The proposed FDA rule mandates that foods labeled as healthy must contain a major food group — such as dairy, fruits, or whole grains — and must fit certain limits on saturated fat, sodium, and added sugars.

The rule limits cereals, for example, to no more than 2.5 grams of sugar per serving in order to be labeled as healthy — a restriction food manufacturers claim would exclude over 95 percent of ready-to-eat cereals on the market.

In response, processed food companies that produce a variety of snacks, baked goods, pastas, and frozen pizzas are challenging the rules before they are finalized by the agency. Among the most vocal food companies are producers of high-sugar cereals, which are largely marketed to children and have been criticized as a driver of the obesity epidemic in America.

In a joint filing made last month, the largest cereal producers in the country — General Mills, Kellogg’s, and Post Consumer Brands — decried the proposed nutritional criteria and threatened to file a lawsuit, challenging the guidelines as a violation of corporate free speech rights.

The rule, “if finalized in its present form,” the companies wrote, “would be open to legal challenge in that it violates the First Amendment by prohibiting truthful, non-misleading claims in an unjustified manner and also exceeds FDA’s statutory authority in several ways.”

The idea of a legal challenge may not be an idle threat.

The public comment docket includes a filing from the Washington Legal Foundation, a shadowy nonprofit that litigates esoteric and often controversial business interests. The group filed a letter in opposition in the form of a legal brief, laying out a broad case for a future court challenge against the FDA guidelines.

The organization contended that the healthy labeling requirements are an unconstitutional overreach of government power. Food companies, the Washington Legal Foundation argued, have “constitutionally protected commercial speech” rights covering their ability to use the term “healthy” to describe their added sugar products.

The FDA, the Washington Legal Foundation wrote in its brief, “cannot explain why consumers cannot make their own healthy decisions based on [nutrition labeling] data. Rather, it seeks to limit the food companies’ speech.”

The group does not disclose its donors and did not respond to a request for comment. In previous years, the Corn Refiners Association, a lobby group that represents the high fructose corn syrup industry, has disclosed financial ties to the Washington Legal Foundation.

Drug companies, including Purdue Pharma, the makers of OxyContin, have also used the Washington Legal Foundation to challenge government rules and establish legal precedent to reduce the ability for prosecutors to seek criminal charges for drug company executives.

Conagra, Ocean Spray, the American Frozen Food Institute, and the American Bakers Association similarly hinted at a legal threat to the FDA healthy food labeling rule. All four organizations cited constitutional issues with the proposed labeling requirements in letters to the agency.

The joint filing from cereal manufacturers not only scorns the labeling rules, but also argues that sugary cereals pose no health risks and are, in fact, beneficial to society and childhood health.

The companies stated that they view the “extremely strict” guidelines as “alarming” because “cereal is one of the most affordable, nutrient dense breakfast choices a person — adult or child — can make … with a wide range of options to suit different cultures, preferences, and taste.” Cereals, the companies claimed, are already recognized for “nutritional benefits,” given their inclusion in a range of federal programs that “serve the nation’s vulnerable populations,” such as the Special Supplemental Nutrition Program for Women, Infants, and Children and the National School Lunch Program.

The companies charged that cereal “delivers on nutrition when eaten alone, but when consumed as part of breakfast, it elevates the nutrition further,” with cereal eaters exhibiting an “overall higher diet quality.” As evidence, the filing cites a 2019 study conducted by in-house researchers employed by General Mills, the maker of Lucky Charms, Cinnamon Toast Crunch, and Trix, among other brands.

Lucky Charms and Trix contain approximately 12 grams of sugar per serving, nearly five times the limit proposed by the FDA’s healthy labeling guidelines. What’s more, researchers have found that children typically eat more than twice the recommended serving size of cereal for breakfast, meaning that a typical sugary breakfast cereal portion contains 24 grams of sugar, close to the sugar content of a Snickers chocolate bar.

The food manufacturers also stressed that the FDA should consider that cereals represent an affordable and accessible option for “families who are experiencing food insecurity.” As evidence, the companies reference another General Mills-funded study to show that low-income cereal consumers had higher daily calcium intake and across all income levels, cereal eaters were associated with better diet quality.

The agency, they wrote, should recognize the beneficial role of sugar. “Sugar plays a role in foods beyond palatability; it controls water activity, creates texture, adds bulk, and also contributes to flavor complexity,” the filing states.

General Mills, Kellogg’s, and the Consumer Brands Association, a trade group for cereal manufacturers, similarly filed a protest against the FDA proposal, citing its impact on sugary cereal brands. Cereal makers produced half a dozen separate filings, counting various trade groups and individual protest letters from manufacturers.

Independent researchers, however, have found that diets high in processed foods and sugar are linked to obesity, diabetes, high risks of stroke, obesity-related cancers, hypertension, and dental diseases.

Children’s eating habits of high-sugar cereals and snacks, multiple studies have shown, are the driving factor for high levels of childhood obesity. Children are also bombarded with advertising for ultrasweet cereals, a dynamic that has been found to increase the subsequent intake of advertised cereals.

The FDA’s move to discourage sugary diets to children and curtail advertising of such foods to children echoes the Obama administration, when a variety of voluntary guidelines were proposed in 2011.

At the time, lobbyists for the food industry mobilized a broad counterassault in Congress, with allied lawmakers inserting provisions into the authorizing legislation to delay the voluntary guidelines. During this fight, the food industries hired SKDK, a consulting firm co-founded by Anita Dunn, who went on to help manage President Joe Biden’s recent campaign and currently serves as his close adviser in the White House.

The new proposed rules also expand the categories of foods that may be labeled as healthy, including nuts, higher-fat fish such as salmon, avocados, and water.

The open comment period for the FDA guidelines closed on February 16. The agency, which has offered companies three years to comply with the rule once it is finalized, is still reviewing the feedback.

The post Fruity Pebbles and Lucky Charms Threaten to Block “Healthy” Food Labeling Guidelines in Court appeared first on The Intercept.

At issue was a bill proposed by the South Dakota Republican designed to push back the deadline for the implementation of electronically controlled pneumatic, or ECP, brakes on rail cars carrying oil or other hazardous liquids. The legislation required years of study and new rulemaking.

Thune argued that the technology was untested and that he simply wanted more data before moving ahead with the mandate for electronically controlled brakes, which had been issued in early 2015, during the Obama administration. At the time, the rail industry was booming as it transported fracked oil from North Dakota oil fields.

During the ensuing debate in the Senate Committee on Commerce, Science, and Transportation, Sen. Maria Cantwell, D-Wash., pointed to the increasing frequency of trains carrying highly flammable oil. “For a state that sees three trains now, and will see as many as fifteen on a weekly basis, this is a lot of activity that goes through every major city in our state,” said Cantwell, who called the safety regulations “critical.”

Sen. Joe Manchin, D-W.Va., noted the explosion of CSX rail cars in his state earlier that year, which caused 100-yard-high flames and one injury. “If my derailment would have happened two miles down the track, it would blow up the whole town, lost a whole town. It happened outside. It’s unbelievable we had no loss of life.”

Thune — the former South Dakota railroad director, a close ally of the rail industry, and one of the largest recipients of railroad corporation campaign donations in Congress — was unmoved. “I would pledge to Senator Manchin and my colleagues that there’s nothing in the underlying ECP provision that’s intended to scuttle the adoption of this,” the South Dakota lawmaker replied, referring to the vote on legislation containing the language delaying the safety rule.

Thune voted down a Democratic amendment to nix the delay before moving to a full committee vote. His Senate office did not immediately respond to a request for comment.

Thune’s legislation was part of an industry push to kill the ECP mandate, review of lobbying, congressional, and court records show. Around the same time as he advanced delaying provisions in omnibus transportation legislation, Thune also introduced another bill to entirely eliminate the mandate for implementation of ECP. Following the election of President Donald Trump and with Republican majorities in the House and Senate, the rule was indeed scuttled in 2018. Thune issued a celebratory press release.

The braking technology and other safety enhancements are now in the limelight once again. Rail safety advocates have argued that ECP may have helped prevent the derailment of a Norfolk Southern Railway freight car in East Palestine, Ohio, earlier this month, a disaster that caused a mass evacuation of residents and the release of pollutants into the surrounding area.

The freight cars in the accident did not use the ECP braking technology, though, according to a Biden administration official, they would not have qualified under the 2015 rule — the rule that was subsequently repealed — given that not every car was carrying hazardous materials.

Former regulators and rail workers told The Lever News that the Norfolk Southern trains should have been designated as hazardous given the risks of carrying vinyl chloride, and that ECP would have at least reduced the damage caused by bringing the trains to halt more quickly.

James Squires, president of Norfolk Southern, made clear early on that his company would oppose the ECP mandate. In a presentation to investors on March 4, 2015, Squires boasted that his company was “probably the furthest along in introducing ECP brakes” and cautioned that “like any big tech investment, it takes longer to bear fruit than you think.” The technology introduced new complexity, he said, as he warned that government mandates were on the horizon.

The development of ECP brakes began in the early 1990s, with tests collaboratively conducted by the Association of American Railroads, an industry trade group that represents the largest rail companies, and the Federal Railroad Administration. ECP uses electronic controls to instantaneously apply air-powered brakes uniformly across the length of a train. Studies have shown the brakes can shorten stopping distances by up to 60 percent.

Initially, the rail industry hailed the new development, touting the brakes as a safe way to transport nuclear waste, as DeSmogBlog has documented.

“ECP brakes are to trains what anti-lock brakes are to automobiles — they provide better control,” Joseph Boardman, President George W. Bush’s FRA administrator, exclaimed in 2006. The agency hired consultants to study the braking system, who concluded that they provided “major benefits in freight train handling, car maintenance, fuel savings, and network capacity” that could “significantly enhance rail safety and efficiency.”

But the sudden growth of the American fracking industry, which fueled the demand for freight cars carrying crude oil from fields in North Dakota and other states to ports and refineries around the country, changed the economic equation for the rail industry. The surge in demand meant it would be much more costly for the forced adoption of new safety regulations requiring ECP brakes on rail cars carrying explosive liquids.

By May 2015, when the Obama administration issued its rule following a number of oil train accidents, the industry coalesced in opposition.

Squires, speaking at another investor event in May of that year, confirmed that Norfolk Southern would oppose the ECP mandate. “We believe that the new braking systems are unjustified from a cost-benefit perspective,” said Squires. He noted the rail industry and his company would fight back against the brake technology mandate, “in some form or another … but there’s no question challenges are coming.” (Norfolk Southern did not immediately respond to a request for comment.)

The rail, oil, and chemical industries — including trade groups such as the Association of American Railroads — filed opposition, citing costs, to the Obama administration. The organizations also filed a lawsuit in administrative court and brought an appeal to the District of Columbia Circuit, attempting to overturn the rule. The challenge was mitigated, however, by the Thune legislation that pushed back the implementation.

In 2015 alone, Norfolk Southern retained 47 federal lobbyists and focused on fighting against ECP regulation.

In 2015 alone, Norfolk Southern retained 47 federal lobbyists and focused on fighting against ECP regulation. The company disclosed that it “opposed additional speed limitations and requiring ECP brakes.” Other rail giants, including BNSF and CSX, deployed lobbyists on the regulations as well, records show.

The Association of American Railroads bought online advertising against the rule, and also mobilized its considerable political influence against the rule and in support of Thune’s legislative efforts to undermine it.

Tax records show the rail industry, while it pushed back against the electronic braking requirement, funneled money to nonprofit groups close to legislators, including the Congressional Black Caucus Foundation, the Congressional Hispanic Caucus Institute, and the Republican Main Street Partnership.

After the rule was eventually repealed, meeting notes from Trump administration Transportation Secretary Elaine Chao show a scheduled call with Carl Ice, then president and CEO of BNSF Railway, for him to “thank her for ECP.”

Congress now has another opportunity to probe these issues. In 2015, when the Senate Commerce Committee intervened to block the ECP rules, the chamber was controlled by Senate Republicans. Now, Democrats are in power and one of the most outspoken critics of the rail industry, Cantwell, is chair of the committee.

On Friday, Cantwell announced a probe of Norfolk Southern and the safety issues surrounding the East Palestine derailment. The committee also sent letters to the seven largest railroad CEOs requesting detailed information about safety practices used for transporting hazardous materials.

Norfolk Southern paid out $18 billion in stock buybacks and dividends over the last five years.

Critics of the rail industry in recent days have pointed out that Norfolk Southern paid out $18 billion in stock buybacks and dividends over the last five years, an amount that eclipses the money spent on railway operations and safety.

Other questions remain about safety regulations that could have prevented the East Palestine disaster. The company once employed five senior engineers who specialized in maintaining detectors that prevent derailments. As Freight Waves, an industry outlet, has reported, Norfolk Southern recently eliminated these positions and has lobbied against rules that required railroads to conduct brake tests on rail cars that had not operated for four or more hours.

The Obama-era railroad regulations also included a rule to use freight cars made of special reinforced materials for the transport of oil and hazardous materials, as the New York Times reported. Of the freight cars that derailed earlier this month, three were of the stronger type and were not breached, while one of the freight cars carrying propylene glycol that did not have the enhanced protections was breached.

The rail and chemical industries, as The Intercept has reported, have enjoyed deep connections to lawmakers and federal regulators, a relationship that has helped delay and prevent a raft of safety rules. Over the last two decades, the rail industry has employed lobbyist family members of powerful lawmakers overseeing the rail industry, and consulting firms tied to both parties, including SKDK, the firm founded by Anita Dunn, a senior adviser to President Joe Biden who also served as chief campaign strategist to his 2020 campaign.

The producers of vinyl chloride, one of the chemicals involved in the Norfolk Southern spill, also maintain a special trade group with close ties to Democratic insiders and lobbyists for the Republican Party, including Stuart Jolly, the former national field director for Donald Trump’s presidential campaign.

“Every railroad must reexamine its hazardous materials safety practices to better protect its employees, the environment, and American families and reaffirm safety as a top priority,” Cantwell wrote.

The post Years Before East Palestine Disaster, Congressional Allies of the Rail Industry Intervened to Block Safety Regulations appeared first on The Intercept.

But the legislation may not stand much of a chance with a Republican House, where the Financial Services Committee, which oversees banking policy, is now chaired by Rep. Patrick McHenry, R-N.C., and staffed by former lobbyists.

Over the last few weeks, McHenry’s hires to run the committee are mostly former lobbyists who served the very banks, lenders, and brokerages seeking to combat Biden regulations. Staffers often play a pivotal role in determining the strategy and policy behind any change in the law.

Larry Seyfried, just months ago, worked as a registered lobbyist and vice president of congressional relations at the American Bankers Association, the bank trade group that is leading the charge against Biden’s crackdown on junk fees. Seyfried was hired by McHenry as the director of member services and coalitions for the House Financial Services Committee.

The American Bankers Association, earlier this week threatened to file a lawsuit to stop the Biden administration from capping certain bank fees at $8 each, claiming such regulations would increase borrowing costs and force banks to cut services to certain types of customers. McHenry, in turn, has threatened to use his new perch on the committee to investigate the primary regulatory agencies charged with enforcing the fee mandate, such as the Consumer Financial Protection Bureau. Several GOP lawmakers on the committee have proposed legislation to rein in the CFPB’s authority.

The committee also recently hired Will Anderson, a former lobbyist for the Business Roundtable, a trade group that represents Wells Fargo & Co., Goldman Sachs Group Inc., Bank of America Corp., and other large financial corporations. Anderson will serve as the staff director for the subcommittee on capital markets, which oversees the Securities and Exchange Commission and other regulatory agencies.

Last year, disclosures show Anderson lobbied Congress and the SEC on behalf of the Business Roundtable on a variety of financial regulations. Now he will work from the inside.

Other committee staffers have similar potential conflicts of interest. Kathleen Palmer, a GOP congressional staffer for the Subcommittee on Financial Institutions and Monetary Policy, is a former lobbyist for JPMorgan Chase & Co. Matt Hoffmann, the staff director of the committee for McHenry, previously worked as a lobbyist for the BGR Group, a large firm with many clients with interests directly impacted by the committee, including Credit Suisse Group and MetLife.

The so-called reverse revolving door, in which lobbyists for highly regulated interest groups temporarily take jobs in government with influence or oversight over policy impacting their former employers, is a vexing issue.

Policymakers need expertise to devise thoughtful policy, and former lobbyists are often well equipped to understand highly technical issues for specialized industries. David Hanke, the recently hired director of the new select committee to probe competition between the U.S. and China, for instance, previously worked as an attorney advising on semiconductor issues, a key concern shaping U.S.-China tensions. He was also registered to lobby.

But the burrowing of corporate lobbyists deep inside powerful roles in the congressional and federal bureaucracy also presents the potential for entrenched corruption.

The advantages for burrowing are so high that many corporations with a stake in government policy write the incentives into employment contracts. Banks and defense contractors extend special bonuses as a reward for executives to leave and enter government. In public service, they are well positioned to reward their former corporate employers. After a stint in government, most return to the private sector.

For example, Northrop Grumman, the defense giant, paid out bonuses to executives who went on to work as congressional staff. One former Northrop Grumman lobbyist received up to $450,000 in bonus and incentive pay as he left the firm to work on the committee that oversees Pentagon policy. Former Northrop Grumman executives worked to advocate for higher military spending and for lawmakers who specifically encouraged spending on Northrop Grumman-built weapons systems, including the RQ-4 Global Hawk drone.

Newly hired congressional staff across the aisle present other potential conflicts of interest. Sen. Tom Carper, D-Del., the chair of the Senate Committee on Environment and Public Works, recently announced the lead staffer on the committee will be Courtney Taylor, who previously worked as senior vice president at the lobbying firm ML Strategies. Disclosures show Taylor has previously lobbied for a range of clients, including the Environmental Defense Fund, Shell, and the American Wood Council, a trade group for the wood products industry.

In Congress, the most important staffer for each member is the chief of staff, who oversees each lawmaker’s operations. Tucker Knott, the new chief of staff to Sen. Ted Budd, R-N.C., previously worked as a lobbyist for Pfizer. Hank Dixon, the chief of staff to newly elected Rep. Sydney Kamlager, D-Calif., comes to the job after working as vice president of corporate affairs at oil firm Talisman Energy and before that, as a D.C. lawyer for Shell. Rep. Dan Meuser, R-Pa., recently hired Tim Costa as his chief of staff. Costa previously worked as a lobbyist at the firm Buchanan Ingersoll & Rooney PC for several health care clients, including Walgreens.

As Truthout reported, several former fossil fuel lobbyists have been hired for key committees overseeing energy and land use policy. Rep. Bruce Westerman, R-Ark., who controls the gavel of the Natural Resources Committee, hired a former lobbyist for Taylor Energy, the Louisiana firm responsible for an oil spill in the Gulf of Mexico. Rep. Pete Stauber, R-Minn., also a member of the same committee, hired Shawn Rusterholz, a former lobbyist for the American Petroleum Institute, a trade group for the oil majors such as Exxon Mobil Corp. and Chevron Corp.

The post Bank Lobbyists Hired by Congress to Oversee Banking Regulations appeared first on The Intercept.

Such a scene would be familiar to anyone who has spent significant time on Capitol Hill. Lobbyists host parties and fundraisers on a nightly basis in order to forge connections with policymakers, gather political intelligence, and nudge politicians into actions that benefit their clients.

But this time, the influence effort was branded as a righteous celebration of racial progress, exploiting the cultural emphasis of liberal institutions to lobby on issues that have nothing to do with increasing diversity.

It was a “night to welcome and celebrate diversity in the 118th Congress.” The event was titled #DiversityAcrosstheAisle, featuring a dozen sitting members of Congress and many staff members. The lobbying shop, Ferox Strategies, currently represents a range of interests, including Walmart, Reynolds American, and Eli Lilly and Company.

In one photograph from the event, Irene Bueno, a lobbyist for Pfizer and Comcast, huddles with staffers to House Minority Leader Hakeem Jeffries, D-N.Y.; Rep. Doris Matsui, D-Calif.; and Sen. Brian Schatz, D-Hawaii. In another picture, Tiffani Williams, a vice president for the Daschle Group, along with Lisa Feng of Alexion Pharmaceuticals, both grin alongside a large group of other congressional staff members to senior Democratic lawmakers.

Bueno has a lobbying agenda that is focused on business interests. Her disclosures show her lobbying largely on behalf of pharmaceutical interests on intellectual property, data exclusivity, and government reimbursement policies.

A bevy of Diversity Staff Associations were our guests of honor at #DiversityAcrossTheAisle last week, including staffers from @CapitolHillCBA, @chsadc, @capasadc, MENASA, @SBLSC, Senate #GLASS Caucus, @BWCADC, Black Men On The Hill, and @lgbtcsa!
#FriendsOfFerox #118thCongress pic.twitter.com/K1pVUB45rt

— Ferox Strategies (@FeroxStrategies) February 7, 2023

Antelo’s firm is a fairly traditional lobbying firm in many respects. In 2019, The Intercept reported on hacked emails from a surveillance company called Perceptics. The emails showed how Ferox Strategies had worked with tough-on-immigration Republican lawmakers to insert provisions into legislation that would have enabled its client to win contracts for reading the license plates of vehicles crossing the U.S.-Mexico border.

Ferox Strategies stands out as one of an emerging set of influence agents that have exploited the appetite for virtue signaling around diversity to push policies benefiting their clients.

