TBR News September 24, 2016

Sep 24 2016


The Voice of the White House 

Washington, D.C.  September 24, 2016:”Why is the United States involved in the Syrian civil war? Assad is a dictator but is far less obnoxious and vicious than many dictators that the US has supported in the past. It is because Assad is too closely connected with Russia for American comfort. And Assad has allowed Russia to trans-ship thousands of surface-to-surface missiles (and other weaponry) to Hezbolla in southern Lebanon. Israel hates Hezbollah who wreaked havoc on IDF forces in their last incursion into Lebanon and Israel, aware that Hezbollah has the ability to deliver terrible missile attacks on them, demanded, not requested, that the US carpet bomb all of southern Lebanon to destroy caches of missles. The US refused so the second alternative was to remove Assad and replace him with a leader chosen by the CIA to be more receptive to Israel’s needs. Also, Assad has leased a naval facility on the Mediterranean to the Russians and America found this unacceptable. These are the real reasons for the fictional ‘US –led coalition’ and the Russian military support of Assad. That all of this had impacted the civilian population of Syria means nothing to the ‘US-led coalition’ and the wanton destruction of property and the high death tolls also mean nothing. Hence we see hospitals being deliberately attacked, aid missions bombed and civilians slaughtered in increasing numbers. The US tries to blame Russia for all of this butchery but if they wish to genuinely identify the guilty, they need only to look in a mirror.”

The Deadly Business of War-Zone Medical Care

With governments bombing hospitals and militias attacking medical staff, the work of Doctors without Borders is in jeopardy. Rules to protect aid workers in war zones are increasingly being ignored.

September 22, 2016

by Katrin Kuntz


Dr. Muhamed brought the baby girl into the world in the midst of a war zone in southern Syria. A few hours later, his hospital lay in ruins.

The baby’s tiny head shimmered, she blinked her eyes and her first cry sounded light but strong. It was a difficult birth and the mother needed blood from the rare O-negative group. Dr. Muhamed issued a call for blood donors at his city’s mosque — and that was when the catastrophe began.

Their rotors pounding loudly, helicopters approached the hospital that evening and the first barrel bombs struck the operating room, injuring dozens of patients. The call for blood donations had led the Syrian regime to believe that a large number of enemy rebels was being treated in Muhamed’s hospital.

After the attack, Dr. Muhamed had two hours to evacuate the hospital. Then the helicopters returned. The next barrel bombs destroyed the gynecology department, the laboratories and the dialysis ward. This was the account Dr. Muhamed gave in a conversation via Skype with members of the organization Doctors Without Borders in Jordan, who provide him with support from afar.

For decades, hospitals had been treated as the last havens of humanity in times of war. In keeping with the Hippocratic oath, doctors treated the wounded without regard for their political views, race or religion. Whether farmer, scholar, Assad supporter, Taliban member, Huthi rebel or Islamic State (IS) fanatic, every human being must receive medical care, even in a war, if he or she is stricken and no longer fighting. Under the Geneva Conventions, ratified by 196 countries, human beings have a right to medical treatment. Doctors and hospitals are also protected under the Geneva Conventions.

The conventions are a sliver of civilization in the midst of the barbarity of war. But with a number of countries no longer abiding by international law in armed conflicts, this achievement is now under threat. In fact, four of the five permanent members of the United Nations Security Council are currently participating in coalitions that have bombed hospitals in Syria, Yemen and Afghanistan.

Death Traps

In the era of the War on Terror, governments are increasingly ignoring the rights of their wounded enemies, who they characterize as terrorists or criminals. In contrast to the combatants in earlier wars, they seek to refuse treatment to their enemies.

This development is extremely dangerous for humanitarian aid workers. Many warring parties see them as supporters of terrorists and are disregarding the neutrality of medical professionals in war zones. As a result, hospitals have gone from being protected zones to death traps.

One organization affected especially dramatically by this development is Doctors Without Borders, known as Médecins Sans Frontières, or MSF in French, the language of its founders. It is the world’s largest, best-organized medical aid organization, with 37,000 volunteers working in 69 countries, funded almost entirely by private donations.

They are experts in coping with natural disasters and civil wars. They are viewed as activists, as courageous members of a flexible organization prepared to take risks, with little conceit and hardly any bureaucracy. Since its founding almost 45 years ago, MSF has become an enormous aid organization and received the Nobel Peace Prize in 1999. It is confident and convinced that it is among the best of aid organizations. Still, in 2016 its self-assurance has been shaken to the core, with volunteers now wondering: “How can I save lives without losing my own?”

Hospital Attacks

They refer to the unsettling trend that has made their work extremely dangerous, leaving thousands upon thousands without medical treatment, as “medical care under fire.” Hardly a week goes by without horrific reports of hospitals being destroyed and attacks on aid workers.

On Oct. 3, 2015, the US Air Force fired on an MSF hospital in Kunduz, Afghanistan. Forty-two people died, including 14 members of the organization.

On Jan. 20, 2015, a jet operated by the Sudanese regime dropped bombs on an MSF hospital in the town of Farandalla. There were 150 patients and staff inside.

On May 18, 2016, unknown assailants attacked an MSF off-road vehicle in the Central African Republic and shot the driver.

In late July 2016, the Syrian regime attacked four hospitals supported by MSF in Aleppo. Two hospitals came under fire as patients were being transferred between their facilities.

In Yemen, both the Saudi-led coalition and Huthi rebels have repeatedly launched air strikes on MSF hospitals. On Aug. 15, 2016, 19 people died and more than 20 were injured in one such attack. Four days later, MSF announced that it was withdrawing its staff from six hospitals in northern Yemen.

What does it mean for the world’s most important medical aid organization when its employees are being threatened and shot at, and its hospitals bombed? Doctors Without Borders provided SPIEGEL with an in-depth look at its work over a period of several months in the bush of the Central African Republic; at its Geneva headquarters; and in Jordan, along the Syrian border. A reporter hoping to describe the world of Doctors Without Borders in armed conflicts can only do so by becoming embedded, which means living in compounds with MSF staff and following their rules.

There are two developments in particular that endanger MSF staff during their work. The first is the disintegration of states. In failed states like the Central African Republic, aid workers who provide services that would normally be administered by the government are at risk, because there is no authority to protect them. The second development is the growing incidence of targeted attacks by warring parties on aid workers, in violation of the provisions of humanitarian international law.

This journey begins in the Central African Republic, one of the world’s poorest countries, a place where Doctors Without Borders must pay close attention to security. The curfew for staff members in the nation’s capital begins at 6 p.m. After that, they are permitted to frequent six selected restaurants, provided a vehicle waits for them outside. They are instructed to walk no more than 300 meters (984 feet) on the street and otherwise travel in motor vehicles. When they begin their deployment, they leave behind passwords for Facebook and Twitter in a safe so that their accounts can be deleted if they are killed. They think up questions to which only they know the answers, so that coworkers can identify them if they are abducted. Those who end up here know that they can die at any time.

