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Cyprus Banks Gamble Away Russian Billions

Posted by Pratap Chatterjee on April 2nd, 2013
CorpWatch Blog
Bank sign in Limassol, Cyprus. Photo: Leonid Mamchenkov. Used under Creative Commons license.

A few years ago Yiannis Kypri and Andreas Vgenopoulos, senior executives at the two biggest banks in Cyprus, were on top of the financial world. Kypri courted wealthy Russian investors in Moscow while Vgenopoulos handed out millions in loans to companies in Greece, the country of his birth.

Both Kypri, the former CEO of the Bank of Cyprus, and Vgenopoulos, the former CEO of Laiki Bank, were fired when their financial institutions collapsed, bringing down with them the economy of the tiny Mediterranean island country. Last week anyone who had deposited more than €100,000 ($129,000) in the two Cypriot banks was forced to write off between 40 to 80 percent cut of their holdings in order to finance a €10 billion international bailout of the country.

Cypriots are understandably angry although the people who will lose the most appear to be expatriates, notably from the former Soviet Union who have been flocking to the country over the last decade. “There is a generation of Russian businessmen like me who have lost faith in the Russian government, in Russian banks and in Russian laws. That is why we are in Cyprus,” Sergey Ivanov, a Russian wine merchant in Cyprus told the New York Times.

Many of these Russians were attracted to Cyprus when it decided to become a “respectable” tax haven inside the European Union and shake off its prior reputation as a center for money laundering for arms traffickers and druglords. Starting in 2008 the country swapped its local currency - the pound - for euros and built up a major offshore banking industry.

Thousands of companies that existed just on paper were set up in Cyprus over the last few years by accountants and lawyers for wealthy expatriates in order to help them avoid taxes. (There are 320,000 registered companies for just 860,000 residents) Andreas Marangos, a Cypriot lawyer, says he alone set up 6,000 shell companies for Russian and Ukranian investors. Michalis Papapetrou, another Cypriot lawyer, told National Public Radio that one of his Russian clients deposited €100 million in the island.

Indeed one in three rubles that left Russia in 2011 went to Cyprus, and almost as much came back, according to the International Monetary Fund. Why? “They were overwhelmingly Russian cash “round-tripping” through Nicosia shell companies and re-entering as foreign investment,” writes Ben Judah, author of the forthcoming book “Fragile Empire: How Russia Fell In and Out of Love With Vladimir Putin.” This even included money state entities like Rosneft, the oil giant, Sberbank and VTB, both major banks, and of course the Russian billionaires who control the steel companies.

Bank of Cyprus acquired 80 percent of Uniatsrum, a Russian bank, in 2008 in order to cash in on this bonanza. “We are utterly convinced as to the huge potential of the Russian economy,” Kypri, who was then group chief general manager of Uniatsrum, told a Moscow press conference in 2010. “Once Uniastrum securities are accepted for trading on the Russian stock market, the bank’s appeal will increase, providing it with access to equity in rubles and further solidifying its position as one of Russia’s foremost banking institutions.”

At the same time, tens of thousands of ordinary Russians also flocked to the southern Cypriot town of Limassol to take advantage of the sunny weather, the banking system and a welcoming mayor who coincidentally speaks fluent Russian. A Russian radio station and two Russian-language newspapers, as well as dozens of shops selling Russian products have sprung up. Indeed, some have taken to calling the city “Limassolgrad” because of the overwhelming Russian presence.

Unfortunately Kypri, Vgenopoulos and their staff squandered the deposits that they were entrusted with on a variety of questionable schemes ranging from a property boom in Cyprus to large bets on Greek bonds, which they bought at 70 percent of their original value. Those bonds sank to a quarter of the original value under a deal engineered by the European Union in late 2011. Laiki alone lost €2.3 billion, an amount equal to an eighth of the national gross domestic product, while the Bank of Cyprus lost €1.6 billion.

Vgenopoulos, for example, used Marfin Popular Bank (a precedecessor to Laiki) to lend money to the monks of Vatopedi Monastery on Mount Athos to buy prime state-owned land in sweetheart deals which they then re-invested in his financial schemes.

Foolish ventures aside, some say the European Union deliberately forced Cyprus to the brink in order to break up the money laundering and tax dodging schemes on the island. “If we knew at the time what might eventually happen, we might not have been so willing to join,” Afxentis Afxentiou, former governor of Cyprus’s central bank from 1982 to 2002, told the Financial Times. “It seems they wanted to punish Cyprus.”

A committee of former Cypriot Supreme Court judges is scheduled to start work this week to attempt to discover who was responsible for the financial mess – presumably investigating the work of senior executives like Kypri and Vgenopoulos. They are expected to report back in three to six months.

Mind you such questions have been asked for a while with no answers forthcoming. "How could (the Cypriot authorities) be fooled by a man who took the capital of Cypriot depositors to Greece and turned it into thin air?" Zacharias Koulias, a Cypriot independent member of parliament asked his colleagues last May. "Is it even possible for a man to come to our country, grab the capital and leave, and all these managers didn't realize what was going on?

Another scandal is also brewing over a list published by a news website of 132 individuals and companies who were allegedly tipped off to the terms of the bailout and withdrew €700 million just before the bailout, incuding relatives of Cypriot President Nicos Anastasiades.

Raytheon Video Claims Riot Software Can Track Users Via Social Networks

Posted by Pratap Chatterjee on February 13th, 2013
CorpWatch Blog
Riot logo created by Raytheon. Image via the Guardian newspaper

Raytheon, a U.S. military manufacturer, is selling a new software surveillance package named “Riot” that claims to predict where individuals are expected to go next using technology that mines data from social networks like Facebook, Foursquare and Twitter.

Based just outside of Boston, Massachusetts, Raytheon sells $25 billion worth of equipment a year to military clients like the Pentagon. Some of its most famous products include Sidewinder air-to-air missiles, Maverick air-to-ground missiles, Patriot surface-to-air missiles and Tomahawk submarine-launched cruise missiles.

Raytheon’s Rapid Information Overlay Technology (Riot) software extracts location data from photos and comments posted online by individuals, and then analyzes this information to create a variety of spider diagrams to show where the individuals like to go, what they like to do and whom they communicate with.

A video demonstration of the software was recently published online by the Guardian newspaper. In it, Brian Urch of Raytheon shows how Riot can be used to track “Nick” – a company employee – to predict that the best time and place to steal his computer or put spy software on it.

“Six a.m. appears to be the most frequently visited time at the gym,” says Urch in the video which is dated November 2010. “So if you ever did want to try to get a hold of Nick - or maybe get a hold of his laptop - you might want to visit the gym at 6:00 a.m. on Monday.”

"Riot is a big data analytics system design we are working on with industry, national labs and commercial partners to help turn massive amounts of data into useable information to help meet our nation's rapidly changing security needs,” Jared Adams, a spokesman for Raytheon's intelligence and information systems department, told the Guardian.

Adams says that nobody has bought the software – which is still under development - yet. However, company filings indicate that Riot is classified as an "Export Administration Regulations 99" item which allows it to be sold or exported to any client.

But it is certainly true that a number of U.S. government agencies have been eagerly pursuing surveillance software to exploit the vast quantities of data that individuals are posting online about themselves. In January 2012 the Federal Bureau of Investigation posted a request for an application that would allow it to “provide an automated search and scrape capability of social networks including Facebook and Twitter … and (i)mmediately translate foreign language tweets into English.”

Last month the U.S. Transportation Security Administration asked contractors to propose applications “to generate an assessment of the risk to the aviation transportation system that may be posed by a specific individual” using “specific sources of current, accurate, and complete non-governmental data.” The initial plan is to use it to screen volunteer flyers who will be offered the benefits of “expedited screening lanes … leave on their shoes, light outerwear and belts, as well as leave laptops and … compliant liquids in carry-on bags.”

Privacy activists say that the Riot package is troubling. "This sort of software allows the government to surveil everyone," Ginger McCall, the director of the Electronic Privacy Information Center's Open Government program, told NBC News. "It scoops up a bunch of information about totally innocent people. There seems to be no legitimate reason to get this."

“(T)he government has no business rooting around people's social network postings—even those that are voluntarily publicly posted—unless it has specific, individualized suspicion that a person is involved in wrongdoing,” writes Jay Stanley,  a senior policy analyst at the Speech, Privacy and Technology Project of the American Civil Liberties Union. “Among the many problems with government “large-scale analytics” of social network information is the prospect that government agencies will blunderingly use these techniques to tag, target and watchlist people coughed up by programs such as Riot, or to target them for further invasions of privacy based on incorrect inferences.”

Indeed, it would also be possible for a tech-savvy malcontent to lead security officials on a wild goose chase, or even deliberately frame anyone they wanted.

“Alchemy” Investigation Alleges Wall Street Fraud at Standard & Poor’s

Posted by Pratap Chatterjee on February 5th, 2013
CorpWatch Blog
Standard & Poor's photo: TreyDanger. Dollar bills photo: Adam Kuban. Used under Creative Commons license

The medieval alchemists claimed they could turn ordinary metals into gold. Analysts at Standard & Poors (S&P), Wall Street’s top ratings agency, claimed that bad loans to poor people were wildly profitably. A U.S. government investigation alleges that S&P financial analysts are no different from the hucksters of yore.

On Monday, the U.S. Department of Justice sued S&P for $5 billion for misleading the Western Federal Corporate Credit Union, the first federally chartered credit union, which collapsed in 2008.  Sixteen states have joined the lawsuit while the U.S. Securities & Exchange Commission has also launched an investigation. S&P has offered to settle for $100 million instead without admitting any guilt.

The lawsuits are based on a special government investigation named “Alchemy” into top ratings provided by S&P for “collateralized debt obligations” (CDOs) composed of sub-prime mortgages. The federal officials allege that analysts knew that the loans were likely to go sour.

Sub-prime mortgages are a name for loans made to people who have bad credit and cannot borrow money to buy houses under normal circumstances. A flood of such loans from U.S. banks that lasted till 2006 created over $1 trillion in debt, typically for poor people, whose property values crashed when the housing bubble burst in 2007.

Two dozen government lawyers spent several years, conducting over 150 interviews, to find out how much the ratings agency knew about the quality of the CDOs. Some of the documents they uncovered were pretty damning.

