Koch Brothers Flout Law With Secret Iran Sales

Original Link: http://www.bloomberg.com/news/2011-10-02/koch-brothers-flout-law-getting-richer-with-secret-iran-sales.html

By Asjylyn Loder and David Evans

In May 2008, a unit of Koch Industries Inc., one of the world’s largest privately held companies, sent Ludmila Egorova-Farines, its newly hired compliance officer and ethics manager, to investigate the management of a subsidiary in Arles in southern France. In less than a week, she discovered that the company had paid bribes to win contracts.

“I uncovered the practices within a few days,” Egorova- Farines says. “They were not hidden at all.”

She immediately notified her supervisors in the U.S. A week later, Wichita, Kansas-based Koch Industries dispatched an investigative team to look into her findings, Bloomberg Markets magazine reports in its November issue.

By September of that year, the researchers had found evidence of improper payments to secure contracts in six countries dating back to 2002, authorized by the business director of the company’s Koch-Glitsch affiliate in France.

“Those activities constitute violations of criminal law,” Koch Industries wrote in a Dec. 8, 2008, letter giving details of its findings. The letter was made public in a civil court ruling in France in September 2010; the document has never before been reported by the media.

Egorova-Farines wasn’t rewarded for bringing the illicit payments to the company’s attention. Her superiors removed her from the inquiry in August 2008 and fired her in June 2009, calling her incompetent, even after Koch’s investigators substantiated her findings. She sued Koch-Glitsch in France for wrongful termination.

Obsessed with Secrecy

Koch-Glitsch is part of a global empire run by billionaire brothers Charles and David Koch, who have taken a small oil company they inherited from their father, Fred, after his death in 1967, and built it into a chemical, textile, trading and refining conglomerate spanning more than 50 countries.

Koch Industries is obsessed with secrecy, to the point that it discloses only an approximation of its annual revenue -- $100 billion a year -- and says nothing about its profits.

The most visible part of Koch Industries is its consumer brands, including Lycra fiber and Stainmaster carpet. Georgia- Pacific LLC, which Koch owns, makes Dixie cups, Brawny paper towels and Quilted Northern bath tissue.

Charles, 75, and David, 71, each worth about $20 billion, are prominent financial backers of groups that believe that excessive regulation is sapping the competitiveness of American business. They inherited their anti-government leanings from their father.

Abolishing Social Security

Fred was an early adviser to the founder of the anti- communist John Birch Society, which fought against the civil rights movement and the United Nations. Charles and David have supported the Tea Party, a loosely organized group that aims to shrink the size of government and cut federal spending.

These are long-standing tenets for the Kochs. In 1980, David Koch ran for vice president on the Libertarian ticket, pledging to abolish Social Security, the Federal Reserve System, welfare, minimum wage laws and federal agencies -- including the Department of Energy, the Federal Bureau of Investigation and the Central Intelligence Agency.

What many people don’t know is how the Kochs’ anti- regulation political ideology has influenced the way they conduct business.

A Bloomberg Markets investigation has found that Koch Industries -- in addition to being involved in improper payments to win business in Africa, India and the Middle East -- has sold millions of dollars of petrochemical equipment to Iran, a country the U.S. identifies as a sponsor of global terrorism.

The ‘Koch Method’

Internal company documents show that the company made those sales through foreign subsidiaries, thwarting a U.S. trade ban. Koch Industries units have also rigged prices with competitors, lied to regulators and repeatedly run afoul of environmental regulations, resulting in five criminal convictions since 1999 in the U.S. and Canada.

From 1999 through 2003, Koch Industries was assessed more than $400 million in fines, penalties and judgments. In December 1999, a civil jury found that Koch Industries had taken oil it didn’t pay for from federal land by mismeasuring the amount of crude it was extracting. Koch paid a $25 million settlement to the U.S.

Phil Dubose, a Koch employee who testified against the company said he and his colleagues were shown by their managers how to steal and cheat -- using techniques they called the Koch Method.

Refused to Falsify

In 1999, a Texas jury imposed a $296 million verdict on a Koch pipeline unit -- the largest compensatory damages judgment in a wrongful death case against a corporation in U.S. history. The jury found that the company’s negligence had led to a butane pipeline rupture that fueled an explosion that killed two teenagers.

Former Koch employees in the U.S. and Europe have testified or told investigators that they’ve witnessed wrongdoing by the company or have been asked by Koch managers to take what they saw as improper actions.

Sally Barnes-Soliz, who’s now an investigator for the State Department of Labor and Industries in Washington, says that when she worked for Koch, her bosses and a company lawyer at the Koch refinery in Corpus Christi, Texas, asked her to falsify data for a report to the state on uncontrolled emissions of benzene, a known cause of cancer. Barnes-Soliz, who testified to a federal grand jury, says she refused to alter the numbers.

“They didn’t know what to do with me,” she says. “They were really kind of baffled that I had ethics.”

Koch’s refinery unit pleaded guilty in 2001 to a federal felony charge of lying to regulators and paid $20 million in fines and penalties.

Corporate Cultures

“How much lawless behavior are we going to tolerate from any one company?” asks David Uhlmann, who oversaw the prosecution of the Koch refinery division when he was chief of the environmental crimes unit at the U.S. Department of Justice. “Corporate cultures reflect the priorities of the corporation and its senior officials.”

Koch Industries declined to make either Charles Koch, who lives near corporate headquarters in Wichita, or David Koch, who lives in New York, available for interviews.

Melissa Cohlmia, Koch’s director of corporate communications, said in an e-mailed statement that the company has developed a good relationship with environmental regulators and now complies with all rules. Cohlmia says the company has learned lessons from past mistakes, including the improper payment scheme that Koch outlined in its letter filed in French court.

‘Steps to Correct’

“We are proud to be a major American employer and manufacturing company with about 50,000 U.S. employees,” she wrote. “Given the regulatory complexity of our business, we will, like any business, have issues that arise. When we fall short of our goals, we take steps to correct and address the issues in order to ensure compliance.”

Cohlmia says Koch fired the employees and sales agents involved in the illicit payments and strengthened internal controls.

Regarding sales to Iran, she wrote, “During the relevant time frame covered in your article, U.S. law allowed foreign subsidiaries of U.S. multinational companies to engage in trade involving countries subject to U.S. trade sanctions, including Iran, under certain conditions.”

Koch has since stopped all of its units from trading with Iran, she says.

Lobbying Washington

The Koch brothers have vaulted into the American political spotlight in recent years. Koch Industries has spent more than $50 million to lobby in Washington since 2006, according to the Center for Responsive Politics, a nonpartisan group that tracks political donations. The company opposed derivatives regulation and greenhouse gas limits.

The brothers have backed a foundation that has trained thousands of Tea Party activists. The Tea Party, a popular movement whose name stands for Taxed Enough Already, has grown into a potent force in national politics. Sixty representatives of Congress, out of a total of 435, identify themselves as Tea Party members. Virtually every Republican candidate for president -- including Texas Governor Rick Perry and Minnesota Congresswoman Michele Bachmann -- has solicited the group’s support.

Integrity and Compliance

Koch Industries’ political action committee, KochPAC, donated $50,000 to Texans for Rick Perry last year for his gubernatorial campaign, according to the Texas Ethics Commission. It has also donated to support Bachmann’s congressional campaigns, Federal Election Commission records show.

The company tells all of its employees around the world that its top two values, which it calls Guiding Principles, are integrity and compliance. Koch Industries and its subsidiaries have won 436 awards for safety, environmental excellence, community and customer service and innovation since January 2009, Cohlmia says.

The U.S. Occupational Safety and Health Administration has recognized several of the company’s units for their commitment to the workplace, the company says. Koch Industries has also supported charitable causes in Wichita and beyond, including the Kansas Special Olympics and Big Brothers Big Sisters. The company has also helped enlistees in the U.S. Army Reserve.

Koch Industries has donated millions of dollars to the Nature Conservancy, the Red Cross, the Salvation Army and victims of the March 11 earthquake and tsunami in Japan.

Reputation is Critical

David Koch has contributed more than $135 million to cultural institutions, including Lincoln Center for the Performing Arts in New York and the Smithsonian’s National Museum of Natural History.

Koch Industries zealously guards its public image.

“A company’s reputation is critical to how it will be treated by others and to its long-term success,” Charles Koch wrote in “The Science of Success: How Market-Based Management Built the World’s Largest Private Company” (Wiley, 2007). “We must build a positive reputation based on reality, or others will create one for us based on speculation or animus and we won’t like what they create.”

The illicit payments uncovered by Ludmila Egorova-Farines raised the specter of a new blow to the company’s effort to improve its reputation following criminal convictions and civil penalties.

Avoiding Scandal

The company wanted to avoid a bribery scandal similar to that of Siemens AG (SIE), says Ged Horner, a managing director at Koch-Glitsch in the U.K. from 2002 until he retired in 2010.

“The only thing that would seriously impact the profitability and continuity of Koch Industries was a compliance issue,” Horner says.

In November 2006, the U.S. Department of Justice and German prosecutors opened an investigation into bribery by Munich-based Siemens, Europe’s largest engineering company. Siemens and three of its subsidiaries pleaded guilty in December 2008 to charges of violating the U.S. Foreign Corrupt Practices Act from 1998 to 2007.

Siemens paid $1.6 billion in penalties, admitting it had paid bribes to companies in Argentina, Bangladesh, Iraq and Venezuela.

“Koch decided that if it could happen to Siemens, it could happen to them,” Horner says.

Koch Chemical Technology Group, a Koch Industries subsidiary run by David Koch, hired Egorova-Farines in April 2008 for the newly created position of compliance and ethics manager for Europe and Asia.

French Investigation

The division, which makes distillation, pollution control and water filtration equipment, recruited her from accounting firm PricewaterhouseCoopers LLP, where she was a consultant for four years on integrating corporate cultures after mergers. As soon as she joined Koch, the company flew her to Wichita to attend an internal compliance conference, she says.

