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TrapWire Leaks Shine Light on New Video Tracking Technologies

Posted by Pratap Chatterjee on August 14th, 2012
CorpWatch Blog
Tag and Track footage from Ipsotek. Footage from company Youtube video.

TrapWire, a company founded and run by former Central Intelligence Agency (CIA) officers, that offers to track “suspicious” activities from surveillance video, has been spotlighted in a new Wikileaks release.

The system is described on the TrapWire’s website as "a unique, predictive software system designed to detect patterns of pre-attack surveillance and logistical planning.” The U.S. Department of Homeland Security paid TrapWire $832,000 to deploy Trapwire in Washington DC and Seattle in December 2011, according to federal spending data records.

The information on Trapwire’s contracts emerged from one of the five million internal emails from Stratfor, an Austin, Texas-based company that brands itself as a "global intelligence" provider, were recently obtained by Anonymous, the hacker collective, and were released in batches by WikiLeaks, the whistleblowing website, earlier this year.

The Trapwire technology was created at Abraxas corporation, which was founded by Richard "Hollis" Helms, a former CIA agent (but not the former head of the CIA under Nixon). Abraxas spun off Trapwire into another company which still has several senior employees who once worked at the agency. They include Dan Botsch, who worked at the CIA for 11 years as a Russian and Eastern European analyst,  Michael Maness, a 20 year CIA veteran who worked in counterterrorism and security operations in the Middle-East, the Balkans and Europe, and Michael K. Chang, a 12 years CIA veteran on counterterrorism operations.

The company appears to have deleted the list of senior employees from its website when the Wikileaks release occurred. But the company still promotes their prior experience: “Our professionals have led successful intelligence operations against terrorist organizations and fought on battlefields across the globe.”

The software has been described as a real life version of a system portrayed in Minority Report, a Hollywood blockbuster. “Anyone who takes a photograph at high-risk locations is logged as a suspected terrorist on a vast network of secret spy cameras linked to the U.S. Government, according to leaked emails,” writes Rick Dewsbury at the Daily Mail, a tabloid newspaper in the UK.

Mainstream media have reacted more cautiously to the TrapWire leaks. The New York Times commented that the “reports appear to be wildly exaggerated” noting that the Homeland Security had ended trials on the technology last year “because it did not seem promising.” The company refused to comment.

While TrapWire is now keeping quiet about its software, a similar UK venture is doing the opposite. Tag and Track, a technology developed by Kingston University researchers, is now being marketed by Ipsotek.

“The notion that you can tag a person and let the system do the tracking is a dream come true for CCTV operators,” says Professor Sergio Velastin who is also co-founder of Ipsotek. “The system relies on the identification of a person through features, such as their appearance, which different cameras can then pick up on.”

Ipsotek has sold its products to the Australian parliament and to airports in Belfast and Edinburgh. In a Reuters video report, the company demonstrates how it can follow any individual that an operator identifies and tags when analyzing video footage. The Tag and Track software then creates a unique colored trail to show where that individual has traveled.

A similar technology called Footpath, which is manufactured by Path Intelligence in the UK, tracks individuals based on the strength of their cell phone signals. The system was piloted by Forest City, a shopping mall company in the U.S. in Promenade Temecula in Temecula, California, and Short Pump Town Center in Richmond, Virginia last year.

The pilot project was canceled after privacy advocates pointed out that it was most likely illegal and members of Congress started to raise questions.

How accurate are these new video surveillance technologies? “(I)t’s extremely difficult, and probably impossible, to distinguish the one-in-a-billion terrorist from innocent people doing ordinary things like taking pictures,” Jay Stanley at American Civil Liberties Union told the New York Times. And therein lies the greatest danger.

Pfizer Admits Bribery in Eight Countries

Posted by Pratap Chatterjee on August 8th, 2012
CorpWatch Blog
Pfelon t-shirt by Zazzle. Dollar bill photo: Adam Kuban. Photo of pills: e-magineart.com. Used under Creative Commons license

For three years, Pfizer Italy employees provided free cell phones, photocopiers, printers and televisions to doctors, arranged for vacations (such as “weekend in Gallipoli,” “weekend with companion” and “weekend in Rome”) and even made direct cash payments (under the guise of lecture fees and honoraria) in return for promises by doctors to recommend or prescribe Pfizer’s products.

Today, the New York headquarters of the pharmaceutical giant has agreed to pay a total of $60.2 million in penalties to settle the documented charges of bribery. The Securities and Exchange Commission (SEC) says that Pfizer Italy employees went out of their way to “falsely” book the expenses under “misleading” labels like “Professional Training,” and “Advertising in Scientific Journals.”

The penalty is roughly half a percent of the company annual profits that exceed $10 billion a year on global sales of $67.4 billion in 2011.

Italy was not the only country where Pfizer has been accused of bribing doctors and local officials. “Pfizer took short cuts to boost its business in several Eurasian countries, bribing government officials in Bulgaria, Croatia, Kazakhstan and Russia to the tune of millions of dollars,” says Mythili Raman, the principal deputy assistant attorney general of the U.S. Department of Justice’s (DoJ) criminal division.

“Pfizer H.C.P. admitted that between 1997 and 2006, it paid more than $2 million of bribes to government officials in Bulgaria, Croatia, Kazakhstan and Russia,” notes a press release issued by the DoJ. “Pfizer H.C.P. also admitted that it made more than $7 million in profits as a result of the bribes.”

Amy Schulman, executive vice-president and general counsel for Pfizer, said: “The actions which led to this resolution were disappointing, but the openness and speed with which Pfizer voluntarily disclosed and addressed them reflects our true culture and the real value we place on integrity and meeting commitments.”

In a criminal complaint issued by the SEC, investigators laid out detailed charges for a total of eight countries: Bulgaria, China, Croatia, Czech Republic, Italy, Kazakhstan, Russia, and Serbia.

For example for almost six years, Pharmacia Croatia made monthly payments of approximately $1,200 per month into the Austrian personal bank account of a Croatian doctor. In 2003, Pfizer bought Pharmacia Croatia but allowed the payments to continue for three months.

A memo from a senior manager noted that the doctors was “a member of the Registration Committee regarding pharmaceuticals, I do expect that all products which are to be registered, will pass the regular procedure by his assistance. . . . He is a person of great influence in Croatia in the area of pharmaceuticals, and his opinion is respected very much; that’s the reason he is so important to us.”

In Russia, from the mid-1990s through 2005, Pfizer Russia had a special sales initiative called the “Hospital Program” under which employees were allowed to pay hospitals five percent of the value of certain Pfizer products. Some of this money was paid out in cash to individual Russian doctors “to reward past purchases and prescriptions and induce future purchases and prescriptions of Pfizer products.”

Government officials were also cultivated. On November 19, 2003, a Pfizer Russia employee sent in an invoice requesting “payment for the (motivational) trip of [the First Deputy Minister of Health] for the inclusion of [a Pfizer product] into the list . . . of medications refundable by the state.”

In another email June 27, 2005, a Pfizer Russia employee noted that a government doctor “should be assigned the task of stretching the amount of the purchases . . . to US $100 thousand” as an “obligation” in exchange for a trip to a conference in the Netherlands or Germany.

Federal officials have forced Pfizer to pay much higher fines in the past, based on the damage assessed in each case (typically a multiple of the damages). For example in 2009, Pfizer paid out $2.3 billion to settle allegations of criminal and civil liability arising from the illegal promotion of Bextra, an anti-inflammatory drug.

All told U.S. government regulators are expected to hand out $8 billion in fines this year to multinational corporations, estimates the New York Times. “Critics remain, however, arguing that the practice of settling fraud cases with companies while not charging any employees might be giving executives an incentive to push the limits of the law,” notes the newspaper.

“If you are an executive, you know that the chances of getting caught are infinitely small, and the chances of getting caught and prosecuted are even smaller,” Dennis M. Kelleher, president of Better Markets, told the New York Times.

Questions are being raised by some members of Congress. “A lot of people on the street, they’re wondering how a company can commit serious violations of securities laws and yet no individuals seem to be involved and no individual responsibility was assessed,” Jack Reed, a Rhode Island senator, said at a recent hearing.

Hospital Corporation of America Allegedly Profited From Questionable Cardiac Procedures

Posted by Pratap Chatterjee on August 7th, 2012
CorpWatch Blog
Richard Bracken, HCA CEO, speaking at Tulane university. Photo: Tulane publications. Used under Creative Commons license.

Hospital Corporation of America (HCA) – the world’s largest operator of private clinics and hospitals – has come under the spotlight for performing unnecessary cardiac procedures, notably in Florida.

Based in Nashville, Tennessee, the company has 163 hospitals and 110 surgery centers, and an annual revenue of $ $29.682 billion in 2011 with profits of $2.465 billion. About a fifth of its income comes from Florida, which has a large retiree population.

HCA previously paid out $1.7 billion in fines and repayments to settle charges of defrauding the government in 2000. One of the key agreements was “to resolve lawsuits alleging that HCA hospitals and home health agencies unlawfully billed Medicare, Medicaid and TRICARE for claims generated by the payment of kickbacks and other illegal remuneration to physicians in exchange for referral of patients.” (Medicaid, Medicare and TRICARE are U.S. government healthcare plans for poor people, elderly people and military personnel and their dependents respectively)

The company also signed a special eight year agreement from 2000 to 2008 with the U.S. Department of Justice that required them to promptly report fraud or face harsher penalties that other companies because of the previous fraud claims.

The new charges suggest “that a defendant, already caught once defrauding the government, has apparently not changed its corporate culture,” Michael Hirst, a former assistant United States attorney in California, told the New York Times.

