It's time to ask "borderless" corporations: Which side are you on?
The attacks of September 11 have not only exposed the failures of our intelligence apparatus and the "blowback" problem of US foreign policy. They have also stripped bare how one branch of corporate America, the $273 billion airline industry, has successfully captured the government agency supposed to oversee it and bought off the people's watchdogs in Congress. This situation argues for far-reaching changes in how campaigns are financed and how government agencies are staffed.
The vulnerability of our airports can be traced, in part, to the role of the airline industry in lobbying year after year against any federal takeover of airport security and its insistence on contracting the work out to low-bidding companies that often pay little more than the minimum wage to the people who check passengers' luggage and X-ray their handbags. Last year the General Accounting Office found that starting salaries for screeners at all nineteen of the nation's largest airports was $6 per hour or less, with five boasting starting salaries of just $5.15 per hour. According to the Federal Aviation Administration (FAA), from May 1998 through April 1999 turnover at those same nineteen airports ranged from 100 percent to more than 400 percent. Argenbright, one of the four big companies that dominate the private airport security business in America, pleaded guilty in 2000 to several charges and agreed to pay $1.2 million in fines for falsifying records, doing inadequate background checks and hiring at least fourteen airport workers in Philadelphia who had criminal convictions for burglary, firearm possession, drug dealing and other crimes. In 1978, reports the New York Times, the FAA "found that screeners failed to detect guns and pipe bombs 13 percent of the time in compliance tests, while in 1987 the agency found that screeners missed 20 percent of the time. Since then, the agency has stopped releasing figures."
Despite these worrisome facts, the airlines and their lobby, the Air Transport Association (ATA), fought against any federal takeover of airport security because they didn't want to have to pay more for it and because they didn't want potential passengers scared off by longer lines or fears of a hijacking. And the FAA dragged its heels, in part because its mandate, written by a Congress addicted to millions in transportation-industry campaign contributions, has been not only to insure air safety but also to promote air travel. The airlines alone have given more than $65 million to federal candidates and parties since 1990, and spent roughly the same amount lobbying the federal government between 1997 and 2000.
Much of that boodle helped to weaken the implementation of new security procedures recommended by a 1996 presidential commission chaired by Vice President Al Gore, set up after the TWA 800 crash. For example, according to a report by Public Citizen, the commission's recommendation that the background of all airport employees be checked for criminal records was opposed by the industry because it would create administrative and financial burdens. Even Gore himself backed down on his commission's insistence that all bags be matched to passengers on all flights. The day after he wrote the ATA about his change of heart, campaign contributions started to pour in from the airlines to various Democratic Party committees at double their previous pace.
Many people in Washington have enriched themselves by maintaining this sordid status quo. Current or recent lobbyists for the airlines and/or the ATA include Linda Hall Daschle (wife of Senate majority leader Tom Daschle), Haley Barbour (former Republican National Committee chair), Harold Ickes (deputy chief of staff in the Clinton White House), Ken Duberstein (chief of staff for Ronald Reagan and a crony of Colin Powell), Nick Calio (now President Bush's Congressional liaison) and former Senators Dale Bumpers and Bob Packwood. Three recent FAA administrators, including Linda Hall Daschle, have come from the industry.
So far, nothing has changed in the wake of the September 11 attacks. According to Paul Hudson, director of the Aviation Consumer Action Project, Transportation Secretary Norman Mineta has "excluded all aviation security proponents, consumer or public representatives, air crash victim groups, former FAA security officials critical of aviation security and the manufacturers of advanced aviation security equipment from his advisory group" on new security measures, relying instead on the industry alone. The airlines finally came out in favor of federalizing airport screening, though by September 12 their lobbyists were already plotting the $15 billion taxpayer bailout. A month later, the thousands of laid-off employees, who lack a similarly well-heeled lobby, are still waiting to find out if they will get emergency unemployment, healthcare and job-training support.
The Bush Administration is blocking efforts to rein in offshore banking.
Citigroup proclaims that its "private bankers act as financial architects,
designing and coordinating insightful solutions for individual client needs,
with an emphasis on personalized, confidential service." That is so colorless.
It might better boast, "We set up shell companies, secret trusts and bank
accounts, and we dispatch anonymous wire transfers so you can launder drug
money, hide stolen assets, embezzle, defraud, cheat on your taxes, avoid court
judgments, pay and receive bribes, and loot your country." It could solicit
testimonials from former clients, including sons of late Nigerian dictator Sani
Abacha; Asif Ali Zardari, husband of Benazir Bhutto, former prime minister of
Pakistan; El Hadj Omar Bongo, the corrupt president of Gabon; deposed
Paraguayan dictator Alfredo Stroessner; and Raul Salinas, jailed brother of the
ex-president of Mexico. All stole and laundered millions using Citibank
(Citigroup's previous incarnation) private accounts.
One lesser-known client, Carlos Hank Rhon of Mexico, has been the object of
a suit by the Federal Reserve to ban him from the US banking business. Hank
belongs to a powerful Mexican clan whose holdings include banks, investment
firms, transportation companies and real estate. Hank bought an interest in
Laredo National Bank in Texas in 1990. Six years later, when he wanted to merge
Laredo with Brownsville's Mercantile Bank, the Fed found that Citibank had
helped him use offshore shell companies in the British Virgin Islands to gain
control of his bank by hiding secret partners and engaging in self-dealing, in
violation of US law. One of the offshore companies was managed by shell
companies that were subsidiaries of Cititrust, owned by Citibank.
