Accounting for Errant Auditors
Posted by Pratap Chatterjee on September 14th, 2007
The U.S. Securities and Exchange Commission (SEC) brought charges against 69 accountants for failing to register with the Public Company Accounting Board (PCAB) earlier this week. This somewhat obscure action is the latest ripple in the wave of crackdowns that followed the Enron accounting scandals in 2001 -- to break up the all too cozy relationship between auditors and the multinationals that they are supposed to be policing.
Governments allow companies to close their financial books at the end of the fiscal year, if a qualified accountant has signed off on it. The problem is that both the companies and the auditors are private entities whose ultimate motive is to make a profit, so there is potential for one or both of the two not to report any cooking of the books, unless they know that a regulator might catch them and discipline them. And in the last two decades, as favored accountants have been rewarded with multi-million dollar non auditing consulting gigs (such as tax planning or management consulting), the worry was that they were looking the other way in order to win more business.
Following the Enron scandal, which showed that Arthur Andersen, the company's auditor, had failed in its public duty, the U.S. Congress passed the Sarbanes-Oxley law in 2002 that replaced the accounting industry's own regulators with the Public Company Accounting Board with subpoena and disciplinary powers. Auditors are supposed to register with the board, but clearly not everyone took this seriously.
The SEC's enforcement director, Linda Chatman Thomsen, said that Thursday's action showed that the agency "is committed to ensuring compliance with the regulatory framework Congress established for auditors of public companies." A total of 50 of the errant accountants settled the charges with the federal agency the very same day.
This action is an important warning shot across the bows to let the auditors know that the SEC is checking up on them. But the jury is still out as to whether the SEC will go one step further and prosecute auditors who fail to report companies that are cooking their books.
In related news, a new study from the University of Nebraska suggests the whistle-blowers who report violations of the Sarbanes-Oxley Act to agencies like the PCAB are not properly protected. The study looked at 700 cases where employees experienced retaliation from companies for whistle-blowing and found that a mere 3.6 per cent of cases were won by employees.
Richard Moberly, the study's author, argues the findings "challenge the hope of scholars and whistle-blower advocates that Sarbanes-Oxley's legal boundaries and burden of proof would often result in favourable outcomes for whistle-blowers."
The Financial Times reports that Louis Clark, president of the Government Accountability Project, a non-profit organization that lobbies for whistle-blowers, calls the law "a disaster." Jason Zuckerman, a lawyer at the Employment Law Group, a law firm that represents Sarbanes-Oxley whistle-blowers, says: "Part of the problem is that investigators misunderstand the relevant legal standards and believe that a complainant must have a smoking gun -- that is, unequivocal evidence proving retaliation."
The debate is still on
over whether Sarbanes-Oxley is effective five years after the law was
passed, although all appear to agree it was a step in the right
direction. The proof of the pudding, they say, will be in the eating,
so we eagerly await the day that SEC puts errant accountants behind
Will the Pope tell Gucci and Prada to please pay their taxes? (Mick Jagger and Microsoft too!)
Posted by Tonya Hennessey on August 14th, 2007
In the next few days Pope Benedict plans to issue his second encyclical – the most authoritative statement a pope can issue – which apparently will focus on social and economic inequity in a globalized economy. In the statement, he is expected to denounce the use of tax havens as socially-unjust and immoral in cheating the greater well-being of society.
According to the Times (UK) newspaper, the statement may have been inspired by a recent request to the Vatican by Romano Prodi, the Italian prime minister, who urged church leaders to speak out on tax evasion.
Prodi’s government plans to seek taxes on undeclared earnings of €60 million ($84 million) by Valentino Rossi, the world motorcycling champion. How about also asking Gucci and Prada, some of Italy’s best known fashion designers, to move their tax headquarters back to home turf (from the tax-saving Netherlands, see below) and contribute to Italy’s budget deficit?
As global capital has progressively unbound itself from traditional national constraints, excessive off-shore wealth seemingly knows no shame, with wealthy individuals and corporations setting up front companies abroad to avoid paying taxes, supported by a new class of financial services specialists.
While Caribbean island resorts are often assumed to be the places where the wealthy stash their money away for retirement, some European countries (and I don't mean Lichtenstein) have also newly seen the light.
A favored location is the Netherlands -- check out the November 2006 report by Dutch-based SOMO, "The Netherlands: A Tax Haven?" The report is the first comprehensive analysis of the complex system of double tax treaties, tax incentives, the relationship with the Netherlands Antilles and the now 20,000 and counting mailbox corporations operating within the borders of this small European nation. According to SOMO, "examples of companies with tax-induced headquarters in the Netherlands are Volkswagen, IKEA, Gucci, Pirelli, Prada, Fujitsu-Siemens, Mittal Steel, and Trafigura."
The issue has been in the news, mostly because big name musical artists (like Bono and Mick Jagger) and famous athletes (think David Beckham) have also been getting in on the act. When it comes to evading taxes on lucrative licensing and royalties, the Netherlands is fast emerging as the hip tax haven of choice because Holland levies no tax on earnings royalties.
In an article titled “Gimme Tax Shelter”, the New York Times reported on this in February 2007 as newly public documentation surrounding the assets and wealth-transfer plans of the Rolling Stones demonstrated that the wily rockers have paid a mere 1.5% (as opposed to the British tax rate of 40%), or $7.2. million, on $450 million in earnings routed through the land of tulips with the help of their company Promogroup.
"The Caribbeans are thinking about trading profits, not royalties, so the smaller European countries like Holland have had to be creative, tax-wise,'' David Pullman, an investment banker in New York who caters to entertainers and athletes told the New York Times. ''They are going for the high-end stuff and don't want to be seen as shady like some Caribbean haven.''
More scandalous was the 2006 revelation that super-rockers U2 had transferred their song-publishing catalog from Ireland to Holland's Promogroup, in order to avoid a change in Irish tax law introducing taxes on royalties earned in excess of 250,000 Euros per year. Much ado was made of Bono's unwillingness to pony up his share of the tax obligation in service of the global debt relief and poverty eradication for which he so famously advocates.
Another European country that has figured they can make money out of tax evasion is Ireland -- whose “Celtic Tiger” growth is largely the product of charming huge corporations like Dell, Google, Microsoft and Sun Systems to move much of their intellectual property patents over to subsidiaries in the land of Eire -- where the corporate tax rate is 12.5%, but no taxes are charged on royalties.
Microsoft has been a major beneficiary of this scheme for the last four or so years -- it slashed billions in tax receipts to the U.S. Treasury -- by setting up subsidiaries Round Island One and Flat Island Company in Dublin. Recently Microsoft took things a step further by re-registering the two patent-holding entities as unlimited liability companies which have no obligation to file their accounts publicly.
Indeed, the Sunday Independent (Ireland) reports that Ireland was the most profitable location for U.S. multinationals between 1998-2002, during which the “the profits of US companies with Irish facilities doubled.”
The Irish law exempting patent income from taxes also provides a sweet loophole for corporate executive pay. In November 2005 it was reported that Dell Ireland’s top executives were reaping the fruits of sumptuous pay, and saving the company taxes: between them the senior management shared nearly $3.8 million in tax-free dividends since 2003.
These corporate tax breaks have earned Ireland the distinction of being hailed “the world’s 7th freest economy” in 2007 by the conservative, DC-based Heritage Foundation, which says that “Ireland’s economy is 81.3 percent free.”
Most of this tax evasion, is sadly, quite legal. But ordinary citizens around the world who think that Microsoft and Mick Jagger should pay taxes, can take heart from the fact that some members of the global elite have been punished -- take the recent conviction of media mogul Conrad Black of Hollinger International. In July, Canadian and U.S. press reported on the lawsuits, corporate and civil, that are following his conviction for obstruction of justice and mail fraud, seeking remuneration from assets, including purported millions stashed in the Caribbean:
…"Not satisfied with receiving $20 to $40 million a year in excessive management fees, Black and the Ravelston insiders then directed significant portions of those fees to Moffat Management and Black-Amiel Management, which were empty shell companies registered in Barbados," a special report from Hollinger’s board stated.
"Even though these entities did nothing to earn fees, and did not have either employees or real operations, paying management fees to them on the pretense that they performed services allowed the recipients the prospect of transforming a portion of the enormous management fees that would otherwise most likely have been taxable in Canada (where the payments were received), or possibly the U.S. (where services were largely performed), into dividends received in Barbados (where nothing occurred)," the report stated.
NOTE: For more good examples of what tax journalist Lucy Komisar calls the “corporate bag of tricks called profit laundering,” check out the Tax Justice Network, and the Komisar Scoop -- who just revealed where did Rupert Murdoch get $5 billion to buy up the Wall St. Journal? (Answer: A collection of 800 offshore companies that helped him cut corporate taxes to 6%!)
CorpWatch stories on Iraq & New Mexico get mainstream coverage
Posted by Pratap Chatterjee on July 27th, 2007
We're gratified to see that the U.S. Congress and the mainstream media are picking up on some of the issues that CorpWatch has been digging into over the last couple of years. For example, there was a hearing on July 26th, 2007 in Representive Waxman's committee (the House Oversight and Government Reform Committee) on a topic that CorpWatch broke a year ago February: the use of trafficked Asian labor to build the US Embassy in Baghdad.
