Cash and Carry, the Mid East way

Afghan Aid on Hold as Corruption Is Probed (WSJ)

The chairwoman of the House subcommittee responsible for foreign aid said she was stripping from pending legislation $3.9 billion in funding for Afghanistan following revelations that billions of dollars, including large amounts of U.S. aid funds, were flowing out of the country through Kabul's main airport.

"I do not intend to appropriate one more dime for assistance to Afghanistan until I have confidence that U.S. taxpayer money is not being abused to line the pockets of corrupt Afghan government officials, drug lords, and terrorists," Ms. Lowey said.

At least $3.18 billion in cash has been flown out of Afghanistan since 2007 after being legally declared to customs officers, according to documents reported Monday in The Wall Street Journal.

U.S. officials say they believe at least some of the cash is siphoned from Western aid projects and U.S., European and North Atlantic Treaty Organization contracts to provide security, supplies and reconstruction work for coalition forces in Afghanistan. NATO spent $14 billion in Afghanistan last year.

Profits reaped from the opium trade are also a part of the money flow, as is cash earned by the Taliban from drugs and extortion, officials say. Almost all the money is sent to Dubai, where wealthy Afghans have long parked their lawfully and unlawfully earned money.

The money is being shipped through private money-transfer networks known as "hawalas," which have been used for centuries across the Muslim world as a fast, cheap and legitimate way to transfer funds.

U.S. State Department spokesman P.J. Crowley said while some of the money leaving through the Kabul airport was likely from Afghanistan's illicit drug trade, the State Department believed most was the product of Afghanistan's growing economy and the need to move funds to a country with a better-functioning banking system, such as Dubai.

"I don't think we have any evidence at this point that the money flowing out of Afghanistan is U.S. money," Mr. Crowley said. "We think for the most part it's the result of legitimate commerce."

And this is from the story that kicked off this brouhaha: Corruption Suspected in Airlift of Billions in Cash From Kabul

The amount declared as it leaves the airport is vast in a nation where the gross domestic product last year totaled $13.5 billion. More declared cash flies out of Kabul each year than the Afghan government collects in tax and customs revenue nationwide. "It's not like they grow money on trees here," said a U.S. official investigating corruption and Taliban financing. "A lot of this looks like our tax dollars being stolen. And opium, of course."

The cash—packed into suitcases, piled onto pallets and loaded into airplanes—is declared and legal to move.

The formal banking system here is in its infancy, and hawalas form the backbone of the financial sector. The State Department says that 80% to 90% of all financial transactions in Afghanistan run through hawalas.

Hawala networks run on what is effectively an honor system and much of the business they do is legitimate.

At their simplest, a customer drops off money at one dealer and is given a numeric code or password, which is then used by the money's recipient when the cash is picked up elsewhere.

The hawala operators then settle up among themselves.

Hawala fees are far cheaper than standard banks, often as little as $150 to move $100,000, and transfers can be done in minutes or hours as opposed to days.

The officials believe hawala customers who have sent millions of dollars of their money abroad include high-ranking officials and their associates in President Hamid Karzai's administration, including Vice President Mohammed Fahim, and one of the president's brothers, Mahmood Karzai, an influential businessmen.

Vice President Fahim, responded through his brother, A.H. Fahim, a businessman, who denied the allegations. "My brother? He doesn't know anything about money," Mr. Fahim said.

Mahmood Karzai, an American citizen, blamed the allegations that he was transferring illicitly earned cash from Afghanistan on political opponents.

"Yes, millions of dollars are leaving this country but it is all taken by politicians. Bribes, corruption, all of it," he said. "But let's find out who is taking it. Let's not go on rumors. I've said this to the Americans."

Newsflash : Airline food is inedible

Numerous airline food kitchens cited for unsanitary, unsafe conditions

There's madness in Court's method

Supreme Court relaxes limits on innovations that can be patented

At issue was a bid by two inventors to patent a business method for hedging risk in buying energy. The high court unanimously rejected the inventors' claim, deeming their innovation too abstract to qualify for patent protection. But in doing so, it also rejected a lower court's reasoning that only inventions involving machinery or physical "transformations" are eligible for patents.

Limiting patents to machines or transformations, the court said, would create uncertainty over the patentability of software, advanced diagnostic medical techniques and the manipulation of digital signals. But the justices stopped short of laying out categorical rules for what kinds of inventions should be patented.

"This age puts the possibility of innovation in the hands of more people and raises new difficulties for patent law," Justice Anthony M. Kennedy wrote in the court's opinion. "The patent law faces a great challenge in striking the balance between protecting inventors and not granting monopolies over procedures that others would discover by independent, creative application of general principles. Nothing in this opinion should be read to take a position on where that balance ought to be struck."

Indeed, the justices were divided over setting broad principles that might replace the lower court's "machine or transformation" test. Although the court was unanimous in rejecting the claims of the inventors in the case, the justices differed over why, issuing three separate opinions that sparred over what types of inventions should be eligible for patent protection.

"The Court, in sum, never provides a satisfying account of what constitutes an unpatentable abstract idea," Justice John Paul Stevens wrote in a concurring opinion. "This mode of analysis [or lack thereof] may have led to the correct outcome in the case, but it also means that the Court's musings on this issue stand for very little."

Given the disagreements, the court relied on another aspect of the law, one that excludes abstract ideas such as natural laws from patents, to reject the inventors' claim.

And, judging by the title to this post, you probably thought Guambat was going to have a rant over this:

U.S. Supreme Court bolsters gun rights

But that's just too bloody maddening to mention.

How agile is Agility?

What, another whistle-blower story? Yep. Read on.

Agility Defense & Government Services, Inc.

Agility Defense & Government Services, Inc. provides supply chain management, logistics, and commodity services for defense and government customers. It offers third party logistics, prime vendor program, sourcing and purchasing, and performance-based logistics. Agility Defense & Government Services, Inc. was formerly known as PWC Logistics. The company was incorporated in 2006 and is based in Alexandria, Virginia. Agility Defense & Government Services, Inc. operates as a subsidiary of The Public Warehousing Company.

From the Agility company website and press releases:

Since 2003, Agility has developed a world-class commercial logistics business to complement its government contracting portfolio. That development has expanded Agility’s geographic footprint around the world, established our leading position in emerging markets, and added specialized capabilities to help us meet the needs of niche market segments.

Today, Agility’s commercial logistics arm, Global Integrated Logistics (GIL) operates in 120 countries and serves over 50,000 customers. Our operational platform is distinguished by its strength in high-growth emerging markets: China, India, and the rest of Asia; the GCC and the rest of the Middle East; Russia and Eastern Europe; and Latin America. And we offer specialized logistics solutions around Chemicals, Fuels, Fairs & Events, and Project Logistics.

We also have diversified our Defense & Government (DGS) business. Our focus has been on expanding our business with the US government in geographies outside of Kuwait and Iraq, as well as attracting other governments, international organizations, and non-governmental organizations as customers. Finally, we acquired a group of non-Agility branded companies working in the areas of industrial real estate management, aviation and ground handling, and customs modernization and e-government solutions, which are grouped together under Agility Infrastructure.

From modest roots in Kuwait, Agility became an acknowledged global top ten global logistics player. We bring global scope, flexibility, and specialization of services to complex logistics challenges. We take pride in our commitment to personal service. Our customers consistently acknowledge that Agility goes above and beyond.


Ethics

Agility believes strongly in conducting business with integrity. Our reputation for integrity and fairness is an asset every employee owns.

Values

Integrity: Building trust with customers, communities, suppliers, and one another by doing what is right: keeping our promises, being a good citizen, complying with regulations and laws, and honoring rules of engagement.

Personal Ownership: Taking personal responsibility for the outcome by anticipating needs, being resourceful, and following through until the job is done.

Teamwork: Working across organizational and cultural boundaries to achieve extraordinary performance and deliver personal service to customers.

Excellence: Building a culture based on excellence in thought and in execution to better serve customers.

