MEDIA ROOTS- Considering the escalation of the war against whistleblowers, it’s getting more rare to see a lone wolf sacrifice their standing from within the system to do the right thing. Amy Goodman writes for TruthDig about the case of Bunny Greenhouse, former employee of the US Army Corps of Engineers, who courageously blew the whistle on her agency for awarding Halliburton subsidiary KBR a no bid 7 billion dollar contract before the Iraqi invasion even occurred. Instead of being rewarded for exposing the revolving door criminality of political and corporate profiteering within her agency, she was harassed and demoted from her position.

Abby

***

TRUTHDIG– “War is a racket,” wrote retired US Marine Major General Smedley D Butler, in 1935. That statement, which is also the title of his short book on war profiteering, rings true today.

One courageous civil servant just won a battle to hold war profiteers accountable. Her name is Bunnatine “Bunny” Greenhouse. She blew the whistle when her employer, the US Army Corps of Engineers, gave a no-bid $7bn contract to the Halliburton subsidiary Kellogg, Brown and Root (KBR) as the US was about to invade Iraq. She was doing her job, trying to ensure a competitive bidding process would save the US government money. For that, she was forced out of her senior position, demoted and harassed.

Just this week, after waging a legal battle for more than half a decade, Bunny Greenhouse won. The US Army Corps of Engineers settled with Greenhouse for $970,000, representing full restitution for lost wages, compensatory damages and attorneys’ fees.

Her “offence” was to challenge the KBR contract. It was weeks before the expected invasion of Iraq, in 2003, and Bush military planners predicted Saddam Hussein would blow up Iraqi oilfields, as happened with the US invasion in 1991. The project, dubbed “Restore Iraqi Oil”, or RIO, was created so that oilfield fires would be extinguished. KBR was owned then by Halliburton, whose CEO until 2000 was none other than then Vice President Dick Cheney. KBR was the only company invited to bid.

Bunny Greenhouse told her superiors that the process was illegal. She was overridden. She said the decision to grant the contract to KBR came from the office of the secretary of defence, run by VP Cheney’s close friend, Donald Rumsfeld. As Bunny Greenhouse told a congressional committee:

    “I can unequivocally state that the abuse related to contracts awarded to KBR represents the most blatant and improper contract abuse I have witnessed during the course of my professional career.”

The oilfields were not set ablaze. Nevertheless, KBR was allowed to retool its $7bn no-bid contract, to provide gasoline and other logistical support to the occupation forces. The contract was so-called “cost-plus”, which means KBR was not on the hook to provide services at a set price. Rather, it could charge its cost, plus a fixed percentage as profit. The more KBR charged, the more profit it made.

As the chief procurement officer, Greenhouse’s signature was required on all contracts valued at more than $10m. Soon after testifying about the egregious RIO contract, she was demoted, stripped of her top secret clearance and began receiving the lowest performance ratings. Before blowing the whistle, she had received the highest ratings. Ultimately, she left work, facing an unbearably hostile workplace.

After years of litigation, attorney Michael Kohn, president of the National Whistleblowers Centre, brought the case to a settlement. He said:

    “Bunny Greenhouse risked her job and career when she objected to the gross waste of federal taxpayer dollars and illegal contracting practices at the Army Corps of Engineers. She had the courage to stand alone and challenge powerful special interests. She exposed a corrupt contracting environment where casual and clubby contracting practices were the norm. Her courage led to sweeping legal reforms that will forever halt the gross abuse she had the courage to expose.”

The National Whistleblowers Centre’s executive director, Stephen Kohn (brother of Michael Kohn), told me:

    “Federal employees have a very, very hard time blowing the whistle … I hope it’s a turning point. The case was hard-fought. It should never have had to been filed. Bunny did the right thing.”

According to Nobel Prize-winning economist Joe Stiglitz, the cost of the wars in Iraq and Afghanistan alone will exceed $5tn. With a cost like this, why isn’t war central to the debate over the national debt?

Two-time congressional medal of honour winner Maj Gen Smedley Butler had it right, 75 years ago, when he said of war:

    “It is possibly the oldest, easily the most profitable, surely the most vicious [racket] … It is the only one in which the profits are reckoned in dollars and the losses in lives … It is conducted for the benefit of the very few, at the expense of the very many.”

