Wednesday, June 02, 2004

Visitors Beware: Accenture's US-Visit Venture

The Department of Homeland Security awarded Accenture a contract -- estimated to total $15 billion -- for US-Visit, a program for "virtual borders" tracking entries and exits of all visitors to the United States. Eric Lichtblau and John Markoff of the New York Times report that "[s]everal industry executives and analysts said that the award surprised them and that Accenture had widely been considered the outside candidate," though some might have cashed in on their insider knowledge, as "Wall Street analysts said . . . that there had been 'chatter' about the award to Accenture before the market opened" on Tuesday, driving up the Accenture stock ("Accenture Is Awarded U.S. Contract for Borders," June 2, 2004).

Apparently, the fact that Accenture -- formerly Andersen Consulting of the Enron scandal notoriety (see the footnote) -- is incorporated in Bermuda to avoid taxes did not prove an obstacle for the Department of Homeland Security, whose commitment to neoliberalism makes it refuse to discriminate against foreign corporations even while it seeks to scrutinize every movement of each foreign visitor to the United States. In fact, Accenture is an industry leader in the art of finagling federal contracts even while dodging federal taxes:
Companies that reduced their U.S. tax bill by incorporating overseas did $1 billion worth of business with the federal government last year, an Associated Press computer analysis of federal contracts showed.

The Bermuda-based consulting company Accenture Ltd., a spinoff of the former Big Five accounting firm Arthur Andersen, was the biggest federal customer. It received $662 million in contracts between Oct. 1, 2001, and Sept. 30, 2002, mostly from the Transportation Security Administration.

The engineering firm Foster Wheeler Ltd. received $293.2 million. Ingersoll-Rand Co. Ltd., which boasts that its equipment helped carve Mount Rushmore, received $7.6 million.

During the federal fiscal year that ended in September 2001, companies with offshore headquarters received $846 million in federal contracts, according to the House Ways and Means Committee's Democratic staff. . . .

The process is known as corporate inversion: A company moves its headquarters -- sometimes nothing more than a post office box -- to a low-tax enclave such as Bermuda or the Cayman Islands while leaving its operations and employees in the United States.

The Senate twice has passed legislation to prevent the new Homeland Security Department from doing business with companies that relocate overseas, but both times the provision was removed from the final bill by House Republican leaders. . . .

Corporations that have moved overseas spent $5 million to lobby Congress and the federal agencies and donated $1.2 million to campaigns in 2001 and 2002, according to an AP analysis of data from Political Money Line, an Internet site.

To fight legislation restricting their ability to move offshore, the companies have assembled an all-star team of lobbyists, including former Sens. Slade Gorton, R-Wash., and Dennis DeConcini, D-Ariz.; former House Ways and Means Committee Chairman Bill Archer, R-Texas; and former House Appropriations Committee Chairman Bob Livingston, R-La., according to disclosure forms filed with the House and Senate. . . .

Lawmakers estimate corporations that have moved to low-tax countries cost the U.S. treasury $4 billion a year.

"People should be screaming to the rafters about the hypocrisy involved in corporations moving offshore and then coming back to the taxpayers for a handout in the form of government contracts," said Charlie Cray, director of the campaign for corporate reform at Citizen Works, an advocacy group affiliated with consumer advocate Ralph Nader. . . .

One of the Homeland Security Department's agencies, the Transportation Security Administration, gave Accenture a contract of close to $515 million to handle human resources for the agency's employees, including administering health insurance, life insurance and retirement benefits. . . . (Jonathan D. Salant, "Offshore Companies Do $1 Billion in Business with US Government," The Associated Press, May 27, 2003 )
Nevertheless, it is odd to award a bigger and more complex project to a company that failed to make a smaller and simpler one work less than four months ago. Accenture was given a contract to build "a $22 million system to allow soldiers and other Americans overseas to vote via the Internet" -- the Secure Electronic Registration and Voting Experiment [SERVE] -- but a panel of computer security experts warned that SERVE "has numerous other fundamental security problems that leave it vulnerable to a variety of well-known cyberattacks, any one of which could be catastrophic":
Serve, the panel members wrote, "has numerous other fundamental security problems that leave it vulnerable to a variety of well-known cyberattacks, any one of which could be catastrophic."

Any system for voting over the Internet with common personal computers, the report noted, would run the same risks.

