Corporate Boards: The Web for the Government-Industrial Monstrosity

Corporate boards approve an annual budget, which includes lobbying fees and political strategy. Board members donate money, time and expertise to further the firm's interest. For that, they are paid handsomely. Not terribly long ago, Senators wouldn't accept donations from corporations. They considered it a conflict of interest, as they were making decisions involving those very firms.

President Dwight Eisenhower warned of the Military-Industrial Complex. Today's steroid fueled version, encompasses much more than the armed forces. The Government-Industrial Monstrosity (GIM) infects nearly every sector of the U.S. While it is the elephant in the room, it badly wishes to remain invisible. Consider the case of Union Pacific, the huge railroad and shipping company. Large shareholders proposed greater political disclosure in April 2009:

As long-term shareholders of Union Pacific, we support transparency and accountability in corporate spending on political activities. These activities include direct and indirect political contributions to candidates, political parties or political organizations; independent expenditures; or electioneering communications on behalf of a federal, state or local candidate.

Disclosure is consistent with public policy, in the best interest of the company and its shareholders and critical for compliance with recent federal ethics legislation. Absent a system of accountability, company assets can be used for policy objectives that may be inimical to the long-term interests of and may pose risks to the company and its shareholders.

Union Pacific contributed at least $3.2 million in corporate funds since the 2002 election cycle.

However, relying on publicly available data does not provide a complete picture of the Company’s political expenditures. For example, the Company’s payments to trade associations used for political activities are undisclosed and unknown. In many cases, even management does not know how trade associations use their company’s money politically. The proposal asks the Company to disclose all of its political contributions, including payments to trade associations and other tax exempt organizations. This would bring our Company in line with a growing number of leading companies, including Pfizer, Aetna and American Electric Power that support political disclosure and accountability and present this information on their websites.

The Company’s Board and its shareholders need complete disclosure to be able to fully evaluate the political use of corporate assets. Thus, we urge your support for this critical governance reform.

How did the company respond?

The Board of Directors recommends a vote AGAINST this proposal.

Union Pacific spent $43.5 million on lobbying from 2003-2009. It reached a maximum of $9.8 million in 2006, the same year it added two politically high powered board members. July 2006 found Andy Card, President George W. Bush's Chief of Staff, with a seat at the table. One story stated:

Union Pacific elected former White House Chief of Staff Andrew Card to its board of directors, a move that added clout to the railroad's already impressive Washington connections but dismayed shippers who feel besieged by UP's market power.

After the midterm elections (when Democrats gained control of the House of Representatives), Union Pacific added Thomas F. "Mac" McLarty to the board ranks. McLarty was President Bill Clinton's Chief of Staff and is a Senior Adviser for The Carlyle Group.

Union Pacific created new board seats for Card and McLarty. Here's their 2008 board compensation:

Card--$231,125
McLarty--$221,125

They both control approximately 7,500 shares of stock. At $61 per share, that equates to over $450,000. Sweet! Three years of board pay and their stock holdings amount to $1 million, a windfall for most people, but chump change for the ex-President's Chiefs of Staff.

What was Union Pacific supporting the last six years that required bringing political insiders onto the board and paying tens of millions in lobbying fees? Did it want to set the stage for Mexico bypassing Western U.S. ports? Was it trying to outsource work to Mexico?

Their company description includes:

Union Pacific connects with Canada's rail systems and is the only railroad serving all six major gateways to Mexico, making it North America's premier rail franchise.

The big money boys hate a level playing field, using Uncle Sam to tilt it in their favor at every turn. Transparency and accountability? Hardly. Think of the windfall awaiting Rahm Emanuel.

Scully Gives Commercial for SHPS on C-SPAN

Tom Scully shared the stage on Washington Journal. At the end he declared he split his time between working for a New York investment firm and a D. C. based law firm, where the attorney works on "health policy." Here's what he didn't say:

1. Tom is a health care lobbyist for Alston & Bird. He lobbies for Aetna and the organized physician groups he plugged on C-SPAN, gastroenterologists, kidney doctors, and oncology physicians.

2. Scully is a private equity underwriter (PEU) with WCAS. As general partner he sits on a number of health care boards, including Solantic and Universal American. Solantic has CEO Rick Scott. The disgraced ex-Columbia/HCA CEO has a clear stake in health reform with his Center for Patients' Rights campaign.

3. Tom spoke eloquently of the benefits of Medicare Part C, also known as Medicare Advantage. WCAS owns Universal American, a Medicare Advantage insurer. In late 2008 Tom Scully had a 135,880 share interest in Universal American

4. Scully referred an Atlanta caller to SHPS for help figuring out her insurance options. C-SPAN allowed him a free commercial. Would he have plugged Viant, if WCAS hadn't sold it to The Carlyle Group?

Tom's a money changer, plain and simple. He should write C-SPAN a thank you note for his ample commercial time.

Who Owns Hawaiian Telecom Post Bankruptcy?

The Honolulu Advertiser reported:

Hawaiian Telcom plans to emerge from bankruptcy at the end of March under a reorganization plan that reduces its debt by nearly $800 million, the company said in a 333-page statement filed with the U.S. Bankruptcy Court Monday.

The article didn't state HT's owners at the end of March. The Carlyle Group shows Hawaiian Telecom as a current investment. The Honolulu article stated:

The company filed for bankruptcy protection Dec. 1 because of its heavy debt load and the loss of thousands of customers to wireless and other competitors.

The debt, which included $574.5 million in bank loans and about $500 million in bonds, helped finance Washington, D.C.-based The Carlyle Group's $1.6 billion takeover of the phone company in 2005.

Since Carlyle's takeover, Hawaiian Telcom has lost more than $200 million.

Who gets crammed down in the proceedings, loan, debt or equity holders? While not clear, the solution is to unwind the Carlyle deal.

