Congressional Travel Junkets or The Perks of Being A Legislator

“Before a Cat will condescend
To treat you as a trusted friend,
Some little token of esteem
Is needed, like a dish of cream…”

                             

                                          -T.S. Eliot

Let’s take a moment to discuss the time honored tradition of the Congressional travel junket. For those of you not fully aware of what a travel junket is exactly let me answer it three ways:

If you’re a Senator or Congress member pressed by the (always uncomfortable) question, you’d answer that a travel junket is a useful venture in which a Senator or Congress member must travel to a location on a fact finding mission to better represent their constituents and country as a whole.

If you’re a tax payer or a constituent, a travel junket is a trip taken by an elected official (and often their spouse or other family member) for the ostensible purpose of hands on education regarding some pending legislation. At times you foot the bill. At others, some private entity does. Either way, in most cases you get nothing of value.

If you’re a lobbyist or corporation or special interest of any sort, a travel junket is a useful tool in which, by covering the flight and other associated costs for what amounts to a vacation, you are given extended access to and many would argue, considerable influence over a particular lawmaker. The investment can be expensive, but the return is generally well worth the expenditure.

The travel junket became a point of discomfort for many voters in 2006-2007 following the discovery of disgraced lobbyist Jack Abramoff’s frequent use of junkets to lord influence over a number of elected officials. These fact finding missions included hard hitting research such as rounds of golf at Scotland’s famed golf course, St. Andrews, and trips to the Fiesta Bowl and Super Bowl. In actuality, those are just some quick highlights. The list of absurd Abramoff coordinated trips is fairly lengthy. Of course, following the public revelation and the eventual indictment and conviction of Abramoff, all of these trips were deemed either demonstrably illegal or, at the very least, gross misappropriations of an official’s time. Congress passed a bill reigning in gifts, meals and travel packages from lobbyists and the number of congressional junkets fell off a cliff—dropping from an all time high of nearly 5,000 trips in 2005 (at a cost of nearly $10 Million) to 1,846 trips the following year. The bill limited trip length on foreign travel to seven days and domestic travel to four days but also allowed for—wait for it—some exceptions. These exceptions included the allowance of educational and charitable groups to finance trips for elected officials.

In completely unsurprising fashion, it didn’t take long for lobbyists and lawmakers to figure out the best way to utilize the exceptions to their full extent. As an article in the Columbia Journalism Review explained recently:

The arrangement works like this: a congressional caucus—an official group of lawmakers (there are many) with common characteristics or interests, such as the Congressional Black Caucus or Blue Dog Democrats or the Congressional Marcellus Shale Caucus—sets up a charitable organization. That organization, in turn, seeks donations, which do not have to be disclosed. In addition to its good works, the charitable entity then organizes events, such as conferences or retreats, in which the caucus members rub shoulders with contributors. The nonprofit can invite special interests—corporations, unions, and others—to fork over large donations to sponsor and participate in these events.

So, not only have lawmakers figured out a way around travel junket reform, they’ve also figured out a way to turn their vacations into a fundraising tool. Nice.

Perhaps the most ostentatious abuse of this new “charitable” junket system came in the summer of 2011, when Eric Cantor arranged for eighty—eighty!—House members and their families to visit Israel through a charity affiliated with the pro-Israeli lobbying group American Israel Public Affairs Committee. This massive “fact finding mission” was capped off quite embarrassingly, with a (quite possibly drunk) Kansas Representative Kevin Yoder taking a late night skinny dip in the Sea of Galilee.

So a Congressman quite possibly got drunk, most definitely got naked and then went for a swim in the body of water Jesus supposedly walked on. It’s embarrassing and completely unprofessional for sure but not much else, right? Well, the real problem with Mr. Yoder’s naked dip into biblical waters stems from the way in which it was discovered. Undoubtedly, Congressman Yoder’s transgressions would likely have gone undiscovered by the press and general public had it not been for its documentation in an FBI probe into the trip over misrepresentation of expenses by some people on the trip.

As it turns out, nothing provably criminal came from the FBI probe but that is more likely due to the fact that there is a fine line between illegal and unethical and many of these travel junkets seem to exist comfortably in that narrowest of spaces. I won’t bother offering up conjecture on the absurd or unethical activities of the AIPAC junket. Instead, let’s look at Doug Thompson’s recollections of the travel junkets he attended as a staffer for the House Committee on Science and Technology back in the late 80’s:

…On such “official” trips funded by taxpayer dollars, I saw members of Congress get drunk and pass out, escort young women to their hotel rooms for the night, lose their “per diem” payments and more at casinos and engage in other antics that wouldn’t set well with folks back in their home districts.  One member bragged about getting a bl*w job from a female employee of the American Embassy in Paris.  Another claimed to have bedded a young lady who worked for the Embassy in London.

Of course, all of these junkets were called “fact-finding” missions but they were, in reality, taxpayer-funded vacations where Congressional wives shopped at the American Embassy stores, paying wholesale prices for French perfume, Italian leather goods or duty-free booze.  I still own a gold Heuer watch that I bought at one Embassy store for about 40 percent of what it would have cost in a jewelry store.

On the flight home from the Paris Air Show in 1985, the largesse from shopping sprees overflowed the cargo holds of the Air Force KC-135 that provided air transportation so some of it was packed into the restrooms of the plane, leaving just one for use on the long flight…

Of course this was more than twenty years ago but, aside from the increase in privately funded junkets, I doubt much has changed. The travel junket is just one of the perks of being an elected official and that is unlikely to change any time in the near future. Since 2000, the legislature has taken over 36,000 privately funded trips at a cost of approximately $83 million. (They’ve taken plenty of tax funded trips as well, though that is a cost more difficult to pin down.) And while the structure of privately funded travel junkets may have changed since 2006, the purpose is still the same. The travel junket is merely a means of lobbying and influence peddling for special interests outside of Washington—the proverbial dish of cream, if you will.   

Did "Fabulous Fab" Take A Dive For His Bosses?

Note: Normally, I focus on corruption on the government side of the equation, but this recent verdict I think points out the systemic corruption that is occurring in the United States' financial industry. I felt it was important enough to cover it, even if it seems slightly off topic for this blog.

The US Securities and Exchange Commission gave themselves a big pat on the back over last week’s conviction of “Fabulous Fab” Fabrice Tourre on securities fraud. Tourre was the only individual found guilty in the convoluted, high-dollar ABACUS scandal—a case in which the investors Tourre sold the investment vehicle to were told it was financially sound and intentionally made unaware of the toxic subprime mortgage securities being bundled into its portfolio; all the while the party responsible for the ABACUS 2007 AC-1 creation was betting against it.

