TBR News April 11, 2016

Apr 11 2016

The Voice of the White House

Washington, D.C. April 11, 2016: “I must admit that I have odd ideas. Many people tell me so when I voice them but later, when they turn out to have been correct, forgetfulness descends upon them and they text message. And while I thought I was wrong once, I later found out I was mistaken. And every day, I see balding and chubby thirty year old men standing in bewilderment in front of the canned vegetables in the market, cell phone in pudgy hand, speaking loudly: ‘I’m looking at the cans now, Maudie. There is one with a green label and some man on it holding a dead poodle by the leg. No, I can’t make out what the letters say…oh and right next to those are other cans. No, I can’t make out the letters but there is a picture of a red thing…it might be an apple but maybe a tomato…’ And ten minutes later, I see the same inbred staring in awe at a stack of bread loaves. Puzzlement marks his face as he lifts his cell phone to his mouth one more time. Next time, Maudie will send their home robot to do the shopping.”


Conversations with the Crow

On October 8th, 2000, Robert Trumbull Crowley, once a leader of the CIA’s Clandestine Operations Division, died in a Washington hospital of heart failure and the end effects of Alzheimer’s Disease. Before the late Assistant Director Crowley was cold, Joseph Trento, a writer of light-weight books on the CIA, descended on Crowley’s widow at her town house on Cathedral Hill Drive in Washington and hauled away over fifty boxes of Crowley’s CIA files.

Once Trento had his new find secure in his house in Front Royal , Virginia, he called a well-known Washington fix lawyer with the news of his success in securing what the CIA had always considered to be a potential major embarrassment. Three months before, July 20th of that year, retired Marine Corps colonel William R. Corson, and an associate of Crowley, died of emphysema and lung cancer at a hospital in Bethesda, Md.           After Corson’s death, Trento and his Washington lawyer went to Corson’s bank, got into his safe deposit box and removed a manuscript entitled ‘Zipper.’ This manuscript, which dealt with Crowley’s involvement in the assassination of President John F. Kennedy, vanished into a CIA burn-bag and the matter was considered to be closed forever

After Crowley’s death and Trento’s raid on the Crowley files, huge gaps were subsequently discovered by horrified CIA officials and when Crowley’s friends mentioned Gregory Douglas, it was discovered that Crowley’s son had shipped two large boxes to Douglas. No one knew their contents but because Douglas was viewed as an uncontrollable loose cannon who had done considerable damage to the CIA’s reputation by his on-going publication of the history of Gestapo-Mueller, they bent every effort both to identify the missing files and make some effort to retrieve them before Douglas made any use of them.

Douglas had been in close contact with Crowley and had long phone conversations with him. He found this so interesting and informative that he taped and later transcribed them.

These conversations have been published in a book: ‘Conversations with the Crow” and this is an excerpt


Conversation No. 73

Date: Wednesday,  March 26, 1997

Commenced: 9:50 AM CST

Concluded: 10:35 AM CST


RTC: Good morning, Gregory. Did you see the papers?

GD: Oh, yes, quite a story. One must read between the lines on that one.

RTC: That becomes second nature, unless, of course, we planted the story in the first place.

GD: So much for freedom of the press.

RTC: They are all under tight control.

GD: I’ll wager that if the Israeli commandos broke into an Arab day care center in Lebanon and torched fifty babies, we wouldn’t see a word of it in either the New York Times or the Washington Post.

RTC: No, not a word.

GD: They’re all a closed shop. I once had a go-around with the art market and it’s the same thing. The Jews own all the big papers and they own the major art markets. Still, I destroyed a good part of it once. Cost them all millions. Have any of my supporters ever told you about that?

RTC: No, never a word. What did you do?

GD: Well, some time ago…this is going to take some time, Robert, so if you have something better to do, let me know and I won’t bore you.

RTC: You rarely bore me, Gregory. I’ll let you know if we have a fire in the kitchen or the Swiss Embassy explodes. Do go on.

GD: A friend of mine up in Menlo Park, fellow by the name of George Schattle, was visiting his mother in Los Angeles and went to a garage sale. He bought, as I recall, four bronze statues in specially constructed wooden crates. Crates indicated the contents were looted by the Germans in Warsaw in ’39 and subsequently got into the collection of Hermann Goering. The sellers told George that their relative was with the U.S. Army at the end of the war. Of course there was no discipline and our boys stole everything they could lay their hands on. Anyway, George knew I was an expert on German subjects and brought the four pieces, in their crates, over for me to look at. I knew nothing about the artist, Auguste Rodin, but I could authenticate the labels and seals. I told him to find an expert to authenticate the statues and busts. I knew nothing about Impressionist artists and could care less. I told him that there was a university professor out at Stanford, which was just down the road from Menlo Park where George lived. I remembered seeing some reference to a huge collection of Rodin pieces being donated to Stanford by some investment banker out of LA. What was the name? Yes. B. Gerald Cantor. Anyway, George looked up the professor, one Albert Edward Elsen, and made a phone call. Yes, Elsen was interested and would look at the pieces. Next day, George rang me up, semi hysterical. It seems Elsen told him that the pieces were stolen by the evil Nazis and that he, Elsen, wanted to take possession of the pieces to be able to return them to Poland. When George refused, and he said that Elsen was a loud-mouthed bully, Elsen then told him the pieces were fake. Now how could they be stolen from some Polish collection during the war and then be fake?

RTC: Maybe this Elsen fellow wanted to con your friend out of them for his own benefit.

GD: I agree. But George told me that Elsen subsequently called up everyone and proclaimed that, on the one hand,  George was illegally in possession of wartime Nazi art loot and, on the other, trying to sell fake Rodins.

RTC: Schizophrenic.

GD: That was just the start. George showed Elsen my written commentary on the boxes and seals and Albert Edward began to attack me. I had a post office box at Stanford and the postmaster said that Elsen had come…actually barged…into his office, ordering the postmaster to give Elsen my home address. Of course the postmaster refused and Elsen started screaming that I was dealing with stolen art and that the FBI would be notified.

RTC: Why was he so upset?

GD: Well, I will get to that. I couldn’t understand any of the noise so I dug up old Chronicle stories about this Cantor Rodin gift. Eighty odd statues presented to the University museum by Cantor and, I noted with some interest, all authenticated by Elsen. Valued at three and a half million. So I drove up to Stanford with a notebook and looked the pieces on display over. I wrote down the name of the foundry, one Georges Rudier of Paris. OK. So much for that. I personally felt that Rodin was crap but I wanted to know why the screaming. Made no sense. Then, I went to the Palace of the Legion of Honor in San Francisco that had a big collection of original Rodin pieces that Mrs. Alma Spreckles had bought from Rodin himself in 1916. Looked at them. I also wrote down the name of the foundry which was one Alexis Rudier of Paris. Not the same name. Also, the Frisco pieces were s different finish. I told George to take his four pieces to the director of the museum, one Thomas Carr Howe, for his opinion. George did this and Howe gave him a written authentication. When George told Howe about Elsen, Howe told him off the record that Elsen was a congenital asshole and that he, Howe, detested him. And when George mentioned the different foundry marks, Howe said that Alexis Rudier had cast up statues for Rodin and that Georges was his great nephew. He also said that Georges didn’t start casting until 1965. Since Rodin died in 1917, I thought this was strange. Note that all the eighty odd pieces given to Stanford were made after 1965.