As President Barack Obama and Congress claim it is Medicare, Medicaid and social security that are breaking the budget, people should demand that they stop paying for war.

• Written by Amy Goodman, Denis Moynihan contributed research to this column

© 2011 Amy Goodman; distributed by King Features Syndicate

Photo by Flickr user geekvsmachine

GLOBAL RESEARCH – This article was written by an investment manager who works with very wealthy clients. I knew him from decades ago, but he recently e-mailed me with some concerns he had about what was happening with the economy. What he had to say was informative enough that I asked if he might fashion what he had told me into a document for the Who Rules America Web site. He agreed to do so, but only on the condition that the document be anonymous, because he does not want to jeopardize his relationships with his clients or other investment professionals.

Below are his thoughts on the disproportion of wealth issued to the top 1%.  Without the use of an income tax calculator, most of us can only speculate as to how this impacts the average American family. Within this article, he paints an accurate portrait as to how this desparity is currently effecting the economy.

G. William Domhoff

***

I sit in an interesting chair in the financial services industry. Our clients largely fall into the top 1%, have a net worth of $5,000,000 or above, and if working make over $300,000 per year. My observations on the sources of their wealth and concerns come from my professional and social activities within this group.

Work by various economists and tax experts make it indisputable that the top 1% controls a widely disproportionate share of the income and wealth in the United States. When does one enter that top 1%? (I’ll use “k” for 1,000 and “M” for 1,000,000 as we usually do when communicating with clients or discussing money; thousands and millions take too much time to say.) Available data isn’t exact. but a family enters the top 1% or so today with somewhere around $300k to $400k in pre-tax income and over $1.2M in net worth. Compared to the average American family with a pre-tax income in the mid-$50k range and net worth around $120k, this probably seems like a lot of money. But, there are big differences within that top 1%, with the wealth distribution highly skewed towards the top 0.1%.

The Lower Half of the Top 1%

The 99th to 99.5th percentiles largely include physicians, attorneys, upper middle management, and small business people who have done well. Everyone’s tax situation is, of course, a little different. On earned income in this group, we can figure somewhere around 25% to 30% of total pre-tax income will go to Federal, State, and Social Security taxes, leaving them with around $250k to $300k post tax. This group makes extensive use of 401-k’s, SEP-IRA’s, Defined Benefit Plans, and other retirement vehicles, which defer taxes until distribution during retirement. Typical would be yearly contributions in the $50k to $100k range, leaving our elite working group with yearly cash flows of $175k to $250k after taxes, or about $15k to $20k per month.

Until recently, most studies just broke out the top 1% as a group. Data on net worth distributions within the top 1% indicate that one enters the top 0.5% with about $1.8M, the top 0.25% with $3.1M, the top 0.10% with $5.5M and the top 0.01% with $24.4M. Wealth distribution is highly skewed towards the top 0.01%, increasing the overall average for this group. The net worth for those in the lower half of the top 1% is usually achieved after decades of education, hard work, saving and investing as a professional or small business person. While an after-tax income of $175k to $250k and net worth in the $1.2M to $1.8M range may seem like a lot of money to most Americans, it doesn’t really buy freedom from financial worry or access to the true corridors of power and money. That doesn’t become frequent until we reach the top 0.1%.

I’ve had many discussions in the last few years with clients with “only” $5M or under in assets, those in the 99th to 99.9th percentiles, as to whether they have enough money to retire or stay retired. That may sound strange to the 99% not in this group but generally accepted “safe” retirement distribution rates for a 30 year period are in the 3-5% range with 4% as the current industry standard. Assuming that the lower end of the top 1% has, say, $1.2M in investment assets, their retirement income will be about $50k per year plus maybe $30k-$40k from Social Security, so let’s say $90k per year pre-tax and $75-$80k post-tax if they wish to plan for 30 years of withdrawals. For those with $1.8M in retirement assets, that rises to around $120-150k pretax per year and around $100k after tax. If someone retires with $5M today, roughly the beginning rung for entry into the top 0.1%, they can reasonably expect an income of $240k pretax and around $190k post tax, including Social Security.