“This market is a wildly spinning top which is going to end badly,” wrote David Tesher, an S&P managing director in an email on December 11, 2006, according to documents released by the government. “Let’s hope we are all wealthy and retired by the time this house of cards falters,” another S&P employee wrote four days later, according to documents released by the U.S. Senate.

"Watch out // Housing market went softer // Cooling down // Strong market is now much weaker // Subprime is boi-ling o-ver // Bringing down the house,” sang an analyst in a parody video of Talking Heads' 1983 song "Burning Down the House" that he recorded for his colleagues in March 2007.

“In effect, rating agencies like S&P greased the assembly line that allowed banks to package and sell risky mortgages that generated huge profits,” wrote the Huffington Post in a summary of the findings.

“We allege that S&P falsely claimed that its ratings were independent, objective, and not influenced by the company’s relationship with the issuers who hired S&P to rate the securities in question,” said Eric Holder, the U.S. attorney general, at a press conference on Tuesday. “When, in reality, the ratings were affected by significant conflicts of interest, and S&P was driven by its desire to increase its profits and market share to favor the interests of issuers over investors.”

“Claims that we deliberately kept ratings high when we knew they should be lower are simply not true. S.&P. has always been committed to serving the interests of investors and all market participants by providing independent opinions on creditworthiness based on available information,” the Wall Street firm said in a statement released to the press.

S&P has also tried to claim in court that its ratings are protected under the first amendment to the U.S. constitution, which guarantees the right to free speech. Federal judges have been skeptical like Shira A. Scheindlin, who recently ruled against the argument.

S&P is one of three major agencies on Wall Street. No federal action has been announced yet against the other two agencies – Fitch and Moody’s – despite evidence gathered two years ago that suggest they knew of the problem too.

Other lawsuits have also uncovered evidence that Wall Street firms were aware of the problems with sub-prime loans as far back as 2005, according to documents just released in a New York court under a lawsuit against Morgan Stanley, a major U.S. investment bank, that was brought by the China Development Industrial Bank (CDIB) from Taiwan.  The bankers cracked jokes about the quality of the CDO that they sold to the Taiwanese suggesting that it should be called “Subprime Meltdown,” “Hitman,” “Nuclear Holocaust” and “Mike Tyson’s Punchout” or “Shitbag.”

Construction Company Bribery Scandal Threatens Spanish Ruling Party

Posted by Pratap Chatterjee on February 4th, 2013
CorpWatch Blog
Protest outside Partido Popular headquarters in Madrid. Photo: Popicinio. Used under Creative Commons license

Top executives from three major Spanish construction companies - Fomento de Construcciones y Contratas (FCC) from Barcelona, Obrascón Huarte Lain (OHL) and Sacyr Vallehermoso from Madrid -
are in the limelight for allegedly contributing money to Partido Popular, the Spanish ruling party.

The conservative Partido Popular was in power from 1996 until 2004 when they were ousted in part because of popular anger against the war in Iraq. During - and even after their time at the helm - a series of undisclosed payments were allegedly made to senior party officials listed in handwritten notes kept by Luis Bárcenas, the party’s former treasurer and his colleague Álvaro Lapuerta, that were revealed in El País newspaper last week.

El País lists chief executives of the three companies as having contributed to the slush fund: José Mayor Oreja, the CEO of FCC allegedly paid out €165,000, Jose Miguel Villar Mir, the chairman of OHL, is said to have contributed €530,000 euros while Luis del Rivero, the former chairman of Sacyr Vallehermoso allegedly donated €380,000.

The cash transfers appear to have begun in 1997, which coincides with the real estate and development boom in Spain. “During those giddy years few wielded more power in Spain than its lords of construction, a group of men who used the country’s post-dictatorship economic miracle to build their companies into behemoths feared more than they were loved,” wrote Miles Johnson in the Financial Times in an account of the era. “Of these, Sacyr Vallehermoso was arguably the brashest.”

In fact, all three companies won billions of euros in Spanish government contracts and concessions during the boom times – Sacyr’s toll road projects were once worth €7.9 billion. OHL reported €3.87 billion euros in road construction work in its 2008 annual report while FCC recently estimated that it is still owed €1.7 billion by Spanish local governments. (Both Sacyr and OHL  have revenues of about €5 billion a year while FCC is approximately twice as big)

Questions are now being raised about the possible connections between the lucrative public sector contracts and the Bárcenas payments, which came to light when the former party treasurer submitted details of a secret Swiss bank account to the tax authorities under an amnesty program set up shortly after Rajoy came to power. The account, which was operated by Bárcenas, held as much as €22 million at times.

Mariano Rajoy, the current Spanish prime minister, has been accused of personally receiving €25,200 ($34,100) a year from the slush fund over a period of 11 years starting in 1997 when he served first as minister of public administration and later as deputy prime minister.

Rajoy has denied receiving the money. "Never, I repeat, never, have I received undeclared money," he told an emergency gathering of the party's executive committee on Saturday. "It is not true that we received cash that we hid from tax officials.”

The payments have also been linked to a similar bribery scandal involving Francisco Correa, a Partido Popular political “fixer” and businessman, who has been accused of paying some seven million euros in cash bribes, Jaguar cars, designer clothing, expensive Franck Muller watches and Caribbean holidays to win development contracts with local governments in Madrid, Castilla-La Mancha and Valencia.

Attorney General Eduardo Torres-Dulce has ordered the anti-corruption prosecutor to investigate the links between the Correa (known in Spain as the Gürtel scandal) and the Bárcenas payments.

Meanwhile close to a million people have signed an online petition on demanding that Rajoy resign, while thousands of Spaniards have also taken to the streets of Madrid, holding nightly demonstrations in front of the party’s headquarters.

Morgan Stanley Knew About “Nuclear Holocaust” Mortgage Loans, Taiwanese Lawsuit Reveals

Posted by Pratap Chatterjee on January 23rd, 2013
CorpWatch Blog
Protest outside San Francisco Federal Reserve. Photo: Steve Rhodes. Used under Creative Commons license.

Morgan Stanley, a major U.S. investment bank, was well aware of the problems in the sub-prime mortgage market as far back as 2005, according to documents just released in a New York court under a lawsuit brought by the China Development Industrial Bank (CDIB) from Taiwan.

Sub-prime mortgages are a name for loans made to people who have bad credit and cannot borrow money to buy houses under normal circumstances. A flood of such loans from U.S. banks that lasted till 2006 created over $1 trillion in debt, typically for poor people, whose property values crashed when the housing bubble burst in 2007.

On July 15, 2010, CIDB brought a lawsuit in New York State Supreme Court in Manhattan over a $275 million portion of a collateralized debt obligation (CDO) sold to them by Morgan Stanley which contained large quantities of mortgage-backed securities that were built on pools of such loans. “The complaint asserts claims for common law fraud, fraudulent inducement and fraudulent concealment,” wrote Morgan Stanley in a summary of the legal charges it was facing in its annual filings. The plaintiffs alleged that the bank “knew that the assets backing the CDO were of poor quality when it entered into the credit default swap with CIDB.”

The court allowed CIDB to examine Morgan Stanley’s emails which have just been made public. Jesse Eisinger of ProPublica, an investigative website, has written an excellent article explaining the scam. The documents reveal that the Wall Street bankers even cracked jokes about the quality of the loans that they packaged and resold to the Taiwanese suggesting that the CDO be called “Subprime Meltdown,” “Hitman,” “Nuclear Holocaust” and “Mike Tyson’s Punchout” or “Shitbag.”  Instead they played it safe and named the financial instrument STACK 2006-1.

Ha ha. Those hilarious investment bankers,” writes Eisinger sarcastically. “We are never going to have a full understanding of what bad behavior bankers engaged in the years leading up to the financial crisis. We are left with what scraps we can get from those private lawsuits.”

“We are pleased that the court in this case is ordering Morgan Stanley to turn over damning evidence, so that the jury will get to see what Morgan Stanley really knew about the troubled nature of its supposedly ‘higher-than-AAA’ quality product,” Jason Davis, a lawyer representing CIDB, told ProPublica. “While investors and taxpayers all over the world continue to choke on Wall Street’s toxic subprime products, to this day not a single major Wall Street executive has been held accountable for misconduct relating to those products.”

The bank has not denied the emails. “While the e-mail in question contains inappropriate language and reflects a poor attempt at humor, the Morgan Stanley employee who wrote it was responsible for documenting transactions,” the bank wrote in a statement to ProPublica. “It was not his job or within his skill set to assess the state of the market or the credit quality of the transaction being discussed.”

But even more damning is the fact that Morgan Stanley had already laid bets in the markets that such CDOs would fail. Howard Hubler, who set up an internal hedge fund named the Global Proprietary Credit Group at the bank in April 2006, where he “shorted” the sub-prime mortgage market. Hubler, however, made a costly mistake though by insuring other mortgages to pay for his bet, a tale told in Michael Lewis’s book – The Big Short, which costs Morgan Stanley $9 billion.

Thanks But No Thanks: Insurance Company Considers Suing Uncle Sam After Rescue

Posted by Puck Lo on January 9th, 2013
CorpWatch Blog
Code Pink protest against AIG. Photo: codepinkhq. Used under Creative Commons license.

The video advertisement launched just before Christmas was stirring - a montage of devastated communities from Joplin, Missouri to New York city after Hurricane Sandy. Insurance officers of every race from the American Insurance Group (AIG), the world’s largest insurance company, conveyed a simple message that they were back in business helping communities recover.

It’s a remarkable turnaround for the company which received a massive $182 billion bailout from the U.S. government in September 2008 after facing certain collapse when it became obvious that the risky mortgages that it had insured were likely to fail. At the time the federal government took a 80 percent ownership stake in the company in return for the loan.

“We’ve repaid every dollar America lent us. Everything plus a profit of more than $22 billion,” intone the AIG officials in the video. It ends with the words: “Now let’s bring on tomorrow.”

Well, tomorrow is here, and now the board of directors of AIG have been asked to consider suing the federal government over the terms of the bailout.

The lawsuit against the government is not new. It was originally filed in 2011 on behalf of AIG’s shareholders by AIG’s former CEO and chairman, 87-year-old Maurice “Hank” Greenberg. The plaintiffs allege that the U.S. government deprived AIG shareholders of tens of billions of dollars by charging the company an interest rate of 14 percent on the bailout loan. The basis of the claim is that other bank were bailed out on more favorable terms than the insurance giant received. It asks for $25 billion to compensate AIG and its shareholders.