RTC: This is beginning to sound like something Sherlock Holmes would have done. Then what?

GD: Well, George tried to sell the pieces and at once, Elsen began calling around to all the local galleries, telling them the pieces were either stolen or fake. Loud bully.

RTC: Elsen is what? French?

GD: Elsen was Jewish.

RTC: Ah, I see. And go on. What happened next?

GD: Well, here we had three million dollars worth of art that probably wasn’t worth it. I have a friend in the Judicial Police in Paris and asked him to check on this Georges Rudier. About a month later, he sent me a thick catalog from the Rodin Museum in Paris. Mrs. Goldscheider there, the director, had custody of all of Rodin’s pieces in a state museum setting and was making copies for people. The catalog showed the pieces, many of which were in the Cantor bequest. More interesting. I wrote to her and asked her about Georges and got back a signed letter stating that he had been doing all their castings, and only from 1965.

RTC: Always better when you get it in writing. Was she pulling a scam?

GD: No, she advertised these as official copies, whatever that might be, but as copies. She wasn’t pulling anything but the others certainly were. Then I made up my mind to wreck their little game. Of course I pulled s little string, which in turn led to a bigger string and then the whole rotten edifice came crashing down.

RTC: That’s how these things can go sometimes. Do continue.

GD: Well, Elsen was hard to attack because he was an important, published art historian and I was nothing. Still where there is a will, there is a way. First off, I got ahold of Jerry Jensen, an anchor for the Channel 7 news people in San Francisco. My cousin knew him. I told him what I discovered and he started digging. My God, Robert, what a hurricane of rage erupted then. Al Frankenstein, who was a senior art critic at  the Chronicle as well as a teacher at Stanford, began to raise hell with the management at Channel 7 and to threaten Jensen with legal action for slander. Jerry told me he must have hit a very raw nerve indeed. And then I got Elsen to break cover.

RTC: How?

GD: Well, I went to a mail drop and telephone answering place in Santa Clara and set up an account for a Basilisk Press. A basilisk is a mythic creature, half rooster and half snake that could allegedly kill by looking at you.

RTC: Dramatic but how many people know that?

GD: I did and that’s what mattered. Letterheads and I made up a fake book publication notice. A book called ‘Rodin:The Anatomy of a Fraud’ and I listed a lot of very true information on that piece of paper. I mailed that out to hundreds of newspapers, to many major art dealers and certainly to Elsen and Frankenstein. Sweet Jesus, what a reaction. The people at the answering service said that a few days after the brochure was delivered, Elsen barged into their office, ordering them to tell him where the people who owned the press lived. They told him to get his loud ass out of the building and he threatened them with the Attorney General and the FBI. They called the police and had him physically removed from the building. Then, knowing that one of Elsen’s prize pupils was art critic on the staff of the Palo Alto Times, I rang her up, told her I was an official at the Basilisk Press and said that Mr. Jensen from Channel 7 was going to expose the art fraud at Stanford. Worked wonderfully. Within days, Elsen wrote a vicious and very actionable letter to Jensen, calling George a criminal and fraud. Jensen sent me the letter and I, in turn, took the letter and George to a very good San Jose lawyer. Because Filthy Al wrote the letter on University stationary, the lawyer filed a suit naming Elsen and Stanford as party defendants.

RTC: As I recall, Stanford is a rich school.

GD: Oh, yes they are. Wonderfully deep pockets. And much screaming and so on. Finally, I decided to up the ante and I went for an interview at the Chronicle with old Frankenstein. That was really something. He had a little office right off the city room and you could hear us two blocks away. I had done my homework on Alfred and when he accused me of being a liar, I said he was a crook. I mentioned a bust of Cosimo D’Medici that he has persuaded a rich Jewish benefactor to buy for the De Young. Big money because Alfred said it was by Cellini. It was a small copy of a bronze original I saw at the Bargello in Florence. Cellini never worked in marble but Alceo Dossena, a nineteenth century art forger did. Alfred stopped yelling when I mentioned this unpleasant fact but I got my wind and they told Jerry Jensen later they could have heard me in Oakland with the windows closed. When I left, I noted that the entire city desk people were standing in a circle around the open door of Alfred’s cubicle and one started applauding me. Such an honor. And Alfred, who looked rather peaked when I last saw him, had a sudden heart attack that night and passed away.

RTC: You sent a wreath no doubt?

GD: Piss on him. Another loudmouth. Still, I saw I was up against acknowledged art experts so I did some further digging and made a major discovery. So simple yet so deadly and with ripples still spreading. It’s just this. You can make a mold of a bronze and duplicate it exactly but the result will, are you ready for this one, will always be 5% smaller. Why, you ask? Because, Robert, cooling metal shrinks and that is a fact. Oh, yes, and since known originals of Rodin’s work were all over the place, taking measurements was not a problem. I got the people at the Legion of Honor to send me a full list of the exact measurements of all their original pieces. And Albert learned of this and threatened the staff at the museum. Wonderful man, making friends wherever he went. And then, Albert enlisted the aid of his co-conspirator, Cantor. You see, Cantor went to the Rodin Museum in Paris and ordered the eighty pieces. He paid eighty thousand dollars for them, brought them over to the States, got his co-religionist and crime partner, Elsen,  to claim they were original and worth over three million dollars and guess what?

RTC: Not a tax write-off?

GD: You got it. A huge tax write-off. Still more fun on my part. I wrote and had typeset, a story from the so-called Ardeth Times about a local bigwig that had been to California and bought four original Rodin’s that once had been the property of Hermann Goering. I printed this on newsprint, glued it onto a piece of paper and mailed it to Elsen at his office. Jesus H. Christ, what a huge uproar. Albert, insane with rage, went to the local FBI, called the office of the Attorney General and about every other law enforcement agency he could find. The result? The FBI got interested and of course the AG wouldn’t talk to him. An agent talked with me and I gave him copies of my papers. The result? The IRS got involved and flew out a specialist from DC to talk with me. He had never heard of the fatal shrinkage factor and we had a wonderful chat. The upshot was that the IRS said one could not take a tax write-off for more than was paid for the art. By the way, there was no town named Ardeth anywhere in the United States. Big Al the Mouth, as empty of brains as a ladle, suffered from mental constipation and verbal diarrhea

RTC: That must have tied a few tails.

GD: Oh, yes it did. The entire market in Rodins, fake and original, collapsed, Cantor’s gift was not allowed as a write-off  and I got about ten letters from various law firms in Los Angeles threatening me with enormous lawsuits for making false statements about the wonderful B. Gerald. And, George’s lawsuit was successful and both Stanford and Elsen had to pay George a lot of money.