The Trojan horses, viruses and other attacks that complicate modern life and allow crimes like online snooping and identity theft could allow hackers to disrupt or even alter the course of elections, the report concluded. A major American election would be an irresistible target for hackers, and the ability of computers to automate tasks means that many attacks could be carried out on a large scale, the report added.

Such attacks "could have a devastating effect on public confidence in elections," the authors wrote, adding, "The best course to take is not to field the Serve system at all." (John Schwartz, "Report Finds Security Risks in Allowing Americans Overseas to Cast Votes on the Internet," New York Times, January 22, 2004, p. A23).
The panel's findings led the Department of Defense to essentially scrap the program: "Deputy Defense Secretary Paul D. Wolfowitz wrote a memo Jan. 30 saying the Pentagon 'will not be using the SERVE Internet voting project in view of the inability to assure legitimacy of votes that would be cast using the system, which thereby brings into doubt the integrity of election results,' said a defense official, speaking on condition of anonymity. Officials previously defended the system, saying security had been enhanced" (Reuters, "The Race to the White House: Web Voting Program Scrapped," Los Angeles Times, February 6, 2004, p. A21). Will US-Visit be any less vulnerable than SERVE? According to Valerie Alberto and Dominique Bogatz, "the federal government's record on computer security is poor":
The CAPPS II system may lack sufficient controls over who will have access to the sensitive personal information contained within the system. According to the Notice, information in this system will be safeguarded in accordance with applicable rules and policies, including the DOT’s automated systems security and access policies. This means that system access will be limited to those individuals who require it to perform their official duties.72 However, the federal government’s record on computer security is poor, according to the GAO.73 In 1998, the GAO failed 7 of 24 major agencies, including the Department of Health and Human Services (“DHHS”), Department of Justice and the Office of Personnel Management, for having poor computer security.74 ("Computer Assisted Passenger Prescreening System ("CAPPS II"): National Security v. Civil Liberties," March 19, 2004)
More recently, the Subcommittee on Technology, Information Policy, Intergovernmental Relations, and the Census gave the Department of Homeland Security an F in computer security ("Federal Computer Security Report Card," December 9, 2003).

For more information about Accenture, consult the Polaris Institute's excellent dossier "Accenture (formerly Andersen Consulting) -- Corporate Profile" (June 2003).

The dossier on Accenture needs to be updated, however. For instance, what came out of the Securities and Exchange Commission and Department of Justice's investigation of Accenture's "possible noncompliance with the Foreign Corrupt Practices Act that the company first announced in July [2003]" ("Accenture under Investigation" The Atlanta Journal-Constitution, November 19, 2003, p. 2C), concerning Accenture's "Middle East division" (Juan Carlos Perez, "Accenture Tops Net Revenue, Earnings Expectations: The Company Continued to Expand Its Outsourcing Business,", July 15, 2003)?

By the way, one of Accenture's partners in the US-visit venture is Titan Corporation, implicated in the Abu Ghraib torture scandal in Iraq and currently investigated for bribery in a number of nations:
  • At least two other firms provided staff who worked in the notorious Abu Ghraib prison: Titan Corporation supplied interpreters, and CACI International of Virginia, interrogators.

    At least one employee from each of those companies has been named in internal Pentagon reports about the Abu Ghraib scandal. (Jon Leyne, "The Business of War in Iraq," BBC, May 25, 2004)

  • California-based Titan Corporation says it is "a leading provider of solutions and services for national security". Between 2003-04, it gave nearly $40,000 to George W Bush's Republican Party. Titan supplied translators to the military. (Neil Mackay, "The Pictures That Lost The War,"Sunday Herald [Scotland], May 2, 2004)

  • Titan manages to score those federal contracts despite the company's history of running afoul of the law. Just two months ago, the Army has suspended 10% of Titan's payment for current work in Iraq pending an audit of employment practices while the Securities and Exchange Commission (SEC) is investigating bribery charges against the company in five countries. . . .

    Like many other contractors in Iraq, Titan workers often carry weapons, technically illegal under United States military law, and travel with the troops, making them easy targets for the underground resistance who view them as traitors.

    Ironically Titan's translators have also been accused of working for the other side. Ahmed Fathy Mehalba, a taxi driver from Boston, was one of the 70 Titan translators hired to aid interrogations in Guantánamo Bay, Cuba. He was arrested in September 2003 after returning from his native Egypt with what authorities claimed were classified information from the Cuban base.

    Mehalba had previously failed Army interrogation school in Fort Huachuca, Arizona and received a medical discharge from the Army in May 2001. A girlfriend he met there was dishonorably discharged after allegedly being caught with a stolen laptop containing classified information.