The procedures that are being questioned today are diagnostic catheterization (insertion of a tube into the heart) and cardiac stents (a tube inserted into cardiac arteries). Medicare normally pays the hospitals about $3,000 and $10,000 for each procedure respectively.

The newspaper revealed that internal investigations at HCA showed that between 2002 and 2010, company doctors were “unable to justify many of the procedures they were performing,” write Reed Abelson and Julie Creswell. “Questions about the necessity of medical procedures — especially in the realm of cardiology — are not uncommon. But the documents suggest that the problems at HCA went beyond a rogue doctor or two.”

A catheterization laboratory at the Lawnwood Regional Medical Center in Fort Pierce, Florida, accounted for 35 percent of the hospital’s net profits. There Dr. Abdul Shadani and Dr. Prasad Chalasani at Lawnwood are named by the New York Times as being quick to perform catherizations. Some 1,200 procedures were found to be unnecessary in a 2010 review.

Also singled out was Dr. Sudhir Agarwal who practiced at the Regional Medical Center Bayonet Point in the town of Hudson, also in Florida. An internal review found that his “style of clinical practice leads to unnecessary procedures and unnecessary complications.”

Dr. Agarwal and the other eight doctors have sued HCA for defamation in county court. Anthony Leon, a lawyer for the nine doctors, issued a statement that said: “There is absolutely no merit to any allegation that any of these doctors were performing unnecessary procedures or performing procedures that led to unnecessary complications as a style or pattern of practice.”

HCA is hardly alone in being accused of defrauding the government. A quick scan of the official press release index of the Department of Justice suggests that it is a rare week when the authorities fail to catch someone who has milked the taxpayer for $10 million or more.

For example, in December 2010 three companies – Abbott Laboratories, B Braun Medical, and Roxane Laboratories – agreed to pay $421 million to settle allegations of overcharging. (The companies were billing the government up to 20 times more than the actual consumer costs for products like intravenous drugs and solutions.)

In 2009, Pfizer paid out $2.3 billion to settle allegations of criminal and civil liability arising from the illegal promotion of Bextra, an anti-inflammatory drug. And less than a month ago, GlaxoSmithKline to pay $3 billion in a civil and criminal settlement to settle allegations of illegal marketing of Paxil and Wellbutrin which was prescribed to treat depression as well as failure to report safety data for Avandia, a diabetes drug.

One of the problems in the U.S. is the staggering sums involved: the government is expected to spend a trillion dollars, or seven percent of GDP, on Medicare and Medicaid, which, in turn, have become a gold mine for the private companies that provide the care. (An interesting statistical note: the UK National Healthcare Services which covers all citizens costs roughly five percent of national income)

“If you are a hospital that wants to boost its bottom line though, performing more surgeries — even those that aren’t necessary — is pretty much the way to go,” writes Sarah Kliff at the Washington Post blog. “Right now, doctors get paid for each service they provide. The cardiologist that inserts more stents and performs more surgeries tends to net a higher salary.”

Chevron Face Opposition Over Eastern Europe Fracking Plans

Posted by Pratap Chatterjee on August 6th, 2012
CorpWatch Blog
Anti-fracking poster in Bulgaria. Photo: Пенка ГенадиеваБългария

Chevron - the Northern California-based oil and gas company – has been quietly acquiring rights to drill for natural gas in Eastern Europe using “fracking” technology – a controversial technique. However, grassroots opposition in Bulgaria and Romania has thwarted the companies plans so far.

An interview with Ian MacDonald, vice-president of Chevron Europe, Eurasia and Middle East, in the Financial Times suggests that the company is getting ready for what it believes is the next fossil fuel extraction boom in the region.

“For years, it has been snapping up exploration acreage along a geological faultline that stretches from the Baltic to the Black Sea,” writes Guy Chazan. “A crucial piece of its jigsaw fell into place in May when it won the right to negotiate a big shale gas contract in Ukraine. That left it with an almost continuous arc of concessions stretching from Bulgaria in the south-east to Poland in the north. The blocks in Romania alone cover 2,700sq km.”

But the company faces an uphill political battle to the technology that has been blamed for contaminating local water supplies and even causing earthquakes. Bulgaria banned fracking in January after a major protest against Chevron’s plans to drill in Dobrudja, the most fertile farm region in the country in January.

Chevron is also running into fierce opposition in Romania which has a moratorium on the technology. The company has licenses in the north-east and south-east Dobrogea region near the southern border with Bulgaria as well as for the in north-eastern Romania near the border with Moldova.

“We examined the Chevron contract and… encountered suspicious secrecy at all levels,” says Nicolae Rotaru of Civic Platform in Romania. “We want a law to be worked out to regulate the drilling for shale gas in Romania … It is dangerous for human life.”

Others pointed out that the drilling would not even benefit the local people financially. “These royalties are so tiny that they cost almost nothing, the private operators who profit from the exploitation and give peanuts to the state,” wrote Ilie Serbanescu in “Romania Libera”

The Czech republic is also considering a ban.

Western European countries have been fighting fracking too. France banned fracking last July after environmentalists and wine producers raised alarms about water pollution. Fracking was also recently briefly banned in the UK.

Why the opposition to fracking? Greenpeace explains here: “To access these reserves, fluid is pumped down a drilled channel (well) into the gas-bearing rock at very high pressures. This causes the rock to fracture, creating fissures and cracks through which the gas can 'escape'. The fracturing liquid generally consists of mainly water, mixed with sand and chemicals. Numerous different chemical agents are used, many of which are flagged as dangerous to humans and the environment (carcinogens, acute toxins).

“The fracturing of a single well requires a huge volume of water: around 9,000 - 29,000 m3 (9 -29 million litres). Chemicals make up about 2% of the fracturing liquid, i.e. about 180,000 – 580,000 litres. Only 15 – 80% of the injected fluid is recovered, meaning that the rest remains underground, where it is a source of contamination to water aquifers.”

The contamination has shown up in unusual place. For example communities in the U.S. have seen tap water catch on fire in fracking areas. (Watch this YouTube video and this one from Time magazine)

Fracking can also dramatically increase the likelihood of earthquakes, according to recent research in Youngstown, Ohio, where residents were hit last Christmas Eve and again on New Year's Eve.

A new study from Cliff Frohlich, a seismologist at the University of Texas, Austin, just published in the Proceedings of the National Academy of Sciences, shows a high degree of correlation between local earthquakes and fracking. “Beginning in 2001, the average number of earthquakes occurring per year of magnitude 3 or greater increased significantly, culminating in a six-fold increase in 2011 over 20th century levels,” Frohlich wrote. “This suggests injection-triggered earthquakes are more common than is generally recognized.”

To learn more about the dangers of fracking, check out the film Gasland and the Drilling Down series in the New York Times.

Congo Copper Mine Deals Questioned

Posted by Pratap Chatterjee on August 2nd, 2012
CorpWatch Blog
Women copper miners in the Congo. Photo: FairPhone. Used under Creative Commons license.

Eurasian Natural Resources Corporation (ENRC), a global mining company that got its start in Kazakhstan, has won a new $101.5 million license to dig for copper at the Frontier mine in the Democratic Republic of Congo. The company has been criticized by Global Witness for its purchases of rights from offshore companies connected to Dan Gertler, a controversial Israeli diamond merchant. http://www.globalwitness.org/library/possible-new-enrc-deal-raises-fresh-corruption-risks

“The Congolese state has foregone billions of dollars in revenues by secretly selling off its assets on the cheap to offshore companies,” Daniel Balint-Kurti, campaigner for the Democratic Republic of Congo at Global Witness said in a press release issued last month. “With so much at stake in one of the poorest countries on the planet, ENRC must do the right thing and shed full light on its dealings.”

Per-capita income in the Congo is under $300 a year and experts at the Carter Centre, which was founded by former US president Jimmy Carter, say there is a reason. "In a mining sector defined by irregularities and mismanagement, large industrial mining projects can earn huge profits for investors and government officials,” Sam Jones, associate director of the centre's human rights program, told the Guardian. “(L)ittle revenue finds its way back into desperately impoverished Congolese communities for schools, healthcare, or other social services.”

The Frontier copper mine is located near the town of Sakania in the Congo, about a mile from the Zambian border. It is located in the copper belt that straddles the border of the two countries that has been exploited commercially from the days of Belgian colonization to this day. Indeed the profits from the Union Minière du Haut Katanga, the original mining company in the region, was a major source of wealth for Belgium at the beginning of the 20th century.

First Quantum, a Canadian company, acquired the rights to mine for copper at Frontier in 2001 but was forced to turn it over to Sodimco, a state owned company in 2010 by the Congolese government. The licences were then sold to Fortune Ahead, a Hong Kong shell company. Meanwhile First Quantum filed multiple legal claims demanding $4 billion in compensation for Frontier and other assets nationalized by the Congolese government.

In January this year First Quantum agreed to turn over all its prior mineral rights to ENRC for $1.25 billion. ENRC had already bought rights to the giant Kolwezi tailings project for $175 million and purchased CAMEC, yet another Congolese company that owned a half share in the SMKK copper and cobalt mine.

But exactly who paid whom how much for mining rights in the Congo is up for debate. “ENRC’s purchase of its stake in Kolwezi was structured through a deal between itself and at least seven companies registered in the British Virgin Islands, all connected to Dan Gertler,” states a Global Witness fact sheet. “When ENRC bought the remaining 50 per cent stake in SMKK, it purchased it from another British Virgin Islands company linked to Mr Gertler. Even ENRC’s acquisition of CAMEC involved sale purchase agreements with several offshore companies linked to Dan Gertler which held shares in CAMEC.”

Gertler, an Israeli diamond merchant, has been doing business in Congo for over a decade, working first with Laurent-Désiré Kabila, the former president of the Congo, and now with his son, Joseph Kabila, the current president.

