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- 11/24/14--02:00: _Court case pushed b...
- 11/24/14--09:06: _Governors and oil i...
- 11/24/14--14:20: _Pro-McConnell nonpr...
- 11/26/14--02:00: _Election ads were a...
- 12/01/14--10:34: _Exploding the myths...
- 12/02/14--09:14: _Peter Bale named ne...
- 12/03/14--08:16: _GOP shelves FEC com...
- 12/03/14--12:01: _Mary Landrieu aband...
- 12/04/14--07:32: _Benzene and worker ...
- 12/04/14--11:13: _Internal documents ...
- 12/05/14--04:27: _A dozen dirty docum...
- 12/08/14--06:54: _Don't wait 'til las...
- 12/08/14--06:55: _ New battlefront fo...
- 12/09/14--02:00: _Scientist with deep...
- 12/09/14--08:19: _Fired: Texas regula...
- 12/09/14--14:51: _Luxembourg tax deal...
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- 12/10/14--02:00: _Plant expansions fu...
- 12/10/14--02:00: _Koch-linked operati...
- 12/10/14--03:00: _Building a tax fair...
- 11/24/14--14:20: Pro-McConnell nonprofit hit with IRS complaint
- 11/26/14--02:00: Election ads were about issues, says 'Carolina Rising' chief
- 12/01/14--10:34: Exploding the myths about American health care
- 12/02/14--09:14: Peter Bale named new head of the Center for Public Integrity
- 12/03/14--08:16: GOP shelves FEC complaint against Van Hollen
- 12/03/14--12:01: Mary Landrieu abandoned on airwaves
- 12/04/14--07:32: Benzene and worker cancers: 'An American tragedy'
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- 12/05/14--04:27: A dozen dirty documents
- The industry knew the dangers of benzene exposure at both high and low concentrations, as illustrated by this 1943 report for Shell Development Company by a University of California researcher.
- “Inasmuch as the body develops no tolerance to benzene, and as there is a wide variation in individual susceptibility, it is generally considered that the only absolutely safe concentration for benzene is zero.” That was a conclusion reached in a 1948 toxicological review of benzene prepared for the American Petroleum Institute, a trade association.
- A 1950 consultant’s memo to Shell lists benzene as having “established carcinogenic qualities.”
- In 1995, a benzene study by the National Cancer Institute caught the attention of Exxon scientists, who closely monitored it.
- While attempting to gain support for a proposed study of benzene toxicity in Shanghai, China, the American Petroleum Institute cites “a tremendous economic benefit” to companies, which could gain data to combat “onerous regulations.” A project overview explains that publications linking benzene to childhood leukemia may cause concerns about the chemical to “resurface.”
- A 2000 summary of the API’s research strategy, drafted by the group’s Benzene Task Force, explains that the research program “is designed to protect member company interests.” The anticipated results could “significantly ameliorate further regulatory initiatives” to curb benzene emissions.
- An email exchange explains how “HSE [health, safety and environment] issues surrounding benzene as well as the litigation claims” against the industry compel companies to participate in the industry-sponsored study.
- A PowerPoint presentation from 2001 lists “significant issues of concern” to encourage financial support for the API’s research on benzene-exposed workers in China. Among them is “litigation alleging induction of various forms of leukemias and other hematopoietic diseases.” The study, according to the presentation, could provide “strong scientific support for the lack of a risk of leukemia or other hematological diseases at current ambient benzene concentrations to the general population.”
- “Litigation support” and “risk communication” are listed as goals in this 2007 memorandum describing an API risk management program. Further objectives are to establish current regulations as “protective” and avoid additional action.
- An undated litigation defense guide written by a senior Shell attorney acknowledges the 1948 report on leukemia and offers a “comprehensive strategy” on how to respond to litigation, including releasing benzene-related documents only on court order.
- After a draft of an API recruitment brief reminds potential study sponsors of “personal injury claims,” an email exchange among members of the Benzene Health Research Consortium urges deletion of “the reference to legal liabilities.”
- A 2001 email from the consortium’s communications committee explains that the perception of the study “needs to be that this is not being done to protect against litigation”
- 12/08/14--06:54: Don't wait 'til last minute to enroll in Obamacare
- 12/09/14--02:00: Scientist with deep industry ties being considered for key EPA job
- 12/09/14--08:19: Fired: Texas regulators say they tried to enforce rules, lost jobs
- 12/09/14--14:51: Luxembourg tax deals for Disney, Koch brothers empires revealed
In July 2002, CIA attorneys told a group of lawyers for the National Security Council, Justice Department and FBI that they had retained expert personnel who possessed extensive interrogation experience to oversee the program. But the CIA station chief in the country where the first CIA prison was created said in an internal 2003 email that officials writing interrogation reports “did not know what was required of them, analysts were not knowledgeable of the target, translators were not native Arab speakers,” and the prison chief had little field experience.
Anticipating criticism, the CIA’s general counsel in 2002 sought – and obtained – an exemption from a presidential directive requiring humane treatment of detainees, and in early 2003, the White House press secretary was privately advised to avoid using the words “humane treatment” while describing Taliban or al-Qaida detainees.
In July 2003, the CIA’s general counsel told top officials at the White House that detainee Khalid Sheikh Mohammed had been waterboarded 119 times and Abu Zubaydah had been waterboarded 42 times. But the actual frequency was 183 and 83 times, respectively. The discrepancy was relevant because the Justice Department’s legal approvals did not countenance such frequent use of the technique.
The same month, senior administration officials privy to the EIT program chose not to brief then-Secretary of State Colin Powell about it out of concern that he might “blow his stack,” an e-mail stated. In two countries where secret CIA prisons were established, the CIA told foreign leaders not to mention the presence of the detainees to the U.S. ambassadors there. In other countries with prisons, the CIA told U.S. ambassadors not to discuss the program with their superiors at the State Department.
In July 2004, the CIA told the Justice Department that it was not using nudity as a form of humiliation, when it was; it said detainees were only being doused with water, when they were being immersed; it said their hands were being shackled for no more than two hours above their heads, when the shackling was often for more extended periods; and it said that detainees were diapered only for hygiene, when it was actually a deliberate tool of humiliation, according to the CIA’s own documents.
Also in 2004, State Department officials told the International Committee of the Red Cross that it supported ICRC access to all detainees. But the CIA, at the same time, was urging officials in one of the countries where it was housing detainees not to allow an ICRC visit.
Concerns about the program expressed by CIA officers, analysts, interrogators and doctors throughout this period “were regularly overridden by CIA management,” with few corrective measures, according to the report.
When the agency was pressed by its inspector general in May 2004 to conduct an independent examination of the program, it asked two of its own top officials to help conduct the review, and their conclusions were based on documents containing “inaccuracies regarding the effectiveness and operation of the CIA program,” the report states. The inspector general declared the review and warned that “we have found that the Agency over the decades has continued to get itself in messes related to interrogation programs for one overriding reason: we do not document and learn from our experience – each generation of officers is left to improvise anew, with problematic results.”
CIA officials claimed in a 2005 letter to the Justice Dept. that the water used in dousing was not cold; that sleep deprivation was halted when it caused swelling of lower extremities; and that detainees were bathed in light. In fact, the water was often cold, sleep deprivation was extended, and detainees were sometimes held in total darkness. The Justice Department responded to the CIA’s claims in May 2005 by approving the continued use of EIT.
Then-CIA director Michael Hayden told the Senate committee in April 2007 that interrogators did not deliberately withhold medical care – but internal CIA records that it did. He said only detainees suspected of knowing about attacks against the United States or its interests or the whereabouts of Bin Laden were subjected to EIT, but the report says CIA records show otherwise. He said the enhanced interrogation techniques were all used previously in U.S. military training, but they were not. He said on-site interrogation observers could call off the use of EIT, but officials in Washington ordered their continuation in some instances, over the objections of those present. He said he was unaware of any CIA personnel expressing concerns, but CIA records show some were moved to “tears and choking up” after viewing waterboarding.
Anna Lusthoff, a spokesman for Hayden, said “we do not have a statement to share” from the former CIA director on the Senate report’s allegations. But the CIA, in its official response to the report, acknowledged that his testimony “contained some inaccuracies, and the Agency should have done better in preparing the Director” for the session. The CIA added that there was, however, no “intent on the part of the Agency or Director Hayden to misrepresent material facts.”
- 12/10/14--02:00: Koch-linked operative mum on mystery millions
- 12/10/14--03:00: Building a tax fairyland in Luxembourg in five not-so-easy steps
At least four million Americans will rejoin the ranks of the uninsured—and consequently lose access to affordable health care—if the Supreme Court sides with opponents of Obamacare in a case that hinges on the interpretation of a single sentence in the law. But if that’s the price that has to be paid to impose an ideology that worships the so-called free market no matter what the cost, so be it, say the folks at a libertarian influence shop in Washington.
When the high court announced earlier this month that it would decide a case on the legality of the federal government’s efforts to help low-income Americans pay for their health insurance, it was time for high-fives at the Cato Institute in Washington.
Cato’s director of health policy studies, Michael Cannon, has argued for more than a year that because of the wording in a single sentence in the Affordable Care Act, the subsidies that have made it possible for millions of folks to buy coverage are unlawful. That’s the crux of King v. Burwell, the case the justices agreed to hear.
The Cato Institute, which began life 40 years ago as the Charles Koch Foundation, describes itself as a think tank “dedicated to the values of individual liberty, limited government, free markets, and peace.” Cannon and his colleagues believe the federal government is now more involved in health care than it should be, at least from a libertarian’s perspective, because of Obamacare. And they contend we’d be a lot better off if we could turn back the clock and let the “free market” decide whether or not people can buy health insurance and how much it will cost them.
In the unfettered market Cato wants to restore, health insurers would once again be able to refuse to sell policies to millions of Americans who’ve been sick in the past. And since that free market wouldn’t include government subsidies, millions of others would once again be unable to afford coverage even if insurers were willing to sell it to them. But those stark possibilities apparently are less offensive to the folks at Cato than the provisions of Obamacare that try to fix those fundamental flaws of the free market.
While I get their ideology, I don’t think Cannon and his associates have given nearly enough thought to the repercussions of a Supreme Court ruling that goes their way. I’ve not seen any evidence of a well-thought-out Plan B from Cato. Aside from getting rid of regulations on the insurance industry—especially the Obamacare regulations that protect consumers from unscrupulous business practices—Cato’s idea of reform is largely limited to allowing people to put more of their money into health savings accounts to pay for medical care when they get sick or injured.
For the healthy and wealthy among us, that might sound pretty good. But it’s not a plan that would be of any help to the low-income folks who have long comprised the uninsured population. Because of the high cost of health insurance (and anti-consumer industry business practices), nearly 50 million of us had become uninsured by 2009, the year before Obamacare was enacted. If the law hadn’t passed, the number was projected to increase to 59.7 by 2015 and to 67.6 by 2020, according to an analysis by the Robert Wood Johnson Foundation, a health care philanthropy.
The drafters of the Affordable Care Act knew the main reasons for the rapid growth in the number of uninsured Americans —the equally rapid increase in health insurance premiums and the ability of insurance firms to condemn many of us to the status of “uninsurable.” So they took away insurers’ ability to deny coverage to legal residents, and they created subsidies to help low-income individuals and families buy policies on the state exchanges established by Obamacare.
The problem is that those drafters included a section in the law that says that tax benefits enabling low-income taxpayers to afford insurance (the subsidies) should be based on the price of insurance on an “Exchange established by the State.” Because 36 states opted to allow the federal government to operate their exchanges, Cato and the plaintiffs in King v. Burwell argue that those exchanges were not technically “established” by the states. And because of that, the subsidies people in those states are getting are illegal.
If the Court agrees with Cato, opponents believe Obamacare will collapse. And there is good reason to believe it would. But where would that leave us? In a market that might indeed be “free” for insurers to pick and choose whom they want to sell coverage to. And a market that would be devastating for a large and growing percentage of the population.
Wendell Potter is the author of Deadly Spin: An Insurance Company Insider Speaks Out on How Corporate PR is Killing Health Care and Deceiving Americans and Obamacare: What’s in It for Me? What Everyone Needs to Know About the Affordable Care Act.
It was a brisk February morning, and the governors of Alabama, Mississippi, Virginia and North Carolina were seated around a ring of tables draped with pleated beige fabric in the ornate Nest Room of Washington, D.C.’s Willard InterContinental Hotel. Sitting across the tables was Interior Secretary Sally Jewell, whom the governors had invited so they could make their case for expanding offshore energy production. It was a long-awaited meeting for the governors, and they’d armed themselves with specific “asks” — that Jewell’s department open access to oil and gas drilling in the Atlantic, for instance, and improve “regulatory certainty” for energy companies operating rigs off the coasts.
The get-together this past winter was but one small push in the type of broader political campaign that occurs every day in countless Washington conference rooms, watering holes and hotel suites. For the past three years, a group of eight, mostly Republican governors from coastal states has been lobbying the Obama administration to expand access to the nation’s offshore oil and gas deposits, working through an organization called the Outer Continental Shelf Governors Coalition.
While the message from the governors that morning would have come as no surprise to Jewell, less clear, perhaps, was that the governors were drawing on the research and resources of an energy lobbying firm acting on behalf of an oil industry-funded advocacy group.
Indeed, the background materials handed to the governors for the meeting, right down to those specific “asks,” were provided by Natalie Joubert, vice president for policy at the Houston- and Washington D.C.-based HBW Resources. Joubert helps manage the Consumer Energy Alliance, or CEA, a broad-based industry coalition that HBW Resources has been hired to run. The appeal for regulatory certainty, for example, came with a note to the governors that Shell, a CEA member, “felt some of the rules of exploration changed” after it began drilling operations in the Arctic.
The governors’ efforts have produced more than just talking points. This summer, the coalition won a major victory when the Interior Department said it would accept applications to probe the Atlantic seabed for oil and gas with seismic tests, a significant step toward allowing drilling off the East Coast — drilling that has been off-limits for decades. While the federal government ultimately controls where offshore drilling is allowed, the Obama administration has made clear it will allow production where the public — and public officials — support development.
And so it appears as if CEA’s considerable investment of time and resources has paid off. Indeed, a review of thousands of pages of public documents, obtained by the Center for Public Integrity through records requests, shows that much of the governors coalition work has been carried out by HBW Resources and CEA, a group that’s channeled millions in corporate funding to become a leading advocate at the state level for drilling.
The governors coalition is just one of many groups, such as the American Legislative Exchange Council (in which CEA is actively involved), that allow powerful corporate interests to gain a direct line to state policy makers not available to common citizens or other stakeholders, all under the banner of a generic advocacy organization.
“It would be alarming I think for many people if they found out that some of the biggest polluters were running a governors group, but less so if it’s a nonprofit,” said Nick Surgey, director of research at the Center for Media and Democracy, a liberal advocacy group. “That one step removed stops the alarm bells going off, but it should really concern people.”
The documents suggest that CEA staff attended the February meeting with Jewell, but Interior Department spokeswoman Jessica Kershaw did not respond to a question asking whether Jewell knew of CEA’s involvement, saying only that the department speaks with “a broad group of stakeholders,” and considers “all points of view.” She said Jewell told the governors that the department “is committed to working with them and their participation in the planning process is fundamental for any kind of coastal development.”
The Center requested interviews with staff of each of the governors — additional coalition members include the chief executives of Alaska, Texas, South Carolina and Louisiana — but none made anyone available, though Alaska responded to questions in writing.
There’s been little effort to explain CEA’s relationship with the coalition, which is currently chaired by North Carolina Gov. Pat McCrory. The coalition’s website made no mention of CEA until recently, when one page was edited — after the Center began reporting this article — to acknowledge the organization provides “information and administrative support.” In March, when the Center first asked who staffs the coalition, Ryan Tronovich, a spokesman for McCrory, said the governors provide the staff (records show Tronovich actually consulted with CEA to answer the Center’s questions). When the Center asked again after learning of CEA’s involvement, Tronovich said in an email that he “should have been more clear,” and compared CEA’s help to that given by an intern. (The Republic Report, an investigative news website, first reported a possible connection with CEA in February when it noted that a coalition letter appeared to have been written by Joubert.)
In an interview, David Holt, president of CEA and managing partner of HBW Resources, said CEA provides assistance to the coalition at the governors’ request. He said both the coalition and CEA have an “all-of-the-above” energy policy that supports renewable as well as fossil fuels. He also characterized his organization’s role as supportive of the coalition in the same way any number of stakeholders may be.
But there’s no evidence that any other group has played a substantive role in the coalition, or that environmental organizations have been invited to any of its meetings. Earlier this month, the McCrory administration organized a meeting with federal officials to discuss Atlantic drilling; no other governors were there, but staff representing the governors of South Carolina and Virginia did attend. McCrory administration staffers told journalists and environmental organizations that the meeting was closed to interest groups so as not to “allow for the potential of the appearance of influence.” In fact, CEA and other industry groups did attend the meeting. Nadia Luhr, the legislative counsel for the North Carolina Conservation Network, wrote a letter to the administration protesting the circumstances of the meeting. She had not previously been aware of CEA’s role in the coalition, but indicated she wasn’t surprised.
“It’s just another example,” she said, “of industry having a voice where no one else does.”
Rebirth of an industry
Each May, tens of thousands of people gather in Houston for the Offshore Technology Conference, the industry’s premier event, and in 2011 they were looking for a fresh start. A year earlier, the Deepwater Horizon rig had exploded in the Gulf of Mexico just weeks before the conference, killing 11 people and leading to the largest oil spill in the nation’s history. In the aftermath, Obama placed a moratorium on deep-water drilling and canceled plans to allow drilling in the waters off Virginia.
Nevertheless, the 2011 conference was bigger than ever, with exhibit booths displaying the latest in drilling technology sprawling over nearly 600,000 square feet of Houston’s Reliant Park complex, which encompasses a cavernous exhibition center, an indoor arena that seats nearly 6,000 people, and covered outdoor booths. There were policy discussions and technical events with titles like “Active Heating for Life of Field Flow Assurance.” The first day kicked off with a panel hosted by Holt and an executive with Noble Energy that featured officials from the five inaugural states of the coalition — Texas, Alaska, Virginia, Mississippi and Louisiana — who decried the federal government for standing in the way of development.
It was there that the governors of those five states announced their coalition, with a stated goal of improving dialogue between the states and the federal government. The coalition’s first chairman was Louisiana Gov. Bobby Jindal, who as a congressman in 2006 sponsored a bill that would have removed the federal moratoriums on drilling in the Atlantic and Eastern Gulf. In 2010, as governor, Jindal railed against Obama’s deep-water moratorium — a moratorium that had been lifted by the time the 2011 conference was held. The governor has been a reliable friend to the oil industry, which has contributed more money to his campaigns than any other sector — more than $1.4 million over the past decade, according to the Center for Responsive Politics and the National Institute on Money in State Politics.
Jindal’s office did not respond to an interview request or to questions about the coalition’s formation. Sharon Leighow, a spokeswoman for Alaska Gov. Sean Parnell, the second chairman of the coalition, said in a written response that the founding governors, not CEA, had decided to form the coalition. When asked how CEA got involved, she wrote: “Unknown.” (Parnell recently lost a bid for re-election.)
CEA president Holt said the governors approached his group because it represents not only energy companies, but also other sectors like airlines, trucking and construction. “They knew of us and asked CEA because we represent the whole economy,” he said.
Some environmental advocates have a dimmer view of why the group was formed that May. “The Outer Continental Shelf Governors Coalition is a Trojan horse,” said Richard Charter, who has fought against offshore drilling for decades and is now a senior fellow at the Ocean Foundation, which supports marine conservation. Oil companies and other industry groups, including CEA, started a campaign a decade ago to repeal the Atlantic moratorium by lobbying officials and the public state-by-state, he said, and the coalition is the culmination of that effort. “They want to create the appearance that a bunch of coastal states are clamoring for ‘drill here, drill now.’”
Throughout its three-and-a-half-year life, the governors coalition has focused on the Interior Department’s “Five-Year Program” — the arcane, bureaucratic process the department uses to plan the nation’s offshore drilling regimen — lobbying at each incremental turn for the department to open more areas to drilling and to ease restrictions where drilling is underway. The coalition has also pushed for the federal government to share more drilling revenue with the states.
The Center requested documents related to the governors coalition from the three states that have chaired the coalition. Louisiana and Alaska provided thousands of pages, though Alaska’s response was heavily redacted. North Carolina has yet to respond to the request, which was submitted in April.
Whatever the origins of the coalition, the documents show that Holt was an early driving force. In May 2011, he and his colleagues at CEA designed a logo for the group. In July, he sent an email to Chip Kline, deputy director of Jindal’s Office of Coastal Activities, congratulating Louisiana on being named the coalition’s first chair, stressing that the governors would add a “meaningful voice” to the energy debate. When they were planning the coalition’s first meeting, alongside a Republican Governors Association gathering in Jackson Hole, Wyoming, and RSVPs weren’t coming in as hoped, Holt fired off a message saying, “REALLY need to have this OCSGC meeting to get things rolling.”
Voice of the consumer?
The Consumer Energy Alliance calls itself “The Voice of the Energy Consumer.” The group was formed in 2006, operating initially out of a small office park in Houston. Its first board of directors included executives with Shell, Hess and a wind power company, as well as geologists and representatives of “consumer” industries such as trucking. Also on the board: Jim Martin, chairman of the 60 Plus Association, which bills itself as the conservative alternative to the elderly advocacy group AARP, but which is also part of the well-financed political network led by Charles and David Koch, the billionaire industrialists with major stakes in oil and gas.
Holt, 48, who speaks with folksy Texan charm, has been the alliance’s only president. Before starting CEA, he had worked in government affairs for Hart Energy, an industry publishing company, and before that, he says, as legal counsel to the top oil and gas regulator in Texas.
The alliance says it seeks to improve understanding of the nation’s energy needs and advocates for lower energy prices through an “all-of-the-above” policy of increased domestic energy production. Over the past eight years, the group’s membership has grown to about 240 corporate entities, including groups from “energy consuming” industries like transportation and construction, as well as energy companies. CEA also claims to have some 400,000 individual members who have signed petitions or taken other actions that are described on its website. (In October, however, Wisconsin regulators rejected a petition CEA had filed in an electricity rate case there after an investigation by the Madison Capital Times revealed that some of the 2,500 people whose names had been used were unaware they appeared on the petition, and actually opposed CEA’s stance. CEA said it stood by the 2,500 signatures, but had actually requested that the petition be withdrawn before it was rejected.)
