Disclosure

Full Graphic Disclosure

Forget Joe Camel and the Marlboro Man. Federal regulators want people to think of disease, birth defects and death when they pick up a package of cigarettes. The Food and Drug Administration, implementing legislation passed by Congress last year, has just released three dozen proposed enhanced warning labels that manufacturers would have to print on each pack of cancer sticks.

In the place of the plain text warnings that have appeared on tobacco packaging for years, these labels would be much larger and much more visually striking. The proposals include, for example, photos of a smoker in an open coffin, a mother blowing cigarette smoke at her infant child, and a sickly cancer victim.

The main objective of the warnings is to encourage existing smokers to quit and the dissuade children from picking up the dangerous habit. But apart from consumer behavior modification, the labels can be seen as a form of disclosure—disclosure of the harmful effects of a product.

The need for bold messages about deleterious aspects of the things we buy is not limited to cigarettes. It might make sense to apply the FDA’s approach to a whole range of goods and services. For example:

SUV models shown to be prone to rollovers should come not just with a plain-text sticker showing miles per gallon, but also full-color photos of mangled vehicles with bleeding drivers and passengers.
Electric bills sent by utilities relying on coal-fired power plants should be required to include photographs of floods, droughts and other effects of catastrophic climate change.
The pumps at gas stations should be adorned with photographs of oil spills and refinery disasters.
A variety of products sold by Wal-Mart should have packaging containing images of the oppressive Chinese sweatshops in which they were produced.
Stores selling gold jewelry should display photographs showing the despoiled land around the cyanide-leaching facilities in which the precious metal is mined.
Producers of dangerous pharmaceuticals should be required not just to mention possible injurious side effects, which most people have tuned out, but to show images of actual victims.
Health insurance providers should have to send out pictures of policyholders who died because an expensive treatment was rejected by the company.
Perhaps manufacturers of the worst junk food should be required to air commercials with actors who are morbidly obese.
And, of course, gun sellers should have to hand out gory photos of victims of accidental discharges.

Given the exalted status of commercial free speech in this country, these ideas could never come to pass. Yet there is still a serious issue to address: How do we turn dry data about corporate harms into messages people pay attention to?

The objective, however, is not just to change consumer behavior but also that of producers. All disclosure is meant to highlight an activity that is subject to abuse and hopefully curb those abuses. The Environmental Protection Agency’s Toxics Release Inventory is designed to get manufacturers to clean up their production processes – and has had a positive impact. Campaign contribution disclosure is meant discourage the big-money takeover of elections (there’s obviously been a lot less progress on that front, especially now that much corporate electoral spending can take place anonymously). Disclosure of executive compensation is supposed to check the relentless march toward lavish CEO salaries, bonuses and stock options (another less than rousing success).

The fact that disclosure does not immediately cure the problem it is meant to highlight does not undermine the case for transparency. It may simply mean that the form of the disclosure is not compelling enough. That’s the beauty of the FDA approach to cigarettes.

In replacing the misleading feel-good images that marketers have long sought to associate with even the most noxious products, the aggressive warning labels begin to force corporations to be honest about what they sell and consumers to come to grips with the true nature of much of what they consume. This form of anti-advertising may begin to liberate us from the illusions of our manufactured desires.

Stealth Disclosure

The Congressional practice of quietly attaching an unrelated provision to a larger piece of legislation at the last minute has all too often been used to benefit powerful corporate interests. In two recent cases, however, the stealth amendment process has resulted in changes that will make it easier to monitor questionable business practices by energy companies and federal contractors.

Extractive industries are complaining about language (Section 1504) slipped into the new financial reform bill that will require them to report on royalties and other payments to governments. The aim is to make it harder for those corporations to conceal bribes and other illegal transfers used to obtain petroleum or mining concessions and that often prop up corrupt regimes such as the one in Equatorial Guinea. The provision, based on a bill that had been introduced by Senators Benjamin Cardin of Maryland and Richard Lugar of Indiana, applies to publicly traded oil, gas and mining companies whose shares trade in the United States.

The law is a victory for groups such as Publish What You Pay, which has long campaigned to increase the transparency of energy corporation dealings with governments around the world. The campaign has already succeeded in getting some firms to disclose the information voluntarily, but it will be much better to have it mandated and overseen by the Securities and Exchange Commission, which will write rules covering the inclusion of the information in financial statements.

