disasters.
hyper-complexity of the existing financial system makes it hard to get
a handle on how to reform the financial sector. (And, by the way,
beware of generic calls for "reform" -- for Wall Street itself taken up
this banner over the past couple years. For the financial mavens,
"reform" still means removing the few regulatory and legal requirements they currently face.)
There is more urgency to such an effort than immediately apparent. If
the Fed and Treasury succeed in controlling the situation and avoiding
a collapse of the global financial system, then it is a near certainty
that Big Finance -- albeit a financial sector that will look very
different than it appeared a year ago -- will rally itself to oppose
new regulatory standards. And the longer the lag between the end (or
tailing off) of the financial crisis and the imposition of new
legislative and regulatory rules, the harder it will be to impose
meaningful rules on the financial titans.
But the complexity of the system also itself suggests the most
important reform efforts: require better disclosure about what's going
on, make it harder to engage in complicated transactions, prohibit some
financial innovations altogether, and require that financial
institutions properly fulfill their core responsibilities of providing
credit to individuals and communities.
(For more detailed discussion of these issues -- all in plain, easy-to-understand language, see these comments from Damon Silvers of the AFL-CIO, The American Prospect editor Robert Kuttner, author of the The Squandering of America and Obama's Challenge, and Richard Bookstaber, author of A Demon of Our Own Design: Markets, Hedge Funds, and the Perils of Financial Innovation.)
Here are a dozen steps to restrain and redirect Wall Street and Big Finance:
1. Expand the scope of financial regulation. Investment banks and hedge
funds have been able to escape the minimal regulatory standards imposed
on other financial institutions. Especially with the government safety
net -- including access to Federal Reserve funds -- extended beyond the
traditional banking sector, this regulatory black hole must be
2. Impose much more robust standards for disclosure and transparency.
Hedge funds, investment banks and the off-the-books affiliates of
traditional banks have engaged in complicated and intertwined
transactions, such that no one can track who owes what, to whom.
Without this transparency, it is impossible to understand what is going
on, and where intervention is necessary before things spin out of
3. Prohibit off-the-books transactions. What's the purpose of
accounting standards, or banking controls, if you can evade them by
simply by creating off-the-books entities?
4. Impose regulatory standards to limit the use of leverage (borrowed
money) in investments. High flyers like leveraged investments because
they offer the possibility of very high returns. But they also enable
extremely risky investments -- since they can vastly exceed an
investor's actual assets -- that can threaten not just the investor
but, if replicated sufficiently, the entire financial system.
5. Prohibit entire categories of exotic new financial instruments.
So-called financial "innovation" has vastly outstripped the ability of
regulators or even market participants to track what is going on, let
alone control it. Internal company controls routinely fail to take into
account the possibility of overall system failure -- i.e., that other
firms will suffer the same worst case scenario -- and thus do not
recognize the extent of the risks inherent in new instruments.
6. Subject commodities trading to much more extensive regulation.
Commodities trading has become progressively deregulated. As
speculators have flooded into the commodities markets, the trading
markets have become increasingly divorced from the movement of actual
commodities, and from their proper role in helping farmers and other
commodities producers hedge against future price fluctuations.
7. Tax rules should be changed so as to remove the benefits to
corporate reliance on debt. "Payments on corporate debt are tax
deductible, whereas payments to equity are not," explains Damon Silvers
of the AFL-CIO. "This means that, once you take the tax effect into
account, any given company can support much more debt than it can
equity." This tax arrangement has fueled the growth of private equity
firms that rely on borrowed money to buy corporations. Many are now
8. Impose a financial transactions tax.
A small financial transactions tax would curb the turbulence in the
markets, and, generally, slow things down. It would give real-economy
businesses more space to operate without worrying about how today's
decisions will affect their stock price tomorrow, or the next hour. And
it would be a steeply progressive tax that could raise substantial sums
for useful public purposes.
9. Impose restraints on executive and top-level compensation. The top
pay for financial impresarios is more than obscene. Executive pay and
bonus schedules tied to short-term performance played an important role in driving the worst abuses on Wall Street.
10. Revive competition policy. The repeal of the Glass-Steagall Act,
separating traditional banks from investment banks, was the culmination
of a progressive deregulation of the banking sector. In the current
environment, banks are gobbling up the investment banks. But this
arrangement is paving the way for future problems. When the investment
banks return to high-risk activity at scale (and over time they will,
unless prohibited by regulators), they will directly endanger the banks
of which they are a part. Meanwhile, further financial conglomeration
worsens the "too big to fail" problem -- with the possible failure of
the largest institutions viewed as too dangerous to the financial
system to be tolerated -- that Treasury Secretary Hank Paulson cannot
now avoid despite his best efforts. In this time of crisis, it may not
be obvious how to respect and extend competition principles. But it is
a safe bet that concentration and conglomeration will pose new problems
in the future.
11. Adopt a financial consumer protection agenda that cracks down on abusive lending practices.
Macroeconomic conditions made banks interested in predatory subprime
loans, but it was regulatory failures that permitted them to occur. And
it's not just mortgage and home equity loans. Credit card and student
loan companies have engaged in very similar practices -- pushing
unsustainable debt on unreasonable terms, with crushing effect on
individuals, and ticking timebomb effects on lenders.
12. Support governmental, nonprofit, and community institutions to
provide basic financial services. The effective governmental takeover
of Fannie Mae, Freddie Mac and AIG means the U.S. government is going
to have a massive, direct stake in the global financial system for some
time to come. What needs to be emphasized as a policy measure, though,
is a back-to-basics approach. There is a role for the government in
helping families get mortgages on reasonable terms, and it should make
sure Fannie and Freddie, and other agencies, serve this function.
Government student loan services offer a much better deal than private
lender alternatives. Credit unions can deliver the basic banking
services that people need, but they need back-up institutional support
to spread and flourish.
