Why Corporate Compliance is a Joke

An Interview With Patrick Burns

by RUSSELL MOKHIBER

 

Patrick Burns says what others know and refuse to acknowledge. Compliance is a joke. Burns is the communications director at Taxpayers Against Fraud.

“What do companies do to people who threaten their profit center – even and maybe especially if the profit center is one based on fraud? They move to isolate, to humiliate and to terminate,” Burns said last week. “And they do it every single time.”

“When I speak to compliance officers, I always ask one question right at the beginning. I raise my hand and say – any companies here ever made a whistleblower employee of the year?”

“Invariably, the room bursts out laughing. It’s treated as the opening of a comedy act when I ask that question.”

“And these are the compliance officers. Then I turn it around on them.”

“I ask them, at the end of this session, to go into their car and turn off the radio and not start the engine. And think for thirty seconds about this question – why was I hired at this company?”

“Was I hired because I am a fierce, tough, brave compliance officer?”

“Or was I hired because they sensed a weakness in me and they thought that I would be a compliant officer? An officer who would be useful to them to ferret out and finger anybody in the company who was actually going to blow the whistle, internally or externally, on massive fraud within the company.”

Does anybody object when you say that?

“They can’t.”

Because what you’re saying is that compliance is a joke?

“I have to say that it really is most of the time.”

Have you come across exceptions?

“No,” Burns said. “The compliance officers are great for the little stealing.”

“The compliance officer at Wal-Mart is there to stop employee theft. It’s to stop someone from bundling up a bunch of frozen meat in the trash bag and throwing it into the trash and then pulling it out thirty minutes later.”

“But some massive bribery scheme in Mexico, importing goods from China that have a made in America label sewed on to them – they won’t pay attention to that.”

“Not paying taxes on what they’re selling, none of that stuff, none of that is going to happen.”

“That is not what a compliance officer is supposed to do. The compliance officer is about twenty levels down within a company. He’s above the rent-a-cop in the lobby, but he’s not much higher than that most of the time.”

“And they are not able to challenge the people in the top executive suites. The never even meet those people most of the time.”

“This idea that a compliance officer is somehow a combination of the Fantastic Four meets the X-men – it’s just not true. It’s a lot closer to Barney Fife with his one bullet.”

And Burns has no illusions about the Justice Department’s war on fraud.

“If you go out to a farm field and you see 2000 pounds bulls standing behind a single strand of hot electric wire,” Burns said. “Those bulls have touched the wire once or twice. And after they touched that wire once or twice and got an immediate serious shock, they never touched it again.”

“That is not the way the Department of Justice works. The Department of Justice will take two, three, five, ten years to work a case.”

“Let me be explicit in what I’m saying here. The GlaxoSmithKline case was settled yesterday for three billion dollars. It’s the largest healthcare fraud case in US history.”

“Whistleblowers went to the company internally. The company did an internal investigation. The compliance officers in the company said – “yes we are indeed doing this fraud.”

“GlaxoSmithKline ran the numbers and decided that doing the fraud and delaying with its interaction with the Department of Justice was a better business plan than fessing up and paying up.”

“So they lawyered up and delayed.”

At the end of eleven years, they paid the three billion dollar fine. But during that time, they’ve collected billions and billions of dollars in profits.”

“Now here’s the perverse part of all of this. During that ten year period, people at GlaxoSmithKline were promoted, they were paid, they got bonuses and they got stock options based on this extravagant fraud scheme that involved nine different drugs, and was a virtual clown car of fraud.”

“All of the profits from this fraud were privatized. Private beach houses were bought. Private careers were made. Private bonuses were cashed. People sent their kids to private schools based on these frauds – this poisoning for profit.”

Burns doesn’t think jailing top corporate executives is likely. He says we need to exclude them from the industries in which they work.

“Putting people in jail we don’t think is very likely,” Burns said.

“The truth of the matter is a criminal prosecution requires a standard of evidence that is beyond a reasonable doubt. Companies will fund a full push back against the Department and there’s a very good chance that they will prevail.”

“The good thing about exclusion is that it can be done administratively.”

“Let me make it as simple as possible here. When you go to a dry cleaner and you put in a shirt or a tie and it comes back stained or ripped, you may get a little miffed. But you’ll talk to them about it, and maybe they’ll promise to never do it again.”

“But the next time you bring in a shirt or a tie and it comes back stained or ripped, you don’t say anything.”

”You just walk away and you never do business with them again.”

“We can do that. The US government is just like you. It is a consumer of goods and services. It can say – we’re done with you. If you continue to hire this person to run this dry cleaner, we will never go to this dry cleaner again.”

“We are not calling for more fines. We want America’s stolen money to be recovered, sure. But we need to disenthrall ourselves from the notion that money alone will change corporate behavior.”

“We also need to disenthrall ourselves that there is a single silver bullet solution. We need to recover America’s stolen billions, but at the same time, we need to make the pain personal within the fraudster companies.”

“That means that people who design frauds, who wink at these frauds, who operationalize these frauds, need to be made unemployed and unemployable.”

“Right now that penalty is only vested upon the whistleblower, the truth teller, the person who stands up to power for the good of all.”

“Being unemployed and unemployable is not something we do to the big fraudsters. We do not send them to jail.”

“We are not going to exclude big companies like Pfizer and Schering Plough and GlaxoSmithKline and McDonnell Douglas.”

“They employ too many people and they’re too central to healthcare and defense in this nation.”

“But if a company is too big to fail, and that may be true, there is no executive that is too big to jail. And certainly there is not an executive too big not to make unemployed and unemployable.”

Courts Should Stop Jailing People for Being Poor

By Carl Takei, ACLU National Prison Project 

Across the country, cash-strapped cities and counties are throwing poor defendants in jail for failing to pay legal debts that they can never hope to manage. On Monday, the New York Times told the story of Gina Ray, whose $179 speeding ticket mushroomed into $3,170 in fines and fees and 40 days in jail when she couldn’t afford to pay it. Gina is one of many swept up in America’s new debtors’ prisons, a growing problem nationwide.

Also this week, the ABA Journal  told the story of the Philadelphia courts’ aggressive efforts to collect unpaid fines and fees, many of which are decades old. Ameen Muqtadir was billed nearly $41,000 for two failures to appear in court dating back to 1991 and 1997—even though he’d been incarcerated at the time of each hearing. Meanwhile, Hakim Waliyyudin spent 12 days in jail while he raised the money to post a $1,000 bond with the court; after the criminal charges against him were dismissed, the court clerk told him that he owed another $9,000 plus $1,500 in collection fees because of a missed court date.   Although a free attorney from Community Legal Services ultimately convinced the court to waive the judgment and collection charges against Hakim, many other indigent defendants around the country face further jail time when they cannot pay court-ordered fines and fees.

As the ACLU emphasized in its October 2010 report, In for a Penny: The Rise of America’s New Debtors’ Prisons, jailing people for unpaid court debts imposes devastating human costs on men and women whose only remaining crime is that they are poor. Upon release, they face the daunting prospect of having to rebuild their lives yet again, while their substantial legal debts pose a significant, and at times insurmountable, barrier as they attempt to re-enter society.

They see their incomes fall, their credit ratings worsen, their prospects for housing and employment dim, and their chances of ending up back in jail or prison increase. Many must make hard choices each month as they attempt to balance their needs and those of their families with their legal financial obligations. They also remain tethered to the criminal justice system—sometimes decades after they complete their sentences—and live under constant threat of being sent back to jail or prison, solely because they cannot pay what has become an unmanageable legal debt.

Aggressive collection of legal financial obligations creates a two-tiered system of justice in which the poorest defendants are punished more harshly than those with means. Although courts attempt to collect legal financial obligations from indigent and affluent defendants alike, those who can afford to pay their legal debts avoid jail, complete their sentences, and move on with their lives. Those unable to pay end up incarcerated or under continued court supervision.
Perversely, they also often end up paying much more in fines and fees than defendants who can pay their legal financial obligations. Additionally, the imposition of legal financial obligations disproportionately affects racial and ethnic minorities, who are disproportionately represented among the prisoner population

Courts have found that incarcerating people for debts they couldn’t afford to pay violates the 14^th Amendment. Further, it creates hardships for men and women who already struggle with re-entering society after being released from prison or jail, and wastes resources in an often fruitless effort to extract payments. In an age when more Americans are deprived of their liberty than ever before, unnecessarily and unfairly, we should be shutting down debtors’ prisons, not creating more of them.