“The nature of these deals raises serious questions about whether corrupt Congolese officials could be benefitting from Congo’s considerable mineral wealth at the expense of the Congolese people,” says Balint-Kurti. “Global Witness has been calling for ENRC to publish the full results of an external audit into its dealings in Congo, conducted by the law firm Dechert.”

It is certainly not the first time Gertler and the Kabila clan have been linked. A lawsuit filed in Israel by Yossi Kamisa, a former Israeli fighter who worked for Gertler, says that the diamond tycoon had offered the elder Kabila military aid to the Congolese army in 2000.

“At the time, the Second Congo War (1998-2003) was raging - one of the most brutal conflicts in the history of the African continent, involving eight countries, dozens of guerrilla organizations and a horrific human toll that included large-scale rape and even cannibalism,” write Gidi Weitz, Uri Blau and Yotam Feldman in Haaretz newspaper. “This did not deter Gertler from realizing his plan to penetrate the lucrative diamond market in the DRC.”

Kamisa’s lawsuit charges that he “witnessed Gertler's method of operation, involving paying considerable sums of money as bribery to different individuals in the Congo government ... all in order to pave the way to a meeting with the president of Congo and to improve the terms of the future agreement that was to be struck between him and the state.”

Gertler denied these allegations, calling them vengeful and baseless, says the newspaper.

Malaysian Water Company Claims To Have Run Dry

Posted by Pratap Chatterjee on August 1st, 2012
CorpWatch Blog
Giant Syabas tap visible from the highway. Photo by suanie. Used under Creative Commons license.

Syabas, a private water company in Malaysia, has threatened to start water rationing in the state of Selangor after claiming that it had almost no water reserves left. The local government has called foul and critics claim that the threat is a ploy to win more lucrative contracts and to favor a rival political party.

“Here, we have a corporation holding a state government and public to ransom,” Charles Santiago, the coordinator of the Coalition Against Water Privatisation who is also a local member of parliament, told Free Malaysia Today. “The truth is not coming out. They have vested interest to overthrow the state.”

Selangor is the richest and most populous state in Malaysia with over seven million inhabitants and many of the country’s key industries in the area surrounding the national capital of Kuala Lumpur. It is governed by Pakatan Rakyat (PR) parties, an opposition coalition.

Syabas (which is short for Syarikat Bekalan Air Selangor) has a monopoly on providing water to Selangor. The company won a 30 year contract to provide water in December 2004 when the ruling Barisan National coalition privatized the state water supply.

Rozali Ismail, the treasurer for the United Malays National Organisation (UMNO) party in Selangor, owns 40 percent of Puncak Niaga Berhad, which in turns owns 70 percent of Syabas. UMNO is one of the key members of Barisan National.

Syabas is now lobbying heavily to raise rates for water but the Selangor government is insisting that the company first reduce the rate of “non-revenue water” which amounts to 30 percent of treated water.

Another option is the construction of a new RM3.6 billion ($1.15 billion) Langat 2 water treatment plant which is also likely to benefit Syabas and its affiliates.

“From what I understand from my industry sources, Umno boys are getting a lot of the contracts,” says Santiago. “I am talking about contracts for things like laying the pipes to others. Industry sources also tell me that Puncak Niaga is also getting the contract to operate and manage this.”

Tony Pua, another opposition politician, says that Barisan National wants to use the water issue as a way to prove that the state is being mismanaged. "They want to influence the course of the elections. They have a monopoly over water resources and are holding the people to ransom," Pua told Reuters.

“(I)n Selangor, the private concession companies chosen to treat and distribute water were not skilled nor experienced in the water services industry,” Khalid Ibrahim, the chief minister of Selangor, told the Sixth World Water Forum in Marseille, France, in March. “There should have been specific and detailed clauses providing penalties for the companies’ failure to comply with conditions. In our case, the agreement was so flawed that when the distributor experienced financial difficulties, the government eventually underwrote the companies’ debts.”

Others say that the idea that water privatization will serve the public better is simply untrue. “Proponents of privatization consistently argue that it saves costs due to competitive pressures private providers face to be more efficient,” writes Mildred E. Warner for the Trans National Institute in the Hague. Yet the reality is quite different. “The majority of the studies (11) found no difference in costs between public and private production,” she adds.

For example, Manila Water and Maynilad, two private corporations have run the water supply of eastern and western Manila since 1997. “Since then, water prices have soared, with increases between 450% - 850% for residents of each zone,” writes Corporate Accountability International. “Quality has suffered, with severe public health consequences, and the much-needed infrastructure investment which was used to justify the privatization has failed to materialize.”

The same was true in Jakarta where PT PAM Lyonnaise Jaya (Palyja) manages the west part of the city and PT Aetra Air Jakarta (Aetra) manages the east part. (Palyja’s major shareholder is Suez Environment, a French water company while Aetra is currently owned by Acuatico Ltd, a company based in Singapore)

“Citizens in Jakarta are suffering from unimproved services, high prices, bad quality of water and environmental deterioration,” writes Irfan Zamzami of the Amrta Institute for Water Literacy.  Zamzami predicts that the city will soon owe the companies 18.2 trillion rupiah. ($2.04 billion). “(W)ater service should be re-municipalized. This is a global trend and needs international solidarity to prevent citizens of the world from a privatized and inaccessible water service.”

Nomura CEO Resigns Over Insider Trading Scandal

Posted by Pratap Chatterjee on July 26th, 2012
CorpWatch Blog
Photo: MJ/TR (´・ω・) Used under Creative Commons license.

Kenichi Watanabe and Takumi Shibata, the CEO and chief operating officer of Nomura, have resigned to take responsibility for several recent insider trading scandals at the Japanese multinational conglomerate. The company, which once was once the world’s largest securities firms with holdings of $76 billion in 1987, is now valued at $12.3 billion.

"It is difficult at this stage to numerically estimate the possible damage,” Junko Nakagawa, chief financial officer of Nomura. “All we want to do is make efforts to regain trust."

In 2010 Nomura underwrote new share offerings for Inpex (an oil and natural gas exploration company), Mizuho Financial Group (one of Japan’s largest banks) and Tokyo Electric Power Company. Such offerings typically have an impact on share prices, so any advance knowledge of such plans allows traders to cash in.

Nomura employees allegedly secretly told a First New York Securities fund manager about the plans for the Tokyo Electric Power Company allowing the manager to take out a “short position” days before the utility company made a share offering in September 2010. First New York Securities made 7.2 million yen ($85,000 at the time) profit as a result.

Likewise Nomura employees gave out nonpublic information on Mizuho and Inpex to fund managers at Chuo Mitsui Asset Trust (now called Sumitomo Mitsui Trust Bank, Japan's biggest trust bank). Chuo sold Inpex holdings a higher price on behalf of foreign investors and bought them back a lower price to make a profit of ¥10 million ($119,000).

In March 2012, Japanese regulators handed out a fine of 8,000 yen (about $600). “The amount was so tiny—it would cover the cost of a fancy dinner for four in a Tokyo restaurant—that some critics questioned whether it would have any deterrent effect,” scoffed the Wall Street Journal at the time.

Japan's Securities and Exchange Surveillance Commission (SESC) has historically been fairly timid in imposing fines on insider trading. All told it has levied just ¥268 million ($3.2 million) in fines for 121 cases of insider trading since 2005. By comparison the Financial Services Authority in the UK imposed a £59.5 million fine (($93.5 million) on Barclays bank in June for fixing rates and the Securities and Exchange Commission levied a $550 million fine on Goldman Sachs in 2010 for the misleading investors on subprime mortgages.

Despite the small fines, the scandal has had a huge impact on Nomura. The Journal reports that Nomura has been dropped from underwriting deals for at least eight Japanese companies including one to act as joint global coordinator for a $6 billion share issue by Japan Airlines, expected to the biggest deal of the year. The company also says its profits for the second quarter have plunged 90 percent.

The scandal on insider trading in Japan may widen, as the SESC is investigating several other firms. Tadahiro Matsushita, the Japanese financial services minister, has asked 12 top brokers in Japan to submit reports by early August on how they handled nonpublic information.

The scandal at Nomura is also just one of a wave of global scandals in recent months that have shone an welcome light on seamier side of the financial industry. Robert Diamond resigned as CEO of Barclays bank earlier this month following a scandal on rigging global interest rates. The Securities and Exchange Commission (SEC) has fined Goldman Sachs researchers for passing on stock tips to investment bankers and traders while a recent a New York Times investigation has uncovered a questionable new phenomenon that suggests that some of the biggest brokerage firms in the U.S. “appear to be giving a handful of top hedge funds an early peek at … research analysts’ views — allowing them to trade on the information before other investors get the word.”

Mystery Threats Dog Russian Activists Fighting Vinci Highway Joint Venture

Posted by Pratap Chatterjee on July 25th, 2012
CorpWatch Blog
Protestors in Khimki forest. Photo by Daniel Beilinson/Coalition "For the Forests of Moscow Region!" Used under Creative Commons license.

A mysterious fire and a missing activist have contributed to the concerns of Russian activists fighting a new highway between Moscow and St. Petersburg.  The highway is being built by a consortium that involves Vinci, a French company, and individuals rumored to be close to prime minister Vladimir Putin.

This past weekend, new automotive dump trucks and a hydraulic excavator were set on fire by unknown individuals, at a disputed site in the Khimki forest that the activists have been fighting to protect. Days later Pavel Shekhtman, who has been campaigning against the impact of the highway on the forest, temporarily disappeared from his flat. “Pavel managed to call a friend and tell him that his apartment was being searched. After that his phone was snatched out of his hand, and he no longer replied to any calls," fellow activist Yevgeniya Chirikova told Interfax news agency.