What is needed, in short, is to reverse the financial deregulatory wave
of the last quarter century. As Big Finance mutated and escaped from
the modest public controls to which it had been subjected, it demanded
that the economy serve the financial sector. Now it's time to make sure
the equation is reversed.
Robert Weissman is managing director of the Multinational Monitor.
The SEC’s Risky New IDEA
Posted by Philip Mattera on September 3rd, 2008
When you go to the Securities and Exchange Commission website these days, the first thing you see is an animation that looks like something out of The Matrix films or the TV show Numb3rs.
It seems the agency’s accountants and lawyers are trying to look cool
as they move toward the creation of a new system for distributing
public-company financial information on the web.
Recently SEC Chairman Christopher Cox (photo) unveiled
Interactive Data Electronic Applications (IDEA, for short), the
successor to the EDGAR system that corporate researchers have relied on
since the mid-1990s for easy access to 10-Ks, proxy statements and the
like. The big selling point of IDEA is tagging. Companies (and mutual
funds) will be required to prepare their filings so that key pieces of
information are electronically labeled—using a system called XBRL—and
thus can be easily retrieved and compared to corresponding data from
other companies. The first interactive filings are expected to be
available through IDEA late this year. EDGAR will stick around
indefinitely as an archive for pre-interactive filings.
“With IDEA,” the SEC press release
gushes, “investors will be able to instantly collate information from
thousands of companies and forms, and create reports and analysis on
the fly, in any way they choose.”
I just finished watching the webcast
of Cox’s press conference earlier this week and came away with mixed
feelings about IDEA. In one respect, it will be great to be able to
readily extract specific nuggets of information. My concern is the
emphasis being placed on disclosure as simply a collection of pieces of
data. This may serve the needs of financial analysts and investors, but
as a corporate researcher, I find that some of the most valuable
portions of SEC filings are narratives rather than
numbers—for example, the descriptions of a company’s operations, its
competitive position and its legal problems that appear in 10-Ks.
As Cox finally mentioned about an hour into the press conference,
tagging can be applied to text as well as numbers. Yet I can’t help
worry that the direction the SEC is going in will tend to reduce
narratives to bite-size portions that serve to diminish the full scope
of disclosure. It was not comforting to hear William Lutz, the outside
academic who is advising the SEC on a complete overhaul
of its entire disclosure system, suggest during the press conference
that the forms (10-K, 10-Q, etc.) companies are currently required to
file will be phased out. Perhaps it was unintentional, but the
impression Lutz and Cox gave is that future disclosure will be mainly
This shift in focus from text to numbers would, I believe, increase
the risk that company reporting on social and environmental matters,
already inadequate, will be scaled back. That may not mean much for
short-sighted investors, but it would be a major setback for corporate
Dirt Diggers Digest is written by Philip Mattera, director of the Corporate Research Project, an affiliate of Good Jobs First.
The Commercial Games: How Commercialism is Overrunning the Olympics
Posted by Rob Weissman on August 17th, 2008
The 2008 Beijing Olympic Games
have been referred to as the “People’s Games,” the “High Tech Games”
and the “Green Games,” but they could be more aptly described as the
Commercialism is overrunning the Olympics. It is undermining the
professed ideals of the Olympic Games, and subverting the Olympics'
veneration of sport with omnipresent commercial messaging and branding.
The Olympics have auctioned off virtually every aspect of the Games to
the highest bidder. In addition to multimillion-dollar sponsorship
deals between the International Olympic Committee and international
companies, smaller firms are paying for designations from “official
home and industrial flooring supplier” to the “frozen dumplings
exclusive supplier” of the Beijing 2008 Olympic Games.
Corporate sponsors are showering money on each tier of the Olympic
organizational committees: the International Olympic Committee, the
Beijing Organizing Committee of the Olympic Games (BOCOG) and the
International Federations governing each individual sport, to each
country’s National Organizing Committees. Corporations are sponsoring
many Olympic teams and national governing bodies for particular sports
-- including virtually every national governing body in the United
States -- and individual athletes themselves.
The scope of commercialism at the Olympics and the consequences of commercialization are detailed in "The Commercial Games," a new report from Multinational Monitor magazine and Commercial Alert (both of which I'm associated with).
To its credit, the Olympics do prohibit advertising in sports stadia or
other venues. The Olympics also prohibit advertisements on uniforms
(other than uniform maker logos).
Everywhere else, Olympic spectators, viewers and athletes, and the
citizens of Beijing should expect to be overwhelmed with
A record 63 companies have become sponsors or partners of the Beijing
Olympics, and Olympics-related advertising in China alone could reach
$4 billion to $6 billion this year, according to CSM, a Beijing
marketing research firm.
The Olympic Partners (TOP) program,
run and managed by the International Olympic Committee (IOC) since
1985, includes 12 companies for the Beijing Olympics. These 12
companies -- among them, Coca-Cola, GE, Johnson & Johnson, Lenovo,
Panasonic and Visa -- have paid $866 million to the International
The U.S. Olympic system is awash in corporate sponsor money. Well over
100 corporations are sponsoring the U.S. Olympic Committee or U.S.
Besides celebrating sport, there is an official ideology of the Olympics, called "Olympism." It aims to promote a pure blend of sport, culture and education.
Sports, of course, remain at the center of the Olympics, but
commercialism has overwhelmed whatever other values the Olympics hope
to embody. The overwhelming cultural influence at the Olympics is now
commercial culture; and the overwhelming informational message is: buy,
Commercial relations interfere with proper functioning of the Olympics.