RTC: What happened to the statues?

GD: Are you sitting down? George got nine million for them. But that’s not the end of the story.

I wrote the whole thing up, more or less along the lines I have been telling you but in greater detail and sent it to a friend on the staff of the Getty in Los Angeles. He loathed Elsen and asked me if he could forward it. I said he certainly could. The man mailed it out on a February first and Elsen must have gotten it a few days later because on the fifth, he had a massive heart attack in his office and died on the spot.

RTC: I imagine that was the end of the matter. Did you make anything out of this?

GD: Enormous satisfaction.

RTC: You must have done months of work, Gregory. Not a penny?

GD: When I read in the Examiner that old Albert had bought the farm, I was paid in full.

RTC: What entertainment. And you are formidable indeed.

GD: Oh not so. Why Mueller, who knew me better than you do, used to call me ‘Mr. Sunshine.’ Isn’t that touching?

RTC: I suspect he was being cynical, Gregory and you know it. But I would agree with him. Such a kind person. You bagged two, count them, two nasty Jews and, from your account, ruined a very profitable number of scams they were involved in. I take it most of the dealers were Jews?

GD: Oh they were. For a time, it sounded like a chorus of sick hyenas.

RTC: Before or after the time the lion pounced on them?

GD: Depended. I nailed more than Albert, believe me but enough is enough. And then I got started on all the fake Frederic Remington’s’ floating around and did even more damage. I do like my fun, Robert, I do like it.

RTC: Others obviously do not. Did you go after these creeps because they were Jewish or in spite of it? Just curious.

GD: Robert, I had no idea about all of this when I got started and for quite some time, I thought Elsen was French. I didn’t wreak my havoc out of anti-Semitism but because I initially started out to help a friend authenticate some old statues. There was nothing more. The squalling uproar spilled over very quickly into attacks on me by Elsen and his vicious co-religionists so I merely obliged them by responding. I didn’t shout and slander but I dealt with facts and quite thoroughly ruined their very lucrative operations. I would have done the same if the perps were Episcopalians or Baptists. Of course, once I could see who, and what, I was dealing with, it was easy to ruin them. Shallow bombast coupled with criminal greed is a hallmark and I can play on such creeps like a piano. Strike this key and an Elsen howls to the press. Strike that one and a Frankenstein writes a hit piece in the Chronicle. Strike a strong chord and they all explode and die. No, Robert, I got into this only to help a friend and nothing else. I spent several years on this, not months, and learned both the business of bronze casting and the modern art world from one end to the other. The cabal lost hundreds of millions of dollars, much reputation painstakingly gained and finally, bitter defeat and well-deserved, oh very well-deserved,  death.

(Concluded at  10:35 CST)




The Panama Papers: Where Are The Americans?

April 10, 2016

by Kelly Phillips Erb


The leak of the Panama Papers from Mossack Fonseca has dominated the headlines over the past week. As name after name was connected to the scandal – from Iceland’s Prime Minister Sigmundur Davíð Gunnlaugsson who stepped down in response to the controversy to the UK’s Prime Minister David Cameron, who admitted a stake in his father’s offshore company – questions continue to spill. The biggest question: where are the Americans?

With 11.5 million confidential documents at stake, including financial and legal records for over 14,000 Mossack Fonseca clients, the lack of well-known American names have caused conspiracy theories to fly. Despite the suggestions of payoffs, government influence and more, the reality is that American names have surfaced in the Panama Papers. Preliminary reports indicate that there are more than 200 people with U.S. addresses named in the Panama Papers. That doesn’t mean that there are more than 200 U.S. citizens involved – an address certainly doesn’t equal citizenship – but it is indicative that Americans are involved.

Why aren’t we hearing about more Americans? There could be a number of reasons. One very simple answer is that the reporting isn’t yet finished. With millions of documents involved, it may simply be that American names are in the Papers but those have not yet made public because there’s more digging to be done.

It may also be the case that Mossack Fonseca just wasn’t a favorite law firm among Americans looking to create offshore entities. Many law firms, including those located in the United States, are involved in offshore asset management. The accounts and funds are certainly out there, perhaps just not at Mossack.

And don’t forget that the United States is considered something of a tax haven. Flexible entity structures, corporate tax breaks and tax-favored capital gains can result in a relatively low tax burden, making it an attractive place to do business (just ask Mascherano). In addition, Delaware and Nevada have tax structures and corporate laws considered favorable in many parts of the world. Both states offer attractive legal protections to corporations, including strong liability protection, as well as a degree of anonymity for corporate owners. The court system is favorable, too: Delaware even has its own “Chancery Court,” an equity court that focuses largely on corporate matters.

As for the rumor making the rounds over the internet that the Internal Revenue Service (IRS) has somehow suppressed the release of information related to Americans? IRS Commissioner John Koskinen says that isn’t true, saying that IRS has “no control” over the release of that information by the International Consortium of Investigative Journalists (ICIJ). He says that the IRS has “interest in information” that comes from all sources but dismisses the notion that the IRS would stand in the way when it comes to tax transparency. It is, he says, just the opposite, noting that as part of the OECD’s Forum on Tax Administration he’ll join the heads of tax agencies from 46 countries in the Joint International Tax Shelter Information & Collaboration (JITSIC) to review information related to the Panama Papers and discuss ways that they can be more cooperative when it comes to the exchange of information. The IRS, in addition to the tax agencies in other countries, has a “great interest” in matters involving tax evasion.

As to whether there might be ongoing investigations related to the Panama Papers, Koskinen wouldn’t say, reminding me that the IRS does not talk about individual cases.

Liesel Pritzker Simmons. She wasn’t just royalty on the big screen (yes, that was her as the lead in the 1995 retelling of Frances Hodgson Burnett’s The Little Princess), Simmons was practically an American princess. Born into a wealthy family (10 Pritzkers appear on the most recent Forbes 400 list), Simmons inherited a tidy $500 million which has since grown to $600 million. Simmons, however, hasn’t joined the ranks of celebutantes on the party scene: instead, she’s been investing her funds in charitable foundations and working on social initiatives. She told Forbes, in 2013, “I didn’t earn this money. And I’ll be damned if I’m going to screw it up!”

While the Pritzker family is no stranger to controversial offshore trusts, Simmons’ squeaky clean image might cause some to wonder how she, together with husband, Ian, ended up in the Panama Papers. The couple is listed as shareholders of a company called Blue Valley Agroinvestment. Simmons has confirmed her ownership to McClatchy, saying, “My husband, Ian Simmons, and I are minority investors in Blue Valley Agroinvestment, a sustainable agriculture project in Colombia. Any income we earn is fully taxed. We are proud of the job creation and community development this project brings to an underserved part of Colombia.”

