Sightings from The Catbird Seat

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Source: The New Republic, Published: 3/10/1997, Author: John B. Judis

Posted on 01/25/2000 by John Huang Is A Chinese Agent

“Much of the American foreign policy establishment, including three former secretaries of state and other former senior officials of both parties, turned a collective thumbs down yesterday on the Clinton administration’s policy of linking trade with China to Beijing’s human rights performance,” The Washington Post reported on March 16, 1994.

Anyone who read the Post’s account, which described a Council on Foreign Relations meeting chaired by former Secretaries of State Henry Kissinger, Cyrus Vance and Lawrence Eagleburger, would have come away knowing that a quorum of foreign policy luminaries had offered a grave indictment of U.S. China policy.

What they wouldn’t know was one particularly relevant fact about those luminaries: namely, that Kissinger, Vance and Eagleburger each have business ties to China. Kissinger is the founder of a firm, Kissinger Associates, which helps its corporate clients secure business in China; Vance is a corporate lawyer who chaperones clients seeking outlets in China; and Eagleburger, once the president of Kissinger Associates, now works for a Washington law firm where he has also helped businessmen secure contracts in China.

Yet this gathering was not in the least unusual. Increasingly, many of our most distinguished and, in theory, disinterested, experts on U.S. China policy are selling their reputations and knowledge to clients with very particular business interests in China. Almost every prominent former government official who speaks out on this subject has direct or indirect financial ties to China. Most of them are Republicans, because a Republican administration first re- established ties with China in 1972, and because Republicans controlled the White House for most of the next twenty years. Besides Kissinger and Eagleburger, they include: former Secretaries of State Alexander Haig and George Shultz, former Secretary of Defense Dick Cheney, former National Security Adviser Brent Scowcroft, former U.S. Trade Representatives Carla Hills and Bill Brock, and former Senate Majority Leader Howard Baker.

But Democrats have also gotten in on the China game. Besides Vance, there is, for example, former Secretaries of State Edmund Muskie and Warren Christopher, former Ambassador to China Leonard Woodcock, former U.S. Trade Representative Robert Strauss and former Senator Gary Hart.

Unlike the ex-officials who have lobbied for Japan and Japanese corporations, these former officials don’t work directly for China or for Chinese businesses, and most have no personal investments in China. The relationship is more subtle and indirect. They are employed by, or serve as, lawyers, advisers or consultants to American companies that have invested, or want to invest, in China. Some, like Kissinger, Hills, Scowcroft and Haig, are high- priced consultants who run their own firms. Others, like Cheney, formerly a director of Morgan Stanley and now the chairman of Halliburton Oil, and Shultz, a director of Bechtel, work for the businesses they seek to help. And still others, like Vance and Howard Baker, are senior or managing partners in law firms that represent companies with an interest in China. What all of them have to offer is not so much knowledge of China as clout with its government– clout based in part on the statements they have made about U.S. policy toward China.

American businesses use these former officials to gain access to high Chinese officials who would otherwise be reluctant to entertain visits from businessmen or bankers. Explains Roger Sullivan, the former president of the National Council for U.S.-China Trade, “The Chinese have all the traditional views toward business. It’s crass, lower-class. Higher-level officials don’t like businessmen that much. You have to have someone else with you if you want to see them.”

James Lilley, who was ambassador to China in the Bush administration and is now a professor at the University of Maryland, concurs. “There is a standard procedure that, if you want to do business in China and get the contracts, you have to have someone to open doors, and people who were in prominent positions are often very good door openers.”

But having been friendly toward China while in office is not enough to guarantee access, even for the most exalted former officials. They must also be seen as ongoing friends and defenders of China’s rulers. Explains Lilley, “If you want to deal in China, you will sing their tune. This can take a number of forms. It can take the form of bringing congressional visitors over, it can take the form of an op-ed piece in The New York Times, it can take the form of a speech, it can take the form of lobbying Congress. There are many, many ways you can influence things.”

The pressure to make favorable statements about China mounts as a visit nears, or as contracts are under consideration. Even when a delegation arrives, the Chinese will often keep them in suspense about how high-ranking an official they’ll get to see. Says Sullivan, “It is always put to you that here is your schedule, and at such and such a date you are going to see a high-level official, but they won’t tell you who it is going to be.” When a former American official–whatever his motive–gives a speech denouncing those who want to tie trade with China to human rights, he is enhancing his ability to open doors at the highest levels in China. If he gives a speech denouncing Chinese policies, he is likely to find himself shunted off to the provinces, taking tea with some minor functionary.

