Drugmaker GSK fined $490 mn in China graft probe

Yahoo – AFP, Felicia Sonmez, 19 Sep 2014

A GlaxoSmithKline (GSK) employee enters their office headquarters
in Shanghai on July 1, 2013

Beijing (AFP) - A Chinese court on Friday fined British drugmaker GlaxoSmithKline 3.0 billion yuan ($490 million) following a nearly year-long bribery probe, the company said.

The firm's former head of China operations, Mark Reilly who would be deported, and four other ex-officials were given suspended sentences of between two and four years in prison, the official Xinhua news agency said.

The fine levied by the Changsha Intermediate People's Court after a closed hearing in central Hunan province was the largest ever handed down by a Chinese court, according to Xinhua.

GlaxoSmithKline global headquarters in

 west London on July 29, 2013 (AFP Photo/

Ben Stansall)

It equals the precise amount that China's ministry of public security said last year had been funnelled between GSK and travel agencies since 2007.

Police allege that GSK took kickbacks from travel agencies to organise conferences that never took place.

The company also "resorted to bribery to boost sales of its medical products and sought benefits in an unfair manner," the court said in a statement, according to Xinhua.

"GSK bribed, in various forms, people working in medical institutions across the country, and the amount of money involved was huge. Five senior executives actively organized, pushed forward and implemented sales with bribery," the court statement added.

The firm said in a statement that the court had found it guilty of "bribing non-government personnel".

'Clear breach' of governance

In an apology posted on its website, GSK said that the illegal activities of the firm's China arm "are a clear breach of GSK plc's governance and compliance procedures; and are wholly contrary to the values and standards we expect from our employees".

The firm "must work hard to regain the trust of the Chinese people", it added.

According to Xinhua, Reilly was given three years in prison but will receive a four-year reprieve and be "expelled" from China. It did not provide further details.

Three other GSK officials -- former human resources director Zhang Guowei, former vice president Liang Hong and former legal affairs director Zhao Hongyan -- received sentences and reprieves of two to three years, Xinhua said.

The firm's former general manager for business development, Huang Hong, was found guilty of "bribing and receiving bribes" and received a sentence of three years, which will be suspended for four years, according to Xinhua.

The court decided to reduce the jail sentences for the five "since they confessed the facts truthfully and were considered to have given themselves up," Xinhua reported.

After being detained by Chinese authorities last year, Huang was quoted in state media as saying that GSK had set up a special team to handle important clients which had an annual "relations" budget of nearly 10 million yuan ($1.6 million).

Sales growth targets set by the firm as high as 25 percent put pressure on employees, Xinhua quoted Huang as saying.

Neither the statement nor the apology mentioned the sentencing of Reilly or other officials.

Peter Humphrey (2nd left) at the Number One People's Intermediate Court

in Shanghai on August 8, 2014 (AFP Photo/People's Intermediate Court)

The verdict comes more than a year after Chinese police first accused Reilly of ordering employees to bribe hospitals, doctors and health institutions to gain billions of dollars in revenue.

China's healthcare sector is widely considered to be riddled with graft, partly the result of an opaque tendering system for drugs, and also due to doctors' low salaries.

GSK is the most high-profile target of wide-ranging Chinese inquiries into foreign pharmaceutical firms, as Beijing also mounts probes into overseas companies in sectors ranging from cars to baby milk.

The investigations come against the backdrop of an anti-graft campaign backed by President Xi Jinping to root out official corruption.

Reilly is not the only non-Chinese national to have been ensnared in the probe.

Last month, a Shanghai court sentenced British investigator Peter Humphrey and his American wife Yu Yingzeng to two-and-a-half years in jail for breaching privacy laws.

The investigators had been hired by GSK to investigate the source of a lurid sex tape of Reilly shortly before the probe went public.

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OECD proposes curbs to corporate tax avoidance

The Organization for Economic Cooperation and Development has proposed draft laws to stop companies from avoiding billions of dollars in taxes. All OECD members and G20 members have already expressed their support.

Deutsche Welle, 16 Sep 2014

International efforts to curb corporate tax avoidance got a boost Tuesday as the OECD proposed changes to global tax laws that would block companies from shifting profits into tax havens.

