Wednesday, April 2, 2014

System With a Master Marionette - Diverting Tax Revenues and Public Money - "The Stans" - "Peak Oil" Scamsters - Gazprom-Itera - There Is a Cockroach Problem

Source: Channeling Reality

The "Market" Racket

Yesterday, I was reviewing all the documentation I have on energy, public utilities, conservation, etc. as part of project to organize all of them into a coherent portfolio. Naturally when I started this project, I began with Ken Lay and the story of Enron but the story actually begins decades before the Enron meltdown of 2001.

In 1972, Ken Lay was the Deputy Undersecretary of Energy working for the Interior Department Secretary Rogers Morton. Some reading this may remember the "oil crisis" in 1973. The Organization of Petroleum Exporting Countries (OPEC) countries raised the price of oil by 70% and placed an embargo on exports of oil to the United States and other nations allied with Israel. The alleged reason for OPEC's price extortion was because Nixon took us off the gold standard but that doesn't really square with the Israel connection. Regardless, the "oil crisis" event was used as the raison d'ĂȘtre (peak oil so they claimed) for what has become an organized crime wave in the United States predicated upon the principles and concepts espoused in United Nations Agenda 21.

Following the coup d'etat of the Nixon Administration and the treason at Helsinki executed by the appointed replacement, Gerald Ford, the people of the United States elected a peanut farmer from Georgia. Carter was a disaster walking. One has to wonder if his administration wasn't really a national "bread and circuses" event in it's own right. At any rate, in 1978, the Congress passed and Jimmy Carter signed legislation that was really a sweeping overhaul of the nation's laws concerning energy. The National Energy Act of 1978 included the following:

Public Utility Regulatory Policies Act (PURPA)
Energy Tax Act
National Energy Conservation Policy Act (NECPA)
Power Plant and Industrial Fuel Use Act
National Gas Policy Act
Another piece of legislation that Carter signed was a bill that consolidated and reorganized the regulatory authorities over energy and energy resources into a new Department of Energy. With respect for the reason behind the National Energy Act and the creation of the Department of Energy, the main objective of the department was to drive up prices to drive down usage. Pure and Simple. In the natural gas business, the strategy was to create a mess with regulation and then to de-regulate the market. That's where Ken Lay came in as COO of Houston Gas Company. "In 1985, HNG merged with InterNorth to form Enron, and Kenneth L. Lay became chairman and CEO of the combined company the next year."

In previous work, 'Where the Bodies are Buried', I documented the strategy that Ken Lay used to build Enron that was the result of the regulatory morass that in hindsight was an attack on both the producers and distributors of natural gas. What Ken Lay did to "solve it", was to propose a middle man strategy which he called a Gas Bank.

If you strip away the labels and look at the organization from a process point of view, what you have is the essence of a computer system. It doesn't matter what the function of the system is; nor does it matter the physical implementation of it. Computer systems are written to manage the process and to control the entities by defining how the entities behave - whether you call them rules, standards, roles, whatever. It doesn't matter. You can think of the system as the Master Marionette. In business terms, within a corporation, it's merely controlling the process and assets of the corporation. In political terms when the government or a quasi-government entity does it - and the entities are private sector, it is collectivization.

In a country that is being run by organized crime and that relies on propaganda for deception it's called "The Market".

So why did I go through this little exercise? It's because this morning as I was refreshing my memory concerning Enron, Ken Lay and Jeff Skilling, I thought of Gazprom wondered about them because I've seen them mentioned in the news but I was always busy pursuing other lines of inquiry. I hit the jackpot. The scandal with Gazprom parallels the Enron scandal even to the extent that one of the Big Five accounting firms was involved - auditing and advising.

