|Sign on Washington DC's K Street - - home of lobbyists and the epicentre of American corruption. Photo: dcra.dc.gov
The Wall Street Journal reported on Tuesday, that the US Justice Department is increasing its prosecutions of alleged acts of foreign bribery by US corporations, forcing them to take costly steps to defend against scrutiny. Meanwhile, actor Kevin Spacey, is preparing to play former Republican Party lobbyist Jack Abramoff, who is in jail for corruption, in a film to be titled Casino Jack. What recently struck me when watching Spacey on the Tonight Show with Jay Leno, recounting a meeting with Abramoff, that to be declared legally corrupt in America, a person must be a cocktail of arrogance, stupidity and greed, given the vast opportunities for legal corruption in a system, where bribery has been almost defined out of existence. Ireland's Jack Abramoff, Frank Dunlop, faced the music on Tuesday but Irish national politicians should be more ashamed than him, as they have done absolutely ZERO to change the Irish land rezoning system, which spawned extensive corruption.
Dunlop, a former lobbyist and consiglierefor the dominant Fianna Fáil party, was given an 18-month jail sentence for bribing politicians on behalf of property developers, to influence planning decisions. Most of the amounts involved were not significant and he would have stayed within the law, if he had given the equivalent in benefit-in-kind e.g. "fact finding" trips with family to exotic locations or access to corporate entertainment at big sporting events - - greasing palms doesn't have to cost an arm and a leg!
The biggest scandal of all, is not what Frank Dunlop did, which was for long a staple of Irish political life, but the failure of politicians to reform the corrupt land rezoning system, which legally transfers huge sums to landowners, in a country that is 4% urbanised. A public planning tribunal has been sitting since 1997; lawyers have become multi euro millionaires from the process and nothing has changed. The "brown paper bag" has been consigned to history but plenty avenues for legal corruption remain.
The Journal reported on Tuesday, that the Justice Department crackdown under the Foreign Corrupt Practices Act, or FCPA -- a post-Watergate law largely dormant for decades -- now extends across five continents and penetrates entire industries, including energy and medical devices. Among the companies currently under Justice Department review: Sun Microsystems and Royal Dutch Shell, according to the companies' disclosures.
The newspaper said at least 120 companies are under investigation, according to Mark Mendelsohn, a deputy chief in the Justice Department division overseeing the prosecutions, up from 100 at the end of last year.
The effort began in the wake of a series of business scandals earlier this decade, including the collapse of Enron, that stirred up a new corporate-reform movement.
Today, companies across the US are working to figure out if they are at risk. In some instances, companies have called the Justice Department to come clean, in hopes of obtaining leniency.
In recent weeks, British MPs have been exposed for fiddling expenses and a Speaker of the House of Commons has been ousted for the first time in over 300 years. In Ireland, their part-time counterparts don't have to fiddle their expenses as they both earn more and can legally claim untaxed expenses of more than 100% of their salaries and hire family on the public payroll.
The British scandal began in 2005, when an American freelance writer and journalism teacher living in London, Heather Brooke, entered a request under the UK’s new freedom of information act for details of the expense claims of British members of Parliament.
|Kevin Spacey on The Tonight Show with Jay Leno, May 13, 2009
The corruption in London is small beer compared with what goes on in Washington DC.
Kevin Phillips wrote in Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism, of the "revolving door": "The English-speaking peoples, when filling in new lands, had a certain naiveté about the power of entrenched interests and how these could be subdued by locating a political capital in a remote federal preserve far from the existing centers of (corrupting) urbanity and wealth. The capitals were thus located in backwaters at a time when geography trumped media (Washington, D.C., Ottawa, and Canberra); but today, those names have become shorthand in their respective electorates for (1) metropolitan areas with strikingly high (and recession-resistant) per capita incomes; and (2) hothouses of seething interest-group concentration where elected representatives, shedding whatever grassroots fealty they may once have possessed, often train to retire after ten or twelve years to triple or even quintuple their salaries by becoming lobbyists."
The Washington Post reportedin June 2005, that the number of registered lobbyists in Washington had more than doubled since 2000 to more than 34,750 while the amount that lobbyists charged their new clients had increased by as much as 100 percent. Only a few other businesses had enjoyed greater prosperity in an otherwise fitful economy.
"There's unlimited business out there for us," said Robert L. Livingston, a Republican former chairman of the House Appropriations Committee and then president of what the Post said was a thriving six-year-old lobbying firm. "Companies need lobbying help."
Livingston had been chosen as Newt Gingrich's successor as Speaker of the United States House of Representatives late in 1998, but retired after extramarital affairs of his were discovered, at a time when Republicans were leading the impeachment of President Clinton.
The US health insurance industry is currently lining up support in Congress to influence the Obama administration's healthcare proposals and there will be cash paybacks for the politicians for their campaigns. For years, the federal mortgage financiers Freddie Mac and Fannie Mae, successfully opposed increased regulation by funding members of both political parties.
