Crooked Congress on Steroids

Senator Orrin Hatch's top aid briefed investors on legislation on the hill that led to huge profits. (photo: Getty Images)

Investors Get 'Political Intel' Directly 

Congress

By Jia Lynn Yang, Tom Hamburger and Dina ElBoghdady, The Washington Post

07 May 13

n the same morning a congressional staffer told investors in a private call that odds were improving for a government decision that would help medical insurers, trading spiked in a major health-care company.

The private call, arranged by a consulting firm called Capitol Street, took place the morning of March 18. At 11:05 a.m., a certain form of speculative trading in Humana, the health insurer, jumped. That day, there was nearly 10 times as much volume as any day in the previous two weeks.

There is no evidence that the trades were in response to the Capitol Hill phone call with a top aide for Sen. Orrin G. Hatch (R-Utah). But the conference call reveals the extent to which a direct pipeline of valuable political insight exists between Capitol Hill and Wall Street, one that ordinary Americans and investors do not enjoy.

"Political intelligence" firms - companies that sell their analysis of federal actions to investors - have drawn much of the scrutiny from lawmakers and investigators worried about potential insider trading. Last month, federal regulators issued subpoenas to the law firm Greenberg Traurig and an analyst at the brokerage firm Height Securities in connection with another spike in trading that occurred after information was shared about the government's health-care decision.

But it is not just boutique firms and lobbyists offering political intelligence. Congress itself has become a source of sophisticated political analysis for investors, for whom every nugget of exclusive information can translate to millions of dollars in profit.

Ipsita Smolinski, managing director of Capitol Street, said she has asked other Senate staffers to participate in similar calls, though she declined to estimate how many had done so, or how often. She viewed the calls as innocuous.

"I wouldn't expect anyone on a call - any staffer - to say anything they would not say to a researcher, a student, an investor or a reporter," said Smolinski, adding that she routinely records such calls as part of an ongoing "commitment to transparency."

She called it "highly unlikely" that her clients would have moved the market. Smolinski described the participants in the call with Hatch's office as institutional investors, such as pension systems, mutual funds and hedge funds. Of interest was how the Obama administration would set rates paid to health insurers that participate in Medicare. She said the half-hour call took place in the morning but could not confirm the precise time.

Hatch spokeswoman Antonia Ferrier denied that the call had anything to do with the spike in trading or that the staff member revealed confidential information.

"No one working for Senator Hatch had any advance knowledge of this [Medicare] announcement - period," said Ferrier, who argued that the staff member, Stephanie Carlton, actually made the wrong prediction on the call about the administration's action.

According to an audio recording of the call obtained by The Washington Post, Carlton, a longtime health-care policy aide for Hatch, spoke cautiously, offering technical details and often attributing her facts to public information.

At one point, Capitol Street's Smolinski pressed Carlton to be specific with her insight. Smolinski asked her to quantify her "crystal ball" regarding the administration's decision.

"I think I would have moved from, say, if I were assigning probabilities 0 to 100 percent, I would have said 5 to 10 percent likelihood . . . a month ago," Carlton said. "I would move it up to maybe 30, 35 percent probability that they change it."

She added that she was "definitely more optimistic," though there remained at least one roadblock.

Based on some different factors, though, if they were ever to change the Medicare policy, "this would be the year to do it," Carlton said.

Carlton left Hatch's staff last week for a job in the private sector, a move that Hatch's office said was a long-standing plan. Attempts to reach her were unsuccessful.

Information in Washington is both highly valuable and extremely fluid. Every day there are lobbyists, congressional staffers and reporters trying to figure out what happened behind some closed-door meeting, which senator is about to switch position on a major piece of legislation and whether a regulator is going to greenlight or block a big merger.

This has given rise to a booming business in researchers claiming to offer political intelligence that could give investors an edge in their trading.

Stan Brand, a Washington lawyer specializing in congressional ethics, said he is hearing increasingly about Hill staffers being called to participate in financial industry and investor briefings like the one hosted by Capitol Street.

"It was not common until very recently," said Brand, former counsel to the House of Representatives who now handles criminal defense and ethics cases involving public officials. "I think the financial meltdown and the ensuing interest in regulation of the markets and how they are impacted by Washington has made this a more recurrent issue."

Ferrier said Hatch was aware that his staff gets requests to do briefings from a wide variety of individuals and organizations, including investors. "What information they share is the same information that Senator Hatch shares in an open and transparent way with his constituents," she said.

From Brand's perspective, virtually no limits on speaking exist for congressional staffers, provided there is no remuneration of gifts provided to the public official. Could a Senate staffer impart insider information and be prosecuted? "I think that would be a tough row to hoe," he said.

Insider-trading laws dictate that information that's "material" and not public has to be treated with the utmost care. The Stock Act, passed last year, makes explicit that members of Congress, their staff members and government officials must treat certain information as confidential.

Yet there is a whole gray area of information - call it analysis - that is not easy to judge. Lobbyists with close ties to former colleagues on the Hill, or congressional staffers themselves, can sometimes offer their best sense of what is happening in Washington, offering to investors a composite of what they are hearing from various sources.

Basing predictions on many little data points, none of which are material, is a permissible practice often referred to as the "mosaic theory" in industry parlance, said John C. Coffee Jr., a professor at Columbia Law School.

"But as a matter of ethical policy, you should have a Caesar's-wife approach," said Coffee, who specializes in securities law and white-collar crime. "Stay above suspicion and do not participate in discussions with investors who are clearly seeking to profit from your information."

A few weeks after the call with Hatch's staffer, the administration announced it would raise rates for insurers participating in Medicare, instead of cutting them as previously proposed.

Investors who purchased the options on March 18 could have made a return of five times on their investment or more, said Laura Robinson, a managing director at Navigant Economics in Washington, an economic and financial consulting firm.

The data on the unusual spike in the trading of certain options on Humana's stock were supplied to The Washington Post by Tradeworx, a quantitative trading firm.

Hatch's office denied that there was any connection.

"To say that a staffer who got it wrong contributed to a spike in the market is like saying that because the sky is blue and a train went through Washington, the reason the train went through Washington is because the sky is blue," Ferrier said. 

The US Surveillance State

The American surveillance state is growing. (photo: Alamy)

Are All Telephone Calls Recorded and Accessible to the US Government?