Our original story can be seen here:
Baghdad Embassy Bonanza
Kuwait Company's Secret Contract & Low-Wage Labor
by David Phinney, Special to CorpWatch
February 12th, 2006
The two witnesses who testified yesterday were first featured in an extensive CorpWatch article in October 2006.
See A U.S. Fortress Rises in Baghdad:
Asian Workers Trafficked to Build World's Largest Embassy
by David Phinney, Special to CorpWatch
October 17th, 2006
To read the article from today's Washington Post about yesterday's hearing, go here:
Foreign Workers Abused at Embassy, Panel Told
By William Branigin, Washington Post
Friday, July 27th, 2007
In related matters, we're also pleased to see that the Special Inspector General for Iraq Reconstruction (SIGIR) has been looking into why Bechtel did such a bad job in Iraq. (Answer: the fault lies quite heavily with the way that the U.S. government managed the contract.) Good coverage of the SIGIR report can be found in yesterday's New York Times.
IRAQ: Bechtel Meets Goals on Fewer Than Half of Its Iraq Rebuilding Projects, U.S. Study Finds
By James Glanz, New York Times
July 26, 2007
But one thing: we'd like to note that SIGIR only looked at the second phase of Bechtel's work, what about the first phase? We ran a story on this some 40 months ago:
Bechtel Fails Reconstruction of Iraq's Schools
by Karim El-Gawhary, Special to CorpWatch
December 2nd, 2003
Back on the U.S. home front we are also glad to see that the New York Times is following the story of the Sithe Global Power's proposed coal-fired power plant at Desert Rock in New Mexico on Diné lands:
Navajos and Environmentalists Split on Power Plant
By Felicity Barringer, New York Times
July 27th, 2007
To get a better feel for how the company has divided the traditional Diné community, do read our story from April of this year:
Speaking Diné to Dirty Power: Navajo Challenge New Coal-Fired Plant
by Jeff Conant, Special to CorpWatch
April 3rd, 2007
Digging for Dirt in the DRC?
Posted by Amelia Hight on July 25th, 2007
Billy Rautenbach, a South African mining kingpin, was deported from Lubumbashi airport in the Democratic Republic of Congo (DRC) on July 18th. “He was accused of fraud, theft, corruption and violating commercial law [the expulsion document] said. He was persona non grata. He would have to leave,” writes Ben Laurence in the Sunday Times (UK).
Best known in South Africa and Botswana for his activities in assembling Hyundai cars, Rautenbach faces hundreds of charges of fraud, corruption and other crimes in his home country of South Africa (the reasons cited in the documents prepared for his deportation last week). South Africa is currently considering asking Zimbabwe to extradite him to stand trial.
But Rautenbach was also once a powerful man in the DRC. He ran Gecamines, the DRC’s state-owned copper mining company, from 1998 to 2000. At the time he was accused of under-reporting exports of sales of huge quantities of DRC cobalt when he was in charge – and diverting the profits to a company he controlled in the British Virgin Islands.
Although Rautenbach lost his job, he continues to play an important role in the mining sector, as he also happens to be a major shareholder of Central African Mining & Exploration Company (CAMEC), which won major contracts in the DRC a couple of years later.
CAMEC’s contracts were the result of an investor-friendly mining code introduced by the World Bank in July 2002. (An informative analysis of this code was done by the Bank Information Center.) While the code calls for a much-needed regulatory framework and environmental protection, it hands the responsibility for mining development to private companies.
However, it is doubtful that the Congolese public institutions charged with regulating the mining sector have the resources to carry through with it, and the World Bank certainly has not been successful in providing oversight. A memo leaked to the Financial Times in November 2006 details the World Bank’s failure to provide sufficient oversight in three major contracts made between Gecamines and international mining groups like CAMEC. Worth billions of dollars, these contracts reportedly gave these groups control over 75% of Gecamines mineral reserves. (In May 2007, the Financial Times also revealed that the World Bank withheld the findings of an inquiry into alleged mismanagement of funds in the Democratic Republic of Congo.)
More details on the business dealings of Rautenbach and CAMEC may emerge from a DRC commission that recently began a three-month review of mining contracts signed in the last decade. The commission is the first attempt of a new “democratically elected” government to investigate ongoing corruption in the DRC’s valuable mining sector. The new commission follows a string of attempts by previous governments and international financial institutions to investigate the exploitation of natural resources in the DRC.
If the commission hopes to be successful it must take a look at whose interests are being promoted/protected in the Congo and how. This would include an investigation into local elites, regional influences, international financial institutions and the powers they represent, and international corporations along with the relationships between these different actors.
History has shown that the more resources a nation or region possess, the more conflict and poverty the people of that nation are forced to endure. The DRC is the third largest country in Africa and is rich in natural resources, particularly cobalt, copper, diamonds and gold. It is home to one third of the world’s cassiterite, the most important source of the metallic element tin and holds 64-80% of the world’s coltan reserves, an ore that is the source of the metal tantalum, which is used in cell phones and other devices.
In an article for Alternet, Stan Cox quotes a miner responsible for digging the valuable cassiterite: "As you crawl through the tiny hole, using your arms and fingers to scratch, there's not enough space to dig properly and you get badly grazed all over. And then, when you do finally come back out with the cassiterite, the soldiers are waiting to grab it at gunpoint. Which means you have nothing to buy food with. So we're always hungry."
This cassiterite will inevitably end up in cheap cell phones and laptops laying abandoned in American landfills.
Despite (or indeed because of) its abundance of resources, the DRC has been plagued by conflict, famine and political instability since its independence in the 1960s. Following the end of the 30-year dictatorship of Mobutu Sese Seko (who was brought to power by the U.S. in the 1960s), the greed of neighboring countries for natural resources forced the DRC into the center of what organizations like Human Rights Watch have deemed, “Africa’s first world war.” The war resulted in the death of three to five million people, many from famine, exposure and disease.
A cease-fire ended the war in 1999, but the DRC has continued to suffer the extraction of resources and wealth through corrupt deals between local elites and international companies. A 2006 report from the London-based watchdog organization, Global Witness, describes how copper and cobalt are mined informally and illicitly exported, robbing the Congolese people of any opportunity to reduce poverty.
The new commission’s plan to revisit mining contracts between the state and private companies is a response to years of domestic and international pressure. Hopefully, once the review is completed (assuming that it is a transparent and non-corrupt process), the international companies involved will be willing to re-negotiate contracts in a way that is more beneficial to the Congolese state and its citizens. An interesting precedent was established last year in Liberia when Mittal Steel, the world’s largest steel company, agreed to step down from an unbalanced concessionary agreement made with a corrupt transitional government once a democratically elected government was in place.
Web Sanctions Tool Backfires on SEC
Posted by Pratap Chatterjee on July 24th, 2007
Boycotts and sanctions are two key tools that activists and governments use to target corporations who do business with "unsavory" regimes. There is a long history of progressive activists calling for boycotts, for example, against companies doing business in South Africa in the 1980s, Burma and Nigeria in the 1990s, and most recently Sudan in an attempt to topple or change regimes with a history of human rights abuse.
In the old days, activists created boycott flyers to target companies that were wheat-pasted on walls, they picketed stores that sold goods from the offending companies, and most recently many activist groups have created websites created to encourage consumers to vote with their dollars: such as Ethical Consumer in the UK or tools to track companies in specific countries such as the Sudan Divestment Network.
The U.S. government has followed a similar but more heavy-handed tactic to enforce its anger against other governments, by passing laws forbidding companies from doing business in countries ranging from Cuba in the 1960s, South Africa in the 1980s, Iraq in the 1990s and most recently in Syria. (A State Department official suggest that sanctions have been imposed on foreign countries well over 100 times since the First World War.) Of course, unlike activists, the U.S. government has the power to prosecute companies who fail to comply.
Some of the targets of boycotts and sanctions have been one and the same: South Africa being a notable example.
How successful have these boycotts and sanctions been? Activists argue that the South African apartheid regime was felled by such pressure, undertaken in solidarity with local movements, although one might argue that anti-apartheid protests within South Africa itself played an even more significant role. A variety of think-tanks (mostly conservative) have argued that sanctions don't work.
In May, Christopher Dodd, a Democrat from Connecticut and the chairman of the Senate Banking Committee, called on the U.S. Securities and Exchange Commission (SEC) to make it easier for "shareholders to access reliable information regarding publicly traded companies' business transactions involving Iran and Sudan."
In June, the SEC decided to copy activist tactics by putting up a Web tool that tracks corporations with investments in countries considered by the U.S. to sponsor terrorism -- specifically Cuba, Iran, North Korea, Sudan and Syria. "No investor should ever have to wonder whether his or her investments or retirement savings are indirectly subsidizing a terrorist haven or genocidal state," Christopher Cox, the SEC chairman, said. In three weeks the site got "exceptional public interest," with more than 150,000 hits.
The tool generated some odd results: Reuters, the media company, had reported news-gathering activities in Cuba, Iran and Syria, so it made all three lists!
Not surprisingly, the Web tool provoked a storm of protest. "The list was fraught with distortions that could have actually harmed investors instead of informing them," Todd Malan, the president of the Organization for International Investment, which represents such companies, told reporters. "It was basically just a word search with no context, scale or reference."
