Saturday, November 29, 2003

Perfectly Legal:
The Covert Campaign to Rig Our Tax System
to Benefit the Super Rich -- And Cheat Everybody Else

By David Cay Johnston

Leona Helmsley, the "Queen of Mean," wasn't afraid to express opinions shared by her more reticent confederates in the ongoing class war, including the belief that "only the little people pay taxes."

Indeed, despite Supreme Court Justice Learned Hand's dictum that "taxes are the price we pay for civilization," the royal "we" as he used it seems quaintly wishful (an unintended sleight of hand?) because, as is so often the case, when it comes to taxes, the wealthy abide by a much different set of rules than the rest of us.

"What surprised me more than anything," NYTimes investigative reporter David Cay Johnston concludes in Perfectly Legal, the best book published in recent memory about U.S. tax policy, "was the realization that our tax system now levies the poor, the middle class and even the upper middle class to subsidize the rich ... the majority of Americans are being duped into supplementing the incomes and extravagant lifestyles of the rich and powerful."

Tax policy is not an easy beat. Johnston has spent almost a decade cultivating contacts within the impenetrable IRS bureaucracy, slogging through the bewildering snarl of intricate provisions known as the U.S. tax code, and "following the money" a lot farther than Woodward and Bernstein ever had to.

Johston's solid research and flair for finding remarkable stories about the most artful of corporate and personal tax dodges has landed him a Pulitzer and a regular spot on the Times' front page, and his ability to elucidate the important outrages has engendered considerable trust, even among many within the corporate sector and its low-lying (but high-priced) tax experts in the accounting and legal professions (the introduction includes a plea to those kind enough to send him documents in unmarked packages to include an explanation of their importance).

In early 2002, Johnston blew the lid off corporate inversions -- transactions that dozens of multinationals have used to moved their headquarters offshore (on paper only) in order to avoid paying U.S. taxes on overseas income. This move, accomplished by opening a mailbox in a place like Bermuda, has saved companies like Tyco hundreds of millions of dollars each year. IRS consultant Jack Blum estimates that individuals and companies using offshore tax havens to escape U.S. taxes on overseas income cost U.S. taxpayers (who have to make up the difference) an estimated total of $70 billion per year. And this is just the tip of the iceberg: loopholes in the Sarbanes-Oxley act passed after Enron and WorldCom have made it easy for accounting firms (and other "aiders and abettors" of corporate crime, fraud and abuse, such as bankers and lawyers) to continue selling all kinds of tax shelter schemes to corporate and individual clients, as Senator Levin and the Committee on Government Reform revealed in recent hearings.

Johnston's coverage of Stanley Works' proposal to relocate its headquarters to Bermuda, coming on the heels of similar moves by Nabors, Ingersoll-Rand and over a dozen other large companies, ignited a strong reaction among shareholders, community members, workers and politicians who, together, managed to stir up enough public indignation to stop the deal. Johnston's reporting uncovered some remarkable information, including the fact that no one would profit from the move except top executives like CEO John Trani -- not even the shareholders, whose ability to bring derivative suits would be hurt in Bermuda, and who would take a capital gains tax hit when the company's stock was converted. (For an overview on corporate tax avoidance through offshore havens see "Sacrifice is for Suckers")

The conversion of corporate tax departments into new profit centers is exemplefied by the lengths to which many corporations go to game the tax system (described in this Business Week investigation ). Corporate tax lawyers and accountants are expected not merely to know how to help the company comply with the maze of intricate and overlapping provisions of the law, but develop new strategies for parking intellectual property offshore, intra-firm transfer pricing and a variety of other schemes that take advantage of specific provisions in the law (some of which they also draft and hand off to the company's lobbyists). As Lindy L. Paull, chief staffer for Congress's Joint Committee on Taxation put it, Enron's tax department "was converted into an Enron business unit, complete with annual revenue targets." Enron managed to avoid to avoid paying taxes four of the last five years before the company filed for bankruptcy.

As excessive as it was, Enron's behavior signalled a general business trend: Despite corporate complaints that the official U.S. income tax rate is among the highest in the world at 35 percent, the percentage of corporate profits (after all the deductions) that went to federal income taxes dropped from 26% in 1993 to 22% in 1998. Publisher Thomas F. Field described the downward trend in corporate taxation as a consequence of globalization in Tax Notes' 30th Anniversary Issue: "One obvious change in the international area is the near-universal reduction in corporate tax rates on a country-by-country basis and the ongoing competition between taxing jurisdictions to reduce their corporate rates further. ... A few years ago, at the first World Tax Conference sponsored by the Canadian Tax Foundation, a corporate tax panelist asked for a show of hands from the audience of tax professionals. He asked, "How many of you think there will be a significant corporate income tax in industrialized countries 10 years from now?" Only a few hands went up. "How many of you think there won't"? Almost all hands were in the air. That response is not a scientific survey, but it shows which way the wind is blowing."

Much more significant and damaging to the Treasury than the offshore corporate tax dodge has been the overall tax agenda that has been openly pushed through Congress since Bush and the "compassionate conservatives" came to town. The logrolling of tax cuts for corporations and the super-rich is the dream of right-wing activists like Grover Norquist who has been working in close coordination with the White House and Republican leaders in Congress to effect a 30-year plan whose only serious obstacle seems to be competing corporate interests.

Yes, there are a few knowledgeable public interest voices that have had some effect on tax policy, including Taxpayers for Common Sense and Bob McIntyre at Citizens for Tax Justice. Significant progressive grassroots education and activism is increasinly being organized by groups such as United for a Fair Economy and other members of the Fair Taxes for All coalition, but the movement still has a way to go before it's strong enough to halt the right-wing/corporate juggernaut that is already in full gear. It doesn't help that so many Democrats turn jelly-legged when accused of instigating "class warfare" when they deign to criticize Republicans for going on a virtual rampage.