Until now AIG’s board has been silent about whether they would join the lawsuit but earlier this week, the board of directors of AIG held an unusual private mock-trial-like session about the matter, in which they heard from attorneys, representatives from the U.S. Treasury and the Federal Reserve.

What the AIG board was asked to decide was whether or not they would like to join the lawsuit, take it over and pursue the claims independently, or if they would try to stop Greenberg’s lawyers from pursuing the case on the company’s behalf. If they tried to prevent Greenberg from continuing with the suit, AIG would potentially lose out on any lucrative potential settlement.

After the board meeting was reported Monday night, the backlash from legislators, regulators and the financial press was swift and scathing.

"Don't even think about it," wrote Peter Welch, a Congressman from Vermont, in a letter to Robert S. Miller, AIG’s chairman: "AIG became the poster company for Wall Street greed, fiscal mismanagement, and executive bonuses—the taxpayer and economy be damned. Now, AIG apparently seeks to become the poster company for corporate ingratitude and chutzpah."

But former CEO Greenberg, who helped built AIG up from its beginnings in the 1960s, believes he has a case. “The (g)overnment loaned billions of dollars to numerous other financial institutions without taking any ownership in those institutions; it loaned billions of dollars to domestic and foreign institutions at interest rates that were a fraction of those charged to AIG; and it guaranteed hundreds of billions of dollars to institutions like Citigroup, Inc,” the lawsuit states. “AIG and its (c)ommon (s)tock shareholders, by contrast, were singled out for differential - and far more punitive – treatment.”

The lawsuit also accuses the government of violating the fifth amendment to the U.S. constitution which prohibits “taking private property for public use without just compensation” when it took the majority of the company’s shares in return for the loan.

The plaintiffs contend that the government used AIG as “a vehicle to covertly funnel billions of dollars to other preferred financial institutions, including billions of dollars to foreign entities, in a now well-documented ‘backdoor bailout.’”

(Greenberg, it should be noted, was forced to resign in 2005 after being accused of misrepresenting the company’s finances.)

“There is no merit to these allegations,” said Jack Gutt, spokesman for the Federal Reserve Bank of New York in response to the news of the AIG’s board discussion. “A.I.G.’s board of directors had an alternative choice to borrowing from the Federal Reserve, and that choice was bankruptcy,” he told the New York Times.

The terms of the other bailouts were different, says commentators, because AIG was not a bank. “Those institutions were either banks that were already closely regulated by the Fed or became bank holding companies and submitted themselves to Federal Reserve regulation in return for access to the Fed’s lending facilities,” Time magazine reported.

Others note that AIG got a really good deal for the price, give the size and the nature of the loan. "Warren Buffett loaned Goldman Sachs $5 billion at 10 percent annual interest, plus upside in the form of warrants," writes Daniel Indiviglio of Reuters. "He ended up booking an annual return of 14 percent without exercising the warrants - far better than the government has managed from AIG on the same basis." (The government ended up with about four percent in interest a year.)

Federal regulators also stress that the massive bail out of AIG was necessary because AIG was selling credit-default swaps that were intended to protect against subprime mortgage default - a major cause of the 2008-2009 financial crisis. If the insurance company had collapsed, the other banks and financial systems that it has insured would have gone down with it also.

“(W)e have no choice but to stabilize, or else risk enormous impact, not just in the financial system, but on the whole U.S. economy,” Ben Bernanke, the chairman of the U.S. Federal Reserve, told CBS television in 2009.

On Wednesday the AIG board decided not to join the lawsuit. “The majority of directors decided that the reputational damage was greater than the possibility on a long-shot lawsuit,” John Coffee, a professor at Columbia Law School, told the Washington Post.

Now Greenberg, whose lawsuit was initially thrown out of the courts in November 2012, will have to proceed without the insurance giant’s backing to an appeal court, which has agreed to review the case.

U.S. Banks Win Mortgage Fraud Settlement, Borrowers Lose

Posted by Pratap Chatterjee on January 8th, 2013
CorpWatch Blog
Protest outside San Francisco Federal Reserve. Photo: Steve Rhodes. Used under Creative Commons license.

Ten major U.S. banks settled charges of illegally kicking people out of their homes for pennies on the dollar, under two agreements with the government announced this week. The biggest beneficiary is Bank of America which will win a get-out-of-jail free card for selling fraudulent loans to two government-sponsored mortgage finance companies.

Bank of America sold bad mortgages that led to numerous foreclosures via subprime mortgage lenders Countrywide Financial Corporation and Countrywide Home Loans, Inc. that it acquired in 2008. “Through a program aptly named ‘the Hustle,’ Countrywide and Bank of America made disastrously bad loans and stuck taxpayers with the bill,” said Preet Bharara, the U.S. Attorney for the Southern District of New York when he sued the company for $1 billion on behalf of the government last October.

Under the new settlement Bank of America will buy back $6.75 billion in residential mortgage loans sold to the Federal National Mortgage Association (Fannie Mae) and give the government an additional $3.6 billion in cash. The other banks - which include Citigroup Inc, JPMorgan Chase and Wells Fargo - will pay out $3.3 billion in direct payments to people who lost their homes plus another $5.2 billion to others who are threatened with possible eviction for not being able to pay their loans. This is in addition to the $26 billion that many of the same banks agreed to pay out last February under a separate deal with 49 state attorneys general, the Justice Department and the Department of Housing and Urban Development.

Despite the large sums involved, most consumer advocates say that the settlements are far too little for those who lost the most. “Communities of color were particularly hard hit by abusive mortgage practices,” said Debby Goldberg, special project director at the National Fair Housing Alliance. "The $8.5 billion and other settlements are not comparable to the trillions of dollars in wealth sucked from communities," added Sasha Werblin, senior program manager at the Greenlining Institute.

The two new settlements were drawn up after the effective failure of the Independent Foreclosure Review  – a 2011 program set up by the banks to review bad mortgages and compensate those who were eligible. Only about one in ten of the potential 3.8 million beneficiaries signed up for the program because they were skeptical of the effort that was widely perceived as biased towards the lenders. They were probably not wrong – the consultants running the program was billing as much as $250 an hour for 20 hours for each case, according to the New York Times.

"It has become clear that carrying the process through to its conclusion would divert money away from the impacted homeowners and also needlessly delay the dispensation of compensation to affected borrowers," said Thomas Curry, the federal Comptroller of the Currency. "Our new course of action will get more money to more people more quickly."

But the activists say that the government had bungled the whole process. “If the reviews had been done right the first time, banks would have been on the hook to pay far more to homeowners,” said Alys Cohen, staff attorney for the National Consumer Law Center.

David Lazarus of the Los Angeles Times put the numbers in context – he estimates that the average amount that most borrowers will get is just $2,000.  On the other hand, Lazarus notes that the banks have done quite a bit better in 2011 - the year covered by the settlement: “Citigroup pocketed $11.3 billion in profit. JPMorgan Chase saw record profit of $19 billion. Wells Fargo posted almost $16 billion in profit. (Bank of America) was the poor relation of the family. It earned only $1.4 billion in profit.”

Argentine Judge Freezes Chevron Assets To Pay $19 Billion Ecuador Fine

Posted by Pratap Chatterjee on November 12th, 2012
CorpWatch Blog
Chevron Spoof Ad. Photo: The Yes Men. Used under Creative Commons license

Adrian Elcuj Miranda, a judge in Buenos Aires, has ordered the seizure of Chevron’s assets in Argentina, to force the company to pay a $19 billion penalty for polluting the Amazon in Ecuador. The plaintiffs are seeking similar legal action in Brazil, Canada, Colombia and other countries.

Chevron – a Northern California-based oil and gas company – merged with another company named Texaco in 2001 whose actions are the basis of the lawsuit. Between 1964 and 1992 Texaco admitted to dumping more than 16 billion gallons of toxic “water of formation” into the streams and rivers of the Ecuadorean Amazon that were used by local inhabitants for their drinking water sickening indigenous tribespeople and farmers.

Some 900 open-air toxic waste pits still dot the area, where approximately 9,000 people are expected to contract cancer unless it is cleaned up, according to a study by Dr. Daniel Rourke, former of the Rand Corporation.

An initial lawsuit was filed by Ecuador’s indigenous communities in 1993. At the time the company asked for a trial in Ecuador to avoid a U.S. court battle. A second lawsuit was filed in 2003 by Fajardo and Luis Manza on behalf of 30,000 Ecuadoreans.

In 2011 the Ecuadorean courts ruled against Chevron and ordered the company to pay $18.2 billion in damages, which was increased to $19 billion this past July. Chevron appealed the judgement but the Ecuadorean appellate court ruled against the company on January 3, 2012.

Chevron is now trying a multitude of ways to defeat the ruling such as appealing the Ecuadorean fine in U.S. courts. "The Ecuador judgment is a product of bribery, fraud, and it is illegitimate ... We do not believe that the Ecuador judgment is enforceable in any court that observes the rule of law,” the company said in a statement.

Unfortunately for the company, U.S. courts have not been very sympathetic so far, presumably since the company argued that it wanted the case to be heard in Ecuador in the first place. Last month the Supreme Court refused to hear an appeal to block the Ecuadorean judgement.

The company has also attempted to have the judgement thrown out by a secret arbitration panel under a provision in the U.S. Ecuador Bi-Lateral Trade. The Permanent Court of Arbitration under the United Nations Commission on International Trade Law in the Hague will begin hearings on the dispute later this month.

Chevron has also filed a lawsuit in the U.S. against the plaintiffs for fraud, which will be heard in October 2013. The company has even created a special website, named “The Amazon Post” to documents its allegations.

The Argentine ruling is a major setback for Chevron, say the plaintiffs.

"We have fought now for almost two decades to correct the injustice created by Chevron in Ecuador,” commented Pablo Fajardo Mendoza, the lead lawyer in the lawsuit, who grew up in the oilfields polluted by Texaco. "While Chevron might think it can ignore court orders in Ecuador, it will be impossible for Chevron to ignore court orders in countries where it maintains substantial assets.”

If Elcuj’s ruling is enforced, Chevron may forfeit as much as $2 billion in Argentine assets and also lose roughly $600 million a year in revenue from ongoing operations in that country, according to estimates by the plaintiffs. The company has appealed the ruling.