In 2011, the year the governors coalition was formed, CEA’s annual revenue ballooned to $3.8 million from just $737,000 the previous year, and it’s remained above $3 million since then. Holt says the majority of CEA’s members are from “consuming” sectors and that its funding comes from all members. He wouldn’t say who pays what, however, and tax records show that in 2011 and 2012, the most recent years available, at least 30 percent of the money came from just three entities: the American Petroleum Institute, the American Fuel and Petrochemical Manufacturers and America’s Natural Gas Alliance, each a prominent oil and gas industry group.
More than $1 million of that revenue goes as a management fee to HBW Resources, an energy-focused lobbying and consulting firm that Holt formed in 2008 along with Michael Whatley — a former chief of staff for Sen. Elizabeth Dole — and Andrew Browning, who had worked as a lobbyist and in the Department of Energy. With the exception of a few regional directors, CEA’s staff is comprised of HBW staff, and to the layman, it’s hard to tell the difference between the two.
HBW’s Washington, D.C., office sits in a giant truncated pyramid of a building, with sloped outer walls, that overlooks Farragut Square on the city’s lobbyist-dense K Street. The firm has offices in five other cities in the U.S. and Canada and has its fingers in many pies. Its 18 employees manage not only CEA, but also the Energy Producing States Coalition, a group of state lawmakers that work on energy policy, and the National Ocean Policy Coalition, a collection of energy companies, commercial fishing organizations and other business interests that opposes the Obama administration’s oceans policy. Whatley is also the vice president of Nebraskans for Jobs and Energy Independence, ostensibly a group of Nebraskans who support the construction of the Keystone XL pipeline. The firm lobbies on behalf of just a handful of clients, including Noble Energy and The Babcock and Wilcox Company, which makes nuclear reactors and other industrial power equipment.
HBW employees have contributed tens of thousands of dollars to dozens of political campaigns. Notably, they gave $1,600 to Democrat Terry McAuliffe — who, following his election as governor of Virginia last year, joined the governors coalition after Whatley and Joubert made a direct appeal to one of his senior advisers during a December meeting. They also gave more than $8,300 to Gov. Nikki Haley of South Carolina within a day of a coalition meeting that Haley attended, in Houston in 2013.
One of the firm’s first major campaigns began in late 2009, when Whatley worked with a Canadian diplomat to help block state and federal attempts in the U.S. to pass low-carbon fuel standards, which could have threatened imports from Canada’s tar sands oil deposits.
The effort previewed what would become a recurring strategy for Whatley and his colleagues: pairing a public advocacy campaign with direct, behind-the-scenes appeals to elected officials, urging them to make similar public comments in their own voices. More recently, CEA has worked through the American Legislative Exchange Council, the conservative state legislators group, to oppose a new federal rule limiting greenhouse gas emissions.
Holt says his organization supports all forms of energy production and is directed by its board, which no longer includes energy companies. “We are a consumer controlled and a consumer funded and a consumer dominated organization,” he said.
Most of its campaigns and communications focus on oil and gas, however. That, coupled with what’s known about its funding, has led some advocacy groups to view CEA as a front group for energy companies, an entity created to give the appearance of an independent and broad-based voice. To these advocacy groups, the governors coalition is just another player in the larger game. “This is a purposed campaign to mislead the public,” said Claire Douglass, campaign director for climate and energy at Oceana, an environmental group that opposes offshore drilling. “The politicians are now doing industry business, not being public servants.”
The governors coalition’s work inched forward through much of its first year-and-a-half, at least in part because there wasn’t that much it could do. The Interior Department had excluded new areas from the current drilling plan, covering 2012-2017, and it hadn’t yet begun substantive work on the next one. The coalition wrote letters to Congress and the Obama administration (two of which appear to have been edited by Shell and Exxon Mobil), urging open dialogue and pressing on other issues, such as revenue sharing. It held periodic meetings. On December 7, 2012, three Alaska officials — Kip Knudson and Nathan Butzlaff, who led Parnell’s work on the coalition, and state Commerce Commissioner Susan Bell — attended CEA’s holiday party at the Old Ebbitt Grill in Washington, according to emails.
In 2013, the newly-elected McCrory, formerly a Duke Energy executive, joined the coalition, adding an important player in the group’s push for drilling off the South Atlantic coast. The group had a new chairman in Parnell, who before entering office had been ConocoPhillips’ chief lobbyist in Alaska and had worked on energy for Patton Boggs, a D.C. lobbying firm that represented Exxon Mobil.
As part of the coalition’s effort to establish itself, the governors and CEA formalized their relationship with a memorandum of understanding designating CEA as volunteer staff with specific duties to manage the organization. It held a “strategy session” with the American Petroleum Institute.
In October, the coalition convened at the Beau Rivage Resort and Casino in Biloxi, Mississippi, alongside the annual gathering of the Southern States Energy Board for what would be a formative meeting. The following year would present the first opportunity for the group to weigh in on the next five-year drilling plan, and the governors and CEA wanted to make sure they were prepared to make their case.
Govs. Parnell, McCrory and Bryant, along with staff of the other governors, met for more than an hour in one of the resort’s ballrooms with executives from Exxon Mobil, Shell, Spectrum Geo — a seismic testing company — and other energy groups, including the Southeastern Coastal Wind Coalition, to hear their concerns, according to a meeting agenda.
Briefing documents prepared by CEA include talking points on the economic benefits of drilling, saying, “the key is to echo these messages to Congress and the Obama Administration, encouraging them to pursue a sensible path that allows for Atlantic leasing.” The document adds that “coastal governors, legislators, and other stakeholders should play a lead role in delivering the messages below to the Administration and to Congress.”
According to notes from the meeting prepared by CEA’s Joubert, Randall Luthi, president of the National Ocean Industries Association, an offshore industry group, advised the governors that they could suggest to the Interior Department which areas should be leased, and he “urged the governors to keep their areas of potential interest as broad as possible.” He also warned of “increasing activism by NGOs against seismic activity and cautioned the governors about some of these groups’ false rhetoric.”
The day after the meeting, Tony Almeida, a senior adviser to McCrory, sent an email to Holt saying the governor had agreed to serve as vice-chairman of the coalition. “Great news, Tony!” Holt replied, adding, “Great work yesterday. Pat was outstanding! Lots of key action items. We can’t thank you enough for all your support and leadership on OCSGC. 2014 is going to be… interesting. :)”
An “interesting” year
This year, the debate over drilling in the Atlantic picked up significantly just as the coalition finally gained the sort of direct access to the Obama administration it had been seeking. And, the emails show, CEA played a critical role in helping the governors respond.
Two weeks before the governors’ meeting with Jewell that cold February morning in Washington, officials from Alaska and North Carolina had a series of email exchanges and phone calls with CEA’s Joubert to prepare for the meeting. Joubert advised Donald van der Vaart — North Carolina’s deputy environment secretary, who had been tasked with preparing McCrory — on specific policies, such as what to request regarding seismic testing. Van der Vaart asked Joubert to send talking points, noting that a previous briefing book she had sent was “an amazing resource.”
In that meeting at the Willard, Jewell reportedly told the governors that her job isn’t “to get in the way of development,” but rather “to make sure it’s done right.” She and her staff also noted that environmental organizations had increased scrutiny of seismic testing, so her department would make sure appropriate mitigation measures were in place to protect marine animals.
Just days after the meeting, the Interior Department released a long-awaited environmental assessment that would allow seismic testing, and the governors coalition decided to defer to industry for their response. “Natalie — Would you be able to check with NOIA and/or API to see where they are on their respective reviews/analyses?” wrote Butzlaff, the Parnell staffer, in March, referring to the National Ocean Industries Association and the American Petroleum Institute, and calling Joubert by her first name. Joubert responded that the industry hadn’t yet reached consensus, but that it “has concerns more broadly that setting a precedent for stringent mitigation measures in the Atlantic could affect future measures in the Gulf and the Arctic.”
This past summer, the Interior Department said it would begin reviewing applications for that testing, with those more stringent measures in place. At the same time, it began accepting comments from industry, advocacy groups and other stakeholders on which areas it should open to drilling beginning in 2017.
Representatives of the governors coalition have maintained that it is an open and transparent group that strives to include different viewpoints. But the Center was only able to learn the details of the organization by submitting records requests — which North Carolina still has not provided — and there’s no evidence that opponents of drilling have been invited to any meetings.
Indeed, critics point to that North Carolina meeting earlier this month as the perfect illustration of what’s wrong with the way the governors coalition operates. On November 6, North Carolina hosted a meeting on the five-year planning process that focused on the Atlantic. Officials from the Department of Environment and Natural Resources told journalists and environmental groups that the event was invitation only and that “neither special interest groups nor industry representatives” would be present.
That was true in regard to environmental groups — but apparently not for others. During the event, reporters waited in the halls of Raleigh’s Nature Research Center as state and federal officials listened to panel discussions that featured, among others, a CEA staffer and someone from the Center for Offshore Safety, an industry group.
McCrory did allow reporters in, but not until after the meeting was finished, and industry groups had given their presentations. McCrory’s position hasn’t wavered, and he made that clear, telling reporters that “North Carolina ought to participate in our country’s energy independence.”
Watchdog organization Citizens for Responsibility and Ethics in Washington has asked the Internal Revenue Service to investigate the Kentucky Opportunity Coalition, a conservative nonprofit that spent millions of dollars supplied by undisclosed donors to boost Senate Minority Leader Mitch McConnell during his contentious 2014 re-election bid.
The nonprofit is “nothing more than a sham,” said Melanie Sloan, CREW’s executive director, and it “makes a mockery of a law that is supposed to promote social good, not get a particular politician reelected."
She continued: "The IRS needs to take quick and decisive action to stop KOC’s blatant violations of tax law and head off others from copying it.”
McConnell, a Kentucky Republican who is set to become the Senate majority leader next year, faced a surprisingly stiff challenge from Democrat Alison Lundergan Grimes.
Ahead of the November election, the Kentucky Opportunity Coalition spent more than $14 million on advertisements, according Scott Jennings, a former McConnell aide-turned-political consultant who serves as its spokesman.
That spending spree earned the Kentucky Opportunity Coalition the distinction of being the top-spending group in the race — airing about one of every seven TV ads.
Jennings did not immediately respond to a request for comment, but in October, he told the Center for Public Integrity that the Kentucky Opportunity Coalition “abides by all rules and regulations governing an organization of its kind.”
The Kentucky Opportunity Coalition, which is organized under Sec. 501(c)(4) of the tax code, was launched in 2008. For years, it was largely inactive — recently filed tax records showing it ended 2012 with just $904 in assets. Now, however, it ranks among the largest social welfare nonprofits in Kentucky. In 2013, it raised $5.9 million, with the largest donor contributing $2 million, according to tax records.
The identities of its donors are unknown. The group’s policy is to “not provide the names of its donors to the general public,” according to its website.
Ever since the U.S. Supreme Court’s 2010 Citizens United v. Federal Election Commission ruling, certain types of donor-shielding nonprofit corporations have been allowed to raise unlimited funds to advocate for and against federal political candidates.
IRS rules, however, stipulate that social welfare nonprofits like the Kentucky Opportunity Coalition “may engage in some political activities, so long as that is not its primary activity.”
Groups that run afoul of these regulations can face penalties, including the revocation of their tax-exempt status.
Earlier this year, for instance, the IRS rejected the tax-exempt application of a liberal group that played a prominent role in the failed 2010 re-election bid of Sen. Blanche Lincoln, D-Ark. That group, Arkansans for Common Sense, spent about $1.3 million that year, the bulk of which the IRS concluded qualified as political, not social welfare, spending.
In the bitterly contested race for the U.S. Senate contest in North Carolina, a mysterious “dark money” nonprofit took to the airwaves in an effort to tip the balance in favor of the Republican candidate.
State House Speaker Thom Tillis, the Republican, was running against Democratic incumbent Sen. Kay Hagan in a pivotal race that would in part decide the balance of power in the U.S. Senate. The group, called Carolina Rising, ultimately ran nearly 4,000 ads praising Tillis.
“Thanks to Speaker Tillis and Gov. McCrory, when your kids go back to school this year, their future just got a little brighter,” said one ad that aired more than 1,700 times. The ad also mentioned North Carolina Gov. Pat McCrory, a Republican who wasn’t on the ballot this year.
In August, Carolina Rising ran more TV ads than either Tillis or Hagan, according to a Center for Public Integrity analysis of data provided by Kantar Media/CMAG, an ad tracking firm.
Interesting thing though, the ads weren’t really political — at least not according to the group that paid for them
“You’re the one who said we participated in the election,” Dallas Woodhouse, the group’s president and founder, told the Center for Public Integrity. “Those are issue ads. Those are not political ads."
Woodhouse, a former North Carolina state leader of Americans for Prosperity, a nonprofit affiliated with billionaire brothers David and Charles Koch, maintains Carolina Rising jumped in to defend Tillis after it became clear Hagan and the Democrats were going to attack him based on the policies passed by the state legislature.
The group, he added, was just carrying out its mission by boosting policies passed by the sitting speaker of the state House.
To the average viewer, Carolina Rising’s TV spots sure looked like political advertising. But under the law, they are really known as “electioneering communications." That means they name a candidate and run inside a certain timeframe but don’t tell voters to vote for or against anyone.
Carolina Rising was one of only 10 outside groups this election cycle that chose to run electioneering communications, according to the Center for Responsive Politics. During the 2012 election cycle, 31 groups reported running such ads, down from 56 during the 2010 election cycle.
Electioneering communications’ current scarcity may be related to an ongoing legal fight over whether nonprofits that run the ads must reveal their donors. A court decision that would have required that was overturned, but there’s still a level of uncertainty regarding the issue.
According to Woodhouse, it really is about issues. Indeed, none of Carolina Rising’s thousands of TV ads overtly advocated for Tillis’ election. Rather, they frequently praised him for his work on such matters as autism legislation and education. Ads like that, which don’t specifically call for a candidate’s election or defeat, don’t always count as political activity under IRS rules.
The distinction can be an important one to groups like Carolina Rising, a nonprofit “social welfare” group organized under Sec. 501(c)(4) of the tax code. Such groups are permitted to keep their donors anonymous, but may not have political activity as their primary purpose.
Woodhouse describes Carolina Rising’s mission as “an issue mission,” which may have led the group to run positive ads, an approach that stood out in the negative North Carolina race.
Larry Noble, senior counsel at the Campaign Legal Center, said Carolina Rising’s positive ads are unusual, since “the conventional wisdom is you let the candidate run the positive ad and the outside group run the negative ads” to avoid backlash against the candidate.
Carolina Rising first rose in late March — a new nonprofit group led by a familiar political operative that promised to push back against “the radical political agenda of the liberal left.” It immediately clashed — face-to-face — with protestors critical of policies passed by the Republican governor and legislature.
But it wasn’t long before the new group shifted focus from grassroots antics to airing millions of dollars in ads boosting Tillis. The group ultimately spent about $4.7 million on the ads, Woodhouse said, and about $3.3 million of that had to be reported as "electioneering communications" to the Federal Election Commission. The contest established Carolina Rising as a major political force.
Tillis won, and Carolina Rising could easily have gone the route of other upstart nonprofits that — thanks to the Supreme Court’s Citizens United v. Federal Election Commission decision — spend big money during political campaign seasons, then all but disappear in off years.
Woodhouse, Carolina Rising’s only employee at the moment, says he’s taking a vacation to enjoy Thanksgiving, but then plans to jump back into telling “the larger narrative” of what Republicans are doing in North Carolina.
That includes pushing back against protestors who have come out in opposition to the policies the party has pushed since taking control, including changes to unemployment benefits, school funding, and election law.
“It’s my view and the view of the people I’ve got behind this…the Republicans are doing good things, they’re just not explaining it very well,” he said.
Woodhouse won’t reveal the identity of the donors behind Carolina Rising.
Reports and speculation have linked the group to the billionaire Koch brothers, the high-profile conservative donors who are affiliated with his former employer, Americans for Prosperity.
And a Washington Post article said one contributor is North Carolina retail industry magnate Art Pope. To the reports, Woodhouse says, “They made that assumption. I don’t talk about donors either way. I will say the left likes to beat up on [Pope] and vastly overstate what he gives to certain causes.”
Woodhouse did say Carolina Rising is funded by multiple donors.
“And I’ll go as far as to say anybody who makes assumptions based on my previous associations are wrong,” he said. “Broadly speaking, we have a large, diverse donor body that we have brought into this mission of helping the Republicans tell their story in North Carolina. They are not the same old usual suspects.”
Asked if the donors are from North Carolina, Woodhouse answered, “Generally, that’s who I go after … I don’t want to be that specific.” He added: “Look, I don’t check people’s residency.”
I don’t agree with Romney and Obama health care advisor Jonathan Gruber that Americans are stupid, but there is abundant evidence that we’re incredibly gullible. And we’re paying a big price for it. For the latest evidence, check out the documentary Remote Area Medical, which opens in select theaters across the country this coming Friday.
We’ve been told over and over again by politicians and flacks — including me in my previous career — that we have the world’s best health care system. As I explained in Deadly Spin, if you continue to believe that no other country could possibly have a better system than ours, it’s because of the overwhelmingly successful PR campaign my former colleagues and I carried out over decades.
The purpose of that campaign — a campaign that’s ongoing, by the way — is to protect the profitable status quo by obscuring an empirical truth: that when it comes to access to affordable health care, millions of Americans might as well be living in a third world country. And that’s still true today, more than four years after Obamacare became law.
Although the Affordable Care Act is helping people find coverage that doesn’t bust the family budget, more than 30 million of us are still uninsured because the law doesn’t bring down the cost of insurance nearly enough.
You will meet a few of those millions in Remote Area Medical, which is named after the organization that former TV star Stan Brock founded 30 years ago to fly doctors to remote villages along the Amazon.
“Welcome to America,” Brock says early in the film as thousands of people wait patiently in long lines at the Bristol Motor Speedway in East Tennessee.
During many weekends in the spring and summer, tens of thousands of fans fill the seats at this racetrack, one of NASCAR’s biggest. But over three days in late April or early May every year, the Speedway is transformed into an enormous pop-up health clinic.
People start arriving days early and sleep in their cars and trucks in the vast parking lot in hopes of getting one of the numbers Brock hands out before dawn each day the clinic is in operation. Inside are doctors, dentists and other caregivers who have volunteered their time to treat the thousands of men, women and children, many of whom have driven hundreds of miles — and all of whom have fallen through the big cracks that continue to differentiate the U.S. health care system from those in every other developed country.
Brock had hoped health care reform would put his operation out of business. He’d like to return to the days when all of his medical “expeditions,” as he calls them, were to countries in South America, Africa and the Caribbean. While Remote Area Medical (RAM) still conducts some missions abroad, most of its clinics for the past several years have been in the U.S. And they still are. RAM’s schedule for 2015 includes 22 clinics, in locations from Anaheim, California to Grundy, Virginia.
Not all of those who show up at RAM clinics are uninsured. Brock told me that a growing number of folks actually have insurance. The problem is that they can only afford plans with high deductibles — deductibles so high they must pay thousands of dollars out of their own pockets before coverage kicks in.
The Affordable Care Act caps the amount of money people have to pay out of pocket each year — $6,600 for an individual and $13,200 for a family — but many folks enrolled in high-deductible plans simply don’t earn nearly enough to afford those high deductibles. The RAM staff frequently gets calls from budget-strapped folks in high-deductible plans who say their insurance companies have suggested they try to find a RAM clinic to get the care they need.
The documentary was produced and directed by Jeff Reichert and Farihah Zaman, a Brooklyn-based couple who first heard about RAM from Jeff’s aunt, a retired nurse, who had volunteered at a RAM clinic. Intrigued, Jeff and Farihah decided to volunteer at a RAM clinic themselves.
“It changed us,” Farihah told me. “We knew we had to make a film about what our system has wrought.”
Unlike other documentaries about health care, Remote Area Medical doesn’t focus on politics. “We wanted to get people to think about health care in a different way,” Farihah said. “It’s easy to have a knee jerk reaction (to the politics of health care). What we wanted to do was make a film that shows what it’s actually like for people who can’t afford health care.”
Although the filmmakers offer no political point of view, they do hope lawmakers — including all those who contend we have the best health care system in the world — will see the film, either on the big screen or in March when it will be available on iTunes and Netflix. Better yet, the filmmakers would like to see lawmakers volunteer at a RAM clinic. Unfortunately, not many have done that yet.
Wendell Potter is the author of Deadly Spin: An Insurance Company Insider Speaks Out on How Corporate PR is Killing Health Care and Deceiving Americans and Obamacare: What’s in It for Me? What Everyone Needs to Know About the Affordable Care Act.
Peter Bale, former Vice President and General Manager of Digital operations at CNN International, has been named Chief Executive Officer at the Center for Public Integrity, the global nonprofit investigative journalism organization based in Washington, DC.
“We are thrilled to have Peter Bale join the Center for Public Integrity as our new Chief Executive Officer," said Bruce Finzen, the Center’s Board Chair.
"Peter brings more than three decades of experience as a distinguished reporter, editor, manager and digital leader to the Center. He has exactly the experience and passion for great journalism that is necessary to lead the Center on a continued upward path, and assure that the vital multimedia investigative reporting that the Center is known for will reach an ever expanding audience," added Finzen.
Bale, 52, joins the Center after three years at CNN International, where he ran CNN.com and other digital products outside the United States. The International edition of the CNN site recorded double-digit growth in users, engagement and revenue during his tenure heading teams in Atlanta, London, Dubai and Hong Kong.
“The Center for Public Integrity is a powerful force for good. I am hugely privileged to join,” said Bale.
“Its history of award-winning investigative reporting, combined with innovation and global reach through the International Consortium of Investigative Journalists, means it has a strong base to have even greater impact.”
Bale is a frequent speaker on media and the impact of the internet on journalism. He is on the board of the Global Editors Network and has been a regular presenter for Speakers for Schools, a British nonprofit aimed at inspiring young people.
A Reuters correspondent and editor for 15 years, Bale worked with the international news agency in Asia, Eastern Europe and the Middle East, and held senior roles in London.
He left Reuters to pursue internet journalism and was a founder of FTMarketWatch, an award-winning site from the Financial Times and MarketWatch. He was later Online Editorial Director of The Times and The Sunday Times in London.