(Johnston is no partisan -- he acknowledges that while the Republicans are more aggressive in cutting corporate taxes, Democrats are also culpable of hurting the poor and middle class by, among other things, letting the alternative minimum tax morph from a catchall for rich and aggressive tax avoiders into a levy on the middle class. "During Clinton's tenure as president, the share of income going to the top 400 more than doubled, from a half of 1 percent to 1.1 percent of all income. But the portion of income going to federal income taxes fell by 18 percent for the top 400, while rising for everyone else by 18 percent. Clearly, favoritism for the rich is bipartisan.")

With tax cuts for the rich and corporate class certain to cause ballooning deficits that can eventually be used as an easy excuse to crush social services and other programs used primarily by the poor and working class, the structural basis of societal cohesion faces significant stress, and a quasi-fascistic erosion of civil rights seems designed to ensure that any signs of social unrest will easily be quelled by a well-developed police and prison state (the part of the government that Grover and the Republicans always manage to avoid mentioning when talking how they want to "get it down to the size where we can drown it in the bathtub.") Meanwhile, the neocons are aways ready to divert us from drawing attention to how few of us benefit with their fear-driven and brazenly imperial foreign military escapades. Understand who pays (and doesn't pay) taxes and you see clearly how cynical and hypocritical all the usual prattle about patriotism truly is.

There is a lot of elegant debunking of right-wing propaganda in this book. Shortly after Bush took office, his Administration was joined by the American Farm Bureau in a campaign to kill the estate tax. "To keep farms in the family we are going to get rid of the death tax," Bush claimed. One problem discovered by reporters at the Times was that neither the Administration nor the Farm Bureau could identify any families who had actually lost their farms to the estate tax. All of the Iowa farmers they interviewed (most of them Republican Party members) had never even heard of anyone losing their farm due to the estate tax. Most had no illusions that its repeal was intended to benefit very wealthy Republicans (including Bush and Cheney) and their high-donor campaign supporters. Yet the grim fact that people like this passively accept the fact that they are being screwed by their own party suggests that they don't feel like they are being offered any viable alternative. That should be a wakeup call to any Democrats who continue to believe the DLC line about how the party needs to shy away from populist notions of economic justice.

Tax coda:

It would be enough to read Perfectly Legal if you're simply interested in arming yourself with the facts, but there is plenty of entertainment and potential intrigue here as well.

In the first chapter, Johnston introduces us to Jonathan Blattmachr of Milbank, Tweed, Hadley & McCloy, a firm that Johnston notes in passing has had longstanding ties to the CIA. (According to his biographer, former CIA director William J. Casey invented the gambit and the term "tax shelter." Casey used offshore corporations as conduits during Iran-Contra; he also used BCCI's Cayman Islands accounts to fund al Qaeda's activities in Afghanistan during the Cold War. Halliburton's use of a Cayman Islands subsidiary to conduct business in "axis of evil" member Iran suggests that the use of offshore tax havens to avoid any scrutiny of foreign policy strategies as complicated as a Mark Lombardi drawing may be a tradition that's very much alive).

Blattmachr is not well known outside the world of trusts and estates, but within the world of the rich (famous and not) he has a reputation for being able to navigate secret passages hidden in the tax code and see both "the whole and the holes in the whole." For instance, Blattmachr is the architect of such clever tax avoidance devices as the "accelerated charitable remainder trust," which Bill Gates used to reap $200 million in profits on Microsoft stock without paying the $56 million of capital gains taxes that federal law required at the time. (Perhaps his son's ability to game the system so blatantly is one reason why Bill Gates Sr., the father, has joined with United for a Fair Economy in their Responsible Wealth Project.)

Monday, November 24, 2003

Jeff Kaplan has a new article about the fight against corporate rights in Orion

"Corporate power, largely unimpeded by democratic processes, today affects municipalities across the country. But in the conservative farming communities of western Pennsylvania, where agribusiness corporations have obstructed local efforts to ban noxious corporate farming practices, the commercial feudalism [Alexis] de Tocqueville warned against has evoked a response that echoes the defiant spirit of the Declaration of Independence."

There are a few excellent books on this topic, including:

Gangs of America: The Rise of Corporate Power and the Disabling of Democracy by Ted Nace (note that you can download the entire book off the web site)

Unequal Protection: The Rise of Corporate Dominance and the Theft of Human Rights
by Thom Hartmann

and Defying Corporations, Defining Democracy
a collection of articles by POCLAD

Related information can be found at Reclaim Democracy and CELDF

Wednesday, November 19, 2003

Corporate Warriors:
The Rise of the Privatized Military Industry

By Peter Singer
Cornell University Press (2003)

It’s a rare day when you’ll find me giving props to anyone from the milquetoast Brookings Institute, but Peter Singer’s Corporate Warriors is both timely and comprehensive.

The growth of the global PMC industry has exploded in the past decade, when the U.S., government alone awarded over 3,000 contracts to private military firms. The 1,000 or so companies that define the corporate military industry currently rake in a total $100 billion per year for active operations in over 50 countries around the world, and the industry is expected to double in size to $200 billion by 2010.

“Accordingly, staggering economic gains have been made in investments in the PMF industry,” Singer reports. “In the 1990s, publicly traded companies in the field grew at roughly twice the rate of the Dow Jones industrial average.” The industry was protected from the ravages of the high-tech market crash by the response to the terrorist attacks of September 11. The value of mil-corp stocks like L-3 (which owns MPRI), for instance, have doubled since 9/11.

“The war on terrorism is the full employment act for these guys,” one Pentagon official commented. “A lot of people have said, ‘Ding, ding, ding, gravy train.’”

Yet the industry’s phenomenal growth started long before 9/11, and is attributable to a number of factors:

First, the military, like many businesses, has outsourced and downsized its permanent labor force in recent years, at a time when there has been an expansion of interventions and other contingency operations. Many argue that the U.S. military is overextended and under resourced. The high political costs make a draft virtually unthinkable (at least before the next election), so the Pentagon has increasingly used military support firms (who also conveniently provide lucrative jobs for ex-military personnel.)