By Glenn Greenwald, Guardian UK

he real capabilities and behavior of the US surveillance state are almost entirely unknown to the American public because, like most things of significance done by the US government, it operates behind an impenetrable wall of secrecy. But a seemingly spontaneous admission this week by a former FBI counterterrorism agent provides a rather startling acknowledgment of just how vast and invasive these surveillance activities are.

Over the past couple days, cable news tabloid shows such as CNN's Out Front with Erin Burnett have been excitingly focused on the possible involvement in the Boston Marathon attack of Katherine Russell, the 24-year-old American widow of the deceased suspect, Tamerlan Tsarnaev. As part of their relentless stream of leaks uncritically disseminated by our Adversarial Press Corps, anonymous government officials are claiming that they are now focused on telephone calls between Russell and Tsarnaev that took place both before and after the attack to determine if she had prior knowledge of the plot or participated in any way.

On Wednesday night, Burnett interviewed Tim Clemente, a former FBI counterterrorism agent, about whether the FBI would be able to discover the contents of past telephone conversations between the two. He quite clearly insisted that they could:

BURNETT: Tim, is there any way, obviously, there is a voice mail they can try to get the phone companies to give that up at this point. It's not a voice mail. It's just a conversation. There's no way they actually can find out what happened, right, unless she tells them?

CLEMENTE: "No, there is a way. We certainly have ways in national security investigations to find out exactly what was said in that conversation. It's not necessarily something that the FBI is going to want to present in court, but it may help lead the investigation and/or lead to questioning of her. We certainly can find that out.

BURNETT: "So they can actually get that? People are saying, look, that is incredible.

CLEMENTE: "No, welcome to America. All of that stuff is being captured as we speak whether we know it or like it or not."

"All of that stuff" - meaning every telephone conversation Americans have with one another on US soil, with or without a search warrant - "is being captured as we speak".

On Thursday night, Clemente again appeared on CNN, this time with host Carol Costello, and she asked him about those remarks. He reiterated what he said the night before but added expressly that "all digital communications in the past" are recorded and stored:

Let's repeat that last part: "no digital communication is secure", by which he meansnot that any communication is susceptible to government interception as it happens (although that is true), but far beyond that: all digital communications - meaning telephone calls, emails, online chats and the like - are automatically recorded and stored and accessible to the government after the fact. To describe that is to define what a ubiquitous, limitless Surveillance State is.

There have been some previous indications that this is true. Former AT&T engineer Mark Klein revealed that AT&T and other telecoms had built a special network that allowed the National Security Agency full and unfettered access to data about the telephone calls and the content of email communications for all of their customers. Specifically, Klein explained "that the NSA set up a system that vacuumed up Internet and phone-call data from ordinary Americans with the cooperation of AT&T" and that "contrary to the government's depiction of its surveillance program as aimed at overseas terrorists . . . much of the data sent through AT&T to the NSA was purely domestic." But his amazing revelations were mostly ignored and, when Congress retroactively immunized the nation's telecom giants for their participation in the illegal Bush spying programs, Klein's claims (by design) were prevented from being adjudicated in court.

That every single telephone call is recorded and stored would also explain this extraordinary revelation by the Washington Post in 2010:

Every day, collection systems at the National Security Agency intercept and store 1.7 billion e-mails, phone calls and other types of communications.

It would also help explain the revelations of former NSA official William Binney, who resigned from the agency in protest over its systemic spying on the domestic communications of US citizens, that the US government has "assembled on the order of 20 trillion transactions about US citizens with other US citizens" (which counts only communications transactions and not financial and other transactions), and that "the data that's being assembled is about everybody. And from that data, then they can target anyone they want."

Despite the extreme secrecy behind which these surveillance programs operate, there have been periodic reports of serious abuse. Two Democratic Senators, Ron Wyden and Mark Udall, have been warning for years that Americans would be "stunned" to learn what the US government is doing in terms of secret surveillance.

Strangely, back in 2002 - when hysteria over the 9/11 attacks (and thus acquiescence to government power) was at its peak - the Pentagon's attempt to implement what it called the "Total Information Awareness" program (TIA) sparked so much public controversy that it had to be official scrapped. But it has been incrementally re-instituted - without the creepy (though honest) name and all-seeing-eye logo - with little controversy or even notice.

Back in 2010, worldwide controversy erupted when the governments of Saudi Arabia and the United Arab Emirates banned the use of Blackberries because some communications were inaccessible to government intelligence agencies, and that could not be tolerated. The Obama administration condemned this move on the ground that it threatened core freedoms, only to turn around six weeks later and demand that all forms of digital communications allow the US government backdoor access to intercept them. Put another way, the US government embraced exactly the same rationale invoked by the UAE and Saudi agencies: that no communications can be off limits. Indeed, the UAE, when responding to condemnations from the Obama administration, noted that it was simply doing exactly that which the US government does:

"'In fact, the UAE is exercising its sovereign right and is asking for exactly the same regulatory compliance - and with the same principles of judicial and regulatory oversight - that Blackberry grants the US and other governments and nothing more,' [UAE Ambassador to the US Yousef Al] Otaiba said. 'Importantly, the UAE requires the same compliance as the US for the very same reasons: to protect national security and to assist in law enforcement.'"

That no human communications can be allowed to take place without the scrutinizing eye of the US government is indeed the animating principle of the US Surveillance State. Still, this revelation, made in passing on CNN, that every single telephone call made by and among Americans is recorded and stored is something which most people undoubtedly do not know, even if the small group of people who focus on surveillance issues believed it to be true (clearly, both Burnett and Costello were shocked to hear this).

Some new polling suggests that Americans, even after the Boston attack, are growing increasingly concerned about erosions of civil liberties in the name of Terrorism. Even those people who claim it does not matter instinctively understand the value of personal privacy: they put locks on their bedroom doors and vigilantly safeguard their email passwords. That's why the US government so desperately maintains a wall of secrecy around their surveillance capabilities: because they fear that people will find their behavior unacceptably intrusive and threatening, as they did even back in 2002 when John Poindexter's TIA was unveiled.

Mass surveillance is the hallmark of a tyrannical political culture. But whatever one's views on that, the more that is known about what the US government and its surveillance agencies are doing, the better. This admission by this former FBI agent on CNN gives a very good sense for just how limitless these activities are.