The company then asked her to investigate Koch-Glitsch in France because it had heard that managers were awarding salary increases inappropriately, Egorova-Farines says. The company never mentioned anything about improper payments for contracts when it gave her that assignment, she says. She declines to discuss the details of her findings, saying it would be unprofessional.

The specifics of illicit payments for contracts by Koch- Glitsch can be found in two French labor court cases. The complaints were brought separately by Egorova-Farines and Leon Mausen, business director of Koch-Glitsch France from 1998 to 2008.

Illicit Payments

Koch-Glitsch fired Mausen on Dec. 8, 2008, sending him a termination letter that described illicit payments from 2002 to 2008 in Algeria, Egypt, India, Morocco, Nigeria and Saudi Arabia. In the Middle East, Koch-Glitsch paid what the termination letter describes as an exceptionally high commission of 23 percent to one of its sales agents.

“A portion of that money was intended to pay a customer’s employee in order to secure the contract,” Koch wrote.

The customer was an unnamed Egyptian company that was partially owned by the state. Koch-Glitsch made similar payments to win other contracts with public and private companies in Egypt and Saudi Arabia, Koch wrote in its letter to Mausen.

Koch-Glitsch gave envelopes stuffed with cash to a Moroccan company, Koch wrote in its letter. Koch-Glitsch also made an improper payment to secure a contract with a Moroccan government organization, Koch wrote. The company made similar payments to an unnamed Nigerian government agency to win contracts, Koch wrote.

Koch Blamed Employee

Koch-Glitsch inflated its bid price to a private company in India in 2008, the letter said. A Koch employee explained the reason in an e-mail copied to Mausen and dated Feb. 6, 2008: “Add an extra 2 percent for a third person whose name I would rather give you only on the phone at this time.”

A Koch-Glitsch agent increased the commission paid to an Algerian agent in 2007 and 2008 to cover what Koch described as an unlawful payment to secure a deal with an unnamed French company.

Koch’s spokeswoman Cohlmia says Koch Industries acted firmly and decisively in response to what it had learned.

In its Dec. 8, 2008, termination letter to Mausen, Koch blamed him for the illegal payments. In July 2009, Mausen sued Koch for severance and performance pay in the Arles Labor Court in southern France.

On Sept. 27, 2010, the court said Mausen hadn’t acted on his own.

“It was not Mr. Mausen alone who was giving authorizations,” the court wrote.

Company policy required approval from other Koch-Glitsch managers, including Christoph Ender, the president of Koch- Glitsch for Europe and Asia, the court said.

‘Without Doing Due Diligence’

“Ender, manager of Koch-Glitsch France, as well as the controllers and auditors who were assisting him, allowed such business practices developed with Mr. Mausen to continue without doing due diligence in their reviews concerning the payment of commissions and the final beneficiaries of said commissions,” the labor court wrote.

An appeals court in Aix-en-Provence issued a second ruling on June 14, 2011, saying the company couldn’t justify terminating Mausen for the payment scheme because his managers had been aware of the practices for more than 60 days before he was fired. The court ordered Koch-Glitsch to pay Mausen 150,808 euros ($206,170).

Mausen declined to comment, beyond saying he disputed Koch’s arguments in court. Ender, who is now a Koch-Glitsch executive in Wichita, didn’t respond to requests for comment.

Koch’s Cohlmia says Ender “had no knowledge of Mr. Mausen’s misconduct at the time it occurred, as Mr. Mausen concealed it from him.”

Initially On Track

As for Egorova-Farines, her career was initially on track after she exposed bribery. Koch Chemical promoted her to a permanent position after her trial period expired in mid-2008, court records show. She was dispatched to offices in Germany, Russia and Switzerland, she says.

“I worked hard to drive cultural change to make these units compliant,” she says.

Egorova-Farines was hospitalized for seven weeks starting in February 2009, according to the decision in her lawsuit against Koch-Glitsch for wrongful termination.

The company fired her on June 16, 2009, saying later in court that she didn’t have the skills she’d listed on her resume and that she had failed to share documents with others at the company, according to the court record. She contested Koch’s arguments.

Court Ruling

Neither Egorova-Farines nor the labor court knew at the time that Koch had cited the company’s six-year pattern of improper payments in its termination letter to Mausen, she says. The court ruled against her on Feb. 11. She filed an appeal two months later in Paris.

She said in court that Koch had harassed her and retaliated against her for uncovering the payment scheme. She asked to be reinstated in her Koch job and paid for the time she was out of work. Egorova-Farines, who was born in London, now runs a business practices consulting firm in Paris.

Koch’s Cohlmia says the labor court found that the company treated Egorova-Farines fairly and provided her with chances to perform adequately.

The payments to win contracts documented by Koch investigators may violate U.S. law, says Sara Sun Beale, a professor at Duke Law School in Durham, North Carolina. She says Koch’s termination letter to Mausen gives clear guidance to federal prosecutors.

‘Smoking Gun’

“It sounds like a smoking gun,” says Beale, who co- authored “Federal Criminal Law and Its Enforcement” (Thompson West, 2010). “It really should get the Justice Department’s attention. When you have a smoking gun, you launch an investigation.”

Such a probe would fall under the Foreign Corrupt Practices Act, a 1977 law that makes it illegal for companies and their subsidiaries to pay bribes to government officials and employees of state-owned companies.

Justice Department spokeswoman Laura Sweeney says the agency won’t confirm or deny the existence of any investigation.

While Koch-Glitsch was conducting its internal probe of illicit payments for contracts, the U.S. government was investigating Koch’s European unit on another front: sales to Iran.

On Aug. 14, 2008, investigators from the U.S. Department of Homeland Security met with George Bentu, who had worked as a sales engineer from 2001 to 2007 for Koch-Glitsch in Germany, Bentu says. In a four-hour interview at the U.S. consulate in Frankfurt, the officials asked about documents showing details of the company’s trades with Iran, he says.

Legal Sidestep

Homeland Security spokeswoman Barbara Gonzalez declined to comment.

Internal company records show that Koch Industries used its foreign subsidiary to sidestep a U.S. trade ban barring American companies from selling materials to Iran. Koch-Glitsch offices in Germany and Italy continued selling to Iran until as recently as 2007, the records show.

The company’s products helped build a methanol plant for Zagros Petrochemical Co., a unit of Iran’s state-owned National Iranian Petrochemical Co., the documents show. The facility, in the coastal city of Bandar Assaluyeh, is now the largest methanol plant in the world, according to IHS Inc., an Englewood, Colorado-based provider of chemicals, energy and economic data.

Engineer Challenged Sales

“Every single chance they had to do business with Iran, or anyone else, they did,” Bentu, 46, says.

Bentu, a German engineer who earned his master’s degree in chemical engineering from Montana State University in Bozeman in 1990, joined Koch-Glitsch in 2001. His duties included drawing up bids for potential buyers of the company’s distillation equipment, which is used in making fuels, fertilizers, detergents and other products.

Bentu says he had been working at Koch-Glitsch in Viernheim, about 80 kilometers (50 miles) south of Frankfurt, for two months when he first saw an order destined for Iran. Concerned that the transaction might run afoul of U.S. law, Bentu asked his manager about it, he says. Bentu says his boss told him not to worry, that the company’s U.S. lawyers made sure the deals with Iran were legal.

U.S. companies have been banned from trading with Iran since 1995, when President Bill Clinton declared it a threat to national security. Iran supports Iraqi militants and Taliban fighters as well as terrorist groups, including Hamas and Hezbollah, according to the U.S. State Department.

Getting Around Ban

Koch Industries took elaborate steps to ensure that its U.S.-based employees weren’t involved in the sales to Iran, internal documents show.

Koch Industries may not have violated the law if no U.S. people or company divisions facilitated trades with Iran, says Avi Jorisch, a Treasury Department policy adviser from 2005 to 2008. That’s impossible to determine without a complete investigation, Jorisch says.

Internal Koch-Glitsch correspondence shows that the company coordinated with Koch Industries lawyers in the U.S. to make sure that American employees didn’t work on sales to Iran. Elena Rigon, now Koch-Glitsch compliance manager for Europe, based in Italy, in December 2000 addressed a memo outlining compliance guidelines to company managers in her region.

‘Axis of Evil’

In another e-mail, Rigon said all offices had to go through a checklist for each estimate quoted for materials headed to Iran.

“Your staff shall send this form to me since I have to send it to the lawyers in the USA as part of the compliance program,” Rigon wrote in the e-mail. “If somebody happens to find out that any U.S. persons are involved in this project or U.S. material is delivered to Iran you CANNOT quote.”

Rigon declined to comment.

“Koch-Glitsch had protocols in place that were consistent with applicable U.S. laws allowing such sales at the foreign subsidiary level,” Koch’s Cohlmia says.

In his annual State of the Union address on Jan. 29, 2002, in the wake of the 9/11 attacks in New York and Washington, President George W. Bush said that Iran was part of what he called the “Axis of Evil.”

A year later, in his Jan. 28, 2003, address to Congress, Bush said, “In Iran, we continue to see a government that represses its people, pursues weapons of mass destruction and supports terror.”

Soliciting Iranian Orders

The following day, Koch-Glitsch was sent a purchase order to supply petrochemical equipment for the Zagros plant, which was being designed and built by two engineering firms, Pidec in Iran and Lurgi in Germany, according to company documents.

On May 31, 2004, Koch-Glitsch secured another contract for 1.2 million Euros, to help expand the Zagros facility. The plant helped Iran turn its vast natural gas reserves into methanol, which is used for making plastics, paints and chemicals.

The Italian office of Koch-Glitsch sought work on other projects in Iran -- the expansion of the Abadan refinery, the country’s largest, and the development of South Pars, part of the world’s largest natural gas field, the documents show.

Koch-Glitsch told employees in 2006 that the company was winding down business in Iran, Bentu says. At that point, he says, his bosses still asked him to work on Iran bids. He says he told them he was no longer willing to sign off on such work, leading to arguments between Bentu and his managers.

‘Totally Betrayed’

Bentu says he felt dismayed because Koch Industries clearly tells all of its employees around the world that integrity is the company’s No. 1 value.

