By William K. Black August 27, 2017 Kansas City, MO Like you, I learned recently that Glenn Simpson had given ten hours of testimony before a closed session of the Senate Judiciary Committee and produced tens of thousands of pages of documents to the committee. Simpson founded a company (Fusion GPS) that hired a former British intelligence officer, Christopher Steele to conduct an investigation of Donald Trump’s ties with Russia. Newsweek reports: Following Simpson’s testimony behind closed doors, his attorney, Josh Levy, told reporters that his firm is “proud of the work” that Steele produced and Simpson oversaw, and that he “stands by it.” Fusion GPS bills itself as a place to buy “opposition research.” In plain English, that means if you pay it lots of money it will produce
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By William K. Black
August 27, 2017 Kansas City, MO
Like you, I learned recently that Glenn Simpson had given ten hours of testimony before a closed session of the Senate Judiciary Committee and produced tens of thousands of pages of documents to the committee. Simpson founded a company (Fusion GPS) that hired a former British intelligence officer, Christopher Steele to conduct an investigation of Donald Trump’s ties with Russia. Newsweek reports:
Following Simpson’s testimony behind closed doors, his attorney, Josh Levy, told reporters that his firm is “proud of the work” that Steele produced and Simpson oversaw, and that he “stands by it.”
Fusion GPS bills itself as a place to buy “opposition research.” In plain English, that means if you pay it lots of money it will produce a hit piece demonizing anyone you hate or fear. We do not know who hired Simpson to arrange the hit piece on Donald Trump. The credibility of Simpson’s hit pieces is one of the most important issues for Americans. The best way to judge that credibility is to evaluate Simpson’s prior hit pieces against national leaders.
I have information essential to judging Simpson’s credibility in his new incarnation as the owner of a firm that exists to sell hit pieces against political candidates and elected officials. I have not seen anyone else discuss the accuracy of prior hit pieces Simpson did attacking other elected officials. I reviewed Simpson’s hit piece attacking President Rafael Correa of Ecuador and I am in a uniquely strong position to evaluate the credibility of that Simpson hit piece. That hit piece proves that Simpson lacks credibility and competence particularly when he purports to rely on information provided by “intelligence officials” to make assertions about supposed conspiracies. Simpson is willing to feed his clients the biased and unreliable hit pieces they pay him to produce to demonize their foes.
I write as a strong opponent of President Trump. I believe that he and President Putin of Russia are two of the most corrupt leaders in the world and pose a clear and present danger to the American people and the peoples of the world. None of this causes me to embrace dishonest hit pieces. It would be a grave error for Democrats to accord credibility to Simpson’s hit piece. Democrats should be using David Cay Johnston’s work on Trump as their investigative roadmap.
I first became aware of Simpson as an excellent reporter for the Wall Street Journal who wrote some of the better straight news pieces explaining how lenders caused the recent financial crisis. Simpson had to meet high journalistic standards for the paper to publish his articles in that era. The commentators I have seen on television discussing the Russia/Trump investigation and dossier evaluated Simpson’s reputation solely on his early work as a journalist. That is a major error. Simpson has not functioned as a journalist for years. He is in business to sell hit pieces to secret funders who wish to vilify those they believe to be their political and economic enemies. Simpson has abandoned journalistic standards in order to sell his hit pieces to secret funders. We can only judge Simpson’s current credibility by examining the accuracy of his prior hit pieces on heads of state. I am in a special position to do that on Simpson’s hit piece attacking President Correa.
I came across Simpson after he left the paper and went to work at a shadowy company. He co-authored a hit piece attacking Rafael Correa, Ecuador’s president. The attack consisted of extreme right wing rhetoric accusing President Correa of seeking to corrupt Ecuador, aid cartels, encourage money laundering and fraud, and lead Ecuador into a “warming relationship with Russia.” Simpson’s hit piece against President Correa provides the best evidence of Simpson’s current reputation now that he is in the business of selling hit pieces based on claims that frequently do not meet even the most lenient journalistic standards.
The reason I came across Simpson’s hit piece on President Correa is that senior Ecuadorian officials appointed by him asked me to help them train their staff and create systems to reduce corruption, cartels and other abuses arising from market power, money laundering, and bank and procurement fraud. I wanted to learn more about Ecuador’s situation so I read Simpson’s hit piece in my routine preparatory research.
