Phil Mattera

Obama and McCain Agree on Transparency

Although he’s been busy with some other matters, Sen. Barack Obama found time this week to introduce legislation that would expand the amount of information made available to the public on federal procurement contracts. The measure was introduced with Sen. Tom Coburn (R-Okla.), who had joined Obama in a previous bipartisan initiative that resulted in the 2006 passage of legislation creating the USA Spending database. The original co-sponsors of the new bill (S.3077) are Senators John McCain (R-Ariz.) and Tom Carper (D-Del.).

S.3077 calls for an expansion of the data provided via USA Spending, the creation of which also needs to be credited to OMB Watch, which built its own contract database, FedSpending, on which the federal resource ended up being based.

As summarized by Obama’s office, the bill would add to USA Spending:

– A copy of each Federal contract in both PDF and searchable text format.

– Details about competitive bidding, the range of technically acceptable bids or proposals, and the profit incentives offered for each contract.

– The complete amount of money awarded, including any options to expand or extend under a contract.

– An indication if the Federal award is the result of an earmark.

– Information about government lease agreements and assignments in the same manner that information is reported for contracts, grants, and other assistance.

– An assessment of the quality of work performed on Federal awards.

– Information about Federal audit disputes and resolutions, terminations of Federal awards, suspensions and debarments, and administrative agreements involving Federal award recipients.

– Information about any civil, criminal, or administrative actions taken against Federal award recipients, including for violations related to the workplace, environmental protection, fraud, securities, and consumer protections.

– Information about Federal tax compliance by Federal award recipients.

– Information about parent company ownership that will be made accessible, along with other data on USASpending.GOV, through application programming interfaces.

– Links to publicly available Government reports.

Legislation covering the bullet point about disclosure of the legal track record of contractors—along the lines of the Project On Government Oversight’s Federal Contractor Misconduct Database—has already passed the House.

It is not clear whether the new Obama-Coburn bill would do anything to address a problem highlighted by Secrecy News—the fact that intelligence agencies such as the Defense Intelligence Agency and the National Geospatial-Intelligence Agency have been refusing to submit data on even their unclassified contracts to USA Spending. As noted in the last issue of the Digest, the intelligence agencies are outsourcing more and more of their work, so disclosure of those contracts becomes all the more important.

Over the Counter Intelligence

Tim Shorrock, a veteran investigative journalist and a longtime subscriber to the Dirt Diggers Digest, has just come out with a book called Spies for Hire: The Secret World of Intelligence Outsourcing. Shorrock describes how an activity that used to be handled by spooks on the federal payroll has been steadily transformed into a $50 billion Intelligence-Industrial Complex.

Thanks to the contracting scandals surrounding Halliburton and its former subsidiary Kellogg, Brown & Root, the public learned of the extent to which the Pentagon has turned over routine functions to private military companies. The outrageous behavior of Blackwater has highlighted the use of mercenaries to protect U.S. diplomats and other VIPs in Iraq.

Shorrock shines a light on another group of corporations that are carrying out a more sensitive function that most people have no idea is being handed over to the private sector. Careful readers of the revelations concerning abuses at the U.S.-run Abu Ghraib prison in Iraq would have learned that interrogators alleged to have abused detainees included civilians employed by a company called CACI. But that is only the tip of a lucrative iceberg, Shorrock shows.

For example, he writes, more than half the people working at the super-secret National Counterterrorism Center in Virginia are employees of companies such as Science Applications International Corporation (SAIC), BAE Systems and Lockheed Martin. The Center’s terrorist database is maintained by The Analysis Corporation, which subcontracted collection activities to CACI.

Since 9/11, Shorrock says, the Central Intelligence Agency has been spending 50-60 percent of its budget (or about $2.5 billion a year) on contractors—both individuals and companies. At the CIA and its sister spook agencies: “Tasks that are now outsourced include running spy networks out of embassies, intelligence analysis, signals intelligence (SIGINT) collection, covert operations, and the interrogation of enemy prisoners.”

Shorrock devotes an entire chapter to Booz Allen Hamilton, known to most people as a management consultant for large corporations but which pioneered the intelligence outsourcing industry (though it recently agreed to sell its federal business to the Carlyle Group). When Mike McConnell, a former Booz Allen executive, was named by President Bush as Director of National Intelligence, it was the first time, Shorrock notes, that a contractor was put in charge of the country’s entire spy apparatus.

