Wednesday, February 28, 2007

Thanks for Cutting and Running, from The Nation

BLOG | Posted 02/21/2007 @ 8:51pm
Cheney: Thanks for Cutting and Running
Vice President Dick Cheney, keeping as far from federal prosecutors as possible these days, arrived in Japan Wednesday to officially thank that country for supporting the Bush-Cheney administration's invasion and occupation of Iraq.
What made the trip absurd was that Cheney was campaigning for a war that he wanted, plotted and defended with a disregard not just for the laws of the land but for reality. And what made it ludicrous was that he was thanking an ally that is not exactly in the alliance.
Japan was a part of the original "coalition of the willing" -- more precisely referred to as the "coalition of the coerced" – that signed on for the quagmire run.
But Japan pulled its troops out of Iraq last year.
The Japanese still provide a minimal number of airlifts in support of U.S. operations in the Middle East, but even that mission is set to end in July.
So Cheney was thanking a country that is essentially, and quite happily, out of the coalition.
If the Japan Appreciation Day mission was bizarre, the vice president's speech in a hangar bay at the Yokosuka Naval Base near Tokyo was downright delusional. "The American people will not support a policy of retreat," Cheney chirped. "We want to complete the mission, we want to get it done right, and then we want to come home, with honor."
Exactly who are these "American people" the vice president is communing with?
Not the overwhelming majority of Americans who tell pollsters they want the U.S. to exit Iraq.
Not the clear majority of Americans who voted last November for a Democratic Congress charged with the task of bringing the troops home.
And not the American president who cheerfully accepted the decision of British Prime Minister Tony Blair to substantially reduce that country's boots on the ground in Iraq – as well as the decision of the Danes to withdraw from the endeavor.
When the Danish prime minister called this week to inform Bush that the country's 46O troops would be leaving Iraq, the president had no objection to the decision to cut and run. According to Denmark's Anders Fogh Rasmussen, Bush expressed "both understanding and satisfaction that the situation in Iraq makes it possible for Denmark and Britain to reduce their numbers of troops."
If this war gets much more "satisfying," the U.S. will be fighting it alone.
But don't expect to hear Bush or Cheney complaining about the inability of the Brits, the Danes, the Japanese or the Tongans to understand the importance of Iraq to the "war on terror." That silly spin is reserved for domestic consumption. It's a political hammer used to attack Democrats who fail to rubberstamp the administration's misguided strategies -- not a serious concern on the part of the administration.
For all the "stay-the-course" rhetoric from Bush and Cheney, this administration has been more than willing to accept the retreats of allies from Iraq. Why? Because the president and vice president don't want Americans to pay attention to the fact that the "coalition of the willing" has crumbled.
In addition to Japan -- which, like most countries, had a largely symbolic presence in the Middle East -- the following countries have joined the coalition of the unwilling to remain in Iraq: the Dominican Republic, Honduras, Hungary, Italy, New Zealand, the Netherlands, Norway, the Philippines, Portugal, Nicaragua, Norway, Singapore, Spain, Slovakia, Thailand, Tonga and the Ukraine.
Along with Denmark's exiting troops, Lithuania's contingent will likely leave this summer. Armenia's 46 troops are expected to be out at year end, as are Poland's 9OO. And, while Moldova is technically still in the coalition, its 11 bomb-defusing experts quietly exited Iraq last December and have yet to be replaced.
Aside from Great Britain, which is dramatically downsizing its presence, only Australia -- where Prime Minister John Howard appears to be channeling Cheney -- and South Korea now have more than 1,000 troops stationed in Iraq. And South Korea, which will extract 1,100 of its troops this spring, may not be around for much longer; the country's parliament has called for total withdrawal by December 31.
According to the website, which tracks military involvement in Iraq, Kazakhstan, with 29 troops, remains committed to the mission, as does Macedonia, with 33 troops; Estonia, with 34 troops; Bosnia and Herzegovina, with 37 troops and another ten countries, with between 1OO and 865 troops each.
Here's a sobering fact to ponder: Add together all the troops from all the foreign countries that are still in Iraq as committed members of the "coalition of the willing" and you will get a figure that is substantially lower than the 21,5OO U.S. troops that are now surging into the country on President Bush's orders.
But, despite the fact that the real surge is the one taking U.S. allies out of Iraq, Cheney will keep preaching about America's refusal to accept retreat -- even as he continues to thank countries, like Japan, that have had the wisdom to abandon a sorely misguided mission.
Interesting the LVLIB spin on the Brits leaving Basra....the reason? "Their job is done, the Iraqis can take over". why are the Brits able to "pacify" a city of 2.6 Million with 7000 troops and can now pull out 1600 of them.
But OUR boys and girls can't pacify a city of 4.5 Million and need to ADD 21,500 troops?!?!?!
Posted by MASK 02/21/2007 @ 9:14pm | ignore this person

Wednesday, February 21, 2007

Military industrial complex? Read on


Washington's $8 Billion Shadow

Mega-contractors such as Halliburton and Bechtel supply the government with brawn. But the biggest, most powerful of the "body shops"—SAIC, which employs 44,000 people and took in $8 billion last year—sells brainpower, including a lot of the "expertise" behind the Iraq war.

By Donald L. Barlett and James B. Steele

02/20/07 "Vanity Fair" - March 2007 --- One of the great staples of the modern Washington movie is the dark and ruthless corporation whose power extends into every cranny around the globe, whose technological expertise is without peer, whose secrets are unfathomable, whose riches defy calculation, and whose network of allies, in and out of government, is held together by webs of money, ambition, and fear. You've seen this movie a dozen times. Men in black coats step from limousines on wintry days and refer guardedly to unspeakable things. Surveillance cameras and eavesdropping devices are everywhere. Data scrolls across the movie screen in digital fonts. Computer keyboards clack softly. Seemingly honorable people at the summit of power—Cabinet secretaries, war heroes, presidents—turn out to be pathetic pawns of forces greater than anyone can imagine. And at the pinnacle of this dark and ruthless corporation is a relentless and well-tailored titan—omniscient, ironic, merciless—played by someone like Christopher Walken or Jon Voight.

To be sure, there isn't really such a corporation: the Omnivore Group, as it might be called. But if there were such a company—and, mind you, there isn't—it might look a lot like the largest government contractor you've never heard of: a company known simply by the nondescript initials SAIC (for Science Applications International Corporation), initials that are always spoken letter by letter rather than formed into a pronounceable acronym. SAIC maintains its headquarters in San Diego, but its center of gravity is in Washington, D.C. With a workforce of 44,000, it is the size of a full-fledged government agency—in fact, it is larger than the departments of Labor, Energy, and Housing and Urban Development combined. Its anonymous glass-and-steel Washington office—a gleaming corporate box like any other—lies in northern Virginia, not far from the headquarters of the C.I.A., whose byways it knows quite well. (More than half of SAIC's employees have security clearances.) SAIC has been awarded more individual government contracts than any other private company in America. The contracts number not in the dozens or scores or hundreds but in the thousands: SAIC currently holds some 9,000 active federal contracts in all. More than a hundred of them are worth upwards of $10 million apiece. Two of them are worth more than $1 billion. The company's annual revenues, almost all of which come from the federal government, approached $8 billion in the 2006 fiscal year, and they are continuing to climb. SAIC's goal is to reach as much as $12 billion in revenues by 2008. As for the financial yardstick that really gets Wall Street's attention—profitability—SAIC beats the S&P 500 average. Last year ExxonMobil, the world's largest oil company, posted a return on revenue of 11 percent. For SAIC the figure was 11.9 percent. If "contract backlog" is any measure—that is, contracts negotiated and pending—the future seems assured. The backlog stands at $13.6 billion. That's one and a half times more than the backlog at KBR Inc., a subsidiary of the far better known government contractor once run by Vice President Dick Cheney, the Halliburton Company.

It is a simple fact of life these days that, owing to a deliberate decision to downsize government, Washington can operate only by paying private companies to perform a wide range of functions. To get some idea of the scale: contractors absorb the taxes paid by everyone in America with incomes under $100,000. In other words, more than 90 percent of all taxpayers might as well remit everything they owe directly to SAIC or some other contractor rather than to the IRS. In Washington these companies go by the generic name "body shops"—they supply flesh-and-blood human beings to do the specialized work that government agencies no longer can. Often they do this work outside the public eye, and with little official oversight—even if it involves the most sensitive matters of national security. The Founding Fathers may have argued eloquently for a government of laws, not of men, but what we've got instead is a government of body shops.

The unhappy business practices of the past few years in Iraq—cost overruns, incompetence, and corruption on a pharaonic scale—have made the American public keenly aware of the activities of mega-contractors such as Halliburton and Bechtel. Although SAIC takes on government projects such as those pursued by contractors like these, it does not belong in exactly the same category. Halliburton and Bechtel supply the government's brawn. They pour concrete, roll out concertina wire, build infrastructure. They call on bullnecked men to provide protection.

In contrast, SAIC is a body shop in the brain business. It sells human beings who have a particular expertise—expertise about weapons, about homeland security, about surveillance, about computer systems, about "information dominance" and "information warfare." If the C.I.A. needs an outside expert to quietly check whether its employees are using their computers for personal business, it calls on SAIC. If the Immigration and Naturalization Service needs new record-keeping software, it calls on SAIC. Indeed, SAIC is willing to provide expertise about almost anything at all, if there happens to be a government contract out there to pay for it—as there almost always is. Whether SAIC actually possesses all the expertise that it sells is another story.