May 12, 2009 Agility Team Captures $17M Guam Depot Contract

Agility Defense & Government Services (DGS) and Accent Controls Inc. have won a contract to manage the Defense Distribution Depot Guam, Marianas (DDGM), the two companies announced today.

The five-year contract, worth $17 million, was awarded May 1, 2009 by the Defense Distribution Center, New Cumberland, Pa.

Accent Controls Inc. (ACI), based in Riverside, Mo., will be the prime contractor. ACI is certified by the federal government as a minority, woman-owned, disadvantaged small business. It will provide program management and ISO certifications in quality, safety and environmental protection.

Agility DGS, based in Alexandria, Va., will act as a subcontractor, providing warehousing, distribution and management services.

November 17, 2009 Agility Shares Drop Most Since July After Indictment (Update1)

Agility, the Middle East’s biggest storage and logistics company, tumbled the most in four months after being indicted by a U.S. federal grand jury on multiple charges of conspiracy to defraud the United States.

The company, also known as Public Warehousing Co., was suspended from future U.S. government contract awards following the indictment until “such time as a determination has been made about the company’s responsibility as a contractor,” it said. All of the charges concern multi-billion dollar contracts issued by the Department of Defense for feeding American troops in Iraq, Kuwait and Jordan, the U.S. Department of Justice said yesterday.

Agility became the principal food supplier to the U.S. army in Iraq and Kuwait in 2003, the logistics provider said in a statement today. In August the company won a contract with a potential value of $214 million from the U.S. Defense Logistics Agency for warehouse and distribution services in Kuwait and Southeast Asia. Orders from U.S. forces increased the company’s third-quarter profit 15 percent to 40.5 million dinars ($141.9 million), Agility said earlier this month.

The complaint alleges that the “defendants knowingly overcharged the U.S. for locally available fresh fruits and vegetables” purchased by Agility from Sultan Center for Food Products Co., according to a statement on the Department of Justice’s Web site. Agility allegedly didn’t disclose or pass on rebates and discounts it obtained from U.S.-based suppliers, as required by its contracts, the statement said.

About $5 billion of Agility’s annual revenue of $7 billion comes from its global logistics business and from private-sector customers, while the remainder is generated from defense and government contracts, Chairman Tarek Sultan said in July. As much as 70 percent of its defense business is in Iraq.

The “allegations” should have no impact on any of its current contracts with the U.S. government, the company added.

Feb 3, 2010 Agility attempts to vault fraud charges

Agility, a Kuwait-based multi-billion-dollar logistics company spawned by the US invasion of Iraq, is scheduled be arraigned on February 8 on criminal charges of overbilling US taxpayers for food supply contracts in the Iraq war zone that were worth more than US$8.5 billion.

If the lawsuit is successful, the company could owe the US government as much as $1 billion.

Agility, originally known as Public Warehousing Corporation (PWC), boasts that it once supplied one million meals a day to US soldiers and contractors in the Middle East. The company's Mercedes trucks hauled delicacies ranging from ice cream to lobster tails to feed soldiers living on military bases scattered throughout Iraq.

Today, it has contracts to provide food to the US Agency for International Development (USAID) in Djibouti in the Horn of Africa and - until about a month ago - was supposed to ramp up food delivery to the troops newly posted in southern Afghanistan.

In a lawsuit filed on November 18, 2005, Kamal Mustafa Al-Sultan accuses Agility of cheating him of a share of profits from the lucrative contract because he refused to go along with alleged corruption. A former business partner of PWC/Agility, Sultan is a cousin of the company founder and CEO, Tarek Abdul Aziz Sultan Al-Essa.

After conducting a grand jury investigation, the US Department of Justice (DoJ) joined Kamal Sultan and filed criminal charges against PWC/Agility on November 9, 2009, immediately boosting the original lawsuit's chances of success.

"We will not tolerate fraudulent practices from those tasked with providing the highest quality support to the men and women who serve in our armed forces," said Tony West, assistant attorney general for the District Court for the Northern District of Georgia, in a press release.

PWC was part of the Sultan family's business empire, which is grounded in high-end supermarkets and mega-stores across the Middle East. Starting in the late 1990s, Tarek Sultan teamed up with ex-US soldiers to bid on lucrative US government projects.

PWC's first major contract, initially advertised in May 2002, was for a US Defence supply center called Prime Vendor Subsistence to supply food to US military bases in the Middle East in anticipation of the invasion of Iraq. (Halliburton/KBR cooks and serves the food, but it does not supply it.)

At the time, Tarek Sultan had no experience in food supply, nor did he have a personal track record with the US military - a requirement for bidding on the contract. However, KMSCO, run by his cousin, Kamal Sultan, had multi-million-dollar US military contracts dating back to 1996 for "life support, food supplements, and ice".

In May 2003, PWC won the initial Prime Vendor contract. Soon after that, Kamal Sultan alleges, PWC officials asked him to take part in a scheme to defraud the military. When Kamal refused, Tarek Sultan dropped KMSCO from the contract, thus depriving Kamal Sultan of his expected 30% profit share.

The company has powerful supporters in the US military. Its brochures quote General David Petraeus, now the head of US Central Command: "Agility has performed a miracle across Iraq."

Some see less a miracle and more profiteering. Rory Mayberry, a Halliburton/KBR food production manager for a dining facility at Camp Anaconda, testified before Congress in June 2005:

"For example, tomatoes cost about $5 a box locally, but the PWC price was $13 to $15 per box. The local price for a 15-pound box of bacon was $12, compared to PWC's price of $80 per box. ... PWC charged a lot for transportation because they brought the food from Philadelphia."

Connections with the Kuwaiti government was a factor in Agility's operations, according Saad Salem Al-Qattan, a Kuwaiti businessman who owns Al-Rakeb Co Petroleum Electricity & Construction Services (RAPICO), which is involved in a land dispute with PWC/Agility. "They get options, privileges, that no one else can get, because they used to be part of the [Kuwaiti] government," he said.

June 27, 2010 Kuwait’s Agility Slumps to Lowest Since 2003 on Fraud Charges

Agility retreated to the lowest level since 2003 after U.S. federal prosecutors said the Middle East’s largest storage and logistics company may still be overbilling the American government for military supplies.

“We feel very strongly and have evidence that the fraud has continued,” Assistant U.S. Attorney Barbara Nelan told Magistrate Judge Alan Baverman at a pretrial hearing in a criminal case against Agility on June 25 in Atlanta.

Agility is accused of overcharging the U.S. government on a multi-billion dollar contract to supply food for troops in Kuwait and Iraq. The company is “war-profiting,” Nelan said. The contract with Agility, formerly known as Public Warehousing Co., runs until December, Nelan said.

In a filing earlier last week, prosecutors accused the company of being a “fugitive from American justice” that is trying to evade a trial on charges of overbilling on military supplies.

Agility claims it has not been properly served in the case.

Meanwhile, back over at the Agility website: A Dialogue with the Chairman on Agility’s Direction for 2010

We are aware that 2010 is a pivotal year for Agility because of the US troop drawdown in Iraq and subsequent phasing-out of some of our large government contracts. This year is the final option year for US government contracts that have historically contributed 25%-35% of Agility’s annual revenue.

Although Agility anticipated and planned for the inevitable troop drawdown in Iraq, there are two additional, unplanned challenges that the company has also had to contend with in the last year.

• The first is the global recession that jolted the world at the end of 2008, along with the slower-than-expected recovery from that recession. The global slowdown has an ongoing impact on our Global Integrated Logistics (GIL) business.

• The second is the legal proceedings by the US government which led to the suspension on winning new government business. This has had a deep impact on our Defense & Government Services (DGS) business.

Together, these three challenges have created a changed financial landscape for Agility in the near-term. I want to explain our financial position today and, more importantly, our plans going forward.

