May/June 2004 - VOLUME 25 - NUMBERS 5 & 6
D i s s e c t i n g B u s h
In the most pro-corporate administration of the last 100 years, there isn't much that big business wants that it doesn't get.
In this issue of Multinational Monitor, we explore just a handful of the countless handouts, bailouts, regulatory rollbacks, exemptions, refusals to enforce, giveaways and subsidies that the Bush administration has gifted to Corporate America.
As diverse as the examples we investigate here, consider a sampling of what we do not cover in this issue:
In whatever corner of the Bush government you look, you'll find special advantages conferred on big business.
In this special double issue of Multinational Monitor, we've organized our dissection of the Bush administration's pro-corporate policies into five categories: corporate power, labor, environment, consumer rights and democracy. We investigate 16 cases of administration favoritism to big business. These are important cases, to be sure -- but, unfortunately, this compilation is merely representative, not comprehensive.
In a tv ad rolled out in February, Halliburton chairman David Lesar addressed rising concerns about the company's work in Iraq: "Will things go wrong? Sure they will. It's a war zone. But when they do, we'll fix it. We always have -- for 60 years for both political parties."
The "fix" Lesar was referring to clearly is not the no-bid contract the company received before the war, which crowned Halliburton king of the Bush administration's corporate cronies. The expansion of that contract from a contingency plan to handle oil well fires after the war to virtual monopoly control over half of the country's oil production and distribution infrastructure has critics fulminating about corruption and oil-related imperialism.
"The entire Halliburton affair represents the worst in government contracts with private companies: influence peddling, kickbacks, overcharging and no-bid deals," Senator Frank Lautenberg, D-New Jersey, charged in March.
The company's close relationship with former CEO Vice President Dick Cheney has done nothing to douse charges of war profiteering and corruption. Cheney -- who pushed the nation towards war like an ideological pile-driver -- told "Meet the Press" host Tim Russert last September that he has "no financial interest in Halliburton of any kind and haven't had, now, for over three years."
The claim was clearly bogus (Cheney received $178,437 from the company in 2003). While the Vice President is technically exempt from federal ethics laws, investigators from the Congressional Research Service concluded that deferred compensation payments like the ones Cheney will receive from Halliburton until 2005 constitute an "ongoing financial interest."
The Inside Track
In June, GAO investigators confirmed that Pentagon officials had broken competitive contracting requirements and overruled objections from an army lawyer to grant the first Iraq oil-related work order to Halliburton.
According to Representative Henry Waxman, D-California, Michael Mobbs, a neoconservative political appointee working under the direction of Under Secretary of Defense for Policy Douglas Feith, made the decision to award the oil contract to Halliburton. At the same time, an Army Corps of Engineers e-mail message surfaced, suggesting that the decision had been "coordinated w VP's office."
In a letter to Cheney asking for more information, Waxman described an October 2002 meeting in which Cheney's chief of staff, I. Lewis "Scooter" Libby, was informed of the decision, along with other White House officials.
Halliburton's advantage was not just the result of its high-level contacts in the Bush White House. It was the product of a decades-long process through which Halliburton subsidiary KBR (formerly known as Kellogg, Brown & Root) has embedded itself deep into the Pentagon's decision-making structure.
After the first Gulf War, when Cheney was secretary of defense under Bush Sr., he hired KBR to plan the privatization of military support services. As a result, KBR received the first global military logistics support contract (LOGCAP) in 1992.
Although Halliburton lost the LOGCAP in 1997 after problems were discovered with its performance in Bosnia, Halliburton won the LOGCAP back soon after Cheney became Vice President in 2001. Although the company says it gained the 10-year contract through an open-bidding process, the LOGCAP has given KBR an inside track for multiple subsequent task orders associated with the administration's military operations.
"We are the only company in the United States that had the kind of systems in place, people in place, contracts in place, to do that kind of thing," Chuck Dominy, Halliburton's vice president for government affairs and its chief lobbyist on Capitol Hill, suggested in response to charges that the company had an inside track on the Iraq oil fire contract, an assertion backed up by the Army Corps of Engineers.