A second factor has been a so-called RMA – Revolution in Military Affairs. Rather than developing and spreading technologies out in the broader market, the military is more often adopting technologies and business strategies developed by the private sector. Private contractors often develop new ways to meet new military requirements more rapidly than the military can meet them itself.

Third is the spread of the dubious doctrine that privatization results in economic efficiency. Privatization has been the mantra for a variety of government services (garbage, prisons, schools, social security), supported by Democrats and Republicans alike, with continuous pressure from the industries that stand to benefit.

Finally, of course, there's the lobbying these firms do in Washington to keep government contracts headed their way. In 2001, 10 private military companies spent more than $32 million on lobbying. DynCorp retained two lobbying firms that year to successfully block a bill that would have forced federal agencies to justify private contracts on cost-saving grounds. MPRI's parent company, L-3 Communications, had more than a dozen lobbyists working on its behalf, including Linda Daschle, wife of Senate Minority Leader Tom Daschle. in 2002, L-3 won $1.7 billion in DoD contracts.

During the first Bush Presidency, Dick Cheney gave Halliburton subsidiary KBR a contract to evaluate the privatization of certain military services. The company conveniently concluded that privatization would save money, and lo and behold, KBR somehow got the first contract -- the same contract (known as the LOGCAP) that was expanded to give the company a leading role in the reconstruction of Iraq. (Cheney must have learned a lot from his DOD experience. Recall that not only did he go to work for Halliburton after his stint at the Pentagon, but he headed the 2000 Bush campaign’s search for a running mate, in the end recommending himself as the best man for the job.)

A lack of basic accountability, and reports of cost over-runs (the GAO found that Halliburton charged the government some $86 per sheet of plywood during operations in Kosovo) suggest that claims for efficiency are unsubstantiated at best. If you want to run a government “like a business” (as our MBA president once claimed), then you probably don’t want to run it like Enron, with Anderson-like accounting. The efficiencies of privatization rest on the theory of a competitive market – which doesn’t apply to most military contracts. In addition, the design of the “cost-plus” contracts is inherently wasteful, delivering profits as a percentage of overall costs, thus creating incentives to jack up the cost).

There are three types of PMCs. The Provider firms, the Consultants, and the Support firms.

• PMCs most closely fit the stereotypical role of mercenaries. They provide technical combat services at the forefront of the battlespace, by engaging in actual fighting, either as line units or specialists (e.g., as combat pilots) and/or commanding and controlling field units. These “tip of the spear” operators, like Sandline, Executive Outcomes and Global Risk (which has 1,100 armed personnel in Iraq, including 100 from the Balkans, 500 from Fiji and 500 Nepalese Gurkas), have run combat operations in Angola, Sierra Leone, Papua New Guinea, Indonesia and elsewhere. “Although these firms deploy units that are often much smaller in manpower relative to their client’s adversaries, their effectiveness lies not in their size, but in their comprehensive training, experience, and overall skill at battlefield judgment, all in fundamentally short supply in the chaotic battlefields of the last decade.” More commonly, they serve as specialized “force multipliers” who act as “mini-generals” providing the expertise that is often lacking.

• Military Consulting Firms don’t operate in the battlefield, but provide consulting and training services integral to the operation and restructuring of the client’s armed forces. Examples include MPRI, Levdan and Vinnell – the PMC that was once owned by the Carlyle Group (See 11/15 entry below), and which lost at least nine employees in the bombing of its compound in Saudi Arabia in May.

• Support firms are skilled in supply chain management. This includes companies like Halliburton’s KBR, which maintain military bases, doing everything from laundry and food services to staging operations and equipment maintenance. In high-tech wars like the Gulf Wars, the maintenance of high-tech equipment is crucial.

As Singer suggested recently in a briefing on PMCs on the Hill, the corporate military industry is “totally unregulated.” Congressional notification doesn’t apply until a contract is worth $50 million or more (a requirement easily evaded by the chartering of extraterritorial subsidiaries or by breaking the contracts up into smaller increments). Often the only bureaucratic requirement is a simple export license from the State Department’s Office of Defense Transitions Assistance, which is usually easy to obtain and comes through a process protected from scrutiny. (State Department officials cannot provide information on PMF contracts due to the claimed need to protect proprietary information.)

Over twenty Private Military Corporations (PMCs) are currently operating in Iraq, training Iraq’s new police force (Dyncorp), protecting the oil pipelines from sabotage, and providing basic logistical support to the troops. We don’t know what most of these firms are actually doing or who hired them, in large part because most PMC contracts are even more obscure than the no-bid contracts that Henry Waxman has been doggedly objecting to.

We know even less about PMC activities elsewhere. Now and then there are news reports about “contract workers” killed in the southeastern mountains of Afghanistan, or about three unidentified contractors captured by the FARC in Columbia after their plane was shot down, but most stories are left untold.

Thus, the use of PMCs allows government agencies (particularly in the executive branch) to potentially skirt specific restrictions on the use of force, such as the Leahy Amendment.

There is also little evidence that the potential strategic consequences of privatizing critical military services on the battlefield are being addressed. For example, the points of interface between public forces and contracted forces can be places of “particular vulnerability that an adversary might exploit in the physical or electronic realm.” There have been reports of U.S. troops left in the lurch during the Iraq war when private contractors suddenly “changed their mind” and left, breaking a critical link in the supply chain. Contract personnel also cannot be shifted quickly to combat roles, so that there is no military buffer or insurance if the force requirements suddenly rise or there is a rapid change of conditions on the ground. Contractors can therefore be “rigid tools for a fluid environment,” according to Deborah Avant, author of “The Market of Force.” There have already been allegations of conflicts between active duty personnel and contractors over who is training forces on the ground.

The rights of contractors as potential prisoners of war is also unclear (a potential concern in places like Columbia, where the FARC is holding three Dyncorp employees hostage): contractors do not operate under a Code of Military Justice.