Following the verdict, Matthew Martens, the SEC’s overseeing attorney on this case, said, “If this doesn’t convince people we can win these cases, I don’t know what would”. I'm not sure it's that simple though.

Yes, the SEC should be happy that it walked away with this conviction, but it seems much more likely that Fabulous Fab, while certainly guilty, was essentially a sacrificial lamb—a mid-level asset that was jettisoned as soon as it became advantageous for folks higher up the food chain. After all, what happened to the person who gained the most from the ABACUS Scandal, John Paulson; the man who commissioned the creation of ABACUS and who played a significant role in the portfolio’s content selection?

Let’s take a quick look at how the scandal actually broke down:

In the mid-2000's John Paulson approaches Goldman Sachs with $15 million to develop a CDO—an investment product based on collateral assets bundled together, most commonly property mortgages. We now know that Paulson, who was already famously bearish on the housing market at that point, wanted this investment product created specifically to be a failure. So, during the portfolio selection, Paulson loads it to the brim with sub-prime mortgages. In fact, his selections were so bad that less than one year following the introduction of ABACUS, 99% of the residential mortgages in the portfolio had been downgraded.

After Goldman created the CDO and let Paulson fill it with ridiculously bad paper, they sold it to investors without accurately disclosing its actual contents. According to the SEC filing:

Goldman Sachs failed to disclose to investors vital information about the CDO, in particular the role that a major hedge fund played in the portfolio selection process and the fact that the hedge fund had taken a short position against the CDO.

Goldman made it appear as if they would have an objective third party (ACA Management LLC) in charge of portfolio assignment and management, but that simply wasn’t the case.

GS&Co marketing materials for ABACUS 2007-AC1 – including the term sheet, flip book and offering memorandum for the CDO – all represented that the reference portfolio of RMBS underlying the CDO was selected by ACA Management LLC (“ACA”), a third-party with experience analyzing credit risk in RMBS. Undisclosed in the marketing materials and unbeknownst to investors, a large hedge fund, Paulson & Co. Inc. (“Paulson”), with economic interests directly adverse to investors in the ABACUS 2007-AC1 CDO, played a significant role in the portfolio selection process.

It’s so important to remember: having investors pour their money into the CDO with the intent of it being profitable is the only way that Paulson had the opportunity to make a fortune shorting the fund.

Goldman then sold the fund to IKB Deutsche Industriebank AG and this is where the SEC was able to scoop up its first victory. Goldman eventually had to concede that there had been omissions of fact and that IKB had not been made adequately aware of Paulson’s position in the portfolio selection. Goldman of course argued that, regardless of their inherent fiduciary responsibility, researching the details of the fund purchase ultimately fell on IKB. That argument fell flat and Goldman had to pay a $550 Million penalty.

So IKB gets burned, investors get burned, Goldman gets caught red handed and pays a fine that allowed them to avoid any admission of guilt or criminality (pretty much standard operating procedure in big financial cases), Fabrice Tourre is indicted and found guilty, and John Paulson walks away unscathed with a claim of plausible deniability and a billion—billion with a B—dollars added to his ledger. Something isn’t quite right here.

Look, I don’t think that anyone with any knowledge of the case is going to say that Fabrice Tourre was innocent. He wasn’t. He knowingly misled investors. But my question is this: at the behest of whom?

John Paulson wanted that CDO to fail. He specifically created it and loaded it with toxic mortgages to do just that. But he also knew that he had to have enough investors thinking that it was a wise investment in order to sell it short and reap a windfall. It takes quite a leap of logic to believe that Paulson had no influence in the matter in which it was marketed or, in the very least damning interpretation of events, that he was completely unaware that Goldman was marketing it dishonestly.

Unfortunately, the SEC never attempted to flesh out the obvious assumption: that Paulson and Goldman (via Tourre) were effectively co-conspirators in what amounts to a massive swindle. I don’t know exactly why they didn’t pursue Paulson but I feel comfortable in speculating that he and executives at Goldman, either directly or indirectly (with a calculated level of cooperation with the SEC), offered up Tourre as a sort of sacrifice to a regulatory body that a disgruntled American public has largely deemed a failure in its prosecution of high level financial criminals following the 2008 financial crisis.

What is equally perplexing is the alacrity with which financial booby traps like ABACUS are constructed. Don’t get me wrong, I’m not necessarily against behavior like stock shorting. It makes sense for an investor to be able to look at a failing company and say, “I’m willing to place my money on the fact that this company is failing worse than people realize”, but ABACUS was a completely different animal. ABACUS was a trap for unwitting investors, intentionally created to fail while allowing those in the know to bet on its imminent failure. How the creation of a financial investment product meant to intentionally fail doesn’t fall into the category of fraud is beyond me. It should be and anyone involved should be held accountable.

His name is John Paulson. His name is John Paulson. His name is John Paulson...

Goldman Sachs and JP Morgan Manipulate Commodity Prices While the SEC Cheers Them On.

This week, I contributed an article to The Capital Press. You can read it here.

Here's a quick excerpt:

It’s not exactly controversial to say that the integrity of the SEC—the institution which holds primary responsibility for enforcing securities laws and regulating the financial industry; the country’s front line of defense against financial wrongdoing—has been compromised by revolving door politics. Just like many politicians and staffers on Capitol Hill have been influenced by the promise of cushy positions in lobbying or law firms following their exit from public life, many financial regulators have also been rendered ineffective under the mantle of personal financial security promised to them by the same institutions they are charged with overseeing.

McCain and Warren Team Up In Quixotic Effort To Bring Back Glass-Steagall

Since the financial crisis in 2008 a desperate cry has been made by many economic and public policy experts: Bring back the Glass-Steagall Act! The demand has graced the pages of hallowed financial publications like the Wall Street Journal and Forbes.  Groups of average Americans have formed Facebook groups to push the Act’s revival. It was name checked in the arguably amorphous list of demands by Occupy Wall Street movement of two years ago. Multiple Nobel Prize Winning Economists have lamented its repeal.

So, a lot of people were likely delighted by the recent news that two unlikely allies, Senator John McCain (R-AZ) and Senator Elizabeth Warren (D-MA) have mounted an attempt to bring back many of the features of Glass-Steagall.  These same people will also be equally disappointed when the bill is slaughtered before it even gets a vote.

Why am I so confident (or cynical might be the right word) that the bill won’t see the light of day? For a couple of reasons really, but let’s first back up and look at what Glass-Steagall was.