Weimar America: Four Major Ways We're Following In Germany's Fascist Footsteps

What happens when a mature industrial nation turns its back on democracy and lets its right-wing elite destroy the middle class? We've seen it before.

By Robert Cruickshank, AlterNet
Posted on July 5, 2012, Printed on July 6, 2012

What happens when a nation that was once an economic powerhouse turns its back on democracy and on its middle class, as wealthy right-wingers wage austerity campaigns and enable extremist politics?

It may sound like America in 2012. But it was also Germany in 1932.

Most Americans have never heard of the Weimar Republic, Germany's democratic interlude between World War I and World War II. Those who have usually see it as a prologue to the horrors of Nazi Germany, an unstable transition between imperialism and fascism. In this view, Hitler's rise to power is treated as an inevitable outcome of the Great Depression, rather than the result of a decision by right-wing politicians to make him chancellor in early 1933.

Historians reject teleological approaches to studying the past. No outcome is inevitable, even if some are more likely than others. Rather than looking for predictable outcomes, we ought to be looking to the past to understand how systems operate, especially liberal capitalist democracies. In that sense, Weimar Germany holds many useful lessons for contemporary Americans. In particular, there are four major points of similarity between Weimar Germany and Weimar America worth examining.

1. Austerity. Today's German leaders preach the virtues of austerity. They justify their opposition to the inflationary, growth-creating policies that Europe desperately needs by pointing to the hyperinflation that occurred in 1923, and became one of the most enduring memories of the Weimar Republic. Yet the austerity policies enacted after the onset of the Depression produced the worst of Germany's economic crisis, while also destabilizing the country's politics. Cuts to wages, benefits and public programs dramatically worsened unemployment, hunger and suffering.

So far, austerity in America has largely taken place at the state and local levels. However, the federal government is now working on undemocratic national austerity plans, in the form of so-called "trigger cuts" slated to take effect at the end of 2012. In addition, there's the Bowles-Simpson austerity plan to slash Medicare and Social Security benefits along with a host of other public programs; and the Ryan Budget, a blueprint for widespread federal austerity should the Republicans win control of the Congress and the White House in November.

2. Attacks on democracy. Austerity was deeply unpopular with the German public. The Reichstag, Germany's legislature, initially rejected austerity measures in 1930. As a result, right-wing Chancellor Heinrich Brüning implemented his austerity measures by using a provision in the Weimar constitution enabling him to rule by decree. More notoriously, Hitler was selected as Chancellor despite his party never having won an election -- the ultimate slap at democracy. Both these events took place amidst a larger backdrop of anti-democratic attitudes rampant in the Weimar era. Monarchists, fascists and large businesses all resented the left-leaning politics of a newly democratic Germany, and supported politicians and intellectuals who pledged to return control to a more authoritarian government.

Democracy is far older in the United States today than it was in Germany during the early 1930s. But that doesn't mean that democracy is actually respected in practice today; it only means that attacks on it can't be as overt as they were in Weimar Germany. From the Supreme Court's Citizens United ruling to Republican voter ID laws to austerity proposals that bypass the normal legislative processes (remember the Supercommission?), American democracy is under similar direct threats now.

3. Enabling of extremists. Well before Hitler was made chancellor in 1933, leading conservatives and business leaders had concluded that their interests would be better served by something other than the democratic system established in 1919. During the 1920s, they actively supported parties that promoted anti-democratic ideologies, from monarchism to authoritarianism. Nazis were just one of the many extremist groups that they supported during the Weimar era. In fact, initially, many on the German right had attempted to exclude the Nazis from their efforts; and as chancellor, Brüning had tried to marginalize the Nazi party. However, his successor, the right-wing Franz von Papen, believed he could control Hitler and needed the support of the Nazi members of the Reichstag. Conservative German leaders ultimately decided their hunger for power was more important than keeping extremists at bay -- and their support finally gave the Nazi Party control of the country.

Tea Party activists aren't Nazis. But with roots in the 20th-century radical right, the Tea Party's attack on the public sector, on labor unions, on democratic practices, and on people who aren't white mark them as the extremist wing of American politics; and they bear many of the hallmarks that characterize fascist movements around the world. In recent years, Republican leaders have been enabling these extremists in a successful bid to reclaim political power lost to Democrats in 2006 and 2008. We don't yet know where this enabling is going to lead the country, but it's hard to imagine it will be anywhere good.

4. Right-wing and corporate dominance. One of the the most prominent German media moguls in the 1920s was Alfred Hugenberg, owner of 53 newspapers that reached over a majority of German readers. The chairman of the right-wing German National People's Party, Hugenberg promoted Adolf Hitler by providing favorable coverage of him from the mid-1920s onward. Major German corporations such as Krupp, IG Farben and others spent money in the 1920s and early 1930s to support the rise of right-wing political parties, including the Nazis, as part of a strategy to undermine democracy and labor unions. Even if Hitler had never taken power, that strategy had already achieved significant returns on their substantial investment.

Here in the United States, one only needs to look at Charles and David Koch, Fox News and other right-wing funders and their media outlets to see the analogy. By funding right-wing politicians who promote austerity, undermine democracy and support extremism, they are active agents in the creation of Weimar America.

The Road Not Taken
None of this means that the United States is about to fall victim to a fascist coup d'etat as Germany did in January 1933. Remember that no outcome is inevitable. Nor would it be accurate to say that the United States is repeating the exact same events and taking the same course as Germany did during the 1930s, because many other important details are different.

For example: Germany was a nation saddled with huge debts and lacking the global political power it needed to reverse its situation; but even with today's high unemployment rates, the United States remains the globe's largest economy, and therefore doesn't face the same fiscal constraints Weimar Germany faced. In fact, a better current analogy may be Greece, which is in a far more similar predicament now.

Yet the underlying similarities ought to be troubling -- and are enough to give us pause. The combination of austerity and well-funded right-wing political movements hostile to democracy destroyed Weimar Germany. And Spain and Italy both experienced a similar situation in their slide into authoritarianism in the 1930s. In those cases -- and in ours -- as people saw their own financial position weaken, and as their democratic rights were increasingly limited in favor of giving more power to the large corporations, the future of a democratic society with a strong middle-class was increasingly jeopardized. Fascism is what happens when right-wing plutocrats weaken the middle class, and then convince it to turn its back on democracy.

Will Weimar America face the same disastrous fate Weimar Germany did? On our current path, democracy and shared prosperity are both in serious trouble. We owe it to ourselves, to our children, and to our world to look to the lessons of history, find a way to change course, and get to work building something better.

Decriminalization of Drug Possession Doesn't Increase Drug Use, New Report Finds

Ernest Drucker - HuffPo
Posted: 07/07/2012


Drug "legalization" is no mystery. A new report shows that there are many alternatives to drug prohibition -- and all of them improve things.

Alcohol prohibition in the United States -- in place from 1920 to 1933-- was a national ban on the sale, manufacture and transportation of alcohol. Ending alcohol prohibition in 1933 required a new constitutional amendment, repealing the one that made alcohol illegal in the first place. Yet many people act as though creating alternatives to drug prohibition (drug legalization) would be like changing one of the 10 Commandments.

Just like ending alcohol prohibition, making the current crop of drugs legal simply means changing the laws.

But changing the laws has been turned into a bloody legal and political battle that is about everything except drugs. Instead of endless rhetoric and empty speculation about how and why it can't be done, we need to be talking about actual solutions.

Mexico, which just elected a new president, appears ready to do whatever it takes to put an end to the horrific violence of failed drug prohibition policy that has already caused over 60,000 murders.

In the United States, the rise of overdose deaths is increasingly from "legal" pharmaceuticals -- showing that the need to change how we regulate and control dangerous drugs is an urgent matter for us too.

What most Americans don't realize is that drug laws are now changing around the world -- step by step and country by country. And a new report concludes that decriminalization of drug possession has not led to increase in drug use.

