Later On

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The Pfizer-Allergan merger is a tax-avoidance scheme

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John Cassidy reports in the New Yorker:

In  an announcement on Monday morning, Pfizer, the big drug company, whose headquarters are on East 42nd Street, in Manhattan, said that it is merging with one of its competitors, Allergan PLC. Ian Read, a Scottish-born accountant who is Pfizer’s chairman and chief executive, said that the proposed deal, which is valued at a hundred and sixty billion dollars, would “create a leading global pharmaceutical company with the strength to research, discover and deliver more medicines and therapies to more people around the world.”

On Wall Street and in the world of big pharma, that statement will raise chuckles. It is widely acknowledged that the primary impetus for the deal is a financial one. In merging with Allergan, which is based in Dublin, Pfizer intends to move its corporate residency to Ireland, where the corporate tax rate is just 12.5 per cent, compared to thirty-five per cent for a company of its size in the United States. Over the next few years, the merger could save Pfizer billions of dollars in taxes and deprive the U.S. Treasury of the same amount.
Tax-driven deals of this nature are known as “inversions,” and they are becoming increasingly common. Burger King, Liberty Global, and Medtronic are among the U.S. corporations to have carried out mergers that moved their headquarters abroad. Last year, Treasury Secretary Jacob Lew said that inversions were “wrong,” and that he would try and restrict them. Only last week, the Treasury Department issued some new administrative guidelines in this area. Without actual legislation, though, there isn’t very much the Obama Administration can do to prevent these exercises in corporate tax-dodging, and Republicans on Capitol Hill have displayed little eagerness to coöperate in a crackdown.
The Pfizer–Allergan deal will be the biggest inversion yet, and it is nothing short of a disgrace. Drug companies like Pfizer have long benefitted from taxpayer-funded research carried out under the auspices of organizations like the National Institutes of Health and the National Science Foundation. Now, Pfizer is seeking to avoid paying the taxes that are due on its profits, particularly profits generated by its overseas subsidiaries. Even though the Obama Administration doesn’t have the legal powers to block the Allergan transaction, it should seek to shame Pfizer and its board of directors into calling it off. . .

Continue reading.

Written by LeisureGuy

24 November 2015 at 10:53 am

Posted in Business

Overreaching in an effort to control customers: The Apple pentalobe

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In Motherboard Jordan Pearson notes the restrictions corporations regularly attempt to enforce on their customers:

It happened suddenly, like most of these stories do. My alarm went off. I kicked my leg out as I jolted awake, making solid contact with my new laptop, which was innocently lying at the foot of my hotel bed for some reason. It landed on a chair leg; the crash was loud. The aluminum next to the Apple logo was visibly, obviously dented. I flipped it open and was greeted with a large blob of dead pixels radiating outward from the dent.

My options were few. $600 for an LCD replacement at the Apple store. $500 to get an independent repairman to do it. On a whim, I searched eBay and was shocked to see that I could get a new LCD for $50, if I was willing to find out whatever the inside of a MacBook Pro looked like. I pressed buy.

And then I saw the screw.


If you’ve tried to open any iDevice—iPad, iPhone, iMac, any of them—within the last four years, you’ve come face-to-face with Apple’s very small, five-pointed Do Not Enter sign. It’s an overt declaration that your phone, or your computer, or your tablet is not really yours to tamper with, a public statement that you are not qualified to fix your own things.

If you’re reading this on your iPhone or have one nearby, look at either side of the charging port and you’ll seem them: two tiny, star-shaped screw heads that, outside of an obscure wheelchair manufacturer, do not otherwise exist in the wild.

There is a solution to this “pentalobe” screw, however. A screwdriver engineered by iFixit, a California startup that has been simultaneously antagonizing Apple and making sure that, as electronics get more and more complicated, the layperson will still be able to learn how to fix them. (Other companies have since begun offering pentalobe screwdrivers.)