Following the Stock Market Crash of 1929 and the ensuing economic devastation, Congress pulled together and passed the Banking Act of 1933. This bill established the Federal Deposit Insurance Corporation (FDIC) and set new regulations on speculation and banking. Included in the bill were provisions set forth by Senator Carter Glass (D-VA) and Henry Steagall (D-AL) that created a hard wall between depository and investment banks—that is, under this provision a low-risk commercial bank that took customer deposits, issued receipts and lent money would not be able to make the high risk financial maneuvers that banks specializing in securities and investments could. This was to avoid the potential loss of said deposits in failed investment strategies since those deposits were never explicitly made by customers for the purpose of speculation.

Blocking the unnecessary exposure of commercial deposits to the wild valuation swings of speculative investment activities should be common sense considering the aforementioned FDIC program and its responsibility to insure commercial bank deposits. As Nobel Prize Winner in Economic Sciences Joseph Stiglitz pointed out in 2009:

“Commercial banks are not supposed to be high-risk ventures; they are supposed to manage other people’s money very conservatively. It is with this understanding that the government agrees to pick up the tab should they fail. Investment banks, on the other hand, have traditionally managed rich people’s money—people who can take bigger risks in order to get bigger returns.” 

But common sense and profitability don’t always overlap and the financial industry tends to be more interested in the latter. They weren’t concerned about the FDIC being on the hook if things went sour. They simply wanted the ability to merge investment and depository banks to tap into those commercial balance sheets for further investment leverage.

And more often than not, it seems, what the financial industry wants the financial industry gets. So, in late 1999 lobbying expenditures of roughly $300 million and years of working the back channels of Washington culminated in the financial industry getting what it wanted: a silver bullet bill—the Gramm Leach Bliley Act— that definitively erased Glass Steagall from the regulatory tool kit. Immediately, mergers between commercial and investment banks began en masse.

So, the first reason that the McCain-Warren effort to bring about a return of Glass-Steagall-styled banking regulation is largely an exercise in futility is that the financial industry simply doesn’t want it to happen. And they spread enough money around Capitol Hill and K-Street to be heard loud and clear. Just last year’s combined Commercial and Financial Banking lobbying expenditures totaled over $159 million which put it third highest on the list of total industry lobbying expenditures. That’s an undoubtedly hefty investment, but it has paid off time and time again. It worked to repeal numerous banking regulations throughout the 80’s and 90’s, it worked to finally kill Glass-Steagall in ’99 and it’s working again as the industry has largely been successful in emasculating the Dodd-Frank Act; the first attempt at wrangling in the excesses of Wall Street following the 2008 financial implosion. Let’s take a closer look at how the financial industry reacts to legislation that it doesn’t care for:

Following passage of Dodd Frank in 2010—no small miracle in itself, even with the American people considerably outraged at that point—the financial industry went into overdrive on the Hill. Their strategy was a multi-pronged approach. First, they sent in a veritable army of lobbyist to persuade Congress members to defund the regulatory agencies necessary for enforcement of the bill. In a long, fairly underreported fight, bank lobbyists outnumbered the bill’s advocates 20 to 1. They outspent the bill’s advocates by an even larger margin. They also got more face time with representatives by a margin of nearly 9 to 1. This fire-hose approach proved rather effective. In addition to cutting off significant funding, they also successfully pushed to have all of the rules and legal language of the bill written by the individual regulatory agencies themselves.

The second part of the assault was a wave of regulatory attorneys. If a regulator were to somehow successfully publish a rule, the banks would immediately take that regulator to court and, at the very least, effectively gum up the rule’s implementation for years; sometimes only over minor technicalities. One such litigator, Supreme Court Justice Antonin Scalia’s son Eugene has already filed seven of these types of suits. Long story short: Less than half of the rules that had been outlined in Dodd-Frank have been finalized. It’s basically a zombie bill; there in appearance and name but effectively dead. And the American people still have no real protections against the same economic dangers they faced from the financial industry in the fall of 2008, even as many Americans seem to be unaware or, in some cases, willfully ignorant of them.

This brings me to the next inevitable roadblock to any attempt to bring back the most important elements of Glass-Steagall. There is, in today’s Congress, an active ideological barrier to necessary and responsible financial regulation. There is a school of thought among many of the conservative members of Congress—particularly those swept in by the Tea Party Movement of the 2010 elections—that government regulation of any kind is an inherently bad thing. Regulation, they have stated time and again, places an impediment on free market capitalism which, they posit, is entirely unnecessary due to the self-correcting nature of the economic system. Of course, this assertion is absurd. After all, many of the most fervent of free market advocates were forced to recalibrate their ideology in the face of the economic destruction of ‘08, including former Federal Reserve Chairman Alan Greenspan who conceded in a House Committee hearing that there was a “…flaw in the model that I perceived is a critical functioning structure that defines how the world works, so to speak”. But those that still buy into the myth of the innate perfection of absolute free market economics will not be dissuaded regardless of these documented concessions or ample evidence to the contrary of their position.

One of the most important things that Dodd-Frank attempted to do was to impose some regulation on the real monster of the financial meltdown: financial derivatives like credit default swaps. While the housing bubble bust was the catalyst for the crisis, it was the near implosion of nearly $700 Trillion in outstanding, unregulated derivatives—ten times the GDP of all the world’s countries combined—that very nearly killed the global economy. Basically, financial institutions had made massive unofficial side bets that they simply didn’t have the capital to cover. When the bets went bad they set off a chain reaction of more bets going bad and as the reality of the situation became apparent the trust so necessary to have a functioning economy nearly disappeared overnight. Credit markets froze. People panicked. Stock Markets tumbled. Ultimately, the government had to “inject liquidity” on a never-before-seen scale to restore confidence. Considering this, some oversight of the derivatives market and the amounts of capital that financial institutions would be allowed to place in it would seem to be, once again, common sense. Think again.

A number of bills that push for the return of deregulation of derivatives have now made their way out onto the floor of the House of Representatives. A co-sponsor of one of these bills, Rep. Scott Garrett, explained his support of the bill, "Our job creators -- millions being crushed by overly burdensome Washington rules and regulations -- deserve to be on a fair, level playing field with the international community" It’s breathtaking to behold.

Not even five years after the world teetered on financial ruin and potential civil unrest and many members of Congress are once again ideologically and financially motivated to load another bullet in the chamber for round two of Global Economic Russian Roulette. Very few stand in the way and those that do are undeniably outgunned and outspent. It won’t be any different for this attempt to reinstate Glass-Steagall. What McCain and Warren (as well as Senators Angus King and Maria Cantwell) are attempting to do is undoubtedly noble but equally impossible. 