The report, published by Release, the U.K.'s "national centre of expertise on drugs and drug laws," reviews the evidence in 21 countries that have adopted some form of decriminalization and finds that the model of enforcement adopted has little impact on the rates of drug use in these countries -- but has a profound impact on the use of arrest and prisons for drug users. (In fact, the huge social and economic costs that accompany drug prohibition are a form of violence in themselves.)

The report, "A Quiet Revolution: Drug Decriminalization Policies in Practice across the Globe", finds that "countries and States as disparate as Belgium, Estonia, Australia, Mexico, Uruguay, the Netherlands and Portugal have adopted different models of decriminalization." Some countries (Spain and the Netherlands) have been moving towards decriminalization since the 1970s -- with the result that their drug use rates are lower than in the United States.

It's time for the United States to shake its obsession with drug prohibition and join the successful global movement that is reducing the problems that come not from the drugs per se, which are amenable to smart and well tested medical and social policies, but to bad drug policies.

Images

Spiderlegs' Advances to the Next Round in the MASSPIRE Battle of the Bands Beta contest

Round Two!
Posted on July 2, 2012

 

Round One is at an end.  The Beta Season did wonders for our faith that small artists are capable of creating awesome things.

Here’s a List of All the Songs that Qualified:

1. Perfectly Broken
2. lyric
3. hussy
4. Where Are You
5. Into the Fray
6. Cross Walk
7. The Willies
8. Like Rain Like Rust
9. Funkyness
10. Insanity
11. Mintberry Slush
12. Heavy Groove
13. Olive Juice
14. Note From Her
15. Everything
16. Kristy Ray
17. Already Home
18. A Wavering Line
19. Jackass
20. Space Journey
21. Grey Wool
22. The Boy Left Behind
23. A Piss Before Dying by Spiderlegs
24. Go to Hell
25. Superman
26. Peyote Coyote
27. Under an Atom Bonding

Round Two ends on July 7th. Round Three will go from July 8th – 31st. The prize for 1st is $500.

 ++++

If you wouldn't mind, folks out there, click the song link and upvote it, if you like it. I'd appreciate it.--jef

New Report on the Dangers of Genetically Modified Foods

Thursday, July 5, 2012 by Common Dreams

by Richard Schiffman

“Aren’t critics of genetically engineered food anti-science? Isn’t the debate over GMOs (genetically modified organisms) a spat between emotional but ignorant activists on one hand and rational GM-supporting scientists on the other?”

These questions are posed by Earth Open Source, a not-for-profit organization dedicated to assuring the sustainability, security, and safety of the global food system. They answer their own questions in a new study “GMO Myths and Truths.”

The myth, they say, is that GM foods have been proven safe. The truth is that there are hidden dangers which corporate-funded research has not yet adequately investigated.

What makes this report unusual is that it was authored not by the usual food activists and environmentalists, but by two well known genetic engineers with help from an investigative reporter. The team conducted an exhaustive survey of hundreds of peer-reviewed scientific studies and concluded not only that GM food crops pose significant, if largely under-evaluated, health risks, but that they have so far failed to deliver on their promise to increase crop yields and lower herbicide and pesticide use.

The authors argue, moreover, that there are already safer environmentally friendly ways to grow more food for the planet’s exploding population. By focusing on the false panacea of genetic modification as a way to feed the world’s hungry, vital research dollars have been siphoned away from more promising lower-tech approaches to increasing the efficiency of the global food system.

The report’s authors include Dr Michael Antoniou of King's College London School of Medicine in the UK, who helped to develop genetic engineering for medical applications, and John Fagan, a biomedical researcher and expert in food system sustainability and GMO testing, who returned $614,000 in grant money to the National Institutes of Health in 1994 because of his concerns about the safety and ethics of genetic modification.

The paper, produced together with Claire Robinson, research director of Earth Open Source, comes out at a critical moment as California voters are considering a referendum which will appear on their ballot in November calling for the labeling of genetically modified foods in the state. Such labeling is already mandatory in Europe, China, India and many other nations.

Seventy percent of the foods that Americans purchase in the supermarket contain ingredients (mostly corn, soy and canola oil) that are genetically modified. The food industry, and often the media, assure us that there is a scientific consensus that GM foods are equivalent nutritionally to foods that have not been modified and not a danger to those who consume them. But it is just not true that all scientists agree. Given the uncertainties in the field and the lack of long-term health studies, some groups like the American Academy of Environmental Medicine and the Union of Concerned Scientists have called for labeling of GM foods.

If Californians agrees, it could have a big impact on the rest of us. Some believe that if the labeling referendum there passes, other states may follow suit. Furthermore, as I reported in the Guardian last month, if food companies are made to label GM foods in California, the nation’s most populous state, they may well do so all over the country, rather than maintain a costly two-tier packaging and distribution system.

The food and biotech industries are expected to fight the labeling initiative with a multi-million dollar statewide PR blitz, like the one which helped to defeat a similar measure in Oregon in 2002. But nearly 90% of Americans-- Republicans and Democrats equally according to a recent survey-- want to see GMOs labeled. This latest report on the dangers of genetically engineered foods will give the referendum’s advocates valuable ammunition in the upcoming California debate.

Here are some of the conclusions of the report:

• Genetically modifying crops, which involves the transfer of genes between biologically unrelated species, is not an extension of traditional plant hybridization, but a radical departure which can produce new toxins or allergens in food that are unlikely to be spotted in current regulatory checks.
• GM foods have not been adequately safety tested. There has been no long term research, and the few short term studies have been inadequate. In many cases proprietary restrictions put in place by biotech companies like Monsanto the devil have prevented independent research by scientists not connected to the corporations which are making claims about their safety.
• Animal studies of the effects of GM foods have disclosed clear signs of toxicity– notably disturbances in liver and kidney function and immune responses. 
• Over 75% of genetical modification are to to increase crop tolerance of herbicides. Where these crops are grown there has been a massive increases in herbicide use.
• Over half of GM crops are engineered to withstand application of Monsanto the devil’s best selling Roundup. Contrary to the company’s claims Roundup is not safe at the levels it is being use, but has been found to be associated with miscarriage, birth defects, neurological development problems, DNA damage, and certain types of cancer. A public health crisis has occurred in GM soy-producing regions of South America, where people exposed to spraying with Roundup and other agrochemicals report escalating rates of birth defects and cancer.
• There is insufficient evidence that the BT toxin engineered into the plant structure of corn and cotton (whose seeds are used in food oil production) is safe for human consumption. Bt crops have been found to have toxic effects on laboratory animals in feeding trials. These toxins have also been found circulating in the blood of pregnant women in Canada and in the blood supply to their foetuses.
• GM crops have not been shown to offer higher crop yields, enhanced nutritional value or greater drought tolerance, as they have been hyped to do. The products of conventional breeding continue to outstrip GM in all of these arenas.
• Conventionally bred, locally adapted crops, used in combination with environmentally sustainable farming practices, offer a safer, cheaper and more efficient way to ensure global food security than genetic modification.

“Crop genetic engineering as practiced today is a crude, imprecise, and outmoded technology,” says the report's coauthor John Fagan. “Recent advances point to better ways of using our knowledge of genomics to improve food crops, that do not involve GM."

Selling patented genetically modified seeds, and the agro-chemicals designed to be used with them, has earned biotech giants like Monsanto the devil, Dupont, Bayer and Syngenta untold billions of dollars in the past two decades. But what is good for these corporate bottom lines may not be good for human health, or the integrity of the environment.

Vast Extent of Congressional 'VIP' Loans from Countrywide Financial Before Crash in Exchange for Influence

Thursday, July 5, 2012 by Common Dreams

In a report released on Thursday, the U.S. House and Government Oversight Committee has revealed how Countrywide Financial Corp sold 'VIP' loans to members of congress in exchange for influence in Washington, Associated Press reports.

In an ongoing bid to kill any legislation that could hurt the company's profits, Countrywide granted hundreds of loans between 1991 and 2008 through the VIP program, which included reduced interest rates and discounted fees, to lawmakers, their staff, top government officials and executives of government-controlled mortgage company Fannie Mae (FNMA.OB), according to the committee's report.