What everyone agrees on is this: No Washington contractor pursues government money with more ingenuity and perseverance than SAIC. No contractor seems to exploit conflicts of interest in Washington with more zeal. And no contractor cloaks its operations in greater secrecy. SAIC almost never touts its activities in public, preferring to stay well below the radar. An SAIC executive once gave a press interview and referred to the enterprise as a "stealth company," a characterization that is accurate and that has stuck. "Nobody knows who they are," says Glenn Grossenbacher, a Texas lawyer who has battled SAIC in court on a whistle-blowing case. "Everybody knows Northrop Grumman and G.E., but if you went out on the street and asked who the top 10 [defense] contractors are, I can guarantee you that SAIC would not be one of them."

Which is all the more remarkable in light of two developments. The first is a mounting collection of government audits and lawsuits brought by former employees for a variety of reasons, some of them personal and some coming under federal whistle-blower statutes. In a response to written queries, SAIC characterized itself as a "highly ethical company and responsible government contractor, committed to doing the right thing." But a review by Vanity Fair of thousands of pages of documents, including corporate e-mail messages, offers disturbing revelations about the company's inner workings, its culture, and its leadership.

The second development is that several of SAIC's biggest projects have turned out to be colossal failures, failures that have occurred very much in public.

One involves the National Security Agency, America's intelligence-gathering "electronic ear" and for many years SAIC's biggest customer. The volume of telephone, e-mail, and other electronic communications that the N.S.A. intercepts worldwide is so massive that the agency urgently needs a new computer system to store it, sort it, and give it meaning—otherwise it will keep missing clues like the Arabic message "Tomorrow is zero hour," intercepted the day before 9/11 but not translated until the day after. SAIC won the initial $280 million, 26-month contract to design and create this system, called Trailblazer. Four years and more than a billion dollars later, the effort has been abandoned. General Michael V. Hayden, the former head of the N.S.A. and now the director of the C.I.A., blamed the failure on "the fact we were trying to overachieve, we were throwing deep and we should have been throwing short passes." Happily for SAIC, it will get the chance for a comeback in the second half. The company has been awarded the contract for a revised Trailblazer program called ExecuteLocus. The contract is worth $361 million.

Another failed effort involves the F.B.I., which paid SAIC $124 million to bring the bureau, whose computer systems are among the most primitive in American law enforcement, into at least the late 20th century. The lack of information-sharing is one reason why the F.B.I. failed to realize that in the year leading up to 9/11 two of the future hijackers—including one with known "jihadist connections"—were actually living in the San Diego home of an F.B.I. informant. SAIC set to work on a system called the Virtual Case File. V.C.F. was supposed to become a central repository of data (wiretap transcripts, criminal records, financial transactions) from which all F.B.I. agents could draw. Three years and a million lines of garbled computer code later, V.C.F. has been written off by a global publication for technology professionals as "the most highly publicized software failure in history." The failure was due in part to the bureau's ever shifting directives, which points up the perverse nature of government-by-contract. When the government makes unrealistic demands, the contractors go along anyway: they are being paid not to resist but to comply. If it turns out they can't deliver, new contracts will simply be drawn up. Responding to questions about the F.B.I. project, the company conceded that "there were areas in which SAIC made mistakes, particularly where we failed to adequately communicate our concerns about the way the contract was being managed."

These and other SAIC activities would seem to be ripe targets for scrutiny by the new Democratic Congress. But don't be surprised if you hear nothing at all: SAIC's friends in Washington are everywhere, and play on all sides; the connections are tightly interlocked. To cite just one example: Robert M. Gates, the new secretary of defense, whose confirmation hearings lasted all of a day, is a former member of SAIC's board of directors. In recent years the company has obviously made many missteps, and yet SAIC's influence in Washington seems only to grow, impervious to business setbacks or even to a stunning breach of security.

Much to the embarrassment of a company entrusted with some of the nation's most precious secrets, its San Diego offices were mysteriously burgled in January of 2005. A censored San Diego police-department report reveals the basic outline. The report notes that the building "is patrolled by DOD certified security" and that "the interior lights are on motion sensors and would have been activated by the suspects." Nevertheless, burglars managed to break into SAIC's headquarters, pry open 13 private offices, and walk out with one desktop-computer hard drive and four laptops. By SAIC's account, the computers contained personal data on thousands of present and past employees, presumably including the company's many former C.I.A. operatives, N.S.A. executives, and Pentagon officials. To date, the burglary remains unsolved.

SAIC has displayed an uncanny ability to thrive in every conceivable political climate. It is the invisible hand behind a huge portion of the national-security state—the one sector of the government whose funds are limitless and whose continued growth is assured every time a politician utters the word "terrorism."

SAIC represents, in other words, a private business that has become a form of permanent government.

A Plain Brown Envelope
On the evening of January 17, 1961, Dwight D. Eisenhower came down from the White House living quarters to the Oval Office and delivered his last address to the American people as president. This was the famous speech in which he warned against the "disastrous rise of misplaced power" in the hands of what he called "the military-industrial complex"—the sturdy hybrid formed by crossbreeding American corporate interests with those of the Pentagon and the intelligence community.

As Eisenhower spoke, a quietly ambitious man on the other side of the country, John Robert Beyster, was going about his business as head of the accelerator-physics department at the General Atomic corporation, in La Jolla, California, one of many secretive companies that sprouted early in the atomic era. Beyster had grown up outside of Detroit, served in the navy during World War II, and earned a Ph.D. in nuclear physics from the University of Michigan before migrating to Southern California in the 1950s. He was a lanky and nerdy-looking technocrat, but the tortoiseshell glasses concealed a driven personality. Beyster believed that General Atomic didn't appreciate his ideas, and he began to lay plans. Within a decade of Eisenhower's farewell speech, Beyster would create an enterprise epitomizing the military-industrial complex that caused Eisenhower such dismay. Now, four decades later, that company epitomizes something beyond Eisenhower's worst nightmare—the "military-industrial-counterterrorism complex."

Science Applications International Corporation was born in February of 1969 in a stucco office building in La Jolla next to a ballet studio overlooking the Pacific. "I was not the brilliant, flash-of-inspiration type of entrepreneur," Beyster would later recall; rather, he was more a "persistent builder type." The name he decided on for his company, though brilliantly opaque, reflected an assumption that the real future of national defense—or, at any rate, the real future profits to be had from national defense—lay in science and technology, not in boots on the ground. And a lot of that scientific work would necessarily be analytical; it would be about thinking as much as about making. Beyster's very first government contract came from the Defense Atomic Support Agency: he was given the task of calculating "the output of nuclear devices."

Beyster understood that this particular moment of the American Century was the perfect time for shrewd consultants to get into the war business. The conflict in Vietnam was still raging, and the Cold War seemed to have become a permanent fixture of the geopolitical landscape. The Nixon administration was promoting a missile-defense system to protect its ICBM installations. Scientists were hard at work on a host of nuclear projects, including the fabled neutron bomb. Although computers had yet to revolutionize government and business, visionaries like Beyster could see that eventually they would, and so, for SAIC, computer systems represented another target of opportunity.

Joined by research scientists from General Atomic and elsewhere, Beyster developed a straightforward business plan. As he later explained it, "People who came into the company went out and got contracts." Everyone who worked for SAIC had to carry his own weight. You might have a Ph.D. in physics or applied mathematics, but at SAIC your job fundamentally was to sell your high-tech ideas and blue-chip expertise to the army, navy, air force, C.I.A., N.S.A., Atomic Energy Commission, and any other government agency with money to spend and an impulse to buy. Contracts were everything. There is much to be said for SAIC's approach: in its four decades of existence, the company has turned a profit every single year.

Beyster aggressively packed his company with former generals, admirals, diplomats, spies, and Cabinet officers of every kind to fill the company's board of directors and the upper echelons of its staff. These were the kinds of people who would always have easy access to the agencies they had left behind—and who someday might even go back into government. To be sure, every Beltway defense contractor tries to bring retired generals and admirals into the fold, but Beyster offered an incentive that others couldn't match: an internal stock-ownership program, which promised to make government officials rich after they left public service. The stock-ownership program would eventually be expanded to include everyone on the company's payroll, but it began as Beyster's way of rewarding favored executives and board members, whose identities were kept secret. A lucky recipient would learn of his good fortune when a messenger appeared in his office carrying a plain brown envelope containing a newly minted stock certificate.

SAIC had its own brokerage subsidiary, licensed by the S.E.C., a kind of in-house Merrill Lynch called Bull, Inc. The name accurately predicted the stock's vitality. Beyster and his board managed every aspect of the stock—the number of shares, who received them, and, most important, the price. Unlike on Wall Street, where individual stock prices go up and down, the SAIC stock price, controlled by Beyster and his board, usually moved in one direction only: up. The more contracts you landed, the more stock you received. Even if you stayed at SAIC for only a short time, you could in the long run earn a lot of money. And if you left SAIC to go back into government service, you had considerable incentive to keep SAIC's continuing good fortunes in mind.

SAIC's internal stock market was instrumental in the company's early success. Peter Friesen, a San Diego attorney who has represented former SAIC employees in civil complaints against the company, says, "If you find somebody [in government] who wants a job with SAIC later, and he sees the steady rise in the stock price over the years and knows he can get a job with stock options and stock bonuses, then he's going to be sending business over to SAIC. And it worked."

