The News — A little bit of this… a little bit of that

Mixing it up, this posting will not focus on one particular area, but rather touch on a variety of areas, ranging from contributions and feedback on the blog over Chinese espionage through to court martial for murder threats, infidelity, and forcible sodomy in the United States military. Variety rules!

General John R. Allen

General John R. Allen

General Allen was in the loop

In a previous posting I had written about General John R. Allen, an apparently prolific communicator, who got washed up in the sordid Petraeus affair, which, in turn, involved a hagiographer, an affair, corporate jetting across the globe, covert emailing, borderline-psychotic behavior by a maybe/maybe not tilted lover, and Ms. Jill Kelley, a Florida socialite that may or may not be broke, but certainly was suffering from a groupie affliction.

General Allen was reported to have exchanged a staggering 20,000 to 30,000 pages of e-mails and other documents with Ms. Kelley between 2010 and 2012, and, as I wrote, I was hopeful that:

“…the 20,000 to 30,000 communications would show to be a media exaggeration, because the alternative is unacceptable. That being said, the problem remain even if we are talking about 3,000 communications, reflecting a 10 fold-exaggeration. In fact, even if we are talking about 300 communications, I would question if a United States top-level military officer could reasonably interact 300 times with a (apparently rather indiscreet) socialite without it raising serious questions about his character.”

On January 22nd, 2013, Mr. Rajiv Chandrasekaran reported in the Washington Post that the Pentagon’s inspector general has cleared General Allen of wrongdoing following an investigation into whether he exchanged inappropriate e-mails with Ms. Kelley. The investigation was ordered by Defense Secretary Mr. Leon E. Panetta after review of the emails between Ms. Kelley and General Allen, some of which were described by senior defense officials as being racy and flirtatious.

Interestingly, Mr. Chandrasekaran, quoting a United States official, reported that the volume of communications were, in fact far less than the previously reported number, and that the “… content was not the sort of things you would print in a family newspaper.”

So, from a tax payer perspective I am glad that Mr. Allen communicated less than reported earlier, but I am disappointed that his communications to and from Ms. Kelley did, in fact, show to be …. well, inappropriate, and I am quite disappointed that he was not disciplined or, better yet, dismissed — an action that would have sent a clear signal to the rank of file of the United States military that this sort of behavior is not tolerated, particularly not when you are on the clock.

Perhaps General Allen can follow the example of his former boss, General David — his Shogun, if you will — who after getting entangled in the web of Ms. Kelley, chose to commit seppuku.

General Sinclair

General Sinclair

General Sinclair steps up

In my posting on November 16th, 2012, I wrote about the ongoing military Article 32 investigation against Brigadier General Jeffrey A. Sinclair, which include a litany of rather remarkable possible charges such as forcible sodomy, threats against victims’ careers, threats to murder a victim and her family, and the transfer of one victim to his unit in Afghanistan for what appears to primarily be sexual purposes.

In total General Sinclair appeared to be facing the potential of being charged with 26 violations of military law.

General Sinclair’s case was indeed referred to general court-martial with charges ranging from fraud to forcible sodomy and was scheduled for arraignment on January 22nd, 2013. In the arrangement General Sinclair appears to have been charged with eight cases of violating the Uniform Code of Military Justice and 25 specifications, allowing for a sentence of life in prison, to which he deferred entering a plea.

Details from the arrangement and a concurrent web-centric media blitz organized by General Sinclair through the PR agency MWW in New York — along the lines of the media blitzes first arranged by the Mr. Kenneth Lay, one of the Enron principals, and latest seen applied in the case involving Ms. Amanda Knox — was reported by Joe gould from the Army Times in a remarkably detailed and comprehensive article. The established web-site of General Sinclair tells a somewhat different story than the one told in mainstream media, with one of the victims, an army captain evidently having been more of a consensual star-struck lover (which turned aggressive when the affair started winding down) than a unwitting victim.

As I have said before, my interest in this matter is not in the sordid details of the case — which now appear to be even more sordid than what was first reported — but rather in the issue of corporate governance. While it is disturbing that the events that are laid out in the military case could occur at all, implying, of course an organization that has lost control of its principals, as perhaps best illustrated by General Sinclair himself, who, allegedly, said “I am a General, I’ll do whatever the f**k I want”, it is encouraging to see that the military is proceeding with the clean-up at a rapid clip and with a fair amount of openness.

What happens next? I don’t know, but I am staying tuned. Clearly in this case anything can happen.

Reuters scores a touchdown

7680417306_df87b76950_oIn these times of declining investigative journalism, Reuters has bucked the trend, following through with serious investigative journalism on some really interesting stories, and Reuters is rapidly becoming one of my preferred and trusted sources for news — something that I would never have guessed two years ago.

One of Reuters’ major hits in 2012 and 2013 has been the series of exposés of the questionable behavior of Chesapeake Energy Corp, its Board of Directors, and Mr. Aubrey McClendon, Chesapeake Energy Corp’s Chief Executive Officer.

In a series of stinging special reports developed and published during the 2012 calendar year Reuters reported, among other things that:

… Chesapeake plotted with Encana, its top competitor, to suppress land prices in the Collingwood shale formation in Northern Michigan, a matter that is the subject of investigations by both the state of Michigan and the Department of Justice… [and that] McClendon had arranged to personally borrow more than $1 billion from EIG Global Energy Partners, a firm that also is a big investor in Chesapeake [and that the loans] … arranged through McClendon’s personal shell companies, were secured by his interest in company wells [and that] McClendon is allowed to take up to a 2.5 percent stake in every well Chesapeake drills under a controversial program called the Founders Well Participation Program (FWPP) [and that] McClendon had partially owned and helped run a secretive $200 million hedge fund to trade in the same commodities Chesapeake produces.

And that is only a subset of the Chesapeake/McClendon affair exposed by Reuters in a remarkable act of journalistic courage and doggedness.

Finally, this week, it was announced that Mr. McClendon was leaving, an act that, according to Reuters, was structured as termination without cause, handily allowing Mr. McClendon to reap substantial benefits, including, as reported by Reuters today, $11.7 million in cash over four years, and, as reported by Reuters on Wednesday, January 30th, 2013:

“…total compensation of about $47 million… [including]… restricted stock awards already given to McClendon that have a value of $33.5 million …… [and] including personal use of corporate jets that could be worth up to $1 million over four years … [and continued use of] Chesapeake accounting services.”

It should be noted that the the use of accounting services and the corporate jet are not trivial matters. According to Reuters:

“… a Chesapeake unit handling such services for McClendon had six company employees, occupying a building on the edge of the campus. Known as “AKM Operations,” after his initials, it served as the hub for managing McClendon’s personal interests in Chesapeake wells, from assessing their value to filing court paperwork documenting his ownership. … Internal 2010 flight logs show the CEO took 155 business charters at a cost of $2.25 million and 75 personal flights worth an estimated $850,000 … These included family vacations to Europe and the Bahamas.”

Amazing. As a fairly seasoned investor, I would have have expected that Mr. McClendon would be terminated for cause and be entitled to nothing or, in the alternative, should have reached a compromise with the Board of Directors whereby he resigned, giving up all his perks, compensation, and incentives (yet again my expectation of honorable seppuku is not met.)

Effectively, this decision amounts to the Chesapeake Board of Directors giving millions of investors’ money to a disgraced employee. Perhaps, they have not learned from the Jack Welch affair, and perhaps it ought to be the Board of Directors members who should be terminated for cause.

New York Times ticks off the Chinese

New York Times is, of course, one of the leading investigative journalism organizations, having, among other things, dug into Walmart’s criminal behavior in Mexico. In January, however, New York Times applied its investigative skills breaking a fantastic story involving themselves.

I think it is now undisputed that the Chinese government for years has run and continue to run a comprehensive, institutionalized military and corporate espionage program (I actually had the opportunity to first-hand get a glimpse of the scope of this program when I visited the United States Patent Office years ago,) — a program that increasingly has migrated to the cyber-space. Likewise, I think that it is undisputed that Chinese government officials for years have enriched themselves at their fellow citizens’ expense.

In a new twist, however, it appears that the Chinese government uses its cyber-spying program to protect its corrupt officials. As reported by Nicole Perlroth of the New York Times on January 30th, 2013, Chinese hackers have attacked The New York Times over a four month period, infiltrating New York Times’ computer systems and getting passwords for its reporters and other employees, starting in October of 2012, and coinciding with:

… the reporting for a Times investigation, published online on Oct. 25, that found that the relatives of Mr. Wen Jiabao, China’s prime minister, had accumulated a fortune worth several billion dollars through business dealings.

Evidently, the hackers tried to cloak the source of the attacks by using United States universities as gateways for the attacks, and the attacks were conducted through an initial installation of malware, which was identified by computer security experts as a specific strain associated with computer attacks originating in China. Moreover, the computer secutiry experts were able to determine that the attacks started from the same university computers used by the Chinese military to attack United States military contractors in the past.

Attack on American news media companies that have reported on Chinese leaders and corporations is not news, by the way. According to the New York Times:

Last year, Bloomberg News was targeted by Chinese hackers, and some employees’ computers were infected, according to a person with knowledge of the compny’s internal investigation, after Bloomberg published an article on June 29 about the wealth accumulated by relatives of Xi Jinping, China’s vice president at the time. Mr. Xi became general secretary of the Communist Party in November and is expected to become president in March. Ty Trippet, a spokesman for Bloomberg, confirmed that hackers had made attempts but said that “no computer systems or computers were compromised.”

In a typical case of bureaucratic double-speak and application of the maxim that the best defense is an offense, the Chinese government did not deny the espionage, choosing instead to throw dung on the New York Times, as reported by Ms. Perlroth:

Asked about evidence that indicated the hacking originated in China, and possibly with the military, China’s Ministry of National Defense said, “Chinese laws prohibit any action including hacking that damages Internet security.” It added that “to accuse the Chinese military of launching cyberattacks without solid proof is unprofessional and baseless.”

This use of government resources to protect personal interest and hinder investigation into corruption is, of course, a logical extension of the corruption itself, which, after all, at its very core, is a question of misappropriation of government resources, and, so, it is almost mundane. What is much more interesting is that it illustrates just how far the Chinese system will go to protect its principals from any scrutiny, which makes you wonder if any means are off-limit. In the most extreme case, for instance, would China invade, say, Vietnam, if Vietnamese journalists engaged in a serious investigative journalism around Mr. Jiabao’s or Mr. Jinping’s business dealings?

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