I spent a few days with iFixit CEO Kyle Wiens and professional repair experts at the Electronics Reuse Conference in New Orleans earlier this month to learn more about how your right to open, tinker with, and repair devices that you own is under attack from the very companies that make them. . .

Continue reading.

Later in the article:

. . . The iPhone 4 shipped with standard, Phillips head screws. Sometime in late 2010, however, the company began ordering its Apple Store Geniuses to replace standard screws with pentalobe ones on any iPhone 4 devices that were brought in for repair.Reuters reported on January 20, 2011 that employees were instructed to not tell customers that they had made the switch. The switch should have, in theory, made it impossible for anyone except for Apple to open the device. . .

Written by LeisureGuy

24 November 2015 at 10:44 am

Posted in Business, Technology

The problem with trade agreements, exemplified by dolphin-safe tuna

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Public opinion cannot seem to halt the passage of the Trans Pacific Partnership agreement, strongly supported by many international corporations and President Obama, but trade agreements supersede national sovereignty and should be approached cautiously. David Dayen provides a good example in The Intercept:

International trade deals like the Trans-Pacific Partnership (TPP) need to be carefully examined piece by piece because they can take precedence over a country’s own laws.

Case in point: the World Trade Organization (WTO) on Friday ruled that dolphin-safe tuna labeling rules — required by U.S. law, in an effort to protect intelligent mammals from slaughter — violate the rights of Mexican fishers.

As a result, the U.S. will have to either alter the law or face sanctions from Mexico.

I wrote a few weeks ago about how the “investor-state dispute settlement system” baked into trade agreements can force countries to compensate corporations when regulations cut into their profits.

The long-running quarrel over tuna reveals another way that domestic laws can be overturned by trade agreements: when countries can file trade challenges on behalf of domestic industries.

“This should serve as a warning against expansive trade deals like the Trans-Pacific Partnership that would replicate rules that undermine safeguards for wildlife, clean air, and clean water,” said the Sierra Club’s Ilana Solomon in a statement.

In the Marine Mammal Protection Act (MMPA) of 1972, the United States banned importation of yellowfin tuna harvested with netting that also scooped up dolphins, which often swim in the eastern Pacific Ocean above yellowfin schools. Since the 1950s, millions of dolphins have been killed in the tuna fishing trade, but the MMPA resulted in significant reductions in dolphin deaths.

Mexico, which has more lax fishing standards than the U.S., launched trade challenges in 1990 to overturn the import ban. Other nations piled on to the trade challenges, seeking to force the U.S. to change its dolphin conservation practices.

Congress did weaken the law in a series of amendments in 1997, replacing the import ban with a voluntary labeling policy. This allowed countries to use the same harmful netting that caught dolphins, as long as they ensured no dolphins were killed. Tuna caught without conforming to these standards can still be sold in the U.S., just without the dolphin-safe label.

But in 2008, Mexico launched a case against the revamped tuna labeling law, arguing that it still violated international trade agreements.

The WTO has ruled in Mexico’s favor on four separate occasions since 2011, most recently last Friday, in a final ruling that cannot be appealed. Though the U.S. changed its label standards several times, most recently in 2013, the WTO said that the law discriminates against tuna caught in Mexico, relative to other countries. Informing consumers of the fishing practices used to catch their tuna, the WTO concluded, represented a “technical barrier to trade.” . .

Continue reading.

Written by LeisureGuy

24 November 2015 at 10:40 am

The most popular arguments against climate change, and the effect of funding

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Funding to support climate change denial comes overwhelmingly from the Koch brothers and from Exxon/Mobil (whose own research shows that climate change is indeed happening). And that funding drives certain arguments.

Kevin Drum summarizes an article that appeared in the Proceedings of the National Academy of Sciences that analyzed which are the most popular arguments against climate change, how they are affected by funding, and how they change over time.