The draft proposals have been agreed upon by all members of the OECD and G20, so most industrialized countries are on board, but they have yet to be ratified into law.

The OECD said the measures would mostly affect leading technology companies such as Amazon and Google, which have been scrutinized for taking advantage of tax treaties that allow them to protect some profits from being taxed at all.

Both companies maintain that they abide by tax law and pay all the taxes they owe.

Corporate tax avoidance has received increased attention since the financial crisis and governments across the world have sought to close legal tax loopholes for businesses.

Traditionally, the OECD's work on international tax regulations has focused on ensuring that companies are not taxed twice. Now it's focus has shifted.

"We are putting an end to double non-taxation," said the OECD's head of tax, Pascal Saint-Amans.

There is, however, criticism from some quarters. Anti-poverty charity ActionAid, for instance, criticized the plans saying some of the measures agreed upon would be too costly for developing countries to implement.

cjc/sri (Reuters, AFP)

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KPMG Nederland overhauls partner bonuses, supervisory board

DutchNews, Friday 12 September 2014

KPMG

Accountancy group KPMG is overhauling its remuneration strategy for partners and boosting the independence of its supervisory board following a string of scandals.

The aim is to ‘win back the trust of stakeholders’, the company said in a news release on Friday. The plan was approved by partners at a closed meeting on Thursday.

In the new set up, partners’ remuneration will be linked to 'the realisation of quality requirements, the motivation of employees and client satisfaction'. Profit shares will be spread out over several years and can be reversed if problems come to light.

The current bonus system is being scrapped and individual partners will only be rewarded for ‘exceptional performance’. The management board will no longer be eligible for profit sharing. They, instead, will have a fixed salary with a performance-related bonus of up to 10%.

Future

KPMG is also looking for new external candidates for its supervisory board, which is currently made up of partners. Chairman Jan Hommen said the company 'wants to take major steps right now, leave the past behind and build on a new future. For our clients, for society and for our own people.'

KPMG Nederland has been hit by a string of scandals in recent months, culminating the resignation of chairman Jurgen van Breukelen in May.

Van Breukelen had been in the firing line over possible tax fraud in connection with the company's new headquarters in Amstelveen, bribery allegations and a string of other issues at client companies.

Chairman Van Breukelen KPMG resigns. (NOS/ANP)

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Koch brothers sought say in academic hiring in return for university donation

• Florida university receives $1.5m from rightwing billionaires

• Kochs wanted appointment of ultra-rightwing economics faculty

theguardian.com, Ed Pilkington in New York, Friday 12 September 2014

David Koch, above, and his brother Charles donated to 163 colleges
and univerisites in 2012. Photograph: Phelan M Ebenhack/AP

The billionaire Koch brothers attempted to wield political influence over appointments and teaching at a major US university in exchange for donations, newly published documents reveal.

Internal emails and memos from the economics department of Florida State University (FSU) open a window into the kind of direct pressure the Kochs seek to exert over academic institutions in return for their largesse. The 16 pages of documents, obtained by the Center for Public Integrity, show that the energy tycoons demanded through their grant-giving arm, the Charles Koch Foundation, a role in faculty appointments and an emphasis on teaching that was in tune with their radical political views.

Charles and David Koch are major funders of the Tea Party and other ultra-rightwing movements that oppose government intervention and advocate for an unregulated free market.

A memo drawn up by the then chair of the FSU economics department, Bruce Benson, set out the Kochs’ terms for funding, noting that “the proposal is … not to just give us money to hire anyone we want and fund any graduate student that we choose. There are constraints.”

A section of the memo headlined “Constrained hiring” says: “As we all know, there are no free lunches. Everything comes with costs. In this case, the money for faculty lines and graduate students is coming from a group of funding organisations with strong libertarian views. These organisations have an explicit agenda.

“They want to expose students to what they believe are vital concepts about the benefits of the market and the dangers of government failure, and they want to support and mentor students who share their views. Therefore, they are trying to convince us to hire faculty who will provide exposure and mentoring. If we are not willing to hire such faculty, they are not willing to fund us.”

The documents date back to 2007, when the Koch deal was first being negotiated with FSU. Among the other demands made by the foundation was that Benson, a free-market libertarian who shares many of the Kochs’ beliefs, must have his term as chair of the economics department extended for three years as a requirement of the donation.