The classic new China hand is, of course, Kissinger. Kissinger has won access to China’s markets for a number of his firm’s clients. In 1995, for instance, he helped GTE sign a memorandum with China’s United Telecommunications Corporation to jointly develop China’s massive telecommunications system. At the same time, he is the Chinese government’s most prestigious defender.

In 1987, at the behest of China’s ambassador to the U.S., Kissinger even founded his own lobby, the American China Society, which he ran out of Kissinger Associates. Most recently, he is credited with weaning House Speaker Newt Gingrich from his support for Taiwan–in July 1995, Kissinger called Gingrich after the Speaker advocated recognizing Taiwan as an independent nation–and with persuading the Clinton administration to decouple trade from human rights.

Other former statesmen have followed closely in his footsteps. The most egregious example is probably Haig, who was Kissinger’s aide during the opening of China in 1971-72. After resigning from the Reagan administration as Secretary of State in 1982, Haig established Worldwide Associates, a Washington consulting group. One of his main clients has been United Technologies, of which he is a former chief operating officer and president. Haig has helped the Connecticut conglomerate win billions of dollars in contracts in China for everything from airplanes to air conditioners. Haig has maintained his access to high Chinese officials through unflagging defense of their actions. Sullivan calls him the “classic patsy of the Chinese.” In October 1989, for instance, four months after Chinese troops crushed pro-democracy demonstrators, Haig was the only prominent American to join Deng Xiaoping in Tiananmen Square for the celebration of the fortieth anniversary of the People’s Republic. Lilley and the ambassadors from Japan and Western Europe boycotted the celebration, as did American businessmen. Afterwards, Deng praised Haig for his “courage.”

Haig has also consistently opposed any American policy that displeases the Chinese. Last year, he even criticized then-U.S. Trade Representative Mickey Kantor for trying to crack down on Chinese software piracy. “I think Mr. Kantor lets domestic American politics play too heavy a sway in his outspoken criticism of our trading partners, whether it be in Tokyo or Beijing,” Haig declared.

Haig has also done his bit in Washington. Last year, he called Representative Christopher Cox and other Republican congressmen to demand they back Most Favored Nation trading status (MFN) for China. Haig berated Cox for opposing MFN and championing Taiwan, prompting Cox to inquire with the House office whether Haig was a registered lobbyist. He’s not. When I interviewed Haig, I wanted to ask him why, but I never got that far. My first question–whether there was any problem with having business interests in China while making public pronouncements on U.S. China policy–made him too indignant. “I don’t see any conflict there at all. I have business dealings all over the world, including my own country, and I don’t think that deprives me of the ability to make judgments on international affairs, which I spent a good part of my life involved in. Who has planted these nasty questions in your craw?” When I tried to rephrase the question, he hung up on me.

Haig is revered by China’s leaders, but disliked and even scorned in Washington, particularly by Republicans who remember his trying to take charge after the Reagan assassination attempt. Scowcroft, by contrast, is widely respected in both Beijing and Washington, though the former national security adviser has mixed public policy pronouncements on China with private business just as freely. Scowcroft, like Eagleburger, also served as president of Kissinger Associates before joining the Bush administration. After leaving the White House, he founded the Scowcroft Group, to consult for businesses, and a nonprofit policy group, the Forum for International Policy, which operates out of the same suite of K Street offices. Like Haig and Kissinger, he helped clients win contracts in China. Last October, for instance, he helped secure a meeting between Chinese Premier Li Peng and Dean O’Hare, the chairman of the Chubb Insurance Company.

And Scowcroft, too, defends China against its critics. Last year, he gave speeches and briefings on China and MFN at the Heritage Foundation for Republican House members. His Forum for International Policy faxed “issue briefs” on China to congressional offices. Some of these briefs seemed to betray the same sort of “blame America first” logic that old Leftists used to resort to when they spoke of the Soviet Union. In one, published on June 12 last year, Scowcroft and former Bush State Department official Arnold Kanter blamed the U.S. for Chinese sales of nuclear technology to Pakistan, arguing that “an accretion of non-proliferation legislation” had led us into strategic blunders.