The fact that President Correa’s government funded my training of scores of Ecuadorian officials to enhance their efforts against fraud, cartels, corruption, and money laundering and tax evasion refuted Simpson’s principal attacks on President Correa. Simpson claimed that President Correa embraced corruption and money laundering. For five months when I lived in Quito, plus nearly a dozen visits over the last five years, I worked extensively with and evaluated scores of senior Ecuadorian officials who had leading roles fighting cartels, fraud, and corruption. President Correa appointed the senior leaders of each of the government agencies I worked with. These officials performed in an exemplary fashion. President Correa selected them for office because of their expertise, courage, and integrity.
I also am in a position of special expertise to evaluate Simpson’s claims that President Correa’s punishment of a huge, powerful Brazilian corporation demonstrated President Correa’s abuse of power. Simpson presented the firm, and Brazil’s government, as paragons of virtue. In reality, the firm was the most corrupt entity in the world, and sought to corrupt all of Brazil’s most senior leaders and institutions.
I have several key takeaways from evaluating the credibility of Simpson’s hit piece attacking President Correa. First, Simpson was dead wrong. He did not simply err on the margins. The Brazilian firm, and its government patrons that he praised, were ‘vectors’ that spread elite corruption through over a dozen Latin American nations. President Correa’s actions, and the actions of the anti-fraud, anti-cartel, and anti-corruption leaders that he appointed to key ministries demonstrate a dedication to opposing elite fraud and corruption and exceptional success in their fields. In particular, President Correa deserves high praise for insisting on applying the rule of law to the immensely powerful and corrupt Brazilian firm that Simpson falsely praised as a paragon of virtue. Simpson’s attacks against President Correa and Simpson’s odes to the Brazilian firm and its government patrons were the opposite of the truth.
Second, Simpson’s hit piece on President Correa did not meet even minimal journalistic standards. It was a screed.
Third, Simpson’s failure to disclose who funded his hit piece on President Correa constituted a fundamental defect of integrity and credibility that should cause any responsible person not to rely on Simpson’s hit pieces. Some senior executive of a corporation wanted Simpson to write a hit piece on President Correa rather than an objective report. The senior corporate officials had a powerful motive to fund such an expensive hit piece on President Correa – and to make it public. That motive is almost certainly personal, opportunistic, and sleazy. Simpson’s failure to disclose the corporate funder and its motives means that his hit piece is inherently unreliable because the reader cannot evaluate its biases.
Fourth, Simpson’s claim that his hit piece on President Correa was based on illegal leaks of classified information to his co-author by unidentified “military intelligence officers” from Mexico, Colombia, and the United States constituted an inherent, serious failure of credibility and integrity. One hopes that Simpson’s claim is false, but if it is true, it is even more disturbing. If military intelligence officers from many nations are repeatedly and illegally leaking classified information to sketchy firms to produce hit pieces against elected presidents, then the sketchy firms are routinely able to suborn intelligence officers. Sketchy firms can suborn intelligence officers through bribery or because the sketchy firms cause the intelligence officers to believe the sketchy firms will hire them when they retire from the government. In either case, the intelligence officers’ claims lack all integrity and credibility.
Any honest and competent intelligence officer who was willing to leak classified information to Simpson’s co-author would have warned Simpson that his ode to the huge and massively corrupt and powerful Brazilian firm that President Correa punished for its crimes was so preposterous that it would destroy Simpson’s credibility. The inherent problem, of course, is that intelligence officers who leak classified information to firms developing hit pieces are neither honest nor competent, which makes their leaks unreliable.
Simpson’s hit piece on President Correa was so over the top and so much worse than his news articles that I immediately wondered who hired Simpson to write it. The hit piece’s contents often failed to meet journalists’ minimum standards. Simpson’s hit piece reads more like how an intelligence agent might report raw, unverified speculation by unidentified sources. Simpson and his co-author stated that their screed:
[I]s based on interviews with Ecuadoran officials, academics and military personnel, as well as interviews with police and military intelligence officers in Mexico, Colombia and the United States.
Simpson and his colleagues do not appear to disclose to the public who those clients are, even though that is essential for the public to judge how biased the reports are.
The non-obvious questions are why Simpson made the President Correa hit piece public and why he made it a screed rather than an objective report. Ecuador is a small nation. American businesses are not clamoring to do business there and eager to pay tens of thousands of dollars for research on the risks of doing business in Ecuador. If a major firm’s officers were trying to decide whether to do business in Ecuador and wanted to commission a report on the risks of doing business in Ecuador the corporate officers would not make the report public and would want the report to be objective and read objectively when they presented it to their CEO.