Dave Levinthal, the centre’s senior political reporter, who broke the story , said: “The documents give a blueprint of what the Kochs wanted and if ultimately they didn’t get everything they demanded it still gives a rare view into their intentions. They were saying ‘We want this, this and that, and if you don’t do it, we are not going to give you any money’.”

The Koch’s financial gift was finalised in 2009 at the sum of $1.5m (£920,000) to be spread over six years – a drop in the ocean for the brothers who own the second largest privately owned company in the US and are valued at $36bn each. The university says that as of April this year it had received $1m.

Under the initial deal with the Kochs, they had direct input into the appointment of faculty members in the economics department through a three-person advisory board set up specifically to liaise with the Charles Koch Foundation over hiring. The terms of the donation have been a running sore within FSU,prompting considerable internal opposition.

In the face of widespread criticism, the university authorities in 2013 revised the terms of the Koch funding to weaken the brothers’ grip on appointments. A statement from the university released earlier this year said that “the decision was made to eliminate any role whatsoever of the advisory group in the hiring of tenure-track faculty members in the department of economics”.

Benson did not immediately reply to questions from the Guardian. But he told the Center for Public Integrity that the documents had been intended for internal use and were written at “early stages of discussion” over the Koch grant, well before it was finalised in 2008.

Florida State University is not the only academic institution that the Kochs have financial relationships with. According to the CPI, the brothers dispensed $13m in 2012 to 163 colleges and universities.

David Koch, chairman of the Americans for Prosperity Foundation, funds some

of the largest dark money networks. (AP Photo/Phelan M. Ebenhack, File) | AP

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EU moves to crack down on banks dodging bonus cap

EU commissioner warns of further action against banks paying shares and allowances as UK sets out its case against cap

theguardian.com, Jennifer Rankin, Monday 8 September 2014

The EU has warned it will crack down on banks dodging the bonus cap via
allowances and share handouts. Photograph: Toby Melville/Reuters

Banks seeking to circumvent the EU's cap on bonuses for top staff could face further action from European regulators, a senior official has warned.

Michel Barnier, a vice-president of the European commission, with responsibility for financial services, said there could be "a coordinated policy response" to banks that dodge the EU bonus cap by paying allowances to their top staff.

The warning comes as the UK government sets out its case on Monday against the EU bonus cap in Europe's highest court.

The EU limited bankers' bonuses to one year's salary, or twice that amount with shareholders' approval, as part of a broader package of reforms aimed at encouraging banks to behave more responsibly, following widespread public anger at bailed-out banks paying lavish bonuses.

In response to the EU clampdown, which came into effect this year, several banks decided to pay their top executives allowances in cash or shares, instead of a bonus. Stuart Gulliver, the chief executive of HSBC, gets an additional £32,000 a week in allowances in top of his £1.2m salary. Bailed-out banks Lloyds Banking Group and Royal Bank of Scotland have awarded their top executives shares, while Barclays are among other banks with similar schemes.

In a letter to the European Banking Authority, which monitors the industry, Barnier said: "I would like to underline my strong concerns with regard to continuing reports of the use of these allowances. It is important to show a collective pro-active stance on this important matter and address the claims made that the spirit – if not the letter – of union law is being disregarded."

The European Banking Authority launched an investigation into allowance payments in June and was due to report at the end of the year, to allow regulators to take action ahead of next year's pay-setting round at the banks.

But Barnier is now urging them to speed up their work. "I would therefore be very grateful if you could share with us the results of your work on this issue as soon as possible and at the latest by the end of September, in order to ensure that we can address any concerns in a timely manner through a coordinated policy response."

Barnier can propose amendments to the law, but any substantial re-working would be seen through by his successor, who has yet to be named. Barnier's successor is expected to take office on 1 November, under a European commission headed by former Luxembourg prime minister Jean-Claude Juncker.

After being outvoted 26 to one on the EU bankers' bonus cap in 2013, the UK launched a legal challenge at the European court of justice.

A Treasury spokesman said the cap had been "rushed through without a proper impact assessment" and "could undermine financial stability by leading to higher fixed costs at banks".