He also spent more than four years at Microsoft, where he was Editorial Director of MSN in the UK and then International Programming Director, responsible for content on more than 40 MSN sites around the world.
Born in New Zealand, Bale worked on newspapers and reported on politics before joining Reuters in Sydney, Australia. He is a dual UK and New Zealand citizen, and tweets under @peterbale.
Bale is expected to begin work at the Center early in 2015, at which time Buzenberg will be moving to Boston to begin a fellowship at the Shorenstein Center on Media, Politics and Public Policy at Harvard’s Kennedy School of Government.
A Republican Party plan to formally accuse Rep. Chris Van Hollen, D-Md., of illegally accepting pro bono legal services has fizzled, the Center for Public Integrity has learned.
A Republican party official this week identified the National Republican Congressional Committee as the previously unnamed GOP group that had considered filing a formal complaint with the Federal Election Commission against Van Hollen — but it never did.
The NRCC, which has panned Van Hollen for what it said were federal campaign law violations, confirmed as much.
"At this time we haven't made any efforts to move forward with an FEC complaint," said NRCC spokeswoman Andrea Bozek, who declined to elaborate.
Van Hollen spokeswoman Bridgett Frey declined to comment Tuesday, but she had earlier decried Republican threats as "desperate" and an indication that "legal efforts to promote transparency and disclosure are making headway."
Republicans' decision not to pursue FEC action against Van Hollen comes days after a U.S. District Court judge handed Van Hollen a legal victory — of sorts — by striking down FEC regulations that frequently allow the donors to nonprofits, corporations and unions that sponsor so-called "electioneering communications" to go unreported.
A legal term created as part of the McCain-Feingold Bipartisan Campaign Reform Act of 2002, electioneering communications are, in essence, political issue ads that mention a political candidate, are broadcast shortly before an election and don't overtly advocate for a candidate's election or defeat.
Van Hollen, the GOP planned to argue, had stated in court documents that his political campaign would be directly affected by the outcome of the Van Hollen v. FEC lawsuit, which aimed to reveal donors behind electioneering communications that secretive nonprofits had sponsored. Thus, they asserted, the free legal aid to affect the outcome of the case should be reported as in-kind campaign contributions.
It is possible that another person or organization could yet file a complaint against Van Hollen.
The FEC does not comment on pending complaints, nor does it acknowledge their existence until after commissioners rule on them. Civil fines are typically the most serious punishment the FEC can mete out, although it may in rare cases refer matters to the Department of Justice for criminal investigation.
Electioneering communications, meanwhile, have become evermore rare.
Nonprofits that would be affected by the Van Hollen decision now often produce advertisements during the time immediately before elections that overtly advocate for or against political candidates. Doing so generally allows them to avoid disclosing their donors.
Given this, the National Law Reviewdeclared Van Hollen's legal win a "Pyrrhic victory" where "the more explicit you are about trying to influence the election, the less you must disclose about your donors."
At least on the television airwaves, Sen. Mary Landrieu, D-La., is facing what's perhaps the end of her political career alone.
The Democratic Senatorial Campaign Committee, super PACs and nonprofit groups, which together supported Landrieu's general election campaign with more than 19,000 TV ads worth millions of dollars, have effectively abandoned her during her runoff against Republican Bill Cassidy, according to a Center for Public Integrity analysis of data from Kantar Media/CMAG, an ad tracking service.
Groups backing Landrieu have aired fewer than 100 TV ads since Nov. 5, with most of those coming from the Humane Society Legislative Fund.
That's less than 1 percent of the 14,000 TV ads that have aired during the Landrieu vs. Cassidy runoff, which became necessary when no candidate earned 50 percent of the Election Day vote on Nov. 4.
Several conservative groups, meanwhile, have blasted Landrieu with nearly 6,000 ads since she advanced to the runoff.
Almost all of the ads have contained messages that attack Landrieu rather than promote Cassidy.
Leading the way among pro-Cassidy groups: the National Republican Senatorial Committee (which has aired more than 1,800), Koch brothers-backed super PAC Freedom Partners Action Fund (about 1,350), super PAC American Crossroads (nearly 1,100) and the National Rifle Association of America Institute for Legislative Action (nearly 900).
Cassidy's own campaign has aired about 5,000 TV ads, besting the 3,000 ads that Landrieu's campaign has run through Monday.
That stands in stark contrast to the first stage of the election, when Landrieu and her allies sponsored nearly two-thirds of the more than 76,000 TV ads that ran through Nov. 4.
Through mid-October, Landrieu's campaign reported spending about $15.5 million on her re-election efforts, nearly double the $7.9 million spent by Cassidy. As of Nov. 16, Cassidy's campaign reported having nearly $1.3 million on hand, while Landrieu's campaign reported having about $783,000, according to their most recent round of financial disclosures filed with the Federal Election Commission.
Two factors have conspired to sink Democrats' enthusiasm for investing in the race.
And a Landrieu victory has no implications on which party controls the U.S. Senate next year, as Republicans easily seized a majority on Election Day.
Bloated and bed-ridden, his skin browned by blood transfusions, John Thompson succumbed to leukemia on November 11, 2009.
A carpenter by trade, Thompson, then 70, had spent much of his life building infrastructure for the petrochemical industry in his native Texas — synthetic rubber plants in Port Neches, chemical facilities in Orange. Throughout the 1960s and early 1970s, he often encountered benzene, stored on job sites in 55-gallon drums, which he used as a cleaning solvent. He dipped hammers and cutters into buckets full of the sweet-smelling liquid; to expunge tar, he soaked gloves and boots in it.
Thompson never figured the chemical could do him harm. Not when it stung his hands or turned his skin chalky white. Not even when it made him faint. But after being diagnosed with a rare form of leukemia in 2006, relatives say, he came to believe his exposure to benzene had amounted to a death sentence. Oil and chemical companies knew about the hazard, Thompson felt, but said nothing to him and countless other workers.
“They put poison on his skin and in the air he breathed,” said Chase Bowers, Thompson’s nephew. “He died because of it.”
Thompson died before a lawsuit filed by his family against benzene suppliers could play out in court, where science linking the chemical to cancer could be put on display. Over the past 10 years, however, scores of other lawsuits, most filed by sick and dying workers like Thompson, have uncovered tens of thousands of pages of previously secret documents detailing the petrochemical industry’s campaign to undercut that science.
Internal memorandums, emails, letters and meeting minutes obtained by the Center for Public Integrity over the past year suggest that America’s oil and chemical titans, coordinated by their trade association, the American Petroleum Institute, spent at least $36 million on research “designed to protect member company interests,” as one 2000 API summary put it. Many of the documents chronicle an unparalleled effort by five major petrochemical companies to finance benzene research in Shanghai, China, where the pollutant persists in workplaces. Others attest to the industry’s longstanding interest in such “concerns” as childhood leukemia.
Taken together, the documents — put in context by interviews with dozens of lawyers, scientists, academics, regulators and industry representatives — depict a “research strategy” built on dubious motives, close corporate oversight and painstaking public relations. They comprise an industry playbook to counteract growing evidence of benzene’s toxic effects, which continue to command the attention of federal and state regulators and be fiercely debated in court.
“The conspiracy exists, and the conspiracy involves hiding the true hazards of benzene at low doses,” said Robert Black, a Houston lawyer who represents plaintiffs in toxic tort cases. Since 2004, while handling dozens of lawsuits filed on behalf of workers sickened by leukemia, lymphoma and other diseases associated with benzene, Black has obtained 16,000 pages of internal records detailing the industry’s research tactics, which he shared with the Center. Other lawyers provided an additional 5,000 pages.
The documents may represent the tip of the iceberg. For decades, the petrochemical industry has employed what one litigation guide calls a “comprehensive strategy” for defending against workers’ legal claims. Penned by a senior attorney at Shell Oil, the undated document lays out a coordinated “industry response” aimed at shielding internal company records on benzene. It warns defense attorneys to “avoid unnecessary or inadvertent disclosure of sensitive documents or information,” for instance, and to “disclose sensitive benzene documents only on court order.”
“We don’t know what the health effects are because they’re not going to let us know,” Black said. “It’s an American tragedy.”
Five million Americans at risk
Benzene emissions in the United States have declined sharply since 1987, when federal regulators set the occupational exposure limit at 1 part per million. Over roughly the same period, there has been a 66-percent drop in releases of the chemical into the environment. Yet experts say it remains a formidable threat. “You’re still seeing elevated risks of leukemias and lymphomas among occupational groups exposed to benzene,” said Peter Infante, a former director of the office that reviews health standards at the Occupational Safety and Health Administration, who has studied the pollutant for 40 years, “as well as populations being polluted from these benzene sources.”
In May, the U.S. Environmental Protection Agency estimated that 5 million Americans — not counting those with workplace exposures — face heightened cancer risks from benzene and 68 other carcinogens spewed into the air by one such source: the nation’s 149 oil refineries. “We are concerned about benzene,” said Kelly Rimer of the EPA’s Office of Air Quality Planning and Standards, which has proposed a rule that would require refinery operators to monitor for the chemical along their fence lines.
“It’s a known human carcinogen,” Rimer said, “and it’s emitted from lots of sectors.”
One month later, California officials lowered the long-term exposure level for benzene from 20 parts per billion to 1 ppb — among the lowest in the country — setting the stage for further emissions cuts at refineries and bulk-oil terminals in that state. Melanie Marty, of the California Office of Environmental Health Hazard Assessment, said regulatory limits are now “getting lower and lower for [benzene’s] non-cancer risks” — dizziness, rapid heart rate, neurological problems, anemia — and not just its carcinogenic effects.
“We have to make sure we’re not exposing people to things we can do something about,” she said.
A naturally occurring component of crude oil, benzene is used to make household products such as plastics, pesticides and dyes. It remains a key ingredient in gasoline, a source of exposure for workers as well as the public: In 2006, the EPA found benzene to be such a “significant contributor to cancer risk from all outdoor air toxics” that it limited levels in fuel. Even oil executives acknowledge its ubiquity; in documents, they call it “universal” and “a basic petrochemical building block.” Benzene ranks 17th among the top 20 chemicals produced in the United States, according to the federal government.
The petrochemical industry’s decade-long research effort on benzene echoes those launched by other industries — asbestos, tobacco, plastics — that used science to create doubt. These industries have employed a host of tactics to try to convince courts and regulators that a chemical or product causes no harm. At times, they funded their own studies in an attempt to show the lack of adverse effects. Experts say the petrochemical industry has bankrolled more research — at greater cost — than anyone but Big Tobacco, which coined the phrase “manufacturing doubt.”
“The more they feel threatened by the outcome of independent research, the more they will quote-unquote invest in their own,” said Celeste Monforton, a public health researcher and lecturer at George Washington University, who has written about corporate corruption of science. Monforton considers the petrochemical companies’ study of workers exposed to benzene in Shanghai to be the most expensive and elaborate effort by any industry to try to refute damning scientific evidence.
The reason, in her mind, is clear: “Litigation is continuing and potential for environmental exposures is still significant,” she said. “They need to protect their economic interests.”
Underwritten by the biggest names in petrochemicals — British Petroleum, Chevron, ConocoPhillips, ExxonMobil and Shell Chemical — and administered by the powerful API lobby, the Shanghai Health Study purported to examine how benzene exposure affects workers’ health. It consisted of three inquiries: The first investigated the link between benzene and non-Hodgkin’s lymphoma as well as acute myeloid leukemia, or AML; the second, progression of diseases caused by the chemical; and the third, the exposure level at which such biological markers as lower blood cell counts indicate benzene's toxicity.
But the study’s outcome seemed to some like a foregone conclusion. Documents suggest oil companies set out to counter U.S. government research tying benzene to more types of cancer and at lower exposure levels than previously known. They show how company executives and scientists plotted objectives and “expected” results before the study began, banking on conclusions that would play down health hazards.
“This is just appalling,” said Carl Cranor, a philosophy professor at University of California, Riverside, who has read some of the Shanghai documents. “This does not sound like a scientific inquiry where you’re not sure what the outcome will be.”
Infante, the former OSHA official, who now testifies for plaintiffs in benzene litigation, put it more bluntly: “It’s called potential bias.”
Study’s authors: No bias
Industry representatives and the scientists they paid to do the Shanghai work say such criticism is unwarranted. Some oil executives, they say, may have been seeking an alternative to government research; others may have wanted to better understand benzene’s connection to disease. Whatever the impetus, they argue, scientific integrity was not compromised.
“There could have been the best intentions or the worst intentions,” said Harvey Checkoway, an epidemiology professor at University of California, San Diego, who served on a scientific review panel created by the petrochemical companies to review the study. “We set that aside for the research.”
Richard Irons, one of the study’s two principal investigators and now head of a consulting firm that does research for the petrochemical industry, said that “if you’re ignorant, it’s a logical conclusion” to view the work as biased. “But it’s an accusation not founded in fact.” Irons acknowledged that he has never testified for a plaintiff in a benzene exposure case. The API has financed his work on benzene since the early 1990s, documents show. Irons said he’s no longer receiving money from the institute but has gotten $100,000 for a small benzene project from the American Chemistry Council, the chemical industry’s main lobby group.
Defenders of the Shanghai study stress the independence of its design. Scientists, they say, have operated under the guidance of not just the scientific review panel, but of two Chinese government ministries and two university boards, all ensuring a proper inquiry. Many of the results — positive and negative, they say — have been published in peer-reviewed journals.
“The results don’t support the presumption of bias,” Irons said, explaining that, so far, the research has confirmed benzene’s association with AML as well as myelodysplastic syndrome, or MDS, a cancer of the bone marrow.
The study’s co-principal investigator, Otto Wong, who directed the work on AML and non-Hodgkin’s lymphoma, said, “I was interested in doing a cutting-edge study and I was confident I had control over our [portion]. The rest is really not a concern.” Wong acknowledged that he has never testified for a plaintiff in a benzene exposure case. His ties to the oil industry date to the 1970s. Now retired, Wong said he has “no contact with the API people at all.”
Representatives of BP, Chevron and ConocoPhillips all declined to comment for this article, referring questions to the API, which did not respond to repeated interview requests. In a one-paragraph statement, Shell said the company’s financial “support for the study reflects our ongoing commitment to health, safety, and product stewardship,” stressing that “the study was wholly independent of Shell.”
ExxonMobil, whose scientists participated in the Shanghai study, said in a written statement that it “supports scientific research through funding and technical support,” painting its involvement in this project — as well as a 2012 ExxonMobil-sponsored study of benzene-exposed workers showing adverse health effects at levels below legal occupational limits — as part of a longstanding corporate commitment to better understanding the chemical. The 2012 results in particular prompted ExxonMobil to “voluntarily reduce allowable benzene exposure limits to one-half of OSHA legal limits” at its workplaces, it said — or 0.5 ppm for an eight-hour shift.
By contrast, the National Institute for Occupational Safety and Health (NIOSH), part of the Centers for Disease Control and Prevention, recommends that workers limit their benzene exposure to an average of 0.1 ppm during a shift.
“Our conservative approach to setting workplace benzene exposure limits is influenced by the most up-to-date scientific evidence, which includes the 2012 study,” ExxonMobil said, noting that its short-term limit is five times lower than OSHA’s.
As the Shanghai findings seep into the scientific literature and, ultimately, the courts, the petrochemical industry generally admits that benzene causes AML and MDS at higher doses. But other blood and bone marrow cancers continue to kill — at lower and lower exposures to the chemical.
On February 27, 2012, Michael Boley, 68, died of a disease Shanghai researchers say can’t be tied to benzene: chronic myelomonocytic leukemia, a form of MDS, combined with another bone-marrow condition known as “myeloproliferative disease.”
Strong and industrious, with a knack for avoiding even the flu, Boley spent 23 years at a Goodyear Tire & Rubber plant in St. Marys, Ohio, site of a seminal benzene study by NIOSH in the 1970s. The research quantified for the first time the leukemia risk for workers exposed to the chemical in the plant’s Pliofilm unit, prompting OSHA to work on the benzene standard that took effect in 1987.
Boley didn’t make the benzene-soaked rubber film for which the unit was named; rather, he was a plant electrician, supervisor and engineer who worked there for an hour or two daily. Still, he knew benzene was in the air: While in the unit he noticed “Authorized Personnel Only” signs for Pliofilm workers who, he testified in a deposition, “were monitored on a regular basis.” At times, he complained about the unit’s “sweeter-than-gasoline” smell. Once, Boley asked a supervisor if he could have the same blood test the company administered to Pliofilm workers.
“His comment was, no, we wouldn’t require monitoring,” Boley testified. “Our levels would be safe.”
Four decades later, after enduring the fatigue, feebleness and shortness of breath accompanying a diagnosis of chronic monomyelocytic leukemia, or CMML, Boley sued Goodyear and its benzene suppliers, including ExxonMobil. “He wanted them to know what had happened to him,” said his widow, Cheryl. But the suit went nowhere: In 2011, Boley settled the litigation in a confidential mediation. His still-pending workers’ compensation claim has seen little traction.
“He couldn’t prove it,” Cheryl said, alluding to the companies’ claims that benzene couldn’t have caused her husband’s illness. Those claims were supported by Irons and other scientists affiliated with the Shanghai study, who reported in a journal article last year that “benzene exposure does not appear to be a significant predictor of CMML.”
Only safe level ‘is zero’
The petrochemical industry has known about benzene’s dangers since the turn of the last century. As far back as 1948, the API’s toxicological profile of the chemical discussed “reasonably well documented instances of the development of leukemia as a result of chronic benzene exposure,” cautioning that “the only absolutely safe concentration … is zero.”
Later, as scientific evidence of benzene’s hazards accumulated and regulatory limits on workplace and environmental levels tightened, the industry took a different stance. By 1990, the API and member companies such as BP, Chevron, Mobil and Shell had launched a research program meant to keep further restrictions at bay — or, minutes from an API meeting in 1992 state, research “that will be most useful in improving risk assessment and influencing regulation.”
Within years, the catalyst for the Shanghai Health Study appeared. In 1995, company representatives turned their attention to work by the National Cancer Institute, which was repeating the Pliofilm study in China to examine the effects on workers exposed to benzene at levels below the OSHA limit. Exxon, which had yet to merge with Mobil, even sent company scientists on a fact-finding visit to interview government researchers.
“We are monitoring the NCI studies,” an Exxon memo explained, “because of their potential impact concerning the health risks at low benzene exposures.”
In 1997, the NCI published a landmark study on benzene-exposed workers in Shanghai. The results reinforced past research showing the chemical causes leukemia, said Richard Hayes, a former NCI epidemiologist and the study’s lead author, but “what moved the science forward” were two findings: That workers with chronic benzene exposures had an increased risk of developing MDS and non-Hodgkin’s lymphoma — i.e., diseases other than leukemia — and that such effects could be triggered by doses of the chemical as low as the OSHA limit.
In 2004, the NCI released the results of a second study. It found that Chinese shoe makers inhaling benzene in amounts below the OSHA limit had fewer white blood cells than unexposed workers, suggesting the chemical has no safe threshold.
“In general,” Hayes said, “we found benzene was a larger problem than we originally thought.”
The industry quickly attacked the NCI’s work. Documents show that the API commissioned a $25,000 “critical review” of the government research from California epidemiologist Wong. In a 10-page paper, Wong challenged the NCI study from every conceivable angle. “The findings,” he wrote, “are unreliable.”
Wong insists today that his corporate funding had no influence on this conclusion. “My critique of the NCI study was comprehensive and specific,” he said. “I was responsible for every comment.”
For the industry, the review had the desired effect: It cast enough doubt on the NCI’s first study to convince the EPA, in 2000, not to rely on the research for estimating benzene’s carcinogenic effects. “We thought there were methodological issues that might be questionable,” said Bob Sonawane, of the EPA’s Office of Research and Development, who has overseen agency assessments of benzene’s health risks. The agency did use the NCI work to assess non-cancer effects in 2002, Sonawane said.
By then, industry representatives were already thinking beyond conventional critiques. Wong remembers reaching out to Chinese scientists about a possible benzene study before broaching it to industry contacts. “I knew quite a few people at API and member companies,” he said. “We just started a conversation.” The campaign to finance an alternative study in China was kicked off in earnest in the late 1990s, when the API approached Irons, then a pathology professor at University of Colorado, Boulder. Irons said API officials asked him to visit Shanghai in 1999 and consider doing a study similar to the NCI’s, which examined workers’ diseases and estimated their benzene exposures after the fact and “had some provocative findings.”
Irons went to China. Upon his return, he urged the API to instead conduct what he calls “a real-time clinical study,” in which researchers examine workers’ diseases as they occur. Within a year, he, Wong and ExxonMobil scientists had drafted proposals for the Shanghai study, which the API circulated among its members to drum up financing.
API representatives went from company to company, giving what amounted to a sales pitch for the Shanghai study. They laid out just what executives might anticipate in return.
A 2001 document listed the following “expected” results:
Provide strong scientific support for a lack of a risk of leukemia … at current ambient benzene concentrations to the general population.
Establish … current occupational exposure limits do not create a significant risk.
Refute the allegation that Non-Hodgkin’s lymphoma can be induced by benzene exposure.
Other documents show that the industry was counting on such findings to combat stringent regulation and stave off “tremendous” costs that would come from having to cut benzene emissions. “Significant issues of concern” identified in a 2001 PowerPoint include potential requirements to reformulate gasoline and “control emissions from stationary sources.”
Liability also was a worry. Documents warned of “litigation costs due to perceptions about the risks of even very low exposures to benzene” and lawsuits “alleging induction of various forms of leukemia and other hematopoietic diseases,” including more commonly diagnosed lymphomas.
For some in the industry, the bait proved enticing.
“Given the magnitude of [health, safety and environment] issues surrounding benzene as well as the litigation claims we continue to see, I believe it would be worthwhile to participate,” a Shell executive wrote in an email in 2000, a year before the company and its four counterparts formed the Shanghai study’s official sponsor: the Benzene Health Research Consortium.
Later, as consortium members tried to plug an ever-increasing budget gap — boosting the research’s price tag from $19 million in 2001 to more than $35 million in 2008 — their argument turned repeatedly to economics. One 2003 script for a CEO-level phone call states, “This study will positively impact our global business concerns.”
