Month: August 2003

The Cameraman and the Diplomat

Mazen Dana, father of four young children, Palestinian, award-winning cameraman for Reuters wire service, was shot dead at close range by a US soldier while filming the damage from a mortar attack on an Iraqi prison. Sergio Vieira de Mello, father, Brazilian, UN envoy to Iraq, was killed when a truck bomb exploded beneath the window of his office in Baghdad. They both died within 48 hours of each other.

Iraq is a dangerous place right now, still in the grip of war, where US soldiers, young and petrified, are stuck in automatic-kill mode. All cars are suspect. Driving too fast or turning the corner into an unmarked roadblock can get a whole family slaughtered by automatic weapons fire. Hold something up to your face and a terrified soldier might see a gun or a grenade launcher where none exists. All targets are soft in a guerrilla war.

What did Mazen Dana and Sergio Vieira de Mello have in common? A lot. Mazen Dana’s home was in the city of Hebron in the West Bank, where he filmed Israeli military incursions into the West Bank, and where he’d been shot and beaten, camera in hand, several times in the past three years. Sergio Vieira de Mello was the UN’s triage specialist, handling refugee populations in Kosovo, Bangladesh, Cyprus, Peru, and Sudan. He stepped into the aftermath of a horrific Rwandan genocide overlooked by the Clinton administration and spent three years guiding East Timor on a rocky road to independence.

Both men, it turns out, were witnesses to conflict and genocide, to murder that comes in the middle of the night, kicks down the door, irreparably separates families, destroys homes, and leaves its mark as brown bloodstains on the floor.

Such witnesses sometimes become ambassadors for the dead. Mazen Dana’s recordings of the terrible destruction of his homeland are a window into the world’s worst continuing conflict, now unfortunately forced into the background by another war–the one that’s killed him.

Other such witnesses try to help living victims cope with the aftermath of violence. Sergio Vieira de Mello stepped into the role of UN High Commissioner for Refugees to do some of the hardest and most rewarding work imaginable: to bring the half-dead–the homeless, stateless, displaced, and dispossessed–back into the world of the living. Both Dana and Vieira de Mello straddled the boundary between life and death.

Both men were also internationals, world citizens. There was no nation that could claim Vieira de Mello’s full allegiance, unless it was the whole world community. And, truly, there is no nation for Mazen Dana and the people of the West Bank and Gaza Strip, and all hope of one seems to be receding further with every passing day.

Both men belonged to a small community of fearless people. Not the “courageous” boys who go to war, gun in hand, to defend a lie. Vieira de Mello and Dana were part of the fearless community of people who walk into danger with nothing in their hands but a camera, a pen, a sack of grain, a handful of medicine, a canvas tent, or a press pass–the people who meet violence with only their humanity as a shield. This takes a kind of courage that simply can’t be comprehended by the people who are running this inexplicable war.

Take, for example, the man supposedly in charge of US forces in Iraq, George W. Bush. He recently visited my home, Washington State. It was a one-day, breathtaking smash-and-grab. After lecturing us about salmon restoration while standing next to a dam that has nearly extinguished several salmon runs, Bush bypassed Seattle entirely so he could rub elbows with multi-millionaire, suburbanite cellphone magnate Craig MacCaw and collect $1.4 million for his reelection campaign. With cowardice leaking from the pores of his sweating face, Bush rode an armored limousine into Boeing Field and hopped onto Air Force One so he could beat it out of town before sundown. The Wild West scares him half to death. Six hours and not a single face-to-face meeting with an ordinary human being.

It’s ironic that the UN, which has now been attacked by both sides in this unforgivable war, must sit quietly and listen to Colin Powell’s demands for more international troops in Iraq. Powell, surely, has become the anti-Sergio Vieira de Mello: a man who is the ambassador from nowhere and represents nothing. The Bush administration has undercut him so many times now that he can’t be taken seriously anymore. Instead, the international community turns its ear to Donald Rumsfeld, the man who’s obviously in control in Washington DC. Rumsfeld, however, is the anti-Mazen Dana: a man who can’t show us any proof, tell us any truth, give us any facts or figures, or describe Arabic people as anything but terrorists or victims. If Dana and Vieira de Mello were ambassadors for the disaffected, for people who are literally dying to find their way to some kind of freedom and peace, then Rumsfeld and Powell are surely the undertakers for Empire.

