The Case for a Financial WikiLeaks

By Brett Scott

May 15th, 2012 (edited May 16th, 2012)

The greatest barriers to financial whistleblowing are social and economic, not legal. Fear of being shunned by colleagues, passed over for promotion, bullied and harrassed, summarily dismissed and even shut out of Wall Street or the City for life plays a big part in dissuading executives who become aware of crimes and misdemeanours inside their organisations from blowing the whistle.

Occasionally, as we saw with Greg Smith and his remarkable New York Times op-ed Why I Am Leaving Goldman Sachs, an employee’s conscience gets the better of them. But fear of being ostracised for “spoiling the party”, coupled with an attachment to the high pay that a financial career can bring (you might call it ‘moral cowardice’) is sufficient to persuade the vast majority of putative whistleblowers to keep schtoom.

That’s why I believe we need a financial version of the whistleblowing website WikiLeaks. It would protect employees from management retribution and eliminate the social barriers to speaking out. There are already several leak sites available (check out the Leak site directory).

WikiLeaks has previously been used for financial leaks relating to the banks Julius Baer and Barclays, and in 2011 there was speculation that it was sitting on a treasure trove of incriminating information that might bring down Bank of America (In the end the emails, published at bankofamericasuck.com and here, turned out to be something of a damp squib. Dating from November 2010, the emails suggest that employees of  Balboa Insurance Group, a subsidiary of Bank of America, removed documents from loan files relating to a group of insured properties).

WikiLeaks though, has mostly made a name for itself in exposing political controversies. People don’t predominantly think of it as the place to go to find out about corporate wrongdoing, and corporate disclosures on the site run the risk of being drowned out by the drone of government abuse.

One organization that does specialize in corporate disclosure isAnonymous Analytics, whose focus is on ”acquiring information through unconventional means” (a.k.a. hacking and subterfuge) and presenting it in the form of investment analysis reports. The group, whose stated aim is to “provide the public with investigative reports exposing corrupt companies” and whose team includes “analysts, forensic accountants, statisticians, computer experts, and lawyers from various jurisdictions and backgrounds” caused a stir last September when it exposed alleged large-scale fraud at Chaoda Modern Agriculture, a Hong Kong-listed company. Anonymous Analytics claimed that Chaoda was:-

“overstating its cash balance, exaggerating its revenue, and falsifying its financial statements.”

Last week Anonymous Analytics initiated coverage of another Hong Kong-listed company Huaboa International. In a 44-page report entitled “Smoke and Mirrors”, it alleged Huabao overpaid for several companies acquired from its chairwoman, Chu Lam Yiu. The research note also questioned the veracity of Huabao’s financial statement and performance data. The report stated that:-

“We believe management is materially overstating Huabao’s earning power … [Huaboa International] is a pump and dump scheme with the primary objective of enriching its chairwoman.”

While Anonymous Analystics specializes in ‘primary research’, it also briefly offered a dropbox facility for would-be whistleblowers. This was recently closed down. The offshoot of the hacker group claimed this was because it had been unable to handle the volume of tips, comments and emails it had received.

Organisations such Anonymous Analytics are firmly focused on overt cases of corporate fraud and headline-grabbing controversies. Nevertheless, while having channels to expose criminality is important, there are many other equally valid reasons to create a financial leaks site.

WikiLeaks’s release of the US Embassy Cables, which commenced in November 2010, didn’t provide much sensational news, but it did provide a rare window into the normally opaque worlds of diplomacy and espionage and the conflict between the State department and more nefarious arms of the US state. It will be an invaluable resource for academic researchers and journalists for years to come. But there are few, if any, such open windows into the financial sector.

The Safe Deposit Box: A Tool for Transparency

This, coupled with the inadequacy of most financial regulators around the world, is why a specialised financial leak site is so badly needed.

Here’s my back-of-the-envelope sketch for the Safe Deposit Box, a site that would improve transparency in financial institutions (including banks, insurers, funds, brokers) and commodity trading outfits, by providing a channel that would encourage internal leaks. It could be curated by individuals with financial expertise, such that information leaked could be vetted for accuracy and presented correctly (something that non-specialist leak sites would be unable to do). The site could be split into two main divisions with different purposes:

• A whistleblowing section to allow employees of banks and other financial institutions to expose dubious behaviour, including instances of financial crime, market manipulation, insider trading, ‘creative’ accounting and rogue trading.
• A transparency initiative focused on shedding light on the inner workings of financial institutions. This section would encourage employees to contribute information such as organisational structures, divisional strategies, risk exposures, compensation, and other information that helps to break the near impenetrable wall of secrecy (omertà) large financial institutions frequently enjoy.