Virginia's Lax Ethics Laws

Want to see blatant corruption in action? The type of corruption that isn't even questionable as unethical? Check out Dahlia Lithwick's post over on Slate about Virginia's lax ethic laws.

Lithwick gets right down to brass tacks:

"Embattled Gov. Bob McDonnell has probably just cratered a once-promising political career over $145,000 in undisclosed gifts—each worthy of its own episode of Real Housewives of Richmond—including a $6,500 Rolex, a New York shopping spree for his wife, limo rides, catering for his daughter’s wedding, and a ride in a Ferrari. Is it shocking that McDonnell and his wife twisted themselves into pretzels to shill for the donor company’s weird tobacco-based nutritional supplements?"

She also discusses Virginia's Attorney General Ken Cuccinelli's unbelievable clearance of a recent ethics probe pointing out the only reason that Cuccinelli was cleared was because of the ridiculously hollow nature of Virginia's ethics laws. Highlighting Jessica Tillipman's work on the FCPA blog:

“Per the State Integrity Investigation, [Virginia] is one of only nine states without a statewide ethics commission and one of four states without campaign finance limits. Moreover, according to the National Conference of State Legislators, Virginia is one of just ten states in the country that, as noted above, does not limit the value of personal gifts provided to elected officials.”

There is a reason that the American people are so cynical about the people they send to their respective capitols to represent them.  Even with stringent ethics laws there tends to be a number of politicians willing to test the boundaries of the system. When there is almost no ethical infrastructure at all, when there are little to no tangible consequences for blatant ethics violations, what could anyone expect the outcome to be?

Putting A Face On Revolving Door Politics (Part 1)

Where does a Congress member or Senator go when they leave the Hill; be it a calculated exit or otherwise? It’s true they have opulent post-employment compensation plans but even with a sturdy safety net many aren’t necessarily ready to trade in their careers or ambitions for leisurely weekday afternoons on the golf course, senior’s cruises and early bird dinners. Like many Americans, this transition usually means they either have another gig lined up if it was a planned departure or they are scrambling to find one if it came unexpectedly.

For many former politicians their new endeavor usually means they end up with a very familiar work commute—right back to Capitol Hill. Equally comforting and advantageous for both the new employee and their employer it usually means a lot of time spent speaking with old, familiar faces—though now it’s from the opposite side of the desk. It certainly doesn’t hurt that the pay also tends to be much more lucrative. And though they’ll likely still be referred to by the honorary title of Senator or Congressman or Congresswoman in mixed company, their new professional title would be lobbyist or consultant.

This transition from elected public servant to well paid influence peddler is commonly referred to as “Revolving Door Politics” and its ubiquity and acceptance in the contemporary mechanics of Washington is often cited as one of the major contributing factors to political/corporate cronyism and the bastardization of our representative government.  

Current participants in revolving door politics would likely argue that there is nothing inherently unethical about their new careers; they’re merely earning a living using their experience and expertise to navigate within the confines of a complicated system. And it certainly isn’t illegal in any way, they might add. There is one gentleman who has been extremely successful in the post-Congressional lobby occupation that would likely be the first to offer up this particular defense of the practice.

Meet former Louisiana Congressman Billy Tauzin:

Congressman Tauzin, “the Cajun in the Capitol”, began his formal political career way back in 1972 when he won a seat in the Louisiana State House of Representatives. He served there until 1980 when a series of fortuitous events catapulted him to a seat in the US House of Representatives. Eventually, in 2001Tauzin landed the chairman position of the House Energy and Commerce Committee. This powerful committee has an exceptionally broad jurisdiction, but one particular area of oversight it’s charged with is the pharmaceutical industry. The pharmaceutical industry also happened to be a big campaign contributor to Congressman Tauzin—contributing over $200,000 throughout his 20+ year congressional career though $91,500 of it came in 2002, just shortly after he landed the chairmanship.

While chairing this committee, Congressman Tauzin co-sponsored and steered a rather large bill through the House titled the Medicare Prescription Drug, Improvement, and Modernization Act. With Tauzin’s help, the bill eventually passed through the House (by a razor thin margin) and the Senate and was signed into law. The bill radically altered Medicare, turning much of the business of caring for America’s seniors and disabled people to private insurance companies. Part of the bill, known as Medicare Part D, mandated that the Federal government cover a significant portion of prescription drug costs for beneficiaries under Medicare. It simultaneously dictated that the Federal Government could not negotiate in any way for lower costs of prescription drugs for the program as it had been allowed to in other programs like the Veterans Health Administration. It also restricted the Medicare system from purchasing cheaper, imported drugs from other countries like Canada and Mexico.

So, plainly stated for anyone not fully understanding the implications, this bill provided the pharmaceutical industry with an absolutely massive expansion in its customer base—with the deepest pockets in the world picking up a large portion of the tab—while at the same time guaranteeing they got to dictate, without protest or the slightest hint of competition, what the prices would be for these new customers. Calling it a sweetheart of a deal would be a serious understatement. Whether they said so or not, the heads of the pharmaceutical industry must have been greatly appreciative of Tauzin’s effort to steer the bill through to completion.

Two months after the Medicare Modernization Act was signed into law by President George W. Bush, Tauzin resigned his chairmanship of the Energy and Commerce Committee and announced that he would not seek reelection for his House seat. Tauzin had a new gig. Citing a successful battle with cancer and his new found appreciation for the pharmaceutical industry, it seems that Congressman Tauzin was called to do even greater work as the head of the Pharmaceutical Research and Manufacturers of America (PhRMA), the largest lobbying entity for the pharmaceutical industry in Washington. The new position came with a modest salary increase of course. As a congressman, Tauzin had a base salary of $154,700 in 2003. His starting salary at PhRMA was $2,000,000. Phenomenal timing on his part since he probably needed a more reliable way to pay for the lavish 1.1 million dollar Texas ranch he had just purchased months prior.

Tauzin would go on to head PhRMA until 2010, ultimately amassing a total of $19,359,927 in pay— $11.6 Million of which he received in his last year with the organization. (There are varying explanations as to why Tauzin left, but it’s largely irrelevant here.)  Following his departure from PhRMA, Tauzin once again decided against retirement. Perhaps closing out his winter years languidly on his Texas ranch, hunting deer and comparing ATM receipts with old colleagues seemed a bit unfair to all those poor souls who needed him and his expertise the most. So instead, in addition to heading his own lobbying firm, Tauzin lathered up in elbow grease and found more work with the lobbying firm Alston & Bird where he parlayed what could have been a new found respect for fossil fuels into crusading on the Hill for companies like ConocoPhillips.

