Accountable Strategies blog

A blog about accountability issues in the public, private, and nonprofit sectors

Archive for January, 2008

Lori Berenson’s insight from prison

Posted by David Kassel on January 25, 2008

One American who has been describing the impact of the unchecked imposition of U.S. free-trade policies in poorer countries around the world just happens to be someone who has been in prison in one of those countries for more than a decade.

In a message last month from Huacariz Prison in Cajamarca, Peru, Lori Berenson, a  native New Yorker, expressed concern in particular about the signing of a new trade treaty between the U.S. and Peru. 

By way of background, Berenson has spent more than 12 years in Peruvian prisons on a charge of having collaborated with a Peruvian terrorist group, the Tupac Amaru Revolutionary Movement or MRTA.  She is serving a 20-year sentence and will be eligible for parole in three years.  In my view, she never received anything resembling due process  in her military and civilian trials in Peru, and her convictions were based on questionable circumstantial evidence.

Interestingly, a number of writers in Peru have recently begun to re-evaluate the case against her.  Those writers include a former Peruvian prime minister, a state prosecutor and a university president.  In the U.S., the mainstream media has barely covered her case.

Berenson has long expressed concern about poverty and repressive political conditions in Peru and has not been afraid to criticize Peru’s political leaders, even though she does so from prison, certainly at some personal risk.  In her end-of-the-year message, which was distributed by her parents, Mark and Rhoda, she criticized Peruvian President Alan Garcia for taking repressive measures against teachers, unions and regional opposition leaders as the economic situation in that country has worsened.  She also took direct aim at U.S. free-trade policies, including a just-signed free-trade agreement with Peru:

I wish it (the trade agreement) could be mutually beneficial but that is not possible.  I see this trade treaty as David meeting Goliath without having a
sling shot.  Peru is not on an equal footing with the US due to size,
resources, economic stability, government support of agriculture, etc.  In
Peru local production leads to local consumption, but if, say, US potatoes
start flooding the local markets what will happen to the local farmers?

It seems somewhat strange to me that both Democratic presidential candidates Hillary Clinton and Barack Obama supported the Peru free-trade agreement, even as they have campaigned against similar NAFTA-style agreements for reasons similar to the ones Berenson cites.  

Berenson maintained that Garcia´s administration has remained afloat through the current economic crisis in Peru by “using smoke screens” such as terrorism scares.

In September 2004, Berenson wrote an article for the e-zine CounterPunch, in which she described massive protests in the town in which her prison is located over the contamination of local water sources by the Yanacocha Mining Company, an affiliate of the North American mining giant, Newmont.  She described how the mining company had brought high prices, a high crime rate, out-of-town workers and ultimately increased poverty and health problems to Cajamarca.  It was part of a pattern, she noted, of unrestrained free-market capitalism imposed on poorer countries throughout the world.  Her article stated: 

Globalized capitalism continues to divide up the world into pockets of resources, natural or human, to be used and disposed of at the whim of those who have power.  Struggling against a monster of that size is not an easy feat; however, there are many who are willing to give it a try.

Berenson’s concerns about free-trade and globalization are apparently shared in a number of other countries and by governments in Latin America, though unfortunately not by the government of the country in which she’s imprisoned.   Naomi Klein reports in her 2007 book, The Shock Doctrine, that Brazil, Nicaragua, Venezuela, and Argentina have either quit or are negotiating to quit participation in the IMF and the World Bank, two of the most visible purveyors of globalization policies and their accompanying doctrines of privatization and deregulation.

It would be good to see the presidential candidates in the U.S. take a more consistent stance against the economic damage that unrestrained free-trade policies have done both in this country and abroad.  It would also be good to see at least one of them champion the cause of Berenson’s release from prison.


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Remaking the United Way

Posted by David Kassel on January 22, 2008

Major scandals can cause the implosion and disappearance of a company or organization—Enron and Worldcom are examples—or else, once scandal-plagued entities can emerge reformed and remade.  Fannie Mae and Freddie Mac are examples of the latter. 

In the nonprofit sector, the United Way might be seen as an example of an organization that has been trying to emerge remade and reformed from numerous scandals. 