That’s why trade associations such as the American Petroleum Institute and companies such as Exxon Mobil are grousing about the law. An API spokesperson told the Wall Street Journal that Russian and Chinese oil companies not subject to the requirement “could use the data to outfox U.S. companies in deals.”

Dubious complaints are also being heard from Beltway Bandit mouthpieces in response to a swift move by Sen. Bernie Sanders of Vermont to insert a provision in the recently passed supplemental appropriations bill giving the public access to a database about contractor performance – which in many cases means contractor misconduct.

The database is the Federal Awardee Performance and Integrity Information System (FAPIIS), which was mandated as a result of 2008 legislation enacted thanks to the efforts of groups such as the Project On Government Oversight (POGO), which has its own Federal Contractor Misconduct Database covering the 100 companies doing the most business with Uncle Sam. FAPIIS is supposed to make it easier for federal agencies to review the track record of a much wider range of companies bidding on new contracts worth $500,000 or more. In addition to contract performance information collected from various federal sources, FASPIIS includes data submitted by companies with more than $10 million in contracts or grants on any criminal, civil or administrative proceedings brought against them during the previous three years.

FAPIIS was an important step forward, but it was able to get through Congress only after its sponsors agreed to restrict access to the database. POGO tested the provision by filing a FOIA request with the Pentagon for its FAPIIS information but was shot down.

A short time later, however, it came to light that the Sanders amendment survived in the supplemental spending bill President Obama signed on July 29. The provision will give the public access to FAPIIS information about contractor track records, but unfortunately it excludes past contract performance reviews by federal agencies.

Already, the Professional Services Council, the leading trade association of federal contractors, is warning that making parts of FAPIIS public “could create a politically motivated blacklist of vendors.” The PSC seems to believe that the public should not have the ability to pressure the federal government to stop doing business with crooked companies.

Speaking of blacklists, the FAPIIS change comes on the heels of an announcement by the Obama Administration that it is creating a master Do Not Pay database covering individuals and businesses that should not be receiving payments from federal agencies. At a time of growing hysteria about the federal deficit, it is good to see that attention is being paid to ways of cutting costs that are truly wasteful.

Shaming the Corporate Cheapskates

Buried among the many features of the financial reform bill passed by Congress is a provision that could get you a raise. For this to happen, however, you have to work for a large company that is uncomfortable with having it made public how little it pays its workers.

Section 953 of the Dodd-Frank bill deals with disclosures relating to executive compensation, not only at banks but at all publicly traded companies. One of the ways it seeks to rein in out-of-control CEO pay is by requiring firms to reveal how the amount paid to the head of the company compares to that received by the typical employee. The theory is that having this information made public would give pause to grasping CEOs and soft-touch board compensation committees.

The total compensation of chief executives (along with that of the four other highest paid executives) is already disclosed through the annual proxy statements companies have to file with the Securities and Exchange Commission (which makes them public through the EDGAR online system, where the documents are designated as DEF 14A). Yet there have been no requirements relating to the disclosure of how much is paid to the CEO’s underlings.

Section 953 fills this gap by instructing companies to include in their future proxies the median of the annual total compensation paid to all employees apart from the CEO. They also have to calculate the ratio of that median to the CEO’s total bounty.

Those ratios will be fascinating to see, but just as interesting will be the figures on non-CEO pay themselves. For the first time, we will be able to make direct comparisons of the broad compensation practices of different companies within given industries or across sectors. Getting official data from the companies themselves will be an improvement on the selective information that now gets posted on websites such as Glass Door.

There will be limitations, of course. Congress should have required the disclosure of data specifically on hourly workers rather than lumping them in with higher-paid professionals and executives. It would also be preferable to have separate numbers on domestic and foreign employees. And it is likely that companies will exclude low-paid temps and (often misclassified) independent contractors in making their calculations.

Yet this information could still be put to good use. Having clear, company-specific data could help stimulate a much-needed movement to address the problem of wage stagnation in the United States. The reality of that stagnation is quite evident from overall labor market data collected by the U.S. Bureau of Labor Statistics, but it would be much more effective to point the finger at individual companies with low medians and seek to shame them for failing to provide adequate compensation to their workers.

