General Electric has moved thousands of jobs overseas during the past two
decades in hopes of reaching new markets and cutting labor costs, and Chief
Executive Jeff Immelt is making no apologies.
“We can’t protect all of our employees from economic reality, but we can treat
them with compassion,” Immelt said of decisions to make products overseas.
Immelt, speaking at GE’s annual meeting yesterday in Louisville, said Appliance Park
is a good example of the company’s attempts to be compassionate as it cuts jobs.
The sprawling complex has fewer than 6,000 employees, down from 23,000 in
1973. Immelt said the company offered severance benefits to the vast majority
of those who lost jobs.
Opponents of sending jobs overseas said they don’t want severance packages.
They want jobs to stay in the country, and they argued that keeping jobs here
would benefit GE.
Jean Cooper, a member of the IUE-CWA labor union, said GE’s decision to send
work from Arkansas to China cost her her job.
“There are probably very few people here who don’t know someone affected by
“If American companies are counting on American consumers to buy their
products, they have to make sure that Americans have jobs.”…
Lauren Asplen, also a union member, said GE could alienate consumers if it
continues to send production overseas. “The American consumer is getting much
more sensitive to the impact of outsourcing,” she said.
In an interview before the annual meeting, the chief executive said companies have
steadily moved production overseas for years, and consumers have accepted that
“Just go to the store and look for people who pick up a product and try to see
where it’s made. It doesn’t happen,” Immelt said. “People want a good
product. They don’t care where it’s made.”
The outsourcing study was one of 15 shareholder proposals presented at the
meeting at the Kentucky International Convention Center. All 15 failed.
The best performer, getting 23 percent of the vote, was a proposal to limit the
number of corporate boards a director of GE can serve on to three for active
executives and five for retirees….
Sister Patricia Daly, a New Jersey nun and social activist, said shareholder
proposals have become a way to gain audiences with powerful corporations and
bring issues to shareholders.
“A proposal may fail, but even 3 percent is a huge win for a first-time issue,” Daly
said, referring to a proposal from People for the Ethical Treatment of Animals
to stop some animal testing at GE’s Medical Systems business. That
proposal won 3.9 percent of the shares voting, but that amounted to 326 million
“When you start talking about millions of people, these are issues that the board
of directors have to pay attention to,” Daly said.
$ $ $
May 13, 2002
WAGES OF SIN
By Christopher H. Schmitt, U.S. News & World Report
SPECIAL INVESTIGATIVE REPORT: Why lawbreakers
still win government contracts
In the mid-1970s,Lockheed Aircraft Corp.was center stage in a scorching
bribery scandal. Millions in secret payments were slipped to public officials and
political parties around the globe, to curry favor and win government contracts.
Stung by the blowback, the company promised stringent reforms. Two decades
later, Lockheed was again in the spotlight, pleading guilty to paying off an Egyptian
official to win a deal for C-130 cargo planes. Once more, the company was contrite.
Standing before a federal judge in 1995, a top executive pledged Lockheed’s
“commitment to the highest ethical standards of conduct.”
In the years since, however, Lockheed’s troubles have only grown. The company
has been named in at least 33 more cases covering overcharges on government
contracts, improper technology transfer to China, falsifying results of nuclear
safety tests, job discrimination, environmental pollution, and more.
These cases, some of which were in motion before the 1995 conviction, have
produced at least $145.3 million in penalties, settlements, and restitution. And at
least 13 more cases are pending.
Lockheed Martin, as the company is known today, says it has a vigorous ethics and
compliance program. And, it turns out, says it has a vigorous ethics and compliance
program. And, it turns out, that promise is good enough for the Pentagon. Last
October, despite the company’s record, the federal government awarded Lockheed
the richest military contract in history – a deal to build the nation’s next
generation jet. The project, the F-35 Joint Strike Fighter, could be worth as
much as$200 billion over several decades.
Lockheed Martin is not the only big federal contractor that continues to do
business with Washington despite repeated contract difficulties and other legal
and regulatory trouble. In the past dozen years, 30 of the 43 largest federal
contractors have racked up more than 400 enforcement cases, resulting in at least
28 criminal convictions, 286 civil settlements, and 88 administrative settlements,
mostly involving their government contracts, according to data from the Project on
Government Oversight, a nonprofit Washington, D.C., group that investigates
government activities, and additional research by U.S. News.
The companies have breached environmental, labor, and securities regulations as
well, For their difficulties, the analysis shows, they have paid at least$3.4 billion
in fines, penalties, and restitution.
The cases cover a wide swath, includingprice fixing, bogus testing, polluting,
overcharging, hiding product defects, violating export laws, and withholding
financial data from the government.