 

Two Explosions, Two Different Responses

TWO EXPLOSIONS, TWO RESPONSES
op-ed by Dr. Marty Nathan
Friday, May 3, 2013, Daily Hampshire Gazette

NORTHAMPTON, MA --- Two days separated the explosions at the Boston
Marathon and West Texas. On April 15, two homemade bombs went off in
Copley Square, killing three people and wounding more than 180. On April
17 a mushroom cloud rose over the West Fertilizer factory, killing 15
people, wounding over 200, destroying 60 houses and evacuating a community.

The responses? 

After the tragedy in Boston, President Obama offered his
prayers and said "any responsible individuals, any responsible groups
will feel the full weight of justice." Thousands of police, state
troopers and FBI swarmed over the Boston area to track down the Tsarnaev
brothers, killing the older brother and capturing the younger, who is
now in federal prison. Despite the fact that the Tsarnaevs were refugees
from the former Soviet Union and their case had nothing to do with the
present immigration debate, Republicans threaten to block the pending
immigration compromise as a result of their actions. There has been a
spate of anti-Muslim acts of violence nationally and every day the
national airwaves, cyberspace and newspapers are filled with further
attack details, speculation about motives and proposals to prevent
further such acts of terrorism.
 

          The carnage of West, Texas, slipped quietly off those same pages and
          airwaves. President Obama offered only his prayers, not the full weight of justice.
          No discussion on the front page of the New York Times of catching the
          (corporate) criminals, no SWAT teams or house-to-house searches, no blaming
          Government officials for dropping the investigative ball that would have
          prevented this horror. And yet, it certainly could have been prevented.

(In the Asian building collapse, the Owner was arrested, and his property seized. -Ed.)

According to Reuters, the West Fertilizer Plant was the site of improper
storage of more than 2,700 tons of ammonium nitrate. This is 1,350 times the amount that would require a facility to self-report its stockpile to
the Department of Homeland Security. Ammonium nitrate is a fertilizer
used around the world, and is safe if handled properly. However, it is
highly explosive when ignited, as it was by Timothy McVeigh in the
Oklahoma City bombing.

In fact, West Fertilizer had not been fully inspected by any agency
since 2006, when a neighbor complained to the Texas Commission on
Environmental Quality about a strong ammonia smell coming from the
plant. That same year the EPA fined the company $2,300 for failing to
update a risk management Plan.

The explosion resulted from a workplace catastrophe and the main agency
responsible for protecting the workers there (and thereby the
community), the Occupational Safety and Health Administration, should
have identified and removed the risk. But when was the last OSHA
inspection? According to the Christian Science Monitor, in 1985, more
than 25 years ago, multiple "serious" violations of federal';; safety
requirements were detected, for which the company paid a grand total of
$30 in fines.

Why the yawning disparity between the two responses? The deaths,
injuries and destruction of West Fertilizer are a Corporate crime. Our
government and our media have different standards for individual and 
Corporate crimes.

In 2010, 4,500 men and women died in the workplace, more than the number
of U.S. soldiers who died in the entire Iraq War. Another 50,000 workers
die annually from chronic diseases contracted in the workplace. Yet the
only agency that protects them --- us --- has always been understaffed,
so that a plant like West Fertilizer can expect to be inspected by OSHA
only once every 67 years. The 2,200 inspectors at both federal and state
level cover 7.5 million workplaces employing more than 130 million
workers. That's one inspector for every 58,000 workers. And the fines,
if ever paid, are a pittance.

Now, enter the federal Sequester. The agency will have to cut its $565
million budget by 8.2 percent, which the White House predicted would
mean 1,200 fewer workplace Inspections.

The Boston Marathon bombing made every one of us think hard about our
own security. But West, Texas, reminds us real security is a complex and
expensive process that results from government investment in
environmental and workplace safety and health, access to necessities for
all our people, particularly the most vulnerable, and ensuring that
there are not different standards of justice for different types of
deadly and preventable violence.

I will be joining Northampton (Massachusetts) City councilors, students, educators,
workers and advocates for the poor on the steps of Northampton City Hall
May 17 at 3:45 p.m. to demand a "Budget for All." We need comprehensive
security for our communities.

Marty Nathan, M.D., of Northampton, MA, is assistant professor of
medicine at Tufts University in Boston, and a family practitioner at
Baystate Brightwood Health Center in Springfield, MA

"Fix the Debt" Screamers are Tax Cheats

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"Fix the Debt" CEOs Enjoy Taxpayer-Subsidized Pay

By Sarah Anderson, Scott Klinger and Javier Rojo, Institute for Policy Studies

REPORT KEY FINDINGS

Thanks to a "performance pay" tax loophole, large corporations in the United States today are routinely deducting enormous executive payouts from their income taxes. In effect, these companies are exploiting the U.S. tax code to send taxpayers the bill for the hue rewards they're doling out to their top executives.

• During the three-year period 2009-2011, the 90 publicly held corporate members of the austerity-focused "Fix the Debt" lobby group shoveled out $6.3 billion in pay to their CEOs and next three highest-paid executives.[i]
• These 90 Fix the Debt member firms raked in at least $953 million - and as much as $1.6 billion - from the "performance pay" loophole between 2009-2011. The exact full value of corporate windfalls from this loophole will remain impossible to compute until we have more complete mandated disclosure for executive compensation.
• Top executives at these same Fix the Debt companies are aggressively advocating cuts to government programs that benefit the ordinary American taxpayers subsidizing their compensation. Many of these executives have also added to America's debt and deficit by using tax havens and other accounting tricks to have their corporations avoid paying their fair tax share.[ii]
• Health insurance giant UnitedHealth Group enjoyed the biggest taxpayer subsidy for its CEO pay largesse. The nation's largest HMO paid CEO Stephen Hemsley $199 million in total compensation between 2009 and 2011. Of this, at least $194 million went for fully deductible "performance pay."[iii] That works out to a $68 million taxpayer subsidy to UnitedHealth Group - just for one individual CEO's pay. A just-released proxy reveals that Hemsley pocketed another $28 million in "performance pay" in 2012, which computes into a tax break for UnitedHealth of nearly $10 million.
• Discovery Communications stood next in line for a government handout. Between 2009 and 2011, CEO David Zaslav pocketed $114 million, $105 million of this in exercised stock options and other fully deductible "performance pay." That translates into a $37 million taxpayer subsidy for Discovery and its lavish executive pay policies. In 2012, Zaslav hauled in enough additional "performance pay" to generate a tax break worth $9 million.