Nobody on Capitol Hill or K Street so much as batted an eye during any of this. Why should they? Tauzin is just another name in a long list of lawmakers who have behaved similarly. I’ll take a second to note here that there is a somewhat analogous profession where this behavior would not be tolerated.

The Model Code of Judicial Conduct dictates that, “[a] judge shall avoid impropriety and the appearance of impropriety in all of the judge’s activities”. There is a very important reason that the court system wants to avoid even the appearance of impropriety: It reflects the serious and warranted concern that, “…some conduct which is in fact ethical may appear to the layman as unethical and thereby could erode public confidence in the judicial system or the legal profession”.  

The conduct of Congressman Tauzin following his departure from his congressional seat doesn’t necessarily constitute an unquestionable impropriety—there is some chance that it was all completely above board—but it would be a difficult to argue that it doesn’t, at the very least, bear some appearance of impropriety. It’s incredible that these types of immediate and questionable employment and pay-grade transitions are not only common but generally accepted as business as usual in Washington. Congressman Tauzin’s brand of Revolving door politics is a major contributing factor in the American People’s eroded confidence in the Congress. The legislative branch should have the same concern about maintaining public confidence in their institution as the court system does.

Why They Can't Trust Us

As most are well aware by now, Egypt’s President Mohamed Morsi was overthrown last week in what some are calling a military coup. There are now legitimate concerns about the possibility of a civil war erupting. Whether it does or not, it’s obvious at this point that Egypt will remain in some state of turmoil for the foreseeable future. It’s heartbreaking for all of the Egyptians that have simply been looking for a better government and way of life. It all seemed within reach just two years ago.

The years since have been a roller coaster ride, starting with the Egyptian people banding together and orchestrating a successful and relatively peaceful overthrow of Hosni Mubarak’s government. Shortly thereafter they elected a president, drafted a constitution and then, rather quickly devolved back into chaos.  While the future for this ancient nation is uncertain, one thing is a pretty safe bet:

The Egyptian People do not trust the US Government and won’t likely be looking to it for guidance in reestablishing and stabilizing their shaky government.

In the now constant flux of the Middle Eastern political landscape, the United States’ long history of financial and political support for tyrannical (many now toppled) regimes has not allowed it much real influence in the way the region is now being restructured. Egypt, for example, has a number of legitimate grievances against the US Government and is a prime example of the United States’ new found diplomatic impotency in the region.

Why am I discussing the United States role in the region? Well, at the risk of sounding solipsistic (after all, this is an Egyptian story, not an American one), I think it’s impossible to ignore the peripheral role the United States played in the oppression of the Egyptian People by the Mubarak government that eventually sparked the revolution and led to the current turmoil. Let’s take a look:

The Mubarak Regime-- which ruled for its entire duration under an emergency law which gave the executive (the Interior Ministry) extensive powers including the ability to detain citizens indefinitely without charge or trial (sound familiar?)-- was notorious for torture and other flagrant violations of human rights. In one example listed in a report by Human Rights Watch released in the early days of the Egyptian Uprising, a young Cairo University law student protesting the US invasion of Iraq in 2003 was detained and brutally tortured:

“He stayed a long time upstairs, up to four hours at a time. He was tortured by electricity as well as beatings—he told us. He didn’t even have to tell us though, you could tell by his condition. We saw the burn marks from the electrocution. He was nearly comatose when they carried him [into the cell]. His face was extremely swollen and bruised. He was shaking. There were burn marks on his hand and elbows, and the feet and toes.”

There is little argument now that it was this type of torture and police abuse which can generally be credited with sparking the revolt in January 2011. As the protest, international exposure and political pressure grew and Mubarak’s fate became increasingly apparent, the Obama Administration rolled out its official position via Secretary of State Clinton who came out publicly for “an orderly, peaceful transition to real democracy”.

 What was not included in this Sunday Morning News Show discussion—at least not by Hillary Clinton—was any mention of the long, dark history of cooperation with the Mubarak government. Indeed, up until that point, Egypt was not only touted as a major ally but was also a major recipient of US Foreign Aid—only second to Israel in total dollars received, though it’s discussed much less than Israeli aid.

There are a number of reasons that Egypt was privy to over $50 Billion dollars in aid since 1975. It’s strategically important to have access to Egypt’s Suez Canal.  It was one of the only Middle Eastern states relatively friendly with Israel, following its controversial entry into the Egypt-Israel Peace Treaty of 1979. Later on, shortly after the 9/11 attacks, Mubarak would prove his loyalty to the US during the “War on Terror” by participating in the infamous extraordinary rendition program which allowed the CIA to send detainees to other countries like Egypt for torture—they were, after all, well practiced with torturing detainees as I previously mentioned—and interrogation. Just a little trade-off: they torture our detainees to extract information and we don’t say anything about them torturing theirs. All in all, it could and most likely would be argued by any State Department official that Egypt got our political and financial support because, in a tumultuous and unfriendly region, it was the devil we knew.

But there’s another reason, rarely acknowledged in political circles, that Mubarak’s government got the amount of aid money and political support that it did. They asked for it the Washington way. They lobbied for it. Right up until the very end.

Even as the truths about torture and oppression became increasingly articulated, even as the Egyptian people began rallying to overthrow the government that had committed such atrocities for three decades, even as the civilized world began to turn its back on the dictator, an influential number of former congressmen turned powerful lobbyists worked the back channels of Capitol Hill to protect Mubarak’s government from potential embarrassment—for just a minor fee, of course.

Over the course of the last six months of 2010, the PLM Group—a joint venture between the lobbying groups of former congressman Toby Moffett, former congressman Bob Livingston and K-Street superstar Tony Podesta—pulled in roughly $400,000 from the Egyptian government to stop a Senate Resolution that called on Mubarak to support “free, fair, transparent and credible” elections as well as bring an end to the Emergency Law that allowed authorities to “harass, intimidate, arbitrarily detain, and engage in violence against peaceful demonstrators, journalists, human rights activists and bloggers.” In the end, their efforts were undeniably successful and the resolution was killed thanks in large part to the bi-partisan efforts of Senators Diane Feinstein of California and (Bob Livingston’s close friend) Roger Wicker of Mississippi.

A little over a month after the resolution died, the people of Egypt made Mubarak’s lobbying effort irrelevant and exposed the US Government on the wrong side of its supposed anchor value of freedom for all. The Egyptian People won't soon forget.