"The VIP loan program was a tool used by Countrywide to build goodwill with lawmakers and other individuals positioned to benefit the company," the report states.

The central findings in the report were also revealed by news reports directly after the crash, but the three-year committee investigation now shows the vast extent of the VIP program, nicknamed “Friends of Angelo” for the company’s chief executive Angelo Mozilo, how it came into existence and how it eventually became one of the biggest scandals of the recession, reports Talking Points Memo.

Countrywide, acquired by Bank of America Corp (BAC.N) in 2008, was a major player in the mortgage business during the housing boom leading up to the mortgage crisis, Reuters reports. The company and its chief executive, Angelo Mozilo, were well known for the risky lending practices which lead to the housing market crash.

The report, obtained by the Associated Press, shows how the discounts were not only aimed at gaining influence for Countrywide but also were used to help other mortgage giants.

"In the years that led up to the 2007 housing market decline, Countrywide VIPs were positioned to affect dozens of pieces of legislation that would have reformed Fannie" and its rival Freddie Mac, the committee said.

See report below.

* * *

Countrywide VIP Report By House Oversight Committee 

* * *

Countrywide VIP Report By House Oversight Committee

# # #

EU Defeats ACTA

Wednesday, July 4, 2012 by Common Dreams

European Parliament votes against controversial Anti-Counterfeiting Trade Agreement

ACTA, the controversial online piracy treaty, was dealt a blow on Wednesday when the European Parliament voted overwhelmingly to reject it.

The European Parliament voted 478 to 39 against the Anti-Counterfeiting Trade Agreement, which was drawn up in secret and had been protested by hundreds of thousands across the EU who saw the treaty as an infringement on internet freedom.

President of the European Parliament Martin Schulz welcomed the decision and stated that "ACTA is the wrong solution to fight online piracy." He said that the treaty negotiations had lacked transparency and acknowledged the massive public mobilizations against the treaty.

"The majority of the parliament is of the opinion that ACTA is too vague - leaving room for abuses and raising concerns about its impact on privacy and civil liberties, on innovation, creativity and the free flow of information," wrote Schulz.

"We have to take all possible measures to fight piracy, but this should never be done at the cost of what has made the internet one of the most revolutionary technologies in history: the EP wants the web to remain free and open," he added.

Civil liberties advocates including Pirate Party leader Loz Kaye also welcomed the decision. "The European Parliament vote is a triumph of democracy over special interests and shady back-room deals. This is a significant victory for digital rights, and it's thanks to the tireless work of activists and grass roots organizations, including the Pirate Party world wide. Without this opposition, our representatives would have waved this agreement through. It is now clear that it is becoming increasingly politically poisonous to be 'anti-internet'," Kaye said.

With this vote, there is no possibility of EU ratification, leaving the future of the treaty uncertain.

Token Fine for GlaxoSmithKline Won't Stop BigPharma's Bad Behavior: Watchdog

Tuesday, July 3, 2012 by Common Dreams

Pharmaceutical mammoth GlaxoSmithKline (GSK) has been ordered to pay $3 billion fine in what is described as the largest case of healthcare fraud in U.S. history. But critics say it is just as a slap on the wrist as the amount "pales in comparison" to the profits pharmaceutical companies earn and does nothing to preclude such further behavior from big pharma.

GSK, which had $44 billion in sales and a net profit of nearly $9 billion in 2011, faces the fine for marketing its antidepressants Paxil and Wellbutrin for non-FDA-approved purposes, including marketing them to children, and for withholding from the FDA safety information for its diabetes drug Avandia.

Deputy U.S. Attorney General James Cole said, "At every level, we are determined to stop practices that jeopardize patients' health; harm taxpayers; and violate the public trust — and this historic action is a clear warning to any company that chooses to break the law," he said.

But Dr. Sidney Wolfe, Director of Public Citizen’s Health Research Group, states that this is in no way a "clear warning."

"The fines imposed on pharmaceutical companies for dangerous and illegal conduct pale in comparison to the profits generated from such activity. The industry is therefore tacitly encouraged to continue its illegal activity," Wolfe said in a statement.

"Until more meaningful penalties and the prospect of jail time for company heads who are responsible for such activity become commonplace, companies will continue defrauding the government and putting patients’ lives in danger," added Wolfe.

Economist Dean Baker notes that GSK's lying about its drugs' safety and uses was incentivized by the monopolies drug companies are allowed to have. "This is the incentive that we give to drug companies when the government grants patent monopolies that allow them to sell drugs for hundreds or even thousands of times the cost of production."

OxyContin For Kids: What Could Possibly Go Wrong?

07.03.12 - Common Dreams

by Abby Zimet

A day after Glaxo agreed to pay the largest drug fraud settlement ever for illegally marketing anti-depressants - and as further if redundant proof that Big Pharma will do anything to make a buck - comes news that Purdue Pharma is trying to get six more months of patent protection for its wildly profitable, highly addictive painkiller OxyContin - second cousin to morphine and heroin - by trying it out on kids as young as six. The company, which in a landmark case already paid $635 million in fines after being found guilty of misleading doctors and the public about OxyContin’s risk of addiction, says it is doing the pediatric trials so doctors "can make better decisions about the care of their patients.”

They also have a bridge to sell you. Shameless.

100 Riffs (A Brief History of Rock N' Roll)

Planet Earth

Where the Money Lives

For all Mitt Romney’s touting of his business record, when it comes to his own money the Republican nominee is remarkably shy about disclosing numbers and investments. Nicholas Shaxson delves into the murky world of offshore finance, revealing loopholes that allow the very wealthy to skirt tax laws, and investigating just how much of Romney’s fortune (with $30 million in Bain Capital funds in the Cayman Islands alone?) looks pretty strange for a presidential candidate.

By Nicholas Shaxson - VANITY FAIRE

A person who worked for Mitt Romney at the consulting firm Bain and Co. in 1977 remembers him with mixed feelings. “Mitt was … a really wonderful boss,” the former employee says. “He was nice, he was fair, he was logical, he said what he wanted … he was really encouraging.” But Bain and Co., the person recalls, pushed employees to find out secret revenue and sales data on its clients’ competitors. Romney, the person says, suggested “falsifying” who they were to get such information, by pretending to be a graduate student working on a proj­ect at Harvard. (The person, in fact, was a Harvard student, at Bain for the summer, but not working on any such proj­ects.) “Mitt said to me something like ‘We won’t ask you to lie. I am not going to tell you to do this, but [it is] a really good way to get the information.’ … I would not have had anything in my analysis if I had not pretended.

“It was a strange atmosphere. It did leave a bad taste in your mouth,” the former employee recalls.

This unsettling account suggests the young Romney—at that point only two years out of Harvard Business School—was willing to push into gray areas when it came to business. More than three dec­ades later, as he tried to nail down the Republican nomination for president of the United States, Romney’s gray areas were again an issue when he repeatedly resisted calls to release more details of his net worth, his tax returns, and the large investments and assets held by him and his wife, Ann. Finally the other Republican candidates forced him to do so, but only highly selective disclosures were forthcoming.

Even so, these provided a lavish smorgasbord for Romney’s critics. Particularly jarring were the Romneys’ many offshore accounts. As Newt Gingrich put it during the primary season, “I don’t know of any American president who has had a Swiss bank account.” But Romney has, as well as other interests in such tax havens as Bermuda and the Cayman Islands.

To give but one example, there is a Bermuda-based entity called Sankaty High Yield Asset Investors Ltd., which has been described in securities filings as “a Bermuda corporation wholly owned by W. Mitt Romney.” It could be that Sankaty is an old vehicle with little importance, but Romney appears to have treated it rather carefully. He set it up in 1997, then transferred it to his wife’s newly created blind trust on January 1, 2003, the day before he was inaugurated as Massachusetts’s governor. The director and president of this entity is R. Bradford Malt, the trustee of the blind trust and Romney’s personal lawyer.