Critics say such documents expose the Shanghai study for what it is: An industry attempt to buy scientific evidence. “It’s all about influencing science to get what industry wants,” said Myron Mehlman, formerly chief toxicologist at Mobil, who became a whistleblower in 1989 after the company fired him for complaining about benzene levels in its gasoline. He sued Mobil, winning a $7 million judgment.
Mehlman remembers hearing about the Shanghai study in 2005 and immediately firing off letters to 45 executives at sponsoring companies. “I knew the scientists would do whatever it takes and whatever the industry needs done,” he said. In response, he said, he got a consortium form letter that “just re-confirmed how the study is being done for a single purpose — to get desirable outcomes.”
Industry-funded researchers bristle at the science-for-sale accusations.
“I didn’t see refuting anything as my charge,” said Irons, the study’s co-principal investigator, “and I wouldn’t have responded favorably to that.”
In depositions, however, Irons conceded that oil companies had a vested interest in the project.
“The oil companies … expected … it would be used for regulation, litigation, and for understanding the health effects of benzene,” he testified in 2010, adding that he didn’t believe a “funding source or the amount of money necessarily impacts on the [study’s] objectivity.”
Wong sounds a similar note. “We didn’t know what the results were before the study began,” he said, claiming he wasn’t privy to “any discussion” among the sponsoring companies. He considers it “just unthinkable” that critics would suggest “all those outside scientists, together with us, tried to create some results.”
Noting that the study relied on actual cases from 29 Shanghai hospitals, Wong explained, “It’s very difficult to argue that we have influenced our data one way or another.”
Members of the Shanghai study’s scientific review panel echo this sentiment. They saw no signs of overt bias in the design, they say, no way to yield preconceived results. “That wasn’t my experience,” said John Cherrie, a former panelist now heading occupational health research at a British nonprofit that has worked for the petrochemical industry. “The studies were designed to investigate the true situation without any obvious bias.”
Some would-be funders weren’t so sure, documents show.
In 2002, consortium members landed a meeting with seven scientists from Dow Chemical Company to pitch the Shanghai study. The meeting came after the scientists had voiced what one described as “specific technical concerns” about its design. Dow eventually opted not to contribute.
In a deposition two years later, Dow’s head of epidemiology, James Collins, testified that the company feared the study could generate inaccurate risk estimates and thus “be biased.”
‘Independent’ review panels
Documents suggest the Shanghai study’s sponsors were keenly aware of such perceptions. To deflect criticism, they set up “independent” review panels consisting of 10 ethicists and scientists, reputable leaders in fields like epidemiology, clinical medicine and bio-statistics. By 2001, panelists were meeting investigators and reviewing protocols — “essentially quality control,” said Jerry Rice, who chaired the scientific panel. Advisory in nature, the boards have remained involved in nearly every aspect of research.
Industry representatives viewed the boards as essential for lending credibility to the study. “There are going to be people out there who will want to misinterpret and criticize the study,” one argued in a 2003 email. “It is important that ‘the integrity’ … be maintained” with the panels.
Panelists insist the boards weren’t simply for show. They say industry representatives routinely encouraged them to offer criticisms and recommendations, and they obliged. Documents show investigators incorporated so many panel suggestions that research costs soared $3 million in one year alone.
“I never felt there was any desire to muzzle or tone down criticism,” said Rice, formerly with the World Health Organization’s International Agency for Research on Cancer, who oversaw the agency’s evaluations of chemicals for carcinogenic risks from 1996 to 2002. At IARC, Rice had come to know oil industry executives, who recruited him for the panel. “If there had been any of that, we’d have all quit.”
Still, company executives maintained tight control over the study. Documents indicate the consortium operated like a corporation, replete with committees governing research, finances and communications. Once a year, it hosted a meeting of 50 or so participants, flying American and Chinese scientists as well as review panelists to a two-day retreat to discuss the work as executives observed. Twice a year, consortium members combed through detailed progress reports filed by investigators.
The consortium also required industry review of draft manuscripts until 2005, when Irons penned his first. In it, Irons announced preliminary results linking a previously unrecognized form of myelodysplastic syndrome -- MDS -- to benzene exposure. The draft set off debate within ExxonMobil and Shell, both of which alerted the EPA — as the law required — to what was vaguely described in a consortium email as “health findings reported in a draft publication.”
At the time, Irons expressed reservations over the manuscript-review requirement.
Consortium members dropped it but kept the review boards. For years, panelists kept circulating “ready-for-submission manuscripts” for “feedback,” documents show.
Consortium members have worked especially hard on controlling their message. Before the Shanghai study began, the communications committee was crafting its marketing strategy. Documents reveal reams of “if asked” statements and media-relations plans, listing objectives such as “counter activists’ negativity.” Among the committee’s tasks, according to a 2001 email:
perception needs to be that this is not being done to protect against litigation
use a consulting attorney to address these issues of perceived motivation
Consortium sales pitches to prospective contributors, expressed in recruitment briefs, “call sheets” and “adaptable” slideshows, epitomize this corporate spin. Publicly, members have claimed altruistic motives for backing the Shanghai study. During a presentation in 2002 at PetroChina, a Chinese oil firm targeted for sponsorship, one Shell scientist proclaimed, according to a company email, “We believe it is important to understand the hazards of the products we make and sell, and we believe it is the right thing to do!”
Privately, consortium members betrayed less charitable motives. A draft of a 2002 recruitment brief reminded potential sponsors that “there is continued concern with the potential health effects of benzene as it relates to worker exposure … and personal injury claims.”
In response, a Shell executive urged colleagues to “delet[e] the reference to legal liabilities” and emphasized that “the only reason we are doing this is in support of protecting workers.”
Widows like Carolyn Wright have trouble processing such statements. Her husband, Eric, was a consummate company man whose closets brimmed with Shell awards, buckles, hats and magnets. Wright spent 34 years, from 1976 to 2010, working on offshore vessels for five oil companies — 18 at Shell. A trained “gun shooter,” he repaired sonar equipment, breaking down air guns. He soaked parts in benzene-laced solvents in a diesel-engine room, breathing in the chemical at exposures estimated to be two to five times greater than the legal limit.
Wright died, at 63, of leukemia in 2010, exactly five months after receiving an MDS diagnosis. Most of that time he remained hospitalized, beset by body sores, eye infections and a failing gall bladder. Within weeks, he couldn’t feed or bathe himself; eventually, he couldn’t hold up his head. Carolyn remembers leaving her husband’s bedside twice — first, to get clothes and then to visit a funeral home.
“They took away my best friend,” she said, referring to Shell and eight other petrochemical companies she and her husband sued 14 days before his death. “They were responsible because they made the benzene.” She settled the case for an undisclosed amount, most of which went toward her husband’s outstanding medical bills and legal fees. Shell admitted no liability.
“I’d rather have my husband,” Carolyn said. “There is not another one like him.”
Seeding the literature
The petrochemical industry’s research strategy had another key component: publication. Oil and chemical companies have long seeded the scientific literature, paying consultants to publish in peer-reviewed journals. They often use the published articles to advance their positions in regulatory and legal arenas. Infante, the former OSHA official, considers benzene “a good example of how the general scientific literature is being polluted by people working for industry.”
A 2002 Shell summary of the Shanghai project defined a “Key Measure/Indicator of Success” as a “Cost effective study reported in public literature … [that would] support … advocacy.”
By the time the research consortium disbanded in 2009, Irons and his colleagues had released results in 20 journal articles as well as at an “international benzene symposium,” in Germany. Industry-funded scientists have added to the literature since; according to Irons, the consortium’s dollars have yielded a total of 30 papers.
Such publications can play a critical role in benzene litigation. The Shanghai study has helped companies deny liability by casting doubt on causation, the central issue in a toxic-tort lawsuit. One tactic the industry has employed — with aid from the study — is to separate cancers into subsets, making it harder to prove a specific link between benzene and the disease. David Eastmond, a toxicology professor at University of California, Riverside, said that the petrochemical industry “gets sued on a fairly regular basis” over “a wide range of diseases.”
“If [it] could narrow down which subtypes are caused by benzene,” he explained, “the industry could eliminate a number of lawsuits.”
Industry-funded Shanghai researchers found that only certain subtypes of MDS and AML are significantly linked to benzene.
Now, in claims involving auto mechanics, gas station attendants and printers, plaintiff’s lawyers are seeing this claim play out in court. There is the case, for example, of a contract worker for southeast Texas refineries and chemical plants who washed his tools in benzene and later developed MDS. Citing a 2009 article by Irons, defense lawyers argued that the worker didn’t have the subtype of MDS associated with benzene exposure. The worker’s family resolved the case under terms that remain confidential.
In another case, a refinery technician who used benzene in laboratory experiments developed the very MDS subtype the 2009 article tied to the chemical. In testimony, however, defense experts used the Shanghai research not to affirm this link, but rather to debate whether his MDS was, in fact, properly diagnosed. The case settled in 2010 as part of a confidential agreement.
Some find such defenses scientifically disingenuous. Hayes, the former NCI scientist, who is now head of epidemiology at New York University’s medical school, explained that scientists cannot eliminate a disease subtype simply because a study doesn’t show an association with benzene exposure. “It doesn’t mean there isn’t any effect,” he said. “The end result is to sow the seeds of doubt.”
Wong said that all he and his fellow researchers can do is report their findings — positive and negative. “I’m sure some people use the results in their own way,” he said, referring to defense lawyers. “I can’t really speak to that.”
Acknowledging that “no study can prove a negative,” Irons defends the Shanghai research as “the best available evidence” benzene causes only certain disease subtypes. That “doesn’t reduce the fact that benzene is associated with MDS,” he said — or, for that matter, AML. And ultimately, some say, these findings aren’t as conclusive as oil executives may have wanted.
“In terms of something that would once and forever cause the petroleum industry’s legal liability problems to go away,” said review panelist Rice, “it didn’t do that.”
In fact, some outcomes have hurt defendants in court. In 2004, after 30 years fixing refrigerators at ice-skating rinks and meat-packing plants — receiving a daily dose of petroleum-based products — Brian Milward developed a rare condition known as acute promyelocytic leukemia, or APL. At the time, he was 47 years old.
“You don’t want to find out you have cancer at that age because of somebody else’s wrongdoing,” Milward said, explaining he had no idea the solvents and paints he used to clean and seal pipes contained benzene until after he was diagnosed.
In 2007, he filed suit against Rustoleum Paints and 20 other manufacturers, whose experts argued no epidemiological studies show a link between benzene and APL. Experts hired by Milward countered that evidence linking benzene to AML essentially links it to all subtypes, including APL. The judge disagreed, ruling for the defendants. But the debate has stymied the case, fueling appeals on both sides, and sparking a brief signed by 27 preeminent scientists affirming benzene can cause any leukemia.
Meanwhile, the Shanghai study affirmed the very link Milward’s lawyers tried to draw. In a 2010 article confirming benzene’s tie to “an increased risk of AML,” Wong discussed the relationship by disease subtype. APL was the “most strongly related” to benzene exposure, he wrote.
While the ruling against Milward eventually was struck down, he has yet to appear before a jury. After settling with every defendant but Rustoleum, he has watched the company challenge the science again. This time, defense experts question whether his workplace exposures could have caused his cancer. A second appeal is pending.
Now in remission, Milward must grapple with cancer’s lasting effects. Nearly a decade of chemotherapy, along with diabetes and a rare bowel disorder, have left him battling what he calls “absolutely ridiculous” fatigue. Retired and on disability, he remembers returning to work twice. First, he resorted to napping to endure an eight-hour shift. When his boss assigned him to office duty, pushing paper and making calls, he still fell asleep at his desk.
“I can’t really do anything,” said Milward, 57 — at least, not what he loves: repairing race cars, working in his yard, playing with his grandchildren. “It just sucks when you get a cancer like this.”
‘He never complained’
To family and friends in Deweyville, Texas, a pine-shaded town along the Louisiana border, John Thompson was “John” — a life-long resident, church deacon and carpentry teacher who reinforced souls as much as structures. To Irons, the Shanghai study investigator who charged $600 per hour as an expert witness, he was “John H. Thompson” — deceased, one of three case referrals from a corporate-defense firm, all in lawsuits alleging cancers caused by benzene.
Thompson had built scaffolding for refineries and chemical plants in the 1960s and early '70s. At the end of most workdays he'd be covered in a thick adhesive known as mastic and would use pure benzene to get it off his hands, clothes and tools. In 2010, three months after Thompson’s death, Irons flew to Houston from China to testify in the benzene litigation, armed with what he has called “the largest single study of AML in history” —the Shanghai study. In a deposition, the scientist touted the research, saying it “inform[ed] with respect to disease specificity to a much greater degree than other previous epidemiological studies.”
“Assumptions and presumptions,” Irons testified, “have to be modified and re-assessed.”
The comment proved prescient in Thompson’s case.
In 2006, the former contract worker was mowing his lawn when he mentioned feeling fatigued. A pillar of a man, Thompson, then 66, had gotten two heart stents without uttering a gripe. “He never complained,” said Chase Bowers, his nephew. Not when he broke both arms on an oil rig, or lost his left eye in a shop accident. Bowers, who, as a teenager, was raised by Thompson and his wife, Carol, remembers watching a tree branch rip open his uncle’s ear. One emergency-room visit and Thompson returned to work.
“That’s the kind of guy he was,” Bowers said.
Within days of the lawn-mowing episode, Thompson learned he had acquired AML — specifically, a subtype of AML known as “inversion 16.”
In the contentious world of toxic-tort litigation, Thompson’s case seems like a classic: The only leukemia the petrochemical industry has admitted benzene can cause is AML — especially at higher doses. According to the Shell benzene-litigation defense guide, the industry might have classified Thompson’s case as “high risk”: He not only suffered from AML, but, as the guide states, “pure benzene is involved,” and his “exposure took place prior to OSHA involvement.” Experts hired by the family estimated Thompson’s cumulative benzene exposures were five times greater than the legal limit.
At trial, however, the case turned out to be anything but a slam dunk. Citing the Shanghai study, Irons worked to debunk a link between benzene and the type of AML afflicting Thompson. The Shanghai research has shown approximately two of the 20 AML subtypes are significantly associated with the chemical, he testified — neither of them “inversion 16.”
“We found many cases of inversion 16,” Irons said in court. “We did not find an association between benzene exposure and inversion 16.” Other scientists disagree, arguing that if benzene causes one subtype of AML, it likely causes all of them.
Keith Hyde, a Beaumont, Texas, lawyer who represents plaintiffs in toxic-tort cases, including the Thompsons, remembers Irons highlighting one Shanghai article after another at trial, raising doubt. “You have doubt here and there through all these industry studies,” Hyde said. “Let’s just say they do their job.”
After two weeks of testimony, the Thompson case ended in mistrial. The suit ultimately was resolved under terms that remain confidential.
In April, Carol, Thompson’s widow, died of liver cancer. In the years after the benzene trial, she rarely mentioned the ordeal — too many painful memories. She had to relive her husband’s death daily in court, watching videos and hearing testimony on his decline. “It was devastating for my aunt,” Bowers said. In his view, she never understood the extent to which oil and chemical companies hid benzene’s hazards and tried to spin the science.
“There’s obvious vested interest here,” Bowers said of the Shanghai study. “If oil companies are willing to spend $36 million to fund research, how much are they afraid of losing?”
Ashley Schwartz contributed to this story.
Sixty-six years ago, a professor at the Harvard School of Public Health wrote a report linking leukemia to benzene, a common solvent and an ingredient in gasoline. “It is generally considered,” he wrote, “that the only absolutely safe concentration for benzene is zero.”
The report is remarkable not only because of its age and candor, but also because it was prepared for and published by the oil industry’s main lobby group, the American Petroleum Institute.
This document and others like it bedevil oil and chemical industry executives and their lawyers, who to this day maintain that benzene causes only rare types of cancer and only at high doses.
Decades after its release, a lawyer for Shell Oil Company flagged the 1948 report as being potentially damaging in lawsuits and gave out instructions to “avoid unnecessary disclosure of sensitive documents or information” and “disclose sensitive benzene documents only on court order.”
Plaintiff’s lawyers like Herschel Hobson, of Beaumont, Texas, wield such documents in worker exposure cases to demonstrate early industry knowledge of benzene’s carcinogenic properties.
“It shows a pattern of behavior,” Hobson said. “It shows how industry didn’t want to share bad news with their employees. None of this information was made available to the average worker … Most of this stuff kind of gets lost in the weeds.”
No more. Today, the Center for Public Integrity; Columbia University’s Mailman School of Public Health and its Center for the History and Ethics of Public Health; and The Graduate Center at the City University of New York are making public some 20,000 pages of benzene documents— the inaugural collection in Exposed, a searchable online archive of previously secret oil and chemical industry memoranda, emails, letters, PowerPoints and meeting minutes that will grow over time.
The aim is to make such materials — most of which were produced during discovery in toxic tort litigation and have been locked away in file cabinets and hard drives — accessible to workers, journalists, academic researchers and others.
Some are decades old, composed on manual typewriters; others are contemporary. Combined with journalism from the Center — such as today’s story on a $36 million benzene research program undertaken by the petrochemical industry — and articles and papers from Columbia and CUNY faculty and students, the archives will shed light on toxic substances that continue to threaten public health.
The benzene documents are just the start. In coming months, we’ll be posting hundreds of thousands of pages of discovery material from lawsuits involving lead, asbestos, silica, hexavalent chromium and PCBs, among other dangerous substances. And we’ll be on the lookout for other documents. The inspiration for the project came when we realized that in CPI’s reporting on environmental and workplace issues, we routinely obtained reams of court documents. Often, these documents hold secrets found nowhere else.
Last year we reached out to William Baggett Jr., a lawyer in Lake Charles, Louisiana, who had acquired more than 400,000 pages of documents from a decade-long case against manufacturers of vinyl chloride, a cancer-causing chemical used in plastics. Baggett agreed to give us all of them.
At the same time, public health historians Merlin Chowkwanyun, David Rosner and Gerald Markowitz were collecting court documents to create a public database and had approached Baggett. We decided to collaborate. Chowkwanyun is currently a Robert Wood Johnson Foundation Health & Society Scholar at the University of Wisconsin-Madison, and will be an assistant professor of sociomedical sciences at Columbia next year. Rosner is Ronald Lauterstein Professor of Sociomedical Sciences and History at Columbia. Markowitz is a professor of history at the City University of New York. Both Rosner and Markowitz have served as expert witnesses in a number of major cases related to these documents and have written Deceit and Denial: The Deadly Politics of Industrial Pollution and other books and articles based on them.
This is not the first database of its ilk. The University of California, San Francisco, maintains a massive collection of documents from tobacco-related lawsuits called the Legacy Tobacco Documents Library, which exceeds 80 million pages.
Our database allows you to search for a word, combination of words or an exact phrase in any of the documents. You can also:
Each document will include the court case from which it came, including the case title, case number, court as well as date filed and date terminated. The original complaint for each lawsuit is also part of the database.
Soon, we will make available a robust set of text-mining tools that will allow researchers to construct chronologies of documents; generate lists of common words, phrases and names; and sort documents in a number of ways. Qualified researchers will also have access to an even larger set of documents that will eventually contain millions of pages.
Robert Proctor, a professor of the history of science at Stanford, has used the UCSF tobacco archive extensively to do research for several books. He called it “an unparalleled treasure” that gives researchers the ability “to look through the keyhole of the mansion of this hidden world and see [corporate officials’] private thoughts, their intent, their ruminations, their jokes, their plans, how they treat their workers, how they treat the public…”
Proctor said he sees value in a similar archive on toxic chemicals. “The internal records of the chemical industry are known only to a tiny group of lawyers and journalists,” he said. “This is going to create a new kind of democracy of knowledge. It also will set the stage for whistleblowers to come forward with documents.”
That’s our hope. The search interface includes options to send us documents or contact us. The ultimate goal, to borrow Proctor’s phrasing, will be to give users “a strong magnet to pull rhetorical needles out of archival haystacks.”
The Center for Public Integrity, along with researchers from Columbia University and the City University of New York, on Thursday posted some 20,000 pages of internal oil and chemical industry documents on the carcinogen benzene.
This archive, which will grow substantially in 2015 and beyond, offers users a chance to see what corporate officials were saying behind the scenes about poisons in the workplace and the environment.
Here are 12 examples of what the petrochemical industry knew about benzene; the impetus behind industry-sponsored science; and the corporate spin that often occurs when damning evidence against a chemical threatens companies’ bottom lines.
What the industry knew:
Motivations for industry involvement in research:
Attention shoppers: After today, for those whose employers don’t offer health insurance, there will only be seven shopping days left for coverage that starts on January 1, 2015.
December 15 is the last day you will be able to pick an Obamacare plan if you want to be insured beginning New Year’s Day. If you’re like most folks, you’ll wait until close to the deadline to make a choice.
Don’t be like most folks.
If you don’t give yourself enough time to sort through the options available to you, you might wind up paying your insurance company a lot more than necessary — which is exactly what a lot of my former colleagues in the business are hoping for.
Insurance company executives have spent millions of dollars persuading us — and the people we vote for — that what we crave is more “choice and competition.” They even bankrolled a group called the Choice and Competition Coalition, which is little more than a public relations and lobbying outfit designed to protect the profitable status quo for health insurers. They do so by making sure certain members of Congress don’t even think about giving us the choice and competition that would really make difference.
That would be the choice of a government-run “public option” to compete with private insurance companies. Insurers spent millions of dollars on lobbying and campaign contributions in a successful effort to strip the public option from the bill that became the Affordable Care Act.
In my 20 years in the insurance industry, I never met anyone who said they were looking forward to picking a health plan. There’s a good reason for that. Trying to figure out what’s best for yourself and your family can be bewildering. Even with my background in the insurance world, I would rather have a root canal than sit in front of a computer for hours trying to determine which plan offers the best value.
Industry statistics show that once people make a decision, they’ll stay with the same plan for years, even if there are other plans available to them that would cost less and provide better coverage. Why? We don’t enjoy the process because we’re not educated consumers of insurance. We don’t really know what we’re doing or what we’re buying. Polls have shown that large percentages of Americans don’t even have a grasp of basic insurance terms and concepts.
That was borne out by a study released in October by The Robert Wood Johnson Foundation and the Kaiser Family Foundation. The researchers described insurance literacy barriers as “huge” for most Americans.