The firm often flaunts its access to identity-based organizations in Congress to leverage client relationships. Ferox Strategies helped Diageo, the distilled spirits giant, contact legislators using access to the Congressional Black Caucus and the Congressional Hispanic Caucus “regarding production facilities in the U.S. Virgin Islands.”

Antelo, the former interim president of the Congressional Hispanic Caucus Institute, or CHCI, the nonprofit arm of the congressional caucus, is a member of the 2044 Council, an organization dedicated to increasing staff diversity in the Senate.

In a message to clients sent after the event, Ferox bragged about using the diversity as a way to ingratiate its corporate clients with Democratic leaders.

“Ferox clients Walmart, Alexion, and Waste Management joined a who’s who of corporate sponsors to generously celebrate the most diverse Congress ever,” the message noted. The invitation for the event included the LGBT Congressional Staff Association, the Black Women’s Congressional Alliance, the Congressional Asian Pacific American Staff Association, and other identity-based professional societies for Capitol Hill staff.

The largest race-based congressional caucuses each have sister nonprofit groups that are funded and led by corporate lobbyists. The advisory board to the CHCI, for instance, features representatives from JPMorgan Chase & Co., Mastercard, Exxon Mobil, Apple, Airbnb, DaVita, Toyota, Reynolds American, Microsoft, and New York Life Insurance, among other interests.

Last month at the Anthem, a Washington, D.C., nightclub, Secretary of the Department of Health and Human Services Xavier Becerra appeared with the Congressional Hispanic Caucus to swear in its first-year class of nine new members. The event featured live music and a message from Jeffries.

But before Becerra could administer the oath, Marco Davis, the president of the CHCI, paused the program to thank the sponsors of the swearing-in ceremony, including Genentech, Google, Amgen, Walgreens, and Target. He then handed the microphone to Omar Vargas, the head lobbyist for General Motors.

Lobbying disclosures show Vargas has focused on influencing Congress on tax credits, emissions standards, and recycling issues, among other policies important to GM’s bottom line. The company did not disclose any lobbying on issues related to diversity. But at the swearing-in ceremony, Vargas hit the right theme for the occasion.

“To be very honest with you tonight,” said Vargas, “General Motors and I are personally extremely committed to diversity in the public policy profession.”

The post Lobbyists Mingle With Congress Under the Banner of Celebrating Diversity appeared first on The Intercept.

The list includes nearly a dozen public relations experts — specialists who generate positive spin in the media on behalf of clients — as well as political consultants, think tanks, and trade groups.

Sometimes, the money went directly to political operations; Majority Forward, a dark-money group designed to elect Senate Democrats, received cash. In some cases, the hired guns, such as PR firms, were paid directly for their services. In others, the groups that received donations maintain that they are independent, but had interests aligned with FTX.

The filing, for instance, listed a donation to the Center for a New American Security, a prominent national security-focused think tank in Washington, D.C., that has worked to shape crypto regulations.

The filing offered a look under the hood of FTX’s intricate maze of influence. On the heels of its meteoric rise as a crypto exchange, FTX quickly began to spend extraordinary amounts of money to buy prestige and friends in high places. Now that the firm stands accused of siphoning off billions of its investors’ dollars — with its disgraced founder Sam Bankman-Fried charged with fraud in the matter — increased scrutiny is falling on powerbrokers’ dealings with FTX.

The relationships of many of the entities listed in the bankruptcy filing and FTX were already known — the company complied with lobbying disclosures for some of its consultants — but the creditor matrix shows the crypto giant also retained several previously undisclosed professional influence peddlers.

One seasoned political hand tied to FTX without any disclosures is former New York City Council Speaker Corey Johnson. His firm, Cojo Strategies, is featured in the FTX vendor list. Another is Susan McCue, a former aide to Sen. Harry Reid, D-Nev., who has advised many Senate Democrats and played a role in the leadership of several Democratic super PACs and dark-money outfits. Her firm, Message Global, is in the filing.

Other consulting firms with a finger on the pulse of power are sprawled through the creditor matrix, which runs over 116 pages. Another creditor, Patomak Global Partners, a firm that specializes in influencing financial regulators, is led by Paul Atkins, a former Securities and Exchange commissioner. Atkins’s company touts its roster of former government officials as providing “a telescope to anticipate trends on the horizon to help position our clients for long-term success.” (Neither Johnson, McCue, nor Patomak responded to requests for comment.)

Think Tank Crypto Regulations

The donation to CNAS — a powerful think tank with ties to both political parties but known for staffing national security roles in Democratic administrations — came at a time when the organization advocated for crypto regulations with a light touch.

“To compete in the digital-economy race with China, the United States must foster a more innovative fintech environment,” CNAS fellow Yaya J. Fanusie said in testimony to the Senate Finance Committee on July 14, 2021. “If U.S. securities regulation does not evolve to account for the new technical and entrepreneurial capabilities offered by blockchain technology and broadcast data transmission, the United States could be hamstrung in a data revolution that is only just beginning.”

CNAS also maintains a task force on crypto, on which FTX formerly served as a member. The task force corresponded with national security-focused government officials, offering policy advice that reflected the crypto industry’s contention that digital tokens on the blockchain pose a low risk for terror financing.

A readout of a CNAS meeting with the Treasury Department’s Brian Nelson, the undersecretary for terrorism and financial intelligence, included a summary of the discussion and noted that the official “recognized the work of many in industry to engage in constructive dialogue and support government efforts to mitigate the misuse of virtual assets for money laundering.” The use of crypto for “illicit activities remains below the scale of traditional finance,” Nelson said.

CNAS’s task force is co-chaired by Sigal Mandelker, who used to hold Nelson’s position at the Treasury before resigning in 2019 to enter the private sector. Mandelker now serves as general partner of Ribbit Capital, an investor in FTX. Mandelker spoke at SALT’s Crypto Bahamas conference last summer. The invite-only conference for “leading players in the crypto and traditional finance industry” also featured talks from Bankman-Fried, former President Bill Clinton, and ex-British Prime Minister Tony Blair.

Mandelker’s talk at Crypto Bahamas was on maintaining permissive crypto regulations.

“The instinct of government is often to focus on risk and not to put as much emphasis on opportunity,” she said. The true risk regulators should be wary of, Mandelker continued, was “shutting down [crypto] innovation.” (Mandelker did not respond to a request for comment.)

“CNAS received a $25,000 donation from FTX in 2022 in general support of CNAS’s independent research on national security,” Shai Korman, CNAS’s director of communications, told The Intercept. “FTX was also a member of the Task Force on Fintech, Crypto, and National Security. FTX is no longer a member of the task force, and CNAS has returned the donation in full.”

PR, Law Firms, and Video Games

FTX once enjoyed a near-mythical status in the media, with splashy cover stories and gushing news articles lauding the crypto powerhouse and Bankman-Fried, its youthful leader. Such coverage rarely emerges organically, and FTX hired an army of public relations firms to burnish its image.

Among them was M Group, a New York-based public relations powerhouse known for its Rolodex of elite journalists. Others under the employ of FTX included TSD Communications and Full Court Press Communications.

The creditor list includes Rational 360, a public relations firm led in part by former White House Press Secretary Joe Lockhart. Emails obtained by Matt Stoller, the director of research at the American Economic Liberties Project, show that Rational 360 pressured activists and political influencers to speak out in favor of a bill that would move crypto regulatory authority to the Commodity Futures Trading Commission. While the Securities and Exchange Commission handles many enforcement actions against crypto firms, the CFTC is seen as more friendly to crypto interests and has fewer disclosure requirements.

Powerhouse law firms also feature heavily in the most recent bankruptcy disclosure. One firm listed is Cleary Gottlieb Steen & Hamilton, which represented Russia in a $3 billion bond dispute against Ukraine before it shuttered its Moscow office last year. Buckley LLP, another large law firm based in Washington that appeared on the FTX creditor list, announced earlier this month that it would merge with the San Francisco-based Orrick to create a combined firm with a total of nearly $1.5 billion focused on “forward-looking regulatory and enforcement advice” in the fields of finance and tech.

Among FTX’s listed creditors were a handful of nations — though the contours of the financial relationships remain unknown. Nevertheless, the list of countries reads like a who’s who of nations with lax financial regulations: The British Virgin Islands, Bermuda, the Cayman Islands, Isle of Man, Liechtenstein, Luxembourg, the United Arab Emirates, Seychelles, and Switzerland all appear in the filing.

In addition to national banks and powerful firms in the corporate PR world, the creditor matrix also details luxury restaurants like Carbone in Miami and the luxury Margaritaville resort in Nassau.

The North America League of Legends Championship Series, a property of a premier video game event franchise, is also listed in the creditor matrix. Bankman-Fried, notorious for playing the video game “League of Legends” during pitch meetings with investors, arranged a $96 million sponsorship deal with Riot Games. In December, as the extent of FTX’s deception unfolded, Riot announced it would attempt to cut ties with Bankman-Fried.

The entertainment relationships provided, in some cases, an additional channel for political access. The creditor list includes the talent agency WME, with a memo mentioning actor Larry David, a celebrity endorser of FTX who appeared in a now-infamous Super Bowl commercial promoting the crypto exchange.

WME itself is owned by Endeavor, an investor in FTX that owns 38,000 shares of the company. Endeavor is also run by Ari Emanuel, the brother of Rahm Emanuel, President Joe Biden’s ambassador to Japan.

Editor’s Note: In September 2022, The Intercept received $500,000 from Sam Bankman-Fried’s foundation, Building a Stronger Future, as part of a $4 million grant to fund our pandemic prevention and biosafety coverage. That grant has been suspended. In keeping with our general practice, The Intercept disclosed the funding in subsequent reporting on Bankman-Fried’s political activities.

The post New FTX Filing Pulls Back the Curtain on Sam Bankman-Fried’s Massive Influence-Peddling Operation appeared first on The Intercept.

“The authorities are warning about ‘serious consequences’ of the action, i.e. posts and a flood of comments ‘that may violate TOS’ as well as the ‘takeover of user accounts’ are to be expected,” wrote Morschhaeuser. “Especially the personal accounts of the management of the vaccine manufacturers are said to be targeted. Accordingly, fake accounts could also be set up.”

The campaign they were concerned about was the launch of an international push to force the drug industry to share the intellectual property and patents associated with coronavirus vaccine development. Making the patents available, in turn, would allow countries across the world to swiftly manufacture generic vaccines and other low-cost therapeutics to deal with the ongoing pandemic.

Morschhaeuser, while alerting several site integrity and safety teams at Twitter, forwarded on an email from BioNTech spokesperson Jasmina Alatovic, who asked Twitter to “hide” activist tweets targeting her company’s account over a period of two days.

Morschhaeuser flagged the corporate accounts of Pfizer, BioNTech, Moderna, and AstraZeneca for her colleagues to monitor and shield from activists. Morschhaeuser also asked colleagues to monitor the hashtags #PeoplesVaccine and #JoinCTAP, a reference to the World Health Organization’s Covid-19 Technology Access Pool, a program promoted by developing countries to accelerate the development of vaccines through the equitable sharing of research and manufacturing capacity. She noted that the group Global Justice Now was spearheading the action with an online sign-up form.

It is not clear to what extent Twitter took any action on BioNTech’s request. In response to Morschhaeuser’s inquiry, several Twitter officials chimed in, debating what action could or could not be taken. Su Fern Teo, a member of the company’s safety team, noted that a quick scan of the activist campaign showed nothing that violated the company’s terms of service, and asked for more examples to “get a better sense of the content that may violate our policies.”

But it shows the extent to which pharmaceutical giants engaged in a global lobbying blitz to ensure corporate dominance over the medical products that became central to combatting the pandemic. Ultimately, the campaign to share Covid vaccine recipes around the world failed.

The Intercept accessed Twitter’s emails after the company’s billionaire owner, Elon Musk, granted access to several reporters in December. This is the second story I have reported through access to these files. The first centered on the Pentagon’s network of fake Twitter accounts used to spread U.S. narratives in the Middle East.

In reporting this story, as with the last, Twitter did not provide unfettered access to company information; rather, they allowed me to make requests without restriction that were then fulfilled on my behalf by an attorney, meaning that the search results may not have been exhaustive. I did not agree to any conditions governing the use of the documents, and I made efforts to authenticate and contextualize the documents through further reporting. The redactions in the embedded documents in this story were done by The Intercept to protect privacy, not Twitter.

Twitter did not respond to a request for comment. BioNTech’s Alatovic, in response to a request for comment, stressed that the firm “takes its societal responsibility seriously and is investing in solutions to improve the health of people regardless of their income.”

A spokesperson for the German Federal Office for Information Security, the cybersecurity agency that Morschhaeuser said contacted Twitter on behalf of BioNTech, emailed The Intercept after publication of this article to say that the agency had raised a “cyber security alert” out of concern the People’s Vaccine campaign amounted to a “DDoS attack.” The agency further claimed that this warning “independent of any content-related or political orientation of an online campaign such as the one planned here.”

In November, the Bureau of Investigative Journalism published a lengthy report showing that pharmaceutical companies went to great lengths to stifle efforts to share pandemic-related patents and IP, including threats to the leadership of Belgium, Colombia, and Indonesia. The Intercept has also detailed the domestic lobbying push to block support for a special World Trade Organization waiver necessary for the rapid creation of generic pandemic medicine. German media has similarly reported on the aggressive effort by BioNTech to build support from the German government in opposing the waiver at the WTO.

In May 2021, the Biden administration reversed its earlier position and that of the Trump administration and voiced support for the WTO waiver, making the U.S. one of the largest wealthy countries to support the idea, backed by a coalition led by India and South Africa. But infighting at the international trade body, along with staunch opposition from other wealthy countries, prevented any effective progress on the issue.

The largely successful assault against the creation of generic vaccines resulted in an unprecedented explosion in profit for a few select biopharmaceutical drug interests. Pfizer and BioNTech generated a staggering $37 billion in revenue from its shared mRNA vaccine in 2021 alone, making it one of the most lucrative drug products of all time.

Moderna, which made $17.7 billion from vaccine sales in 2021, recently announced its plan to hike the price of its Covid shot by about 400 percent.

The high cost of vaccines and concentrated ownership meant supplies in 2021 were hoarded in the European Union, United Kingdom, United States, Canada, Japan, and other wealthy countries, while much of the developing world was forced to wait for excess vaccines the following year.

“To try and stifle digital dissent during a pandemic, when tweets and emails are some of the only forms of protest available to those locked in their homes, is deeply sinister.”

“For more than two years, a global movement has been speaking out against pharmaceutical greed and demanding that everyone, everywhere has the tools to combat pandemics,” said Maaza Seyoum, a campaigner for the People’s Vaccine Alliance.

“Whatever nasty tricks companies and governments pull,” she added, “we cannot and will not be silenced.”

Nick Dearden, director of Global Justice Now, noted that at the time of BioNTech’s censorship request, much of the world was under various lockdown orders, making digital forms of protest all the more vital for influencing public policy.

“To try and stifle digital dissent during a pandemic, when tweets and emails are some of the only forms of protest available to those locked in their homes, is deeply sinister,” he said.

Stronger, a campaign run by Public Good Projects, a public health nonprofit specializing in large-scale media monitoring programs, regularly communicated with Twitter on regulating content related to the pandemic. The firm worked closely with the San Francisco social media giant to help develop bots to censor vaccine misinformation and, at times, sent direct requests to Twitter with lists of accounts to censor and verify.

Internal Twitter emails show regular correspondence between an account manager at Public Good Projects, and various Twitter officials, including Todd O’Boyle, lobbyist with the company who served as a point of contact with the Biden administration. The content moderation requests were sent throughout 2021 and early 2022.

The entire campaign, newly available tax documents and other disclosures show, was entirely funded by the Biotechnology Innovation Organization, a vaccine industry lobbying group. BIO, which is financed by companies such as Moderna and Pfizer, provided Stronger with $1,275,000 in funding for the effort, which included tools for the public to flag content on Twitter, Instagram, and Facebook for moderation.

Many of the tweets flagged by Stronger contained absolute falsehoods, including claims that vaccines contained microchips and were designed to intentionally kill people. But others hinged on a gray area of vaccine policy through which there is reasonable debate, such as requests to label or take down content critical of vaccine passports and government mandates to require vaccination.

One tweet flagged by the BIO-backed moderation effort read, “if a vaccinated person and an unvaccinated person have roughly the same capacity to carry, shed and transmit the virus, particularly in its Delta form, what difference does implementing a vaccination passport actually make to the spread of the virus?”

Public health experts and civil libertarians strongly debated the constitutionality of such passports, an idea that was eventually discarded by U.S. policymakers.

Joe Smyser, the chief executive of Public Good Projects in charge of the Stronger campaign, said his organization’s work was a good-faith effort to battle disinformation. “BIO contributed money and said, ‘You guys are planning on running a pro-vaccine, anti-vaccine misinformation effort and we will give you $500,000 [per year] no questions asked,’” said Smyser.

Many pharmaceutical lobby groups made exaggerated claims about the danger of sharing vaccine technology. PhRMA, another drug industry lobby group, falsely claimed on Twitter that any effort to allow the creation of a generic Covid vaccine would result in placing all 4.4 million jobs supported by the entire American drug industry at risk.

I asked Smyser whether his group ever flagged any content distributed by the pharmaceutical lobby as “misinformation.”

Smyser agreed that policy debate was important, and if misinformation was spread by pharmaceutical companies, any global citizen “should be aware of it,” but that his organization never flagged or focused on any drug industry content.

“I understand why someone would be skeptical, because as a researcher, it matters where your money comes from,” Smyser said. But, he argued, “my job is, how do people figure out where to go get vaccinated? And how do I encourage them to get the vaccine? That was it.”

In a December 2020 email thread further discussing how to monitor BioNTech and respond to the vaccine equity campaign engaging in “spammy behavior” potentially in violation of the social media company’s policies, Holger Kersting, a Twitter spokesperson in Germany, offered several links to tweets in potential violation of the policy.

Two of the tweets were from an account owned by Terry Brough, a retired bricklayer in a small town outside of Liverpool. The messages called on the chief executives of Pfizer, Moderna, and AstraZeneca to share vaccine technology with “poor countries.”

Reached for comment, Brough reacted with surprise that his messages were being monitored for possible fake content.

“I’m actually 74 and still living,” said Brough with a chuckle. “I was a bricklayer all my life just like my dad. I’m no Che Guevara, but I’ve been an activist, a trade unionist, and a socialist. And all I did was sign a tweet. I wish I could’ve done more, really.”

Update: January 17, 2023
The piece has been updated with a comment from the German Federal Office of Information Security received after publication.

The post Covid-19 Drugmakers Pressured Twitter to Censor Activists Pushing for Generic Vaccine appeared first on The Intercept.

Behind the scenes, however, the social networking giant provided direct approval and internal protection to the U.S. military’s network of social media accounts and online personas, whitelisting a batch of accounts at the request of the government. The Pentagon has used this network, which includes U.S. government-generated news portals and memes, in an effort to shape opinion in Yemen, Syria, Iraq, Kuwait, and beyond.

The accounts in question started out openly affiliated with the U.S. government. But then the Pentagon appeared to shift tactics and began concealing its affiliation with some of these accounts — a move toward the type of intentional platform manipulation that Twitter has publicly opposed. Though Twitter executives maintained awareness of the accounts, they did not shut them down, but let them remain active for years. Some remain active.

The revelations are buried in the archives of Twitter’s emails and internal tools, to which The Intercept was granted access for a brief period last week alongside a handful of other writers and reporters. Following Elon Musk’s purchase of Twitter, the billionaire started giving access to company documents, saying in a Twitter Space that “the general idea is to surface anything bad Twitter has done in the past.” The files, which included records generated under Musk’s ownership, provide unprecedented, if incomplete, insight into decision-making within a major social media company.

Twitter did not provide unfettered access to company information; rather, for three days last week, they allowed me to make requests without restriction that were then fulfilled on my behalf by an attorney, meaning that the search results may not have been exhaustive. I did not agree to any conditions governing the use of the documents, and I made efforts to authenticate and contextualize the documents through further reporting. The redactions in the embedded documents in this story were done by The Intercept to protect privacy, not Twitter.

The direct assistance Twitter provided to the Pentagon goes back at least five years.

On July 26, 2017, Nathaniel Kahler, at the time an official working with U.S. Central Command — also known as CENTCOM, a division of the Defense Department — emailed a Twitter representative with the company’s public policy team, with a request to approve the verification of one account and “whitelist” a list of Arab-language accounts “we use to amplify certain messages.”

“We’ve got some accounts that are not indexing on hashtags — perhaps they were flagged as bots,” wrote Kahler. “A few of these had built a real following and we hope to salvage.” Kahler added that he was happy to provide more paperwork from his office or SOCOM, the acronym for the U.S. Special Operations Command.

Twitter at the time had built out an expanded abuse detection system aimed in part toward flagging malicious activity related to the Islamic State and other terror organizations operating in the Middle East. As an indirect consequence of these efforts, one former Twitter employee explained to The Intercept, accounts controlled by the military that were frequently engaging with extremist groups were being automatically flagged as spam. The former employee, who was involved with the whitelisting of CENTCOM accounts, spoke with The Intercept under condition of anonymity because they were not authorized to speak publicly.

