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Foreign Money and Revolving Doors


December 12, 2012

It was difficult to take seriously the attack on President Obama’s UN ambassador, Susan Rice, based on her faulty renditions of events surrounding the killing of a U.S. ambassador and three other Americans in Benghazi, Libya. Certainly, her performance on the Sunday TV talk shows was unimpressive, whatever conclusions one may draw as to what accounted for her persistent inaccuracies in describing what happened. But there was no real evidence that she willfully dissembled on the matter, and it didn’t seem to be of a magnitude to disqualify her for the job of Secretary of State, to which Obama reportedly wants to nominate her.

The subsequent reports about her actions regarding various African conflicts and her coziness with certain brutal strongman figures are another matter. These call into question her judgment and generate puzzlement about just what drives her views and attitudes about the bloody conflagrations that erupt with such regularity on that continent. These matters clearly would justify voting against her if any confirmation resolution made its way to the Senate, although many supporters of Rice—and of Obama—would find ways to dismiss the issue.

But there’s one fact in the background of Susan Rice that ought to be considered disqualifying—her past work for Rwanda when she was a consultant with a strategic consulting firm called Intellibridge. The riff on Rice is that she has demonstrated a certain softness toward Rwanda and particularly its president, Paul Kagame, in various policy deliberations regarding Rwanda’s support for a brutal rebel group that is wreaking havoc in neighboring Congo. And some have wondered if her past business relationship with Rwanda may be influencing her thinking on the matter.

But let’s step back here. We can never know for sure just what drives Rice’s ongoing desire to shield the Rwandan leader from international censure and pressure, though her actions, as reported recently by Helene Cooper in the New York Times, aren’t particularly fragrant. But we do know that she took money from an African government after serving in the State Department as assistant secretary for African affairs.

There’s nothing wrong with contracting with foreign governments who want influence in the U.S. capital. And some Washington bigwigs have made lots of money catering to these governments and their leaders. That’s fine. I wouldn’t even argue that Obama should succeed in extracting more tax dollars from these people.

But our country’s Secretary of State represents the United States of America throughout the world—to countries large and small; in matters weighty and trivial. There should never be any doubt—abroad or at home—about what drives the sentiments and actions of such high governmental officials: the national interest, as determined by the nation’s president.

No president should ever appoint to the position of secretary of state anyone who has ever taken money from a foreign government. There should be a clear dichotomy between getting rich serving the interests of other countries in the U.S. capital and serving U.S. interests at the top of America’s foreign-policy establishment.

In fact, there ought to be a law. Congress should pass legislation debarring from such elevated positions of service in the foreign-policy realm people who have had business relationships with foreign countries. No debates about how long those relationships lasted . . . or how much money was involved . . . or whether it really and truly would color the person’s judgment or outlook on countries of past financial alignment. The law would cut through all that by saying simply that you can take money from foreign governments or you can represent your country abroad, but you can’t do both.

Paul R. Pillar of Georgetown, writing in these spaces, noted accurately the problems that arise when top Washington officials navigate the enticing revolving door between government service and rich contracts in the private sector. He said Rice’s attachment to Kagame and his government illustrates “the baggage that in-and-outers may acquire during periods that they are out of government.” He adds, “Relationships…of advocacy, trust and taking action on behalf of the client’s interests are not relationships that can be turned on and off like a light switch.”

True, but it gets difficult to sort it all out, and efforts to do so simply confuse the matter and foster endless debate.

In Helene Cooper’s Times piece, Rice’s acolytes rushed to her defense by saying that her past connection with Rwanda hasn’t affected her behavior as U.S. ambassador to the United Nations—and hence presumably wouldn’t do so if she were secretary of state. Her spokesman, Payton Knopf, told the Times, “Ambassador Rice’s brief consultancy at Intellibridge has had no impact on her work at the United Nations. She implements the agreed policy of the Unites States at the U.N.” Perhaps. But that’s hardly the point. The question is what kind of advocacy does she put forth before the agreed policy of the United States is determined.

We don’t know the answer to that question and, if we did, we still wouldn’t know what motivations affected whatever advocacy Ms. Rice embraced. But, if Congress drew a line between foreign representation and U.S. foreign service, it wouldn’t matter. No debate. Her name wouldn’t come up.

No such line is going to be forthcoming from Congress. It is not in the interest of official Washington, and the American people don’t care. But, if Obama sends up Rice’s name for secretary of state, an ugly debate will ensue. And it will be a debate that should have been avoided.

Robert W. Merry is editor of The National Interest and the author of books on American history and foreign policy. His most recent book is Where They Stand: The American Presidents in the Eyes of Voters and Historians.

Public firms usually settle foreign bribery charges


USA Today

You’re the CEO of a global, publicly traded corporation. You’ve just learned that some employees may have bribed foreign government officials to help your business get contracts.

Now federal prosecutors and regulators want to see company records as part of an investigation under a law called the Foreign Corrupt Practices Act.

What do you do? In many cases, negotiate a settlement, pay a fine, and get back to business.