Many people intuitively understand the value of division one, but division two is perhaps harder to justify. What’s the point of transparency for transparency’s sake, some might ask? I would argue that banks and other financial institutions still enjoy huge political clout (and indeed some are owned by the public), yet citizens have virtually no insight into their inner workings and strategies,  including who they are lending to, how they treat distressed assets, or their level of speculation on energy and food prices. (see “Barclays shame award“)

For example, I suspect that the residents of Chicago do not have the faintest idea of how a Morgan Stanley consortium came to own the city’s parking meters. I also suspect the residents of Edinburgh have no idea how a RBS consortium came to own the city’s main hospital, the Edinburgh Royal Infirmary.

At a systemic level, the very opacity of financial transactions increases systemic risk, which in turn has a massive impact broader society. Providing a channel for financial employees to shed light on their organisations would have: (1) a democratic empowerment benefit and (2) A research and regulation benefit, providing more material for citizens, academics and regulators to understand and monitor the financial sector.

The transparency initiative could be split into specific research domains that are of particular concern (or ought to be) to journalists, researchers, campaigners, regulators, and even some politicians. For example, domains could include:

• A high-pay transparency programme to gather leaked payrolls, compensation reports and other material to help in monitoring financial incentive systems.
• A tax haven programme to gather lists of subsidiaries, offshore transactions and other material to help shed light on tax avoidance systems.
• A loan transparency programme to gather information on loan portfolios of the banks’ corporate banking divisions, thereby helping keep tabs on socially and environmentally irresponsible lending
• A programme gathering information on banks’ dealings with Polically Exposed Persons (including deposed dictators and their families), authoritarian regimes, and dodgy individuals
• A systemic risk programme gathering info on prop trading levels, interbank risk exposures, and shadow banking systems
• A programme collecting information on ‘mis-selling’ and poor customer service (aka. treating clients as muppets)

I don’t want to be flippant. I also accept that actively encouraging breaches of confidentiality might border on being illegal. Yet confidentiality and non-disclosure agreements are often used by banks to bury frauds and other issues of concern, whose victims are often outside the institution that perpetrates them.

For example, in my research into the potentially damaging effects of commodity speculation, I hit a brick wall when seeking to establish how much banks earn from their agricultural commodity trading desks. They simply don’t report it, and stonewall all requests for information.

I recognise that that leak sites are far from perfect mechanisms and that innumerable issues would have to be overcome before a site along the lines I describe could be launched.

These would include how it would be structured and who would be permitted to access the information. Would it be better to use a centralised WikiLeaks structure, or something more decentralised along the lines OpenLeaks (set up by Wikileaks defectors, but yet to launch)? Might it be better to consider something more conciliatory and collaborative, more like Wikipedia, a financial commons that would allow people with financial expertise to freely and anonymously contribute?

What I do know though, is that financial secrecy benefits a very small section of society, but harms a very large section of society, and I’m also sure that there are a great many financial workers who would love the opportunity to spread the love by spreading the knowledge. There again, there’s always the risk that such a site might also attract the attention of the financial blockade.

The original version of this article was headlined The Safe Deposit Box: Creating a Financial Wikileaks. Written by Brett Scott, who operates as a consultant bridging the gap between finance and those involved in socio-environmental justice and international development. He has also written for the Guardian, the Ecologist, New Internationalist and Open Democracy. Brett blogs at www.suitpossum.blogspot.com and tweets as @Suitpossum. He is a fellow of the WWF/ICAEW Finance Innovation Lab.

@UFE Fair Economy

#Occupy always on our staff mtg agenda. #Solidarity w/ #ows #seattle #oakland #denver #portland. pic.twitter.com/auhKMRGf

US Uncut Exposes Rush Limbaugh with One Simple Question

http://www.alternet.org/newsandviews/?akid=7519.187755.owKoql&id=660961&rd=1&t=1

Sometimes It’s Easy: US Uncut Exposes Rush Limbaugh with One Simple Question

 Carl Gibson, one of the founders of US Uncut, just steamrolled the drugged one. It was a thing of beauty. Rush would take a punch, hit the canvass, struggle to his feet, only to be flattened again. Eventually, as is always the case when right wing talkers find their asses handed to them, Ruash cheated. He spoke over Gibson, cut him off, spewed a slew of irrelevant right wing talking points, hung up on him, and then spent the next 10 minutes flailing desperately in an effort to make his audience forget what Carl’s question was.