Hawaiian Telcom's financial projections assume that the company's debt load will be sharply reduced, lowering its monthly interest payments.

Without that albatross, Hawaiian Telecom returns to profitability in 2011. If Carlyle keeps HT, they will have welched on 75 cents of every financing dollar.

To think the FDIC meets today to make it easier for private equity underwriters (PEU's) to buy struggling banks. Did you know the new rules will get a six month review?

(Update: Secured loan holders will own the company according to the Honolulu Star Bulletin)

Col. Gadhafi's Son Admits Corporate Ties to Freed Pan Am 103 Bomber

The TelegraphUK reported:

In a TV broadcast recorded on the plane, he (Saif Gadhafi) sparked a new row between Britain and Libya by claiming that the release of the Pan Am culprit had indeed been linked to lucrative business deals - despite Downing Street's insistence that it was purely a matter for the Scottish government.

"It is to be said for the first time, you were present on the table in all commercial, oil and gas agreements that we supervised in that period," he told Megrahi, as the pair sat together in the private jet's luxury lounge. "You were on the table in all British interests when it came to Libya, and I personally supervised this matter."

Saif Gadhafi knows how to handle Western government/business leaders. His father hired a D.C. lobbying firm to push Libyan interests on Capital Hill. The Carlyle Group hosted a star studded dinner in honor of Saif. James A. Baker, III and Frank Carlucci attended, according to a Libyan newspaper. The younger Gadhafi confirmed my suspicions. Will Senator John McCain tweet on Saif's revelation?

UBS Squealer Gets Extra 10 Months

FT reported:

Bradley Birkenfeld, the former UBS private banker turned key informant, was on Friday sentenced to a tougher-than-expected 40 months in prison for helping wealthy American clients evade taxes.

The prison term is 10 months longer than was recommended by prosecutors, who said Mr Birkenfeld had provided “substantial assistance” to their tax evasion investigation involving UBS, Switzerland’s biggest bank.

U.S. District Court Judge William J. Zlock handed down the stiffer sentence. Does he not like whistle blowers? Who might Judge Zlock have been protecting?

Phil Gramm has been Vice Chair of UBS since 2002. A NYT article on his appointment said:

At Warburg, Mr. Gramm, 60, will be one of three vice chairmen and will report to John P. Costas, the chairman and chief executive.

The firm became aware of the tax evasion scheme in 2005. For years it did nothing to ameliorate the situation. What did Phil Gramm know and when did he know it? A nation of "whiners" awaits an answer to that lingering question.

Republican Phil Gramm was elected to the U.S. Senate in 1984. One of his first jobs was voting on the judgeship of William Zlock. His bio states Zlock was confirmed by the Senate on November 1, 1985.

Did the Zlock-Gramm history, however sketchy, play into the legal decision? Corporatists hate accountability, especially when a peon is delivering justice. There are lots of warnings in the legal world these days. It's getting harder to read the tea leaves, at least without a program describing links to the Red or Blue team.

Update: President Barack Obama played golf with the President of UBS Investment Bank/Chairman & CEO of UBS Group Americas during his Martha's Vineyard vacation.

(HT-Economic Policy Journal)

White Collar Rendition for Small Fry

The Obama administration renditioned Raymond Azar for bribing military purchasing employees. In a sting operation, Azar paid $106,000 in kickbacks to an Army Corps of Engineers official. His employer, Sima Salazar Group, is also under indictment,

An Army general stated the rough treatment should serve as a warning for other fraudulent contractors. Maybe, Mr. Azar didn't have enough money to buy special treatment.

Consider the cases of Chiquita Brands and The Carlyle Group/Riverstone Holdings. Chiquita Brands sponsored Colombian terrorists. It paid a $25 million fine. No rendition. No indictment.

Carlyle and its energy joint venture, Riverstone, paid a combined $50 million to make a pension bribery scandal go away. No rendition. No indictment.

Halliburton has a facilitating payments policy, i.e. the firm pays bribes to advance work in foreign countries. What practice wins out in a grease happy global economy? Who gets kid glove treatment when caught? The big money boys.

Small guys get fried, including the taxpayer. Azar and a CIA agent could've flown commercial. At what cost savings? Don't tell me the administration made the run to keep their renditioning skills sharp.

Saif Gadhafi: From Carlyle Group Dinner to Terrorist Plane

Col. Gadhafi's son Saif factored into two news stories. CNBC reported he escorted the Pam Am 103 bomber off his father's private jet to a hero's welcome. According to Reuters, Saif said:

"I also personally thank our friends in the British government as they have had an important role in reaching this happy conclusion," he said in a statement.

"I affirm that the Libyan people will not forget this brave stance from the governments of Britain and Scotland and that friendship between us will be enhanced forever. The page of the past has been turned and is now behind us," he added.

The crowd that greeted them at Tripoli's Mitiga airport, a former U.S. air base, were mostly members of Libya's National Youth Association which is close to Gaddafi's son.

In November 2008, Saif received a missive from President George W. Bush. The Carlyle Group hosted a dinner in his honor at the Washington Club. James A. Baker, III and Frank Carlucci attended according to a Libyan newspaper.

Who releases a convicted bomber after eight years of a century long sentence? Scotland did. Why? Mrs. Susan Cohen, a New Jersey woman, weighed in:

"I think it's appalling, disgusting and so sickening I can hardly find words to describe it," said Susan Cohen, of Cape May Court House, New Jersey, whose 20-year-old daughter, Theodora, died in the attack. "This isn't about compassionate release. This is part of give-Gadhafi-what-he-wants-so-we-can-have-the-oil."

CNBC said Libyan oil comes out the ground for the low cost of $1 per barrel. It seems the prisoner release and Western corporate expansion are connected.