That was news to GSM Consulting's CEO Bob Grace, who led a team that extinguished more than 300 oil-well fires set by Saddam Hussein's troops after the first Gulf War.
Grace contacted the Pentagon repeatedly in the fall of 2002 to try to bid on the post-war oil-fire work, but was effectively told to get lost. When Senator John Breaux inquired on behalf of GSM, he received a terse response from Alan Estevez, an Army supply chain management official, who asserted that: "The department is aware of a broad range of well firefighting capabilities and techniques available. However, we believe it is too early to speculate what might happen in the event that war breaks out in the region. If for any reason the U.S. government is called upon to suppress well fires through contractor support, we would do so in accordance with the Competition in Contracting Act and implementing regulations."
Estevez's letter was dated December 30, 2002 -- a month and a half after the Pentagon had issued the "Iraq Oil Field Plan" task order to Halliburton subsidiary KBR under the LOGCAP. That decision in fact violated the Competition in Contracting Act because, as David Walker, the Comptroller General, later determined, the oil infrastructure work was not "within the scope of the overall LOGCAP contract."
The "Don't Worry About Price" company
Officials from the Army Corps of Engineers repeatedly stated that the no-bid contract would be a short-term "bridge" contract that would only last until a new contract could be competitively bid. But the inside track established by Halliburton continued to give it at an advantage over other potential bidders for subsequent contracts. Former Bechtel employee Sherryl Tappan has alleged that the San Francisco firm withdrew from bidding on the oil contracts after finally realizing that the bidding process was a sham. In December 2003, Waxman wrote in a letter to Admiral Nash of the Pentagon's Program Management Office that "Halliburton has a monopoly on all oil work."
Meanwhile, Halliburton has come under fire for a variety of contract abuses associated with LOGCAP:
ï Federal prosecutors opened a criminal probe after a Defense Contract Audit Agency audit found that Halliburton overcharged by $61 million for fuel deliveries from Kuwait to civilians in Iraq.
ï A Pentagon audit concluded Halliburton charged millions of dollars for meals that it never served to troops. (Halliburton officials say problems might have occurred because the number of troops in and near Iraq often changed quickly and drastically.)
ï The Defense Department is probing allegations a Kuwaiti subcontractor paid kickbacks to two former Halliburton employees. The company says it repaid $6 million to the government after it discovered the scheme and fired the employees as soon as the corrupt deals were discovered.
ï This May, a dozen current and former truck drivers told reporters that the company ordered them to drive empty trucks on phantom missions across the desert, billing the Pentagon for unnecessary work, and putting their lives at risk. Thirty-four Halliburton employees and subcontractor employees have been killed since the war began.
In June, Representative Tom Davis, R-Virginia, blocked an attempt by Waxman to bring whistleblowers into a Congressional committee hearing. They were ready to testify about specific abuses they observed at the company, including the ditching of $80,000 trucks because of a flat tire, a $100 average charge for 15-pound bags of laundry, $45 cases of soda and the use of five-star hotels in Kuwait.
Critics suggest the way Halliburton's contracts were structured ("cost-plus" contracts reimburse the contractor for its actual costs, adding a percentage fee as profit) have provided an inherent incentive for these kinds of waste, abuse, and possible fraud. Halliburton whistleblowers have testified in Congress that it was common for high- and mid-level Halliburton officials to tell subordinates: "Don't worry about price. It's cost-plus."
The People's Confidence?
"Just as it was then, oversight should not be considered partisan," Leach asserted. "It should be viewed solely in the context of protecting and preserving public resources and bolstering people's confidence in their government."
Yet Leach's bill was quietly quashed by Republican leaders who clearly understood that any investigation of Halliburton would be political suicide during an election year.
-- Charlie Cray
In a move that critics say opens the doors to media conglomerates' domination of local markets, the Federal Communications Commission (FCC) last June loosened some of the few remaining restrictions on corporate media monopolies.
In the end, the decision may end up looking like a hollow victory for companies like Viacom, CBS, Disney and Rupert Murdoch's News Corporation, since the FCC's decision provoked unprecedented grassroots engagement with the issue and widespread opposition across the political spectrum.