Igor Olenicoff is also no stranger to offshore assets. The billionaire real estate developer was sentenced to two years probation in 2008 for lying on his federal income tax return about $200 million in offshore accounts. Olenicoff sued UBS in 2008, alleging, among other things that the bank helped him break the law and then turned him in; that lawsuit was dismissed. In return, UBS sued Olenicoff in 2012, charging that his earlier lawsuit against was merely intended to “deflect blame” from his own actions; last July, citing the “unclean hands” doctrine, a judge ruled against UBS.

As part of his deal to avoid jail time for failing to report those offshore accounts, Olenicoff agreed not to move assets offshore. His name, however, appears in the Panama Papers, naming him as a shareholder in Olen Oil Management Limited. Olenicoff has denied any involvement in any Panama companies, including Olen Oil Management. (For more specifics on Olenicoff’s denial, read Janet Novack’s interview

John Michael “Red” Crim was convicted of conspiracy to defraud the United States, in violation of 18 U.S.C. §371, and interference with the administration of internal revenue laws, in violation of 26 U.S.C. §7212(a). Crim was a co-founder of the Commonwealth Trust Company (CTC) based in Conroe, Texas (not the same as the Commonwealth Trust Company in Wilmington, DE). According to the Justice Department (downloads as a pdf), CTC marketed two domestic trust packages and one offshore trust package to its clients and “persuaded investors to place income and assets into trusts for the purpose of avoiding payment of federal income tax.” Crim was initially sentenced to the maximum term of eight years in prison (downloads as a pdf). In addition to prison, Crim was ordered to pay $17.2 million in restitution, a $175,000 fine, a $200 special assessment, and serve three years supervised release. The investigation into CTC eventually led to charges against actor Wesley Snipes. Crim’s name is found in the Panama Papers as an intermediary who registered a company with Mossack Fonseca.

While Crim and Olenicoff are associated with financial crimes, Andrew Mogilyansky has a different reputation: sex offender. The Bucks County millionaire pleaded guilty in 2009 to traveling for the purpose of engaging in illicit sexual conduct and three counts of engaging in illicit sexual conduct in foreign places. He had been charged with traveling to Russia to have sex with 13- and 14-year-old girls he procured from an orphanage. According to the indictment, Mogilyansky also took his victims to Moscow where he made them work as prostitutes (Mogilyansky has since denied the latter, claiming he was framed by Putin’s spy agencies). After the plea, Mogilyansky was sentenced to eight years in prison and ordered to pay restitution.

Mogilyansky incorporated three companies with Mossack Fonseca and, according to prosecutors, expenses for the Moscow trips were run through one of those companies, IFEX Global Ltd. Cossack found out about the charges in 2014 and despite concerns about Mogilyansky’s criminal history, continued working with him.

American film and music producer David Geffen is synonymous with success. His record labels have included Asylum Records (now part of Elektra/Asylum Records) and Geffen Records (now Interscope-Geffen-A&M division of Universal Music Group) and in 1994, he co-founded the movie studio, DreamWorks SKG with Steven Spielberg and Jeffrey Katzenberg (Geffen left DreamWorks in 2008). Geffen is now a billionaire with an estimated net worth of $6.8 billion, landing him at #176 on the Forbes billionaires list and #70 on the Forbes 400. Geffen’s name appears in the documents as the director of a Delaware company called Barham Maritime LLC, which sold shares of a Cayman Islands company created to hold title to Pelorus, a yacht Geffen purchased from Roman Abramovich’s ex-wife, Irina, in 2011 for an estimated $300 million. Geffen subsequently sold Pelorus to a Panama offshore company called Marfleet Limited S.A.; the Papers indicate that the actual owner is Royal Group Companies Management, a company with ties to the United Arab Emirates focusing on real estate, tourism and international trade and development. For his part, Geffen’s lawyer says Geffen has “never used an offshore account for business or commercial purposes or has any kind of tax haven.”

Marianna Olszewski, the author of Live it, Love it, Earn it (A Woman’s Guide to Financial Freedom) built her fortune as a life coach and money expert. Hailing from a family of modest means, she worked her way through Wall Street to become the founder and CEO of Madison Financial Management LLC, a broker-dealer and hedge fund marketing company. Olszewski didn’t shy away from the spotlight but she did want to keep her identity secret when allegedly parking approximately $1.8 million offshore. How far would she go? According to the BBC, she worked with Mossack Fonseca to hire an intermediary (a 90-year old British man) to keep her identity and the account secret.

Sanford Weill made $150 per week in his first job as a runner for Bear Stearns. Today, Forbes estimates the value of the former Citigroup CEO at $1.05 billion, landing him at #1694 on the 2016 Billionaires List (#509 in the U.S.). According to McClatchy, Weill holds a stake in two companies: April Fool Ltd. (British Virgin Islands, no longer active) and Brightao Corp (British Virgin Islands) named in the Papers.

Before you jump to any conclusions, remember: just having your name on the list doesn’t mean that you’ve done anything wrong. Owning an offshore company or creating an offshore trust isn’t illegal. In fact, it’s perfectly legally in most countries, including in the United States. What is illegal, however, is using offshore trusts to hide assets from known creditors or for evading taxation: failure to disclose offshore assets and report offshore income once again made the Internal Revenue Service’s Infamous Dirty Dozen this year.

And despite the handful of individual Americans (comparatively speaking), no U.S. banks are included in the list of banks that requested the most offshore companies for clients. That list includes such European-based banks as HSBC Private Bank (Monaco); HSBC Private Bank (Suisse); Credit Suisse Channel Islands Limited and UBS AG (Succ. Rue du Rhone).

There are certainly more names to come: in early May ICIJ will release the names of the more than 214,000 offshore entities and names revealed in the leaks.

Before you jump to any conclusions, remember: just having your name on the list doesn’t mean that you’ve done anything wrong. Owning an offshore company or creating an offshore trust isn’t illegal. In fact, it’s perfectly legally in most countries, including in the United States. What is illegal, however, is using offshore trusts to hide assets from known creditors or for evading taxation: failure to disclose offshore assets and report offshore income once again made the Internal Revenue Service’s Infamous Dirty Dozen this year.

And despite the handful of individual Americans (comparatively speaking), no U.S. banks are included in the list of banks that requested the most offshore companies for clients. That list includes such European-based banks as HSBC Private Bank (Monaco); HSBC Private Bank (Suisse); Credit Suisse Channel Islands Limited and UBS AG (Succ. Rue du Rhone).

There are certainly more names to come: in early May ICIJ will release the names of the more than 214,000 offshore entities and names revealed in the leaks.


Editor in Panama Papers says published in the public interest

April 11, 2016

by Paul Carrel


Berlin-The editor of the German newspaper that broke the Panama Papers story said on Monday he did not know exactly where his team’s source got the information but defended his decision to publish on the basis of the public interest.

Wolfgang Krach, co-editor-in-chief of the Sueddeutsche Zeitung, said a source who introduced themselves as “John Doe” contacted the paper a year ago and with an offer of encrypted internal documents from Panamanian law firm Mossack Fonseca.

Sueddeutsche, realizing the sheer number of documents to be scrutinized, began working with a consortium of other media organizations before publishing the Panama Papers story that has shone a light on the financial schemes of the world’s elite.