• The Defense & Government (DGS) business has been set back by the combination of the troop drawdown and the legal case with the US government. If the company is able to settle the dispute, then DGS will focus on aggressively rebuilding its business, reinvigorating business development and customer outreach. If we cannot reach a mutually-agreeable settlement, then we would need to assess all strategic options for the DGS business. For now, the situation is fluid and no decision has been made, but we have contingency plans in place.

There's much more on this floating around the web.

You're the meat in their salami sandwich

Mrs. Guambat rails at Guambat for failing to pay close attention to things like prices the grocery clerk rings up, restaurant bills, department store dockets and, especially, credit card statements. Guambat gives it a quick once over, if he can see the small print at all, and if ballpark right, it's good enough for him.

If Guambat sees an item like a charge on his credit card bill for, say, $3.50 that he didn't remember charging (and he never charges that small an amount anyway), he'd be miffed but not bothered to do anything about it because of all the time and aggravation it would cost -- an expense well in excess of the cost of a small error.

This could easily mark Guambat for a slice of salami, and you, too, if you're at all like Guambat in this particular habit.

A what, you ask?

Glad you asked, because the story of this post reminded Guambat of a term he had heard years ago and had begun to think he had mistakenly made it up because he hadn't heard it since.

FTC says scammers stole millions, using virtual companies

The U.S. Federal Trade Commission has disrupted a long-running online scam that allowed offshore fraudsters to steal millions of dollars from U.S. consumers -- often by taking just pennies at a time.

"It was a very patient scam," said Steve Wernikoff, a staff attorney with the FTC who is prosecuting the case. "The people who are behind this are very meticulous."

According to him, the scammers found loopholes in the credit card processing system that allowed them to set up fake U.S. companies that then ran more than a million phony credit card transactions through legitimate credit card processing companies.

The scammers stayed under the radar by charging very small amounts -- typically between $0.25 and $9 per card -- and by setting up more than 100 bogus companies to process the transactions. Typically they floated just one charge per card number, billing on behalf of made-up business names such as Adele Services or Bartelca LLC.

U.S. consumers footed most of the bill for the scam because, amazingly, about 94 percent of all charges went uncontested by the victims. According to the FTC, the fraudsters charged 1.35 million credit cards a total of $9.5 million, but only 78,724 of these fake charges were ever noticed.

In March Alexsandr Bernik of Roseville, California, was sentenced to 70 months in prison for running a similar scam. He put tens of thousands of charges on Amex accounts, each ranging from $9 to $15. Neither federal authorities nor American Express would explain how Bernik obtained his card numbers.

Bernik made his charges on behalf of a fictional corporation called Lexbay Ltd., but in the FTC case, the scammers would mimic legitimate companies -- taking real federal tax I.D. numbers and then setting up fake businesses with nearly identical names that appeared to be located nearby. In a move that apparently tricked credit card processors into granting it a merchant account, Adele Services, for example, was set up to mimic a legitimate Bronx, New York group called Adele Organization.

When the scammers tried to register merchant accounts with credit card processors, the processors would do some investigating, but using tricks like these, the scammers were always one step ahead.

In fact, the FTC's description of their operation reads like a textbook on how to set up a fake virtual corporation in the Internet age.

OK, so what does this have to do with salami?

Well, the phrase Guambat recalled was "salami slicing". Reading this story reminded him of it, so being at the computer anyway, looked for "salami slicing in Wikipedia. Sure enough, there it was:

Salami slicing is a series of many minor actions, often performed by clandestine means, that together results in a larger action that would be difficult or illegal to perform at once. The term is typically used pejoratively.

An example of salami slicing, also known as penny shaving, is the fraudulent practice of stealing money repeatedly in extremely small quantities, usually by taking advantage of rounding to the nearest cent (or other monetary unit) in financial transactions. It would be done by always rounding down, and putting the fractions of a cent into another account. The idea is to make the change small enough that any single transaction will go undetected.

In information security, a salami attack is a series of minor attacks that together results in a larger attack. Computers are ideally suited to automating this type of attack.

In politics, the term salami tactics has been used since the 1940s to refer to a divide and conquer process of threats and alliances used to overcome opposition.

In academium, salami slicing refers to the practice of creating several publications out of material that could have been published in a single journal or review.

In 2008 a man was arrested for fraudulently creating 58,000 accounts which he used to collect money through verification deposits from online brokerage firms a few cents at a time. While opening the accounts and retaining the funds may not have been illegal by themselves, the authorities charged that the individual opened the accounts using false names (including those of cartoon characters), addresses and social security numbers, thus violating the laws against mail, wire and bank fraud.

In Los Angeles in October 1998, the district attorneys charged four men with fraud for allegedly installing computer chips in gasoline pumps that cheated consumers by overstating the amounts pumped.

In January 1993, four executives of a rental-car franchise in Florida were charged with defrauding at least 47,000 customers using a salami technique.

Historically, actual physical "penny shaving" may be considered a form of salami slicing. The edges of coins made of precious metals have been clipped or shaved by individuals in order to procure small quantities of said metals at a time with the intention that the coin would still retain its nominal value.

Salami slicing has played a key role in the plots of several films. The earliest mention of this practice was in the UK TV series The Sweeney, a 1976 episode called "Tomorrow Man", of a man rounding up percentage points and putting the difference in his own account (totaling two million dollars), using a computer. Other films include Superman III, Hackers, Entrapment, Web of Lies, and Office Space (one of whose characters mentions Superman III as inspiration). In Office Space, Peter Gibbons, Michael Bolton, and Samir Nagheenanajar decide to divert the supposedly "rounded-off" portions of banking interest deposits after Michael and Samir learn that they will be laid off. However, they end up taking much more than the fractions of a cent because of a misplaced decimal point. In reality, currency banking transactions are usually conducted using integer-only functions; no real rounding occurs on the books (as all operands are stored and manipulated as groups of integers, with the decimal point calculated at the end of the transaction and stored as a separate piece of data), precluding this particular scenario.

In a 1972 episode of the TV series M*A*S*H, Radar attempts to ship an entire Jeep home from Korea one piece at a time. Hawkeye commented that his mailman "would have a retroactive hernia" if he found out.

In the anime series, Ghost in the Shell: S.A.C. 2nd GIG, terrorist Hideo Kuze uses salami slicing in order to finance his actions, eventually stealing enough money to buy plutonium from a Russian smuggler.

The term is used in the country song "The Ballad of Silicon Slim". A non-digital variant of the practice is described in the 1976 Johnny Cash song, "One Piece At A Time", in which the protagonist, an automobile factory worker, steals individual parts to build a complete car over a period of decades.

An example of salami slicing also appears in a volume of Harry Harrison's Stainless Steel Rat series. The revolutionaries in Robert A. Heinlein's The Moon Is a Harsh Mistress use the technique to fund their war for independence. Thomas Whiteside's 1978 book, Computer Capers, documents how a programmer at a mail-order company diverted money from rounded-down sales commissions into a phony account for three years before he was caught.

There's references, footnotes and more info in the Wikipedia article.

So now, aren't you glad you asked?

Hello? Hello?

Apocalypse Dow?

As the Dow (DJIA) continues to drift down towards 10,000, it is interesting to note a recent observation from a column of the Intelligent Investor in the WSJ personal finance section:


The 11-Year Itch: Still Stuck at Dow 10000

Last week, the Dow Jones Industrial Average rose above 10000—again. Since March 16, 1999, when it first touched 10000 in intraday trading, the Dow has bounced over that threshold and back 63 times. This Friday, the index closed 219.6 points below where it stood exactly 11 years ago.

This isn't the first time stocks have been stuck on a seemingly endless pogo-stick ride. On Jan. 18, 1966, the Dow hit an intraday high of 1000.50. It broke through the four-digit barrier three more times that January and February, then faded. The Dow cracked 1000 again in 1972 and 1976, then fell back both times. Not until December 1982 did the Dow finally hurdle above 1000 and stay there.

Will Dow 10000 turn out to be a long replay of Dow 1000?