Meanwhile, there are few to no standards within the industry itself regarding who they hire (when firms are struggling to get people into the field, there is little incentive to screen personnel for their potential history of human rights violations – which has important implications for jobs such as the training of ex-Baathists to serve in the new Iraqi police force).

PMCs can suffer from a bad reputation, but that hasn’t stopped many of them from working for drug cartels, guerrilla groups and even groups linked to al-Qaeda (two firms -- Sakina and Transglobal -- have reportedly run jehadi training courses). It’s unlikely that the conservation groups that hired them to protect the White Rhino in Africa were able to conduct due diligence on a PMC firm that could in turn use this contract as a resume builder to provide legitimate cover for shadier operations.

There is also an obvious absence of any control over subcontracting and some PMCs are often incorporated offshore (in places like the Channel Islands) where their finances and ties are difficult to track. The UN has a special commissioner for mercenaries, but they are overwhelmed and essentially incapable of dealing with PMCs as a regulatory issue.

Nor does the U.S. set any contractor responsibility standards, as should be obvious considering that Dyncorp was awarded the same kind of contract in Iraq that they were awarded in the Balkans, where company employees were allegedly involved in sex trafficking. (When it came to light, Dyncorp fired the whistleblowers, not the personnel who allegedly committed the crime.)

There are also other potentially unforeseen consequences. According to Max Weber, one of the essential characteristics of a state is that it “successfully upholds a claim to the monopoly of the legitimate use of physical force in enforcement of its order,” the ultimate measure of sovereignty being the control over the means of internal and external violence. It has been assumed for some time that the exercise of power in the form of sheer military force has been largely the exclusive prerogative of governments. But that assumption may soon break down, complicating questions of sovereignty, so that “where state structures are weak, the result is a direct challenge to the local basis of sovereign authority, its ability to overwhelm all other challengers when it comes to violent force.”

It is not out of the range of possibility that we are entering an age, similar the early medieval period, “when highly expert military tasks … were often handled by hired specialists, rather than by regular soldiers.” With organized military resources available on the open market, power is more fungible than ever.

In the late 1990s PMCs tipped the balance in a number of wars. After experiencing early defeats in its war with neighboring Eritrea, Ethiopia hired Russian military experts to run its air defense, artillery, radar and electronic warfare. The firm Sukhoi sold Ethiopia a wing of Russian Su-27 fighter jets (equivalent to the U.S. F-15), including in the contract the services of over 250 pilots, mechanics, and ground personnel, who would fly and maintain the planes. In essence, Ethiopia was leasing its own small, but complete air force. The country also hired its own set of private Russian ex-generals, who played a strategic planning role. Ultimately, this revamped force crushed the Eritrean army quickly.

The potential for scenarios that are the stuff of science fiction is not unimaginable.
There could be a foreseeable circumstance where corporations hire the PMCs, or corporate conglomerates have their own PMC subsidiaries that pursue the company’s interests, apart from any nation-state.

“The one aspect that formerly limited the power of multinational corporations was their physical weakness, which kept them dependent on the local state and only able to operate in zones of relative stability. This security was provided by the state, meaning that their operations and even survival as a viable business were conditional on the local state carrying out its responsibilities. Today, this limit no longer necessarily holds true. PMFs possess a capacity for armed force that rivals and even surpasses local state functions. They can transfer this to their multinational corporate clients. Thus, multinational corporations and their allied private military firms now have the capability to engage in what they term “security-led investment,” in which the physical weakness of the local state is irrelevant to their business operations.”

The emergence of this new form of transnational firm is an obvious example where the expansion of global markets – globalization – has done anything but diminish the incentives for violent conflict (Thomas Friedman’s ludicrous theory, spelled out in the Lexus and the Olive Tree). “PMFs are a different type of company that, instead, relies on the very existence of conflict for profit.”(174).

PMCs could thus act as leaders in a newly evolving stage of corporate dominance, or as the UN special rapporteur put it, “the multinational neocolonialism of the twenty first century.” If Osama bin Laden and al Qaeda can take advantage of the weaknesses of Afghanistan’s government to build a base of operations accountable to no one, there is little that one can imagine can stop corporations from similarly colonizing their hosts. With extreme polarizations of wealth, it’s easy to imagine giant gated cities which protect rich outsiders from the demands of poorer locals (not unlike Vinnell’s compound in Riyadh).

“Conceptions of the international security environment exclusively based on the sole power of states miss out on some of the important changes that the privatized military industry portends,” Singer warns. “The result is that states in the current global system may be like dinosaurs toward the end of the Cretaceous period: powerful but cumbersome, certainly not superceded, but no longer the unchallenged masters of their environment.”

PMFs reject this thesis of a new type of corporate imperialism, says Singer, noting that they have generally been invited in by legitimate governments. But of course 19th century imperialism also often began when a weak ruler requested the original intervention.

It is also easy to envisage situations similar to the warfare that occurred between the various mercantile companies in the 1600s and 1700s, Corporate forces might again enter battle against each other (there are already many well-known examples of large-scale corporate espionage which likely represent only the tip of the iceberg).

“In fact,” Singer adds, “this scenario may already have occurred. Executive Outcomes is rumored to have engaged forces of Omega Support Ltd. in Angola. Violence among firms has also been reported in the DRC and Sierra Leone, often over competing mining claims.” (189) “An added danger of greater private power is the risk that empowered corporate actors themselves will become competitive not only with weak local states, but also to the national interests of other powers, including even their own home states.” (Imagine a plot similar to the movie “Seven Days in May,” where PMC officers, originally invited to serve in top Pentagon advisory roles, effectively take over the military leadership, and in turn unilaterally force the country into war. You might object that we've already sen that w/Richard Perle and neocon cabal.) “Examples of American-based arms manufacturers and technology firms that sold their goods to foreign enemies of the United States abound; nothing would seem to make PMFs, who have even less oversight on their services, any different.

