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How Ukraine’s Finance Chief Got Rich

By Robert Parry | Consortium News | November 10, 2015

Before becoming Ukraine’s Finance Minister last December, Natalie Jaresko collected $1.77 million in bonuses from a U.S.-taxpayer-financed investment fund where her annual compensation was supposed to be limited to $150,000, according to financial documents filed with the U.S. Internal Revenue Service this year.

The near 12-fold discrepancy between the compensation ceiling and Jaresko’s bonuses, paid in 2013, was justified in the IRS filing from the Jaresko-led Western NIS Enterprise Fund (WNISEF) by drawing a distinction between getting paid directly from the $150 million U.S. government grant that created the fund and the money from the fund’s “investment sales proceeds,” which were treated as fair game for extracting bonuses far beyond the prescribed compensation level.

Using this supposed loophole, Jaresko and some of her associates enriched themselves by claiming money generated from U.S. taxpayers’ dollars while avoiding any personal financial risks. She and other WNISEF officers collected the bonuses from what they deemed “profitable” exits from some investments even if the overall fund was losing money and shrinking, as it apparently was in recent years.

According to WNISEF’s filing for the 2013 tax year, submitted to the IRS on Aug. 11, 2015, the value of the investment fund had shrunk from $150 million at its start to $93.9 million in the fund’s 2012 tax year and to $89.8 million in the 2013 tax year. (WNISEF’s tax years end on Sept. 30.)

So, Jaresko’s arrangement was something like taking someone else’s money to a roulette table, placing it on black, and claiming a share of the winnings if the ball stopped on black. However, if the ball landed on red, then the someone else absorbed the loss, except in this case the winners were Jaresko and her associates and the losers were the American taxpayers.

The purpose cited by the U.S. Congress in starting the non-profit WNISEF with $150 million in the 1990s was to help jumpstart an investment economy in Ukraine and Moldova for the benefit of the people of those countries. The project was administered by the U.S. Agency for International Development (USAID), which selected Jaresko, a former U.S. diplomat of Ukrainian heritage, to run the project.

Last December, Ukrainian President Petro Poroshenko named Jaresko Finance Minister after awarding her instant Ukrainian citizenship. At that point, she quit WNISEF and has since become the face of Ukrainian “reform,” representing the U.S.-backed government at international banking events at Davos, Switzerland, and elsewhere while appealing for billions of dollars in Western financial aid which she oversees.

Thus, Jaresko’s standards for handling public moneys are relevant to judging whether the new regime is just a reshuffling of who gets to plunder Ukraine or a serious effort at reform. The overthrow of the previous Ukrainian government of President Viktor Yanukovych was largely justified in February 2014 because of allegations about corruption. The new regime has presented itself as committed to reform, even though some outside observers contend that corruption is as bad or worse than under the old government.

Self-Interest v. Public Interest

There is also the question of whether Jaresko is more interested in getting rich than in serving the people of Ukraine. As WNISEF’s chief executive officer, Jaresko seemed to grow dissatisfied with her $150,000 salary. For instance, in 2004, she earned more than double the prescribed amount, paid $383,259 along with $67,415 in expenses, according to WNISEF’s IRS filing for that year.

According to audit documents that I obtained from USAID, an “Expense Analysis” for 2004 showed $1,282,782 being paid out as “Exit-based incentive expense-equity incentive plan” and another $478,195 being paid for “Exit-based incentive expense-financial participation rights.” That suggested that Jaresko was already claiming bonuses from WNISEF’s investments (bought with U.S. taxpayers’ money) and sold during 2004.

In 2006, Jaresko’s compensation for her work with WNISEF was removed from public disclosure altogether after she co-founded two related entities – Horizon Capital Associates (HCA) to manage WNISEF’s investments (and collect around $1 million a year in fees) and Emerging Europe Growth Fund (EEGF), a private entity to collaborate with WNISEF on investment deals.

Jaresko formed HCA and EEGF with two other WNISEF officers, Mark Iwashko and Lenna Koszarny. They also started a third firm, Horizon Capital Advisors, which “serves as a sub-advisor to the Investment Manager, HCA,” according to WNISEF’s IRS filing for 2006.

According to the USAID’s expense analyses for 2004-06, the taxpayer-financed WNISEF spent $1,049,987 to establish EEGF as a privately owned investment fund for Jaresko and her colleagues. USAID apparently found nothing suspicious about these tangled business relationships despite the potential conflicts of interest involving Jaresko, the other WNISEF officers and their affiliated companies.