“You feel totally betrayed,” Bentu says. “Everything Koch stood for was a lie.”

Bentu, who was earning about 49,000 euros a year, says the company forced him out in April 2007 and paid him 25,000 euros severance.

In 2009, Bentu was interviewed as part of a probe by the Bundeskartellamt, the German antitrust agency. It was looking into whether Koch-Glitsch had collaborated with a rival, Montz GmbH, a smaller petrochemical equipment maker in nearby Hilden, to rig bids they made to supply products to companies.

In November 2010, Koch-Glitsch and Montz each paid 250,000 euros as part of a settlement with the regulator for sharing information from December 2002 to August 2008. The German regulator said the violations were a minor infraction. Koch- Glitsch closed its office in Viernheim in 2009, Bentu says. Several former employees went to work for Montz.

Guenther Frey, general manager for Montz, declined to comment.

Cohlmia says of the agency’s ruling, “The decision did not find that Koch-Glitsch GmbH engaged in price fixing or any illegal behavior.”

Felony Conviction

This wasn’t Koch Industries’ first brush with complaints of improper competition. In October 2000, the FBI secretly recorded the telephone calls of Troy Stanley Sr., director of textile staples at KoSa, then a Luxembourg company with its main office in Charlotte, North Carolina.

Koch Industries and a Mexican company established KoSa as a joint venture in 1998 to buy the Hoechst AG unit that produced polyester staples, which are used in making textiles. KoSa pleaded guilty in October 2002 to a felony charge of conspiracy to restrain trade and paid a $28.5 million fine.

Stanley pleaded guilty to one count of conspiring to restrain trade in December 2004 and was sentenced to one year of probation and a $5,000 fine.

‘Anti-trust Conspiracy’

“Officers, directors, managers or employees participated in the conspiracy” between September 1999 and January 2001, KoSa admitted in the plea agreement.

The conspiracy began before KoSa bought the business and continued during its ownership, Stanley testified. Koch bought out its partner in 2001. The criminal activity occurred while Koch was a 50 percent owner.

During the next eight years, Koch Industries paid $76 million to settle antitrust claims brought by KoSa’s customers, and $59 million in legal fees, according to court records. KoSa is now part of Koch’s Invista unit.

A prosecution of KoSa by Canada’s attorney general for price fixing followed in August 2003. KoSa pleaded guilty and paid a C$1.5 million fine.

Cohlmia says a KoSa subsidiary “unknowingly bought into an ongoing antitrust conspiracy.” Once the company found out about the wrongdoing, it stopped the conspiracy and cooperated with the U.S. Justice Department, she says.

Benzene Emissions

The price-fixing convictions came after years of investigations, environmental lawsuits and fines that had plagued Koch’s oil pipeline and refining divisions.

In April 1996, Koch environmental technician Sally Barnes- Soliz walked into the offices of Texas regulators in Corpus Christi and told them the company had lied about spewing benzene into the air.

Koch Refining Co. had recruited Barnes-Soliz in 1991 to work in the safety department at the company’s Corpus Christi refinery. Barnes-Soliz, then 30, had earned a bachelor’s degree in science and environmental health and a Master of Science in industrial hygiene at Colorado State University in Fort Collins.

“I loved that job,” she says, describing how she helped protect plant workers and neighborhood residents from the many hazards at the refinery. “It’s important to me that people are safe and their job is not the reason they die.”

Federal rules in 1995 required the plant, one of two refineries Koch owns in Corpus Christi, to reduce benzene emissions to less than 6 metric tons a year. Benzene, a chemical compound refined from crude oil, was found to cause leukemia in 1928 by two Italian doctors who detected the cancer in a worker exposed to benzene for five years.

False Report

Four federal agencies -- the National Institutes of Health, the Food and Drug Administration, the Environmental Protection Agency and the Occupational Safety and Health Administration -- say that benzene is a cause of cancer.

On Jan. 6, 1995, Koch’s refining unit informed the Texas Natural Resource Conservation Commission, or TNRCC, that it had installed a new anti-pollution device called a Thermatrix that used flameless heat to burn off the benzene. The machine lacked sufficient capacity for the job, Barnes-Soliz says, and refinery workers disconnected it within days.

“The refinery was just hemorrhaging benzene into the atmosphere,” she says.

Three months after disconnecting the machine, Koch filed a quarterly report with Texas regulators, while concealing that it had violated the emission rules.

Pressured to Change

On Aug. 17, 1995, Koch Industries attorney Vincent Mietlicki wrote a memo to another company lawyer, Thomas Meek, saying the refinery had given the state incorrect information about its uncontrolled benzene emissions.

“I think it goes without saying that there is a need to correct our first quarterly report which is misleading and inaccurate,” he wrote.

That December, a refinery manager asked Barnes-Soliz to tally the plant’s annual benzene emissions for a report to state regulators, Barnes-Soliz says. She found 91 metric tons of uncontrolled benzene emissions, more than 15 times higher than what the rules allowed.

“I redid the calculation a lot of times,” Barnes-Soliz says.

Those levels of emissions could increase the cancer risk to refinery employees and the public, she says. Barnes-Soliz reported the results in a document dated Jan. 4, 1996, to Mietlicki, the same lawyer who had written the memo calling out the inaccuracies in the quarterly report Koch filed with the state. She says Mietlicki and other Koch executives pressured her to lower the figures in her report.

Falsified Document

“There were a lot of meetings to try and get me to change the number,” she says. “It was hard, but I held firm to my convictions.”

Barnes-Soliz’s bosses went around her. On April 8, 1996, Koch reported to Texas regulators that its Corpus Christi plant had uncontrolled emissions of 0.61 metric tons for 1995, or 1/149th the quantity she had found.

“When I saw they had actually falsified that document, I had no recourse but to notify the authorities,” Barnes-Soliz says.

On April 18, 1996, on her lunch break, she drove to the state’s TNRCC office and reported that Koch had lied about its benzene emissions. By the time Barnes-Soliz walked in, environmental regulators were already investigating Koch in Corpus Christi.

Oil Slick

The EPA had sued Koch Industries a year earlier for a series of pipeline leaks in several states, including one that left a 12-mile-long oil slick on Nueces and Corpus Christi bays in October 1994. Her statement triggered another probe by state regulators and the FBI.

During the next three years, investigators compiled evidence that included hundreds of internal memos about benzene emissions. In 1999, Koch’s lawyers tried to stop prosecutors from using the documents in court.

Koch argued that records of the company’s internal investigation regarding benzene rules were protected by attorney-client privilege. U.S. District Judge Janis Graham Jack in Corpus Christi rejected that claim, ruling that the privilege doesn’t apply when used to help commit a crime or fraud. She singled out Mietlicki.

‘Front Man’

“The government has submitted evidence which indicates that Koch was intentionally using Mietlicki and his investigation and expertise in reference not to prior wrongdoing, but to future wrongdoing,” the judge wrote. “The February memo strongly suggests that Koch was using Mietlicki (and his investigation and expertise) as a ‘front man’ to impede the TNRCC from ascertaining the extent of its noncompliance.”

The February memo was sealed by the court.

A federal grand jury issued a 97-count indictment against Koch Petroleum Group, Mietlicki and three refinery managers on Sept. 28, 2000. Koch Petroleum Group pleaded guilty to a felony charge of lying to the government about its benzene emissions in April 2001.

Judge Jack fined Koch Petroleum $10 million and ordered that it pay another $10 million to fund environmental projects in south Texas. Koch earned $176 million in profit from the Corpus Christi plant in 1995, prosecutors told the court. The company said in a hearing that it would have cost $7 million to comply with the benzene emission regulation.

Koch Petroleum changed its name to Flint Hills Resources in 2002.

In the agreement to plead guilty, prosecutors dropped the charges against the four individuals.

‘Ultimately Collapsed’

Koch spokeswoman Cohlmia says the company reported its compliance issues to the state before a whistle-blower did so. She says the federal case was flawed, citing testimony by a prosecution expert witness.

“The government’s case ultimately collapsed after the company finally had an opportunity to challenge the government’s key expert witness,” she says.

Uhlmann, the federal prosecutor who led the probe, says Koch’s after-the-fact response is a public relations whitewash.

“The Koch case was a classic case of environmental crime, significant violations of law occurring alongside widespread efforts to conceal those violations, which Koch has admitted,” Uhlmann says. He now teaches at the University of Michigan Law School in Ann Arbor.

Empty Office

Mietlicki, who is now assistant principal at John Paul II High School in Corpus Christi, says he can’t comment on details of the case.

“I know all of my actions as a lawyer, throughout all my years of practice, were nothing but honest and truthful,” he says.

After the company found out that Barnes-Soliz had tipped off state regulators, Koch stripped her of her responsibilities and moved her to an empty office with no tasks and no e-mail access, she says.

“They were pressuring me to quit,” she says.

She left the company in July 1996. Barnes-Soliz sued Koch in January 1997, saying the company harassed and mistreated her after she became a whistle-blower. Koch settled the lawsuit in July 1999 for an undisclosed amount.

The Corpus Christi case was one of a series of challenges Koch Industries faced in the 1990s over environmental issues. In 1997, a company now owned by ConocoPhillips sued Koch for toxic waste dumping at a refinery in Duncan, Oklahoma.

‘Replete With Evidence’

In March 1998, U.S. District Court Judge Vicki Miles- LaGrange in Oklahoma City ordered Koch to pay for 15 percent of the cleanup costs for dumping at the site between 1946 and 1953. That decision was upheld by the U.S. Court of Appeals for the 10th Circuit in May 2000.

“The record is replete with evidence Koch used unlined ditches, pits and ponds to dispose of hazardous waste at the site,” the appeals court ruled, finding that Koch had tainted groundwater. “The pollution of any Oklahoma waters, including groundwater, has been prohibited by state statute since the early 1900s -- well before Koch’s waste disposal activity at the refinery.”

By March 2007, Koch Industries had paid just $440,899 and still owed $2.97 million for its share of the cleanup, Conoco told the court.

“Koch simply refuses to pay its share as ordered by this court,” Conoco said.