SAIC opened its Washington office in 1970. Although San Diego would remain SAIC's home base, the workforce in the Washington area soon eclipsed the workforce everywhere else. To ensure support on Capitol Hill, corporate outposts were prominently set up in key congressional districts. Meanwhile, scores of influential members of the national-security establishment clambered onto SAIC's payroll, among them John M. Deutch, undersecretary of energy under President Jimmy Carter and C.I.A. director under President Bill Clinton; Rear Admiral William F. Raborn, who headed development of the Polaris submarine; and Rear Admiral Bobby Ray Inman, who served variously as director of the National Security Agency, deputy director of the C.I.A., and vice director of the Defense Intelligence Agency.

SAIC's relative anonymity has allowed large numbers of its executives to circulate freely between the company and the dozen or so government agencies it cares about. William B. Black Jr., who retired from the N.S.A. in 1997 after a 38-year career to become a vice president at SAIC, returned to the N.S.A. in 2000. Two years later the agency awarded the Trailblazer contract to SAIC. Black managed the program. Donald Foley, a current SAIC director, came out of a top position at the Defense Advanced Research Projects Agency, the Pentagon group responsible for developing new military technology. SAIC might as well operate an executive shuttle service between its McLean, Virginia, offices and the C.I.A., the F.B.I., the Pentagon, and the Department of Energy. Technically, federal ethics rules stipulate that former government officials must wait one year before contacting anyone in their former agencies. Sometimes they can't wait: Mark A. Boster left his job as a deputy assistant attorney general in 1999 to join SAIC, and was already calling Justice three months later on behalf of his new employers—a violation of federal law. Boster paid $30,000 in a civil settlement.

The Young-Boy Network
The driving force behind SAIC, the man who shaped its personality and culture across nearly four decades, until he was forced out in 2004, was of course Bob Beyster. From the beginning Beyster was indefatigable, constantly on the road, promoting SAIC to any government official who would listen. On a 10-day trip, he'd jam in as many as 80 appointments. If he had an hour between planes, he'd order his secretary to jam in one more. Beyster may have been a scientist by training, but he was a salesman at heart. He described himself as a "marketeer."

Although he could be an engaging companion when dealing with military brass and agency heads, around the office Beyster could also be distant and imperious, an autocrat who ruled with an iron hand. SAIC presented itself as a friendly "employee owned" company. Inside, everyone understood how the stock program was really used—to punish and reward. No one harbored any illusions about whose company it was. "In Bob Beyster's mind, that company was not the shareholders' company, it was Bob Beyster's company," said Gerald Pomraning, a nuclear physicist who helped Beyster set up SAIC, in a legal proceeding. "When I was on the board of directors, he told us many times that the board of directors was simply a legal entity that was required, but it was his company."

Beyster advocated a form of internal entrepreneurship that led to cutthroat competition for contracts. Operations were chaotic because divisions independent of one another frequently fought for the same business. Glenn Grossenbacher, the Texas lawyer, describes the dynamic as "eat what you kill." Chief financial officers, frustrated by Beyster's exacting and sometimes mercurial demands, came and went. The company's organizational chart was often in flux. According to one former executive, Beyster was known around the office as a "control freak" who undermined managers by going around them and dealing directly with their staffs. Bernice Stanfill King, a former SAIC executive who managed the company's internal stock program, says that Beyster would often assign a single job to two executives. "He would call in one high-level guy and put him on a project," she explains. "Then he would call another guy in a totally different part of the company and put him on the project. Then these guys would bump into each other and [wonder], 'What's he doing?' You never honestly knew what was going on inside. Nothing was ever in the open."

As befits a company with deep ties to the intelligence and national-security community, SAIC's culture has always had a military cast to it. Employees are expected to follow orders. Even former employees are wary of discussing SAIC. One former manager who has worked on sensitive, even dangerous assignments abroad spoke about SAIC only after receiving assurances of anonymity, saying, "This is a very powerful company."

In the years when most corporations had glass ceilings for women, few were lower or thicker than the one at SAIC. Although Beyster was married (and the father of three children), his behavior toward women often ranged from coolness to open hostility. His former secretary, Linda Anderson, once testified that Beyster was "uncomfortable with women." She recalled that when a woman came into a meeting Beyster's manner became stilted. "Even his posture changed," she said. King, who sued the company for sex discrimination and won, said in an interview with Vanity Fair that when passing Beyster in the hall she was not to speak to him or even to look at him. Women were made to address the boss as "Dr. Beyster"; men called him "Bob." When a woman made a mistake, Beyster typically called her on it, using words like "stupid" or "incompetent." When a man made a mistake—well, it was just that, a mistake. Beyster's former secretary testified that he once instructed her, on the eve of a major corporate function, to make sure he wasn't seated next to SAIC's one female board member, "because all women talked about was where they got their hair done."

Beyster's close associates within SAIC were a succession of young men. Known as aides-de-camp, they were usually handsome, well educated, and intelligent, with a facility for numbers and a willingness to perform personal tasks for their boss. Beyster was an ardent sailor, and in the summertime he liked to spend afternoons cruising the waters off San Diego aboard his yacht in the company of these young men. George Wilson, who once headed SAIC's public-relations operation, has stated in a legal proceeding that the young men provided a variety of personal services for Beyster, including using SAIC equipment to make copies of pornographic movies that Beyster would watch aboard his boat.

When Beyster traveled on business, he often took one of the aides-de-camp with him, and asked his secretary to arrange for them to stay in the same hotel room—this according to the secretary's courtroom testimony. Wilson said in a deposition that one of the young men he knew who slept in the same room with Beyster on these trips told him that he didn't like doing it, but that "it was part of traveling with Beyster." Some of the young aides-de-camp went on to become executives at SAIC. Bernice King testified that Beyster had a name for his young assistants: he called them his "baby boys." When asked about these assertions, which surfaced in a sex-discrimination case, Beyster declined to comment on any particulars, saying, "Although I cannot address the specific points you raise from court testimony, I will say that during this trial a number of very personal accusations were leveled against me that are not accurate."

Klondike on the Euphrates
Civilians at SAIC used to joke that the company had so many admirals and generals in its ranks it could start its own war. Some might argue that, in the case of Iraq, it did.

There isn't a politically correct way to put it, but this is what needs to be said: 9/11 was a personal tragedy for thousands of families and a national tragedy for all of America, but it was very, very good for SAIC. In the aftermath of the attacks, the Bush administration launched its Global War on Terror, whose chief consequence has been to channel money by the tens of billions into companies promising they could do something—anything—to help. SAIC was ready. Four years earlier, anticipating the next big source of government revenue, SAIC had established the Center for Counterterrorism Technology and Analysis. According to SAIC, the purpose of the new unit was to take "a comprehensive view of terrorist threats, including the full range of weapons of mass destruction, more traditional high explosives, and cyber-threats to the national infrastructure." In October of 2006 the company told would-be investors flatly that the war on terror would continue to be a lucrative growth industry.

SAIC executives have been involved at every stage of the life cycle of the war in Iraq. SAIC personnel were instrumental in pressing the case that weapons of mass destruction existed in Iraq in the first place, and that war was the only way to get rid of them. Then, as war became inevitable, SAIC secured contracts for a broad range of operations in soon-to-be-occupied Iraq. When no weapons of mass destruction were found, SAIC personnel staffed the commission that was set up to investigate how American intelligence could have been so disastrously wrong.

It is Wednesday afternoon, March 25, 1998, and David A. Kay, who had been a U.N. official in Iraq in the aftermath of the 1991 Gulf War, is on Capitol Hill testifying before the Senate Armed Services Committee. Americans generally remember Kay as the head of the Iraq Survey Group, the man who showed that Saddam Hussein didn't possess W.M.D. when America invaded in 2003, and that the war was launched under false pretenses. But today, in 1998, he is not David Kay, weapons inspector, but David Kay, director of SAIC's Center for Counterterrorism Technology and Analysis. He is a stockholder in a company known to cognoscenti in the hearing room as a fraternal twin of the intelligence establishment. With great authority, Kay tells the committee that Saddam Hussein "remains in power with weapons of mass destruction" and that "military action is needed." He warns that unless America acts now "we're going to find the world's greatest military with its hands tied."

Over the next four years, Kay and others associated with SAIC hammered away at the threat posed by Iraq. Wayne Downing, a retired general and a close associate of Ahmad Chalabi, proselytized hard for an invasion of Iraq, stating that the Iraqis "are ready to take the war … overseas. They would use whatever means they have to attack us." In many of his appearances on network and cable television leading up to the war, Downing was identified simply as a "military analyst." It would have been just as accurate to note that he was a member of SAIC's board of directors and a company stockholder. (Downing was also the chief proponent of a weapons system called Metal Storm, capable of firing a million rounds of ammunition a minute; SAIC received $10 million from the Pentagon to develop prototypes, but in the last two years the Metal Storm company has lost millions.) In the run-up to the war, David Kay remained outspoken. He told NBC News in October of 2002, "I don't think it's possible to disarm Iraq as long as Saddam is in power and desires to maintain weapons of mass destruction."

On all these points Kay and Downing were buttressing the views of Vice President Dick Cheney, Defense Secretary Donald Rumsfeld, and others in the Bush administration. They were also echoing the assertions of Iraqi exiles living in the United States, who had been trying to overthrow Saddam Hussein for years. Many of those exiles—people like Khidhir Hamza, a onetime atomic-energy official in Iraq, who insisted that Saddam posed an imminent nuclear danger to the United States—would in time receive paychecks from SAIC. Although his evidence had long been discredited by weapons experts, Hamza was among about 150 Iraqi exiles designated by the Pentagon as members of the newly chartered Iraqi Reconstruction and Development Council. The plan was that, once American troops secured Iraq, the I.R.D.C. recruits would move into influential positions in a rebuilt Iraqi government.