This is from an article in Bloomberg from 2002 titled, Gazprom: Russia's Enron?:
Right now it's PwC that's in the hot seat. The focus is the review the auditor did for the Gazprom board last year on ties between Gazprom and Itera, a Moscow-based gas producer. Suspecting that Gazprom management was using Itera as a front company for the improper transfer of assets, a shareholder faction led by Browder sought to engage Big Five auditor Deloitte & Touche to investigate Gazprom-Itera transactions. Gazprom management was dead set against bringing in Deloitte & Touche, says Fyodorov. According to PwC sources, even some senior partners in the firm's Moscow office argued that any self-review would lack credibility. But PwC ultimately decided to have a probe done by an in-house team headed by a London partner. PwC delivered the report to Gazprom's board last July. Copies of the report are now providing fresh ammunition to PwC's critics who want to fire the firm from the Gazprom account.
There seems to be plenty of gunpowder. Consider this convoluted example from the report. PwC's review team examined a deal in which the province of Yamal-Nenetsk accepted gas from Gazprom as payment in kind for $200 million in taxes. The regional authorities sold the gas for a very low price to Itera, which then resold the energy to customers outside Russia at what PwC in its report called a "significant profit."
Something doesn't sound right here. Why couldn't Gazprom itself have sold the gas to foreign customers for a rich price, paid off its regional tax bill, and pocketed the profit for its shareholders? The report concludes that in-kind payment of gas saved Gazprom from borrowing cash at high interest rates to pay taxes. But according to a Hermitage analysis based on data from Russia's Audit Chamber, a government watchdog, the company lost out on a $5.5 billion pretax profit by handing over the gas to Itera via the Yamal-Nenetsk tax transaction.
Then there's the PwC review team's analysis of asset transfers from Gazprom to Itera. PwC found that Gazprom sold Itera a 32% stake in a gas-producing subsidiary, Purgas, for just $1,200. PwC noted the market price could have netted Gazprom $400 million and determined the deal was "advantageous for Itera." Why was this defensible? PwC's answer: Gazprom, afflicted by cash shortages due to Russia's financial crisis, lacked funds to develop the Purgas field. 
Former Gazprom managers, meanwhile, deny owning any stake in Itera. Itera says it cooperated with PwC's review, but adds it does not have to tell PwC who gets dividends because PwC is not its auditor.
Another controversy centers on Stroitransgaz, a Moscow pipeline-construction company that landed more than $1 billion in contracts from Gazprom. Stroitransgaz disclosed in a February, 1999, filing with Russia's Federal Securities Commission that Gazprom managers and relatives, including Vyakhirev's daughter, owned more than 50% of the contractor.
Itera has a USA subsidiary. Their headquarters facility curiously resembles a Las Vegas hotel at first glance. "Oil for food"?
Itera USA is an American branch of the Itera Group of companies. Originally a commodities trading company, Itera USA was created in the wake of the collapse of the Soviet Union, when the previous economic ties between the former Soviet Republics were broken and the new countries, with a total population of over 250 million people, faced enormous difficulties providing the basic human needs such as food and medicine. Multi-national corporations did not rush to do business with these countries because of their insolvency and the inherent political risks. In this dire situation, Itera was founded in 1992, and created a unique network of barter transactions not only with the governments of the new nations, but also with plants, factories and other commercial entities.
Innovation
In 1994 the office of Itera USA, in conjunction with the Itera Group of Companies provided large shipments of produce to Turkmenistan. Based on the initial success in the region, Itera reached an agreement with Turkmenistan forming the first private gas trading company in the Former Soviet Republics. This new entity traded Turkmenistan gas to Ukraine in exchange for barter, which was handled by Itera Group, with headquarters in Moscow.
The mention of one of the "The Stans" - in this case Turkmenistan, made me wonder if the story of James Giffen was connected to this Gazprom-Itera story of accounting fraud, pipelines and tax evasion. I found the story of James Giffen very intriguing but at the time (2005), I didn't have anything that connected it to except a general idea of public corruption involving Russians, Mikhail Gorbachev, San Francisco and the Presidio. (The Russian Connection)

This story is no longer posted on the web, but I was able to retrieve it from the Internet archive: Kazakhstan: United States vs. James H. Giffen

Other stories I gathered on Giffen include:

United States Attorney - Press Release - March 31, 2003
Indictment: American businessman charged with $78 million in unlawful payments

United States Attorney - Press Release - April 2, 2003
Indictment: Unlawful payments and tax evasion

United States Attorney - Press Release - May 3, 2003
Civil Forfeiture Action - Conditional Release of Funds to Foundation for benefit of poor children in Khazakhstan