Barney Frank, a Democrat from Massachusetts, called the list "unfair and perhaps counterproductive." He said some companies "apparently have investments that are so negligible they could not be considered material either to investors or the economy of the terrorist-financing state."
On Friday the SEC took the web page down and promised to rethink the idea -- either to return with a new, more sophisticated, tool or to figure out another way to achieve the same results.
"Our role is to make that information readily accessible to the investing public, and we will continue to work to find better ways to accomplish that objective," says the SEC. We await the results eagerly -- will the SEC try picketing the listed companies or dropping protest banners? If so, we just might know some folks who might be able to help.
Frequent Toxic Miles
Posted by Pratap Chatterjee on July 12th, 2007
The Wall Street Journal has an interesting article today about how toxics in the United States that are dumped in other countries may come back to haunt U.S. consumers. Toxics have been found in jewelry ranging from "Best Friends Forever" necklaces sold at a chainstore called Claire's Stores Inc. to necklace and earring sets with plastic "birthstones" sold by Kmart, another major retail chain.
Many of these products are made in China – which is probably the leading exporter to the U.S. But not many know that the reason for this is that the country also is a major importer of U.S. electronic waste, despite the fact that the country's laws essentially ban imports of such waste.
Reporter Gordon Fairclough writes: “For lead, the trip to China from the U.S. typically goes something like this: U.S. consumers and businesses send their old electronics to recycling firms -- often by way of innocuous recycling drives. Some of those firms then sell the electronics to dealers in the U.S., who sell them to dealers in China. Chinese companies buy the e-waste and strip lead and other re-sellable materials from it -- often discarding harmful materials along the way, adding to local pollution. The lead makes its way -- sometimes at toxic levels -- into trinkets sold to consumers in the U.S.”
The article is based on studies by Jeffrey Weidenhamer and Michael Clement, chemists at Ashland University in Ohio, who examined the composition of children's highly leaded jewelry and key chains and determined that some also contained levels of copper and tin that suggested the source was lead solder used in electronic circuit boards. Other jewelry samples were also found to contain antimony, a toxic metalloid element used to harden lead used in batteries.
Our friends at Silicon Valley Toxics Coalition have a great animated film showing how this works. (Full disclosure here: Aditi Vaidya, SVTC program director, is on CorpWatch’s advisory board) The video was created by Ben Goldhirsch’s Good magazine.
Two other good films can be obtained from the Basel Action Network, which has a film on e-waste in Asia as well as one on similar schemes to dump e-waste in Africa.
Says Jim Puckett, coordinator of BAN. “In a globalized world, pollution knows no borders so the US government’s policy of allowing a free trade in hazardous waste has come back to haunt and hurt us.”
None of this should be legal. Under the Basel convention, as of 1 January 1998, all forms of hazardous waste exports from the 29 wealthiest most industrialized countries of the Organization of Economic Cooperation and Development (OECD) to all non-OECD countries. Unfortunately although China has ratified the treaty, the United States has not, so the trade continues.
For U.S. consumers, SVTC has guides about less harmful ways to dispose of electronic waste and how to buy electronics more responsibly.
The European Union is way ahead of the U.S. here – it requires companies to cover the costs of recovery and recycling under the Waste Electrical and Electronic Equipment (WEEE) Directive. Last week, Britain become the latest country to enforce that law. For another fun way to learn about this issue, check out the WEEE man: a huge robotic figure made of scrap electrical and electronic equipment. It weighs 3.3 tonnes and stands seven meters tall – representing the average amount of e-products every single British citizen throws away over a lifetime.
Is Big Business Buying Out The Environmental Movement?
Posted by Philip Mattera on June 5th, 2007
Good Jobs First
In the business world these days, it appears that
just about everything is for sale.
Multi-billion-dollar deals are commonplace, and even
venerable institutions such as the Wall Street
Journal find themselves put into play. Yet
companies are not the only things being acquired.
This may turn out to be the year that big business
bought a substantial part of the environmental
That’s one way of interpreting the remarkable level
of cooperation that is emerging between some
prominent environmental groups and some of the
world’s largest corporations. What was once an arena
of fierce antagonism has become a veritable love
fest as companies profess to be going green and get
lavishly honored for doing so. Earlier this year,
for instance, the World Resources Institute gave one
of its “Courage to Lead” awards to the chief
executive of General Electric.
Every day seems to bring another announcement from a
large corporation that it is taking steps to protect
the planet. IBM, informally known as Big Blue,
launched its Project Big Green to help customers
slash their data center energy usage. Newmont Mining
Co., the world’s largest gold digger, endorsed a
shareholder resolution calling for a review of its
environmental impact. Home Depot introduced an Eco
Options label for thousands of green products.
General Motors and oil major ConocoPhillips joined
the list of corporate giants that have come out in
support of a mandatory ceiling on greenhouse gas
emissions. Bank of America said it would invest $20
billion in sustainable projects over the next
Many of the new initiatives are being pursued in
direct collaboration with environmental groups.
Wal-Mart is working closely with Conservation
International on its efforts to cut energy usage and
switch to renewable sources of power. McDonald’s has
teamed up with Greenpeace to discourage
deforestation caused by the growth of soybean
farming in Brazil. When buyout firms Texas Pacific
Group and KKR were negotiating the takeover of
utility company TXU earlier this year, they asked
Environmental Defense to join the talks so that the
deal, which ended up including a rollback of plans
for 11 new coal-fired plants, could be assured a
green seal of approval.
Observing this trend, Business Week detects
“a remarkable evolution in the dynamic between
corporate executives and activists. Once fractious
and antagonistic, it has moved toward accommodation
and even mutual dependence.” The question is: who is
accommodating whom? Are these developments a sign
that environmental campaigns have prevailed and are
setting the corporate agenda? Or have enviros been
duped into endorsing what my be little more than a
new wave of corporate greenwash?
An Epiphany About The Environment?
The first thing to keep in mind is that Corporate
America’s purported embrace of environmental
principles is nothing new. Something very similar
happened, for example, in early 1990 around the time
of the 20th anniversary of Earth Day.
Fortune announced then that “trend spotters and
forward thinkers agree that the Nineties will be the
Earth Decade and that environmentalism will be a
movement of massive worldwide force.” Business
Week published a story titled “The Greening of
The magazines cited a slew of large companies that
were said to be embarking on significant green
initiatives, among them DuPont, General Electric,
McDonald’s, 3M, Union Carbide and Procter & Gamble.
Corporations such as these put on their own Earth
Tech environmental technology fair on the National
Mall and endorsed Earth Day events and promotions.
difference between then and now is that there was a
lot more skepticism about Corporate America’s claim
of having had an epiphany about the environment. It
was obvious to many that business was trying to undo
the damage caused by environmental disasters such as
Union Carbide’s deadly Bhopal chemical leak, the
Exxon Valdez oil spill in Alaska and the
deterioration of the ozone layer. Activist groups
charged that corporations were engaging in a bogus
public relations effort which they branded “greenwash.”
Greenpeace staged a protest at DuPont’s Earth Tech
exhibit, leading to a number of arrests.
Misgivings about corporate environmentalism grew as
it was discovered that many of the claims about
green products were misleading, false or irrelevant.
Mobil Chemical, for instance, was challenged for
calling its new Hefty trash bags biodegradable,
since that required extended exposure to light
rather than their usual fate of being buried in
landfills. Procter & Gamble was taken to task for
labeling its Pampers and Luvs disposable diapers
“compostable” when only a handful of facilities in
the entire country were equipped to do such
processing. Various companies bragged that their
products in aerosol cans were now safe for the
environment when all they had done was comply with a
ban on the use of chlorofluorocarbons. Some of the
self-proclaimed green producers found themselves
being investigated by state attorneys general for
false advertising and other offenses against the
The insistence that companies actually substantiate
their claims put a damper on the entire green
product movement. Yet some companies continued to
see advantages in being associated with
environmental principles. In one of the more brazen
moves, DuPont ran TV ads in the late 1990s depicting
sea lions applauding a passing oil tanker
(accompanied by Beethoven’s “Ode to Joy”) to take
credit for the fact that its Conoco subsidiary had
begun using double hulls in its ships, conveniently
failing to mention that it was one of the last oil
companies to take that step.
At the same time, some companies began to infiltrate
the environmental movement itself by contributing to
the more moderate groups and getting spots on their
boards. They also joined organizations such as
CERES, which encourages green groups and
corporations to endorse a common set of principles.
By the early 2000s, some companies sought to depict
themselves as being not merely in step with the
environmental movement but at the forefront of a
green transformation. British Petroleum started
publicizing its investments in renewable energy and
saying that its initials really stood for Beyond
Petroleum—all despite the fact that its operations
continued to be dominated by fossil fuels.
This paved the way for General Electric’s
“ecomagination” public relations blitz, which it pursued even
while dragging its feet in the cleanup of PCB
contamination in New York’s Hudson River. GE was
followed by Wal-Mart, which in October 2005 sought
to transform its image as a leading cause of
pollution-generating sprawl by announcing a program
to move toward zero waste and maximum use of
renewable energy. In recent months the floodgates
have opened, with more and more large companies
calling for federal caps on greenhouse gas
emissions. In January ten major
corporations—including Alcoa, Caterpillar, DuPont
and General Electric—joined with the Natural
Resources Defense Council and other enviro groups in
forming the U.S. Climate Action Partnership. A few
months later, General Motors, arguably one of the
companies that has done the most to exacerbate
global warming, signed on as well.