Though other members of the informal China lobby are more discreet than Kissinger, Haig and Scowcroft, they, too, get themselves into situations in which they appear to be abusing their roles as members of the foreign policy establishment. One such incident involving former Defense Secretary Cheney stirred the wrath of some of his fellow Republicans on Capitol Hill. In February 1995, the Chinese Navy entered the waters around the disputed Spratly Islands and erected structures on Mischief Reef, which is also claimed by the Philippines. Philippine President Fidel Ramos ordered the Philippine Navy to the area, and the Philippine ambassador complained to Washington.

In March, Dick Cheney, who had joined the board of directors of Morgan Stanley, visited China with representatives from the bank and secured meetings with high-ranking Chinese officials, including Defense Minister Chi Haotian. In Beijing on March 10, after three days of meetings, Cheney told Xinhua News Agency, “I do not really perceive any threat from China to the world or to the region.”

After leaving China, Cheney attended a business meeting in Singapore, where he made further public statements suggesting that he believed the Philippines had no cause for concern. According to Reuters, Cheney said he did not think China had embarked upon a “hostile course” in the area. Afterwards, one Republican China expert on Capitol Hill told me, “Cheney’s statement [on Mischief Reef] was very mischievous. Saying China is not a threat sent a message to Southeast Asian countries who were backing the Philippines that major parts of the U.S. establishment weren’t going along.”

In the months after Cheney’s visit, the People’s Construction Bank of China, a joint venture between the government and Morgan Stanley, announced a major expansion of its services.

Kissinger, Haig, Scowcroft, Cheney, Hills, Vance and Shultz stand atop a pyramid of numerous former officials who are involved in U.S. China policy and who share the same conflict of interest.

Kanter and former NSC staff member Eric Melby work for Scowcroft. Former ustr official Erin Endean works for Carla Hills at Hills & Co. in Washington, D.C., where she advises firms about investing in China.

In January 1996, former Clinton Commerce Department official David Rothkopf joined Kissinger Associates as its managing director. As Ron Brown’s deputy undersecretary for international trade, Rothkopf had supervised Deputy Assistant Secretary John Huang.

These lower-ranking officials don’t have the same influence on Capitol Hill as Kissinger or Scowcroft, but they can function more plausibly as impartial experts, particularly for the media. The same reporters who would hesitate before quoting Kissinger or Haig as impartial experts on China are happy to rely on Rothkopf or Kanter.

Last November, for example, Business Week blithely invoked Rothkopf’s expert opinion about the “importance of cultivating the relationship with China.” In August, Reuters, citing Rothkopf’s opinion that China should be made “a full member of the global trading system,” left out his affiliation with Kissinger Associates, identifying him only as a former Commerce Department official.

Rothkopf or Kanter can argue that their opinions are independent of their employers, but the Chinese don’t see it that way. The Chinese government closely monitors what researchers and policy wonks in this country say and write about China. One head of a policy group, who didn’t want his name or organization revealed for fear of further reprisal, told me what happened when one of his researchers, writing in an obscure academic journal, described China’s trade policy as “mercantilist.” The Chinese Embassy in Washington immediately protested to the businesses that funded the policy group.

Until now, the new China hands and their minions have had the best of both worlds. Not only have they gained contracts for their clients; they have shaped opinion in Washington, too. Says one aide to a Republican congressman, “They are respected voices on foreign affairs. Congress is especially susceptible to authoritative statements from Kissinger and Vance because so few members have any experience or knowledge about foreign affairs. Between [Richard] Armey, [Thomas] DeLay and [John] Boehner, you’ve got zero knowledge of foreign affairs.”

A Senate Republican aide who has advocated a harder line toward China told a similar story. “I can deal with the Motorolas of the world,” he said. “The problem I have is the George Shultzes, where these guys show up and they are not directly on the payroll. You get overwhelmed as a staff guy. You get a discussion going, and then someone gets a call from Scowcroft and he is off the reservation again.”