“We don’t know how this source came upon the information,” Krach told Reuters by telephone from his office in Munich. “Mossack Fonseca say themselves ‘we were hacked’ – I don’t know if that is the case. I can’t confirm that.”

The head of Mossack Fonseca has denied any wrongdoing, and said his firm has fallen victim to “an international campaign against privacy”.

Suddeutsche Zeitung has said it received a cache of 11.5 million leaked documents from the law firm’s database.

The documents cover a period over almost 40 years, from 1977 until last December, and purport to show that some companies domiciled in tax havens were being used for suspected money laundering, arms and drug deals and tax evasion.


“We don’t know if this source got access lawfully or unlawfully, we just don’t know,” Krach said, but he said the provenance of the information was less important than the credibility of the documents and the public interest.

“The decisive question is first of all: is the information that came to us from the source credible? That is the most important point. And the second point is: is it relevant so that we publish?”

He said the Sueddeutsche had cross-checked thousands of documents against information it had previously received. This quashed any doubt that the Panama Papers might not be genuine.

“To the question, ‘Are these documents genuine?’ Yes they are genuine,” Krach said, adding that some of the information was not of public interest but much was. “And those are the cases about which we have partially reported.”

Asked how he would react if it turned out the source had come across the data by hacking into Mossack Fonseca, Krach said this was a hypothetical question but pointed to the case of Edward Snowden, the former U.S. spy agency contractor who leaked top secret information.

“Nonetheless, I think it is completely indisputable that it was valid, correct and even necessary to publish this data,” he said of the Snowden case.

(Writing by Paul Carrel; Editing by Alison Williams)


Sexists’ and ‘perverts’: insults rock Turkish politics

April 8, 2016


Istanbul (AFP) – President Recep Tayyip Erdogan slammed an allegedly sexist remark by Turkey’s opposition leader as an “affront” to all Turkish women on Friday, further fueling a colourful war of words which erupted earlier in the week.

The verbal spat started when the leader of the Republican People’s Party (CHP), Kemal Kilicdaroglu, accused Family Minister Sema Ramazanoglu of “laying down in front of someone”, to criticise her handling of recent cases of sexual abuse in schools.

The remark prompted outrage with the ruling party accusing Kilicdarogul of sexism and “immorality”.

“What will we do with these political perverts?” Erdogan said on Wednesday, in comments carried by local media.

He said every word used by his opposition rival was “unnecessary, like Kilicdaroglu himself.”

Prime Minister Ahmet Davutoglu meanwhile accused the opposition chief of being “inhumane” and declared he had unfollowed him from Twitter as a result of his remarks.

As the scandal mushroomed, the family minister Ramazanoglu decided Thursday that enough was enough and pressed charges against Kilicdarogul for “mental anguish and violating her personal rights”, reported the pro-government Daily Sabah, adding she sought 50,000 Turkish Lira (15,000 euros, $17,000) in damages.

“I believe these unfortunate statements have bothered all female members of the CHP and also Kilicdaroglu’s wife,” she said in a statement, reported by Hurriyet daily news.

Kilicdaroglu fired back at the criticism, saying it was in fact Erdogan who was guilty of “perversion”, after the president said recently that the way some young people dressed or showed public affection was not in line with his values.

“Is it your job to sit at (the presidential palace) and look at the girls and women?” he said.

Kilicdaroglu has denied his original remark was sexist.

With the debate showing no sign of dying down, Erdogan brought it up again Friday after finishing prayers at a mosque, saying the remark was “an affront to all the women of Turkey”.

Erdogan himself has raised eyebrows over his comments about women, urging Turkish women to have at least three children and railing against efforts to promote birth control as “treason”.

Critics have accused his government of trying to impose strict Islamic values on Turkey and curtailing women’s civil liberties.

In March he marked International Women’s Day with the comment: “I know there will be some who will be annoyed, but for me a woman is above all a mother.”

Thousands of women protested his remark in Istanbul with chants of “We want equality”.

The president is also exceedingly touchy at any hint of an slur against him, with dozens of cases ongoing against journalists and cartoonists accused of insulting him.


1st delivery of Russian S-300 air defense system arrives in Iran – Iranian FM

April 11,2016


The first delivery of the Russian S-300 surface-to-air missile system has arrived in Iran, the country’s Foreign Ministry has announced.

“We had already announced that despite several changes in the time of delivery, the deal is on its path of implementation and today I should announce that the first part of this equipment has arrived in Iran and delivery of other parts will continue,” Foreign Ministry spokesman Jaberi Ansari told journalists, Mehr news agency reported.

He said the delivery came through the Caspian Sea, which both Iran and Russia border.

Russia’s sale of S-300 missiles to Iran has a bumpy history. The deal was first signed in 2007, but was suspended by Russia under pressure from the US and Israel. Moscow said the delivery would destabilize regional security at a time when Tehran was accused of having a clandestine nuclear weapons program.

The contract was revived last year after Iran and six leading world powers signed a nuclear deal, which addressed concerns over a potential nuclear breakout by Tehran.

The S-300 system now being delivered by Russia is the result of a new deal signed with Iran in November, and is an upgraded version of the one that Tehran initially purchased. The delivery is expected to be complete by mid-2016.


Egyptian president attacked over Red Sea islands transfer to Saudi Arabia

Abel Fatah al-Sisi signed deal to hand over Tiran and Sanafir, which Cairo has controlled since 1950

April 11,2016

The Guardian

Egypt’s president, Abdel Fatah al-Sisi, has been criticised at home and abroad for agreeing to transfer two Red Sea islands to Saudi Arabia that have been controlled directly from Cairo for more than 60 years.

The deal on Tiran and Sanafir paves the way for the construction of a bridge linking Saudi Arabia to Sharm el-Sheikh, at the tip of the Sinai peninsula. It was announced at the weekend during a visit by King Salman of Saudi Arabia.

The agreement, which the government said had been negotiated over six years, immediately became embroiled in the polarised politics of Egypt and geopolitical rivalries of a bitterly divided Middle East.

Egyptian newspaper Al-Ahram described “a huge wave of controversy and confusion” as five people who protested against the decision were arrested at the weekend before being released on Monday. The agreement is subject to a vote in parliament, but critics insisted that a referendum should be held.

Thousands of Twitter users accused Sisi of selling the islands. Tiran_Sanafir became the top trend in Egypt on the site, with more than 28,000 tweets posted in relation to the decision.

The uninhabited islands, once the border between the Ottoman empire and British-controlled Egypt, are strategically important because of their location on the sea route to the ports of Aqaba in Jordan and Eilat in Israel. Egypt’s blockade of the Strait of Tiran in 1967 was one of the main triggers for the Arab-Israeli war, also known as the six-day war.

Generations of Egyptian schoolchildren have been taught that the islands – known for their fishing and diving – were Egyptian, and legal experts question the legitimacy of the agreement. But authorities in Cairo insisted that they had always been Saudi territory, despite being under Egyptian control since 1950.