"The torching of the vehicles in the Khimki forest is a provocation aimed at smearing the Khimki forest campaigners who use only peaceful, legitimate and non-violent methods," Chirikova wrote on Twitter.

The 2,500 acre Khimki forest, just outside Moscow where the Czars of Russia once hunted, boasts 200-year-old oaks that the Washington Post described as “stand(ing) so thick and silent that traffic from the nearby highway sounds like the hum of a lazy mosquito, leaves fall to the ground with a veritable clatter.” It was designated a “forest park” - which protected it from development under Russian law - until November 2009.

A few months prior, in July 2009, "Severo-Zapadnaya Concessionnaya Kompaniya" (North-West Concession Company (NWCC) was awarded an $8 billion contract to build a 700 kilometer (437 mile) highway. NWCC is a joint venture between Vinci - the largest construction company in Europe with over €28.5 billion ($37 billion) in orders last year – which owns half of the venture and a secretive group of investors.

An investigation by CEE Bankwatch, published in April 2011, revealed “a complex web of offshore entities ending in the British Virgin Islands, and confirms the involvement of Arkady Rotenberg “a friend of prime minister Putin. It noted that the entities were “mainly based in the tax privileged jurisdiction of Cyprus and partially end up in tax haven companies based in Tortola, British Virgin Islands, and (possibly) in Nassau, the Bahamas.”

The NGO also noted that Igor Levitin, a former Russian minister of transport who is now a presidential advisor, was formerly deputy CEO of SeverstalTrans, one of the Russian partners. “Levitin is also a Chairman of the Board of Directors of the Sheremetyevo International Airport corporation,” writes CEE Bankwatch. “A considerable part of the first section of the motorway coincides with the route of another project, the MRAR (Moscow Ring Auto Road)- Sheremetyevo-3 toll road, which would bring direct economic advantages for the airport company.”

Violence has dogged the highway project. Mikhail Beketov, a local newspaper editor who supported the cause, was viciously beaten in November 2008 leaving him half paralyzed and unable to talk. Stanislav Markelov, his lawyer and a human rights activist, was shot and killed on a Moscow street in January 2009. In 2010 Khimki opposition activist Konstantin Fetisov had his skull fractured in an assault shortly after leaving a police station where he had been questioned about a protest. And Oleg Kashin, a reporter with the Kommersant newspaper, was savagely beaten with an iron bar and his fingers were smashed, after reporting on the project.

In August 2010 President Dmitry Medvedev called a temporary halt to construction pending an environmental review. An independent expert assessment published in February 2011 found that the planned routing was among the very worst among several alternative solutions.

A few months later, Pur Projet, a a French consultancy, was hired to advise on minimizing the environmental impact of the road.

Last month, Khimki activists traveled to Brussels to lobby the European Parliament to take action against the project. "This case is a powerful example of the need for a law banning European companies from involvement in corruption outside the EU," Satu Hassi, a green Member of the European Parliament and former Finnish environment minister who organized a hearing on the highway project, told The Moscow Times.

On July 20 the construction company made “a sudden attempt” to cut down an oak grove at the site. “In the morning, loggers with heavy machines started to cut down trees there (100-years-old oaks among them)” wrote the activists in a news flash, “Destruction of the forest was protected by few men with criminal appearance, presumably private security guards. Trees were also cut down near the mesotrophic bog – another piece of pristine wilderness heavily damaged by the project.”

“They destroyed many, but it’s far from destroying all. This time we were lucky enough to repel them,” Sergey Ageev, one of the activists, tweeted. That night, a mysterious fire destroyed the construction equipment and soon after Shekhtman disappeared.

“(T)he official pre-text for this action was Pavel’s participations in an anti-Putin rally on May 6 where our movement formed a “Green Column” demonstrate that Russian environmentalists oppose Putin’s course in both economics and politics,” an activist press release announced this morning. “Fortunately, he was ultimately released and returned to the Khimki Forest Camp.”

U.S. Federal Agencies Targeted Employees With Commercial Spy Software

Posted by Pratap Chatterjee on July 23rd, 2012
CorpWatch Blog
Image courtesy: The Bureau of Investigative Journalism

SpectorSoft spyware is the latest tool to be employed by some U.S. government officials to conduct surveillance on staff. Best known for its off-the-shelf products for parents to track children, the Vero Beach, Florida, digital manufacturer has been revealed to be selling “keylogger” software to the U.S. Food and Drug Administration (FDA) to track every digital move of certain employees.

Police officials have long been happy to endorse the 14 year old private company’s products: "Our Internet safety presentation for parents and children has several tools that are important for parents, and Internet monitoring software is one of the tools," Sergeant Paul Garcia of Albuquerque, New Mexico, was quoted as saying in company literature in 2009. "Along with our IT team, I tested several products, and our first choice is Spector."

Dr Jefrrey Shuren, the director of the Center for Devices and Radiological Health at the FDA, apparently concurs. According to a court filing by Steven Kohn, a lawyer at the National Whistleblower Center, Shuren personally sent federal investigators at the office of the inspector general “several screen shots and documents obtained through spying on the private email correspondence of Dr. Robert C. Smith, Dr. Ewa M. Czerska, Mr. Paul T. Hardy, and Mr. Julian J. Nicholas.” (all FDA scientists apart from Hardy who worked for the U.S. Public Health Service Commissioned Corps)

The technology used by the FDA was identified by Eric Lichtblau and Scott Shane at the New York Times as SpectorSoft products which “captured screen images from the government laptops of the five scientists as they were being used at work or at home. The software tracked their keystrokes, intercepted their personal e-mails, copied the documents on their personal thumb drives and even followed their messages line by line as they were being drafted.”

The surveillance began soon after the scientists sent a letter in January 2009 letter to John Podesta, then director of the transition team of the newly elected Obama administration, blowing the whistle on how senior FDA staff  “ordered, intimidated, and coerced FDA experts to modify their scientific reviews, conclusions and recommendations in violation of the law.”

Journalists took an immediate interest in the concerns raised by the scientists. An article published on January 12, 2009, took issue with the SecondLook Digital Computer-Aided Detection System for Mammography manufactured by iCAD Inc. of New Hampshire. The reporter quoted an internal FDA review of the product that suggested it might miss cancers and risked “unnecessary biopsy or even surgery (by placing false positive marks) and unnecessary additional radiation.”

A second critical article appeared in the New York Times in March 2010 challenging FDA approval for coloscopy devices manufactured by General Electric of New York. “One CT colonoscopy device that they exposed made it onto the market, 600 to 800 times the radiation dosage of similar devices that are more effective,” says Kohn. (Researchers estimate that as many as 14,000 people may die every year of radiation-induced cancers as a result of excessive use of such scanning practices).

After the articles appeared GE officials and iCAD CEO Ken Ferry allegedly complained to the FDA the whistleblowers may have revealed trade secrets. In June 2010 Shuren took a personal interest in the matter by sending the results of the surveillance of the scientists to federal investigators. (To the credit of the investigators, they declined to act noting that government employees have the right to blow the whistle to Congress.)

The scientists are predictably outraged by the news of the surveillance. "Who would have thought that they would have the nerve to be monitoring my communications to Congress?" Robert Smith, one of scientists, told the Washington Post. "How dare they?" Members of Congress were also furious. The FDA "sound(s) more like the East German Stasi than a consumer protection agency in a free country” said Senator Chuck Grassley, a Republican from Iowa.

The agency denies it broke the law. "FDA did not monitor the employees’ use of non-government-owned computers at any time. Neither members of Congress nor their staffs were the focus of monitoring," the FDA told Democracy Now! “At no point in time did FDA attempt to impede or delay any communication between these individuals and Congress. Employees have appropriate routes to voice their concerns without disclosing confidential information to the public, and FDA has policies in place to ensure employees are aware of their rights and options.”

However, Quality Associates Inc. of Fulton, Maryland, another FDA contractor mistakenly posted the data retrieved by the SpectorSoft software on the Internet, where one of the scientists recently discovered the data and the extent of the surveillance operation. “(O)ne congressman, Van Hollen, was specifically put on it. Aides for Senate and House were put on it. Journalists were on it. Scientists and doctors were on it,” says Kohn.

“This is the insidious nature of electronic surveillance, because once they had the first whistleblower, Dr. Smith, target number one, they were able to learn who he was talking to and who was supportive of what he was trying to change. They were able to then identify all the other whistleblowers and then people who endorsed them. And then they created a list. And this list set forth additional targeted monitoring or surveillance.”

While one would hope that the FDA’s action was a rogue operation, it is definitely not the only agency in the market for covert surveillance spy software to track federal employees. A contract posted in June by the Transportation Security Administration (TSA) seeks a product to “monitor user activities through keystroke monitoring/logging; chat monitoring/logging; email monitoring/logging; attachment monitoring/logging; website monitoring/logging; network activity monitoring/logging; files transferred monitoring/logging; document tracking monitoring/logging; screenshot capture; program activity monitoring/logging,” with a key requirement that the “end user must not have the ability to detect this technology.” (first revealed by NextGov)

The solicitation was simply posted for public information, the TSA will not accept unsolicited bids. One presumes that SpectorSoft would be keen to bid. The company is in no trouble since it did not break any laws in selling software to the FDA. On the other hand, Quality Associates, which has a $20 million document archival contract with the FDA as well as a $30 million contract with the National Institutes of Health, seems likely to be shunned for future government contracts.

HSBC Bank Apologizes for Laundering Mexican Drug Cartel Money

Posted by Pratap Chatterjee on July 20th, 2012
CorpWatch Blog
HSBC protest in Hong Kong. Photo by twak. Used under Creative Commons license. Photo of David Bagley testifying at the Permanent Subcommittee on Investigations taken from official video feed.