While income and lifestyle are all relative, an after-tax income between $6.6k and $8.3k per month today will hardly buy the fantasy lifestyles that Americans see on TV and would consider “rich”. In many areas in California or the East Coast, this positions one squarely in the hard working upper-middle class, and strict budgeting will be essential. An income of $190k post tax or $15.8k per month will certainly buy a nice lifestyle but is far from rich. And, for those folks who made enough to accumulate this much wealth during their working years, the reduction in income and lifestyle during retirement can be stressful. Plus, watching retirement accounts deplete over time isn’t fun, not to mention the ever-fluctuating value of these accounts and the desire of many to leave a substantial inheritance. Our poor lower half of the top 1% lives well but has some financial worries.

Since the majority of those in this group actually earned their money from professions and smaller businesses, they generally don’t participate in the benefits big money enjoys. Those in the 99th to 99.5th percentile lack access to power. For example, most physicians today are having their incomes reduced by HMO’s, PPO’s and cost controls from Medicare and insurance companies; the legal profession is suffering from excess capacity, declining demand and global outsourcing; successful small businesses struggle with increasing regulation and taxation. I speak daily with these relative winners in the economic hierarchy and many express frustration.

Unlike those in the lower half of the top 1%, those in the top half and, particularly, top 0.1%, can often borrow for almost nothing, keep profits and production overseas, hold personal assets in tax havens, ride out down markets and economies, and influence legislation in the U.S. They have access to the very best in accounting firms, tax and other attorneys, numerous consultants, private wealth managers, a network of other wealthy and powerful friends, lucrative business opportunities, and many other benefits. Most of those in the bottom half of the top 1% lack power and global flexibility and are essentially well-compensated workhorses for the top 0.5%, just like the bottom 99%. In my view, the American dream of striking it rich is merely a well-marketed fantasy that keeps the bottom 99.5% hoping for better and prevents social and political instability. The odds of getting into that top 0.5% are very slim and the door is kept firmly shut by those within it.

The Upper Half of the Top 1%

Membership in this elite group is likely to come from being involved in some aspect of the financial services or banking industry, real estate development involved with those industries, or government contracting. Some hard working and clever physicians and attorneys can acquire as much as $15M-$20M before retirement but they are rare. Those in the top 0.5% have incomes over $500k if working and a net worth over $1.8M if retired. The higher we go up into the top 0.5% the more likely it is that their wealth is in some way tied to the investment industry and borrowed money than from personally selling goods or services or labor as do most in the bottom 99.5%. They are much more likely to have built their net worth from stock options and capital gains in stocks and real estate and private business sales, not from income which is taxed at a much higher rate. These opportunities are largely unavailable to the bottom 99.5%.

Recently, I spoke with a younger client who retired from a major investment bank in her early thirties, net worth around $8M. We can estimate that she had to earn somewhere around twice that, or $14M-$16M, in order to keep $8M after taxes and live well along the way, an impressive accomplishment by such an early age. Since I knew she held a critical view of investment banking, I asked if her colleagues talked about or understood how much damage was created in the broader economy from their activities. Her answer was that no one talks about it in public but almost all understood and were unbelievably cynical, hoping to exit the system when they became rich enough.

Folks in the top 0.1% come from many backgrounds but it’s infrequent to meet one whose wealth wasn’t acquired through direct or indirect participation in the financial and banking industries. One of our clients, net worth in the $60M range, built a small company and was acquired with stock from a multi-national. Stock is often called a “paper” asset. Another client, CEO of a medium-cap tech company, retired with a net worth in the $70M range. The bulk of any CEO’s wealth comes from stock, not income, and incomes are also very high. Last year, the average S&P 500 CEO made $9M in all forms of compensation. One client runs a division of a major international investment bank, net worth in the $30M range and most of the profits from his division flow directly or indirectly from the public sector, the taxpayer. Another client with a net worth in the $10M range is the ex-wife of a managing director of a major investment bank, while another was able to amass $12M after taxes by her early thirties from stock options as a high level programmer in a successful IT company. The picture is clear; entry into the top 0.5% and, particularly, the top 0.1% is usually the result of some association with the financial industry and its creations. I find it questionable as to whether the majority in this group actually adds value or simply diverts value from the US economy and business into its pockets and the pockets of the uber-wealthy who hire them. They are, of course, doing nothing illegal.