For instance, WNISEF’s 2012 annual report devoted two pages to “related party transactions,” including the management fees to Jaresko’s Horizon Capital ($1,037,603 in 2011 and $1,023,689 in 2012) and WNISEF’s co-investments in projects with the EEGF. Though the IRS forms have a line for earnings from “related organizations,” WNISEF listed nothing, apparently treating compensation from Horizon Capital and EEGF as “unrelated” for the purposes of reporting compensation for Jaresko and other officers.

So, the scale of how much Jaresko was making from her association with WNISEF was unclear until last week when the IRS released WNISEF’s 2013 tax filing of Aug. 11, 2015, in response to a request from Consortiumnews.com. Though the filing still did not disclose all of Jaresko’s WNISEF-related compensation, it did list her $1.77 million share of the $4.5 million in bonuses awarded to her and two other WNISEF officers, Iwashko and Koszarny.

WNISEF filings also said the bonuses were paid regardless of whether the overall fund was making money, noting that this “compensation was not contingent on revenues or net earnings, but rather on a profitable exit of a portfolio company that exceeds the baseline value set by the board of directors and approved by USAID” – with Jaresko also serving as a director on the board responsible for setting those baseline values.

Though compensation for Jaresko and other officers was shifted outside public view after 2006 – as their pay was moved to the affiliated entities – the 2006 IRS filing said: “It should be noted that as long as HCA earns a management fee from WNISEF, HCA and HCAD [the two Horizon Capital entities] must ensure that a salary cap of $150,000 is adhered to for the proportion of salary attributable to WNISEF funds managed relative to aggregate funds under management.”

Audit Gaps

KPMG auditors, who reviewed WNISEF finances, also took a narrow view of how to define income for Jaresko and other officers, only confirming that no “salary” exceeded $150,000, apparently not looking at bonuses and other forms of compensation. Neither USAID officials nor Jaresko responded to specific questions about WNISEF’s possible conflicts of interest, how much money Jaresko made from her involvement with WNISEF and its connected companies, and whether she had fully complied with IRS reporting requirements.

After Jaresko’s appointment as Finance Minister — and her resignation from WNISEF — I reviewed WNISEF’s available public records and detected a pattern of insider dealings and enrichment benefiting Jaresko and her colleagues. That prompted me in February to file a Freedom of Information Act request for USAID’s audits of the investment fund.

Though the relevant records were identified by June, USAID dragged its feet on releasing the 34 pages to me until Aug. 28 when the agency claimed nothing was being withheld, saying “all 34 pages are releasable in their entirety.” However, when I examined the documents, it became clear that a number of pages were missing from the financial records, including a total of three years of “expense analysis” – in three-, six- and nine-month gaps – since 2007.

Part of KPMG’s “Independent Auditors’ Report” for 2013 and 2014 was also missing. The report stated that “except as discussed in the third paragraph below, we conducted our audits in accordance with auditing standards generally accepted in the United States of America,” accountant-speak that suggests that “the third paragraph below” would reveal some factor that did not comply with generally accepted accounting principles (or GAAP).

But three paragraphs below was only white space and there was no next page in what USAID released. After I pointed out the discrepancies to USAID on Aug. 31, I was told on Sept. 15 that “we are in the process of locating documents to address your concern. We expect a response from the bureau and/or mission by Monday, September 28, 2015.”

After the Sept. 28 deadline passed, I contacted USAID again and was told on Oct. 2 that officials were “still working with the respective mission to obtain the missing documents.” On Oct. 22, USAID sent me one additional page from KPMG’s audit report stating that its review of WNISEF’s books lacked “an external quality control review by an unaffiliated audit organization” – as required by the U.S. government’s auditing standards – because no such program is offered in Ukraine. Other pages are still missing.

An earlier effort by Jaresko’s ex-husband Ihor Figlus to blow the whistle on what he considered improper business practices related to WNISEF was met by disinterest inside USAID, according to Figlus, and then led to Jaresko suing him in a Delaware court in 2012, using a confidentiality clause to silence Figlus and getting a court order to redact references to the abuses he was trying to expose.

Figlus’s complaints related to what he saw as improper loans that Jaresko had taken from Horizon Capital Associates to buy and expand her stake in EEGF, the privately held follow-on fund to WNISEF. After Figlus discussed this issue with a Ukrainian journalist, Jaresko sent her lawyers to court to silence him and, according to his lawyer, bankrupt him.

The filings in Delaware’s Chancery Court are remarkable not only because Jaresko succeeded in getting the Court to gag her ex-husband through enforcement of a non-disclosure agreement but the Court agreed to redact nearly all the business details, even the confidentiality language at the center of the case. [See Consortiumnews.com’sUkraines Finance Ministers American Values.”]