A Cause for Celebration or Dismay?
Today the term “greenwash” is rarely uttered, and
differences in positions between corporate giants
and mainstream environmental groups are increasingly
difficult to discern. Everywhere one looks, enviros
and executives have locked arms and are marching
together to save the planet. Is this a cause for
celebration or dismay?
Answering this question begins with the recognition
that companies do not all enter the environmental
fold in the same way. Here are some of their
Defeat. Some companies did not embrace green
principles on their own—they were forced to do so
after being successfully targeted by aggressive
environmental campaigns. Home Depot abandoned the
sale of lumber harvested in old-growth forests
several years ago after being pummeled by groups
such as Rainforest Action Network. Responding to
similar campaign pressure, Boise Cascade also agreed
to stop sourcing from endangered forests and J.P.
Morgan Chase agreed to take environmental impacts
into account in its international lending
activities. Dell started taking computer recycling
seriously only after it was pressed to do so by
groups such as the Silicon Valley Toxics Coalition.
Diversion. It is apparent that Wal-Mart is
using its newfound green consciousness as a means of
diverting public attention away from its dismal
record in other areas, especially the treatment of
workers. In doing so, it hopes to peel
environmentalists away from the broad anti-Wal-Mart
movement. BP’s emphasis on the environment was no
doubt made more urgent by the need to repair an
image damaged by allegations that a 2005 refinery
fire in Texas that killed 15 people was the fault of
management. To varying degrees, many other companies
that have jumped on the green bandwagon have sins
they want to public to forget.
Opportunism. There is so much hype these days
about protecting the environment that many companies
are going green simply to earn more green. There are
some market moves, such as Toyota’s push on hybrids,
that also appear to have some environmental
legitimacy. Yet there are also instances of sheer
opportunism, such as the effort by Nuclear Energy
Institute to depict nukes as an environmentally
desirable alternative to fossil fuels. Not to
mention surreal cases such as the decision by
Britain’s BAE Systems to develop environmentally
friendly munitions, including low-toxin rockets and
In other words, the suggestion that the new business
environmentalism flows simply from a heightened
concern for the planet is far from the truth.
Corporations always act in their own self-interest
and one way or another are always seeking to
maximize profits. It used to be that they had to
hide that fact. Today they flaunt it, because there
is a widespread notion that eco-friendly policies
are totally consistent with cutting costs and
fattening the bottom line.
“ecomagination” campaign was launched, CEO Jeffrey
Immelt insisted “it’s no longer a zero-sum
game—things that are good for the environment are
also good for business.” This was echoed by Wal-Mart
CEO Lee Scott, who said in a speech announcing his
company’s green initiative that “being a good
steward of the environment and in our communities,
and being an efficient and profitable business, are
not mutually exclusive. In fact they are one in the
same.” That’s probably because Scott sees
environmentalism as merely an extension of the
company’s legendary penny-pinching, as glorified
Chevron Wants to Lead
activists seem to welcome the notion of a
convergence of business interests and green
interests, but it all seems too good to be true. If
eco-friendly policies are entirely “win-win,” then
why did corporations resist them for so long? It is
hard to believe that the conflict between profit
maximization and environmental protection, which
characterized the entire history of the ecological
movement, has suddenly evaporated.
are fooling themselves, in which case they will
eventually realize there is no environmental free
lunch and renege on their green promises. Or they
are fooling us and are perpetrating a massive public
relations hoax. A third interpretation is that
companies are taking voluntary steps that are
genuine but inadequate to solve the problems at hand
and are mainly meant to prevent stricter,
In any event, it would
behoove enviros to be more skeptical of corporate
green claims and less eager to jump into bed with
business. It certainly makes sense to seek specific
concessions from corporations and to offer moderate
praise when they comply, but activists should
maintain an arm’s-length relationship to business
and not see themselves as partners. After all, the
real purpose of the environmental movement is not
simply to make technical adjustments to the way
business operates (that’s the job of consultants)
but rather to push for fundamental and systemic
Moreover, there is a
risk that the heightened level of collaboration will
undermine the justification for an independent
environmental movement. Why pay dues to a green
group if its agenda is virtually identical to that
of GE and DuPont? Already there are hints that
business views itself, not activist groups, as the
real green vanguard. Chevron, for instance, has been
running a series of environmental ads with the
tagline “Will you join us?”
Wasn’t it Chevron and the other oil giants that
played a major role in creating global warming?
Wasn’t it Chevron that used the repressive regime in
Nigeria to protect its environmentally destructive
operations in the Niger Delta? Wasn’t it Chevron’s
Texaco unit that dumped more than 18 billion gallons
of toxic waste in Ecuador? And wasn’t it Chevron
that was accused of systematically underpaying
royalties to the federal government for natural gas
extracted from the Gulf of Mexico? That is not the
kind of track record that confers the mantle of
In fact, we shouldn’t
be joining any company’s environmental initiative.
Human activists should be leading the effort to
clean up the planet, and corporations should be made
to follow our lead.
Alcan pulls out of Utkal project in India
Posted by François Meloche on April 16th, 2007
Groupe Investissement Responsable Inc. (Montreal)
Alcan, a Canadian company, has decided to sell its 45 percent stake in Utkal Alumina International Limited, a company aiming to produce alumina in the state of Orissa in India. Alcan had been under pressure for years to withdraw or at least ensure the project had obtained the free prior and informed consent of local communities.
Community members, mostly "scheduled tribes" Adivasis, have opposed the Utkal project, to protect their right to control local resources and avoid environmental damage. The project, which is in its "engineering phase" has already started to displace the 200 or so families living on the site of the future alumina plant. Herders and others would also be affected by the mining operation. It is unclear how many people would be affected but some critics have estimated that over 10,000 people would suffer. At least 23 villages would be affected by the project.
In December, 2000, police in Kashipur opened fire on protesters opposed to the Utkal mine and smelter, killing three people. One of the partner at that time, Norsk Hydro of Norway, immediately pulled out and sold its share to Alcan.
Activists from Alcan't in India, a solidarity group based in Montreal, Quebec, Canada, are pressuring Alcan to compensate people whose "lives have been ruined through jailings, beatings, displacement, and even death due to Alcan’s involvement."
Last year, Alcan promised it would provide an answer to shareholder activists by March 2007 on its involvement in the project. Shareholders had filed a proposal (see 'Tis the Season for Shareholder Activism) asking for an independent study on the consent of the community, a proposal that received a surprisingly high 37 percent. (Similar resolutions typically get between zero and ten percent. Any resolution that scores in the higher end of that range is taken seriously by management)
The Indian partner in the Utkal project, Hindalco, the industrial division of the Indian conglomerate Aditya Birla group, which owns 55% of the project, has not given any indication that it will change its plans.
Alcan, on the other hand, invests a lot of money in public relations to promote its sustainability strategy, has portrayed itself as a minority partner that does not participate in the real decision making around this project.
“We have carefully weighed the opportunity and risk presented by the Utkal Project, and, given constraints within the governance structure that limit Alcan's ability to participate in key decisions, believe that we have acted in the best interests of all our stakeholders,” Jacynthe Côté, president and chief executive officer of Alcan Bauxite and Alumina, said in a statement.
Alcan says it will keep a commercial interest in the project by continuing to "benefit from an Alcan technology supply agreement", according to the Alcan press release, but it does not give further details.
Editor's note: The decision of Alcan to pull out of the Utkal smelter reflects similar dissatisfaction over aluminum smelters around the world. Sujatha Fernandes reported for us from Trinidad on a similar project in the Chatham/Cap-de-Ville area (see “Smelter Struggle: Trinidad Fishing Community Fights Aluminum Project") that was canceled in January 2007 although the Alcoa is now hoping to get permission to relocate the project to Otaheite Bay, which also serves as a nesting ground for the scarlet ibis, one of Trinidad and Tobago's national birds, as well as 36 other avian species.
And communities in Iceland have also been battling a proposed Alcoa smelter, for which the gigantic $3 billion Karahnjukar dam, north of Vatnajokull, Europe's biggest glacier, is being built. The Guardian did a great story ("Power Driven") on this in 2003, and the New York Times recently did a feature on what it called the angriest and most divisive battle in recent Icelandic history. Updates can be found at the Saving Iceland website.
Total Denial: Burmese peasants fight Unocal
Posted by Pratap Chatterjee on March 20th, 2007
Continuing our film recommendations from last
week, we'd like to mention "Total Denial"
- a new
documentary on corporate-financed human rights abuses in Burma. The film was
made by Bulgarian-born Milena Kaneva.
newspaper in Texas called the film:
"heart-wrenching and utterly
chronicles a major human rights lawsuit brought by EarthRights
International and villagers from Burma against oil giant Unocal, a
company based right here in California, as well as a French
multinational named Total. A number of screenings
are coming up
in the next few weeks here in the U.S.