The row generated jokes and cartoons on social media as well as angry criticism of Sisi, relating to his overthrow of the Muslim Brotherhood president Mohamed Morsi in 2013. “When Sisi sells the islands they are Saudi, but if Morsi had done that, they would have been described as Egyptian,” read one post on Facebook.

Twitter users circulated grainy footage of the former Egyptian president Gamal Abdel Nasser warning of any violations of the Tiran waters, which he said were Egyptian. One cartoon showed Sisi swapping the islands for a sack of rice.

“Roll up, roll up, the island is for a billion, the pyramid for two and a couple of statues thrown in for free,” the satirist Bassem Youssef tweeted. The former presidential candidate Hamdeen Sabahi called on Sisi and Salman to rescind the accord.

The Muslim Brotherhood said the islands had been handed over “for a fistful of dollars, or in exchange for support for government policies sanctioning murder, detentions, violations, forced disappearances and extrajudicial killings”.

Media outlets in Iran, which is deeply hostile to Saudi Arabia, are also portraying the agreement as Sisi “selling” the islands to the conservative monarchy. Tehran and Riyadh are on opposite sides of the wars in Syria and Yemen.

Adel al-Jubeir, the Saudi foreign minster, said: “Egypt did not occupy the two islands, but entered them on a Saudi request. History and documents of both countries have not shown any disagreement on the Saudi identity of both islands. But some are trying to fish in troubled waters.”

Egypt sent troops to Tiran and Sanafir in the mid-1950s in response to a Saudi request to protect them from Israeli invasion. Israel occupied them in 1967, but evacuated the islands in 1982 in line with the peace treaty with Egypt.

Salman ended a five-day visit to Egypt on Monday by signing a $1.5bn (£1.1bn) investment in housing in the Sinai region as well as an agreement to finance five years’ of Egypt’s petroleum needs at an optimal 2% interest rate.

The bridge, to be named after Salman, will facilitate pilgrimages to Mecca and promote local industry, and is likely to pass through the islands. Saudi newspaper Alriyadh described the project as the realisation of a great vision that would “join the two continents of Asia and Africa by connecting Saudi Arabia to Egypt over the water”.Salman, speaking in parliament, said the two countries would work together to create a pan-Arab defence force, an Egyptian idea first suggested last year but apparently overtaken by Riyadh’s announcement of an anti-terrorist coalition of Islamic countries.

On Monday, the Saudi king flew on to Ankara, where he is attending an Islamic summit as part of efforts to promote a rapprochement between Egypt and Turkey following strained relations over Turkish support for the Muslim Brotherhood.


The Enemy Within: Terrorist Enablers on the Potomac

The main enemy is at home

April 11, 2016

by Justin Raimondo


Hillary Clinton and CIA director David Petraeus had a brilliant idea: they would fund, arm, and train a proxy army in Syria, overthrow the regime of strongman Bashar al-Assad, and jump on the rapidly moving train of the “Arab Spring” to extend US influence in the region. What could go wrong?


The “Free Syrian Army” created by Washington is, today, fighting alongside al-Qaeda and its Salafist allies, filling the vacuum left behind by the “Islamic State”/ISIS as it contracts under fire from Russian war planes and the Syrian army. As Middle East specialist Juan Cole points out:

“[E]ven as Daesh has been set back, al-Qaeda has recovered some of the territory lost to the SAA earlier this year southwest of Aleppo.

“Al-Qaeda is allied with the Freemen of Syria (Ahrar al-Sham) and the Jerusalem Army among other hard line Salafi Jihadis. These groups are in turn allied with remnants of the old Free Syrian Army (mostly Muslim Brotherhood) that are supported by the US, Saudi Arabia and Turkey. That is, the US-backed groups are battlefield allies of the allies of al-Qaeda. US and Gulf-supplied weaponry routinely makes its way to al-Qaeda.”

Those geniuses in Washington thought they could take advantage of the jihadist siege of Syria to create the conditions for a three-sided civil war in which Assad would be overthrown, the Islamic State would be decimated, and their “vetted” sock puppets would wind up in the saddle. Indeed, it was the same strategy the neoconservatives envisioned in Iraq, where the Shi’ite majority and the Sunni minority would supposedly be sidelined by Ahmed Chalabi and his “vetted” Iraqi National Congress – except, for some reason, things didn’t turn out that way.

What happened instead is that Chalabi – a marginal figure, who had no support inside Iraq, and was an Iranian agent from the get-go – defected, the Shi’ite majority took state power and the Sunnis rose up, embroiling the country in a vicious civil war that eventually generated ISIS.

A parallel process is unfolding in Syria: the US-created “Free Syrian Army” had no real support on the ground in Syria and was soon marginalized and absorbed by battle-hardened jihadists. Succored by the Turks, the Qataris, and the Saudis, this third force wasn’t the result of US manipulations, but the consequence of a split in the jihadist ranks, pitting ISIS against the old-line followers of Osama bin Laden in al-Qaeda. So that, today, we see US-supported Syrian rebels fighting on the same side as those who took down the World Trade Center and the Pentagon on September 11, 2001.

Not that this obscenity wasn’t anticipated by Washington. Indeed, Gen. Petraeus has long been an advocate of openly allying with “moderate” fighters within al-Qaeda’s Syrian franchise, the al-Nusra Front. This strategy is an extension of his “surge” operation in Iraq, where the US military allied with Sunni tribes in what was deemed the “Arab Awakening” – the very tribesmen who later morphed into ISIS and crossed the border to wreak havoc in Syria.

I have to laugh when I hear Donald Trump declare that we shouldn’t become involved in the Syrian civil war by arming the rebels because “we don’t know who they are.” We know precisely who they are – and that is the great crime at the heart of our policy.

The Obama administration has taken the same course set out by the neoconservatives who were at the helm during the Bush years: instead of going after the Sunni jihadists who are the core of al-Qaeda and ISIS, they have been intent on eradicating the last remnants of the old secular despots like Libya’s Moammar Gadhafi and Assad, empowering the Sunnis, and working to whittle down the “Shia crescent” in preparation for a final assault on Tehran. And if they have to ally with the perpetrators of the 9/11 terrorist attacks to do it, well then so be it.

Standing behind this Orwellian turn in US policy are our allies in the region: the Saudis, the Gulf emirates, and the Israelis. The motives of the first two are ideological: Riyadh and Doha are engaged in a holy war against what they see as the rising influence of Shi’ite Iran, and are determined to stop Tehran by any means necessary. That’s why they have been funding, arming, and directing the jihadist armies currently decimating what is left of Syria.

The Israelis, who have long schemed to overthrow their old enemy in Damascus, are motivated by strategic concerns: they much prefer to see Syria in chaos rather than under Assad’s control. Their target is, as always, their principal enemy, Iran, which is aiding Hezbollah in Lebanon and sending fighters to prop up Assad. In the religious war that is tearing the Muslim world apart, they have clearly taken the side of the Sunnis: in covert alliance with the Saudis, their American lobby has been agitating for US intervention in Syria for years.