Romney failed to list this entity on several financial disclosures, even though such a closely held entity would not qualify as an “excepted investment fund” that would not need to be on his disclosure forms. He finally included it on his 2010 tax return. Even after examining that return, we have no idea what is in this company, but it could be valuable, meaning that it is possible Romney’s wealth is even greater than previous estimates. While the Romneys’ spokespeople insist that the couple has paid all the taxes required by law, investments in tax havens such as Bermuda raise many questions, because they are in “jurisdictions where there is virtually no tax and virtually no compliance,” as one Miami-based offshore lawyer put it.

That’s not the only money Romney has in tax havens. Because of his retirement deal with Bain Capital, his finances are still deeply entangled with the private-equity firm that he founded and spun off from Bain and Co. in 1984. Though he left the firm in 1999, Romney has continued to receive large payments from it—in early June he revealed more than $2 million in new Bain income. The firm today has at least 138 funds organized in the Cayman Islands, and Romney himself has personal interests in at least 12, worth as much as $30 million, hidden behind controversial confidentiality disclaimers. Again, the Romney campaign insists he saves no tax by using them, but there is no way to check this.

Bain Capital is the heart of Romney’s fortune: it was the financial engine that created it. The mantra of his campaign is that he was a businessman who created tens of thousands of jobs, and Bain certainly did bring useful operational skills to many companies it bought. But his critics point to several cases where Bain bought companies, loaded them with debt, and paid itself extravagant fees, thereby bankrupting the companies and destroying tens of thousands of jobs.

Come August, Romney, with an estimated net worth as high as $250 million (he won’t reveal the exact amount), will be one of the richest people ever to be nominated for president. Given his reticence to discuss his wealth, it’s only natural to wonder how he got it, how he invests it, and if he pays all his taxes on it.

Ironically, it was Mitt’s father, George Romney, who released 12 years of tax returns, in November 1967, just ahead of his presidential campaign, thereby setting a precedent that nearly every presidential candidate since has either willingly or unwillingly been subject to. George, then the governor of Michigan, explained why he was releasing so many years’ worth, saying, “One year could be a fluke, perhaps done for show.”

But his son declined to release any returns through one unsuccessful race for the U.S. Senate, in 1994, one successful run for Massachusetts governor, in 2002, and an aborted bid for the Republican Party presidential nomination, in 2008. Just before the Iowa caucus last December, Mitt told MSNBC, “I don’t intend to release the tax returns. I don’t,” but finally, on January 24, 2012—after intense goading by fellow Republican candidates Newt Gingrich and Rick Perry—he released his 2010 tax return and an estimate for 2011.

These, plus the mandatory financial disclosures filed with the Office of Government Ethics and released last August, raise many questions. A full 55 pages in his 2010 return are devoted to reporting his transactions with foreign entities. “What Romney does not get,” says Jack Blum, a veteran Washington lawyer and offshore expert, “is that this stuff is weird.”

The media soon noticed Romney’s familiarity with foreign tax havens. A $3 million Swiss bank account appeared in the 2010 returns, then winked out of existence in 2011 after the trustee closed it, as if to remind us of George Romney’s warning that one or two tax returns can provide a misleading picture. Ed Kleinbard, a professor of tax law at the University of Southern California, says the Swiss account “has political but not tax-policy resonance,” since it—like many other Romney investments—constituted a bet against the U.S. dollar, an odd thing for a presidential candidate to do. The Obama campaign provided a helpful world map pointing to the tax havens Bermuda, Luxembourg, and the Cayman Islands, where Romney and his family have assets, each with the tagline “Value: not disclosed in tax returns.”

Romney’s personal tax rate is a particular point of interest. In 2010 and 2011, Mitt and Ann paid $6.2 million in federal tax on $42.5 million in income, for an average tax rate just shy of 15 percent, substantially less than what most middle-income Americans pay. Romney manages this low rate because he takes his payments from Bain Capital as investment income, which is taxed at a maximum 15 percent, instead of the 35 percent he would pay on “ordinary” income, such as salaries and wages. Many tax experts argue that the form of remuneration he receives, known as carried interest, is really just a fee charged by investment managers, so it should instead be taxed at the 35 percent rate.

Lee Sheppard, a contributing editor at the trade publication Tax Notes, whose often controversial articles are read widely by tax professionals, is nonplussed that the Obama campaign has been so listless on the issue of carried interest. “Romney is the poster boy, the best argument, for taxing this profit share as ordinary income,” says Sheppard.

In the face of such arguments, Romney’s defense is that he never broke the rules: if there is a problem, it is in the laws, not in his behavior. “I pay all the taxes that are legally required, not a dollar more,” he said. Even so. “When you are running for president, you might want to err on the side of overpaying your taxes, and not chase every tax gimmick that comes down the pike,” says Sheppard. “It kind of looks tacky.”

The assertion that he broke no laws is widely accepted. But it is worth asking if it is actually true. The answer, in fact, isn’t straightforward. Romney, like the superhero who whirls and backflips unscathed through a web of laser beams while everyone else gets zapped, is certainly a remarkable financial acrobat. But careful analysis of his financial and business affairs also reveals a man who, like some other Wall Street titans, seems comfortable striding into some fuzzy gray zones.

The Caped Avoider!

 

One might perhaps accept an explanation by Romney’s campaign spokeswoman, Andrea Saul, that the candidate’s failure to include his Swiss account in earlier financial disclosures was merely a “trivial inadvertent issue.” But deeper questions do emerge.

All the assets on Mitt’s financial disclosures are in blind trusts or retirement accounts held by him and Ann. Blind trusts are designed to avoid conflicts of interest for those in public office by having politicians’ assets managed by independent trustees. The Romneys’ blind trust was created when Mitt was elected governor of Massachusetts. Curiously, the Romneys appointed Bradford Malt as their trustee. It’s certainly true that under Malt the trusts don’t appear to be as blind as they might be: for instance, in 2010 the Romneys invested $10 million in the start-up of the Solamere Founders Fund, co-founded by their eldest son, Tagg, and Spencer Zwick, Romney’s onetime top campaign fund-raiser; Solamere is now in the Ann Romney blind trust. Malt has said he invested in Solamere without consulting Mitt or Ann and explained he liked Solamere because of its diversified approach and because he knew the founders and had confidence in them.

Likewise, the Romneys were reported to have invested at least $1 million in Elliott Associates, L.P., a hedge fund specializing in “distressed assets.” Elliott buys up cheap debt, often at cents on the dollar, from lenders to deeply troubled nations such as Congo-Brazzaville, then attacks the debtor states with lawsuits to squeeze maximum repayment. Elliott is run by the secretive hedge-fund billionaire and G.O.P. super-donor Paul Singer, whom Fortune recently dubbed Mitt Romney’s “Hedge Fund Kingmaker.” (Singer has given $1 million to Romney’s super-pac Restore Our Future.)

It is hard to know the size of these investments. Romney’s financial disclosure form lists 25 of them in an open-ended category, “Over $1 million,” including So­lamere and Elliott, and they are not broken down further. Romney hides behind a disclaimer that the fund managers “declined to provide such information” about their underlying assets. Many of these funds are set up in tax havens such as the Cayman Islands, where a confidentiality law states that you can be jailed for up to four years just for asking about such information.

Andrea Saul said of these investments, “Everything … was reported correctly.” Joseph Sandler, a Democratic lawyer who has worked with candidates on disclosures for more than two dec­ades, is skeptical. “The law is the law,” Sandler says. “[Romney] says, ‘Well, you know, they won’t tell me.’ But when you run for office in the U.S. and are not prepared to comply with disclosure requirements, you should either divest yourself of the assets or don’t run.” The Washington Post summarized the opinions of experts across the political spectrum by saying Romney’s disclosures were “the most opaque they have encountered.”

Mysteries also arise when one looks at Romney’s individual retirement account at Bain Capital. When Romney was there, from 1984 to 1999, taxpayers were allowed to put just $2,000 per year into an I.R.A., and $30,000 annually into a different kind of plan he may have used. Given these annual contribution ceilings, how can his I.R.A. possibly contain up to $102 million, as his financial disclosures now suggest?