Even big losers win with the "performance pay" loophole. Gambling titan Caesars Entertainment has hemorrhaged money in recent years, driving CEO Gary Loveman's stock options underwater. Loveman managed, even so, to take home $9.6 million in cash bonuses between 2009-2011, a windfall that's generating taxpayer subsidies the firm can cash in to lower its taxes over years to come.

INTRODUCTION

Fix the Debt is a corporate-backed lobby group committed to slashing Social Security and other earned benefits and social

The insurance programs - all under the veil of "deficit reduction." But, as this report documents, the very taxpayers who pay into and depend on these programs and benefits are subsidizing excessive compensation for the top executives of Fix the Debt member corporations and other large firms.

These pages calculate how much the corporations Fix the Debt CEOs manage have benefited from a federal tax code loophole that lets major firms deduct unlimited amounts off their income taxes for the expense of executive stock

A loophole history

In 1993, amid widespread public revulsion at executive pay excess, Congress passed legislation that capped the tax deductibility of executive pay at $1 million. The ostensible message this legislation sent: No rational society can view annual executive compensation over $1 million as a reasonable business expense worthy of a tax deduction. Without putting a ceiling on executive pay, this reform aimed to prevent taxpayers from subsidizing amounts over $1 million per executive. But the law left a huge loophole. Corporations could exempt "performance-based" pay from the $1 million limit. This loophole quickly led to an explosion of "performance-based" compensation, particularly in the form of stock options.

Corporate boards of directors touted this new surge in stock options as a means to align the interests of executives and shareholders. In practice, options align only greed and the tax code. If a firm's shares decline in value over time, shareholders lose wealth. But executives with stock options lose nothing. In fact, during stock slumps, executives often receive boatloads of new options with lower exercise prices. In 2007, for instance, Goldman Sachs gave executives options to purchase 3.5 million shares. In December 2008, after the crash had driven Goldman shares to record lows, the bank's top executives received nearly 36 million stock options, ten times the previous year's total. This new grant positioned Goldman executives for massive new windfalls even if the bank's shares never regained their 2007 price level.

On the upside, stock options gains have no limit, a reality that encourages reckless, short-sighted executive behaviors designed to jack up share prices by whatever means necessary. What sort of reckless behaviors? Over the past two decades, the Institute for Policy Studies has documented the connections between massive CEO options payouts and corporate tax-dodging, excessively risky financial gambles, and accounting fraud.

Stock options also provide huge personal tax advantages for executives. If executives hold onto their shares for more than two years after the grant date and more than a year after the exercise date - the point at which the stock is transferred to the executive - they pay only the long-term capital gains tax rate on this income. This rate will rise from 15 to 20 percent as a result of the "fiscal cliff" deal, a rate still far lower than the new 2013 top marginal rate of 39.6 percent on ordinary income.

The performance pay loophole, in short, serves as a critical subsidy for excessive compensation. The larger the executive payout, the less the corporation pays in taxes. And Taxpayers wind up footing the bill.

For data on individual CEOs and corporations, tables, charts, methodology, and appendices, please see the  full report.

[i]To analyze the tax implications of compensation, we included forms of pay that were taxable in the year received: salary, bonus, non-equity incentives, perks, and the value of options realized and vested stock. (Stock options are taxed in the year they are exercised and stock awards in the year they vest).The executives in the sample are those covered by Section 162(m) of the tax code: the CEO and next three highest-paid executives, excluding the CFO. For banks in the Troubled Asset Relief Program (TARP), 162(m) also applied to CFOs, and we added the CFO data for these banks during the years they participated in TARP. See annex for more detail.

[ii] See: http://www.alternet.org/economy/10-filthy-rich-tax-dodging-hypocrites-pushing-disastrous-austerity-america.

[iii]Hemsley received the bulk of his compensation in the form of exercised stock options, a pay category considered “performance-based.” He received much smaller amounts in the form of vested stock awards. For 2011, the company identified what portion of the value of this stock qualified “performance-based.” For the other two years, it did not.

Congress Can Cheat on Insider Trading Again

ALERT: STOCK Act Reversal Signed by President

By Dan Auble
President Obama has just signed a rollback of key transparency provisions of the STOCK Act. 

Late Thursday night, as we reported last week, the Senate gutted the disclosure requirements by approving S.716, an act amending the requirements of the 2011 law. The House followed suit the next day, and the president signed the bill minutes ago.

The bill doesn't just eliminate a controversial requirement that personal financial disclosures of tens of thousands of high level federal employees be made publicly accessible online. It also reverses two critical components of the original STOCK act: mandatory electronic filing of PFDs by the president, his cabinet and members of Congress, and the creation of a publicly accessible database.

The elements of the STOCK Act that were removed include:

•     Creation of searchable, sortable disclosure of the information contained in reports even for Congress, the president, vice president, the president’s cabinet and congressional candidates.

•     Required electronic filing for Congress, the president, vice president, the president’s cabinet and congressional candidates, as well as high-level executive and congressional branch employees. Even images of the staffers' filings will not be available for viewing on the web.

Without the provisions, the STOCK act is made toothless. Insider trading by members of Congress and federal employees is still prohibited, but the ability of watchdog groups to verify that Congress is following its own rules is severely limited because these records could still be filed on paper -- an unacceptably outdated practice that limits the public's access.

This is not true disclosure.

Contact President Obama’s office today to signal your disappointment, and urge YOUR members of Congress to file their personal financial disclosure documents electronically and to propose legislation reinstating the database provision.

AFL-CIO Funded Coup vs Chavez 2002

By KIM SCIPES - WORKER TO WORKER, September 28th 2006


In April 2002, following a general strike led by oil company management and collaborating labor union leaders in Venezuela, parts of the Venezuelan military launched a coup to remove democratically-elected President Hugo Chavez Frias from office.  After physically removing Chavez from the presidential palace in Caracas, Miraflores, the head of the national business confederation, FEDECAMARAS, Pedro Carmona, was sworn into office.1

In response, literally millions of Venezuelans swarmed to Miraflores, surrounding the palace, protesting the coup.  Faced with the widespread public opposition, frustrated by loyal military forces who supported President Chavez, and condemned by heads of state across Latin America, the coup attempt collapsed. Chavez was returned to Miraflores, unharmed, where he resumed his duties as head of state2 (Ellner and Rosen, 2002).