They also represent more than accounting quibbles: Company workers have been
killed and seriously injured and national security potentially put at risk. Yet,
together, these firms have corralled more than 4 of every 10 federal procurement
dollars. “If it was a food-stamp recipient, they’d go to jail,” says Rep Peter
DeFazio, an Oregon Democrat, who complains about repeat offenders.
“If it was a student-loan recipient who wasn’t paying, they’d have their wages
garnished. It’s an extraordinary double standard.”
The government actually has a process for cutting off wayward contractors from
future work, but in practice, purchasing officers focus on getting projects done,
not holding firms accountable for past behavior. And other officials responsible
for barring firms can’t legally use punishment as a motive, says Robert Meunier,
head of a committee of those officials.
“We’re here to protect the government’s business interest,” he says. Even if a
current contractor is prevented from doing future business, the company could
continue to do billions of dollars’ worth of government work under existing
agreements. As best as can be determined, the government has cut off only one of
the 30 big contractors with problems –General Electric Co. – and, even then,
suspended the company for just a few days.
If federal agencies wanted to crack down on offending contractors, they couldn’t.
The U.S. government is the biggest shopper on the planet, buying some $235 billion
worth of goods and services last year – everything from military hardware to
management of nuclear laboratories to food for school lunches. But the reasons of
cost, bureaucracy, and plain indifference, it doesn’t keep tabs on the behavior of
its vendors. Contracting officers don’t know, for instance, if a company has
already agreed with other agencies to clean up its act, and several agencies –
including the General Services Administration – can’t even produce a list of whom
they have suspended or barred from further contracts.
In effect, contractors have no official history when they line up for government
The military tops the government’s buying list – with contracts for $156.5 billion
last year. Not surprisingly, some of the worst offenders are military contractors.
But while the government may be reluctant to move against its biggest suppliers,
federal agencies don’t have the same qualms about cracking down on small firms.
Officials maintain that federal rules are written evenhandedly, but they
acknowledge that larger companies can naigate them more successfully.
Take James Verlander, a Houston-area researcher who in early 1990s got tangled
up in Operation Lightning Strike, a federal sting operation targeting NASA
suppliers. Federal agents drew Verlander and several others into a scheme
revolving around a bogus medical device that supposedly could improve monitoring
of space-station astronauts.
Threatened with a heavy prison sentence, he pleaded guilty to having accepted
$2,000 as part of an effort to win approval and funding for the device, says his
attorney, Charles Portz. Barred from government work ever since, Verlander
suffered a nervous breakdown and has since become a medical technician.
By contrast, two big contractors that came under scrutiny in the affair – Martin
Marietta and General Electric – settled their involvement by paying $1 million to
defray the government’s expenses.
“They didn’t want to make arrests of the higher-up people because it would
damage the space program,” says Portz, “so they busted a bunch of little
Small fry get nailed more often because it’s more likely that senior executives
were involved in any wrongdoing, say those familiar with the issue. And large
contractors have more financial juice to make a case go away – to hire pricey legal
talent, create compliance programs, or pay settlements.
“They’re pretty willing to settle it to stay in business,” says Jacques Ganaler,
former undersecretary of defense for acquisition, technology, and logistics, who is
now a professor of public affairs at the University of Maryland.
Oversight of military and other federal spending has been kneecapped in recent
years – through budget cuts and under the banner of streamlining regulation – and
new proposals would weaken it further. Reflecting those developments and
changing priorities, federal prosecution of contract fraud has fallen sharply in
recent years, as have attempts by federal agencies themselves to rein in abuse,
according to government data obtained by the Transactional Records access
Clearinghouse at Syracuse University.
Many expect enforcement efforts to suffer further still as homeland defense
comes to the fore. U.S. Department of Justice officials did not respond to
requests for comment.
Even in extreme situations, the biggest firms don’t face contracting’s version of
the death penalty.
Take behemoth General Electric. In the early 1990s, problems including bribery
and mispricing became so pervasive that the Pentagon’s Defense Contract
Management Agency took the unusual step of setting up a special investigations
office just for GE. The office produced 22 criminal indictments of the company,
its sub-contractors, and employees, and recovered $221.7 million.
Although individuals were booted from future government work, the company was
not, despite recommendations from frustrated investigators. Not barring the firm
“is clearly a disincentive to forcing a major contractor to institute [change],” they
said at the time.
“Other remedial actions, including criminal prosecutions, did not seem to be
Since then, GE has been named in new cases, involving both its military and civilian
businesses. GE spokesman Gary Sheffer says that the earlier cases involved a
small number of people and that the company used the experience to tghten an
already strong compliance program….