UK Pathology Labs Suffer In Quality Under Serco Management

Posted by Puck Lo on October 24th, 2012
CorpWatch Blog
Photo: Byzantine_K. Used under Creative Commons license

Privatization of major medical laboratories from the National Hospital Service (NHS) in Britain has led to a dramatic decline in service quality, according to “Transforming Pathology, the Serco way,” a recent report from UK-based researchers Corporate Watch.*

A 2006 UK government report, authored by Lord Patrick Carter, urged that pathology labs – which conduct the study and diagnosis of disease that determine 70 to 80 percent of clinical treatments – be run as “managed pathology networks” to cut costs by as much as 30 percent - or $1.2 billion a year across the nation.

In 2009 and 2010, a joint venture named GSTS won bids to take over pathology services for two major London hospitals - King’s College and St. Thomas’ Hospital. GSTS is a joint venture between the two trusts that manage King’s and St. Thomas with Serco, a UK contractor that has over 750 contracts in 37 countries to run prisons, immigrant detention centers, military operations, nuclear weapons facilities, schools and transit systems. The deals are worth £800 million ($1.28 billion) over the next decade.

But instead of saving money and improving services, the GSTS joint venture lost money and suffered 400 clinical “incidents” at St. Thomas’ labs during 2011, including misplacing and mislabeling blood and tissue samples, according to documents obtained by Corporate Watch using Freedom of Information Act requests.

“There appeared to be an increase in the number of these incidents since GSTS took over,” Corporate Watch stated in a September 30 report.

Performance reviews of St. Thomas’ hospital show that under GSTS management pathology lab “turnaround times” did not meet expectations 46 different times in 2011 and exceeded “critical risk levels” 14 times. During that same period computer failures led to inaccurate kidney damage readings and a patient receiving “inappropriate blood.”

One reason maybe that the “reform of the workforce” has led to losing experienced scientists who are not being replaced, suggest union activists. Unite, the union which represents NHS hospital workers, says that new recruits are given less training and fixed term contracts, as opposed to the pay packages enjoyed by NHS workers.

“Pathology staff take years to train and need constant development and training to keep pace with rapid scientific changes,” said Frank Wood, a biomedical scientist at King’s hospital and a member of the national executive of Unite. “The private sector has made frequent attempts to run [National Health Services] NHS pathology services and has failed due to its inability to retain and attract these type of staff.”

“A report by the Care Quality Commission from June this year said GSTS was ‘not compliant’ with the regulation to ensure staff were ‘properly trained and supervised, and have the chance to develop their skills,’” the Corporate Watch report added.

Financially Serco also appears to have benefited unduly from the GSTS joint venture. Documents show that Serco did not contribute capital into the equally split three-way partnership, yet the hospital trusts provided labs, staff, equipment and nearly $5 million.

In its first six months of operation GSTS lost almost $350,000. Yet in 2010 GSTS paid Serco consultants $16 million to implement a “transformation program” and in bidding fees. By the end of 2011 GSTS went over its budget by $8.1 million, forcing Serco’s partnering hospital trusts to subsidize the venture again. In 2011 King’s Hospital trust lost over $1 million, and Guy and St. Thomas’ trust went into the red as well, Corporate Watch reported.

While GSTS lost money, Serco as a whole continued to profit. The company made $163 million during the first half of 2012. By May, a senior leadership strategy document declared that GSTS had “no future if it cannot be commercially viable.”

But GSTS rejects claims that it is failing and announced in an official statement that it is “on track to break even this financial year.” Responding to the Guardian article, GSTS said, “The pathology service provided by GSTS compares favourably with any pathology service in the NHS and patient safety and the quality of our service are our foremost priorities. There is no evidence to support the Guardian’s claim that the creation of GSTS … led to any of these incidents happening. The incidents listed in the article are the sort that happen in all pathology services and which GSTS has a good record of reducing year on year.”

More dramatic changes are under way at the two hospitals. Before the end of 2012 GSTS intends to consolidate many of the pathology services at the two hospitals: Immunology and blood testing currently done at St. Thomas’ Hospital will be moved to King’s College Hospital to reduce duplication, GSTS said. The bulk of St. Thomas’ toxicology department will be sold or closed. “Staff worry this will overload the service at King’s, causing severe delays and risk the quality of tests provided,” Corporate Watch wrote.

The pathology lab problems are not the first time that Serco (dubbed “the company that runs Britain” by the Daily Telegraph) has come under fire for its health care service and provision in England.

For example Ethan Kerrigan, a six-year-old boy, died in 2010 from a burst appendix in Cornwall, the westernmost region of Britain, after Serco staff at a medical clinic advised putting him to bed rather than sending a doctor to examine him. That incident and other complaints of long lines and chronic understaffing have led to an investigation by the Care Quality Commission, the UK public regulator that oversees healthcare.

Last month, a Serco worker leaked to the press that Serco had falsified its records 252 times, according to an audit demanded by the National Health Service.

Yet despite the controversies, Serco has continued to win contracts to run medical care facilities.

* Corporate Watch is a UK non-profit which is not affiliated with CorpWatch. The two organizations share similar objectives and missions.

Taiwanese Display Manufacturer Fined $500 Million for Price-Fixing

Posted by Puck Lo on October 22nd, 2012
CorpWatch Blog
LCD Assembly. Photo: Gdium. Used under Creative Commons license.

Taiwanese company AU Optronics and its U.S. subsidiary were fined $500 million by a U.S. judge for conspiring to artificially inflate the prices of liquid crystal display (LCD) screens in a verdict handed down last month. Two former AU Optronics executives were also given three-year prison sentences.

AU Optronics is the fourth-largest LCD producer in the world, supplying computer, phone and TV screens to many major electronic manufacturers. Between 2001 and 2006, the company held 60 secret meetings with LG, Samsung, Sharp, Hitachi, Toshiba, Epson and several other electronics producers in luxury hotels, tearooms and karaoke bars, according to detailed notes and legal documents from AU Optronics executives.

High-ranking executives made deals on production levels and set prices of LCD screens used in “almost every laptop computer and computer monitor sold in the U.S.,” smart phones and other electronic devices, according to a statement issued by the U.S. Department of Justice. A third of the $74 billion made by the cartel’s LCD sales came from U.S. companies like Apple, Dell, HP and other electronics and television manufacturers, the New York Times reported.

“This long-running price-fixing conspiracy resulted in every family, school, business, charity and government agency who bought notebook computers, computer monitors and LCD televisions during the conspiracy to pay more for these products,” said Scott Hammond, deputy assistant attorney general for the Department of Justice’s antitrust division’s criminal enforcement program.

In early 2006 the group meetings stopped due to fear of detection, according to legal documents filed by the Department of Justice. But AU Optronics continued to meet one-on-one with its supposed competitors in karaoke bars around Taipei to coordinate production and set prices.

“Only when the FBI raided AUOA’s [AU Optronic’s U.S. subsidiary] offices in Houston in December 2006 did AUO and AUOA cease their participation in the cartel,” an earlier statement filed by the Department of Justice on September 11 stated.

“The defendants, unlike their coconspirators, are remorseless, having refused to accept responsibility or provide any assistance that would justify a reduction in their sentence,” the government lawyers said.

Several other LCD producers charged with price-fixing by the U.S. have previously pled guilty. In 2008 LG Electronics agreed to pay a $400 million fine to avoid trial. Hitachi, Sharp and Samsung, agreed in December to pay a total of $538 million in settlement fees. Only AU Optronics denied the allegations and took their case to a jury trial.

After AU Optronics and its executives were found guilty this past March, the Department of Justice petitioned Judge Ilston to impose maximum penalties upon the company.

“A $500 million fine would be a cost-of-doing-business fine for a large-scale, highly successful cartel like the one proven in this case,” the Department of Justice statement said. “It is possible that even a $1 billion fine will not deter the type of pernicious conduct before the court, but it is the maximum deterrent message that can be sent in the most serious price-fixing cartel ever prosecuted by the government.”

Wall Street law firm Skadden, Arps law issued a warning to clients that the size of the fine should serve as a warning to collaborate with the goverment: “(T)he case leaves room for companies to continue to negotiate resolutions based on the many factors that bear on a final penalty — from the level of affected commerce to mitigating circumstances and proportionality in sentencing.”

Had the judge imposed a $1 billion penalty and ten-year prison sentences, as requested by the government lawyers, the fine would have set a record and could have represented a “watershed moment in antitrust law,” the Wall Street Journal reported.

AU Optronics issued a statement on September 21, saying it “regrets” the judgment and intends to appeal the decision. The company added that there were “important, yet unresolved, legal questions surrounding this matter.” In a previous statement it said that the U.S. government wanted "to punish AUO for its temerity in electing to subject the validity of the government's charge to the test of a jury trial."

AU Optronics and other coconspirators in the LCD cartel have also been sued by retailers and consumers in class-action lawsuits. All together, eight companies have paid $1.39 billion in criminal fines, and twelve executives have been convicted and sentenced to a total of 4,871 days in prison.

Mongolian Nomadic Herders Worry About Impact of Rio Tinto's Gold Mine

Posted by Puck Lo on September 24th, 2012
CorpWatch Blog
Father and daughter, resettled by Oyu Tolgoi. Photo by CEE Bankwatch Network. Used under Creative Commons license

Mongolian livestock herders are worried that a series of massive gold and copper mining projects will dry up scarce water reserves and exacerbate desertification in the delicate Gobi Desert when operations begin next year to tap one of the world’s largest copper and gold deposits.

A landlocked country of 2.8 million caught between China and Russia, Mongolia is home to the first "cowboys" - nomadic herdsman. Even today, two out of five people in Mongolia still make their living herding livestock, and the same number live in poverty.

After the fall of the Soviet Union, Mongolia’s major former trading partner, the government encouraged free market development and expansion of mining in the gold, copper and uranium-rich country, on the advice of the World Bank. Last year the country’s economy grew 17 percent from mining alone - faster than any other in the world and twice as fast as China.

Eurasia Capital, a Hong Kong-based investment bank, estimates that Mongolia sits on $1.3 trillion worth of untapped mineral assets. They predict that the country’s gross domestic product could swell from $5 billion to $30 billion by 2020, based on its mineral resources alone.

The biggest project to date - the $6 billion Oyu Tolgoi gold and copper mine (“Turquoise Hill” in Mongolian) - is now nearly ready to open. Located just 50 miles north of the Chinese border, it is expected to be one of the world’s three largest mines when it reaches full production in 2018. Two thirds of Oyu Tolgoi is owned by Canadian-owned Turquoise Hill (formerly Ivanhoe Mines), which in turn is majority-owned by Rio Tinto, the world’s largest private mining company, based in London.

