Tag Archives: corruption

Oxfam says lack of SEC rule contributing to oil-fueled corruption

WASHINGTON–A bureaucratic delay in carrying out a rule requiring U.S.-listed companies to disclose payments to foreign governments for getting access to oil, gas and minerals has contributed to corruption in those countries and harm to investors at home, says a report by nonprofit Oxfam America.

At issue is the implementation of a key section of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which is approaching its fifth anniversary next week.

“That is five years of payments for oil projects without adequate transparency and citizen oversight. Five years of corruption and poverty in oil-rich countries. Five years with investors not having access to this critical data,” the report says.

The provision requires oil, gas and mining companies to disclose payments to the Securities and Exchange Commission for things such as taxes, permits and licenses needed for development overseas.

Oil production in developing countries including Angola, Nigeria, Indonesia, Sierra Leone is estimated to have generated approximately $1.55 trillion for such governments in the five years since Dodd-Frank Act was enacted, and much of it has flowed to governments with limited or no transparency, according to the report by Oxfam America, the U.S. branch of the international charity working to find solutions to poverty around the world.

The federal rule would also have “serious impact on investors and their bottom line,” said Isabel Munilla, Oxfam America’s senior policy advisor.

“Oil, gas and mineral development has destabilized a lot of countries,” Munilla said in a phone interview. Despite generating a lot of money, the development often leads to conflicts in local communities, where many remain poor despite the windfall, she added.

“And when communities protest to stop a mining or oil drilling project, the company can loose millions of dollars in a day,” Munilla said.

The report also indicates that American Petroleum Institute and 10 of its members have spent over $360 million on lobbying and political contributions in the U.S. between 2010 and 2014. Most notably among their efforts, was an oil industry lawsuit led by the API that resulted in the overturn of a “strong final rule” issued by the SEC in 2012.

The U.S law, when implemented, will “shine a light on payments made by more than 1,100 companies”, many of which constitute the world’s largest oil, gas and mining businesses, including Chinese and Brazilian state-owned companies, says the report.

In a March filing the SEC has indicated that it may not issue the new rule until spring of next year.

Oxfam has asked the U.S. District Court in Massachusetts to compel the SEC to finish the rule by the close of 2015. The court’s decision is still pending but “should come out any day from now,” said Munilla.

“With payments for oil and mining projects out in the open, citizens can demand their governments spend these funds in the communities where drilling is taking place – using it to fight extreme poverty and build roads, schools, and hospitals,” said Raymond Offenheiser, president of Oxfam America.

Facing aggressive lobbying and legal challenges by trade groups like the API and oil industry giants like Shell and Chevron, the SEC has already delayed its rule making “at least seven times,” Munilla said.

An SEC spokeswoman declined to comment on the report or the rule-making process.

The Dodd-Frank provision has inspired 30 countries to adopt similar laws and regulations requiring payment transparency of oil, gas and mining companies, the report says. As a result, U.S.-listed companies including Shell and BP, even though not yet required by the SEC to disclose payments, will soon have to do so as these companies are also covered by the European and Canadian regulations.

Not all companies in the oil, gas and mining industry oppose the disclosure rule. Oil companies including Statoil and Kosmos Energy have already begun disclosing their payment information. Statoil, an API member, has publicly distanced itself from the lawsuit against the SEC, the report says.

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Some point to abuses in Mexican drug war

WASHINGTON–Mexican President Felipe Calderon and U.S. President Barack Obama used Calderon’s recent trip to Washington to reaffirm their mutual support for the fight against drug cartels on both sides of the border.

Lawmakers on both sides of the aisle have called the fight a priority, and both Democrats and Republicans have proposed beefed-up security measures on the U.S. side of the border. Most recently, Obama announced plans to send 1,200 National Guard troops to the southwest border.

Congress has appropriated about $1.3 billion in anti-crime and drug funding for Mexico through the Merida Initiative, a multi-year program launched in 2007 that also targets criminal organizations in Central America and the Caribbean.

But the militarization of the fight against drug cartels on the Mexican side of the border, and U.S. support of the effort, has raised red flags in some quarters over escalating violence as well as human rights violations and corruption in the Mexican military and justice system.

At a U.S. Senate subcommittee hearing on drug enforcement and the rule of law May 18, Jose Miguel Vivanco, executive director of the Americas Division of Human Rights Watch, criticized the human rights record of the Mexican military and the lack of accountability for human rights violators. Calderon has relied heavily on the military in his effort to quell the drug cartels.

“Too often local leaders respond to public demands to get tough on crime by condoning abusive practices that not only undermine the rule of law by violating basic rights but also fail to curb crime,” Vivanco said.

In the three years since Calderon launched a military crackdown on drug cartels, about 22,700 people have been killed in drug-related violence.

Beyond the violence, Vivanco’s testimony pointed to alleged abuses by the military, including rape and killings, as well as at least 100 people who claimed to have been arbitrarily detained and then tortured to obtain false confessions since 2009.

Vivanco said that last year Congress should not have given Mexico the 15% of its funding under the Merida legislation that is conditional on fulfillment of human rights requirements. A State Department report to Congress highlighted some issues, including lack of transparency in the military justice system, but found that Mexico had met the four human rights conditions.

Sen. Dick Durbin, D-Ill., chairmen of the subcommittee, was also the sole senator in attendance at the hearing, as his colleagues were occupied with debating Wall Street reform. Durbin called the fight against drug cartels a priority but said the United States has a responsibility to see that its aid does not fuel human rights abuses.

“The military in Mexico in many instances operates with virtual impunity, resulting in limited success in stemming drug violence and human rights abuses that rival and surpass often the corruption of the law enforcement system they were sent to replace,” he said.

Officials from the State Department and Department of Justice testified that Mexico has made significant reforms. The Calderon administration has taken steps to remove suspect law enforcement officials, customs officials and judges and to reform and modernize its judicial system, with U.S. assistance.

David T. Johnson, Assistant Secretary of State for International Narcotics and Law Enforcement Affairs, wrote in his testimony that institutional reforms in Mexico are a work in progress.

“The strategy that the U.S. Government is pursuing with the Government of Mexico is an effective, long-term program, not a temporary ‘quick fix’,” he wrote.

As the drug war continues in Mexico, it’s a debate that will likely be played out many times.

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