And the work of the former officials nicely complements that of the corporate lobbyists. While the lobbyists appeal to the politicians’ instincts for electoral survival, the former officials seem to offer an intellectual rationale for obeying those instincts. Explained one House aide, “I have been in meetings and heard members say that they have to vote for MFN, but they need some way to cover their own rear ends. That just tells me right there, they are not making the vote on any intellectual or moral grounds. They are making the vote because of their campaigns. The role of Scowcroft or Kissinger is to provide cover.”

But in the long run, the new China hands’ success may prove to be the country’s failure. Some of the policies they promote may have been justifiable on their merits. It made a certain sense for the Clinton administration not to base its trade negotiations on China’s human rights record.

But many of the former officials have not simply argued for pursuing negotiations on different tracks, but for virtually abandoning any effort to influence either China’s highly protectionist trade policies–at the root of last year’s record $39.5 billion deficit–or its support for tyranny at home and abroad. They identify the interests of American corporations abroad with the interests of Americans at home, many of whom could see their jobs shifted from Seattle to Shanghai. They overlook the fact that China could pose a far greater threat to international security than rogue states like North Korea or Iraq. And, as they did in Iran, they cast America’s lot with an unpopular autocracy.

Perhaps more important, the new China hands could have a corrosive effect on American democracy. In foreign policy debates, average Americans, as well as many of their political representatives, often defer to prominent former officials whom they believe speak disinterestedly for the national interest. When the public becomes aware that they are also speaking for the interests of their business clients, the cynicism about how important policy decisions are made will deepen.

This, together with revelations about the Clinton Commerce Department and presidential campaign, and a growing anxiety about the role of money, especially foreign money, in American politics, could precipitate a crisis of political confidence as profound as that caused by Watergate. Those who understand what has happened to the foreign policy establishment can’t conceal their concern.

Says Lilley, “Who are the real objective observers? It’s like Diogenes looking for an honest man. It is very, very hard to find one.” . . .

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The Comprehensive Annual Financial Report (CAFR) Exposed

by Walter J. Burien, Jr.

© December 17th 1999


The Biggest Game In Town is of major importance to every American. You are encouraged to video tape it for further review and sharing with others.

This program is a comprehensive disclosure of governmental financial operations that have been deliberately concealed and kept from the American people by the governmental financial agencies as well as by the syndicated media. The scope is huge; the personal financial impact of vital concern to all.

Do the people of this great land own the government or do the collective governments think they own the people?

Is it time to mandate “effective action” through united efforts of the American people?

Can David still fling the rock true and straight to hit its mark and defeat Goliath?

Are you aware that 30 years ago only 8-12% of the financial activity and ownership of our nation resulted from the activity of the government, but today the figure is conservatively 48%?

We the People have been victimized by the largest organized syndicate on the face of the Earth. The Constitution declares that all political power is inherent in the people and that all powers not directly and specifically delegated to public servants remain with the people.

Our public servants are accountable to us and it’s time we hold them accountable with genuine liability and cause the profits resulting from governmental activity to directly benefit the people!!!

************************** Walter Burien Narrative ******************************

Good morning. What we’re going to be talking about today is what I’ve called The Biggest Game in Town. My name is Walter Burien. I live in Prescott, Arizona. I became aware of something approximately 10 years ago, which changed my life. I will give you a little analogy of how I learned about the complete financial takeover of the wealth of this country by composite government.

Back in 1989 1 lived in New Jersey. There was a governor by the name of Jim Florio who was running for office under a no-new-tax platform. He won, and as soon as he got into office a $2.8 billion tax increase was enacted—the largest in the state’s history. It’s obvious that the public was not too thrilled about Mr. Florio’s actions and one of the local radio stations, 101.5 FM, started doing some rabble-rousing, taking calls from listeners on examples of waste and misspending in government. My first two days I was listening, and I heard people calling in with examples of $5,000, $15,000; $85,000 was the highest figure I heard. I pulled out the State of New Jersey’s budget report, which is the only thing I was aware of at that time. They had $11 billion on budget, $6 billion off budget; the total annual service budget was $17 billion a year. I called in to the show and I made the comment, “Come on, guys; you’re missing the whole point. The highest figure I heard was $85,000. The state’s dealing with billions of dollars.” I read off the figures. I said, “If there’s fraud, waste and misspending taking place, it’s taking on tunes of tens of millions, if not hundreds of millions of dollars.” The DJ at that time challenged us, the listeners, to start a tax protest organization to repeal the $2.8 billion tax increase.