Who is James Giffen? Recordnet - Stockton, CA - August 31, 2005

You might be asking by now, how is this related to what I wrote at the beginning of this. Here it is in an article by Marlena Telvick posted on Asianet (retrieved from the archive):
The four-year investigation unearthed a labyrinth of complex financial transactions to accounts in Switzerland and the British Virgin Islands allegedly made by U.S. oil companies Mobil, (now ExxonMobil), Texaco (now ChevronTexaco), Phillips Petroleum (now ConocoPhillips)and Amoco, (now BP) in connection with various fees for the purchase of oil and gas rights in the 1990s. 
...The indictment revealed that Swiss authorities began investigating accounts "nominally owned by offshore companies but beneficially owned, directly or indirectly, by Balgimbaev and Nazarbaev … into which Mr. Giffen had made tens of millions of dollars in unlawfulpayments" in 1999.
...The news of another delay in the court proceedings follows a series of recent legal moves by Giffen attorney William Schwartz. On 25 March, Schwartz asked the court to turn over "all documents and records, including classified documents and records related to Mr. Giffen or Mercator Corporation," which he hopes will illustrate that "close and repeated contact with officials’’ at the CIA, FBI and State Department approved of Giffen’s actions.
Records for nearly every major player from this time period whom Giffen could have come into contact with were requested, including CIA Director Robert Gates, Brent Scowcroft of the National Security Council, Secretaries of State James Baker and Lawrence Eagleburger, and former U.S. ambassadors to Kazakhstan William Courtney and Elizabeth Jones, now assistant secretary at the State Department. 
THE ADVICE PEDDLERS
In December 1984, as a member of the American Trade Consortium, Giffen became one of the first Americans to be received in Moscow by Mikhail Gorbachev. Giffen worked actively to cultivate relationships with officials of the Communist Party, including rising politician Nazarbaev. By the late 1980s, a booming new industry was emerging: providing advice on doing business in the former Soviet republics.
By 1991, Giffen was attending Gorbachev’s Kremlin dinners with the political elite: President George H.W. Bush and his wife, Secretary of State James Baker, and National Security Adviser Brent Scowcroft.
William Courtney, who served as Kazakhstan’s first ambassador, said people were open to the new U.S. presence. "They didn’t know how to do business Western-style, but they were willing to pay intermediaries and legal and accounting firms coming in from the U.S. to show them how," he says. 
What a difference a few years and high level connections make:

2010 - New York Judge: Kazakh bribe defendant is Cold War Hero
Giffen used his expertise to advise Kazakhstan on foreign investments and provided advice on economic development, helping the country develop its vast natural resources, Pauley said.
"In doing so, he advanced the strategic interests of the United States and American businesses in Central Asia," Pauley said. "Throughout this time, he continued to act as a conduit for communications on issues vital to America's national interest in the region."
So Giffen - and corrupt accountants, in this case, PriceWaterhouse were Reagan's secret weapon against the Soviet Union. Officially sanctioned corruption through accounting trickery and bribery they managed to corrupt public officials, divert tax revenues and public money to dummy companies and through bloated contracting cycle money back into the hands of the relatives of the corrupt officials. If that doesn't sound familiar, it should because that's exactly what Enron was doing - except that I don't know if Enron was putting money into the hands of relatives of public officials but I'd be willing to bet...

Jumping ahead a little bit, the image of President Nursultan Nazarbaev of Kazakhstan has been sheep-dipped, his corruption wiped from the pages of history and now he's a New World Order success story:

In 2001, Seymour Hersh wrote an article titled, The Price of Oil; What was Mobil up to in Kazakhstan and Russia?
In the fall of 1997, an international businessman named Farhat Tabbah filed suit in London against three American businessmen, the oil minister of Kazakhstan, and a subsidiary of the Mobil Corporation. He charged that they had cheated him out of millions of dollars in commissions on what was to have been a ten-year swap of oil between Kazakhstan and Iran. Mobil and the other defendant denied the allegations and successfully moved to suppress all Tabbah's affidavits and supporting documentation. A few months after Tabbah filed his lawsuit, he flew to the United States and gave his account of the swap plan to federal authorities. He also turned over several file drawers of documents, including internal Mobil faxes and memos, to agents of the United States Customs Service.
...Mobil investigators also uncovered an array of unseemly business dealings that took place in Russia and Kazakhstan in the mid-nineties. More than a billion dollars of Mobil's cash was paid to Russian companies in unorthodox transactions; questionable accounting practices were followed; and multi million-dollar transfers were made that, as a Patton Boggs report put it in one case, "did not have any apparent valid business purpose."
The oil industry has long been swapping as a way to reduce the cost of transporting crude oil, by pipeline or other means, to refineries. The arrangement also provides a way to get oil from remote oil fields and isolated nations, such as Kazakhstan, to market. In a swap, the title to oil in one location is transferred to oil of an equivalent value that may be hundreds, or even thousands, of miles away. Because of the potential for abuse in such complicated transactions, major oil companies carefully monitor and record their swaps.
"It's extremely rare for a legitimate company to play pricing games in a transfer," said Thomas Stauffer, a retired economics professor at Harvard and Georgetown who specializes in oil and taxation issues. "But in the Third World --and especially in places like Kazakhstan -- its an invitation to corruption. You can hide a lot of sins in an oil swap. Title to oil in any tanker might change a dozen times before it gets to port." Such sins include oil laundering -- concealing an illegal source of oil -- and sanctions busting. "Oil is oil," Stauffer said. It can be sold in any given market at any time." Men like Marc Rich, the fugitive financier who was pardoned by President Clinton in January, have earned hundreds of millions of dollars over the years by brokering oil deals with pariah nations such as Iran and the former regime in South Africa.  
In Mobil's case, the company's in house investigators came to believe that the proposed swap between Kazakhstan and Iran was but one element in a complex of seemingly high-risk business deals that were devised by Bryan Williams. The investigation also led to the two other Americans named in the Tabbah's suit: James H. Griffen, a New York merchant banker and advisor to Kazakhstan's President Nazarbayev; and Friedhelm Eronat, a businessman who often acted on behalf of Mobil overseas. The business dealings and friendships among these three men date back many years, and they have done billions of dollars worth of deals worldwide. The three might never have become the focus of grand-jury scrutiny if they hadn't fallen out with Farhat Tabbah.
...Dan White, a former ARCO executive, said that when, in late 1995, he arrived to open an ARCO office in the former Soviet Union a senior American diplomat in Kazakhstan told him, "The best way to get what you want is to see Giffen." One afternoon, White happened to encounter the Kazakh oil minister in a hotel lobby. They exchanged a few pleasantries, and then Balgymbayev raced off to the airport. At that moment, White recalled, "the fellow next to him says, 'I'm Jim Giffen,'" and told him, "Dan, nobody gets to Balgymbayev without coming through me." Giffen paused, White told me, and said, "You know this is a strange place here. A lot of people carry guns, and bad things happen to people." (end of excerpt, at end of page 51 of an article that continues to p. 65) The New Yorker article must be the starting point for any man seeing to expose the true authors of the crashbombing terror acts of September 11th, the Great Frame-Up.
The common thread through all of these stories is "the market" - commodities, front companies, barter deals, money laundering, unrelated transactions, corruption of public officials, tax evasion.