BIG CONTRACTS – REPEAT OFFENDERS
In the past dozen years, 30 of the federal government’s biggest contractors have
accumulated more than 400 enforcement cases, resulting in at least $3.4 billion in
penalties, settlements, and restitution.
The top 10 firms:
GENERAL ELECTRIC … $982.9 million for 63 cases
TRW … $389.5 million for 17 cases
BOEING … $358.0 million for 36 cases
LOCKHEED MARTIN … $231.9 million for 63 cases
UNITED TECHNOLOGIES … $214.8 million for 18 cases
ARCHER DANIELS MIDLAND … $208.2 million for 8 cases
He is the chief executive officer of General Electric, the world’s most valuable
corporation. Perhaps America’s most ruthless manager, Welch puts profits above
human and community concerns. . . .
Enter Thomas O’Boyle. O’Boyle, a former Wall Street Journal reporter and
current assistant managing editor at the Pittsburgh Post-Gazette, has written a
hard-hitting expose titled “At Any Cost: Jack Welch, General Electric and the
Pursuit of Profit” (Knopf, 1998), in which he raises the question–”Is profit and
return on investment all we should care about?”
To which he answers, “Of course not.” But this simple question, and obvious
answer, has shaken the business media out of its complacency….
Over 17 years as CEO, Welch eliminated hundreds of thousands of jobs, bought
and sold hundreds of businesses, and shifted the company’s focus from
manufacturing to entertainment, O’Boyle reports.
During the same period, the company was caught in a web of scandals including
defective refrigerators brought to market, industrial wastes improperly
buried, excessive radiation in the workplace, fraud in military contract
procurement, and the Kidder, Peabody financial disaster— all reported in detail
in the book.
O’Boyle writes that to many of the people who worked at General Electric, “the
connection between the severity of Welch’s demands and the occurrence of
repeated scandal was a clear cause and effect, as transparent as glass.”
GE’s public recklessness is paralleled by a private recklessness that O’Boyle details
in a chapter on GE Plastics, the division where Welch started his career.
“Extravagance was a way of life at GE Plastics,” O’Boyle reports. “Like Welch’s Phi
Sigma Kappa college fraternity, which threw the wildest parties at the University
of Massachusetts, Jack’s boys at Plastics were a wild fraternity.”
According to O’Boyle, one attractive woman who interviewed for a job at GE
Plastics in 1973 recalls being asked, “Would you f— a customer for a million-dollar order?” The woman walked out of the interview. . . .
For years, GE has told us they bring “good things to life.” Now O’Boyle has
written a book that presents the dark underside of a premiere criminal recidivist
corporation. . . .
The global community has created a dynamic in which competition among localities
has become as real as competition among firms….
Americans need go no farther than the Mexican border to get an idea of what it
now takes to be globally competitive. The maquiladoras are assembly plants in the
free-trade zone on the Mexican side of the border with the United States. The
zone has become a powerful magnet, attracting many U.S. companies, including
General Electric, Ford, General Motors, GTE Sylvania, RCA, Westinghouse,
and Honeywell, that are seeking low-cost locations in which to produce for the U.S.
Growth has been explosive, from 620 maquiladora plants employing 119,550
workers in 1980 to 2,200 factories employing more than 500,000 Mexican workers
in 1992. Many feature the most modern high-productivity equipment and
technology. Although the productivity of Mexican workers who work in modern
plants is comparable to that of U.S. workers, average hourly wages in maquiladora
factories are just $1.64, compared with an average manufacturing wage of $16.17
in the United States.
To maintain the kind of conditions transnational corporations prefer, the Mexican
government has denied workers the right to form independent labor unions and has
held wage increases far below productivity increases….
* * *
February 9, 2003
GE’s Washer/Dryer Sings in Perfect
GE Consumer Products’ Profile Harmony washer/dryer system will be one of
the Best New Products featured in the June issue of Popular Mechanics.
The magazine will highlight innovative products shown at the International Builders’
Show last month in Las Vegas.
GE Consumer Products has its headquarters in Louisville at Appliance Park, which
just marked the 50th anniversary of the shipment of its first appliance, a clothes
The GE Profile Harmony pair, which are not made by GE but are outsourced and
made to the company’s specifications, go on sale in June.
* * *
March 21, 2002
FromMSNBC – (Note: MSNBC is a joint venture of Microsoft and NBC, which
is owned by GE):
* * *
Fund manager Gross
lashes out at GE
Criticizes company’s debt load, disclosure to investors
By Gregory Zuckerman and Rachel Emma Silverman, THE WALL STREET
The bond king is taking on one of the biggest players in the corporate-bond
In an unusual public rebuke, Bill Gross, manager of the world’s biggest bond fund,
lashed out atGeneral Electric, saying the company is carrying too much debt
and isn’t dealing honestly with investors.