Spies for Hire has much more to offer that cannot be adequately summarized here. I recommend that you read it in full. But let me let also note that profiles of some of the intelligence contractors discussed by Shorrock—such as CACI and ManTech International—can be found on the Crocodyl wiki to which I contribute. Also note that the updated edition of Jeremy Scahill’s valuable book Blackwater, recently issued in paperback, has a discussion (p.453 forward) on the mercenary company’s move into another form of privatized intelligence—a product called Total Intelligence Solutions that is designed to bring “CIA-style” services to Fortune 500 companies.

Where the Revolving Door Spins Fastest

The movement of federal officials through the revolving door into lucrative private-sector positions is a well-known story, but a new report by the Government Accountability Office provides some quantification of the phenomenon and names companies that are most frequently involved.

GAO focused its research on the Defense Department, which seems hell-bent on outsourcing as many of its functions as possible, thereby intensifying the desire of contractors to hire ex-officials with the right contacts. The agency found that in 2006, 52 major contractors were employing a total of 86,181 individuals who had left military or civilian positions with DOD since 2001.

Special attention was paid to those individuals whose former positions made them subject to the limited restrictions on post-government activity that exist in federal law. GAO found that, as of 2006, the 52 companies employed “2,435 former DOD senior and acquisition officials who had previously served as generals, admirals, senior executives, program managers, contracting officers, or in other acquisition positions” to which the rules apply.

Not surprisingly, GAO found that the companies employing the largest number of former DOD senior and acquisition officials are the top military contractors, especially the following seven:

– Science Applications Intl. Corp. (263 former key officials employed)
– Northrop Grumman (260)
– Booz Allen Hamilton (243)
– L-3 Communications (241)
– Lockheed Martin (221)
– General Dynamics (207)
– Raytheon (146)

(Booz Allen has announced it is selling its federal business.)

Together, these seven employed 1,581 former key DOD officials, or 65 percent of the total found by GAO. The report notes that the numbers reported to GAO by the contractors themselves substantially understated the former DOD officials on their payrolls. GAO got more accurate figures by checking confidential Internal Revenue Service data.

GAO also helpfully notes that the seven top employers of former officials received DOD contract awards worth some $61 billion in fiscal year 2005. With that amount of money at stake, it is no wonder that the companies like to invest in the revolving door.

For an overview of revolving-door issues, see the 2005 report of the Revolving Door Working Group (in which yours truly wrote the section on the reverse revolving door—the movement of lobbyists and corporate executives from the private sector to public positions). Also see the revolving-door section of the Open Secrets database.

Slapping the Corporate Wrist

Deferred prosecution. Corporate monitors. These are the less-than-intimidating terms used to describe the manner in which the U.S. Department of Justice goes after corporate crime these days. Not exactly in keeping with attitude of “throwing the book at them” applied to blue-collar criminals or the “Gitmo” treatment given to those charged as terrorists.

The Bush Administration has let many corporate offenders off the hook through the use of deferred prosecution agreements, which are arrangements under which the Justice Department postpones the filing of criminal charges against companies that agree to pay fines and submit to third-party monitoring. If the monitor determines that the company has cleaned up its act, the charges effectively disappear. The corporation avoids a major stain on its record, and the Justice Department avoids the trouble of putting on a trial.

This dubious practice had been going on largely under the radar. Russell Mokhiber, editor of the Corporate Crime Reporter, carried on a one-man effort to publicize it. Reports earlier this year that former Attorney General John Ashcroft’s consulting firm had been given a $52 million contract to serve as a corporate monitor for a medical supply company briefly put deferred prosecution (and possible impropriety in the selection of monitors) in the spotlight. Then the New York Times “discovered” the practice in a front-page story on April 9.

Thanks to the efforts of the House Judiciary Committee and its Chairman John Conyers, more is becoming known about the Justice Department’s light-handed treatment of corporate malefactors. Last week, Conyers and several of his colleagues announced that Justice had turned over the texts of 85 deferred prosecution and non-prosecution agreements, which were promptly posted on the Committee’s website along with a letter from Justice that includes the names of 40 monitors, most of whom turn out to be former federal prosecutors and other government officials .

Among the companies involved in the Justice Department’s list of unprosecution agreements (which Conyers said was missing at least a dozen cases) are: America Online, Bank of New York, Blue Cross and Blue Shield of Rhode Island, Boeing, BP America, Bristol-Myers Squibb, Chevron, HealthSouth, lngersoll Rand, KPMG, Lucent, Merrill Lynch, Monsanto, Prudential Securities and Textron.