On a balmy June evening in the bush, French nurse Miriam Peters, 27, was confronted with the extreme danger involved in her work. Her team was having a beer at the MSF compound in the town of Bambari when two masked men wielding machetes stepped onto the veranda.

They said nothing as they looked at the foreigners: a male nurse, a logistics expert, a financial expert from Canada, the drivers and Miriam Peters, who was in charge of local security at the time. “What do you want?” Peters asked the masked men.

The robbers seized money, radios and computers, and then they ordered the aid workers to lie on the ground. For 10 minutes, the assailants beat the aid workers with the butts of their machetes to humiliate them. Peters ended up with a scrape on her cheek, another woman had bruises on her shoulder and a man was hardly able to sit down the next day.

It was only one of many incidents that make it so difficult for MSF staff to work in this country. There was an attack on an MSF meeting, in which militants shot and killed 16 people. There have also been attacks on MSF vehicles, and in one incident, villagers used iron bars to force their way into a hospital, where they attacked patients.

A few weeks later, Miriam Peters is sitting on the veranda where the attack occurred. She is wearing faded jeans and Creole earrings as she reviews a list of medications prior to leaving for the hospital to check on a girl with burn wounds. “We need a roof next to the latrines,” she calls out to a coworker. These are the small things for which she gave up the big things in Europe, like her job in an intensive care unit in London and her boyfriend, who is forced to wait for her when she is abroad with MSF.

Next to the Democratic Republic of Congo and South Sudan, the Central African Republic is one of the countries where MSF staff are most heavily engaged. The country is like a boiler, ready to explode at any time. Following a coup in 2013 and massacres between Muslim Seleka and Christian anti-Balaka militias, the Central African Republic has an elected president again, but state structures are essentially non-existent.

Insignificant by Comparison

Bambari, where Peters is stationed, resembles a giant refugee camp. Thousands who have fled there from the bush now live in huts or the ruins of buildings. The rebels have divided up the city among themselves, and gunfire can be heard at all times of the day.

Peters doesn’t like to talk about the attack that night. She views the violence she suffered as being insignificant compared to what the local population experiences. “I feel a little fragile, but this sort of thing can always happen here,” she says.

The volunteers took a few days off after the attack, with some flying to the capital to eat pizza. They also set up a new volleyball net, but no one left the project because of the attack. “It was not a targeted attack on MSF,” says Peters. Afterwards, she went to the rebels and told them that violence would not be tolerated. “Otherwise we will shut down the project,” she warned.

Before MSF launches a “mission,” investigative teams study the situation in the region. If there is more than one death per 10,000 people a day, MSF considers it an emergency and springs into action.

As a first step, Doctors Without Borders explains to all parties to a conflict that they are neutral volunteers who have no interest in politics. Before they treat patients, they meet every rebel chief and every imam, to explain who they are and what they plan to do. They say to the warring parties: “If you want us to care for your people, you must allow us to have access to your enemies.”

In the jargon of aid workers, this is called “negotiating access.” It is essential for survival that everyone understands that MSF is independent and requires a reasonable level of security in return for the aid it provides. “To be protected by an armed group would violate our principle of independence,” says Peters.


MSF has two clinics in Bambari — one on the Christian and one on the Muslim side, partly to preserve neutrality. They treat the injured, people suffering from malaria and starving children. They also distribute bags of “Plumpy’nut” peanut-based paste to families.

The principle of emergency aid is to alleviate the worst problems and then to move on. But in the Central African Republic, MSF has now permanently taken over what would normally be the government’s task of caring for the population. Its volunteers will probably be there for decades. Never would they exert pressure on those in power by threatening to pull out, of threatening to allow a child to suffer now so that another child may have a better life 10 years from now. But is it possible that this makes aid workers complicit in an injustice?

It is a question that drove the founders of Doctors Without Borders 45 years ago when they separated from the International Red Cross. To understand what motivated them, it is worth looking back at the year 1859, to Italy, where Swiss businessman Henry Dunant was witness to an abomination during a carriage journey. His experience would become the big bang of humanitarian aid. It was during the Sardinian War, between the Kingdom of Austria and the Kingdom of Sardinia, when Dunant passed a battlefield near the Italian town of Solferino. He looked on with horror as thousands of Frenchmen and Austrians died in agony. Dunant organized help for the soldiers, but he would never forget the images he saw.

In 1864, he convinced European nations to sign an agreement at the First Geneva Convention for the Amelioration of the Condition of the Wounded in Armies in the Field. It declared that the wounded of all parties in a war have the same right to assistance. It placed volunteers and medical staff under the protection of neutrality. The convention marked the beginning of a Holy Scripture of sorts, which MSF still strives to uphold today.

Dunant founded the mother of all humanitarian organizations, the International Committee of the Red Cross (ICRC), which cared for the wounded on battlefields. The ICRC received a mandate, under international law, to serve as the advocate of the Geneva Conventions in war. The aim of its volunteers was to civilize war.

Tantamount to Betrayal

To achieve this goal, the Red Cross is dependent on the good will of the powerful. It takes no public positions, nor does it charge anyone with war crimes. Its critics feel that the Red Cross all too often enters into a pact with the devil.

This was also the opinion of a group of young French Red Cross doctors when the Biafra region in southeastern Nigeria declared its independence in 1967. Nigerian government forces surrounded the rebels and starved them to death. For the doctors, including the later French foreign minister, Bernard Kouchner, the silence of the Red Cross was intolerable and tantamount to betrayal.

In a media campaign, Kouchner accused the Nigerian government of genocide and in 1971, a group of doctors headed by Kouchner founded Médecins Sans Frontières. A new idea had been born, the notion that doctors could continue to treat patients while also testifying to injustice. It was the birth of MSF, a child of activism.

Today the Red Cross and MSF are fundamentally different organizations. Through its mandate under international law, the ICRC has different objectives and is subject to different constraints than privately funded aid workers. Nevertheless, the two groups complement each other or coordinate their activities. The ICRC has become somewhat louder over the years, while MSF has become less vociferous. “The Red Cross is slow and bureaucratic,” says a woman who has worked in famine relief for 25 years. “MSF are activists, but their emergency aid is of little use outside wars. It’s too transient for that.”

It is a day in July of this year and fighting has once again erupted in the Central African Republic. Hundreds of people have fled from the bush to a sugarcane field south of Bambari and Doctors Without Borders wants to help them, which is why Miriam Peters pays a visit to Ali Darassa, the warlord in charge of the Muslim Ex-Seleka. His militia controls the road to the south.

Darassa takes his time, but after half an hour, he finally steps out of a clearing, escorted by armed men. A giant of a man dressed in camouflage and combat boots, he has an inscrutable expression on his face.