Take, for example, the argument that CO2 buildup in the atmosphere is not a problem “because CO2 is good.” The frequency of the appearance of the argument is heavily influenced by funding:

CO2 is good

Written by LeisureGuy

24 November 2015 at 10:23 am

Vital Lies, Simple Truths should be required reading for all journalists

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Michael Massing writes in the NY Review of Books:

Despite fizzling out within months, Occupy Wall Street succeeded in changing the terms of political discussion in America. Inequality, the concentration of wealth, the one percent, the new Gilded Age—all became fixtures of national debate thanks in part to the protesters who camped out in Zuccotti Park in lower Manhattan. Even the Republican presidential candidates have felt compelled to address the matter. News organizations, meanwhile, have produced regular reports on the fortunes of the wealthy, the struggles of the middle class, and the travails of those left behind.

Even amid the outpouring of coverage of rising income inequality, however, the richest Americans have remained largely hidden from view. On all sides, billionaires are shaping policy, influencing opinion, promoting favorite causes, polishing their images—and carefully shielding themselves from scrutiny. Journalists have largely let them get away with it. News organizations need to find new ways to lift the veil off the superrich and lay bare their power and influence. Digital technology, with its flexibility, speed, boundless capacity, and ease of interactivity, seems ideally suited to this task, but only if it’s used more creatively than it has been to date.

Consider, for instance, DealBook, the online daily financial report of The New York Times. It has a staff of twelve reporters plus a half-dozen columnists covering investment banking, mergers and acquisitions, private equity, hedge funds, venture capital, and regulatory matters. Every day, DealBook posts a dozen or so pieces on theTimes website, some of which also appear in the print edition, making it seem a good vehicle for showing how Wall Street really works.

Unfortunately, it only intermittently delivers. Most DealBook postings are narrowly framed, with a heavy emphasis on CEO comings and goings, earnings and expectations, buyouts and IPOs. Some sample headlines: “BB&T Is New Deal-Making Powerhouse in Banking.” “Investors Hope to Ride Swell of SoulCycle Fever in Coming IPO.” “Dell Is the Straw That Stirs Tech M&A.” “Strong Profit for Bank of America, and Investors See Signs of Progress.” Some pieces veer into outright boosterism. A long feature on “How Jonathan Steinberg Made Good on a Second Chance,” for instance, described in admiring detail how this mogul, through a combination of pluck and savvy, built his asset management firm into “one of the fastest-growing fund companies around.”

DealBook’s founder and editor, Andrew Ross Sorkin, is known for his closeness to Wall Street executives (many of whom serve as sources of information), and it often shows in his weekly column. In one that appeared on October 3, 2011, two weeks after the start of Occupy Wall Street, he explained that he had decided to visit Zuccotti Park after getting a call from the chief executive of a major bank:

“Is this Occupy Wall Street thing a big deal?” the CEO asked me. I didn’t have an answer. “We’re trying to figure out how much we should be worried about all of this,” he continued, clearly concerned. “Is this going to turn into a personal safety problem?”

After speaking with some of the occupiers, Sorkin concluded that the bankers were not in imminent danger, though he warned that they did have to grapple with the demonstrators’ demands for accountability for the financial crisis and growing inequality. . .

Continue reading.

I highly recommend Vital Lies, Simple Truths: The Psychology of Self-Deception; in it, Daniel Goleman explains why blind spots occur: that is, what is the value of having a blind spot? Why do we create them? Some of the secondhand copies at the link cost little more than shipping.

Written by LeisureGuy

23 November 2015 at 6:20 pm

Posted in Business, Media

Wall Street’s biggest players are at war with each other

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Pam Martens and Russ Martens report in Wall Street on Parade:

Until March 30, 2014, most Americans and even long-term veterans on Wall Street had no idea how the electrical plumbing responsible for transacting buy and sell orders at stock exchanges and other trading platforms actually worked. That all changed on March 30 when author Michael Lewis went on 60 Minutes and told its 12 million viewers that “The United States stock market, the most iconic market in global capitalism is rigged.”