HSBC, one of the world’s largest banks, has been accused of laundering money for Mexican drug cartels. At a hearing conducted by the U.S. Senate earlier this week, David Bagley, HSBC's head of compliance, apologized and resigned.

"I recognize that there have been some significant areas of failure. Despite the best efforts and intentions of many dedicated professionals, HSBC has fallen short of our own expectations and the expectations of our regulators," Bagley told the U.S. Senate Permanent Subcommittee on Investigations.

HSBC traces its origins back to the Hong Kong Shanghai Banking Corporation that was set up in 1865. Today it is one of the largest financial institutions in the world, with over $2.5 trillion in assets, 89 million customers, 300,000 employees, and 2011 profits of nearly $22 billion. The CEO is still based in Hong Kong but the bank is run out of London.

In 2002, HSBC bought up a Mexican bank named Banco Internacional, S.A. from Grupo Financiero Bital, S.A. de C.V. “A pre-purchase review disclosed that the bank had no functioning compliance program, despite operating in a country confronting both drug trafficking and money laundering,” noted a report prepared for the U.S. Senate. “It opened accounts for high risk clients, including Mexican casas de cambios and U.S. money service businesses, such as Casa de Cambio Puebla and Sigue Corporation which later legal proceedings showed had laundered funds from illegal drug sales in the United States.”

HSBC officials, however, treated the new Mexican unit as low risk. Paul Thurston, chief executive of retail banking and wealth management, who was dispatched to Mexico in 2007 to look into the matter, told Congress that he was "horrified" by what he found. "I should add that the external environment in Mexico was as challenging as any I had ever experienced. Bank employees faced very real risks of being targeted for bribery, extortion, and kidnapping – in fact, multiple kidnappings occurred throughout my tenure," he said.

Other HSBC staff also raised the alarm. “The AML (anti-money laundering) Committee just can’t keep rubber-stamping unacceptable risks merely because someone on the business side writes a nice letter. It needs to take a firmer stand. It needs some cojones. We have seen this movie before, and it ends badly,” wrote John Root, a senior HSBC Group Compliance expert, wrote in an email to Ramon Garcia, the compliance director in Mexico, on July 17, 2007.

All told, the Senate report estimates that HSBC’s Mexican affiliate transported $7 billion in physical dollars to the U.S. between 2007 and 2008 alone, outstripping other Mexican banks, even one twice its size. One Cayman islands subsidiary set up by the Mexican division of HSBC handled 50,000 client accounts and $2.1 billion in deposits, but neither staff nor offices. (Pro-Publica has a nice annotated summary of the 335 page report here.)

“Due to poor AML controls, HBUS exposed the United States to Mexican drug money, suspicious travelers cheques, bearer share corporations, and rogue jurisdictions,” said Senator Carl Levin of Michigan, the chairman of the subcommittee. “If an international bank won’t police its own affiliates to stop illicit money, the regulatory agencies should consider whether to revoke the charter of the U.S. bank being used to aid and abet that illicit money.”

While Bagley was taking the bullet, his former boss, Lord Stephen Green, who was chief executive of HSBC between 2003 and 2006 and chairman until 2010, has been avoiding calls to testify. An ordained priest and the author of a book titled "Serving God? Serving Mammon?" he is now the UK Trade minister.

“No one should raise questions about Mr Green's integrity. Au contraire. The cerebral businessman and part-time preacher turned minister isn't the type to play silly games with regulators,” wrote James Moore, the deputy business editor of the Independent newspaper. “But he does have questions to answer. Such as whether time spent on books would have been better spent on business. Or whether he was just asleep at the wheel.”

Court to Hear Challenge to Myriad’s Human Gene Patent

Posted by Pratap Chatterjee on July 19th, 2012
CorpWatch Blog
DNA sequence exhibit at the Science Museum in London. Photo by John Goode. Used under Creative Commons license.

Should a private company be allowed to patent isolated human genes? A lawsuit to be heard Friday pits Myriad Genetics of Utah against the American Civil Liberties Union (ACLU). Myriad wants to be the exclusive U.S. commercial provider of genetic screening tests for breast cancer or ovarian cancer but the non-profit says the patent limits scientific research as well as health care options for women.

Myriad Genetics Inc. has filed patents on the BRCA1 and BRCA2 genes which allow it to figure out if a woman is at risk of breast cancer or ovarian cancer. The tests cost over $3,000 and no other company is allowed to do research on the genes without permission from Myriad.

“For women as they are trying to make these major life decisions, it is very helpful for them to have a second opinion. By having only a single lab offering that testing, it is impossible really to be able get that second opinion, either in the way the test is performed or in the interpretation of such a result,” says Dr. Wendy Chung, a clinician and a geneticist at Columbia University. “You’re essentially stuck in a situation of a mediocre test.

The Myriad screening test is also mostly based on results gathered from white women. The patent has limited further research to see if the results are accurate for women of other races, says Kim Irish of Breast Cancer Action who cites the example of Runi Limary, an Asian woman who received ambiguous results when she had genetic testing done. “Runi was told that this “variant of uncertain significance” has been seen in Asian women, and that these ambiguous results seem to come up more for women of color,” says Irish.

The ACLU filed a lawsuit against Myriad, the University of Utah Research Foundation and the U.S. Patent and Trademark Office in May 2009. A federal judge ruled against Myriad in 2010 but the company won on appeal at the U.S. Court of Appeals for the Federal Circuit. This past March, the U.S. Supreme Court told the appeals court to revisit the case after it rejected a similar lawsuit.

(The other case involved Prometheus Laboratories of California which tried to patent a blood test for patients with Crohn's disease which was rejected unanimously by the Supreme Court justices.)

James Watson, one of the two scientists who discovered DNA, has filed a friend of the court brief that states: “(W)e would not want one individual or company to monopolize the legal right to the beneficial information of a human gene—information that should be used for the betterment of the human race as a whole.”

The U.S. Patent and Trademark Office has long accepted claims that include DNA sequences – an estimated 35,000 such patents have been approved.

However the Obama administration has recently started to limit this approach. “The chemical structure of native human genes is a product of nature, and it is no less a product of nature when that structure is ‘isolated’ from its natural environment than are cotton fibers that have been separated from cotton seeds or coal that has been extracted from the earth,” wrote lawyers for the U.S. Department of Justice in a legal brief in 2010. "Common sense would suggest that a product of nature is not transformed into a human-made invention merely by isolating it.”

Myriad may be in for a difficult fight, given the government opinion.

United Nations, Olympics Accused of Using “Unaccountable” Private Security

Posted by Pratap Chatterjee on July 13th, 2012
CorpWatch Blog
Thames river police boarding teams in Olympics security exercise, London. Photo: Terry Seward, UK Ministry of Defense.

Two global institutions – the United Nations and the Olympic Games – face charges that they are using “unaccountable and out of control” private security contractors. One of the companies at the heart of both controversies is G4S, a private security company in the UK.

Preparations for the Olympic Games in London later this month have been plunged into chaos because G4S failed to hire sufficient security while the U.N. has been alleged to have quietly been ramping up the use of such contractors in foreign missions including G4S.

G4S won a £284 million ($450 million) contract to provide 13,700 guards for the 2012 Olympics. A few days ago, the company was discovered to have only 4,000 in place.

Guards told the Guardian newspaper that they had been “offered shifts after they had failed G4S's own vetting.”

One G4S trainee, an ex-policeman, described the hiring process to the Guardian as "an utter farce". "There were people who couldn't spell their own name. The staff were having to help them. Most people hadn't filled in their application forms correctly. Some didn't know what references were and others said they didn't have anyone who could act as a referee. The G4S people were having to prompt them, saying things like "what about your uncle?"

The guards who were hired “had received no schedules, uniforms or training on x-ray machines” just 14 days to go until the Olympics opening ceremony.

The Guardian newspaper also published a memo that G4S sent out Thursday to retired police. "G4S Policing Solutions are currently and urgently recruiting for extra support for the Olympics. These are immediate starts with this Tuesday, Wednesday, Thursday and Friday available. We require ex-police officers ideally with some level of security clearance and with a Security Industry Association [accreditation], however neither is compulsory."

The UK government is now making emergency preparations to deploy the British military if G4S cannot meet the requirements laid out in the contract.

Meanwhile G4S and its subsidiaries were revealed to have received $3 million in U.N. contracts in 2010 in “Dangerous Partnership: Private Military & Security Companies and the U.N.” – a new report from Global Policy Forum (GPF), a New York think tank.

Other companies hired by the U.N. included Dyncorp and Saracen, according to GPF. Dyncorp of Virginia also recieved $3 million in U.N. contracts in 2010. (DynCorp became infamous for a sex trafficking scandal during the U.N. mission in Bosnia in the 1990s) Saraccen of South Africa was hired to support the Monusco peacekeeping mission in the Democratic Republic of Congo in 2010 and 2011.

GPF estimates that U.N. spending on private security companies went from at least $44 million in 2009 to $76 million in 2010, a 73 percent increase.

The U.N. Development Program spent $30 million of this amount. The U.N. peacekeeping program came second with $18.5 million while U.N. refugee programs spent and $12.2 million for private security contractors. This carries heavy risks, says GPF. "Armed security contractors can … smuggle weapons into conflict zones and sell them or make them available to parties to the conflict, as has happened in Bosnia, Sierra Leone, Afghanistan and Somalia," the report warns.

The GPF report underlines the fact that the U.N. does not have an overview of which contractors it is using. "U.N. security officials themselves cannot give an estimate of total security contracting within the U.N. system or a complete list of companies hired. This suggests a system that is unaccountable and out of control," the report says.

The U.N. has defended its policies. "U.N. contracting policies have improved and we need to continue to improve them," Martin Nesirky, a U.N spokesman, told the Associated Press. "The distinct differences in the ways that private security contractors go about their work also must be borne in mind."