Of course, financial history doesn't repeat itself—and even when it rhymes, the sounds can be almost unrecognizable. Inflation, at roughly 7% annually, was much higher from 1966 to 1982 than it is today, devouring all the return on stocks. And during the 1970s, according to an analysis for The Wall Street Journal by Wharton Research Data Services at the University of Pennsylvania, the Dow captured only about 15% of the total value of U.S. stocks, versus 30% today

Guambat once made some notes and observations about the prospects of a repeat of the Dow 1000 experience around the Dow 10,000 mark, back in 2002. But he did it one better (perhaps) by taking the idea all the way back to Dow 100, which was the pivot point around which the Great Crash in 1929 occurred.

The paper was discussed, and a link to the paper provided, in this post about a year ago: The battle of Bull Runs and Bear Runs

He even went so far as to state pages of historical events of the Dow 100 era and the Dow 1000 era, in chronological order, to emphasize the point that the historical facts and circumstances were sufficiently different as to give no clue that the stall in the Dow, otherwise called a secular bear market, would occur at any particular interval.

But he did note (back in 2006 in this post and the chart in it: Analagous?) that the technical consolidation that occurred at Dow 100 and again at Dow 1,000 looked to be occurring again at Dow 10,000, notwithstanding some interim cyclical bull and bear moves.

Here is an updated version of the 2006 chart. In this one, rather than using a rectangle, there's an ellipse, which is just a haphazard guess as to the shape the Dow 10,000 consolidation may take (if it does complete a secular consolidation here), and the time frame in which it might conclude. This is wild speculation, mind you. More Rorschach than prophecy.

(Click to enlarge; right click to enlarge in new tab.)

And while Guambat agrees with the WSJ article that history doesn't repeat and may not be recognizable when if rhymes, he is mesmerized by the possibility, however remote, that market behavior could be so simplistic as to predictably consolidate around a 10 to the 10th interval.

Why, if that were so, once this bear plays out, you could postulate Dow 100,000!!. As outlandish as that is, it is no more than to predict Dow 1,000 at Dow 100, or Dow 10,000 at Dow 1,000.

In the WSJ article, it was mentioned that this inability to shake off Dow 10,000 and move on was called "'quadraphobia', or the fear of a four-digit closing value for the Dow".

At least one Elliott Wave theorist will have none of that quadraphobia, however. This one fears a three-digit closing value for the Dow, in what can only be described as an Apocalyptic vision.

Elliot Wave predicts triple-digit Dow in 2016

An investment letter that called the Crash of 2008 said that this would be a bad year -- and it now says it will get worse.

A whole generation of investors think that Robert Prechter and his Elliott Wave Theory letters, Elliott Wave Financial Forecasts and Elliott Wave Theorist, are permabears. But Prechter was very bullish after the 1974 low

Elliott Wave Financial Forecasts (EWFF) makes recommendations specific enough to be tracked by the Hulbert Financial Digest. (The Elliott Wave Theorist is too, well, theoretical.)

The EWFF issue published in early May said flatly: "The topping process is over for the countertrend rally that started in the first quarter of 2009. The next leg lower that commenced in April should now deliver a decline that will ultimately be bigger than the 2007-2009 sell-off."

How bad? The clearest statement comes from the Elliott Wave Theorist, discussing a numerological technical theory with which it supplements the Wave Theory's complex patterns: "The only way for the developing configuration to satisfy a perfect set of Fibonacci time relationships is for the stock market to fall over the next six years and bottom in 2016."

"Stock market bulls and most economists think that a new bull market and economic recovery are underway. Most bears are looking for either a long sideways bear market à la 1966-1982, or a hyperinflationary run to infinity. Our Elliott Wave outlook opposes both of these scenarios. The most likely profile is a stock market crash of historic proportions."

Elliott Wave Theorist offers several reasons, including: "This bear market is of Supercycle degree, the biggest since 1720-1784. It should therefore include a decline deeper that the 89% decline of 1929-1932. A decline of 91.5% or more would carry it below 1,000."

There will be a short-term rally at some point, thinks Prechter, but it will be a trap: "The 7.25-year and 20-year cycles are both scheduled to top in 2012, suggesting that 2012 will mark the last vestiges of self-destructive hope. Then the final years of decline will usher in capitulation and finally despair."

Wow, and Guambat was ruminating about how bearish his view was getting. He's only thinking the apparent cold/right shoulder the Dow seems to be making these days will take it down but within the parameters of the last low, perhaps not piercing it, staying roughly in the bounds of the ellipse.

Guambat's money is on the side line for the time being. All two cents worth.

Putting your money where their mouth is

Guambat is sure there must be some social value somewhere in the private equity concept, but he'd be hard pressed to put a finger, let alone a paw, on it. Maybe once, if ever, the government starts to tax their income as ordinary income as it would for the rest of us, it might be easier to spot.

It might also be interesting to see the result of the following "conundrum" and the fall out it generates before trying to make that decision.

Private Equity Firms Have Billions and Nowhere to Spend It

Corporate buyout specialists generally raise money from big investors and then buy undervalued or underappreciated companies. To maximize investment returns, they typically leverage their cash with loans from banks or bond investors.

Critics contend that leveraged buyouts can saddle takeover targets with dangerous levels of debt. But unlike indebted homeowners, highly leveraged companies under the care of private equity have so far dodged the big bust many have predicted.

After an unprecedented burst of buyouts during the boom leading up to 2008, a vast majority of these companies are hanging on. Whether they will avoid a reckoning is uncertain.

Private equity funds generally tie up investors’ money for 10 years. But they typically must invest all the money within the first three to five years of the funds’ life.

For giant buyout funds raised in 2006 and 2007, at the height of the bubble, time is short. They must invest their money soon or return it to clients — presumably along with some of the management fees the firms have already collected. Some of the industry’s biggest players, like David M. Rubenstein of the Carlyle Group, Henry Kravis of Kohlberg Kravis Roberts and David Bonderman of TPG, have more than $10 billion apiece in uncommitted capital — what is known as “dry powder” — according to Preqin, an industry research firm.

A big drop in returns would be particularly vexing for pension funds, which are counting on private equity, hedge funds and other so-called alternative investments to help them meet their mounting liabilities.

Some buyout firms are asking their clients for more time to search for companies to buy. Many more are rushing to invest their cash as quickly as possible, whatever the price.

Still, those with dry powder are bidding aggressively, in the United States, Europe and Asia.

Not just whistleblowin' Dixie

Northrop Grumman settles whistleblower case

Spurred by a Northrop quality assurance manager-turned- whistleblower, the government alleged Northrop's Navigation Systems business unit failed to make sure the electronics would work at the temperature extremes required for military and space uses, the department said in a statement Wednesday.

The agreement resolved claims made in a qui tam or whistleblower lawsuit filed in May 2006 against Northrop in the U.S. District Court for the Central District of California by Allen Davis. Davis was employed as a quality assurance manager at Northrop's Navigation Systems Division facility in Salt Lake City, Utah. He maintained that Northrop failed to comply with testing requirements set out in a November 1998 protocol for the use of commercial parts in military systems.

After investigating, the United States alleged the failures to test continued from November 1998 until February 2007. Davis' share of the settlement amounts to $2,375,000 under whistleblower provisions of the False Claims Act.

The 11th one is the most disturbing

The Smithsonian has one of those "10 most" list things in its recent journal. Guambat reckons the mere idea of such a list trivializes whatever is in it and reveals more of the maker than the matter. Unfortunate for the esteemed The Smithsonian.

The Ten Most Disturbing Scientific Discoveries

1. The Earth is not the center of the universe.

2. The microbes are gaining on us.

3. There have been mass extinctions in the past, and we’re probably in one now.

4. Things that taste good are bad for you.

5. E=mc²

6. Your mind is not your own.

7. We’re all apes.

8. Cultures throughout history and around the world have engaged in ritual human sacrifice.

9. We’ve already changed the climate for the rest of this century.

10. The universe is made of stuff we can barely begin to imagine.

Read more: http://www.smithsonianmag.com/science-nature/The-Ten-Most-Disturbing-Scientific-Discoveries.html?c=y&page=3#ixzz0rI3eUnqR

Guambat, however, is more disturbed by the following discovery, which wasn't even mentioned. And it's pretty darned cute, too.