SAIC served as the paymaster for the Iraqi exiles under a $33 million government contract. It brought them all together in the Washington, D.C., suburbs, rented apartments for them, paid their living expenses, provided various support services, and, later, after the invasion and occupation, flew them to their jobs in the new, democratic Iraq. This SAIC operation reported to Douglas Feith, the undersecretary of defense for policy at the Pentagon, a key assistant to Rumsfeld, and one of the architects of the Iraq invasion and occupation. Feith's deputy was Christopher "Ryan" Henry, a former SAIC senior vice president.

It was understood in Washington, long before the actual onset of "shock and awe," that the Iraq war would be a Klondike gold rush for contractors. Prior to the war, SAIC was awarded seven contracts, together worth more than $100 million, without competitive bidding. The Defense Department's justification for the no-bid contracts: "We need the immediate services of a fully qualified contractor who has the unqualified support and confidence of the Pentagon leadership." SAIC's personnel, designated "subject-matter experts," were expected to lend a hand on such matters as "business development, international and regional political relations, the role of women in government, and government reform." Among SAIC's subject-matter experts was Shaha Riza, an Arab feminist and communications adviser at the World Bank. Riza also happened to be the girlfriend of Paul Wolfowitz, the deputy secretary of defense.

One week before the invasion, SAIC was awarded yet another no-bid contract, this one for $15 million, which within a year would balloon to $82 million. The contract gave SAIC the responsibility for establishing a "free and independent indigenous media network" in Iraq, and for training a cadre of independent Iraqi journalists to go with it. The selection of SAIC for this job may have seemed counter-intuitive. A year earlier, SAIC had been involved in a Pentagon program designed to feed disinformation to the foreign press. The program was overseen by a Pentagon entity with the Orwellian name of Office of Strategic Influence, and its aims proved sufficiently odious that someone inside the Pentagon leaked its existence to The New York Times. An unrepentant Donald Rumsfeld stated that he would shut down the Office of Strategic Influence—but in name only: "There's the name. You can have the name, but I'm going to keep doing every single thing that needs to be done."

To create its Iraqi Media Network, SAIC hired professional newsmen from the United States as consultants. One of them was a former NBC News staff member, Don North, who had launched his career as a cameraman in Vietnam and eventually rose to become the NBC News bureau chief in Cairo. North began with high expectations. Once Saddam Hussein was ousted, he and his colleagues hoped to create a BBC-like news operation, instilling "standards of international broadcasting and news reporting" that Iraqis had never known before. It soon became clear that the Pentagon and the Coalition Provisional Authority had other ideas. To them, the Iraqi Media Network represented an opportunity to push the U.S. agenda in Iraq in the most simplistic sort of way. With SAIC's cooperation, the network quickly devolved into a mouthpiece for the Pentagon—"a little Voice of America," as North would put it. Iraqis openly snickered at the programming. Every time North protested, he recalls, he was rebuffed by SAIC executives. "Here I was going around quoting Edward R. Murrow," North says, "and the people who were running me were manipulating and controlling a very undemocratic press and media that was every bit as bad as what Saddam had established." In the end the network was turned over to Iraqi control. Today it is a tool of Iraq's Shiite majority and spews out virulently anti-American messages day and night. "And to think we started it," says North. The SAIC-created television network may be the only functioning weapon of mass destruction in today's Iraq.

As everyone now acknowledges, no other such weapons have ever been found, although search teams ran through more than $1 billion looking for them. The closest they came was the discovery, in May of 2003, of a "mobile bioweapons lab" in the form of a tractor-trailer whose interior configuration looked suspicious. David Kay was on hand to lend credence to the notion that the trailer was a weapons lab. "This is where the biological process took place," he explained in one NBC News broadcast. "You took the nutrients. Think of it sort of as a chicken soup for biological weapons. You mixed it with the seed stock, which came from this gravity-flow tank up here into the fermenter, and under pressure with heat, it fermented." Kay outlined the process step by step. The discovery of the trailer was, as the NBC News interviewer allowed, "very close to that elusive smoking gun."

It turned out, however, that the mobile weapons lab was nothing of the kind. To be sure, the military, back in the United States, did have in its possession something that looked a lot like the Iraqi trailer. In advance of the invasion, SAIC had built its own version of a mobile bioweapons lab, intended to help U.S. troops recognize such a facility if they ever came across one. SAIC had built, in effect, a self-fulfilling prophecy.

After failing to find the W.M.D., Kay told Congress in January of 2004: "Let me begin by saying we were almost all wrong, and I certainly include myself here." The next month President Bush appointed a commission to look at how American intelligence managed to miss the truth about Iraq's weapons programs. The commission delivered its report one year later, and although it sternly pointed to obvious intelligence failures, it kept its gaze, as it had been told to do, at a very low level—and far away from the issue of whether senior policymakers had deliberately manipulated intelligence findings: "The Commission found no indication that the Intelligence Community distorted the evidence regarding Iraq's weapons of mass destruction," the report concluded.

Three of the commission's staff members had direct ties to SAIC. One was Gordon Oehler, the commission's deputy director for review. When Oehler left the C.I.A., in October of 1997, after a 25-year career, he in essence walked down the street and into the McLean offices of SAIC to become a vice president for corporate development. A second commission staff member with ties to the company was Jeffrey R. Cooper, vice president for technology and chief science officer in one of SAIC's major sub-units. The third member was Samuel S. Visner, who holds a graduate degree in Washington's revolving-door system. From 1997 to 2001, Visner was an SAIC vice president for corporate development, and also a business-development manager. Next, he moved into a government spymaster job, becoming chief of signals-intelligence programs for the National Security Agency. During this time SAIC was one of several firms to receive a $280 million contract from the N.S.A. to develop one of its secret eavesdropping systems. In 2003, Visner returned to SAIC to become a senior vice president and the director of strategic planning and business development of the company's intelligence group.

As for General Downing, he has become a regular contributor on television as a military expert on the war in Iraq and America's options. Everyone seems to have forgotten his earlier bellicosity.

The Flying Hummer
SAIC's ability to prosper is all the more remarkable given its record of lawsuits, charges brought by whistle-blowers, allegations of profiteering, fines assessed by federal judges, and repeated investigations and government audits. According to one former executive, in a sworn deposition in 1992, the practice of "mischarging" became "institutionalized within the company." (SAIC denies such allegations.)

The job of establishing the Iraqi Media Network's infrastructure—cables, transmitters, dishes—was rife with corruption and waste. In one instance, government auditors questioned an SAIC invoice for approximately $10 million. (SAIC says it is unaware of the auditors' report.) In March of 2004 the Pentagon's inspector general found widespread violations of normal contracting procedures: improper payments to subcontractors, unsubstantiated equipment purchases, unauthorized personnel on the payroll. One of the more blatant transgressions concerned SAIC's overall manager of the media effort in Iraq. The investigators discovered that he had bought a Hummer and a pickup truck in the United States and then chartered a DC-10 cargo jet to fly them to Iraq. When a Pentagon official refused to allow the charge, the inspector general reported, "SAIC then went around the authority of this acquisition specialist to a different office within the Under Secretary of Defense for Policy to gain approval and succeeded." SAIC's performance on the Iraqi Media Network contract is now, indirectly, at issue in a lawsuit brought by an employee who alleges that she was fired after she tried to draw the attention of SAIC executives to what she described in the suit as "unethical, illegal, and unsafe practices" by the company in Iraq. Because of the pending legal action, this employee declined to be interviewed, but considerable documentation is already part of the public record, including portions of her personnel file. SAIC's corporate priorities are suggested by one commendation the employee received, for her "excellent billing credentials."

This way of doing business has been an SAIC character trait for years. In 1991, SAIC was charged with falsifying data submitted to the E.P.A. on soil samples from Superfund toxic-waste sites. The law required the E.P.A. to identify toxic dumps and determine which ones posed the gravest risks. To perform the analysis, the E.P.A. contracted with independent labs, including SAIC's Environmental Chemistry Laboratory, in La Jolla. The lab was supposed to test soil and water samples within a certain number of days of their being received "to ensure the chemicals being tested for would not have dissipated in the interim." But technicians at SAIC's lab tested some samples after the deadline and then backdated the results. SAIC mounted a high-powered behind-the-scenes campaign to escape prosecution. A member of SAIC's board of directors, former secretary of defense Melvin R. Laird, wrote a personal letter to Attorney General Dick Thornburgh. "I can assure you there was no wrongdoing on the part of the corporation," Laird stated. Criminal prosecution of SAIC, he went on, would be "entirely inappropriate." Ultimately the company was accused by the government of making "false, fictitious and fraudulent statements," and pleaded guilty to 10 counts of making false statements or claims. SAIC paid $1.3 million in fines and restitution.

A few years later SAIC was in trouble again, this time over its efforts to design a flat-panel liquid-crystal-display screen to be used as a navigational device in the cockpits of air-force fighter jets. The initial contract had been awarded in 1987, but SAIC kept going back for more money. The government would shell out millions—even as SAIC assured the air force that steady progress was being made. And in fact air-force officials had no reason to believe otherwise: they had seen what they thought was a demonstration model when SAIC officials unveiled a slick-looking compact box with a backlit screen. SAIC officials traveled to military bases around the country to show off the prototype. A respected magazine, Engineering Design News, published a photograph of the display screen on its cover.