The new rules loosen "cross ownership" standards that restrict media conglomerates from owning newspapers, television stations and radio stations in the same local markets; raise the number of radio stations one company can own in a single market; and raise the share of the national TV audience that any single company through ownership of local stations can reach to 45 percent, an increase from 35 percent (the standard was later reduced to 39 percent by an irate Congress.)
FCC Commissioner Michael Powell led the drive to loosen the rules on media monopolies. "Monopoly is not illegal by itself in the United States," Powell asserted in early 2002. "There is something healthy about letting innovators try to capture markets."
Powell claimed that court decisions required the FCC to strike down existing broadcast-ownership limits promoting diversity, localism and competition. Many of the rules extended back decades. According to Powell, the courts held that the growth of cable TV, satellite broadcasts, the Internet and other technologies had long ago rendered these rules obsolete.
"Keeping the rules exactly as they are, as some so stridently suggest, was not a viable option," Powell explained.
Yet opponents pointed out that the courts did not require the FCC to gut the rules, but simply use up-to-date market facts to explain them.
FCC Commissioner Jonathan Adelstein, who voted against Powell, called the decision "the most sweeping and destructive rollback of consumer-protection rules in the history of American broadcasting."
"This plan is likely to damage the media landscape for generations to come," Adelstein said. "In the end, this order simply makes it easier for existing media giants to gobble up more outlets and fortify their already massive market power."
Adelstein and Commissioner Michael Copps, who also voted against Powell, were not alone in opposition to the rule changes. The FCC received an unprecedented 750,000 public comments on the proposals, over 99.9 percent of them reportedly in opposition.
But Powell dismissed the outpouring of opposition, for failing to address the specific technical questions at issue. The comments "didn't provide the kind of record evidence that leads to very specific decisions," he suggested. But as Common Cause and others who encouraged people to comment point out, the FCC had failed to make any formal, detailed proposal available to the public, Congress, or even Copps and Adelstein until three weeks before the vote.
Getting access to the draft rules was apparently not much of a problem for 63 executives from the nation's top broadcast companies -- including Rupert Murdoch of NewsCorp and Mel Karmazin of Viacom -- who reportedly met with FCC staff over 70 times behind closed doors before the commission reached its decision. In fact, the Wall Street Journal reported on the day of the vote, Bear Stearns media analyst Victor Miller helped FCC staff draft the regulations themselves.
Meanwhile, the Center for Public Integrity reported on another indicator of close ties between FCC regulators and the media they regulate: FCC staff had accepted more than 2,500 junkets worth nearly $2.8 million from the telecommunications and broadcast industries over the previous eight years.
By contrast, the FCC held just one official public hearing before issuing its new rules and met with opponents to discuss the rules in their offices just five times.
"In the digital age, you don't need a nineteenth-century whistle-stop tour to hear from America," Powell explained.
Concerned about the lack of attention the media itself was paying to the issue, commissioners Copps and Adelstein attended a series of informal public meetings organized by the Center for Digital Democracy and local, nonpartisan civic groups across the country.
The meetings highlighted the impact the new rules would have at the local level, where the media giants would soon be able to own the daily newspaper, two or three TV stations, and up to eight radio stations.
The impact of the Texas company's monopoly on local culture and even national security is illustrated by what happened after a freight train derailed in Minot, North Dakota in 2002. A deadly cloud of anhydrous ammonia floated over the small city, posing a public emergency. Police called town radio stations to attempt to alert the public. But all of the six radio stations in the city of 36,500 were owned by Clear Channel, which had largely done away with local programming and local staff. Nobody answered the phones for more than an hour and a half. Three hundred people were hospitalized, some partially blinded. Pets and livestock were killed.
The propagandistic power of Clear Channel's monopoly was also clear during the Bush administration's buildup to the war in Iraq, when Clear Channel stations organized a series of flag-waving pro-war rallies in Atlanta, Cleveland, San Antonio, Cincinnati and other cities. (Clear Channel vice chair Tom Hicks is an old Texas buddy of President Bush, from whom he bought the Texas Rangers.) Although Clear Channel promoted the rallies on its corporate web site, company officials claim there was no corporate directive that stations organize the rallies, or that the rallies had anything to do with pending regulatory matters the company had before the FCC.