The world's only immortal animal

The turritopsis nutricula species of jellyfish may be the only animal in the world to have truly discovered the fountain of youth.

Since it is capable of cycling from a mature adult stage to an immature polyp stage and back again, there may be no natural limit to its life span. Scientists say the hydrozoan jellyfish is the only known animal that can repeatedly turn back the hands of time and revert to its polyp state (its first stage of life).

Researchers are studying the jellyfish to discover how it is able to reverse its aging process.

Because they are able to bypass death, the number of individuals is spiking. They're now found in oceans around the globe rather than just in their native Caribbean waters. "We are looking at a worldwide silent invasion," says Dr. Maria Miglietta of the Smithsonian Tropical Marine Institute.

More in Google search.

A government of the dollar, by the dollar and for the dollar

The banking industry, especially Big Banking, isn't very popular amongst the voters, yet Congress is "finding" it difficult to pass through any meaningful and effective reform that targets the excesses and deregulation that nearly made the Great Depression seem not so great as the Big Dipper Recession we're now experiencing in all industrialized countries world wide.

Similarly, the Drill Baby Drill crowd and the fossil fuel industry, especially Big Oil, isn't very popular at the moment amongst the voters, yet Congress and the administration is "finding" it difficult to say or do much to take any meaningful and effective measures to target the free reign and sham regulation of the oil industry that made the Exxon Valdez look like spilled milk compared to the Deepwater Doodoo.

But if the disgusted voters are not able to make their sentiments known, what is holding them back?

Big Money.

Lotsa Big Money from Big Banks, Big Oil, and Big Pharma, spread, like farmers fertilizing their fields, by lobbyists and their phony phinancial phronts. That and the Business-as-Usual state of governance that passes for our elected leadership in Congress.

Donations Create a Tricky Balance for Oil-State Politicians

For the last decade, the oil industry has been one of the most powerful lobbying constituencies in Washington. It has spent nearly a billion dollars on federal lobbying since 1998, according to the Center for Responsive Politics, making it the sixth-biggest industry in terms of expenditures.

In the current election cycle, the oil and gas industry has contributed $12.8 million to Congressional candidates, with 71 percent of it going to Republicans.

The outburst by Representative Joe L. Barton of Texas in support of BP underscored the potential peril for lawmakers forced to respond to crises involving industries vital to their regions, and whose bountiful donations finance their political campaigns.

But in going after Republicans, the Democrats’ attacks gloss over a more complicated picture.

The largest beneficiary of campaign donations from BP in the 2008 election cycle, for instance, was President Obama, who took in $77,000 from company executives and its political action committee. This year, Senator Blanche Lincoln, Democrat of Arkansas and chairwoman of the Agriculture Committee, leads all candidates with $286,000 in donations from oil and gas companies.

And while Democrats have pounced on Mr. Barton for accusing Mr. Obama of conducting a “shakedown” by demanding that BP set up a $20 billion fund for oil spill claims, a number of Democratic lawmakers — especially those from oil-producing Gulf states — have struggled to balance their criticism of BP with support for the industry.

Officials like Senator Mary L. Landrieu and Representative Charlie Melancon, both Democrats of Louisiana, have demanded accountability for BP and reparations for individuals and businesses who may face financial catastrophe. But they have also fought to lift the moratorium on offshore drilling imposed by the Obama administration after the Deepwater Horizon rig explosion, saying it is crippling the local economy.

Both Ms. Landrieu and Mr. Melancon, who is running for a Senate seat, receive substantial donations from the oil and gas industry, which is hardly surprising given the industry’s big presence in Louisiana. For her campaigns, Ms. Landrieu has taken in $751,000 since 1996, while Mr. Melancon has received $312,000 since 2004.

To put this in the broader context that Guambat began this post, the NYT piece notes,

The tightrope walk faced by elected officials from oil and gas states is similar to the New York delegation’s struggles when it comes to legislation to regulate Wall Street banks, or the New Jersey delegation’s sensitivity on legislation related to the pharmaceutical industry.

“You’ve got this conflict for these folks where they acknowledge the spill is a problem but, with the significant support they get from the industry, are a heck of a lot more reluctant to take aggressive legislative action against the company,” said Tyson Slocum, who runs the energy program at Public Citizen, a political research and advocacy group.

In a democratic system of government, it's one person, one vote.

In the corporate world of "democracy", it's one dollar, one vote.

Big Money reflexively and diligently pursues its own sense of democracy on the People's government. For a while, the people had managed a very small curb on the Big Voice of Big money and its One Dollar, One Vote philosophy of commercial democracy.

But the Supreme Court nominees of the Bush family have now also cut back on the effectiveness of the One Person, One Vote philosophy of political democracy by giving the Big Money the vote. They've given the purely legally fictional corporate "persons" the equal protection of real, human beings.

Supreme Court's campaign finance ruling: just the facts

On Jan. 21, the US Supreme Court announced a landmark decision establishing for the first time that corporations enjoy the same First Amendment free-speech rights as individuals.

On one side, liberal reformers have sought to limit the influence of wealthy corporate interests by emphasizing the importance of maintaining a "level playing field." If American democracy is based on the principle of one person, one vote, they say, then corporations must be muzzled during political campaigns to prevent their amassed wealth from dominating and corrupting a political campaign.

Conservatives and libertarians, on the other hand, have countered that limiting the amount of money a corporation – or anyone – can spend to make their political point is censorship and a violation of the letter and spirit of the First Amendment's guarantee of free speech.

Lest we go down any path toward thinking this is just a Republican thing, consider this.

Did Democrats' deal with the NRA kill campaign finance reform?

The derailing this week of the House Disclose Act gave Republicans – still reeling from Rep. Joe Barton’s “apology” to BP CEO Tony Hayward this week – a rare chance to gloat about the pitfalls of cozying up to special interests.

“Van Hollen’s carve-out for special interests has proven about as popular as first-time World Cup ref Koman Coulibaly’s blown call today, which cost the United States a victory,” said House Republican whip Eric Cantor (R) of Virginia in a blog today. His barb was aimed at Rep. Chris Van Hollen (D) of Maryland, chair of the Democratic Congressional Campaign Committee.

At issue is a deal brokered by the House Democratic leadership to exempt the powerful National Rifle Association (NRA) and others from disclosure requirements in a new campaign finance law. The legislation aimed to restore campaign finance limits stripped away by a controversial 5-4 US Supreme Court decision in Citizens United vs. Federal Election Commission, which scrapped restrictions on when and how much corporations and unions can spend to influence elections.

The NRA initially backed the Supreme Court decision.

“This ruling is a victory for anyone who believes that the First Amendment applies to each and every one of us,” said NRA executive vice president Wayne LaPierre in a statement on Jan. 21. “This is a defeat for arrogant elitists who wanted to carve out free speech as a privilege for themselves and deny it to the rest of us; and for those who believed that speech had a dollar value and should be treated and regulated like currency, and not a freedom.

On May 26, the NRA had announced opposition to the bill as “intimidating speech,” but dropped opposition after the carveout.

The proposed law would ban some corporations from funding campaign ads and require others to disclose their top five donors in ads and on their websites.

“We believe voters have an absolute right to know who is spending money to try to influence their vote. And this will prevent big special interests from hiding behind front organizations, sham entities, to try and hide from the voter what they're doing. Nobody, nobody should be afraid of this transparency unless they have something to hide,” said Rep. Van Hollen in a press conference introducing the act on April 29.

But cribbing from President Obama’s playbook in cutting early deals with pharmaceutical companies and other potential opponents to move health care legislation, Democrats this week cut deals exempting the NRA as well as the Sierra Club, the Humane Society, and AARP from disclosure requirements in the bill.