So… What was the question? Well, a bit of background is in order first. Did you know that 47% of American households pay no income taxes? Let me tell you, every listener to right wing talk radio has heard that tired old talking point hundreds of times. It’s the ear bug of right wing talk that establishes the foundation of their resentment politics. After all, somebody has to be paying for all those welfare checks, right?

I probably don’t have to mention it to this crowd, but it is true, of course, that Limbaugh and his lieutenants (and the cultists that tune in faithfully every day) ignore the fact that everyone that works pays payroll taxes to the feds (about 12% of every dollar they earn)… They don’t mention the federal tax on gasoline… Or state, local and sales taxes. The truth is that nobody escapes the tax man, and that many of the folks that pay no federal income taxes nevertheless lose a higher percentage of their earnings to taxes than the super-rich do.

So yeah, virtually every day, Limbaugh tells his listeners that they are paying income taxes so that leech scum underclass of America can be coddled by the nanny state. So Carl called and politely as can be, asked:

Carl:  “…several multi-billion dollar corporations paid their CEOs more than they pay the government in taxes. Now I know how you feel about folks, I mean individuals who don’t pay their taxes, but I want to know how you feel about corporations that don’t pay taxes. Do you have the same antagonism for them?”

Rush: “How do I feel about how he felt about corporations that don’t pay income taxes?”

Carl:  “No, corporations.”

Rush:  “No, you said you know how I feel about individuals that don’t pay taxes… How do I feel about that?”

Carl:  “Well, I’ve heard you refer to the 47% of Americans that don’t pay taxes.”

Rush:  “Well, that’s… uh… they’re not illegally avoiding taxes, they don’t have to pay taxes because they’ve been exempted. Their votes are being purchased.”

Carl:  “Well, they have to pay a third of their income in sales and property and payroll and excise taxes too… but..” 

Rush:  “Look, the only major corporation I know not paying US taxes is General Electric.” 

Carl:  “GE, EBAY, Verizon, Exxon Mobil, Chevron, Bank of America, Citibank, I mean I can go on…”

Rush:  “Are you trying to tell me that every one of those corporations pay zero US taxes?”

Carl:  “Zero US taxes Rush. Sometimes they get money back from the federal government.”

And on, and on, and on and on… 

Eventually, Rush came back from his break to inform his listeners that ExxonMobil paidbillions in taxes!  It was just the caller's clever use of a technicality that allowed for him to make his claim.  It turns out that United States corporations can deduct the taxes they pay to other governments from their US tax bill.  

Are you kidding me?

Rush thinks it's OK for us to cut Social Security and Medicare while ExxonMobil pays nothing in taxes because they are sending money to other countries instead?  From there, Limbaugh just became a caricature of himself.  The plain fact is this:  Limbaugh had no good answer for Carl's question.  Limbaugh refused to say why he takes umbrage at the poor not paying federal income taxes while multi-billion dollar corporations that are enjoying record profits either pay no taxes, or even get refunds from the federal government.  

Listen for yourself (and you should - there's a lot of good stuff I left out):

By Mike Stark | Sourced from DailyKos 

US in Revolt. It Can Be Done. Now is the Time.

If you want protest v ideos here they are !!

These are a few among many, many more examples of America in revolt. Multiple protests are occurring every week. America is in revolt and October2011.org is seeking to bring all of these concerns together. October 6 ,the beginning of the occupation of Freedom Plaza, is the beginning of 11 years of war in Afghanistan and the first week of the new federal fiscal year that will make austerity spending - for everything except war - a reality. Every issue will be affected by this new budget and the link between war spending and austerity will become evident to all.
October2011.org seeks to unite Americans who recognize the need to end corporatism and militarism.

Already enough people have signed up and many more have told us they are coming without signing up so that we knowOctober2011.org will be a success. The only question is how successful. When we announced October2011.org we published an article History is knocking! Now that we have been organizing this event for two months, there is no doubt history is in fact knocking. October2011.org will be an event of historic significance.

We know that out of this event will come more actions - just like a splash creates ripples; mass resistance will create more resistance. As Wikileaks says, "Courage is contagious." We want to make as big a splash as possible so that the impact is long-lasting and an independent political movement builds so it cannot be ignored. If you would like to see a turning point in history be part of October2011.org. Join us in spreading the word, reaching out to all Americans and making the turnout as large and as strong as possible.

Kevin Zeese is on the steering committee of October2011.org and directs It’s Our Economy.

PayUpNow has new boycott, corporate tax info .. RAH!!

Pay Up Now is an online effort by US Uncut Chicago members to boycott corporations that pay little or no federal income tax.