The question Rick Cohen asks in an article in the Nonprofit Quarterly is whether the United Way today is “on the cusp of rebirth, or is it in the death throes?”  The United Way of course is a collection of individual agencies around the country, which operate semi-autonomously under an umbrella organization, the United Way of America.  Scandals seem to have hit a great many of these individual agencies, starting in the 1990s.

Cohen cites many of the cases:  William Aramony’s theft of $600,000 “to support a high-flying lifestyle and various paramours.”  Oral Suer’s and Norman Taylor’s mismanagement of the United Way in metropolitan Washington, D.C.;  and Jacquelyn Allen-McGregor’s embezzlement of nearly $2 million from the Capital Area United Way in East Lansing, Michigan, while she was the vice president of the organization.  And Cohen notes that the United Way has faced serious criticism of its accounting practices, including revelations in 2002 and 2003 that United Ways in several cities had inflated their fundraising totals by double counting the numbers.  As Cohen notes:

The image of a United Way system hobbled by widespread accountability and ethical problems has been difficult for nonoffending United Ways to shake.

That perception coupled with various economic and demographic changes have significantly dampened the United Way’s fundraising ability since the 1990s.  As a result, United Ways around the country have been trying to modernize themselves, and have turned to the latest business and governmental management models to do so.

A major thrust has been the “Community Impact Agenda,” implemented by United Way of America President Brian Gallaher, which reflects a strategy of focusing larger and longer grants toward a small range of “priority issues,” Cohen says.   Borrowing the terms of those management models, the new United Way approach places a focus on “results” and “performance.”

One of those results has been that the former staples of United Way funding—the “core” agencies, such as the Salvation Army, Volunteers of America, the Boys & Girls Clubs of America, and the YMCA and WYCA—are losing United Way funding, “in part because their broad missions might not align with emerging local priorities in the action agenda.” 

Cohen maintains that United Way agencies around the country now talk of addressing “root causes” of social problems, which are often identified through community surveys.  He maintains, though, that by addressing root causes, it appears that some agencies “are simply refocusing attention on intervention points that make sense.”  In Battle Creek, Michigan, for instance,  the United Way discovered that teenage pregnancy was positively correlated with the problem of illiteracy.  This prompted a shift in funds into programs that focused on literacy skills.

Meanwhile, United Ways themselves are finding that their traditional sources of revenues are changing as well.  Cohen points out that despite the generosity of workplace givers, participation rates of federal employees through payroll deduction have declined significantly, from 47.9 percent of solicited federal employees in 1993 to 31 percent in the most recent campaign results.  To replace these declining workplace revenues, the United Way system has had to find alternatives by tapping institutional donors to replace workplace donors. 

Cohen doesn’t venture a prediction as to whether the United Way’s new management approaches will work in the long run.  The United Way may prove an interesting test case as to whether a major nonprofit institution can indeed reinvent itself. 


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Fernald and the folly of unchecked privatization

Posted by David Kassel on January 14, 2008

A bitter battle over privatization is being fought in federal court in Massachusetts.  It’s one that has garnered little substantive media coverage in the state, yet it promises to have lasting consequences for the care of some of the most vulnerable members of society and for the role of government itself in this state. 

The battle is over the fate of the Fernald Developmental Center in Waltham, Massachusetts, the nation’s oldest, state-run facility for persons with mental retardation.  The administration of Gov. Deval Patrick, which is seeking to carry out the former Romney administration’s plans to close Fernald and privatize its services, is appealing  U.S. District Court Judge Joseph Tauro’s ruling last year that Fernald must stay open to its current residents.  

By way of disclosure, I have been working as a consultant to The Fernald League for the Mentally Retarded, Inc., a nonprofit, family-run organization seeking to keep Fernald open.   However, I’ve written this and a previous entry, about how the Patrick administration has politicized Fernald cost-benefit numbers, on my own volition.

I think it’s important to know what’s at stake here and what the state is potentially giving up in closing an institution such as Fernald and very likely the five other remaining state facilities in Massachusetts for persons with mental retardation.  (Administration officials insist they have no plans right now to close any facility other than Fernald, but I think it’s unlikely they would be underaking the expense of this legal battle in the U.S. Court of Appeals if they didn’t have ambitions to close other state facilities as well.)