Peters asks a polite question: “Can we go to the civilians in the sugarcane field?” — “Of course!” the self-proclaimed general bellows with a smile. “There are no problems whatsoever in our zone.” — “Okay,” says Peter, “because we would like to begin our medical activities there. It would be important to know whether to expect incidents on the way.”

The general gazes into the distance. He doesn’t find the question amusing. Darassa knows that the new president is having all rebels disarmed, and he doesn’t want this to happen to his men. It could also be that he doesn’t have a complete picture of what is happening in the bush. He refuses to provide any guarantees.

“The man who is responsible for disarming my soldiers has disappeared and gone to Europe,” says Darassa. “But of course you can go.” Peters smiles and shakes his hand.

The team subsequently drives to the sugarcane field. But when the volunteers arrive, more people are killed in the villages and they cancel the mission.

The political battle is fought 5,000 kilometers (3,100 miles) to the north. It is here, in an inconspicuous building a short walk from the lake in Geneva, Switzerland, where Doctors Without Borders lobbies to ensure its future. Marine Buissonnière, a key advisor, meets with us in the library on the ground floor.

Born in 1973, Buissonnière spent many years working abroad and also served for four years as the secretary-general of MSF. “I am a humanitarian out of conviction,” she says with a laugh. Today she documents what happens in and to hospitals on the front. And she fights for the Geneva Conventions — for the enforcement of rules aimed at making warfare a bit more humane.

“For about a year, I have noticed how warring parties try to eliminate their enemies, attacking hospitals and doctors in the process,” says Buissonnière. “Some people claim that if you go into a war, you can expect to be bombed. But that’s not true at all! There is something completely revolutionary about the Geneva Conventions. We cannot allow this idea to die.”

Buissonnière uses the term “alarming” when she talks about the number of attacks. “It all started with Kunduz,” she says. Doctors Without Borders had never before lost as many of its staff members in an airstrike as it did in Kunduz.

At 2:08 a.m. on Oct. 3, 2015, US forces fired on a trauma center in Afghanistan. MSF had opened the facility four years earlier, and its GPS coordinates were known to the Afghan government, the Taliban and NATO forces. “We had made an agreement,” says Buissonnière. “The wounded were to be treated with no political discrimination, and that included Taliban fighters — as long as they entered the hospital without weapons.”

When the Taliban captured Kunduz in September 2015, the Afghan government’s willingness to accept a hospital where its enemies were being treated dwindled. It is still, however, not entirely clear how it came to the attack. Photos taken after the airstrike show people dying in a place where they had hoped their lives would be saved, in beds and on operating tables.

“Kunduz was an assault on the Geneva Conventions,” says Buissonnière. “If you are a civilian or an injured soldier and are no longer fighting, you always have the right to medical treatment. It sounds like a very simple idea, and yet it is now being questioned more than ever before.” The manner in which warring parties think about their enemy has changed completely, she says. As a result, so has MSF’s work.

Blurring Perceptions

From today’s perspective, there was a certain wild and romantic aura to the early years of Doctors Without Borders during the Cold War. Many volunteers were attracted to the dangers involved and they felt it was natural to openly take political positions. When the Soviets bombed hospitals in Afghanistan, MSF called upon journalists to go to the country and report on the atrocities. When the Khmer Rouge committed genocide against their own people in Cambodia, MSF volunteers organized a “March for the Survival of Cambodia.” Humanitarian aid was considered an enforceable right.

After the Cold War ended, governments also waged war in the name of human rights, using humanitarian aid to achieve political and military goals. Non-governmental organizations like MSF found it difficult to distance themselves from these goals. Who could distinguish between soldiers digging wells in Afghanistan and the doctors working nearby? Perceptions of soldiers and aid workers began to blur.

“Since 9/11, military theory has shifted, and so has the manner in which the enemy is viewed,” says Buissonnière. “There were standards before that. A country at war ensured that its soldiers abided by certain rules. The enemy was considered equal, which meant it had the same right to medical care. The reasons why it was waging war were not considered.”

With the “War on Terror” came the idea that there are “just reasons” to wage war. “This places the enemy on a lower moral plane,” says Buissonnière. By this logic, she explains, it becomes “just” to kill the wounded from the “unjust side” — even doctors, in extreme cases.

Another reason that hospitals became targets has to do with modern warfare, says Buissonnière. “When you wage war from the air and deploy special forces instead of an ordinary army, you are no longer dependent on equal treatment in the field, because your troops are never caught in a real emergency situation.”

Buissonnière also believes that terrorism in Europe is contributing to the death of Dunant’s legacy. “After the attacks in Paris, Brussels and Munich, many anxious people are adopting a dangerous attitude,” she says. “Could there be a category of human being who doesn’t deserve the same treatment?”

In High Demand

This is why Buissonnière and her colleagues are engaging in lobbying efforts to save Dunant’s legacy. They include steps like testifying before the British parliament and training military doctors. Attacks are “described as mistakes, denied or simply covered up,” MSF President Joanne Liu said in a furious speech given before the United Nations Security Council. Hospitals and patients, she said, are being “dragged onto the battlefield.” In May, the Security Council issued a statement condemning attacks on hospitals, but failed to enact consequences.

Despite the danger, jobs at MSF are in high demand, with about 15,000 people applying to go abroad each year. The organization seeks flexible team players who are analytical, willing to take risks and have strong social skills. In addition to doctors, MSF needs, for examples, political scientists, mechanical engineers and people with business backgrounds.

Many who work at MSF admit that they like the adrenalin rush that comes with the work, even though this is officially frowned upon. And their personal lives? They shouldn’t be that important, because positions for families are rare. A so-called mission usually lasts a year. In high-risk areas, teams are replaced every month and volunteers are required to take a vacation every three months.

Many who volunteer at MSF secretly see themselves as a better version of the United Nations and a more courageous ICRC — and as being in touch with the times. But the one thing they have experienced above all else in the war in Syria, the biggest human disaster of our time, is helplessness.

Dr. Muhamed, the doctor from southern Syria whose destroyed hospital was mentioned at the beginning of this story, speaks with a hoarse voice. His face appears on a screen in the MSF office in Amman, Jordan as he talks to the team that supports him from the Jordanian capital, the same team that helped him build a new hospital. “Our city was bombed four times this week,” he says wearily. He’s a graying man in his early 50s.

The regime often stages “double-tap attacks,” in which the first rocket is followed by a second one 20 to 60 minutes later. “The second one is intended to kill the helpers who come to recover the injured.”

“They don’t just target hospitals, but also market squares, schools and playgrounds — all the places where normal civilians congregate,” says Dr. Muhamed. This is the regime’s way of punishing people for living in rebel-held territory, he explains. “I pray that we will not have large numbers of casualties again today,” he says. “When we admit patients, we only have a few minutes to make life-and-death decisions.” When 20, 30 or 40 casualties arrive at the same time, the doctors sort them using a traffic signal system.