In a world run by the exterminators, men like Vieira de Mello and Dana, who routinely walk into war with only their wits and honor for weapons, are destined to die in some violent and terrible way. Did their deaths have meaning?

Certainly the international community will remember Mazen Dana. Of course, they had more access to his film footage than we Americans do. We’ve only been allowed to see film stock taken by reporters in bed with the US Army, flat on their backs with their conscience squashed beneath them. Mazen Dana inspired a whole generation of reporters in Israel and Palestine who admired and loved him and were inspired by his professionalism and courage. The real news will continue to flow in his honor, even if the wave never reaches our shores.

Sergio Vieira de Mello, likewise, will be mourned by the international community that had hoped he might one day replace the retiring Kofi Annan as UN Secretary General. Vieira de Mello’s death has already had a serious impact on the international community: the Bush administration’s few allies in Iraq are having second thoughts about participating in this ill-conceived war. Poland has withdrawn its troops from a 1,000 square kilometer region just south of Baghdad. Japan has postponed deployment of 1,000 troops to Iraq. Thailand also is reviewing its original commitment to send 400 troops. Even Turkey, eager to gain access to the northern oil fields in Iraq, is suffering second thoughts: its parliament may not approve a commitment of 10,000 troops promised by the Turkish military. And other nations that haven’t made firm commitments–India, Pakistan, Egypt, Germany, Russia, France–have carried the burden of peacekeeping operations in Africa, Eastern Europe, and Southeast Asia with little or no help from the United States. What goes around comes around.

In the end, Mazen Dana and Sergio Vieira de Mello might both, in death, become ambassadors for peace. We can only hope, and try to help make that happen.

Corporate Scandals: One Year Later

Approximately a year ago, before the Bush administration made the Iraq war its major priority, the nation was riveted by corporate scandals. At the time, Congress passed the Sarbanes-Oxley Act to stiffen regulation of the accounting industry. The Bush administration threw a little extra money into the Securities and Exchange Commission so that it could, ostensibly, pursue the job of enforcing corporate compliance with basic accounting standards.

Of course, these were only palliative measures. Conservatives argued forcefully that nothing else really needed to be done, because the market would regulate itself. Corporate officers would see the damage sustained by Enron and Worldcom and be driven to clean up their balance sheets before the same terrible fate hit their own companies–or so the argument went.

A year later, however, little has changed.

The Sarbanes-Oxley Act established the Accounting Oversight Board, whose purpose is to keep an eye on accounting firms and set new standards for auditing public corporations. Setting up a new agency can be a slow process, but the Accounting Oversight Board faces unique hurdles.

The funding issue is the most critical. The board is currently operating on money borrowed from the US Treasury, because the Sarbanes-Oxley Act set aside no public funding source for the Accounting Oversight Board. Instead, the Act specified that the board itself would bill accounting firms and use those funds for its operations. But the board has yet to finish registering all the public accounting firms in the US and the foreign accounting firms that do business with US companies overseas (a contentious issue with the European Union), much less figure out rules for how much to bill them and how often. Should they impose an annual fee? Bill only those firms they audit? What ratio should they use in order to avoid over-taxing smaller firms?

More importantly, this raises the issue of whether the Accounting Oversight Board can be truly independent of the accounting industry if its main funding source is the industry itself, particularly the big firms that are responsible for the most egregious abuses.

In the same vein, the board is having trouble recruiting members and drafting rules for inspection and enforcement. Naturally, the pay is not as good as in private industry. Chairman William McDonough, however, makes half a million dollars per year–more than the chairman of the SEC and the President of the United States make combined. No one, so far, has pointed out that this classic corporate pay scale might be counterproductive for recruitment purposes. Currently, after a year of recruiting, the board has only 60 members, while its goal was to have 200 by the end of this year.

New employees are being drawn from large public accounting firms and the industry’s own trade group, the American Institute of Certified Public Accountants, which has been attempting to influence the standards set by the Accounting Oversight Board. This increases the risk of the board becoming a revolving door for the very industry it’s supposed to be regulating, like so many other government agencies.