In his email, Kahler sent a spreadsheet with 52 accounts. He asked for priority service for six of the accounts, including @yemencurrent, an account used to broadcast announcements about U.S. drone strikes in Yemen. Around the same time, @yemencurrent, which has since been deleted, had emphasized that U.S. drone strikes were “accurate” and killed terrorists, not civilians, and promoted the U.S. and Saudi-backed assault on Houthi rebels in that country.

Other accounts on the list were focused on promoting U.S.-supported militias in Syria and anti-Iran messages in Iraq. One account discussed legal issues in Kuwait. Though many accounts remained focused on one topic area, others moved from topic to topic. For instance, @dala2el, one of the CENTCOM accounts, shifted from messaging around drone strikes in Yemen in 2017 to Syrian government-focused communications this year.

On the same day that CENTCOM sent its request, members of Twitter’s site integrity team went into an internal company system used for managing the reach of various users and applied a special exemption tag to the accounts, internal logs show.

One engineer, who asked not to be named because he was not authorized to speak to the media, said that he had never seen this type of tag before, but upon close inspection, said that the effect of the “whitelist” tag essentially gave the accounts the privileges of Twitter verification without a visible blue check. Twitter verification would have bestowed a number of advantages, such as invulnerability to algorithmic bots that flag accounts for spam or abuse, as well as other strikes that lead to decreased visibility or suspension.

Kahler told Twitter that the accounts would all be “USG-attributed, Arabic-language accounts tweeting on relevant security issues.” That promise fell short, as many of the accounts subsequently deleted disclosures of affiliation with the U.S. government.

The Internet Archive does not preserve the full history of every account, but The Intercept identified several accounts that initially listed themselves as U.S. government accounts in their bios, but, after being whitelisted, shed any disclosure that they were affiliated with the military and posed as ordinary users.

This appears to align with a major report published in August by online security researchers affiliated with the Stanford Internet Observatory, which reported on thousands of accounts that they suspected to be part of a state-backed information operation, many of which used photorealistic human faces generated by artificial intelligence, a practice also known as “deep fakes.”

The researchers connected these accounts with a vast online ecosystem that included “fake news” websites, meme accounts on Telegram and Facebook, and online personalities that echoed Pentagon messages often without disclosure of affiliation with the U.S. military. Some of the accounts accuse Iran of “threatening Iraq’s water security and flooding the country with crystal meth,” while others promoted allegations that Iran was harvesting the organs of Afghan refugees.

The Stanford report did not definitively tie the sham accounts to CENTCOM or provide a complete list of Twitter accounts. But the emails obtained by The Intercept show that the creation of at least one of these accounts was directly affiliated with the Pentagon.

“It’s deeply concerning if the Pentagon is working to shape public opinion about our military’s role abroad and even worse if private companies are helping to conceal it.”

One of the accounts that Kahler asked to have whitelisted, @mktashif, was identified by the researchers as appearing to use a deep-fake photo to obscure its real identity. Initially, according to the Wayback Machine, @mktashif did disclose that it was a U.S. government account affiliated with CENTCOM, but at some point, this disclosure was deleted and the account’s photo was changed to the one Stanford identified as a deep fake.

The new Twitter bio claimed that the account was an unbiased source of opinion and information, and, roughly translated from Arabic, “dedicated to serving Iraqis and Arabs.” The account, before it was suspended earlier this year, routinely tweeted messages denouncing Iran and other U.S. adversaries, including Houthi rebels in Yemen.

Another CENTCOM account, @althughur, which posts anti-Iran and anti-ISIS content focused on an Iraqi audience, changed its Twitter bio from a CENTCOM affiliation to an Arabic phrase that simply reads “Euphrates pulse.”

The former Twitter employee told The Intercept that they were surprised to learn of the Defense Department’s shifting tactics. “It sounds like DOD was doing something shady and definitely not in line with what they had presented to us at the time,” they said.

Twitter did not respond to a request for comment.

“It’s deeply concerning if the Pentagon is working to shape public opinion about our military’s role abroad and even worse if private companies are helping to conceal it,” said Erik Sperling, the executive director of Just Foreign Policy, a nonprofit that works toward diplomatic solutions to foreign conflicts.

“Congress and social media companies should investigate and take action to ensure that, at the very least, our citizens are fully informed when their tax money is being spent on putting a positive spin on our endless wars,” Sperling added.

“Combatting attempts to interfere in conversations on Twitter remains a top priority for the company, and we continue to invest heavily in our detection, disruption, and transparency efforts related to state-backed information operations. Our goal is to remove bad-faith actors and to advance public understanding of these critical topics,” said Pickles.

In 2018, for instance, Twitter announced the mass suspension of accounts tied to Russian government-linked propaganda efforts. Two years later, the company boasted of shutting down almost 1,000 accounts for association with the Thai military. But rules on platform manipulation, it appears, have not been applied to American military efforts.

The emails obtained by The Intercept show that not only did Twitter whitelist these accounts in 2017 explicitly at the behest of the military, but also that high-level officials at the company discussed the accounts as potentially problematic in the following years.

In the summer of 2020, officials from Facebook reportedly identified fake accounts attributed to CENTCOM’s influence operation on its platform and warned the Pentagon that if Silicon Valley could easily out these accounts as inauthentic, so could foreign adversaries, according to a September report in the Washington Post.

Twitter emails show that during that time in 2020, Facebook and Twitter executives were invited by the Pentagon’s top attorneys to attend classified briefings in a sensitive compartmented information facility, also known as a SCIF, used for highly sensitive meetings.

“Facebook have had a series of 1:1 conversations between their senior legal leadership and DOD’s [general counsel] re: inauthentic activity,” wrote Yoel Roth, then the head of trust and safety at Twitter. “Per FB,” continued Roth, “DOD have indicated a strong desire to work with us to remove the activity — but are now refusing to discuss additional details or steps outside of a classified conversation.”

Stacia Cardille, then an attorney with Twitter, noted in an email to her colleagues that the Pentagon may want to retroactively classify its social media activities “to obfuscate their activity in this space, and that this may represent an overclassification to avoid embarrassment.”

Jim Baker, then the deputy general counsel of Twitter, in the same thread, wrote that the Pentagon appeared to have used “poor tradecraft” in setting up various Twitter accounts, sought to potentially cover its tracks, and was likely seeking a strategy for avoiding public knowledge that the accounts are “linked to each other or to DoD or the USG.” Baker speculated that in the meeting the “DoD might want to give us a timetable for shutting them down in a more prolonged way that will not compromise any ongoing operations or reveal their connections to DoD.”

What was discussed at the classified meetings — which ultimately did take place, according to the Post — was not included in the Twitter emails provided to The Intercept, but many of the fake accounts remained active for at least another year. Some of the accounts on the CENTCOM list remain active even now — like this one, which includes affiliation with CENTCOM, and this one, which does not — while many were swept off the platform in a mass suspension on May 16.

In a separate email sent in May 2020, Lisa Roman, then a vice president of the company in charge of global public policy, emailed William S. Castle, a Pentagon attorney, along with Roth, with an additional list of Defense Department Twitter accounts. “The first tab lists those accounts previously provided to us and the second, associated accounts that Twitter has discovered,” wrote Roman. It’s not clear from this single email what Roman is requesting – she references a phone call preceding the email — but she notes that the second tab of accounts — the ones that had not been explicitly provided to Twitter by the Pentagon — “may violate our Rules.” The attachment included a batch of accounts tweeting in Russian and Arabic about human rights violations committed by ISIS. Many accounts in both tabs were not openly identified as affiliated with the U.S. government.

Twitter executives remained aware of the Defense Department’s special status. This past January, a Twitter executive recirculated the CENTCOM list of Twitter accounts originally whitelisted in 2017. The email simply read “FYI” and was directed to several Twitter officials, including Patrick Conlon, a former Defense Department intelligence analyst then working on the site integrity unit as Twitter’s global threat intelligence lead. Internal records also showed that the accounts that remained from Kahler’s original list are still whitelisted.

Following the mass suspension of many of the accounts this past May, Twitter’s team worked to limit blowback from its involvement in the campaign.

Shortly before publication of the Washington Post story in September, Katie Rosborough, then a communications specialist at Twitter, wrote to alert Twitter lawyers and lobbyists about the upcoming piece. “It’s a story that’s mostly focused on DoD and Facebook; however, there will be a couple lines that reference us alongside Facebook in that we reached out to them [DoD] for a meeting. We don’t think they’ll tie it to anything Mudge-related or name any Twitter employees. We declined to comment,” she wrote. (Mudge is a reference to Peiter Zatko, a Twitter whistleblower who filed a complaint with federal authorities in July, alleging lax security measures and penetration of the company by foreign agents.)

After the Washington Post’s story published, the Twitter team congratulated one another because the story minimized Twitter’s role in the CENTCOM psyop campaign. Instead, the story largely revolved around the Pentagon’s decision to begin a review of its clandestine psychological operations on social media.

“Thanks for doing all that you could to manage this one,” wrote Rebecca Hahn, another former Twitter communications official. “It didn’t seem to get too much traction beyond verge, cnn and wapo editors promoting.”

CENTCOM did not initially provide comment to The Intercept. Following publication of this story, CENTCOM’s media desk referred The Intercept to Brigadier Gen. Pat Ryder’s comments in a September briefing, in which he said that the Pentagon had requested “a review of Department of Defense military information support activities, which is simply meant to be an opportunity for us to assess the current work that’s being done in this arena, and really shouldn’t be interpreted as anything beyond that.”

The U.S. military and intelligence community have long pursued a strategy of fabricated online personas and third parties to amplify certain narratives in foreign countries, the idea being that an authentic-looking Persian-language news portal or a local Afghan woman would have greater organic influence than an official Pentagon press release.

Military online propaganda efforts have largely been governed by a 2006 memorandum. The memo notes that the Defense Department’s internet activities should “openly acknowledge U.S. involvement” except in cases when a “Combatant Commander believes that it will not be possible due to operational considerations.” This method of nondisclosure, the memo states, is only authorized for operations in the “Global War on Terrorism, or when specified in other Secretary of Defense execute orders.”

In 2019, lawmakers passed a measure known as Section 1631, a reference to a provision of the National Defense Authorization Act, further legally affirming clandestine psychological operations by the military in a bid to counter online disinformation campaigns by Russia, China, and other foreign adversaries.

In 2008, the U.S. Special Operations Command opened a request for a service to provide “web-based influence products and tools in support of strategic and long-term U.S. Government goals and objectives.” The contract referred to the Trans-Regional Web Initiative, an effort to create online news sites designed to win hearts and minds in the battle to counter Russian influence in Central Asia and global Islamic terrorism. The contract was initially carried out by General Dynamics Information Technology, a subsidiary of the defense contractor General Dynamics, in connection with CENTCOM communication offices in the Washington, D.C., area and in Tampa, Florida.

A program known as “WebOps,” run by a defense contractor known as Colsa Corp., was used to create fictitious online identities designed to counter online recruitment efforts by ISIS and other terrorist networks.

The Intercept spoke to a former employee of a contractor — on the condition of anonymity for legal protection — engaged in these online propaganda networks for the Trans-Regional Web Initiative. He described a loose newsroom-style operation, employing former journalists, operating out of a generic suburban office building.

“Generally what happens, at the time when I was there, CENTCOM will develop a list of messaging points that they want us to focus on,” said the contractor. “Basically, they would, we want you to focus on say, counterterrorism and a general framework that we want to talk about.”

From there, he said, supervisors would help craft content that was distributed through a network of CENTCOM-controlled websites and social media accounts. As the contractors created content to support narratives from military command, they were instructed to tag each content item with a specific military objective. Generally, the contractor said, the news items he created were technically factual but always crafted in a way that closely reflected the Pentagon’s goals.

“We had some pressure from CENTCOM to push stories,” he added, while noting that he worked at the sites years ago, before the transition to more covert operations. At the time, “we weren’t doing any of that black-hat stuff.”

Update: December 20, 2022, 4:17 p.m.
This story has been updated with information provided by CENTCOM following publication.

The post Twitter Aided the Pentagon in Its Covert Online Propaganda Campaign appeared first on The Intercept.

As lawmakers consider whether to attach the measure to end-of-the-year spending packages, Google and Meta are pouring money into two, seemingly contradictory messages in an effort to defeat it.

The full-court strategy plays on left- and right-wing concerns about social media: According to the messaging, the JCPA is simultaneously a legislative proposal backed by liberals to “silence conservative voices” and a far-right effort that will fund pro-Trump voices that are the source of “dangerous misinformation.”

The exaggerated rhetoric was part of a larger campaign to stop any proposal to share advertising revenue, the main source of income for social media and search engine tech companies. The message designed to orchestrate Republican opposition to JCPA is sponsored by NetChoice, and the message designed to whip up Democratic opposition to JCPA is sponsored by the Computer and Communications Industry Association. Both organizations are funded by Google and Meta, Facebook’s parent company, and serve to influence lawmakers and the public on behalf of shared concerns by the two megacorporations.

Earlier this week, reports leaked that sponsors of JCPA — including Sens. Amy Klobouchar, D-Minn.; John Kennedy, R-La.; Cory Booker, D-N.J.; and Chuck Grassley, R-Iowa — had convinced Senate leaders to include the legislation as a provision of the National Defense Authorization Act, a sweeping bill that funds the military. The bill passed the Senate Judiciary Committee in September.

The lobbying blitz has so far been successful; the bicameral NDAA text, released Tuesday evening, does not include the JCPA, a reversal that reflected Silicon Valley’s influence over congressional leadership.

While the NDAA path appears closed, supporters of the JCPA hope for a potential deal to include the legislation in the omnibus spending package Congress will take up later this month.

The JCPA, which was modeled on a novel 2021 Australian law, would provide a legal exemption to antitrust rules for media outlets to collectively bargain with Silicon Valley platforms for a slice of the advertising revenues they help generate.

Proponents argue that Google and Facebook’s domination over the online advertising industry has decimated the traditional news business model. While social media companies report profits in the billions of dollars, the news industry has seen the destruction of over 70 daily and 2,000 weekly news outlets since 2004. One Pew Research Center survey, taken before the pandemic, found that U.S. newsrooms had shed 30,000 positions since 2008, a number that has likely grown over the last two years.

Proponents of the JCPA point to the relative success of the Australia model, which led to AU$200 million in revenue sharing with news publishers. Many publications large and small have reported success from the deal, including The Guardian, which increased its newsroom in Australia by 50 journalists following a negotiated deal.

One point of contention is what types of media outlets would qualify for a collective bargaining role and how negotiations might impact editorial content. During committee debate over the Senate draft of the JCPA legislation, Sen. Ted Cruz, R-Texas, successfully added provisions to “the bill’s antitrust exemption only to discussions of pricing terms while explicitly excluding any discussions or agreements between Big Tech and media outlets that concerns content moderation,” according to a release from his office.

The Australian bargaining law has brokered deals for large established newspapers and broadcasters, as well as some smaller publishers. Nelson Yap, the editor of the Australia Property Journal, noted in an email to The Intercept that his publication was able to join a group of 24 local small publishers to negotiate a deal with Google, which helped his outlet expand its news team. Meta, however, refused to negotiate with the collective of small Australian publishers.

The tech industry is wary of the Australia model spreading to other parts of the world. A similar bill is being debated in Canada.

In addition to the television advertisements from NetChoice and CCIA, the news that the NDAA may include the news bargaining legislation triggered alarm from a range of left- and right-wing nonprofits funded by the tech industry, attacking the proposal as misguided.

The Chamber of Progress, a Google and Meta trade group oriented toward influencing liberals, warned that JCPA would supposedly deliver seven times the revenue sharing to conservative outlets than local media. The R Street Institute, which receives funding from Google, appeared on Breitbart News’s radio program to warn that JCPA will only help “big media conglomerates” at the expense of small conservative outlets.

A coalition letter released Monday by tech funded nonprofits, including NetChoice, the Copia Institute, and Chamber of Progress, claimed JCPA will “increase the amount of networked disinformation, hate speech, and harassment.”

“I think it’s a lot of astroturfing,” said Jon Schweppe, the director of policy and government affairs at the American Principles Project, a right-leaning watchdog group that warns against the influence of the tech industry. “These guys, the big tech companies, are brilliant at doing the double talk to both sides at once.”

Andy Stone, a spokesperson for Meta, said in a statement that his company would be “forced to consider removing news” from Instagram and Facebook rather than submit to revenue negotiations with news publishers.

The threat mirrors the debate around Australia’s News Media Bargaining Code. During debate over the law, Google claimed the Australian proposal would “break” its search service, and Facebook similarly threatened to pull out of Australia and ban links to Australian news sites. Google even claimed that the proposal “could lead to your data being handed over to big news businesses.”

In the end, the tech industry backed down. After a brief shutdown, Facebook returned to Australia and, along with Google, participated in negotiations with publishers.

“As we are seeing with the JCPA, Australia also experienced big tech propaganda against its News Media Bargaining Code,” said Emma McDonald, a senior policy adviser at Minderoo Foundation, an Australian philanthropic organization that backed the bargaining law.

“Facebook and Google have been free-riding on the coattails of media publishers for years. The code addresses the bargaining imbalance and made big tech pay their fair share,” McDonald added. “It has worked in Australia and there is no reason why it won’t work in the US. Small publishers collectively bargained with Google and they got a good deal.”

The post Google and Meta Embrace Full-Court Strategy Against Media Ad Revenue Sharing Proposal appeared first on The Intercept.

The infusions of cash, designed largely for get-out-the-vote efforts, are detailed in documents tied to Run Herschel Run, a super PAC, and the Empowerment Alliance, a nonprofit that says it is devoted to policies to “secure America’s energy independence and, with it, Americans’ prosperity, freedom, and security.”

The effort reflects the consensus view that voter drop-off in the last Georgia runoff after the 2020 election led to Republican defeat, an outcome the outside groups hope to change for the election next week.

“Republicans lost both US Senate runoffs in 2021 because the Republican coalition that voted in November did not turnout in January,” notes a slide deck prepared by the Run Herschel Run political action committee. “Tens of millions of dollars were spent on television ads, but comparatively little on the vital ‘ground game’. This effort fills that gap in 2022 while others still focus on TV.”

The Empowerment Alliance is registered in Kentucky and does not disclose its donors. But the group, launched in 2019, hardly hides its affiliation with the oil, gas, and energy utility industries. The Empowerment Alliance promised when it launched to push a national campaign to promote natural gas while battling renewable energy-focused policies such as the Green New Deal.

Matthew Hammond, the executive director of the group, was previously the president of the Ohio Oil and Gas Association and a registered lobbyist for fracking interests. The Energy and Policy Institute, a watchdog group, published documents that show close financial ties, through surrogate groups, between the utility giants Duke Energy, American Electric Power, and Entergy to the Empowerment Alliance.

The alliance did not respond to a request for comment.

The Empowerment Alliance plans to contribute $1.5 million out of a planned $11.5 million budget for the Run Herschel Run super PAC, a group that is spearheading an independent effort to elect Walker, according to the leaked documents.

Spending records show the PAC has retained Majority Strategies to engage in direct marketing in opposition to Warnock.

The groups plan to target the nearly half million voters who voted for Republican Gov. Brian Kemp and declined to support Walker in the general election last month. The internal budget for the group lists $1 million for direct contact with voters door-to-door, $500,000 for telemarketing, $4 million for digital advertisements, and $5 million for traditional mail advertisements.

The Empowerment Alliance President Brooke Bodney notes in one of the documents that her organization has identified 136,000 mid- to low-propensity voters who lean Republican, voted in the last runoff and general election, and care about energy issues.

The PAC’s pre-runoff disclosure filing shows a $50,000 donation from Javaid Anwar, the owner of Texas oil company Midland Energy. The bulk of the funding for Run Herschel Run may not be known until after Georgia has selected a senator. As OpenSecrets has noted, so-called pop-up super PACs involved in the runoff only have to file disclosures for donors through November 16, and many will not have to disclose donors until after the election is already over.

Earlier this year, the Affordable Energy PAC, a group that ran in “parallel” to the Empowerment Alliance, raised over $1 million for election-related purposes, largely to boost the campaign of J.D. Vance, who triumphed in his Senate race in Ohio. The Affordable Energy Fund maintains close ties to the Empowerment Alliance. The fund retained a consulting firm run by James Nathanson, a Republican consultant who served as the alliance’s first executive director.

“Vote Affordable Energy. Vote JD Vance,” read one of the mailers that went to Ohio voters. The group features similar messaging against Warnock on its website.

The Empowerment Alliance’s blunt talk disparaging renewable energy may face headwinds in Georgia. The dark-money group has sharply mocked the growing adoption of electric vehicles, and has sneered at the “ongoing electric vehicle push from the Biden Administration” as “just another slogan masquerading as policy.”

But electric vehicles have proven popular election-season issues for voters in Georgia.

Both Kemp and Warnock have regularly touted the success in bringing electric vehicle projects, including a $5.5 billion Hyundai factory to build electric cars and a $5 billion Rivian electric truck plant, manufacturing facilities that are set to bring thousands of jobs to the state.

The post Fossil Fuel-Funded Super PAC Eyes $11.5 Million Spending Operation for Herschel Walker in Final Days appeared first on The Intercept.

While the agreement between IronNet, founded by Alexander, and the cyber school was widely reported in intelligence industry outlets and the Saudi press at the time, it faced no scrutiny for its association with Qahtani, after the brutal killing of Jamal Khashoggi he reportedly orchestrated just a few months later.