The Romneys won’t say, but Mark Maremont, writing in The Wall Street Journal, uncovered a likely explanation. When Bain Capital bought companies, it would create two classes of shares, named A and L. The A shares were risky common shares, to which they would assign a very low value. The L shares were preferred shares, paying a high dividend but with the payoff frozen, and most of the value was assigned to them. Bain employees would then put the exciting A shares in their I.R.A. accounts, where they grew tax-free. With all the risk of the deal, the A shares stood to gain a lot or collapse. But if the deal succeeded, the springing value could be stunning: Bain employees saw their A shares from one particularly fruitful deal grow 583-fold, 16 times faster than the underlying stock.

The Romneys won’t tell us how, or even if, they assigned super-low values to the A shares, but there are a couple of ways to do it. One is to use standard options models to price the shares—then feed inappropriate assumptions into those models. Romney could alternatively have used a model called liquidation valuation, which Kleinbard says would have been “completely inappropriate.” Without seeing the assumptions used on Romney’s tax returns from the years when those lowball A shares were squirted into his I.R.A., we cannot know how he did it. Whatever methods he used, however, the valuations were, according to Andrew Smith, of Houlihan Capital in Chicago, “pushing the envelope.” (Andrea Saul retorts, “Why should successful investments be criticized?”)

Mitt’s and Ann’s I.R.A.’s have also been receiving profit interest from (mostly Cayman Island–based) Bain Capital funds that were set up long after he had left the company, in 1999. For example, the 2010 return reveals a profits interest in a Cayman-based fund called Bain Capital Partners (AM) X LP, which was transferred to the Ann D. Romney trust in October 2010. An attachment to the return says the Ann D. Romney trust is “performing services” to the partnership, which is boilerplate language for these kinds of filings. Her blind trust could receive lightly taxed income from Bain Capital for years to come, well into the presidential term her husband hopes to win.

But administrative guidance says you can do this kind of thing only if the compensation is in recognition of past services you have provided. “This should not mean retired from the mother ship 10 years out and getting profits you had nothing to do with,” Sheppard says, adding that Romney can get away with it because of excessive “administrative indulgences” that have allowed a “perversion of the law in favor of a small class of overcompensated investment managers.”

Romney’s I.R.A. also appears to have invested in so-called blocker corporations in the Cayman Islands and elsewhere. U.S. pension funds, foundations, and even I.R.A.’s routinely use offshore blocker corporations to avoid something called the Unrelated Business Income Tax, which was designed to keep nonprofits from competing with ordinary companies in areas outside their core purpose: if you invest directly you get hit with the tax, but if you invest in a blocker, which then invests in the U.S. business, you escape it. Romney’s I.R.A. appears to have employed this lawful escape route, and his campaign has used language suggesting that it has. But that would mean the Romney camp’s claim that Mitt’s tax consequences of investing via the Cayman Islands is “the very same” as it would have been had he invested directly at home is simply not true. (Romney spokesperson Andrea Saul says Romney “gets the same benefit anyone would get from an I.R.A.,” but she did not respond to questions on whether his I.R.A. had used blockers or avoided taxes by investing via tax havens.)

A Deutsche Bank analysis of 68 Bain deals Romney was involved in calculated an internal rate of return—a standard private-equity benchmark—at a staggering 88 percent annually (though after fees and inflation, investor performance may have been little more than half that). It is substantially on this stellar rec­ord that Romney is now running for president. His work at Bain was unquestionably good for himself and for Bain, but was it also good for the businesses he acquired, for their workers, and for the economy, as he claims?

A report by Bain and Co. itself, looking at the period from 2002 to 2007, concluded that there is “little evidence that private equity owners, overall, added value” to the companies they took over: nearly all their returns are explained by broad economic growth, rising stock markets, and leverage. Josh Kosman, who researched the subject of private equity for his book The Buyout of America, singles out Bain Capital in particular. “They take pride in pushing the leverage envelope [i.e., use of borrowed money, which magnifies returns, while off-loading the risks onto others] more than their peers,” he says. “I have heard that from limited partners in Bain’s funds. I have heard that from bankers who lend money to finance their leveraged buyouts. Bain always prided itself on ‘We’ll push leverage more than the others.’ They brag about that, behind closed doors.”

Dade Behring is a cause célèbre for Romney’s and Bain’s critics, and it illustrates the leverage problem clearly. In 1994, Bain bought Dade International, a medical-diagnostics company, then added the medical-diagnostics division of DuPont in 1996 and a German medical-testing company called Behring in 1997. Former Dade president Bob Brightfelt says the operation started well: the Bain managers were “pretty smart guys,” he recalls, and they did well cutting out overlap, and exploiting synergies.

Then brutal cost cutting began. Bain cut R&D spending to an average of 8 percent of sales, a little more than half what its competitors were doing. Cindy Hewitt, Dade’s human-resources manager, remembers how the firm closed a Puerto Rico plant in 1998, a year after harvesting $7.1 million in local tax breaks aimed at job creation, and relocated some staff to Miami, then the company’s most profitable plant. Based on re­a­ssur­ances she had received from her superiors, she told those uprooting themselves from Puerto Rico that their jobs in Miami were safe for now—but then Bain closed the Miami plant. “Whether you want to call it misled, or lied, or manipulated, I do not believe they provided full information about what discussions were under way,” she says. “I would never want to be part of even unintentionally treating people so poorly.”

Bain engaged in startling penny-pinching with the laid-off employees. Their contracts stipulated that if they left early they would have to pay back the costs of relocating to Miami—but in spite of all that Dade had done to them, it refused to release the employees from this clause. “They said they would go after them for that money if they left before Bain was finished with them,” Hewitt recalls. Not only that, but the company declined to give workers their severance pay in lump sums to help them fund their return home.

In 1999, generous pensions were converted into less generous benefits, wages were cut, and more staff members were laid off. Some employees contacted Norman Stein, then the director of the pension-counseling clinic at the University of Alabama law school, with a view to challenging the conversions. Stein says the employees were “extraordinarily nervous,” so fearful, in fact, that they refused to let lawyers even make copies of pension documents. “I have been dealing with pensions issues for over 25 years and I never saw anything like this,” recalls Stein. The spooked employees did not go to court. Stein says that, while breaking pension contracts like this was not unheard of, the practice at that time was “questionable,” adding that Dade may have saved $10 to $40 million from converting its pensions.

The beauty—or savagery—of leverage is that it can magnify any and all cash-flow boosts, such as this one. Take $10 to $40 million squeezed from a pension pot, then use that to create new, rosier financial projections to borrow several times that amount, and then pay yourself a big special dividend from the borrowed funds, many times the size of the pension savings. That is just what Bain Capital did: the same month it converted the pensions, it created new financial projections as a basis to borrow an extra $421 million—from which Bain, its co-investor Goldman Sachs, and top Dade management extracted $365 million in dividends. According to Kosman, “Bain and Goldman—after putting down only $85 million … made out like bandits—a $280 million profit.” Dade’s debt rose to more than $870 million. Romney had left operational management of Bain that year, though his disclosures show that he owned 16.5 percent of the Bain partnership responsible for the Dade investment until at least 2001.

Quite soon, however, a fragile Dade faced adverse conditions in the currency markets, and it had to start in effect cannibalizing itself, cutting into the core of its business. It filed for bankruptcy in August 2002 and Bain Capital departed. When Dade emerged from bankruptcy, its new owners invested in long-term R&D, and it flourished again.

Nor was this an isolated incident: Kosman lists five other “formerly healthy” companies—Stage Stores, Ampad, GS Technologies, Details, and KB Toys—Bain helped drive into bankruptcy, while making big profits.

(Despite numerous entreaties from Vanity Fair to Bain Capital to address on the record points in this article with which it might disagree, the firm refused to do so and instead provided this statement: “When politics overwhelm fact, some will distort or cherry-pick our record and launch unfounded allegations and insinuations. The truth and the full record show that Bain Capital operates with high standards of integrity and excellence in compliance with all laws. Any suggestion to the contrary is baseless.”)

Tax Haven U.S.A.

 

The term “financialization” describes two interlocking processes: a disproportionate growth in a country’s deregulated financial sector, relative to the rest of the economy, and the rising importance of financial activities with a focus on financial returns among industrial and other non-financial corporations, often at the expense of real innovation and productivity.