Oil is a commodity. Natural gas is a commodity. Electricity is a commodity. Enron was an example of a front company for trading energy commodities and if you just do a little reading on the Public Utilities Holding Company Act of 1935 and the reason it was passed in 1935, plus the investigative paper trail of Enron's activities, then you will gain a conceptual understanding of the kind of corruption that "the market" entails. Unfortunately (and disastrously) for us, PUHCA was repealed in 2005 in legislation sponsored by Senator Pete Dominici of New Mexico and now the "peak oil" scamsters of the Department of Energy "partnered" with the Technocrats of the technology industry are running the electricity "market" through the implementation of the smart grid. In plain language, the commodity trading criminals have institutionalized the corruption within our state and federal governments. They masquerade as regulators while they set up the components of "the market" for fraud and extortion. Case in point, Senator Joe Lieberman was the lead on the investigation into the Enron scams. Senator Joe Lieberman was the Senate representative for Al Gore's "reinvention of government". And Senator Joe Lieberman was involved in writing the legislation to "fix" the problem of Enron's fraud - and now we have no electricity market regulators - only advisors.

When you go to the Department of Energy website, do you see anything that looks like government?

In the 2009 National Broadband Plan, a company called EnerNOC was mentioned as a "virtual power company". Enron was a "virtual power company". The way it is described, the "cycle slicing" of kilowatts by EnerNOC will be voluntary. But there is nothing that says it has to stay voluntary. The Smart Grid and Smart Meters will allow them to control electric usage - having you live under their rules and demands.

They've broken up the utility business model of generation to end user service inserting the middle man as a "virtual power company" supposedly on the idea of competition. There is no competition. The "competition" is a virtual farce. There is one product and the product doesn't vary and there is nothing that anybody can do to enhance the service beyond its purpose which is to electrify. That's it. A stream of electricity is a stream of electricity - period. No substitutes. No variability.

Multi-party bartering. Here is where the difficulty comes in for criminal investigations. Unrelated transactions are difficult - almost impossible to trace back to the source deal - especially with the assistance of computers. And adding to the difficulty, with a trading platform like...say, Pierre Omidyar's eBay with the capability of symbolic replacement and the wizard behind the curtain with the records - but not necessarily all the records, it would take years to resolve one line of inquiry on one case.

We have systemic corruption [enforce RICO laws] in the essential critical economic sector of the country - electricity - energy. The only way to deal with this kind of problem is very strict laws, severe penalties that are enforced and essentially closed borders until the "actors" in the crime wave are expunged from the system. Simply stated, if you have a cockroach problem, you don't solve the problem by killing one cockroach at a time. You have to tent the structure and fumigate - and we need it NOW.

Vicky Davis
April 2, 2014

PS To Whom It May Concern:

No... I did not miss the symbolism you rotten **************

1 comment:

  1. Very interesting article. This evening I listened to the following videos, which explain how this process of corruption almost destroyed the Russian people after the USSR was destroyed and how Putin and his colleagues have been working to rebuild Russia: https://www.youtube.com/watch?v=qCU4C6ajgBI
    https://www.youtube.com/watch?v=LRSVNPQKDkM

    ReplyDelete

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