“This is the biggest agreement in the history of the country by a magnitude of a thousand,” Jim Dwyer, executive director of the Business Council of Mongolia, told the Global Mail in February.

Indeed, even while under construction Oyu Tolgoi accounted for 30 percent of Mongolia’s current economy, according to the mine’s spokesperson. Already thousands of young people in their 20s and 30s have flocked to the capitol, Ulan Bator, seeking jobs working for Oyu Tolgoi. The noveaux rich spend time at the new Irish pubs near the Louis Vuitton store and watch Hummers drive by alongside Soviet-era buses.

“When international investors make big decisions to employ their scarce capital, cutting-edge technology, management expertise, and marketing prowess, they look for responsible partners,” Oyu Tolgoi’s Australian CEO Cameron McRae, said. “Partners like Rio Tinto prefer to invest in countries when the government takes the long view, as we do.”

But critics say that the large-scale mining operations have dire social and environmental costs.

“We don’t need money from mining,” Battsengel Lkhamdoorov, a 40-year-old former herder, told the New York Times. “What we need is water and land.”

Sukhgerel Dugersuren, head of Oyu Tolgoi Watch, a Mongolian non-governmental organization that keeps tabs on the mine, says the agreement with Rio Tinto is a bad deal for Mongolia. Dugersuren said that the investment agreement the government signed with Rio Tinto is unfair and that World Bank leadership pushed too hard for the Mongolian government to sign on. She told the Bank Information Center in Washington DC that the World Bank extended  "too much credit to Mongolia” in support of mining “without implementing compliance monitoring mechanisms or impact assessments.”

Today, the Mongolian government owns just 34 percent of the mine under the deal that was signed with Rio Tinto in 2009. Mongolian members of parliament are now pressuring the government to push the mining companies to renegotiate for a majority 51 percent share but the company has refused - noting that the agreement only allows for the state to negotiate for a larger share after the project has been in operation for 30 years - and even then no more than 50 percent.

Even worse, the London Mining Network alleges that the Mongolian government signed the agreement “before a technical and economic feasibility study was accepted by the Mongolian government, as prescribed by law." Additionally, the London Mining Network notes that the mining company has failed to show that there is enough water for the 30 to 60-year project.

This is despite the fact that mining industries consume the largest part of the country's annual water consumption, says The RiverMovements, a Mongolian environmental group which points out that Oyu Tolgoi will use approximately 243 gallons of water a second.

Meanwhile nomadic herders, who comprise 40 percent of the country’s population, will be forced to wander further to find water for their flocks, a 2011 United States Agency of International Development report said.

“(Oyu Tolgoi) does not understand the dynamics of herding and the need to follow the livestock to adequate pasture and water sources,” the report stated. “It is economically and psychologically difficult for herder families to move from their traditional land.”

Rio Tinto says it is committed to having a “zero impact on community water sources.”

“The water source for Oyu Tolgoi is the Gunii Hooloi aquifer - a deep, non-drinkable water source that is separate from the shallow water sources used by households and animals,” the company states on its website. “Oyu Tolgoi is only allowed to use approximately 20 per cent of the water from Gunii Hooloi, so the aquifer can never be exhausted. We do not need to take water from any other source.”

But many local herders are skeptical.

"When we come to the well, we can see the level of the well water is 8 inches lower than it used to be," Mijiddorj Ayur, a 76-year-old who herds his camels near Oyu Tolgoi, told National Public Radio.

Oyu Tolgoi Watch believes that the country should invest instead in sustainable economic development that bolsters traditional livelihoods like cashmere production and organic beef ranching.

“If the same amount of credit was made available to developing world standards products and services from these sectors Mongolia could sit on its wealth until there is dire need to disturb the earth,” Dugersuren said. “Unfortunately, this does not coincide with the interest of the World Bank to support Western industries to extract and sell minerals to China.”

The government has made a major effort to ban mining in environmentally sensitive areas but ironically this has the heaviest economic impact on the 100,000 Mongolian self-employed miners rather than on Rio Tinto. By contrast, Oyu Tolgoi will employ about 3,500 workers when it is fully operational, according to the World Bank.

Stanford Organics Study A “Fraud” – Linked to Cargill & Tobacco Money

Posted by Pratap Chatterjee on September 13th, 2012
CorpWatch Blog
Food labeling campaign image courtesy Yes on 37

A new study, issued by scientists at the Freeman Spogli institute at Stanford university in California, that suggests that organic food has no medical or health values is deeply flawed, say outraged activists.

Media coverage of the scientific paper that was published in the Annals of Internal Medicine last week was mostly supportive, as is customary for studies from famous universities. "Organic Food 'Not Any Healthier," wrote a BBC journalist, while the New York Times published an article titled "Stanford Scientists Cast Doubt on Advantages of Organic Meat and Produce."

NGOs immediately questioned the conclusions of the study. "There was just no way that truly independent scientists with the expertise required to adequately answer such an important question would ignore the vast and growing body of scientific literature pointing to serious health risks from eating foods produced with synthetic chemicals," says Charlotte Vallaeys, food and farm policy director at the Cornucopia Institute Institute, an organic farm policy organization in Wisconsin.

"Make no mistake, the Stanford organics study is a fraud," says Mike Adams of and Anthony Gucciardi of "The mainstream media has fallen for an elaborate scientific hoax that sought to destroy the credibility of organic foods by claiming they are "no healthier" than conventional foods (grown with pesticides and genetically modified organisms).”

Adams and Gucciardi note that Dr. Ingram Olkin, a co-author of the organics study and a professor emeritus in statistics at Stanford, has deep financial ties to Cargill, the agribusiness multinational which sells genetically engineered foods. Olkin also accepted money from the tobacco industry’s Council for Tobacco Research, according to letters dating back to 1976.

“I learned, in visiting with Dr. Olkin, that he would like to examine the theoretical structure of the "multivariate logistic risk function." This particular statistical technique has been employed in the analysis of the Framingham study of heart disease,” wrote William W. Shinn, a lawyer with Shook Hardy & Bacon who represented the tobacco industry's Committee of Counsel at the time. “He is asking for two years of support at the rate of $6,000 per year … We believe that a modest effort now may stimulate, a broader interest in such questions especially among theoretical statisticians at Stanford and elsewhere. Dr. Gardner has reviewed and approved the proposal.”

“To say that conventional foods are safe is like saying that cigarettes are safe,” adds Adams. “Both can be propagandized with fraudulent science funded by corporate donations to universities, and we’re seeing the same scientist who helped Big Tobacco now helping Big Biotech in their attempt to defraud the public."

Stanford University has reacted to the controversy in a defensive manner: “This paper was published in a reputable, peer-reviewed journal, and the researchers received no funding for the study from any outside company. We stand by the work and the study authors,” the university is quoted as saying in the Los Angeles Times. “Stanford Center for Health Policy (where the study was conducted) has never received research money from Cargill.”

One of the reasons that the Stanford study has become a lightning rod is a ballot initiative that California voters will be asked to vote on in November. Proposition 37 will require labeling on raw or processed food “if the food is made from plants or animals with genetic material changed in specified ways” and also “prohibit labeling or advertising such food as ‘natural.’”

See “The Devil is in the Details” for a good technical review of the Stanford study, authored by Dr Charles Benbrook, former executive director of the subcommittee of the House Committee on Agriculture in the U.S. Congress, that explains the scientific errors.

Cameroon Palm Oil Plantation Withdraws Sustainability Application

Posted by Pratap Chatterjee on September 6th, 2012
CorpWatch Blog
A bulldozer clears natural forest for the Fabe SGSOC oil palm nursery. Photo: Jan-Joseph Stok / Greenpeace.

A subsidiary of Herakles Capital, a New York based investment firm, has decided to cancel its application to join the Roundtable on Sustainable Palm Oil (RSPO) after environmental groups alleged that its 73,086 hectare project in southwestern Cameroon would threaten the sustainability of the local community.

In 2009, the SG Sustainable Oils Cameroon, Ltd. (SGSOC), which is wholly owned by Herakles Capital, acquired a 99 year lease to land in Ndian and Kupe-Manenguba divisions where it drew up plans for a $350 million palm oil plantation. (Herakles Capital has several other investments in Africa such as the Bujagali dam in Uganda, the Boke Alumina Project in the Republic of Guinea and an East African undersea fiber-optic project.)

“From its very name, American-owned SG Sustainable Oils Cameroon, Ltd. (SGSOC) presents a pro-environment, pro-resources image,” writes Frederic Mousseau, policy director of the Oakland Institute in California in a new report released this week. “(But it) is also part of a strategy to deceive the public into believing that there is logic to cutting down rainforests to make room for palm oil plantations.”

SGSOC has gone to great lengths to convince the public that it is socially responsible. “Our project, should it proceed, will be a big project with big impacts – environmentally and socially,” Herakles CEO Bruce Wrobel wrote to the Oakland Institute in July 2011. “The big question – and the real story – is whether it ends up strongly positive or strongly negative. I couldn’t be more convinced that this will be an amazingly positive story for the people within our impact area.”

In addition to Herakles, Wrobel operates a non-profit dedicated to poverty reduction named “All for Africa” that boasts board members like Nigerian-American actor Gbenga Akinnagbe who shot to fame in The Wire, a U.S. TV series, and the film: The Taking of Pelham 123.

And SGSOC also applied to join the international Round Table on Sustainable Palm Oil (RSPO), which has signed up 779 members and associates including almost every major industry player in the world, in an effort to burnish its social responsibility credentials.

Indeed RSPO was created in 2004 to address the numerous clashes over palm plantations around the world with the help of non-government organizations such as the World Wildlife Fund which helped set up the organization.
But the palm oil industry – which produces 50 million tons of edible oils and biofuels a year - remains deeply controversial.

As CorpWatch writer Melody Kemp noted in her recent article for us “Green Deserts: The Palm Oil Conflict” the plantation companies make money in two ways: First they clear cut and sell the existing high-value trees, burning the residue. The haze from those forest fires has interrupted regional air traffic and caused severe respiratory illnesses in countries like Indonesia, Malaysia as well as Singapore. Then the companies plant the spiky oil palms trees, creating vast, eerily silent monoculture plantations.

