corruption

Wall Street’s Investments on Capitol Hill

It’s Wednesday. Time for a pop quiz.

I know, most of you are already whining like school children but trust me, when you read these few questions, your should be forthcoming.

Let’s get started. Shall we?

1. Can Congressional representatives properly oversee the bailout of the financial sector when they get hundreds of thousands of dollars from the banks receiving hundreds of billions in public support?
2. Is it a potential conflict of interest for members of Congress to own stock in the companies that they are overseeing?
3. Is disclosure of political contributions by bank to Congressmen and Senators sufficient when hundreds of billions of taxpayer money are involved?

Okay, time is up. Put down your pencils.

If you think this is an academic exercise, you are wrong. These are questions that every American should consider since these are real problems in Congress today.

Yesterday, the Center for Responsive Politics posted an interesting story on their Open Eye blog about the contributions received by member of Congress from the banking industry. Their findings were shocking. Here is an excerpt from the story:

The eight CEOs testifying Wednesday before the House Financial Services Committee about how their companies are using billions of dollars in bailout funds may find that the hot seat is merely lukewarm. Nearly every member of the committee received contributions associated with these financial institutions during the 2008 election cycle, for a total of $1.8 million. And 18 of the lawmakers have their own personal funds invested in the companies.

All of the companies represented at the hearing have received millions, even billions, from the government’s Troubled Assets Relief Program (TARP), including Goldman Sachs, JPMorgan Chase, Bank of New York Mellon, Bank of America, State Street Corporation, Morgan Stanley, Citigroup and Wells Fargo. These companies’ PACs and employees gave $10.6 million to all members of the 111th Congress in the 2008 election cycle, with 61 percent of that going to Democrats.

It was noted in the piece that68 Congressional representatives sitting on the finance committee overseeing the TARP program received approximately $1,848,803 in contributions from the financial services industry.

As we have noted in previous posts at Global Investment Watch, political contributions by financial service companies and corporations as a whole are not a new phenomena. As companies and regulators develop better risk models for doing business, we must reconsider the political risks associated with their business activities. As the core of this political risk assessment is how Congress receives money from the very businesses they oversee. It’s not just about disclosure and transparency. Being honest about the disclosures is only the first step.

At the end of the day, preventing this sort of sanctioned corruption must be stopped. What do you think?

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Restoring Justice to the DoJ

As the Senate Judiciary Committee contemplates the appointment of President Obama’s candidate for Attorney General, Eric Holder, I am reminded of two incidents that drive home the need for worthy officials and systems of fairness in the justice system at all levels. While the Republican Senators on the Committee flex their political might, citing Holder’s involvement in ex-President Clinton’s late minute pardons eight years ago, they should be much more concerned with what U.S. Attorneys do in the trenches – rendering injustice.

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In this edition of 2N2, Rob Kellogg discusses the fallout from the Siemens bribery scandals and the U.S. regulators’ responses.

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Like a worn out car sent south of the border for reuse as a taxi cab, Bush Administration insiders capitalize on their access to anyone with a checkbook. An exposé by the Sunday Times of London (TimesOnline) tells the story in print and on camera.

Ken Silverstein, writer and contributer to Harpers magazine and author of Turkmeniscam: How Washington Lobbyists Fought to Flack for a Stalinist Dictatorship, turned me on to this piece that I frankly overlooked when it broke back in July of this year. Admittedly, this is an old tale as news goes. But like loose change in the folds of the sofa, its fun to shake off the lint and have a go of it.

In a nutshell, a reporter from the Sunday Times teamed up with Eric Dos, whose full name is Yerzhan Dosmukhamedov. Dos told Steven Payne, that he was representing another Kazakhstani political figure who was looking to meet the top people in the US government.

Dos had good reason for believing that Payne could make it happen. Payne has accompanied Bush and Cheney on foreign trips to the Middle East and Asia, and he sits on the influential advisory council to the Department of Homeland Security. Payne is also president of a lobbying company, Worldwide Strategic Partners (WSP), which specialises in connecting business and political interests with the US government.

Akayev, who is in exile in Moscow after being ousted from power three years ago in a people’s revolt, was seeking an endorsement from senior US figures in order to help rehabilitate himself in the eyes of the world, Dos told Payne.

For those of us who have lost any sense of surprise at the depths of political depravity within the White House, the direction that this story goes will come as no surprise. Suffice it to say that Payne was willing, if not eager, to represent the interests of a deposed Kazakhstani dictator.

For an adventure in political corruption, read and view the following items in sequence:

• The Sunday Times, July 13, 2008 “Stephen Payne: a hotshot lobbyist who can get you into White House”

This is the piece published in the Sunday Times back in July that exposed the sordid mess.

• A Steven Payne Scrapbook: Pics with the President and Other Pals

In addition, the Times collected a number of photographs of Mr. Payne and George W. Bush working on Bush’s Crawford, Texas ranch.

• Brochure: Worldwide Strategic Partners – Steven Payne’s lobbying shop

Pay particular attention to page 3, which describes some of Mr. Payne’s qualifications and his intimate relationship to the Bush White House.

• White House Responds to Lobbyist Access-for-Donations Report

Here White House Press Secretary Dana Perino makes light of the relationship between Steven Payne and President Bush, referring to the “hundreds of volunteers” working with the Administration.

The Bush Administration is all but over in the next few weeks and I am beginning to worry. With something resembling ethical government fast approaching, I may have to turn to blogging about kittens or some such thing. Geeesh.