“Green are the ones who can still walk. Yellow means critical but stable. Red means that the injured patient needs surgery immediately. Black means it’s too late — or that the injury is so complicated that three reds would die if you operated on someone in the black category.”

“That’s the reality,” Dr. Muhamed says via Skype. “Thank you, doctor,” says Bettina Weitz, country director for Syria, “is there anything else you need?”

“No,” he replies.

Weitz says goodbye and looks into the tense faces of her team members. The office of the Spanish section of MSF is in an inconspicuous office district of Amman, its walls are covered with maps of Syria. MSF supports 17 facilities in southern Syria from this office, and there are 150 facilities throughout the country.

‘Like Family’

Weitz has never met Dr. Muhamed in person. But, she says, “we talk to each other so often that it feels like family.” MSF has only a few local staff members in Syria, and it is close to impossible for them to verify the information they receive from inside the country.

Ever since Islamic State (IS) kidnapped five of its international staff, MSF has only provided assistance in the form of what it calls “remote management,” from the neighboring countries of Turkey, Lebanon, Iraq and Jordan. Weitz calls the system “the most frustrating experience of our time.”

Weitz, a 45-year-old Berlin native, has just returned from a mission in Sudan with her young child. MSF offered her the new position because it is one that allows staff to bring along family members.

One of the skills she has had to learn in Jordan is how to smuggle. Every month, Weitz and her team load a truck with medications, water, oxygen bottles and gasoline for generators. The truck is driven to Ramtha, where the Jordanian authorities allow a Syrian NGO to take over. “Everyone knows that we use an unofficial border crossing,” says Weitz. “But they all look the other way.”

Since the war in Syria began five years ago, the regime and its allies have murdered 698 Syrian doctors and nurses, according to the organization Physicians for Human Rights, which documents attacks on healthcare facilities. Some 63 hospitals supported by Doctors Without Borders were bombed in 2015 and a further 16 have been attacked by August of this year. When officials planned to rebuild a hospital in southern Syria, the local residents protested — out of fear. The attacks have not just singled out organizations like MSF, but also local clinics and hospitals.

The suppression of Syrian doctors began in 2011, during the first, peaceful protests against President Bashar Assad. Damascus refused to allow MSF to enter Syria, with the government accusing the organization of being a branch of al-Qaida. At the time, Assad’s thugs were already persecuting anyone in Syria who treated wounded demonstrators. After a few months, MSF began helping Syrian doctors working underground from its offices in Lebanon.

The Arrival of IS

They smuggled emergency kits to treatment units in bathrooms, caves and basements, where doctors provided emergency care to wounded members of the opposition. When the demonstrations became more violent, MSF helped to build more stable field hospitals. The organization sent medications to Syria, but it is unclear whether they ever arrived.

In June 2012, MSF was able to enter rebel territory in northern Syria for the first time and set up the first field hospital in a villa near the Turkish border. A month later, in July 2012, the Syrian government enacted a new anti-terror law, which criminalized any medical aid for the opposition. From that point on, Doctors Without Borders could only operate in secret.

In the summer of 2013, Islamic State expanded its area of influence in northern Syria and its representatives demanded that the aid workers operate their hospitals in accordance with Islamic rules, as interpreted by IS. “They wanted us to separate men and women in the emergency room, even when all were brought in at the same time after a bombing attack,” says the employee who negotiated with IS. “We were supposed to have male and female doctors to treat male and female patients, respectively. And they wanted the Niqab, the facial veil, to be a requirement.”

Islamic State was not pleased to hear that Doctors Without Borders had a decontamination unit in which men and women were treated in the nude with water after a poison gas attack.

MSF suspended its operations in territory held by IS and withdrew all international workers after Islamic State kidnapped 13 staff members from a hospital in Latakia Province in January 2014. Eight were Syrians and were soon released. The five international staff members remained in captivity for months.

Today, the ongoing airstrikes have increased the threat to doctors and volunteers. With each new targeted attack, Doctors Without Borders must decide how to respond.

One of the main objectives of doctors is to treat every individual, which is why aid workers, even in the midst of the war on terror, will continue to insist that the powers involved observe the conventions they have signed. Doctors believe that helping and healing should not be a deadly occupation.

Bigger Holes

In the dusty Jordanian town of Ramtha on the Syrian border, 82-year-old Canadian doctor Edgar Escalante, an orthopedic surgeon, is making his final rounds through a field hospital. His mission is about to come to an end.

In his 14 months here, he has seen things he will never forget, including a Syrian who arrived with a makeshift tracheotomy consisting of a plastic bottle cut in half. He has also seen severed limbs, mothers in a panic, a patient with bullet wounds in his stomach. “There was a boy who had been ripped apart by bomb fragments and was on the verge of death. When I had given up all hope, he squeezed my hand and signaled to me not to give up.”

Dr. Escalante, who has seven children of his own, once worked as a doctor in the jungles of Nicaragua. “I spent my entire life working, so that they could have a better future,” he says. “When I retired, my wife said: Now it’s time for you to fulfill your dream.”

He began working as a surgeon for MSF in Kunduz, and he flew to Yemen three months later. It was his team that died in the American airstrike in Kunduz.

Dr. Escalante bends over a Syrian who is so thin and pale that it seems clear he is on the verge of death. “You’ll make it,” he whispers into his ear.

He spent 20 months working for MSF in war zones. Does he have anything to say about the bombs and the attacks on doctors? He shakes his head. “We do our work here,” he says. “No one will prevent us from doing that.” The wounds of his Syrian patients have been getting worse lately, he says. “The projectiles are creating bigger holes.”

At the end of his rounds, shortly before Dr. Escalante is to hand in his MSF coat, he stands in the street and begins to weep. Life and death, fear and joy, all of these things have created a close bond between him and this place and his colleagues here. “Hold the fort, and keep on going,” he says quietly as he says his goodbyes.

He knows how difficult it is for his fellow doctors and aid workers to listen to the bombs falling in nearby Syrian villages every night. The border has been closed since IS staged an attack on Jordanian soldiers in June. An estimated 75,000 refugees are now stuck in the desert, and no new patients are being brought to Ramtha.

“The authorities here fear that there are terrorists among the refugees,” says Dr. Escalante. A few days ago, Syrians tried to get an injured girl across the border to the hospital where Escalante worked, but they were denied entry.

The girl bled to death at the border.

Translated from the German by Christopher Sultan

Russia and US Provide a Lesson in Propaganda Over Syrian Ceasefire

September 23, 2016

by Patrick Cockburn

Unz Review

Airstrikes that hit the wrong target have always been justified or denied by the perpetrators with a rich blend of hypocrisy and lies. It was interesting to see this tradition of deliberate mendacity being not only maintained, but outdone in Syria over the last week. The US was seeking to explain how it had come to kill at least 62 Syrian soldiers fighting Isis in the besieged government-held city of Deir Ezzor a week ago and the Russians evading responsibility for an air attack on a UN aid convoy killing 20 people outside Aleppo five days later.