Here’s what the state and its citizens and taxpayers will be losing if the Patrick administration wins its appeal:

1.  They will lose a long-held state asset—190 acres of land and buildings—in exchange for one-time revenues from developers purchasing the property.  The Department of Mental Retardation has already signed 20-year agreements with a contractor to lease homes in the community for some of the transferred Fernald residents.  The state will not own those properties even though it will be paying up to $2 million per home over the 20-year period

I should note that the Fernald League does not oppose the sell-off and development of most of the Fernald Center campus, and has proposed a “postage-stamp” arrangement under which the current residents would remain in a smaller, designated section of the grounds.  The Patrick administration, however, has declined all offers to negotiate such an arrangement.

2.  They will lose a source of high-quality state-operated care for persons with mental retardation.  This care will ultimately be assumed by contractors, who are more interested in preserving their bottom lines.  This is evidenced by the fact that levels of staffing in community-based, privatized group homes are lower than in state facilities such as Fernald, and by and large community-based staff have little or no health care benefits.

It is this lower level of staffing and lower levels of pay and benefits that are driving the administration’s assertions that the state will save money in closing Fernald.  The problem is that facilities such as Fernald serve individuals with the most severe and profound levels of mental retardation and extensive medical needs in the state.  These people don’t represent the average population in the DMR system, who, by and large, have more mild to moderate levels of mental retardation.  And yet the administration insists, without any explanation, that when these fragile Fernald residents are transferred to the community, they will receive equal or better care there.

 3. They will lose the ability to oversee the care and services provided by the DMR.  In a brief filed in 2006 in the federal court case over Fernald, the Wrentham Association, a plaintiff in the case, noted that DMR’s oversight of the community system is inadequate and relies largely on consumer satisfaction surveys and reviews whose reports are not available until long after the data have been collected.

In addition to eroding the ability of the state to oversee care provided in thousands of community residences, the spread-out community system erodes families’ ability to organize and advocate effectively for their loved ones.  DMR officials have shown that they understand the power of this advocacy.  When families of DMR clients have gotten together to hold DMR to account for its treatment those clients, DMR officials have threatened to evict those clients from their residences and split the families apart.

In its notice of appeal last September in the Fernald case, the Patrick administration stated that the decision to close Fernald is:

…consistent with a national shift away from institutional care in favor of community living.  Decades of research indicate that community settings offer people with mental retardation the best care available and the highest quality of life. 

The first sentence of this statement is true, and the second is false.  It’s true that there has been a national shift away from institutional care in the past three decades.  In state after state, families of residents of state-fun facilities have been fighting uphill battles to save them.  What is false is that the privatized alternative to the facilities provides the best care available and the highest quality of life.

In Massachusetts, the 2006 legal brief filed by the Wrentham Association detailed a privatized system of community-based care in Massachusetts that is at the “breaking point.”  Levels of physical and sexual abuse, medication errors, and outright neglect were far higher in the privatized community system on a per-resident basis than in the state facility system, the brief stated.

It is patently false, therefore, to say that community settings provide the best care available or the highest quality of life.  If that was the case, families of residents in institutions would be clamoring to get those residents out of the facilities and into the community settings.  Instead, they’re fighting to keep them in.  This has forced the privatization proponents to adopt the condescending position that these families don’t know what’s best for their own loved ones.

In June 2007, a Boston Globe editorial, headlined “The Folly of Closing Fernald,” called on the Patrick administration to “stop sparring with a judge (Tauro) whose rulings are consistently in the best interest of the Fernald residents,” and craft “a solution that makes economic and therapeutic sense.”  The administration, however, has chosen not to follow either of these pieces of advice.

Simply because a practice or governmental policy has become a trend doesn’t make it inherently good or right.  As the Globe stated, “deinstitutionalization is not the right remedy for every man and woman with mental retardation, despite the assertions of advocates for group homes.”

In Latin America, country after country have been reversing the privatization trend in recent years, recognizing the economic demage that privatization and deregulation have inflicted on their economies since the 1970s.  Is there really agreement in this country that privatizaton and deinstitutionalization have been uniformly good things?