The Justice Department is apparently sensitive to charges that it is not aggressive in fighting corporate crime. In a March 7 memo to U.S. Attorneys, Acting Deputy Attorney General Craig S. Morford warned that “the criminal conviction of a corporation may have harmful collateral consequences for employees, pensioners, shareholders, creditors, consumers, and the general public.” What a relief! Now, every time I read that a corporation caught committing a crime is being let off with a slap on the wrist, I can take comfort in the knowledge that the leniency is actually for my benefit.

Fallen Crusaders Against Corporate Abuse

For more than 30 years, big business has whined about class-action lawsuits filed on behalf of consumers, workers and shareholders. The Republican Party made plaintiffs’ lawyers one of its favorite bogeymen and “tort reform” a centerpiece of its policy agenda. John McCain carries on this dubious tradition, suggesting for example that putting limits on medical malpractice suits is a key element of healthcare reform.

Whether or not there ever was a real plethora of frivolous lawsuits, one fact is now undeniable: the plaintiffs’ bar is in disarray. Part of the reason is that conservatives succeeded in getting numerous state legislatures to impose restrictions on class-action lawsuits and individual damage cases. Yet perhaps more dramatic has been the spectacular demise in recent months of the country’s leading trial lawyers through personal legal entanglements.

The conventional wisdom is that these super lawyers were victims of their own greed, while conspiracy theorists might wonder how these giant killers were brought down in such short order. In any event, there have certainly been sighs or relief—if not spasms of schadenfreude—in boardrooms across America.

The most recent crusader to fall was Melvyn Weiss, who built a career filing lawsuits charging that companies had defrauded investors. In March, Weiss agreed to plead guilty to federal criminal charges, acknowledging his role in making millions of dollars in secret side payments to plaintiffs in class actions filed by his firm Milberg Weiss. He consented to $10 million in fines and forfeiture, and last week prosecutors proposed that he spend up to 33 months in prison.

Weiss’s former partner, the even more flamboyant William S. Lerach, entered a guilty plea last fall on similar federal charges. In February he was sentenced to two years in prison and ordered to forfeit $7.75 million. That was a small fraction of the several hundred million dollars in fees Lerach and his partners earned from scores of cases involving many billion dollars in settlements and awards from the likes of Enron and WorldCom as well as many less venal corporations.

In March, another larger-than-life trial lawyer, Richard “Dickie” Scruggs, filed a guilty plea in the face of allegations that he and others bribed a judge in Mississippi who was hearing a case involving a dispute over $26 million in legal fees from a mass settlement of insurance claims brought by victims of Hurricane Katrina. Scruggs is best known for his role in winning a $200 billion settlement from the tobacco industry in the 1990s.

There was never any doubt that Weiss, Lerach and Scruggs were motivated by personal enrichment at least as much as their quest for justice. Yet in the absence of adequate government regulation of business, their lawsuits served as a countervailing force against the power of big business. Now that they have been neutralized, what corporate abuses will go unchallenged?

Unions Developing A Global Reach of Their Own

Newspapers in both Britain and the United States have reported in recent days that two major labor organizations are preparing to announce the creation of the first trans-Atlantic union. The merger will bring together the United Steelworkers, the leading U.S. union in manufacturing and heavy industry, and Unite, the mega British union formed by the joining of Amicus and the Transport & General Workers Union last year.

The step does not come as a surprise, since the unions created a strategic alliance in 2005 and announced their intention to wed about a year ago. But the formal marriage of the organizations will, nonetheless, represent a milestone in labor history. For decades, large corporations have been operating across national borders and in recent years have increasingly formed international mergers and joint ventures. Unions have expanded their international solidarity efforts but have largely remained tied to single countries. The Steelworkers-Unite initiative will be a major step toward the globalization of labor organizing. In its report, Britain’s Telegraph said the combined entity could be named the United Global Workers’ Union, which sounds like something out of science fiction.

The current scope of the 850,000-member Steelworkers is illustrated by the fact that a global search of 10-K filings with the SEC reveals that more than 100 publicly traded companies report having North American workers represented by the union. These include industrial giants such as Dow Chemical, Alcoa, International Paper and Goodyear Tire & Rubber that all do a substantial amount of overseas business. Dow Chemical, for example, derives 66 percent of its revenue from outside the United States. Unite is also a highly diversified union that represents workers at the UK operations of global companies such as Airbus, BP, British Airways, Michelin, Shell and Unilever. Steelworkers President Leo Gerard told the Wall Street Journal that among the organizing targets of the combined union could be India’s Tata Steel Ltd., part of the Tata Group conglomerate.