The explanation of US military officials was splendidly ingenious. As dutifully retailed by CNN, they said they believed a likely scenario was that the personnel hit were prisoners of the regime, perhaps military personnel being detained, although that is not certain.

The initial signs indicated that they were dressed in civilian clothing. They may not have had the typical weapons of a Syrian military unit but rather trucks with weapons mounted on top of them. It is also not known if they were deliberately placed there to potentially deceive the coalition.

For students of war propaganda this is a wonderful piece of obfuscation. No evidence is produced for “the likely scenario” in which supposition is heaped on supposition. Its purpose is instead to mask, or throw in doubt over, the obvious fact that someone had committed a blunder and ordered an attack on a long established Syrian Army position near Deir Ezzor airport. This sort of smoke screen is not designed to last very long, but to blunt criticism during the first crucial few days when the story is still at the top of the news agenda. Then a few weeks or even months down the road, there can be a grudging admission of the truth, or part of it, when it will barely get a mention at the end of newscasts or be relegated to page 24 of the newspapers. An old PR adage says that the best way for the perpetrator of some disaster to limit the damage to himself or herself is to “first say no story and then say old story.” It still works.

The Russian explanation of the attack on the UN aid convoy on 19 September is also well worth studying as an example of the propagandist’s art. It is important to make your explanation detailed and interesting because it will be competing with a reality which, in the nature of war, will be murky and confusing. The Russian news agency Tass quoted a senior Russian official as saying that “analysis of video records from drones of yesterday’s movement of the humanitarian convoy across Aleppo territories controlled by militants has revealed new details. It is clearly seen in the video that a terrorists’ pickup truck with a towed large-calibre mortar is moving along with the convoy.”

This was good stuff. Suggesting that there was an understandable reason to imagine they were attacking a legitimate target – though it had to be admitted that “the large calibre mortar” had somehow disappeared by the time of the attack. But the Russians made the mistake of producing too many exculpatory stories at the same time, claiming there were no Russian or Syrian planes in the area – in which case why suggest the legitimate target scenario? Other Russian explanations were that there had been no attack at all and, if there had been, it had been carried out by jihadis and, in any case, all the damage was done from the ground and not from the air.

The crucial point is never to leave a vacuum of information when a story is at the top of the news agenda because that vacuum will be filled by your enemies (if it has not got wide media attention it may be better to ignore it because a rebuttal may serve only to give the story legs). It does not matter if what you are spouting is nonsense because it only has to hold up for two or three days and probably less (the UN aid convoy attack was swiftly overtaken as a news story by the riots in Charlotte, North Carolina). An advantage for the propagandist is that it is easy to make up a lie, but it can take much more time and effort to convincingly refute it.

The truth is that air attacks fail to hit the right target regularly, though not often with such diplomatically disastrous consequences as last week. Air forces emphasise that with smart bombs they can hit targets with far more accuracy than ever before, but they seldom stress that the targeting is based on intelligence which may be flawed or misinterpreted. The misinterpretation may take place far away in some operations centre or it may be some partisan local source peering through binoculars.

Most intelligence comes from local ground forces. The RAF says that the reason that it has only launched 65 airstrikes in Syria over the last nine months compared to 550 in Iraq is that it lacks partners on the ground in Syria while in Iraq it has the Iraqi Army and the Kurdish Peshmerga.

Bombing blunders have a certain amount in common in all recent wars. In 1991, I went to the Amariyah shelter in Baghdad where sometime earlier the US had dropped two smart bombs that had incinerated 400 people, mostly women and children. The US had supposed it was a command centre based on radio signals and local informants. The reliability of these spies could be judged by several disastrous attempts, based on their information, to kill Saddam Hussein and his senior lieutenants who turned out to be nowhere near at the time.

In 2009 I reported on an airstrike in three villages in Farah province in south west Afghanistan, which had killed 147 villagers. It had started when there was a fight between local Afghan police and the Taliban in which the police had come off the worst. Three of their vehicles had been destroyed. Because they were frightened – and perhaps as an act of vengeance – the police (though they must have got a US Special Forces officer to sign off on this) had called in airstrikes that had destroyed the mud brick walls of the compounds and left craters 20 feet deep. The first US military explanation of what had happened, repeated by US Secretary of Defence Robert Gates, was that the Taliban themselves were responsible.

Despite the depth of the craters and the total destruction of the villages, the US officials in Kabul claimed that the Taliban, angered by lack of support locally, had gone from house to house tossing in grenades. It was an obvious lie, but, as in Deir Ezzor and Aleppo last week, it served its purpose of obscuring what had happened for a few days.

Some Yahoo users close accounts amid fears breach could have ripple effects

September 23, 2016

by Angela Moon and Amy Tennery


Many Yahoo users rushed on Friday to close their accounts and change passwords as experts warned that the fallout from one of the largest cyber breaches in history could spill beyond the internet company’s services.

After Yahoo disclosed on Thursday that hackers had stolen the encrypted passwords and personal details of more than 500 million accounts in 2014, thousands of users took to social media to express anger that it had taken the company two years to uncover the data breach.

Several users said they were closing their accounts.

“We’re probably just going to dump Yahoo altogether,” said Rick Hollister, 56, who owns a private investigation firm in Tallahassee, Florida. “They should have been more on top of this.”

Due to the scale of the Yahoo breach, and because users often recycle passwords and security answers across multiple services, cyber security experts warned the impact of the hack could reverberate throughout the internet.

Several users said they were scrambling to change log-in information, not just for Yahoo but for multiple internet accounts with the same passwords. Accounts at banks, retailers and elsewhere could be vulnerable.

“I suppose a hacker could make the connection between my Yahoo and Gmail,” said Scott Braun, 47, who created a Yahoo email when he was setting up a shop on online retailer Etsy. “They both use my first and last name. Not being a hacker, I don’t know what their capabilities are.”

That concern was echoed in Washington. “The seriousness of this breach at Yahoo is huge,” Democratic Senator Mark Warner said Thursday. The company plans to brief Warner next week about the attack, his office said.

Yahoo has said that it believes that the breach was perpetrated by a state-sponsored actor.

SY Lee, a former Department of Homeland Security spokesman, said that would be of particular concern to the intelligence community, given the interest state-sponsored hackers have in compromising employees with security clearances.

The FBI had not issued specific guidance to its employees on handling their personal Yahoo accounts, a spokeswoman said.

British companies BT Group (BT.L) and Sky Plc (SKYB.L), which use Yahoo to host email for some of their broadband customers, said they were communicating with their users.

Yahoo urged users to change their passwords and security questions, but some said it would be easier just to give up their accounts because they rarely use them.