The ability of employers to keep wages low stems from two classic sources: low unionization and high unemployment. We know all too well the story of how anti-union animus on the part of employers has pushed the percentage of private sector workers with collective bargaining protections to historic postwar lows. To the extent they are able, unions target individual companies such as Wal-Mart, T-Mobile and (until it was finally organized) Smithfield Foods for denying their workers the right to representation.

Unions and other advocacy groups also criticize specific companies that engage in mass layoffs, especially when they seem to be undertaken mainly to impress Wall Street.

Yet we rarely hear criticisms of particular companies for failing to hire new workers when conditions seem to warrant it. The “economy” is assumed to be to blame for the high levels of joblessness afflicting us, not deliberate decisions by corporations to keep their payrolls artificially lean. Recently, the U.S. Chamber of Commerce made the absurd argument that overregulation is responsible for the anemic hiring situation. The Obama Administration responded by saying that weak consumer demand is the cause. Absent is the idea that corporations are failing in their responsibilities.

The unwillingness to chastise corporations is all the more bewildering in the face of growing evidence that business is hoarding cash instead of investing in job-creating ways. A front-page story in the Washington Post headlined COMPANIES PILE UP CASH BUT REMAIN HESITANT TO ADD JOBS notes that U.S. nonfinancial companies, buoyed by rising profits, are now sitting on $1.8 trillion in liquid reserves.

Why is there not more of an outcry about this behavior? Here’s an idea: pick companies with the most egregious combinations of rising profits and falling payrolls and press them to justify their boycott of U.S. workers. Once the new disclosure requirement kicks in, they could also be pushed to explain their low compensation levels. Business needs a strong reminder that it also exists to provide opportunities for people to earn a living.

A Corporate Full-Body Scan

The one redeeming feature of the abominable Supreme Court ruling on corporate electoral expenditures is the majority’s retention of the rules on disclaimers and disclosure. While opening the floodgates to unlimited business political spending, the Court at least recognizes that the public has a right to know when a corporation is responsible for a particular message and a right to information on a corporation’s overall spending.

Writing for the majority, Justice Kennedy states: “The First Amendment protects political speech; and disclosure permits citizens and shareholders to react to the speech of corporate entities in a proper way. This transparency enables the electorate to make informed decisions and give proper weight to different speakers and messages.”

There’s no question that steps must be taken to mitigate the Citizens United ruling, whether through changes in corporation law, shareholder pressure, enhanced public financing of elections, or even a Constitutional amendment.

Yet while these efforts progress, it is also worth taking advantage of the Court’s affirmation of the principle of transparency and push for even greater disclosure than what we have now. Groups such as the Sunlight Foundation are already moving in this direction.

The effort could begin with pressing the Federal Election Commission to tighten the existing reporting rules on what are known as “electioneering communications” and to enforce them more diligently. But that’s not enough.

In the wake of Citizens United, we’ve got to demand more information on the many ways corporations exercise undue influence not only on elections but also on legislation, policymaking and public discourse in general. Now that Big Business is a much bigger threat to popular democracy, we have to subject corporations to intensive full-body scans to find all their hidden weapons of persuasion. The following are some of the areas to consider.

Lobbying. In his State of the Union Address, President Obama said that lobbyists should be required to disclose every contact with the executive branch or Congress. That’s fine, but why stop there? Many corporations do their lobbying indirectly, through trade associations which disclose little about their sources of funding. How about rules that require those associations to disclose the fees paid by each of their members and require publicly traded companies to disclose exactly how much they pay to belong to each of their various associations?

Front Groups. Corporations also indirectly seek to influence legislation and public opinion by bankrolling purportedly independent non-profit advocacy groups. Such front groups—such as those taking money from fossil-fuel energy producers to deny the reality of the climate crisis—do not have to publicly disclose their contributor lists. Why not require publicly traded companies, at least, to reveal all of their payments to such organizations?

Union-Busting. Encouragement of collective bargaining is still, in theory, official federal policy. Yet many companies violate the principle—and the rights of their workers—by using corporate funds to undermine union organizing campaigns. The existing rules on the disclosure of expenditures on anti-union “consultants” are too narrow and not vigorously enforced. That should change.

These are only a few of the ways that undue political influence and other forms of anti-social corporate behavior could be addressed through better disclosure. Yet, as we’ve seen, transparency by itself does not counteract corporate power unless something is done with the information.