Companies Settled

The two companies settled in February 2009. Terms weren’t disclosed.

Cohlmia says, “We understand that appropriate remediation is occurring and Koch has met all of its obligations with respect to this matter.”

A Koch unit in Rosemount, Minnesota, pleaded guilty in 1999 to two federal misdemeanors of violating the Clean Water Act and paid $8 million in fines and penalties. The company used fire hydrants to pump more than a million gallons of wastewater contaminated with ammonia onto the ground.

Koch also increased its dumping of wastewater on weekends when it didn’t monitor discharges, circumventing the reporting requirement of its permit, the EPA said. Koch also admitted that it negligently released between 200,000 gallons (757 kiloliters) and 600,000 gallons of aviation fuel into a nearby wetland.

Cohlmia says the company cooperated with state and federal regulators to resolve the Rosemount issues and has met all of its obligations.

“In March, 1999, Koch Petroleum Group took full responsibility for past underlying discharges,” she says.

Koch Industries also spent much of the 1990s defending itself against what a U.S. Senate subcommittee called a widespread scheme to steal oil on Indian land.

Twin Brother

The Senate held hearings in May 1989 after Bill Koch, David Koch’s twin brother, told a U.S. Senate special committee on investigations that Koch Industries was stealing oil on American Indian reservations, cheating the federal government of royalties.

Bill Koch had a long-standing feud with his brothers after his failed attempt to take over the company in the early 1980s. He sold his shares in June 1983 and later lost a lawsuit claiming he’d been shortchanged.

The Senate committee sent investigators to Oklahoma to secretly observe oil companies, including Koch, buying crude on Indian land. The federal agents hid in ditches, crouched behind scrub cedars and ducked behind cows to avoid detection by Koch Oil’s purchasers, FBI agent Richard Elroy testified to the committee in May 1989.

‘Theft is Widespread’

The investigators caught Koch Oil’s employees falsifying records so that the company would get more crude than it paid for, shortchanging Indian families, Elroy said. Koch’s records showed that the company took 1.95 million barrels of oil it didn’t pay for from 1986 to 1988, according to data compiled by the Senate.

“The theft is widespread and pervasive, and these people are being horribly victimized,” Elroy testified.

Elroy told the committee that Charles Koch gave a deposition that said that no one could make exact measurements.

“There was a lot of uncertainty and tremendous variations,” Elroy quoted Koch as saying. The full deposition is sealed, which is committee policy.

The committee concluded in a November 1989 report that Koch Oil had engaged in a widespread, sophisticated scheme to steal millions of barrels of oil. The Senate referred the case to the Justice Department, which convened a grand jury that never indicted the company.

“We believe that our practices were consistent with industry practice,” Cohlmia says.

The Civil Trial

Bill Koch brought a lawsuit on behalf of U.S. taxpayers, claiming that Koch Industries’ scheme defrauded the government of royalties. The case came to trial in 1999. Former company employees testified that Koch Industries trained them to steal.

Phil Dubose, who worked for Koch Industries from 1968 to 1994, told the jury how the scheme worked.

“The Koch Method is to cheat the producer out of crude oil,” he said.

He testified that he was able to steal 2,000 barrels a month from one customer.

“You used every available tool to mismeasure the crude oil in Koch’s favor,” says Dubose, who is now retired.

Charles Koch testified in the trial, saying the company had the highest standards.

“By 1988, I thought we had developed the best measurement approach, controls and so on of any crude oil purchaser in the industry,” Koch said. “And that’s why we became the No. 1 crude oil purchaser in the United States.”

24,587 False Claims

Two days before Christmas 1999, the jury delivered the verdict: Koch Industries had made 24,587 false claims in buying oil, underpaying the U.S. government for royalties on Native American land from 1985 to 1989. Koch paid the U.S. $25 million to settle the case in 2001.

The Koch brothers, meanwhile, reached an agreement, with undisclosed terms, dropping all litigation against each other.

While the Koch brothers battled over oil, Koch Industries clashed with regulators over its failure to properly maintain its pipelines. In 1995, the EPA sued the company, saying poor maintenance resulted in corrosion that contributed to hundreds of spills.

The following year, before the EPA case was resolved, a leak in a Koch butane pipeline led to an explosion that killed two teenagers.

Burned Alive

On Aug. 24, 1996, Danielle Smalley and her high school friend and neighbor Jason Stone, both 17, smelled gas outside Smalley’s mobile home in rural Lively, Texas, 50 miles southeast of Dallas. The house had no telephone, so they decided to drive the Smalley family’s pickup truck to a neighbor’s home to call 911.

They never made it.

The truck stalled after the couple drove into a fog-like cloud, says Danielle’s father, Danny Smalley, who watched them drive away. It was butane vapor, leaking from a corroded steel pipeline. Seconds later, as Danielle restarted the truck, the gas ignited into a fireball, burning Danielle and Jason to death.

Smalley’s father sued Koch Industries in 1997 in the Kaufman County, Texas, district court for the wrongful death of his daughter.

‘Definitely Responsible’

“I will tell you Koch Industries is definitely responsible for the death of Danielle Smalley,” Bill Caffey, an executive vice president of the company, testified in a 1999 deposition during Smalley’s lawsuit.

Caffey oversaw pipeline safety at the company. He testified that he thought the pipeline was safe before the explosion. Koch Pipeline Co., the unit that managed the Texas pipeline, knew the line had corroded and didn’t fix it, an investigation by the National Transportation Safety Board concluded in November 1998.

The 570-mile-long pipeline carrying liquid butane from Medford, Oklahoma, to Mont Belvieu, Texas had corroded so badly that one expert, Edward Ziegler, likened it to Swiss cheese. The company didn’t give 40 of the 45 families near the explosion site -- including the Smalley and Stone families -- any information about what to do in case of an emergency, the NTSB wrote.

Danny Smalley hired Ziegler, a third-generation oilman and certified safety professional, as an expert witness. Ziegler had previously been retained by Koch Industries as an expert witness in an unrelated case. Ziegler told the jury that he’d never seen a company disregard safety to this extent in his more than 25- year career.

‘A Total Failure’

“This is an example of a total failure of a company to follow the regulations, keep their pipeline safe and operate it as the regulations require,” Ziegler, who now operates his own pipelines, testified.

A memo forwarded by Caffey to another Koch executive vice president justified putting a 70-mile section of the pipeline back into operation after being closed for three years because it could earn more than $7 million in operating income a year.

“We were to work on reducing wasteful spending,” Caffey said in his deposition.

In his 2007 book, Charles Koch didn’t comment on the pipeline explosion. He did, however, offer this observation: “Our organization does not reward failure.”

Koch Industries didn’t penalize Caffey, the executive in charge of pipeline safety. The company doubled his annual bonus to $900,000 for 1996, the year the fatal blast occurred, according to court records. In his deposition, lawyers asked Caffey whether the disaster came up during his annual review.

‘I Don’t Believe’

“I don’t believe we discussed that specifically in my review,” he said.

Caffey, who stayed with Koch for a decade after the explosion and now runs the BB River Ranch in Comanche, Texas, says the explosion was a one-of-a-kind tragedy.

“I have never known any company executive more focused on compliance than Charles Koch,” he says.

The state jury awarded Danny Smalley $296 million in its Oct. 21, 1999, verdict. The jury found that Koch Industries acted with malice because it had been aware of the extreme risks of using the faulty pipeline.

Smalley later settled for an undisclosed amount. Stone’s family also settled. Danny Smalley used settlement money to start the Danielle Dawn Smalley Foundation for pipeline safety education. Large pipeline operators such as ExxonMobil Corp., BP Plc and Kinder Morgan Inc. -- and not Koch -- accept free services from the foundation, Smalley says.

‘Never Forget’

“You see two children burned to death in front of you, you never forget that,” he says. “I want to stop other parents from ever having to see that.”

Cohlmia says Koch Industries used the lessons learned from the explosion to help avoid similar accidents. The company immediately accepted responsibility for the explosion, which was the only one of its kind, she says.

Three months after the Smalley verdict, Koch settled the five-year-old EPA case for pipeline leaks, along with a second EPA case brought in 1997. The company paid $35 million to resolve those cases, which covered more than 300 oil spills in six states.

For six decades around the world, Koch Industries has blazed a path to riches -- in part, by making illicit payments to win contracts, trading with a terrorist state, fixing prices, neglecting safety and ignoring environmental regulations. At the same time, Charles and David Koch have promoted a form of government that interferes less with company actions.

‘Overall Concept’

“My overall concept is to minimize the role of government and to maximize the role of the private economy and maximize personal freedoms,” David Koch told the National Journal in May 1992.

In his 2007 book, Charles Koch says his company had difficulty keeping up with changing government regulations and that it did eventually build an effective compliance program for 20 areas ranging from environmental to antitrust to safety regulations.

“We were caught unprepared by the rapid increase in regulation,” he wrote. “While business was becoming increasingly regulated, we kept thinking and acting as if we lived in a pure market economy.”

Fox's Weeklong Attack On Government Regulations Was Dreamed Up By Ailes

Original Link: http://mediamatters.org/research/201109260019

During the week of September 12, Fox's "straight news" division launched a weeklong attack on government regulations, including child labor, workplace safety, and civil rights laws. Fox's war on regulation, which mirrors Republican talking points, has now been revealed to be the brainchild of Fox News president Roger Ailes.

Ailes "Cooked Up" Fox's Attack On Government Regulations

Howard Kurtz: Ailes Came Up With Idea For Fox Special On Regulations Because Bureaucrats "Draw Up Regulations To Try To Ruin Your Life." From an article in Newsweek by Howard Kurtz:

The topics bounce from CNBC's weekend ratings ("They have shows about hookers and stuff, don't they?") to Fox's own security ("Listen, one out of every 25 people in America is a psychopath"). Ailes raises a Fox initiative that he cooked up: "Are our producers on board on this 'Regulation Nation' stuff? Are they ginned up and ready to go?" Ailes, who claims to be "hands off" in developing the series, later boasts that "no other network will cover that subject ... I think regulations are totally out of control," he adds, with bureaucrats hiring Ph.D.s to "sit in the basement and draw up regulations to try to ruin your life." It is a message his troops cannot miss. [Newsweek, 9/25/11]

Fox's Attack On Regulations Echoed A GOP Talking Point

AP: "The House Republican Agenda This Fall Will Focus On Repealing Environmental And Labor Regulations." On August 29, the Associated Press reported that repealing regulations would be a priority for the Republican Party:

The House Republican agenda this fall will focus on repealing environmental and labor regulations that GOP lawmakers say are driving up the cost of doing business and discouraging employers from hiring new workers.

