Subject: Fwd: Citizen Works' Corporate Reform Weekly, April 14, 2003 Are we going to war and destroying countries so Bush administration cronies can get these lucrative contracts at taxpayer expense.
Hmmmmm! I wonder what is going on.
Ben and Jean

Begin forwarded message:

The Corporate Reform Weekly
Vol II, #14  April 14, 2003

In Short:
NEWS

In Washington:
Congress: Senior House Dems request GAO investigation of Halliburton…
Sen. Grassley calls for reducing executive tax shields at hearing on Enron’s taxes…
Senate charitable giving bill passes with provisions to strengthen the SEC and crack down on tax shelters…
Doggett introduces two bills to crack down on tax abuse…
Securities and Exchange Commission: SEC gets support from appropriation committees on budget, flak from House commerce committee on investigations… Donaldson talks with Oxley about curbing state securities regulation

In the States
California: State  Senate committee will hold hearings on Corporate 3 Strikes Bill

In Business
Scandals: Sara Lee, ConAgra admit to assisting U.S. Foodservice fraud
Executive compensation: Salaries and retirement benefits for executives continue to grow
Corporate Governance: CII teams up with NACD to examine director-shareholder communication

ACTION

Fighting Back: “The Bermuda Project” aims to pressure Congress into stopping offshore tax expatriation
This Week’s Action Items: Tell your elected officials to stop corporate tax cheating
 

NEWS

In Washington

Congress

Senior House Dems request GAO investigation of Halliburton

Reps. Henry Waxman (D-Calif.) and John Dingell (D-Mich.) have requested that the General Accounting Office investigate whether Halliburton, Dick Cheney’s former company, has received any special treatment from the Bush Administration in the awarding of post-war reconstruction contracts.

The senior Democrats note that Halliburton subsidiary Kellogg, Brown and Root (KBR) recently won a no-bid contract to put out oil well fires in Iraq, a contract that has no time limits, no cost limits (though the Army Corps of Engineers has estimated it to be worth up to $7 billion), and was not announced until two weeks after it was awarded. The Congressmen’s letter also notes that KBR was awarded a 5-year $300 million contract to provide logistical support to the Navy in May 2001 and a 10-year contract with no cost limits to provide support services to the Army in December 2001. KBR has done $624 million of government contract work from October 2000 to March 2002.

Of particular concern is that KBR has a “questionable track record of prior performance.” The Congressmen cite: 1) a 1997 GAO report documenting questionable expenses for work in the Balkans – for example, charging $85.98 per sheet of plywood that cost $14.06; 2) a 2000 GAO report that documented more overcharging for Balkans work, including charges for cleaning offices four times a day; 3) $2 million that the company paid in fines in February 2002, to resolve fraud claims involving work at Ford Ord. Calif; and 4) an ongoing Securities and Exchange Commission investigation into accounting practices at Halliburton that began in 1998 when Cheney was CEO.

In the Senate, Sens. Ron Wyden (D-Ore.), Susan Collins (R-Maine) and Hillary Rodham Clinton (D-N.Y.) sponsored a bill that would require federal agencies to make a public justification for any Iraq rebuilding contracts awarded with a closed bid.

"The pattern of closed-door bargaining for massive contracts is a distinct departure from the way that government contracts have traditionally been awarded," Wyden said
 

To read more of Waxman’s concerns about how the Bush administration is handling contracts, see CLICK HERE

To read more about Halliburton’s deals, see “Cheney, Halliburton and the Spoils of War” CLICK HERE

Also see: “More Flak on Halliburton Deal” by Mark Fineman of the LA Times CLICK HERE
 

Sen. Grassley calls for reducing executive tax shields at hearing on Enron’s taxes

Tax experts last week detailed how Enron executives avoided paying taxes by deferring $150 million worth of compensation in the five years leading up to the company’s bankruptcy. The executives cashed out on $53 million of deferred payment just before Enron collapsed.

The details, revealed at a Senate Finance Committee hearing, prompted Sen. Charles Grassley (R-Iowa), the chair of the committee, to consider legislation that would strengthen oversight of executive compensation plans. The Joint Tax Committee report recommends prohibiting executives from deferring stock options gains and restricted stock programs.

“What bothers me are the abuses of the system,” Grassley said.

At the hearing, Houston lawyer Charles E. Essick, of compensation consultant Towers Perrin, said Enron’s compensation reflected “standard practices in the marketplace.” Essick and his firm were criticized at the hearings for their advice to Enron.

For details on the committee hearings, visit: CLICK HERE

Also see: “Testimony Casts Doubt on Enron Tax Deferrals” by Albert B. Crenshaw of the Washington Post: CLICK HERE
 

Senate charitable giving bill passes with provisions to strengthen the SEC and crack down on tax shelters

The CARE Act (S. 476) is ostensibly a bill that will make it easier for individuals to donate to charitable organizations. But the bill, which passed last week 95-5, also contains good provisions to strengthen the Securities and Exchange Commission and crack down on tax shelters.