This came to mind in reading the last portion of the Citizens United ruling. Not all five Justices in the majority went along with the idea of maintaining the disclaimer and disclosure rules. Parting with Kennedy, Roberts, Scalia and Alito, Justice Thomas argued not only that corporate independent expenditures should be unrestricted, but also that they should be allowed to take place under a veil of secrecy.

He bases his argument not on legal precedent, but rather on dubious anecdotal evidence that some supporters of California’s anti-gay-marriage Proposition 8 were subjected to threats of violence after their names appeared on public donor lists. Thomas thus suggests that corporations should be able to make their political expenditures anonymously to avoid retaliation.

While I am in no way advocating violence, I think activists need to use the information that becomes public as the result of expanded disclosure to make corporations pay a price for any attempts to buy our political system. If we can get them to worry about (non-violent) retaliation to the point that they limit their expenditures, then we will have gone a long way toward neutralizing the pernicious effects of the Citizens United ruling.

Misbehaving Contractors are Recovery Act Winners

The federal government has awarded about $17 billion in direct contracts under the various provisions of the American Recovery and Reinvestment Act (ARRA). Given the Administration’s commitment to accountability, one hopes that the contractors were chosen with the utmost care and that any companies with serious blemishes on their record were excluded.

If the timing had been a bit different, such a review could have been accomplished much more easily. The General Services Administration is in the process of implementing legislation passed by Congress last year that mandates the creation of a database on the integrity and performance record of federal contractors and grantees. In September GSA published a notice in the Federal Register about its plans for what is being called the Federal Awardee Performance and Integrity Information System, or FAPIIS. The comment period on the plan ended earlier this month. Perhaps the system will be operational before ARRA reaches the end of its two-year life.

Unfortunately, the public will never know the details of how FAPIIS is used to vet contractors for ARRA or any other program. The reason is that Congress caved in to pressure from the contractor community and prohibited public disclosure of the database, which will be available only to federal agencies for internal use.

Fortunately, the public still has access to the Federal Contractor Misconduct Database (FCMD), which was created and is maintained by the non-profit Project On Government Oversight (POGO). It served as the inspiration for FAPIIS, though POGO and other watchdog groups pushed for a public version of the federal database. The FCMD, which covers the 100 largest federal contractors, documents more than 700 cases of misconduct since 1995 that resulted in more than $26 billion in fines and penalties. It covers a wider range of misconduct than will FAPIIS.

Apparently, most federal agencies did not pay close attention to the FCMD in awarding their ARRA contracts. An examination of the national Recovery Act contractor spreadsheet shows that many of those companies appear in POGO’s database as having been involved in cases of misconduct. They account for more than $6 billion in Recovery Act contract awards.

There are 12 contractors with more than one instance of misconduct and ARRA contracts of at least $150 million.* Here they are (listed by volume of ARRA contracts):

CH2M ($1.8 billion in ARRA contracts; 6 instances of misconduct with penalties of $2.8 million)
URS ($737 million in contracts; 4 instances and $2.4 million in penalties)
Northrop Grumman ($596 million in contracts; 29 instances and $821 million in penalties)
Battelle Memorial Institute ($522 million in contracts; 7 instances and $1.3 million in penalties)
Honeywell International ($472 million in contracts; 31 instances and $641 million in penalties)
Fluor ($469 million in contracts; 23 instances and $198 million in penalties)
SAIC ($312 million in contracts; 10 instances and $14 million in penalties)
Bechtel ($270 million in contracts; 15 instances and $359 million in penalties)
University of California ($270 million in contracts; 25 instances and $67 million in penalties)
Lockheed Martin ($180 million in contracts; 50 instances and $577 million in penalties)
University of Chicago ($163 million in contracts; 4 instances and $22 million in penalties)
Jacobs Engineering ($161 million in contracts; 2 instances and $37 million in penalties)

When the nation’s largest contractors have track records such as these, it is not surprising that Congress chose to keep its misconduct database a secret.

* In the case of joint ventures, the amount of the contract award is divided equally among the companies or institutions involved.

Stimulus Lobbying Pays Off for Major Contractors

K street Last spring, when the ink was barely dry on the $787 billion American Recovery and Reinvestment Act (ARRA), there was already concern about an emerging frenzy of lobbying on behalf of corporations seeking a slice of the stimulus pie.