And now the Sunnis have opened up another front in their war on Tehran: in Yemen, where Saudi forces are carpet-bombing civilian areas in support of a “government” that has lost all legitimacy. The Houthi rebellion – which I wrote about here – is caricatured as Iranian-sponsored “aggression,” when the reality is that it is the invading Saudis who are the real aggressors. Their war – with full US backing – has killed many thousands, with civilians caught in the middle of a vicious conflict that is now deadlocked. And it has had another deadly consequence, as Reuters reports:

“Once driven to near irrelevance by the rise of Islamic State abroad and security crackdowns at home, al Qaeda in Yemen now openly rules a mini-state with a war chest swollen by an estimated $100 million in looted bank deposits and revenue from running the country’s third largest port.

“If Islamic State’s capital is the Syrian city of Raqqa, then al Qaeda’s is Mukalla, a southeastern Yemeni port city of 500,000 people. Al Qaeda fighters there have abolished taxes for local residents, operate speedboats manned by RPG-wielding fighters who impose fees on ship traffic, and make propaganda videos in which they boast about paving local roads and stocking hospitals.

“The economic empire was described by more than a dozen diplomats, Yemeni security officials, tribal leaders and residents of Mukalla. Its emergence is the most striking unintended consequence of the Saudi-led military intervention in Yemen. The campaign, backed by the United States, has helped Al Qaeda in the Arabian Peninsula (AQAP) to become stronger than at any time since it first emerged almost 20 years ago.”

One has to wonder how “unintended” is this consequence. The Saudis have been exporting their austere Wahabist ideology for decades, creating and expanding al-Qaeda’s mass base in the Arab world. And if the censored 28 pages of the Senate-House report on the 9/11 terrorist attacks are ever declassified – which reportedly details their role in funding and enabling it – the true extent of Riyadh’s role in empowering al-Qaeda will blow the US-Saudi alliance to kingdom come.

The truth about our Middle Eastern policy is that we are now allied with our most deadly enemies – in Syria, in Yemen, and in Saudi Arabia itself. The money and influence wielded by the Saudis and the obscenely rich mini-states of the Gulf has corrupted Washington to the point where our own government has become complicit in the terrorist threat that looms over us at every turn – a threat that is used by the Beltway politicians as a pretext for their endless wars.

What we need is a foreign policy that puts America first: stop defending the Saudis, stop intervening on the side of our enemies, and leave the snake-pit of the Middle East to stew in its own poisonous juices. Before we can do that, however, our bought-and-paid-for political class has to be swept away in a tide of populist anger of the very sort that we are now seeing arising all over the country.

The main enemy isn’t overseas: they’re living the good life here in the USA, right on the banks of the Potomac. The warmongers who control both political parties, the foreign lobbyists, and their shills in the media – these are the enemies within who must be exposed and expunged from public life.

What we are seeing today is the first stirrings of such a movement – and it’s only going to get more intense. That’s something I look forward to every day, because as Bob Dylan said on the cusp of another great era of tumult in this country: the times they are a changing!


How Not to Audit the Pentagon

Five Decades Later, the Military Waste Machine Is Running Full Speed Ahead

by William D. Hartung


From spending $150 million on private villas for a handful of personnel in Afghanistan to blowing $2.7 billion on an air surveillance balloon that doesn’t work, the latest revelations of waste at the Pentagon are just the most recent howlers in a long line of similar stories stretching back at least five decades. Other hot-off-the-presses examples would include the Army’s purchase of helicopter gears worth $500 each for $8,000 each and the accumulation of billions of dollars’ worth of weapons components that will never be used. And then there’s the one that would have to be everyone’s favorite Pentagon waste story: the spending of $50,000 to investigate the bomb-detecting capabilities of African elephants. (And here’s a shock: they didn’t turn out to be that great!) The elephant research, of course, represents chump change in the Pentagon’s wastage sweepstakes and in the context of its $600-billion-plus budget, but think of it as indicative of the absurd lengths the Department of Defense will go to when what’s at stake is throwing away taxpayer dollars.

Keep in mind that the above examples are just the tip of the tip of a titanic iceberg of military waste. In a recent report I did for the Center for International Policy, I identified 27 recent examples of such wasteful spending totaling over $33 billion. And that was no more than a sampling of everyday life in the twenty-first-century world of the Pentagon.

The staggering persistence and profusion of such cases suggests that it’s time to rethink what exactly they represent. Far from being aberrations in need of correction to make the Pentagon run more efficiently, wasting vast sums of taxpayer dollars should be seen as a way of life for the Department of Defense. And with that in mind, let’s take a little tour through the highlights of Pentagon waste from the 1960s to the present.

How Many States Can You Lose Jobs In?

The first person to bring widespread public attention to the size and scope of the problem of Pentagon waste was Ernest Fitzgerald, an Air Force deputy for management systems. In the late 1960s, he battled that service to bring to light massive cost overruns on Lockheed’s C-5A transport plane. He risked his job, and was ultimately fired, for uncovering $2 billion in excess expenditures on a plane that was supposed to make the rapid deployment of large quantities of military equipment to Vietnam and other distant conflicts a reality.

The cost increase on the C-5A was twice the price Lockheed had initially promised, and at the time one of the largest cost overruns ever exposed. It was also an episode of special interest then, because Secretary of Defense Robert McNamara had been pledging to bring the efficient business methods he had learned as Ford Motors’ president to bear on the Pentagon’s budgeting process.

No such luck, as it turned out, but Fitzgerald’s revelations did, at least, spark a decade of media and congressional scrutiny of the business practices of the weapons industry. The C-5A fiasco, combined with Lockheed’s financial troubles with its L-1011 airliner project, led the company to approach Congress, hat in hand, for a $250 million government bailout. Wisconsin Senator William Proxmire, who had helped bring attention to the C-5A overruns, vigorously opposed the measure, and came within one vote of defeating it in the Senate.

In a time-tested lobbying technique that has been used by weapons makers ever since, Lockheed claimed that denying it loan guarantees would cost 34,000 jobs in 35 states, while undermining the Pentagon’s ability to prepare for the next war, whatever it might be. The tactic worked like a charm. Montana Senator Lee Metcalf, who cast the deciding vote in favor of the bailout, said, “I’m not going to be the one to put those thousands of people out of work.” An analysis by the New York Times found that every senator with a Lockheed-related plant in his or her state voted for the deal.

By rewarding Lockheed Martin for its wasteful practices, Congress set a precedent that has never been superseded. A present-day case in point is — speak of the devil — Lockheed Martin’s F-35 combat aircraft. At $1.4 trillion in procurement and operating costs over its lifetime, it will be the most expensive weapons program ever undertaken by the Pentagon (or anyone else on Planet Earth), and the warning signs are already in: tens of billions of dollars in projected cost overruns and myriad performance problems before the F-35 is even out of its testing phase. Now the Pentagon wants to rush the plane into production by making a “block buy” of more than 400 planes that will involve little or no accountability regarding the quality and cost of the final product.