Ten of us got together the next day and incorporated a group called Hands Across New Jersey. We scheduled our first rally ten days out from that point. And basically, with the help of 101.5, we had 115,000 people converge on Trenton from all the shore points in New Jersey, effectively shutting the city down. Now, during the course of organizing that rally, I took over looking at the budget, revenue and finance of the state.

For about fifteen years I was a Commodity Trading Advisor, I was one of the first tenants of the World Trade Center, back in 1979. And large figures didn’t bother me-a hundred million and one dollar – there was no difference. So when I started looking at the figures on the New Jersey budget report, as I mentioned, there were $11 billion on budget, $6 billion off budget, it showed a net available of $25.6 billion. Then, I asked myself the number one question that IRS asks in an audit: What are the cash gross receipts?

I started noticing the large cash cow groups in state government – the New Jersey Turnpike, Garden State Parkway, Port Authority of New York, and New Jersey. The revenue was not inclusive in the budget report. I didn’t see any large returns from investment funds on the budget report.

And I said, “They have to have two sets of books here. They’re not accounting for the whole picture”.

The director of the budget at that time was an individual by the name of Richard Keevy. He was on vacation till the following Tuesday of that week. I found out who his lower assistant was, called in, and the conversation went just like this:

I said, “Hi, this is Walter Burien. I’m working on a report for Richard. Have to have it done by Tuesday when he gets back from vacation. I need all the figures on the autonomous agency accounts, interest accounts, investment accounts. And the reply I got was, “Oh, you want the Comprehensive Annual Financial Report”.

Bing!!! First time I ever heard that before in my lifetime. Got it that Friday. Started crunching numbers. It showed a total liquid investment funds of $188 billion dollars — $188 BILLION DOLLARS — of which common stock ownership $70 billion, on loan to public and private corporations $10 billion, insurance company equity participation, $14 billion, on loan to public and private corporations $10 billion.

And I started looking for the total cash gross receipts. As I mentioned, what IRS would ask for in an audit. I found it on page 174.

Now this is 1989’s Comprehensive Annual Financial Report. On page 174 under Cash Additions, all agencies, all departments, all sources, here’s a state with a declared service budget of $17 billion, who was bringing in $86 billion, $799 million in cash. I saw that figure and instantly realized the definition of syndicated organized crime.

Here, we had a representation to the public that the state of New Jersey was bringing in $17 billion when in reality, they were bringing in close to $86 billion. They had $188 billion in liquid investment funds.

I also learned the principle of operation that day. Anything that was a cost and an expense, traditional service side of the budget report, health and welfare, human services, motor vehicles, was left under the budgetary basis, and the public footed 100% of the bill for 100% of the services. Now, anything that was a profit center, had the ability of being a profit center, large investment fund that generated tens and hundreds of millions of dollars, totally restricted by a statute for no tie or inclusion whatsoever with the budgetary basis.

Now, this is what I have called The Biggest Game In Town.

I saw it first in New Jersey and I said the Comprehensive Annual Financial Report�� here I am a Commodity Trading Advisor, I was doing a national news line coast to coast at the time and I never heard of the Comprehensive Annual Financial Report. I wanted to find out why. I was mad. I mean, there was such a distinct difference between the revenue shown on the Comprehensive Annual Financial Report and the minuscule revenue that was shown now on the budgetary basis.

I said, “Why did I not see this in a newspaper, radio show, TV show?”

Now, the department that mailed out the report the Comprehensive Annual Financial Report was from the Department of Treasury. I called the mailroom, and the mailroom usually doesn’t get a call from the public, so they were very cooperative. I wanted to find out who the report was sent to. I thought it was a short list.

They said, “I’m sorry, sir. The list is too long – we can’t read it to you on the phone.” So I start qualifying. I found out it was sent to every editor of every paper on the East coast. It was sent to the deans of all the colleges. It was sent to the CEO and every one of the directors from ABC, CBS, and NBC. When I verified that, I started smelling cooperative effort for nondisclosure. I then got the telephone number for ABC and NBC on where the report was sent to.

I called, and the conversation went just like this:

“Hi. This is Walter Burien calling from the Department of the Treasury. We’ve been sending you our Comprehensive Annual Financial Report for the last fourteen years and we’re doing a logistical survey on how many other states are sending you their reports. Could you please help me?”