“The political, special-interest nature of the legislation is reflected in the recent addition to the bill of the NRA exemption," says R. Bruce Josten, chief lobbyist for the US Chamber of Commerce.

“This ad hoc carve-out is specifically tailored to exempt the National Rifle Association from the bill’s key restrictions and burdens. The admitted purpose was to end the NRA’s opposition to the bill to secure passage,” he adds. “This is clear and unconstitutional discrimination in favor of one speaker and against others.”

Guambat was considering settling in with a warm cuppa tea to contemplate this when he realized how cozy he was beginning to get with the leanings of the Tea Party. So he grabbed a big jug of moonshine and went out onto the porch to watch the Green Flash of the sun setting over the Philippine Sea.

Too Big to Foil

Texas politicians have always stood behind their oil industrialists. So it was only to be expected that US Representative from Texas, Joe Barton, tried to foil the effort President Obama had constructed to escrow $20 Billion of BP funds to secure some of the cost of the Deepwater Doodoo cleanup.

The Houston Chronicle reported, Barton BP 'shakedown' remark draws fire

"I do not want to live in a country where any time a citizen or a corporation does something that is legitimately wrong, (they are) subject to some sort of political pressure that … amounts to a shakedown," Barton told BP CEO Tony Hayward. "So I apologize."

Barton chairs the Republican party’s top seat on the powerful House energy committee. The Jerk's kneejerk defense of Big Oil, however, proved no match, in this election year, to foil the Deepwater Doodoo cleanup plan.

The New York Times noted the immediate cleanup efforts of the Republican party, who understood the Deep Doodoo Barton had plunged into.

Republican, Under Pressure, Backpedals From Apology to BP

“I’m ashamed of what happened in the White House yesterday,” Mr. Barton said in his opening statement. “I think it is a tragedy of the first proportion that a private corporation can be subjected to what I would characterize as a shakedown — in this case a $20 billion shakedown.”

[Old Joe knows a good shakedown when he sees one:] Individuals and political action committees in the oil and gas industry have been Mr. Barton’s biggest source of campaign money, the Center for Responsive Politics reported, contributing $1.4 million since the 1990 election cycle.

Of the five Gulf Coast states, Mr. Barton’s Texas is the only one whose beaches, fisheries and tourist haunts are not threatened by oil spewing from BP’s ruined well. Republican lawmakers from Louisiana, Mississippi, Alabama and Florida quickly disavowed Mr. Barton’s apology to BP, and one was the first to call for stripping Mr. Barton of his committee seat.

Representative John A. Boehner of Ohio, the House Republican leader, and Representative Eric Cantor of Virginia, the Republican whip, summoned Mr. Barton and he “was told to apologize, immediately, or he would lose his spot, immediately,” a senior aide said.

Mr. Barton, in his [subsequent] statement, apologized “for using the term ‘shakedown’ ” to describe the $20 billion escrow account that BP and the White House announced Wednesday. He also retracted the apology to BP and said the company “should bear the full financial responsibility for the accident on their lease in the Gulf of Mexico” on April 20 and “fully compensate those families and businesses that have been hurt.”

Not to be "misunderestimated", Old Joe used what was almost a fellow Texan's Bushism to say he'd been miscontructed to the opposite effect, as reported in that Houston Chronicle piece above:

"I think BP is responsible for this accident, should be held responsible, and should, in every way, do everything possible to make good on the consequences that have resulted from this accident," Barton said. "And if anything I said this morning has been misconstrued to the opposite effect, I want to apologize for that misconstruction."

A boatload of sugar helped the poison go down

AIG’s Government Rescue Had ‘Poisonous’ Effect, U.S. Panel Says

“The government’s actions in rescuing AIG continue to have a poisonous effect on the marketplace,” said the Congressional Oversight Panel panel, led by Harvard University law professor Elizabeth Warren.

“The AIG rescue demonstrated that Treasury and the Federal Reserve would commit taxpayers to pay any price and bear any burden to prevent the collapse of America‘s largest financial institutions and to assure repayment to the creditors doing business with them.”

American International Group Inc.’s bailout had a “poisonous” effect on the U.S. financial system because it demonstrated the government would protect firms from their own risk-taking.

Treasury Secretary Timothy F. Geithner said in January. Geithner, 48, executed the bailout while he led the Federal Reserve Bank of New York in 2008.

AIG leaders allowed the firm to accumulate “staggering amounts of risk” in derivatives and other areas, the panel said.

The breadth of operations weren’t “matched by a coherent regulatory structure to oversee its business.” The Office of Thrift Supervision had oversight of the parent company and failed to limit risks from swaps, the panel said.

Regulators have said that they were forced to save AIG to prevent a wave of failures that a collapse would have sparked.

The report “overlooks the basic fact that the global economy was on the brink of collapse and there were only hours in which to make critical decisions,” Andrew Williams, a Treasury spokesman, said in an e-mailed statement.

“We have learned from that experience and have been fighting for more than a year to give the government authority to put firms, like AIG, out of existence when their failure poses a danger to our economic system.”

If Congress truly has learned anything from the experience, they should be passing rock solid and loop-hole free financial reforms, including the Volker Rule, rather than continue to pander to the banking lobbyists as has been their habit.

Write your Senator, write your Congresswoman, and insist on the Volker Rule. Guambat would, but being a dual Guamanian/Australian doesn't give him any such representation.

Congressional watchdog criticizes rescue of AIG

The firm was nearly wiped out by credit default swaps, which amount to insurance [sic: in reality, bets] against the risk that mortgages and other debts will go bad. Treasury and the Fed pulled AIG back from the brink in September 2008.

When the housing market collapsed, AIG couldn't meet its obligations to its counterparties, including Goldman Sachs and JPMorgan Chase. In the bailout, the Fed paid the counterparties 100 cents on the dollar.

The government relied only on Goldman Sachs and JPMorgan to arrange a private rescue of AIG, a conflict of interest because, as AIG counterparties, "They would have been among the largest beneficiaries of a taxpayer rescue."

Of BP and Bhopal

There is no doubt that BP is in Deepwater Doodoo, described as "the worst spill in U.S. history, which has now affected 120 miles of coastline."

BP will no doubt take a financial hit of some small (in the scheme of things) proportion: BP oil spill clean-up costs rise to $1.25bn.

But, in the other hand, "BP's first-quarter [that's only 3 months, mind you] replacement cost profit was $5,598 million, compared with $2,387 million a year ago, an increase of 135%."

In the larger picture it might be said, "the oil company posted profits of $26bn last year".

Hell, even the shareholders might have to pony up lost opportunity costs if the political fallout from the Deepwater Disaster gets out of hand: Gulf of Mexico oil spill: BP to mull politics of shareholder dividend payments.

To be sure, the BP's British cheerleaders are doing their part to mitigate any damages to BP, if not the Gulf Coast. Simply look at that last story's headline from the UK's Telegraph. It wimply characterizes the Deepwater Disaster as a simple "oil spill". Oh Blimey, did I spot your rug? Oh tish!

Despite Tony Hayward's "idiotic remarks", the BP CEO is sounding almost Churchilian in his stiff upper lip fortitude: BP's Tony Hayward: I'm a Brit. I can take it.

The British bristling is perhaps best distilled in this bit of bloody whinging Pom pub talk from Bruce Anderson:

Any fair-minded person who examines the Gulf of Mexico oil spillage is compelled to two conclusions. First, that there is no evidence of wrongdoing by BP. Second, that the President of the United States has behaved disgracefully.

The history of the modern oil industry is punctuated by disasters: Exxon Valdez, Piper Alpha, Texas City. The history of modern aviation is also punctuated by disasters, too

In the Gulf of Mexico, there are difficulties with fishing and tourism. These should not be exaggerated. Some of the lemming media would have us believe that the Louisiana coast is inhabited by pre-lapsarian fisher-folk whose arcadian tranquility has now been violated by the brutalities of BP. Has anyone ever met an insurance claimant who understated his loss?