Simpson indicated that the hit piece on President Correa was expensive to produce. The hit piece say that the authors had to arrange many interviews in three nations and spent several weeks abroad. The authors say their research took four months to complete. The report is lengthy, about 75 pages long with 159 footnotes. A client paid very large amounts of money, not to learn about Ecuador, but to purchase a public hit piece against President Correa that would not identify the funder of that hit piece. Simpson believed that the client wanted a screed rather than an objective report. Simpson had no ethical restraints against producing a hit piece secretly funded by someone who wanted to demonize the President of a sovereign nation. A senior officer of a corporation must have approved secretly funding (directly, or indirectly through a right wing ‘think tank’) an expensive hit piece of this nature against President Correa.
The Simpson screed is particularly impassioned in denouncing President Correa for imposing legal sanctions against a specific corporation – “the respected Brazilian construction firm Odebrecht.” If you have been following the Brazilian corruption scandal, you know that Simpson’s ode to Odebrecht demonstrates rank incompetence and dishonesty. If he was truthful in reporting that “military intelligence officers” of three nations secretly leaked him classified information, then his ode to Odebrecht also demonstrates the incompetence or dishonesty of the “military intelligence officers” of Mexico, Colombia, and the United States. Ecuador sanctioned Odebrecht for procurement fraud (overcharges by Odebrecht to Ecuador). Any honest report would have praised President Correa and Ecuador’s government for being the first government to take effective action (beginning in 2008) to counter Odebrecht’s crimes and protect the citizens of Ecuador. Instead, Simpson railed in his hit piece about the supposed outrage of Ecuador enforcing the rule of law against Odebrecht’s public procurement fraud.
Simpson’s ode to Odebrecht is absurd on its face. It makes no pretense of objectivity. It does not even present Ecuador’s case against Odebrecht’s frauds. It presumes that President Correa must have acted illegitimately. Simpson’s strongest basis for labeling Odebrecht a paragon of virtue is hilariously weak – it “competes successfully in some of the most transparent markets in the world including the United States.” Yes, bribery and bid-rigging do wonders for a firm’s ability to “compete successfully.” Simpson was implying that elite fraud and corruption could not occur in the United States. In addition to all the usual reasons that claim is preposterous, one must recall that Simpson and his colleagues at the Wall Street Journal explained in thousands of articles how elite corporate executives in the United States became wealthy by causing their firms to engage in fraud and corruption – and why U.S. markets gave only the illusion of being “transparent.”.
Odebrecht is the sleaziest large company in the world. Its business plan was combining the creation of cartels that rigged government procurement bids and bribed senior government officials and procurement officials in order to overcharge massively the public. Business Insider’s May 30, 2017 column summarizes the key points.
One name has completely disrupted politics in the Western Hemisphere, taken down at least one presidency and threatens to topple another.
It has sent protesters to the streets in more than one nation, and has American officials combing through bank transactions leading to a nebulous web of offshore accounts.
The name is Odebrecht — it’s a Brazilian construction company that became an international giant over years of using bribery and corruption to secure around 100 projects in 12 countries, generating ill-gotten gains of about $3.3 billion.
That $3.3 billion, however, has nothing on the impact Odebrecht will have on history. In the countries where it operated — especially in Brazil and the Dominican Republic — the revelation that Odebrecht’s corruption reached the highest levels of government has destroyed storied careers and crippled political parties.
Former left wing Brazilian President Dilma Rousseff was an Odebrecht casualty. She was forced to step down from office last year. Her right wing successor, Michel Temer may not survive his full tenure in office either. Recently, tapes of him encouraging bribes leaked to the public, and on Sunday Brazilians held yet another massive protests calling for his resignation.
In Peru, a judge ordered the arrest of former President Alejandro Toledo, who was accused of accepting millions from Odebrecht. Another governor has been placed in “preventative prison” for 18 months for accepting $4 million in bribes as protesters have taken to the streets.
In Colombia, prosecutors are investigating whether or not President Juan Manuel Santos’ 2014 campaigned received improper donations from Odebrecht. Protesters in Guatemala have also called for the resignation of their president and any other politicians involved in the scandal.
In the Dominican Republic, almost a dozen officials were arrested on Monday on suspicion of involvement with the $92 million in bribes Odebrecht paid there. According to the Justice Department, the company made $163 million from those bribes.
Odebrecht optimized its corrupt and fraudulent profits through bribery, cartels, bid-rigging of public procurement to overcharge massively many government entities, and money laundering and tax evasion using offshore tax havens infamous for aiding drug cartels.
The US is investigating Odebrecht for violations of the Foreign Corrupt Practices Act because the company allegedly made million in corrupt payments from New York City and held meetings in Miami. The Justice Department complaint reads like a Bond-villain’s backstory.
According to the Feds, Odebrecht started bribing officials around 2001. In 2006, though, things got really streamlined. The company created an entire division simply for making corrupt payments — it was called the Division of Structure Operations. It had a separate computer process from the rest of the company for its communications and payments.