BOND INVESTORS, he said, suffered a particularly steep loss in recent days
after GE’s financial unit, GE Capital, announced it might sell as much as $50 billion
in bonds, only days after investors bought $11 billion of new bonds in the biggest
U.S. sale in history.
The slap is notable in part because it marks the first time Mr. Gross, whose $250
billion under management and stellar track record make him the bond world’s
Warren Buffett, has so aggressively gone after a blue-chip name.
But it also could cause headaches for GE: In an interview, Mr. Gross said the
mutual-fund giant that he heads, Pacific Investment Management, dumped $1
billion in GE commercial paper in recent days. If other companies follow Pimco’s
lead — as is sometimes the case — GE’s borrowing costs could go up, hurting its
“The corporation’s honesty remains in doubt,” said Mr. Gross, in a report
circulated to Pimco investors. He said GE Capital’s foundation is “vulnerable”
because it depends on the confidence of investors to keep its financing costs low.
Mr. Gross’s critique helped send shares of GE down almost 3 percent, and added
to the recent complaints among some investors that the conglomerate isn’t being
forthcoming enough about its balance sheet and how it has been able to boost
In response to Mr. Gross’s claims, Keith Sherin, GE’s finance chief, said, “We have
a world-class business. We think we operate it pretty effectively.”
But Mr. Gross said GE Capital has commercial paper outstanding adding up to three
times the size of the company’s lines of credit with its banks — an unusually high
ratio that could signify added risk for investors.
“GE Capital is using near-hedge fund leverage” not consistent with the triple-A
rated debt of the world’s largest company, Mr. Gross said. . . .
If those rates rise, the engine that is helping to drive GE’s earnings could stall out,
Mr. Gross argues.
He said GE “grows earnings not so much by the brilliance of its management,” but
by selling debt at cheap rates, and using stock for acquisitions.
“Pimco will not own GE commercial paper in the foreseeable future.” . . .
GE Capital had $127 billion in short-term debt as of March 11, making it the
largest issuer in the world of commercial paper, according to a recently released
assessment by Moody’s Investors Service.
Pimco has reduced its longer-term GE bond holdings to $50 million of its $250
Mr. Gross also counts himself among the analysts who have started to wonder how
GE has been able to consistently beat Wall Street’s earnings expectations.
He saidJohn F. Welch Jr., former chief executive of GE, and his successor,Jeffrey Immelt,haven’t been “totally forthcoming in the explanation for why
GE has been able to grow earnings by nearly 15 percent per year for the last
“I didn’t mean to pick a fight with GE, this is probably the first time I’ve criticized
a company,” he said.
A hard-fought battle that united management and labor in an effort to cut costs,
save jobs and keep refrigerator production alive at GE’s Appliance Park in Louisville
wasn’t enough to prevent the elimination of one manufacturing shift.
General Electric Co. has told employees of the refrigerator operation that it
expects to eliminate its second shift, and360 jobs, in June or July….
Despite a cost-cutting agreement hammered out by GE and leaders of Electronic
Workers union Local 761 in 1999, Dunn said, the Louisville refrigerator unit still is
in a “high cost position,” will a senior work force of union employees.
“We’re under tremendous cost pressure in the marketplace,” he said, and that “has
made it difficult to sell the kind of numbers we need to reduce losses.”
Dunn said in January that the refrigerator line was losing $90 million a year, up
from $40 million a year in 1989, when the company committed to building a new line
of high-efficiency, 18- and 19-cubic-foot, top-freezer models in Louisville.
At the same time, it moved production of its high-end Artica model to a plant in
Celaya, Mexico, operated by its Mexican partner, Mabe. That model is doing very
well, he said.
But Dunn said the smaller refrigerators made in Louisville face the fiercest
competition – including new pressure from a plant built last year in Monterrey,
Mexico, by Korean manufacturer LG Electronics and from another built in 2000 in
South Carolina by Chinese appliance maker Haier Group….
* * *
February 26, 2002
GE RETIREES CONTINUE PUSH FOR PENSION RAISE
By David McGinty, The Courier-Journal
When John Snyder retired from General Electric Co.’s Appliance Park in 1982, he
attended a retirement seminar and was told how well-funded the company’s pension
“They said GE used the interest (to pay pensions); they never went into the
principal,” Snyder recalls. . . .
Now, years into retirement and drawing about $900 a month in pension payments,
Snyder has come to view GE’s pension fund as not only well-funded, but TOO well-funded. He believes GE should be paying him more.