But the box was a fake. SAIC had been unable to develop the actual technology. The prototype—in effect, nothing more than a cheap video game—had been cobbled together with components taken from TV sets, computers, and everyday consumer appliances. When two SAIC employees complained to their superiors, both were fired. Two employees later filed whistle-blower lawsuits charging SAIC with defrauding the government. While denying any wrongdoing, in 1995 SAIC settled the suit with the government and paid a fine of $2.5 million.

The ill-fated cockpit-display project was hardly an isolated case. A recent case revealed one method SAIC employed to increase the profits on a contract. In San Antonio, the air force awarded SAIC a $24 million contract to clean up contaminated-waste sites at Kelly Air Force Base. Once the project was under way, the SAIC manager overseeing the job realized that the work would cost much less than the amount SAIC had negotiated. "It was massively overstaffed," Michael Woodlee, the former manager, said in an interview. "I didn't need that many [people]." Woodlee said he told one of his superiors that "there was no way under the moon we could spend all this money."

This is not what SAIC wanted to hear. Woodlee said that, because he couldn't spend everything in his budget, his SAIC superiors suggested that he "harvest money out of [his] project and send it up the corporate ladder." After he resisted, Woodlee contended, the project was taken away from him, and he was laid off.

In 2002, Woodlee filed a whistle-blower lawsuit charging SAIC with fraud under the federal False Claims Act. Working with air-force investigators, the U.S. attorney in San Antonio concluded that SAIC had in fact grossly understated profits on the contract: rather than the 8 to 10 percent profit the contract allowed, SAIC had, "unbeknownst to the Air Force," realized profits of three times that amount, and had submitted "false and fraudulent statements of its expected costs and profits."

SAIC's response was audacious. It told federal officials, in effect, that the government was right: the company does increase the profit margin beyond the terms of the contract. But there's a reason: risk is involved, and the additional profit is compensation for that risk. According to documents in the case, SAIC explained that it employs something called "Quantitative Risk Analysis" to identify potential business risks, and that it factors those costs into its contracts, although without ever mentioning the fact to customers. In a written response, the company stated that this kind of risk analysis is "commonly used throughout industry" and "such purely judgmental information was not required to be disclosed under [federal law] based on longstanding legal principles." But by failing to disclose that information to federal negotiators, the air force maintained, SAIC induced it "to agree to much higher prices than [the air force] would have agreed to had SAIC truthfully disclosed its cost and pricing data." After SAIC's "risk defense" surfaced, the air force issued a written alert to warn other agencies about SAIC's business methods, which it said SAIC "intends to continue using."

Although the amount of money in contention was relatively small, the principle involved was large, and it had potentially national implications. Was SAIC using the same formula in thousands upon thousands of other contracts it had with the government? We'll never know. For reasons that remain unclear, the Justice Department decided against expanding the probe beyond San Antonio. Is it possible that a call was made from one well-placed individual to another? In April of 2005, SAIC, while denying wrongdoing, settled the San Antonio lawsuit by paying a fine of $2.5 million.

More important, the company had forestalled a wider investigation. One of Woodlee's lawyers, Glenn Grossenbacher, who has represented other whistle-blowers against other companies, describes SAIC as unlike any other company he has ever confronted. "These guys handle things very differently than other people," he said. "They had better access to the Pentagon than the government's own attorneys. They are so well connected they were able to isolate this one case. This should have been a [national] case. The reason it wasn't was because of their political clout to shut it down and localize it."

Not every SAIC client is as forgiving as the United States government. When SAIC failed to deliver a highly touted security system for the 2004 Athens Olympics, the Greek government refused to make a final payment. SAIC had proposed the most extensive security shield in Olympic history: more than 100 command posts, vehicle-tracking devices and sensors everywhere, 1,600 video cameras, and a blimp loaded with "sensitive equipment" floating "silently overhead acting as an airborne surveillance center." As video feeds flowed to a central command post, SAIC's state-of-the-art software would link all these capabilities. The system was to remain in place as an anti-terrorism tool in Athens for years to come. But turmoil within SAIC plagued the effort from the start. Project managers came and went. On the eve of the games a source close to the Olympic planners stated that "the entire Committee without exception believe that the … system doesn't work."

The Olympics started up on schedule. SAIC's security system did not. A newspaper in Athens described the system as "operationally useless," and Greek officials improvised simply by adding more guards. Before the games began, SAIC and the Greek government had quietly come to an agreement that called for continued testing of the system and "final acceptance to occur no later than October 1, [2004]"—one month after the games ended. A payment of $23 million would follow. SAIC missed this deadline, too. After more wrangling the two sides, according to an Athens newspaper, reached an understanding that calls for SAIC to complete work by May 2008, almost four years after the Olympics. As of last fall, SAIC's losses on the project totaled a staggering $123 million, and the company acknowledges "our poor performance on the Greek Olympics contract." SAIC is trying to recoup some of its losses in an arbitration and so far has managed to keep the lid on potentially embarrassing revelations about the competence of a company whose operations are built on claims of technical expertise.

Radiation Sickness
Given that its founder came from a company called General Atomic it is hardly surprising that SAIC has been heavily involved in the nuclear business. One early project came in the 1970s and 80s, when SAIC received Pentagon contracts to reconstruct the amount of radiation absorbed by military personnel during atomic-bomb tests and other service-related exposures. The government's bookkeeping was so erratic from the early days of the Cold War that it was often difficult to tell how much radiation soldiers had received and whether it might have been responsible for their various cancers. When SAIC did the numbers, few veterans qualified for compensation. The Pentagon's nuclear testing was in effect off the hook, and ailing veterans were out of luck. After years of hearings, Congress in 1988 passed the Radiation-Exposed Veterans Compensation Act, which gave veterans the benefit of the doubt. It was presumed that their cancer was attributable to nuclear exposure without considering the radiation dose. By then many of the veterans were dead. A health physicist who testified later on behalf of the veterans spoke unkindly of the original SAIC work: "Atomic veterans have been deprived of benefits intended by Congress through [SAIC's] deceptive internal dose reconstructions and poor understanding of radioactive material distribution in the body." SAIC disagrees, saying that it "continues to work with the government to apply the best science to performing dose reconstruction for atomic veterans."

Periodically over the years, the Nuclear Regulatory Commission and the U.S. Department of Energy, prodded by executives in the nuclear industry, have sought to ease the rules against re-using "lightly" contaminated radioactive waste. The impetus has been the inexorably growing stockpile of nuclear debris—much of it lethal—that has been accumulating at weapons sites and power plants in America for decades. One way to draw down the stockpile would be to recycle large volumes of discarded nickel, aluminum, copper, steel, and other irradiated metals into usable products. If slightly radioactive metal were combined with other metals, the resulting material could be made into all kinds of consumer items—knives and forks, baby strollers, chairs, rings, eyeglass frames, bicycles, reclining rockers, earrings, frying pans. It also could be used in construction.

Lest any of this sound improbable, in the 1980s radioactive table legs began turning up in the United States everywhere from restaurants to nursing homes. A radioactive gold ring cost a Pennsylvania man his arm. The public outcry was so great that in 1992 Congress set out to ban this form of recycling. The N.R.C., D.O.E., and nuclear industry saw the ban coming and were not happy about it, but they also saw a way out: maybe it would be possible to develop broad guidelines that would allow the contaminated waste to be recycled based on what were deemed "safe" exposure levels. Never mind that there is no such thing as a safe dose of radiation. Two months before the ban was signed into law, the N.R.C. gave the multi-million-dollar job of formulating the guidelines to an outside contractor. The contractor was SAIC.

As the years slipped by, across town, another federal agency, the Department of Energy, was handing out a $238 million contract to B.N.F.L. Inc., at that time the U.S. subsidiary of British Nuclear Fuels, "to clean up and reindustrialize three massive uranium enrichment facilities" at Oak Ridge National Laboratory, in Tennessee. The agreement called for B.N.F.L. to recycle "hundreds of thousands of tons of metals." British Nuclear Fuels had a questionable track record in the nuclear industry. For decades it had dumped plutonium and other radioactive waste into the Irish Sea and the North Atlantic. Its workers had falsified critical quality-control data. When the D.O.E. announced the contract, SAIC was identified as a major subcontractor in the recycling of radioactive scrap metal.

Because the N.R.C. and the D.O.E. for some reason weren't talking to each other, the elegance of this arrangement escaped everyone's attention. To connect the dots: SAIC was writing the regulations for one government agency, the N.R.C., which would set the permissible limits of radioactive contamination for recycling, even as it partnered with another company, under contract to a different federal agency, the D.O.E., to recycle the radioactive metal for which it was drafting the regulations.

The synergy of this arrangement was discovered accidentally by a Washington lawyer, Daniel Guttman, whose longtime passion has been conflicts of interest that inevitably—purposefully—arise from government outsourcing. Guttman called attention in public hearings to what was happening, thoroughly embarrassing officials at the N.R.C. and the D.O.E. and stirring the ire of public-interest groups. The N.R.C. killed its contract with SAIC. The recycling project was put on hold. And the N.R.C. filed suit against SAIC, alleging "false and/or fraudulent representations to the effect that [SAIC] was providing services to the NRC which were free from bias." SAIC has denied the conflict-of-interest claims, and the suit is still pending.

But SAIC is by no means out of the nuclear business. It may be under a cloud at the N.R.C., but it's still a partner, with the construction giant Bechtel, in the largest nuclear project of all—the $3.1 billion effort to build a repository for America's high-level radioactive waste. The firm Bechtel SAIC is constructing the repository deep under Yucca Mountain, Nevada, where the buried waste will remain lethal for at least 10,000 years. It could provide a revenue stream for SAIC as far into the future as one can imagine.