In at least one notable case, commercial entanglements have called into
question the integrity of a national sports governing body. A lawsuit
and accusations around the activities of USA Swimming and the national
team coach -- both sponsored by swimwear maker Speedo -- charge Speedo,
the national team and the coach with antitrust violations. The lawsuit,
filed by Tyr, a Speedo competitor, alleges the coach has trumpeted the
benefits of LZR Racer, a new, high-profile Speedo suit, because of his
financial ties to the company. Tyr says its Tracer Rise swimsuit,
introduced weeks before the LZR Racer, is comparable to the Speedo
The Olympic race for corporate sponsors has also put the Olympics in unhealthy -- and sometimes quite unpleasant -- company.
+ The International Olympic Committee will not partner with hard liquor
companies, but the IOC tolerates sponsorships by beer and wine
companies. Anheuser-Busch says it is a sponsor of 25 national Olympic
Committees, including those of China, Japan, Great Britain and the
United States. A tequila maker, Jose Cuervo, is a sponsor of the U.S.
+ Notwithstanding the fundamental principles of "Olympism," which
celebrate healthful living, two of the 12 Olympic TOP sponsors run
businesses centered around the sales of unhealthy food: Coca-Cola and
McDonald's. Snickers, the candy bar made by Mars, is an official BOCOG
supplier. Hershey's is a sponsor of the USOC. Coca-Cola is a sponsor of
FIFA, the international soccer federation. McDonald's and Sprite are
sponsors of USA Basketball. McDonald's and Sierra Mist are sponsors of
the U.S. Soccer Federation. Coca-Cola is a sponsor of USA Softball.
Hershey's is a sponsor of USA Track & Field.
+ Many of the sports apparel and equipment makers partnered with the Olympics and official Olympic bodies -- among them Adidas, Nike and Speedo -- source their products from sweatshop factories. In a very disturbing development just before the start of the Olympics, Adidas reportedly announced it was transferring large amounts of its production out of China because wages set by the government were "too high" (!).
+ At least two major Olympic partners, the China National Petroleum Corporation (CNPC) and Sinopec, have been linked to gross human rights violations in Sudan. Both companies are sponsors of the Beijing Organizing Committee of the Olympic Games.
There is no doubt that the horse is out of the barn on Olympic
sponsorships, and the world is unlikely to see a commercial-free Games
Nonetheless, the most egregious problems with the Olympics' pervasive sponsorship arrangements can and should be addressed.
The IOC, National Olympic Committees, and international and national
sports governing bodies can and should scale back the number of
They can and should develop safeguards to ensure apparel and equipment
sponsorships do not compromise sports governing bodies' decisions.
Coaches of national teams should be prohibited from serving as paid
spokespeople or consultants for apparel and equipment makers.
They can and should refuse to accept sponsorships from any alcohol
company, including beer and wine companies. This recommendation does
not reflect a prohibitionist impulse. It merely extends the insight in
the present IOC ban on hard liquor sponsorships: promoting more alcohol
consumption is unhealthful, and inappropriate for an event with
enormous appeal to children.
They can and should end partnerships and sponsorship arrangements with
junk food, soda and fast food companies. These companies' operations
are incompatible with Olympic ideals of promoting fitness and healthful
living, and the companies use the association with the Olympics to
remove some of the tarnish of their unhealthy products.
They can and should insist that official, sponsoring apparel and
equipment makers disclose where their products are manufactured, and
ensure that their products are manufactured in a fashion that respects
core labor standards.
They can and should refuse to enter into sponsorship arrangements with
companies connected to gross human rights abuses. This is a simple
ethical standard, and one required by the Olympic commitment to
demonstrate "respect for universal fundamental ethical principles."
Will the IOC and other committees move in these directions? They
refused to respond to repeated requests for comment. It may be,
however, that it will be the corporate sector driving reduced
commercialization of the Olympics. The opportunity to project a
high-profile in China's fast-growing market has made the Beijing
Olympics uniquely attractive; but already leading sponsors
have indicated they do not intend to continue paying for the right to
besiege the planet with Olympics-related marketing in connection with
Original post at:
Multinational Monitor Editor Robert Weissman is managing director of
Commercial Alert, which opposes excessive commercialism in society.
Giant Mining Firm’s Social Responsibility Claims: Rhetoric or Reality?
Posted by Philip Mattera on August 1st, 2008
The recent decision by the U.S. Supreme Court to slash the damage
award in the Exxon Valdez oil spill case and the indictment of Sen. Ted
Stevens on corruption charges are not the only controversies roiling
Alaska these days. The Last Frontier is also witnessing a dispute over
a proposal to open a giant copper and gold mine by Bristol Bay, the
headwaters of the world’s largest wild sockeye salmon fishery. Given
the popularity of salmon among the health-conscious, even non-Alaskans
may want to pay attention to the issue.
The Pebble mine project
has been developed by Vancouver-based Northern Dynasty Ltd., but the
real work would be carried out by its joint venture partner Anglo
American PLC, one of the world’s largest mining companies. Concerned
about the project and unfamiliar with Anglo American, two Alaska
organizations—the Renewable Resources Coalition
and Nunamta Aulukestai (Caretakers of the Land)—commissioned a
background report on the company, which has just been released and is
available for download on a website called Eye on Pebble Mine (or at this direct PDF link). I wrote the report as a freelance project.
Anglo American—which is best known as the company that long
dominated gold mining in apartheid South Africa as well as diamond
mining/marketing through its affiliate DeBeers—has assured Alaskans it
will take care to protect the environment and otherwise act responsibly
in the course of constructing and operating the Pebble mine. The
purpose of the report is to put that promise in the context of the
company’s track record in mining operations elsewhere in the world.
The report concludes that Alaskans have reason to be concerned about
Anglo American. Reviewing the company’s own worldwide operations and
those of its spinoff AngloGold in the sectors most relevant to the
Pebble project—gold, base metals and platinum—the report finds a
troubling series of problems in three areas: adverse environmental
impacts, allegations of human rights abuses and a high level of
workplace accidents and fatalities.