He has a lot of company.
A national group of GE retirees, the GE Retirees Justice Fund, has been pressing
for several years now to get the company to put an annual cost-of-living
adjustment, modeled after the Social Security Administration adjustment, into its
pension plan. . . .
Annually, the retirees’ group tries to put before GE shareholders a proposal that
would establish the cost-of-living increase. And annually, GE excludes the proposal
from its proxy statement on the basis of a U.S. Securities and Exchange
Commission ruling that pension matters are part of ordinary business operations.
That has not stopped the group, which attends GE’s annual meetings and raises the
issue from the floor, under the guise of a proposal to require GE to nominate two
directors for one spot on its board of directors to ensure more independent
The retirees’ efforts have become so familiar that former GE Chairman Jack
Welch treated them with a wary jocularity.
He has signed T-shirts for Kevin Mahar, co-chairman of the national retirees’
group, and when Machar rose to speak from the floor at last year’s annual meeting,
Welch quipped, “Here we go. Hang on, everybody.”
Beneath the humor, however, is an issue of large dimensions.
There are approximately 195,000 GE retirees, about 16,000 in Kentucky. Their
pensions are paid from a trust fund that had, as of the last annual report, assets
worth about $49.8 million.
At that time, GE figured its obligations to current and future retirees were about
$28.5 million. In other words, the fund has enough money to pay 174 percent of
its current and anticipated obligations.
That is very generous funding, James Delaplane, vice president of retirement
policy at the American Benefits Council, a trade association for companies
concerned with benefit issues, said if a pension fund has assets equal to all its
current obligations, “most people regard that as well-funded.”
If the assets are more than 125 percent of current obligations, he said, that is
considered “very well-funded.”
In GE’s case, the pension plan has been so well-funded that GE has not contributed
to the fund since 1987….
GE’s top officers do not want to dip deeper into the pension fund, Mahar said,because they can report some of the overfunding as earnings, which boosts
the company’s financial performance and, consequently, executive pay that is
tied to performance.
“There’s something wrong with that picture,” Mahar said….
A measure of how serious GE retirees are about getting pension increases may
come from Jeffrey Immelt, Welsh’s successor as chairman of GE. Immelt’s
father is a retiree.
When he was named chairman and chief executive, Immelt said in a recent
interview with Business Week magazine, the first call he made was to his father.
“He said congratulations. And he said, ‘Now you can do something about the
* * *
AND SPEAKING OF PENSIONS . . .
Many of us have heard about ENRON’S employees who lost millions in their
401k pension plan….
But are you still in the dark about…
WHO OWNS ENRON?
As of Sept 30, 2001, the top institutional holders were:
#1 – Alliance Capital Mgmt with 42,939,048 shares; followed closely by #2-Janus Capital Mgmt with 41,361,200 shares; #3 –Putnam Investment Mgmt
(Marsh & McLennan) with 23,122,100 shares; #4-Barclays Global Investors
(Committee of 300) with 23,047,196 shares; and #5-Fidelity Mgmt & Research
with 20,790,452 shares.
The remaining of the top 15 investors included: Smith Barney; State St. Global
Advisors; Aim Mgmt; Vanguard Group; Morgan Stanley; Northern Trust;
Deutsche Bankers Trust; Massachusetts Financial Service; Presdner Rcm; CS
First Boston Investment….
* * *
And WHO owns ALLIANCE CAPITAL
As of Sept 30, 2001, the top institutional holders were:
#1-General Electric Co.; #2-Citigroup; #3-Pfizer; #4-Tyco Int’l; #5-AOL-Time Warner; #6-Microsoft; #7-MBNA Corp; #8-American
International Group; #9-Kohl’s Corp; #10-AT&T Wireless; #11-Banc of
America; #12-The Home Depot; #13-Comcast Corp; #14-Liberty Media Corp;
* * *
And to complete the incestuous circle… WHO owns GE?
As of December 31, 2001, the top institutional holders were:
#1-U.K.’s Barclays Global Investors (Committee of 300); #2-Fidelity Mgmt &
Research;#3-State Street Global Advisors; #4-Alliance Capital Mgmt;
#5-Vanguard Group; #6-J.P. Morgan Fleming Asset Mgmt; #7-Wells Fargo
Bank; #8-Teachers Insurance & Annuity; #9-GE Asset Mgmt; #10-Deutsche Bankers Trust; #11-Putnam Investment Mgmt (Marsh & McLennan);
#12-Northern Trust Co.; #13-Janus Capital Mgmt.; #14-Banc of America;
#15-Smith Barney Asset Mgmt.