Of the millions of people who enrolled in Obamacare plans last year, “many…didn’t understand basic concepts like how a deductible works or why premiums must be paid every month,” the researchers wrote. “Many consumers also had trouble understanding (Affordable Care Act) premium and cost sharing subsidies.”
Knowing this, the Obama administration last week pleaded with folks who will be returning to the marketplace this year to shop around. Chances are good they can save money and get better coverage if they do.
Last year, some insurers offered policies with relatively low premiums to attract customers in a practice known in the industry as “buying market share.” This year, those insurers are hitting their customers with hefty rate increases. An example is Blue Cross Blue Shield of Tennessee, which grabbed 88 percent of the Obamacare market in the Volunteer State with rates considerably lower than its competitors.
Hardly more than six months into the year, the insurer filed documents with state regulators saying it planned to raise rates by an average of 19 percent for its exchange plans for 2015. The insurer couldn’t possible have had enough claims data by July to know for sure that it would need to jack rates up that much, but it wanted to be certain its Obamacare business would be profitable next year.
Even with that kind of an increase, chances are great that the insurer’s Obamacare members will simply renew their coverage without shopping for a better deal with another company.
The Obama Administration said in a report last week that more than 70 percent of people who bought coverage on their state exchanges last year can find a health plan for 2015 that offers the same level of coverage at a lower premium and that 80 percent could find a plan with monthly premiums lower than $100 after subsidies are factored in.
While that sounds like great news, shoppers beware. Plans with the lowest premiums often provide inadequate coverage for a lot of people, especially those who have to take expensive medications and go to the doctor frequently. The bronze plans have considerably lower premiums than the gold and silver plans, but the deductibles are typically much higher.
For 2015, the average deductible for a bronze plan for an individual will be almost $5,200. That means that you’d have to spend that much money out of your own pocket before your insurance coverage kicks in.
One of my biggest complaints about Obamacare, aside from the fact that insurers killed the public option that was once a part of the bill, is that it forces us to gamble with our health and our finances. And most of us are just not insurance literate enough to make the best choices.
Wendell Potter is the author of Deadly Spin: An Insurance Company Insider Speaks Out on How Corporate PR is Killing Health Care and Deceiving Americans and Obamacare: What’s in It for Me? What Everyone Needs to Know About the Affordable Care Act.
ATHENS, Georgia — It was December 29, 1998, six years after Jill McElheney and her family had moved next to a cluster of 12 petroleum storage tanks. Jill was escorting her son Jarrett, then 4, to the doctor again. He had spent the day slumped in a stroller, looking so pale and fatigued that a stranger stopped her to ask if he was all right.
It was an encounter Jill couldn’t shake. For the previous three months, she had noticed her once-energetic preschooler deteriorating. He complained of pain in his knee, which grew excruciating. It migrated to his shoulder and then his leg. His shins swelled, as did his temples. At night, Jarrett awoke drenched in sweat, screaming from spasms. Jill took him to a pediatrician and an infectious-disease specialist. A rheumatologist diagnosed him with anemia.
Now, as Jarrett lay listless, Jill found herself back at the pediatrician’s office. Tests confirmed a blood count so low that she was instructed to get him to an emergency room immediately. Within hours she was at a hospital in Atlanta, some 65 miles from her home in Athens, watching nurses rush in and out of Jarrett’s room. Doctors identified a common form of childhood leukemia. “I heard the words,” Jill recalled, “and I only knew the bald heads and the sadness.”
In the waiting room, family members heard more unsettling news: A neighbor’s child also had developed leukemia.
Days later, Jarrett’s doctor penned a letter to federal environmental regulators about the two cancer patients, highlighting their “close proximity” to Southeast Terminals, a group of 10,000-gallon tanks containing gasoline, diesel and fuel oil.
“Could you please investigate,” the doctor wrote, “whether high levels of chemicals could have contaminated the water, possibly contributing … to the development of leukemia?”
Only then did the McElheneys consider the possibility that living beside one of the nation’s 1,500 bulk-oil terminals — known sources of cancer-causing benzene — had triggered their son’s leukemia.
“It was one of those light-bulb moments for us,” said Jeff McElheney, Jarrett’s father. “You never get over it.”
New battlefront for industry
Jarrett McElheney does not represent the standard benzene plaintiff. He’s not among the hundreds of thousands of people who toil in American oil refineries or other workplaces contaminated with the chemical and run the risk of developing leukemia. In the rancorous world of toxic-tort litigation, he stands virtually alone. A lawsuit filed by his parents in 2011 against Southeast Terminals owners BP and TransMontaigne is among a relatively few alleging leukemia caused by environmental benzene exposure. Among these, the McElheney case is rarer still: Most have hinged on adult leukemia.
Yet the case may signal an emerging quandary for the petrochemical industry, according to tens of thousands of pages of previously secret documents that have come to light in lawsuits filed against benzene manufacturers and suppliers on behalf of those who suffered from leukemia and other blood diseases, including Jarrett McElheney.
Internal memorandums, emails, letters and meeting minutes obtained by the Center for Public Integrity over the past year suggest that BP and four other major petrochemical companies, coordinated by their trade association, the American Petroleum Institute, spent at least $36 million on research “designed to protect member company interests,” as one 2000 API summary put it. Many of the documents chronicle a systematic attempt by the petrochemical industry to influence the science linking benzene to cancer. Others attest to the industry’s longstanding interest in topics such as childhood leukemia.
“A number of publications in the last few years have attempted to link increased risks of childhood leukemia with proximity to both petroleum facilities and local traffic density,” another 2000 API memo warns. “Although these publications have had little impact to date, the emphasis on ‘Children’s Health’ may cause these concerns to resurface.”
“This is indeed a battlefront for the oil industry,” said Peter Infante, a former director of the office that reviews health standards at the Occupational Safety and Health Administration, who has studied benzene for 40 years and now testifies for plaintiffs in benzene litigation. He has worked on a handful of cases involving children sickened by leukemia.
“It’s in the industry’s economic interests to refuse to acknowledge the relationship between benzene and childhood leukemia,” Infante said.
In May, in a sign of the chemical’s continuing threat, the U.S. Environmental Protection Agency estimated that 5 million Americans — excluding workers — face heightened cancer risks from benzene and 68 other carcinogens spewed into the air by the nation’s 149 oil refineries. The EPA has proposed a rule that would require refinery operators to monitor for benzene, in particular, along their fence lines.
Aimed at curbing “fugitive” emissions from equipment leaks and similar releases, the proposal would set a fence line limit for benzene of 3 parts per billion — a fraction of the 10 ppb the agency recommends as the maximum chronic exposure level for the chemical.
Industry groups are pushing back. In written comments, the API’s Matthew Todd called the proposal “a major and significant Agency action [that] will dramatically increase the paperwork and recordkeeping burden on refineries. It includes several precedent-setting proposals, will cost our industry hundreds of millions of dollars per year, increase safety risk [and] may impact fuels production and cost …. Production outages will likely occur.”
The EPA also heard from the people the rule is designed to protect. “We live near a refinery, and as a result my son can’t breathe,” a woman from Fontana, California, wrote in Spanish. “My cousin had respiratory problems while living near a refinery for more than 10 years,” a woman from Houston wrote, also in Spanish. “Unfortunately, he died 2 years ago from bone cancer. We believe this was a result of the ambient air where he lived.”
In June, California officials lowered the long-term exposure level for benzene from 20 ppb to 1 ppb — among the lowest in the country — setting the stage for further emissions cuts at refineries and bulk-oil terminals in that state. Officials say such regulatory actions aim to protect children, who are more susceptible to benzene’s toxic effects than adults because their cells aren’t as developed. California is considering classifying benzene not just as a human carcinogen, but as a “toxic air contaminant which may disproportionately impact children.”
“The fact that benzene impacts the blood-forming organs when you’re a developing child is a big deal,” said Melanie Marty of the state’s Office of Environmental Health Hazard Assessment.
Jill McElheney agrees. A warm, garrulous mother of five who has schooled herself in the health effects of pollution, she has spent the past 16 years seeking the cause of her son’s leukemia. She has filed open-records requests and contacted state and federal agencies, piecing together a history of gasoline spills and diesel-fuel leaks at Southeast Terminals. She can cite endless details about lingering benzene contamination on terminal property — extensively catalogued in state enforcement files — located “a stone’s throw away” from the trailer park where her family lived for seven years.
Now vacant and overgrown with brush, the former site of the Oakwood Mobile Home Park lies across a residential street from Southeast Terminals, its tanks rising above a thicket of pines and oaks. All day, every day, trucks drive in and out of the facility’s gates, filling tankers with gasoline and other products.
What can’t be seen is the plume of benzene that has worked its way into the groundwater beneath the tanks. “It’s not like Cancer Alley, with smokestacks belching crap in your face,” Jill said. “It’s hidden — literally.”
When she and Jeff moved to Oakwood in 1992, they saw the 14-trailer community as something of an oasis — quiet, tight-knit. Nestled under shady trees, near churches and schools, it seemed like the perfect location. Even the park’s water supply, drawn from an unpermitted well dating back decades, appeared idyllic: Its pump house served as a beacon on park property, visible for all to see — including, court depositions later confirmed, terminal employees.
“We saw Oakwood as an opportunity,” recalled Jeff, a mustachioed, genial man who operates a roofing company and managed the park for his father, its previous owner.
Jarrett arrived two years later and, by his fourth birthday, had grown into an adventurous boy with an abiding love of water. His parents remember him splashing in the tub for hours. Often, he swam in an inflatable pool in their yard, dressed in what he called his “little blue [wet] suit.” He slurped on Kool Aid and popsicles made from well water whose purity his parents never questioned — until his 1998 diagnosis of acute lymphocytic leukemia, or ALL, a form of the blood cancer found overwhelmingly in children.
Within days of hearing the news, Jarrett’s parents tested their water. Samples from the Oakwood well revealed a brew of such chemicals as carbon tetrachloride and 1,2-dichloroethane, sparking a state investigation. The Georgia Environmental Protection Division (EPD) found benzene in the water of Oakwood’s well at levels up to 13 ppb — 26 times higher than the federal safety standard. In response, the agency shuttered the well and connected residents to public water.
Over the next year, state geologists worked to identify the contamination’s source. They dug monitoring wells and collected soil samples. Their initial investigation linked at least one pollutant in the park well — not benzene — to nearby abandoned grain silos. Geologists eventually eyed Southeast Terminals as a likely source of the benzene contamination, records show.
“The terminals are certainly suspects for the benzene detected in the [Oakwood] well,” one posited in a 2000 email. “The probable path is deep ground water.”
Another noted the presence of “a possible plume (with benzene) moving by Oakwood … and within a few hundred feet of the [park]’s former well, [thus] too close for comfort for a public-water supply well.”
Two years later, EPD investigators were still documenting high levels of benzene, ranging from 8,000 to 12,000 ppb, on terminal property — as well as the likelihood that, one 2002 EPD memorandum states, “the benzene contamination found in the trailer park well came from the Southeast Terminals.”
Ultimately, though, the state’s two-year, nearly $200,000 investigation yielded few answers. By 2008, groundwater monitoring results revealed only trace amounts of benzene at Oakwood. Today, EPD officials say they lack definitive proof tying the well’s benzene pollution to any source.
For Jill McElheney, the outcome of the inquiry was anything but satisfying. “It just seems to me that when you’ve got benzene in a well and a major source of it next door, you’d make the connection,” she said.
In fact, Jill already had been seeking answers elsewhere. In 2000, she turned to the federal Agency for Toxic Substances and Disease Registry, or ATSDR, petitioning it for a public health assessment. Instead, the agency launched a less-thorough public health consultation, meant to ascertain the risk to human health posed by the contaminated well water at Oakwood.
The results brought little clarity. In a 2001 report, the ATSDR determined that “the groundwater contaminant plume” initially sampled in the Oakwood well “is a public health hazard.” At the same time, it singled out a pollutant other than benzene as the threat. For benzene, the agency found that “the likelihood someone would get cancer as a result of their exposure is very low.”
In a 2000 draft filed with the state, however, the ATSDR concluded that the highest concentrations of benzene in the water were of concern. “This risk DOES exceed an acceptable risk level,” the draft states, “and may result in an elevated risk of cancer for exposed individuals.”
An ASTDR spokeswoman did not respond to requests for comment.
Mounting evidence on benzene and leukemia
The science linking benzene to cancer — particularly leukemia, in all its forms — has preoccupied the petrochemical industry for more than half a century. As far back as 1948, the API’s toxicological profile of the chemical discussed “reasonably well documented instances of the development of leukemia as a result of chronic benzene exposure,” cautioning that “the only absolutely safe concentration … is zero.”
Later, as scientific evidence of benzene’s hazards accumulated and regulatory limits on workplace and environmental levels tightened, the industry took a different stance. By 1990, the API and member companies such as BP, Chevron, Mobil and Shell had launched a research program meant to keep further restrictions at bay — or, minutes from an API meeting in 1992 state, research “that will be most useful in improving risk assessment and influencing regulation.”
Within months, the API task force overseeing the program was enumerating “developing issues.” Topping its list, according to minutes from a meeting in 1993, was this notation: “link to childhood leukemia?”
That possible link appeared on the industry’s radar again in 2000, documents show. At the time, API representatives were drumming up financial support for an unparalleled study of workers exposed to benzene in Shanghai, China, delivering what amounted to a sales pitch for the project. They touted what one 2000 API overview described as its “tremendous economic benefit to the petroleum industry” — helping to combat “onerous regulations” and “litigation costs due to perceptions about the risks of even very low exposures to benzene.” Childhood leukemia was mentioned explicitly.
Five years later, industry representatives grew concerned enough to bankroll their own research. Documents show the API task force approved funding for what minutes of one meeting in 2005 dubbed a “benzene regulatory response,” comprising a “childhood leukemia review” and “child-to-adult sensitivity to benzene” analysis, for a total of $30,000.
By then, the scientific evidence on benzene and leukemia in adults was well-established. Throughout the 1960s and early 1970s, studies of Italian shoe and leather workers indicated a relationship between the chemical and the cancer. Then, in 1977, the National Institute for Occupational Safety and Health, part of the Centers for Disease Control and Prevention, launched a seminal study of two Goodyear plants in Ohio that made Pliofilm, a thin rubber wrap. The research quantified for the first time the leukemia risk for workers exposed to benzene, prompting OSHA to work on a stricter standard that took effect in 1987.
In years since, the science has solidified. Recent research has shown lower and lower levels of the chemical — less than the OSHA limit of 1 part per million — can cause leukemia as well as other blood and bone marrow disorders.
By contrast, experts say, the research on benzene and childhood leukemia isn’t as conclusive. Multiple studies have indicated that children whose mothers were exposed to benzene-containing solvents during pregnancy experience elevated risks of developing the disease. Others have shown that children living near gas stations or highways — breathing in benzene in the air — face heightened risks. One 2008 study reported a significant spike in the rate of the disease in Houston neighborhoods with the highest benzene emissions.
Taken together, the nearly four dozen publications on the topic strongly suggest the carcinogen can cause leukemia as much in children as adults, experts say.
“Children aren’t another species,” said Infante, the former OSHA official who has reviewed the scientific literature for medical associations and governmental agencies. “If benzene causes leukemia in adults, why wouldn’t it cause leukemia in children?”
The scientist behind the API-commissioned analysis would likely disagree. In 2009, David Pyatt, a Colorado toxicologist with long-standing ties to the petrochemical industry, published a journal article about his review, in which he reported examining 236 studies on the relationship between benzene and childhood leukemia. Many of the studies suggesting a link “suffer from the same limitations,” he concluded, such as poorly quantified exposure estimates.
“At this point,” Pyatt wrote, “there is insufficient epidemiologic support for an association or causal connection between environmental benzene exposure … and the development of childhood [leukemia].”
Some say the review reflects a common industry tactic: Compile studies on a subject, and then shed doubt on each one by claiming the data aren’t good enough.
Pyatt did not respond to repeated emails and phone calls from the Center seeking comment; nor did the API.
In depositions, Pyatt acknowledged that he has never testified for a plaintiff in a benzene exposure case. He has worked as a consultant and defense expert for such petrochemical giants as BP, ConocoPhillips, ExxonMobil and Shell, he has said; the API has financed additional work of his on benzene, as has the American Chemistry Council, the chemical industry’s main lobby.
In a deposition taken last year, Pyatt said he wouldn’t discount benzene’s link to childhood leukemia — at least, not to acute myeloid leukemia, or AML, a type rarely found in children.
“There is no reason to think that [children] are going to be protected,” he testified. “So I would certainly think that a child can develop AML if they are exposed to enough benzene.”
In other depositions, Pyatt has conceded no link between benzene and ALL, the type that attacked Jarrett McElheney.
‘They have to stop this practice’
For the McElheneys, the extent of the benzene contamination from Southeast Terminals only came to light years after Jarrett’s chemotherapy regimen had beaten back his leukemia. Yet state and federal enforcement records pinpoint on-site releases of the chemical in 1991, a year before the family moved to the area. At the time, managers of the terminal — jointly owned and operated by BP and Unocal Corp. — discovered a leak of diesel fuel seeping through soil where an underground pipeline was buried.
Terminal employees removed 40 cubic yards of “petroleum contaminated soils,” according to a report filed by BP with the state, and recorded benzene on site at levels as high as 81 ppb. Groundwater samples showed even higher concentrations: 12,000 ppb.
State regulators found such pollution “exceeds our ‘trigger’ levels,” a 1991 letter to the company states, and requested further action.
Under Georgia law, the company was required to develop what the EPD calls a “corrective action plan,” which, among other things, would have delineated the terminal’s benzene plume, as well as identified nearby public water wells.
In a 1991 reply, BP promised the EPD it would file its plan in four months.
Nine years later — after the McElheneys had tested their well water and the EPD had issued a 2000 citation against BP for failing to submit a “timely” corrective action plan — the company finally carried out that requirement, records show.
BP, in charge of the terminal’s daily operations, declined to comment for this article. At different times, Unocal, Louis Dreyfus Energy and TransMontaigne have been BP’s partners at the site. TransMontaigne, its current partner, did not respond to repeated emails and phone calls. TransMontaigne purchased Louis Dreyfus Energy in 1998. Chevron, which merged with Unocal in 2005, declined to comment.
Today, state regulators attribute their own delay in cracking down on the diesel leak to an internal debate over which EPD division had authority over the terminal’s benzene contamination — its underground storage tank program, which has purview over the pipeline; or, its hazardous waste branch. For years, compliance officers in that branch, along with their counterparts at the EPA, had been monitoring the facility’s practice of dumping benzene-laced wastewater on site — a practice later confirmed by terminal employees in court depositions.
In 1990, the EPA issued new rules classifying benzene as hazardous waste and requiring bulk-oil terminals to have permits for discharging the “bottoms water” in petroleum tanks. This wastewater can become tainted by the chemical when mixed with gasoline. Rather than treat the water, Southeast Terminals funneled it through an “oil/water separator” to skim off fuel, and then dumped it into a ditch on the ground.
Company records at the time show that terminal supervisors admitted they drained the wastewater “direct into streams” or “a dike area which eventually drains offsite into a stream.”
“I remember thinking, ‘They have to stop this practice,’” said John Williams, an EPD environmental specialist who inspected the terminal in 1993 and documented the dumping.
Three months later, the EPD issued a notice of violation against Southeast Terminals, forcing supervisors to test the bottoms water. Regulators found benzene at levels four times greater than the legal limit of 0.5 ppb, prompting the EPA to take action.
“We saw an issue there,” said Darryl Hines, of the EPA’s regional office in Atlanta, explaining why officials initiated a 1997 civil enforcement action against the facility.
In its complaint, the EPA accused BP and then-partner Louis Dreyfus Energy of violating federal hazardous-waste law — disposing waste without a permit, and failing to categorize it as hazardous. The agency ordered the companies to shut down the oil/water separator, and implement a plan addressing “any groundwater contamination.”
By the time Jarrett developed leukemia a year later, the EPA had negotiated a settlement with the companies and laid out a series of requirements for cleaning up the benzene. Without admitting fault, BP and Louis Dreyfus agreed to spend at least $100,000 to remove leaking underground pipelines and install above-ground infrastructure. They also paid a penalty of $15,000.
When BP finally filed its long-delayed action plan, it revealed the presence of what EPD project officer Calvin Jones described as a “dissolved hydrocarbon” plume containing benzene — “a bigger problem than we had thought.” The chemical, concentrated at 500 ppb and counting, had spread beyond the immediate spill areas. Of greater concern to regulators, the plan identified “free product” in groundwater.
“There was actually gasoline floating on the water,” explained Jones, of the EPD’s underground storage tank program, who oversaw the facility’s protracted cleanup. Referring to gasoline’s ability to dissolve in water, he said, “You can’t get higher concentrations of benzene … than free product.”
Despite a decade-long cleanup — 35.2 million gallons of contaminated groundwater and 1,009 pounds of benzene were collected — the chemical still saturates much of the nearly 19-acre Southeast Terminals site, records show. Last year, the EPD issued a letter declaring “no further action required,” which released the companies from remediation. At the time, the state-sanctioned benzene count remained at 1,440 ppb.
Over the years, enforcement records show, company consultants and regulators alike have tried to trace the path of the wastewater at the terminal. One company analysis details a trail beginning at the property line and then spilling into adjacent woods before hitting a tributary. Another document, produced by the EPA, depicts the discharge as moving offsite through woods and into a resident’s backyard.
“It’s where the drainage flows,” said Jeffrey Pallas, deputy director of the agency’s hazardous waste division in Atlanta, who oversaw the case against BP and Louis Dreyfus, explaining that the document, complete with photographs, was only intended to verify the hazardous-waste law violations.
“We cannot substantiate from the documentation we have that the benzene left the site,” he said.
The McElheneys have seen the evidence they need to connect Southeast Terminals to the benzene in the Oakwood well — and Jarrett’s suffering. They believe all the state and federal enforcement actions have yielded few consequences for the facility’s owners. If Jarrett hadn’t gotten sick, they say, they might never have known about the benzene hazard. “The companies would have paid off their small fines,” Jill said, “and nobody would have been the wiser.”
Seeking some accountability, the family filed a lawsuit three years ago against BP, TransMontaigne and seven other previous owners, alleging that the “illegal discharge and release of toxic chemicals” at Southeast Terminals contaminated the surrounding environment and caused Jarrett to develop leukemia.