If you live in the Bay area, do check it out on Thursday, in
Los Angeles on March 27th or in Washington DC on April
The lawsuit was brought by 11 Burmese peasants who suffered a variety of human
rights violations at the hands of Burmese army units that were
securing the pipeline route. These abuses included forced relocation,
forced labor, rape, torture, and murder.
The case was spearheaded by Ka Hsaw Wa
, the executive
director of Earth Rights International, an organization based in
Washington DC. Of the Karen indigenous minority in Burma, he was one of the student leaders in the 1988
nation-wide student uprising for democracy and freedom, and has been a
human rights activist since he fled Burma in 1988. He was helped by
Paul Hoffman of the Center for Constitutional Rights, Hadsell &
Stormer, and Judith Brown Chomsky.
Almost a decade after the case was brought,
the court decided that:
that the military had a record of committing human rights abuses; that
the Project hired the military to provide security for the Project, a
military that forced villagers to work and entire villages to relocate
for the benefit of the Project; that the military, while forcing
villagers to work and relocate, committed numerous acts of violence;
and that Unocal knew or should have known that the military did
commit, was committing and would continue to commit these tortious
The legal basis for the case was a laws called
the Alien Tort Claims Act (a 1789 law intended to curb piracy on the high seas by extending U.S. jurisdiction to cover breaches of international law outside its borders), which has been used
primarily to sue international human rights abuses in U.S. courts. In recent
years a number of plaintiffs
have sued multinational corporations for
abuses outside the U.S. under this law. While many of these cases are
now in court, Unocal decided to settle out of court and
compensate the victims in January 2006.
The case is based on two
incidents: the shooting of peaceful protestors at Chevron's Parabe
offshore platform and the destruction of two villages by soldiers in
Chevron helicopters and boats.
Last week U.S. District Judge
Susan Illston in San Francisco agreed
that the Nigerian plaintiffs: "have presented
evidence of a link between the conduct of Chevron in the United States
and the attacks in Nigeria at issue" as well as evidence that the corporation had
substantial control over its Nigerian unit, that it
"designed and adjusted the general security policies and
procedures" of its subsidiary and approved payments from the
subsidiary to the Nigerian government security
The particular abuses at issue
are the November 10, 1995 hangings of Ken Saro-Wiwa and John Kpuinen,
two leaders of MOSOP (Movement for the Survival of the Ogoni People),
the torture and detention of Owens Wiwa, and the shooting of a woman
who was peacefully protesting the bulldozing of her crops in
preparation for a Shell pipeline by Nigerian troops called in by
Mercenaries, Multinationals and Movies
Posted by Pratap Chatterjee on March 9th, 2007
There's a constant stream of good films coming out about corporate malfeasance and we'll try to keep you updated on this blog about some of our favorite ones.
"Shadow Company" opens tonight at the Roxie movie theater in San Francisco. This documentary follows the tale of James Ashcroft, a college friend of film maker Nick Bicanic, who quits his job in a British law firm to take a job with a private security company in Baghdad, whom many human rights activists consider to be "mercenaries," or soldiers for hire made famous by Blackwater in Fallujah.
An excellent interview with film maker Bicanic, explains why people become mercenaries.
It's simple math: you have a given individual who has the prospect of risking his life as part of a member of a nation-state military for X amount of dollars or doing virtually the exact same level of risk and almost the exact same job for roughly three to five times the money for a private company. The proof is in the pudding. A very large number of U.S. and U.K. Special Forces are asking for early retirement, and it's a serious problem.Like any good documentary, "Shadow Company" has no shortage of "talking heads" ï¿½ expert human rights activists and academics alike ï¿½ but it also has quite a few fun little graphics, historical footage, and lots of action to explain the history of private military companies.
What sets this film apart from the classic military channel films or even your typical Amnesty fare, is that it chooses not to take sides, but allow the characters to argue the case for and against private military work in their own words. There's Cobus Classens, a South African mercenary who worked for Executive Outcomes; there's Robert Young Pelton, author of the "The Guide to the World's Most Dangerous Places;" and there's a professor of ethics and a lobbyist for the "International Peace Operations Association" (yes, there is an industry association, believe it or not).
There could have been voices of Iraqis who are rightly angry that men in plainclothes and assault weaponry have taken over their cities and obey no laws. (Yes, there are clips from the classic Al Qaeda videos, but that's not the same as interviews with the citizenry.) All in all, it is very educational and a good introduction to this emerging business and the potential threats to human rights.
"Shadow Company" only discusses the gun-carrying contractors. Another excellent (though one-sided) film that explains other contractors like Halliburton who do military logistics is "Iraq for Sale."
"Iraq for Sale" also discusses contractors like CACI, which used to provide interrogators at Abu Ghraib and other prisons. (David Phinney wrote an excellent article for us about CACI. If you want to learn who has since taken over the contract, read our article about L-3) .
Greenwald's films are produced quickly and distributed widely by his supporters. He is one of the most successful grassroots film-makers in history ï¿½ he made "Uncovered: The War on Iraq," "Outfoxed: Rupert Murdoch's War on Journalism" and his most recent, "Wal-Mart: The High Cost of Low Price."
Here's what the Washington Post had to say about him:
His fans applaud his work; his detractors, such as Fox's Bill O'Reilly, call him "a radical progressive who blames America first," as well as "a liar and an idiot." He calls it "People Powered Film." It could be the start of something.Greenwald's films cover very important issues, but they would benefit from interviewing some of the promoters of military contracting, if only to learn why this business is so profitable.
More movies on corporate malfeasance next week.
The Curse of Gold
Posted by Sakura Saunders on February 28th, 2007
This week's CorpWatch feature highlights the plight of indigenous people in Papua New Guinea, where landowners feel that they are cheated out of their resources, livelihoods, and just compensation by the world's largest gold producer, Barrick Gold.
Papua New Guinea represents a case study in how resource extraction just might be the worst possible way to develop a country, especially where 85 percent of the population depends on the environment for their subsistence livelihood. Here, the pollution caused by open-pit mining and cyanide leaching creates an especially vulnerable situation for the indigenous people. In our recent feature, we attached testimonies from the landowners, mine workers, women, and human right activists who are affected by the mine. A principal landowner, Nelson Akiko, describes his disillusionment with the mine:
We depend on our land. You depend on money. Money is not need, it is only a want, but it is need in western society. I live on land, which is my stomach. I grow food from this land and then I survive. But now, where can I get food?
Also, the fact that mineral deposits, including oil, copper, and gold, account for two-thirds of PNG's export earnings leaves them susceptible to the Dutch Disease, or the phenomenon wherein resource exports raise the exchange rate for a country's currency, thereby making their labor less desirable. While this only accounts for a tiny part of the negative consequences of mining, it does illustrate that even within an economic paradigm, mining carries negative consequences for 'development', especially open pit mines because they require less human labor. Large mineral exports also make countries more susceptible to corruption because of the negotiating power held with government gatekeepers.
This is similar to Mali, where gold makes up 65 percent of its exports, dwarfing its former economic bedrock cotton. Some 64 mining companies have active mining and exploration projects in this landlocked African country, but despite a surge in gold prices, Mali's development indicators have stagnated. A recent Oxfam report 'Hidden treasure: in search of Mali's gold mining revenues',
"There is not sufficient disclosure in an
understandable form for citizens or civic groups to determine whether
they are indeed benefiting as they should according to current law in
The fact that gold is a largely useless metal (that is already hoarded and unused in large quantities) makes the destruction caused by it's extraction all the more tragic. According the No Dirty Gold Campaign, 80% of the gold is used by the jewelry industry. On average, the production of one gold wedding ring produces 20 tons of waste.
Unfortunately, Papua New Guinea is not an isolated example of how gold mines can destroy communities. Mining Watch Canada summed their view of the mining industry in Canada, where 60% of the world's mining companies reside:
Metal prices are booming, and Canadian mining companies are taking advantage of the same prejudicial conditions to expand into all corners of the globe, manipulating, slandering, abusing, and even killing those who dare to oppose them, displacing Indigenous and non-Indigenous communities alike, supporting repressive governments and taking advantage of weak ones, and contaminating and destroying sensitive ecosystems.
CorpWatch has been tracking Barrick elsewhere in the world, most recently at its Pascua Lama project in Argentina.
Barrick's plans to "relocate" three glaciers - 816,000 cubic meters of ice - by means of bulldozers and controlled blasting, is seen by mine-opponents as symbolic of the company's utter insensitivity to the environment. As headwaters for a water basin in an arid region receiving very little rainfall, many opponents are gravely concerned for the ice. They say the mechanical action involved in moving the glaciers will irreversibly melt much of it, jeopardizing a delicate ecological balance further downstream.
While Barrick originally planned to "relocate" three glaciers to another area, since being denied their original plan, the project now aims to build an open-pit mine next to the glaciers. However, most alarmingly, since construction has started on the mine, the glaciers have been depleted an estimated 50-70 percent, according to Chilean General Office of Waters (DGA). Barrick attempted to blame global warming for the melting, but those claims have been disproven.
Mining in the U.S.
In the U.S., Western Shoshone lands now account for the majority of gold produced within the United States and almost 10 percent of world production. The scale of development is unprecedented and will leave a legacy of environmental impacts for centuries into the future.