It will be interesting to see how labor relations change once one union, at least, can start to match giant employers in its global reach.

Firm Headed by Major Republican Contributors Accused of Supplying Substandard Plane Parts

The Project On Government Oversight (POGO) and CBS News just revealed that Pentagon investigators have accused a California company of supplying substandard components for military and civilian aircraft for nearly a decade, charging that the firm committed fraud and bribery and exhibited “brazen disregard for the safety of soldiers and civilians as well as for the sanctity of laws, rules and regulations.” The company is privately held Airtech International Inc., which also goes by the name of Airtech Advanced Materials Group.

POGO and CBS obtained a September 2006 memo in which the allegations were made by a special agent of the U.S. Army’s Criminal Investigation Unit, who argued that Airtech should be debarred from doing business with the federal government. The investigator charged that Airtech, which makes light-weight composite materials, “knowingly supplied nonconforming products to DOD [Department of Defense] prime contractors.”

Airtech has not been debarred or formally charged in the matter. A company spokesperson told CBS “we are aware of no current ongoing investigation,” but CBS reports that a document dated earlier this month indicates that an “active investigation” is still being conducted by the Army. CBS also says the House Transportation Committee is looking into the matter.

One fact not mentioned by either POGO or CBS is that the two top executives of Airtech—CEO William Dahlgren and his son Jeffrey Dahlgren, who serves as President—have together made a total of $308,700 in federal campaign contributions since the early 1990s—all of it to the Republican Party or Republican candidates, according to the Open Secrets database. Among those candidates: John McCain, who received $1,000 from William Dahlgren in February 2007, and George W. Bush, who got $2,000 from William Dahlgren in May 2000. Most of the Dahlgren money—more than $250,000—went to the Republican National Committee.

Apart from seeking contracts, the Dahlgrens may also have been investing in politics to gain influence in regulatory matters. According to the inspections database of the Occupational Safety & Health Administration, Airtech was cited for a serious violation in September 2006. OSHA proposed a fine of $5,060 (which is on the high side for the agency) but later settled with the company for $2,700.

Another model corporate citizen supporting the Republicans.

The Democratic Convention: Brought to You By Your Friends in Corporate America

Barack Obama and Hillary Clinton may be bashing big business (up to a point), but a number of major corporations are positioning themselves to win favors from a possible Democratic administration next year by signing up as sponsors of the party’s convention. Last week, Kevin Vaughan of the Rocky Mountain News reported that the August gathering in Denver has already lined up 56 corporate supporters.

Vaughan notes that these companies appear to be motivated by something other than civic responsibility: “Almost all of them have the same thing in common: They either have business with the federal government or they lobby on pending issues.”

Massie Ritsch of the Center for Responsive Politics told Vaughan: “Corporations aren’t allowed to contribute directly to political parties or candidates’ campaigns, but they can subsidize the gatherings that show off a party’s candidate to American voters and get the candidate officially nominated…Money from these corporate donors helps the party, it helps the candidate, and to call it anything other than a campaign contribution is to make a distinction without a difference.” Also on the list of sponsors is the Service Employees International Union.

The Center’s Capital Eye blog later reported that companies on the sponsorship list are also associated with actual campaign contributions—through their political action committees and individual giving by employees and their families. In this way, the Center says, 38 of the sponsoring companies have provided about $971,000 to Sen. Clinton and 48 have provided about $1.3 million to Sen. Obama.

Vaughan does a good job of cataloging the issues on which the corporate sponsors would likely seek help from the Democrats if they control the White House as well as Congress. For example, AT&T’s concern about liability in connection with its involvement in national security wiretapping; Merck’s opposition to low-cost drug importation; and Visa’s worries about new restrictions on credit card companies.

Other sponsors include leading weapons producer Lockheed Martin, the giant for-profit medical insurer UnitedHealth Group, and utility firm Southern Co., one of the largest producers of greenhouse gas emissions. Another of the sponsors, Molson Coors, may be a significant liability for the Democrats even during the convention. Jonathan Coors, nephew of company vice chairman Pete Coors, is leading an effort to put an anti-union right-to-work initiative on the ballot in Colorado.

Isn’t it wonderful that the Democrats display such diversity among those helping to make its historic convention possible.