Objections to the FCC ownership rules have come from a diverse array of groups from across the political spectrum, including the National Rifle Association, religious and civil rights groups, consumer, labor and even certain industry groups, such as the National Association of Broadcasters, which represents smaller broadcasting corporations.
Media moguls Barry Diller and CNN founder Ted Turner also spoke up against the rules.
"When the smaller businesses are gone, where will the new ideas come from?" Turner asked. "Under the new rules, there will be more consolidation, and more news sharing. That means laying off reporters or, in other words, downsizing the workforce that helps us see our problems and makes us think about solutions. Even more troubling are the warning signs that large media corporations -- with massive market power -- could abuse that power by slanting news coverage in ways that serve their political or financial interests."
Yet Powell and the other commissioners wouldn't budge. But after the FCC's 3-2 decision, the battle was far from over. In some ways, it had just begun: A bipartisan group of senators led by Byron Dorgan, D-North Dakota, and Trent Lott, R-Mississippi, responded by leading an effort to overturn the rule changes. They won a 55-40 vote to overturn the rules in the Senate.
With over 200 members of the House of Representatives demanding that the matter be brought to a vote, Republican leaders struggled to keep a lid on the issue. To avoid a situation where Bush might have to veto a popular law in an election year, Republican leaders instead forced the matter into an omnibus budget bill towards the end of 2003, where they managed to rig a "compromise" that left the big conglomerates happy. The omnibus bill kept the Powell rules in place, but capped TV station ownership at 39 percent -- just high enough to keep Viacom and Murdoch's News Corporation in compliance with the law.
The battle was also taken to the courts. The Media Access Project filed a petition on behalf of the Philadelphia-based Prometheus Radio Project with the Third Circuit Court of Appeals, arguing that the rule changes violated federal law. The court agreed to hear the case and issued an immediate stay so that the rule changes would not be put into effect until the case was decided.
Meanwhile, in November, more than 2,000 activists converged in Madison, Wisconsin for a landmark national conference on media reform, a sign that the battle against corporate control of the media was escalating.
As Michael Copps said in explaining his dissenting vote against the FCC's decision, "The obscurity of this issue that many have relied upon in the past, where only a few dozen inside-the-beltway lobbyists understood this issue, is gone forever."
-- Charlie Cray
At a gathering of top law enforcement officials held during the peak of the 2002 corporate crime wave, President Bush proclaimed that his administration's efforts to crack down on corporate crime were "sending a clear warning and a clear message to every dishonest corporate leader: You will be exposed and you will be punished."
But months before, Bush administration officials had sent corporate criminals a very different message: we're open for business.
In 2001, the administration quietly repealed a contractor accountability standard passed by the Clinton administration, which clarified Federal Acquisition Regulation (FAR) standards for "integrity and business ethics" that prospective bidders for federal contracts were required to meet.
Government officials admit that without the rule, specific decisions regarding suspension and debarment are left to individual agencies. Critics say the lack of a consistent standard has allowed politics to influence enforcement of acquisition regulations. The evidence for that, they say, is clear from the administration's debarment of a few infamous companies (e.g. Enron) at the same time that other, less notorious, corporate criminals continue to receive federal contracts.
"The debarment process is obviously broken, and we need to find a way to fix it," says Danielle Brian, executive director of the government-watchdog group the Project on Government Oversight (POGO).
According to a 2002 POGO investigation of top federal contractors, between 1990 and 2001 the top 10 federal contractors had 280 instances of misconduct and alleged misconduct and paid more than $1.97 billion in fines, penalties, restitution, settlements and cleanup costs. Four of the top 10 government contractors had at least two criminal convictions. Yet only one of the top 43 contractors was ever suspended or debarred from doing business with the government -- in that case for just five days.
The year after the POGO study, in 2003, the Air Force barred three Boeing space contract units from federal contracts after company employees had been caught with thousands of proprietary documents stolen from rival Lockheed Martin. Although it was one of the largest government sanctions ever against a military contractor, it only applied to the specific Boeing divisions involved. Industry analysts say the lost contracts represent less than 1 percent of the giant contractor's projected revenues through 2009.