Shared Values

Earlier this year, I sent detailed questions to USAID and to Jaresko via several of her associates. Those questions included how much of the $150 million in U.S. taxpayers’ money remained in WNISEF, why Jaresko reported no compensation from “related organizations,” whether she received bonus money, how much money she made in total from her association with WNISEF, what AID officials did in response to Figlus’s whistle-blower complaint, and whether Jaresko’s legal campaign to silence her ex-husband was appropriate given her current position and Ukraine’s history of secretive financial dealings.

USAID press officer Annette Y. Aulton got back to me with a response that was unresponsive to my specific questions. Rather than answering about the performance of WNISEF and Jaresko’s compensation, Aulton commented on the relative success of 10 “Enterprise Funds” that USAID has sponsored in Eastern Europe, adding:

“There is a twenty year history of oversight of WNISEF operations. Enterprise funds must undergo an annual independent financial audit, submit annual reports to USAID and the IRS, and USAID staff conduct field visits and semi-annual reviews. At the time Horizon Capital assumed management of WNISEF, USAID received disclosures from Natalie Jaresko regarding the change in management structure and at the time USAID found no impropriety during its review.”

One Jaresko associate, Tanya Bega, Horizon Capital’s investor relations manager, said she forwarded my questions to Jaresko, but Jaresko did not respond.

Despite concerns that Jaresko may have enriched herself at the expense of U.S. taxpayers and then used a Delaware court to prevent disclosure of possible abuses, Jaresko has been hailed by the U.S. mainstream media as a paragon of reform in the U.S.-backed Ukrainian regime.

Last January, New York Times columnist Thomas L. Friedman cited Jaresko as an exemplar of the new Ukrainian leaders who “share our values” and deserve unqualified American support. Friedman uncritically quoted Jaresko’s speech to international financial leaders at Davos, in which she castigated Russian President Vladimir Putin:

“Putin fears a Ukraine that demands to live and wants to live and insists on living on European values — with a robust civil society and freedom of speech and religion [and] with a system of values the Ukrainian people have chosen and laid down their lives for.”

Exactly which Western “values” Jaresko actually shares remains unclear because of the fog surrounding her actions at WNISEF and her unwillingness to reveal how much she made from her association with a U.S.–taxpayer funded project. However, if those Western “values” include putting citizens’ interests before self-interest and believing that transparency is critical for a democracy, Jaresko may need some remedial training.


Investigative reporter Robert Parry broke many of the Iran-Contra stories for The Associated Press and Newsweek in the 1980s. You can buy his latest book, America’s Stolen Narrative, either in print here or as an e-book (from Amazon and barnesandnoble.com).

November 10, 2015 Posted by | Corruption, Deception | , , , , | Leave a comment

MH-17 Case: ‘Old’ Journalism vs. ‘New’

By Robert Parry | Consortium News | October 20, 2015

The first thing any thinking person learns about the Internet is not to trust everything you see there. While you can find much well-researched and reliable material, you’ll also encounter disinformation, spoofs, doctored photographs and crazy conspiracy theories. That would seem to be a basic rule of the Web – caveat emptor and be careful what you do with the information – unless you’re following a preferred neocon narrative. Then, nothing to worry about.

A devil-may-care approach to Internet-sourced material has been particularly striking when it comes to the case of the shoot-down of Malaysia Airlines Flight 17 over eastern Ukraine on July 17, 2014. It has now become de rigueur on the part of the West’s mainstream news outlets to tout the dubious work of a British Internet outlet called Bellingcat, which bases its research on photographs and other stuff pulled off the Internet.

Bellingcat’s founder Eliot Higgins also has made journalistic errors that would have ended the careers of many true professionals, yet he continues to be cited and hailed by the likes of The New York Times and The Washington Post, which have historically turned up their noses about Internet-based journalism.

The secret to Higgins’s success seems to be that he reinforces what the U.S. government’s propagandists want people to believe but lack the credibility to sell. It’s a great business model, marketing yourself as a hip “citizen journalist” who just happens to advance Official Washington’s “group thinks.”

We saw similar opportunism among many wannabe media stars in 2002-03 when U.S. commentators across the political spectrum expressed certitude about Iraq’s hidden stockpiles of WMD. Even the catastrophic consequences of that falsehood did little to dent the career advancements of the Iraq-WMD promoters. There was almost no accountability, proving that there truly is safety in numbers. [See Consortiumnews.com’sThrough the US Media Lens Darkly.”]

New Recruits

But there’s always room for new recruits. Blogger Higgins made his first splash by purporting to prove the accuracy of U.S. government claims about the Syrian government firing rockets carrying sarin gas that killed hundreds of civilians on Aug. 21, 2013, outside Damascus, an incident that came close to precipitating a major U.S. bombing campaign against the Syrian military.