An excellent article on the boom in gold mining from the Las Vegas Mercury News explains the predicament that Shoshone face.
Is Houston smarter than Detroit? Big Oil versus Big Auto (and a simple solution for global warming)
Posted by Pratap Chatterjee on February 17th, 2007
US car makers and the US oil industry appear to be speeding in opposite directions in what may seem like a complete paradox. Just as companies like Chevron, Exxon and Shell announce the highest profits of any company in history, Chrysler, Ford and General Motors sales are in free fall. Is the oil industry in Houston is smarter than the car industry in Detroit?
Ford announced a global loss of $12.7 billion last year. The company plans to close 16 plants and cut up to 45,000 jobs in North America. Chrysler made a $1.5 billion loss last year and just announced it will cut 13,000 jobs. General Motors cut 35,000 production jobs last year but is suggesting it might have turned a profit after losing $10.6 billion in 2005. (The company "found" $200 million in earnings previously unaccounted for between 2002 and 2006, according to a Friday filing with the Securities and Exchange Commission. But given that it has restated its results seven times in the last two years, the numbers maybe rather meaningless.)
So it may seem astonishing that the Big Three's twin brother - Big Oil - is making money hand over fist. Chevron profits totaled $17.14 billion in 2006, Exxon made $39.5 billion (the highest any company has ever made in history) and Shell made $25.4 billion.
That adds up to $82 billion, three times greater than the losses of the Big Three car companies!
What's the difference between the two industries? Those of us that live in North America know exactly why: the price of gasoline has soared since the invasion of Iraq, and the oil companies have taken advantage of the high prices to cut themselves a bigger piece of the pie. Consumers don't have a choice as the oil industry is an oligopoly.
On the other hand the car industry is much more competitive, so consumers do have some choice.
Instead of buying giant cars that consume more gasoline than the original Model T Ford made in 1908 (the energy efficiency of a Ford Explorer is 16 miles per gallon versus the 25 miles per gallon of the signature Ford car), US consumers have made the cheaper choice and bought Japanese-made cars.
Japanese car maker profits are in stark contrast with the Big Three. Toyota is expecting a $13.4 billion profit for the fiscal year ending next month while Honda is predicting 2006 profits to come in close to $5 billion.
Ten years ago, General Motors controlled about a third of the U.S. market while Toyota's share was closer to eight percent. As General Motors has lost about eight percent of the market, Toyota has gained about the same.
(Another major difference between the two companies: General Motors expects to pay $50 billion in health care costs for its retired workers, while Toyota's Japanese workers are covered by a government health care system.)
Simple, isn't it? Energy conscious vehicles could turn around the US car makers and government provided health care for workers could cut Detroit's losses.
Yet, that would not solve all our problems. Even if the Big Three are losing market share, U.S. citizens are still buying cars that emit greenhouses gases and contribute to global warming. The latest figures show that U.S. greenhouse gas emissions during 2004 increased by 1.7 percent from the previous year, according to the U.S. Environmental Protection Agency (EPA), which released the figures last April. This was the largest annual amount ever produced by any country on record.
Perhaps the price of gasoline is still far too low? If doubling the price of gas has crushed the once mighty U.S. car industry, what if prices were to double again? People might start shopping close by, taking buses and trains to work. New jobs would be created by small local businesses for all those Wal-Mart employees and out-of-work Big Three employees.
Toyota and Honda might have to give way to a bus system or railways! Gasp! How archaic! How could the U.S. pay for a new mass transit system? Well, I heard some folks in Houston just found $82 billion... and the Japanese car makers have another $17 billion. that could pay for a lot. (That's not their money, its money taken out of the pockets of consumers who had no choice)
The U.S. needs mass transportation - and it needs to stop sprawl - lessons on how to do this can be found anyway outside the borders of this country when people live, work and shop in communities and take bicycles, buses and trains to work.
If commuters in the U.S. were to stop driving altogether, we could slash global fossil fuel emissions by 25 percent. Now that would be a revolution, and it would reverberate through history. How America saved the world it might even surpass Superman as a story for ages to come! If not, there won't be much more history to write. But that final page in human history might record that the U.S. failed to act.
P.S. I hear that Richard Branson and Al Gore are offering a $25 million reward for a solution to global warming. You can write that check out to groups like Smart Growth America and Surface Transportation Policy Project. They have the answers to global warming.
Remembering Oil Spills, Old and New
Posted by Sakura Saunders on February 13th, 2007
The week opened with the start of a four month trial against France's oil giant, Total, by groups like Friends of the Earth France.
The Paris tribunal will examine the 1999 Erika tanker disaster that poured 20,000 tonnes of oil into the sea, polluted 250 miles of coastline and caused $1.3 billion in damage. At least 150,000 seabirds were found dead on the coast and up to 10 times as many were probably lost in the oil-blackened seas. Observers say this may also turn into a trial of the "globalized" international shipping system as the Erika was crewed by Indians, sailing under a Maltese flag, chartered by a shipping company registered in the Bahamas for a French oil company.
Meanwhile, a lawsuit between the state of New York against Exxon and four other companies has recently been announced. This suit addresses an oil spill from the 1950's that was several times the size of the Exxon Valdez oil leak in Alaska, but lay undiscovered until 1978. According to New York state attorney Andrew Cuomo, Exxon has been slow to clean up, with an estimated eight million gallons of oil and petroleum byproducts still underground and toxic vapors from the ground threatening neighborhood health.
A Bloomberg article quotes local residents:
"There are people who live above this that still don't know about it,'' said Basil Seggos, chief investigator for Riverkeeper, an environmental group that sued in 2004 to try to force Exxon Mobil to clean up the creek. Others in Greenpoint have become spill experts, according to Seggos, and they say the fumes that rise from basements and sewers are especially bad when the barometer drops before a storm. "The locals tell you they know when it's going to rain because they can smell the oil.''
In other oil spill news, Lagos' Vanguard newspaper reported today that ten Ijaw communities had been displaced and 500 made homeless by a Chevron Nigeria oil spill.
The report quotes Gbabor Okrika, the councilor representing the affected communities:
"Chevron is not bothered about the health of the people they are only concerned about their operations and they have now started a process that can only divide the people and create further division among them."
Also, last month's massive leak in the Chad Cameroon Pipeline caused a storm of criticism regarding the environmental safety of this project. This Exxon-managed pipeline extends from landlocked Chad through Cameroon and extends 11 kilometers off the coast into the Atlantic. This project, which is overseen by the World Bank, has already received much criticism due to money from this project fueling conflict in Chad.
IRIN News quoted Kribi Mayor Gregoire Mba Mba:
"Our town lives on fishing and tourism. If more incidents like this or worse occur it is the economic future of the town that is threatened."
Environmental groups are warning that a similar spill could happen in the Baku-Ceyhan pipeline operated by BP that transports crude 1750 kilometers from the Caspian to the Mediterranean Sea. On Monday, a coalition of Azeri, British and US watchdog groups leaked a report from the U.S. Overseas Private Investment Corporation, which says that cracks and leakages in the coating of the pipeline will need to be monitored closely.
The Fourth Branch of Government
Posted by Pratap Chatterjee on February 12th, 2007
Technology consultants Booz Allen Hamilton may not be on the top of everyone's lists for conflicts of interest, but Congressman Henry Waxman revealed some rather interesting information about this McLean, Virginia, company at last week's hearing on contracting abuse.
Waxman told the hearing that Booz Allen had $97 million in contracts with the Department of Homeland Security in 2005. One job that Booz Allen staff were hired to do was to help plan, award and manage the federal government's SBI-Net program, a high technology security fence between the U.S. and Mexico (Joe Richey wrote us an article on this program - see Border for Sale)
Of the 98 personnel assigned to the SBI-Net project office as of December 2006, 60 work for contractors like Booz Allen. The company that these personnel are overseeing for SBI-Net is Boeing.
What Waxman finds worrying is the fact that Booz Allen has had an ongoing relationship with Boeing since 1993 to assist Boeing in maintaining its market share in the airplane industry, and other extensive relationships with the aircraft manufacturer since 1970.
The question is an important one: how can you be an impartial supervisor over someone who also pays your bills?
Booz Allen is no stranger to the inner workings of government, though. They happen to be one of the largest contractors to the Central Intelligence Agency and the National Security Agency. Tim Shorrock has done some digging into this subject, which you can read in his Mother Jones article: The Spy Who Billed Me.
Contractors supervising their own business partners is fashionable in Washinton DC these days, so we are glad to see that Scott Shane of the New York Times has started a regular series on this subject which he calls "The Fourth Branch of Government". In the first article about this phenomenon he wrote:
In June, short of people to process cases of incompetence and fraud by federal contractors, officials at the General Services Administration responded with what has become the government's reflexive answer to almost every problem.The use of private interrogators at Abu Ghraib another matter we've been tracking, to read more about that, see David Phinney's article: "Prison Interrogation for Profit". To be fair, CACI is no longer in the interrogation business. To find out more about who has this lucrative work, do read "Intelligence in Iraq: L-3 Supplies Spy Support"
They hired another contractor.