The environmental problems include numerous spills and accidental
discharges at Anglo American’s platinum operations in South Africa and
AngloGold’s mines in Ghana. Waterway degradation occurred at Anglo
American’s Lisheen lead and zinc mine in Ireland, while children living
near the company’s Black Mountain zinc/lead/copper mine in South Africa
were found to be struggling in school because of elevated levels of
lead in their blood.
The main human rights controversies have taken place in Ghana, where
subsistence farmers have been displaced by AngloGold’s operations and
have not been given new land, and in the Limpopo area of South Africa,
where villagers were similarly displaced by Anglo American’s platinum
High levels of fatalities in the mines of Anglo American and
AngloGold—more than 200 in the last five years—have become a major
scandal in South Africa, where miners staged a national strike over the
issue late last year.
Overall, the report finds that Anglo American’s claims of social
responsibility appear to be more rhetoric than reality. Salmon eaters
Dirt Diggers Digest is written by Philip Mattera, director of the Corporate Research Project, an affiliate of Good Jobs First.
Disclosure Issues Bedevil Climate-Change Debate
Posted by Philip Mattera on July 8th, 2008
Big business is talking more these days about the need to reduce
greenhouse gas (GHG) emissions. Even long-time global warming denier
Exxon Mobil feels the need to publicize
what it is doing in this regard. Claims of reductions in GHG are not,
however, meaningful unless those emissions are being estimated
consistently to begin with.
A study issued yesterday by the Ethical Corporation Institute raises
questions about how much we really know about the volume of GHG being
generated by large corporations. According to a press release about the report
(which is available only to those willing to fork over more than 1,000
euros), there are “staggering inconsistencies in how companies
calculate and verify their greenhouse gas emissions.” The report found,
for instance, that companies responding to the fifth annual Carbon Disclosure Project
questionnaire used more than 30 different protocols or guidelines in
preparing their emissions estimates. The report, it appears, surveys
this potpourri of measurement techniques but does not attempt to
resolve the differences.
The absence of consistency has not prevented the Carbon Disclosure
Project from trying to use current reporting to understand the larger
framework of GHG trends. In May, the Project issued the first results of its Supply Chain Leadership Collaboration,
an initiative in which large companies such as Nestlé, Procter &
Gamble and Unilever urge their suppliers to report on their own carbon
footprint. It is unclear how much effort is made to ensure these
results are reported in a uniform manner.
Along with the need for improved GHG reporting, there are growing calls for companies to disclose the liability risks
(and opportunities, if any) associated with those emissions. Recently,
a broad coalition of institutional investors and major environmental
groups once again urged
the U.S. Securities and Exchange Commission to clarify the obligations
of publicly traded companies to assess and fully disclose the legal and
financial consequences of climate change. The statement was aimed at
reinforcing a petition filed with the SEC last year on climate-change
Climate-change liability risks no longer exist just in the realm of the theoretical. Lawsuits
have been filed against the major oil companies for conspiring to
deceive the public about climate change—including one brought in the
name of Eskimo villagers in Alaska who are being forced to relocate
their homes because of flooding said to be caused by global warming.
Famed climate scientist James Hansen recently declared
at a Capitol Hill event that oil and coal company executives could be
guilty of “crimes against humanity.” If that isn’t a risk worth
reporting, what is?
Dirt Diggers Digest is written by Philip Mattera, director of the Corporate Research Project, an affiliate of Good Jobs First.
The Internet and Globalization: A View from Buenos Aires
Posted by Joshua Karliner on June 30th, 2008
Almost twelve years ago, when a group of us started CorpWatch, we did so because it seemed then that a few hundred transnational companies were intent on remaking the earth in their image. As we saw it, the corporate version of globalization undermined community, ecology and democracy. At that moment the Internet had just appeared on the scene, and it seemed to us, and to many others, a vehicle through which to build an alternative – a form of grassroots globalization that fostered human rights and environmental rights, and that helped hold corporations accountable across the globe. Thus CorpWatch was born.
In the ensuing dozen years, the corporate encirclement of the earth has only
grown – as has the grassroots response to it in every corner of the planet.
The Internet has boomed and become on the one hand, more corporatized than we might once have imagined and yet also an increasingly powerful tool for building democratic participation and communication (and I’m very proud that CorpWatch is still part of it). This dual nature of the Internet embodies a fundamental paradox of globalization. While globalization seems to concentrate power in the hands of a few in most every realm it touches, it also increasingly interconnects us, interweaving universal values into a multinational tapestry of cultures and politics.
I see this here in Argentina, where I’ve had the good fortune to live for the past year. As numerous people here will tell you, once, this country was so isolated from the rest of the world that a lot of folks were not aware of the magnitude of the horrors unleashed by the military dictatorship between 1976 and 1983. People knew enough and saw enough and felt enough to be afraid, and tens of thousands felt the direct impact as they or their loved ones were arrested, tortured, “disappeared.” But the truth was hard to come by; there was heavy local censorship, and there was no Internet. People abroad knew more about what was going on in Argentina, than many here did.
Today, the country, like most of the rest of the world, is dialed-in, networked to the hilt, totally online. It seems almost unthinkable that something similar could happen here again. There is a strong consciousness of and commitment to human rights, and an understanding of the connection between what Argentina went through, and similar histories and battles elsewhere in the Latin American region and the world. Argentina pulled itself out of the horrors of dictatorship, and as it has re-evolved as a nation, it has benefited in this way from globalization.
At the same time, the country is suffering many of the attendant ills. I asked my twelve year-old daughter what she had learned about the United States from spending a year outside of the country. Her reply was quick and clear – I’ve learned that the US controls the media in the rest of the world. From the mouths of babes...but after all, she learned to speak Spanish, in part, by watching American sitcoms dubbed into Spanish on the local TV. Meanwhile, although the country has reaped significant economic benefit from its agricultural prowess as a giant in the world soy market – the control of this commodity is increasingly in the hands of a few transnational corporations: Cargill, ADM and others. And the country’s forests are suffering as more and more trees are felled to make room for more and more soybeans. These facts will remain true, no matter the outcome of the current conflict between President Kirchner and the country’s farmers.