In court filings, the companies denied the allegations and dismissed any link between benzene and childhood leukemia. Last year, defense lawyers invoked a familiar tactic: They cited the Pyatt review to support their claims that the chemical couldn’t have caused Jarrett’s illness. The family recently has agreed on a settlement in principle and is working toward resolving the litigation.
“I thought, ‘This is par for the course,’” said Jill, who has read some of the industry documents uncovered by the lawsuit. “The oil industry has fought regulations and lawsuits for workers and adults. Now they’re going to do it with children.”
Jarrett is now a slight, reserved 20-year-old in remission. He remembers his bout with leukemia through a child’s eyes — the “really cool” ambulance rides, the nurses with coloring books, swinging golf clubs in hospital hallways. “I remember being stuck over and over again by needles” while getting a bone-marrow aspiration or a chest catheter or countless blood draws, he said. “But it wasn’t until much later I realized what happened to me didn’t happen to other kids.”
Today, he has had to grapple with cancer’s lasting effects — the feebleness, and the fatigue — as well as its lingering fears. As a leukemia survivor, he is at risk for developing osteoporosis, cataracts, or even another cancer. Sitting in an Olive Garden in Athens, sandwiched between his parents, Jarrett came across as exceedingly shy, uncomfortable in the limelight. Often, his parents did the speaking for him.
Moments earlier, Jill had explained how leukemia had changed her son, taken an emotional toll.
“He had a really loud voice as a toddler but that voice has mellowed,” she said. “I’ll take that voice over anything.”
Maryam Jameel contributed to this story.
A scientist with deep ties to the chemical industry is one of two finalists to lead the office at the U.S. Environmental Protection Agency that determines which chemicals can make people sick, and in what doses.
Michael Dourson is being considered to direct the Integrated Risk Information System (IRIS), whose scientific reports are used by the EPA and states to draft regulations to rid air, water or soil of toxic chemicals.
Dourson runs his own nonprofit consulting group, Toxicology Excellence for Risk Assessment, or TERA, which does substantial work for chemical and drug companies. TERA maintains a database of chemicals as an alternative to IRIS. It includes data typically showing the chemicals at low doses are safer than the EPA says.
The other finalist is Vincent Cogliano, the acting director of IRIS and previously the manager of chemical assessments at the International Agency for Research on Cancer, part of the World Health Organization.
The chemical industry has long accused the EPA of exaggerating the harm done by chemicals in its scientific assessments. Because of intense pressure from the industry over the past 20 years, the IRIS program has averaged only five assessments a year, even though the EPA once said it needed to complete 50 a year to do its job properly.
In 2008, the Government Accountability Office reported that the IRIS database of toxic chemicals was updated so infrequently that it was in danger of becoming obsolete.
The Obama administration has failed to increase the number of IRIS assessments, largely because of pressure from Congress and lobbying by the chemical industry. Assessments that have been delayed for more than a decade include those for cancer-causing chemicals such as arsenic, formaldehyde and hexavalent chromium.
Dourson left the EPA in 1994 to start TERA, based in Ohio. The group’s website notes that 63 percent of TERA’s revenue in 2013 came from government agencies and nonprofits, such as the Consumer Product Safety Commission. The rest came from for-profit companies.
Among his clients in recent years have been two major trade associations, the American Chemistry Council and the American Petroleum Institute.
In an interview with the Center for Public Integrity, Dourson declined to discuss the EPA job. However, he said TERA is not slanted toward industry.
"Our motto was we were going to be neutral," Dourson said. "And we were going to seek work equally from government and industry and importantly, we were going to build collaborations"
Dourson has been harshly critical of the IRIS program. In written testimony before a House subcommittee in 2009, he said, “The single, most intense, frustration on the IRIS process, made by many erudite scientists, both inside and outside EPA, is that EPA's IRIS staff will not listen to, or is not capable of understanding, their scientific comments.”
Dourson has advocated having IRIS scientists collaborate with other scientists both inside and outside the EPA to do their chemical assessments.
A group of environmental scientists and public-health advocates, led by Kathleen Burns of the consulting firm Sciencecorps, wrote EPA leaders after finding out that Dourson was a finalist.
"We hope that the Agency will keep its mission 'to protect human health and the environment' clearly in focus in this and coming years when choices are made regarding the leadership of essential programs such as IRIS,” the scientists wrote. “We need objective high quality science to protect our air, water, soil, food and the health of our people."
Rosalind Adams of the Center for Public Integrity and Lisa Song of InsideClimate News contributed to this story.
PEARSALL, Texas — During their careers as oil and gas inspectors for the Texas Railroad Commission, Fred Wright and Morris Kocurek earned merit raises, promotions and praise from their supervisors.
They went about their jobs — keeping tabs on the conduct of the state’s most important industry — with gusto.
But they may have done their jobs too well for the industry’s taste — and for their own agency’s.
Kocurek and Wright, who worked in different Railroad Commission districts, were fired within months of each other in 2013. Both say their careers were upended by their insistence that oil and gas operators follow rules intended to protect the public and the environment.
The incidents Kocurek and Wright describe offer an inside look at how Texas regulates the oil and gas industry, a subject InsideClimate News and the Center for Public Integrity have been investigating for more than a year and a half.
The investigation has found that the Railroad Commission and its sister agency, the Texas Commission on Environmental Quality, focus more on protecting the industry than the public, an approach tacitly endorsed by the state’s political leaders. The Railroad Commission is controlled by three elected commissioners who, combined, accepted nearly $3 million in campaign contributions from the industry during the 2012 and 2014 election cycles, according to data from the National Institute on Money in State Politics. Gov. Rick Perry collected a little less than $11.5 million in campaign contributions from those in the industry since the 2000 election cycle. The governor-elect, Attorney General Greg Abbott, accepted more than $6.8 million.
Wright’s job with the Railroad Commission was a particularly important one.
The commission issues permits for oil and gas wells, and Wright spent much of his time inspecting newly built wells and determining whether they were safe enough to become operational. Shoddy well construction is considered a primary cause of groundwater contamination at drilling sites. His job also included making sure decommissioned wells were properly plugged with cement, so residual oil and gas didn’t pollute groundwater.
Wright was known as a stickler for regulations. One industry executive complained that Wright returned unapproved applications “dripping in red pen.”
Wright said he was often encouraged to bend the rules.
In a July 2013 complaint he filed with the commission to protest his firing, he said his superiors told him to say “operators had complied with certain rules when they had not.” According to a letter his attorney wrote to the U.S. Department of Labor, he was “threatened, intimidated, and coerced into not requiring operators to comply with the rules and laws with which the RRC is charged with enforcing.”
Kocurek’s primary job was to enforce another Railroad Commission mandate: Making sure the industry’s often-toxic waste was disposed of properly. Kocurek said his bosses never directly told him to go easy on the industry but made it clear that’s what they wanted. He said they were slow to process the violation notices he issued and sometimes assigned follow-up investigations to more lenient inspectors.
The Railroad Commission declined to comment on the men’s dismissals. Spokeswoman Ramona Nye said the agency doesn’t discuss personnel issues.
Wright, 64, and his attorney declined to be interviewed for this article because of his pending litigation, but hundreds of pages of records released under the Texas Public Information Act provide details about the deterioration of his career. Wright has filed a civil lawsuit alleging wrongful termination. He has also filed a federal whistleblower complaint.
Kocurek, 61, hasn’t taken any legal action. He said he prefers to forget about his 18-month stint with the Railroad Commission.
Several of the accounts Kocurek shared in interviews for this report were corroborated by documents obtained from the Railroad Commission through the open-records requests and by Deputy Sheriff Hector Zertuche, the environmental crimes officer for Jim Wells County, who often worked alongside Kocurek. A U.S. Fish and Wildlife officer corroborated another account.
Kocurek said he realized soon after he was hired that the industry held great sway with the commission: Phone calls were made, and violations disappeared.
“It didn’t take long to see what was happening,” he said. “Go through the motions, but don’t really do your job. That’s what everybody wanted.”
‘Operators complain that you are unreasonable’
Wright joined the Railroad Commission in 2007 with an impressive résumé: a bachelor’s degree in engineering, post-graduate training in petroleum engineering and more than a decade of experience with the oil and gas industry and the U.S. Bureau of Land Management.
Year after year, formal performance reviews by his supervisors indicated that the quality and quantity of his work met the commission’s requirements. Never once was a box checked indicating that his work was unsatisfactory or needed improvement.
He was promoted two times and given merit and retention bonuses, according to performance appraisals obtained under an open-records request. His monthly salary increased from $3,541 to $4,325.
Wright’s official performance evaluations for 2007 and 2008 show he met all of the requirements for his job. He got his first promotion in 2008.
In 2009 his work was again rated satisfactory, but a note from his supervisor hinted of trouble.
“Mr. Wright should continue to improve his knowledge of RRC rules and policies and their nuances [when an exception is warranted],” said a note in his evaluation. (The bracketed phrase was in the evaluation.)
In his 2010 evaluation, Wright was praised for “excellent knowledge of RRC rules, regulations and policies.” But again the praise came with a caveat.
"He needs to have a better understanding that there can be and are exceptions to many of them if the circumstances seem to meet the required objective,” the unsigned document said.
In a rebuttal to that evaluation, Wright described how one of his bosses had renewed a permit for a “land farm” over Wright’s objections. A land farm is the term used for a commercial operation where waste from oil and gas extraction is spread on top of the ground.
Wright said the permit should have been denied because samples of the contaminated waste that was to be spread on the land “exceeded the level that would classify the material as hazardous waste,” making it “ineligible for land farming.”
A 2012 evaluation again praised Wright’s knowledge of commission rules but suggested he should “continue to improve relations with operators.”
When industry members complained about Wright, his boss was quick to respond, as reflected in a 2012 email exchange between the operations manager of a company that plugged old wells and Wright’s boss at the time, Charlie Teague.
“Every time we call in to get a variance from Fred he comes up with some very different and costly methods that are not practical for plugging operations,” the operator wrote to Teague. Teague did not respond to an InsideClimate News request for comment.
Teague later sent Wright an email saying Wright would no longer be reviewing that company’s work. Teague and two other commission inspectors would now handle the job, Wright was told. The email offered no explanation for the change.
Wright responded with an email to Teague: “I don’t see any justification for me being excluded [from] handling plugging operations in my areas of responsibility, based on an unsupported claim from a plugging company.”
Teague replied: “I have to allow an operator or plugger a way to appeal when he believes our requirements are unreasonable.”
‘A hard-working and loyal employee’
Landing a job as an inspector with the Railroad Commission was something Morris Kocurek had wanted since he graduated from Florida Atlantic University with a degree in geology. He worked in the industry for a while, then took a job as a prison guard before being hired by the commission in January 2012.
“This is a job I knew I had to earn,” he said in an interview. “And I was going to do the best I could.”
Kocurek apparently flourished in his first year.
“Edwin Morris Kocurek is a hard-working and loyal employee,” said his first evaluation, obtained through an open-records request. “The quantity and quality of his inspections and investigations, especially involving waste haulers, is instrumental in the reduction of the number of oil-based waste spillage on highways.”
In the first 15 months of his 18-month stint with the commission Kocurek earned two merit bonuses that bumped his salary to $3,200 a month. He consistently met the requirements of his job, according to personnel records.
Kocurek often teamed with Deputy Sheriff Hector Zertuche, the environmental crimes officer for Jim Wells County, an area in South Texas about 45 miles from Corpus Christi. Together they’d stake out facilities they suspected of having unpermitted pools of waste. They also used the powers of their separate agencies to cite waste haulers for spilling sludge along roadways.
“I was out there doing my job,” Kocurek said. “They told me to go get ‘em — so I did.”
But Kocurek sensed something was amiss. He said nothing came of many of the violation notices he filed with his office. He was given what he felt were trivial assignments in areas away from where real violations were occurring.
“I was never told straight up to back off. But I was getting the message. They didn’t like my style.”
Zertuche, the sheriff’s deputy, said he, too, noticed the Railroad Commission’s inaction.
“The office was always dragging their feet, not taking action on things Morris reported,” Zertuche said in an interview. “He was reporting these things over and over. The same things, and nothing was happening.”
Kocurek became especially frustrated with a commercial waste facility in Jim Wells County. He said he watched waste haulers back up to the pit and unleash torrents of watery muck. He watched the pit grow bigger every month, despite the numerous reports he wrote about the facility.
“It didn’t seem to matter that they didn’t have the permit for disposing of this kind of material,” Kocurek said. “And it didn’t seem to matter that they were caught doing it.”
Kocurek thinks his downfall came when he pushed hard against another waste disposal pit, where he often saw ducks sitting on top of a berm surrounding a pool of sludge. The facility had a permit for water-based waste, not oil. But Kocurek said the waste was black and sludgy thick. It had an oily sheen on the surface and smelled awful.
“This place was a disaster,” he said. “I went after them. I wrote report after report.”
One of those reports showed the facility hadn’t responded to his notice — issued more than a month earlier — that it needed to remove the oil from its site.
“There has been no visible progress of oil removal,” he said in the April 2012 inspection report.
In several reports he urged the pit operators to safeguard the birds.
"No change in status for birds,” Kocurek wrote in October 2012.
One day he noticed the ducks were gone from the berm. When he went closer, he found dead birds in the oily water.
“When I saw the carcasses floating in the water, I knew I had a way to finally stop what was going on with this place,” he said in an interview.
Kocurek documented the scene with notes and diagrams and called the U.S. Fish and Wildlife Service.
“I did what had to be done,” he said. ”I went to the feds because the commission wasn’t doing anything.”
A Fish and Wildlife special agent collected the bodies of two birds at the site, a redhead duck and a mourning dove. The agent’s supervisor, David Hubbard, said the agent saw a sheen floating on top of a black, soupy pond. He said heavy petroleum odors hung in the air.
Hubbard said Kocurek briefed the agent on the pit’s history and the notices he had issued. “It didn’t look like they had met the deadlines in the notices,” Hubbard said the agent told him.
Forensic tests showed the birds died after becoming coated in sludge, Hubbard said. The pit operators were fined $700—an amount typical for a first offense of this sort—under the Migratory Bird Treaty Act, a federal statute that makes it illegal to kill migratory birds.
Kocurek said his bosses asked him why he had alerted Fish and Wildlife without first getting commission approval, but they didn’t give him an official reprimand. After the federal investigation concluded, they authorized him to close the facility.
He took Zertuche, the sheriff’s deputy, with him the day he put a lock on the gate.
“It was this big ol’ lock with a warning sticker saying it was a crime to tamper with it,” Zertuche said. “We hung that lock on the gate and said ‘Finally, we got the place shut down.’”
Zertuche thinks Kocurek’s bosses didn’t like being backed into a corner by Fish and Wildlife.
“After he called and got the feds on the case, well, I think the commission couldn’t look the other way anymore,” Zertuche said. “They were forced to do something.”
Kocurek and Wright lost their jobs within six weeks of each other in 2013.
About a month after Kocurek padlocked the pit where the birds had died, he was assigned to the hinterlands around Laredo, wide-open expanses of mesquite and cactus where there wasn’t much to do. He said he spent his time doing “Mickey Mouse make-work,” digging though old records for long-abandoned well sites.
It seemed odd, but Kocurek said he didn’t protest.
Then one day he was summoned to the Railroad Commission’s district office in Corpus Christi.
“They said, ‘That’s it. You’re done,’” Kocurek said. “There was no discussion. Just turn in your stuff.”
He handed over the keys to his agency-issued truck, dropped his commission identification on his boss’s desk and walked out the door. A Railroad Commission employee drove him 80 miles to his home in Freer.
Kocurek said he was told he had been terminated “for cause,” a catchall term that allows dismissal for just about any reason.
But a Railroad Commission employee performance form that InsideClimate News obtained through an open-records request described Kocureck as “insubordinate.” It said he refused to submit paperwork when ordered to do so and that he didn’t adhere to the “chain of command” and refused assignments.
On the back of the form is a handwritten note: “This counseling form was not given to Mr. Kocureck, but is being placed in his file.”
When Kocureck was shown the document by InsideClimate News, he disputed the accusations.
Kocurek now works 12-hour shifts as a night watchman guarding the entrance to a drilling patch. He said he uses the quiet time at night to ponder a move to Puerto Rico or maybe Hawaii.
‘Legal and routine’
Wright’s problems peaked in 2013.
In May, a performance counseling form said “unsolicited complaints continue to be received regarding your relationship with operators. Operators report that you are difficult to work with.”
Performance counseling — usually a less-formal review by an immediate supervisor — is separate from annual employee evaluations and is done when a problem arises that needs immediate attention.
The document said Wright was condescending and had “resorted to name-calling,” though no examples were offered.
“Operators complain that you are unreasonable and do not attempt to offer solutions to bring them in compliance with commission rules.”
In his wrongful-termination lawsuit, Wright traces his dismissal to a complaint he filed in February 2013 against Teague, the boss he had clashed with in 2012. In the complaint filed with Gil Bujano, the Railroad Commission’s oil and gas division director, Wright said Teague ordered him to sign off on two new wells that didn’t meet state requirements to become operational.
Wright’s lawyer described the incident later in a letter to the Labor Department. Teague “directed Wright to ‘approve the completion reports,’ banging on Wright’s desk as he gave this direction,” the letter said. “Wright repeatedly complained about being asked to help operators violate Statewide Rules.”
Wright approved one of the wells after the operator agreed to bring it into compliance, according to the letter. He refused to approve the second well.
Wright was told that instead of requiring operators to correct problems before their wells became operational, he should note the deficiencies at the same time he approved the projects, his attorney said. That way the wells could go into production and the operators could fix the problems later.
In a letter the Railroad Commission sent to the Labor Department in response to Wright’s complaint, the agency said Wright should have handled the problem differently, by filing a form that could have allowed the commission to shut the wells down.
The commission has used that tool for decades, said the letter from commission lawyer Jason Boatwright, on hundreds of wells throughout the state. "The Commission did not instruct Mr. Wright to approve inaccurate wellbore completion reports,” according to the letter.
There is no evidence Wright’s complaint resulted in any action against his supervisors. But three months later Wright himself received a stinging rebuke.
The mere fact of complaining “clearly demonstrates your continued resistance to acknowledge constructive guidance from your supervisors,” said the memo Wright received from Bujano. Bujano did not respond to a request for comment.
The Railroad Commission cited one grievance in particular as a reason for Wright’s termination. It was from a former Railroad Commission employee who had gone to work for an oil and gas developer.
“I have not sent in a completion report to the commission for our Central Texas properties that hasn’t had Mr. Wright hold up for some reason,” said the email from Douglas W. Storey of Houston-based Fidelity Exploration & Production Company.
“Dealing with Mr. Wright becomes an effort in futility in that he will not give any operator the benefit of the doubt and considers himself right in all cases.”
Storey said Wright often returned applications “dripping in red pen.”
“Mr. Wright is usually in some form or manner correct but does not realize … that the intent of the rule or order may not be as black and white as he seems to think,” the oil and gas manager said in the email.
Emails obtained under an open-records request indicate that Storey’s complaint wasn’t spontaneous. It was solicited by Ramon Fernandez, deputy director of the commission’s oil and gas field office in Austin on April 16, 2013, seven weeks after Wright filed his formal complaint against Charlie Teague.
“Hi Doug,” Fernandez wrote to Storey. “Please send me your issues with Fred. I have received a couple of others. Want to compile everything. Thx for your help.” The email was signed “Ramon.”
The Railroad Commission wouldn’t comment on Wright’s case, but Boatright’s letter to the Labor Department said Wright had been fired because “he refused to follow legal and appropriate instructions and requests.”
This story is part of an ongoing project by InsideClimate News and the Center for Public Integrity. David Hasemyer is a reporter with InsideClimate News. CPI reporters David Heath and Ben Wieder contributed to this report.
A new leak of confidential documents expands the list of big companies seeking secret tax deals in Luxembourg, exposing tax-saving maneuvers by American entertainment icon The Walt Disney Co., politically controversial Koch Industries Inc. and 33 other companies.
Disney and Koch Industries, a U.S.-based energy and chemical conglomerate, both created tangles of interlocking corporations in Luxembourg that may have helped them slash the taxes they pay in the U.S. and Europe, according to the documents obtained by the International Consortium of Investigative Journalists.
Widespread corporate use of tax maneuvers akin to these, in tax shelters the world over, are estimated to cost the U.S. treasury billions annually. They increase profits and benefit shareholders at the expense of the companies’ home countries and other places where they do significant business.
ICIJ obtained the Disney and Koch tax documents as part of a trove of information that details big companies’ complex financial maneuvers through subsidiaries in Luxembourg. ICIJ received these documents last month, soon after publishing an earlier set of leaked documents detailing the Luxembourg tax deals negotiated by FedEx, Pepsi, IKEA and 340 other globe-spanning companies.
Other companies appearing in the newest leaked files include Hong Kong-based conglomerate Hutchison Whampoa, private equity firm Warburg Pincus, and Internet phone giant Skype. One of the Skype files relates to a restructuring in which Internet mega-marketer eBay sold a controlling stake in Skype to private investors. Skype, based in Luxembourg, is now a division of Microsoft.
“Microsoft adheres carefully to the laws and regulations of every country in which we operate,” the company said in an emailed statement.
The first set of Luxembourg tax deals, published by ICIJ and its media partners on Nov. 5, was arranged through the accounting giant PricewaterhouseCoopers. The latest set of documents reveal that the aggressive tax structures are being brokered not only by PwC but also by Luxembourg-based law and tax firms and the other “Big 4” accounting firms: Ernst & Young, Deloitte and KPMG.
Since the first wave of stories was published by a team of more than 80 journalists around the world, ICIJ’s “Lux Leaks” investigation has sparked swift condemnation and calls for reform in Europe. In the wake of the revelations, Jean-Claude Juncker, the new president of the European Commission, who was prime minister of Luxembourg while many of the controversial tax policies were enacted, survived a no-confidence vote in the European Parliament but saw his leadership questioned.
Juncker has firmly maintained that his home country’s tax practices are legitimate but also admitted after the “Lux Leaks” publications that the system was “not always in line with fiscal fairness” and may have breached “ethical and moral standards.”
Ernst & Young, KPMG, PwC and Deloitte have all declined to answer detailed questions regarding the tax agreements and instead cited their global codes of conduct requiring that their employees comply with the law and behave ethically.
“EY professionals provide independent tax advice to clients in accordance with national and international law,” Ernst & Young spokesman Will Brewster said in a statement emailed to ICIJ. “This includes advice on compliance with tax regulations in the territories in which they operate.”
