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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.

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
.
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"

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.

Ding Dong ...

Posted by Brooke Shelby Biggs on July 6th, 2006

I admit when I heard that Ken Lay had died, I sat bolt upright in bed and then wondered what to think. No more. The bastard flipped America - and especially the thousands of peniless ex-Enron employees, and the entire state of California - a final bird. Not a day in jail. Not another penny to the people he stole from.

Perhaps what shocked me most was the discovery that the convicted felon was at home in Aspen, Colorado when he died, out on a $5 million bond while awaiting sentencing. How, I wondered, could this little man who claimed to be $250,000 in debt, be living so high, just a month post-conviction? Ah, the American legal system. Had Lay been, say, an African American looter in New Orleans, he'd have died in a rat-infested cell.

And, lookee here: poor, poor Kenny-Boy had a Goldman Sachs investment account worth over $6 million when he died. Woe was he, indeed.

Now we learn that the civil suits aimed at collecting some of Lay's ill-gotten assets for the benefit of those bilked by his scheming may be dropped. Lay's wife, who stands to inherit the estate, will likely keep it all. This is the woman who staged the most grotesque PR stunt ever when she opened a second-hand store (called, repulsively, "Jus' Stuff" to sell of trinkets from the Lays' 15 homes, claiming she was destitute.

It is infuriating, particularly if you don't believe in karma, or hell, or any other means of divine retribution available after the grave. It almost makes you believe he died on purpose.

How We Got Here: Post-Doctoral Division

Posted by Brooke Shelby Biggs on June 16th, 2006

The New Left Review will either excite or exhaust your brain. But if you want to see the rise of capitalism on a global scale through the eyes of an economist who speaks economese, this is your guy: Robin Blackburn. I'm not saying I understood the whole thing (I wonder if many outside the ivy-clad ivory towers could), but the whole issue of how corporations came to be the driving force in almost everything in the world, and how money became both the ends and the means to all things, is somewhere here between the lines.

The NLR summarizes the piece thusly: "The concept of alternative futures, banished from postmodernity’s eternal present, flourishes on the financial summits of the global economy. Robin Blackburn argues against a neo-Luddite dismissal of the new financial engineering techniques by the Left, while coolly assessing the economic and social costs of their current configurations."

Uh-huh. I almost said that.

The gist is, once you see everything - people, the environment, cultures - as commodities, it all makes perfect sense. Of course, money doesn't have a soul.

Therefore, this begins to appear to be a genius corporate philosophy:

In the years 2001–03 about three million jobs were lost in the United States. By the turn of the century Enron’s managers had become famous for a regime in which each employee knew that one tenth of the staff, those who failed to reach trading targets, would be sacked each year, no matter how good or bad the overall performance. Many of the most powerful corporations today do their best to avoid having a workforce; instead they out-source and sub-contract.

We've seen see how well that works.

Ultimately, the soveriegnty of financial institutions that make this entire "financialization" thing work, actually causes corporations and the system they have creates, self-destruct (see Enron, WorldCom, Delphi et al):

[F[inancial profits over the last decade have mainly taken the form of the cancellation of promises made to employees—exploitation over time—the erosion of small capital holdings by large and unscrupulous money managers and the swallowing of shoals of tiny fish by a shark-like financial services industry. Few of the gains from the reallocation of capital through superior risk assessment have been channelled to production. Financial profits have instead prompted a surge in upscale real-estate prices and the turnover of the luxury goods sector. The mass of employees and consumers have sunk deeper into debt. Yawning domestic inequalities have been compounded by escalating international imbalances, with an inflow of foreign capital covering a deficit on the us current account. With a sagging dollar, an oil price shock and rising interest rates, American households—the consumers of first and last resort—are likely to find the strain of carrying the world on their shoulders ever more difficult. Financialization promotes such a skewed distribution of income that it ends by undermining its own credit-driven momentum.

Took the words right out of my mouth.


U.S. Military Clothing Contractor Raided

Posted by Brooke Shelby Biggs on May 17th, 2006

How cynical is this? In order to take advantage of quotas that require a certain nmumber of federal contracts be awarded to minority-owned and operated businesses, the cuddly sounding "National Center for the Employment of the Disabled" used the word "disabled" to win a contract to manufacture miltary uniforms, and then failed to actually employ disabled people to do the work.

Well, the FBI agents who raided the company's factory last week found out that a whopping 7 percent of the laborers at the plant were moderately to severely disabled. The contract was awarded based on assurances that the labor force would be at least 75 percent disabled.