The Fed says that in 1993, Hank's father, Carlos Hank González, met
with his Citibank private banker, Amy Elliott, and said he wanted to buy a $20
million share of the bank with payment from Citibank accounts of his offshore
companies, done in a way that hid his involvement. Citibank granted him $20
million in loans and sent the money to his son Hank Rhon's personal account at
Citibank New York and to an investment account in Citibank London in the name
of another offshore company.
Citigroup spokesman Richard Howe said, "We always cooperate fully with
authorities in investigations, but we do not discuss the details of any
At press time, there were reports that Hank had negotiated a settlement
with the Fed, which the parties declined to confirm.
US employers like Coca-Cola are implicated in Colombia's brutality.
The biggest brand name in for-profit education is floundering.
Thefts from other countries pale in relation to the looting of Russia, with
the indispensable assistance of the "Offshornaya Zona." The 1995 "loans for
shares" scheme transferred state ownership of privatized industries worth
billions of dollars to companies whose offshore registrations hid true owners.
More billions were stolen around the time of the August 1998 crash.
Insider banks knew about the coming devaluation and shipped billions in
assets as "loans" to offshore companies. The banks' statements show that their
loan portfolios grew after the date when they got loans from the Russian
Central Bank, which were supposed to stave off default. After the crash, it was
revealed that the top borrowers in all the big bankrupt banks were offshore.
For example, the five largest creditors of Rossiisky Credit were shell
companies registered in Nauru and in the Caribbean. As the debtors' ownerships
were secret, they could easily "disappear." Stuck with "uncollectable" loans
and "no assets," the banks announced their own bankruptcies. Swiss officials
are investigating leads that some of the $4.8 billion International Monetary
Fund tranche to Russia was moved by banks to accounts offshore before the 1998
The biggest current scam is being effected by a secretly owned Russian
company called Itera, which is using offshore shells in Curaçao and
elsewhere to gobble up the assets of Gazprom, the national gas company, which
is 38 percent owned by the government. Itera's owners are widely believed to be
Gazprom managers, their relatives and Viktor Chernomyrdin, former chairman of
Gazprom's board of directors and prime minister during much of the
privatization. Gazprom, which projected nearly $16 billion in revenues for
2000, uses Itera as its marketing agent and has been selling it gas fields at
cut-rate prices. Its 1999 annual report did not account for sales of 13 percent
of production. As its taxes supply a quarter of government revenues, this is a
devastating loss. Itera has a Florida office, which has been used to register
other Florida companies, making it a vehicle for investment in the US economy.
Unwilling to pay for a PCB cleanup, it argues that nature can do the job.
Industry has been doing all it can to keep an EPA report from being published.
This is not about profits and
patents; it's about poverty and a devastating disease." That
statement did not come from AIDS activists struggling to provide
sub-Saharan Africa's 25 million HIV-positive people with access to
life-extending medications. It came from the executive vice president
of Bristol-Myers Squibb, which recently announced it would slash
prices on its two AIDS drugs and forgo patents on one of them. A week
earlier, Merck & Co. said it would lower prices on its two AIDS
drugs not just in Africa but, pending review, in other heavily
affected countries as well.
What's going on is not a
change of heart on the part of "Big Pharma"--which John le
Carré describes in this issue as a group of
"multibillion-dollar multinational corporations that view the
exploitation of the world's sick and dying as a sacred duty to their
shareholders." Far from being a humanitarian action, the price
reductions represent an attempt to preserve patent rights by
diffusing international pressure for generic manufacturing.
Revealingly, neither BMS nor Merck has withdrawn from a suit against
the South African government brought by thirty-nine pharmaceuticals
seeking to prohibit importation of generic drugs, which they claim
would violate their patents.
The Indian generic
manufacturer Cipla announced in February that it would sell the
entire AIDS triple-therapy combination at $350 per person, per year,
and other generic manufacturers, in Thailand and Brazil, currently
offer AIDS drugs at a fraction of multinational prices. By
comparison, the Wall Street Journal reported that a
combination of AIDS drugs from BMS and Merck would cost between $865
and $965 per person, per year. If those prices were multiplied by the
number of AIDS patients in, say, Zimbabwe, a relatively prosperous
country by African standards, the total would come to about 20
percent of its GDP. And that sum doesn't include the investments in
healthcare infrastructure needed to distribute and monitor the drugs'
But even if poor African countries could somehow find
the money to pay the high patent-protected prices of the drug giants
(the $26.6 billion a year it would cost to provide all Africa with
AIDS drugs is no more than about a third of what Bush's tax plan
would give to America's wealthiest 1 percent), that would not be the
end of their problems. Rather, such a course would lock them into
exclusive trade agreements with multinationals and put them at the
continual mercy of Western foreign aid budgets. As new treatments are
developed, Africa would have to negotiate new price reductions,
country by country, company by company.
If the solutions
lie with generic manufacturing (not just for AIDS medications but for
a slew of vital drugs for malaria and other ills), then circumventing
existing international patent regulations is a necessity. The trial
in South Africa over compulsory licensing is one crucial test of the
viability of this option. Another potential plan would be for the
National Institutes of Health to give patents owned by the US
government on publicly funded AIDS drugs to the World Health
Organization, thereby licensing it to oversee generic manufacturing.
Why not, in fact, let governments underwrite the entire cost of drug
research--rather than, as now, underwriting substantial amounts of
the research, which drug companies then exploit--and do away with
Whatever the recourse, and despite the
well-publicized gestures by multinational pharmaceutical companies,
the solutions to Africa's AIDS epidemic lie in sustainable
competitive drug production, not momentary self-interested