Ernst & Young’s role
The Disney and Koch files show that both companies, advised by Ernst & Young, engineered complex restructurings that reorder the ownership of many subsidiaries and centralize them under Luxembourg companies that are all served by internal corporate finance companies, akin to a company’s own bank. These internal lenders received interest from affiliated companies channeling hundreds of millions of dollars in profits through Luxembourg between 2009 and 2013 and paid little tax. In some years, the two parent companies’ Luxembourg subsidiaries enjoyed tax rates of less than 1 percent.
“Professional standards, as well as privacy laws, require that EY safeguards confidential client information. We take these obligations very seriously and are therefore unable to comment on individual cases,” Brewster, of Ernst & Young, said in the statement.
“When the money arrives in Luxembourg, taking advantage of an agreement between countries that assumes it will be taxed in Luxembourg, it goes in one of these unusual structures … and it's not taxed very much at all,” Richard Brooks, a former tax inspector in the U.K. and author of The Great Tax Robbery, said about these types of arrangements. Brooks was not speaking about Disney and Koch specifically.
It’s impossible to determine exactly how Disney’s and Koch Industries’ Luxembourg tax deals affected the companies’ U.S. tax bills without seeing their confidential filings to the U.S. Internal Revenue Service.
Several experts consulted by ICIJ, however, said the Luxembourg subsidiaries could help both companies move profits outside the U.S. to lower-tax jurisdictions.
Both sets of “Lux Leaks” files detail confidential tax rulings — also known as “advance tax agreements” or “comfort letters” — from Luxembourg officials that assure companies they will get favorable treatment for their tax-saving maneuvers. The newest leaked documents involve tax deals presented to Luxembourg authorities between 2003 and 2011.
Luxembourg’s tax deals are legal within its borders, but may be subject to challenges if tax authorities in other countries view them as allowing companies to avoid paying their fair share of taxes to them. Under the U.S. tax code, a transaction that cuts a company's tax bill must have a true business purpose or the IRS can disallow the tax benefit.
“Americans are sick and tired of big corporations arranging sweetheart deals with tax havens to dodge their U.S. tax obligations,” said U.S. Senator Carl Levin, D-Mich., who has led investigations and held hearings into corporate tax avoidance, including by Apple and Caterpillar. “It is unfair and unaffordable to let another year pass without eliminating the unjustified corporate tax giveaways that force everyone else to pick up the tab for government services.”
The European Union has been investigating tax deals provided to companies that have established footholds in Ireland, the Netherlands and Luxembourg to see if these countries’ tax deals provided the companies impermissible “state aid” under European Union law.
In the past 15 years Luxembourg has become a hub for some of the world’s largest brands — big companies attracted by rulings that allow them to reduce the landlocked Central European duchy’s corporate income tax rate of 29 percent to little more than zero through financial maneuvers blessed in advance by Luxembourg tax officials. Internal company banks are one way corporations shift profits to Luxembourg in the form of interest payments on intra-company loans. Another way is through royalty payments on intellectual property, which enjoy an 80 percent tax exemption in Luxembourg.
A spokesman for Luxembourg’s Finance Ministry defended the tax ruling practice, saying it’s not unique to his country. Any problem stems from the interaction of tax regimes in multiple countries.
Such interplay “can currently lead to a significant reduction of a company’s tax or even no taxation at all.” While legal, its “legitimacy is put in doubt from an ethical point of view,” he said.
A tax-savings fairyland
Disney and Koch Industries’ Luxembourg structures differ in their specifics, but show common threads.
The Disney tax scheme is laid out in a 34-step advance tax agreement proposed in October 2009 by Ernst & Young. The document shows the corporate parent of Mickey Mouse moving money in circles across the globe while transforming it from cash to debt to equity and back. The copy of the ruling obtained by ICIJ does not bear the stamp of approval of the Luxembourg tax authority. Yet ICIJ was able to verify that the actions outlined in the document took place based on the company’s public filings in Luxembourg.
Disney’s Luxembourg offices are set up in a way that could allow the entertainment giant to move profit away from countries with high corporate taxes like France and Germany.
Disney’s Rube Goldberg-like series of equity transfers gathered ownership of at least 24 of its subsidiaries in France, Italy, Germany, the U.K., Australia, the Cayman Islands and the Netherlands under the umbrellas of two newly created companies in Luxembourg, the new documents show.
At the center of the new structure is a third company, a finance arm initially called Wedco Participations SCA.
The internal bank made loans to many of the subsidiaries at high interest rates, draining profits from those companies that were often in high-tax countries back to Luxembourg in the form of interest payments. In addition, a Cayman Islands subsidiary, which legally owns at least 16 Disney companies in Europe and Australia, sent its profits to Luxembourg in the form of annual dividends.
The Luxembourg internal lender, whose name was later changed to Wedco One (Luxembourg) S.à.r.l. Participations SCA, reported profits for the four years ending September 2013 of more than €1 billion and paid €2.8 million in income tax in Luxembourg, according to the companies’ public accounts reviewed by ICIJ. That works out to a tax rate of just over a quarter of 1 percent.
The documents show Disney used this internal bank as an intermediary for two loans totaling €75 million to its French subsidiary, Walt Disney International, France, SAS. Disney charged Wedco Participations just 0.42 percent interest; Wedco went on to charge Disney’s French subsidiary 5.7 percent.
The transaction may have allowed Disney to reduce its French taxes because the French company paid more than €16 million in interest to the Luxembourg company from 2009 through 2013. Further, Disney received so little in interest payments from Wedco that it would have incurred little tax on its U.S. interest income from the transaction.
Loans worth €717 million to two of Disney’s U.K. subsidiaries generated €181 million in interest payments, while a €12 million loan to The Disney Store Netherlands generated €495,000 in interest. The Cayman Islands company returned €837 million in dividends to Luxembourg.
Disney’s tax agreement also lays out a series of tax-free “hidden capital contributions” from other Luxembourg subsidiaries to the finance company, totaling more than €650 million.
Disney also set up a U.S. branch of the Luxembourg-based internal lender, at Disney’s headquarters in Burbank, California. Brooks said the U.S. branch likely pays no tax on its transactions, because of a loophole in the U.S. tax code where, at the request of the parent company, the IRS can ignore certain subsidiaries for tax purposes.
If so, “it is U.S. tax being avoided as this is ultimately investment from the U.S. being routed through Luxembourg for tax purposes,” said Brooks, who was hired by ICIJ to review some of the documents.
All together, the three Disney companies established by the tax deal crafted by Ernst & Young recorded more than €2.8 billion in profits from 2009 through September 2013, yet they share a grand total of one employee, according to the tax agreement.
They are located in a residential building in Luxembourg with two additional Disney subsidiaries. On the group’s letter box, the name of Disney CIS Holdings S.à.r.l., a firm created in 2011, had been added by a handwritten notation on a piece of masking tape.
When a reporter from ICIJ partner MO* Belgium visited, a man opened the door and introduced himself as director of the five companies. “Now you can see that we really are present here. There is substance,” said the man, a Belgian citizen who declined to give his name.
“We use a large apartment on the ground floor as our office,” he said. “There’s not need for a lot of personnel. A qualified person with a full-time job can manage those five holding companies. And all the accounting and board meetings happen in Luxembourg.” He declined to answer specific questions about Disney’s Luxembourg business or about the 2009 advance tax agreement.
“Our global effective tax rate has averaged 34% for the past 5 years and 35% in the most recent year,” said Zenia Mucha, Disney’s spokeswoman in the U.S. “We manage our tax affairs responsibly and aim to fully comply with all applicable tax rules. Your assertions are not based on an accurate understanding of our global tax position.” She did not respond to a dozen detailed questions emailed to the company and did not specify what she saw as inaccuracies.
It’s unclear if Disney has brought any of its Luxembourg profit back to the U.S., where it would be taxed at the corporate rate of 35 percent. Disney reported in its 2014 earnings report that it was holding $1.9 billion in foreign earnings overseas and estimated that the U.S. tax liability if it brought that income home would be $377 million.
The $377 million, a fraction of Disney’s operations worldwide, would still boost its total global tax bill by more than 10 percent. The company reported in its 2014 financial statement that it paid $3.1 billion in U.S. federal and state income taxes and $600 million in foreign taxes.
Koch’s Luxembourg transactions revealed by the new documents involved its chemicals and polymers subsidiary Invista BV, which makes Lycra-brand fiber and Stainmaster-brand carpets.
The Koch documents, also prepared by Ernst & Young, describe “Project Snow,” a 26-step restructuring of Invista designed, they say, to simplify the company’s structure, centralize its cash flow into Luxembourg, and pay down debt.
The restructuring was worked out in a series of four meetings in late 2008 and early 2009 between Ernst & Young employees and Marius Kohl, head of the Bureau d’imposition Sociétés VI, part of Luxembourg’s revenue authority, according to the tax ruling. Kohl, now retired, approved thousands of tax deals over 22 years that helped save companies billions of dollars.
The documents show that in the restructuring, which took place starting in September 2008, the subsidiaries of Invista passed hundreds of millions of dollars back and forth, converting shares to debt and occasionally dissolving firms. Tax-free “hidden distributions” among subsidiaries are just one type of head-spinning transaction included in the confidential tax ruling approved by Luxembourg authorities. Another section describes a $736 million loan that gets passed from company to company until a U.S.-based subsidiary becomes “both the debtor and creditor of the same debt,” and the debt is canceled.
Each step in the tax ruling includes a separate interpretation of how it will impact the company’s taxes in Luxembourg. In most instances, the transactions are exempt.
Central to Koch’s restructuring deal is an internal company bank, Arteva Europe S.à.r.l., which manages the cash flows of the company’s European operations through Luxembourg. Arteva had established a Swiss branch that likely benefited from low tax rates in Switzerland. Luxembourg officials agreed to treat the Swiss branch as separate from the Luxembourg company, according to the tax deal.
From 2010 through 2013 the company paid $6.4 million in taxes on $269 million in profits. Its highest annual tax rate was 4.15 percent.
Arteva reported no staff costs in its annual financial reports filed in Luxembourg. In Switzerland, Arteva’s branch shares an address in Zurich with a firm called Tax Partners AG, whose principals are also listed in public filings as the deputy branch managers of Arteva, according to reporting by ICIJ partner, The Guardian. The branch manager of Arteva Switzerland describes himself on the web site LinkedIn as “tax director, Europe” for Koch International Shared Services.
“Like all Koch companies, Invista conducts its business lawfully, and pays its taxes in accordance with applicable laws,” said Rob Tappan, a Director of External Relations for Koch Companies Public Sector. The company declined to respond to detailed questions about its Luxembourg operations.
Koch says Invista is headquartered in the United States. However, U.S. and other operations are owned by a holding company incorporated in the Netherlands, a low-tax country, where it reports financial results.
The Invista offices are located in a modern office building in Luxembourg in a suite with other Koch companies. A sign on the glass front says Koch Business Solutions — Europe S.à.r.l. The building is home to more than 670 active businesses, according to an ICIJ analysis of Luxembourg’s corporate registry as of September 2014.
No one responded when a reporter rang the bell at the office, and two workers who were leaving declined to say how many people work there and what they do.
Koch Industries is the second-largest privately owned company in the United States, according to Forbes, and it is not required to report its financial information in the U.S., so it’s impossible to know how much tax it has paid here. The company bought Invista from DuPont in 2003 for $4.4 billion and combined it with KoSa, the Koch subsidiary that produced polyester and nylon fibers. It incorporated the new company in the Netherlands.
Koch Industries immediately began paying down Invista’s debt, according to reports from Moody’s. By 2010, Koch Industries had contributed $350 million to Invista, and by 2011, Koch had helped the company repay an additional $720 million, leaving Invista debt-free, Moody’s said.
Owners Charles and David Koch have been in the center of political controversy in recent years as they’ve sought to use their money and connections to elect Republican political candidates who are sympathetic to their libertarian beliefs.
Koch Industries admitted in 2011 that one of the key companies in its Luxembourg holdings, Invista S.à.r.l., had funneled a dozen illegal campaign contributions to state political candidates in Virginia, Delaware and Kansas and to the U.S. Democratic Governors Association. The company agreed to pay a fine of $4,700.
In its submission to the Federal Election Commission the company said that “the violations resulted from a general lack of knowledge among company personnel of either the nature of Invista's legal structure or of the restrictions that applied to it as a foreign company.”
The Kochs and their network of big-money donors and politically active nonprofit groups raised more than $400 million in an unsuccessful effort to thwart President Barack Obama’s bid for re-election in 2012. They were back this year, supporting Republicans’ successful bid to gain control of the U.S. Senate.
The Center for Responsive Politics calculated that David Koch and his wife Julia contributed at least $2.4 million to political candidates and groups during the 2014 election cycle, while Charles Koch and his wife Elizabeth contributed about $2.3 million. Each of the brothers, through trusts, contributed $2 million of that to the nascent Freedom Partners Action Fund super-political action committee.
Disney and Koch may be benefiting from a loophole in the U.S. tax code that allows them to tell the U.S. government to ignore the existence of a multitude of subsidiaries and look only at the corporation’s foreign parent at tax time. The so-called check-the-box provision allows companies to bypass a rule that would normally require foreign subsidiaries to pay U.S. taxes every time money flows from one subsidiary to another.
“We actually facilitate international tax avoidance with policies like check-the-box,” said Kimberly Clausing, an economics professor at Reed College in Portland, Oregon, who specializes in multinational corporate taxation. While such provisions are bad policy, she said, “it’s not really wrong for the firms to make use of them.”
In 2009, President Obama included check-the-box in a list of tax loopholes he wanted to eliminate. Documents prepared by his administration at the time claimed that getting rid of check-the-box would raise an additional $86 billion in ten years in U.S. taxes, the most of the more than 25 business tax proposals in the president’s plan.
Businesses mounted an aggressive lobbying campaign to protect their loophole and the proposal was dropped in less than a year.
The tactic is one of a handful of tax strategies U.S. companies employ to move their profits to low-tax countries from the U.S., where the statutory corporate rate is 35 percent.
Companies also use a strategy called cost-sharing, where they attribute some of the costs of developing new products to foreign subsidiaries, according to Stephen Shay, a professor of practice at Harvard Law School and a former international tax official at the U.S. Treasury. That way they can attribute the profits from those products, or the licensing of trademarks and patents, to the company outside the U.S.
The strategy ends up locking corporate profits outside the U.S., because companies have to finally pay the tax if they bring the cash home. That may be why Disney is leaving $1.9 billion abroad.
According to Bloomberg, U.S. companies in the S&P 500 have $1.95 trillion in profits stashed overseas. They have lobbied for a temporary reduction in the corporate tax rate on dividends from those profits, or a so-called repatriation holiday.
Clausing estimates that companies shifting profits to low-tax countries rather than booking them where they are actually earned costs the U.S. between $57 billion and $90 billion a year.
U.S. companies appear to be taking full advantage.
Multinational corporations based in the U.S. have booked 6.1 percent of their foreign profits in Luxembourg while recording only 0.6 percent of sales in the Duchy, according to Clausing, who based her calculations on data from the U.S. Bureau of Economic Analysis. The same companies have only one-tenth of one percent of their foreign employees based in Luxembourg.
Clausing said, in discussing corporations in general and not Disney and Koch specifically, “There’s obviously a lot of lying going on, mischaracterization of what’s really happening.”
Global accounting and tax advisory firms, including Ernst & Young, are prime architects of the inventive profit-shifting strategies that allow multinational companies to cut taxes via the Grand Duchy and other low-tax jurisdictions.
The Big 4 firms’ role in boosting international tax avoidance has come under increasing scrutiny over the past decade. KPMG, for example, paid $456 million as part of a deferred prosecution agreement with U.S. authorities to settle charges that the firm had set up sham offshore shelters that allowed its clients to generate at least $11 billion in paper losses that cost the U.S. Treasury $2.5 billion. Earlier this year, a U.S. Senate investigation found the PwC tax advisors used legal loopholes to help heavy equipment maker Caterpillar Inc. cut its U.S. tax bill by $2.4 billion by shuffling paper profits from the U.S. to Switzerland.
Both Ernst & Young and PwC have been investing in their operations in Luxembourg.
Ernst & Young’s office in the Grand Duchy brought in $153 million in revenues in the year ended June 30, led by growth in its tax business, and is planning to hire 350 new employees by June 2015. PWC meanwhile held a grand opening for its 320,000-square-foot Luxembourg office building at a ceremony in late November in which Prime Minister Xavier Bettel and Finance Minister Pierre Gramegna gave speeches. With the “Lux Leaks” scandal still making headlines in Europe, PwC rescinded reporters’ invitations to the event.
These investments may be at risk after the document leaks that have exposed how Luxembourg officials and global tax firms cooperate to help companies avoid paying the taxes in the countries where they truly operate.
The European Commission is already investigating the legality of tax rulings obtained by Amazon and Fiat in Luxembourg and by Apple and Starbucks in Ireland and the Netherlands. Luxembourg is expected to adopt changes that it says will make tax rulings more transparent. Under a proposed new law, corporate rulings would have to be approved by a commission rather than a single official.
Now the new EU Competition Commissioner Margrethe Vestager has said her team will review the tax rulings leaked to ICIJ.
“We consider the Luxembourg leaks as market information,” she said at a recent press conference. “We will examine it and evaluate whether or not this will lead us to opening new cases.”
Simon Bowers, Kristof Clerix, Emilia Díaz-Struck, Rigoberto Carvajal, Mar Cabra, Minna Knus-Galán, Bastian Obermayer, Lars Bové and Jan Kleinnijenhuis contributed to this story.
Six months after the Central Intelligence Agency first captured a suspected high-level al-Qaida figure in early 2002, it opened a potential can of worms by briefing several Senators about new policies for detaining and aggressively interrogating such captives. The Senate Intelligence committee chairman, Bob Graham (D-Fla.), responded by sending the agency multiple requests for additional information.
No problem, CIA officials decided, according to a report about the program finally published by the committee’s Democrats on Tuesday after years of back-and-forth argument over its release. Knowing that Graham was retiring in January 2003, the agency simply deferred additional congressional briefings until after he had left. That decision stemmed from what the CIA’s liaison to Congress depicted in an internal email at the time as a desire to “get off the hook on the cheap.”
Thus began what the Intelligence Committee report portrays as a sustained CIA effort to block potential scrutiny of an exceptionally secretive and unquestionably brutal program using what became known as EIT, or enhanced interrogation techniques, that even some internal CIA documents said encompassed torture.
According to the controversial report, the agency’s effort to shield the initiative from accountability persisted through 2005, when the CIA made a series of claims to the Justice Department about interrogations that were “incongruent” with its actual program, and 2007, when then-CIA director Michael Hayden allegedly made roughly three dozen “inaccurate” statements to the committee. The false claims by the agency produced a series of key legal opinions by the Justice Department that supported the program’s continuation, the report states.
In between, according to the report, the agency repeatedly lied to the media, to the National Security Council, to lawmakers and to the State Department about the program’s scope, its methods and its effectiveness. At the helm of this effort: A group of roughly three to four dozen CIA officials privy to all its workings, who had either wrongfully convinced themselves it was succeeding or willfully decided to exaggerate its accomplishments.
Sen. Dianne Feinstein (D-Calif.), the committee’s current chairwoman, said in a lengthy Senate floor speech unveiling the 2012 report that the CIA’s actions were “a stain on our values and our history.”
CIA director John Brennan, in a statement also released on Tuesday, acknowledged that the agency made mistakes and said “we did not always live up to the high standards that we set for ourselves and that the American people expect of us.” But he disputed that the agency “systematically and intentionally misled” Congress, the executive branch and the public, even though the CIA acknowledged it sometimes made claims that were inaccurate or imprecise.
“Despite some flaws in CIA’s representations of effectiveness, the overall nature and value of the program…were accurately portrayed to CIA’s Executive and Legislative Branch overseers, as well as the Justice Department,” the agency said in a statement posted on its website. It also said the program “did produce valuable and unique intelligence that helped thwart attack plans, capture terrorists and save lives.”
Republicans from the Senate committee said in a lengthy minority report that they agreed with the CIA, and accused the Democrats of conducting a flawed and biased review of the program. But the Democrats said their report, based on a review of more than 6 million pages of material, merely reveals that the CIA’s internal records show that using EIT “was not an effective means of acquiring information or gaining cooperation from detainees.”
Many of the darker details of the CIA’s interrogation program – including one detainee’s death from hypothermia, the repeated use of a simulated drowning technique known as waterboarding, and threats to harm detainees’ relatives —have leaked out over the past decade.
But the report adds a few more: Naked detainees were hooded and dragged up and down corridors while being punched or slapped at one prison. Some of the CIA officers involved in interrogations had “histories of violence and abusive treatment of others,” it states. President Bush himself expressed discomfort when shown a picture of a detainee in diapers who was chained to a ceiling and forced to defecate on himself. And a summary by the CIA inspector general of a private interview with then-CIA director George Tenet said he believed in 2005 that "if the general public were to find out about this program, many would believe we are torturers."
The bulk of the report, however, contains fresh information about how hard the CIA worked to block any independent review of the program and protect it from criticism.
The key CIA deceptions and rear-guard actions included the following, according to the report:
National security reporters and researchers Douglas Birch, Alexander Cohen, and Julia Harte contributed to this article.
WESTLAKE, La. — Stacey Ryan already knows where he’ll be buried.
It will be in Perkins Cemetery, the same place his mother and father were laid to rest after dying from cancer. It’s where his aunts, uncles, grandfather and great-grandfather are interred, having been felled by various malignancies, diabetes, and ailments of the heart, respiratory system and pancreas. Most of Ryan’s family is there, along with almost everyone else who ever died in Mossville, an unincorporated area founded by freed slaves.
Soon, the cemetery may be all that is left.
Sasol North America, the domestic division of a South Africa-based energy and chemical company, has begun buying out many of the 300 or so remaining inhabitants of Mossville, offering cash for the homes they grew up in and their parents built. Those it hasn’t bought may be expropriated come February. By 2018, the land Ryan and other holdouts have fought to keep will be consumed by an $8.1 billion ethane cracker and a multibillion-dollar gas-to-liquids facility, a massive addition to a plant Sasol already operates nearby.