The real threat to Louisiana's economy, and to America's, comes from President Obama.

In the Liberal media, Mr Obama's rhetorical skills have been grotesquely overrated. He is not a good speaker. Presidents Reagan and Clinton were naturals, while George Bush Jnr could give a superb performance from a prepared text. But Barack Obama's delivery is cold and introverted. The presidency is a strange office, its incumbents caught between regular illusions of omnipotence and equally regular frustrations of Congressional constraint. The only way to break out of Lilliput is to use the White House as a bully pulpit. This President cannot do that, because he cannot make Americans feel good about themselves.

There may be an explanation for this. Nobody knows what Mr Obama believes. During his brief period in the Senate, he took ultra-left wing positions on almost everything. This delighted Democrat activists, and turned him into a presidential candidate. Once he had secured his base, he dumped almost all the leftism in pursuit of electability. That means a chronic political crisis.

Instead, he has to defame BP. To listen to Mr Obama, one might have thought that BP was run by George III and Lord North, with Lord Cornwallis in charge of safety – and there is worse.

It has been 10 years since BP stopped calling itself British Petroleum (patriots could be tempted to conclude that its present misfortunes are divine punishment). Yet the President constantly reverts to the old name, as if "British" were a term of abuse. Not only is Britain the US's most important ally. BP has 24,000 American employees and 10,000 British ones. So when he denigrates this great company, Mr Obama is damaging US interests as well as British ones.

The international left has always hated the oil industry; the oil well and the motor car are two of capitalism's principal heraldic devices. It might have been hoped that the anti-oil nonsense would subside with the blowout of Marxism: not so. The poisonous gases merely found another vent: the extremities of the Green movement, and especially Greenpeace, which would like to deny mankind the energy resources upon which civilisation depends.

So, on this note of poisonous gases found in other vents, Guambat segues to another gas: acetylene.

The Union Carbide & Carbon Corp. (UCC) was formed in 1917 from the combination of four companies: Union Carbide Co. (incorporated 1898), Linde Air Products Co. (incorporated 1907), National Carbon Co., Inc. (incorporated 1899), and Prest-O-Lite Co., Inc. (incorporated 1913). The new entity was organized as a holding company, with its four members acting relatively autonomously and cooperating where their businesses converged.

This is part of the beginnings and history of Union Carbide, a US company, not at all British, although both companies might be more critically aligned as Global powerhouses:

The merger combined what had often been competing interests to form an industrial chemicals powerhouse. The oldest member of the quartet, Union Carbide, had been formed to manufacture calcium carbide, which was used in the production of metal alloys. A by-product of alloying calcium carbide with aluminum was acetylene, a gas that company executives hoped would prove useful for street and household lighting. But when Thomas Edison's electric incandescent light bulbs proved more practical for most lighting, it looked as if Union Carbide's acetylene lighting business was obsolete. Luckily, a French researcher discovered that acetylene could be burned in oxygen to produce a hot, metal-cutting flame. A whole new market for the gas emerged, and UCC was ready to take advantage of it.

Union Carbide had been involved with the Linde Air Products Co. through joint acetylene experiments for about six years before the formation of the UCC holding company. As one of America's first oxygen-producing concerns and (after 1917) part of one of the country's largest chemical companies, Linde soon became the world's largest producer of industrial gases like acetylene, hydrogen and nitrogen. These gases formed the foundation of the petrochemical industry.

With combined research efforts and a national push for new technologies to help win World War I, new developments came in rapid succession at Union Carbide. New products included batteries for portable radios and corrosion and heat-resistant ferroalloys that strengthened the steel used to build skyscrapers, bridges, and automobiles. The government's need for ethylene during "the great war" also generated interest in hydrocarbon byproducts. These substances were made from calcium carbide and would later become the raw materials for the production of plastics, synthetic rubber, fibers, solvents, explosives, and industrial chemicals. In 1919 the first production of synthetic ethylene began. Ethylene would develop into the industry's most important industrial hydrocarbon, eventually used in polyethylene (plastics), polystyrene (styrofoam), and antifreeze, among other products. Union Carbide's Prestone brand ethylene glycol soon became the top-selling antifreeze, a position it held throughout the twentieth century.

Polyethylene, a plastic used in squeeze bottles (high-density polyethylene), as well as in films and sheeting (low-density polyethylene), became Union Carbide's largest dollar-volume product after World War II. An olefins division was set up in the 1950s to supply low-cost raw materials for the chemicals and plastics industry in the 1950s. For several years the company sold these plastics to other manufacturers. But Carbide finally capitalized on this discovery in 1964, when Glad branded plastic wraps, bags, and straws were introduced. Within just four years, Glad became the leading brand in its market.

By the 1960s, Union Carbide occupied the top spot in many of its primary fields, including industrial gases, carbon electrodes for industrial electric furnaces, batteries, atomic energy, polyethylene plastic, and ferroalloys. In 1965 the conglomerate's sales topped $2 billion for the first time. And from 1956 to 1966, Union Carbide parlayed a few plants in a dozen countries into 60 major subsidiary and associated companies with plants in 30 countries serving over 100 markets. International operations of the conglomerate contributed 29 percent of its annual sales, and mid-decade the company name was changed to Union Carbide International Co. to reflect its increased global presence.

Union Carbide was still the United States' second-largest chemical producer, but it invariably lagged behind most of its competitors in terms of growth and profitability during this period. Misguided investments in petroleum, pharmaceuticals, semi-conductors, mattresses, and undersea equipment, combined with a $1 billion petrochemicals complex at Taft, Louisiana, which ran in the red for the last three years of the 1960s, further tarnished Union Carbide's standing. Not surprisingly, the conglomerate's stock dropped from $75 in 1965 to $45 in 1968 as the company "earned a reputation for aimless fumbling," according to Business Week.

Unfortunately for Union Carbide, environmental complaints about the company's Marietta, Ohio, ferroalloy plant came to a head in 1971, when consumer champion Ralph Nader brought a decade of local residents' complaints into the national spotlight. For four years, the conglomerate had largely ignored public and government efforts to make it clean up several plants that were polluting the air over West Virginia. Union Carbide's resistance to outside influence gave it the public image of a reactionary bully concerned only with profits and scornful of the environment, a stigma that would haunt the company for years to come. In 1971, UCC capitulated to federal orders that it immediately use more expensive low-sulphur coal to reduce noxious sulfur dioxide emissions by 40 percent. The company was given a fall 1974 deadline to install $8 million in advanced emissions scrubbers.

From 1967 to 1973, physical output of chemicals and plastics rose 60 percent, while per-pound production costs were cut by one-third. William S. Sneath continued these trends when he became chairman and CEO in 1977. Still, the company found itself increasingly strapped for cash. Steadily rising expenses in Europe resulted in a $32 million loss in 1978, which forced Carbide to divest virtually all of its European petrochemicals and plastics operations. That same year, UCC was forced by its creditors to retire $292 million in long-term debt, which forced it to borrow another $300 million in 1979. That year, Carbide's Standard & Poor's credit rating fell from AA to A+, and its stock fell as low as 42 percent below its $61 book value.

Chairman Sneath embarked on another round of cost-cutting in 1980, pruning the executive staff by 1,000 and divesting a total of 39 businesses. Sneath retained six primary businesses: graphite electrodes, batteries, agricultural products, polyethylene, and industrial gases. By 1980, Carbide had 116,000 employees at over 500 plants, mines, and laboratories in 130 countries, bringing in over $9 billion in annual sales. Sneath embarked on a plan to invest profits into high-margin consumer goods and specialty chemicals.

The massive disaster at Union Carbide's pesticide plant in Bhopal, India, in December 1984 struck the corporation just as it was beginning to make lasting strides toward profitability.