The scenario is a hot topic in corporate boardrooms in the wake of allegations by a former Wal-Mart official that company executives in Mexico paid millions of dollars to government officials there in a successful effort to speed the opening of new stores. The allegations, now under review by the company and federal investigators, were disclosed last month by The New York Times.

It’s not yet clear what, if anything, will come of the review. But records of Foreign Corrupt Practices Act cases show publicly traded companies are leery about going to trial against the government.

“The companies that actually fight the Justice Department or the Securities and Exchange Commission are pretty few and far between,” said Amy Conway-Hatcher, a former federal prosecutor who heads the Internal Investigation practice for the Kaye Scholer law firm in Washington, D.C. “You usually see corporate settlements arise out of this.” Read more.

Wal-Mart scandal intensifies focus on foreign bribery


The Kansas City Star

By Mark Davis

April 24, 2012

U.S. government in recent years has sought to crack down on crooked tactics abroad.

Foreign bribery. Internal investigations. Public scandal. Hefty fines. Prison.

Doing business in a global economy isn’t supposed to be like this.

But recently-published allegations that Wal-Mart Stores Inc. covered up bribes in Mexico add to the considerable evidence that simple corruption is ingrained in the international business world.

Wal-Mart said Tuesday it was taking “a deep look” at its policies and procedures, and would name a global compliance officer to oversee five regional officials charged with meeting the terms of the U.S. Foreign Corrupt Practices Act.

The Wal-Mart case brings renewed attention to the 1977 law that grew out of a discovery that hundreds of U.S. companies had paid bribes and made questionable payments overseas. The law forbids individuals or companies from winning or keeping business through bribery.

But it clearly happens.

“It’s difficult to do business in many countries,” said Linda Tiller, international business law attorney at Husch Blackwell in Kansas City. “The officials expect to have a perk — cash or trips or other things of value — for access to government contracts or approvals. Frankly, in many countries they simply don’t understand U.S. law.”

Perhaps some distant workers don’t either — but companies are liable just the same.

Locally, Layne Christensen Co., based in Mission Woods, continues to deal with its September 2010 discovery of questionable payments to agents and others interacting with government officials in some countries in Africa. The latest news is that the $3.7 million that Layne Christensen, a mining and drilling services company, set aside to cover its exposure under the Foreign Corrupt Practices Act may not be enough.

The weight of the law on any company depends a great deal on how quickly it acts and cooperates with federal officials about what it learns. The Securities and Exchange Commission made that written promise in a 2001 document informally called the Seaboard Report.

Seaboard Corp., the Merriam-based agriculture and shipping conglomerate, avoided SEC sanction under a different law by acting quickly and openly when it learned of problems with its financial reports traced back to an employee. The report outlines 13 factors that could work to a company’s credit in SEC cases.

It matters, for example, whether senior personnel turned “a blind eye toward” obvious signs of a problem, the Seaboard Report said.

Civil cases brought by the SEC under the act have jumped sharply since 2006, as have criminal prosecutions by the U.S. Justice Department.

It’s not that foreign corruption suddenly began five years ago. It’s that it began to get a lot more attention.

Several schemes alleged by the SEC in recent years have targeted corrupt practices that had persisted for a decade — for example, bribing doctors in South America or government officials in Nigeria.

Increased government action seemed to begin with a 2007 case against Baker Hughes Inc., said Russ Berland, a lawyer at Stinson Morrison Hecker in Kansas City who helps companies comply with the act. The fine was the largest at the time, and it was the second time that Houston-based Baker Hughes, an oilfield services business, was sanctioned, he said.

A New York Times article Sunday said Wal-Mart failed to tell law enforcement about its own 2005 discovery of possible bribery in its Mexico business.

The Times said a Wal-Mart investigation found details of $24 million in suspect payments to help expand the retailer’s presence in Mexico. But according to The Times, the inquiry was shut down despite a report from the lead investigator that Mexican and U.S. laws probably were violated.

Wal-Mart, in a statement by spokesman Dave Tovar, has since said that it is “committed to getting to the bottom of this matter.” The statement said the alleged bribery “occurred more than six years ago” and was “not a reflection of who we are or what we stand for.”

Tovar also has said the company’s effort includes “developing and implementing recommendations” for training about the Foreign Corrupt Practices Act, anti-corruption safeguards and other controls.

The U.S. law grew out of a mid-1970s SEC investigation in which more than 400 U.S. companies told the agency about making more than $300 million in illegal or questionable payments to foreign officials and others. Similar laws spread to 33 other nations in the 1990s.

In 2010, Britain adopted a tougher version than the U.S. law, which allows payments to “facilitate or expedite” a “routine governmental action” such as obtaining a permit, processing government papers, providing police protection and similar actions.

Still, some in the American business community have called for relaxing the U.S. law, saying some provisions make competing for business overseas too difficult. But no proposals have reached Congress.

Attention to corruption also has become a part of business routine. Companies that list their stock for public trading warn investors that their employees or foreign subsidiaries might expose the company to anti-corruption prosecution in the United States and abroad. Others formally vow in the paperwork tied to mergers or bond deals that they, their employees and subsidiaries have not violated the Foreign Corrupt Practices Act.