Lewis was promoting his new book, Flash Boys, which detailed in language the public could easily understand, (devoid of the intentionally cryptic acronyms used across Wall Street) how the stock exchanges, mega Wall Street banks and high frequency traders were conspiring through technology to front run orders from unknowing investors.

In the 60 Minutes interview with Steve Kroft, Lewis drilled down to how the legalized theft had escaped the notice of so many market watchers: “If it’s so complicated you can’t understand it, then you can’t question it,” said Lewis.

At first, the Securities and Exchange Commission denied that the markets were “rigged” and simply tried to ride out the public uproar. Then it decided to create an Equity Market Structure Advisory Committee, effectively bringing together in one room the Wall Street people involved in the mad-scientist technology and market rigging devices to hash it out in a public venue.

The Committee most recently held a meeting on October 27, where slurs, barbs and accusations were thrown at opposing sides by meticulously tailored men using their most polite voices.

Jamil Nazarali, head of Citadel Execution Services, landed the best insult of the day with this gem directed at the stock exchanges:

“This industry is the only one that I am aware of where a for-profit public company regulates its customers and competitors. And I understand that you guys think that that’s important but what is it that you guys do that someone else couldn’t do. All those regulatory functions that you described, why couldn’t some other entity do that? Why does it have to be within your four walls?”

Citadel is a hedge fund and dark pool operator. (Dark pools are trading venues which lack full SEC oversight and trade in the dark without public transparency.)

Nazarali heads up Citadel’s trading operations, also known as “execution” services. Nazarali was throwing a jab at the men from the stock exchanges that had given testimony during the full day conference on how they served a public interest function by regulating their members. Dark pools compete with exchanges for customers and trading volume, are typically also broker dealers and members of the exchanges, and resent being regulated by a competitor.

Citadel is an unlikely candidate to be slinging mud, as we explained in an in-depth article on August 14, 2014.

Thomas Wittman, Executive Vice President of the Nasdaq stock market and Global Head of Equities, zinged both the SEC and dark pools, which are also known as “unlit” markets. Wittman told the Committee:

“Given the intense price competition, we question the time and resources spent by the Commission [SEC] analyzing whether exchanges have fully justified proposals reducing their fees. Nearly 40 percent of the executions occur on venues that lack not only pre-trade price discovery but operational and fee transparency. Yet Nasdaq has encountered difficulty in gaining Commission approval for a fee reduction for members that transact the most volume across three of its options exchanges. I ask, again, in what other industry would a company be prohibited from lowering prices for the most value and value contributing investors.”

As for the value of exchanges versus dark pools, Wittman said: “If you take a look at high volatility times like August 24, you saw that the amount of off-exchange trading almost was cut in half as flow moved to the lit venues which underscores the importance of the lit venues in capital formation.”

The Dow Jones Industrial Average plunged by 1,089 points in the opening minutes of trading on August 24. (See related article below.) Finger-pointing and hostility have grown among competing factions since that day.

Andrew Silverman, a Managing Director at the giant retail broker and investment bank, Morgan Stanley, which also operates dark pools, effectively told the Committee panel: “Look at me, I’m Sandra Dee, lousy with virginity.” For example, Silverman testified: . . .

Continue reading. Silverman’s statement is interesting.

The SEC is a failure as a regulatory agency, fully captured by the business interests it is supposed to regulate (with the cooperation of President Obama, who appointed a Wall Street lawyer to head the commission).

Written by LeisureGuy

19 November 2015 at 11:18 am

Do the Kochs have their own spy network?