The SEC provision, an amendment proposed by Senator Carl Levin (D-Mich.), essentially enhances the agency’s ability to levy fines for financial fraud and increases the limits on those fines. (For more on the Levin amendment, see: CLICK HERE )

The tax shelter portion of the bill essentially strengthens the penalties and enforcement mechanisms for the IRS to crack down tax shelter abuse. It clarifies the judicial doctrine of "economic substance," a doctrine that judges have used to challenge transactions that have no economic purpose other than to avoid taxes. In recent years, however, the use of this doctrine has faded.

For the text of S. 476, see CLICK HERE
 

Doggett introduces two bills to crack down on tax abuse

Rep. Lloyd Doggett (D-Texas) has introduced two bills to curb tax abuse.

The Abusive Tax Shelter Shutdown and Taxpayer Accountability Act (HR 1555) would enforce penalties and shut down tax shelters. The language of the bill is very similar to the tax shelter provisions of the CARE Act. (see above)

For the text of HR 1555, see CLICK HERE

The Corporate Accountability Tax Gap Act of 2003 (HR 1556) essentially requires corporations to disclose the same information to the IRS and shareholders. Corporate America has increasingly offered one set of financial records to shareholders (usually rosy), and a separate set of records to the IRS (usually not-so-rosy). The result is that the gap between the profits reported to shareholders and to the IRS is widening every year. In 1998 (the most recent year for which data was analyzed), the gap was $159 billion.  A recent Joint Committee on Taxation report on Enron revealed that despite claiming $2.3 billion in profit between 1996 and 1999, Enron also managed to report a $3 billion tax loss to the IRS. Having this information available would help investors make better choices and help regulators crack down on tax shelter abuses.
 

For the text of HR 1556, see CLICK HERE
 

Securities and Exchange Commission

SEC gets support from appropriation committees on budget, flak from House commerce committee on investigations

The chronically underfunded Securities and Exchange Commission has had to struggle for funding increases. But last week it shored up the support of Judd Gregg (R-NH), the chairman of the Senate appropriations committee, who pledged to deliver on  the $841.5 2004 budget the President had recommended. “The check is in the mail,” Gregg told the SEC.

The Chairman of the House Commerce Committee, Frank R. Wolf (R-Va.) has told SEC chairman Donaldson that “Whatever you need, you’re going to get.”

Donaldson, however, didn’t get the same warm response from House Commerce Committee Chairman Billy Tauzin (R-La.), who is threatening to subpoena documents from the SEC regarding accounting practices at 13 companies, including IBM, Kmart, Rite Aid, Adelphia, Waste Management, Sunbeam, Peregrine Systems, MicroStrategy, Tyco, and Xerox. In a letter to Donaldson, Tauzin said he had been seeking this documentation for nine months, and had been frustrated by former SEC chairman Harvey Pitt.
 

Donaldson talks with Oxley about curbing state securities regulation

Securities and Exchange Chairman William Donaldson last week shared his concerns over the “balkanization” of state financial regulation with Rep. Michael Oxley (R-Ohio), the chairman of the House financial services committee.

Both seem eager to curb the ability of state attorneys general to handle settlements and regulations in response to securities fraud, as New York Attorney General Eliot Spitzer has done with the recent corporate scandals. They both want power concentrated at the federal level, even though Spitzer and other state AGs were filling a void left by the inaction of the SEC.

 “States can prosecute fraud but should not have the ability to make rules for capital markets,” Oxley said. “That’s the job of Congress and the SEC…My biggest concern is whether any of the fine money will go towards shareholders or whether it’s just going to be a cash cow for states.”

For more, see “SEC looks to impose curbs on watchdogs at state level,” by Adrian Michaels and Joshua Chaffin of the Financial Times, CLICK HERE
 

In the States

California

State  Senate committee will hold hearings on Corporate 3 Strikes Bill

The California State Judiciary Committee has agreed to hold hearings on a bill that would prohibit repeat corporate offenders from incorporating, forming, or transacting business in the state.

The bill, SB 335 (introduced by Sen. Gloria Romero), would apply a three-strikes-and-your out logic to repeat corporate criminals. Any corporation with three violations of a million dollars or more in a ten-year period would lose its state charter or, if incorporated in another state, its license to do business in California.

The bill also requires corporations to produce an annual statement of all criminal convictions, and to report its first and second offense of a million dollars or more by taking out a full-page advertisement in the largest newspaper in the state or community where the offense took place.

The hearings will begin on April 28.

To read the bill, see: CLICK HERE

For more info, see: CLICK HERE
 

In Business

Scandals
Sara Lee, ConAgra admit to assisting U.S. Foodservice fraud

Salespeople at Sara Lee Corp. and ConAgra Foods Inc. last week admitted that they helped U.S Foodservice to inflate earnings by $500 million by supplying false rebate information.

U.S. Foodservices, a subsidiary of the Dutch retailing giant Royal Ahold NV, announced in February that it had overstated revenue through false rebates. SEC investigators are now looking at what role food suppliers had in facilitating that fraud. Besides Sara Lee and ConAgra, the SEC is also looking at Hormel Foods Corp., H.J. Heinz Co., Tyson Foods Inc., General Mills Inc, and Kraft Foods Inc.