The Permanent Government
Bob Beyster turned 79 in 2003. He was in his 34th year with the company. A writer for The San Diego Union-Tribune, granted a rare interview around this time, observed that Beyster was a "little more stooped now," but still vigorous. He continued to run three or four miles almost every day. Over the years numerous executives rumored to be his successor had come and gone as it became apparent that Beyster had no intention of relinquishing power. But the sheer size of the company and its aggressive, internally competitive style were catching up to Beyster. Even Pentagon officials had begun to complain that SAIC's overlapping divisions were creating confusion. When the Pentagon talks, contractors listen. In 2003, the SAIC board forced him out. By 2004, SAIC had a new chairman, Kenneth Dahlberg, a top executive at General Dynamics with long experience in the defense industry.

In October of 2006, SAIC carried out a long-anticipated I.P.O., selling 86 million shares at $15 a share in its debut on the New York Stock Exchange, raising $1.2 billion. Reflecting investor bullishness, shares rose to $21 in a matter of days. Its prospects have never looked brighter.

Unlike traditional wars, which eventually come to an end, the Global War on Terror as defined by the Bush administration can have no end: it is a permanent war—the perfect war for a company that has become an essential component of the permanent government. Political change causes scarcely a ripple. As one former SAIC manager observed in a recent blog posting: "My observation is that the impact of national elections on the business climate for SAIC has been minimal. The emphasis on where federal spending occurs usually shifts, but total federal spending never decreases. SAIC has always continued to grow despite changes in the political leadership in Washington."

And the revolving door never stops spinning. One of the biggest contracts ever for SAIC is in the works right now. It's for a Pentagon program called Future Combat Systems, which is described as "a complex plan to turn the U.S. Army into a lighter, more lethal, more mobile force" and also as "the most difficult integration program ever undertaken by the U.S. Department of Defense." The contract runs into the billions of dollars. The man who helped craft this program at the Pentagon was Lieutenant General Daniel R. Zanini. Zanini recently retired from the army, and he now has a new job. Can you guess where it might be?

Donald L. Barlett and James B. Steele are Vanity Fair contributing editors


Friday, February 16, 2007

Paul Krugman, The Health Care Racket

February 16, 2007
Op-Ed Columnist
The Health Care Racket

Is the health insurance business a racket? Yes, literally — or so say two New York hospitals, which have filed a racketeering lawsuit against UnitedHealth Group and several of its affiliates.

I don’t know how the case will turn out. But whatever happens in court, the lawsuit illustrates perfectly the dysfunctional nature of our health insurance system, a system in which resources that could have been used to pay for medical care are instead wasted in a zero-sum struggle over who ends up with the bill.

The two hospitals accuse UnitedHealth of operating a “rogue business plan” designed to avoid paying clients’ medical bills. For example, the suit alleges that patients were falsely told that Flushing Hospital was “not a network provider” so UnitedHealth did not pay the full network rate. UnitedHealth has already settled charges of misleading clients about providers’ status brought by New York’s attorney general: the company paid restitution to plan members, while attributing the problem to computer errors.

The legal outcome will presumably turn on whether there was deception as well as denial — on whether it can be proved that UnitedHealth deliberately misled plan members. But it’s a fact that insurers spend a lot of money looking for ways to reject insurance claims. And health care providers, in turn, spend billions on “denial management,” employing specialist firms — including Ingenix, a subsidiary of, yes, UnitedHealth — to fight the insurers.

So it’s an arms race between insurers, who deploy software and manpower trying to find claims they can reject, and doctors and hospitals, who deploy their own forces in an effort to outsmart or challenge the insurers. And the cost of this arms race ends up being borne by the public, in the form of higher health care prices and higher insurance premiums.

Of course, rejecting claims is a clumsy way to deny coverage. The best way for an insurer to avoid paying medical bills is to avoid selling insurance to people who really need it. An insurance company can accomplish this in two ways, through marketing that targets the healthy, and through underwriting: rejecting the sick or charging them higher premiums.

Like denial management, however, marketing and underwriting cost a lot of money. McKinsey & Company, the consulting firm, recently released an important report dissecting the reasons America spends so much more on health care than other wealthy nations. One major factor is that we spend $98 billion a year in excess administrative costs, with more than half of the total accounted for by marketing and underwriting — costs that don’t exist in single-payer systems.

And this is just part of the story. McKinsey’s estimate of excess administrative costs counts only the costs of insurers. It doesn’t, as the report concedes, include other “important consequences of the multipayor system,” like the extra costs imposed on providers. The sums doctors pay to denial management specialists are just one example.

Incidentally, while insurers are very good at saying no to doctors, hospitals and patients, they’re not very good at saying no to more powerful players. Drug companies, in particular, charge much higher prices in the United States than they do in countries like Canada, where the government health care system does the bargaining. McKinsey estimates that the United States pays $66 billion a year in excess drug costs, and overpays for medical devices like knee and hip implants, too.

To put these numbers in perspective: McKinsey estimates the cost of providing full medical care to all of America’s uninsured at $77 billion a year. Either eliminating the excess administrative costs of private health insurers, or paying what the rest of the world pays for drugs and medical devices, would by itself more or less pay the cost of covering all the uninsured. And that doesn’t count the many other costs imposed by the fragmentation of our health care system.

Which brings us back to the racketeering lawsuit. If UnitedHealth can be shown to have broken the law — and let’s just say that this company, which is America’s second-largest health insurer, has a reputation for playing even rougher than its competitors — by all means, let’s see justice done. But the larger problem isn’t the behavior of any individual company. It’s the ugly incentives provided by a system in which giving care is punished, while denying it is rewarded.

Copyright 2007 The New York Times Company

Don't do it Mr. President

Don't Do It, Mr. President

Hon. Ron Paul Of Texas
Before the U.S. House of Representatives 02/06/07

02/14/07 "ICH" -- --

It’s a bad idea.
There’s no need for it.
There’s great danger in doing it.
America is against it, and Congress should be.
The United Nations is against it.
The Russians, the Chinese, the Indians, and the Pakistanis are against it.
The whole world is against it.
Our allies are against it.
Our enemies are against it.
The Arabs are against it.
The Europeans are against it.
The Muslims are against it.
We don’t need to do this.
The threat is overblown.
The plan is an hysterical reaction to a problem that does not yet exist.
Hysteria is never a good basis for foreign policy.
Don’t we ever learn?
Have we already forgotten Iraq?
The plan defies common sense.
If it’s carried out, the Middle East, and possibly the world, will explode.
Oil will soar to over $100 a barrel, and gasoline will be over $5 a gallon.
Despite what some think, it won’t serve the interests of Israel.
Besides-- it’s illegal.
It’s unconstitutional.
And you have no moral authority to do it.
We don’t need it.
We don’t want it.
So, Mr. President, don’t do it.
Don’t bomb Iran!
The moral of the story, Mr. Speaker, is this: if you don’t have a nuke, we’ll threaten to attack you. If you do have a nuke, we’ll leave you alone. In fact, we’ll probably subsidize you. What makes us think Iran does not understand this?

In accordance with Title 17 U.S.C. Section 107, this material is distributed without profit to those who have expressed a prior interest in receiving the included information for research and educational purposes. Information Clearing House has no affiliation whatsoever with the originator of

Thursday, February 15, 2007

The rights of children, Libby Brooks, The Guardian UK

It's not enough to say we should listen to children

If we take anything from this devastating report, it must be just how poorly young people's rights are being served in the UK

Libby Brooks
Thursday February 15, 2007
The Guardian

Al Aynsley-Green has got it right. There is a crisis at the heart of our society. The children's commissioner was responding to the publication yesterday of Unicef's report on the well-being of children and adolescents in wealthy countries. Its results are devastating. Overall, this country ranks last, making it the worst place to grow up in the developed world.

British children are more likely to have got drunk or had sex than those of any other country. In terms of numbers living in households where the income was less than 50% of the national median, the UK surpasses only the US. And just over 40% of British children found their peers "kind and helpful", compared with over 80% in Switzerland.

What is so striking is not only the lack of security and contentment that has been identified, but the vast gap between British children's experience and those of young people in other developed countries. Indeed, the UK's only partner in crime is the US, which must lead one to question how successful the Anglo-Saxon economic model can ever be at tackling entrenched inequality and burgeoning discontent.

The government was swift to dismiss the findings as "historic", because they analyse research that was done before the implementation of the Children's Act 2004. But Unicef's report comes after several other substantial pieces of research, from the Institute of Public Policy Research, Save the Children and the Nuffield Foundation, which all identified similar trends. The truth is that post-2004 child poverty still remains nearly double what it was in 1979, while we continue to have the highest teenage birthrate in Europe.

It's important not to cry "toxic childhood" immediately. This is not solely a consequence of junk food, computer games and the Pussycat Dolls. Many of Unicef's findings can be traced back to poverty, pure and simple. But not all of them. The report also points to significant cultural factors. British society does not value its children. Since the Victorian era, they have been segregated from society, corralled into classrooms and swept off the streets. In many ways, simply to be young is to meet the definition of social exclusion: no say in the political process, not contributing directly to the economy, criminalised for offences determined by your status rather than actions, vilified by the media.