Finally, globalization and all its contradictions hits home directly for me here in the Buenos Aires neighborhood I’m living in. Once a zone of automechanics and warehouses, Palermo Viejo is today one of the hippest and most popular destinations in this wonderful city. Now known as Palermo Hollywood, it is a barrio in the midst of a vast transformation. Many of our neighbors have lived here for forty or more years – they are old-school butchers, bakers, antique dealers, bar owners. Yet they are increasingly surrounded by trendy boutiques and fashionable restaurants. Many are being squeezed out by big corporate real estate that has entered the scene and is speculating on a series of high-end apartment towers that will forever change the face of this low-slung old time neighborhood. In the midst of it all are a throng of artists, ex pats, and activists organizing for the soul of the barrio.
Don’t get me wrong; it ain’t all bad. To be honest, all the paradoxes and contradictions of the gentrification of this globalizing hub make it an exciting and wonderful place to live (for the moment). I decided to try and document the intersection – the convergence and contradiction – of these various separate realities-the old and the new of Palermo Viejo. You can check out my photo essay on the subject at http://www.palermobuenosaires.blogspot.com.
Josh Karliner is Founder and a board member of CorpWatch.
Over the Counter Intelligence
Posted by Philip Mattera on June 13th, 2008
Tim Shorrock, a veteran investigative journalist and a longtime subscriber to the Dirt Diggers Digest, has just come out with a book called Spies for Hire: The Secret World of Intelligence Outsourcing.
Shorrock describes how an activity that used to be handled by spooks on
the federal payroll has been steadily transformed into a $50 billion
Thanks to the contracting scandals surrounding Halliburton and its
former subsidiary Kellogg, Brown & Root, the public learned of the
extent to which the Pentagon has turned over routine functions to
private military companies. The outrageous behavior of Blackwater has
highlighted the use of mercenaries to protect U.S. diplomats and other
VIPs in Iraq.
Shorrock shines a light on another group of corporations that are
carrying out a more sensitive function that most people have no idea is
being handed over to the private sector. Careful readers of the
revelations concerning abuses at the U.S.-run Abu Ghraib prison in Iraq
would have learned that interrogators alleged to have abused detainees
included civilians employed by a company called CACI. But that is only
the tip of a lucrative iceberg, Shorrock shows.
For example, he writes, more than half the people working at the
super-secret National Counterterrorism Center in Virginia are employees
of companies such as Science Applications International Corporation
(SAIC), BAE Systems and Lockheed Martin. The Center’s terrorist
database is maintained by The Analysis Corporation, which subcontracted collection activities to CACI.
Since 9/11, Shorrock says, the Central Intelligence Agency has been
spending 50-60 percent of its budget (or about $2.5 billion a year) on
contractors—both individuals and companies. At the CIA and its sister
spook agencies: “Tasks that are now outsourced include running spy
networks out of embassies, intelligence analysis, signals intelligence
(SIGINT) collection, covert operations, and the interrogation of enemy
Shorrock devotes an entire chapter to Booz Allen Hamilton, known to
most people as a management consultant for large corporations but which
pioneered the intelligence outsourcing industry (though it recently
agreed to sell its federal business to the Carlyle Group). When Mike
McConnell, a former Booz Allen executive, was named by President Bush
as Director of National Intelligence, it was the first time, Shorrock
notes, that a contractor was put in charge of the country’s entire spy
Spies for Hire has much more to offer that cannot be
adequately summarized here. I recommend that you read it in full. But
let me let also note that profiles of some of the intelligence
contractors discussed by Shorrock—such as CACI and ManTech International—can be found on the Crocodyl wiki to which I contribute. Also note that the updated edition of Jeremy Scahill’s valuable book Blackwater,
recently issued in paperback, has a discussion (p.453 forward) on the
mercenary company’s move into another form of privatized intelligence—a
product called Total Intelligence Solutions that is designed to bring
“CIA-style” services to Fortune 500 companies.
Dirt Diggers Digest is written by Philip Mattera, director of the Corporate Research Project, an affiliate of Good Jobs First.
See also feature articles by Tim Shorrock on CorpWatch.org:
Domestic Spying, Inc.
QinetiQ Goes Kinetic: Top Rumsfeld Aide Wins Contracts From Spy Office He Set Up
Carlyle Group May Buy CIA Contractor: Booz Allen Hamilton
Iranian schools teach Islamic version of history: CIA contractor
Posted by Pratap Chatterjee on May 30th, 2008
The U.S. Department of National Intelligence (the body that oversees spy agencies like the Central Intelligence Agency and the National Security Agency) recently decided it wanted to know what Iranian students were taught in school these days.
Most people might have considered the obvious: pick up the phone and ask an Iranian student or perhaps their parents, who have already had to spend many days and probably nights reading the books.
But fortunately for the DNI, such a treasonous act was not necessary.
Instead they hired SAIC, a major CIA and NSA contractor, to do the job. On December 31st, 2007, the company published the results: a 17 page report on 85 Iranian textbooks that the company downloaded off the Internet from the Iranian government's website. The final report was not made public, but Secrecy News, an excellent electronic newsletter written by Steven Aftergood and published by the Federation of American Scientists, obtained a copy.
The textbooks that are used in Iranian schools "reveal a clear emphasis on Islam, as it has been interpreted by the leadership of the Islamic Republic of Iran," is one of "the most important conclusions" of the study and they "provide a distorted view of Shia Islam as the only true path in Islam, and among religions."