Naturally, there was an opaque and complicated structure of offshore accounts. Payments could go through up to four levels of offshore bank accounts before reaching their final destination. To further streamline this process, in 2010 or 2011 Odebrecht bought a branch of an Austrian bank in Antigua.
This is how the company managed to pay out $788 million in bribes.
Recall that Simpson’s hit piece against President Correa specifically denounced him for (a) taking effective action against Odebrecht’s criminal overcharges of the public in procurement and (b) for purportedly not cracking down adequately on money laundering and corruption. The Odebrecht scandal demonstrates that the Simpson hit piece against President Correa exactly reversed the facts. Simpson’s ode to Odebrecht’s supposed integrity and his denunciation of President Correa’s firm actions against its crimes demonstrate that Simpson lost all journalistic integrity in the pursuit of profit from his sleazy corporate sponsors. Did Odebrecht directly or indirectly fund Simpson’s hit piece?
What was the goal of the secret corporate sponsor(s) of Simpson’s hit piece on President Correa? Was it sleazy “opposition research” designed to defeat President Correa and his party in the next election? Was it to push President Obama to adopt policies more hostile to Ecuador? Was it to provide the pretext for a coup to remove President Correa from office? We should not have to guess about who funded Simpson’s hit pieces. It is essential to know the funder and its motivations for the reader (or Congress) to understand and counter Simpson’s biases and evaluate the dubious credibility of his hit pieces. As with any secretly funded hit piece, we should accord Simpson’s hit piece zero credibility until his client and its motivations are disclosed.
Was the corporate funder’s goal to help Odebrecht bring a claim against the Nation of Ecuador? The Simpson hit piece celebrates the hostility of the biased “arbitration panels” that are designed to allow business – and only business – to sue governments that dare to adopt and enforce effective rules of law against business crimes and abuses such as pollution and the sale of unsafe products. The Trump administration and some Democratic candidates for the presidency have identified these kangaroo tribunals as an unconscionable surrender of national sovereignty and one of the key ways in which every major trade deal has rigged the system in favor of the most rapacious and dishonest elite corporate officers at the direct expense of the public.
Simpson’s hit piece against President Correa (unintentionally) reveals the obscenity of such kangaroo (non-court) “arbitration” schemes. Simpson urged that the arbitrators treat the sleaziest company in the world (Odebrecht) as a tremendously “respected” corporation and award it “damages” against Ecuador that its citizens would have to pay for the high crime of Ecuador sanctioning a criminal corporation for its crimes. Simpson called the kangaroo tribunals he was openly egging on to try to bankrupt Ecuador through crippling fines – for the purposes of rewarding Odebrecht’s crimes – necessary to prevent “radical populist attacks on foreign companies.” Odebrecht was the one making radical elite attacks on a foreign people – the relatively poor people of Ecuador. Democrats should be particularly outraged at Simpson’s shilling for the Oldebrecht’s corrupt leaders and the kangaroo tribunals they use to extort democratic government.
Brazil did not begin to crack down on Odebrecht’s endemic crimes until 2014 (six years after Ecuador began its crackdown in 2008). By that time, Odebrecht’s crimes had caused so much economic, political, and moral damage to Brazil that it led to economic and political crises that continue to be acute today – three years after Brazil began its crackdown. As a criminologist and former senior financial regulator, I want to emphasize that the speed at which government leaders counter elite fraud and corruption is critical to avoiding catastrophic harm to the public.
President Correa saved the people of Ecuador from a catastrophe. One of the three keys to President Correa’s plans for economic development was the rapid improvement of Ecuador’s poor infrastructure. This meant greatly increased spending on public construction projects. Odebrecht was Latin America’s largest and best-known public construction firm. It stood to make enormous profits off the Ecuadorian government and people through its greatest expertise – corrupt and unlawful destruction of honest government procurement. Odebrecht was not content with normal construction profits. Recall what investigators from Brazil, the United States, Peru, and the Dominican Republic have confirmed – Odebrecht routinely obtained supra-normal profits through endemic criminal means. Investigators have found that “$788 million in bribes” produced “ill-gotten gains of about $3.3 billion” for Odebrecht – over a 400% return on their ‘investment.’
As the Business Insider article explains, Odebrecht specialized in bribing Latin American presidents. As a criminologist who studies and acts against elite corruption, I have repeatedly warned that the biggest bang for the buck from bribery comes from suborning the most senior corporate and public officials. Odebrecht’s leaders understood this fact and repeatedly bribed heads of state.