The Obama Administration enacted rules designed to make ARRA lobbying more transparent. That didn’t work out very well, but the Recovery Accountability and Transparency Board recently completed the release of the first round of quarterly disclosure reports by ARRA recipients. In part, these reports serve as a score card showing which companies won the great stimulus lobbying competition.

Beginning with a list of the largest direct federal contracts, I ran the names of the prime contractors through the invaluable lobbying database maintained by the Center for Responsive Politics. Many of the largest contracts went to joint ventures set up by major engineering companies to do clean-up work at nuclear facilities owned by the Department of Energy. In those cases I searched the names of the individual parent companies (and some universities) involved.

There are a total of 52 companies and institutions involved with the 50 largest ARRA contracts. Of these, 34 show up as clients in the Center’s lobbying database. These include large corporations such as Bechtel, Lockheed Martin, Northrop Grumman, General Motors and Ford—as well as smaller players. Also on the list are educational institutions such as the University of California, Stanford University and the University of Chicago.

So far in 2009, the 34 have spent a total of $65 million on lobbying the federal government. Of course, not all that lobbying can be attributed to the quest for stimulus contracts, but it shows in general terms that the ARRA winners include some of the biggest influence-peddlers in Washington.

Moreover, there is every reason to think that a significant portion of their lobbying efforts were focused on stimulus contracts. I searched the database of lobbyist disclosure reports provided by the Senate Office of Public Records. Of those 34 contractors, 24 show up as clients in 2009 lobbying reports in which the word “recovery” or “stimulus” is mentioned in the description of the specific issues on which the lobbyists reported working.

It’s not possible to determine how much of their spending went specifically to ARRA issues. But whatever portion of the $65 million was involved, it was money well spent for the contractors. The 24 that definitely had lobbyists working on ARRA matters ended up with stimulus contracts worth some $7.4 billion. That’s an impressive return on political investment.

Now we can only hope that these and other stimulus contractors crank up their hiring so taxpayers also get something significant out of this bonanza. According to the recent ARRA recipient reports, some of the projects being carried out by those two dozen firms have already created (or retained) a substantial number of jobs. Yet others, in a pattern seen in the overall ARRA contractor data, report few or no jobs despite having already received substantial sums for the projects.

Is the Recovery Act Stimulating Privatization?

AFSCME Key portions of the $787 billion American Recovery and Reinvestment Act, especially the state fiscal stabilization fund, are designed to prevent job loss among teachers and other state and local government employees. But what about the rest?

The assumption seems to be that most of the job creation and retention will take place in the private sector. Yet one question that has received little attention since ARRA was signed by President Obama in February is whether the spending will contribute to the process of privatization and contracting-out of functions previously performed by public sector workers.

On October 15 the Recovery Accountability and Transparency Board released the first batch of recipient reporting data covering some $15 billion in direct federal contracts. Although this is a small portion of overall ARRA spending (information relating to the much larger realm of federal grants to states and others will be released on October 30), it begins to shed some light on the privatization question.

My colleagues and I at Good Jobs First have been examining the universe of around 9,000 recipient reports summarized in a national spreadsheet available on the Recovery.gov website. Many of the entries are unremarkable. They involve contracts for functions such as manufacturing and construction that have traditionally been concentrated in the private sector. It is not surprising that the federal government gave an ARRA contract to Chrysler to supply vehicles and one to Clark Construction to build a new headquarters for the Coast Guard.

Yet many of the other entries appear to be part of the contracting-out phenomenon. You can tell this, first, by looking at the names of the contractors: one firm called Federal Contracting Inc. leaves little doubt as to its orientation. There are others that have a reputation for being involved in high-profile outsourcing deals. An example is IAP Worldwide Services, a politically connected firm (former Vice President Dan Quayle is on its board of directors) that got a controversial contract to take over management of the Walter Reed Army Medical Center in Washington.

Or else you can look at the description of the projects. A company called 4W Solutions got a contract from NASA for “administrative activities, configuration management of documents, procurement-related analysis and support for report integration/administrative support for Cross-Agency Support construction contracts.”

To be a bit more systematic in our analysis, my colleagues and I decided to match the Recovery.gov list of contractors to the membership list of the Professional Services Council, the leading trade association for the federal outsourcing industry.