Every effort has been made to provide truthful, documented information. Inaccuracies can be reported to contact@PayUpNow@gmail.com.  Use that email address to make suggestions or offer help.  Great going, Uncutters!  Magnificient work!!

Corporate Tax Compliance Rankings Summary

PayUpNow.org is evaluating the 10-Ks (financial summaries submitted by corporations to the SEC) and other documents to determine the tax avoidance levels of Fortune 500 companies, especially those familiar to American consumers. One of our objectives is to make recommendations to shoppers about purchase options that favor tax-responsible corporations. 

Evaluating 10-Ks is not an easy task. Variations , amendments, and financial jargon abound amidst the everpresent hint of accounting legerdemain. With due care we took revenues and pre-tax incomes for five years, and chose current federal tax payments to the exclusion of deferred and foreign and state taxes over the same period. We organized the results by industry in order to identify relative tax avoiders in specific consumer areas. 

Results in these industries stood out: 

-- Beverage: Coca Cola paid a much smaller percentage (6.5%) than Pepsi (13.6%). Both were significantly below the maximum statutory rate of 35%.

-- Computers: Hewlett-Packard (2.9%) and IBM (3.3%) both paid much less than the industry average of about 20%.

-- Finance: Citigroup, with revenues of almost $400 billion, claimed an overall 5-year loss and received a $5 billion refund. PNC and Wells Fargo both paid about 9%, much less than the other major banks.

-- Telecommunications: Verizon (8.8%) paid a much smaller percentage than AT&T (22.1%). The little guy, US Cellular, paid the most (almost 35%). 

In other industries, one or two companies stood out, above or below the pack: 

-- Cable TV: Dish Network (14.5%) and DirecTV (16.6%) paid less than Comcast (22.5%).

-- Petroleum: Exxon (3.6%) and Chevron (5.6%) paid much less than Marathon (12%), and much less than Phillips (17.1%).

-- In fast food, KFC/PizzaHut/TacoBell paid the least at 10%, a little worse than McDonalds at 14%. Burger King (19%) was near the middle. Starbucks paid 33%.

-- In processed food, Heinz (5.1%) paid the least, General Mills the most (25.7).

-- For office supplies, Office Max and Office Depot both lost money. Staples was profitable and paid a 25% tax.

-- For insurance, Geico (22.2%) and Allstate (26%) paid mid-level taxes, while Progressive paid 35%.

Interestingly, tech firms and retail stores were closely grouped in federal tax payment percentages, as if adapting to similar accounting protocols. Amazon, Intel, Cisco, Dell, Microsoft, and Google were all between 19-25%, with Apple falling a little farther from the tree at 16.3%. Wal-Mart, Costco, Target, JC Penney, Best Buy, and Kohl's were all between 24-32%.

Work continues on PayUpNow.org investigations, as new data is weighed, and as feedback helps to eliminate errors and discrepancies. We will also be reviewing statistics on executive compensation and job outsourcing.

Our ultimate goal is to realize product boycotts of the worst offenders. Hitting them in their 10-Ks will remind tax dodgers that their use of American research and infrastructure and transportation and security should be paid for through their taxes.

Corporate Tax Compliance Rankings (Click for Summary)