ABC was getting it from 36 states; NBC was getting it from 34 states. When I heard that, now I’m getting very mad. I’m starting to see a clear-cut cooperative effort for nondisclosure on the most important information that exists in this country…Period. The extent of the financial takeover by composite government of the wealth of this country, with the full cooperation of the syndicated media for nondisclosure.

My next step was I called New York, got New York’s Comprehensive Annual Financial Report, which showed approximately $735 billion in liquid investment funds. I then got the city of Manhattan’s report.

Now, when I mention the Comprehensive Annual Financial Report, it’s not just the state — the majority of all cities, counties, school districts, pension funds, autonomous agencies such as the New Jersey Turnpike or New York Throughway Authority, put out a Comprehensive Annual Financial Report.

When I got Manhattan’s report it showed liquid investment funds of $1.2 trillion, more than the entire state. My mind started getting boggled, thinking of the composite totals — for all the states, all the cities, and all the counties.

Subsequently, over the last ten years I’ve been factoring in, compiling, the aspect of composite totals. The current figure stands at about $60 trillion plus, in liquid investment funds — the composite totals for all cities, counties, states, and the federal government.

Now, the viewers of this show would say “Oh, wait a second here! Wait a second here! I thought we were in debt for the state, in debt for our school districts, or in debt for the federal government”.

Well, let me explain something. I’m going to give you the biggest wake-up call in your life.

This example holds true all across the country, for every city, county, and state and the federal government. You always hear the budgetary basis referenced — “the budget report, the budget report.”

Now, I’ll use this one example. Say, for example, you are making $100,000 a year, and your budget for operating your house is $20,000 a year. You could audit your budget a hundred times over – account for every nickel, dime, and penny on your budget report. If you spent $19,000 this year you’d have $1,000 surplus. If you spend $21,000 this year you’d have a thousand-dollar deficit.

Now, in reality, if you decided you wanted to spend $30,000 this year on your budget for operating your house, would you go knocking on your neighbor’s door, saying, “Hey, John, I had $20,000 allocated to operate my budget, but I spent $30,000; can I borrow $10,000?” No, you’d pull from your $100,000 salary.

Governments across this country on the city, county, state levels, and federal, have created a two-tier accounting structure. One, the annual operating budgets, the cost side of operating government for the year – the monies they bring in for the year to handle that cost and what they expend.

What’s being left out is the decades — the decades of investment wealth, enterprise ventures which generate hundreds of billions of dollars each year, which are not inclusive in the budgetary basis.

Government has turned into a financial empire across the board. And the public, basically, allowed the foxes to write the laws on how many hens they could eat from the hen house. And of course, foxes being foxes, they’ve eaten all the hens.

When you start looking at composite totals of revenue and compare it to the private sector, government currently now is substantially bigger than the private sector. We are standing at about 65% government, 35% the private sector.

Now, when you look at stocks, as I mentioned, New Jersey State Government I saw, had $70 billion in common stock ownership. That floored me. I never even thought about New Jersey as a state owning $70 billion in stocks. Composite totals city, county, state and federal on stock ownership, equates to approximately $32 trillion. That’s over 53% of the entire open interest of all issued stocks from all exchanges is owned by composite government sources.

You won’t have one city or county or state owning a phenomenal base in one stock, but you’ll have thousands of the different cities, counties and states owning the composite totals. They own over 51 percent. So, when you look at individual corporations, Xerox Corporation, IBM, AT&T the primary owners are composite government funds, and they’ll be listed as institutional funds – when you see the word “institutional funds” – that is government monies, in most cases.

So, when you have a supposed public corporation – say, 72% owned by composite government funds, I wouldn’t call that a public corporation; I would say that’s a government operation. Xerox is approximately 72% owned by composite government funds; AT&T is up around 42%, so on and so on…

But the bottom line here is, when I learned this, this was a revelation that changed my life. Up until this point, when the comprehension finally dawned on me, prior to that, I always thought government was maybe 5% of the GNP of this country and this was a free-market economy, and I learned I was wrong.

Basically, what the public has done here – I did this, you did this – we all have done this – we left the vault door open. In fact, 95% of the public would say, “Vault? What vault?”