This exclusion has been compounded by an increasing panic around the behaviour of some children. New Labour has pandered to popular prejudice with its antisocial behaviour agenda, as well as legitimising adult avoidance of collective involvement in the socialisation of children. Additionally, over recent decades this country has become infected with a culture of individualism and materialism that has proved disastrous for children and parents. The values of parenting are in direct opposition to those that currently dominate society - the modern absolutes of autonomy, freedom and selfhood.

Having children is now increasingly seen as a lifestyle choice. And there is no sense from government that having children could be socially rather than economically useful. Families are encouraged to have babies to ensure that future jobs are filled, not to sustain the community. Education is valued as an investment in potential earning and spending power. Schools have become extraordinarily competitive institutions. Psychologists have identified how, because children use comparison with their peers as a means of self-evaluation, modern teaching methods exploit this. The system is designed to create more losers than winners, and so it's hardly surprising that children are reporting feelings of failure rather than mutual liking, or are deciding to escape it all with a two-litre bottle of White Lightning.

Reactions to the Unicef report have again underlined the need to listen to children. But what do we mean by that? When less than a quarter of children in this country say they feel respected they are articulating something much bigger than the desire to be included in the occasional impact assessment. They are expressing a genuine lack of agency, and the need for a more coherent social identity to allow them real involvement in the world they are growing up in.

If we take anything from the Unicef report it must be just how poorly children's rights are served in this country. Five years ago, the UN Committee on the Rights of the Child found Britain failing on many counts, and a recent Children's Rights Alliance for England report found that the government has only made significant progress on 12 of the 76 recommendations made.

Sweden, which came second-top in Unicef's ranking, is a country whose entire approach to children is rights-based. Every aspect of emerging legislation is assessed for its impact on children. The equivalent in this country might include an increase in taxes to support public services for children. If we want a Scandinavian-style rating next time around, we can't have American-style taxation. We could stop locking children up as an antidote to antisocial behaviour, and extend to them the same protection from physical punishment that adults have. We could assess why alcohol has to be so cheap and advertising so pervasive.

Last week, Charles Falconer described human rights as "common sense". But a country that respected its children as rights-holders, with all this entails? That really would be common sense.

· Libby Brooks is the author of The Story of Childhood.

No apology needed, by David Brooks

February 15, 2007
Op-Ed Columnist
No Apology Needed

Far be it from me to get in the middle of a liberal purge, but would anybody mind if I pointed out that the calls for Hillary Clinton to apologize for her support of the Iraq war are almost entirely bogus?

I mean, have the people calling for her apology actually read the speeches she delivered before the war? Have they read her remarks during the war resolution debate, when she specifically rejected a pre-emptive, unilateral attack on Saddam? Did they read the passages in which she called for a longer U.N. inspections regime and declared, “I believe international support and legitimacy are crucial”?

If they went back and read what Senator Clinton was saying before the war, they’d be surprised, as I was, by her approach. And they’d learn something, as I did, about what kind of president she would make.

The Iraq war debate began in earnest in September 2002. At that point Clinton was saying in public what Colin Powell was saying in private: emphasizing the need to work through the U.N. and build a broad coalition to enforce inspections.

She delivered her Senate resolution speech on Oct. 10. It was Clintonian in character. On the one hand, she rejected the Bush policy of pre-emptive war. On the other hand, she also rejected the view that the international community “should only resort to force if and when the United Nations Security Council approves it.” Drawing on the lessons of Bosnia, she said sometimes the world had to act, even if the big powers couldn’t agree.

She sought a third way: more U.N. resolutions, more inspections, more diplomacy, with the threat of force reserved as a last resort. She was triangulating, but the Senate resolution offered her a binary choice. She voted yes in order to give Powell bipartisan leverage at the U.N.

This is how she’s always explained that vote, and I confess that until now, I’ve regarded her explanation as a transparent political dodge. Didn’t everyone know this was a war resolution? But now, having investigated her public comments, I think diplomatic leverage really was on her mind. I also know, from a third person, that she was spending a lot of time with Powell and wanted to help.

On Nov. 8, 2002, the Security Council passed a unanimous resolution threatening Saddam with “serious consequences” if he didn’t disarm.

The next crucial period came in March 2003, as the U.S. battled France over the second Security Council resolution. Clinton’s argument at this point was that inspections were working and should be given more time. “It is preferable that we do this in a peaceful manner through coercive inspection,” she said on March 3, but went on, “At some point we have to be willing to uphold the United Nations resolutions.” Then she added, “This is a very delicate balancing act.”

On March 17, Bush gave Saddam 48 hours to disarm or face attack. Clinton tried to be critical of the Bush policy while being deferential to the office of the presidency. She clearly had doubts about Bush’s timing, but she kept emphasizing that from her time in the White House, she knew how unhelpful it was for senators to be popping off in public on foreign policy.

At one press event in New York, she nodded when Charles Rangel said Bush had failed at the U.N. But when reporters asked Clinton to repeat what Rangel had just said, she bit her tongue. On March 17, as U.S. troops mobilized, she issued her strongest statement in support of the effort.

Clinton’s biggest breach with the liberal wing actually opened up later, in the fall of 2003. Most liberals went into full opposition, wanting to see Bush disgraced. Clinton — while an early critic of the troop levels, the postwar plans and all the rest — tried to stay constructive. She wanted to see America and Iraq succeed, even if Bush was not disgraced.

When you look back at Clinton’s thinking, you don’t see a classic war supporter. You see a person who was trying to seek balance between opposing arguments. You also see a person who deferred to the office of the presidency. You see a person who, as president, would be fox to Bush’s hedgehog: who would see problems in their complexities rather than in their essentials; who would elevate procedural concerns over philosophical ones; who would postpone decision points for as long as possible; and who would make distinctions few heed.

Today, the liberal wing of the Democratic Party believes that the world, and Hillary Clinton in particular, owes it an apology. If she apologizes, she’ll forfeit her integrity. She will be apologizing for being herself.

Copyright 2007 The New York Times Company

Monday, February 05, 2007

The Green-Zoning of America

February 5, 2007
Op-Ed Columnist
The Green-Zoning of America

One of the best of the many recent books about the Iraq debacle is Rajiv Chandrasekaran’s “Imperial Life in the Emerald City.” The book tells a tale of hopes squandered in the name of politicization and privatization: key jobs in Baghdad’s Green Zone were assigned on the basis of loyalty rather than know-how, while key functions were outsourced to private contractors.

Two recent reports in The New York Times serve as a reminder that the Bush administration has brought the same corruption of governance to the home front. Call it the Green-Zoning of America.

In the first article, The Times reported that a new executive order requires that each agency contain a “regulatory policy office run by a political appointee,” a change that “strengthens the hand of the White House in shaping rules that have, in the past, often been generated by civil servants and scientific experts.” Yesterday, The Times turned to the rapid growth of federal contracting, fed “by a philosophy that encourages outsourcing almost everything government does.”

These are two different pieces of the same story: under the guise of promoting a conservative agenda, the Bush administration has created a supersized version of the 19th-century spoils system.

The blueprint for Bush-era governance was laid out in a January 2001 manifesto from the Heritage Foundation, titled “Taking Charge of Federal Personnel.” The manifesto’s message, in brief, was that the professional civil service should be regarded as the enemy of the new administration’s conservative agenda. And there’s no question that Heritage’s thinking reflected that of many people on the Bush team.

How should the civil service be defeated? First and foremost, Heritage demanded that politics take precedence over know-how: the new administration “must make appointment decisions based on loyalty first and expertise second.”

Second, Heritage called for a big increase in outsourcing — “contracting out as a management strategy.” This would supposedly reduce costs, but it would also have the desirable effect of reducing the total number of civil servants.

The Bush administration energetically put these recommendations into effect. Political loyalists were installed throughout the government, regardless of qualifications. And the administration outsourced many government functions previously considered too sensitive to privatize: yesterday’s Times article begins with the case of CACI International, a private contractor hired, in spite of the obvious conflict of interest, to process cases of incompetence and fraud by private contractors. A few years earlier, CACI provided interrogators at Abu Ghraib.

The ostensible reason for politicizing and privatizing was to promote the conservative ideal of smaller, more efficient government. But the small-government rhetoric was never sincere: from Day 1, the administration set out to create a vast new patronage machine.

Those political appointees chosen for their loyalty, not their expertise, aren’t very good at doing their proper jobs — as all the world learned after Hurricane Katrina struck. But they have been very good at rewarding campaign contributors, from energy companies that benefit from lax regulation of pollution to pharmaceutical companies that got a Medicare program systematically designed to protect their profits.

And the executive order described by The Times will make it even easier for political appointees to overrule the professionals, tailoring government regulations to suit the interests of companies that support the G.O.P. — or to give lucrative contracts to people with the right connections.

Meanwhile, never mind the idea that outsourcing of government functions should be used to promote competition and save money. The Times reports that “fewer than half of all ‘contract actions’ — new contracts and payments against existing contracts — are now subject to full and open competition,” down from 79 percent in 2001. And many contractors are paid far more than it would cost to do the job with government employees: those CACI workers processing claims against other contractors cost the government $104 an hour.

What’s truly amazing is how far back we’ve slid in such a short time. The modern civil service system dates back more than a century; in just six years the Bush administration has managed to undo many of that system’s achievements. And the administration still has two years to go.

Copyright 2007 The New York Times Company
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Friday, February 02, 2007

Missing Molly Ivins, by Paul Krugman

February 2, 2007
Op-Ed Columnist
Missing Molly Ivins

Molly Ivins, the Texas columnist, died of breast cancer on Wednesday. I first met her more than three years ago, when our book tours crossed. She was, as she wrote, “a card-carrying member of The Great Liberal Backlash of 2003, one of the half-dozen or so writers now schlepping around the country promoting books that do not speak kindly of Our Leader’s record.”