For more, see “2 U.S. Foodservice Suppliers Confirmed Wrong Payments,” by Brooke A. Masters of the Washington Post: CLICK HERE

Executive compensation

Salaries and retirement benefits for executives continue to grow

Two weeks ago, the New York Times reported that the combined value of CEOs’ cash pay, stock and perks rose an average of 5 percent to $4.85 million a year, at the nation’s 200 largest companies (see New York Times special section on Executive Pay, April 6, 2003).

Last week, CNBC reported that chief executives leaving S&P 500 companies in the last two years got an average retirement package of $16.5 million (See “You’re fired. Here’s your $16 million” by Michael Brush: CLICK HERE

Also, the Washington Post has a good article on the disparity between executive and employee retirements.  Kirstin Downey writes: “As workers' pensions are eroding, employees, shareholders, unions and legislators are focusing new attention on the many ways top executives' retirement packages outshine those of their employees.” (See “ The Pension Chasm:  Disparity Between CEOs, Workers Under Scrutiny”CLICK HERE ):

Also see “Shed no tears for the CEOs,” by Ralph Nader: hCLICK HERE
 

Corporate Governance

CII teams up with NACD to examine director-shareholder communication

The Council of Institutional Investors (an association of large funds concerned with corporate governance issues) and the National Association of Corporate Directors (the nation’s only membership organization for corporate directors) have teamed up to form a joint Task Force on Improving Director-Shareholder Communication.

The Task force will focus on current barriers to shareholder-director communications and “best practices” on overcoming those barriers.

“As owners of the companies, shareholders want to express their views directly to the board and have them listened to,” said Sarah A.B. Teslik, executive director of the CII. “Now, shareholders generally have no input into selecting director nominees, no meaningful choice in their election, and no real way to exchange views with them, so it’s not surprising if many shareholders feel they aren’t truly represented in the boardroom.”
 

For more information, see:
CLICK HERE

ACTION

Fighting Back

“The Bermuda Project” aims to pressure Congress into stopping offshore tax expatriation

Columnist Arianna Huffington, working with Moveon.org, Working Assets, the Institute for America’s Future, and several other nonprofits, last week launched “The Bermuda Project,” a campaign to pressure Congress into closing the loophole that allows U.S. corporations to move their headquarters to offshore tax havens to save potentially hundreds of millions of dollars on taxes.

Huffington and others are putting their focus on getting a floor vote on the Corporate Patriot Enforcement Act, which essentially denies tax benefits to companies that reincorporate in offshore tax havens. The bill, introduced by Rep. Richard Neal (D-Mass.) as HR 737 has 152 co-sponsors, but remains stuck in the Ways and Means Committee, where Chairman Bill Thomas (R-Calif.) does not seem likely to bring it up. So the Bermuda Project is calling on the House leadership, Speaker Dennis Hastert and Republican Leader Tom Delay to bring the legislation to the floor for a vote. The companion bill in the Senate, introduced by minority Whip Harry Reid (D-Nev.) is S. 384.

The Bermuda Project has also produced a television commercial that juxtaposes images of soldiers fighting a war with those of greedy executives. “In the sands of Iraq, our soldiers risk their life for our country,” the voiceover says. “At the same time, big corporations are abandoning our country and setting up phony tax shelters in the sands of Bermuda.”

For more information, visit the Bermuda Project atCLICK HERE

For more information on tax traitors (including an informative tax sheet to distribute for Tax Day), see CLICK HERE
 

This Week’s Action Items
 

Tell your elected officials to stop corporate tax cheating

Tomorrow is tax day, so today is a great day to call up your senators and representatives and tell them that, as a taxpayer, you are sick and tired of corporations not paying their fair share and shifting the tax burden onto individuals.

One thing your elected officials can do is Support the Corporate Patriot Enforcement Act (HR 737 in the House/ S 384 in the Senate), which would close the loophole that allows U.S. companies to reincorporate in offshore tax havens and save tens of millions a year in taxes. Moveon.org is coordinating a letter-writing campaign on this issue. See
CLICK HERE

While you are contacting your representative, you should also tell him or her about the Corporate Accountability Tax Gap Act of 2003 (HR 1556) , Rep. Lloyd Doggett’s bill to require corporations to disclose the same information to shareholders and the IRS so that investors and the rest of the public can see all the schemes that corporations are using to avoid taxes and gain valuable insight into combating corporate tax cheating.

  To contact your senators - CLICK HERE
To contact your representative - CLICK HERE
 

Hand out Citizen Works’ “Stopping Corporate Tax Traitors” Fact sheet for Tax Day

To help spread the word about the egregious corporate tax dodging that is happening, you can download Citizen Works’ “Stopping Corporate Tax Traitors” fact sheet. We encourage you to print it out, make copies, and distribute it in your community.

To view the fact sheet (in PDF form), visit:
CLICK HERE