The company has been losing users, traffic and ad revenue in recent years and over the summer agreed to sell its core business for $4.8 billion to Verizon (VZ.N).

Rachel, a 33-year-old from Newcastle, England, who asked Reuters not to use her last name, said she would be shutting down the Yahoo account she opened in 1999.

Furious that the company had not protected its customers’ data better, she said she thought this could be yet another blow for the email service, which has been overtaken in popularity by Google’s Gmail over the last decade.

But Cody Littlewood, who owns a start-up incubator in Miami Beach, was one of several users who said it was precisely because of the decline in the use of Yahoo’s services that they were not worried about the hack.

“Yahoo is only relevant for fantasy football. Worst case scenario, they get into my account and drop Jamaal Charles,” he said, a reference to the star Kansas City running back who regularly tops fantasy football rankings.

(Additional reporting by Dustin Volz; Editing by Cynthia Osterman)

 Excerpt and translation of Russian document AZ 1287-801 U concerning some aspects of the 911 attack.

“About three weeks prior to the actual attack, the special code words were developed by Atta. In that case, the Pentagon was called  ‘The Faculty of  Fine Arts”, the Capitol was termed “The Facility of Law;” and the Trade Building tower was termed, as “The Faculty of Town Planning.”  This, of course was part of the cover story that Atta and his people were students, following an educational career in America and used these for international telephone calls to their superiors in Saudi Arabia.

As soon as the date was fixed for the attack, and this information passed by the Mossad agents in Florida working inside the Atta group, the White House warned very senior American officials like the Attorney General and the Secretary of Defense and his staff, not to fly on commercial aircraft because of “rumors of possible hijackings” . No one outside of a very small circle was told the truth. And because of the possibility that the White House might still be a target of opportunity, the President went in early October, well before the projected attack date, to Texas and then later went to Florida where he and his staff remained in safety until after the attack was over.

July 26, 2001: Attorney General Ashcroft stops flying commercial airlines due to a threat assessment but “neither the FBI nor the Justice Department … would identify [to CBS] what the threat was, when it was detected or who made it.”. [Source: CBS, 7/26/01]  He later walks out of his office rather than answer questions about this. [Source: Associated Press, 5/16/02]

August 4-30, 2001: President Bush spends most of August 2001 at his Crawford, Texas, ranch, nearly setting a record for the longest presidential vacation. While it is billed a “working vacation,” ABC reports Bush is doing “nothing much” aside from his regular daily intelligence briefings. [ABC 8/3/01; Washington Post 8/7/01; Salon 8/29/01] One such unusually long briefing at the start of his trip is a warning that bin Laden is planning to attack in the US, but Bush spends the rest of that day fishing (see August 6, 2001). By the end of his trip, Bush has spent 42 percent of his presidency at vacation spots or en route. [Washington Post 8/7/01] At the time, a poll shows that 55 percent of Americans say Bush is taking too much time off. [USA Today, 8/7/01] Vice President Cheney also spends the entire month in a remote location in Wyoming. [Jackson Hole News and Guide 8/15/01]

September 6-7, 2001: 4,744 put options (a speculation that the stock will go down) are purchased on United Air Lines stock as opposed to only 396 call options (speculation that the stock will go up). This is a dramatic and abnormal increase in sales of put options. Many of the UAL puts are purchased through Deutschebank/AB Brown, a firm managed until 1998 by the current Executive Director of the CIA, A.B. “Buzzy” Krongard. [New York Times; Wall Street Journal]

September 10, 2001: 4,516 put options are purchased on American Airlines as compared to 748 call options. [New York Times; Wall Street Journal.]

September 6-11, 2001: No other airlines show any similar trading patterns to those experienced by UAL and American. The put option purchases on both airlines were 600% above normal. This at a time when Reuters (September 10) issues a business report stating “airline stocks may be poised to take off.”

September 6-10, 2001: Highly abnormal levels of put options are purchased in Merrill Lynch, Morgan Stanley, AXA Re (insurance) which owns 25% of American Airlines, and Munich Re. All of these companies are directly impacted by the September 11 attacks.

On September 10, 2001, the NSA intercepted two messages in Arabic. One message read:

“Tomorrow is zero hour” and the second “The match begins tomorrow.” [Source: New York Times, August 10, 2002] On June 19, 2002, CNN reported the contents of these two National Security Agency intercepts. Other news outlets, including The Washington Post, also reported on the intercepts.  [Source: New York Times, August 10, 2002]

September 10, 2001: Bush flew to Florida from Texas to visit with his brother Governor Jeb Bush. Attorney General Ashcroft rejects a proposed $58 million increase in financing for the bureau’s counter-terrorism programs. On the same day, he sends a request for budget increases to the White House. It covers 68 programs, but none of them relate to counter-terrorism. He also sends a memorandum to his heads of departments, stating his seven priorities—none of them relating to counter-terrorism. This is more than a little strange, since Ashcroft stopped flying public airplanes in July due to terrorist threats (see July 26, 2001) and he told a Senate committee in May that counter-terrorism was his “highest priority.” [New York Times, 6/1/02, Guardian, 5/21/02]

  • Final Observations

The final attack varied very little from the last planning stage. One of the hijacked planes, the one intended to hit the Capitol building, was crashed by action of its passengers but the other three struck their targets as anticipated. The flames, smoke and general confusion were indeed a public spectacle, seen by all of America and the buildings, beams severed when the heat reached a certain point, did collapse in great clouds. A third building was tended to from the inside, not struck by an aircraft, and because great tanks of fuel were ignited, burned until it collapsed some time later.

The carnage was not to believe and everyone involved in this felt is was a most profitable operation. As we know, and was intended, the President was acclaimed as a great leader and he was then able to marshal national support into his attack on Iraq. The failure of the commandeered aircraft to strike Congress precluded the enactment by the President of an enabling act but there was sufficient damage for him to establish more civil observations and ultimate control. e military campaign, as foreseen, has proven to be quick and decisive, Hussein and his henchmen were swept away and now the American military and civilian forces are in complete control of Iraq and its extensive untapped oil fields.. Iran has been put on notice and we expect a large, permanent American military base in the area to act as a deterrent to any future manifestation of Arab nationalism. All of our technicians, as opposed to our intelligence people, were immediately evacuated and aside from several who were temporarily detained by American authorities, eventually all were released and returned safe home.

Now, the Americans have moved from a defensive to an offensive posture and, with American support and a large military presence, the ever-present fears of attacks against Israel have been neutralized, hopefully for a very long time.”

What if the aliens we are looking for are AI?

The search for extraterrestrial life has so far assumed our cosmic neighbours are organic. What if we’re dealing with artificial intelligence?

September 23, 2016

by Richard Hollingham


For more than a century we have been broadcasting our presence to the cosmos. This year, the faintest signals from the world’s first major televised event – the Nazi-hosted 1936 Olympics – will have passed several potentially habitable planets. The first season of Game of Thrones has already reached the nearest star beyond our Solar System.