The state of Louisiana says it will allow the facility to release up to 10.6 million tons of greenhouse gases and 3,275 tons of volatile organic compounds such as benzene, a carcinogen, into the atmosphere each year. This is on top of the 963 tons of pollutants that were discharged into the air by Sasol and other companies within the 70669 ZIP code last year, according to the U.S. Environmental Protection Agency.
“With the plans they have,” Ryan said, “Mossville just sits in the way.”
The Sasol project is among at least 120 of its type planned around the United States, according to data compiled and analyzed by the Environmental Integrity Project, a research and advocacy organization. Motivated by an abundance of cheap natural gas unleashed by hydraulic fracturing – fracking — companies like ExxonMobil and Shell want to build or add on to petrochemical plants, oil refineries and fertilizer plants in places like Mont Belvieu, Texas, and Monaca, Pennsylvania. They have asked state regulators for permission to release a collective 130 million tons per year of carbon dioxide equivalent, a measure of the global-warming potential of certain emissions.
From a climate perspective, that’s comparable to 28 coal-fired power plants, according to the EIP data, which were independently verified by the Center for Public Integrity.
Louisiana and Texas account for most of these projects — 34 and 50, respectively. In those states alone, 68 projects have been given final approval to emit up to 65.5 million tons per year of carbon dioxide equivalent. Sixteen more, which would add nearly 31 million tons to this total, have received draft permits or have applications pending.
Failing to address these emissions essentially gives the petrochemical industry a free pass at a time when the Obama administration is cracking down on coal, said Eric Schaeffer, EIP’s executive director and the former head of civil enforcement for the EPA.
“People talk about natural gas as being better for the climate, but hydraulic fracturing has also sparked this huge industrial boom that creates a lot of greenhouse gas emissions,” Schaeffer said. “We’re not paying attention to emissions from these other sources, and we need to for an honest accounting of fracking’s greenhouse gas footprint.”
Janet McCabe, acting assistant administrator for the EPA’s Office of Air and Radiation, said the White House has focused on power plants and the transportation sector, which make up the majority of the nation’s greenhouse gas inventory.
In a telephone interview, McCabe said “it’s really important that we focus on the highest priority categories and the categories that have the largest emissions, and that has been the theme of this administration and that’s the theme that’s in the climate action plan. …You want to focus there, but of course you want to keep track of where the entire domestic inventory is trending over time.”
In a written statement, Sasol said its Louisiana project will yield a projected 1,200 permanent jobs and another 5,000 or so during construction.
“This project is important to a region that has not enjoyed significant economic development for an extended period of time,” company spokesman Russell Johnson wrote. “As a result, economic opportunities exist for all of the citizens of the area that did not exist prior to the projects.”
The American Chemistry Council, the chemical industry’s main trade group, said the “new factories and expansions [around the country] will create hundreds of thousands of well-paying new jobs, strengthen communities, and put money in the pockets of American families.” Another trade group, the American Fuel & Petrochemical Manufacturers, declined to comment.
Asked about the increased emissions anticipated with the Sasol project, a state official said that all companies seeking to expand must follow the law.
“As far as we’re concerned, we’re holding them to all federal and state standards that exist,” said Bryan Johnston, a senior environmental scientist in the Louisiana Department of Environmental Quality’s air permits division. “They’re not getting a free pass at all.”
‘Only place…I feel safe’
Mossville is hard to find on a map, but that doesn’t make it any less real to the people who grew up there.
Founded in 1790 by Jim Moss, a freed slave, the community has no formal government and no elementary school (it was sold to Sasol in 2013 for $9.5 million). It’s enveloped by Westlake, an industrial haven just west of Lake Charles.
“This is the only place I’ve lived where I feel safe,” said Dorothy Felix, 75, whose roots in Mossville go back several generations. “We used to sleep with our windows up and leave our doors open because if the neighbors wanted to come by and come in, they could walk in the house. That’s the kind of life we lived.”
In 1945, Felix’s family lived about a mile up the road from her current home, she said, and closer still to where PPG Industries wanted to use an old magnesium plant to make chlorine and other chemicals. The company bought out all of the families who lived nearby. Some relocated within Mossville; others moved away.
Since then, industrial facilities have multiplied. Mossville is encircled by 14 of them, and more are coming. Seven companies have received final approval to build three chemical plants, three natural gas plants and one refinery in Calcasieu Parish since 2013, according to EIP data.
“In Westlake, they accept and support the industry because it gives them jobs,” said Wilma Subra, an environmental consultant who has been advising Mossville residents. Mossville receives not jobs but pollution that has caused “huge health impacts,” Subra said. High levels of cancer-causing dioxins – industrial byproducts deposited in fish and homegrown fruits and vegetables – were found in blood samples taken from 28 residents by the U.S. Agency for Toxic Substances and Disease Registry in 1998. Subra contributed to a 2007 study that tied the dioxins to nearby plants like PPG. “Yet we still couldn’t get the agencies to get the facilities to reduce their dioxin emissions,” she said.
At the final public hearing on the Sasol project, held March 25 at Westlake City Hall, residents’ anger boiled over.
“How many more communities are going to be taken from the people and destroyed?” Lois Booker Malvo of Lake Charles asked at the packed session. “There is no compassion, no respect or concern of a better life for the people… Industry, please …come back with better ways to make sure you stop destroying what God has created.”
‘Jacking up the baseline’
The uptick in greenhouse gases that can be expected if Sasol and the 100-plus other expansion projects come to fruition would seem to run counter to the White House’s pledge to slash carbon emissions in the United States.
“The President made it very clear from the beginning of his Administration that cutting carbon pollution is a top priority and that natural gas is a bridge fuel that will help us achieve this goal,” the White House said in a written statement to the Center. “In that vein, the President set a goal of reducing U.S [greenhouse gas] emissions in the range of 17 percent below 2005 levels by 2020 - a goal we are on track to meet. In fact, we are about halfway there already.”
Compared to the 6 billion tons of pollution the White House expects to save from increased fuel efficiency and other climate initiatives, as well as the recently announced emissions deal with China, 130 million tons of carbon dioxide equivalent (CO2e) may seem like a drop in the bucket.
Still, EIP’s Schaeffer said, “People need to understand, when we are looking long term, we are bringing in new industries that are jacking up the baseline.”
Liquefied natural gas export facilities could wind up being one of the biggest CO2e sources, according to EIP data. The three projects that have received final permits from regulators in Florida, Maryland and Louisiana have the potential to emit up to 7.5 million tons per year. Another seven proposed projects could add another 25.9 million tons annually, though it’s unlikely all will be built.
Chemical and natural gas processing plants account for the biggest number of final permits (68) and draft permits or applications (12) documented by EIP.
“There’s going to be more production in the U.S., which is great news from a jobs perspective, but not from an emissions perspective,” said Doug Vine, a senior energy fellow at the Center for Climate and Energy Solutions, a think tank. If the emissions do rise, he said, “We’re going to have to offset that.”
The EPA’s McCabe said that new plants are now required to use pollution-control “technologies that will be as efficient as possible in limiting the amount of greenhouse gases that are emitted.”
“As the technology evolves, the permit reviews will track with that and over time, plants will get more and more efficient,” she said.
In its statement, the American Chemistry Council said, “The new U.S. chemical industry production will be advanced, state-of-the-art, and energy-efficient. Since we are drawing market share from areas of the world where production may be more greenhouse-gas-intensive… our expansion in the U.S. may result in lower net global GHG emissions.”
Billions in investment
Sasol’s planned expansion in Westlake is the cornerstone of the company’s North American strategy.
“The abundance of affordable domestic natural gas played a key role in our decision to expand our operations in Louisiana,” company spokesman Johnson wrote. “We chose Louisiana — and Westlake specifically — because of its positive business climate, robust energy infrastructure and skilled workforce and proximity to our existing facilities.”
The 650-acre expansion project includes an ethane cracker and derivatives unit, set to come online in 2018, which will turn natural gas components from fields such as the Haynesville Shale in northwestern Louisiana and northeastern Texas into ethylene, used to make plastics and other products. Sasol also wants to build the first gas-to-liquids (GTL) facility in the United States, which would transform natural gas into diesel fuel and products such as paraffin and liquefied petroleum gas. Sasol already operates GTL facilities in South Africa and Qatar and is in the final stages of a project in Uzbekistan.
All told, Sasol said it plans to invest billions to quadruple its operations in southwest Louisiana over the next six years.
For the state, that investment didn’t come cheap.
The Louisiana Economic Development office said that Sasol received a state incentive package that included $115 million to buy land and develop the site, as well as a payroll incentive for the GTL project, which provides a rebate of up to 15 percent for each job over the first 10 years of operations. Sasol was given a separate payroll and tax incentive package for the ethane cracker portion of the project, and Louisiana is investing $20 million in SOWELA Technical Community College to help train the sorts of workers Sasol needs.
The project also qualified for Louisiana’s Industrial Tax Exemption, which absolves the industry of property taxes for 10 years on capital investments. The facility is projected to create 1,200 direct jobs, according to the LED.
“Despite a national economic downturn, this historic economic development win is happening in Louisiana because we have been laser focused on job creation by creating an environment where businesses want to invest and create jobs for our people," Governor Bobby Jindal said at a December 2012 event announcing the project.
However, because of the hefty incentives, the state’s chief economist, Greg Albrecht, told the New Orleans Times-Picayune, “in my analysis (the Sasol project) would not be a break-even or a gain for the state.”
The costs are too steep, said Monique Harden, a lawyer and co-founder of Advocates for Environmental Human Rights, a nonprofit public interest law firm in New Orleans.
“Sasol is getting all of this welfare from people who can ill afford it in the state of Louisiana and will be bringing more pollution, more hazards and more risks,” she said. “There’s no way you can offset what we’re giving them and what we’re giving up for them, with what they’re bringing in. But that’s never been part of the calculation in Louisiana.”
Jim Cox, who represented the Lake Charles area in the state senate from 1991 to 2000, said industry almost always gets its way in Louisiana.
“This state is ruled by oil and gas,” he said.
Cox served on the Revenue & Fiscal Affairs Committee and Labor & Industrial Relations Committee during his time in the legislature. He was an anomaly, he said — a politician who advocated standing up against the oil and gas companies.
“They claimed I was going to drive jobs out of the community,” Cox said. “That’s the influence of the money on the politicians. They heavily finance the campaigns and wine and dine the politicians and they basically own the state of Louisiana.”
Cox acknowledged that industry has brought jobs to southwest Louisiana.
“And to a lot of people, that employment is everything,” he said. “But not at the cost of your own health and safety and the welfare and the health and safety of your children.”
Sasol, for its part, insists it wants to be a good neighbor. It established operations in Westlake in 2001, after buying a chemical complex from Condea Vista, which had polluted the groundwater beneath Mossville and agreed to buy 206 homes for $13.88 million to settle a class-action lawsuit. As Sasol’s expansion has moved forward, the company has offered a voluntary buyout program to Mossville residents and held regular meetings with them. Sasol is also offering scholarships to students seeking careers in the chemical industry and says it will underwrite an oral history project in conjunction with the Imperial Calcasieu Museum to preserve people’s stories.
“Sasol is proud not only of what we are doing, but how we are doing it,” spokesman Johnson said. “We are continually engaging in dialogue with our neighbors, listening to their concerns and responding.”
The company approached regional EPA Administrator Ron Curry to discuss environmental justice issues in Mossville, Curry said at the Louisiana Chemical Association’s annual legislative conference in May.
“They think about the environment they are going to live in and the environment they’re going to raise their children in” he said. “When we have that sort of robust conversation that was initiated by the company, I think it’s a lesson and it’s a model for all of us…”
‘It’s not worth it’
Not everyone is sold.
At the March 25 hearing, more than 100 people crowded into the Westlake City Council chambers, waiting their turn to speak. Inside, the moderator reminded attendees to keep the center aisle clear for safety reasons. Resident after resident stepped up to the microphone to plead that the project be reconsidered.
“Everybody wants the $20 billion to come to this area and you can't say you don't,” said Delmar Bennett of Sulphur, Louisiana. “But when the $20 billion comes to this area, you want to make sure that you can at least be comfortable with the air that you breathe, and the water that you drink.”
“Your 1,200 jobs are not worth our children, grandchildren, future children,” said Dawn Kelly of Lake Charles. “Diseases that have no cures. Cancers that have no cures. It's not worth it.”
It was an unexpectedly large turnout, said Michael Tritico, an environmental activist based in Longville, Louisiana, north of Lake Charles.
“That was gratifying,” he said. “There I was sitting there, thinking, ‘My goodness, this room is filled and overfilled and at the last hearing, they had me and that was it.’”
Still, Tritico is a realist. On a daylong boat trip down the Calcasieu River last June, the 71-year-old biologist spoke of the futility of being an environmentalist in an industry-loving state.
“I think what we do is symbolic,” Tritico said as the boat entered Clooney Island Loop, a bend in the river and site of a vast spill of ethylene dichloride, a chemical linked to kidney, liver and heart disease, from Condea Vista and ConocoPhillips in the 1990s. “We have done our absolute best and it’s made no difference.”
Tritico is old enough to have belonged to the Calcasieu Rod and Gun Club, a long-defunct group of hunters and fishermen who objected to the industrial pollution that began to appear in the 1930s. “They stood up and said, ‘You can’t do this. You’re ruining what we live for.’ They were told to shut up: ‘We need the jobs. You’re in the way of progress.’”
Tritico is still railing, knowing that people like him are branded “radicals, crazies, whatever.” In his written comments on the Sasol permit, he questioned the “no significant impacts” finding by the LDEQ. “If a project with unprecedented amounts of air and water emissions is declared to be so benign,” he wrote, “what is the point of having any regulatory framework?”
Mike Thomas, Sasol’s vice president of U.S. operations, reminded the audience at the March hearing that “more than 400 Sasol employees and their families— including me and my family — call Southwest Louisiana home and have a personal vested interest in the environmental conditions and quality of living in our area.”
In its statement to the Center, Sasol said that its permits “underwent the most rigorous review possible” by the LDEQ and the EPA. The two agencies, it said, had a “sharp focus on both greenhouse gases and on criteria pollutants, and were extremely thorough in their evaluations.”
The state’s Johnston said there were “certain things LDEQ has control over and things LDEQ doesn’t have control over. Site location, the Sasol buyout program, the willingness of Mossville residents to move — that’s not under the purview or regulation of LDEQ.”
McCabe said she wasn’t familiar with Mossville, but that in general, the EPA works with states to issue air permits that meet federal guidelines.
“The reason why activities like this go through the air permitting process is to establish that emissions from a plant are not going to create a health threat in the community,” she said. “There are areas in this country where there are concentrations of industrial activities and that’s one reason why those permitting processes are so important.”
The core problem, lawyer Harden said, is that the permits aren’t crafted with neighbors’ well-being in mind. She pointed to the historically African-American communities of Morrisonville and Reveilletown, which have been lost to industrial expansion in Louisiana. She also pointed to Bayou Corne, portions of which have been swallowed by a sinkhole caused by a salt dome that collapsed while being mined by a Texas company.
“There’s an inherent danger in our permitting process for communities like Mossville and so many others,” Harden said. “That’s the reason why these facilities go to places like Mossville. It’s because the permits don’t protect people. So you go to places where people socially, economically, and politically are also without protection.”
She urged regulators to consider federal and state environmental laws in harmony with international human rights treaties with which the U.S. has agreed to abide. Until that happens, she said, “It’s sort of like an outlaw situation — with the permit, I can do whatever I want and your needs and your rights have no moment.”
‘A place to lay my head’
Stacey Ryan worked for six years as a plant operator at Condea Vista and LyondellBasell before illness forced him to retire. In 2011, he moved his Hurricane Rita-era FEMA trailer to a small plot of land his family still owned near the entrance to the Sasol plant. Adjacent land had been sold to Sasol in 2001, along with the shotgun house he grew up in. Utilities won’t service his trailer — the result of a long-running dispute with city officials, who rezoned his property “heavy industrial” — so Ryan powers it with solar panels and batteries when he can. He sleeps in his truck when he can’t.
“Right now, I’m just trying to maintain a place to lay my head,” Ryan said.
In November, the Port of Lake Charles said it would allow Sasol to expropriate 24 parcels of land the company had been unable to acquire through negotiations or whose owners or heirs could not be located. Ryan’s property is among those parcels.
Residents have until late January to come to an agreement with Sasol. After that, the Port of Lake Charles will take over negotiations, said the port’s general counsel, Michael Dees. It will offer residents the highest of two appraisals for their land; if the offer is refused, the port will take the landowner to court.
Sasol said it has made “good faith efforts to purchase the properties” and that it was “willing to continue negotiations with property owners to avoid expropriation.”
For now, Ryan, who rejected a $40,000 offer from a local real estate agent for his property, is staying put.
His health continues to deteriorate. A chronic diabetic with severe kidney damage who lives on Social Security, he began losing his sight in November. No man in his family has lived beyond 52, he said. He’s 46.
“I was born here and raised here,” Ryan said, “but they won’t let me die in peace here.”
Jim Morris contributed to this story.
Three years ago, the Center to Protect Patient Rights — a nonprofit grant-making organization fueled by the political fundraising network of conservative billionaires Charles and David Koch — made a seven-figure contribution to another nonprofit.
That transaction itself may not have been notable, except for the fact that the group, American Commitment, says it wasn’t the beneficiary of the money.
Now, Sean Noble— a political consultant who was chosen by the Koch brothers to quarterback their political efforts, and who signed the Center to Protect Patient Rights’ tax return disclosing the contribution under penalty of perjury — is refusing to explain where the missing $1.6 million went.
Noble did not respond to numerous requests for comment by phone and email. Upon two separate visits to Noble’s Washington, D.C., office, employees said Noble wasn’t there.
Reached by phone Monday after multiple inquiries by the Center for Public Integrity over two weeks, Jason Torchinsky, a lawyer who represents the Center to Protect Patient Rights, said he and his client are “reviewing the transaction.”
Torchinsky continued: “At this point, it is likely we will file an amendment, but what the amendment will be and when we will file it, I don’t know.”
When groups like Noble’s Center to Protect Patient Rights make grants to other organizations, they are, by law, required to provide detailed information about the beneficiaries. That includes not only the groups’ names but also their federal employer identification numbers.
That’s significant because in 2011, the Center to Protect Patient Rights told the Internal Revenue Service it gave $1.6 million — one of its largest grants that year — to a social welfare nonprofit called “American Commitment,” whose listed name and federal employer identification number matches the name and ID number of another group connected to Noble.
But that American Commitment, where Noble also serves as a director, only reported raising $216,500 during 2011 — far less than $1.6 million.
“A different organization with which we are unaffiliated previously used the name,” Kerpen wrote in an email to the Center for Public Integrity.
Kerpen declined to elaborate beyond saying his nonprofit’s tax filings were “complete and accurate.”
A Center for Public Integrity review of business records does show two other groups have used the name “American Commitment,” in addition to the American Commitment run by Kerpen.
Both are connected to Noble. But neither of these other American Commitment groups appears to be the beneficiary of the mysterious $1.6 million grant from the Center to Protect Patient Rights.
For example, a limited liability company called Meridian Edition LLC was, for a period, called American Commitment LLC. This group, which is, for tax purposes, a subsidiary of the Center to Protect Patient Rights, reported no income to the IRS in 2011.
Meanwhile, a Virginia-based nonprofit named Free Enterprise America initially called itself American Commitment.
This group, which Noble led until it dissolved in 2012, told the IRS it raised nearly $5.9 million in 2011.
But Free Enterprise America listed just two seven-figure donations on its 2011 tax return — one for $2 million, the other nearly $3 million.
As required by law, the group disclosed the amount of money each of its donors gave. Their names are not required to be revealed.
Further confusing the matter: the same tax document that shows the Center to Protect Patient Rights giving $1.6 million to Kerpen’s American Commitment in 2011 also shows the Center to Protect Patient Rights giving more than $3.6 million to Free Enterprise America that year.
When reached by phone, the man who prepared the tax filings for both Free Enterprise America and the Center to Protect Patient Rights declined to comment and referred questions to Noble.
There’s “really nothing I can share with you,” said Howard Sckolnik, an Arizona-based accountant. “I can’t discuss anything because it’s not my place.”
A political consultant with offices both in Washington, D.C., and Arizona, Noble has reportedly fallen from the Koch brothers’ good graces, though his Center to Protect Patient Rights is still active in the political arena — now under the name American Encore.
Earlier this year, the Center to Protect Patient Rights, using its new name American Encore, teamed with Kerpen’s American Commitment and co-wrote a letter to the IRS urging the agency to scrap a proposal to further regulate politically active nonprofits.
The IRS is debating new rules that would define how much money social welfare nonprofits may spend on political campaigns without jeopardizing their tax-exempt status.
Since it was formed in 2009, the Center to Protect Patient Rights has doled out more than $180 million to a cluster of groups that advocate for “limited government, free enterprise and patient rights,” including $14.8 million in 2011, when it made the mysterious $1.6 million grant.
The Walt Disney Co., in 2009, moved a bit of its magic kingdom into the Grand Duchy of Luxembourg.
In a 34-step restructuring of its foreign operations, the parent company of Mickey Mouse and Cinderella established three companies in the tiny country nestled between Belgium, Germany and the Netherlands, and proceeded to move more than 20 of its subsidiaries under their corporate umbrella.
Here, in five steps, is how the company gathered ownership of its empire, from Australia to Denmark to the Cayman Islands, into Luxembourg. The documents are in the original French and were translated for the International Consortium of Investigative Journalists (ICIJ).
1) Disney’s Netherlands subsidiary transfers ownership of five companies worth $522 million into a Luxembourg company referred to in the documents as WedcoLux 1.
2) A Disney U.S. subsidiary called Wedco International Holdings Inc. transfers ownership of 16 companies such as The Walt Disney Company Germany and Buena Vista Television Australia, worth €2.1 million, to a second Luxembourg company referred to as WedcoLux 2.
3) WedcoLux 1 and WedcoLux 2 transfer their shares into the third Luxembourg company, which is simply referred to as Wedco S.C.A.
4) WedcoLux S.C.A. transfers ownership of many of those companies to a U.K. company called Walt Disney International Ltd., which is already a subsidiary of WedcoLux S.C.A.
5) WedcoLux S.C.A. moves ownership of WDI Ltd., and by extension more than a dozen Disney subsidiaries in Europe and Australia, into a Cayman Islands-registered company called Hammersmith Ltd.