Cheney Profits From Katrina

Posted by Brooke Shelby Biggs on April 19th, 2006

A Notre Dame professor has analyzed Dick Cheney's 2005 tax return and concluded that our fair Vice President exploited a new tax law instituted post-Katrina to save himself several million dollars. It turns out that Smirky Dick used a loophole intended to encourage charitable donations for Katrina relief to write off charitable contribution which went to non-Katrina causes. That alone might not be enough to get irked about, except that it looks like the exploitation of the loophole was deliberate to minimize his overall liability, and he used Halliburton money to do it.

Cheney exercised some of his Halliburton options in late 2005, during which time that company's profits were soaring in part because of fat no-bid reconstruction contracts granted to its subsidiary KBR in the wake of Katrina. Cheney used those proceeds -- $6.8 million -- to donate to charities per his 2001 agreement to use his options only for charity.

Says the prof: "While there's nothing inappropriate about that from a legal perspective, it does demonstrate how the legislation, which was sold to the public as providing relief to Katrina victims, provided significant tax benefits to the VP (and potentially other wealthy individuals) in situations that have nothing to do with Hurricane Katrina."

Not illegal but definitely soulless, cynical, opportunist, and greedty. So, no big surprise.

See No Corruption, Address No Corruption

Posted by Brooke Shelby Biggs on April 3rd, 2006

It seems that not only does the right hand not know what the left hand is doing, the right hand doesn't even knows what it's doing.

Last week the Pentagon, presumably with a collective straight face, finished reviewing its contract procurement system (specifically with regard to its primary vendors), and found that, hey! the system works great!

Never mind that Iraq contractor Custer Battles was found guilty of $3 million in fraud just the week prior. Never mind that the Defense Logistics Agency confessed that it had been overcharged more that $300,000 by its suppliers of such crucial terror-fighting implements as refrigerators and ice-cube trays. ($32,000 for a refrigerator somehow didn't spark suspicion for years, nor did a $20 ice-cube tray; I'm in the wrong business). Never mind that the DLA decided to discontinue contracts with several suppliers deemed to have scammed them.

If it weren't my money, as a United States taxpayer, it would be hard to feel sorry for the feds for getting, er, used and abused. After all, the only way they can avoid being embarassed is to deny that they were suckered. Its like enabling an abuser. Rumsfeld pops up with a black eye, and says "I ran into a door," instead of "I bought a $32,000 fridge." Maybe he thinks deserves it.


Beyond Cronyism to Geopolitics in the Port Controversy

Posted by Brooke Shelby Biggs on February 22nd, 2006

As much as this is a story of privatization and racism, it is also about cronyism. The New York Daily News notes that Dubai Ports World has at least two ties to the Bush Administration - Treasury Secretary John Snow who, a year after joining the administration, sold his company's port operations to the same Dubai firm; and David Sanborn, the head of the U.S. Maritime Administration who still runs Dubai Ports World's European and Latin American operations.

But before concluding that this is simply more Bushistic cronyism, consider that almost all of the United States' military supplies headed for Iraq and Afghanistan are channelled through Dubai's ports, at the pleasure of Dubai's government, which in turn just happens to run DP World. This is geopolitical quid-pro-quo. Don't piss off Dubai, and we can still run our wars in the Middle East.


Pump and Dump

Posted by Brooke Shelby Biggs on February 22nd, 2006

We're back!

Great interview with the authors of "Pump and Dump: The Rancid Rules of the New Economy" on the WaPo site today. The book's authors float an obvious theory (to us anyway) of 1990s financial fraud called "pump and dump," in which corporate executives artificially inflate stocks and securities in order to sell their shares at higher prices, leaving any fall-out and responsibility on naive investors.

You don't say? We applaud the market timing of the publisher, releasing the book as they did during the Enron trial.


Tyco Execs' Mugshots

Posted by CorpWatch on January 3rd, 2006

It isn't everyday you get to see Dennis Kozlowski holding a jailhouse clapboard featuring his vitals. Thanks to Thesmokinggun.com, we can give you that pleasure.

kozlowski mugshot

Click here for former Tyco CFO Mark Swartz's mugshot. (Hey, where did his curly tresses go?)

Looking Back on 2005

Posted by Brooke Shelby Biggs on January 2nd, 2006

Sure, sure, The New York Times is the voice of the status quo according to lefties, the bully pulpit of the liberal elite according to righties. But if corporate corruption, graft, greed, incompetence and influence-peddling are of concern to you - no matter your political stripe - you have to admit that a lot of stories used to fly under the radar of the Gray Lady are now frontpage news, and that is good news. Perhaps we can thank Kenneth Lay for that; what we at CorpWatch have long done just wasn't as sexy before he came along. Thanks, you big lug.

So here in the first week of a new year, we begin with a clean slate, ready for a year of customary despoiling. In reflection, let us review the year in corporate crime, courtesy of Gretchen Morgenson at The New York Times. (Or, of course, you could page through a few thousand of our favorite stories on the subject from the last 12 months ...)

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