It did not matter that the company they chose, CACI International, had itself recently avoided a suspension from federal contracting; or that the work, delving into investigative files on other contractors, appeared to pose a conflict of interest; or that each person supplied by the company would cost taxpayers $104 an hour.
... CACI had itself been reviewed in 2004 for possible suspension in connection with supplying interrogators to the Abu Ghraib prison in Iraq.
U.S. Army takes $19.6 million from Halliburton
Posted by Pratap Chatterjee on February 8th, 2007
Tina Ballard, deputy assistant secretary for policy and procurement for the U.S. Army, told the same hearing that they had taken back $19.6 million from Halliburton for employing private security guards in Iraq, because their contract specifically stated that they could only use U.S. military for security. "We removed the money yesterday," said Ballard (on February 6th, 2007)
Halliburton, a Houston, Texas-based company, has been paid over $20 billion to provide logistical support to U.S. troops occupying Iraq such as building bases, cooking food and cleaning toilets.
Although Halliburton director of security, George Seagle, acknowledged that the company had used Blackwater and other private security sub-contractors in Iraq, he denied that the company was working for them in Fallujah, the day that the four Blackwater men were killed in Fallujah in March 2004, as related earlier. He also told the Congressmen that he did not know what company provided security for their convoys because that was the responsibility of the sub-contractor.
"You should know who you hired, who you sub-contracted to," scolded Republican Congressman Christopher Shays. "You can't be Pontius Pilate and wash your hands of the matter."
Seagle's statement contradicts a 2004 investigation by the Raleigh News-Observer, which unearthed documents that suggest that Blackwater was working indirectly for Halliburton via a complex pyramid of sub-contracting.
An email dated June 3, 2004, produced by Congressman Waxman at the hearing, quotes James Ray, a Halliburton contract administrator, warning the company that they could get into trouble for using Blackwater. "We should not attempt to effect a material change in our contract with the government by hiring a company that we know uses armed contracts. That company is an agent of KBR (Halliburton) and if anything happens KBR is in the pot with them. Even with lipstick, a pig is a pig. Dancing around it will only weaken out position with the government."
Blackwater counsel Andrew Howell says that the men who were killed in Fallujah, were providing security for a company in Kuwait named Regency Hotel, which in turn was employed by a company named ESS in Germany.
Throwing fresh doubt on this matter, was Steve Murray, the director of contracting for ESS, who was also at the hearing says that the four men who were killed that day were actually protecting another major U.S. engineering company named Fluor on that particular day.
But Tom Flores, the director of security for Fluor, who also testified at the hearing, says he was unaware that the Fallujah convoy was protecting his company.
"This tells me that we are not going to have good quality work if neither the government or the contractors can tell us who the subcontractors are," said an exasperated Shays.
Blackwater security shot Iraqi man
Posted by Pratap Chatterjee on February 7th, 2007
Lawyers for Blackwater, the private security company, today publicly acknowledged that one of their security guards shot dead an Iraqi man whom he worked with. "He was off-duty that day," said Andrew Howell, the company's general counsel told a Congressional hearing today. "We brought him back to the States the next day and took him off the contract."
The story of the killing, which took place on December 24, 2006, was first broken by Bill Sizemore of the Virginian Pilot less than a month ago.
The admission by Blackwater's lawyer came at a hearing that was convened by U.S. Congressman Henry Waxman at the House Government Reform Committee.
Blackwater, a North Carolina company, became famous when four of their contractors were shot and killed in Fallujah in March 2003, sparking a massive U.S. military assault on the city in which hundreds were killed. (Excellent accounts of this incident can be found in Robert Young Pelton's new book: "Licensed to Kill" and Jeremy Scahill's forthcoming book: “Blackwater: The Rise of the World's Most Powerful Mercenary Army.” out later this month from Nation Books) The company was back in the news ten days ago when five of their employees were shot down as they accompanied U.S. embassy employees in Baghdad.
The admission by Blackwater confirms worries that armed contractors working directly or indirectly for the U.S. government have been involved in killing Iraqi civilians and that they have escaped the rule of law in Iraq or in the United States.
An article in the Washington Post in September 2005 quoted Brigadier General Karl R. Horst, deputy commander of the 3rd Infantry Division, which is responsible for security in and around Baghdad. "These guys run loose in this country and do stupid stuff. There's no authority over them, so you can't come down on them hard when they escalate force. They shoot people, and someone else has to deal with the aftermath. It happens all over the place."
The article described the shooting of an Iraqi man named Ali Ismael in Erbil, Northern Iraq by unamed U.S. private security contractors.
Nor is Blackwater the only company to have been accused of shooting at Iraqi civilians with an intent to kill.
* In July 2006, two security contractors working for Triple Canopy in Iraq witnessed their boss shoot at Iraqi civilians.
Shane B. Schmidt, a former Marine Corps sniper, and Charles L. Sheppard III, a former Army Ranger, have sued the company, which they say fired them after they filed a report on July 8 that their shift leader fired deliberately and unnecessarily at Iraqi vehicles and civilians in two incidents while their team was driving in Baghdad.
Schmidt and Sheppard's lawsuit claims that the Triple Canopy employee announced that he was ''going to kill someone today,'' stepped from his vehicle and fired several shots from his M4 assault rifle into the windshield of a stopped white truck. The men claim that the truck was not an evident threat and that their team was not in danger. The men say in the suit that the shift leader then returned to their truck and said, ''That didn't happen, understand.'' Later that day, the suit says, the shift leader said, ''I've never shot anyone with my pistol before,'' and then opened the vehicle door and fired seven or eight shots into the windshield of a taxi.
* Custer Battles, another U.S. security company, was accused of shooting at Iraqis in February 2005, in an investigative report by NBC News. Titled "U.S. Contractors in Iraq Allege Abuses." The report quotes four former U.S. soldiers.
"[He] sighted down his AK-47 and started firing," says (Corporal Ernest) Colling. "It went through the window. As far as I could see, it hit a passenger. And they didn't even know we were there."
Later, the convoy came upon two teenagers by the road. One allegedly was gunned down.
"The rear gunner in my vehicle shot him," says Colling. "Unarmed, walking kids."
In another traffic jam, they claim a Ford 350 pickup truck smashed into, then rolled up and over the back of a small sedan full of Iraqis.
"The front of the truck came down," says (Captain Bill) Craun. "I could see two children sitting in the back seat of that car with their eyes looking up at the axle as it came down and pulverized the back."
* CorpWatch's David Phinney was among one of the first reporters to chronicle the infamous "Trophy Video" in Novermber 2005, in which security contractors for Aegis, a British company, in Iraq, were seen shooting at Iraqi civilians.
David Phinney also broke the story of another North Carolina company named Zapata, whose security guards allegedly fired at U.S. Marines in Fallujah in May 2005.
Meet the Wizard of Oz
Posted by Pratap Chatterjee on February 5th, 2007
Paul Bremer, the U.S. envoy who ran Iraq for over a year, will testify before the U.S. Congress on Tuesday, February 6th, 2007. This rare opportunity to see what the man we call the Wizard of Oz is rare, so CorpWatch plans to attend. Why do we call him the "Wizard of Oz", you may ask? Well, for those of you who remember the children's book by L. Frank Baum, the man who ran the land of the Munchkins, was protected from his subjects by special soldiers in the Emerald City.
And "Imperial Life in the Emerald City" is the title of a simply incredible book, that every member of Congress and the public at large, should first read to understand why Iraq is such a mess today. Rajiv Chandrasekaran, the bureau chief of the Washington Post in Baghdad for almost two years, published an account of the so-called Green Zone, the six square miles that the new rulers of Iraq have lived in ever since they occupied the country in April 2003.
This books lays out in hilarious detail the adventures of Paul Bremer, protected by his private security detail from Blackwater, and two of the three other men who testify on Tuesday: Tim Carney and David Oliver.
Tim Carney has just been appointed by Condoleeza Rice to oversee U.S. reconstruction and development projects in the country. Chandrasekaran tells us that Carney, who was in charge of the ministry of industry and minerals, was also a big game hunter who has hunted elephants, cape buffalo, giraffes, warthogs and two species of zebra, but sadly had no experience in either industry or minerals. (He was however a personal friend and ex-deputy to Paul Wolfowitz) In "Emerald City" we learn about his disastrous attempts to privatize Iraq's industries.
David Oliver, was Bremer's budget chief in the Emerald City. He first drew up a plan to fix Iraq that would have cost $60 billion. Bremer asked him to cut it to $18 billion and Oliver obligingly slashed the budget to ribbons.
Chandrasekaran's book is easily the funniest in what is now a library of books on the U.S. in Iraq, although ultimately it tells a tragic tale. The stories he tells reveal an incompetent and ideological group of inexperienced people. He lets us know that the nickname for the first group of advisors - Office of Reconstruction and Humanitarian Assistance or ORHA - was the "Office of Really Hapless Americans" and that the organization that Bremer ran - the Coalition Provisional Authority or CPA - was also known as "Can't Produce Anything."
Some gems from his book:
- An exchange between, Bernard Kerik, the New York cop who was put in charge of the Iraq police, in conversation with Robert Gifford, his predecessor, about a group of Iraqi judges who came to visit him.
"Bob, who are these people? Who the fuck are these people?"
"Oh, those are Iraqis"
"What are they doing here?"