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Missing the Katrina feeding frenzy

Posted by David Kassel on January 10, 2008

Many causes of governmental failure in relation to Hurricane Katrina are now well known.  They include the fragmented authority and confusion over responsibility for maintenance of the levee system, the misguided encouragement of urban sprawl in the area, and bureaucratic ineptitude, which led to the failure to provide adequate food, water, and buses for days to homeless survivors.

These causes are examined in depth in a December 2007 special supplementary issue of Public Administration Review entitled “Administrative Failure in the Wake of Katrina.”   What may be missing from the discussion in this issue, though, is an examination of how the federal government simply conceded much of its authority in responding to Katrina to the private sector and stood by as a feeding frenzy of profit-making, fraud, and mismanagement occurred.

In her book, The Shock Doctrine, Naomi Klein paints a stark picture of the response to Katrina as one in which a “hollow government” cheered on corporate profiteering.  Katrina provides an eerie parallel to the situation Klein describes in Iraq.

Klein sees Katrina as a template for a future in which government retreats further and futher, letting private corporations assume virtually all its previous roles and functions, from providing security to delivering health care, to the actual day-to-day process of governing.  The services, however, will be available only to those who can afford them, she says.

Companies, many of which had gotten lucrative reconstruction contracts in Iraq, were given huge contracts in New Orleans, including Halliburton and Blackwater, which was hired to protect FEMA employees from looters.   Fluor, Shaw, Bechtel, and CH2M Hill were given $3.4 billion in no-bid contracts to provide mobile homes for the evacuees.  Meanwhile, thousands of city workers, including teachers and planners, were fired.

In the PAR special issue, Carole L. Jurkiewicz notes that the citizens most affected by the hurricane “have received but a trickle of the flood money that has poured into the state.”  Jurkiewicz, however, blames it in part on the ethical culture of Louisiana.  She states at the outset that Louisianans are, by and large, proud of the state’s reputation for colorful political corruption.

In the wake of Katrina, Jurkiewicz does state that the citizens faced “the vacuum of professionalism and leadership in state and local administrations,” as well as “a partisan and ill-functioning federal administration.”  But she places much of the blame on cultural conflicts between the lower, middle, and upper-income citizens within the state, which she says have played a role in the administrative failures.  Lower-income  individuals falsified documents to receive cash cards from FEMA and looted retail shops followng the storm, she says.  Middle-income individuals overbilled for services or billed for services that were never rendered.  Upper-income individuals used their network of associates to “arrange no-bid, multi-million dollar contracts between their companies and the government.”

What Jurkiewicz doesn’t seem to acknowledge, though, is that these multi-million dollar contracts didn’t apparently go primarily to companies in Louisiana, they went to Halliburton, CH2M Hill, Bechtel etc.  This was bigger than Louisiana and its dysfunctional ethical culture.  It was the dysfunctional ethical culture of Washington and Wall Street that was involved here.

In another article in the special PAR issue—“Where Federalism Didn’t Fail”—Martha Derthick maintains that that governmental reaction to Katrina presents “a complicated mixture of failure and success.”

Derthick contends that careful planning allowed the evacuation of more than one million people out of the population of 1.4 million in greater New Orleans in the two days before the hurricane struck.  This was indeed a success and was a result of prior cooperation between the governments of Louisiana and Mississippi.  She also credits the National Hurricane Center in Miami, a federal agency, which had urgently warned state and local officials well in advance of the danger.  And she credits the search and rescue operations of the U.S. Coast Guard and the Lousiana National Guard and Department of Wildlife and Fisheries for saving the large number of people who had not evacuated.  FEMA teams helped, through they responded late.

In contrast, officials at the top of the federal government were slow to comprehend that a catastrophe had struck New Orleans, Derthick says.  She paints a picture of ineffective bureaucracy, resulting in unacceptable delays and screwups in providing food and transportation to victims.  But she, too, does not focus on the hollowness of that bureaucracy.