House Majority Leader Eric Cantor, R-Va., says in a memo to his fellow Republicans that as soon as Congress returns to Washington next week he will start bringing up bills to repeal or restrict federal regulations. He also said the House would also act on a small business tax deduction.

The memo was released Monday.

The GOP approach to job creation comes as President Barack Obama prepares to announce after Labor Day a broad jobs package expected to include tax cuts, infrastructure projects and help for the unemployed.

"By pursuing a steady repeal of job-destroying regulations, we can help lift the cloud of uncertainty hanging over small and large employers alike, empowering them to hire more workers," Cantor said in his memo.

He said that in the first week after Congress returns from its August recess the House will vote on a bill preventing the National Labor Relations Board from restricting where an employer can locate in the United States. [Associated Press, 8/29/11]

House Republicans Have Their Own "Regulation Nation" Website. The House Republican Conference has its own "Regulation Nation" website, which has been in existence since at least June.[GOP.gov, accessed 9/26/11]

Under "Regulation Nation" Guise, Fox's "Straight News" Division Launched Attack On Bedrock Protections Of 20th Century

Fox News "Regulation Nation" Series Echoed Ailes' Attack On Regulation. Throughout the week of September 12, Fox's premiere "straight news" political program, Special Report, ran multiple segments on "Regulation Nation." Fox's on-air promotion for its "Regulation Nation" series echoed Ailes' claims that "regulations are totally out of control" and can "ruin your life." From a promo for "Regulation Nation":

VOICEOVER: Tying companies into knots. Creating a maze of paperwork. Spinning a web of rules and red tape. Killing jobs. Government regulations. We expose how excessive laws are drowning American businesses. Regulation Nation. All next week on Fox News Channel and Fox Business Network. [Fox News, 9/6/11]

September 12: Fox "Straight News" Host Bret Baier Falsely Claimed Regulations Cost Businesses On Average "$161,000" Each Year. During the September 12 edition of Fox News' Special Report, host Bret Baier said: "According to the Small Business Administration, these regulations place a burden of $161,000 on the average business in America each year." This statistic was also cited by other "straight news" and opinion programs on Fox. But the study has been criticized for using a flawed research design, cherry-picking the highest cost estimates, and relying on "crude" data. Moreover, the Small Business Administration has said the study does not even reflect its views. [Media Matters, 9/14/11]

Click here for more on the discredited cost estimate relied on by Fox News.

September 13: Baier Hosts Rep. Issa (R-CA) To Continue Assault On Regulations. From the September 13 edition of Fox News' Special Report:

BAIER: House Oversight and Government Reform Committee chairman, Darrell Issa, has a full plate these days. He's trying to get a handle on how to save the U.S. Postal Service, looking for answers about operation "Fast and Furious," and he's investigating the effect of regulations on businesses. He joins us now. Welcome, Mr. Chairman.

DARRELL ISSA (R-CA) (HOUSE OVERSIGHT/GOVT REFORM CHMN): Well, thanks for having me on and thanks for doing it in that order, because postal is hard to sell, but it's important. It's an institution we've relied on since our founding. "Fast and Furious" is, obviously, critical because men are dying on both sides -- and women on both sides of the border as a result of this program, and regulations are killing our chance for a return to a vibrant economy.

BAIER: Let's start there. Critics of the Republican push on this issue say it's overblown, this focus on regulations, that businesses don't feel it, and that it's really a lack of demand and not overregulation that is affecting these businesses. How do you respond to that?

ISSA: There's no demand when your product costs too much. There's no demand when you can't get your factory built on time. There's no demand when a factory is being built in another country, because it's a better place to do business. So, the critics are right, but their right without understanding, that little by little, the growth of regulations under Republicans and now under this Democratic president are killing our competitive ability around the world.

And when Boeing can't export as many, guess what, the jobs in Washington that rely on that success, that will begin to fade, and that's what's happening in the Rust Belt where I grew up in Ohio is we're not exporting the kind of products we once did. As a result, the shop keepers, the restaurants, don't enjoy the business.

BAIER: And you have a hearing on that on regulations tomorrow. Specific examples about business?

ISSA: We ran the gamut from live stock individual to a snake, you know, raiser (ph). The fact is, with American job creators.com we asked job creators to tell us what was stopping them, what the impediments to job creation were, and then, we've gone out and interviewed and gone out and video, and we've asked these people in a few cases to come here and tell their story.

So, tomorrow what you're going to see are job creators telling their stories. But, it's not anecdotally in just three or four, go to our site and see that it's hundreds and hundreds of companies large and small who said, if not for this, I could create jobs. And in most cases, it's not working capital, it's not the demand, it's things that are making them less competitive.

BAIER: Now to operation "Fast and Furious," your investigation there. You sent a letter to the White House, asking for William Newell, the special agent in charge of the ATF Phoenix field office and Kevin O'Reilly, director of North American Affairs -- American Affairs National Security Council staff, an e-mail exchange between the two of them and I'll quote from your letter.

The e-mail says, quote, "When a 22-year-old kid on state financial assistance walks into a gun store and plops down $12,000 in cash to buy a tripod mounted 50 caliber rifle, that's a clue even for us that he's involved in trafficking firearms to a Mexican DTO, in other words, moving this to cartels. Is this -- do you believe, evidence that this goes all the way to the White House?

ISSA: Well, it went all the way to the White House, whether it went to people who knew or should have known to stop this, remains to be seen, but our committee has been following the trail that has been impeded by the administration, particularly, by the justice department. And each time we get to a certain level of clearness, somebody gets fired, somebody gets changed, and we keep going.

Well, stop throwing the little guys under the bus and just tell us that somebody did something stupid by allowing this so that we can be assured it won't happen again. So far, we don't get that.

BAIER: And you have in this letter a request for response from the White House by September 14th to make Mr. O'Reilly available. Has there been a response yet?

ISSA: Not yet. The expectation is, we want to be very narrow. There was an exchange. We have copies of it. We become aware of it. There's a claim that it was benign. That there wasn't a lot of information exchanged. f he corroborates that, we can move on, because we have lots of other areas in which we're seeing an expanding program that "Fast and Furious" wasn't supposed to be, but appears to be.

BAIER: I want to ask you about the post office before I ask you about something else. The post office set to lose a record $10 billion this year. How will -- how could you save it without bailing it out?

ISSA: Ordinary business practices of right sizing the work force, even with existing pay and benefits would allow us to go from a $10 billion dollar to a $7, $8, $9 billion profit. Now, we know this is government. We know there'll be impediments to us getting all the way there, but it's very clear without reducing substantially any real service to Americans all over the United States, including the last island in Alaska or Maine.

We can, in fact, get back to profitability. That's what we're holdings hearings on. That's what we're holding a markup op. That's what I'm meeting with the senators on. This is a business unit that is supposed to be self-sufficient. It can be, we can't kick the can down the road. We've borrowed money. We've got to fix this.

BAIER: Another topic, eight Democrats on your committee have written you a letter asking you to investigate the allegations of actions by the parent company of this network, news corporation, and the defunct tabloid "News of the World" allegations that the company sought to hack telephones of 9/11 victims and other U.S. citizens. Where do you stand on this?

ISSA: Well, thank you for being fair and balanced, because it's hard to ask a question when it concerns your own company. This is being looked at by the justice department. This is being looked at by the Senate, and we're keeping an eye on it.

But at the same time, this is a story that is about a unit in another country, and we want to make sure that we don't enter the ground that is most inappropriate for us, which is we don't start picking on media, whether they're the left or right just because we can. So, we're monitoring it. We're certainly asking the justice department to continue doing a reasonable check, but I think that's where the line has to be drawn and each of these members that wrote that would say the same thing if it was MSNBC.

BAIER: Last thing. American Family Voices, liberal advocacy group says it's going to file a complaint with the House office, Congressional Ethics about alleging that you have used your public office for personal gain. How do you respond to that?

ISSA: There's 308 million Americans, and every single one of them has a right to file with the outside group, but the allegations they put in their press release that they're going to file have already been shown to be less than truthful. `The New York Times" did a piece. They've had them do four corrections, so far, and they still haven't corrected some of the inaccuracies.

I came to Congress as one of the richest members of Congress, with any luck I might leave still having some of that. If I cared about money, I wouldn't have come to Congress. I've made a real effort every single day to make sure I stay in those things that don't conflict between my private life and the public life. But I welcome the fact if they want a hearing and an evaluation by this group, fine. I have nothing to hide.

I'm sure they'll find that one of the things that was claimed was that my foundation made 1,900 percent on an investment. Well, thank you for pointing out that no, I didn't, but there was an error in the report from Merrill-Lynch. That sort of thing I'm willing to do as part of being in the public eye.[Fox News, Special Report with Bret Baier, 9/13/11, via Nexis]

September 14: Special Report Attacked EPA For Imposing Regulations On Agriculture. From the September 14 edition of Fox News' Special Report:

BAIER: We continue our series on "Regulation Nation" tonight with a look at how many American farmers have a lot more to worry about than just sunshine and rain. Here is correspondent Shannon Bream.

(BEGIN VIDEOTAPE)

BILL COUSER (IOWA FARMER): The last thing we want to do is ruin the land that we survive on.

SHANNON BREAM (FOX NEWS CORRESPONDENT): Across the United States a growing farmers and agricultural business owners say they are concerned about the impact of the government mandates on their operations.

CALVIN HAILE (GRAIN FARMER): I would say any regulation from the EPA is worrisome to us. They have power. And nobody seems to have a hold on what they can do.