Predictably, almost five decades after the C-5A contretemps, Lockheed Martin has deployed an inflationary version of the jobs argument in defense of the F-35, making the wildly exaggerated claim that the plane will produce 125,000 jobs in 46 states. The company has even created a handy interactive map to show how many jobs the program will allegedly create state by state. Never mind the fact that weapons spending is the least efficient way to create jobs, lagging far behind investment in housing, education, or infrastructure.

The Classic $640 Toilet Seat

Despite the tens of billions being wasted on a project like the F-35, the examples that tend to draw the most attention from the media and the most outrage among taxpayers involve overspending on routine items. This may be because the average person doesn’t have a sense of what a fighter plane should cost, but can more easily grasp that spending $640 for a toilet seat or $7,600 for a coffee pot is outrageous. These kinds of examples — first exposed through work done in the 1980s by Dina Rasor of the Project on Military Procurement — undermined the position taken by President Ronald Reagan’s administration that not a penny could be cut from its then-record peacetime Pentagon budgets.

The media ate such stories up. Pentagon overpayments for everyday items generated hundreds of articles in newspapers and magazines, including front-page coverage in the Washington Post. Two whistleblowers were even interviewed on the Today Show, and Johnny Carson joked about such scandals in his introductory monologues on the Tonight Show. Perhaps the most memorable depiction of the problem was a cartoon by the Washington Post’s Herblock that showed Reagan Secretary of Defense Caspar Weinberger wearing a $640 toilet seat around his neck. This outburst of truth-telling, whistleblowing, investigative journalism, and mockery helped put a cap on the Reagan military buildup, but — you won’t be surprised to learn — didn’t keep the Pentagon from finding ever more innovative ways to misspend tax dollars.

The most outrageous spending choice of the 1990s was undoubtedly the Clinton administration’s decision to subsidize the mergers of major defense firms. As Lockheed (yet again!) and Martin Marietta merged, Northrop teamed with Grumman, and Boeing bought McDonnell Douglas, the Pentagon provided funding to pay for everything from closing down factories to subsidizing golden parachutes for displaced executives and board members. At the time, Vermont Congressman Bernie Sanders aptly dubbed the process “payoffs for layoffs,” as executives of defense firms received healthy payouts while laid-off workers were largely left to fend for themselves.

The Pentagon’s rationale for giving hundreds of millions of dollars to these emerging defense behemoths was laughable. The claim — absurd on the face of it — was that the new, larger companies would provide the Pentagon with lower prices once they had eliminated unnecessary overhead. Former Pentagon official Lawrence Korb, who opposed the subsidies at the time, noted the obvious: there was no evidence that weapons programs grew any cheaper, cost overruns any less, or wastage any smaller thanks to government subsidized mergers. As in fact became clear in the world of the weapons giants that followed, the increased bargaining power of companies like Lockheed Martin in a significantly less competitive market undoubtedly resulted in higher weapons costs.

It Took $6 Billion Not to Audit the Pentagon

The poster child for waste in the first decade of the twenty-first century was certainly the billions of dollars a privatizing Pentagon handed out to up-armored companies like Halliburton that accompanied the U.S. military into its war zones and engaged in Pentagon-funded base-building and “reconstruction” (aka “nation building”) projects in Iraq and Afghanistan. The Special Inspector General for Afghan Reconstruction (SIGAR) alone seems to come out with new examples of waste, fraud, and abuse on practically a weekly basis. Among Afghan projects that stood out over the years was a multimillion-dollar “highway to nowhere,” a $43 million gas station in nowhere, a $25 million “state of the art” headquarters for the U.S. military in Helmand Province, with all the usual cost overruns, that no one ever used, and the payment of actual salaries to countless thousands of no ones aptly labeled “ghost soldiers.” And that’s just to begin enumerating a long, long list. Last year, Pro Publica created an invaluable interactive graphic detailing $17 billion in wasteful spending uncovered by SIGAR, complete with information on what that money could have purchased if it had been used productively.

One reason the Pentagon has been able to get away with all this is that it has proven strangely incapable of doing a simple audit of itself, despite a Congressionally mandated requirement dating back to 1990 that it do so. Conveniently enough, this means that the Department of Defense can’t tell us how much equipment it has purchased, or how often it has been overcharged, or even how many contractors it employs. This may be spectacularly bad bookkeeping, but it’s great for defense firms, which profit all the more in an environment of minimal accountability. Call it irony or call it symptomatic of a successful way of life, but a recent analysis by the Project on Government Oversight notes that the Pentagon has so far spent roughly $6 billion on “fixing” the audit problem — with no solution in sight.

If anything, in recent years the Pentagon’s accounting practices have been getting worse. Among the many offenses to any reasonable accounting sensibility, perhaps the most striking has been the way the war budget — known in Pentagonese as the Overseas Contingency Operations account — has been used as a slush fund to pay for tens of billions of dollars of items that have nothing to do with fighting wars. This evasive maneuver has been used to get around the caps that were placed on the Pentagon’s regular budget by Congress in the Budget Control Act of 2011.

If the Pentagon has its way, nuclear weapons will get their very own slush fund as well. For years, the submarine lobby floated the idea of a separate Sea-Based Deterrence Fund (outside of the Navy’s regular shipbuilding budget) to pay for ballistic missile-firing submarines. Congress has signed off on this idea, and now there are calls for a nuclear deterrent fund that would give special budgetary treatment to bombers and intercontinental ballistic missiles as well. If implemented, this change would throw the minimalist budget discipline that now exists at the Pentagon decisively out the nearest window and increase pressures to raise the department’s overall budget, which already exceeds the levels reached during the Reagan buildup.

Why has waste at the Pentagon been so hard to rein in? The answer is, in a sense, not complicated: the military-industrial complex profits from waste. Closer scrutiny of waste could mean not just cheaper spare parts, but serious questions about whether cash cows like the F-35 are needed at all. An accurate head count of the hundreds of thousands of private contractors employed by the Pentagon would reveal that a large proportion of them are doing work that is either duplicative or unnecessary. In other words, an effective audit of the Pentagon or any form of serious oversight of its wasteful way of life would pose a financial threat to a sector that is doing just fine under current arrangements.

Who knows? If the Department of Defense’s wasteful ways were ever brought under genuine scrutiny and control, people might start to question, for example, whether a country that already has the capability to destroy the world many times over needs to spend $1 trillion over the next three decades on a new generation of ballistic missiles, bombers, and nuclear-armed submarines. None of this would be good news for the contractors or for their allies in the Pentagon and Congress.

Undoubtedly, from time to time, you’ll continue to hear outrageous media stories about waste at the Pentagon and bomb-detecting elephants gone astray. Without a concerted campaign of public pressure of a sort we haven’t seen in recent years, however, the Pentagon’s runaway budget will never be reined in, that audit will never happen, and the weapons makers will whistle a happy tune on their way to the bank with our cash.


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