We have already learned from Iran-Contra and BCCI that the locus of judgment on whether, when and how military operations are carried out can easily slip outside state control. In such circumstances, the state’s agent of action is no longer its national military, but instead a network of actors with little accountability or allegiance to any nation, respect for its laws or its citizens. Throw in unbridled profit motive and you have the potential for significant and unforeseen consequences.

Tuesday, November 18, 2003

Saving Private Power
(The Hidden History of “The Good War”)
by Michael Zezima
New York: Soft Skull (2000)

When William E. Dodd, U.S. ambassador to Germany during the 1930s, declared that “a clique of U.S. industrialists is … working closely with the fascist regime[s] in Germany and Italy,” he wasn’t kidding. In fact, it was more than just a small “clique.” A handful of books published in recent years have pulled the fascist skeletons out of more than a few corporate closets.

Among the major U.S. Corporations who invested in Germany during the 1920s were Ford, General Motors, General Electric, Standard Oil, Texaco, International Harvester, ITT, and IBM. Although corporate historians profess that they did this to help the country recover from the devastations of WW I, they are careful to omit mentioning that the German cartels they financed helped bring Hitler to power. And of course all were more than happy to see the German labor movement and working-class parties smashed by SS thugs. U.S. multinationals profited from and supported Hitler’s industrial war machine as it was built and even after the U.S. entered the war:

• As Max Wallace writes in The American Axis, Ford was not only aware of the Nazis’ use of slave labor at their factories in Germany and France, but condoned it. Hitler, in turn, was a big admirer of Henry Ford (a notorious anti-semite) whose photo he kept on his desk.

• Standard Oil of New York honored its chemical contracts with I.G. Farben – the German chemical cartel that manufactured Zyklon-B, the poison gas used in the Nazi gas chambers – right up until 1942. IG Farben’s corporate descendants include companies like BASF. (Aside: In the late 1980s, I was helping a community group in Indiana fight a BASF hazardous waste incinerator proposal. A guy who claimed to be an opponent came to our office in Chicago with information about BASF’s ties to the Nazis. We never got distracted by that history from the threat the incinerator posed to community health. We had reason to be reluctant, not just because it might derail us from broad community support, but also because I could smell a strong chemical smell on the guy’s suit – which may just mean that he was a guilt-stricken employee, not a plant. In any event, BASF ended up shipping their waste to Chemical Waste Management’s notorious commercial incinerator on Chicago’s south-east side where, on Labor Day, community residents added this sign to the parade in protest of the company’s search for a permit renewal from EPA: “1940: Hitler Brings People to the Gas Chamber…1990: Chem Waste Brings the Gas Chamber to the People.”)

• In 1976, Anthony Sutton wrote in Wall Street and the Rise of Hitler that not only was an influential sector of American business aware of the nature of Naziism, but for its own purposes aided Naziism wherever possible (and profitable) – with full knowledge that the probable outcome would be war involving Europe and the United States.” Those eminent business leaders included the Rockefellers, GE , National City Bank, Chase and Manhattan banks, Kuhn, Loeb and Company, ITT and “scores of other business elitists.” Sutton’s book puts much of the blame on international bankers who constructed complicated deals to hide their support of Hitler. Of course, the multinationals have not forgotten how to engineer such coups. ITT, for example, later backed the coup that brought to power Latin America’s most notorious fascist, general Pinochet in Chile in 1972.

• Other companies that traded with the Reich and, in some cases directly aided the war machine before and during this time, included the Chase Manhattan Bank, Davis Oil Company, DuPont, Bendix, Sperry Gyroscope, and the aforementioned General Motors. GM top man William Knudsen called Nazi Germany “the miracle of the 20th century.”

• In 2001, Edwin Black explained the strategic alliance between Big Blue’s founder Thomas Watson and the Nazis in IBM and the Holocaust. No surprise to readers of Gravity’s Rainbow (even Wyman Jr. at Amherst?), who know that behind the cybernetic language of corporations there is a universal stone determinacy, a Calvinistic preterition, a single labyrinthine plot that manipulates men and events, so that we fight ineffectually against a vastly superior machine that makes us active participants in our own destruction, yearning, perhaps, for a secret integration -- the “single-set of coordinates” where Zero and One meet and we can find a starting place for a new beginning -- after all, haven’t They arranged everything? But how does that explain the wing-tips?

• Perhaps most interesting is John Buchanan’s series of reports for the Nashua, NH Gazette (finally picked up by AP) that Prescott Bush (father of President George Bush and grandfather of the current president) worked with his father-in-law, George Herbert Walker, in the family firm Union Banking Corporation to raise $50 million for the Nazis, by selling German bonds to American investors from 1924 to 1936. The Federal Government shut the bank down in 1942, under the Trading With the Enemy Act.

• We should also not forget that the corporate collaboration with members of the Nazi technocratic and scientific elite extended long beyond the war. In 1991, Linda Hunt, a former executive producer of CNN’s investigative unit, published Secret Agenda (St. Martin’s), an expose of Project Paperclip, an OSS/CIA program designed to keep Nazi war criminals and scientists from falling under commie influence by placing them in the employ of U.S. companies such as General Electric, Grace and Dow Chemical. At least 1600 scientific and research specialists and thousands of their dependents were brought to the U.S. under Operation Paperclip. Hundreds went to work for universities, defense contractors, and CIA fronts, with all sorts of weird consequences. E.g. Paperclip scientists working at Edgewood Arsenal in MD performed some of the first human experiments with LSD and other “psychochemical warfare” agents that were developed in the search for the ultimate mind-control weapon that could turn a man into a “Manchurian Candidate” (Richard Condon’s fictional character, who had been brainwashed and reprogrammed as an unwitting assassin). As former CIA agent David McMichael said, “drugs and covert operations go together like fleas on a dog.”

