Doing Business With The Enemy http://www.cbsnews.com/stories/2004/01/22/60minutes/main595214.shtml
(CBS) Did it ever occur to you that when President Bush says, "Money is the lifeblood of terrorist operations," he's talking about your money -- and every other American's money?
Just about everyone with a 401(k) pension plan or mutual fund has money invested in companies that are doing business in so-called rogue states.
In other words, there are U.S. companies that are helping drive the economies of countries like Iran, Syria and Libya that have sponsored terrorists. Correspondent Lesley Stahl reports.
"The revenue that is generated from the work that these companies are doing, we believe, helps to underwrite and support terrorism,â says William Thompson, the New York City comptroller who oversees the $80 billion in pension funds for all city workers.
He says he wants everyone with a retirement or investment portfolio to know what these companies are up to: âWe're going to increase the public visibility on this issue until these companies change their practices.â
Heâs actually identified specific companies that have invested in these rogue countries, including Halliburton, Conoco-Phillips and General Electric. And he points out that New York's pension funds own nearly a billion dollars worth of stock in these three Fortune 500 companies, which have operations in Iran and Syria.
What was Thompsonâs reaction when he found out about this? âAnger that there were companies that could be contributing to attacks on our nation,â he says. âYouâd think to yourself, well, why would they do that? â I didn't think they could. And more than anything it was, you thought, that the law prevented them from doing this.â
In fact, U.S. law does ban virtually all commerce with the rogue nations, but there's a loophole that G.E., Conoco-Phillips and Halliburton have exploited: The law does not apply to any foreign or offshore subsidiary so long as it is run by non-Americans.
âThese three companies, as far as we were concerned, appear to have violated the spirit of the law,â says Thompson. âIn the case of Halliburton, as an example, they have an offshore subsidiary in the Cayman Islands. That subsidiary is doing business with Iran.â
That subsidiary, Halliburton Products and Services, Ltd., is wholly owned by the U.S.-based Halliburton and is registered in a building in the capital of the Cayman Islands â a building owned by the local Calidonian Bank. Halliburton and other companies set up in this Caribbean Island, because of tax and secrecy laws that are corporate friendly.
Halliburton is the company that Vice President Dick Cheney used to run. He was CEO in 1995 to 2000, during which time Halliburton Products and Services set up shop in Iran. Today, it sells about $40 million a year worth of oil field services to the Iranian Government.
In the case of Iran, Thompson says they earn most of their revenues through their oil industry. So what is the connection between that oil business and terrorism and weapons of mass destruction?
âThe Iranian Government is receiving dollars from it. And then turning around and exporting terrorism around the world. It benefits terrorism. At least that's our belief,â says Thompson.
60 Minutes decided to ask Halliburton's subsidiary about its work in Iran. But we weren't allowed to enter the building with a camera. So we went in with a hidden camera, and were introduced to David Walker, manager of the local Calidonian Bank, where the subsidiary is registered.
60 Minutes was expecting to find a bustling business, but, to our surprise, Walker told us that while Halliburton Products and Services was registered at this address, it was in name only. There is no actual office here or anywhere else in the Caymans. And there are no employees on site.
We were told that if mail for the Halliburton subsidiary comes to this address, they re-route it to Halliburton headquarters in Houston.
âIf you understood what most of these companies do, you would, they're not doing any business in Cayman per se. They're doing business, international business,â says Walker. âWould it make sense to have somebody in Cayman pushing paper around? I don't know. And some people do it. And some people don't. And it's mostly driven by whatever the issues are with the head office.â
Does that mean the head office is calling the shots? If it is, that would be against the law, which says the subsidiary must be completely independent of the U.S. company. But 60 Minutesâ attempts to ask headquarters in Houston about this were rebuffed.
In a letter to New York City Comptroller Thompson, Halliburton says its Cayman Island subsidiary is actually run out of Dubai. 60 Minutes went there and learned that it shares office space, phone and fax lines with a division of its U.S.-based parent company -- which raises more legal questions about its independence from Houston. But once again, our inquiries went unanswered.
In its letter to Thompson, Halliburton insists it is complying with all U.S. laws. But he and legal experts we consulted believe they are dancing right along the edge of legality.
âIf the intent was to try and prevent United States-based companies from doing business in these "rogue" nations, then it appears as if they've gotten around what the law had intended,â says Thompson, who filed a shareholderâs resolution calling on the company to review and justify its operations in Iran. âHalliburton attempted to block the shareholder resolution. They went to the SEC and asked for permission not to put this before shareholders.â
Did the SEC take it up and rule on it?
âOh, absolutely. The SEC ruled against Halliburton and said that it had to be put in front of the shareholders,â says Thompson, who plans to file the resolution at the next shareholders meeting in April.
Heâs also taking issue with GE and its electrical work in Iran, as well as Conoco-Phillips' gas production business in Syria: âIf there are nations that wind up increasing their resources because these companies are doing business there, and we're attacked because of it, it in fact undermines our entire country.â
Thompson says he decided to open the investigation in the first place at the request of New York City's police and firemen, who were outraged when they learned where their retirement money was going.
âThe members of the Fire Department and the Police Department, after September 11th, given the fact that hundreds of them died in the World Trade Center as a result of a terrorist attack, had greater sensitivity than almost anybody,â says Thompson. âAnd they were the ones who kind of took the lead on this.â
But why do moral issues come into play when talking about pension funds?
âThe way we've approached it isn't as on a moral basis, it is as investors,â says Thompson. âAnd what is in the best long-term interests of our pension funds because we hold stock in these companies.â
What these companies are doing, he says, isn't just a question of ethics - it's financially unsound, and bad for business.
-- Doug _______________________________________________ http://www.mccmedia.com/mailman/listinfo/brin-l