FOR A CLOSER LOOK AT SOME OF THESE HIGH FLYING
VULTURES AND THE NESTS WHERE THEY HATCH THEIR
ELEPHANT-SIZE FINANCIAL SCHEMES, JUST LET YOUR
MOUSE SCAMPER BELOW!
Last year, CEO Jack Welch took home more in compensation and stock option
exercises than the combined wages of 15,000 Maquiladora factory workers. Of
course, GE also operates factories in such countries as China and India, where
workers are paid even less than in Mexico.
The Performance – Since 1986, Welch has cut GE’s domestic work force by nearly
50% while nearly doubling the number of workers employed abroad. Today, barely
half of GE’s workers are in the U.S.
“Ideally, you’d have every plant you own on a barge, to move with currencies and
changes in the economy,” Welch said when asked to describe his business
philosophy during an interview on CNN.
In his annual pep talk to GE’s management, Welch stresses the need to globalize
production to remain competitive: “squeeze the lemon” is one of his favorite
The company has sponsored what it calls “supplier migration” conferences to
pressure its business partners with U.S. operations to move to Mexico: “This is not
a seminar just to provide information. We expect you to move and move quickly,”
the company has said….
* * *
April 25, 2002
Editor Quits Harvard Business Review
The Harvard Business Review editor embroiled in a controversy over her
relationship with former General Electric chiefJack Welch quit yesterday, saying
the situation was too distracting.
Suzy Wetlaufer, announced that she was stepping down as editor but would stay
on as editor-at-large and keep an office.
But yesterday, she stepped down from that job too.
Joseph I. Lieberman – U. S. Senator from Connecticut – Al Gore’s Vice-Presidential running mate in 2000.
From The Center for Responsive Politics:
1999-2000 – Total Campaign Funds Received: $3,413,893
Miller & Chevalier – A Washington, DC-based nest of Lawyers and Lobbyists.
From their web-site, 8/1/00: . . .In 1920, Robert Miller and Stuart Chevalier
founded Miller & Chevalier as the nation’s first law firm specializing in tax
matters. Mr. Miller had served as Solicitor and Mr. Chevalier as Asst Solicitor of
the Internal Revenue Service shortly after the first federal income tax laws were
Like our firm’s founders, many of our tax lawyers have worked in federal
Our firm’s tax practice is diverse, responding to the increasing complexity of the
international tax system and the need for Washington representation to deal
effectively with important tax policy issues. We serve clients in numerous
industries: … aerospace, automobile, banking and finance, natural resources and
energy, chemicals, electronics, pharmaceutical, retail, and health care insurance….
Our firm represents over half of the Fortune 50 companies. We also work with
foreign-owned companies of similar size….
* * *
Taxation – Representative Engagements
Amoco Corp v. Commissioner (a.k.a. US Taxpayers) . . . The U.S. Court of Appeals
… held that Amoco was entitled to foreign tax credits for Egyptian income taxes
paid on its behalf by the Egyptian National Oil Co . . . The amount of the asserted
deficiency was over $450 million….
Atlantic Richfield Co v. Commissioner (a.k.a. US Taxpayers). . . This case involves
over 200 issues and a deficiency in excess of $700 million. Some of the issues
involve hedging, tax accounting, foreign source income, and capitalization
B.F. Goodrich v. United States (a.k.a. US Taxpayers) . . . This case involved
whether interest expenses incurred on corporate owned life insurance were
deductible. The taxpayer sought a refund of approximately $2.5 million. The case
The Boeing Co v. United States (a.k.a. US Taxpayers) . . . This case involves the
allocation and apportionment of research and development expenses for purposes
of computing combined taxable income for DISC/FSC purposes. The taxpayer is
seeking a refund of over $450 million. The District Court granted Boeing’s motion
for summary judgment; the govt’s appeal to the Ninth Circuit is pending….
Cheng v. Commissioner and Pen v. Commissioner . . . The issue in these companion
cases was whether commissions earned as compensation for the performance of
personal services in Taiwan were taxable as income effectively connected to a U.S.
trade or business. The total amount at issue exceeded $40 million in deficiencies,
penalties, and interest. The government conceded…. (Those must have been some
personal services! I wonder what kind?)
Exxon Corp v. Commissioner (a.k.a. US Taxpayers) . . . The Tax Court held that
the Commissioner’s proposed allocation of over $6.5 billion in income was
precluded under Code sections 61 and 482 due to a foreign legal restriction….
General Electric Co v. Commissioner (a.k.a. US Taxpayers) . . . This case involved
whether the taxpayer properly elected … to deduct currently approximately $118
million in research and development expenses.