Of course, in America you're not taken seriously if you openly deny the Holocaust. (In 1993, Newsweek reported that nearly 40 percent of adult Americans expressed doubts as to whether a European Holocaust of the magnitude depicted in standard histories occurred during World War II.) But what does it say about our culture and politics that we deliberately ignore the role of business in the emergence of monstrous forms of blind nationalism and patriotism? Although there is little doubt outside the U.S., there continues to be a strong culture of denial that the war in Iraq had anything to do with oil or the interests of defense contractors? And maybe the comparisons between Saddam and Hitler are apt, considering U.S. corporations provided support to both. We should ask ourselves how much the world really has changed since WW I, when Americans renamed Sauerkraut “liberty cabbage.”

“My hope,” Zezima writes, “is that by exposing the lie of such a powerful and enduring myth, we can all begin questioning everything being marketed to us within our commodity culture. Saving Private Ryan (the movie), by bringing home the insanity and suffering of warfare, has led directly to Saving Private Power which, I feel, can help explain how that insanity and suffering has been packaged and sold as inevitable and necessary … and good.”

On the role of corporations in fascism:

In 1980, Webster’s New World Dictionary offered the following definition of fascism:
“a system of government characterized by rigid one-party dictatorship, forcible suppression of opposition, private economic enterprise under centralized government control, belligerent nationalism, racism, militarism, etc.”

In true Orwellian fashion, a recent (1990) variation removes all that unpleasant talk about private economic enterprise: “fascism: a system of government characterized by dictatorship, belligerent nationalism and racism, militarism, etc.”

Saturday, November 15, 2003

The Iron Triangle: Inside the Secret World of the Carlyle Group
By Dan Briody
John Wiley & Sons (2003)

(A 45 minute web-streamed Dutch documentary about Carlyle)

It's hard to write objectively about the Carlyle Group, the global private equity investment bank that specializes in defense and aerospace takeovers, without sounding like a conspiracy nut. Yet it's hard to imagine any single company that epitomizes Eisenhower's warnings about the "military-industrial complex" more than the Carlyle Group.

The company employs a who's who of Washington and global insiders, including (until recently) ex-president George H.W. Bush, ex-SEC Chair Arthur Levitt, former UK British Prime Minister John Major, "Spooky" Frank Carlucci -- the former deputy director of the CIA and Reagan-era Secretary of Defense, Bush family consigliere James Baker III, Fidel Ramos (former President of the Philippines), and a roster of other top ex-government figures, Ivy-league MBAs, World Bank executives, etc. As Dan Briody (a business journalist who has written for Forbes, Wired and others) puts it: "over time, the pattern of Carlyle's hiring practices emerges to reveal a series of old friends helping one another out." And opportunizing on the decisions that their ex-colleagues (e.g. Colin Powell, once a Carlyle consultant) or sons (in Bush's case) are making inside a sitting administration.

The Carlyle Group was the first major private venutre capital firm to be located on Pennsylvania Avenue, blocks from the White House. As such, Carlyle epitomizes what Michael Lewis was the first to label "access capitalism" in a 1993 article for The New Republic. And given the way many of the post-war contracts have been doled out, Carlyle has become a model for THE way of doing business in Washington these days.

The company has come a long way since the early 1970s, when it was first established by a fluke at a NYC hotel of that name (chosen to give teh firm an old money patina). The company's first deal was a scam that brokered tax loopholes intended for Alaskan Eskimos but sold to U.S. companies. Carlyle partners have since continuously milked their high-level contacts ("in Washington, it's not what you know, but who you know" Briody writes) so successfully that the company boasts in its own marketing literature about having "a vast interlocking global network." Carlyle's influence clearly signals a dangerous trend in U.S. foreign policy that has gained considerable force and deserved attention during the Bush administration.

The company was embarrassed when an investment stake from the bin Laden family was revealed after 9/11. (Carlyle quietly returned the investment after the unwelcome attention, though bin Laden had been identified as a terrorist long before then). Like Halliburton, Carlyle pioneered the privatization of certain military operations. The company's Vinnell Corporation subsidiary (which Briody calls the "clearest example of Carlyle's business inside the Iron Triangle") -- recently spun off -- has been training the Saudi Armed Forces in how to protect their country's oil fields since the mid-1970s (Vinnell personnel actually fought alongside Saudi forces in the first Gulf War). Vinnell was the target of a major terrorist bomb attack in July. (The bin Ladens pulled their money out of Carlyle after 9/11.)

Critics have suggested U.S. interests have also been bent to help the company. For example, ex-president George H.W. Bush (who took a leading role in the company's Asian operations) is reported to have influenced his son's decision to reverse course and reopen negotiations with North Korea, a move tied to the over $1 billion the company had invested in South Korea. (Carlyle invested in South Korean banks after the Asian crisis of the late 1990s collapsed the country's economy. The IMF had forced South Korea to open up the banking sector to overseas investors as a bailout condition.) The IMF may criticize countries like Indonesia for fostering a system of "crony capitalism," while forgetting to look out of its windows and down Pennsylvania Avenue for a better example.

Carlyle has had a few setbacks, but they are rare. The ill-fated (and unfortunately named) Crusader howitzer, for instance, was cancelled through the efforts of Donald Rumsfeld, a friend of Carlucci's from Princeton days. (Rumsfeld shortly thereafter threw his old friend a contract for another new weapon system that the company's United Defense Industries subsidiary could supply.)

With all of their connections, some of Carlyle's executives also epitomize the Bush League's ability to rise to top-level positions despite their less than stellar business record (President Bush himself was appointed to the board of a Carlyle subsidiary - Caterair -- that also crashed). Before he joined the Reagan administration (where he was called "Mr. Clean" for coming in after the Iran-Contra scandal left so many people tarnished, if not indicted), Carlucci made $1.2 million -- not bad for steering a company (Sears World Trade) into bankruptcy. He succeeded Caspar Weinberger as secretary of defense for the final year and a half of the Reagan administration, where he spent much of his time refining the budgeting and weapons procurement process, experience that would serve him well in his future role with Carlyle, where "he would have special knowledge of which defense contractors would later be cashing in on the long-term procurement system he had arranged."