Those of us who noted the startling lack of evidence in the Syria-sarin case – much as we had questioned the Iraq-WMD claims in 2002-03 – were brushed aside by Big Media which rushed to embrace Higgins who claimed to have proved the U.S. government’s charges. Even The New York Times clambered onboard the Higgins bandwagon.

Higgins and others mocked legendary investigative journalist Seymour Hersh when he cited intelligence sources indicating that the attack appeared to be a provocation staged by Sunni extremists to draw the U.S. military into the war, not an attack by the Syrian military.

Despite Hersh’s long record for breaking major stories – including the My Lai massacre from the Vietnam War, the “Family Jewels” secrets of the CIA in the 1970s, and the Abu Ghraib torture during the Iraq War – The New Yorker and The Washington Post refused to run his articles, forcing Hersh to publish in the London Review of Books.

Hersh was then treated like the crazy uncle in the attic, while Higgins – an unemployed British bureaucrat operating from his home in Leicester, England – was the new golden boy. While Higgins was applauded, Hersh was shunned.

But Hersh’s work was buttressed by the findings of top aeronautical scientists who studied the one rocket that carried sarin into the Damascus suburb of Ghouta and concluded that it could have traveled only about two kilometers, far less distance than was assumed by Official Washington’s “group think,” which had traced the firing position to about nine kilometers away at a Syrian military base near the presidential palace of Bashar al-Assad.

“It’s clear and unambiguous this munition could not have come from Syrian government-controlled areas as the White House claimed,” Theodore Postol, a professor in the Science, Technology, and Global Security Working Group at Massachusetts Institute of Technology, told MintPress News.

Postol published “Possible Implications of Faulty US Technical Intelligence in the Damascus Nerve Agent Attack of August 21st, 2013” in January 2014 along with Richard Lloyd, an analyst at the military contractor Tesla Laboratories who was a United Nations weapons inspector and has to his credit two books, 40 patents and more than 75 academic papers on weapons technology.

Postol added in the MintPress interview that Higgins “has done a very nice job collecting information on a website. As far as his analysis, it’s so lacking any analytical foundation it’s clear he has no idea what he’s talking about.”

In the wake of the Postol-Lloyd report, The New York Times ran what amounted to a grudging retraction of its earlier claims. Yet, to this day, the Obama administration has failed to withdraw  its rush-to-judgment charges against the Syrian government or present any verifiable evidence to support them.

This unwillingness of the Obama administration to fess up has served Higgins well, in that there is still uncertainty regarding the facts of the case. After all, once a good propaganda club is forged for bludgeoning an adversary, it’s not something Official Washington lays down easily. [See Consortiumnews.com’sThe Collapsing Syria-Sarin Case.“]

The MH-17 Mystery

So, Higgins and Bellingcat moved on to the mystery surrounding MH-17, where again the Obama administration rushed to a judgment, pinning the blame on the Russians and ethnic Russian rebels in eastern Ukraine who were fighting the U.S.-backed regime in Kiev.

Though again hard evidence was lacking – at least publicly – Official Washington and its many minions around the world formed a new “group think” – Russia’s President Vladimir Putin was responsible for the 298 deaths.

On July 20, 2014, just three days after the MH-17 shoot-down in an article with the definitive title “U.S. official: Russia gave systems,” The Washington Post reported that an anonymous U.S. official said the U.S. government had “confirmed that Russia supplied sophisticated missile launchers to separatists in eastern Ukraine and that attempts were made to move them back across the Russian border.”

This official told the Post that there wasn’t just one Buk battery, but three. The supposed existence of these Buk systems in the rebels’ hands was central to the case blaming Putin, who indeed would have been highly irresponsible if he had delivered such powerful weapons – capable of hitting a commercial airliner flying at 33,000 feet as MH-17 was – to a ragtag rebel force of ethnic Russians in eastern Ukraine.

But there were problems with this version, including the fact that – as reflected in a “government assessment” from the Director of National Intelligence released on July 22, 2014, (or five days after the crash) – U.S. intelligence listed other weapons allegedly provided by the Russians to the ethnic Russian rebels but not a Buk anti-aircraft missile system.

In other words, two days after the Post cited a U.S. official claiming that the Russians had given the rebels the Buks, the DNI’s “government assessment” made no reference to a delivery of one, let alone three powerful Buk batteries.

And that absence of evidence came in the context of the DNI larding the report with every possible innuendo to implicate the Russians, including references to “social media” entries. But there was no mention of a Buk delivery.