Some see the rising influence of finance and financial models in epochal terms. Author of Financialization and the U.S. Economy Özgür Orhangazi summarizes academic literature that sees financialization “as one of the indicators of the decline of the heg­e­mon­ic power”: imperial Venice, Genoa, Holland, and Britain all saw their power rise on the back of productive industrial capitalism, followed by domination by the financial sector, which eventually began to cannibalize the productive sector in pursuit of financial returns—a process that ended in weakness and collapse.

Little noticed in the academic discussions of financialization is the role of offshore tax havens, one of the big reasons the financial sector has become so powerful. In 1966, Michael Hudson, a young Chase Manhattan balance-of-payments economist, was in a company elevator when he was handed a memo by a former State Department operative. The memo came from the U.S. government, and Hudson was tasked with figuring out how much foreign money the U.S. might attract. “They were saying, ‘We want to replace Switzerland,’ ” Hudson explains. “All this money will come here if we make this the criminal center of the world. We wanted foreign criminal money, which was patriotic, but not American criminal money.”

In the years since then, almost unknown to most Americans, the United States has turned itself into a giant tax haven for foreigners, just as the memo suggested. Federal and state tax laws have been deliberately shaped to give foreigners special tax exemptions unavailable to Americans, plus financial secrecy and exemptions from regulatory restraints. “We have criticized offshore tax havens for their secrecy and lack of transparency,” said Senator Carl Levin. “But look what is going on in our own backyard.”

In this grand scenario, tax havens such as the Caymans serve as feeders of foreign savings into Tax Haven U.S.A. from abroad, providing foreign investors with additional ways to skip around tax, disclosure, and regulatory requirements that they might trigger if they invested directly.

The money sucked into Tax Haven U.S.A., often via the “feeder” tax havens, is frequently tax-evading and other criminal foreign money, in the spirit of Hudson’s 1966 memo, and it is predominantly channeled not into productive investment but into real estate and financial business.

One cannot properly understand Wall Street’s size and power without appreciating the central role of offshore tax havens. There is absolutely no evidence that Bain has done anything illegal, but private equity is one channel for this secrecy-shrouded foreign money to enter the United States, and a filing for Mitt Romney’s first $37 million Bain Capital Fund, of 1984, provides a rare window into this. One foreign investor, of $2 million, was the newspaper tycoon, tax evader, and fraudster Robert Maxwell, who fell from his yacht, and drowned, off of the Canary Islands in 1991 in strange circumstances, after looting his company’s pension fund. The Bain filing also names Eduardo Poma, a member of one of the “14 families” oligarchy that has controlled most of El Salvador’s wealth for decades; oddly, Poma is listed as sharing a Miami address with two anonymous companies that invested $1.5 million between them. The filings also show a Geneva-based trustee overseeing a trust that invested $2.5 million, a Bahamas corporation that put in $3 million, and three corporations in the tax haven of Panama, historically a favored destination for Latin-American dirty money—“one of the filthiest money-laundering sinks in the world,” as a U.S. Customs official once put it.

Bain Capital has said it did everything required by the U.S. government to check that the investors were not associated with unsavory interests. U.S. law doesn’t require Bain to enforce the tax laws of its investors’ home countries, but the presence of Swiss trustees, Bahamas trusts, and Panama corporations would raise red flags with any tax authority.

Many Americans might react with a shrug to the idea of shady foreign money such as Robert Maxwell’s being invested here. But, says Rebecca Wilkins, of the Washington, D.C.–based nonprofit Citizens for Tax Justice, “It is shocking that a presidential candidate should think that is O.K.”

Government-sponsored study destroys DEA’s classification of marijuana

By Stephen C. Webster - RAW Story 

Tuesday, July 3, 2012

 

 

A government-sponsored study published this month in The Open Neurology Journal concludes that marijuana provides much-needed relief to some chronic pain sufferers and that more clinical trials are desperately needed, utterly destroying the U.S. Drug Enforcement Agency’s (DEA) classification of the drug as having no medical uses.

While numerous prior studies have shown marijuana’s usefulness for a host of medical conditions, none have ever gone directly at the DEA’s placement of marijuana atop the schedule of controlled substances. This study, sponsored by the State of California and conducted at the University of California Center for Medicinal Cannabis Research, does precisely that, driving a stake into the heart of America’s continued war on marijuana users by calling the Schedule I placement simply “not accurate” and “not tenable.”

Reacting to the study, Paul Armentano, director of the National Organization for the Reform of Marijuana Laws (NORML), told Raw Story that the study clearly proves U.S. drug policy “is neither based upon nor guided by science.”

“In fact, it is hostile to science,” he said. “And despite the Obama Administration’s well publicized 2009 memo stating, ‘Science and the scientific process must inform and guide decisions of my Administration,’ there is little to no evidence indicating that the federal government’s ‘See no evil; hear no evil’ approach to cannabis policy is not changing any time soon.”

Schedule I is supposedly reserved for the most inebriating substances that have no medical value, like LSD, ecstasy, peyote and heroin. As the DEA describes it: “Drugs listed in schedule I have no currently accepted medical use in treatment in the United States and, therefore, may not be prescribed, administered, or dispensed for medical use. In contrast, drugs listed in schedules II-V have some accepted medical use and may be prescribed, administered, or dispensed for medical use.”

And that’s the problem, the study’s authors portend.

“The classification of marijuana as a Schedule I drug as well as the continuing controversy as to whether or not cannabis is of medical value are obstacles to medical progress in this area,” they wrote. “Based on evidence currently available, the Schedule I classification is not tenable; it is not accurate that cannabis has no medical value, or that information on safety is lacking. It is true cannabis has some abuse potential, but its profile more closely resembles drugs in Schedule III (where codeine and dronabinol are listed). The continuing conflict between scientific evidence and political ideology will hopefully be reconciled in a judicious manner.”

They add that their evidence showed marijuana reliably reduced chronic neuropathic pain and muscle spasticity due to multiple sclerosis versus trials where a placebo was used. They also specifically tested marijuana’s effects when smoked, calling the delivery method “rapid and efficient” but noting that vaporization is a better choice because it produces less carbon monoxide.

The study adds that, like all medicines, there are negative side effects associated with marijuana, such as dizziness, fatigue, lightheadedness, muscle weakness and pain and heart palpitations — all of which can pose a risk in some chronic pain patients with co-occurring conditions like cardiovascular disease or substance abuse disorders. However, they call these side effects “dose-related” and “of mild to moderate severity,” adding that they “appear to decline over time, and are reported less frequently in experienced than in naïve users.”

Researchers also noted that “fatal overdose with cannabis alone has not been reported.”

Authors additionally found that marijuana does cause withdrawal symptoms within 12 hours of use, noting the symptoms are mild in experienced users and typically abate within 72 hours. They added that ingesting marijuana “can acutely impair skills required to drive motor vehicles,” but noted that the data on marijuana and traffic accidents is “inconclusive.”

Ultimately, they concluded that more clinical trials are needed to determine which individual components of the marijuana plant are causing the medicinal effects, and whether the plant can be used to treat a host of other ailments.

“Medical marijuana is mostly used for chronic pain, and has enabled countless patients to either reduce or eliminate their pharmaceutical drug regimen,” Kris Hermes, a spokesman for Americans for Safe Access (ASA), one of the nation’s leading medical marijuana advocacy groups, told Raw Story. “However, it can also be used for: arthritis, nausea or as an appetite stimulant for people living with HIV/AIDS or cancer, gastrointestinal disorders, and movement disorders (not just for people with multiple sclerosis). That is only a sampling of health conditions for which cannabis has been found helpful in alleviating symptoms. Other health conditions include: [post-traumatic stress disorder], [attention deficit disorder], [attention deficit hyperactivity disorder] and other mental health conditions, glaucoma, and migraines.”

In hopes of forcing recognition of marijuana’s medical value, ASA sued the federal government last year after a long-running appeal for the reclassification of marijuana was shot down nearly a decade after it was filed. That case should go before the U.S. Court of Appeals District of Columbia Circuit later this year.

“The federal government’s strategy has been delay, delay, delay,” ASA chief counsel Joe Elford said in an advisory. “It is far past time for the government to answer our rescheduling petition, but unfortunately we’ve been forced to go to court in order to get resolution.”