Because of the apparent connection between the oil workers' union--the key union of the labor center Confederation of Venezuelan Workers (CTV in Spanish) and whose leader, Carlos Ortega, was the president of the CTV--and the coup attempt, and the long-standing ties between the CTV and the US labor center, the AFL-CIO, questions have risen about possible involvement of the AFL-CIO in the coup attempt.

This article addresses the question of possible AFL-CIO involvement in the coup attempt, trying to confirm or deny any possible involvement.  To do this, the paper proceeds in the following directions:  (A) it discusses the AFL-CIO's foreign policy program and its history of foreign interventions; (B) it considers evidence of the AFL-CIO's Solidarity Center staff activities in Venezuela prior to the coup attempt, and the coup attempt itself; (C) reports AFL-CIO statements as well as others' concerning the coup attempt that followed, and subsequent analyses of the coup and US involvement; and (D) it answers the question as to whether the AFL-CIO, through its Solidarity Center, was involved in the 2002 coup attempt.  To this task, we now turn.

A.  AFL-CIO's Foreign Policy Program

Before we can consider possible involvement of the AFL-CIO in the 2002 Venezuelan coup attempt, we must first consider any foreign policy it may have established:  if the AFL-CIO has no history of foreign involvement, then obviously it was unlikely to be involved.  However, if it has such a foreign policy program, then the possibility of such involvement is more likely to be substantiated.

Although not generally known by union members as it has been consciously hidden by its leaders, the AFL-CIO actually has a long-time foreign policy program that goes back to the days of the American Federation of Labor (AFL) during the 19-teens under then-president, Samuel Gompers.  And, in fact, much of this foreign policy program--during Gompers' time but also since 1962--has been carried out in Latin America [among others, see Morris, 1967; Hirsch, 1974, n.d; Scott, 1978; Spaulding, 1984; Scipes, 1989; Andrews, 1991; Sims, 1992; Scipes, 2000, 2004a, 2005a, b).

This foreign policy program has been initiated and carried out behind the backs of American workers, although "in our name." The AFL-CIO has long been known to carry out a reactionary labor program around the world.  It has been unequivocally established that they have worked to overthrow democratically-elected governments, have collaborated with dictators against progressive labor movements, and have supported reactionary labor movements against progressive governments (Scipes, 2000: 12; Shorrock, 2002, 2003; see, among others, Snow, 1964; Morris, 1967; Radosh, 1969; Scott, 1978; Spaulding, 1984; Barry and Preusch, 1986; Cantor and Schor, 1987; Weinrub and Bollinger, 1987; Armstrong, et. al., 1988; Sims, 1992; Scipes, 1996; Carew, 1998; Nack, 1998; and Buhle, 1999).

And while the AFL-CIO's regional organization, AIFLD (American Institute for Free Labor Development), was especially known for its involvement in events leading to the 1973 coup in Chile (Hirsch, 1974, n.d.; Scipes, 2000; Shorrock, 2003), what is less well known is it's long-standing ties with the Venezuelan CTV.  In fact, according to labor journalist Lee Sustar,

Venezuela--a key focus of U.S. foreign policy since the oil boom of the 1920s--became Washington's counterweight to the Cuban Revolution of 1959. The headquarters of the AFL-CIO-initiated Inter-American Regional Organization of Workers (ORIT) was moved to Caracas. In 1962, Venezuela was the linchpin of the AFL-CIO's newly launched American Institute for Free Labor Development (AIFLD); the AIFLD board included both the AD leader Betancourt and his COPEI counterpart, Rafael Caldera. Next, in the mid-1960s, the AFL-CIO even provided funding for a CTV-owned bank. AIFLD chief Serafino Romualdi, later alleged to have been a CIA agent, called his relationship with Betancourt "the most fruitful political collaboration of my life." Romualdi helped engineer the expulsion of the Communist Party and other leftists from the CTV; elsewhere, AIFLD collaborated with the CIA and the State Department to undermine or overthrow Latin American governments opposed to the U.S. (Sustar, 2005; 3 see also Hirsch, 2005).

In other words, not only has the AFL-CIO had a long-standing foreign policy program, it long has been active in Latin America, and especially in Venezuela.

B.  Solidarity Center Activities in Venezuela, and the Attempted Coup

With the 1995 election of John Sweeney to the presidency of the AFL-CIO, the labor center appeared to have changed its foreign policy "stripes."  One of the things that Sweeny did was disband the semi-autonomous regional organizations in Africa, Asia, Latin America and Western Europe, and put them under control of the newly established and centrally-controlled "Solidarity Center" (officially known as the American Center for International Labor Solidarity or ACILS) (Scipes, 2000).  It appeared to have changed its international orientation from "anti-communism" to "international labor solidarity," although critics such as Judy Ancel (2000), Peter Rachelff (2000); and Kim Scipes (2000: 6-7), all noted specific problems that continued under the Sweeney Administration.

The biggest problem was the AFL-CIO's continuing relationship with the National Endowment for Democracy or NED.  The NED was established by the Reagan Administration in 1983 to do overtly what the CIA had previously tried to do covertly.  Although the NED is proclaims itself a "private" organization--a non-governmental organization (NGO)--in reality, it was US Government initiated through US Government legislative processes, it was signed into law by US President Ronald Reagan, its Board members have included a number of people who have served at the highest levels of the US Government's foreign policy apparatus under both Democratic and Republican Administrations (including former Secretaries of State Henry Kissinger and Madeleine Albright, former Defense Secretary Frank Carlucci, and former National Security Council Chair Zbigniew Brezezinski), and it has been overwhelmingly funded by annual appropriations by the US Congress (Robinson, 1996; Blum, 2000: 179-183; Golinger, 2005; Scipes, 2005b).

The NED was established with four "core institutes":  the International Republican Institute (the international wing of the US Republican Party); the National Democratic Institute for International Affairs (the international wing of the US Democratic Party); the Center for International Public Enterprise (the international wing of the US Chamber of Commerce); and the Free Trade Union Institute (superceded by the Solidarity Center) of the AFL-CIO (Lowe, 2004). So far, no one has publicly stated what exactly is meant by "core institute" other than they each channel funding from the NED (which gets it from the US Congress via the US Information Agency) to non-governmental organizations in various countries around the world.  I have suggested before that these are likely to be policy-making organizations for the NED itself (Scipes, 2005b). Harry Kelber reports that over 90% of the Solidarity Center's funding comes via the US State Department (Kelber, 2005a, b).