PSC’s members range from large and notorious contractors such as KBR (formerly the Halliburton subsidiary Kellogg, Brown and Root), Xe Services (formerly Blackwater) and CACI International (linked to the Abu Ghraib torture scandal) to small and obscure consulting firms. During its 27-year history, the association has sought to banish the use of the term “Beltway Bandit” to refer to federal contractors and has pushed for legislation that would maximize the amount of federal work that gets outsourced. It has also resisted the recent move toward insourcing.

We found that, of the 382 PSC members listed on the association’s website, about 50 are on the list of ARRA federal contract recipients (name variations make an exact count difficult). In all, these members and their affiliates have been awarded about 250 ARRA contracts with a total value of more than $800 million.

Some of these involve engineering and construction services, but others deal with functions that are more inherently governmental, such as a contract given to Deloitte Consulting to provide “program management oversight” for ARRA grants made by the Federal Aviation Administration.

In an economic crisis such as the current recession, all job creation is to be welcomed. But it would be a shame if some portion of Recovery Act money is being used in ways that do little more than shift work from the public sector to the private sector.

(Thanks to Tommy Cafcas, Caitlin Lacy and Leigh McIlvaine for their research help.)

Update: I should have mentioned that KBR and Xe Services are not among the recipients of ARRA contracts, but CACI has two.

Further update: We spent more time analyzing the spreadsheet and found many more ARRA contracts that can be attributed to PSC members through joint ventures, affiliates, etc. Our tally is now about 470 contracts worth a total of about $3.5 billion. These include some huge contracts associated with clean-up projects at Department of Energy nuclear facilities.

Exposing the Executive Pay of Beltway Bandits

The recipient reporting system mandated by the American Recovery and Reinvestment Act is designed to inform the public on how federal stimulus spending is creating jobs. The just-released first phase of that system still has a considerable number of bugs to work out with regard to its job numbers, but it also represents a new step forward in making the operations of federal contractors more transparent.

The rules governing Recovery Act reporting include a requirement (FAR 52.204-11) that certain contractors disclose the amount of compensation paid to their five highest paid executives. These include companies that receive $25 million or more in federal governments as long as federal contracts account for 80 percent or more of their total revenue.

Publicly traded companies already report this information to the Securities and Exchange Commission in their proxy statements, which are made available to the public. The Recovery Act rule is unusual in that it extends executive compensation reporting to privately held firms, which typically keep such information to themselves.

In the new Recovery Act contract data, several hundred contractors provided compensation information, including many that apparently were not required to do so. As shown in the table below, 14 contractors reported compensation in excess of $1 million for their top executive (not including obvious glitches such as a modest-sized excavating company in Washington State that entered $986 million in the compensation column).

Half of the contractors are part of publicly traded companies, and their compensation amounts match what was previously disclosed by those companies. The rest are privately held, meaning that this may well be the first time the pay of their top executives has been officially disclosed.

The most interesting of these is the huge consulting company Booz Allen Hamilton, which since fiscal year 2000 has been the recipient of more than $16 billion in federal contracts. It does business with many agencies, but it is especially close with the Pentagon. Last year it was the 22^nd largest military contractor. The Recovery Act reports do not list executive names, but it likely that Booz Allen CEO Ralph W. Shrader was the one who was paid more than $8.4 million last year.

The Recovery Act does not include funding for military purposes, but it forces Pentagon contractors and other Beltway Bandits that happen to be privately held to reveal how richly they are rewarding their top executives with the help of taxpayer funds.

Top Compensation Amounts Reported by Recovery Act Federal Contractors

JOHNSON CONTROLS BUILDING AUTOMATION SYSTEMS LLC
$17,385,308

RAYTHEON TECHNICAL SERVICES COMPANY LLC
$15,056,151

BOOZ ALLEN HAMILTON INC.
$8,457,003

BALL AEROSPACE & TECHNOLOGIES CORP.
$8,111,298

ENERGYSOLUTIONS FEDERAL SERVICES, INC.
$6,336,752

ADVANCED CONSTRUCTION TECHNIQUES LTD
$2,724,660

DANYA INTERNATIONAL INC.
$2,363,143

ROLLS-ROYCE NORTH AMERICAN TECHNOLOGIES INC.
$2,025,860

WEST VALLEY ENVIRONMENTAL SERV
$1,955,909

SCIENTIFIC RESEARCH CORPORATION
$1,471,745

ORBITAL SCIENCES CORPORATION
$1,448,752

STG, INC.
$1,201,762

PARSONS INFRASTRUCTURE & TECHNOLOGY GROUP INC.
$1,128,070

ENVIRONMENTAL CHEMICAL CORPORATION
$1,016,426

Source: Analysis of the combined state spreadsheets provided at the Recipient Reported tab here.