Activists have sparked a raging debate over the industry, faulting palm oil for contributing significantly to carbon dioxide and methane emissions, the loss of biodiversity and precious carbon sequestering forests, land subsidence, poverty, and for exacerbating starvation resulting from land appropriation.

The very same problems have been predicted in an Environmental and Social Impact Assessment (ESIA) conducted by SGSOC itself. The company assessment suggested that the negative impact of the plantation on livelihoods will be “major” and “long-term.”

Nor is the Herakles investment the most efficient way to support the local economy, according to a report by on the SGSOC deal by two Cameroonian NGOs, the Centre for Environment and Development (CED) and Réseau de Lutte contre la Faim (RELUFA). The groups calculated that the government of Cameroon could generate 13 times more employment and significantly larger tax revenue if it were to require local bread-makers to use 20 percent locally produced flour (derived from sweet potatoes, corn or cassava), using just 15,000 hectares of land.

Local farmers and politicians are especially skeptical of SGSOC because palm oil plantations are not new to the region. Beginning in 1927, companies like Pamol have operated similar projects for decades. “Plantation jobs have always been modern day slavery,” says Joshua Osih of the Social Democratic Front, Cameroon’s main opposition party, in an interview for the film “The Herakles Debacle” just released by the Oakland Institute. “We’ve seen a lot of industrial plantations develop around this area and nothing, absolutely nothing, has happened positively to the population.”

“Everybody here is self employed,” Okie Bonaventure Ekoko, a cocoa farmer from Mboko village told the film maker Franck Bieleu. “There is no advantages that the people here will have (from Herakles investments). We don’t need them, we are fine.”

“And if they come and say they want to take this land from us, we are not ready for it,” says Esoh Sylvanus Asui, a farmer from Bombe Konye village. “We will fight and we will die for our land.”

In May 2011, some 50 local and international environmental and community groups wrote a letter to Wrobel expressing concern. In March 2012 a number of the same groups lodged a formal complaint against Herakles with the RSPO alleging that Herakles' project violated Cameroonian laws and noted that it "would disrupt the ecological landscape and migration routes of protected species." Meanwhile local farmers have begun to organize against the project. On June 6, 2012, villagers from Fabe and Toko held a protest against the plantation during the visit of the local governor.

On August 24 2012, Herakles withdrew its application to the RSPO.

“The RSPO regrets this withdrawal of membership by Herakles Farms,” the organization said in a brief statement posted to its website. “This action pre-empts recommendations from the RSPO Complaints Panel to further verify the allegations made by the complainants.”

The company did not respond to requests for comment from the media.

Payments to Saudi Generals Investigated in UK Military Contract Bribery Case

Posted by Pratap Chatterjee on August 29th, 2012
CorpWatch Blog
Saudi security forces. Photo: Omar Chatriwala, Al Jazeera English. Used under Creative Commons license

Four cars worth £201,000 were allegedly gifted to Saudi generals and £278,000 paid out to rent a villa to win a military IT contract for a major European military contractor. Altogether at least £11.5 million ($18 million) in bribes were allegedly paid out via two Cayman Island companies.

The £2 billion ($3.2 billion) contract to build a military intranet as well as internet monitoring and jamming systems for Sangcom, the communications arm of the Saudi National Guard, was awarded in 2010 to GPT Special Project Management, a British subsidiary of European Aeronautic Defence and Space Company N.V. (EADS).

A UK Serious Fraud Office investigation is underway after Ian Foxley, a former project manager in Riyadh, Saudi Arabia, blew the whistle in 2011. “I have had first hand experience of the pernicious effects of corruption. My father was a high ranking civil servant who was convicted of corruption in defence procurement in the 1980s and pursued by the MoD Solicitor for a further 22 years,” wrote Foxley in a letter dated January 9, 2012, to Vince Cable, the UK Business Secretary.

“You may also imagine my utter horror and repugnance at the rank hypocrisy of the MoD’s obscene participation in similar corrupt practices throughout the whole period whilst relentlessly pursuing my father until 2002,” added Foxley. “Here is an organization whose officers are taught from the outset at RMA (Royal Military Academy) Sandhurst that the foundations of their profession rest on honesty, integrity and moral courage, yet which so duplicitously condones and complies with corruption for commercial gain.”

The story begins in 1977 when Sir Frank Cooper, a senior bureaucrat at the U.K. ministry of defence, issued a secret order allowing bribes to be paid out on government to government deals. Anything above ten percent or exceeding a certain amount had to be personally authorized by him.

A memo discovered in the UK national archives from Lester Suffield, then head of defence sales at the ministry, stated: “(T)he percentages commonly charged in Saudi Arabia for the sort of service being offered, which, although described as 'technical consultancy', amounts in practice to the exertion of influence to sway decisions in favour of the client." Cooper replied: “I see no difficulty about what you propose.”

The contract is now managed by EADS, a Netherlands-based company which was created in 2000 by the merger of French, German and Spanish arms manufacturers. EADS generated revenues of over €49 billion ($61.5 billion) in 2011 and is best known as the manufacturer of the Airbus passenger jets.

Mike Paterson, then financial controller of GPT Special Project Management, first noticed unusual payments to Simec International and Duranton International in the Cayman islands. He reported the matter to his managers in 2007 but no action was taken.

Emails seen by the Financial Times suggest that the bribes continued till at least December 2010. At least £11.5 million ($18 million) or about 12 per cent of a specific contract were paid out for questionable “bought-in services.”

EADS has kept relatively silent about the scandal. “Certain allegations have been made in connection with the company’s contracts with a subcontractor group. These allegations have been notified to the UK authorities with whom EADS is maintaining a dialogue,” the company wrote in a statement to the Financial Times. “The relevant subcontracts were terminated. This termination has led recently to an unquantified claim from the subcontractor group for monetary damages.”

Similar investigations into Saudi contracts in the past have been quashed. The most controversial was a £43 billion ($68 billion) deal signed in 1985 by BAE, a British arms manufacturer, to supply Hawk warplanes, Tornado aircraft and other military equipment. The deal, which was named Al-Yamamah (Arabic for "dove"), allegedly included quarterly payments of £30 million that were paid out to Prince Bandar of Saudi Arabia for at least 10 years.

A UK fraud investigation was halted in 2006 and Tony Blair, the prime minister, took “full responsibility.” Later BAE agreed to pay out over $400 million in fines after the U.S. launched an investigation into multiple instance of corruption in several countries including Saudi Arabia.

Today critics question whether the EADS case will be properly investigated by UK authorities. “(T)here appears to be prima facie evidence of bribery. Will the SFO break the trend of decades by fully investigating the allegations and, if appropriate, charge the corporate entity and the individuals responsible?” asks Andrew Feinstein, a former South African member of parliament and author of the book “The Shadow World: Inside the Global Arms Trade.”

“Or will this be another whitewash to protect the British defence industry, the government and its munificent Saudi client?” Feinstein wrote in the Guardian.

Gazprom Arctic Oil Rig Blockaded By Greenpeace

Posted by Pratap Chatterjee on August 28th, 2012
CorpWatch Blog
Greenpeace protest at Prirazlomnaya rig. Image courtesy Greenpeace.

Sailors working for Gazprom, the Russian oil giant, used water cannons to remove Greenpeace activists who were protesting their plans to drill in the Arctic. The environmental group took action to signal the potential for a catastrophic environmental disaster as well as the impact on climate change.

Gazprom is drilling in the Prirazlomnoye oil field located in the Pechora Sea off the northwest coast of Russia. It is the first company to attempt commercial extraction of the 526 million barrels of oil that are estimated to be located in the offshore fields. To date it has been impossible to work in the region because it is blocked by thick ice for eight months of the year. The Prirazlomnaya rig, a Russian all weather oil platform, was specially designed at the Severodvinsk shipyard, to overcome the harsh conditions.

Last Friday climbers from the environmental group scaled the Prirazlomnaya rig and spent 15 hours holding up a banner that read “Save the Arctic.” On Monday the Greenpeace activists used four speed boats to block the Anna Akhmatova ship from bringing workers to the rig. Sailors turned water cannons on the boats to force them out of the way.

“The force of the water was so intense it knocked my boots off!” tweeted one Greenpeace activist who attempted to block the Anna Akhmatova. “So much water, sometimes all you saw is white. Felt like we were in a hurricane,” tweeted another. (Watch a video of the Greenpeace boat being flipped over)

We climbed Gazprom's rusting oil platform backed by over a million people who have joined a new movement to protect the Arctic,” Kumi Naidoo, the executive director of Greenpeace international, said in a press release. (Naidoo was one of the climbers.) “(I)t’s not a question of if an Arctic oil spill will happen, but when. The only way to stop a catastrophic oil spill occurring in this unique region is to permanently ban all drilling now."

Gazprom received a permit to drill for oil in July 2007. The company submitted an official oil spill response plan that expired last month. The original document “shows that the company would be completely unprepared to deal with an accident in the Far North, and would rely on substandard clean-up methods — such as shovels and buckets — that simply do not work in icy conditions,” says Greenpeace.

“We can often observe conditions when the operating company will not be able to contain and recover (potential oil) spill(s),” says Valentin Ivanovich Zhuravel, the project manager at the Informatika Riska, a Russian consultancy, that was asked by Greenpeace and WWF Russia to comment on the response plan."This can lead to significant pollution in the Pechora Sea coast and protected areas.”

The company disagrees. "Last winter demonstrated the platform['s] safety and reliability in the Arctic environment," a Gazprom spokesperson told the Moscow Times in an e-mail. "A professional emergency response crew works night and day. Crews of the offshore ice-resistant stationary platform and support vessels were trained under a dedicated program for emergency response and first aid in case of sea accidents.”

Greenpeace has received support for its protest from the local indigenous community in the Komi Republic. “The peoples of the north will no longer be bought with dimes and cents to stand silently by while the oil companies destroy our native land,” says a support statement issued by the Save the Pechora River committee. “Our culture and history cannot be bought off and replaced with pipelines and drill rigs.”

Meanwhile, ice cover in the Arctic Ocean has thawed to a record low of less than 4.0 million square kilometers. The numbers could drop further given that ice cover typically continues to melt till the end of September.

"This is due to climate change," Nicolai Kliem, head of the ice service at Danish Meteorological Institute (DMI) told Reuters.