Beyond this shocking headline, SAIC can also reveal that the Iranian government may be censoring detailed news of discrimination: While page 74-77 of the sociology textbook for the third year of high school makes reference to discrimination, there are no specific cases of discrimination in Iran mentioned, according to the company's analysts.
The CIA will be delighted to learn that, in accordance with popular belief, the textbooks do spread hate against the U.S. Page 64 of the Islamic Teaching textbook for the fifth grade contains a quote from Ayatollah Khomeini that reads: "The Muslims must use the power of the Islamic Republic of Iran for crushing the teeth of this oppressive government [the USA] in its mouth."
Although SAIC says it studied Iranian mathematics and chemistry textbooks, the geeks at the NSA will be disappointed that they contained no smoking guns or secret equations.
The question CorpWatch wants to know - how much did the government pay for this study? For any of our readers out there with access to the spy budget, here's a clue: it is contract number: 2003*N443600*022
Military contractor’s 747 crashes just before Memorial day
Posted by Pratap Chatterjee on May 25th, 2008
A Kalitta Air plane en route to Bahrain in the Middle East has crashed. The Michigan based company has been linked to the CIA rendition program. It is also the main contractor that flies home bodies of U.S. soldiers after they are killed in combat in Iraq and Afghanistan.
Ironically the cargo plane crashed the day before “Memorial Day,” a major U.S. federal holiday that commemorates U.S. men and women who die while in military service.
Amnesty International has reported that Kalitta Air has been linked to “covert intelligence and military operations” but unlike other CIA contractors that appear to be dummy companies run by fictitious individuals, it was founded by a Conrad Kalitta, a retired U.S. drag racing driver.
Kalitta first entered the freight business in 1967 when he started ferrying car parts in a Cessna 310. In November 2000, Kalitta Air, started running domestic and international scheduled or on-demand cargo service and support for the Pentagon’s Air Mobility Command based at Scott Air Force Base in Illinois.
Shortly before the invasion of Iraq, Kalitta started up a scheduled cargo service to Europe and in 2005 the company won a part of a $1.2 billion dollar contract to provide airlift services to the Air Mobility Command.
On Sunday, a 25 year old Boeing 747 Kalitta jet, N704CK, crashed on take-off from Brussels airport. The specific plane is one of four of the company’s 747-200F’s and it regularly flies on Kalitta’s European cargo service to New York and Chicago, according to the company’s web schedule.
The plane broke in half and Belgian firefighters, who rushed to the scene, coated the wings of the plane with special fire retardant foam as a precaution because the plane was still full of jet fuel. The five people on board were slightly injured although none were killed. The plane was carrying 76 tonnes of cargo, half of which Belgian media reported to be mail. Details of the remaining cargo were not revealed.
Back in the U.S., the Wilmington News-Journal reported that the company planes were awaiting Monday’s commemoration ceremonies. “Along Delaware 1 near a busy Dover Air Force Base, travelers could catch glimpses in the distance of the original reason for Memorial Day. White, corporate-size jets owned by Kalitta Air waited in the sun to ferry home fallen troops whose final journey passes through the large military mortuary at Dover.”
(The company also leased one of its 747s to a Columbia Pictures film named “Air Force One,” a 1997 suspense thriller about the hijacking of the U.S. president's plane. The film starred Harrison Ford, Gary Oldman and Glenn Close.)
Pharmaceutical Payola -- Drug Marketing to Doctors
Posted by Rob Weissman on May 22nd, 2008
Last week, a Congressional committee properly raked Big Pharma over the coals for misleading advertising of pharmaceuticals.
A hearing of the House Energy and Commerce Committee's oversight subcommittee focused on advertising campaigns for three drugs, including the remarkable case of Robert Jarvik. Jarvik is featured in endlessly re-run ads for Pfizer's blockbuster cholesterol drug Lipitor. Known as the inventor of the Jarvik artificial heart, he is not a cardiologist, not a licensed medical doctor and not authorized to prescribe pharmaceuticals. He's shown in the ads engaged in vigorous rowing activity, but in fact he doesn't row. Pfizer pulled the ads in February after controversy started brewing.
Among industrialized countries, only the United States and New Zealand permit drug companies to market directly to consumers. It's a bad idea, it drives bad medicine, and it should be banned.
But although it has the highest profile, direct-to-consumer advertising is a small part of Pharma's marketing machine.
Researchers Marc-André Gagnon and Joel Lexchin conclude in a recent issue of the journal PLOS Medicine that direct-to-consumer ads make up less than a tenth of industry marketing expenditures ($4 billion of $57.5 billion in 2004). And Gagnon and Lexchin's estimate of $57.5 billion on marketing excludes many industry expenditures that are really driven by marketing, including clinical trials conducted for marketing purposes.
The bulk of the industry marketing effort -- more than 70 percent by Gagnon and Lexchin's calculation -- is directed at doctors.
Because it works.
The companies spend huge amounts paying firms that carefully track
what doctors prescribe, and then they use the information to tailor messages to doctors, distribute samples and develop continuing medical education programs.
Gagnon and Lexchin report that Pharma spends more than $20 billion a year on "detailers" -- the pharma reps that knock on doctor doors, ply the staff with free coffee and lunches, distribute samples ($16 billion worth), and prod docs to prescribe their drugs.
This is complemented by a host of tactics that in other circumstances might be called bribes.
"Virtually all physicians in America take cash or gifts from the drug companies," says Melody Petersen, author of Our Daily Meds: How the Pharmaceutical Companies Transformed Themselves into Slick Marketing Machines and Hooked the Nation on Prescription Drugs
, and a former New York Times reporter. "A recent survey said 94 percent of physicians took something of value from the drug companies. Some doctors take hundreds of thousands of dollars a year from these companies, and there’s no law that says they can’t."