Alexander officially inked the deal with the Prince Mohammed bin Salman College of Cyber Security, Artificial Intelligence, and Advanced Technologies — a school set up to train Saudi cyber intelligence agents — at a signing ceremony in Washington, D.C., according to an announcement in early July.

Qahtani’s proxy at the signing noted in a statement that “the strategic agreement will ensure [Saudi Arabia is] benefiting from the experience of an advisory team comprising senior officers who had held senior positions in the Cyber Command of the US Department of Defense.” Alexander’s for-profit cyber security firm IronNet would work closely with the Saudi Federation of Cybersecurity, Programming, and Drones, an affiliate of the college devoted to offensive cyber operations and at the time overseen by Qahtani.

Saudi Arabia’s agreement with IronNet was part of a host of moves to step up its cyber capabilities, coinciding with a campaign against the kingdom’s critics abroad. Khashoggi, then a Washington Post columnist and prominent Salman critic, received a series of threatening messages, including one from Qahtani, warning him to remain silent. Khashoggi, whose family and close associates discovered listening malware electronically implanted on their smartphones, was then lured to the Saudi Embassy in Istanbul.

It was there that a team dispatched by Qahtani detained and tortured the Saudi government critic. Qahtani, according to reports, beamed in through Skype to insult Khashoggi during the ordeal, allegedly instructing his team to “bring me the head of the dog.” Khashoggi was then dismembered with a bone saw.

IronNet’s agreement tied to the alleged mastermind behind the killing of Khashoggi is not listed on the IronNet website, and it is not known if the business relationship still stands — or what the extent of it ever was. IronNet and representatives of the Saudi government did not respond to repeated requests for comment. The Saudi relationship, according to former IronNet employees, has largely been shrouded in secrecy, even within the firm.

Qahtani’s role of enforcer on behalf of bin Salman, well known prior to the Khashoggi slaying, has closely followed the young prince’s meteoric rise as the effective leader of Saudi Arabia.

In 2017, Qahtani played a pivotal role in the abduction and interrogation of hundreds of Saudi elites, who were held captive at the Ritz-Carlton in Riyadh, at which they were forced to pledge loyalty and money to Salman. Qahtani personally led the questioning efforts, according to reports.

Later that year, he reportedly participated in the interrogation of former Lebanese Prime Minister Saad al-Hariri, who was beaten and forced to resign. The following year, according to the brother of Saudi women’s rights activist Loujain al-Hathloul, Qahtani also directly participated in the torture of al-Hathloul, where he mocked her and threatened to have her raped.

On behalf of the kingdom, Qahtani has made it his personal quest to acquire and expand Saudi cyberwarfare tools. Beyond the deal with IronNet and other top-flight American cyber experts, he has spent over a decade directly negotiating the accumulation of computer and phone infiltration technology.

Qahtani took the helm of official state-backed efforts to expand Saudi Arabia’s cyber offensive capabilities in October 2017, when he was named president of a committee called the Electronic Security and Software Alliance, later renamed the Saudi Federation for Cybersecurity, Programming, and Drones.

Earlier this year, SAFCSP signed an agreement with Spire Solutions, a consulting firm that partners with a wide range of cyber intelligence contractors. Haboob, another cyber venture promoted by Qahtani, is a private venture that recruits hackers on behalf of the Saudi government. Haboob’s chair, Naif bin Lubdah, is on SAFCSP’s board of directors.

In 2018, Chiron Technology Services, another American cyber consulting firm, also inked a memorandum of understanding to provide training to the same Saudi hacker school advised by IronNet. Chiron’s team includes top talent recruited from the U.S. Air Force, Army, and NSA, including Michael Tessler, who previously worked at the NSA’s Tailored Access Operations command, which handles high-profile computer infiltration missions of foreign governments.

Jeff Weaver, the chief executive of Chiron, said in an email that his company signed a memorandum of understanding “with the college to develop a cybersecurity curriculum in support of their technical degree programs. However, no collaboration ever occurred, and they never called on us to contribute. We haven’t heard from them since 2018.”

Online cyber sleuths identified Qahtani’s multiple handles on online hacking forums, where he was an active member seeking to purchase hacking tools. A screen name used by Qahtani, for instance, appeared to have purchased a remote access trojan known as Blackshades, which can infect targeted computers to modify and seize files, activate the webcam, and record keystrokes and passwords.

Cybersecurity researchers have identified powerful hacking technology implanted on the phones of Khashoggi’s family, likely by agents of the United Arab Emirates, a close Saudi ally. Several received malicious texts that infected their phones with Pegasus, a tool created by the NSO Group to remotely access a target’s microphone, text messages, and location.

Qahtani, who briefly faced house arrest, was swiftly cleared of wrongdoing in Khashoggi’s death by the Saudi government. Five of the hitmen in the squad sent to kill Khashoggi were sentenced to death, including Maher Abdulaziz Mutreb, an intelligence officer who worked under Qahtani. Qahtani’s current relationship with the institute is unknown.

In 2019, BAE Systems, a major defense contractor based in the U.S. and the U.K., entered into a training agreement with the MBS College of Cyber Security. Last year, Cisco unveiled a training relationship with the Saudi Federation of Cybersecurity, Programming, and Drones.

BAE, reached for comment, distanced itself from the deal. “BAE Systems works with a number of partner companies based in Saudi Arabia,” said a spokesperson for the company. “ISE, one of our Saudi partner companies, was awarded a contract in 2019 by the MBS College for Cyber Security to provide support services to establish the college, such as general staffing and facilities management but this contract wasn’t activated and is still on hold.”

Alexander has continued to do work in the region as a member of Amazon’s board. Intelligence Online, a trade outlet for intelligence contractors, reported, “As a partner of Amazon, for which it offers native surveillance of its AWS’ cloud traffic, IronNet helps the company win public contracts, especially since CEO Keith Alexander has sat on Amazon’s board.”

IronNet, however, has faltered in recent months, with two waves of layoffs this year and a lawsuit from investors. The company has touted skyrocketing growth, like many defense-related contractors, by promising to harness growing security threats. Much of the American traditional defense industry has long sought lucrative foreign relationships, particularly with the Saudi government, a path IronNet appears to have attempted to follow.

And President Joe Biden, who promised during his election campaign to make the Saudi state a “pariah” over the slaying, has since appeared to move on from the scandal. In June, he traveled to Riyadh to shore up the U.S.-Saudi alliance and request an increase in oil production. The four-year anniversary of Khashoggi’s slaying is on October 2.

The post Former NSA Chief Signed Deal to Train Saudi Hackers Months Before Jamal Khashoggi’s Murder appeared first on The Intercept.

Alexander, a current board member for Amazon who previously served as the head of U.S. Cyber Command and as director of the National Security Agency under Presidents George W. Bush and Barack Obama, allegedly misled investors through a pump-and-dump scheme that enriched him with at least $5 million.

In a securities lawsuit filed in April, investors in IronNet, a cybersecurity company co-founded by Alexander after he left the Obama administration in 2014, claim that the former general gave false promises of government contracts and inflated revenue numbers, all while selling off his shares in the company.

IronNet, which advertises systems to help public and private clients defend against a variety of hackers and other forms of electronic intrusion, relies heavily on Alexander’s image and reputation as a former intelligence official. “As commander of U.S. Cyber Command, we had responsibility for defending the nation,” says Alexander in a promotional video that runs on the company’s homepage.

Joseph Depa, a spokesperson for IronNet, declined to comment.

Plaintiffs in the U.S. District Court in Alexandria, Virginia, allege that IronNet made lofty promises as a cover for company insiders to quickly unload stock on clueless retail investors.

In August 2021, IronNet went public through a “special purpose acquisition company.” The SPAC process allows private companies to go public by leapfrogging the traditional initial public offering process through a merger with a “blank check” corporation. The trend skyrocketed over 2020 and 2021, with over 3,000 listings last year, though the investing craze has died down in recent months following a wave of investor fraud scandals associated with SPAC mergers.

On September 14, shortly after IronNet successfully completed its merger and transition into a publicly traded company, the company issued a press release projecting $75 million in annual recurring revenue for the following fiscal year through an expanded customer base. Alexander, quoted in the release, said that the company stood to take advantage of the “explosive increase in adversary activity that we are seeing.” The company website details specific cyber threats from Russia and Iran.

The next day, according to the complaint, IronNet’s stock swelled from $23.32 to $32.12, as Reddit and other platforms frequented by retail investors buzzed with enthusiasm over the role of a former NSA chief at the helm of a security contractor promising dazzling revenue growth. The 38 percent surge in price was so quick that the New York Stock Exchange briefly halted trading.

On September 20, according to the lawsuit, the chief financial officer, James Gerber, promised that “large transactions” were progressing at a company event with Wells Fargo, leading to another surge in stock price.

Then between October 18 and November 22, Alexander sold over 85 percent of his stock, according to the Securities and Exchange Commission’s Form 4 reports, making more than $5 million. The complaint alleges that “IronNet securities were artificially inflated by Defendants’ material misstatements and omissions about the Company’s Guidance and near-term growth” and that Alexander’s stock sales “were all in a compressed and suspiciously timed five-week period.”

On December 12, 2021, IronNet reversed its projections, reducing its guidance to $30 million annual recurring revenue, a 60 percent reduction. On the news of the revised guidance, IronNet’s stock went down 31 percent that day, trading at $6.80. It now trades at slightly above $2.

SPAC fraud has become a feature of pandemic-era investing.

The IronNet lawsuit also names chief executive William Welch and the chief financial officer, Gerber, alleging they made false statements. According to the complaint, the contracts promised by Gerber did not materialize. Neither did the “new customer momentum” promised by Welch, the lawsuit says. (Matthew Olsen, a co-founder of IronNet now serving as the assistant attorney general for the National Security Division of the Justice Department, was not named in the lawsuit.)

Alexander also serves on a number of corporate boards, the most prominent of which is cloud and e-commerce giant Amazon. At Amazon, Alexander is a member of the company’s audit committee, responsible for reviewing financial statements and maintaining compliance with legal and regulatory requirements.

SPAC fraud has become a feature of pandemic-era investing, with dozens of scandals and lawsuits creating a damning picture of the industry.

Electric vehicle company Nikola Corp., one of the largest early pandemic companies to go public via a SPAC, minting an overnight billionaire of founder Trevor Milton, paid $125 million to settle charges that the company misled investors with false information about its products and technical capabilities. A number of celebrities, including Jay-Z, have been criticized for lending star power to the value of SPACs, only for insiders to cash out.

But the proverbial “deep state” has also harnessed investor interest around lucrative defense contracts and government access to jump on the SPAC bandwagon. As The Intercept previously reported, officials tied to the CIA launched a SPAC at the height of investor interest last November.

IronNet stands out among other companies that went public last year with one of the most prominent former government insiders leading it.

“Because it is a former SPAC, the identity of the company is more closely tied to the expertise and influence of one individual or a small handful of individuals,” said Usha Rodrigues, a professor of law at the University of Georgia.

The post Former NSA Chief Keith Alexander Accused of Pump-and-Dump Investment Scheme appeared first on The Intercept.

The UNI Global Union, a global federation of labor unions that counts CWA as an affiliate, had initially commissioned a report by Tech Inquiry, an investigative nonprofit led by Jack Poulson that serves as a watchdog of the tech industry. But UNI suddenly backtracked after a landmark neutrality deal this summer between CWA and Microsoft in which the Seattle-based tech giant pledged not to oppose efforts by workers at Microsoft subsidiary Activision seeking to form a union.

“Because Microsoft came out and did what they did, in terms of respecting workers rights to organize, we do not, we cannot be associated with this paper and its release,” a UNI official told Tech Inquiry, delivering the news.

CWA and UNI both said that CWA did not have any knowledge of the report prior to publication. “The UNI staff person quoted by the publication did not make this decision regarding this research and was not speaking on behalf of the organization,” said Matthew Painter, a spokesperson for UNI, in a statement. UNI said it killed the report because it “determined it was unhelpful to publish the research product as presented because it was not useful to our ongoing global effort to hold Amazon accountable.”

The censored report, as yet unpublished, is available here.

According to Tech Inquiry, the sponsors of the report killed the project over political considerations. The same UNI official who spoke to Tech Inquiry this month explained that Microsoft’s pledge to allow the process of organizing, which could mean “thousands [of workers] are able to organize unions and win collective bargaining agreements,” had placed CWA in a tough position. Poulson did not want to reveal the specific union official’s identity, since it was clear he was serving as a messenger.

“I really don’t want to evoke the contract language, and bury this paper like, I feel like that would be fucked up and a disservice to the world,” said the UNI official. “But by the same token, there’s just, we cannot let you have our name in this document and jeopardize our relationship with CWA, CWA’s relationship with Microsoft, the Activision workers’ right to organize, my job, like, it’s just too much. It’s too much, it will never stand. I will be fired.”

“Our affiliates, they pay a portion of my salary,” the UNI official added. Asked why issues with CWA would undermine a report technically sponsored by UNI, the UNI official clarified that he was acting on behalf of CWA. “We have a financial relationship with CWA. They are one of our members.”

Later, during the call, the UNI official again referenced the original contract, which makes Tech Inquiry’s research findings “confidential” and exclusively owned by UNI Global Union. “Speaking of the contract, I mean, it actually says that the report is ours, right,” said the official, before later adding that the contract clause was designed to “protect” the “myriad political considerations we have as an organization” in “situations like this.”

No workers at Activision have yet obtained a formal labor union contract, but organizing efforts are currently underway at several divisions of the company. In May, quality assurance workers at Raven Software, a division of Activision, voted to join the Game Workers Alliance, a project of CWA, in a ballot that passed with 19 of 22 votes in favor. The Microsoft pledge stands in sharp contrast to other technology giants, which have viciously opposed union drives with outside consultants and creative attempts to undermine employee support for organized labor.

The neutrality agreement could not only improve the living standards of Activision workers with enhanced workplace protections and higher wages, but also serve as a vast financial windfall for CWA, which stands to potentially collect a portion of worker salaries as dues money.

The UNI Global Union, along with the Friedrich Ebert Foundation, an affiliate of the German Social Democratic Party, pledged support for the research project beginning in September 2021. Poulson, the founder of Tech Inquiry, is a former research scientist at Google who resigned from the company in protest of its secret efforts to build out a censored search engine in China. Poulson is also a contributor to The Intercept.

The labor union official offered an apology to Tech Inquiry for pressing for the completion of the investigative project, only to censor it just prior to release. “No one could have predicted Microsoft would become, seek to become a pro-union employer, like that would have been like flying pigs, you know. I never would have predicted that,” the official said.

The Tech Inquiry research paper compiled thousands of government contracts worldwide to detail the ways in which technology firms such as Microsoft, Amazon, IBM, Oracle, and Google have quietly transformed into major military contractors through lucrative cloud computing projects. Many of the contracts were concealed “through intermediaries rather than directly to the tech companies whose products are being purchased,” Poulson noted in the report.

The report found that many of the public-facing government disclosure websites fail to accurately report the level of militarized contracts with tech giants. More than 98 percent of Microsoft, Amazon, and Alphabet’s post-2018 awards from the U.S. federal government are from military, intelligence, or law enforcement contracts, the report further noted.

The union official liaison from UNI noted that the report had to be killed given its focus on Microsoft. “If we had just stuck to Amazon, it would have been much simpler,” the official added.

After releasing its neutrality agreement to CWA, Microsoft gained a new ally in its bid for regulatory approval of the merger with Activision, one of the largest gaming companies in the world. In June, Christopher Shelton, the president of CWA, sent a letter to Federal Trade Commission members, requesting that the agency not use antitrust laws to prevent Microsoft’s acquisition.

“We now support approval of the transaction before you because Microsoft has entered an agreement with CWA to ensure the workers of Activision Blizzard have a clear path to collective bargaining,” wrote Shelton.

CWA, known for its support of progressive causes, has pledged regulatory support for allied industries in the past. The union lobbied in favor of AT&T’s attempted merger with T-Mobile in 2011, for example. That acquisition was abandoned in the face of opposition from the Justice Department’s antitrust attorneys.

Jon Schweppe, director of policy and government affairs at the American Principles Project, which has called for greater antitrust scrutiny of tech giants, noted that Microsoft has been less than transparent in the past about funding third-party groups to gain allies in Washington, D.C. The company’s moves to dominate the global video gaming market, he noted, have not provoked much backlash or opposition.

Compared to Amazon and Google, Schweppe continued, Microsoft receives far less scrutiny, a dynamic he attributed to Microsoft’s subtle lobbying efforts among politicians, influential political organizations, and now unions. “Microsoft,” he added, “is incredibly effective at just making itself invisible.”

Correction: September 8, 2022
This article has been updated to include comment from CWA and UNI and to provide further context clarifying the justification given to Tech Inquiry for withholding the report, including CWA’s relationship with UNI and Microsoft. The article previously stated that CWA had communicated with UNI about the report; in fact, the labor official said that UNI was acting on behalf of its affiliate and with knowledge of its priorities, but did not say they were directly instructed by CWA.

The post Labor Union Censored Report Criticizing Microsoft’s Military Contracts appeared first on The Intercept.

American drug executives and lobbyists countered that the U.S. should not only vigorously oppose any patent sharing, but also move to sanction any country that dared to violate corporate patent rights.

“Patents are the reason that Covid-19 vaccines exist. Waiving them would undermine our response to this pandemic and future health emergencies,” wrote Michelle McMurray-Heath, a top biotech lobbyist and head of the Biotechnology Innovation Organization, or BIO, in an opinion column scorning the South Africa-led waiver request.

McMurray-Heath, in her column, referenced the success of Moderna Inc., in which “licensing technology, not abrogating patents” made vaccines possible.

That tough talk belies an unprecedented suspension of patent enforcement granted to select pharmaceutical and medical device companies — including Moderna.

We now know that drug companies like Moderna took advantage of emergency conditions to waive patent rights for components of Covid-19 mRNA vaccines. Despite the drug industry’s rhetoric around the sanctity of patent protections, newly disclosed government pandemic contracts and a contentious patent infringement lawsuit against Moderna showcase the extent to which American-made coronavirus treatments were accelerated using the very type of involuntary patent sharing the drug industry has decried.

Knowledge Ecology International, an advocacy group that campaigns for access to medicine, recently released the results of a Freedom of Information Act request showing that the Trump administration quietly invoked a World War I-era law to give companies racing to produce Covid-19 medications, vaccines, tests, and other pandemic-related products special authority to seize virtually any patent they wished without authorization.

KEI has identified 62 federal pandemic-related contracts — including with major companies such as Corning Inc., Eli Lilly and Co., Merck & Co. Inc., Qiagen, Sanofi, Moderna, and Siemens — with clauses that reference regulations associated with Section 1498, a statute that grants a compulsory license for the completion of the contract. A compulsory license allows the use of patented inventions without the permission of patent holders. In the case of the statute, such broad suspension of traditional patent rights are granted as long as the patented invention is used in service of a critical government function, typically in areas of national security or a national emergency.

The contracts flowed to companies that swiftly developed products needed to respond to the pandemic. Qiagen’s federal funding helped it produce the QIAstat-Dx line of PCR testing equipment to detect Covid-19 pathogens in human samples. The Corning contract identified by KEI supported the manufacturing of medical-grade vials and glass tubing used for coronavirus response efforts.

The KEI-identified contracts cite regulations promulgated by Section 1498, some of which indemnify the government over patent lawsuits, while others do not.

“There’s a whole debate: Supposedly, the U.S. government is a big believer in patent rights, we bully other countries on these issues,” said James Love, the director of KEI. “And at the same time, during the pandemic, the U.S. just went hog-wild issuing compulsory licenses.”

“I’m glad they did it,” added Love, “but I was just surprised at what we found.”

BIO and Moderna did not respond to a request for comment.

The Right to Waive Patents

Section 1498 was first enacted in 1910, with lawmakers interested in ways to ensure that patents useful for national security could be quickly deployed by the government. Just a few years after its enactment, the start of World War I pushed what had, up until then, been theoretical applications into reality.

Early in the development of the airplane industry, “almost confiscatory” patent licensing enforcement from the Wright brothers and airplane manufacturer Glenn Curtiss severely restricted competition in the U.S. On the eve of the war, France held 266 military airlines, while the U.S. military owned only six. As the U.S. attempted to close the gap, excessive royalty demands from airplane patent holders throttled aircraft manufacturers. In response, a number of officials, including acting Navy Secretary Franklin Roosevelt, then serving under President Woodrow Wilson, called for Congress to expand the 1910 law so the military could acquire aviation patents by seizure through eminent domain.

The law was expanded again during World War II. In a proposal that was subsequently adopted into law, designed to “aid in the successful prosecution of the War,” Section 1498 was expanded to include subcontractors to the government, to allow the termination of royalty payments deemed “excessive,” and for patent holders to seek compensation in federal court.

The George W. Bush administration also threatened to invoke Section 1498 during the anthrax scare following the September 11 attacks in 2001. At the time, the pharmaceutical company Bayer held the patent on ciprofloxacin, the antibiotic for treating anthrax, but said it would take two years for the company to produce enough supply. Despite protests from generic manufacturers that offered to produce the drug faster, Bayer refused to license the patent.