Iowa Company Linked to Refugee Abuses In Tanzania

Posted by Pratap Chatterjee on July 10th, 2012
CorpWatch Blog
Local fisherman in Rukwa province. Image courtesy Oakland Institute.

AgriSol, an Iowa company, has been linked to plans to evict 160,000 Burundian refugees from Katumba and Mishamo in western Tanzania, according to “Lives on Hold,” a new report by the Oakland Institute.

Kilimo Kwanza which translates as “Agriculture First” is a recent Tanzanian government initiative to promote a “greener revolution” through agricultural modernization and commercialization via public-private partnerships. The program was launched in August 2009 by Tanzania's President Jakaya Kikwete.

Enter Agrisol Energy LLC's - an Iowa-based investment company that specializes in agribusiness. The company’s goal is to find “underdeveloped global locations that have attractive natural resources but lack best-in-class agricultural technology, farming techniques, equipment and management.” The company opened talks with the government to start large-scale crop cultivation, beef and poultry production, and biofuel production in three “abandoned refugee camps” - Lugufu in Kigoma province (25,000 hectares) and Katumba (80,317 hectares) and Mishamo (219,800 hectares), according to company business plans.

A 2011 investigation by the Oakland Institute,  a California based NGO, revealed that the refugee camps were not abandoned but very much occupied by Burundian refugees who have lived in the area for 40 years.

Agrisol does not deny this. Henry Akona, AgriSol Tanzania's director of communications, says that the company officials were initially told that plans had been made to move the refugees from the settlements. "We were considering those areas a few years ago, but we have suspended any plans because the land is occupied," Akona told the Daily Iowan. "We should have done better homework."

Oakland Institute profiled Sembuli Masasa, the father of seven children, who had been farming in Katumba for 39 years who told researchers: “They are giving us $200, ask us to dismantle our own house and to move to a place we have never seen before.”

"Initially promised citizenship, the residents still await their papers, conditional on them vacating their homes and lands in order to make way for the foreign investor,” says Anuradha Mittal, executive director of the Oakland Institute. “The residents have been banned from cultivating crops including perennial crops such as cassava or building new homes and businesses, leaving them with no other option but to consider moving.”

The new report alleges human rights abuses of the refugees “which range from the burning down of houses and crops and violation of their freedom of speech to inequities in social services.”

Akona disputes charges that the company is responsible for the fate of the Burundians. “AgriSol has absolutely nothing to do with the refugees in Katumba and Mishamo,” he told the Daily Iowan.

The Oakland Institute report has created a storm in Iowa, notably for Bruce Rastetter, CEO of AgriSol Energy who worked with Iowa State University's College of Agriculture and Life Sciences in Ames, Iowa, to get support for the deal.

Faced with growing questions, the university pulled out in February 2012

Iowa Citizens for Community Improvement, a community group in Des Moines, Iowa, has filed an official conflict of interest complaint against Rastetter with the Iowa Ethics and Campaign Disclosure Board, and are lobbying for Bruce Rastetter to be removed as Iowa Board of Regents President Pro Tem.

The Tanzania project is part of a new phenomenon that activists are calling “land grabbing.” GRAIN, a global agricultural think tank based in Barcelona, estimates that at least 50 million hectares of good agricultural land – enough to feed 5 million families in India – have been transferred from farmers to corporations in the last few years alone.

Economists say that governments have to be very careful about inviting corporations to manage vast swathes of land in poor countries. “If it’s done properly, and if African governments take care of their countries and their populations, this can be a big benefit,” says Jeffrey Sachs of Columbia University told Dan Rather reports. “If they in effect give away these valuable resources, then what happens is these scarce resources benefit some other part of the world. And Africa is left even worse off than it was before.”

Barclays Bank Fine Reveals Global Rate Setting Scandal

Posted by Pratap Chatterjee on July 6th, 2012
CorpWatch Blog
Photo: Alex Milan Tracy. alexmilantracy.com

A record £290 million ($450 million) fine for fixing rates at which banks lend to each other has been levied on Barclays bank in the UK by U.S. and U.K. authorities. The scandal has forced Bob Diamond, the Barclays CEO who had ignored activist protests over his sky-high $28 million salary, to resign on Tuesday.

Perhaps even more importantly, the scandal has shone a light into how banks set – and manipulate - rates at which $360 trillion in international deposits are loaned out every day. While most of these loans are overnight transfers between banks, they affect the price of consumer loans like mortgages, car loans and credit card loans.

Minos Zombanakis, a Greek banker who worked at Manufacturers Hanover Trust, invented a system in 1969 to estimate “market” rates for lending money when he was asked to work on a $80 million loan to Iran. “We had to fix a rate, so I called up all the banks and asked them to send to me by 11 a.m. their cost of money,” he told the New York Times. “We got the rates, I made an average of them all and I named it the London interbank offer rate.”

In subsequent years, the British Bankers Association took on the daily task of setting “LIBOR” rates for as many as 150 different kinds of loans. These BBA-determined rates are now considered the global benchmark says Donald MacKenzie, a sociologist at the University of Edinburgh, who wrote a fascinating article in 2008 about how they are set.

“This can now be done on-screen, but – especially if large sums are involved or market conditions are tricky and changing rapidly – it’s often better to use the ‘voicebox’. This is a combination of microphone, speaker and switches that instantly connects each broker by a dedicated phone line to each of his clients in banks’ dealing rooms.”

“A broker needs to pass information to his clients as well as to receive it: that’s a major part of what they want from him, and a good reason to use the voicebox rather than the screen. The brokers’ code of conduct prohibits passing on private knowledge of what a named bank is trying to do (unless a client is about to borrow from it or lend to it), but that restriction leaves plenty of room for brokers to tell traders what has just happened and to convey the ‘feel’ of the market.”

What Barclays brokers did was to claim that they could borrow money more cheaply than anyone else to mask their financial problems. “This is a big deal,” writes Dylan Matthews in the Washington Post. “Remember that JP Morgan scandal a few months back? That was mostly JP Morgan hurting itself. The LIBOR scandal was Barclay’s making money by hurting you.”

Matthews goes on to add: “The direct effect for consumers here was to make loans cheaper, but the indirect effect, or the intended one at least, was to lessen chances of government action against the banks.”

For example, one trader is reported to have told a Barclays employee: "Coffees will be coming your way either way, just to say thank you for your help in the past few weeks". The reply came back: "Done, for you big boy."

Public speculation that the rates were being fixed date back to at least 2007. Libor rates could “be manipulated if contributor banks collude or if a sufficient number change their behaviour” concluded a 2008 study by the Bank for International Settlements. So did a paper published on the Social Science Research Network which found evidence of “questionable patterns.”

Heads are continuing to roll. Marcus Agius, the chairman of the British Bankers’ Association, resigned Monday over the scandal. By coincidence, or perhaps not, Agius was also chairman of Barclays.

But that may not be enough, say some. “(T)oday’s leaders must be for finance but against banking behemoths. The instruments of finance, from risk models to derivatives, are useful when used responsibly,” concludes Sebastian Mallaby in the Financial Times. “But the structure of modern finance – vast institutions that borrow cheaply because taxpayers are on the hook to save them – is an abomination that must stop.”

Rio+20 Ends in Failure, Corporate Capture

Posted by Pratap Chatterjee on June 27th, 2012
CorpWatch Blog
Image by Friends of the Earth International

The United Nations Rio+20 Conference on Sustainable Development in Brazil concluded this past weekend with no new government pledges. On the other hand, multinationals scored a public relations victory by claiming that they will implement $50 billion of sustainable changes to help save the environment, under an initiative led by UN Secretary-General Ban Ki-Moon.

The conference was supposed to take advantage of the 20th anniversary of the 1992 United Nations Conference on Environment and Development in Rio de Janeiro to commit to further efforts to save the global environment.

But the final inter-governmental declaration of the 2012 conference was widely panned. “The text was so anodyne there was nothing in it which could be disagreed. So the talks fell, in tumult, to a lifeless ocean,” writes Fiona Harvey at the Guardian.

“We’ve sunk so low in our expectations that reaffirming what we did 20 years ago is now considered a success,” said Martin Khor, executive director of the Geneva-based South Centre and a member of the UN Committee on Development Policy.

They came, they talked, but they failed to act. Paralysed by inertia and in hock to vested interests, too many leaders were unable to join up the dots and solve the connected crisis of environment, equality and economy,” wrote Wisdom Mdzungari in of Zimbabwe.

Not so multinationals. Chad Holliday, chairman of the Bank of America and former president of DuPont, who co-chaired the the UN led Sustainable Energy For All initiative, was quoted in New Scientist saying: "Companies are here because they see opportunities."

“Microsoft has committed to going carbon neutral and will be rolling out an internal carbon fee that will apply to Microsoft’s business operations in over 100 countries. Italian energy company Eni has earmarked approximately $5 billion to achieve its gas flaring and carbon intensity reduction goals; and, the Renault-Nissan Alliance has committed approximately $5 billion to commercialize affordable zero-emission vehicles,” boast the United Nations in an official statement.

“Bank of America has set a ten year $50 billion environmental business goal. the World Bank Group has committed to doubling the leverage of its energy portfolio by mobilizing private, donor and public contributions to World Bank-supported projects."

Twenty years ago, at the original 1992 Earth Summit, similar pledges were made by the World Bank and a number of multinationals, yet today emissions of greenhouse gases in a number of countries exceeded worst case estimates.

For example at the Earth Summit in 1992, 170 nations agreed to voluntary reductions of greenhouse gas emissions to 1990 levels. At the Kyoto protocol meeting in 1997 countries agreed to cut emissions by an average of 5 percent by 2012.