Petersen says she "had no idea this was so extensive until one day I was writing a story about Celebrex and Vioxx -- this was before Vioxx was taken off the market. The story was about the marketing battle between these two pain drugs. I called one of the large societies of rheumatologists and asked for an expert on arthritis. I specifically said I needed an expert who was not being paid as a consultant to one of the manufacturers of these drugs. A staff person said, 'We have lots of people you can talk to, but all of these doctors are consultants to one or both of the drug companies.'"
Drug companies hire doctors to give lectures, and they hire other doctors as "consultants" to go to fancy dinners and listen to the lectures. "There are more than 500,000 of these dinners or events in America every year," Petersen says.
The drug companies weave these diverse strategems into an elaborate tapestry -- not infrequently to push drugs for inappropriate purposes. One eye-opening case that Petersen details in Our Daily Meds concerns Neurontin, a mediocre drug for epilepsy that Warner-Lambert illegally peddled as an unapproved treatment for bipolar disorder, migraines, attention deficit disorder in children and other conditions. The drug does not work for most of these conditions. Many persons were injured by taking excessive doses of Neurontin, and many others wasted money and emotional energy on hopeless Neurontin treatment strategies. Warner-Lambert ultimately paid $430 million to settle criminal and civil charges
related to Neurontin marketing, but Petersen says that, even so, the illegal marketing scheme was clearly profitable for Warner-Lambert (and Pfizer, which acquired Warner-Lambert in 2000).
Petersen's account of the Neurontin nightmare draws heavily on a whistleblower, David Franklin. She summarizes the central theme of the story Franklin revealed: "The company got doctors to prescribe the drug for all these experimental uses by paying them. They paid physicians to give speeches to other physicians at restaurants or hotels or resorts. The doctors not only enjoyed a nice meal or a weekend vacation, they often also received a $500 check for attending. The physicians giving lectures at these parties were often trained by the drug company’s ad firm to describe how Neurontin could work for conditions like bipolar. … The company tracked the doctors’ prescriptions before and after these dinners or weekend retreats. The executives saw how well it worked."
Which raises an interesting question: How is that industry can so effectively manipulate highly trained doctors?
Answers Adriane Fugh-Berman, a doctor and Georgetown University professor who runs PharmedOut
, a project that focuses on how pharmaceutical companies influence prescribing decisions
and encourages physicians to educate themselves from non-industry sources: "Physicians are trained in medicine, not psychological manipulation. Every bit of flattery, friendship and information offered by reps is aimed at selling drugs."
There is no simple solution to these problems, though ending patent-based marketing monopolies
would transform pharmaceutical marketing practices and likely eliminate most abuses.
In the meantime, a ban on Pharma gifts to doctors would be a modest step forward. In the United States, notes Petersen, "radio disc jockeys can’t take cash from music companies. But when it comes to something like medicines -- which mean life or death for people -- doctors can take as much money as they want from the drug companies. We need a law to stop that."
Note: Rob Weissman serve as managing director for Commercial Alert, which advocates for elimination of direct-to-consumer pharmaceutical advertising.
Wal-Mart and the Chinese Earthquake: Cheap Help for A Cheap-Labor Country
Posted by Philip Mattera on May 19th, 2008
Wal-Mart Stores has put out a press release
patting itself on the back for promising the equivalent of about
$430,000 for disaster relief and reconstruction for the area of China
hit by a massive earthquake this week. The gesture was laudable but the
amount was less than impressive.
After all, the giant retailer would be nowhere today without the
countless Chinese workers who toil in sweatshops so that American
consumers can be offered the cheap goods that are at the core of the
company’s business model. Last year those largely Chinese-made goods
brought Wal-Mart profits of $12.7 billion, or about $1.4 million every
hour of every day. The $430,000 contribution thus represents less than
20 minutes of profit.
Wal-Mart also profits from Chinese consumers. The company operates more than 200 stores in
China (through joint ventures and minority-owned subsidiaries), several
of which have been shut down because of the tremblor. Wal-Mart was so
eager to operate stores in China that it agreed to let its employees
there be represented by unions (though of the government-dominated
Wal-Mart has a history
of using relatively inexpensive amounts of disaster relief to boost its
reputation. After Hurricane Katrina hit the U.S. Gulf Coast in 2005,
Wal-Mart maneuvered to get maximum exposure for its prompt delivery
of relief supplies. A fairly routine operation for a company possessing
the most advanced logistics infrastructure was seen as nearly
miraculous, given the ineptitude of federal and state public officials.
The company made an initial faux pas (quickly reversed) in
announcing that employees at its stores shut down by the storm would be
paid for only three days.
It also started out offering a measly $2 million in relief but soon
overcame its parsimonious instincts and upped the figure by $15 million, thereby winning wide praise. The wave of favorable coverage went on for several months, thanks at least in part to the efforts of
its army of p.r. operatives from Edelman and a conservative blogger who
was paid to tout Wal-Mart’s hurricane work in the blogosphere.
Wal-Mart may have to part with more than $430,000 to get a similar public relations bonanza from China’s suffering.
Dirt Diggers Digest is written by Philip Mattera, director of the Corporate Research Project, an affiliate of Good Jobs First.