After pressure from Senate Democrats and calls by senior Bush Cabinet members to invoke the statute for a compulsory license to make generic cipro, Bayer relented and promised a price cut and a massive increase in manufacturing of the drug.

The Lawsuit Against Moderna

President Donald Trump made no announcement of his administration’s decision to invoke Section 1498, yet the law is inserted into dozens of pandemic contracts, KEI revealed.

The compulsory license clause is embedded in the research and development contracts awarded in 2020 to Moderna. The company, through the Operation Warp Speed program to leapfrog coronavirus medications, received $2.48 billion in federal funding to produce its mRNA vaccine.

Once Moderna began producing Covid-19 vaccines, the company “simply used the patented technology without paying for it or even asking for a license.”

That contract language is now at the center of a contentious legal battle over patented technology that served a critical function in one of the most widely used vaccines. Earlier this year, Moderna was hit with two patent lawsuits alleging that the company infringed on patents controlled by Arbutus Biopharma Corp. and Alnylam Pharmaceuticals Inc. over the use of lipid nanoparticle technology. The lipid droplets are essential for protecting the integrity of mRNA vaccines, which tend to degrade rapidly once entering the body. The companies are seeking royalties for the use of their patents.

The plaintiffs note that Moderna had licensed patents for its other products in the past but that once the company began producing Covid-19 vaccines, Moderna “simply used the patented technology without paying for it or even asking for a license.”

In court, Moderna attorneys have moved first to argue that the plaintiffs in the patent dispute may only seek compensation from the U.S. government, not Moderna, given the special license granted to Moderna under Section 1498 in its contract to produce the vaccine. In its brief to dismiss the case, Moderna noted that the government enacted the law for national emergencies and included protections against patent infringement lawsuits for situations like the coronavirus crisis.

“Short of war,” wrote Brian Egan, an attorney for Moderna with the law firm Morris, Nichols, Arsht & Tunnell, “it is difficult to conceive of a situation more within the heart of Section 1498 than the COVID-19 crisis, ‘one of the greatest public health challenges in modern history.’”

The only redress, Moderna claims, is for the plaintiffs to file a lawsuit to seek taxpayer money through a special claims court. If Moderna is successful in dismissing the lawsuit, the only route for Arbutus and Alnylam will be to seek payment through the U.S. Court of Federal Claims. The legal strategy would amount to taxpayers providing yet more of a windfall to the pharmaceutical industry while shielding the profits the companies made as they denied cheap, global vaccine production.

Refusing to Share Patents

Regardless of the court decisions, the hypocrisy of pharmaceutical companies is clear and egregious.

BIO, a lobbying group that represents Moderna and other pharmaceutical research companies, has argued against any compulsory license to share patents that could be used to assist in the creation of coronavirus vaccines or medicine for lower-income countries. The organization seems to neglect the role of a compulsory license for one of its own members to seize patents.

“BIO and its members are also extremely concerned about emergency regulations introduced in several countries that call for the unilateral use of compulsory licenses for COVID products or those implemented under vague national security grounds,” BIO wrote in a petition last year to the Biden administration, asking that it oppose any patent sharing with countries seeking to produce generic vaccines and coronavirus treatments.

Pharmaceutical Research and Manufacturers of America, another drug industry trade group, similarly mobilized lobbyists and urged the Biden administration to oppose the patent waiver request. “Eliminating IP protections undermines our global response to the pandemic and compromises safety,” read one PhRMA advertisement urging opposition against the patent waiver.

Meanwhile, Moderna has capitalized on its position as one of the financial winners of the pandemic. The company, which also utilized government National Institutes of Health patents in the development of its coronavirus vaccine, has catapulted in size, winning multibillion-dollar contracts.

Stéphane Bancel, the chief executive of the company, has sold more than $400 million of company stock since the beginning of the pandemic. Earlier this year, the Moderna board approved a “golden parachute” compensation package for Bancel worth more than $926 million if the company is sold or he exits the firm.

The vaccine, noted KEI’s Love, is “really one of the most profitable biopharmaceutical products of all time.”

WTO Deal Falls Short

In March 2020, recognizing the need for rapid global cooperation to respond to the pandemic, Costa Rican President Carlos Alvarado Quesada, who left office earlier this year, called for special efforts to share patents and know-how across borders for developing drugs, vaccines, and diagnostic tests.

The discussions transformed into a formal petition later that year by a coalition led by India and South Africa for a formal World Trade Organization exemption on patent and intellectual property enforcement on a range of medical tools and medicine used for treating Covid-19.

Instantaneously, the pharmaceutical industry, with allies in wealthy countries, pushed back — opposing any, even temporary, lifting of WTO rules that govern patent and IP enforcement.

The political wrangling over the request to the WTO stymied an effective global response to the pandemic. While negotiators dithered, hundreds of thousands died without access to vaccines or personal protective equipment.

Moderna played multiple sides in the dispute. In 2020, Moderna pledged not to enforce patents on its vaccine during the pandemic, a promise that won international acclaim. Yet the company did not explicitly endorse the South Africa and India-led WTO waiver, and its lobbyists at BIO and other organizations mobilized aggressive opposition to the campaign. And the company has reportedly reserved the right to return to enforcing patents when the pandemic becomes endemic.

And in the meantime, Moderna has filed for broad mRNA patents in South Africa that critics fear will undermine future vaccine development. While the company has pledged narrowly not to enforce patents on Covid-19-related issues, the broad mRNA patents may represent a stumbling block to copying the vaccine formula in an effective way for emergency and existing diseases.

Then, earlier this year, after making a surprise move to endorse the WTO waiver, the Biden administration negotiated a watered-down proposal for the waiver only on vaccine patents. Public health advocates and industry groups assailed the agreement to exempt therapeutics and diagnostic systems, the areas where the need is now highest.

“They waited out the clock. The time to waive patents was in 2020, when it takes about six months to have a vaccine out the door,” noted Love. Now, with close to sufficient global vaccine supplies, the need in lower-income countries centers on diagnostic equipment and therapeutic medications like Pfizer’s Paxlovid — all of which are more easily copied as a generic than a new vaccine yet are exempted from the current WTO deal.

“Just waiving patents for vaccines isn’t really enough. But if used for drugs, you can get a generic version on the markets within months. It’s much harder for a generic vaccine, which requires close cooperation and lengthy regulatory approval,” added Love.

The post Moderna Among Firms Quietly Granted Powers to Seize Patent Rights During Early Days of Covid Pandemic appeared first on The Intercept.

“Our community development grantmaking focuses primarily on enhancing the quality of life in Indianapolis and Indiana,” the Lilly Endowment declares on its website. “We grant funds for human and social needs, central-city and neighborhood revitalization, low- and moderate-income housing, and arts and culture in Indianapolis.”

But many large grants distributed by the Lilly Endowment, led in part by former Eli Lilly executives and still financed by corporate stock options, are given far from Indiana to think tanks that work to shield corporations from taxation or government regulation. The foundation has provided millions of dollars over the years to libertarian groups that lobby against any price controls on insulin, a key product for Eli Lilly.

The Federalist Society, for example, has received over $1.5 million from the charitable arm over the last decade and is listed under “community development” grantees of the Lilly Endowment. The Washington, D.C.-based group is a professional society for conservative attorneys, with an eye toward pro-business ideological positions.

The Federalist Society funds included a $150,000 grant last year, at the same time that the group was sharply criticizing a new Minnesota law that forces manufacturers to provide free or affordable insulin to low-income residents. The law “[inflicts] an injustice upon companies that are regularly demonized in the media,” an attorney for the Goldwater Institute writes on the Federalist Society’s website.

The Lilly Endowment describes itself as independent and “a separate entity from the company, with a distinct governing board, staff and location.” The board, however, includes Daniel P. Carmichael, who previously led Eli Lilly’s lobbying operations and served as a spokesperson for the company. Eli Lilly II, the great-grandson of the founder, is on the Lilly Endowment board. And Eli Lilly the corporation has touted joint philanthropic efforts with Lilly Endowment in the past.

The Lilly Endowment is also the largest shareholder of Eli Lilly, with 104,161,053 shares — an ownership stake worth approximately $31 billion.

“Lilly Endowment for many years has made modest general operating support grants to the four organizations you listed, each of which conducts public policy research and educational programs on many important issues relevant to our work in community development,” wrote Judy Cebula, a spokesperson for the Lilly Endowment, in a statement. “These grants are not restricted or directed to specific issues, and as a matter of practice we do not share publicly our discussions with potential or actual grantees.”

Over the last 80 years, the endowment has provided $10 billion to over 10,000 charitable organizations. Many of the recent grant recipients include traditional service-oriented groups, such as the Career Learning & Employment Center for Veterans in Indianapolis and the American Red Cross.

Other recipients of Lilly Endowment “community development” funds, however, have advocated on issues central to Eli Lilly’s bottom line.

Sally C. Pipes — an outspoken voice on health care issues who campaigns against single-payer and other government interventions into the health care market — is heavily funded by the Lilly Endowment, which has provided $175,000 per year in grants to her nonprofit, the Pacific Research Institute for Public Policy, since 2015.

Pipes has authored multiple opinion columns assailing any effort to cap the monthly copayment price of insulin at $35. The proposal was part of the failed Build Back Better legislation debated last year. Last weekend, Senate Republicans defeated an amendment to attach the price cap for individuals with private health insurance to the Inflation Reduction Act before the overall bill reached passage out of the chamber. The legislation only curtails costs for Medicare Part D prescription drug beneficiaries.

The Pacific Research Institute, which has offices in Pasadena and San Francisco, has slammed a California initiative to develop a government-supported generic manufacturer of insulin to compete with for-profit drugmakers. “The state would be better served if the governor tabled this idea,” wrote a senior fellow at the Pacific Research Institute in a column published in the San Francisco Chronicle.

The Lilly Endowment is also a longtime supporter of the American Enterprise Institute, a prominent think tank in Washington that opposes most health care price regulations and supports corporate tax cuts.

Last month, prior to the release of the Inflation Reduction Act negotiations, a bipartisan group of lawmakers introduced the Improving Needed Safeguards for Users of Lifesaving Insulin Now, or INSULIN, Act. The bill, like the defeated amendment, would lower insulin out-of-pocket expenses by ensuring that insurance plans waive deductibles and provide cost-saving programs to patients so that insulin never costs more than $35 per month or 25 percent of list price.

In response, AEI swiftly condemned the proposal, arguing that the INSULIN Act “would likely undermine competition and raise costs more broadly.”

Eli Lilly is one of the three companies that control the insulin industry, along with the French company Sanofi and Novo Nordisk, which is based in Denmark. Last year, Eli Lilly collected over $2.4 billion in revenue from its insulin products, including the brand Humalog, with roughly $1.3 billion of that from U.S.-based sales.

“One vial of Humalog (insulin lispro), which used to cost $21 in 1999, cost $332 in 2019, reflecting a price increase of more than 1,000%. In contrast, insulin prices in other developed countries, including neighboring Canada, have stayed the same,” wrote S. Vincent Rajkumar in the journal of the Mayo Clinic in 2020.

The political demands to address the soaring costs of insulin have grown as the price paid by patients and the government has steadily increased. The out-of-pocket spending by Medicare beneficiaries for insulin products increased from $236 million to $1.03 billion between 2007 and 2020, according to figures compiled by the Kaiser Family Foundation.

Out-of-pocket costs for individuals with high-deductible plans can require patients to pay as much as $8,000. The Minnesota law that makes insulin more accessible to low-income residents was passed in honor of Alec Smith, a 26-year-old diabetes patient who died because he rationed his insulin after struggling to pay the $1,300 monthly costs.

Repealing the Minnesota law has been a focus of the pharmaceutical industry. The Pharmaceutical Research and Manufacturers of America, a drug lobby group that counts Eli Lilly as a member, is currently in federal appeals court attempting to overturn the law as unconstitutional. Eli Lilly, in response to the push in Congress to regulate the costs of insulin, has deployed lobbyists on a variety of cost-control proposals, disclosures show.

In the past, Eli Lilly and other drugmakers have blamed pharmacy benefit managers, which negotiate deals between pharmacies and insurance companies, for the high cost of insulin.

Update: August 11, 2022
This story was updated with a statement from the Lilly Endowment sent following publication.

The post Eli Lilly Charity Finances Groups That Oppose Insulin Price Caps Under the Auspices of “Community Development” appeared first on The Intercept.

“I want to say it is very disappointing that they are choosing to single out one industry,” Bourla said during a call with investors last week.

The legislation, said Bourla, includes “specific measures to affect only the pharma industry, particularly when we are out of a pandemic, where this industry has proven the value that brings to public health and to the global economy.”

The bitter comments about the Inflation Reduction Act — the work of quiet negotiations led by Sen. Joe Manchin, D-W.Va., and Sen. Chuck Schumer, D-N.Y. — reflect the pharmaceutical industry’s opposition to a key financing provision for a range of energy incentive and deficit reduction plans. The legislation aims to finance these programs primarily through changes in the tax code and the revival of a drug price reduction plan from last year.

The drug price plan, which was formulated last year in the House of Representatives, is a compromise measure that falls short of progressive demands for Medicare to directly negotiate the price of all drugs it reimburses on behalf of seniors. Instead, it would allow the Centers for Medicare and Medicaid Services to negotiate the costs of 10 high-priced legacy drugs in 2023, for agreements that would take effect in 2025. Drugmakers that do not participate in the negotiations would face a special excise tax, and the provision contains several exemptions for newly released drugs and certain biologics that have been available for less than 12 years.

Even with the severely scaled-back proposal, major pharmaceutical companies stand to lose future profits. The pharmaceutical lobby, as a result, has mobilized to fight the legislation, and with the powerful fossil fuel industry likely placated by Manchin’s protections, it may pose the bill’s most formidable threat.

Pfizer is among the biggest spenders on lobbying on the congressional negotiations and the drug pricing provision. Many of the company’s 76 lobbyists on retainer have disclosed that they are working on shaping the current legislation. In recent years, Pfizer has gone on a hiring spree of lobbyists, including many former Democratic congressional staffers. Pfizer and Bourla did not immediately respond to The Intercept’s request for comment.

Pfizer is one of the leading opponents of the drug pricing proposal, but other drug industry voices, represented by the lobby group PhRMA, stand united against the legislative initiative. Medicare Part D drugs that could be subject to the drug pricing provision include Bristol Myer Squibb/Pfizer’s Eliquis, AbbVie/Johnson & Johnson’s Imbruvica, Pfizer’s Ibrance, Eli Lilly’s Jardiance, and Astellas Pharma/Pfizer’s Xtandi, all of which are among the most expensive pharmaceuticals with a release date that fits the drug pricing provision formula.

In 2019, Ibrance, used to treat breast cancer, cost Medicare $1.8 billion. That same year, Medicare spent $7.3 billion on the blood clot medication Eliquis and $1.4 billion for Xtandi, a drug to treat prostate cancer.

During his remarks on the investor call, Bourla continued to express disbelief that his industry would face any regulations given its role in the coronavirus pandemic.

“We would be in a very different point in this global economy if we didn’t have the investments in the thriving life sciences sector,” Bourla said. “And they are choosing to single out this industry. I think it’s wrong.”

Yet his complaints about being unfairly targeted after the pandemic come at a time when the pharmaceutical giant is reaping one of the greatest financial windfalls ever from its role in supplying Covid-19 vaccines and antiviral medications. Earlier on the same call, Pfizer executives touted expected sales this year of Paxlovid, Pfizer’s antiviral treatment for coronavirus, at $22 billion. For its coronavirus vaccine, the projected revenue was $32 billion.

The post Pfizer CEO Complains to Investors About Lower Drug Prices Under Inflation Reduction Act appeared first on The Intercept.

Just months into Donald Trump’s presidency in 2017, the Mosaic Co. retained Ballard Partners, whose founder was a key fundraiser for the Trump campaign, to push tariffs on fertilizer imports. With Ballard’s help, Mosaic executives secured high-level meetings with White House trade officials to discuss what they claimed were unfair subsidies for foreign importers, according to emails obtained via a Freedom of Information Act request by American Oversight, a nonprofit watchdog.

The yearslong lobbying campaign resulted in the Trump administration recommending tariffs in 2020 that went into effect last year on phosphate fertilizer from Russia and Morocco, the first- and fourth-largest fertilizer exporters in the world, respectively. As foreign imports plummeted, Mosaic gained control of 90 percent of the U.S. phosphate fertilizer market.

Disclosures show that Mosaic has paid Ballard $1.49 million in lobbying fees. The firm remains on the company payroll.

Over the last year, costs of key fertilizer products have risen to record levels, fueling a food crisis throughout the world including skyrocketing prices for meat and vegetables in the United States. While the war in Ukraine and supply chain issues have been major factors in the unfolding crisis, the tariffs as well as war-related sanctions on Belarus and Russia have destabilized agricultural markets, and opposition to the tariffs has grown.

Mosaic did not respond to a request for comment.

Mosaic’s squeeze on the supply of fertilizer began with a series of meetings with top Trump officials.

Shortly after signing with Ballard Partners, Mosaic executives traveled to Washington, D.C., to make the case that phosphate fertilizers produced in Morocco, which controls close to 75 percent of the world’s phosphate reserves, posed a competitive threat to their business. At the time, fertilizer prices were low, and U.S. suppliers expressed concerns that foreign state-owned firms were unfairly subsidized.

On June 5, 2017, Syl Lukis, a Ballard lobbyist, wrote that he represented Mosaic in an email to a U.S. Trade Representative adviser. Lukis sought a meeting with the Trump administration’s top trade negotiator, Robert Lighthizer.

Lukis noted in an email that the Mosaic CEO and the senior vice president for phosphate production had already scheduled a meeting with Peter Navarro, the director of the National Trade Council.

“There are some International Trade issues they would like to discuss regarding Moroccan phosphate production,” Lukis wrote.

Later that month, Mosaic executives were scheduled to meet with Commerce Secretary Wilbur Ross. Emails show that the meeting was scheduled through Lorine Card, an in-house lobbyist for Mosaic, and Linda Dempsey, the vice president of international economic affairs policy at the National Association of Manufacturers, a business trade group for which James O’Rourke, the Mosaic CEO, is a board member. The correspondence shows that the lobbyists coordinated the meeting with a group of Commerce Department officials, including Eric Branstad, the son of then-Ambassador to China Terry Branstad.

Meeting records show a scheduled event for O’Rourke, acting Commerce Undersecretary for International Trade Israel Hernandez, and Mark Kaplan, an executive in Mosaic’s phosphate division. Scheduling records show that the meeting took place on the same day that Ross had planned to meet with the Mosaic executives, though it is unclear if the meetings were planned to be combined or separate.

The discussions revolved around “key trade issues, including trade with the EU as well as competition here in the United States from China, Russia and Morocco,” wrote Dempsey.

In July 2020, following years of lobbying Trump officials, Mosaic formally filed a petition with the U.S. International Trade Commission for a countervailing duty investigation to determine whether Morocco and Russian exporters received unfair subsidies.

In November 2020, the Commerce Department announced that it supported Mosaic’s assertions and would officially press forward with the company’s tariff petition. The following March, the ITC imposed duties of 20 percent on Moroccan fertilizer giant OCP Group, 9 percent on Russian firm PhosAgro, and 47 percent on Russian-owned EuroChem.

Critics immediately questioned the logic of the tariffs. A group of domestic agricultural groups filed a trade lawsuit, arguing that the tariffs granted Mosaic a “near monopoly” on phosphate fertilizer. The brief claimed that the U.S. government erred when attributing a supply imbalance in the phosphate fertilizer market in 2019 to Moroccan and Russian subsidies. The agricultural groups claimed that Mosaic and another U.S.-based firm, Nutrien, had idled plants while increasing exports.

The Open Markets Institute, a think tank that studies competition policy, bolstered the lawsuit’s claims in a letter last month, stating that Mosaic in 2014 acquired the phosphate fertilizer business of competitor CF Industries for $1.2 billion. Mosaic then moved to cancel plans for a $1.1 billion plant in Louisiana that would “increase ammonia production needed to make finished phosphate fertilizer” as well as for a $1 billion Florida plant for processing phosphate fertilizer. Mosaic, the group claimed, used savings for stock buybacks. Following the imposition of tariffs on foreign competition, Mosaic’s stock roughly doubled over the following year, from $31.15 to $61.92. The stock now hovers around $50 a share.

Farmers in the U.S. face fertilizer prices that are four to five times higher than last year.

In other words, Mosaic allegedly consolidated market share, reduced fertilizer supply, and then used its profits to lavish investors while also lobbying to restrict competition.

Farmers in the U.S. face fertilizer prices that are four to five times higher than last year, according to a study by Texas A&M University, driving up the costs of a wide range of crops. Phosphate fertilizer at the beginning of planting season this year was double the price over the previous year. Higher costs for growing feedstock have also fueled higher prices for meat, particularly beef.

Soaring agricultural prices have prompted increasing opposition to the tariffs. In March, a bipartisan group of congressional legislators wrote to ITC Chair Jason Kearns, asking the trade body to reconsider the duties placed on phosphate fertilizer products imported from Morocco.

Sen. Roger Marshall, R-Kan., and Rep. Tracey Mann, R-Kan., have also introduced a bill in Congress to allow emergency waivers on fertilizer tariffs.

The Moroccan government has mobilized a counter-lobbying campaign as well. The influential law firm Covington & Burling has received at least $15 million in fees from the state-owned OCP in connection to its work battling the tariffs and other key issues for Morocco.