So why hasn’t ET called us back?

There are plenty of obvious answers. Maybe there are no intelligent space aliens in our immediate cosmic vicinity. Perhaps they have never evolved beyond unthinking microbial slime or – based on our transmissions – aliens have concluded it is safer to stay away. There is, however, another explanation: ET is nothing like us.

“If we do find a signal, we shouldn’t expect it’s going to be some sort of soft squishy protoplasmic alien behind the microphone at the other end,” says Seth Shostak, senior astronomer for alien-hunting organisation Search for Extraterrestrial Intelligence (Seti).

Seti has been actively searching for signs of intelligent extraterrestrial life for more than half a century. Despite tantalising signals (such as this recent one), it has so far drawn a blank. But Shostak believes we should consider looking to our own future to imagine what aliens will be like.

“Perhaps the most significant thing we’re doing is to develop our own successors,” says Shostak. “If we can develop artificial intelligence within a couple of hundred years of inventing radio, any aliens we are likely to hear from have very likely gone past that point.”

“In other words,” he says, “most of the intelligence in the cosmos, I would venture, is synthetic intelligence and that may disappoint movie goers who expect little grey guys with big eyeballs, no clothes, no hair or sense of humour.”

The argument assumes that the creatures who built the first AIs – grey guys, hyper- intelligent pan-dimensional beings, sentient trees or whatever – are no longer around.

“Well they might be,” Shostak concedes, “but once you develop artificial intelligence you can use that to develop the next generation of thinking thing and so on – within 50 years you not only have a machine that’s far smarter than all the previous machines but certainly smarter than all humans put together.”

“The big question,” says astronomer and author of the Search for Earth’s Twin, Stuart Clark, “is whether the AI goes on to become conscious and define its own goals and decide it doesn’t need the biological creatures that developed it.”

From the self-aware death machines of the Berserker books to the cyborgs of Battlestar Galactica or The Terminator, science fiction certainly has a rich seam of AIs taking over and wiping out their inferior biological creators. It is not, however, necessarily the inevitable path of any technological civilisation. Artificial Intelligence – truly thinking machines with synthetic super-brains – may not even be possible.

“It’s very unclear to me that this is inevitably going to happen,” says Clark. “But the key point is we are looking for something we imagine to be a bit like us and we’re limiting the search as a result.”

Seti uses an array of radio telescope dishes in California to search for signals. The receivers are aimed at star systems where planets have been discovered by Earth or space telescopes such as Nasa’s Kepler observatory. These are planets which might have liquid oceans and life-supporting atmospheres – habitats that have made human evolution possible. But machine intelligences could live anywhere.

“That’s the whole problem,” says Shostak. “Not only could they be anywhere, it would make sense for them to go to places in the Universe where there were big sources of energy – if you’re going to do a lot of thinking, a lot of energy helps so maybe that’s the place to look.”

If this is the case, then Seti could be looking for ET in the wrong place. “Instead of having their own fields of radio telescopes,” says Clark, “maybe that money would be better spent equipping every observatory with piggyback equipment that looks at every signal that’s been received and look for repeating patterns.”

Whether every observatory would agree to host a Seti sensor is a matter for debate. The technology might, however, reveal some other surprising astronomical discovery. We now know that pulsars are rapidly rotating neutron stars. When Jocelyn Bell discovered the first of these oscillating signals in 1967, only half-jokingly did the University of Cambridge team label it LGM1 for Little Green Men.

In the short term, Seti is likely to continue its search for life on Earth-like planets. “But,” says Shostak, “over the course of time if we can come up with some ideas of where you might find synthetic intelligence, I think they’ll be more and more experiments aimed at doing that.”

Another approach would be to broadcast messages from Earth to target regions of the cosmos. It is a controversial strategy that Stephen Hawking has warned could leave the Earth vulnerable to attack and exploitation. “We only have to look at ourselves to see how intelligent life might develop into something we wouldn’t want to meet,” he warned in 2010.

“I don’t agree,” Shostak says. “But Seti has no broadcasting capability and the other thing about broadcasting is that even if you do it, it might be a very long time before you get a response – depending how close the aliens are.”

So are we any closer to discovering whether we are the lone intelligence – AI or not – in the Universe? “I don’t think you can ever say there’s nothing there, you can’t prove that negative,” Shostak says. “What you can say is that there’s something wrong with our approach so, for me, it’s very, very early days to think about giving up.”

Clark agrees. “I think Seti should generalise its search as much as possible,” he says. “An answer to ‘yes there’s intelligent life in the Universe’ has profound implications for us and that alone qualifies Seti to carry on.”

Naked Shorts Can’t Stay Naked Forever

September 24, 2016

by David Dayen

The Intercept

Part 3

A few years into his personal quest to understand how he had lost a million dollars on a penny stock, Chris DiIorio developed a sweeping hypothesis involving Knight Capital, the mammoth brokerage company that frequently traded in them.

Knight earned $333 million in pre-tax profits in 2008, and another $232 million in 2009. But DiIorio didn’t think Knight was making that kind of money simply from executing transactions for clients.

As a market maker, Knight was in the rare position of being able to legally sell a stock it didn’t have (the principle being that it will get that stock soon, so no worries). That’s called naked shorting. It’s illegal when regular people do it.

DiIorio suspected that Knight, either on its own behalf or on behalf of clients, made a practice of artificially increasing the number of shares available in a stock through naked shorting, thereby depressing the price.

His suspicion grew when he noticed that Knight often traded in securities that were red-flagged on the Depository Trust Company’s “chill list.”

The DTC is an obscure financial industry-owned company that manages the custody of more than $1 quadrillion in securities annually, recording the transfers with journal entries and guaranteeing the trade. The company makes it easy for people to buy and sell securities without needing to exchange paper stock.

But when the DTC senses trouble, it will stop clearing trades on a stock temporarily.

A chilled stock can still trade — as long as the market participants handle the physical certificates themselves. But it can be a sign that something is gravely wrong. The DTC states on its website that it chills stocks “when there are questions about an issuer’s compliance with applicable law.”

That doesn’t stop Knight from buying and selling them, though. Its chief legal officer, Thomas Merritt, acknowledged at a 2011 Securities and Exchange Commission roundtable that the company actively traded chilled stocks, saying that as long as the security still trades, “we are going to be involved in that business.” And DiIorio found numerous examples of Knight trading chilled penny stocks.

“I didn’t know they did that,” said Jim Angel, a Georgetown University business school professor. “I’m kind of shocked to think that Knight would be working with paper stock certificates.”

He suggested that Knight might simply want to accommodate customers trying to get out of chilled stocks. “Or maybe they feel there’s enough interest in a security that they can trade profitably, even if they have to shuffle the certificates.”

Because most other market makers flee chilled stocks, however, this means Knight can assume even more control over the stock price.