The Coal, the Cash and the Lobby

In spite of (or perhaps because of) all the recent chaos over embarrassing revelations of the surveillance habits of the US government, the Obama Administration pushed forward with its climate agenda last week and announced plans to further curb future carbon emissions. The plan, unveiled by the President during a speech at Georgetown University, called for the Environmental Protection Agency to establish more stringent carbon pollution standards for already active coal plants. As expected, the coal industry was quickly up in arms over the speech’s implications and moving forward with a massive, multi-million dollar public relations assault to counter the policy push by the Executive Branch. Of course, these types of PR expenditures by the coal industry have become increasingly commonplace as they enlist some friendly voices to push the narrative that the Obama Administration is actively trying to kill the coal industry.

Coal can be a highly charged subject depending on which area of the country you live in and which party you tend to vote for. The argument for and against are generally framed in familiar fashion. On one side, we have the progressive, environmentalist argument—generally accompanied with images of billowing smoke stacks and/or the sad, soot smeared faces of coal workers—that, regardless of the general accessibility and its claims of being inexpensive, coal is incredibly harmful to the environment and people and should be held to a high regulatory standard if not eliminated altogether. On the other side of the coin, we have the conservative, economic angled argument—replete with images of smiling, relatively clean coal miners standing proudly outside a mine lift and/or pictures of happy families gathered closely together, bathing in the warm glow of inexpensive electricity provided by coal power—that coal is not as hazardous as many deem it to be. In addition, they point out that as of right now, it’s cheap and locally sourced which means it provides Americans with jobs and  spurs growth for the American economy with dependable, inexpensive energy.  Both sides, at times, make valid arguments. What can’t be argued is that the coal industry is spending a veritable mountain of cash to convince Congress and the American public that it is still a viable energy option but in the process is ignoring some painful truths.

Last year, the Coal Industry spent $17,361,948 on lobbying the Federal Government. (They also spent plenty of money lobbying various state governments as well, but that number is much more difficult to quantify.) In addition to pushing for favorable regulatory legislation, these lobbyists also work to make sure the subsidy spigot stays wide open.

Along with official lobbying, the Coal Industry also spent a considerable amount ($13,391,247) on political donations in the 2012 election cycle. One such recipient of this campaign cash is Republican Congressman David McKinley of West Virginia. McKinley receives the lion’s share of his campaign financing from the Mining industry—an amount more than any other member of Congress. Does this mean that Congressman McKinley owes an oath of fealty to the Coal Industry? Not necessarily. After all, as Mr. McKinley likes to point out, coal mining is one of West Virginia’s largest industries and provides jobs to his constituents. But it becomes rather apparent when Mr. McKinley introduces legislation like H.R.2273—a bill which, among other things, sought to prevent the EPA from designating coal ash (“Coal Combustion Residuals”) as hazardous—that the Coal Industry isn’t exactly throwing their money away when they write him checks. Sure, it can be argued that the Coal Industry provides jobs for West Virginians but outside of the strange semantic wonderland of a well lobbied Congress and the halls of the Coal Industry, nobody in their right mind is arguing that coal ash is not hazardous.

There is just way too much scientific evidence that confirms that coal ash is indeed hazardous. Not to mention, the recent instances of real world destruction that should lay rest to any notion that coal ash is some benign externality of necessary economic progress. Plainly stated, coal particulates are extremely hazardous and harmful, there’s just no way around it. Mitt Romney knew it before it became politically expedient to say otherwise.  And that’s the bottom line.  The coal industry spends a lot of money to make it politically difficult to state an obvious truth.

Another plain truth that the coal industry can’t admit is this: it isn’t over-regulation or some deep grudge the Obama Administration has against it that is killing coal. It’s the market and the massive increase in Natural Gas production. Here is a chart showing the Coal Industry’s lobbying expenditures in recent years:

 

Interestingly, in 2005, the executives in the coal industry made a decision to increase their lobbying expenditures by quite a large margin. Why the sudden increase then? After all, in 2005, they had a coal-friendly president in the White House and Barack Obama had just come onto the national political scene as a junior Senator from Illinois and didn’t pose much of a threat to them yet. Likely, the Shale Gas revolution that kicked off in late 2005 has a lot more to do with it. See here:

(source data: US Energy Information Administration)

The correspondence between lobbying expenditure and natural gas production is a hard coincidence to shrug off. Why do they fail to mention this more often?

It’s more palatable to say that your industry is beleaguered by a spiteful administration with unreasonable regulatory standards than it is to say that your industry is taking a beating because it produces a more expensive product with more negative externalities than your competitors’.

Perhaps worst of all for the coal industry, the argument that it is a major jobs creator in the US is becoming increasingly more difficult to make. As of 2012, the coal industry employed a total of 87,520 people according to the Bureau of Labor Statistics; a number that is only impressive without proper context. When compared to other industries, the number becomes rather paltry. The automotive industry, for instance, employs nearly ten times as many people. The Natural Gas Industry, coal’s closest competitor, employs 106,770. Even wind energy clocks in at a relatively formidable 85K employed.

This isn’t to trivialize the number of jobs created by the industry or the plight of the common coal worker. That’s 87,520 people who rely on coal to put food on their table, a roof over their head, and in many cases pay for the needs of their children. They are justifiably concerned about their future. But the writing is on the wall. The sun is setting on the coal industry, just as it did on the once gargantuan whaling industry a century and a half ago. And this isn’t a bad thing. Just like the coal industry, whaling also supported and fed families, but if we had allowed whaling to exist continuously on life support through legislative favors and lobbied subsidies solely for the sake of the employment of a relatively small segment of the population we might still be filling lanterns with whale oil or, most likely, long ago witnessed the self-imposed death of the industry after it had extinguished the whale species from the oceans entirely. Thankfully, we found more efficient sources of the energy the country needed to expand and thrive instead. We’ll do it again. It looks like we already are. 

Lockheed Martin: Well Versed In Unethical Lobbying (Part II)

In my previous post, I briefly went into the lobbying expenditures of Lockheed Martin—currently the largest US Federal Government contractor—and also highlighted a couple of blatant ethical transgressions. I wanted to follow it up by answering a question that many people might have: What is lobbying?

There are two answers. The short, simple answer of what lobbying is supposed to be and the much longer, much more complicated reality of what lobbying actually can be and predominately is.