BREAM: Keeping up with the permitting process can be time consuming. One Indiana hog farmer says it takes her 10 to 15 hours every week, including detailed recordkeeping about each load of manure hauled out of the barn. Farmers also have to deal with regulation on pesticide, fertilizers and dust. Staying in compliance can be expensive.

RICK KRAUSE (AMERICAN FARM BUREAU FEDERATION): The average cost of obtain a permit, doing paperwork to apply and to get the approvals that are necessary, they say the average cost is $23,000 per permit.

BREAM: Krause says because of the number of federal agencies, farmers may have to get multiple permits to comply on a single issue. The supporters of the Environment Protection Agency and other similar government entities say it's a small price to pay to ensure safety of food prices cultivated on the U.S. farm and the integrity of the surrounding land, air, and water sources.

DAVID CARR (ENVIRONMENT WORKING GROUP): If you are getting subsidy dollars and getting federal support in exchange, maybe the American taxpayer needs to get clean water.

ELIJAH CUMMINGS (D-MD) (HOUSE OVERSIGHT COMMITTEE): EPA estimates in 2010 alone, the clean air prevented 160,000, 160,000 premature deaths.

BREAM: The agency says, quote, "EPA has profound respect for the contribution that farmers make to our economy. EPA is in close consultation with America farmers and ranchers. We have listened to their concerns and made them a part of the work we do." But skeptics remain.

STEVE BAKER (HOG FARMER): There are still a lot of questions and concerns for us all.

BREAM: Some 45 government agencies regulate farmers and ranchers. We asked just one, the EPA, how many of its regulations directly impact the agriculture business. And even the agency couldn't give us a specific number.[Fox News, Special Report with Bret Baier, 9/14/11, via Nexis]

September 14: Special Report Attacked Issue That The Government Said It Is Working To Solve. In a second "Regulation Nation" report on September 14, Special Report attacked regulations that, according to Fox's own report, the government says it is working on:

BAIER: Parents of school-age students in some Alabama communities are breathing a little easier this fall after the construction of tornado shelters following last spring's deadly storms, but senior national correspondent, John Roberts, report the shelters could soon be blown away in a storm of government regulation.

(BEGIN VIDEOTAPE)

JOHN ROBERTS (SENIOR NATIONAL CORRESPONDENT) (voice-over): It was the worst tornado outbreak in almost 100 years, and for Alabama schools, it was devastating.

CHARLES WARREN (DEKALB CO SUPERINTENDENT): I don't like to use the word insane or crazy, but, that's exactly what it is.

ROBERTS: DeKalb County superintendent, Charles Warren, isn't talking about the rubble. He's talking about the red tape. The problem, a FEMA funded tornado shelter that he'll likely have to tear down.

WARREN: That is insane, you know, to start with.

ROBERTS: Same thing across the state in Marion County where the Hackleburg elementary and high schools were demolished by an F-5 tornado. With the students in portable classrooms and another storm season coming, FEMA put up hundreds of thousands of taxpayer dollars to build big tornado shelters on school property. Modular Connections is putting in one of them, a half million dollar bunker (ph) rated to the highest standards.

ILLIA AYERS (MODULAR CONNECTIONS): The building is rated to 250-mile- per-hour wind load. That's going to withstand an F-5 tornado.

ROBERTS: But here is where the red tape comes in. You would think Alabama could keep the shelters, but FEMA regulations say, when the schools are rebuilt, they can only have shelters if they buy them, and there's no money to do that. If they can't pony up the cash, FEMA will actually give the schools more taxpayer money to bulldoze them.

WARREN: I was shock when I was told that they would actually help us to demolish it and hole the grill way (ph). I was just totally shocked.

ROBERTS (on-camera): People here in Alabama are of two minds about all of this. First of all, they're very thankful that FEMA stepped in while their schools are being rebuilt. But to a person, none of them can understand why FEMA would leave them no other choice than to tear down a perfectly good tornado shelter desperately needed in communities like this.

RYAN HOLLINGSWORTH (MARION CO SUPERINTENDENT): You would think, at some point, some folks would sit down and take some common sense to this and say, hey, you know, look, we've got a shelter up here that hold 600 people in Hackleburg and just been hit with an F-5 tornado in April. Why would we go and tear that down? That's nonsense.

UNIDENTIFIED MALE: These counties are totally strapped.

ROBERTS (voice-over): So, now, Alabama congressman, Spencer Bachus, is battling that red tape, and he went all the way to the top, writing this letter to the president of the United States, declaring the FEMA policy short-sighted and indefensible.

SPENCER BACHUS (R) (ALABAMA REPRESENTATIVE): Oh, it's a ridiculous regulation, and it tells you why the American people have lost confidence in their government or its ability to make the right choice.

ROBERTS: In Marion County, the Hackleburg schools will be rebuilt with a hard and safe room inside, but Superintendent Ryan Hollingsworth says the town could still use the FEMA storm shelter. After all, 18 people died here back in April.

In Dekalb County, once the FEMA shelter goes away, there won't be anything to protect students. Children would ride out tornado in the hallways, and you only need to look at these pictures to see the possible consequences of that.

WARREN: The FEMA regs (ph) make it by this much sense to me as the navy building in this ship, setting it out to sea, taking it out in the middle of the Atlantic, and then sink it. It makes about the same sense.

(END VIDEOTAPE)

ROBERTS (on-camera): We reached out to FEMA for a response to this. They didn't give us much more than -- other than to give us the regulation and say they continue to work with the community, but we did get this e- mail, Bret, late this afternoon from Alabama congressman, Robert Aderholt, who says he spoke with the FEMA director, Craig Fugate, today that the director acknowledged the problem with this and that they would continue to work over the next 30 days to get it solved -- Bret. [Fox News, Special Report with Bret Baier, 9/14/11, via Nexis]

September 16: Special Report Went After Regulations Including Child Labor, Workplace Safety, And Civil Rights Laws. On September 16, Special Report listed "jobs regulations" that supposedly "adversely impact ... small business owners in a real-time way." However, the regulations listed include vital statutes that are the bedrock of 20th and 21st century worker protections in the United States, including child labor, workplace safety, and civil rights laws. From the show:

BRET BAIER (host): We continue our series about excessive regulations, tonight focusing on small business. Chief Washington correspondent, James Rosen, reports while the companies may not be large, the rule books they must follow are getting bigger all the time -- James.

JAMES ROSEN (Fox News chief Washington correspondent): Bret, good evening. There are close to 28 million small businesses in the United States, and they employ more than half of all private sector workers. One problem is that as he hires more people, the small business owner will often not know about new regulations he faces until after he's been found in violation of them, or perhaps, even fined.

Businesses with just one employee face right off the bat at least ten federal regulations, including predictable ones like Social Security, but, also, the Polygraph Protection Act. Grow your business to 25 employees and you face all of those plus a whole new wrath of them, including the Older Worker Benefit Protection Act. Surely every pizzeria owner has that memorized. And the list grows like a beanstalk when your company grows to 100 employees.

Last year, we saw a distinct rise in the number of proposed federal rules affecting small business, you can see from 758 to 845. And the smaller a firm is, fewer than 20 employees say, the more expensive it gets per employee to comply with those regulations. Five federal agencies last year proposed 501 of those 845 rules we're talking about, roughly 59 percent of the total.

They are the Departments of Agriculture and Commerce, Health and Human Services, the Environmental Protection Agency and the Federal Communications Commission. President Obama has pledged to streamline and pare back the U.S. regulatory burden but with limits.

PRESIDENT OBAMA (video clip): I reject the argument that says for the economy to grow, we have to roll back protections that ban hidden fees by credit card companies or rules that keep our kids from being exposed to mercury, or laws that prevent the health insurance industry from short-changing patients.

ROSEN: The head of the nation's oldest small business advocacy group explained to Fox News how regulations adversely impact on small business owners in a real-time way.

TODD MCCRACKEN (president, National Small Business Association) (video clip): Every minute they spend dealing with regulation is a minute they're not spending growing their business, meeting with customers, developing new products, mentoring employees, and all those are the components for getting this economy going again.

ROSEN: In fairness to President Obama, federal regulatory spending has grown steadily since the early 60s with a doubling of those budgets seen even in decades dominated by Republican presidents -- Bret. [Fox News, Special Report with Bret Baier, 9/16/11, via Media Matters]

Business Owners And Economists Say Regulations Are Not Hurting Business

Survey Of Business Economists: Vast Majority Of Respondents Feel Current Regulatory Environment Is "Good" For Business. [National Association for Business Economics, August 2011]

McClatchy Survey Finds That Small Business Owners Say Regulation Is Not Harmful To Them. [McClatchy Newspapers, 9/1/11]

WSJ: "The Main Reason U.S. Companies Are Reluctant To Step Up Hiring Is Scant Demand." [The Wall Street Journal, 7/18/11]

Roger’s Reality Show

Original Link: http://www.thedailybeast.com/newsweek/2011/09/25/roger-ailes-repositions-fox-news.html

By Howard Kurtz

First, Ailes dialed back the Tea Party talk. Now he’s turning the GOP race into a political X-Factor—and steering the election agenda one more time.

It was part political spectacle, part American Idol, part YouTube extravaganza, a pure Roger Ailes production—and the latest sign that the Fox News chairman is quietly repositioning America’s dominant cable-news channel.

Hours before last week’s presidential debate in Orlando, Ailes’s anchors sat in a cavernous back room, hunched over laptops, and plotted how to trap the candidates. Chris Wallace said he would aim squarely at Rick Perry’s weakness: “How do you feel about being criticized by some of your rivals as being too soft on illegal immigration? Then I go to Rick Santorum: is Perry too soft?”

“That’s going to get some fireworks going,” said managing editor Bill Sammon, grinning.

When showtime arrived, producer Marty Ryan choreographed the action from a crowded trailer outside the convention hall: he called for a two-shot when Wallace invited Mitt Romney to criticize Perry’s immigration stance, so the audience could watch both men’s agitated expressions. But Ryan barked, “Let’s just be on Perry,” as the Texas governor demanded to know whether Santorum had ever been to the Mexican border, capturing the moment. Afterward, Ailes phoned a top lieutenant: “Tell the team we’ve been kicking ass in these debates.”