The Solidarity Center has been active in Venezuela since 1997.  According to then-AFL-CIO International Affairs Department Assistant Director Stan Gacek, the Solidarity Center was working to help democratize the CTV and its member unions (Gacek, 2004, 2005).

While that might have been true, it is not all the Solidarity Center was doing. During early 2002, CTV leaders visited Washington, DC, to meet with high level AFL-CIO and Bush Administration officials.  Katherine Hoyt, of the Nicaraguan Solidarity Committee, reported that CTV leaders had visited Otto Reich, the Assistant Secretary of State for Western Hemisphere Affairs (Hoyt, 2002; see also Golinger, 2005: 85-86).4

Just before these visits--according to a January-March 2002 quarterly report from the Solidarity Center to NED that was discovered through a FOIA (Freedom of Information Act) request by journalists Jeremy Bigwood and Eva Golinger (Bigwood and Golinger, n.d.)5--Solidarity Center staff members were involved in a series of meetings that were designed to bring together leaders of the CTV and FEDECAMARAS (the national business confederation).  These meetings, six in all, took place around the country and culminated in a national meeting on March 5, 2002.  At that meeting, the CTV and FEDECAMARAS, supported by the hierarchy of the Catholic Church, came together to discuss their concerns, perspectives and priorities regarding national development and to identify common objectives as well as areas of cooperation.  At this meeting, the CTV and FEDECAMARAS were anointed "flagship organizations" in the struggle against President Chavez (Bigwood and Golinger, n.d.).

According to the Solidarity Center documents unearthed by Bigwood and Golinger, this national conference was the culminating event of some two months of meetings and planning between FEDECAMARAS and the CTV.  The joint action was intended to produce a "National Accord" to avoid a supposedly "deeper political and economic crisis."

The report continues:  "The Solidarity Center helped support the event in the planning stages, organizing the initial meetings with the governor of Miranda state and the business organization, FEDECAMAS, to discuss and establish an agenda for such cooperation in mid-January.  The report continued to detail more of their efforts, concluding with the comment that, "The March 5 national conference itself was funded by counterpart funds" (Bigwood and Golinger, n.d.)6

Barely more than 30 days after the March 5 conference, the CTV and FEDECAMARAS launched a national general strike on April 9th to protest the firing of oil company management on April 7th,7 and the events leading to the coup attempt--in which CTV and FEDECAMAS played central roles--began. On April 11th, a massive march and demonstration was held to support the union.  "About midday on April 11th, speakers at the opposition rally, including Carmona and Ortega, began calling for supporters to march on the Presidential Palace, Miraflores, to demand Chavez's resignation" (Golinger, 2005: 96).  In case there was any doubt of CTV leaders' active role in events, Lee Sustar wrote, "What is indisputable, however, is that Ortega joined with FEDECAMAS to call the strike and march that set the stage for the coup" (Sustar, 2005).

When the coup's military leaders decided to act and depose Chavez, FEDECAMARAS' Carmona was chosen by coup leaders to become the new president.  Carmona was sworn in on April 12, and immediately dissolved "all of Venezuela's democratic institutions, including the National Assembly, the Supreme Court, the Public Defender's Office, the Attorney General, the Constitution and the 49 laws Chavez had decreed in December" (Golinger, 2005: 105).

The coup was denounced generally throughout the hemisphere (Golinger, 2005: 105, fn. 23), with two notable exceptions.  The President of the International Republican Institute, George A. Folsom, issued a statement publicly praising the coup leaders for their coup (Marquis, 2002).8 And then, the Bush Administration supported the coup (see Golinger, 2005, but specifically pp. 103-105).9

In response to this coup attempt, the people mobilized in the millions, the military split and the coup attempt failed.  Chavez was returned to Miraflores on April 14th, where he resumed his duties as President.

C.  Developments After the Attempted Coup
Once the coup attempt collapsed and constitutional order was returned, many efforts were made to "explain" developments.  Both the CTV and the AFL-CIO provided their views, as did others.

On April 25, 2002, the New York Times published a piece by Christopher Marquis that discussed US involvement in the coup attempt.  While Marquis did not provide any specific details about the work of the Solidarity Center, he did provide considerable information about NED efforts in Venezuela in the year prior to the coup, such as providing hundreds of thousands of dollars to Venezuelan opposition groups "including the labor group whose protests led to the Venezuelan president's brief ouster earlier this month."  Marquis did point out, however,

Of particular concern is $154,377 given by the [NED] to the American Center for International Labor Solidarity, the international wing of the AFL-CIO, to assist the main Venezuelan labor union in advancing labor rights.

The Venezuelan union, the Confederation of Venezuelan Workers [CTV], led the work stoppages that galvanized the opposition to Mr. Chavez.  The union's leader, Carlos Ortega, worked closely with Pedro Carmona Estanga, the businessman who briefly took over from Mr. Chavez, in challenging the government (emphasis added) (Marquis, 2002).

Marquis also noted that the NED had quadruped its annual budget to its Venezuelan clients to $877,000 in the year before the coup attempt.  In addition to the $154,377 given to the Solidarity Center, the NED also provided the National Democratic Institute for International Affairs $210,000 "to promote the accountability of local government': $399,998 to the International Republican Institute for "political party building"; and apparently the balance to Center of International Private Enterprise (Marquis, 2002).

On April 27, 2002, the AFL-CIO issued a statement, "The AFL-CIO and Workers' Rights in Venezuela."  In this statement, the AFL-CIO wrote in response to the coup, "… there is no evidence that the CTV or its leaders went beyond the democratic expressions of dissent."  In this statement, the AFL-CIO detailed its work in Venezuela:

… the CTV conducted an impressive process of internal democratization with the assistance of the AFL-CIO and the Solidarity Center.  The assistance included:  the printing of election materials, the training of CTV election committees, and the sponsoring the forums which brought labor, business, human rights and religious leaders together in defense of freedom of association.  All of the AFL-CIO-Solidarity Center funding for Venezuela went for this purpose" (quoted in Scipes, 2002).