The UK government will make its case today at a hearing in Luxembourg, but the ECJ is not expected to make a ruling until the end of the year at the earliest.

Dozens of fast-food protesters arrested while striking against low wages

Protesters in more than 100 US cities conduct sit-ins and marches outside restaurants to call for a $15 minimum wage

Fast-food protests continue across US – live updates

theguardian.com, Dominic Rushe and Lauren Gambino in New York, 4 September 2014

Protesters demanding higher wages and unionization for fast food workers march
on Thursday in New York. Photograph: Andrew Burton/Getty Images

Police arrested dozens of people on Thursday during a series of strikes across the US over low wages at fast-food companies including McDonald’s, Burger King and KFC.

Protesters in more than 100 cities including Chicago, New York and Detroit conducted sit-ins and marches outside fast-food restaurants calling for a $15 minimum wage and better benefits for workers. Many fast-food jobs pay just more than the federal minimum wage of $7.25 an hour.

By lunchtime unconfirmed reports said police had arrested 43 people in Detroit, 19 in New York City, 23 in Chicago, 10 in Little Rock, Arkansas, and 10 in Las Vegas. Protests were just starting in California and organisers expected hundreds would be arrested by the end of the day.

Thursday’s strikes were the seventh in a series that began as a local protest in New York two years ago. Each strike has been progressively bigger and organisers credit the movement with focussing the debate on low wage workers and reinvigorating president Barack Obama’s attempts to increase the federal minimum wage.

The latest protests mark a departure from previous efforts with protesters, many of whom were transported to the event by union backers, deliberately getting themselves arrested. So far there have been no reports of injuries.

A worker is detained by police during a protest outside a McDonald’s
restaurant in Philadelphia. Photograph: Matt Rourke/AP

Despite strong opposition from Republicans and business lobby groups, there have been some significant moves to raise wages. Seattle recently increased its minimum wage to $15 and there are proposals of a rise to $13 in New York, Los Angeles and Chicago.

Jeanina Jenkins, a McDonald’s worker from St Louis, Missouri, told the Guardian that $15 an hour would change her life. Jenkins, 21, lives at home with her mother and earns $7.97 an hour. “If I made $15 an hour I’d go back to university and study nursing,” she said.

The latest strike is being backed by the Service Employees International Union, (SEIU) which represents about 2 million workers across the US, mainly in healthcare, public services and property services including janitors and security officers.

The union has been moving to unionise more fast-food workers, but at the moment the process can only be conducted piecemeal, because workers are technically employed by individual franchise-holders, not the bigger chains.

But SEIU won a major victory last month when the National Labor Relations Board ruled that McDonald’s could be held jointly liable for employment and wage violations by its franchise operators. The move, which is being heavily contested, could force fast food firms to negotiate on wages and allow SEIU to unionise restaurants on a larger scale.

Police arrest demonstrators who were protesting for an increase in wages
in Chicago, Illinois. Photograph: Scott Olson/Getty Images

Arun Ivatury, campaign strategist for National Employment Law Project, said: “We talk a lot about responsibility in this country but corporations have to take responsibility too. I am confident that we are now at a moment of change.”

The National Restaurant Association, the largest trade body representing the industry, dismissed the strike actions as a PR stunt, saying it was a “multi-million dollar campaign” funded by unions. “The activities have proven to be orchestrated union PR events where the vast majority of participants are activists and paid demonstrators. This is nothing more than labor groups’ self-interested attempts to boost their dwindling membership by targeting restaurant employees,” the NRA said in a statement.

Obama has been pushing for an increase in the federal minimum wage to $10.10 but has faced stiff opposition from Republican opponents and business lobby groups who argue a wage hike would kill job creation.

Speaking at a Labor Day rally in Milwaukee on Monday, Obama said: “If I were busting my butt in the service industry and wanted an honest day’s pay for an honest day’s work, I’d join a union ... I’d want a union looking out for me and if I cared about these things I’d also want more Democrats looking out for me.”