~ ~ ~
In addition to their legal services, Miller & Chevalier declared lobbying income of
$1.4 million in 1998, with total lobbying expenditures of $320,000 (all to the
lobbying firm of Akin, Gump).
Among Miller & Chevalier’s lobbying clients: Assn of Financial Service Holding
Cos; Atlantic Richfield; Blue Cross/Blue Shield; Boeing Co; Boston Edison; Chevy
Chase Bank; Gallo Winery; Monsanto Co; Nuclear Fuel Services; and the
Arkansas-based Wal-Mart Stores.
From Corp Watch, 5/29/98, Repression, Inc. – The Assault on Human Rights. . .
Statement of Allan Nairn Before House Briefing on the IMF and Indonesia:
For 33 years a Suharto/Armed Forces (ABRI) regime built on “the underlying
threat of force” … made it possible for foreign companies to grow rich on
Indonesia’s vast resources and labor.
But now that unjust arrangement is facing a historic challenge from below. Popular
protest has ousted Suharto and though the ABRI police state remains, its leaders
fear that they have not seen the last of Indonesia’s new freedom movement.
The question for foreign firms and powers is: on which side do they stand? . . .
The current policy of the US Executive Branch and of the IMF is to continue the
old system in a new guise – with one key exception. While reluctant to back
freedom for workers and dissidents, they aggressively push it for foreign
The US continues to back ABRI with weapons, spare parts and ammunition as well
as intelligence support …. But they and the IMF do want to make a change in the
old regime: to move it from so-called crony capitalism dominated by the Suharto
family, to a corporate version dominated by the global markets, by multinational
firms and the strictures of the World Trade Organization.
There is some irony in this, since the roster of de facto Suharto cronies includes
many of the largest multinationals in the world.
The companies in business with the Suharto family include Morgan Stanley,
Lucent Technologies, General Dynamics, Motorola, Mitsubishi, Dupont, BP,
Hughes Siemens, Hyatt, Hundai, Edison Mission Energy, General Electric,
Westinghouse, NEC, and Rolls Royce, to name a few, along with Merrill Lynch
which is in business with Suharto’s notorious son-in-law General Prabowo.
Freeport McMoRan and Textron are in business with the ABRI (Freeport recently
built a $35 million garrison for ABRI troops in West Papua, and Textron licenses
the manufacture of Bell Helicopters for ABRI by the state aerospace firm, IPTN,
controlled for years by current President Habible).
Caltex, Shell, Phillips Petroleum, USX, and Mobilehave illegally drilled for oil in
the Timor Gap. ATT andTexaco have lobbied behind the scenes for the regime.
For more on BIG OIL and drilling America’s Arctic National Refuse, GO TO > > >
Heavens and Earth* * *
From wsws.org: Growing Demands for the Seizure of Suharto’s Empire, by Mike
Head, 6/5/98: . . .
Suharto and his family accumulated extraordinary riches while millions of
Indonesian workers and peasants were subjected to grinding poverty at the hands
of the military dictatorship and its international backers.
Earlier this year, the US business magazine Fortuneassessed the family’s total
personal wealth at $US40 billion …
Formally barred from having direct business interests himself, Suharto entrusted
his commercial affairs to his late wife Tien (nicknamed “Madam 10 percent”
because of the cuts she obtained from government contracts), his six children,
half-brother Probosutedjo and cousin Sudwikatmono.
Together, they created a sprawling array of businesses, including toll roads,
satellite communications, broadcasting, vehicle plants, electricity projects, water
supply utilities, domestic airlines, plantations, taxi services and trading ventures.
The also formed joint ventures with the armed forces and giant ethnic Chinese
groups such as Salim and Barito Pacific.
Various members of the family own luxurious mansions, ranches and other
properties around the globe, including in Britain, Bermuda, the Cayman Islands, Los
Angeles, Hawaii, Germany, Singapore and Australia.
Their lifestyles were a world apart from the landless peasants and slum dwellers as
well as the industrial workers, paid the equivalent of less that $US3 dollars a day
… The economic meltdown and the demands of the International Monetary Fund
mean that unemployment, homelessness and hunger confront millions in both the
cities and the countryside….
Popular sentiment seemed to be summed up by one student … Referring to three of
Suharto’s children, he told one reporter: “There should be a public trial of
Tommy, Tutukt and Bambang. They’ve got rich and we got poor and now we
Indonesians have to face crisis and pay for their loot.”…
There is no prospect that the Habibie-led regime or any alternative capitalist
government will do anything else but safeguard the key business interests tied up
in the Suharto network, whatever cosmetic measures may be taken against
individual members of the Suharto family.