On May 2, 2002, this author published a piece on Z Net, whereby he noted the incredible similarities between the coup in Chile on September 11, 1973, and the April 2002 coup attempt in Venezuela.  This author noted that he had no proof to his accusations, but that the patterns were strikingly similar, and his suspicions had been raised.   After including the "AFL-CIO and Workers' Rights in Venezuela" statement in his article that tried to make sense of developments in Venezuela, this author was willing to consider the possibility that the AFL-CIO had not been involved in the coup attempt.  However, he advanced three questions--(1) Why is the AFL-CIO doing anything in Venezuela?; (2) Why does the AFL-CIO have any relationship with the National Endowment for Democracy [NED]?; and (3) Why has the AFL-CIO never given a detailed and honest accounting of its past and present operations to its members?--that he felt had to be answered before he considered the issue resolved (Scipes, 2002).  As far as can be determined, no answers to these questions have ever been provided publicly.

In the Spring 2004 issue of New Labor Forum, Stan Gacek again discusses the AFL-CIO's work with the CTV.   He writes, "… our total solidarity program with the CTV amounted to less than $20,000 in support of the Confederation's highly successful internal democratization program" (Gacek, 2004).

However, Gacek also gives the AFL-CIO's perspective of the 2002 coup attempt, which exonerates the CTV from participating in the coup attempt.  Gacek states "The CTV publicly condemned the April 2002 coup, never recognized the short-lived regime of Carmona and, unlike the Catholic Church, refused to endorse Carmona's degree dissolving the National Assembly" (Gacek, 2004).10

Journalist Robert Collier, with many years' experience of reporting in Latin America for the San Francisco Chronicle, directly contradicted Gacek's statement in the following issue of New Labor Forum.  Collier wrote that the CTV had worked with FEDECAMARAS not only in the April 2002 attempt, but also in an earlier lockout in December 2001, and a subsequent 63-day oil strike in December 2002-February 2003.  Collier reports according to many published reports and interviews that he had conducted in Venezuela, that "… the CTV was directly involved in the [April 2002] coup's planning and organization."  Further, Collier reported, "For months before, CTV Secretary-General Carlos Ortega created a tight political alliance with FEDECAMARAS leader Pedro Carmona, and they repeatedly called for the overthrow of Chavez" (Collier, 2004; see also Ellner, 2004).

In March 2004, Alberto Ruiz, writing from inside the labor movement, asked, "What is the AFL-CIO Doing in Venezuela?" In this article, he addresses the issue as to whether the AFL-CIO knew about the CTV role in the coup:

To deflect criticism about the aid to the CTV, the AFL-CIO has publicly claimed that the CTV did not have anything to do with the coup against Chavez.  However, as the Boston Globe reported … [August 18, 2002], 'the Venezuelan media broadcast a recorded telephone conversation between [exiled former president Carlos Andres] Perez and Carlos Ortega, president of the Confederation of Venezuelan Workers, in which the pair plotted against Chavez.'  Moreover, the AFL-CIO has privately conceded that the CTV leadership did have participation in the coup against Chavez" (Ruiz, 2004).

In the April 2004 issue of Labor Notes, this author again returned to the debate, this time with evidence.  He focused on issues concerning CTV involvement in the coup attempt, Solidarity Center staff members' involvement in efforts beyond traditional labor movement activities, and outside (of the labor movement) funding of Solidarity Center's Venezuelan activities.

(1) The CTV was involved in the coup attempt.  This author joined accounts of the Times' Christopher Marquis and the Chronicle's Collier with that of Professor Hector Lucena, another labor observer in Venezuela, and then with an account of the coup by Professor Steve Ellner and long-time Latin Americanist Fred Rosen, each who presented evidence of CTV's participation in the coup attempt, and that the CTV leadership played a leading role.  Ellner and Rosen report--based on Hearings of the Special Political Commission of the National Assembly that were broadcast on Venezuelan TV on May 10, 2002--that "[CTV leader] Ortega had publicly called for the immediate dissolution of the [National] Assembly on April 12, prior to the announcement of Carmona's decree" (emphasis added) (Ellner and Rosen, 2002).  Additionally, in a personal communication with this author on March 6, 2004, Steve Ellner elaborated on events:

"The CTV promoted a march which was designed to topple the Chavez regime and everybody knew at the time that the idea was to create chaos so that the military would intervene."  Going further, he explained that "Opposition leaders openly called on the military to overthrow Chavez, and the strike leaders--not only Ortega but the supposed 'moderates' like Manuel Cova, Alfredo Ramos, Pablo Castro, Rodrigo Penson, Froilan Barrios--none of them stated at least publicly that they were opposed to a military coup" (quoted in Scipes, 2004a).

Yet what about Gacek's claim that the CTV condemned the coup?  Yes, he is correct, but the CTV leaders condemned it after they had been betrayed by Carmona and his people.  According to Ellner and Rosen, despite the CTV and Ortega being key players in the coup efforts, upon attaining the presidency during the coup, Carmona ignored the labor wing of the opposition, appointing a cabinet of business leaders, military men and conservative politicians (Ellner and Rosen, 2002).

It was only after this betrayal that the CTV condemned the coup, according to Robert Collier (2004).  And David Corn, writing in the August 5, 2002 issue of The Nation, confirmed this:  "The CTV did denounce Carmona--but not until Carmona, on the afternoon of April 12, announced his decree to shutter the National Assembly and the Supreme Court" (Corn, 2002).

And Eva Golinger, writing in her book on the US attacks on Chavez, The Chavez Code, adds even more detail to the CTV role.  She presents the CTV's activities before and during the general strike to support the fired oil managers.  She reports that Ortega, along with Carmona, called for the general strike to be "indefinite" on April 10th.  And she reprints the March 2002 cable from the US Embassy in Caracas to the Secretary of State, in which it reports Ortega's drive for a new "government for democratic unity" (Golinger, 2005).  There cannot be any doubt of the CTV leadership's involvement in the events leading up to and including the coup, despite the AFL-CIO's efforts to deny it.