Industry	Company	5 yr Revenue	5 yr  Income	5 yr  Fed Tax	5 yr  Tax%	(boycott)
Beverage	Coca-Cola	150,998	45,146	2,941	6.5
Beverage	PepsiCo Inc.	218,932	37,976	5,183	13.6
Beverage	Dr Pepper Snapple	27,272	2,936	916	31.2
Cable TV	Dish Network	55,648	6,295	915	14.5
Cable TV	DirecTV	82,606	10,207	1,692	16.6
Cable TV	Comcast	163,977	23,211	5,222	22.5
Computers	Hewlett-Packard	554,893	47,230	1,392	2.9
Computers	IBM	489,468	82,382	2,688	3.3
Computers	Apple	188,942	47,379	7,706	16.3
Computers	Google	101,965	34,714	6,636	19.1
Computers	Microsoft	276,745	107,011	20,995	19.6
Computers	Dell Inc.	294,050	15,870	3,281	20.7
Computers	Cisco	179,103	44,457	9,324	21.0
Computers	Amazon	103,425	4,596	1,124	24.5
Computers	Intel	190,052	45,669	11,296	24.7
Drug &  Household	Eli Lilly	99,607	17,869	900	5.0	Prozac,  Cialis,  Ceclor
Drug &  Household	Merck & Co.	121,462	30,366	2,386	7.9	Claritin,  Coppertone, Solarcaine,  Dr. Scholl’s
Drug &  Household	Bristol-Myers  Squibb	90,408	21,720	1,743	8.0	Plavix
Drug &  Household	Colgate	72,247	14,470	1,615	11.2	Palmolive,  Irish Spring, Speedstick,  Ajax
Drug &  Household	Procter & Gamble	379,587	71,468	9,071	12.7	Tide, Crest,  Downy,   Bounty, Pampers, Head&Shoulders
Drug &  Household	Kimberly-Clark	93,289	11,578	1,475	12.7	Huggies, Kotex, Depend, Kleenex, Scott,  Viva
Drug &  Household	Johnson & Johnson	301,650	77,501	13,422	17.3	Band-Aid,  Tylenol,  Motrin, Neutrogena,  Carefree
Drug &  Household	Pfizer Inc.	262,903	52,249	10,894	20.9	Viagra,  Celebrex,  Lipitor
Fast Food	Wendys, Arbys	11,324	-608	-54
Fast Food	KFC, Pizza Hut,  Taco Bell	53,460	6,580	658	10.0
Fast Food	McDonalds	114,021	27,371	3,831	14.0
Fast Food	Burger King	11,775	1,164	221	19.0
Fast Food	Starbucks	48,061	4,413	1,460	33.1
Financial	Citigroup	383,307	-17,705	-5,099
Financial	PNC	48,478	14,479	1,213	8.4
Financial	Wells Fargo	211,384	64,576	5,690	8.8
Financial	Amer. Express	115,175	23,232	4,640	20.0
Financial	JPMorgan Chase	403,751	86,390	17,411	20.2
Financial	Bank of America	442,254	60,362	13,441	22.3
Food Processing	Heinz	48,034	5,656	288	5.1
Food Processing	Kraft Foods	197,843	16,930	1,874	11.1
Food Processing	Kellogg	60,477	8,076	1,300	16.1
Food Processing	Campbell	37,539	5,306	915	17.2
Food Processing	General Mills	67,291	9,165	2,359	25.7
Insurance	Prudential	78,532	13,828	-622
Insurance	BerkshireHathaway (Geico)	139,905	75,116	16,662	22.2
Insurance	Allstate	133,720	13,180	3,443	26.1
Insurance	Progressive	69,951	7,025	2,480	35.3
Med Supplies	Baxter	59,394	10,946	150	1.4
Med Supplies	McKesson Corp.	496,997	6,853	678	9.9
Med Supplies	Abbott Labs	143,847	25,506	3,917	15.4
Med Supplies	Medtronic	67,522	15,825	2,432	15.4
Med Supplies	AmerisourceBergen	337,449	4,049	1,043	25.8
Med Supplies	Cardinal Health	448,417	6,657	1,820	27.3
Office Equipt	Office Depot	68,809	-781	144
Office Equipt	Office Max	40,675	-1,379	24
Office Equipt	Staples	109,435	6,779	1,725	25.4
Petroleum	Exxon Mobil	1,886,999	309,009	11,216	3.6
Petroleum	Chevron Corp.	1,049,541	157,783	8,782	5.6
Petroleum	Marathon Oil	336,198	31,142	3,749	12.0
Petroleum	ConocoPhillips	980,994	78,077	13,389	17.1
Recreation	Royal Caribbean	30,551	2,518	-18
Recreation	Carnival Corp.	67,748	10,898	119	1.1
Retail Bldg Supp	Home Depot	361,832	27,967	8,530	30.5
Retail Bldg Supp	Lowe's	239,475	19,068	6,439	33.8
Retail Store	Macys	126,667	-345	1,070
Retail Store	Sears Holdings	237,858	4,713	264	5.6
Retail Store	Wal-Mart	1,953,254	105,649	25,185	23.8
Retail Store	J C Penney	93,564	5,409	1,299	24.0
Retail Store	Costco	343,901	9,252	2,231	24.1
Retail Store	Target	317,044	21,025	6,192	29.5
Retail Store	Best Buy	201,514	9,974	3,097	31.1
Retail Store	Kohl’s	84,029	8,311	2,640	31.8
Telecom.	Sprint Nextel	181,607	-39,145	193
Telecom.	Verizon	493,378	45,493	3,981	8.8
Telecom.	AT&T	552,219	61,269	13,561	22.1
Telecom.	US Cellular	18,672	1,503	524	34.9
Transport	FedEx	175,692	10,701	2,063	19.3
Transport	United Parcel	243,567	20,845	4,710	22.6