In the first place, all of the leading figures in the Habibie cabinet and the military,
including Habibie, Wiranto and economics minister Ginandjar Kartasasmita, have
personal fortunes closely interlocked with those of the Suharto group….
Whether under Suharto or his predecessor Sukarno, the ruling elite has rested on
the same underlying system of state-sponsored and military-related financial and
Moreover, Suharto’s military junta was installed with the backing and direct
assistance of the United States and other imperialist powers.
For years it served their requirements for ready access to Indonesia’s vast
natural wealth and reserves of cheap labour….
In Feb of 1995, the administration announced that for the first time it would
consider the financial state of U.S. defense contractors when negotiating overseas
arms sales. The administration has also pushed to relax export restrictions on
high-tech equipment used to manufacture sophisticated weapons systems.
Part of what has ingratiated the Clinton administration to weapons manufacturers
has been the presence of William J. Perry, first as Deputy Secretary and later as
Secretary of Defense.
Perry is a former defense consultant who headed Technology Strategies and
Alliances (TSA) between 1985 and 1993. TSA’s 1994 clients included Boeing,
Grumman, Lockheed, Martin Marietta, McDonnell Douglas, Northrop, Textron,
Texas Instruments, TRW, Westinghouse, and 20 other defense contractors.
While Perry severed his ties with the company, he had amassed more than a million
dollars in consulting fees from TSA’s clients. Not long after he joined the Defense
Department, Perry began going to bat for the industry.
One of Deputy Defense Secretary Perry’s extra base hits came when he and then-Defense Undersecretary for Acquisitions and TechnologyJohn Deutch quietly
agreed to provide U.S. defense contractors with taxpayer-finance subsidies for
mergers and acquisitions. That was a dramatic shift in Pentagon policy. Usually,
such issues are taken before Congress.
Instead, Deutch, in a July 21, 1993 memo, reversed the Pentagon’s ban on the
subsidies and underwrote $270 million worth of TSA client Martin Marietta’s
acquisition of General Electric’s Aerospace Division.
Just seven weeks earlier, on June 3, 1993, industry CEOs, including Martin
Marietta’s Norman Augustine, had sent a letter to Perry and Deutch asking for
DOD funding of “restructuring costs” for mergers and acquisitions. Perry also
approved Northrop’s $2.1 billion acquisition of Grumman. Both were TSA clients.
The Pentagon called the policy shift a “clarification” that did not require
congressional consent. . . .
The policy shift required both Perry and Deutch to seek ethics waivers from rules
that call for a one-year “cooling off” period before Pentagon officials can deal with
former clients. They got them from then-Defense Secretary Les Aspin, whom
Perry replaced in February 1994.
Paul Kaminski got an ethics waiver in November of 1994, when he was named to
head the Pentagon’s Acquisitions and Technology Department, replacing Deutch.
Deutch remained in the Pentagon loop a while longer and became Deputy Secretary
of Defense before moving to the CIA.
Kaminski,who worked at TSA, is responsible for awarding$43 BILLIONin
defense programs to Pentagon contractors.
The Kaminski appointment marked the first time former defense industry
consultants filled the Pentagon’s top three policy posts….
The Media – What we depend upon to obtain 99.9% of our knowledge of current
FromDerailing Democracy: . . . It has been almost 40 years since President
Eisenhower, in his final address to the nation before leaving office in 1961, issued
a rather extraordinary warning to the American people that the country “must
guard against unwarranted influence, whether sought or unsought, by the
military-industrial complex. The potential for the disastrous rise of misplaced
power exists and will persist.”
Following the same course that virtually every other major industry has in the last
two decades, a relentless series of mergers and corporate takeovers has
consolidated control of the media into the hands of a few corporate behemoths.
The result has been that an increasingly agenda has been sold to the American
people by a massive, multi-tentacled media machine that has become, for all intents
and purposes, a propaganda organ of the state. . . .
And it is certainly true that by all outward appearances the United States does
appear to have the very epitome of a free press. . . . Yet behind this picture of
plurality there are clear warning signs that an increasingly incestuous relationship
exists between the media titans and the corporate military powers that
Eisenhower so feared.
For example, the number-one purveyor of broadcast news in this country— NBC,
with both MSNBC and CNBC under its wing, as well as NBC news and a variety of
“news magazines”– is now owned and controlled by General Electric, one of
the nation’s largest defense contractors.
Is it not significant that as GE’s various media subsidiaries predictably lined up
to cheerlead the use of U.S. military force in Kosovo, it was at the same time
posting substantial profits from the sale of the high tech tools of modern
warfare it so shamelessly glorifies?…
~ ~ ~
“You know the one thing that is wrong with this country? Everyone gets a
chance to have their fair say.”
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