Notes:

The figure for Johnson Controls Building Automation Systems is apparently the compensation of Stephen A. Roell, CEO of the parent company Johnson Controls Inc., which is publicly traded and thus already reported the compensation of its top officers through its SEC filings. The figure above is the same as that reported for Roell in the company’s latest proxy statement.

The figure for Raytheon Technical Services is the same as that reported for parent Raytheon’s CEO William H. Swanson in the company’s latest proxy statement.

Booz Allen is privately held. Its CEO is Ralph W. Shrader.

The figure for Ball Aerospace is the same as that reported for parent Ball Corporation’s CEO R. David Hoover in the company’s latest proxy statement.

The figure for EnergySolutions Federal Services Inc. is the same as that reported for parent EnergySolutions’ chief financial officer Philip O. Strawbridge in the company’s latest proxy statement.

Advanced Construction Techniques Ltd is privately held. Its president is James Cockburn.

Danya International Inc. is privately held. Its CEO is Jeffrey A. Hoffman.

The figure for Rolls-Royce North American is roughly the same (after currency conversion) as that reported for parent Rolls-Royce PLC chief executive Sir John Rose in the company’s annual report.

West Valley Environmental Services LLC describes itself as “a newly-formed company comprised of four companies – URS Washington Division, Jacobs Engineering Group, Environmental Chemical Corporation (ECC), and Parallax/Energy Solutions – with extensive experience conducting environmental cleanup at Department of Energy (DOE) sites across the United States.” Its compensation figure above is the same as that reported in the proxy statement of URS Corporation for URS Washington Division President Thomas H. Zarges.

Scientific Research Corporation is privately held. Its CEO is Michael Watt.

The figure for Orbital Sciences is the same as that reported by the company for CEO David W. Thompson in the company’s latest proxy statement.

STG Inc. is privately held. Its CEO is Simon S. Lee.

Parsons Infrastructure is a unit of privately held Parsons Corporation, whose CEO is Charles L. Harrington.

Environmental Chemical Corporation (which seems to prefer being called simply ECC) is privately held. Its CEO is Manjiv Vohra.

UPDATE: On October 30 Recovery.gov published a revision of the contractor data that fixed various formatting problems and added names to the executive compensation figures. For more details, see here.

Barofsky’s Bailout Bible

Rejecting the evasion and obfuscation that has characterized most official pronouncements about the federal bailout of the financial and auto industries, Neil Barofsky has a talent for cutting through the crap. The Special Inspector General for the Troubled Asset Relief Program (or SIGTARP) speaks plainly and makes no compromises in his pursuit of accountability.

Barofsky’s aggressive watchdog style is in full display in a document he just submitted to Congress and released to the public. Despite having the unassuming title of Quarterly Report, it is actually the most lucid and comprehensive analysis of the bailout program published to date.

The part of the report that has received most press attention is the warning that the Public-Private Investment Program promoted by Treasury Secretary Geithner to deal with toxic bank assets is quite vulnerable to fraud. This is just one of a slew of ways that Barofsky argues that the TARP program lacks adequate safeguards. To help make up for these limitations, the SIGTARP office is proceeding with half a dozen audits and is coordinating its efforts with various federal law enforcement agencies.

Barofsky’s 250-report also contains what amounts to a textbook and statistical abstract about the bailout. He reminds us that TARP is not one but a dozen different programs with various objectives. (Citigroup, for instance, has gotten three different forms of assistance.) He carefully explains each one and provides a wealth of quantitative as well as qualitative detail. There’s even a tutorial on securitization. Among the data that I believe are being made public for the first time are a table showing the dividends paid by banks receiving capital infusions and an eleven-page appendix providing the status of every one of the common stock warrants the Treasury Department received from TARP recipients.