However, in April 2012, the U.S. announced that its greenhouse gas emissions were 10.5 percent above 1990 levels. Canada was over by 17 percent and Spain by 30 percent. Not all did that badly - Germany cut emissions by 25 percent.

The new Sustainable Energy For All pledges represent just a drop in the bucket, say activists. Daniel Mittler, political director of Greenpeace noted: “The epic failure of Rio+20 was a reminder [that] short-term corporate profit rules over the interests of people…They spend $1 trillion a year on subsidies for fossil fuels and then tell us they don’t have any money to give to sustainable development,” he told the Guardian.

Some activists say that the initiative is just “greenwash” and that the Sustainable Energy For All initiative proves that the UN has sold out to corporate interests. “Governmental positions have been hijacked by corporate interests linked to polluting industries,” said Nnimmo Bassey, chairman of Friends of the Earth International.

Rio+20 Summit Weasels Out On Holding Corporations to Account

Posted by Daniel Nelson on June 20th, 2012
CorpWatch Blog
Rio+20 protest. Photo: youthpolicy. Used under Creative Commons license

The curtain rises Wednesday on the 20th anniversary of the “Earth Summit” in Rio de Janeiro in 1992. Once again environmental groups and global dignitaries will gather in Brazil to talk about saving the planet.

Last time the eyes of the world were upon the United Nations Conference on Environment and Development when George Bush (senior) joined 108 other heads of state, 172 countries, 2,500 official delegates, and about 45,000 environmentalists, indigenous peoples, peasants and industrialists came together.

“Helicopters thundered up and down the chic Copacabana and Ipanema beaches. Tanks guarded the bridges and tunnels. The favelas were in lockdown, schools closed and supermarkets stood empty,” remembers John Vidal in the Guardian. “The Dalai Lama meditated with Shirley MacLaine on the beach at dawn, Jane Fonda and Pelé turned up, as did Fidel Castro, train robber Ronnie Biggs, and an obscure US senator called Al Gore.”

The 2012 United Nations Rio+20 Conference on Sustainable Development that runs from 20-22 June event is a relatively tame affair but make no mistake, there have been major changes in the last two decades. One of the biggest differences is the enormous growth in corporate power.

Just before the first Rio Summit, the UN Code of Conduct on Multinational Corporations was abandoned, and just after the meeting, the UN Centre on Multinational Corporations was closed.  Subsequent deepening corporate involvement with UN agencies stems from their accreditation to the summit, alongside civil society groups. A decade later, the international environmental organisation Friends of the Earth commented, “Some people date the rise of corporate globalization” from this period.

Yet as Helena Paul of EcoNexus points out, greater corporate participation has not been accompanied by greater obligations.

“It is strange that there has been so little discussion about controlling corporate power and exploitation in the run-up to Rio+20,” she says.

That power and exploitation ranges from Olympic sponsor Dow Chemical’s continuing failure to address the long-lasting effects of the chemical plant disaster in Bhopal, India, to the case against Chevron, formerly Texaco, for toxic waste dumping and oil leaks in the Amazon, and from Asian Pulp and Paper’s forest destruction in Southeast Asia to Sun Biofuels’ landgrab in Tanzania.

One of the few initiatives is Convention on Corporate Social Responsibility and Accountability, promoted by the Stakeholder Forum and Vitae Civilis.

It is countered by a proposal for a Convention on Corporate Sustainability Reporting, pushed by UK-based multinational insurance company Aviva and the Aviva-convened Corporate Sustainability Reporting Coalition.

The proposal would commit states to develop regulations or codes to “encourage the integration of material sustainability issues” in large companies’ annual reports. There is an opt-out clause for companies, but they would have to explain their non-participation to shareholders or other stakeholders. The proposal says nothing about what shareholders could do if they didn’t accept the company’s explanation.

Use of the weasel word “encourage” is in line with the language of the Rio+20 documents. Lasse Gustavsson, the head of the WWF team at the conference, said on Sunday that “’encourage’ is used approximately 50 times in the negotiating text, while the word ‘must’ is used three times.”

The net result, in Paul’s view, is that “At present, serious debate on international regulation of corporations appears to have been effectively marginalized.”
A good beginning, Dr Alison Doig, Christian Aid’s senior adviser on sustainable development, said at an event on Sunday in the Rio Centro hosting the negotiations, would be for multinationals to pay the $160 billion a year which the charity estimates is lost every year to tax dodging by multinationals.

Do Not Pay Dozen: 12 CEOs Who Met Shareholder Spring Revolts

Posted by Pratap Chatterjee on June 14th, 2012
CorpWatch Blog
Cartoon by Khalil Bendib

Martin Sorrell, CEO of WPP, the global ad agency, was defeated Wednesday in his attempt to get shareholders to approve his $20 million (£13 million) a year salary. He was at least the 12th CEO to face a shareholder revolt against excessive compensation this spring.

“Ever since the first revolts erupted in earnest this year, the “shareholder spring” has been searching for its own Hosni Mubarak to rally against,” writes Jonathon Ford in the Financial Times. “Now a suitably pharaonic candidate has emerged in Sir Martin Sorrell.”

WPP began life as Wire and Plastic Products plc in 1971, as a company that manufactured wire shopping baskets, but was bought out in 1985 by Martin Sorrell, former finance director of Saatchi & Saatchi. Today it is one of the most powerful ad agencies in the world, after having bought up some of its most famous rivals like Burson-Marsteller, Grey, Hill & Knowlton, JWT, Ogilvy Group and Young & Rubicam. Sales in 2011 hit £10 billion ($16 billion)

Sorrell defended his salary in a June 5 Financial Times commentary titled "I Act Like The Owner That I Am." "I find the controversy over my compensation deeply disturbing. Some imagine that I wake up every morning and make decisions, including those over compensation, in the shaving mirror ... If the government or institutions believe pay is excessive, tax it. Do not fiddle with the market mechanism. WPP is not a failure, it is a success."

A week later, some 60 percent of shareholders voted against Sorrell’s pay package. The revolt “appeared to stun the board directors as they watched the results appear on TV screens” wrote the Independent. (The directors were meeting on Wednesday in Dublin, where the company is headquartered to avoid taxes)

"People are concerned because there is a recession, they're concerned about inequality, inequality of wealth and incomes,” a suitably chastened Sorrell told a Reuters meeting in Paris on Thursday. “At times of recession people become more concerned about that, you see that politically.”

Here is the CorpWatch list of CEOs who have seen significant shareholder votes against their multimillion dollar salaries so far this spring.

* David Brennan, CEO of AstraZeneca, the Anglo-Swedish pharmaceutical company, resigned April 26 after shareholders voted against his £9 million pay ($14.4 million)
* Andrew Moss, CEO of Aviva, the top UK insurance company, was forced to resign on May 8 after he lost a vote against his £2.7 million ($4.3 million) pay package
* Sly Bailey, CEO of Trinity Mirror, the UK’s biggest newspaper group, decided to step down May 3 after shareholders voted against her £1.7 million ($2.7 million) pay
* Vikram Pandit, Citibank’s CEO, faced a revolt against his proposed salary of $15 million from some 55 percent of shareholders
* Brady Dougan, CEO of Credit Suisse, saw his salary slashed in half to $6.37 million
* Bill Gammell, founder of Cairn Energy, lost share options worth £2.5 million ($4 million) after 67 percent of shareholders voted against his pay package
* Mike Davies, chairman of Pendragon, a UK car dealership, saw 25 percent vote against his salary
* Andrew Sukawaty, the executive chairman of Inmarsat, the satellite phone company, saw a shareholder revolt against his £2.66 million salary ($4.25 million)
* Ralph Topping, CEO of William Hill, a major UK betting company, saw 49.9 percent of shareholders vote against his £1.2 million ($1.92 million) pay package
* Ivan Glasenberg, CEO of Swiss mining company Xstrata
* Kaspar Villiger, chairman of UBS bank in Zurich

Fake Drug Plague or Pharmaceutical Industry Attack on Generics?

Posted by Pratap Chatterjee on June 13th, 2012
CorpWatch Blog
Pills. Photo: e-magineart.com. Used under Creative Commons license

Are Africa and South East Asia just suffering from a deluge of fake medicines that is causing disease resistance to rise? Or are they also suffering from a deluge of poorly informed media articles, encouraged by the pharmaceutical industry that wants to make war on generic drugs?

A recent article published in the latest issue of the Lancet Infectious Diseases magazine examines a new study by the U.S. National Institutes of Health noting that a third of malaria drug samples examined from the two regions were found to be fake or substandard.

The magazine says that it is "simplified and neutral" to "use falsified as a synonym for counterfeit, devoid of considerations of intellectual property" and urges the use of tough measures to combat these fake drugs.

Similar articles on “fake” drugs appear regularly in the medical publications like the British Medical Journal as well as major business publications like the Financial Times, which suggest that the black market for fake drugs generated $75 billion in revenues in 2010.

Pfizer, a New York company, is particularly active in the campaign against “fake drugs.” There is good reason for Pfizer to be concerned: Viagra, Pfizer's brand of sildenafil citrate, is one of the most popularly faked drugs. James Love, the executive director of Knowledge Ecology International, a Washington NGO, notes that “It is quite clear that the overwhelming majority of counterfeit busts involve Viagra and other erectile dysfunction drugs.”

The data on drug busts is not that surprising given the fact Viagra is an expensive drug in high demand from people who are willing to buy it under the counter or online.

However, such “lifestyle” drugs – as they are often called – are quite different from cancer drugs which are not faked quite as often. Indeed the problem is far more complex: there is a wide range of so-called “fake” drugs such as spurious drugs, counterfeit drugs, falsely labeled drugs (wrong dates, missing ingredients etc.) and poor quality drugs which the Lancet proposes to lump together.