Gazprom is not the only company to be targeting the Arctic. In the Nenets autonomous district, also in northwestern Russia, Lukoil and Bashneft are currently drilling for oil in the Trebs oil field.

Cairn Energy, a Scottish company, is exploring off the coast of Greenland.  And in Alaska, Shell obtained authorization to drill for oil in the Chukchi sea, with the personal help of Barack Obama, the U.S. president.

Grupo San Jose Linked to Bulldozing of Land of Paraguayan Uncontacted Tribe

Posted by Pratap Chatterjee on August 27th, 2012
CorpWatch Blog
Ayoreo woman. Photo: Survival International

Grupo San Jose, a Spanish construction company, has been accused of bulldozing the forest home of the Ayoreo, one of the last uncontacted tribes outside the Amazon. The indigenous community lives in the Chaco forests, a semi-arid zone in northern Paraguay not too far from the borders with Brazil and Bolivia.

In late July, Paraguayan forestry officials caught workers for Carlos Casado SA “bulldozing forest, constructing buildings and reservoirs, and putting up wire fencing” on land that the Totobiegosode – a sub-group of the Ayoreo - are known to inhabit. The discovery was confirmed by a letter from the Paraguayan ministry of environment sent to Organizacion Payipie Ichadie Totobiegosode (OPIT)

Carlos Casado SA is a ranching subsidiary of Grupo San Jose. The president of both Carlos Casodo and Grupo San Jose is Jacinto Rey González, who is also the controlling shareholder of Grupo San Jose.

“It’s shocking to discover that one of Spain’s biggest companies is involved in such scandalous behavior. Perhaps they thought that as this is happening in a far-off corner of South America, no-one would notice,” Stephen Corry, director of Survival International, a UK-based NGO, said in a press release. “But if they continue, they will be directly responsible for the destruction of the Ayoreo’s heartland – in flagrant violation of Paraguayan and international laws.”

The Ayoreo are nomads who hunt wild pigs and large tortoises. They live in small communities of three to four families and shun the outside world. First contact was established by Mennonite farmers in the 1940s and 1950s, followed by the New Tribes Mission - a Florida-based evangelical group that attempts to spread the Bible by translating it to into other languages – who sponsored manhunts to track down the Ayoreo in 1979 and 1986.

Almost 70 years later, some of the members of the tribe have managed to elude all contact with others and environmentalists argue that this isolation needs to be maintained. One of the major reasons is that these tribes lack immunity to illnesses and diseases that are common elsewhere, and could die from exposure. 

This isolation has been threatened in recent years as three Brazilian companies have started clearing land in the area to set up ranches: BBC SA, River Plate SA and Yaguarete Porá SA. Survival was able to catch two of the companies doing illegal logging, using satellite imagery.

Guyra, an environmental group in Asunción, estimates that some 1.3 million acres of Chaco forest have been cleared in the last two years, for cattle ranches. Lucas Bessaire, a U.S. anthropologist told the New York Times that the rate of deforestation was so rapid that even during the day, the sky turns “twilight grey” from the forest fires. “One wakes with the taste of ashes and a thin film of white on the tongue,” he said.

Today the Mennonites farmers and Brazilian ranchers have coverted vast swathes of the Chaco region. Displaced Ayoreo live in poverty outside the new ranching boomtowns, sleeping under plastic bag tents under the trees.

“We are witnessing ethnocide in action,” Gladys Casaccia and Jorge Vera of Gente, Ambiente y Territorio (GAT), a Paraguayan NGO that supports environmental initiatives for the indigenous people of the Chaco. “This crime is a human tragedy, an embarrassment for Paraguay in the eyes of the world – and it will only stop if those responsible are caught and punished.”

Paraguay already has the sad distinction of being a deforestation champion,” José Luis Casaccia, a former environment minister, told the New York Times. “If we continue with this insanity, nearly all of the Chaco’s forests could be destroyed within 30 years.”

Turmoil at South Africa’s Platinum Mines

Posted by Pratap Chatterjee on August 23rd, 2012
CorpWatch Blog
Cyril Ramaphosa photo courtesy Mining Weekly video. Rustenberg platinum processing plant courtesy bbcworldservice. Used under Creative Commons license

A third wildcat strike this year has closed yet another South African platinum mine less than a week after the police opened fire and killed 34 miners at the Lonmin mine north of Johannesburg. The latest to lay down tools are a thousand workers at the Royal Bafokeng Platinum Mine at Rasimone this Wednesday.

The strikes have hit the global supply of platinum, which is mostly used by the car manufacturing industry to make catalytic converters. Some 80 percent of the world’s supply of the precious metal is mined in South Africa.

Clashes between South Africa’s powerful mining companies and the government are only part of the story. A battle to win membership between two rival unions – the older establishment affiliated National Union of Mineworkers (NUM) and the newer more radical Association of Mineworkers and Construction Union (AMCU) – is also reported to be a major factor in the violence.

NUM - which was founded by Cyril Ramaphosa in 1982 – was deeply involved in rallying black mine workers against apartheid. AMCU was created in 1998 by Joseph Mathunjwa who left the NUM after he fell out with Gwede Mantashe, then general secretary of the older union.

Today Mantashe has become the right hand man of Jacob Zuma, the president of South Africa and Ramaphosa has become a powerful and wealthy businessman. Last year Ramaphosa took over the franchise for McDonald’s in South Africa. He also serves on the board of Lonmin, the UK-based platinum mining company where workers were killed last week.

But while the NUM’s former leaders have become powerful actors in post-apartheid South Africa, the union has started to lose members. “The National Union of Mineworkers doesn’t care about the workers,” Thabo Moerane, a Lonmin supervisor told Bloomberg. “It is eating with management. We’ve been trying to get a decent salary increase since 2007. That is why we wanted to join AMCU.”

AMCU, which has grown to about a tenth of the size of NUM with 30,000 members nationally, has also attracted its own share of controversy. “Its leaders call themselves devout Christians and say life is sacred,” wrote Reuters recently. “But its supporters march with spears, machetes and clubs and anoint themselves with magic potions to ward off police bullets.”

Meanwhile, local anger at the mining companies has been brewing for a while. “Lonmin has done nothing for the local community. They take our platinum and enrich themselves but where is our royalty money going? We don't have tar roads and our youth are unemployed,” a woman worker told the BBC. “They cut off our water supply every day during the day. The water comes back only late at night. The water stinks and we have to buy purified water.”

The first strike, early this year, was in Rustenberg at the world’s largest platinum mine run by Impala Platinum Holdings. Three workers were killed in clashes between the unions. Then on August 10, some 3,000 Lonmin rock drill operators went on strike at the Marikana mining complex to ask for a pay raise to 12,500 rand ($1,500) a month. AMCU, which represents 5,000 workers out of a total workforce of 28,000 was in favor of the strike. NUM which represents some 12,000 workers at Lonmin did not back the strike. (Frans Baleni, NUM’s new general secretary, is paid 105,000 rand or $12,600 a month)

Over the next week, violent attacks and clashes resulted in ten deaths, including two police officers and at least one worker who was hacked to death on his way to work.

Then on August 16, the police claim they came under attack from workers armed with guns, spears and machetes. “Police had no option but to open fire,” police commissioner Riah Phiyega said. “This is a dark moment for the country.”

The police killed 34 people and injured another 78. The deaths caused shockwaves to roll through South Africa, where it brought back memories of the apartheid era shootings of protestors. Lonmin said it would not insist that workers return to work this week and Zuma came to meet with the workers Wednesday.

Workers feel that (violence) adds both positive and negative value,” Crispen Chinguno, a sociologist at the University of Witwaterstrand who conducted research among the platinum workers, told the Mail & Guardian newspaper. "At Implats, where workers were also demanding a salary adjustment (of 9,000 rand) outside of a bargaining agreement, they ended up getting more than 8,000 rand. The strike was illegal, some were dismissed, but most of them got their jobs back. From that perspective, the workers feel the use of violence is working for them. The negative aspects are some job losses, injuries and death."

Others say the killings reflect the reality of the new South Africa. “The story of the Marikana mine shootings is that of a trade union that cosied up to big business; of an upstart and populist new union that exploited real frustration to establish itself; and of police failure,” writes Justice Malala, founding editor of South Africa's ThisDay newspaper, in the Guardian. “It is a story which exposes South Africa's structural weaknesses too: we are one of the world's top two most unequal societies (with Brazil). Poverty, inequality and unemployment lie at the heart of the shootings this week.”

Indian Supreme Court to Hear Novartis “Patents Versus Patients” Case

Posted by Pratap Chatterjee on August 21st, 2012
CorpWatch Blog
Poster designed for Oxfam by net_efekt. Used under Creative Commons license.

Novartis, the Swiss pharmaceutical company, will appear before the Indian Supreme Court Wednesday to appeal against a patent rejection for a popular cancer drug. A decision in favor of the company could have a devastating impact on cheap supplies of many kinds of generic drugs for poor patients.

Cancer Patients Aid Association (CPAA) – an Indian non profit that has treated 300,000 patients since 1969 – is a key plaintiff in the case against Novartis. "(Their) aggressive patent policy makes Novartis responsible for the misery of thousands of cancer patients in India today and if not restrained will have similar effect at the global level," says Y.K. Sapru, the CEO of CPAA.

"It would quite simply be a death sentence for us," Vikas Ahuja, president of the Delhi Network of Positive People, told the Guardian. Ahuja was diagnosed with HIV almost 20 years ago. "I am quite sure that if Novartis wins, other multinationals will follow suit and other drugs will become prohibitively expensive."

The patent that the judges will examine is for imatinib mesylate, which is used to treat various forms of cancer. Developed by Nicholas Lydon in the 1990s, imatinib mesylate is now marketed under the brand name Gleevec by Novartis.

In the U.S. companies are issued 20 year patents, after which the drug becomes available for anyone to make. Novartis filed for a patent on imatinib mesylate in India in 1997 but Indian regulators ignored the application. At the time India refused to recognize international patents on essential drugs in order to keep prices affordable.

In 2005, India changed its laws to accept patents, as part of an agreement to join the World Trade Organization. At the time Gleevec was being sold by Novartis at prices of $32,000 per patient per year while Indian companies were selling the same drug for roughly $2,100 per patient per year. (Gleevec now retails for almost $70,000 a year)

In January 2006 the Patent Controller in Chennai ruled that Gleevec was not novel under section 3(d) of the patents law which explicitly requires that patents should only be granted on medicines that are truly new and innovative.