Before we get in too far, let me first clarify that I’m not reflexively opposed to lobbying per se. The concept of having direct communication between constituents and their government is an important and essential piece of representative democratic infrastructure. It was, in fact, considered so important a function to the nation’s founders that it was protected in the very first amendment of the Constitution: "Congress shall make no law … abridging … the right of the people peaceably … to petition the Government for a redress of grievances."

In its simplest incarnation lobbying works like this (please forgive me if this comes across as patronizing, my intent is to provide a comparison, so just bear with me): Under the protection of the First Amendment, citizens in Congressional District ABC might discover that they have a collective problem with issue XYZ. They decide that they should get together and petition their representative to have issue XYZ resolved legislatively.  They do so. After hearing the collective’s concerns, the representative makes the decision on whether issue XYZ truly affects the majority of his constituency and attempt to legislate accordingly.

Why does this work as a system? In theory, a representative must rely on the majority of his constituents to vote for him to remain in office and would therefore be directly accountable to them. If he doesn’t do what the majority of his constituents desire of him he runs the risk of being voted out in favor of someone who will. Simultaneously, the representative has to develop working relationships with his colleagues in order to be an effective legislator and achieve the goals of his constituency so necessary to stay in office. Thus, a congenial congress would necessarily emerge and ultimately a legislative equilibrium which would generally benefit the nation as a whole.

It should be apparent, particularly after examining the last three decades in Washington that this ideal scenario has not played out.

To be fair, the authors of the Constitution weren’t naïve to the potential corruption of the lobbying system—James Madison famously weighed the implications of “faction” throughout his Federalist #10 essay— and certainly anticipated there to be questionable practices in small proportion as well as the possible rise of powerful professional lobby agents, like the 19^th century “King of the Lobby”, Samuel Ward. What they couldn’t have reasonably anticipated though, and what has frequently debased the good intentions of the lobbying system, was the powerful rise of the modern corporation over the course of the late 19^th and 20^th centuries and the increased importance of campaign finance in the modern political landscape. Both of these factors have converged to give us the lobbying system and its rampant, systemic corruption.

(I’m going to avoid getting derailed here on the history and details of these two factors. Suffice to say, they deserve and will soon get much more than a simple paragraph synopsis from me.)

Having quickly covered the short, simple answer to what lobbying is, let’s take a look at one real world example of what lobbying actually is via Lockheed Martin.

The first complication in defining lobbying is that, in reality, lobbying is actually an amalgamation of tools and tactics that various parties use to solicit influence. For instance, the amount of money that Lockheed Martin officially spent on lobbying last year (2012) was $15,347,350. What this number actually represents is the reported amount of money that Lockheed officially paid to lobbying firms like Podesta Group or Venable LLP or Carliner Strategies to lobby on their behalf—that is, to show up on Capitol Hill and arrange for time to speak with politicians on a variety of key issues with the hopes of influencing them to legislate in a particular direction. These conversations often occur in all sorts of ideal, vacation-like settings. Still, this doesn’t paint close to the entire picture.

In addition to spending $15 million plus on official lobbying, Lockheed Martin is also responsible for a total of $4,034,489 in campaign contributions for the 2012 election cycle. $1,143,092 of this went to Political Action Committees, Parties and various other outside spending groups, while $2,891,397 went directly to candidates like Kay Granger (R-TX) whose district just so happens to contain a number of Lockheed locations and has, for reasons that should be apparent to anyone after viewing her political donation disclosure, helped the company out in numerous ways including pressing Taiwan to purchase Lockheed F-16’s that they didn’t want.

For politicians like Granger, making sure Lockheed is happy is an easy win/win calculation. After all, legislating favorably for Lockheed means they stand to not only gain the hefty political donations that are so necessary for reelection but also, during their next campaign, they can point to all the jobs that they have created or saved via the Lockheed projects they supported on Capitol Hill. No politician wants to be perceived as a job killer.

The problem is that what amounts to a win/win for politicians and congressional districts intertwined with Lockheed Martin, in many cases, ultimately amounts to a net loss for the rest of the country and the American taxpayer. I discussed the C-130 scenario in my last post, in which Lockheed, via direct lobbying of Congress in the late 1970’s, had managed to pull down a contract for 256 of the airplanes when the Department of Defense had only wanted five—many of which sat idle on tarmacs and in hangars afterward. Now, I’ll turn quickly to a modern program with similar results: the infamous F-35 Joint Strike Fighter.

The F-35 is the most expensive military weapons program in US history. In accordance with standard practice, Lockheed has strategically stretched the influential jobs programs (and the corresponding congressional influence) for the project out across the country, covering over 47 states as well as Puerto Rico.  The fighter jet program, which was initially quoted at $226 billion for around 2,900 planes and an operational start date estimated at 2012 has now ballooned into a cost of $400 billion for 2,400 planes, an additional $1 Trillion in maintenance and repairs over the programs lifetime and an operational start date now estimated at 2017. The increased cost had also made the Pentagon under Robert Gates consider terminating portions of the project. Lockheed consultant’s immediately rejected the cuts as unreasonable. When cuts to the program were formally submitted by House Representative Todd Akin, Lockheed lobbyist marched on the House Armed Services Committee. Unsurprisingly, the suggested cuts never came. Sound familiar? It should.

It’s happened with numerous programs like the C-130, the F-35, and recently, in another example, when the Pentagon wanted to end General Dynamics’ M1-Abrams battle tank program, largely considered to be a cold war relic without much use in today’s defense (a program which already had more tanks sitting idle than actually deployed), they found their efforts thwarted “…after a well-organized campaign of lobbying and political donations involving the lawmakers on four key committees that…decide the tanks’ fate…”. 

It’s fairly standard play in the US armaments industry. The Pentagon wants to cut or drastically reduce an outdated or ineffectual weapons program that nets your company a significant sum, so you do an end-around the Department of Defense, toss some money to key congressional members, scare them about job cuts, pay some lobbyist to talk to the other representatives and voila, the program isn’t ended or cut and in some cases—like the C-130— might even be expanded. Your company and its shareholders win, the American military and taxpayers lose. This is what lobbying can be.

In his farewell address of 1961, President Eisenhower offered up a prescient warning on the potential corruption in maintaining a war-ready private armaments industry:

“This conjunction of an immense military establishment and a large arms industry is new in the American experience. The total influence-economic, political, even spiritual-is felt in every city, every state house, every office of the Federal government. We recognize the imperative need for this development. Yet we must not fail to comprehend its grave implications. Our toil, resources and livelihood are all involved; so is the very structure of our society.

In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex. The potential for the disastrous rise of misplaced power exists and will persist.”

It’s a shame the American public didn’t listen then.