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Astonishing. Jane Mayer reports in the New Yorker:

ve years ago, when The New Yorker published my piece “Covert Operations,” about the ambitious and secretive political network underwritten by the billionaire industrialists Charles and David Koch, the Koch brothers complained mightily about the story’s title, protesting that there was nothing at all covert about their political activities. Since then, the two have embarked on an impressive public-relations campaign meant to demonstrate their transparency and openness. But today, the Politico reporter Kenneth Vogel came out with a blockbuster scoop suggesting that the brothers, whose organization has vowed to spend an unprecedented eight hundred and eighty-nine million dollars in the 2016 election cycle, are more involved in covert operations than even their own partners have known.

After culling through the latest legally required disclosures, Vogel unearthed a new front group within the Kochs’ expanding network of affiliated nonprofit organizations—a high-tech surveillance and intelligence-gathering outfit devoted to stealthily tracking liberal and Democratic groups which Politico calls the “Koch Intelligence Agency.” The sleuthing operation reportedly includes twenty-five employees, one of whom formerly worked as an analyst for the Central Intelligence Agency, and follows opponents by harvesting high-tech geodata from their social-media posts.
According to Vogel, the effort is so secretive that very few people know of it even within the Kochs’ own sprawling political operation. Housed with other Koch nonprofit organizations in a bland office building in Arlington, Virginia, the outfit is managed by a limited-liability partnership called American Strategies Group, LLC. The company is part of the Kochs’ main political group: a circle of ultra-conservative donors called Freedom Partners Chamber of Commerce, which describes itself as a “business league” and so claims that it can legally hide the identities of its members.
Reached for comment, James Davis, the spokesman for Freedom Partners, described news accounts comparing the organization’s operation to espionage as “inaccurate.” Davis said, “Like most other organizations, Freedom Partners has a research department that benchmarks our efforts against other organizations.”
While it’s big news that the Kochs are now running their own private intelligence-gathering operation in order to track political opponents, including labor unions, environmental groups, and liberal big-donor groups, it actually isn’t surprising, given their history.
For decades, there have been reports suggesting that Charles and David Koch and Koch Industries have employed private investigators to gather inside information on their perceived enemies, including their own brother, Bill Koch, with whom they fought over control of the family business and fortune. My forthcoming book, “Dark Money: The Hidden History of the Billionaires Behind the Rise of the Radical Right,” which will come out in January, builds on earlier reporting about this, including my 2010 New Yorker piece. In fact, again and again, those who have challenged the Kochs and Koch Industries—whether they are federal officers, private citizens, or members of the press—have suspected that they have been under surveillance.
In Daniel Schulman’s deeply researched biography of the Kochs, “Sons of Wichita,” for instance, he describes how Angela O’Connell, the lead federal prosecutor in a huge environmental-pollution case brought against Koch Industries in 1995, “began to suspect that Koch had placed her under surveillance. ‘I thought that my trash can was taken outside my house several days,’ she recalled. ‘I was upset enough about it at the time to report what I thought was a bugging and what I thought was the trash being taken—a number of incidents,’ ” Schulman writes that “the Justice Department was never able to prove that Koch had targeted one of its prosecutors, but for the first time in her career, O’Connell operated as if everything she said and did was being monitored.”
Schulman also quotes a lawyer for the plaintiff in a massive fatal personal-injury case, brought against Koch Industries in 1999, as saying that he hired a security firm to sweep his office after suspecting that his phones were bugged. The firm, he said, discovered electronic transmitters had been planted there. “I’m not saying that the Kochs did it,” the lawyer, Ted Lyon, told Schulman. “I just thought it was very interesting that it happened during the time we were litigating the case.”
Similarly, as I reported in my New Yorker piece, when a Senate committee investigated Koch Industries, in 1989, for what its final report called a “widespread and sophisticated scheme to steal crude oil from Indians and others through fraudulent mismeasuring,” the report noted that in the course of the probe Koch operatives had delved into the personal lives of the committee’s staffers, even questioning one’s ex-wife.
Vogel, the Politico reporter who broke today’s story, has had his own run-ins with the Kochs’ hyper-vigilance. . .

Continue reading.

Written by LeisureGuy

18 November 2015 at 5:24 pm


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