We recently reported on how the top US subprime lenders whose loans are largely blamed for triggering the global economic meltdown were owned or backed by giant banks now collecting billions of dollars in bailout money, according to Who’s Behind the Financial Meltdown?, a new investigation by the Washington-based Center for Public Integrity. They spent almost $370m in Washington over the past decade on lobbying and campaign donations as they tried to head off tighter regulation of their industry. Another report estimates that from 1998-2008, Wall Street investment firms, commercial banks, hedge funds, real estate companies and insurance conglomerates spent more than $5bn - - political contributions totalling $1.7bn and another $3.4bn on lobbyists - - termed a financial juggernaut aimed at undercutting federal regulation
“Congress and the Executive Branch responded to the legal bribes from the financial sector, rolling back common-sense standards, barring honest regulators from issuing rules to address emerging problems and trashing enforcement efforts,” said Robert Weissman of Essential Information last March.
“The progressive erosion of regulatory restraining walls led to a flood of bad loans, and a tsunami of bad bets based on those bad loans,” he said. “Now, there is wreckage across the financial landscape.”
See also Weissman's Wall Street's Best Investment II: 12 Deregulatory Steps to Financial Meltdown
Finfacts reported last month, that in his two-and-a-half-year stint as a banker, Rahm Emanuel, President Obama's chief of staff and former adviser to President Clinton, made $16.2m, even though he had no financial experience.
In April this year, the White House released records, which showed that the President's top economic adviser Lawrence Summers, earned nearly $5.2m in just two years at one of the world’s largest hedge funds - - working one day a week.
In April 2008, investment bank Goldman Sachs paid Summers $135,000 for a one-day appearance at a company event.
The huge money resources buys influence.
US commentator David Sirota recently wrote : "In the last decade, the financial industry's $5 billion investment in campaign contributions and lobbyists resulted in deregulation, which generated trillions for executives. And when the bubble burst, there was another boatload of free money! By Bloomberg News' account, $12.8 trillion worth of taxpayer loans, grants and guarantees — all to Wall Street!
But wait ... there's more!
The Associated Press this week reports that "companies that spent hundreds of millions lobbying successfully for a tax break enacted in 2004 got a 22,000-percent return on that investment" — $100 billion in all. That could be you!
Of course, the secret is investing heavily in specific political stocks."
Big Pharma firms also have deep pockets and influential medics have for long been the targets of their generosity.
In recent years, the New York Times has reported on documents filed in a lawsuit against Medtronic, one of America's largest medical device makers, with $10 billion in annual sales.
A prominent surgeon in Wisconsin was paid $400,000 a year by Medtronic for a consulting contract requiring him to work just eight days. Another doctor in Virginia received nearly $700,000 in consulting fees from Medtronic for the first nine months of 2005.
These doctors work in a growing field, complex back surgery, and this makes them particularly valuable to the spinal-implant division of Medtronic. In recent years, the company has spent tens of millions of dollars on consulting contracts and other types of payments to them and numerous other prominent surgeons, according to papers filed as part of a whistle-blower lawsuit. The suit contends that some of these payments were made to attract or retain the doctors' business.
The New York Times says that a spreadsheet compiled by Medtronic for a June 2003 meeting in Dana Point, California, indicated what Medtronic hoped to accomplish with each doctor attending an event. This list of 230 or so doctors included an estimate of the dollar value of the devices each doctor used in surgery, including the value of the devices made by Medtronic. One doctor is described as "a 100 percent compliant M.S.D. customer," while others were cited for "special attention." M.S.D. referred to Medtronic Sofamor Danek, the largest competitor in the spinal device market.
A surgeon in Phoenix, who used an estimated $400,000 in devices, favoured a rival maker, Spinal Concepts, the spreadsheet said. Company representatives were urged to make overtures to him. "M.S.D. corporate involvement at this program," it said, "would help us earn a bigger share of his business on a grand scale."
The Seattle Times reported that doctors testing new drugs are sworn to keep their research secret until drug companies announce the final results. But elite Wall Street firms — looking to make quick profits — have found a way to harvest these secrets:
They pay doctors to divulge the details early.
A Seattle Times investigation found at least 26 cases in which doctors leaked confidential and critical details of their ongoing drug research to Wall Street firms.
The practice involves doctors at top research universities from UCLA to the University of Pennsylvania, and powerful financial firms including Citigroup Smith Barney, UBS and Wachovia Securities.
In 24 of the 26 cases, the firms issued reports to select clients with detailed information obtained from doctors involved in confidential studies. The reports advised clients whether to buy or sell a drug stock.
The practice of selling drug secrets, The Times found, was being driven by hedge funds, the largely unregulated investment pools that cater to the super-rich.
A single drug's prospects can determine whether a small biotech company's stock soars or plummets, so any inside information provides a potent investing edge.
Such information is so valuable that elite investors pay up to $1 million a year to firms known as matchmakers, which pair Wall Street firms with doctors involved in ongoing drug research. Gerson Lehrman Group, the largest matchmaker, claims to have 60,000 doctors available to speak to Wall Street, double the number from three years earlier.
Some American companies operating in Ireland have explicit policies banning suppliers providing gifts or inducements to staff. However, that is an exception.
Given the huge amounts spent by the Irish public sector for example, there is a strong incentive for suppliers to invest in legal bribery - lavish corporate entertainment.
As for the US Justice Department's campaign against US firms bribing overseas, there is clearly much more corruption happening in their own backyard, in Washington DC.