Odebrecht’s leaders faced a seemingly insoluble problem with their normal bribery game plan when Ecuadorians elected Rafael Correa president of Ecuador. They knew that they could not bribe President Correa. Odebrecht’s leaders knew that if they tried to bribe President Correa he would have prosecuted them for that crime. That fact refuted Simpson’s smears that President Correa was corrupt, so it never appears in his hit piece.
There was only one elegant solution for Odebrecht’s leaders – remove President Correa from office so that they could bribe his successor. Simpson’s hit piece against President Correa begins by explaining that Odebrecht had serious reasons to hope that it could drive President Correa from office.
From 1997 until Correa’s election [in 2007], Ecuador had six presidents, none of who served a full term in office.
Simpson’s hit piece argues:
[Rafael Correa’s] most important promise was to end the traditional bickering and corruption that had characterized the prior governments and to usher in a new era of “clean hands,” honesty and accountability.
Simpson’s hit piece, unintentionally, demonstrates that President Correa made good on his “most important promise” to the people of Ecuador – which is why Odebrecht was so eager to drive him from office through its repeated libels of President Correa. President Correa had the courage to take on the most powerful company (Odebrecht) of the most powerful nation in Latin America (Brazil) and impose the rule of law on the most elite of the elites. The Brazilian government was furious at President Correa’s effective crack down on Odebrecht’s crimes. Simpson quotes this fact – and asserts that it somehow proves that President Correa was acting unlawfully in sanctioning Odebrecht for its crimes. The facts prove the opposite. President Correa knew that Brazil would be furious if he punished Odebrecht’s crimes – and President Correa still had the courage to do the right thing. That demonstrated his integrity. President Correa knew that Odebrecht’s leaders would have been delighted to pay him tens of millions of dollars in bribes to rig the procurement processes on hundreds of millions of dollars of infrastructure construction projects. Many government leaders talk a good game about integrity but are not tested in the crucible. President Correa placed himself in the crucible and faced the most intensive temperatures and pressures.
I spent months in Ecuador at the invitation of the President Correa’s government training staff on how to combat procurement fraud and corruption, banking fraud, money laundering and tax evasion, and antitrust and market power abuses. First, President Correa would not have done this if he were corrupt. Second, I know well the leader of Ecuador’s National Procurement System (SERCOP). President Correa chose Santiago Vasquez (and his predecessor Andrés Arauz) to head SERCOP because they are amongst the best of Ecuador’s young technocrats. They are also Ecuadorian patriots with reputations for complete integrity. Mr. Arauz served a short time as head of SERCOP, but began some of the key reforms. Mr. Vasquez has run SERCOP for several years and has implemented most of the successful reforms.
I also need to emphasize a point made by Odebrecht’s criminal schemes well known to white-collar criminologists who study procurement fraud and corruption. One of the most common and expensive sources of procurement abuses is a bid-rigging cartel. I encouraged SERCOP to train and work closely with Ecuador’s antitrust authority to spot and sanction bid-rigging cartels. President Correa created Ecuador’s first authority for the control of abuses of market power, the Superintendencia de Control del Poder de Mercado (SCPM). President Correa (who has a doctorate in economics from a U.S. University) appointed another distinguished economist, Dr. Pedro Páez, as SCPM’s first Superintendent. Dr. Paez enthusiastically committed to training most of his staff in spotting, preventing, and sanctioning bid-rigging cartels. We were able to conduct multiple, detailed joint training sessions for SERCOP and SCPM staff. The related goal was for the staff of both agencies to get to know each other to make it far easier to create effective teamwork between the two agencies.
Under the leadership of this talented trio, SERCOP has risen in the World Bank rankings of national procurement authorities to the 11th best in the world – the highest rating in Latin America and a higher rating than its American and Canadian counterparts. Again, none of this would have happened unless President Correa meant to make good on what Simpson described as his “most important promise” to the people of Ecuador – integrity and clean hands. The people of Ecuador are the direct beneficiaries of the success of SERCOP under Messrs. Vasquez and Arauz and SCPM under Dr. Páez.
No country is without corruption. SERCOP lacks statutory authority over the oil industry and defense procurement. The government of Ecuador may choose to fill that statutory gap in protection against corruption.
Simpson’s record in attacking another leader of a sovereign nation, President Correa, demonstrates that Simpson’s hit pieces are spectacularly unreliable. In the case of Odebrecht and President Correa, Simpson was as wrong as it is humanly possible to be wrong. Worse, the reason Simpson was wrong on the substance of his dishonest attacks was that he abandoned journalistic ethics and premised his business on selling secret funders unreliable hit pieces designed to demonize their political foes. Democrats should not rely on Simpson or his hit pieces.