Letting More Sunshine In

I’m writing this from beautiful Bigfork, Montana, where I’ve had the pleasure of attending a gathering of government transparency experts and activists convened by the National Institute on Money in State Politics. The message here is a mixed one. Speakers such as Charles Davis, head of the National Freedom of Information Coalition, told harrowing tales of how state governments try to block access to public records. Yet we are also being treated to reports on new advances in disclosure and new online tools to access the data. I’ll focus here on the latter.

Ed Bender, executive director of the Institute and our host, demonstrated new features recently added to the Institute’s already remarkable Follow the Money website as well as features that will soon be introduced. These include:

Committee Analysis Tool (or CAT). Using continuously updated legislative rosters compiled by Project Vote Smart, a user of Follow the Money can now quickly see all the contributions going to members of a given committee.
Lobbyist Link. This feature, which is currently in beta form and is expected to launch in the next month or two, allows users to see the extent to which a large company or other institution is trying to influence policymaking throughout the country. For example, by searching Verizon, one will be able to see data on the giant phone company’s lobbying efforts in every state and the campaign contributions associated with those efforts. The Institute invites Digest readers to preview the tool, but recognize that work is still being done on matters such as variations in company names. Send comments to the Institute using the link on the beta page.

Sheila Krumholz and Susan Alger of the Center for Responsive Politics provided a tour of their recently redesigned Open Secrets site, the leading source for data on federal campaign contributions and related issues such as lobbying, financial disclosure by public officials and the revolving door between the public and private sectors. The redesign makes it possible for registered users to display a personalized set of data on particular candidates or donors every time the site is opened. This was described as just the first in a series of planned personalization tools. The Center is also considering adding data on earmarks and federal contracts to the site.

Greg Elin of the Sunlight Foundation, whose new site Fortune 535 I wrote about recently, wowed even this sophisticated crowd with his description of a prototype tool called Influence Explorer, which will allow one to dump a body of text, such as a newspaper article, into a database that will automatically extract key names and assemble data on those individuals. The initial application is limited to members of Congress (the data thus include items such as campaign contributions), but it could be extended to other groups of people or institutions.

Among the other speakers were Cindi Canary of the Illinois Campaign for Political Reform, who told about the origins of Open Book, a site that combines data from campaign contributions and procurement contracts in Illinois (which I covered last year), and Mike Smith, chief technology officer of the Washington Public Disclosure Commission, who described plans for upgrading the state’s already excellent site on campaign finance, lobbying and financial disclosure.

Hearing these presentations and others was both exciting to me as a researcher looking for new tools and inspiring evidence that proponents of transparency are making major inroads against the forces of darkness.

Wal-Mart and the Chinese Earthquake: Cheap Help for A Cheap-Labor Country

Wal-Mart Stores has put out a press release patting itself on the back for promising the equivalent of about $430,000 for disaster relief and reconstruction for the area of China hit by a massive earthquake this week. The gesture was laudable but the amount was less than impressive.

After all, the giant retailer would be nowhere today without the countless Chinese workers who toil in sweatshops so that American consumers can be offered the cheap goods that are at the core of the company’s business model. Last year those largely Chinese-made goods brought Wal-Mart profits of $12.7 billion, or about $1.4 million every hour of every day. The $430,000 contribution thus represents less than 20 minutes of profit.

Wal-Mart also profits from Chinese consumers. The company operates more than 200 stores in China (through joint ventures and minority-owned subsidiaries), several of which have been shut down because of the tremblor. Wal-Mart was so eager to operate stores in China that it agreed to let its employees there be represented by unions (though of the government-dominated variety).

Wal-Mart has a history of using relatively inexpensive amounts of disaster relief to boost its reputation. After Hurricane Katrina hit the U.S. Gulf Coast in 2005, Wal-Mart maneuvered to get maximum exposure for its prompt delivery of relief supplies. A fairly routine operation for a company possessing the most advanced logistics infrastructure was seen as nearly miraculous, given the ineptitude of federal and state public officials.

The company made an initial faux pas (quickly reversed) in announcing that employees at its stores shut down by the storm would be paid for only three days. It also started out offering a measly $2 million in relief but soon overcame its parsimonious instincts and upped the figure by $15 million, thereby winning wide praise. The wave of favorable coverage went on for several months, thanks at least in part to the efforts of its army of p.r. operatives from Edelman and a conservative blogger who was paid to tout Wal-Mart’s hurricane work in the blogosphere.

Wal-Mart may have to part with more than $430,000 to get a similar public relations bonanza from China’s suffering.