“Reform advocates can and should use this study to show their congressional representatives that our country’s leading medical marijuana researchers agree that it should be reclassified,” Hermes added. “…This certainly should also have a bearing on the D.C. Circuit’s deliberations in the appeal of the rescheduling petition denial.”

Medical marijuana is currently legal in just 17 states and Washington, D.C.

GlaxoSmithKline settles healthcare fraud case for $3 billion

By David Ingram - Reuters

WASHINGTON (Reuters) – GlaxoSmithKline Plc agreed to plead guilty to misdemeanor criminal charges and pay $3 billion to settle what government officials on Monday described as the largest case of healthcare fraud in U.S. history.

The agreement, which still needs court approval, would resolve allegations that the British drugmaker broke U.S. laws in the marketing and development of pharmaceuticals.

GSK targeted the antidepressant Paxil to patients under age 18 when it was approved for adults only, and it pushed the drug Wellbutrin for uses it was not approved for, including weight loss and treatment of sexual dysfunction (one of its side effects is sexual dysfunction), according to an investigation led by the U.S. Justice Department.

The company went to extreme lengths to promote the drugs, such as distributing a misleading medical journal article and providing doctors with meals and spa treatments that amounted to illegal kickbacks, prosecutors said.

In a third instance, GSK failed to give the U.S. Food and Drug Administration safety data about its diabetes drug Avandia, in violation of U.S. law, prosecutors said.

The misconduct continued for years beginning in the late 1990s and continued, in the case of Avandia’s safety data, through 2007. GSK agreed to plead guilty to three misdemeanor criminal counts, one each related to the three drugs.

Guilty pleas in cases of alleged corporate misconduct are exceedingly rare, making GSK’s agreement especially unusual.

The agreement to settle the charges “is unprecedented in both size and scope,” said James Cole, the No. 2 official at the U.S. Justice Department. He called the action “historic” and “a clear warning to any company that chooses to break the law.”

The settlement includes $1 billion in criminal fines and $2 billion in civil fines.

GSK said in a statement it would pay the fines through existing cash resources. The company announced a $3 billion charge in November related to legal claims [ID:nL5E7M315A].

NEW ‘ERA’ AT GSK

Chief Executive Officer Andrew Witty said the misconduct originated “in a different era for the company” and will not be tolerated. “I want to express our regret and reiterate that we have learnt from the mistakes that were made,” he said in a written statement.

The GSK settlement surpasses what had been the largest criminal case involving a drugmaker in U.S. history. In 2009, Pfizer Inc agreed to pay $2.3 billion to settle allegations it improperly marketed 13 drugs.

The cases follow a trend of U.S. authorities cracking down on how pharmaceuticals are sold, in part because of the rising cost of providing drugs through government programs.

Part of civil fines address allegations that, from 1994 to 2003, GSK underpaid money owed to Medicaid, the healthcare program for the poor run jointly by states and the federal government. The company had an obligation to tell the government its “best prices” but failed to do so, prosecutors said, and $300 million of the settlement will go to states and other public health authorities.

A portion of the $2 billion in civil fines may go to a group of whistleblowers who contributed to the government’s investigation and who are eligible to share in the recovery under the False Claims Act. Cole said the amount has not been determined.

‘INTEGRITY’ PLAN

As part of the settlement, GlaxoSmithKline agreed to new restrictions by the U.S. government to prevent the use of kickbacks or other prohibited practices. The inspector general of the U.S. Department of Health and Human Services will oversee the “Corporate Integrity Agreement” for five years.

The company will not be able to compensate its salesmen based on sales goals for territories. It was also required to change its executive compensation program to allow the company to “claw back” certain pay for those engaged in misconduct.

Witty said GSK’s U.S. unit has “fundamentally changed our procedures for compliance, marketing and selling. When necessary, we have removed employees who have engaged in misconduct.”

Prosecutors have not brought criminal charges against any individuals in connection with the GSK case, although the settlement expressly leaves open that possibility. Cole declined to comment on the possibility of future charges.

Almost exactly a year ago GSK agreed to pay nearly $41 million to 37 states and the District of Columbia in an unrelated case about substandard manufacturing processes at a Puerto Rico factory.

In 2010, the company took a $2.4 billion charge in connection with Avandia to settle claims from patients.

GSK’s shares were positive on the New York Stock Exchange on Monday, up 1.6 percent to $46.29 at 1400 EDT.

The case is U.S. v. GlaxoSmithKline LLC, U.S. District Court for the District of Massachusetts, No. 12-cr-10206.

Some Outrageous Facts about Inequality

Monday, July 2, 2012 by Common Dreams

by Paul Buchheit

 

Studying inequality in America reveals some facts that are truly hard to believe. Amidst all the absurdity a few stand out. 

1. U.S. companies in total pay a smaller percentage of taxes than the lowest-income 20% of Americans.

Total corporate profits for 2011 were $1.97 trillion. Corporations paid $181 billion in federal taxes (9%) and $40 billion in state taxes (2%), for a total tax burden of 11%. The poorest 20% of American citizens pay 17.4% in federal, state, and local taxes.

2. The high-profit, tax-avoiding tech industry was built on publicly-funded research.

The technology sector has been more dependent on government research and development than any other industry. The U.S. government provided about half of the funding for basic research in technology and communications well into the 1980s. Even today, federal grants support about 60 percent of research performed at universities.

IBM was founded in 1911, Hewlett-Packard in 1947, Intel in 1968, Microsoft in 1975, Apple and Oracle in 1977, Cisco in 1984. All relied on government and military innovations. The more recently incorporated Google, which started in 1996, grew out of the Defense Department's ARPANET system and the National Science Foundation's Digital Library Initiative.

The combined 2011 federal tax payment for the eight companies was just 10.6%.

3. The sales tax on a quadrillion dollars of financial sales is ZERO.

The Bank for International Settlements reported in 2008 that total annual derivatives trades were $1.14 quadrillion. The same year, the Chicago Mercantile Exchange reported a trading volume of $1.2 quadrillion.

A quadrillion dollars is the entire world economy, 12 times over. It's enough to give 3 million dollars to every person in the United States. But in a sense it's not real money. Most of it is high-volume nanosecond computer trading, the type that almost crashed our economy. So it's a good candidate for a tiny sales tax. But there is no sales tax.

Go out and buy shoes or an iPhone and you pay up to a 10% sales tax. But walk over to Wall Street and buy a million dollar high-risk credit default swap and pay 0%.

4. Many Americans get just a penny on the dollar.

• For every dollar of NON-HOME wealth owned by white families, people of color have only one cent.
   
• For every dollar the richest .1% earned in 1980, they've added three more dollars. The poorest 90% have added one cent.
   
• For every dollar of financial securities (e.g., bonds) in the U.S., the bottom 90% of Americans have a penny and a half's worth.
   
• For every dollar of 2008-2010 profits from Boeing, DuPont, Wells Fargo, Verizon, General Electric, and Dow Chemicals, the American public got a penny in taxes.

5. Our society allows one man or one family to possess enough money to feed EVERY hungry person on earth.

The United Nations estimates that $30 billion per year is needed to eradicate hunger. Several individuals have more than this amount in personal wealth.

There are 925 million people in the world with insufficient food. According to the World Food Program, it takes about $100 a year to feed a human being. That's $92 billion, about equal to the fortune of the six Wal-Mart heirs.

One Final Outrage...

In 2007 a hedge fund manager (John Paulson) conspired with a financial company (Goldman Sachs) to create packages of risky subprime mortgages, so that in anticipation of a housing crash he could use other people's money to bet against his personally designed sure-to-fail financial instruments. His successful gamble paid him $3.7 billion. Three years later he made another $5 billion, which in the real world would have been enough to pay the salaries of 100,000 health care workers.

As an added insult to middle-class taxpayers, the tax rate on most of Paulson's income was just 15%. As a double insult, he may have paid no tax at all, since hedge fund profits can be deferred indefinitely. As a triple insult, some of his payoff came from the middle-class taxpayers themselves, who bailed out the company (AIG) that had to pay off his bets.

And the people we elect to protect our interests are unable or unwilling to do anything about it.