I think it’s important to emphasize one of the dangers of wealth concentration: irresponsibility about the wider economic consequences of their actions by those at the top. Wall Street created the investment products that produced gross economic imbalances and the 2008 credit crisis. It wasn’t the hard-working 99.5%. Average people could only destroy themselves financially, not the economic system. There’s plenty of blame to go around, but the collapse was primarily due to the failure of complex mortgage derivatives, CDS credit swaps, cheap Fed money, lax regulation, compromised ratings agencies, government involvement in the mortgage market, the end of the Glass-Steagall Act in 1999, and insufficient bank capital. Only Wall Street could put the economy at risk and it had an excellent reason to do so: profit. It made huge profits in the build-up to the credit crisis and huge profits when it sold itself as “too big to fail” and received massive government and Federal Reserve bailouts. Most of the serious economic damage the U.S. is struggling with today was done by the top 0.1% and they benefited greatly from it.

Not surprisingly, Wall Street and the top of corporate America are doing extremely well as of June 2011. For example, in Q1 of 2011, America’s top corporations reported 31% profit growth and a 31% reduction in taxes, the latter due to profit outsourcing to low tax rate countries. Somewhere around 40% of the profits in the S&P 500 come from overseas and stay overseas, with about half of these 500 top corporations having their headquarters in tax havens. If the corporations don’t repatriate their profits, they pay no U.S. taxes. The year 2010 was a record year for compensation on Wall Street, while corporate CEO compensation rose by over 30%, most Americans struggled. In 2010 a dozen major companies, including GE, Verizon, Boeing, Wells Fargo, and Fed Ex paid US tax rates between -0.7% and -9.2%. Production, employment, profits, and taxes have all been outsourced. Major U.S. corporations are currently lobbying to have another “tax-repatriation” window like that in 2004 where they can bring back corporate profits at a 5.25% tax rate versus the usual 35% US corporate tax rate. Ordinary working citizens with the lowest incomes are taxed at 10%.

I could go on and on, but the bottom line is this: A highly complex and largely discrete set of laws and exemptions from laws has been put in place by those in the uppermost reaches of the U.S. financial system. It allows them to protect and increase their wealth and significantly affect the U.S. political and legislative processes. They have real power and real wealth. Ordinary citizens in the bottom 99.9% are largely not aware of these systems, do not understand how they work, are unlikely to participate in them, and have little likelihood of entering the top 0.5%, much less the top 0.1%. Moreover, those at the very top have no incentive whatsoever for revealing or changing the rules. I am not optimistic.

Written by G. William Domhoff

© 2011 Global Research

Photo by Flickr user Maciej Dakowicz

PROPUBLICA– Since 2008, an Ohio-based company, White Hat Management, has collected around $230 million to run charter schools in that state. The company has grown into a national chain and reports that it has about 20,000 students across the country. But now 10 of its own schools and the state of Ohio are suing, complaining that many White Hat students are failing, and that the company has refused to account for how it has spent the money.

The dispute between White Hat and Ohio, which is unfolding in state court in Franklin County, provides a glimpse at a larger trend: the growing role of private management companies in publicly funded charter schools.

Contrary to the idea of charters as small, locally run schools, approximately a third of them now rely on management companies — which can be either for-profit or non-profit — to perform many of the most fundamental school services, such as hiring and firing staff, developing curricula and disciplining students. But while the shortcomings of traditional public schools have received much attention in recent years, a look at the private sector’s efforts to run schools in Ohio, Florida and New York shows that turning things over to a company has created its own set of problems for public schools.

Government data suggest that schools with for-profit managers have somewhat worse academic results than charters without management companies, and a number of boards have clashed with managers over a lack of transparency in how they are using public funds.

Read more about Charter Schools Outsource Education to Management Firms, With Mixed Results

© 2011 ProPublica

Photo by Flickr user mwhatley

ALTERNET– A discussion between Noam Chomsky and Michael Lerner:

Michael Lerner (ML): You have made many excellent analyses of the power of global capital and its capacity to undermine ordinary citizens’ efforts to transform the global reality toward a more humane and generous world. If there were a serious movement in the U.S. ready to challenge global capital, what should such a movement do? Or is it, as many believe, hopeless, given the power of capital to control the media, undermine democratic movements, and use the police/military power and the co-optive power of mass entertainment, endless spectacle, and financial compensations for many of the smartest people coming up through working-class and middle-income routes? What path is rational for a movement seeking to build a world of environmental sanity, social justice, and peace, yet facing such a sophisticated, powerful, and well-organized social order?