"Bernie, that's the reason we are here.
- John Agresto, the director of St John's College in Santa Fe, New Mexico, who was a friend of both Donald Rumsfeld and Dick Cheney's wife, was put in charge of Iraq's university system.
He left the country after saying to Chandrasekaran what must be one of the most compelling confessions of failure by a Bush supporter: "I'm a neoconservative who has been mugged by reality."
And Chandrasekaran has a wonderful description of life inside the Emerald City aka the Green Zone, catered by Halliburton.
"You could dine at the cafetaria in the Republican palace for six months and never eat hummus, flatbread or a lamb kebab. The fare was always American, often with a southern flavor. A buffet featured grits, cornbread and a bottomless barrel of pork, sausage for breakfast, hot dogs for lunch, pork chops for dinner. There were bacon cheeseburgers, grilled bacon-and-cheese sandwiches and bacon omelets."
"Hundreds of Iraqi secretaries and translators who worked for the occupation authority had to eat in the dining hall. Most of them were Muslims, and many were offended by the presence of pork. But the Americans running the kitchen kept serving it. The cafeteria was all about meeting American needs for high-calorie, high-fat comfort food."
Chandrasekaran, who had first hand access to Paul Bremer, provides a delightful antidote to the more ponderous and self-important book by his chief subject: "My Year in Iraq" (Simon and Schuster, 2006). Although it should be said that Bremer's book is an important insight into why the U.S. failed in Iraq, chronicling in minute detail how he worked to manipulate Iraq's politics by creating the Iraqi Governing Council.
But read Bremer's book only after you read Chandrasekaran, and another book that I also heartily recommend: "Babylon by Bus" (Penguin, 2006) by two young volunteers from the United States named Ray Lemoine and Jeff Neumann, who worked under Bremer, who were put in charge of non-governmental organizations in Iraq.
The book, which is a modern day equivalent of Jack Kerouac's "On the Road" consists of them boasting about their complete lack of qualifications for the job and the chaos that they took advantage of by getting stoned on Valium, drive around rip-roaring drunk, helped soldiers get illegal steroids. The book, which is alternately funny and horrifying, explains that they did what they thought was best under the circumstances but admitted freely that they had no idea what they were doing.
"Babylon by Bus" concludes with the person that they selected to take over their job being targeted and killed in June 2004 and an apology to the people of Iraq:
"(W)e apologize for the reckless, unplanned, understaffed, corrupt, and wasteful way in which our country occupied and failed at rebuilding your shattered nation. For every innocent (person) who was killed, tortured, or injured by our country, we extend our deepest sympathy."
But back to the hearing on February 7th, 2007, in Washington DC. The fourth man that will testify is also a staunch friend of the administration: Stuart Bowen. There the similarity between the four men ends, because Bowen is honest and competent, and has dedicated his last three years to uncovering fraud in Iraq.
To learn about his work you need to check out the website of the Special Inspector General for Iraq Reconstruction (SIGIR) although I dare say that you will find it rather dry reading, being composed of serious audit reports and project assessments.
If that does not draw your fancy, check out a sobering and well written book by T Christian Miller, titled "Blood Money" (Little, Brown 2006) that portrays Bowen, a former fund raiser for George Bush in Texas, as a man who is a mix of "professor, political junkie and prosecutor." And also read a series of articles by Ed Harriman of the London Review of Books, who has been following SIGIR's work in detail. Another journalist who has tracked the work of SIGIR practically daily is James Glanz of the New York Times.
Back to Miller. Some more gems from his excellent book, which members of Congress and the public really should read, to get an adequate picture of what went wrong in Iraq's reconstruction.
- "A nation-building process crafted with the care of a sand castle."
- "The rebuilding process was like an enormous bulldozer with a cinder block on the gas pedal, grinding blindly forward but accomplishing little." " Achievements were tallied like body counts: another 100 schools painted, another clinic opened, another 1000 Iraqis employed - statistics that said little about the reality on the ground. It was rebuilding without a foreman or blueprints"
(Miller is perhaps one of the best investigative journalists who has tracked infrastructure and corruption projects until the Los Angeles Times put him on the environment beat. His work is as relentless as Chandrasekaran's is humorous, although both do an excellent job of explaining why the U.S is failing so badly, with their intimate portraits of the real heart of the occupation.)
He interviews Douglas Feith, the under secretary of defense for policy, at his home in Washington about the infamous Halliburton no-bid contracts and Dick Cheney. He tracks down the failure of Halliburton to fix Iraq's oil fields and restore the natural gas supply, perhaps one of the few detailed accounts available in print on what has really happened to Iraq's main source of revenue.
Miller visits Parsons engineering at the company headquarters in Pasadena, California, and at the Green Zone in Baghdad, and tells how they botched the job of fixing Iraq's infrastructure. "Fear and confusion were better reasons than greed for explaining the way that the company acted the way it did." The company was "caught in a crossfire between customer satisfaction, profit and death."
The book tells the sad tale of Colonel Ted Westhusing, who reportedly committed suicide (a matter of some dispute) soon after discovering allegations of fraud by a Carlyle Group subsidiary that was training Iraqi commandos.
And lastly, but not least, it also has excellent descriptions of how David Oliver and Paul Bremer botched the plan for Iraq's reconstruction.
Our next posting, hopefully, will come from the inside the Throne Room, where Henry Waxman, playing the role of Dorothy Gale, will attempt to uncover the real story behind the Throne of the Wizard of Oz.
Beyond We Told You So
Posted by on August 24th, 2006
John Kenney, a former advertising guy, wrote an op-ed entitled "Beyond Propaganda" last week in the The New York Times about his disillusionment upon finally accepting that the new company name and identity for BP he helped create – "Beyond Petroleum" to replace "British Petroleum"– has turned out to be just so much bunkum designed to make a dirty oil company look environmentally friendly on TV, while it's busy drilling for ever more petroleum and spilling billions of gallons all over Alaska.
Its nice to know there are (or were) still idealists in the ad business, people who believe their job can be something noble instead of public deceipt and manipulation. And kind of sad he was so naive.
We at CorpWatch, however, have always been cynical enough to see through obvious rebranding. Way back in 200, we wrote this about BP's new image: "British Petroleum: Beyond Pompous, Beyond Protest,
Beyond Pretension, Beyond Preposterous, Beyond Platitudes, Beyond
Posturing, Beyond Presumptuous, Beyond Propaganda... Beyond Belief."
Entergy Still Asking for Handouts and Putting Screws to Ratepayers
Posted by CorpWatch on August 23rd, 2006
The Times-Picayune has followed up on an issue that CorpWatch broke back in May, namely, how the people barely scraping by in New Orleans are being asked to foot the bill for the private utility's recovery from Katrina. Now it seems ratepayers, who are dealing with higher rents and fewer jobs to begin with, will be paying electricity bills 50% higher than before Katrina. Not because Entergy can't afford to fix its own infrastructure, but because doing so would bite into profits.
Rita J. King, author of our report "Big, Easy Money: Disaster Profiteering on the American Gulf Coast," noted four months ago that Entergy's corporate structure deliberately shields it from most risk associated with doing business in Hurricane Alley. Although Entergy New Orleans is a wholly-owned subsidiary, it is fiscally independent of its massive parent. Therefore, the larger Entergy doesn't have to make up its losses in case of, say, a major natural disaster. What Entergy N.O.'s insurance didn't cover it is demanding from the state government in the form of a block grant. The rest will come out of the pockets of it's customers, many of whom will be unable to pay, and therefore unable to stay.
This is a evilly clever arrangement. Entergy has New Orleans over a barrel. Ratepayers will complain to their lawmakers, who will be motivated to favor directing a massive public grant to a private corporation in order to keep rates down and taxpayers and voters happy and, more importantly, in Louisiana at all.
The Times-Picayune notes that the latest proposed hike is being justified as a "fuel adjustment charge." Which is a time-honored and now again fashionable way to raise prices for just about anything without looking greedy.
How High Can the Katrina Price Tag Go?
Posted by CorpWatch on August 22nd, 2006
It is Katrina anniversary week, and news outlets are abuzz with stories probing why, 12 months after the worst natural disaster in American history, so little progress semms to be made. USA Today notes that the price tag for recovery and reconstruction stands at $122 billion, and shows no signs of slowing its ascent.
That's still much less than half of what the war in Iraq has cost the just the United States so far; the amount spent on that conflict recently surpassed $300 billion. And more than twice as many Americans have died in Iraq.
It is important to note that the war in Iraq is very much man-made, and was very much voluntarily created.
We at CorpWatch strive to put numbers like these into perspective. Our new report, "Big, Easy Money: Disaster Profiteering on the American Gulf Coast" explores where all of that money appropriated to Katrina relief so far has gone. And the answer is: into the same pockets as much of the money appropriated for the war. Huge multinational corporations such as Halliburton, Bechtel, AshBritt and CH2M Hill (who have well-documented ties to the Bush Administration and/or members of Congress) have made a fortune from no-bid and contingency contracts to rebuild Afghanistan and Iraq, and have also received similar contracts to clear debris and rebuild the Gulf Coast. And the very same problems have emerged: overcharging, underperformance, and a near complete lack of accountability.