Derthick points out that three major federal reports on Katrina—from the White House, the Senate, and the House of Representatives failed to confront the risks of urban sprawl in exposed locations.  The Bush administration report sought typically to enhance presidential authority and control over disasters and broadened the president’s power to use the National Guard.  The Senate approach took a more temperate approach.   But the authors of these reports, as well, apparently didn’t see what Klein saw—the ceding of governmental authority to the private sector.

In “Learning from the Katrina Crisis,”  Ali Farazmand seeks to provide a “global perspective” on the crisis and to provide recommendations “to cope with hyper-uncertainties and unknowns.”  One of his recommendations is the imposition of “surprise management,” which involves “sound leadership through a central command structure” and “advanced, nonlinear, and chaos management systems that can be applied beyond tomorrow.” 

Farazmand’s recommendations sound fine (although I’m not sure what nonlinear chaos management is all about); but it would seem no central command structure would be truly effective if it’s the case, as Klein persuasively argues, that FEMA in New Orleans was “a laboratory for the Bush administration’s vision of government run by corporations.”

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The candidates’ silence on contractor oversight

Posted by David Kassel on January 7, 2008

None of the presidential candidates seems to want to address one of the most critical accountability issues we face—our inability to monitor our contractors in Iraq. 

This past Saturday night’s marathon debate in New Hampshire is an example.  Iraq was a major focus, but the candidates stayed clear of issues of economic accountability there, particularly the area of corporate oversight.  They (the Democrats at least) talked about the failure of the troop surge to bring about political reconciliation in Iraq, but they never mentioned our increasingly privatized miltiary operations and our inability to oversee or control it.  Neither Blackwater nor Halliburton were ever mentioned. 

Among the Republicans, only Ron Paul was critical of our occupation of Iraq (although McCain has been critical of management of the war); but Paul, an avid free-marketeer, was only talking about the military invasion, not the economic one that has accompanied it.

In her book, The Shock Doctrine, Naomi Klein describes the ineffectiveness of the Coalition Provisional Authority, the transitional government that the U.S. set up to govern Iraq under Paul Bremmer.  The CPA was far too understaffed, Klein noted, to monitor the contractors.   Halliburton, by contrast, had 50,000 workers in the region.  Bremer’s staff was a mere 1,500 government employees.  As a result, firms such as CH2M Hill in a joint venture with Parsons Brinckerhoff were paid tens of millions of dollars to monitor other contractors. 

Klein describes a morass of mismanagement in which contractors endlessly subcontracted cost-plus contracts to other contractors.  She visited the Baghdad Central Children’s Hospital, which had supposedly been rebuilt by a U.S. contractor.  There was raw sewage in the hallways and none of the toilets worked.  The engineering firm, Parsons, was “handed” $186 million to build 142 health clinics, and only completed six.   Iraq’s power grid was producing significantly less electricity in 2007 than it did in 2006.

Then there’s the issue of the interrogators the U.S. has used in Iraq to root out the insurgency.  Klein contends the U.S. military’s own investigation into the Abu Ghraib scandal found that government officials in charge of overseeing the interrogators’ performance were not even in Iraq, “making it ‘very difficult, if not impossible, to effectively administer a contract.'”

 Klein concludes that:

Iraq under Bremer was the logical conclusion of Chicago School (of economics) theory: a public sector reduced to a minimal number of employees, mostly contract workers, living in a Halliburton city state, tasked with signing corporate friendly laws drafted by KPMG and handing out duffle bags of cash to Western contractors protected by mercenary soldiers, themselves shielded by full legal immunity.  All around them were furious people, increasingly turning to religious fundamentalism because it’s the only source of power in a hollowed-out state. 

 During the debate, Edwards, Clinton, Obama, and Richardson talked eloquently about the unacceptable toll in blood and treasure that the war has cost us.  But one of the key causes of this toll has gone undiscussed—the failure of our government to exercise planning and control over the economic aspect of our presence there. 

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The cost of hollow government

Posted by David Kassel on January 2, 2008

The cost of the increasingly hollow, ideological governance within our public sector is starkly revealed in one of the more riveting political books of 2007, The Shock Doctrine, by Naomi Klein.