Lockheed Martin: Well Versed In Unethical Lobbying (Part I)

Recently I examined the lobbying expenditures of Booz Allen Hamilton in comparison with the other contracting companies that vie for the monetary attention of the US government. I discovered that strangely—though they are the 14^th largest US Government contracts holder— Booz Allen doesn’t have much of a presence on K Street. As I also pointed out, this couldn’t be further from the truth with the other companies on that list. Their lack of spending was an anomaly and so I decided to take a closer look at the other companies who have so obviously found value in the art of the Washington lobby. The top player on that list of Federal contracts awarded, and naturally the first company to examine was Lockheed Martin which spent at least $15.3 million in lobbying last year.

First, a quick historical primer on the company:

Lockheed Martin is a company with roots that date back nearly to the dawn of heavier-than-air flight. Just prior to the start of World War II, Lockheed opened up its Skunk Works facility in Burbank California and quickly began to land government contracts for planes such as the P-38 Lightning and the Ventura. Through the next two decades following the War, Lockheed would continue to win contracts and produce some amazingly successful planes such as the C-130 Hercules (which is still used today nearly 60 years later for reasons we’ll get into further down), the Cold War workhorse spy-plane the U-2, and the plane that any boy growing up in the 1970’s or 80’s drew ad nauseam in the margins of their schoolwork, the SR-71 Blackbird. But in the late 60’s and early 70’s their luck would change with a number of troubled projects including the C-5 Galaxy and the cancelled AH-56 Cheyenne Helicopter, and the company found itself in serious financial trouble. Lockheed applied for and received an— at the time— unprecedented massive bailout from the Federal Government. Of course the bailout left a bad taste in a lot of people’s mouths, but shortly thereafter it was also revealed that Lockheed had added insult to injury and had actually used millions of dollars from the bailout to bribe foreign officials to land foreign contracts. On a more positive note, the scandal (along with a number of others including Bananagate) did ultimately result in the passing of the Foreign Corrupt Practices Act of 1977, so there’s that. So anyway, after a couple of resignations from the ensuing fallout and not much else, Lockheed pushed on, fought off a hostile takeover attempt and locked down a number of acquisitions over the next two decades including Martin Marietta and divisions of General Dynamics which brings us to where we are today.

So now, in light of the bribery scandal of the 1970’s, it’s unquestionable that Lockheed has previously engaged before in unethical business behavior to achieve its goals. The problem is that, as I’ll point out, they continued to operate in an ethically ambiguous manner. They aren’t alone in this, of course, but here’s the rub: the dark art of the multi-billion dollar contracting business lies in the murky grey area between legal and illegal, ethical and unethical. I like to refer to this area as the billion dollar buffer-zone, and Lockheed is a master of navigating within its confines.

A prime example of Lockheed operating in the billion dollar buffer zone is in their C-130 Hercules deals post 1978. It was right around that time that the Pentagon decided that they were fully loaded on C-130’s and didn’t really need to order any more. The truth was, the Department of Defense had been considering dropping the C-130 since 1963, as they were looking to acquire a newly designed plane—one with shorter landing capabilities— which would be better suited to the Pentagon’s overall mission. After all, the C-130 project was "ripe for replacement because they have been in operation since the Korean and Vietnam Wars, making parts and maintenance very expensive." In 1972 they had issued a formal request for proposal (RFP) and by 1973 had given contracts to both Boeing and Douglas to build and test two prototypes each.  Lockheed, already in financial distress, sensed that one of its key programs was in danger of being decommissioned and decided it best to circumvent the Pentagon entirely and instead take the issue straight to Congress. In a successful effort via Congressional earmarks, Lockheed managed to turn a DoD request for five more C-130’s over the course of the following twenty years into a Congressional order of 256.  Here’s how they did it:

“…Lockheed lobbied members of Congress who represent states and districts with C-130 production facilities or parts manufacturers. The most prominent group in this category has been the entire Georgia state delegation because the plane is assembled in Marietta, Georgia. Second, Lockheed increases congressional demand for new planes by identifying aging C-130 units in National Guard and Reserve units throughout the country. National Guard and Reserve units are ideal because, again, their inventories often consist of whatever the active-duty forces send their way and because the officers and enlisted men typically are part-time and reside in the states and congressional districts that the air station calls home. So Lockheed identifies and lobbies those members of Congress who represent the districts and states in which the bases are located…Lockheed then prioritizes these prospective C-130 replacements according to need and political opportunities to increase support in Congress. Not all members' C-130 needs can be satisfied in any one fiscal year, however. Lockheed strategically lines up potential senators and representatives to support current add-ons designated for other states and districts by committing to lobby for their own add-ons in the future. As one congressional aide put it, Lockheed has become adept at managing support for the tactical airlifter with "C-130 math" to make sure that, during any given fiscal year, a substantial and often influential cadre of members supports the C-130 add-on. By following this strategy from year to year, Lockheed has been able to turn what was to be the C-130's doom in the 1970s into a regularly funded military spending program, all without a single request having been sent by the administration to Congress.”

That last sentence sums it up. Lockheed managed to churn billions of dollars in revenue out of a losing proposition on an outdated program, not because it was what was best for the country’s military (because it certainly wasn’t) but because it was what was best for the company’s bottom line. Simple as that.

And what did the citizens of the United States get for their tax dollars? 251 planes that the Military didn’t want or need. Perhaps worst of all is what became of many of these multi-million dollar planes once they had been purchased. Jeremiah Goulka points out:

“The Air Force didn't have the space for them, so they retired some older models that still had plenty of life in them and shunted most of the rest off to the Air Force Reserves and Air National Guard.”

Many sat unusable for years in hanger bays and on tarmacs around the country because an additional problem was that:

“…sufficient operating and maintenance funds didn't always come with the planes…”

To those that are aware of Lockheed's penchant for shady dealings, this sort of behavior is enraging but not all that surprising. But for those unacquainted with the lobbying antics of the military industrial complex (and other industries), this sort of wasteful result might seem shocking but the odd occurrence. It’s not. The results aren’t always as dramatic as the C-130 fiasco, but these kind of scenarios are the rule unfortunately, not the exception.

Of course, at this point, without further explanation lobbying might seem like some sort of voodoo ritual, a mysterious ceremonial dance that magically produces billion dollar results.  After all, the C-130 deal that Lockheed pulled off certainly seems like an act of magic. In the second part of this post, I’ll take a look into the methods and strategies that contractors like Lockheed use to coerce those in Washington with a grip on the purse strings and will begin to explain how, in so many ways, it is detrimental it is to our Democracy.