Mosaic has petitioned the U.S. government to argue against lifting tariffs. In a letter to Agriculture Department officials last month, Ben Pratt, the senior vice president of government and public affairs at Mosaic, cast rising fertilizer prices on “many events, including geopolitical ones” as well as “supply disruptions, inflation, and other countries that have restricted fertilizer exports to preserve domestic supply.”

Pending a ruling on the trade lawsuit or government action, the fertilizer tariffs will be in full effect through 2026.

The post Lobbying Blitz Pushed Fertilizer Prices Higher, Fueling Food Inflation appeared first on The Intercept.

Earlier this year, Harvard University President Lawrence Bacow personally met with lawmakers, including Senate Majority Leader Chuck Schumer, D-N.Y., and members of the Massachusetts delegation, to lobby against the excise tax.

Stanford University, the University of Pennsylvania, and Cornell University have also pushed lawmakers to roll back the 1.4 percent excise tax on private college endowment investment returns passed by Congress in 2017. The excise tax, enacted as part of President Donald Trump’s Tax Cuts and Jobs Act, applies to investment returns on endowment assets of $500,000 per full time equivalent student at private colleges. The formula impacts over 40 private universities around the country.

Last year, thanks to outsized investment returns, large endowments around the country grew in size. Harvard University reported a 33.6 percent return as its endowment swelled to $53.2 billion. In 2021, Stanford University announced a 40.1 percent return, with its endowment growing to $41.9 billion.

Despite the vast holdings and a student base that represents the children of the wealthiest Americans, university endowments, before the passage of this excise tax on investment returns, were otherwise largely tax-free, with donations to endowments shielded from federal and state taxes.

The mass accumulation of wealth by these elite colleges has not prevented the schools from pressing on with a demand for a special tax cut. A review of lobbying records show that private colleges have mobilized over two dozen lobbyists to pressure policymakers on repealing the tax. Harvard University, for example, has a team of staff lobbyists, along with two additional lobbyists on retainer from the law firm O’Neill, Athy & Casey, to work on the issue.

“Repealing the endowment tax would be an indirect gift to the private equity and hedge fund billionaires that already exploit too many tax breaks,” said Charlie Eaton, a sociology professor at the University of California, Merced.

As Eaton notes in his book “Bankers in the Ivory Tower,” which investigates the role of finance in higher education, elite university endowment money is pooled into investment vehicles managed by hedge funds and private equity. The arrangement means a generally tax-advantaged stream of cash for Wall Street’s leading figures, whose children are then educated at colleges and universities subsidized by these endowments.

Universities have argued that endowments are essential for funding student aid programs, and that any tax on endowment returns negatively impacts their ability to provide support for low-income students.

In May, Bacow, in conversation with David Rubenstein, the billionaire co-founder of the Carlyle Group and now the chair of the University of Chicago Board of Trustees, at the Economic Club of Washington, D.C. — a private, members-only venue, in which dues run at least $2,500 per year — the Harvard University chief complained bitterly about the unfairness of the tax.

“I think this is bad public policy. We’re a charitable institution,” said Bacow, who noted the tax meant Harvard University will pay more in federal taxes than many large corporations pay in income taxes. The tax, he also argued, was designed by Republicans to punish Democratic-leaning institutions.

“The tax was constructed disproportionately to tax institutions in liberal states,” he said.

But the comments belie a push for tax justice that is growing across the country. Massachusetts politicians have repeatedly called for a tax on private university endowments, including a proposal from former Democratic gubernatorial candidate Jay Gonzalez, who called for a 1.6 percent tax to raise $1 billion for K-12 education, public transit, and public higher education.

In Rhode Island this year, state legislators have proposed taxes on Brown University’s endowment in order to fund public K-12 education. The money is designed as an offset over the fact that university-held land is exempt from local property taxes, starving the adjacent communities, many of which are working class, from adequate local school budget money.

State lobbying records show that Brown University has retained at least three lobbyists to oppose the endowment tax proposals.

Last week, Inside Higher Ed reported on emails from Suzanne Day, an in-house lobbyist at Harvard, encouraging colleagues to press Democratic lawmakers on the issue. The lobbyists had hoped to include a provision in President Joe Biden’s Build Back Better package last year that offset the tax via payments made in institutional aid.

“I write to urge you to engage with Democratic Senators and allies to press for action on this in the pending FY22 reconciliation bill. We believe this is one of our best chances for improvement in this policy,” Day wrote in the email.

An initial draft of the bill contained the Harvard-backed provision, but the reconciliation package was sidelined after objections were raised by Sen. Joe Manchin, D-W.Va., and Sen. Kyrsten Sinema, D-Ariz.

Though the path through Build Back Better remains uncertain, members of Congress have other routes through which to hand elite universities a tax cut. Rep. Brendan Boyle, D-Pa., a member of the influential Ways and Means Committee that oversees tax policy, has a separate bill to repeal the tax.

Harvard University’s lobbyists did not respond to a request for comment.

The post Ivy League Universities Push for Special Tax Cut appeared first on The Intercept.

“CoreCivic is one of the very few companies in the United States that has proactively embraced the process,” Hininger gloated.

The private prison corporation’s stock price and access to bond markets had been battered by pressure over its role in profiting from immigrant detention and for providing financial support to Donald Trump’s presidency. The company is currently facing a class-action lawsuit brought by immigration detainees claiming that they were forced to work with little or no pay. The racial equity audit was a conscious effort by CoreCivic not only to mend its poor public image, but also to harness public interest in racial justice to bring the company back into the good graces of Wall Street investors.

The contents of CoreCivic’s audit pointed to mostly superficial contributions to diversity and equity. The report, conducted by Moore & Van Allen, a North Carolina-based law firm, offered some room for improvement but largely applauded the private prison giant for its “genuine” commitment to diversity principles, including by raising cultural awareness with a mural of Martin Luther King Jr. at one of its Immigration and Customs Enforcement detention centers in Arizona. The report also praised CoreCivic for its philanthropy and business practices that have “benefitted communities of color.”

In an accompanying report on the company’s diversity, equity, and inclusion — known as DEI — CoreCivic touted its ranks of nonwhite prison guards, diversity on its board of directors, and diverse ranks of wardens, as well as its partnership with a Black-led, pro-business trade group.

Those supposed strides elicited eye rolls among its critics. “They put children’s murals on the wall while incarcerating infants. That doesn’t mean they have positive impacts for children,” said Bob Libal, a longtime watchdog of the private prison industry, referencing the company’s Taylor, Texas-based ICE detention center.

“This is hollow at best, and probably a deeply cynical attempt to whitewash a company that has a horrible reputation, a horrible track record of abuse and neglect of people who’ve been sentenced in their facilities,” added Libal. The company has faced multiple allegations of severe understaffing and safety issues, as well as unsanitary conditions in many facilities.

“The reality is, CoreCivic’s entire existence is offensive to Black and brown communities. They’re trying to create some version, right, some image that they aren’t one thousand percent harmful,” said Bianca Tylek, the founder of Worth Rises, an advocacy group that focuses on the privatization of the criminal justice system.

“The audit tells us nothing,” said Tylek. “The private prison business model is the problem. Everything they do is the problem, and to be honest, sometimes we’re at odds with other advocates because these racial equity audits are absolutely ridiculous and not an effective advocacy tool.”

Asked for comment about activist concerns, CoreCivic reiterated its support for the “principles of diversity, equity and inclusion.” The company, said spokesperson Ryan Gustin, “didn’t hesitate to participate in the recent racial equity audit.”

“They put children’s murals on the wall while incarcerating infants. That doesn’t mean they have positive impacts for children.”

But Tylek, Libal, and members of the activist community are not the intended audience for the report; the racial equity audit and similar measures are part of an opaque and virtually unregulated rubric that sets the flow of massive piles of investor dollars. CoreCivic’s gestures are meant to shape its standing in “environmental, social, and governance,” or ESG, funds, a catchall term for a system that allows investors to put their money into companies that score as socially responsible by various metrics.

Compliance can be lucrative. For instance, among the many ESG ratings agencies, a company with nonwhite or female board members or a decision to simply conduct a racial equity audit or DEI report can automatically lead to a higher score, and corporations with high ESG rankings find placement in special exchange-traded funds, or ETFs, that are marketed as socially responsible, opening the door for investor cash.

Over $35 trillion in global assets are invested in funds that claim to vet companies using ESG principles, making the label one of the hottest trends in finance. Following the racial justice protests of 2020, a coalition of institutional funds, which now includes the California State Teachers’ Retirement System, a pension fund with over $250 billion in assets, launched proxy campaigns to pressure publicly traded companies to undergo racial equity audits and to prioritize racial diversity issues.

Proponents of the approach claim that the market sprouting up around ESG principles provides a window, guiding investors into safer, less controversial companies while creating a market incentive for good corporate behavior, whether on racial justice, the climate crisis, or any number of issues.

Larry Fink, the chief executive of BlackRock Inc. and one of the most powerful ESG-focused asset managers in the world, has described the move toward socially responsible investing as a “tectonic shift” that stands to reshape capitalism as we know it. In his letter to investors this year, Fink made clear that racially diverse boards and racial diversity would be a focus of his company.

BlackRock is among the many corporations that sponsor television advertisements — the latest featuring NBA star Jalen Duren — touting their socially responsible or sustainable investment funds, luring ordinary retail investors.

But a growing chorus of critics have questioned the lofty promises of ESG investing. The high-minded rhetoric of the movement, they argue, serves to enrich a small set of ESG-focused consultants and fund managers while misleading the public and investor community and providing little to no benefit to society. They charge that the investing trend is no more than reputation laundering and, potentially, fraud on an industrial scale.

“People who are buying these funds almost always believe that they’re doing something to make the world a better place, and in reality, they’re just moving shares around in publicly traded companies,” said Tariq Fancy, the former chief investment officer for social responsibility investing at BlackRock, who has emerged in recent years as a critic of ESG.

“People who are buying these funds almost always believe that they’re doing something to make the world a better place, and in reality, they’re just moving shares around in publicly traded companies.”

“It’s actually dangerous because they imply real-world impact, creating a societal placebo,” continued Fancy. “It actually lowers the case for government regulation. If you think you can do something quick and easy like ESG, then it follows to say, ‘We don’t need a carbon tax.’”

Fancy also finds the righteous rhetoric of his former employer hypocritical. BlackRock will make a fortune in fees promoting an ESG model entirely based on voluntary self-reporting requirements and opaque scores, said Fancy, while using its power as a shareholder to block proposals that call on companies to disclose political spending — the very political spending that corporations use to prevent any meaningful laws and government regulations on social welfare spending or pollution.

“It’s like they’re giving us talking points on good sportsmanship, meanwhile, they’re saying it’s all right for teams to secretly pay off the referees.”

In an email, BlackRock spokesperson Matt Kobussen noted that the company provides multiple ESG index products, some of which include CoreCivic and others of which do not. The ETF that includes private prisons is based on ESG criteria provided by the index provider S&P, while another, the MSCI Small Cap ESG Aware, uses an index provided by MSCI and “does not have exposure to CoreCivic or GEO Group,” another main prison company.

Despite the rhetoric, the portfolio managers preaching the gospel of ESG are in fact legally prohibited from doing anything that compromises corporate profits. The types of changes they promote are superficial at best, critics charge.

What’s more, regulators have taken notice that fund managers have marketed ESG investing with little due diligence in regard to how companies are changing any actual business practices or whether companies included in the funds meet the stated criteria. In May, around 50 German police officers raided the Frankfurt offices of DWS Group, the asset manager subsidiary of Deutsche Bank. The investigation stems from allegations by a former DWS Group executive that the company had made misleading statements about how ESG assets were allocated.

And this year, the Bank of New York Mellon Corp.’s asset manager paid $1.5 million to settle claims by the Securities and Exchange Commission over “misstatements and omissions about ESG considerations.” The bank, as part of the settlement, did not admit any guilt.

Earlier this month, word leaked that the SEC is currently investigating Goldman Sachs Group Inc. over similar claims about its ESG mutual fund business. In June 2020, Goldman Sachs renamed its blue-chip fund as the U.S. Equity ESG Fund, while maintaining the same top holdings.

Last month, the SEC began collecting comments for new regulations aimed at boosting transparency and accountability around ESG funds.

Measures of Goodness

At the core of the criticisms is the fact that there is no set definition for how ESG rankings are devised. Competing ratings agencies and financial analysts offer a tangled web of various scores, with no consistency from firm to firm.

Charles Schwab Corp.’s asset management arm, for example, last year launched Schwab Ariel ESG ETF, an ESG fund that excludes tobacco products, the extraction of fossil fuels, weapons manufacturers, and operators of private prisons such as CoreCivic.

Other asset managers, however, sell ESG funds that do include private prisons. BlackRock’s iShares ESG Screened S&P Small-Cap ETF, one of its social responsibility funds, includes CoreCivic. Investors purchasing shares in DWS Group’s Xtrackers S&P SmallCap 600 ESG are also buying a slice of CoreCivic.

State Street Corp., an asset manager that is one of the loudest and most prominent proponents of ESG, markets a social responsibility fund, SPDR S&P SmallCap 600 ESG ETF, that owns shares in CoreCivic as well as the second-largest private prison company in the U.S., GEO Group Inc.

State Street spokesperson Deborah Heindel said in an email that ESG can be very broad or specific depending on who’s defining the term. “Case in point, a Google search pulls several million results from countless sources,” she said.

Many ESG funds used to exclude certain arms manufacturers, arguing that the global sale of bombs and missiles did not constitute a social good — now there’s a push to reward them.

Ratings agencies can change ESG formulas on a dime, with little public notice. Fund managers are free to choose any ratings agency with any formula, often with most sources of information completely self-reported by corporations.

CoreCivic, in its own ESG report, touts a 2021 award issued by Newsweek/Statista claiming that it is one of America’s most responsible companies. The Newsweek/Statista ESG rankings give CoreCivic a high social rating in part based on the prison company’s commitment to “good causes” and the number of women and racial minorities on its board of directors.

The criteria for what constitutes a socially responsible investment can change from day to day. In March, analysts from Citigroup Inc. suggested that companies that manufacture weapons used for the war in Ukraine to thwart the Russian invasion could count toward a better ESG score. “Defending the values of liberal democracies and creating a deterrent, which preserves peace and global stability,” they wrote.

Before this year, many ESG funds promoted the exclusion of certain arms manufacturers, arguing that the global sale of bombs and missiles did not constitute a social good — now there’s a push to reward arms makers. If a shift in public opinion can reshape the entire model, that leaves many to wonder how any fund can claim fixed principles when ideas around social responsibility are inherently subjective.

“It’s a scam, that’s all it is, a scam,” said Aswath Damodaran, a professor of finance at New York University’s Stern School of Business, of ESG. “How can you have a measure of goodness? Or let me put it another way: Name me one social factor where we have consensus in society. How the heck are we going to come up with one score?”

The CoreCivic board of directors, its ESG report proudly notes, is 36 percent “gender or racially diverse,” a figure that the company notes won recognition from a women’s advocacy group. The private prison company’s board includes Donna Alvarado, a former Reagan administration official, and Thurgood Marshall Jr., the son of the former Supreme Court justice.

“For-profit incarceration is the antithesis of social responsibility,” said Libal. “They’ve made profits on the back of incarceration at record numbers while contributing millions of dollars in campaign contributions to ensure their interests are met.”

“If your board is diverse, it doesn’t matter what you’re selling, right?” he added. “If you have enough women on the board of Blackwater, that doesn’t make mercenary companies a positive influence on the world.”

“Greenwashing Is a Feature, Not a Bug”

Fulfilling diversity goals is a highly visible way to offset lower scores in other areas. Defense contractors, fossil fuel companies, banks, and pharmaceutical giants that annually hike the prices of lifesaving drugs have all used diversity metrics to earn placement as socially responsible companies, eligible for placement in lucrative ESG funds. And according to a review by The Intercept, several of the corporations commonly included in ESGs have recently been under investigation or scrutiny, engaging in business practices that few would call socially responsible.

Eli Lilly and Co., the pharmaceutical company, is facing multiple regulatory and legal battles over its practice of hiking the price of insulin. The company raised the price of its Humalog line of insulin products by 1,219 percent since it launched. The high prevalence of diabetes among nonwhite Americans has placed the rising costs of insulin disproportionately on members of racial minority groups, a dynamic that some public health researchers argue amounts to a form of structural racism.

But the disparate impact of drug pricing dynamics are not measured by ESG scores. Instead, the Eli Lilly report notes that the company promotes diversity through a variety of measures, such as DEI training and employee resource groups that sponsor events such as the Lunar New Year Gala.

Those efforts are among the qualifications used to include Eli Lilly prominently in multiple ESG exchange-traded funds. Eli Lilly is the second-largest holding of a BlackRock fund marketed as focused on promoting companies that excel in the fields of diversity and inclusion.

Just Capital, a not-for-profit group that provides ESG rankings, scores Amazon as an industry leader and a three-time winner of its America’s Most Just Companies award. Despite an aggressive anti-union campaign against its warehouse workers in Alabama and New York that has garnered international condemnation and wide-ranging complaints about working conditions, the Seattle-based company has a mixed record in the category of labor practices. But the score is boosted by Amazon’s “diversity, equity, and inclusion” policies and the total number of jobs the company has created — two areas in which Just Capital ranks Amazon as the best company in America.

“I think it’s smoke and mirrors. From a social, from a labor perspective, it’s not a good company. That’s like rating the Triangle Shirtwaist Co. a model employer in New York,” said Seth Goldstein, an attorney for the Amazon Labor Union, which represents warehouse workers who won an upset victory to form the company’s first labor union.

Just Capital — whose board includes HuffPost founder Arianna Huffington and Marc Morial, the president of the National Urban League — partners with Goldman Sachs to promote a special ESG fund that utilizes the organization’s social responsibility analytics. The third-largest holding for the fund is Amazon.

In response to an inquiry from The Intercept, Just Capital said that Amazon was scored on a number of factors. “We find that, like many other companies, Amazon is both a leader and a laggard relative to its peers across all of the individual stakeholder categories that we measure, from communities to environment to workers,” wrote Martin Whittaker, chief executive of Just Capital, in a statement to The Intercept.

PepsiCo Inc. and Coca-Cola Co., for instance, routinely score well on ESG rankings through relatively low greenhouse gas emissions, while delivering a core product that is fueling a crisis of diabetes, obesity, and heart disease, noted Hans Taparia, an associate professor also at NYU’s Stern School of Business, in an article for the Stanford Social Innovation Review. Alphabet, Amazon, and Facebook are also among the largest holdings of ESG funds but engage in a variety of monopoly, surveillance advertising practices and provide a core product that has fueled mental health issues among users. They all tout DEI and diversity-related measures in the glossy ESG reports that are submitted to fund managers.

“If a company’s core business model does so much harm,” wrote Taparia, “the cover-up through ‘good behavior’ on other parameters shouldn’t be so easy.”

Exxon Mobil Corp., one of the largest oil and gas companies in the world, has been cited as a prime example of an ESG victory, after the company added board members viewed as more favorable to action on climate change last year in response to pressure from activist investors and ESG-minded asset managers.

But there is still little evidence that ExxonMobil has changed any core fossil fuel-related business practices. The oil giant has massively increased spending on green-related marketing, and the word “climate” now appears all over its corporate reports. The company has sold off some assets that will be developed by other companies.

Calls for decarbonization, once central in the ESG movement, can also be offset by racial metrics.

Damodaran and his NYU colleagues have chronicled many of the inconsistencies and the subjective nature of ESG rankings. As oil majors sell off carbon-intensive oil and gas assets in order to comply with ESG fund objectives, Damodaran noted, the same assets are being purchased by private equity firms that are far less accountable, a shift in hands that he argues nullifies any greenhouse gas benefit from the campaign.

“So basically, here’s what you accomplished,” said Damodaran. “You took the reserves out of a company where you had a semblance of prudent strategy in process and put it in the hands of the least scrupulous people on the face of the Earth. And if you declared this to be a victory, I’d hate to see what your defeat looks like.”

The calls for decarbonization, once central in the ESG movement, can also be offset by racial metrics. ESG rankings maintained by the S&P 500 now include ExxonMobil but exclude electric car marker Tesla Inc. One of the reasons? Racial discrimination charges lodged against Tesla, a dynamic bitterly highlighted by Tesla chief executive Elon Musk on Twitter. Many of the charges, including a class-action lawsuit, are still making their way through court.

Researchers have also found that companies selectively omit certain suppliers and business practices in order to artificially report low carbon emissions and thereby gain higher ESG scores.

One of the most revealing reports came from Bloomberg News, which found that one of the largest ESG ranking companies, MSCI Inc., which BlackRock uses to market “sustainable” stocks and bonds, provided year-to-year upgraded rankings to companies that increased levels of carbon emissions.

In the case of McDonald’s Corp., MSCI provided an upgraded ESG ranking despite the fact that the company produced an increase of 7 percent in global emissions over four years. The ratings agency made the determination because the climate crisis did not pose a special risk or “opportunity” for the company.

The MSCI rankings for climate change score corporations over the possibility of climate regulations and whether restrictions on carbon emissions could harm future profits. In other words, when anti-regulation Republicans take office, the environmental scores of fossil fuel companies improve.