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Bank of America reaches record $17bn settlement over questionable mortgages

Deal resolves investigation into mortgage-backed securities sales and is largest settlement arising from 2008 financial crisis

theguardian.com, Associated Press in Washington, Thursday 21 August 2014

Bank of America. The deal requires the bank to acknowledge making serious
 misrepresentations about the quality of its residential mortgage-backed securities.
Photograph: Matt Rourke/AP

Bank of America has reached a record settlement of nearly $17bn (£10.2bn) to resolve an investigation into its role in the sale of mortgage-backed securities before the 2008 financial crisis, officials directly familiar with the matter have said.

One official, who spoke with AP on condition of anonymity because the announcement was not scheduled until Thursday at the earliest, said the bank will pay $9.65bn in cash and provide consumer relief valued at $7bn.

The deal is the largest settlement arising from the economic meltdown in which millions of Americans lost their homes to foreclosure. It follows agreements in the past year with Citigroup for $7bn and with JPMorgan Chase & Co for $13bn.

Like the Bank of America deal, those settlements were a mixture of hard cash and "credits" for various forms of consumer aid that the banks have promised to provide in coming years.

The Bank of America settlement was negotiated through a joint federal and state working group established by the US president, Barack Obama, two years ago with the justice department and other federal and state authorities. Individual states are expected to share in the settlement.

Justice department spokeswoman Ellen Canale declined to comment, as did the New York attorney general, Eric Schneiderman, a co-chairman of the group. The bank also declined comment.

The deal requires Bank of America to acknowledge making serious misrepresentations about the quality of its residential mortgage-backed securities issued by itself and by Countrywide Financial and Merrill Lynch. Those institutions were acquired by the bank when they were on the brink of failure in 2008 and they were responsible for the bulk of the questionable loans.

The deals are intended to offer some financial relief to homeowners, whose mortgages were bundled into securities by the banks and then sold to investors.

The securities contained residential mortgages from borrowers who were unlikely to be able to repay their loans. Yet, the securities were promoted as relatively safe investments until the housing market collapsed and investors suffered billions of dollars in losses.

The poor quality of the loans also led to a slew of foreclosures, kicking off the recession that began in late 2007. The cash totals now being paid by some of the country's largest banks are not nearly enough to reverse the damage caused by the bursting of the housing bubble and the ensuing recession.

Bank of America had argued that it should not be held liable for the subprime mortgages issued by Countrywide and Merrill Lynch. Combined, those three firms issued $965bn in mortgage-backed securities from 2004 to 2008, according to public records. Roughly 75% of that came from Countrywide.

In a federal lawsuit last year, the Securities and Exchange Commission charged Bank of America and two subsidiaries with defrauding investors in an offering of residential mortgage-backed securities by failing to disclose key risks and misrepresenting facts about the underlying mortgages.

The justice department filed a parallel civil action against Bank of America, alleging violations of the Financial Institutions Reform, Recovery, and Enforcement Act.

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"The Recalibration of Awareness – Apr 20/21, 2012 (Kryon channeled by Lee Carroll) (Subjects: Old Energy, Recalibration Lectures, God / Creator, Religions/Spiritual systems  (Catholic Church, Priests/Nun’s, Worship, John Paul Pope, Women in the Church otherwise church will go, Current Pope won’t do it),  Middle East, Jews, Governments will change (Internet, Media, Democracies, Dictators, North Korea, Nations voted at once), Integrity (Businesses, Tobacco Companies, Bankers/ Financial Institutes, Pharmaceutical company to collapse),  Illuminati (Started in Greece, with Shipping, Financial markets, Stock markets, Pharmaceutical money (fund to build Africa, to develop)), Shift of Human Consciousness, (Old) Souls, Women, Masters to/already come back, Global Unity.... etc.) - (Text version)

“…  The Shift in Human Nature

You're starting to see integrity change. Awareness recalibrates integrity, and the Human Being who would sit there and take advantage of another Human Being in an old energy would never do it in a new energy. The reason? It will become intuitive, so this is a shift in Human Nature as well, for in the past you have assumed that people take advantage of people first and integrity comes later. That's just ordinary Human nature.

In the past, Human nature expressed within governments worked like this: If you were stronger than the other one, you simply conquered them. If you were strong, it was an invitation to conquer. If you were weak, it was an invitation to be conquered. No one even thought about it. It was the way of things. The bigger you could have your armies, the better they would do when you sent them out to conquer. That's not how you think today. Did you notice?