(2) Solidarity Center staff members were involved in something beyond traditional labor movement activities.  The Solidarity Center reports surfaced by Bigwood and Golinger (n.d.) are important.  Solidarity Center staffers were detailing their efforts in quarterly reports to the National Endowment for Democracy (NED).11

Not only does their existence conclusively prove that Solidarity Center staff members were involved in bringing together disparate groups--the CTV and FEDECAMARAS, most particularly--but they also organized an initial meeting with the governor of Miranda state.  Additionally, as they put it, "The March 5 [2002] national conference itself was financed by counterpart funds."  While they don't detail what they mean, since they talk about this differently than any other funding, it is clear it does not come from "ordinary" processes, but from something "outside."12

In other words, they are obviously working in a broader "field" than just the labor movement (Hirsch, 2005).  They are using their position "within" the US labor movement for purposes other than to advance the well-being of workers and their organizations, ostensibly the role of any labor movement.  Because NED is part of US Government's foreign policy apparatus--despite their claims otherwise, and their so-called "private" status (see Robinson, 1996; Agee, 2005; Golinger, 2005; Jones and Tayler, 2005; Scipes, 2005b)--it is clear that the Solidarity Center in Venezuela has been helping to carry out US foreign policy operations in that country.

It's telling that the NED grants often allocate equal amounts to the Solidarity Center and its counterpart institutions run by the Republican and Democratic parties and business.  This allows US unions to project political weight abroad that they never had at home, even in the long-gone days of 'Big Labor'.  The reality is that the Solidarity Center's clout is based not on the strength of US unions, but on government funds from the world's only superpower (emphasis added) (Sustar, 2005).

Similarly to developments in Chile preceding the September 11, 1973 coup against the government of Salvador Allende (see Hirsch, 1974, n.d., Scipes, 2000; Shorrock, 2003), these "labor" efforts are part of something larger.  As Scipes wrote,

This destabilization effort in Venezuela is not singular, but is one component of a multiple-track endeavor that includes supporting a peasant organization that opposes land reform; an educational organization that has suggested no education reforms; an organization seeking to incite a military rebellion; a civic association that has worked to mobilize middle class neighborhoods to 'defend themselves' from the poor; a civil justice group that opposes grassroots community organizations because they support the Chavez government; a 'leadership group' that supports the metropolitan Caracas police, whose behavior has become markedly more repressive over the past year; and a number of other anti-Chavez organizations, each which have received funding from NED (Scipes, 2004a).

(3) Funding from outside the labor movement.  This author was able to locate NED funding for Venezuela:

NED has been long active across Latin America.  It has been active in Venezuela, the fifth largest oil producer in the world, since 1992.  According to accounts gathered from the NED itself, NED provided $4,039,331 to Venezuelan and American organizations working in Venezuela between 1992-2001; 60.4 percent of that, or $2,439,489 was granted between 1997-2001.  Of that, $2.4-plus million since 1997, $587,926 (or almost one-quarter) went to ACILS for its work with the Confederation of Venezuelan Workers (CTV in Spanish).  In 2002, the last year for which details are available, NED pumped in another $1,099,352, of which ACILS got $116,001 for its work with CTV.  Altogether, ACILS received $703,927 between 1997-2002 for its work in Venezuela alone (Scipes, 2004a).

In her book, Eva Golinger (2005) provides extensive funding accounts from the NED to its various grantee agencies in the country.  Most of these accounts--not all--however, agree with my figures.  In short, combining my own research with that of others, this author shows that the CTV leadership was involved in the coup, that Solidarity Center staff members were involved beyond the field of organized labor, and that all of these operations were funded from outside of the US labor movement.

Interestingly, even with publication of extensive material by a number of authors, the AFL-CIO has stuck to its original position:  the CTV was not involved in the coup:

The CTV executive refused to sign the infamous decree of the short-lived Carmona regime that dissolved the National Assembly.  The CTV refused any and all offers to serve in the coup-installed government, and made a point of not being present at the inauguration of Carmona's cabinet (Gacek, 2005).

However, Gacek actually made a demonstrably false claim; referring to the series of meetings that led to the March 5 national conference, he wrote, "The five events financed by the Solidarity Center involved the participation of organized labor only, not the national business federation."  If that is correct, then why did Solidarity Center staff report that they themselves were involved in a series of meetings that were designed to bring together leaders of the CTV and FEDECAMARAS (the national business confederation)? (Bigwood and Golinger, n.d.)

(4)  Synopsis.  Despite the protestations and claims otherwise by the (now former) Assistant Director of the AFL-CIO's International Affairs Department, Stanley Gacek--and, interestingly, as far as can be ascertained, not corroborated by a single independent analyst--the evidence is overwhelming that the AFL-CIO and particularly its Solidarity Center were knowingly involved in events preceding the coup attempt against democratically-elected Venezuelan President Hugo Chavez Frias; that they acted as part of a multi-pronged attack by the US Government and its misnamed National Endowment for Democracy on democracy in Venezuela and particularly the administration of President Chavez; that they were funded by the US Congress through the National Endowment for Democracy; and they lied and tried to cover up their involvement and the involvement of the leaders of their long-time associate, the CTV.

CONCLUSION
In this paper, this author has taken a comprehensive look at the possibility of AFL-CIO involvement in the April 2002 coup against Venezuela's democratically-elected president, Hugo Chavez Frias.  He noted that the AFL-CIO had a long-time foreign policy, that was involved previously in Latin American in general, and specifically in Venezuela.  This author previously expressed concerns around the strikingly similar situation to that of Chile before the September 11, 1973 coup, that he also suggested that possibility for Venezuela, although he published the AFL-CIO's denial out of the possibility that its' statement might be correct.  However, through discovering a number of independently-produced accounts and analyses--and after seriously considering the AFL-CIO's version of what happened, conveyed through the writings of Stanley Gacek--he came to the conclusion that the AFL-CIO, and specifically its Solidarity Center--played an active and conscious role in helping to create the conditions that led to the April 2002 coup attempt, and also played a similar role in trying to deny the now-established involvement of the CTV leadership in the planning and participating in at least the initial efforts that led to the coup.

Thus, any understanding of the AFL-CIO foreign policy program in the post-1995 years must specifically include its activities in Venezuela, and their similarities to previous pre-1995 operations, most importantly in Chile.


Excellent Bibliography and Book List on AFL-CIO, NED, and CIA at Venezuelan Analysis
"The AFL-CIO Foreign Policy Program and the 2002 Coup in Venezuela"
http://venezuelanalysis.com/analysis/1977