And those sharp little crackers said, “Thank you very much. Have a good day.” . . .

For the rest of the story, GO TO > > >


By Gary Strauss, USA TODAY

Dick and Lynne Cheney could be in for some belt-tightening.

Should Dick Cheney become vice president after the November election, he’ll earn an annual salary of $181,400, plus $10,000 for expenses. Of course, there’s free limo service, Air Force Two, a house and 24/7 security, not to mention the other perks.

Lynne Cheney’s 1999 director compensation packages

American Express/IDS Funds, $95,000

Lockheed-Martin, $120,000

Reader’s Digest, $50,000

Union Pacific Resources Group, $40,000

Dick Cheney’s 1999 director compensation packages

Procter & Gamble, $110,000

Electronic Data Systems, $112,500

Union Pacific, $60,000

But that pales compared with his $26.4 million compensation package last year as CEO of energy services giant Halliburton. That included $1.3 million in pay, $5.6 million in stock, and stock options valued at up to $18.9 million. Cheney also holds Halliburton shares worth $46 million at Tuesday’s market close.

Lynne Cheney earned more than $300,000 last year in retainers and stock compensation as a director at defense contractor Lockheed-Martin, publisher Reader’s Digest Association , energy services firm Union Pacific Resources Group and AmEx/IDS, the mutual fund arm of financial services behemoth American Express. Although federal elections and ethics office officials say there are no laws precluding Cheney from retaining her directors’ posts, she’d likely resign to avoid potential conflicts of interest, says Pat McGurn, a corporate governance expert with Institutional Shareholder Services.

There is a precedent. Hillary Clinton resigned from Arkansas-based yogurt franchiser TCBY Enterprises’ board after Bill Clinton was elected president in 1992. “There are inherent conflicts, but I can’t remember anything like this coming up with the spouse of a vice president before,” McGurn says. As vice president, Dick Cheney would be required to give up his corporate roles.

Lynne Cheney, a senior fellow at the American Enterprise Institute, a Washington think tank, didn’t return calls. Her board seat at Union Pacific Resources Group ended this month after a merger with Anadarko Petroleum.

Combined with Dick Cheney’s directorships at consumer products giant Procter & Gamble, Union Pacific railroad and Electronic Data Systems, few power couples share as many directorships.

Washington powerbroker Vernon Jordan and his wife, Ann Dibble Jordan, held more than a dozen directorships in 1999, pulling in more than $1 million in board retainers. Former Trade representative Carla Hills and her husband, Rod Hills, a former Securities and Exchange Commission member, held seven seats.

Ex-politicians and government appointees are popular choices for corporate boards for their contacts, expertise and celebrity status. . . .

Contractors With a License to Steal?

Government Agencies Ignore Fraud, Bribery and Abuse Convictions

July 24, 2000

WASHINGTON (AP) — When Saybolt Inc. pleaded guilty in 1998 to falsifying lab tests for the Environmental Protection Agency, government officials didn’t mince words. The company “betrayed the public’s trust and cheated us all,” they declared.

The judge who fined the company $4.9 million suggested it might deserve to be banned from future federal business.

“You run the risk of being investigated, prosecuted and, perhaps worse, debarred from engaging in that business,” U.S. District Judge Mark Wolf said.

But today, Houston-based Saybolt remains eligible for contracts and continues to get some federal business — because the government chose to give the company and its new managers a second chance and not ban them.

History of fraud

A computer analysis by The Associated Press found that hundreds of other contractors with a history of fraud and other offenses also avoided government bans. Some had multiple run-ins with the government and still turned around and got new business.

They range from a Texas contractor convicted of selling faulty windshields to the Coast Guard to an environmental cleanup corporation found guilty of bribery.

“There is a continuing pattern of fraud and abuse in some of our largest contractors. The American people have every right to be outraged at this,” said Sen. Tom Harkin, D-Iowa, who has tried to highlight the problem for a decade.

Vice President Al Gore wants to expand the federal debarment program to exclude businesses with troublesome labor or worker safety records. But Harkin said the program is hardly able to ban even those convicted or sue for fraud.

$50,000 bribe

Saybolt, which also admitted paying a $50,000 bribe to Panama’s government, says it was given another chance because it implemented state-of-the-art technology to ensure that its tests were not rigged.