Naked Manipulation

The thing about naked short sales is they can’t stay naked forever.

Even if you don’t have the stock when you sell it, at some point it is expected that you hand it over.

And even with its market-maker exemption, Knight is required by SEC rules to eventually deliver the shares in a naked short transaction to the buyer and close out the trade.

Not doing so results in a “fail to deliver,” which DiIorio describes as the securities version of an IOU. And that IOU comes with rules: Under the SEC’s  Regulation SHO, short sellers have to cough up the stock within one day of incurring the fail. Routine failures to deliver can lead to fines by the SEC, or even a ban from the securities markets.

Instead of complying with the rule, however, DiIorio alleges that Knight circumvented it by manipulating an obscure process within the machinery of the nation’s clearing system known as the “Obligation Warehouse.”

This service facilitates the matching of self-cleared trades (often known as “ex-clearing”) that don’t go through the DTC —  for instance if the stock was chilled.

The Obligation Warehouse instead simply asks the buyer and seller of these ex-cleared trades if they “know” the transaction. If they both agree, the trade gets confirmed with a journal entry — and the buyer receives their stock purchase. It actually shows up in the buyer’s brokerage account.

The trades still have active IOUs, but according to DiIorio’s theory, buyers wouldn’t clamor for the trades to be closed because they would’ve already received their purchase.

If true, this would allow Knight to bury its naked short trades.

“They set up a shadow clearing system,” DiIorio said.

Furthermore, DiIorio recognized what he considered a persistent cycle in the stocks Knight traded. After being beaten down through what he suspected was naked shorting, they would often engage in a reverse stock split or reverse merger, like E Mobile did with Best Rate Travel in the trade that ended up losing DiIorio over $1 million.

This, he observed, could enable Knight to rerun the scheme over and over again, pummeling the stock price and then letting it move back up like a yo-yo.

Laura Posner of the New Jersey Securities Commission said constant reverse splits would require a coordinated relationship between the penny stock issuer and the broker-dealer. “I know that there are situations in which fraudsters will take advantage of a stock split to commit fraud,” Posner said. “But it’s different than a typical pump-and-dump, where you don’t have to have a personal relationship.”

Alternately, the cycle could be a cat-and-mouse game playing out between the short sellers and the stock issuers. Hawk Associates, a consulting firm to small companies, recommends that penny stock issuers victimized by naked shorting engage in reverse mergers and/or reverse splits to stop the rapid degradation of their stock price. “It may be useful as part of a larger strategy to deter naked shorting,” the firm writes on its website. “This may be more trouble than it’s worth, however. Once the new shares are in circulation, there’s nothing to stop a new round of naked shorting by determined parties.”

Knight’s involvement with suspicious stocks following this same pattern kept cropping up.

For example, NewLead Holdings (NEWL) — a shipping company with a mining concern on the side that was accused in federal court of having “no coal mines, no coal, and no ability whatsoever to engage in the coal business” — engaged in 1-1,125,000 worth of reverse splits over nine months in 2013 and 2014, meaning that 1,000 shares prior to the splits were equivalent to 0.0008 shares afterward. NewLead did another 1-300 stock split just this spring; it now trades as NEWLF, at 0.00030 as of August 23. Its 2015 annual report admits, “There is substantial doubt about our ability to continue as a going concern.”

FreeSeas (FREE), another penny stock, did a 1-60 reverse split on January 15 of this year, and then another 1-200 split on April 13, changing its stock symbol to FREEF. The company has engaged in seven reverse splits in the last five years; someone with 900 million shares five years ago would have one share today, trading at less than a penny. The company’s annual report says it currently has no employees. Private equity firm Havensight Capital made an alleged bid to purchase FreeSeas in June at $0.43 a share, about 80 times its price at the time of this writing, which FreeSeas called “false and misleading.”

While one might think this cycle of splits and price declines would trigger red flags with federal regulators, Joseph Borg of the Alabama Securities Commission doubted they would pay attention. “It’s like asking the SEC, of all the 35,000 private placements issued, you look at how many? And if they were telling the truth they would say we’re putting them in a drawer,” Borg said. “Anything like that on miniscule levels, they just get filed away.”

Furthermore, while there are “circuit breaker” rules preventing short sales when a stock loses more than 10 percent of its value in a day, these swings were more gradual. Knight made a lot of money on these plays, not just from the spread in trading profits, but because it often traded on its own account rather than on behalf of customers, DiIorio concluded. When the stock dropped, Knight got rich from the short. And it could rerun this repeatedly

“He’s got a theory that, without studying it, I see theoretically where he’s going with it,” concluded Borg. “It’s an interesting idea.”

Knight is now known as KCG. Its spokesperson Sophie Sohn declined to comment when asked about this and other matters.

Attempts to reach spokespeople at FreeSeas have proven unsuccessful. Elisa Gerouki, corporate communications manager at NewLead, asked me to prove he wrote for The Intercept; after I did so, Gerouki failed to respond to questions.

Where Naked Shorts Go to Die

DiIorio also spotted a significant, seemingly toxic byproduct of this sort of activity.

Reverse mergers and reverse splits typically result in a change in the CUSIP, the nine-digit identification symbol assigned to a public stock.

Once that CUSIP changes, the naked shorter has no apparent way to close out the naked short position. No stock under the old CUSIP number exists anymore; it all automatically converts to the new CUSIP.

Those trades can sit in the Obligation Warehouse forever, in theory. But the “aged fails” — essentially orphaned naked short transactions — remain on the naked shorter’s balance sheet as a liability to be paid later.

By DiIorio’s reckoning, then, the cycle of naked shorting and reverse splits would inevitably result in an ever-increasing number of aged fails. And if that was happening, and those liabilities grew bigger and bigger, then federal regulators could see the outlines of the scheme on any financial statement.

DiIorio believed Knight accounted for its aged fails in the “sold not yet purchased” liability on its balance sheet. That’s supposed to be an inventory of stocks for use in future market making, which goes up and down as orders are filled. But DiIorio says it was a hiding place for a billowing structural liability.

And consider this: According to its own financial reports, Knight’s “sold not yet purchased” liability jumped from $385 million at the beginning of 2008 to $1.9 billion by mid-2011.

Jim Angel, the business professor, said there could be other explanations — such as Knight’s growth as a company during that period — for why the “sold not yet purchased” liability ballooned. But, he said, market makers are typically “in the moving, not storing, business, and like to keep their inventories as small as possible.”

DiIorio had no such doubts. He saw the fact that Knight was blowing a hole in its own balance sheet as undeniable evidence of the naked shorting play.

KCG spokesperson Sophie Sohn was asked specifically about that claim and declined to comment.

If DiIorio was correct, Knight was driving penny stocks down over and over again with naked shorting, then not actually closing the trades, and racking up enormous paper liabilities.

This was even more complicated than he thought. It was time to call the cops.



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