Also included are details of the administrative and operational costs incurred by the Treasury Department in connection with TARP, including $6.9 million to PricewaterhouseCoopers, $5.7 million to Bank of New York Mellon and $2 million to Ernst & Young as well as about $10 million to various law firms.

This single SIGTARP document, produced by an entity with a staff of only 35, does more to clarify the bailout than the combined efforts of the Treasury Department, the Federal Reserve and other banking regulators over the past seven months. This is not a case, however, in which clarification creates greater confidence. One comes away from Barofsky’s report with the sense that the bailout is a vast Rube Goldberg contraption that requires careful monitoring. Fortunately, Neil Barofsky is on the case.

Note: Another useful new resource on TARP is the website just launched by Bailout Watch, an initiative led by the Center for Economic and Policy Research, Economic Policy Institute, OMB Watch, OpenThegovernment.org, Project On Government Oversight, and Taxpayers for Common Sense.

Blurring the Bailouts

This is the time of year when most U.S. public companies file their 10-K annual reports with the Securities and Exchange Commission, which in turn makes them available to the public through its IDEA web page (formerly EDGAR). These reports include sections in which management discusses the firm’s performance over the past year and tries to put the best face on the financial results.

Many companies are, of course, reporting disappointing results this time around, but perhaps the most awkward filings are the ones being made by companies that had to get bailed out by the federal government to get through the year. Let’s take a look at how they are talking about being wards of the state.

We don’t yet know how General Motors is dealing with this challenge, since it notified the SEC that its 10-K will be late. So let’s focus on two of the other biggest supplicants: Citigroup and AIG. The first lesson, apparently, is not to use the term “bailout” when talking about being bailed out. The term appears nowhere in either firm’s 10-K.

Citi instead employs the bland statement that “the Company benefited from substantial U.S. government financial involvement.” Substantial, indeed. Citi matter-of-factly describes the capital infusions, loss-sharing agreements and loan guarantees through which the feds have made a commitment potentially costing several hundred billion dollars to keep the giant bank holding company afloat. With all the references to UST and USG, a casual reader might think Citi was referring to conventional investors rather than the U.S. Treasury and the U.S. Government.

AIG adopts a more narrative approach, writing that: “By early Tuesday afternoon on September 16, 2008, it was clear that AIG had no viable private sector solution to its liquidity issues. At this point, AIG received the terms of a secured lending agreement that the NY Fed was prepared to provide.” This does not quite capture the gravity of events that the New York Times, for example, reported on in a front-page story headlined: FED IN AN $85 BILLION RESCUE OF AN INSURER NEAR FAILURE; U.S. GETS CONTROL; POLICY REVERSAL ARISES FROM GROWING FEAR OF GLOBAL CRISIS.

Aside from downplaying the gravity of their bailouts, the Citi and AIG 10-Ks are less than lucid on what led up to their troubles. In describing conditions in 2008 that led to a $27 billion net loss, Citi takes no responsibility. The causes, instead, are said to have been “continued losses related to the disruption in the fixed income markets, higher consumer credit costs, and a deepening of the global economic slowdown.” Contrast this to its 10-K of two years ago, which stated: “We enter 2007 with good business momentum, as we expect to see our investment initiatives generate increasing revenues, and are well-positioned to gain from our balanced approach to growth and competitive advantages.” In other words, when things are going well, management strategy gets the credit; when the red ink begins to gush, impersonal market forces are to blame.

AIG, which reported an astounding $99 billion net loss for the year, also paints itself as a victim of conditions outside its control, saying “the 2008 business environment was one of the most difficult in recent decades.” The difference with Citi is that AIG’s management is blunter about the continuing dismal prospects for the company. The notes to its financial statements include a section entitled “Going Concern Considerations” that raises the possibility that the company may need yet more government assistance and that, even then, its survival is far from a sure thing.

Perhaps the most telling parts of the reports are the sections in which the companies have to disclose significant legal proceedings in which they are involved. It takes more than 7,000 words for AIG to summarize all of its legal problems, including about a dozen securities fraud class action cases. Citi engages in a similar recitation.

While the two companies are still in a state of denial about their responsibility both for their own circumstances and for the larger financial crisis (as illustrated in the image above from Citi’s website), the existence of these legal proceedings may see to it that they are eventually held accountable for their financial misdeeds.