Noam Chomsky (NC): There is no doubt that concentrated private capital closely linked to the state has substantial resources, but on the other hand we shouldn’t overlook the fact that quite a bit has been achieved through public struggles in the U.S. over the years. In many respects this remains an unusually free country. The state has limited power to coerce, compared with many other countries, which is a very good thing. Many rights have been won, even in the past generation, and that provides a legacy from which we can move on. Struggling for freedom and justice has never been easy, but it has achieved progress; I don’t think we should assume that there are any particular limits.

At the moment we can’t realistically talk about challenging global capital, because the movements that might undertake such a task are far too scattered and atomized and focused on particular issues. But we can try to confront directly what global capital is doing right now and, on the basis of that, move on to further achievements. For example, it’s no big secret that in the past thirty years there has been enormous concentration of wealth in a very tiny part of the population, 1 percent or even one-tenth of 1 percent, and that has conferred extraordinary political power on a very tiny minority, primarily [those who control] financial capital, but also more broadly on the executive and managerial classes. At the same time, for the majority of the population, incomes have pretty much stagnated, working hours have increased, benefits have declined — they were never very good — and people are angry, hostile, and very upset. Many people distrust institutions, all of them; it’s a volatile period, and it’s a period which could move in a very dangerous direction — there are analogues, after all — but it could also provide opportunities to educate and organize and carry things forward. One may have a long-term goal of confronting global capital, but there have to be small steps along the way before you could even think of undertaking a challenge of that magnitude in a realistic way.

ML: Do you see any strategy for overcoming the fragmentation that exists among social movements to help people recognize an overriding shared agenda?

NC: One failing of the social movements that I’ve noticed over many years is that while they are focusing on extremely crucial and important social issues like women’s rights, environmental protections, and so on, they have tended to ignore or downplay the economic and social crises faced by working people. It’s not that they are completely ignored, but they are downplayed. And that has to be overcome, and there are ways to do it. So, to take a concrete example right near where I live, right now there is a town near Boston where a multinational corporation is closing down a local plant because it’s not profitable enough from the point of view of the multinational. Members of the workforce have offered to purchase the plant and the equipment, and the multinational doesn’t want to do that; it would rather lose money than offer the opportunity for a worker self-managed plant that might well become successful. And the multinational has the power to do what it wants, of course. But sufficient popular support — community support, activist support, and so on — could swing the balance. Things like that are happening all over the country.

Read the balance of the interview about Chomsky: Wealthiest 1% Rule Our Politics — But There’s Hope in the Fight Against Global Capital.

© 2011 AlterNet

Photo by Flickr user austinosuide

GUARDIAN– Let’s get this right: the world’s biggest boss, supported by companies as diverse as Altria, Bank of America, Microsoft and General Electric and backed up by the godfather of big business (the US Chamber of Commerce) has persuaded the US supreme court that thousands of women workers can’t possibly share enough of an interest to constitute a class?

It’s hard to know which part of the court’s decision in Dukes v Walmart hurts equity most: the assault on class-action jurisprudence generally, at a time of shrinking tools for workers seeking redress, or the defeat of history’s biggest gender-based claim before a court that, for the first time, includes two women, one of whom (Ruth Bader Ginsburg) made her reputation in sex discrimination law.

Dividing 5-4, in Dukes v Walmart, the supreme court on Monday dismissed the plaintiffs’ claim that companywide policy gave local managers too much discretion in pay and promotion decisions, leaving Walmart employees at thousands of Walmart and Sam’s Club stores vulnerable to gender stereotypes. (The company changed the format of its name since the case was filed.) The plaintiffs “provide no convincing proof of a companywide discriminatory pay and promotion policy,” Justice Antonin Scalia wrote for the majority.

Read full article about Walmart: Too Big to Sue?

© 2011 Guardian

Photo by flickr user Walmart Stores