The fact that more and more financial companies are hiring politicians like Rudolph Giuliani or Al Gore during their hiatus from politics suggests that they are either learning from Carlyle's example, or coming to recognize that having a quality rolodex may be increasingly more important than having a better business plan.

In a move that Business Week characterized as an attempt to "scramble the conspiracy theories," Carlyle recently hired Lou Gerstner - the ex-chair of IBM to succeed Carlucci as chairman. Although Gerstner helped the computer maker turn itself around in the 1990s, no matter how much he diversifies the company's business, it will continue to rely most heavily on the deal-maker's high-level political contacts.

Other Carlyle stories:
Red Herring

Also, check out this French Stop Carlyle web site.

Friday, November 14, 2003

Miss the National Conference on Media Reform in Madison last weekend?

So did I. But you can see/hear/read a lot of what happened on
Bob McChesney and John Nichols' site (read Bill Moyers' keynote).

Here's a poem related to the issue. Written after seeing a "United We Stand" billboard on the side of the hwy. in Jersey on the way back to DC from the big 2/15 NYC anti-war rally. (I think this was before we heard the stories about their Nuremberg-style pro-war rallies):

Clear Channel: United We Stand

"United We Stand"
Supporting the Man
Because we believe the News
That broadcasts his views
On 1,200 stations
Across the nation
One program -- one brand.
One simple command.
Clear Channel: United We Stand

Originally published in Multinational Monitor.

For details on Clear Channel check out Eric Boehlert's series on Salon.

Prometheus Radio in Philly is a good source of info on Clear Channel. Like this fact sheet

Jim Donahue and Essential Information filed this excellent challenge to CC's license renewal
(gives a good overview of their abuses -- I especially like the one where they offered "10,000"
to anyone who could answer 10 questions correctly -- without explaining that they mean liras, not dollars,
-- 10,000 liras is about $53).

Thursday, November 13, 2003


In 1986 there were 28,496 shopping centers in the
U.S., boasting 3.5 billion square feet of space. Today there are 46,438
malls and such with 5.8 billion square feet of space. . . The number of
malls is growing faster than the number of babies. . . American households
owe on average $8,940 on their credit cards, up 173% from 1992, when we had
an average outstanding balance of $3,275.

This is all part of a disturbing over-leveraging and over-capacity problem
we have in this country. For the past 20 years the mantra from Wall Street
has been that if an asset isn't leveraged, it's underutilized. In other
words, if you can borrow against something - a factory, a business, a cash
flow - why, by golly, you should. But what if you don't need the capital?
Heck, son, you always need capital. Use it to expand. Create new sports
teams, build new cookie factories, develop new shopping malls. And so what
do we end up with? We have the Tampa Bay Devil Rays, and bags and bags of
Keebler cookies, and 22 shopping malls around Columbus. . .

-- Fortune, Andy Serwer

Remember that big NFL season kickoff show on the Mall back in September?
Here's a poem memorializing that ostentasteless event:

On the 2003 NFL Kickoff Festival, Washington, D.C.
(Co-sponsored by the Pentagon, Reebok, Coors, AOL and Pepsi)

The view's much better, since the protesters are gone
and Britney's singing (half-unzipped) on the Jumbotron
before thousands of uniformed personnel whose
Commander calls this a "celebration of American values."

Yes, it's a new season, and we're going for broke:
Patriots versus Redskins; Pepsi versus Coke.
And by now every citizen should know why we call
the Capital's most important public park the "Mall."

Remember the old joke?

"Here's a deep story:
There were three holes ... well, well, well..."

here's my poem for today:


The last word that passes through my lips is
An attempt at three eternal points… an ellipsis.
A Fan's Notes
By Fred Exley

There are enough comical novels about middle-aged fuckups (the humor a kind of pathos, and therefore unintentional) that it could be considered an important genre in a country that values material and social success as much as Americans do. Call it the anti-bildungsroman. I've read quite a few in this genre (but don't tell me I should start reading a bunch of self-help books to compensate).

The first examples I recall reading as a teen were Tropic of Capricorn (fits this genre more than Miller's masterpiece, Tropic of Cancer). Then it was the Beats. Not just On the Road and Junky, but others who from the fringe, like Kenneth Patchen's Journal of Albion Moonlight (a hallucinatory, dream-like rage against WW2 & mankind's insanity and hatred in general), Mark Vonnegut's The Eden Express (an astonishing depiction of schizophrenia), and Bukowski. Even some of the essays of John Holmes (not the porn star, but the southern beat novelist who wrote GO, the onventional yet underrated 1950's tale that's still far more relevant to the lives of twenty-something Manhattanites than Friends ever could be) would probably qualify. Jack Black's You Can't Win an others

Why is it that recent attempts to write in this genre seem so affected? Are they spoiled by trying to live up to a standard set by their predecessors? I'm thinking of Nersesian's The Fuck Up and Frey's A Million Little Pieces (a mostly convincing journey through rehab). Frey's doesn't reek of pretense and hidden literary ambition so much as other overrated novels like Dave Eggers' Staggering Work of Heartbreaking Genius, which might have better been titled "Fuck Me Because I'm Such a Sensitive Guy Who Tragically Had to Take Care of His Younger Brother like a Stray Dog and So Had to Grow Up Faster Than Most Young Suburanites"), but you get the feeling that he's still holding onto certain delushions of old-Grandadeur.

I thought I'd just about exhausted the genre when I came across Fred Exley's A Fan's Notes. It was like discovering a great band years after the lead singer commits suicide and wondering why no one told you to check them out before.

Notes is the first (and best) of a trilogy, and easily stands alone. (I've also read Pages from a Cold Island, his second installment. It a disappointing recollection of how he stalked his literary hero, Edmund Wilson, in upstate New York. I haven't touched Last Notes From Home, his third installment, or Jonathan Yardley's bio of Exley, The Misfit, which is supposed to be good).