When MSCI gave positive “water stress” scores, the rating had no bearing on pollution or discharges into local water systems. Rather, the scores were awarded based on whether chemical companies had enough water to sustain their factories — an inversion of the very idea of environmentalism that reporters labeled as blatant doublespeak.

“This is exactly what gamification looks like: You create the rules of the game, I’ll find a way to play it,” said Damodaran. “A lot of ESG advocates say ESG would work except for the greenwashing. And my response is, greenwashing is a feature, not a bug. It’s exactly what you get when you create something like ESG.”

High-Minded Rhetoric, Even Higher Fees

Three weeks after the George Floyd protests began in 2020, Marvin Owens, then the senior director for economic programs at the NAACP, appeared on CNBC to tout an ESG-style fund on diversity branded with the NAACP.

“The problem that has existed for ESG is that the ‘S’ has been very difficult to define, and that’s why an organization like the NAACP, with its 111-year history of being advocates for African Americans in this country, is the right kind of organization to partner on this work,” said Owens.

The ETF, Owens told CNBC, is “the next evolution in our corporate advocacy work around closing the wealth gap for African Americans in this country.” The Minority Empowerment ETF website features the logo of the NAACP and iconic images from civil rights history.

Owens noted that the fund used a variety of diversity metrics, reflecting the NAACP’s scorecards on corporations, to invest in companies that make “commitments, public commitments, to standing against racial discrimination.”

Two years later, the NAACP ETF’s largest holdings include Amazon, Tesla, Meta Platforms Inc., Johnson & Johnson, Microsoft Corp., JPMorgan Chase & Co., and Nvidia Corp. The holdings are fairly similar to many large- and mid-cap ETFs, such as the Vanguard Total Stock Market Index Fund, or VTI, which has the same seven companies among its largest holdings.

The difference, however, is the fee structure. The Minority Empowerment ETF has a fee of 0.49 percent compared with the VTI fee of 0.03 percent, making the NAACP ETF 16 times more expensive for investors. Impact Shares, the plan sponsor that operates the Minority Empowerment ETF, in addition to other thematic ETFs around sustainability and women’s empowerment, says that the excess profits after expense fees are donated back to the NAACP, though it has not made enough fees to transfer any funds to the NAACP yet.

Impact Shares has lobbied the federal government to allow retirement plans to be invested with ESG funds. The investment firm wrote to regulators “on behalf of Impact Shares and our advocacy partners including the NAACP.”

Asked how the ETF fund has impacted racial justice issues, Ethan Powell, the chief executive of Impact Shares, gave Amazon credit for permitting its workers to vote on a union. Amazon, he claimed, engaged in a “significant shift in company policy” by allowing workers at its Alabama warehouse “the opportunity to vote on unionization” this year.

Labor officials, however, contend that Amazon spent millions of dollars on efforts to derail the union vote and engaged in a campaign of intimidation and surveillance against workers suspected of sympathizing with the union — and that the unionization at Amazon was in spite of the company’s efforts, not because of them.

LGBTQ Loyalty Holdings Inc., a company led in part by former Massachusetts Rep. Barney Frank, launched the LGBTQ + ESG100 ETF, which invested in large-cap public companies that “demonstrated a commitment to LGBTQ diversity and inclusion.” The fund, which wound down earlier this year, had an even higher fee structure of 0.75 percent.

Despite the fact that the ESGs largely mirror traditional ETFs, a higher fee structure, typically benefiting investment managers, is common across the board. An analysis from the Wall Street Journal found that ESG funds have 43 percent higher fees than widely popular standard index funds.

Fancy, the BlackRock social responsibility CIO turned critic, has argued repeatedly that many ESG funds are virtually identical to existing mutual funds, rebranded as “green” with higher fees. There are almost no discernible differences other than marketing, he has said in a series of confessional essays about the nature of ESG.

The notion of investment funds that promote social change without any of the guilt of profiting from capitalism can be alluring. Betterment, a millennial-focused “robo-advisor” that markets wealth-building strategies, has sponsored Facebook ads promising racial justice-minded investing. Betterment steers consumers to products such as the NAACP ETF without warning of the high fees or an explanation that many of the holdings are simply traditional large companies that investors would find in ordinary funds.

Asset managers have even worked with public relations firms to co-opt public opinion around social justice movements into inflows of cash to ESG funds. In 2017, at the height of the #MeToo movement, State Street worked with advertising agency McCann New York to create the “Fearless Girl” campaign, which featured a statue of a young woman, with her arms planted defiantly on her hips, that was placed in front of the bronze Charging Bull outside the New York Stock Exchange.

The corporate beneficiaries of the fund might come as a surprise to retail investors who thought they were supporting the political goals of #MeToo.

The wildly successful ad campaign, launched the day after International Women’s Day, was designed to advertise State Street’s women-focused SHE ETF, an ESG fund marketed as a vehicle to promote companies with gender diversity on corporate boards. But the corporate beneficiaries of the fund might come as a surprise to retail investors who thought they were supporting the political goals of #MeToo or feminism more broadly. The current SHE ETF holdings include weapons maker Northrop Grumman Corp., fracking giant Pioneer Natural Resources Co., and health insurer UnitedHealth Group Inc.

State Street and other fund managers have boasted about the growth of ESG funds as a cash cow. Last December, Gary Shedlin, the chief financial officer at BlackRock, appeared at a conference hosted by Goldman Sachs at the Conrad Hotel in New York to tout the growth of the firm’s ESG business. BlackRock ESG-related products, he said, had generated over 20 percent new fee growth. In January, BlackRock’s ESG funds reportedly surged to over $508 billion in managed assets, more than double the previous year.

It’s not just fund managers that are poised to gain from the influx of money into ESG. The trend has been a job creator for accountants, analysts, and other specialty consultants. MSCI, the largest data provider for ESG funds, disclosed that revenue from its ESG ratings business jumped to $166 million in 2021 from $90 million in 2019.

Both former attorneys general of the Obama administration are now serving as consultants to companies hoping to burnish their credentials as racially progressive. Eric Holder, now with the law firm Covington & Burling, was tapped by Citigroup to conduct its racial equity audit, to review its efforts to close the racial wealth gap. In April, Amazon announced that Loretta Lynch, a partner with Paul, Weiss, Rifkind, Wharton & Garrison, will work for the company to produce a similar report.

And Preet Bharara, the former U.S. attorney for the Southern District of New York, an Obama administration prosecutor turned vocal Trump critic, this month announced his move to become a partner at the law firm WilmerHale. According to reports, he will focus on advising companies on ESG. “Simple-minded criticism of this issue fails to appreciate its complexity and its emerging importance,” Bharara told the New York Times.

ESG investing has been an attractive proposition for investors who consider themselves to be civic-minded and want to use market logic to make change. But as The Intercept’s review shows, diversity audits and other superficial measures are simply being used to sell investors on the same old funds.

The implication is explicit. Moore & Van Allen, the firm that conducted the racial equity audit on behalf of CoreCivic, noted in an article this year that such audits serve multiple goals, including increased profits and a competitive advantage in a market. The public relations benefits are also clear, the law firm argued. The racial equity audits can lead to a “positive impact on reputation for companies,” partners at the firm wrote.

Placing selective pressure on a few companies won’t work, Damodaran argued, because businesses that voluntarily retreat from one area will be swiftly replaced by less accountable players, such as private equity or hedge funds. If advocates seek better business practices, he said, they should change the law to force compliance instead.

“These are decisions we should be making as voters, as regulators pushing for change. Instead, we’ve passed on this responsibility to CEOs and fund managers.”

“These are decisions we should be making as voters, as regulators pushing for change,” said Damodaran. “Instead, we’ve passed on this responsibility to CEOs and fund managers to make these decisions for us.”

“The U.S. political sphere is putting optics over substance,” noted Fancy, the former BlackRock executive. “We could do some version of reparations, like a serious investment in Black communities and education and social welfare, but that’s going to cost a lot of money.” Instead, he said, high-profile Black Americans are elevated onto corporate boards to “create a marketing narrative” that helps a small number of elites without substantive change for the public.

One chief executive of a publicly traded company, who asked for anonymity while speaking with The Intercept, said he recently paid around $20,000 to social responsibility consultants in order to produce a special report to submit to ratings agencies. The ESG professionals created a document that dazzled with progress on a number of environmental and racial grounds. The self-reported data isn’t checked by anyone, he noted with a shrug.

The chief executive said that he appears white to most people, but he is technically a quarter nonwhite, making him, for the purposes of ESG, a “diverse” CEO — a dynamic he found absurd.

“It’s kind of like the one-drop rule. I’m diverse for the purpose of these rules, they really make no sense,” said the executive, who wondered how asset managers and investors can demand compliance on rules around racial identity when race is socially constructed, not a biological reality.

“We didn’t change any business practices. It’s a charade, yet no one questions this stuff,” he added. “It sounds good, but it doesn’t do anything.”

The post Private Prisons Are a Socially Responsible Investment, According to Bizarre Wall Street Measures appeared first on The Intercept.

“I figured this group would appreciate as much as any that you know, when you’ve got a lawyer in your facility, you usually don’t want them to come in looking all lawyered up,” said Merrell, a management labor attorney at the firm Ogletree Deakins, a South Carolina-based law firm that specializes in closely advising businesses on how to counter union organizing drives. “I’m trying to be somewhat incognito.”

The group had gathered to speak candidly about creative new ways in which employers can subtly counter union organizing. There’s a “huge uptick in activity,” Merrell began, not just at name brand companies like Starbucks, but union drives “even in the Carolinas where [I am] based, we’re seeing a lot of an uptick of activity in some kind of unexpected places, unexpected industries, not the industries that you typically think of as being your unionized industries.”

In the “heyday” for union organizing, he continued, “we just thought of them as seeking better wages and working conditions for their workers.” Now, workers were agitating for respect and in opposition to “harassment, bigotry, discrimination and retaliation,” said Merrell, quoting a mission statement from the Alphabet Workers Union, which secured bargaining rights for a small group of Google Fiber workers in Kansas City, Missouri, in March.

Corporations, advised Merrell, should be ready to pivot and respond quickly to these “social justice-driven” campaigns.

Across the country, particularly in highly educated workplaces, employee activism has centered on demands that go beyond the bread and butter of higher salaries and better retirement benefits. YouTube and Facebook employees have demanded that management take a greater role in censoring content viewed as sexist or racist. Amazon corporate headquarters workers this month staged a protest to demand that the company restrict the sales of books that are perceived by some activist groups as anti-trans. The union that represents workers at NPR has demanded that the media outlet develop demographic tools to track the race and gender of every source that appears in stories.

Workers now have a “heightened focus on the optics” of race, continued Merrell, so management should do more to match the demographics of the workforce. “Diversity, Equity and Inclusion” initiatives, social consciousness raising, and constant surveys were all on the table as tools to monitor employee sentiment.

Merrell’s presentation was just one in a two-day April conference that showcased the changing face of union-busting. Over a dozen other presenters who work in “union avoidance” gave talks during the virtual conference, sponsored by a group called CUE, on the latest trends in organizing, strike-breaking, and how to get ahead of changes in the law and political environment that could provide an edge to the labor movement. They included representatives from Kellogg’s, John Deere, Five Below, Lowe’s, and the U.S. Chamber of Commerce, as well as a consultant hired by Amazon to oppose the warehouse worker union drives.

In the new environment, businesses facing worker uprisings are attempting to co-opt the language of social justice movements and embrace trends around self-growth and positive lifestyles to counter demands for unionization — a far cry from the old days of union prevention, a history that featured employers routinely threatening workers with private guards and violent clashes on the picket lines.

Businesses facing worker uprisings are attempting to co-opt the language of social justice movements and embrace trends around self-growth and positive lifestyles to counter demands for unionization.

Leny Riebli, the vice president of human resources at Ross Stores, noted that given “what’s happening at Amazon and Starbucks,” her company had retooled its training to remain union-free. “We really had to redouble our efforts,” said Riebli. The company, said Riebli, closely monitors employee concerns that might spill over into support for unionization, so managers have been trained not only to spot potential “card check” organizing, but also listen for issues around safety, scheduling, and respect in the workplace.

“This relates to our diversity, equality and inclusion efforts,” explained Riebli, noting that the company sought managers who can be approachable to an array of worker issues.

Virtually none of the presenters identified explicitly as anti-union agents. Many described themselves or had professional biographies emphasizing their role as DEI experts, developers of “human capital,” and champions of workplace “belonging.” The industry has undergone somewhat of a rebranding, with many labor relations executives now identifying as “people experts” and diversity executives.

Even the host of the conference was camouflaged. The conference was organized by a group called CUE, which bills itself publicly as simply “a community for positive employee relations.” But that sunny image belies its true agenda: Founded in 1977 by the National Association of Manufacturers, as part of a sweeping crusade against organized labor, CUE is formally known as the “Council for a Union-Free Environment.” The organization provides research and training for the union suppression tactics, an estimated $340-million-per-year cottage industry of lawyers and consultants who specialize in assisting corporations with mitigating the threat of organized labor.

But there was no doubt that they understood how controversial their work can be. Ken Hurley, the vice president of Kellogg’s Co. for human resources and labor relations who presided over the effort last year to replace striking cereal workers, said he did not want participants to share his slide deck, for fear of leaks. And, after The Intercept published his remarks in which he described the union as “behaving more like terrorists than partners,” Hurley left Kellogg’s.

So-called union avoidance consultants, also known as persuaders, work in a specialty profession that has been honed in recent decades. They are hired by corporations to train managers to spot union sympathies or to lead “captive audience” lectures — where attendance is mandatory — to pressure workers against voting for a union.

These seminars can involve threats of retaliation, warnings that a union will force the company to close down, and claims that union dues will negate any benefit of a union contract. But the most important aspect of these meetings, experts say, can be collecting information to identify union supporters within a workplace so that they may be sidelined or fired before they gain influence with their co-workers.

The industry has undergone somewhat of a rebranding, with many labor relations executives now identifying as “people experts” and diversity executives.

The persuader industry has evolved to match the cultural trends among many workers. Jason Greer, who has led a diversity seminar at CUE in the past, embodies the evolution of the anti-union industry to match cultural trends among workers. Greer, founder of the eponymous business Greer Consulting, is a persuader who helps companies fend off unionization drives, but you wouldn’t necessarily know it from talking to him.

“I do leadership coaching. I do diversity management training,” said Greer. “I’m known as the employee whisperer within my industry.”

Major corporations are at once under pressure to appear sensitive to employees from marginalized groups and eager to blunt unionization efforts that would hurt their bottom line. Thanks to consultants like Greer and others, these companies can sometimes kill two birds with one stone by wrapping anti-union talking points in a patina of racial sensitivity and commitment to diversity; Greer’s company advertises “labor relations” alongside “diversity training.”

Over the last year, Greer and his team have worked for B&H Photo, Keurig Dr Pepper, Studio in a School, and Blues City Brewery, and are paid as much as $2,000 per day to pressure workers not to join a labor union. B&H, notably, settled a federal racial discrimination lawsuit in 2017, and agreed to paying $3.2 million in back pay to over 1,300 individuals.

Employees, said Greer, fundamentally want respect and dignity on the job. Listening to worker demands, he explained, can prevent workers from drifting toward a third party, like a labor union. In some cases, that means providing seminars on leadership and understanding, or creating employee resource groups that provide special recognition to marginalized communities.

“People will work for money, but they will die for respect and die for recognition,” continued Greer. “If your employees are talking about wanting diversity and inclusion practices, don’t shut your eyes and, you know, shut your ears to that.”

The Labor Pros, a Florida-based firm that runs anti-union campaigns across the country, prominently presents a diverse team that conducts diversity training adjacent to interventions to remove the “union threat.”

Nekeya Nunn, the chief executive officer of the Labor Pros, has adopted terminology from left-wing, activist spaces. “I’m a proponent of listening, heart-led leaders, people who make decisions on how they would want somebody else to treat them,” said Nunn, in an interview with The Intercept.

Nunn echoed Merrell’s argument, that employees care as much about dignity as wages and benefits. “People unionize against bad managers, not bad companies,” she said. Programs that help people from different demographics and different nationalities integrate are simply part of a positive workplace culture, she continued. “People work for companies that make them feel valued and included, so if that’s a tactic to not have a union, then so be it.”

A contract obtained by The Intercept shows that the Labor Pros provided a menu of options to Hilton Hotels last year on options for persuading workers against joining a union. The firm offered up to four consultants to speak to 80 employees for four days at a cost of $43,120, plus per diem.

Danine Clay and Byron Clay of the firm Diverse Workforce Consultants are among the union avoidance professionals who have worked on recent high-profile campaigns to persuade workers against joining a union at Hershey’s and at Mission Hospital in North Carolina, according to disclosures. Their firm touts its “ability to empower management with employee selection, retention, diversity training and skills, and union avoidance tools and strategies are unmatched.”

Danine Clay was listed on disclosure forms as a consultant for Amazon engaged in persuading warehouse workers not to join a union. Over the phone, she said the disclosure form was incorrect but declined to comment further.

“There’s kind of a jiujitsu, to get employees thinking about racial justice issues, at least superficially, as a way to deflect labor and collective bargaining,” said Michael C. Duff, a law professor at the University of Wyoming. Duff attended law school after union organizing cost him his job working for an airline. He understands why the diversity, equity, and inclusion field has become an asset for companies hoping to skirt unionization — particularly at a time when employee interest in both is rising rapidly.

“Labor consultant folks converting into DEI folks,” added Duff. “It’s really a wonderful kind of psyops, right, because these people are supposed to be close to employees.”

The approach is on display in some of the most high-profile union battles going on now. One example is Starbucks, which has faced growing unionization pressure as over 100 stores have voted to join a union. The company, in response, launched an anti-union website earlier this year. Among the reasons not to join a union? The Starbucks website says the firm already provides an “inclusive” environment and maintains a strong commitment to diverse hiring practices.

So far, the approach has mostly backfired for the company. “Starbucks claims to be a progressive company, and they’re using this social justice language, but people see past that,” said Joseph Thompson, a student barista who organized two Starbucks locations in Santa Cruz, California.

Thompson has corresponded with other baristas seeking to form unions around the country as far away as Idaho. Many have voiced frustration at the company’s union-busting tactics in contrast to its purported values, he said.

Despite the rosy image of inclusiveness and activism touted in Starbucks press releases, the company has been accused of over 200 violations of federal labor laws, and over 20 baristas say they have been illegally fired in retaliation for attempting to form a union.

“It’s a brutal anti-union campaign, but also one that tries to appeal to the sort of progressive sensibilities of the kinds of people who work at Starbucks,” said John Logan, professor and director of labor and employment studies at San Francisco State University.

Effective or not, it’s becoming a standard playbook. Princeton University, in a page outlining “alternatives to unionizing” for graduate students, notes that the school already welcomes input on all areas of university life, such as professional development and diversity and inclusion. Princeton University has so far prevailed: The graduate student union has not held a unionization vote, there is no recognition to bargain with the graduate students, and they do not have a contract.

When workers at vegan food company No Evil Foods, which makes imitation meat products sold at Whole Foods and other upscale groceries, held captive audience anti-union seminars, the company warned workers about the “old white guys” in union leadership and compared union dues to taxpayers funding President Donald Trump’s golf junkets.

In other records leaked out of the No Evil Foods seminars, workers were warned that unions were hotbeds of sexism and sexual harassment, and did not share the vegan food manufacturer’s progressive values. The union drive at the firm ultimately failed.

“Corporations are trying to hijack the language of liberation as a way to prevent workers from having a voice at the table and a say in their jobs.”

Critics say that many corporations merely channel concerns around racial injustice into a reputation-laundering strategy, one that can serve the bottom line of keeping workers in check. “For lack of a better word, we’re in this woke moment,” said Wes McEnany, a former organizer with CODE-CWA, a project of the Communication Workers of America to unionize the tech industry. “Corporations are trying to hijack the language of liberation as a way to prevent workers from having a voice at the table and a say in their jobs.”

McEnany noted that when he worked on a campaign to organize workers at Mapbox, a technology firm that provides custom online maps, management responded with accusations of bigotry, claiming efforts to prevent the offshoring of jobs reeked of “xenophobia.”

Medium, the publishing website launched by Twitter co-founder Ev Williams, countered a union organizing drive with a promise to increase spending on diversity and inclusion efforts, according to McEnany. After the union vote failed by one vote, Medium liquidated its primary editorial division.

Such left-leaning language and promises were on display in the recent organizing drive at REI, the outdoor clothing and equipment retailer. The company this year posted an internal podcast featuring its chief executive, Eric Artz, and the company’s chief diversity and social impact officer, Wilma Wallace, discussing why “REI doesn’t think unionization is the right thing for the co-op or for the employees.”

Much of the conversation centered on claims that a union would hamper the company’s ability to “listen and communicate directly with our employees” and reduce the company’s ability to be flexible in resolving workplace concerns. Such arguments are routine in most organizations facing a union vote.

But what stood out was the language of social justice that filled the discussion. Wallace began the talk by stating her preferred pronouns and a land acknowledgement to honor the “traditional lands of the Ohlone people.” Artz, while arguing against unionization, peppered his remarks with comments about how REI intends to maintain its focus on “inclusion” and “racial equity.”