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In this edition of our weekly video, 2N2, Rob Kellogg discusses two companies: Banco Santander, a Spanish banking company and BAE Systems, a U.K. based aerospace and defense company.

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BAE Systems is Europe’s largest defense contractor and the largest foreign player in the U.S. defense market. Despite (or perhaps “because of”) its global presence, the company remains a troubling enterprise because of its business profile and its lack of transparency with respect to its global arms dealing in the third world. These factors make this company as risky investment from a human rights perspective.

Profile

BAE’s offerings include avionics, military aircraft, armored vehicles, air-defense systems, missiles, artillery locators, communications and navigation systems, radar, ships, space systems, and aerospace electronics. The company’s fighter aircraft include the Harrier, Hawk, Tornado, and the next-generation Eurofighter Typhoon. BAE operates in the U.S. through BAE Systems, Inc. In 2006 BEA divested its 20% stake in Airbus when it sold its shares back to EADS.

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BAE Systems Announces New Ethical Standards for Business Conduct

Last Tuesday, BAE Systems announced that it has adopted all 23 recommendations from the Woolf Committee, which was established in the wake of a corruption scandal at the company.  As noted by GIW earlier this year, the committee, which was asked to examine the ethical principles and practices underlying the company’s business, identified various areas for further improvement that the Company should address in its business operations.

Dick Olver, Chairman of BAE Systems said, “This programme is of fundamental importance to how we do business now and in the future and it will derive benefits for our shareholders, employees and customers. We believe the Woolf Report provides valuable insight and observations that BAE Systems, the defence industry and all global companies can learn from.”

Commissions or Bribes? The £32M Question

Earlier this year, the Serious Frauds Office (SFO) in the U.K. interviewed several executives about their roles in the payment of commissions to sales agents going back to the 1980s. They pointed to Mike Turner, BAE CEO, as the person who authorised the payments. It is understood the SFO was concerned about a lack of documentation to show where sales commission payments of up to £32m a time actually went.

The company has maintained the commissions paid are legal, legitimate and not bribes and believes Turner is being unfairly targeted.

It has also been reported that BAE kept documents detailing the payment of commissions outside the UK in the city of Zurich. When the SFO asked BAE why they were kept there, the company responded it was because they were worried arms trade activists could seize them if they were on UK soil. The SFO had focused on arms sales in Romania, Czech Republic, South Africa, and Tanzania.

The implementation programme will be managed by a programme director and will focus on several areas:

1. Changes to and the monitoring of application of policies and procedures;
2. Revised training needs and the subsequent delivery of training programmes;
3. A programme to consult and communicate with stakeholders on the Company’s plans;
4. Communication and engagement with 97,500 employees.

The full implementation programme will be rolled out over three years. A Steering Committee, comprising senior executives globally from across the business and reporting to the Executive Committee, has been established with responsibility for providing oversight of the implementation programme. The Committee met earlier this month. In addition, six Working Groups comprising senior managers and functional experts have been established covering specific areas such as the global code of conduct and leadership in business ethics. These Working Groups will address between them all the recommendations contained in the
report said company spokespeople.

CEO Turner’s last few years at Britain’s biggest defence contractor have been blighted by the SFO probe. A leaked SFO document published by a South African newspaper last year named Turner and BAE’s former chairman Sir Dick Evans as suspects in the inquiry. The document, which was a request for assistance from the SFO to the South African authorities, said there was “reasonable cause” to believe Turner, Evans and the company were guilty of corruption. 

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As reported by BBC News, the ex-chairman of South Korean firm Samsung, Lee Kun-hee, has been found guilty of tax evasion in Seoul and given a three-year suspended jail term. The charges followed a three-month investigation into alleged corruption at South Korea’s biggest conglomerate. Lee, one of South Korea’s richest men, had headed Samsung for two decades before his resignation from the chairmanship in April.

The corruption case has been keenly followed in South Korea, where Samsung remains one of the country’s most powerful and respected organizations despite the charges against Lee. Samsung is best-known for its electronics unit, but it is also one of the world’s largest shipbuilders. With a global workforce of 254,000, it enjoyed annual profits of more than $12.9bn in 2006 and accounts for nearly a fifth of all South Korean exports.

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According to a July 7 posting on BBC Africa, an international cartel of oil smugglers steals billions of dollars in “blood oil” from Nigeria, trading it for guns, according to the president of the country. Speaking at the G8 summit in Japan, President Umaru Yar’Adua drew comparisons between oil “bunkering” and the trade in “blood diamonds”.

He said an international effort must be made to stop the trade, which fuelled unrest in the Niger Delta. The conflict means Nigeria is no longer Africa’s largest oil exporter. Militant attacks in the Delta have reduced production by around a quarter, allowing Angola to overtake Nigeria. But no-one really knows exactly how much oil is pumped out of the ground, according to a Senate inquiry set up in March.

The smuggling cartel includes officials at the Nigerian state oil company, government, the military and international oil companies, according to Delta activists. Trying to stop the trade must be an international effort, the president says, because the people driving the market are companies looking for cheap crude to feed international markets.

But activists in the Delta say there is no way oil smuggling could be done without the compliance of corrupt elements of the Nigerian state. “I have never seen this bunkering business as an illegal thing,” says Anyakwee Nsirimovu, a Port Harcourt-based human rights lawyer. In order for tankers to dock and receive oil from boats coming from the creeks, there must be a high level of involvement from government and the military, he says. “They are making billions of dollars and they don’t want this thing to end.”

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