Any country that thinks this way today will not survive, for humanity has discovered that the world goes far better by putting things together instead of tearing them apart. The new energy puts the weak and strong together in ways that make sense and that have integrity. Take a look at what happened to some of the businesses in this great land (USA). Up to 30 years ago, when you started realizing some of them didn't have integrity, you eliminated them. What happened to the tobacco companies when you realized they were knowingly addicting your children? Today, they still sell their products to less-aware countries, but that will also change.

What did you do a few years ago when you realized that your bankers were actually selling you homes that they knew you couldn't pay for later? They were walking away, smiling greedily, not thinking about the heartbreak that was to follow when a life's dream would be lost. Dear American, you are in a recession. However, this is like when you prune a tree and cut back the branches. When the tree grows back, you've got control and the branches will grow bigger and stronger than they were before, without the greed factor. Then, if you don't like the way it grows back, you'll prune it again! I tell you this because awareness is now in control of big money. It's right before your eyes, what you're doing. But fear often rules. ...”

Standard Chartered fined $300m by US financial watchdog

Further penalty imposed for failing to tackle compliance problems following $340m fine in 2012 over money-laundering scandal

theguardian.com, Dominic Rushe in New York, Wednesday 20 August 2014

Standard Chartered have been fined $300m for lapses in its compliance

after the Iran money-laundering scandal. Photograph: Kevin Lam/Reuters

Standard Chartered has agreed to pay $300m over lapses in its anti-money-laundering procedures, the New York State Department of Financial Services (DFS) has announced.

The settlement comes almost exactly two years after the British bank paid a $340m fine to the DFS after it was accused of scheming with Iran to hide from US authorities billions of pounds worth of transactions.

The latest payment follows the bank's failure to tackle problems with its anti-money laundering compliance that the New York regulator required following the 2012 settlement.

"If a bank fails to live up to its commitments, there should be consequences. That is particularly true in an area as serious as anti-money-laundering compliance, which is vital to helping prevent terrorism and vile human rights abuses," said Benjamin Lawsky, superintendent of the DFS.

Lawsky alleged the British lender failed to catch millions of higher-risk transactions that should have triggered further investigation. He said "a significant amount" of the potentially high-risk transactions the bank failed to detect originated from its Hong Kong subsidiary (SCB Hong Kong) and branches in the United Arab Emirates (SCB UAE), among others.

As well as the monetary penalty the bank agreed to keep on for a further two years an independent compliance monitor appointed by the regulator and to make enhancements to the transaction surveillance system at its New York branch. It will also suspend dollar clearing operations for high-risk retail business clients of SCB Hong Kong and start abandoning high-risk small and medium business clients at SCB UAE.

The New York branch will not, without the prior approval of the DFS, open a US dollar demand deposit account for any customer who does not already have such an account there.

Standard Chartered settled with Lawsky in 2012 after he released a scathing report that accused a unit of the bank of leaving the American financial system susceptible to terrorists and "drug kingpins". The $340m fine was part of a $667m settlement with other regulators over breaches of US sanctions on Iran.

Lawsky had accused the bank of helping Iran launder about $250bn, keeping false records and handling lucrative wire transfers for Iranian clients.

The report found that one Standard Chartered executive caustically dismissed concerns from a US colleague about dealings with Iran, one of a number of countries under American sanction.

"You fucking Americans. Who are you to tell us, the rest of the world, that we're not going to deal with Iranians," Lawsky's report quoted the banker as saying.

That fine was a particular embarrassment for Standard Chartered – which is based in London but best known for its banking services in Asia and Africa – as its management had weeks earlier emphasised that it had a more conservative, "boring" culture than some rivals.

The bank strongly rejected Lawsky's portrayal of its activities, which sent its share price and management into a tailspin. In August 2012, chief executive Peter Sands agreed to settle the charges while insisting that the bank had committed only minor breaches of the rules.

Announcing quarterly results this month, the bank warned it faced further US fines, saying Lawsky had uncovered "certain issues" with its efforts to block money laundering following the 2012 agreement.

The alleged lapse in anti-money laundering controls was detected by Ellen Zimiles, the independent monitor installed as part of the 2012 settlement. According to the DFS the bank's New York office had developed a transaction monitoring system, the SCB Rulebook, designed to alert the New York branch to unusual transaction patterns that would require further investigation.