UCC had established battery plants in India as early as the mid-1920s, and had seven plants with 5,000 employees there by 1967. India's chronic food shortages precipitated a government-sponsored "Green Revolution" in the 1960s, with the country's socialist government eager to join Union Carbide in establishing pesticide and fertilizer plants. In 1975 the Indian government granted Union Carbide a license to manufacture pesticides, and a plant was built on the sparsely populated outskirts of the regional capital of Bhopal. The plant drew more than 900,000 people to Bhopal by 1984.

Union Carbide officials estimated that at least five tons of methyl isocyanate (MIC) seeped out of the plant in just 30 minutes one day in December 1984. The accident killed over 2,300 people and permanently injured another 10,000. Newsweek magazine called the incident "the worst industrial accident in history."

Five senior Indian executives of Union Carbide were arrested. The Indian government charged Warren Anderson, chairman of Union Carbide's board, with "corporate and criminal liability" and accused the Union Carbide management of "cruel and wanton negligence." Many class action suits were filed against Union Carbide on behalf of the victims. In April 1988, a court in India ordered Carbide to pay $192 million in "interim" damages. Union Carbide and the Indian government reached a much-criticized settlement for $470 million in 1989.

In addition to the human toll, the tragedy set off a chain reaction at Carbide: by 1985, the company's market value dropped by two-thirds to less than $3 billion, and GAF Corp.'s Samuel Heyman accumulated enough stock to mount a hostile takeover bid of $5.3 billion. After working for two decades to expand its consumer products lines, Carbide was forced to sell off its Consumer Products Division, a profitable group that included Glad trash bags, Eveready batteries, Prestone, and STP automotive products, for $840 million. The corporation borrowed $2.8 billion, raised a total of $3.6 billion in asset sales, and repurchased $4.4 billion in stock to repulse Heyman's attack.

Carbide scaled back to the three main business lines--chemicals and plastics, industrial gases, and carbon products--that were once its strength, and benefited from sharply reduced interest rates and falling costs of petrochemical feedstocks. But the company had lost the safety net provided by its consumer products.

In 1989 Carbide advanced slightly on its long journey toward financial recovery. Net income was $573 million. Profits in the chemicals and plastics divisions put Carbide in the number two spot on the list of the top ten publicly traded companies in America. The company succeeded in reducing its debt-to-capital ratio to below 50 percent, and invested $181 million in research and development. That year, the company introduced its proprietary LIHDE Oxygen Combustion System, which used pure oxygen to burn organic wastes.

As a fitting mark to Union Carbide's 75th anniversary in 1992, the company had the year's best-performing stock on the Dow Jones list of 30 industrials. Carbide was half way to achieving its $400 million cost reduction goal, and had endured a loss of $187 million. The dramatically smaller corporation had shifted its focus from diversification to becoming a low-cost leader in basic chemicals.

This strategy included uncharacteristic environmentalism: Carbide anticipated "inevitable government mandates on waste reduction and recycling" when it started reprocessing plastic bottles in 1992. After Bhopal, UCC's efforts helped raise industry performance standards and levels worldwide, and the company was praised for its "Responsible Care" efforts.

In 1999, Dow Chemical bought out Union Carbide, and thereafter, became a wholly owned subsidiary of Dow Chemical Company on February 6, 2001, following completion of its settlement and opening of The Bhopal Memorial Hospital and Research Centre, ending its chapter in India.

Fast forward into the past and present:

Court Convicts Seven in Bhopal Gas Leak

A district court in Bhopal found seven former Union Carbide India Ltd. officials guilty of "causing death by negligence" in the gas leak there 25 years ago, the first verdict in the only Indian criminal case against the company related to the disaster.

The defendants were found guilty of failing to prevent the leak at a Union Carbide pesticide plant, sentenced to two years in prison and fined 100,000 rupees ($2,130), India's Central Bureau of Investigation said.

The verdicts will likely be appealed.

Victims' representatives say the gas leak, India's worst industrial disaster, killed between 8,000 and 10,000 people in the days following the accident, has resulted in the deaths of 25,000 people, and that 100,000 people continue to suffer from chronic illnesses stemming from gas exposure.

The government of Madhya Pradesh, the central Indian state where Bhopal is situated, puts the death toll at 3,787.

Union Carbide has said its officials weren't involved in the day-to-day running of the plant and therefore weren't subject to the jurisdiction of the Indian court.

"Union Carbide's responsibility—along with the rest of the chemical industry—is to work hard every day to prevent a tragedy like this from ever happening again," the company said in a statement after the verdict.

The statement added, "After 25 years, what are needed most now in Bhopal are prompt and effective government attention to claims that victims and their families are still suffering and a cleanup of the Bhopal site by the Madhya Pradesh State Government, which controls the site."

Bhopal gas leak: Each victim has got around Rs 12000 [that's a bit more than US$250]

The world's worst ever industrial disaster took place on the night of 2-3 December 1984, when a tank full of deadly methyl isocyanate gas exploded in a fertilizer plant owned by UCIL. Over 40,000 kg of the toxic, colorless gas wafted over the sleeping city. People who breathed the gas suffered symptoms ranging from suffocation, blindness and vomiting to spontaneous abortions, lung, kidney, liver and brain damage. Initially, nearly 4,000 people died and over a lakh suffered injuries. Latest estimates put number of deaths at over 20,000 and injured at nearly 6 lakh. [A lakh is roughly 100,000.]

The highly reactive gas is supposed to be kept at temperatures below 5°C, under pressure. However, the refrigeration system had been shut down since June 1984. The tank and valves that regulate gas flow were also defective. There was no safety system in place. There was no warning system for localities surrounding the factory. Lessons had not been drawn from earlier accidents in the same plant.

A BBC account of the events at Bhopal on December 3, 1984, described the situation:

Hundreds of people have died from the effects of toxic gases which leaked from a chemical factory near the central Indian city of Bhopal.

The accident happened in the early hours of this morning at the American-owned Union Carbide Pesticide Plant three miles (4.8 km) from Bhopal.

Mr Y P Gokhale, managing director of Union Carbide in India, said that methyl isocyanate gas (MIC) had escaped when a valve in the plant's underground storage tank broke under pressure.

This caused a deadly cloud of lethal gas to float from the factory over Bhopal, which is home to more than 900,000 people - many of whom live in slums.

Chaos and panic broke out in the city and surrounding areas as tens of thousands of people attempted to escape.

More than 20,000 people have required hospital treatment for symptoms including swollen eyes, frothing at the mouth and breathing difficulties.

Thousands of dead cats, dogs, cows and birds litter the streets and the city's mortuaries are filling up fast.

Bhopal resident, Ahmed Khan, said: "We were choking and our eyes were burning. We could barely see the road through the fog, and sirens were blaring.

"We didn't know which way to run. Everybody was very confused.

"Mothers didn't know their children had died, children didn't know their mothers had died and men didn't know their whole families had died."

Another account reported,

The leak was caused by a series of mechanical and human errors in the pesticide producing plant, operated by the Union Carbide Corporation, a U.S.-based multinational. For a full hour, the plant's personnel and safety equipment failed to detect the massive leak, and when an alarm was finally sounded most of the harm had already been done. To make matters worse, local health officials had not been educated on the toxicity of the chemicals used at the Union Carbide plant and therefore there were no emergency procedures in place to protect Bhopal's citizens in the event of a chemical leak. If the victims had simply placed a wet towel over their face, most would have escaped serious injury.

As near as Guambat could discern, no one blamed the US President for the situation.


So, to put this into perspective, in terms of real damage, the Deepwater Doodoo is a big stink, but the numbers of human deaths, particularly the "collateral damage", resulting from it pale in comparison to the Union Carbide disaster.

But otherwise, how are the similarities shaping up, if at all? It will be intriguing to see if BP goes the course of Union Carbide, or if we've now learned from past disasters.

Whatever will come of the Deepwater Doodoo, as for Bhopal, the British Broadcasting Corporation is reporting,

Rashida Bee, president of the Bhopal Gas Women's Workers group, told the AFP news agency that "justice will be done in Bhopal only if individuals and corporations responsible are punished in an exemplary manner".