More than the Great Gatsby, A Fan's Notes is a classic tale of American failure and disappointment, the observations of a man forced by alcohol and depression and bouts of insanity (and forced hospitalization) to be a spectator not just of sports, but of life and others who manage to succeed in it. It is one of the most honest and tales of alcoholic failure that you'll read.

Exley never seems to be a caricature in his own novel, unlike Portnoy or, even more so, the aimless wastrels that you find in so many of P.J. Donleavey's novels (e.g. in his hilarious masterpiece, The Ginger Man). And at times the book reminds you of something of your own life, making it all the more engrossing (and potentially frightening):

"Next I read the book reviews. I read them with nostalgia and remorse. There was a period when I had lived on book reviews, when I had basked and drawn sustenance from what I deemed the light of their intelligence, the beneficence of their charm. But something had gone sour. Over the years I had read too much, in dim-lighted railway stations, lying on the davenports of strangers' houses, in the bleak and dismal wards of insane asylums. That reading had forced the charm to relinquish itself. Now I found that reviews were not only bland but scarcely, if ever, relevant; and that all books, whether works of imagination or the blatant frauds of literary whores, were approached by the reviewer with the same crushing sobriety. I wanted the reviewer to be fair, kind, and unny. I wanted to be made to laugh. I had not better luck that Sunday than on any other." (p. 16).

Exley' rambling style reminded me of the desultory days when I used to sit in Harvard Square and talk with every homeless stewbum and mental outpatient that I could corner for a cup of coffee (sometimes I bought; other times it was necessary to let them buy, to allow them to demonstrate they didn't want anything from me). Out of college with a liberal arts degree, somehow I was convinced I could learn more there on the street than within the wall of Ivy League institutions, with their rigid syllabi etc. (my parapathetic indulgences in poetry and eclectic reading of Joyce, Mailer, Miller, Plath, Sexton, Vonnegut, Heller, Pynchon, etc. bolstering this pseudo-philosophy and lifestyle).

I remember spending many days under the broken schizzors of the Harvard Square clock, reading and jabbering with newfound friends. It was easy to be convinced that, deracinated from the pressures of a career-track, you could somehow understand that if everything is an illusion (as the Buddhists say and LSD can reveal), then we're all failures -- especially those who succeed by our society's terms, though they don't know it, because they are the most afraid to let go of our collective illusions, living their lives in the rigid comfort of workaholic schedules -- yes, our "best and brightest" would rarely climb the mountains of mental mania that allowed you to look down in exhilaration and lonely clarity upon the Empire's foolish rules -- no better place to see this from than from Harvard Square, where other brilliant outcasts could be found -- totally ignored by the prim traditionalists and disciplined young MBAs and law students who would soon be off to Wall Street and the State Department (to eventually start another war). You could sit there for days with the wicked geniuses who had long ago chosen to apply their minds to chess rather than nuclear game theory, the scruffy alcoholic blues guitarist Jake who had to drink just to keep his hand from shaking out of control, the Wookie, Albert Fine (the man who introduced me to Proust, an expert on Gustav Mahler and John Cage, who had one day walked out of Manhattan, sleeping in roadside ditches all the way to Maine) and ... And, if you ran out of company, there were plenty of libraries and bookstores within a close distance that you could wander off to, including the Grolier, there on Plympton, the only poetry store in the country. But I digress.

Exley was the son of a father he didn't know well (dead at 40), except as a legendary football player: "Once, when I was very small, I actually saw my father play football; but like the propagators of his legend I remember nothing about the game save that at one point in it an opposing player, whose cleats had been removed to expose the sharp steep screws that held them (a customary bit of nastiness among the old-timers), stepped on my father's hand, tearing it rather badly.It was a nasty, jagged tear; it bled profusely, a heavy, brilliant, crimson blood; and the trainer no sooner began pouring iodine into it than my father let out a high, fierce, almost girlish howl, one that representing, as he did to me, the epitome of strength and courage immediately induced in me the urge to scream in terror. But then, almost as suddenly, the substitutes on the bench, the crowd behind them, and even the trainer who was ministering to the wound were uproarious with glee, were bellowing and guffawing, slapping their thighs and pounding each other's backs, and I saw that my father was parodying how a lesser man might react to iodine. Suspended between tears and laughter, I stood there listening to the gleeful homage of the crowd; then I, too, began to laugh, hysterically, wildly, until my father looked up at me, surprised and not a little upset, recognizing what had transpired. It was the first time the crowd had come between my father and me, and I became aware that other people understood in him qualities I did not -- a knowledge that gave them certain claims on him. It is a terrifying thing to have a wedge driven into one's narrow circle of love."

"Other men might inherit from their fathers a head for figures, a gold pocket watch all encrusted with the oxidized green of age, or an eternally astonished expression; from mine I acquired this need to have my name whispered in reverential tones. There were, that summer n New York, other things I longed for. I wanted the wealth and the power that fame would bring. I told myself I would one day write The Big Book; but I can understand now that I never believed I would." Instead, he is haunted by the success of college classmates like Frank Gifford, whose denial at being forced to retire (after a tackle-induced concussion) rather than decide for his own reasons a perfect mirror to Exley's own soused solipsism (or so he sees it): "On reading his exasperating remark, I immediately rose, went out and bought a copy of every New York newspaper, returned, and read their accounts with equal diligence. Searching for the slightest nuance, I wanted to see if any of the reporters had greeted his remark with, if not outright laughter, a splattering of levity. I understood perfectly. With a magnanimous gravity not unlie that of the reporters, people were at this time meeting my protestations that I could quit drinking any time I chose. Thus it was tat at the end, or at what Gifford and I must have believed would be the end for him, it gave me some consolation that we were both addicted to something -- he to football and I to liquor -- capable of destroying us, if not actually, in humiliation and loss of pride."

Exley calls himself a "paltry poet." Hardly. Of course, when the anti-novel is your genre, it's hard to beat the first volume. I've heard that the third installment comes back strong from the second. When I get to it, I look forward to telling you if that's so.