Ailes has always been a master showman—he even gave advice on triple-checking the audio—and Fox’s partnership with Google produced striking videos, graphics, and a backstage smoothie bar. But the real eye-opener was the sight of his anchors grilling the Republican contenders, which pleases the White House but cuts sharply against the network’s conservative image—and risks alienating its most rabid right-wing fans.

More than 40 years after helping to elect Richard Nixon, Ailes is more in demand than ever as the man to see for Republicans with designs on the White House. Perry stopped by his midtown Manhattan office a few months back, Newsweek has learned, when he was still weighing whether to make a run, and confided that he was worried about being able to raise the big bucks. “Money will find you if people believe in your message,” Ailes assured him. Afterward, Ailes concluded that Perry had a look that “if he tells people he’s gonna kick their ass, he might actually do it, which is useful for a president.”

Three weeks after dropping out of the race, Tim Pawlenty showed up to ask for a gig at Fox. But there was a complication: Pawlenty was on the verge of endorsing Romney. “I’m not sure I want to sign you as a paid spokesman for Romney,” Ailes said.

When Romney himself sought out Ailes for a pasta dinner, the Fox chief was struck by a sense of humor rarely displayed in public. “You ought to be looser on the air,” he said while dropping off the former Massachusetts governor at his hotel.

The left has long branded Fox a propaganda arm for Ailes’s pugnacious conservatism, and while his journalists maintain they play it straight, the network has certainly provided ample fodder for liberal detractors. But as President Obama’s popularity has plummeted and the country has grown increasingly sick of partisan sniping, something unexpected happened. Roger Ailes pulled back a bit on the throttle.

He calls it a “course correction,” quietly adopted at Fox over the last year. Glenn Beck’s inflammatory rhetoric—his ranting about Obama being a racist—“became a bit of a branding issue for us” before the hot-button host left in July, Ailes says. So too did Sarah Palin’s being widely promoted as the GOP’s potential savior—in large measure through her lucrative platform at Fox. Privately, Fox executives say the entire network took a hard right turn after Obama’s election, but, as the Tea Party’s popularity fades, is edging back toward the mainstream.

While Fox reporters ply their trade under Ailes’s much-mocked “fair and balanced” banner, the opinion arm of the operation has been told to lower the temperature. After the Gabrielle Giffords shooting triggered a debate about feverish rhetoric, Ailes ordered his troops to tone things down. It was, in his view, a chance to boost profits by grabbing a more moderate audience.

As he embarks on his last hurrah—Ailes’s contract is up in 2013—he is acting not like a political operative but as a corporate chieftain who knows that fostering friction and picking fights make for good television—and good business. Next fall’s election could well pivot on whether Ailes is more interested in scoring political points or ramping up ratings and revenue.

The 71-year-old Ailes ambles toward a conference room, where 15 Fox executives await his arrival. Balding and heavyset, he is not an imposing presence; his voice is a low rumble. But when he takes his seat at the head of the table, there is no doubt about who is in charge.

Told that the network has secured an interview with Palestinian leader Mahmoud Abbas, Ailes mentions that he’s been chatting with Prime Minister Benjamin Netanyahu—and insists Abbas should be asked about the extent of the U.S. commitment to Israel.

The talk turns to terrorism. Ailes is angry about an Associated Press report that 29 worshipers were killed by a suicide bomber in Baghdad’s largest Sunni mosque during prayers. “How do we know they were worshiping?” he demands. “I think the AP is so far over the hill, they’ve become left wing, antiwar. Gotta watch their copy.”

The topics bounce from CNBC’s weekend ratings (“They have shows about hookers and stuff, don’t they?”) to Fox’s own security (“Listen, one out of every 25 people in America is a psychopath”). Ailes raises a Fox initiative that he cooked up: “Are our producers on board on this ‘Regulation Nation’ stuff? Are they ginned up and ready to go?” Ailes, who claims to be “hands off” in developing the series, later boasts that “no other network will cover that subject … I think regulations are totally out of control,” he adds, with bureaucrats hiring Ph.D.s to “sit in the basement and draw up regulations to try to ruin your life.” It is a message his troops cannot miss.

With the debates, Fox has created a reality-TV show, with the built-in combat needed to win viewers. It’s working—Thursday night’s showdown was the best-watched debate of the year thus far—but Ailes’s approach has rankled the right. Following the network’s previous face-off in Iowa, Rush Limbaugh proclaimed that “Fox wants these people to tear each other up, ’cause they want approval from the mainstream media.” Ailes declares his love for Limbaugh before challenging the critics: “Because they see conservative thinking on our channel and don’t see it on any other channel, they think we’re in someone’s pocket.”

Ailes is exploiting the reality-TV tension—even as the contestants are seeking his advice. Perry is right to be wary of talking to news organizations, the chairman says: “They will set a trap for him and ask him who’s the leader of Uzbekistan and run with that for a week.” Michele Bachmann was clearly joking when she said God was sending a message with Hurricane Irene: “The way they’re playing it on the networks is that she’s a Jesus freak.” As for the longtime description of Romney as a weak frontrunner, that’s because “‘weak’ is a word the mainstream press will give to all Republicans always, as a precursor to killing them off … It saddens me. America used to be able to get straight journalism.”

It may seem funny to hear the man who gave the world Sean Hannity, Bill O’Reilly, and Beck lamenting the demise of straight journalism. But Ailes has brought in—and built up—anchors and correspondents who could succeed anywhere. Chris Wallace had been at ABC and NBC, where he moderated Meet the Press. Bret Baier worked his way up as a Pentagon and White House reporter.

Megyn Kelly, who had been a Washington lawyer, so dazzled the network that she was hired without a vacancy. She did a sultry photo shoot for GQ and exudes on-air feistiness, but was nervous that at the debate she would “blurt out something that’ll be a career killer” (Ailes called with a pep talk). Kelly missed the rehearsal because she was nursing her 5-month-old daughter.

The anchors spent hours getting ready. In one prep session, Kelly said she wasn’t afraid of Newt Gingrich’s strategy of bashing the media: “If I see him gearing up, I’ll say, ‘Are you going to yell at me?’” Wallace, who had been denounced by the former House speaker for “Mickey Mouse” questions, dismissed the subject: “Let him be the crazy uncle in the attic if he wants to be.”

Ailes has a blunt rejoinder to those who say he runs a biased outfit: “Every other network has given all their shows to liberals. We are the balance.” Even MSNBC morning host Joe Scarborough, a former GOP congressman, “tacks to the center,” Ailes complains, and “doesn’t act like a conservative.”

Ailes is a brawler, albeit one with a preference for lavender shirts, and he isn’t one to mince words. A mention of New York Mayor Michael Bloomberg unleashes a tirade about the mayor’s latest health crusade. “I like Bloomberg, he’s a friend. But fuck him and the salt. I like salt. It’s not his business.”

He keeps his edge in part because after all these years, he still sees himself as an insurgent—an identity rooted in his blue-collar upbringing in Warren, Ohio. He likes to tell interns that he dug ditches as a teenager and was once fired for throwing a man off a loading dock. And then there was the time he got into a fistfight with a political consultant and “took him out.”

His outsider self-image is ironic, considering that he’s been an establishment power broker for decades, burnishing the images of Ronald Reagan, George H.W. Bush, and Rudy Giuliani before launching Fox 15 years ago. Now he earns as much as $23 million a year, and Rupert Murdoch calls him almost every day, often to gossip about politics. (Ailes picks his battles; he avoided offering advice about the phone-hacking scandal that engulfed Murdoch’s News of the World tabloid.)

Fox, of course, still has its share of Obama bashers. Hannity’s show uses a logo that asks, “Can You Afford Four More?” Ailes calls him “predictable,” but Hannity says he’s not a party man: “I’m a registered conservative; I’m not a registered Republican.” O’Reilly, who chatted up Obama during this year’s Super Bowl, occasionally defends the president against harsh attacks. Ailes says O’Reilly has “moderated” his views and that “Beck scared him”—meaning Beck was so popular on the right that O’Reilly had to find a different niche.

For his part, O’Reilly says he supported most of George W. Bush’s policies and gave Obama’s economic plans a chance for 18 months—before opposing them as unworkable. “I took flak from the far right all day long. They attacked me viciously,” he says. He waves off any talk of moderation and insists he never worried about the now-departed Beck: “He’s a performer, I’m a journalist.”

(Ailes seems to relish the feuding among his stars, saying, “O’Reilly hates Sean and he hates Rush because they did better in radio than he did.”)

Ailes keeps a wary eye on anchor Shepard Smith, who occasionally backs aspects of the Obama record: “Every once in a while Shep Smith gets out there where the buses don’t run and we have a friendly talk.” And Ailes likes to tease O’Reilly: “You gonna suck up to Obama so you can get another interview at the next football game?” Democrats have noticed the change. Says former Obama aide Anita Dunn: “You have the sense that they’re trying to at least appear less of the hyper-partisan political network they had been.”

On the day that Obama is to deliver his jobs speech to Congress, Bret Baier attends a secret White House meeting. Over Dover sole in the Red Room, the president tries to sell his $450 billion plan to a handful of anchors. The earnest, square-jawed Baier is animated upon returning, briefing two news executives in the hallway.

Obama “painted a picture of a double-dip recession” and said if the bill “does not get through, I will blame Republicans” for their “irresponsible position,” Baier says, reading from his scribbled notes. Although the two men clashed during an interview last year in which Baier repeatedly interrupted the president, Obama made a point of praising the previous Fox debate, telling Baier: “By the way, you guys did a great job in Iowa.”

A producer calls to remind Baier that he is to preview the Obama speech on Kelly’s afternoon show. Baier begs off, saying it would be too “awkward” after the off-the-record luncheon. The phone rings again. Baier stands firm, saying it’s “ridiculous” for him to pretend he doesn’t know what’s in the speech. He is now a Washington insider.