KBR Questioned on Labor Abuses in Iraq
Posted by Pratap Chatterjee on May 7th, 2008
BE&K is no stranger to KBR: indeed BE&K was sub-contracted to build a temporary tent
city after Hurricane Katrina to house 7,000 military personnel and
others assisting in the disaster response. Both KBR
BE&K came under scrutiny for firing dozens
of unionized electricians, many of them local residents who had their
homes destroyed during Hurricane Katrina, in favor of lower-wage
CorpWatch attended KBR's annual meeting today at the Houstonian
hotel and met with William Utt, the company CEO, to ask him about the
company's policy on the exploitation of migrant workers, particularly
in Iraq, where the many sub-contractors employ at least 35,000 Third
Country Nationals (largely from South and South East
Indeed these are the people who are
responsible for KBR's boast that it has
"served over 500 million meals, delivered 272 million pounds of
mail, produced more than 7.5 billion gallons of potable water,
transported more than 3.5 billion gallons of fuel, hosted more than 87
million patrons at MWR (Morale, Welfare and Recreation) facilities,
logged nearly 3.7 million miles transporting supplies and equipment
for the military, and laundered 32 million bundles of laundry for the
troops." And this work is set to continue far into the
future - KBR
has just been awarded a big chunk of the mammoth new $150
billion troop support contract in Iraq
Utt told CorpWatch that his
company followed the Federal Acquisition
Regulations and paid their staff "world-scale wages". When we
noted to the assembled shareholders and the board of director that
these wages were as low as $9 a day for cleaners and $20 a day for
short-order cooks at the dining facilities we visited in April 2008,
and that many of these workers paid as much as $4,000 to get these
jobs in the first place, he acknowledged that he was aware of the
But our question still remains, what are
companies like KBR
and BE&K going to actually do about their
workers wages other than react and investigate?
We invite Utt and Nash to learn more about the
labor conditions of workers in Iraq by reading some of our coverage of
this matter on the last few years. Our trip to Iraq in April 2008
suggests that very little has changed for the men and women who cook
the food and clean the toilets for the U.S, soldiers living in Iraq on
contract to KBR, its competitors, and their
Adding Insult to Injury
An Afternoon with L-3 Communications/Titan
Posted by Tonya Hennessey on April 30th, 2008
A funny thing happened on the way to exercising my presumed right, as a shareholder, to attend yesterday’s annual shareholder meeting
of private military contractor
L-3 Communications, held at the Ritz-Carlton Hotel in
Manhattan’s financial district.
I was one of a group including a translator, Marwan Mawiri, who worked for
a year and ½ for Titan, now an L-3 subsidiary, in
Iraq. Marwan has witnessed first-hand numerous problems with the way
interrogation and translation contracting is being handled in Iraq – a
practice that may be putting at substantial risk the national security and
lives of the Iraqi people, of U.S. and multinational troops, officials
and contractors, and of the United States itself.
The problem is clear: inadequate and downright bad vetting and hiring practices for analysts, interrogators and linguists. Indeed, the U.S. military has recently cancelled Titan’s translation contract due to poor practices along with waste, fraud and abuse.
What is also crystal clear is that the war in Iraq can neither be won,
effectively prosecuted, nor competently withdrawn from until these
problems are solved and until proper oversight is in place.
If people hired to translate in critical battlefield and other situations
are not even fluent in at least Arabic and English; if screeners
monitoring the entry and exit of people to U.S. military bases at times
have no more qualification and training than having been a baggage
screener at a U.S. airline (see CorpWatch’s new report [note: updated December 2008] "Outsourcing Intelligence in Iraq":); if
interrogators are not qualified, experienced and trained to the highest
standards possible, how can we ensure that we avoid future travesties due
to bad intelligence? Such as the bad intelligence around the supposed
Iraqi weapons of mass destruction program (which was, of course, Bush/Cheney and neocon-driven, not L-3-driven), that got the U.S. into this war
in the first place? (And remember, even when U.S. soldiers start coming
home from Iraq, large numbers of private contractors will stay, making proper
oversight all the more crucial.)
It turned out that L-3’s management wasn’t so happy to see us, and that my co-worker, Pratap Chatterjee and I, were supposed to have received a
certain admission ticket to attend the meeting. The same went for our companions from the Iraq Campaign 2008 – a major coalition to oppose the war, which is now taking on private military contractors as part of their broader campaign on the high cost U.S. taxpayers are paying for the war in Iraq – and Foreign Policy in Focus, who were holding proxies. Funny that.
Looking out at the Statue of Liberty from the hotel lobby downstairs, where we gathered to figure out how to proceed, I pondered the damage this
war has done to the liberties of so many Iraqi people, and to so many
U.S. liberties and values that I hold dear. Like respect for human
rights, compliance with the Geneva Conventions around torture, appropriate
security that is handled with skill and integrity. I wasn’t surprised that
L-3/Titan didn’t want to hear our message; though I sincerely hope some of the shareholders, managers, directors, staff and financial analysts do
take the time to read our report and to talk to current and former contractors like Marwan. We didn’t go in malice.
We went in genuine concern over business operations that, while they may
be earning a pretty profit for large shareholders, pose a genuine
reputational risk to the company for future liability. And are causing harm on the ground, to real people. We challenge L-3 Communications
to become a truly ethical leader in business
practices, not just in products and sales. Surely the sixth-largest U.S. defense industry company (according to their website) has the intelligence to recognize bad
practices and the ability to change them for the better.
Or are we simply destined for years more, as Huffington Post blogger
Charlie Cray put it, of companies and investors milking a “Baghdad Bubble
as a result of the Bush administration's refusal to hold them accountable”?
As the meeting ended, and the muckety-mucks began leaving the Ritz-Carlton
to be chauffered away in their Lincoln Town cars and limousines, we gave
these decision makers another opportunity to take a copy of CorpWatch’s
report, or even to talk to us directly. The vast majority kept their
blinders on and marched resolutely past.
Suddenly we saw General Carl Vuono
(ret.). Vuono is former chief of staff of the U.S. Army, and long-time president of private military
consulting firm MPRI, which is now
also an L-3 subsidiary. Pratap and Marwan rushed to try and speak with him, while a reporter and cameraman from Al-Jazeera English filmed and stood at the ready for the general’s reply. The general didn’t want to
talk, but you can see some of the footage on YouTube. You can also watch Pratap and Marwan describe their experiences on Democracy Now!, where they were interviewed live this morning.
Pratap gave the general a copy of “Outsourcing Intelligence In Iraq” – maybe
he’ll decide to have one of his staffers give it a read. We’d love to
talk, and welcome any dialogue with officials of L-3.