“The government does set a high standard when they don’t debar a company, and that is rightfully so,” company general counsel John Denson said. “We were fortunate as new management of Saybolt to demonstrate our commitment to those high standards.”

The AP identified 1,020 companies that were sued or prosecuted for fraud over the past five years. The businesses were identified using court records, news stories, government documents obtained under the Freedom of Information Act and inspector general reports. A check of the 1,020 companies against a master list of contractors barred from federal business found that 737 remained eligible for future contracts.

Stewart & Stevenson Services of Houston was indicted in 1995 on charges of conspiracy, fraud and making false statements involving a contract to provide generator equipment to the Air Force. The government temporarily suspended the company, which reached a plea bargain and paid $7 million in criminal penalties and restitution.

Stewart & Stevenson got its suspension lifted by signing an “administrative agreement” and promising to change its business practices.

It recently ran into trouble with the government again.

Faulty drive shafts

After receiving a $1.4 billion contract to build 5,000 Army trucks and 1,000 trailers, the company produced trucks with faulty drive shafts that caused one vehicle to flip and another to land on its side. The Army said the trucks could not be driven above 30 mph until the problem was fixed. The company wants the Army to cover the $40 million repair bill.

Perkins Aircraft Services of Fort Worth, Texas, pleaded guilty in late 1997 to falsely representing that it repaired 14 windshields for Coast Guard rescue jets when the windshields were not airworthy. The company can still receive contracts.

Company owner Jim Perkins blamed the problem on a fired employee and said the issue of debarment “didn’t matter much to us because we don’t pursue any military contracts.” The company occasionally works as a subcontractor on the government’s civilian aircraft.

Why bad contractors remain eligible

Federal officials offer a variety of reasons why contractors remain eligible. Some agencies only work at it part time.

“We’re not a large player in the grand scheme of things,” said Dean Titcomb, a senior procurement analyst at the Interior Department, which bans only a few companies every three or four years.

“Usually the cases are very solid, a conviction or some particularly bad contract,” Titcomb said.

In contrast, the Veterans Affairs Department has banned about 700 companies and aggressively audits its contractors. If fraud is detected, “unless you are looking at the second coming of Christ, then you will get debarred,” said Gary Krump, a VA deputy assistant secretary.

Hurt national security?

At the Pentagon, contractors often provide a unique service with no competitors, and banning them is deemed to hurt national security.

And many health care companies, such as nursing homes accused of defrauding Medicare, are not banned because officials fear their patients will be penalized.

About 24,000 companies or individuals are barred from doing business with the government for infractions that range from drug-free workplace laws to embezzlement and contract fraud. The bans can range from indefinite to just a few years. The list is maintained by the General Services Administration, and agencies are required to check it before awarding contracts and grants.

Name change

The AP review found that bad contractors can slip through with a simple name change.

Environmental Health Research and Testing in Lexington, Ky., and one member of the Sabharwal family were banned from government business after being convicted of bribing officials in 1995.

Rather than close their doors, the family drained the company’s assets and returned to federal contracting under the name Environmental Chemical Corp., prosecutors allege. By the start of this year, ECC had secured about $55 million in new federal contracts.

Sabharwal family members were indicted in May on charges including abusing the Small Business Administration’s minority-owned business program to get new federal contracts.

James Walsh, an attorney representing one of the Sabharwals, said the family was entitled to participate in the program, and he dismissed the charges as “bogus.”

The review suggests the debarment program catches many smaller companies on their first offense while larger companies with more resources preserve eligibility despite multiple lawsuits and criminal charges.

Inflated work hours

Alliant Techsystems in Hopkins, Minn., was sued three times by the government in the 1990s. The company paid $12 million to settle environmental claims and $4.5 million to settle charges that managers instructed workers to charge inflated work hours on defense missile contracts.

Separately, Alliant paid $228,750 to settle allegations it overcharged the government in an $82 million tank ammunition contract.

The company has received $723.6 million in new contracts this year alone. It says two cases came with subsidiaries it purchased, and all were settled to avoid expensive litigation.

In contrast, Kenneth Hansen, an Abilene, Kan., dentist who provided care to low-income patients, was banned indefinitely from government contracting in the mid-1990s for defaulting on dental school loans. . . .


Last updated September 2, 2001, by The Catbird