In fact, this book has explained to me why the Bush administration didn’t equip our troops with adequate armor in Iraq and why they weren’t, and still aren’t, interested in winning the war.  It appears the administration is not even really interested in reconstructing Iraq.  That’s because scores of current and former members of the administration and their friends in the corporate sphere are more interested in making a huge profit off the billions of taxpayer dollars intended to reconstruct the place.

What are the presidential candidates saying about this?  They’ve taken positions on withdrawing the troops from Iraq, but what about the matter of America’s role in plundering the country?

The book details how Halliburton has used $20 billion in public reconstruction funds to build “city-states” for the thousands of contractors that have overrun Iraq, yet little or no money has gone to the country’s factories.  The money has been turned over almost exclusively to American and other foreign contractors and accountants, most of them handed no-bid contracts, while Iraqis themselves have largely been excluded from all the fun.

Meanwhile, the administration never set up a workable system of public oversight of these contractors, who seem to be immune as well from both Iraqi and American laws in their dealings.  The result has been widespread fraud and mismangement.  As Klein puts it:

…the occupation of Iraq was, from the start, a radical experiment in hollow governance.

Klein contends that this situation, coupled with American decisions early on to stifle democratic elections in Iraq led to the horrific violence there, which was then met with American-imposed repression, ultimately symbolized by the spectacle of Abu Ghraib.

Klein makes a convincing case that all too many key current and former members of the U.S. government, such as Dick Cheney, Donald Rumsfeld, Henry Kissinger, Richard Perle, James Baker, George Shultz and others have personally profited either from the war in Iraq or from the Bush administration’s “War on Terror” in the wake of 9/11.  She notes:

In the Bush administration, the war profiteers aren’t just clamoring to get access to government, they are the government: there is no distinction between the two.

The book, subtitled “The Rise of Disaster Capitalism,” also describes a pattern of  corporate corruption in country after country in which the U.S. has intervened economically and sometimes militarily in the past four decades.  This pattern began in Chile and Argentina in the 1970s, and continued in Poland and Russia, just after the fall of Communism, in South Africa after Apartheid, in Thailand and other countries in Asia, and finally in Iraq.  It’s a pattern that appears to involve the imposition of Milton Friedman’s “Chicago School” economic doctrines in every case.

In none of these cases have these doctrines of mass privatization, deregulation of markets, and massive cuts in social services worked.  In every case, a small cadre of corporate elites has gotten rich, while the middle class has been pushed into poverty and despair.  Iraq has been the ultimate example of this.  Moreover, because these economic principles are so unpalatable to the local populations, Klein contends, the principles have had to be imposed in conjunction with violent shocks involving repression, violence, natural disasters, and, in many cases, torture.   

Klein opens with the example of Hurricane Katrina, a major shock, which was seen by many local politicians and corporate lobbyists as an opportunity to level public housing projects in New Orleans, lower taxes, deregulate the economy, and downsize the government.  She  details the situations in Chile, Argentina and other South American countries, beginning in the 1970s, in which Augusto Pinochet and other dictators imposed the shocks on their own, instituting enormous repression, killings, torture, and disappearances on their populations, with the sole aim, it turns out, of installing free-market economies in their countries.  Lurking behind the scenes in case after case has been the University of Chicago Economics Department and Friedman, its free-market guru, who advised and encouraged these dictators to transform their countries according to their free-market theories.  

Klein also drags Israel into this morass, but I think she goes off the track here.   She contends that Israel’s security wall has turned that country into a “fortified gated community” equivalent to the Green Zone in Iraq.  She makes no mention of the fact that the wall appears to have stopped the suicide bombings inside Israel.  She also contends that a lot of Israeli companies have profited from selling security-related technology around the world, but she makes no case that those companies are running the Israeli government the way Halliburton etc. appear to be running the U.S. government.  She makes no case, moreover, that Israel’s leaders are seeking to impose free-market principles on the Palestinians or anyone else for that matter, so this chapter really doesn’t seem to fit within this book.

On the whole, however, this is a book that should be read and discussed in both programs and courses on corporate social responsibility and public sector governance.  It should also be part of the curriculum in economics departments and should be a key focus of discussion in the presidential campaign as well.

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