I can’t claim to have known her well. But I spent enough time with her, and paid enough attention to her work, to know that obituaries that mostly stressed her satirical gifts missed the main point. Yes, she liked to poke fun at the powerful, and was very good at it. But her satire was only the means to an end: holding the powerful accountable.

She explained her philosophy in a stinging 1995 article in Mother Jones magazine about Rush Limbaugh. “Satire ... has historically been the weapon of powerless people aimed at the powerful,” she wrote. “When you use satire against powerless people ... it is like kicking a cripple.”

Molly never lost sight of two eternal truths: rulers lie, and the times when people are most afraid to challenge authority are also the times when it’s most important to do just that. And the fact that she remembered these truths explains something I haven’t seen pointed out in any of the tributes: her extraordinary prescience on the central political issue of our time.

I’ve been going through Molly’s columns from 2002 and 2003, the period when most of the wise men of the press cheered as Our Leader took us to war on false pretenses, then dismissed as “Bush haters” anyone who complained about the absence of W.M.D. or warned that the victory celebrations were premature. Here are a few selections:

Nov. 19, 2002: “The greatest risk for us in invading Iraq is probably not war itself, so much as: What happens after we win? ... There is a batty degree of triumphalism loose in this country right now.”

Jan. 16, 2003: “I assume we can defeat Hussein without great cost to our side (God forgive me if that is hubris). The problem is what happens after we win. The country is 20 percent Kurd, 20 percent Sunni and 60 percent Shiite. Can you say, ‘Horrible three-way civil war?’ ”

July 14, 2003: “I opposed the war in Iraq because I thought it would lead to the peace from hell, but I’d rather not see my prediction come true and I don’t think we have much time left to avert it. That the occupation is not going well is apparent to everyone but Donald Rumsfeld. ... We don’t need people with credentials as right-wing ideologues and corporate privatizers — we need people who know how to fix water and power plants.”

Oct. 7, 2003: “Good thing we won the war, because the peace sure looks like a quagmire. ...

“I’ve got an even-money bet out that says more Americans will be killed in the peace than in the war, and more Iraqis will be killed by Americans in the peace than in the war. Not the first time I’ve had a bet out that I hoped I’d lose.”

So Molly Ivins — who didn’t mingle with the great and famous, didn’t have sources high in the administration, and never claimed special expertise on national security or the Middle East — got almost everything right. Meanwhile, how did those who did have all those credentials do?

With very few exceptions, they got everything wrong. They bought the obviously cooked case for war — or found their own reasons to endorse the invasion. They didn’t see the folly of the venture, which was almost as obvious in prospect as it is with the benefit of hindsight. And they took years to realize that everything we were being told about progress in Iraq was a lie.

Was Molly smarter than all the experts? No, she was just braver. The administration’s exploitation of 9/11 created an environment in which it took a lot of courage to see and say the obvious.

Molly had that courage; not enough others can say the same.

And it’s not over. Many of those who failed the big test in 2002 and 2003 are now making excuses for the “surge.” Meanwhile, the same techniques of allegation and innuendo that were used to promote war with Iraq are being used to ratchet up tensions with Iran.

Now, more than ever, we need people who will stand up against the follies and lies of the powerful. And Molly Ivins, who devoted her life to questioning authority, will be sorely missed.

Copyright 2007 The New York Times Company

Fukuyama ("The end of History") on the neocons

The neocons have learned nothing from five years of catastrophe

Their zealous advocacy of the invasion of Iraq may have been a disaster, but now they want to do it all over again - in Iran

Francis Fukuyama
Wednesday January 31, 2007
The Guardian

The United States today spends approximately as much as the rest of the world combined on its military establishment. So it is worth pondering why it is that, after nearly four years of effort, the loss of thousands of American lives, and an outlay of perhaps half-a-trillion dollars, the US has not succeeded in pacifying a small country of some 24 million people, much less in leading it to anything that looks remotely like a successful democracy.

One answer is that the nature of global politics in the first decade of the 21st century has changed in important ways. Today's world, at least in that band of instability that runs from north Africa and through the Middle East, sub-Saharan Africa and central Asia, is characterised by numerous weak and sometimes failed states, and by transnational actors who are able to move fluidly across international borders, abetted by the same technological capabilities that produced globalisation. States such as Afghanistan, Pakistan, Iraq, Lebanon, Somalia, Palestine and a host of others are not able to exercise sovereign control over their territory, ceding power and influence to terrorist groups such as al-Qaida, political parties-cum-militias such as Hizbullah in Lebanon, or various ethnic and sectarian factions elsewhere.

American military doctrine has emphasised the use of overwhelming force, applied suddenly and decisively, to defeat the enemy. But in a world where insurgents and militias deploy invisibly among civilian populations, overwhelming force is almost always counterproductive: it alienates precisely those people who have to make a break with the hardcore fighters and deny them the ability to operate freely. The kind of counterinsurgency campaign needed to defeat transnational militias and terrorists puts political goals ahead of military ones, and emphasises hearts and minds over shock and awe.

A second lesson that should have been drawn from the past five years is that preventive war cannot be the basis of a long-term US nonproliferation strategy. The Bush doctrine sought to use preventive war against Iraq as a means of raising the perceived cost to would-be proliferators of approaching the nuclear threshold. Unfortunately, the cost to the US itself was so high that it taught exactly the opposite lesson: the deterrent effect of American conventional power is low, and the likelihood of preventive war actually decreases if a country manages to cross that threshold.

A final lesson that should have been drawn from the Iraq war is that the current US government has demonstrated great incompetence in its day-to-day management of policy. One of the striking things about the performance of the Bush administration is how poorly it has followed through in accomplishing the ambitious objectives it set for itself. In Iraq, the administration has acted like a patient with attention-deficit disorder. The US succeeded in organising efficiently for key events such as the handover of sovereignty on June 30 2004, or the elections of January 30 2005. But it failed to train Iraqi forces, failed to appoint ambassadors, failed to perform due diligence on contractors and, above all, failed to hold accountable those officials most responsible for these and other multiple failures.

This lack of operational competence could in theory be fixed over time, but it has important short-term consequences for American grand strategy. Neoconservative theorists saw America exercising a benevolent hegemony over the world, using its enormous power wisely and decisively to fix problems such as terrorism, proliferation, rogue states, and human-rights abuses. But even if friends and allies were inclined to trust America's good intentions, it would be hard for them not to be dismayed at the actual execution of policy and the amount of broken china this particular bull left behind.

The failure to absorb Iraq's lessons has been evident in the neoconservative discussion of how to deal with Iran's growing regional power, and its nuclear programme. Iran today constitutes a huge challenge for the US, as well as for America's friends in the Middle East. Unlike al-Qaida, Iran is a state, deeply rooted historically (unlike Iraq) and flush with resources as a result of energy price rises. It is ruled by a radical Islamist regime that - particularly since Mahmoud Ahmadinejad's election in June 2005 - has turned in a disturbingly intolerant and aggressive direction.

The US unintentionally abetted Iran's regional rise by invading Iraq, eliminating the Ba'athist regime as a counterweight, and empowering Shia parties close to Tehran. It seems reasonably clear that Iran wants nuclear weapons, despite protestations that its nuclear programme is only for civilian purposes; nuclear energy makes little sense for a country sitting on some of the world's largest oil reserves, but it makes sense as the basis for a weapons programme. It is completely rational for the Iranians to conclude that they will be safer with a bomb than without one.

It is easy to outline the obstacles to a negotiated end to the Iranian programme, but much harder to come up with an alternative strategy. Use of force looks very unappealing. The US is hardly in a position to invade and occupy yet another country, especially one three times larger than Iraq. An attack would have to be conducted from the air, and it would not result in regime change, which is the only long-term means of stopping the WMD programme. It is hard to have much confidence that US intelligence on Iranian facilities is any better than it was in the case of Iraq. An air campaign is much more likely to build support for the regime than to topple it, and will stimulate terrorism and attacks on American facilities and friends around the globe. The US would be even more isolated in such a war than during the Iraqi campaign, with only Israel as a certain ally.

None of these considerations, nor the debacle in Iraq, has prevented certain neoconservatives from advocating military action against Iran. Some insist that Iran poses an even greater threat than Iraq, avoiding the fact that their zealous advocacy of the Iraq invasion is what has destroyed America's credibility and undercut its ability to take strong measures against Iran.

All of this could well be correct. Ahmadinejad may be the new Hitler; the current negotiations could be our Munich accords; Iran could be in the grip of undeterrable religious fanatics; and the west might be facing a "civilisational" danger. I believe that there are reasons for being less alarmist. Iran is, after all, a state, with equities to defend - it should be deterrable by other states possessing nuclear weapons; it is a regional and not a global power; it has in the past announced extreme ideological goals but has seldom acted on them when important national interests were at stake; and its decision-making process appears neither unified nor under the control of the most radical forces.

What I find remarkable about the neoconservative line of argument on Iran, however, is how little changed it is in its basic assumptions and tonalities from that taken on Iraq in 2002, despite the momentous events of the past five years and the manifest failure of policies that neoconservatives themselves advocated. What may change is the American public's willingness to listen to them.

· This is an edited extract from After the Neocons by Francis Fukuyama, published in paperback by Profile books at £7.99

Thursday, February 01, 2007

Virtual march on Washington to stop the escalation

Please use this link to sign into the virtual stream of protest. One million signatures are the target for today: