Part VIChapter 36

Deviant formal organizations share bond of membership in large-scale, highly-structured associations that extend over time & space

They entail more highly sophisticated relationships than less-structured or committed crews, where a division of labor exists & members learn specific skills & pursue specialized tasks within the group

Since WWII organized crime has carried out a wide range of domestic activities, using violence, extortion, bribery & murder to advance its interest Part 6: Ch. 36

Part 6: Ch. 36

While organized crime is growing, there is no integrated centrally directed criminal conspiracy

The first business of criminal organizations is usually business, its protection & promotion

Like legitimate enterprises, the activities of separate “corporations” can be cooperative or competitive

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Activities must be criminal; individuals engaged in such activities

must be organized; profit-oriented; use of violence & bribery to advance causes;

Forms of entrepreneurial activity that are classified illegitimate if they do not meet the state’s test for permits, licenses, etc.

These organizations account for significant proportion of all meaningful economic activity

For example, in Italy, Peru, Columbia, Russia, Mexico, etc Part 6: Ch. 36

Most major crime organizations have a family or ethnic base

Operate out of small, tight-knit communities

Rituals, codes of allegiance, ethnic bonds & quasi-religious ceremonies help to engage compliance & loyalty

Involvement places individuals outside of law & subject to arrest helps reinforce ties that bind

Murder is usually the final sanction to ensure loyal silence

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First, the broader, global canvas of traditional criminal activity

Second, the growth of transnational links between criminal organizations & other groups

Third, growing ability & power of international criminal organizations (ICOs) to threaten stability of states, undermine democratic institutions, hinder economic development & undermine alliance relationships

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Part 6: Ch. 36

ICOs transnational scale & ability to challenge national & international authority sets them apart from other major criminal organizations

Disposing of large quantities of ready cash, diversified into a wide range of activities, & employing a workforce spread around the globe, the ICOs represent a different order of magnitude in criminal operations

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America Mafia or La Cosa Nostra (LCN)Hells Angels motorcycle gangChinese TriadsColumbian cartelsMexican cartels

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Part 6: Ch. 36

It’s more economical, for example, for a farmer to grow drug-related crops given the profitable nature of these products Example: Poppy in Afghanistan

Large markets, such as the US & Europe make them the world’s most lucrative markets for illegal as well as legal enterprises

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Growth of international crime parallels global trend of ungovernability – the declining ability of governments to manage or govern a modern state & to provide adequate or effective servicesExample: The Andes & Amazon of Latin

America, regions in Afghanistan & Pakistan, Burma, Peru, Southern China

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Part 6: Ch. 36

Ethnic criminal organizations likely to follow immigration patterns – not always but there’s a strong correlation

Economic pressures & ethnic turmoil generate refugees & immigrants from regions where international criminal groups are basedExample: Chinese, Mexicans, Middle-

Easterners, Russians, etc

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US’s long open borders with Mexico & Canada provide ready access for criminals & illegal goods & tens of thousands of miles of coastline

The North American Free Trade Agreement (NAFTA) & EC lowers many existing safeguards

(However, after 9/11 a lot more scrutiny & security does exist)

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Continued advances & international transportation will facilitate growth in ICOs

The movement of trillions of dollars in wire transfers make it difficult for law enforcement to track every transaction down

(The use of the internet, which cannot be controlled or monitored adequately, reinforces this)

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Preventing, disrupting & successfully prosecuting organized crime in most parts of the world is difficult

Criminal organizations have survived the onslaught of law enforcement for decades

Now, ICOs pose a bigger threat and are more powerful than their predecessors

Enforcement of law globally poses jurisdictional issues as well

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In a post-9/11 world, what challenges do ICOs face that they would otherwise not experience?

With a focus on terrorism & terrorists, have ICOs been able to operate under the radar of law enforcement?

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Part VI Chapter 37

Intersection of state & corporate interests during war is basic part of war-making

Every capitalist country must rely on private sector production to make weapons

With a permanent wartime economy in US after the end of World War II, major providers of weapons and logistical support such as General Electric, Lockheed and Boeing became regular recipients of government contracts

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These companies also were at center controversies regarding cost overruns and questionable charges

Much of this situation had been described by C. Wright Mills (1956) in Power Elite which also noted the “revolving door” between corporate, military and political organizations as leaders from each move from one to the other

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Part 6: Ch. 37

Examines current controversy about former VP Dick Cheney & Halliburton: Claims that Halliburton was awarded no-

bid, cost-plus contracts point to the potential for state-corporate crime and war profiteering becoming a legitimate practice

This study examines the relationship between Halliburton, the Bush administration, the War on Terror, and war profiteering

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First established in 1919, Halliburton has had a history since the 1990s and Cheney’s tenure as CEO prior to the 2003 invasion and occupation of Iraq, of what can be classified as corporate crime

Many of its actions have come under the scrutiny of the Securities & Exchange Commission (SEC), US General Accountability Office (GAO), and Congress

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These include: Overcharging the US government for

contracted workUtilizing bribes to attain foreign contracts Using subsidiaries and foreign joint

ventures to bypass US law restricting trade embargoes

In 2001 the Treasury Department began an inquiry into whether Halliburton had used transnational trade loopholes to circumvent sanctions on Iran by doing business with it through foreign subsidiaries

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In another case, Halliburton’s subsidiary Dressler, Inc. did substantial business with Iraq from 1997 to 2000, $73 million worth of

deals with Saddam Hussein Such business was prohibited by

international trade sanctions at the time & carried out under the guise of the UN’s oil-for-food program

In 2004 Halliburton came under investigation by the French government, the US Dept of Justice & SEC for international bribery

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For example the DoJ and France conducted a criminal investigation into an alleged $180 million bribe paid by Halliburton & three other companies to Nigerian government in exchange for a $4 billion contract to build a natural gas plant

In 1997 the GAO charged Halliburton with billing the US Army for excessive charges related to ” cleaning” the same offices up to four time a day

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A 2000 follow-up GAO report found systematic overcharges via inflated costsHalliburton paid $2 million in fines to resolve

the fraudulent overcharges Separately the Defense Department

inspector general and a federal grand jury investigated charges that Halliburton’s subsidiary KBR defrauded the government millions of dollars through inflated repair prices at Fort Ord in California

Halliburton again paid $2 million in fines to resolve the fraud charges

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The relation between Halliburton and Cheney date back to 1990s when Cheney, then Reagan’s secretary of defense, assigned Halliburton the task of conducting a classified survey detailing how private corporations could do logistical support for US military

Paid $3.9 million for this work, and another $5 million for a follow-up study, this led to Halliburton receiving a 5 year contract to be the US Army’s on-call private logistics arm

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It held this contract until 1997 when it was beat out by DynCorp in competitive bidding

Dick Cheney, along with David Gribbin his deputy secretary of defense, was hired by Halliburton as its CEO in 1993 providing the company with invaluable level of access to government

The connection paid off: Between 1995 and 2000 Halliburton

doubled the value of its government contracts, obtaining $1 billion in defense contracts in 1999-2000

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Cheney himself after becoming Bush’s Vice President continued to directly hold Halliburton stock until 2002

He had a direct financial interest in the company during his first two years as VP

A number of Bush family members have direct and indirect financial connections with Halliburton in various roles and capacities

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While serving as VP, Cheney continued to draw income from both the US government and Halliburton

Since Cheney returned to government service, Halliburton has paid far less for lobbying for defense contracts while receiving greater, even bigger awards

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For example, in the two years prior to Cheney’s election as VP, Halliburton spent $1.2 million lobbying & attained about $900 million a year

In 2001-2002, it spent half the previous amount, $600,000 lobbying;

by 2003 it halved that amount again to just $300,000 lobbying for over $6 billion in contracts

The VP’s office apparently coordinated in March 2003 some $7 billion of defense contracts for Halliburton in connection with the Iraqi War as well as future options Part 6: Ch. 37

Many of these contracts were noncompetitive, cost-plus

Essentially blank checks that ensured Halliburton would be reimbursed for whatever it bills for cost, plus its profit

As a result, Halliburton’s stock nearly doubled from $12.62 a share in 2002 to $23.90 in 2004

Halliburton’s “insider” advantage for war contracts is further demonstrated by the fact that very few other corporations, domestic or foreign, received government contracts

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Halliburton companies have engaged in systematic, significant overcharging for its Iraq contracts

On April 1, 2001, the Bush administration revoked strict regulations(no. 65 FR 80255) that would have made Halliburton et al.’s overcharging as well as other violations a basis for a period of ineligibility for future government contracts

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Some overcharging by Halliburton involved huge amounts of money

A Pentagon audit found in 2003 that it had overcharged $61 million for gasoline deliveries to Iraqi citizens

Another audit found that it overcharged $67 million for military dining services or 3 times the number of dinners it provided

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The Pentagon warned Halliburton in 2003 of “serious repercussions” for poor food & dining service quality although nothing ever happened

In addition Halliburton billed for labor never performed as well as charges for delivery & transportation costs of empty trucks and trailers

All of the above clearly fall into the category of state-facilitated corporate crime

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Why was Halliburton able to get away with its unethical practices even after Dick Cheney left office?

What would other government contractors (without such a connection to the White House) experience if they would have implemented the same practices as Halliburton?

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