And by introducing the term “devoid of considerations of intellectual property” the Lancet is also including the trade in generic drugs.

It is these generic drugs that pharmaceutical industry lobbyists like the Pharmaceutical Research and Manufacturers of America (PhRMA) and the U.S. Chamber of Commerce, both major lobbyists in the U.S., want the media to attack, says Love.

Here’s where the problem arises: “For political reasons, PhRMA and the Chamber plays up the counterfeit angle quite a bit, to justify a very broad intellectual property right enforcement agenda, by mixing together the counterfeit, falsified, substandard or fake drug categories,” he writes.

Love says that the Lancet suggestion to use "simplified and neutral" language could well lead to problems for buyers in poor countries. He notes that “corporate intellectual property right holders … are lobbying governments for stronger IPR enforcement measures. These lobby groups present dangerous drugs as the core motivating factor for legislation that has little to do with solving the bulk of the substandard and dangerous drug problem, and they also seek to introduce measures the undermine the trade in high quality legitimate generic products.

“One risk is that the various anti-counterfeit drug initiatives will be used to further undermine legal parallel trade in branded drugs. Another is that surveillance of trade in unpatented and unbranded chemicals will be used to further expand monopoly power,” Love adds.

Let’s unpack that a bit. What’s the legal parallel trade in branded drugs? Well, drug manufacturers themselves often sell their drugs cheaper in countries with big public health systems or just because the population is too poor to pay for Western prices. These drugs are sometimes sold back legally to buyers in other countries. Technically this trade could be shut down. (See “Murky Medicines” for an interesting article on how the U.K. buys medicines abroad legally at cheaper prices)

What about unpatented and unbranded chemicals? Are they a good idea? Well, it turns out that even the major drug makers use unpatented and unbranded chemicals all the time. Drugs typically contain one or more active pharmaceutical ingredients (APIs). If these APIs are patented, the patent holder can make a lot of money. But a lot of drugs are made from cheap (and perfectly good) unpatented APIs that even the big companies buy to make their branded drugs.

When countries like Thailand or India allow generic manufacturers to make drugs (either because the license has expired or to deal with an urgent healthcare crisis), these manufacturers turn to the very same API producers. Where it gets complicated is that the API producers are in a tough spot because if they supply the generic manufacturers, the big boys have been known to cut them off. (Bristol-Myers Squibb used this strategy in Thailand to cut off production of the AIDS drug ddI)

Basically what Love is saying is that if we use a hammer to address the issue of drugs, all the problems of generic, spurious, counterfeit, falsified and poor quality drugs look like different kinds of nails, when in fact some of them may not even be nails at all. “If authors systematically see the problem in ways consistent with drug company lobbyists, they are not seeing the whole picture,” he concludes.

Stamp out spurious drugs by all means, check to make sure that expired drugs are not re-labeled, and test batches to make sure that low quality drugs are not slipped into the market, but be careful of stopping the sale of perfectly good generic drugs that can save lives at a dramatically cheaper price by making them illegal.

Fracking Billionaire Faces Shareholder Anger

Posted by Pratap Chatterjee on June 8th, 2012
CorpWatch Blog
Photo: Gasland still. From the film by Josh Fox.

Aubrey McClendon, the founder and CEO of Oklahoma-based Chesapeake Energy, who championed natural gas to the extent of paying environmental groups to oppose coal, is facing angry shareholders for his profligate ways. Chesapeake is one of the leading users of fracking - an environmentally questionable method of extracting natural gas by injecting fluids underground at high pressure.

Chesapeake Energy, a 23-year old oil and gas company with 2011 sales of $11.64 billion, has bought up rights to drill on millions of acres of land in the U.S. This past March Rolling Stone magazine described the company thus: “It’s not only toxic – it’s driven by a right-wing billionaire who profits more from flipping land than drilling for gas,” wrote Jeff Goodell. “McClendon's primary goal is not to solve America's energy problems, but to build a pipeline directly from your wallet into his.”

McClendon aggressively promoted natural gas as part of the solution to climate change. He gave over $25 million to the Sierra Club’s Beyond Coal campaign and in return former executive director Carl Pope even accompanied him to speak out in favor of natural gas. (The Sierra Club’s new director, Michael Brune, has returned the remaining money)

But in the last four years, the company’s share price has dropped from almost $67 in June 2008 to about $18 now because of the crash in natural gas prices as well as the company heavy debt load. Shareholders have forced McClendon to resign as chair and this Friday, they voted out a number of individuals that he appointed to the board of directors.

Well blow-outs and water contamination from fracking haven’t helped the company’s image or share prices either. Alarming incidents like tap water catching on fire started to bring national attention to the environmental impact of fracking in recent years. By 2011, even the New York Times started to investigate the matter. (CorpWatch raised these questions in 2005 in a partnership with the Oil and Gas Accountability Project)

Fracking uses a mix of water, sand and a variety of chemicals, many of which are dangerous to humans and the environment. A study by the U.S. Congress estimated that out of 2,500 hydraulic fracturing products "(m)ore than 650 of these products contained chemicals that are known or possible human carcinogens, regulated under the Safe Drinking Water Act, or listed as hazardous air pollutants.”

Then there is the problem of waste waters. "Since there were no laws covering the disposal of this stuff at first, they (fracking companies) just dumped it into rivers or hauled it off to sewage plants to be 'treated,' which they knew didn't work," Deborah Goldberg, a lawyer at Earthjustice, told Rolling Stone. "They just wanted to get rid of the stuff as quickly and as cheaply as possible."

McClendon also brought attention to his company by funding right-wing causes like the Swift Boat attacks against John Kerry in 2004 and contributing more than $500,000 to stop gay marriage.

The latest scandal to entwine McClendon are his spendthrift ways. He shot to fame when he paid himself $112 million in 2008. Now Reuters has uncovered documents on how McClendon fused his personal expenses with that of the company.

“In 2010, Chesapeake employees spent more than 15,000 hours working on McClendon's personal projects at a cost of about $3 million,” write John Shiffman, Anna Driver and Brian Grow. The journalists report that McClendon arranged for over $1.5 billion in personal loans using his interest in company-owned wells as collateral. He bought a house on Bermuda's so-called billionaire's row, which includes houses purchased by Michael Bloomberg, Ross Perot and Silvio Berlusconi.

He was generous with shareholder’s money too. “On one flight, nine friends of McClendon's wife took a Chesapeake-leased jet to Bermuda without any McClendons aboard,” Reuters reports.

Small wonder that Forbes magaine once called him “America’s Most Reckless Billionaire.” Today, it's a bit hard to shed a tear for his plunging fortunes.

How to Make A (Foreign) Wall Street Bank Vanish

Posted by Pratap Chatterjee on June 7th, 2012
CorpWatch Blog
Photo: SheepGuardingLlama. Used under Creative Commons license.

Can you name the eight largest banks in the U.S.? Seven of them are easy – Bank of America, Citigroup, Goldman Sachs, JP Morgan, MetLife, Morgan Stanley, Wells Fargo. Then there’s Taunus at 60 Wall Street, New York. You mean to say you haven’t heard of Taunus? Well, you’d be even more surprised to learn it doesn’t even appear on the list of the top 50 banks maintained by the Federal Reserve.

Visit the 23 year old 55 story skyscraper and you might still be confused because for all practical purposes the building is occupied by employees of Deutsche Bank. Scratch a little deeper and you will soon discover that Taunus is the name of the holding company that controls Deutsche Bank and by rights should be counted as the eighth largest bank in the U.S. because its $354 billion of assets and 8,652 employees put it slightly ahead of the next contender.

In February, Deutsche Bank changed the listing for Taunus Corp. from a "financial holding company" to "domestic entity—other” Poof! Without even a puff of smoke, Taunus/Deutsche Bank disappeared from the list of the top 50 banks maintained by the Federal Reserve.

This was after the German bank spent $3.4 million lobbying on Capitol Hill in 2010 followed by $2.2 million in 2011, according to numbers compiled by Deutsche Welle, the German public broadcast network. (By comparison Bank of America spent $3.7 million in 2011 and Goldman Sachs, generally considered to be the most politically connected Wall Street firm, spent $6.1 million) Deutsche Bank, like many others on Wall Street, apparently was concerned about the Dodd-Frank act, the 2010 law to improve transparency and accountability in financial institutions.

"Deutsche Bank has extensive business activities in the US and is subject to the rules and regulations there," Deutsche Bank spokesman Ronald Weichert told the German broadcaster by e-mail in response to a query about why it spent so much money on lobbying.

Deutsche Welle has a theory for why Deutsche Bank spent the money. At stake was an extra $20 billion that Taunus needed to keep on hand to comply with the new law which increased the minimum amount of money required in reserve to prove they were fiscally solvent. The Federal Reserve had previously given Taunus a waiver from the higher capital requirements, according to a recent Wall Street Journal article but Dodd-Frank made the waiver moot.

By delinking Taunus from a Deutsche Bank trust company, Tanuas was converted to doing just investment banking, which then allowed it change its listing with the Federal Reserve to "domestic entity—other” where it was no longer subject to the stricter new rules. (Deutche Bank is the second foreign institution to do this – after Barclays of the UK)

“Deutsche Bank in particular had been given some extraordinary and hard to believe advantages," Simon Johnson, a former International Monetary Fund chief economist, told Deutsche Welle. "They wanted to have very little capital in the (Taunus) operation to keep it as a highly leveraged and highly risky business and they were allowed to do that.”

Footnote: The name Taunus comes from the parent Deutsche Bank which is headquartered on Taunusanlage in Frankfurt. Taunus is also the name of a low mountain range visible from the Germany’s financial capital.

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