At least the SEC is on the case, right? Well, the added funding from the Bush administration has made little difference in the SEC’s ability to review the thousands of financial statements filed by public companies in the US every three months. It’s a Herculean task, an insurmountable mountain of paper, and the SEC has been historically (and still is) chronically understaffed, only able to check selected financial statements on a spot basis and with little depth.

For example, last year the SEC issued a rule that requires corporate executives to personally sign and certify the accuracy of their companies’ financial statements. In the months since then, there have been many companies whose executives have failed to comply, including some who’ve simply refused to comply on principle, like Intel Corp. Qwest Communications, Gemstar-TV Guide, Footstar, and others have broken this rule repeatedly but have not received any fines or other sanctions from the SEC. In fact, only one company has been punished under this rule: HealthSouth Corp., whose officers signed financial statements that were so clearly incorrect as to be impossible to ignore.

Meanwhile, the notion that US companies would voluntarily stop abusing the system has been disproved by recent financial scandals, most of which have received little press coverage. For example, Freddie Mac has been recently caught incorrectly booking derivatives on its balance sheet in a effort to smooth out its earnings and make the company look consistently profitable from quarter-to-quarter–an illegal move that got Microsoft and other companies in trouble with the SEC in the 1990s. The repercussions for the economy have been serious: market analysts blame much of the increase in mortgage interest rates on the accounting scandal at Freddie Mac.

Another example: ten banks, including Bank of America and Washington Mutual, have been forced by the SEC to close down proprietary mutual funds the companies set up in the mid-1990s. The banks transferred a number of loans to these mutual funds, and each fund only had one shareholder: the bank that set it up. The banks then reported the interest earned on the loans in these mutual funds to the IRS as tax-exempt dividends, and thereby avoided paying state and federal income taxes on billions of dollars of income from 1995 to the present. The IRS and the States of California and New York are also investigating this widespread scam–set up by accounting firm KPMG LLP–and are expected to levy heavy penalties. Naturally, the banks will have to pass this expense on to their clients in the form of higher fees and interest rates.

It’s true that many companies have given up publishing and publicizing “pro forma” financial statements–revised balance sheets that subtract certain expense and debt items and have the effect of making companies look more profitable or in better shape than they really are. However, other companies have learned new gimmicks for dressing up their finances. One popular route is the “net debt” calculation. Heavily indebted telecom companies, in particular, are pushing this iffy number as a way for investors and creditors to gage the soundness of their companies.

“Net debt” is simply a company’s total debt minus its cash on hand. The problem is that cash on hand isn’t always available to directly pay off debt. Cash may be needed instead to pay restructuring costs, buy back shares for stock option plans, pay off fired or retired corporate officers, pay legal bills or penalties, shore up under-funded pension plans, or pay for new acquisitions. And many companies, particularly those with heavy debt loads, are required by their creditors to keep a large amount of cash on hand for emergencies, effectively putting that money off-limits for paying down debt. The difference between “net debt” and total debt can run into billions and tens of billions of dollars.

Clearly, the subterfuge is continuing. So far the war in Iraq has served as the perfect smokescreen to cover up the abiding problems in corporate America. But the public’s attention is turning back to the ailing economy, and it will soon become very clear that leaving the market–and the Bush administration–in control is an extremely dangerous game.

Some sources for this article: “Modest Digs, Tough Job for an Accounting Cop,” Cassell Bryan-Low, Wall Street Journal, 7/23/03, C1; “SEC’s Top Accountant Candidate Is PriceWaterhouse’s Nicolaisen,” Jonathan Weil and Deborah Soloman, WSJ, 8/4/03, A4; “Sealed, Delivered but Not Yet Signed by CEOs,” Kate Kelly, WSJ, 7/25/03, C1; “Surge in Rates May Hurt Pillar of the Economy,” Edmund L. Andrews, New York Times, 8/5/03; “Is It Too Late To Refinance?” Jon E. Hilsenrath, WSJ, 7/31/03, D1; “Bond chaos hurts US mortgage financiers,” Jenny Wiggins, Financial Times, 8/4/03; “Banks Shifted Billions Into Funds Sheltering Income From Taxes,” Glenn R. Simpson, WSJ, 8/7/03, A1; and “Talking Up ‘Net Debt’ Allows Some Firms To Take a Load Off,” Shawn Young, WSJ, 7/28/03, C1.

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