Novartis –said the court – was attempting to prolong an expired patent through an industry practice called “evergreening” – a tactic by pharmaceutical companies change the composition of the medicine or the way that it is delivered in order to claim a new innovation.

“Novartis argued that increased bioavailability of the salt form of imatinib meant increased efficacy, entitling it to a patent on imatinib mesylate,” a fact sheet from Médecins Sans Frontières (Doctors Without Borders) explains. “But at the time, Madras High Court clarified efficacy to mean ‘therapeutic effect in healing a disease.’The rejection of Novartis’s patent application was therefore confirmed.”

Novartis appealed the Indian decision in June 2006 and was rejected. The case has now wound its way to the Supreme Court where industry observers say a decision (which may not come down till November after several weeks of hearings) will have a dramatic impact of the future of foreign drug sales in the country.

For example, Leena Menghaney of Doctors Without Borders says that Indian generic drug manufacturers have been able to cut drug bills for HIV patients from $10,000 a year to just $150.

"If we lose, we don't know if we can continue sustaining a large number of patients in developing countries," Menghaney told the Wall Street Journal. "You could have existing drugs [in India] being patented and newer drugs about to go off patent being extended. It could be a big problem for us in the coming decade."

Pharmaceutical companies see the matter differently. If Novartis wins, the believe that India’s $11 billion drug market could be worth $74 billion by 2020.

Meanwhile Indian regulators are looking at setting price caps on as many as 348 drugs, up from 74 today, in order to protect poor patients.

In recent months Indian regulators have come down on the side of patients. In March, PH Kurian, the controller general of patents, designs and trademarks in India, allowed a local company to manufacture and sell a generic version of Sorafenib, a drug used to treat advanced kidney cancer and liver cancer.

Bayer, a German multinational, had been selling Sorafenib, under the brand name of Nexavar, for $5,600 a month. (The average per capita income in India is a little under $100 ie two percent of the price of the drug) Kurian allowed Natco Pharma, an Indian company, permission to sell the drug at $176 a month.

India is not the first country to act on this matter. Between November 2006 and January 2007, Thailand issued compulsory licenses for two AIDS drugs (efavirnz and the combination of lopinavir+ritonavir) and one antihypertension drug (clopidegrel). Several other countries - Ethiopia, the Congo, Tanzania and Uganda – are also considering similar action.

Serengeti Under Threat from UAE Big Game Hunting Company

Posted by Pratap Chatterjee on August 20th, 2012
CorpWatch Blog
Maasai warriors. Photo: David Berkowitz. Used under Creative Commons license

Serengeti national park is under threat from Ortello Business Corporation (OBC) in a deal that could displace 48,000 indigenous Maasai and open it up for hunting of lions and leopards. An urgent action by Avaaz, an international campaigning group, has gathered close to a million signatures to protest the scheme.

The Serengeti region covers 12,000 square miles (30,000 square kilometers) from north Tanzania to south western Kenya. Over 2,000 lions roam the area among dozens of other species from the crowned eagles to elephants and rare black rhinos. It is most famous for an annual migration during which over a million wildebeest and about 200,000 zebras travel south from the northern hills to the southern plains in October and November and then move west and north between April and June.

The region is also called Maasailand, after the semi-nomadic indigenous community that lived there for centuries until the British colonialists started to grab their lands to build ranches. Today the colorfully dressed spear carrying tribe have become a global tourist attraction.

“(O)ur vision of virgin nature has encouraged the takeover of the land by a new breed of super-rich conservationists and tourism operators,” writes New Scientist journalist Fred Pearce in his new book, The Land Grabbers. “The Serengeti has become the world’s biggest zoo, in which the Maasai warriors are reduced to decorative walk-on parts.”

One of these operators is OBC, which is based in the United Arab Emirates, and markets big game safaris. The company prefers not to speak to the media but a Conde Nast Traveler reporter sketched a profile of the company and its recent conflicts with the local Maasai.

In the early 1990s the Tanzanian government “granted OBC the right to hunt in more than 50,000 acres of savanna and hills in Masailand, reportedly in exchange for millions of dollars in financial aid to the Tanzanian armed forces,” writes Joshua Hammer.

In July 2009, the Tanzanian army allegedly kicked dozens of Maasai out of the area for "trespassing" on OBC land. " They ordered us out of our bomas (thorn bush compounds), then they poured gasoline on them and set them on fire," a cattle herder told Hammer. "After the burning, we rebuilt, and they came and did it again."

A similar report was published by a Tanzanian fact-finding mission conducted in August 2009 by Feminist Activist Coalition (FEMACT) which reported that “there were ruthless eviction operations conducted in the Loliondo villages. Contrary to the District Commissioner’s claims, the investigation team came across testimonies and evidence of despicable despicable acts. The team came across women who had undergone miscarriages, rape, loss of children and other properties including food and shelter. Men who were chained beaten and humiliated in front of their families, those who had lost thousands of livestock among other properties and those who were imprisoned for no apparent reasons.”

In September 2009, James Anaya, the United Nations special rapporteur on the human rights and fundamental freedoms of indigenous peoples wrote to the Tanzanian government to ask for an explanation of the incidents.

The UN letter notes that the original contract between OBC and the government, required to company to make payments of three million Tanzanian shillings to each villager and provide employment, roads, schools and water to the community. But OBC “has not complied with the contractual terms related to compensation, provision of services, and employment,” writes Anaya.

A week ago Avaaz, a letter writing campaign group, heard from the Maasai that OBC had new plans to expand and asked for their help.

“The last time this same corporation pushed the Maasai off their land to make way for rich hunters, people were beaten by the police, their homes were burnt to a cinder and their livestock died of starvation,” wrote Avaaz’s Sam Baraat in an email sent out last week. “But when a press controversy followed, Tanzanian President Kikwete reversed course and returned the Maasai to their land. This time, there hasn’t been a big press controversy yet, but we can change that and force Kikwete to stop the deal if we join our voices now.”

"For us, our land is everything, but these Arab princes have no respect for the animals or our rights,” Mzee Orosikos, a Maasai elder, told the Observer newspaper. “Many of us would rather die than be forced to move again."

The government denies the allegations. "(N)o eviction exercise has been planned for the Serengeti district, which is one of the districts in Mara region” George Matiko, spokesman for the resources and tourism ministry, told the newspaper. “In the Serengeti there is no hunting bloc allocated to Middle Eastern kings and princes to hunt lions and leopards."

The campaigners says that the government reply has been carefully worded to avoid the bigger question. "(T)he Tanzanian government is playing cynical word games – the Maasai lands in question are commonly understood to be within the Serengeti ecosystem’” says Emma Ruby-Sachs, campaign director at Avaaz. “If the government does not believe there is any threat to the Maasai lands, it should be easy for it to commit to a policy of not forcibly evicting any of its people to make way for foreign interests."

Hanwha CEO Jailed for Four Years

Posted by Pratap Chatterjee on August 17th, 2012
CorpWatch Blog
Hanwha building photo: riNux Kim Seung-youn photo: Πρωθυπουργός της Ελλάδας. Used under Creative Commons license.

Kim Seung-youn, the CEO of the Hanwha group in South Korea, has been sentenced to four years in prison and fined 5.1 billion won ($4.5 million). The jail time marks an unusual departure for the Korean judiciary who typically issue suspended sentences when prominent business bosses are found guilty.

Hanwha is the tenth largest “chaebol” or business conglomerate in South Korea. Started by Kim Chong-Hee as Korea Explosives Inc. in 1952, it now has an annual revenue of $30 billion and interests as diverse as dairy farming, finance and petrochemicals.

Kim Seung-youn, the son of the founder, has been in trouble with the law several times. In 1993 he was found guilty of smuggling cash to buy a large mansion in Los Angeles and then in 2004 he was found guilty of bribing a politician. In 2007, he was given a suspended sentence for assaulting workers with a steel pipe after his son got in a fight.

This time Kim has been accused of buying and selling shares in employees names to avoid taxes, bailing out his brother’s failing business and forcing his affiliates to sell shares in an oil company to his sister at below market prices.

"As a controlling shareholder of Hanwha Group, the defendant is passing on his responsibility to working-level officials and he has not shown remorse," said Seo Kyung-hwan, one of the three judges on the panel that decided the case. “Considering this, he needs to be strictly punished.”

Most chaebol got their start after the end of the Second World War when the government of Syngman Rhee encouraged entrepreneurs to rebuild the country. During the administration of General Park Chung Hee in the 1960s, the favored chaebol were given easy access to loans, foreign technology and large government contracts in order to rapidly industrialize the country. Today these elite companies – some of which have become global players like Hyundai, LG and Samsung – control much of the South Korean economy.

The chaebol bosses have operated beyond the reach of the law for many years. Take Lee Keun-hee of Samsung who was found guilty in July 2008 of operating a slush fund to bribe politicians, prosecutors and government officials. Lee was fined $109 million and given a five year suspended sentence.

Or Chung Mong-koo of Hyundai who was found guilty of embezzling funds that were funneled to politicians in February 2007 and sentenced to three years in jail. Chung had his sentence suspended on appeal. "The court has been agonising over whether to put the accused in jail or keep him out of prison," said Lee Jae-Hong, the chief judge. "But in consideration of the huge economic impact that could result from imprisonment, it decided to suspend the sentence."

A few brave whistleblowers have risked their careers to speak out against the chaebol. "Our society is so corrupt, and people are blindfolded because everyone is living well and people are greedy,” says Kim Yong-chul, a Samsung whistleblower. “I am not a revolutionary, an ideologue or a revenge. But I am against business as usual.”

Kim wrote a book about his experiences: "Thinking of Samsung" ("Samsungul Sanggak Handa"). The book was never reviewed by the South Korean media and he has been ostracized by the business establishment. “Isn’t this a comedy?” Kim told the New York Times. “I am challenging them to slap my face, to file a libel suit against me, but they don’t. They treat me like a nut case, an invisible man, although I am shouting about the biggest crime in the history of the nation."

Despite the news blackout, his book has become a best seller, promoted solely by Twitter and word-of-mouth. And distrust of the chaebol has been growing among ordinary citizens – indeed a recent poll by a major think tank found that 74 percent of people believed that the conglomerates were not moral.

It is this change in the political mood in the country that anti-corruption advocates are hoping will make sure that Kim Seung-youn serves his sentence

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