But when Zimiles, an authority on anti-money laundering programmes at Navigant Consulting, gathered information and attempted to test the SCB Rulebook she found it contained numerous errors and other problems.

As a result, said the DFS, SCB failed to identify high-risk transactions for further review. "SCB failed to detect these problems because of a lack of adequate testing both before and after implementation of the transaction monitoring system, and failed to adequately audit the transaction monitoring system."

In a statement the bank said it "accepts responsibility for and regrets the deficiencies in the anti-money laundering transaction surveillance system at its New York branch. The group has already begun extensive remediation efforts and is committed to completing these with utmost urgency."

US Police: Going Military with Program 1033

The shooting of Michael Brown has revived debates about race and policing in the US. Not just over the killing – but the response to the protests that followed, and what’s being called the "militarization" of the police.

Deutsche Welle, 15 Aug 2014

The civil rights legend John Lewis expressed what many Americans were thinking. "This is not China or Russia or the Congo. This is America." His statement came after Wednesday night's turmoil in Ferguson, when the streets of the Missouri town were transformed into a conflict zone.

It wasn't just the tear gas, smoke bombs and Molotov cocktails that proved shocking. It was the sight of armored vehicles on American streets, surrounded by officers armed so heavily they looked like they were going to war.

Barack Obama interrupted his vacation to call for calm. Attorney General Eric Holder – leading the White House's response to the situation – said, "At a time when we must seek to rebuild trust between law enforcement and the local community, I am deeply concerned that the deployment of military equipment and vehicles sends a conflicting message."

'Small Armies'

The shooting of teenager Michael
 Brown triggered days of protests and
riots in Ferguson

It's a concern that has been echoed across the political divide. "We need to de-militarize the situation," said Missouri Senator Claire McCaskill, a Democrat.

"Washington has incentivized the militarization of local police precincts by using federal dollars to help municipal governments build what are essentially small armies," wrote Republican Senator Rand Paul in Time Magazine.

At the heart of this process of "militarization" is a Pentagon program that has channeled billions of dollars worth of surplus weapons, vehicles and even aircraft from the military to law enforcement agencies all over the US – virtually free of charge. Its name is Program 1033.

Program 1033

Run by the Defense Logistics Agency, the program has its roots in the early 1990s, as a means of providing local agencies with equipment for use in the "war on drugs." It was expanded later in the decade and is now subject to "few limitations and requirements" according to the American Civil Liberties Union (ACLU).

The program's website hails its own scope: "If your law enforcement agency chooses to participate, it may become one of the more than 8,000 participating agencies to increase its capabilities, expand its patrol coverage, reduce response times, and save the American taxpayer's investment." And with US combat forces now long out of Iraq and soon leaving Afghanistan – there is a lot of surplus equipment going for free.

Small town police force?

The incentive to militarize

From M16 rifles to Mine-Resistant Ambush Protection Vehicles (MRAPs) – there's plenty on offer for cash-strapped police forces. And they only have to pay the cost of delivery and maintenance.

There is even an incentive to put their new equipment to use – and fast. The ACLU highlights a clause in the Memoranda of Agreements between states and the DLA requiring the recipient to "utilize property within one year or schedule its return."

The ACLU says Program 1033 is encouraging not just escalation on the streets of Ferguson but countless SWAT team deployments that never go reported: forms of "militarization" that disproportionately target the black community.

Congressman Henry Johnson says it is time to end this process. He has drafted a "Stop Militarizing Law Enforcement Act," which he says will "end the free transfers of certain aggressive military equipment to local law enforcement." His spokesman told DW that the bill does not seek to scrap Program 1033 altogether. But he said it would limit the types of weapons on offer – as well as boosting accountability.

Ferguson regroups

Back in Ferguson, the police response demilitarized dramatically on Thursday night after Governor Jay Nixon weighed in. But there is no sign the equipment seen on the suburb's streets will be returned to sender.

DW asked the spokesman for Missouri's Department of Public Safety if the police would ever have been able to afford – or even obtain – such gear without access to government programs like 1033. He would only say that Missouri was no special case: "This is a national program available right across America."

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