A Pattern of Inconsistency
Yet a GAO investigation released in 2002 found that only 39 of 17,000 contractors awarded new contracts during 2000 might have been captured by the rules for violating one or more federal laws between 1997 and 1999.
"Suspension from government procurements is appropriate where adequate evidence shows that a company or person has committed misconduct related to business ethics and integrity, or other irregularities relevant to their present responsibility, and where a pending investigation or legal proceeding is examining those questionable activities," the GSA announced when it banned Enron and its accounting firm Arthur Andersen from federal contracts in March 2002, prior to the accounting firm's June 2002 conviction for obstruction of justice.
If anything, the repeal of the FAR rule has increasingly politicized the procurement process by reverting to the vague provisions that stood before the rule was enacted.
In May, for example, Public Citizen challenged a Department of Defense decision to grant an exclusive $36 million electricity contract to Reliant Energy for Andrews Air Force base and Walter Reed Army Medical Center while the company was under indictment for its role in creating the California energy crisis. According to Public Citizen, Reliant has contributed $539,000 to President Bush and the Republican National Committee from the 2000 elections on.
Too Big to Debar?
Perhaps the best example is the embarrassing history of the federal government's treatment of WorldCom. On the same day in May 2003 that the SEC announced a proposed penalty for the biggest accounting fraud in history (estimated at $11 billion), the Pentagon awarded WorldCom a $45 million contract to rebuild Iraq's wireless network (even though the company had no previous experience with wireless technology).
In fact, the Iraq contract was just one of many the company received after its book cooking was revealed. WorldCom/MCI racked up $507 million worth of contracts in 2002 and another $772 million in the first half of 2003 before the GSA finally announced that it was suspending the company from receiving any more contracts.
"It is important that all companies and individuals doing business with the federal government be ethical and responsible," GSA Administrator Stephen Perry explained when the suspension was finally announced in July, adding that the agency needed to "protect the interests of the government and taxpayers."
Even after the suspension, U.S. agencies continued to grant WorldCom more than $100 million worth of work through an obscure waiver process. Six months later, the GSA reinstated the company, just in time for MCI to receive a new one-year contract extension to provide telecommunications service for numerous government agencies.
"I question whether GSA made the right decision in reinstating MCI when allegations involving the company remain under investigation by federal authorities," Senator Susan Collins, R-Maine, stated.
According to a Defense Contract Audit Agency audit filed on December 31, "Halliburton repeatedly violated the Federal Acquisition Regulation." Halliburton is also still under investigation by various federal agencies for accounting fraud, conducting business with state sponsors of terror (e.g. Iran) and allegations of bribery associated with its operations in Nigeria.
Yet army suspension officer Robert Kittel, the Army's representative to the Interagency Suspension and Debarment Coordinating Committee, says no decision to suspend or debar the company will be made until ongoing investigations are concluded. Even then, it's unlikely the company would be suspended unless it was indicted for a crime.
"Do I have to wait for, or does any suspension or debarment official have to wait for a criminal action to be filed? If you look at the FAR, of course you don't," Kittel told the Monitor. "But you're supposed to be fair. You're supposed to ensure that the government is protected Ö and you want to know what the facts are before you take an action."
Moreover, Kittel says, even if Halliburton were proposed for suspension or debarment, under the existing standards, contracting officials would still be able to create an exception, "based on the compelling needs of that agency." Given the inside track Halliburton has had so far in obtaining the no-bid contracts it operates under in Iraq, even procurement officers who wanted to suspend the company might find it difficult to convince officials higher up the ladder to agree.
To remedy the lack of consistent suspension and debarment standards, a bipartisan group of representatives introduced the Contractor Accountability Act of 2003, which would create a central database of legal actions taken by the government against federal contractors and "provide debarring officials with the information they need" to protect U.S. taxpayers. "The federal government should not be in the business of repeatedly awarding contracts to companies that repeatedly break the rules," says Representative Carolyn Maloney, D-New York, a co-sponsor of the bill.
Maloney's bill has not made it out of committee.
-- Charlie Cray
AUTHORS OF BUSH DISSECTION ARTICLES