    Mehalba said he did not know how the information, some of it marked secret, got on the disc, according to the affidavit. He told the FBI interrogators that he got the CD from an uncle had worked in military intelligence in Egypt but had long since retired. . . .

    In March 2004 the Pentagon's Defense Contract Audit Agency (DCAA) discovered "deficiencies in the labor accounting controls of Titan in Iraq prompting them to penalize the company. William Reed, DCAA director, said in an interview. "In layman's language it basically says 'You submit a bill to us and we are only going to pay 90% of it until you fix these labor accounting deficiencies.'"

    DCAA said Titan had inadequate systems for documenting its billing of the Pentagon for labor costs and for tracking the work of non-American consultants. The agency will withhold as much as $4.9 million in payments until the company fixes accounting deficiencies uncovered by the audit. . . .

    Titan is also currently being investigated for bribing officials in Indonesia, Ivory Coast, Nigeria, Saudi Arabia and Zimbabwe, according to CorpWatch sources. The Wall Street Journal has also suggested that the company is being investigated in Bangladesh and the Philippines.

    The criminal investigation was triggered when Lockheed Martin, a Bethesda, Maryland, based military contractor, made an offer to buy the company for $1.8 billion. Because Lockheed is the biggest contractor to the Pentagon, the government performed a routine anti-monopoly check which uncovered the bribery scandals.

    This in turn led the Justice Department and the SEC to begin separate investigations into "allegations relating to certain payments and provisions of items of value to foreign officials, which, if true, raise questions as to whether Titan has violated the Foreign Corrupt Practices Act," Titan Chief Executive Officer Gene Ray wrote in a March 8 letter to customers.

    "These are allegations; not evidence of wrongdoing," [Titan spokesman Wil] Williams told reporters. But Lockheed is no angel in these matters -- in 1995 the company pleaded guilty and paid a $24.8 million fine for conspiring to bribe an Egyptian politician for help in securing a contract for three C-130H cargo jets. (Pratap Chatterjee, "Titan's Translators in Trouble," CorpWatch, May 7, 2004)
A "virtual border" guard that is certain to reassure would-be tourists, businessmen, and students from all nations. . . .

A Footnote on Accenture, Arthur Andersen, and Enron:
  • In 1989, the auditing and consulting divisions were designated Arthur Andersen and Andersen Consulting, respectively, and became separate units of what amounted to a holding company, Andersen Worldwide.

    Throughout the 1990s, a feud developed between the two halves of Andersen Worldwide. The feud eventually went before an International Chamber of Commerce arbitrator; in 2000, the arbitration proceedings finally resulted in a complete split between the divisions. Andersen Consulting had to pay holding company Andersen Worldwide $1 billion to sever its ties (less than the parent company claimed it should get). As of January 1, 2001, Andersen Consulting became Accenture. ("Meet the Privateers — Brief Profiles")

  • Accenture is the new name for Andersen Consulting, which broke away from Arthur Andersen in 2000, after a longstanding feud. The change to Accenture was the fastest, most expensive re-branding effort in history as everything was changed to fit the new logo in a matter of days. It is Arthur Andersen that is in so much legal trouble for allowing Enron to cook their books and destroying Enron’s documents as Enron collapsed. While Accenture states that because it is no longer tied to Andersen it is not implicated in the Andersen/Enron scandal, the Wall Street Journal reported that Accenture might have some legal exposure to the Enron scandal, especially if Accenture had anything to do with consulting for Enron’s ‘special-purpose entities’ which were among the main players in Enron’s collapse. ("Accenture [formerly Andersen Consulting] -- Corporate Profile," June 2003)

1 comment:

jgmitch said...

Accenture Ltd did not perform a "corporate inversion" as it was originally established in Bermuda and not moved there at a later time. Before Accenture was formed it existed as a series of partnerships around the world. In fact, the U.S. General Accounting Office concluded that Accenture did not conduct a corporate inversion. Additionally, the Accenture company that won the US-VISIT project is LLP not Ltd and is based in the US AND pays taxes on all income earned in the US. It may surprise many that Accenture LLP's US tax rate is HIGHER than the companies it competed against for the US-VISIT program.

The allusion that Accenture was involved in the Enron scandal is also a stretch and misleading to say the least. The Wall Street Journal reporting that Accenture MIGHT have some legal exposure to the scandal does not warrant that Accenture is of the, "Enron scandal notoriety."