It was Baier who led the aggressive questioning at last week’s debate, where the panelists orchestrated yet another round of sparring between Romney and Perry over health care, Social Security, and immigration. But after the debate, Romney, holding hands with his wife, Ann, strolled down the hall for the first of several candidate interviews with registered conservative Sean Hannity. In some ways, Fox is still Fox.

It's Not 'Class Warfare' When the Rich Do It

Original Link: http://www.thenation.com/blog/163471/its-not-class-warfare-when-rich-do-it

By Jamelle Bouie

Last night, the White House released details of President Obama’s plan for deficit reduction: in addition to a $250 billion reduction in Medicare spending on the provider side, and $330 billion in immediate spending cuts over the next decade, the president wants an end to the Bush tax cuts on the rich, and a millionaire’s tax called “the Buffett Rule,” after bilionaire investor Warren Buffett. The White House hasn’t released details on the exact mechanism of the Buffet Rule, but it would exist to ensure that high-income individuals pay a higher marginal rate than the middle class. Together, the tax increases would raise $1.5 trillion over the next ten years.

Not only is this good policy – it begins to correct tax imbalances that hugely benefit the wealthy – but it’s good politics. It provides a stark contrast to the Republican message of tax cuts for the rich, tax increases for the poor and spending cuts for everyone else, particularly those that rely on government programs: students, children, seniors and the unemployed.

In response, Republicans have brushed off their old rhetorical standby: “class warfare.” “Class warfare will simply divide this country more. It will attack job creators, divide people and it doesn’t grow the economy,” Rep. Paul Ryan said last night on FOX News Sunday. “Class warfare may make for really good politics, but it makes for rotten economics.”

Of course, Paul Ryan is the author of a plan that slashes discretionary spending and turns Medicare into an under-funded voucher scheme, so that the federal government can afford more and greater tax cuts on the wealthy. As a whole, the Republican Party has enthusiastically endorsed plans to slash social and anti-poverty spending to the bone, cut taxes on rich people and corporations, and crush organized workers. And this is to say nothing of right-wing attacks on the poor and working-class as “moochers” who don’t deserve the (paltry) benefits they receive. Given the extent to which they have monopolized attacks on the non-rich, Paul Ryan – and every other Republican – should be laughed off of the stage whenever they accuse Democrats of “class warfare”

As it stands, I look forward to media personalities demanding for the president to explain his hatred for rich people and the “producers” that shower us with their bountiful job creation. Or something.

A Tax Plan to Rally Around The Buffett Rule

Original Link: http://www.huffingtonpost.com/chuck-collins/buffett-rule_b_971870.html

By Chuck Collins

If you care about the future of the republic, the health of our communities, and the prospects for a transition to a new green economy -- the fight over taxation and concentrated wealth is your fight.

If you care about children -- and the kind of society we are going to leave for the next generation -- in terms of ecological health, infrastructure, functioning government -- the fight to tax the wealthy and close corporate tax abuses is your fight.

President Obama has put forward a revenue proposal worthy of vocal support and organizing. Progressives need to engage the media and our neighbors -- and dramatize the reality that a majority of people support increasing taxes on millionaires and corporate tax dodgers.

Why We Should Increase Taxes on the Wealthy

There will be a vigorous debate over this proposal that will flow all the way into the 2012 election. There are four reasons for taxing the wealthy that we should repeat in any conversation we have:

1. Taxes on the Wealthy Have Declined Steadily for Decades. Over the last decade -- and really over the last fifty years -- the portion of income paid in taxes by our wealthiest citizens has steadily declined. In 1961, when Barack Obama was born, the effective rate paid by households with income over $1 million was 43 percent. Today it is 23 percent. The richer you are, as Warren Buffett has illustrated, the smaller the percentage of your income you pay.

2. The Wealthy Benefit Enormously from U.S. Society. The U.S. wealthy have disproportionately benefited from the public investments we have all made together over the last several generations in technology, scientific research, infrastructure and the system of property rights protections, education and stable market regulations that enable wealth creation to happen. If they have any doubts about the centrality of the U.S. system to their good fortunes, they should try somewhere else.

3. We All Have A Moral Obligation to Future Generations. Those with significant wealth at this time have a moral obligation to pay back the society that made their wealth possible. Progressive taxation is an "economic opportunity recycling" program, enabling present generations to ensure that future generations have the same opportunities they had. We all have a responsibility to future generations -- and the wealthy have an obligation to pay their fair share of taxes as their parents and grandparents did.

4. Progressive Taxation will Reduce Extreme Inequalities of Wealth and Power. Over the last thirty years, we've seen a dramatic increase in inequalities of income, wealth and opportunity. The wealthiest one percent of households own 35.6 percent of all private wealth, more than the bottom 95 percent of households combined. These extreme inequalities have undermined all that we care about -- our democracy, education, mobility, economic stability. This concentrated wealth and power is threatening the fundamental tenets of our democracy -- and progressive taxation is one of the few ways to reduce inequality.

President Obama's Tax Plan

The President's Tax Reform Plan has many components and covers eight pages of provisions in the summary released, "Living within Our Means and Investing in the Future." But they fall into three areas:

1. Allowing Bush Tax Cuts Expire and Reform the Estate Tax. President Obama has renewed his campaign pledge to allow the 2001 and 2003 Bush tax cuts for the wealthy expire on households with incomes over $250,000. Since 2001, we've effectively borrowed almost $1 trillion to give the highest income households in our nation these tax breaks. Reversing them is part of how we'll get our fiscal house in order.

The President also proposes restoring the estate tax to 2009 levels when the tax applied to individuals with wealth over $3.5 million and couples with wealth over $7 million. The estate tax is our nation's only levy on substantial inherited wealth. The combined revenue of these provisions would generate over $866 billion over 10 years, according to the Office of Budget and Management.

2. Millionaire Tax Rates and the Buffett Rule. The Obama proposal includes the "Buffett Rule" that no millionaire should pay an effective rate lower than a middle class taxpayer. It was inspired by the billionaire investor's disclosure of the ways our tax code gives preferential treatment to higher income taxpayers. Buffett revealed that in 2010 that he paid an effective tax rate of 17.4 percent while many middle class and higher income taxpayers pay over 25 percent of their income.

High wage earners pay at 35 percent rate while income from wealth -- capital gains and dividend tax rates -- are 15 percent. This preference creates all kinds of distortions, including hedge fund managers who claim their income should be taxed at the lower 15 rate. The President's tax proposal would eliminate this so-called "Carried Interest" loophole and require hedge fund managers to pay at higher rates.

3. Corporate Tax Reform. The Obama proposal includes a number of important tax reforms, including elimination of subsidies for the oil and gas industry and reform of huge loopholes the insurance industry uses. It closes down some of the accounting games that corporations play that contribute little to jobs or economic health.

A Few Missing Pieces

There are few major missing pieces in the President's revenue plan. There is no proposal for a financial transition tax, a modest levy on transfers of stocks, bonds and other financial instruments. European countries have been pressing the U.S. to join a global move to institute such taxes to slow unproductive currency and financial speculation. A penny tax on every four dollars of transactions could generate over $150 billion a year in revenue.

The president's proposal unfortunately does not fully address the huge corporate loopholes that encourage offshore tax havens and aggressive corporate tax avoidance by U.S. companies. He should fully embrace Sen. Carl Levin and Rep. Lloyd Doggett's "Stop Tax Haven Abuse Act," which would raise an estimated $100 billion a year.

The president's proposal still gives preferential tax treatment to income from capital over income from work. The tax rate gap between earned wage income and investment income is a glaring problem that creates huge abuses and distortions. We should tax all income under the same rate structure system, whether it comes from dividends or paychecks.

Organizing Time: Celebrate and Get to Work

The principles and policies behind President Obama's revenue proposals are worth lifting up and defending. They would restore progressivity and fairness to the tax code. They would raise $1.5 trillion over the next decade from those with the greatest capacity to pay.

The push back will be enormous. Hedge fund managers, corporate CEOs, the offshore tax dodgers -- together will spend hundreds of millions if not billions to attack these proposals. They believe income from their investments is more virtuous that income from wages. They believe they should get special treatment for everything they do. They would be comfortable living in an American with great disparities of income, wealth and opportunity.

They'll accuse Obama of class warfare. But as Warren Buffett himself observed, "There is a class war in a America, and my class is winning." Obama noted that his proposal is not based on class war, but math.

We must talk to our friends, families and neighbors -post articles on social media and send around information. Tell people you know why the fight for fair taxes matters to everything they care about.

Get the facts -and counter the mythology offensive. Check out Citizens for Tax Justice, the Center for Budget on Policy Priorities and the Tax Policy Center.

Join groups like U.S. UNCUT and The Other 98 Percent and other social networking and direct action groups that will be keeping the pressure on.

If you know a wealthy person who believes their taxes should be raised, tell them to join Wealth for the Common Good and speak out for the tax fairness. It does no good if they keep their position private. Warren Buffett made a difference by telling his story and exposing that there is one tax system for the wealthy and one for the other 98 percent.

If you are a small business owner, don't let the right wing perpetuate the myth that tax increases on the wealthy and closing corporate tax loopholes are bad for small business and destroy jobs. You have a unique voice in this debate. Join Business for Shared Prosperity along with thousands of other small business people who believe that taxes are the price we pay for an unparalleled business environment and infrastructure.

We should remember to celebrate. The fact that these tax proposals are on the agenda is testament to a decade of work by organizers, netroots activists, workers, researchers, and policy advocates who have made the case for progressive taxation.

It is the result of groups like Patriotic Millionaires and Wealth for the Common Good -that lift up the Warren Buffetts of the world, the thousands of other business leaders and wealthy individuals who believe they should pay more and are willing to face the cameras and say so.

It is a celebration of legislative champions like Sen. Bernie Sanders, Rep. Jan Schakowsky, Rep. Barbara Lee, Sen. Carl Levin, and Rep. Lloyd Doggett who introduced and incubated many of the policies that are in the President's proposal when they were considered "off the table."

This fall will be decisive -and the debate over taxes will go to heart of what kind of country we become. All hands on deck!