Finally, Dollar General is perhaps one of the most glaring retailers facing criticism for its labor practices. The company, in its latest annual disclosure, reported that its median annual salary for workers was $17,773. Workers have cited broken air conditioners, mold in the break rooms, and little safety precautions for employees who face constant robberies and violent incidents within stores. The widespread problems have led to a worker revolt, including store clerks posting TikTok videos of unsanitary work environments and grossly understaffed stores, and some moving toward demands for a labor union to negotiate better conditions.

Dollar General has responded with an aggressive anti-union effort that is overseen by Kathy Reardon, the company’s chief people officer. In public, Reardon is touted for leading the discount retailer’s “ongoing diversity and inclusion journey” and for creating an “allyship guide that helps employees play an active role in creating a more inclusive environment.”

Records show that Reardon is involved in the hiring of $2,700-per day consultants who have helped the firm defeat a push for a labor union at its Connecticut locations.

One of the most insidious tactics have been the use of supposed employee resource groups, also known as affinity groups or ERGs, to undermine labor activism. Many companies offer specific ERGs for Asian, Black, Latino, or LGBTQ+ individuals, among other identity-based suborganizations as part of a larger diversity and inclusion program.

The management-sanctioned groups are attempts to create safe spaces for historically marginalized identities to voice shared concerns and create a sense of community within the workplace. According to a study published last year by McKinsey & Co. that surveyed 423 organizations employing 12 million people, close to 35 percent of firms have added or expanded ERGs since 2020.

Supporters of these initiatives say these groups provide a useful channel to improve communications and spotlight company practices that might be shaped by racial biases or lack of sensitivity to minority cultures.

These lofty goals, however, at times run parallel to or even in conjunction with anti-union measures at some firms. IRI Consultants, a union avoidance firm, noted in one publication that unions in some industries, particularly high tech, have drifted toward capitalizing on demands that employers do a better job of hiring diverse talent. One way to “union-proof your business,” IRI claims, is to develop “effective leadership, consistent employee training, and diversity and inclusion (D&I) initiatives that address challenges like unconscious bias in the human resources (HR) process.”

“When people feel powerless, resentment festers until someone comes along, like a union representative saying, ‘You have a right to be heard. We can help you get a voice in your workplace, and your employer will have to listen,’” IRI noted in another publication.

In response, IRI suggests the creation of ERGs within a workplace. “If you don’t give today’s employees a voice, the workforce is likely to have a low engagement level, and the union is going to see an opportunity,” warns IRI.

ERGs are becoming more and more common. CUE, along with Littler Mendelson and Jackson Lewis, two of the largest union suppression law firms, have encouraged them.

That’s because ERGs can provide a useful corporate alternative to unions that places management in control. The tech reporting site Protocol noted that when tech firms such as Mapbox faced a union organizing drive, the company kicked off DEI-related efforts, including ERGs, in order to allay worker concerns.

“ERGs kind of passively work against the idea of a union in that they’re a way for you to kind of spend your energy without it turning into anything,” one tech worker told the media outlet.

When Google, notably, hired IRI Consultants to suppress union activism within the tech giant, the decision, recent court documents show, was made by the then-chief diversity officer, Danielle Brown, who previously led the firm’s ERG programs.

“The ERG is essentially the company’s union. … It’s more about surveillance, about keeping an eye on workers.”

“The ERG is essentially the company’s union. It’s engaged in this way: ‘Oh, you’re from a marginalized identity group, you have a place to speak,’” said McEnany, the organizer. “But if you talk to a lot of workers interested in real change, they see this as a way to throw money for a party. It’s more about surveillance, about keeping an eye on workers.”

In the late 19th and early 20th century, in the early days of the U.S. labor movement, corporations facing labor activism would often create fake union organizations controlled by management. These so-called company unions would provide a false sense of worker empowerment, with some fringe benefits like a pool hall or recreation center, while keeping wage and benefit decisions controlled by corporate leaders.

The National Labor Relations Act of 1935, also known as the Wagner Act, which enshrined federal labor union rights, expressly outlawed the formation of company unions. Corporations cannot form worker organizations that claim to negotiate on behalf of employees.

“Company unions were a major concern of Sen. [Robert F.] Wagner because it’s very easy for a working person to mistake these groups as third parties,” said Duff, the University of Wyoming law professor.

The movement to create ERGs at a time when workers demand better conditions could be a violation of labor law, Duff argued.

“It’s a distraction. The idea is, ‘We’re going to siphon off energy that might be devoted to creating your own arms-length groups that would be adversarial,’” he added.

Nunn, of the Labor Pros, agreed that operating ERGs in some ways could run in violation of the National Labor Relations Act but questioned the wisdom of such prohibitions. “So workers get what they want, companies could not have to deal with a union if they didn’t want, and employees would still feel they’re fairly compensated and they work in a just environment that speaks up on social justice issues. It would make unions obsolete,” said Nunn.

“If a company is willing to create those things outside of the union, outside the labor union, what’s the problem with that?” she asked.

The success or failure of a union election is almost always determined by knowledge of the workforce and an intimate understanding of the values and beliefs of each employee. The union suppression industry has made workforce intelligence gathering a key element of its trade.

In the ’70s and ’80s, industrial psychologist Charles Hughes trained over 27,000 managers and supervisors to “make unions unnecessary.” One of his methods was to promote the use of surveys to collect information about workers. Employers signed up by the hundreds to attend Hughes’s talks, including a seminar titled, “Attitude Survey Techniques for Measuring Union Sentiments.” CUE — which hosted the conference — helped streamline the emerging industry of management consultants, industrial psychologists, and law firms that helped turn the tide against the labor movement, which has declined precipitously since the ’70s.

“It’s intimate to talk about race and identity,” said Duff. “That creates a vulnerability, and to have consultants come in and say, ‘Hey, look, I understand the discrimination you’ve gone through, you can open up to me,’ that can get you a lot of valuable intelligence.”

Such vulnerabilities can be key insights during an organizing drive. In 2011, Pratt Logistics opened a new plant in Pennsylvania. The company brought in a man who only identified himself as an efficiency expert named “Jay.” Jay went around conducting one-on-one interviews with workers, asking them about what problems they faced, their values, and concerns.

Later, when truckers and warehouse workers at Pratt began steps to form a union at the new plant, the company instantly fired union sympathizers. It wasn’t until later that they found out Jay’s real identity: Jason Greer, the union suppression consultant, who had been hired explicitly to identify potential union supporters.

When the Teamsters union later brought the case to court, arguing illegal retaliation and unfair labor practices, labor attorneys noted that Greer on his website explicitly advertised himself as a “union buster” who “wakes up every day with one goal in mind, and that’s to keep unions from taking over and ruining businesses that my friends and my clients have worked their entire lives to build.”

Those words are gone from Greer’s website. Now he lists himself as a diversity consultant.

The post Breaking Unions With the Language of Diversity and Social Justice appeared first on The Intercept.

Sebastian praised the Looking Glass Portrait as “freaking awesome,” especially considering the progress the company had made since Sebastian had toured their office two years earlier, after $2.5 million in money from a Kickstarter campaign. “For the price, for the amount of development work, and how niche this thing is, it honestly looks like a pretty compelling value for the right customer,” marveled Sebastian. “Which raises the questions, who is that exactly?”

Sebastian suggested the product would be a perfect fit for those who wanted to “flex” with a novelty piece of artwork or a designer seeking to preview their own work.

But Looking Glass Factory’s other customers went unmentioned in any of the splashy coverage of the new device: the Central Intelligence Agency and the Department of Defense. The military was interested in holographic technology, but the price was a potential obstacle. “The high cost of assembling holographic display devices are restraining market growth,” noted International Defense Security & Technology, a trade publication, last year. One of the growing players in the market, IDST added, is Looking Glass Factory.

Looking Glass received $2.54 million of “technology development” funding from In-Q-Tel, the venture capital arm of the CIA, from April 2020 to March 2021 and a $50,000 Small Business Innovation Research award from the U.S. Air Force in November 2021 to “revolutionize 3D/virtual reality visualization.”

With a brick and black metal facade, Looking Glass looks, from the outside, like another art studio in New York City, but its connection to the intelligence community is not disclosed on its website or public facing materials. Looking Glass Factory did not respond — in person, by phone, or by email — to requests for comment. In-Q-Tel also did not respond to a request for comment.

Looking Glass received $2.54 million of “technology development” funding from the venture capital arm of the CIA.

Across the various branches of the military and intelligence community, contract records show a rush to jump on holographic display technology, augmented reality, and virtual reality display systems as the latest trend. According to its advocates, augmented reality goggles will allow soldiers to see through buildings and mountains to visualize enemies on the other side of the battlefield, or even serve as the primary interface for pilots of unmanned drones, tanks, or underwater vehicles.

Critics argue that the technology isn’t quite ready for prime time, and that the urgency to adopt it reflects the Pentagon’s penchant for high-priced, high-tech contracts based on the latest fad in warfighting.

“It’s kind of the culture,” said Dan Grazier, a former Marine and now a fellow at the nonprofit Project on Government Oversight, investigating military waste and abuse. “The Pentagon always wants to find a technological solution, particularly one that can generate contracts and subcontracts spread all over the country.”

“A lot of these fancy electronic systems end up being more of a distraction than they are actually useful in helping soldiers do their jobs,” added Grazier.

Eight years ago, the 2014 edition of IQT Quarterly, the publication of In-Q-Tel, notes that we are still “far away from a true Star Trek Holodeck experience,” yet:

A perfect simulated reality that is indistinguishable from real life will ultimately take one of two forms: it will either manipulate real light and real matter, like the Star Trek Holodeck, or it will remove the “middleman” of wearable VR inputs and instead directly manipulate our perceptions through a machine-brain interface, like that envisioned in The Matrix. Between those perfect simulations and the current state of the art, we envision the emergence of hybrids, such as the manipulation of real light (holograms) combined with haptic gloves, or the direct manipulation of the brain’s sense of touch combined with VR/AR contact lenses, or many other such combinations involving other senses. Given where VR is now compared to just 10 years ago, and the historical pace of technological change since the Industrial Revolution, it’s astounding to consider how VR might continue to evolve. We think these “perfect systems” may emerge within the next two centuries, and that the current state of the art provides a strong foundation to build upon.

The rapid investments from government sources in augmented and virtual reality reflect the vision laid out eight years ago. Mojo Vision, a startup based in Saratoga, California, is developing an augmented reality contact lens using “tiny microLED” displays the size of a grain of sand to project images directly onto the retina. The company is backed financially by the Defense Advanced Research Projects Agency, or DARPA, a research and development arm of the Pentagon.

In 2018, In-Q-Tel backed a startup called Immersive Wisdom that provides communication and data sharing interfaces. “Allowing multiple users to be anywhere in the world, while still being connected via the same virtual space containing shared maps, video feeds, and real-time data, offers a significant new edge,” In-Q-Tel said in a statement at the time.

In-Q-Tel also invested in DigiLens, the producers of a low-cost holographic lens used for augmented and virtual reality glasses. Last year, the Air Force awarded $1.2 million in contracts to the company.

According to the new disclosure, In-Q-Tel also invested over $1.9 million in Dreamscape Immersive, a Los Angeles-based virtual reality company. Co-founded by former Disney executive Bruce Vaughn, the company provides story-based virtual reality experiences, including the VR-based “Men in Black” feature released in 2019. As previously reported by Forbes, former Raytheon executive Dave Wajsgras — who became a member of Dreamscape Immersive’s board — has said, “The US department of defense is aggressively increasing spending on synthetic digital training which prepares personnel for real-life situations.”

Military interest in holographic imaging, in particular, has grown rapidly in recent years. The IDST article reported that military planners in China and the U.S. have touted holographic technology to project images “to incite fear in soldiers on a battlefield.” Other uses involve the creation of three-dimensional maps of villages of specific buildings and to analyze blast forensics.

Perhaps no investment is as illustrative of the industry’s commitment to production despite potential red flags as the Defense Department’s flagship augmented reality project: the Army’s Integrated Visual Augmentation System, or IVAS, goggles. IVAS provides headsets to guide soldiers through unfamiliar territory, along with machine learning to instantly distinguish between friend or foe, and targeting systems for tracking vehicles and objects on the battlefield. (Investor presentations show the IVAS contract is also supported by Ultralife Corp., a battery provider, and Intevac, which produces night vision sensors and cameras for the defense industry.)

The Army has touted the system as a way to “fight, rehearse, and train” using “advanced eyewear that places simulated images in a Soldier’s view of real-world environments,” allowing soldiers to see through smoke or complete darkness.

The initial contract for the IVAS system, which is based on Microsoft’s HoloLens technology, was awarded to Microsoft and a number of other firms.

But the IVAS contract, which could one day cost upward of $22 billion, has faced chronic delays and failures. Last October, the Army pushed the official launch date to September 2022 for the product for operational fielding and testing.

The Defense Department’s 2021 annual report from its Director of Operational Test & Evaluation, or DOT&E, painted a sobering picture. According to the report, “Soldiers continue to lack confidence in their ability to complete the most essential warfighting functions effectively and safely while wearing the IVAS in all mission scenarios.” At worst, the goggles led to soldiers being unable to “distinguish enemy from friendly forces.”

At worst, the goggles led to soldiers being unable to “distinguish enemy from friendly forces.”

But all such damning details were — despite congressional appeal — redacted from the publicly available version of the DOT&E’s report through being labeled as “controlled unclassified information,” or CUI. And while the Department of Defense Office of Inspector General made headlines last month through a report based on DOT&E’s critique, the underlying details remained redacted.

The CUI version of the Defense Department’s testing report was only made public through a leak to the nonprofit Project on Government Oversight, where Grazier works. POGO’s primary reason for releasing the document was to help expose the failure of the F-35 program, but Grazier stated that he ultimately released the entire document in hopes of crowdsourcing the analysis of broader instances of fraud, waste, and abuse.

“If you can’t distinguish between a friendly troop and an enemy troop, then you’re going to have a very difficult time distinguishing a civilian,” noted Grazier. “If a soldier can’t identify friends or enemies with their vision system,” he added, “that tells me that system probably needs a lot more work or possibly needs to be scrapped altogether.”

Soon after Congress put $349 million of its IVAS funding on hold in March, Insider reported on a leaked Microsoft memo in which a manager wrote that the company “expect[s] soldier sentiment to continue to be negative as reliability improvements have been minimal from previous events.” HoloLens boss Alex Kipman reportedly described his team as “[s]o depressed, so demoralized, so broken.” The Wall Street Journal reported that roughly 100 Microsoft HoloLens employees left to work at Facebook parent company Meta Platforms Inc. in 2021.

In February, Secretary of the U.S. Air Force Christine Wormuth also poured cold water on the project, at an event for the Center for a New American Security, tempering expectations.

“Remember early satellite phones from the 1980s that wealthy people had in their cars?” said Wormuth during the event. “They were big and clunky and now we have iPhones. It took us some time to get there. The first iteration of IVAS may not be quite as streamlined as we want it to be ultimately, but it’s the alpha version, and we need to start there.”

The military, including soldiers at Fort Benning, have found some productive applications of the IVAS system. Rather than forming the basis of futuristic cyborg warriors, the HoloLens goggles have been an expensive thermal sensor for rapidly detecting soldier temperatures — as a way to screen Covid-19 cases.

In-Q-Tel has a history of working closely with companies that have commercial success providing consumer products while developing innovations with military applications. The investment fund, for instance, backed a skin care company with a line of popular beauty products that had created a method for removing biomarkers that could be used for intelligence purposes. AR and VR technology appears to follow the same track, where consumer products are helping fuel the advancement of innovations that can be one day used for the military.

Before founding Looking Glass Factory in 2014, their CEO, Shawn Frayne and then-CTO Alex Hornstein had each run separate pieces of the Ocean Invention Network, an interconnected group of inventor labs. Press coverage in early 2013 described the network as “an indie rock supergroup of the cleantech scene; Haddock Invention, which opened shop in 2006, is on lead guitar, while Mantis Shrimp Invention, opened in Manila (Philippines) by Alex Hornstein in 2012, hits the drums. The Solar Pocket Factory … is their hit single.”

Frayne and Hornstein had both completed bachelors of science at Massachusetts Institute of Technology in the early 2000s: Frayne in physics in 2003 and Hornstein in electrical engineering in 2007. Their third partner was Jordan McRae, who finished his B.S. in aerospace engineering at MIT in 2005 (and spent two years working for Lockheed Martin before joining the Ocean Invention Network as CTO of Humdinger Wind Energy under Frayne).

Frayne and Hornstein’s Haddock and Mantis Shrimp labs would collaborate on Solar Pocket Factory, a “coffee-table size machine that makes panels small enough to power pocket-size devices.” As reported by Fast Company, the effort raised $78,000 via Kickstarter in 2012 but by the end of 2013, Frayne and Hornstein had pivoted to purchasing solar panels from a factory in Dongguan, China, adding the ability to control them with a cellphone, then renting them out for $1.50 to $2 per week. They would partner with a utility company in the Philippines as part of a trial on top of 20 homes in the island of Alibijaban. (This last incarnation was called Tiny Pipes.)

While Frayne and Hornstein would move on from the Ocean Invention Network to focus on Looking Glass Factory’s holographic devices in 2014, McRae’s component of the network, Octo23, would continue on until 2017. Octo23 began with a mandate as broad as the Ocean Invention Network’s: “clean energy, clean water, ocean conservation, and robotics.” But it later focused on OCTOtalk, a “proprietary technology to reinvent the diving/snorkelling mask enabling recreational divers and snorkelers to talk underwater” — a product that McRae then repackaged for the military.

McRae’s Mobilus Labs, founded in 2017, produces bone conduction communication technology that would later be combined with Microsoft’s HoloLens 2 in Trimble’s XR10 hardhat and, reportedly, tested by the British Army.

Hornstein ultimately departed Looking Glass in February 2021 — his LinkedIn status remains “tbd” — and both Mobilus and Looking Glass were listed among Time magazine’s “Best Inventions of 2021.”

McRae did not immediately respond to a request for comment.

One of the loudest voices in the startup scene evangelizing the promise of augmented and virtual reality systems for modernizing the military is Palmer Luckey, who founded the technology startup Anduril Industries after Facebook bought his first company, Oculus VR.

During a Ronald Reagan Presidential Foundation and Institute interview in December titled “Into the Metaverse,” Luckey claimed Facebook’s rebranding to Meta resulted directly from the company’s 2014 acquisition of his virtual reality headset company. “Facebook paid a lot of money for Oculus — a few billion dollars — all the way back then because they saw that our technology was the key for unlocking the Metaverse,” said Luckey. “In a way, Oculus took over Facebook for the Meta rebranding,” he added.

Anduril has been promoting a relatively restrained approach to military adoption of augmented and virtual reality interfaces that emphasizes its usefulness for training. Its central product is Lattice, an artificial intelligence operating system. “I think soldiers are going to be superheroes who have the power of perfect omniscience over their area of operations, where they know where every enemy is, every friend is, every asset is,” Luckey exclaimed, during a 2018 speech.

Last year, in the Reagan Institute talk on defense issues, Luckey was brimming with excitement. “We’ve gotten some really big contracts with DoD including with the U.S. Air Force on the Advanced Battle Management System,” he said. “We’ve integrated our system as part of life fire exercises where we were tying together naval assets, air assets, ground assets, shooting cruise missiles out of the air with real gun systems on the ground — all command and controlled through a virtual reality interface.”

Just last week, Anduril executive David Goodrich posted on LinkedIn about the possible use of the company’s virtual reality headsets as part of its recent Underwater Autonomous Vehicle partnership with the Royal Australian Navy. The video that prominently plays on the company’s website suggests the use of virtual reality headsets for monitoring a fleet of its tube-launched Altius drones.

Anduril maintains a large team of lobbyists, spending roughly a million dollars a year influencing congressional budgets and Pentagon planners, and last year formed an advisory board filled with former top government officials. The board now boasts former CIA chief strategy officer Constantine Saab, retired Adm. Scott Swift, and Kevin McAleenan, President Donald Trump’s acting secretary of homeland security.

Luckey has received secretive Air Force contracts to develop next-generation artificial intelligence capabilities under the so-called Project Maven initiative, as The Intercept reported. Similar to Google — whose participation as a subcontractor on Maven was confirmed by the Pentagon — there is no known public procurement record of Anduril subcontracting on Maven. While it is unclear whether Anduril was serving as a prime or subcontractor, Google worked underneath Virginia-based staffing firm ECS Federal, which was named as the major Project Maven prime contractor in a heavily redacted report released by the Defense Department’s Office of Inspector General in January.

Anduril and Looking Glass share an early investor, Lux Capital co-founder Josh Wolfe. Wolfe has become a prominent advocate of Silicon Valley venture capital playing a more prominent role in the Department of Defense; he even recruited the former head of U.S. Special Operations Command, Tony “T2” Thomas, as a venture partner at the beginning of 2020.

Wolfe has periodically tweeted updates on the progress of Looking Glass’s holographic technology, using a “Star Wars” X-wing fighter as an example in February 2018. The Pentagon’s now-scrapped cloud computing initiative, JEDI, would be unveiled the following month and — according to reporting from ProPublica — the C3PO acronym had been blocked from use in the project.

4/ And the progress from this (Star Wars x-wing fighter) also from 3 years ago…https://t.co/3mTLN3ePxa

— Josh Wolfe (@wolfejosh) December 3, 2020

The post The Brooklyn Hologram Studio Receiving Millions From the CIA appeared first on The Intercept.