Corruption has even become part of not doing business.

“In some countries, there is a culture of having to pay officials to get things done,” said Chip Breitweiser, a vice president in international operations at Lenexa-based CST Industries Inc. “Where that is customary, we choose not to participate in those countries.”

CST Industries, which makes storage tanks, domed covers and related products, has offices in Brazil, Britain, India, Singapore, Vietnam and Dubai, and does business in 125 countries.

Breitweiser said many of the trouble spots are in Africa and former Soviet republics.

Transparency International would second that notion. It surveys businesses and makes other assessments of the perceived corruption among the public sectors of 183 nations. Its worst scores pepper Africa, Asia and South America.

The scores it assigns rely on perceptions about bribery of public officials, kickbacks in public procurement, embezzlement of public funds and the like, because this behavior typically remains hidden.

Wal-Mart’s brush with the foreign bribery ban could in the end put it on a long list of companies that have run afoul of the law. Several large and well-known companies have faced federal action in the last three years, including Johnson & Johnson, Siemens, IBM, Tyson Foods, Alcatel-Lucent, GE and DaimlerChrysler.

The Associated Press contributed to this report.

Source: Transparency International

Morocco’s High-Speed Train Not Yet on Track


The New York Times

By Aida Alami

April 18, 2012

CASABLANCA — The Moroccan government’s cherished ambition to build a fast train linking its major cities is running into trouble.

The plan has provoked a debate not only about the wisdom of the project but also about what form development should take in a country as poor as Morocco: Should it be embracing potentially transforming technology or should it stick to basics like building schools and hospitals?

The high-speed rail link would be built with French help. It would link the country’s economic center, Casablanca, with the capital, Rabat, and Tangier, in the north. The project, expected to cost $4 billion, is to be financed by French loans and donations from Kuwait, the United Arab Emirates and Saudi Arabia…Last October, Cap Democracy Morocco released a 30-page report analyzing the project’s economics and enabling Moroccan citizens to judge its merits for themselves. The report was written by Ahmed Damghi, a 25-year-old engineering student in Paris, who interned at Alstom and Veolia, both major French companies. He believes that the country could get a much better value by adjusting the existing system rather than undergoing a high-technology makeover that is unnecessary.

“Nobody can predict if it is going to be profitable or not,” Mr. Damghi said. “The decision should be made after a public debate and in a democratic manner.”

He noted that the bid had been awarded to Alstom without a competitive tender, even though there are other high-speed rail makers in Germany and Japan. The motivation, he argued, was to cozy up to France. “We all know that there are diplomatic motivations for this project,” said Mr. Damghi, “but they are not enough to justify undertaking a project that profits a small minority.” Read more.

Africa on K Street: Lobbying Is Not Restricted to the Developed World


Huffington Post.

By Vijava Ramachandran

This is a joint post with Julie Walz.

February 13, 2012

The aid community is well-accustomed to pushing for transparency in foreign aid transactions. But are we missing another key flow of money?

A recent article by Geoffrey York, African bureau chief for the Globe and Mail, described a contract signed a few years ago by the Government of Rwanda with Racepoint Group, which was tasked with doing an image makeover for the Rwandan government for a monthly fee of over $50,000. The rationale was that public perceptions of Rwanda were dominated by the horrific genocide that occurred in the 1990s, along with accounts of human rights abuses and media censorship. The contract with Racepoint reportedly aimed to increase the number of stories of Rwanda’s successes and block criticism of the government and its alleged human rights abuses. The effort landed more than 100 positive articles per month in newspapers from the New York Times to BBC, increased discussions of travel to Rwanda by 183%, and decreased discussion of the genocide by 11%, according to Racepoint.

In 2007, Racepoint also led a campaign to promote Libya‘s Gaddafi as an “intellectual and philosopher,” in advance of the thirtieth anniversary of his rule. Four years later, Libyan rebels hired the Washington lobby firm, Patton Boggs to help them unseat Gaddafi.

Other African governments have also invested in lobbyists. The Kenyan government contracted one of the top Washington lobbying firm Chlopak Leonard Schechter to restore its reputation after stories of election-related violence dominated the news headlines. It hoped to further U.S. support for its military and intelligence work, fighting piracy and dealing with the deteriorating situation in Somalia. Chlopak Leonard successfully placed positive stories in US media outlets and was able to call attention in Congress to the Somali crisis. President Obama’s Somalia policy even includes specific recommendations from the Kenyan government’s proposal to fight piracy and terrorism…Read more.

Russia seeks foreign investment to fill budget gap


Image representing New York Times as depicted ...
Image via CrunchBase

New York Times, January 24, 2011 by Andrew Kramer

Moscow- A few years ago, Vladimir V. Putin, as president compared the energy riches of Siberia to a piece  of candy held tightly by Russia, as if in a “sweaty fist.” However much investors might want it, it was off limits. Yet just last month, Mr. Putin, now prime minister, said Russian officials “understand that we need foreign investment.” Read more

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