The significance of this missing link is hard to overstate. At the time eastern Ukraine was the focus of extraordinary U.S. intelligence collection because of the potential for the crisis to spin out of control and start World War III. Plus, a Buk missile battery is large and difficult to conceal. The missiles themselves are 16-feet-long and are usually pulled around by truck.

U.S. spy satellites, which supposedly can let you read a license plate in Moscow, surely would have picked up these images. And, if – for some inexplicable reason – a Buk battery was missed before July 17, 2014, it would surely have been spotted on an after-action review of the satellite imagery. But the U.S. government has released nothing of the kind – not three, not two, not one.

Different Account

Instead, in the days after the MH-17 crash, I was told by a source that U.S. intelligence had spotted Buk systems in the area but they appeared to be under Ukrainian government control. The source who had been briefed by U.S. intelligence analysts said the likely missile battery that launched the fateful missile was manned by troops dressed in what looked like Ukrainian uniforms.

At that point in time, the source said CIA analysts were still not ruling out the possibility that the troops were actually eastern Ukrainian rebels in similar uniforms but the initial assessment was that the troops were Ukrainian soldiers. There also was the suggestion that the soldiers involved were undisciplined and possibly drunk, since the imagery showed what looked like beer bottles scattered around the site, the source said. [See Consortiumnews.com’sWhat Did US Spy Satellites See in Ukraine?”]

Subsequently, the source said, these analysts reviewed other intelligence data, including recorded phone intercepts, and concluded that the shoot-down was carried out by a rogue element of the Ukrainian government, working with a rabidly anti-Russian oligarch, but that senior Ukrainian leaders, such as President Petro Poroshenko and Prime Minister Arseniy Yatsenyuk, were not implicated. However, I have not been able to determine if this assessment was a dissident opinion or a consensus within U.S. intelligence circles.

Another intelligence source told me that CIA analysts did brief Dutch authorities during the preparation of the Dutch Safety Board’s report but that the U.S. information remained classified and unavailable for public release. In the Dutch report, there is no reference to U.S.-supplied information although the report reflects sensitive details about Russian-made weapons systems, secrets declassified by Moscow for the investigation.

Into this propaganda-laced controversy stepped Eliot Higgins and Bellingcat with their “citizen journalism” and Internet-based investigation. The core of their project was to scour the Internet for images purportedly of a Buk missile system rumbling through the eastern Ukrainian countryside in the days before the MH-17 crash. After finding several such images, Bellingcat insistently linked the Buk missiles to the Russians and the rebels.

Supposedly, this investigative approach is better than what we traditional journalists do in such cases, which is to find sources with vetted intelligence information and get them to share it with us, while also testing it out against verifiable facts and the views of outside experts. Our approach is far from perfect – and often requires some gutsy whistle-blowing by honest officials – but it is how many important secrets have been revealed.

A central flaw in the Internet-based approach is that it is very easy for a skilled propagandist in a government dirty-tricks office or just some clever jerk with Photoshop software to manufacture realistic-looking images or documents and palm them off either directly to gullible people or through propaganda fronts that appear as non-governmental entities but are really bought-and-paid-for conduits of disinformation.

This idea of filtering propaganda through supposedly disinterested – and thus more credible – outlets has been part of the intelligence community’s playbook for many years. I was once told by Gen. Edward Lansdale, one of the pioneers of CIA psychological operations, that his preference always was to plant propaganda in news agencies that were perceived as objective, that way people were more believing.

Lost Credibility

After the Pentagon Papers and Watergate scandals of the 1970s, when the American people were suspicious of whatever they heard from the U.S. government, the Reagan administration in the 1980s organized inter-agency task forces to apply CIA-style techniques to manage the perceptions of the U.S. public about foreign events. The architect was the CIA’s top propaganda specialist, Walter Raymond Jr., who was transferred to the National Security Council staff to skirt legal prohibitions against the CIA manipulating Americans.

Raymond, who counseled his subordinates in the art of gluing black hats on U.S. adversaries and white hats on U.S. friends, recommended that U.S. propaganda be funneled through organizations that had “credibility in the political center.” Among his favorite outlets were Freedom House, a non-governmental “human rights” group that was discreetly funded by the U.S. government, and the Atlantic Council, a think tank led by former senior U.S. government officials and promoting strong NATO ties. [For more background, see “How Reagan’s Propaganda Succeeded.”]

The same process continues to this day with some of the same trusted outlets, such as Freedom House and Atlantic Council, but requiring some new fronts that have yet to be identified as propaganda conduits. Many receive discreet or backdoor funding from the U.S. government through the National Endowment for Democracy or other U.S. entities.

For instance, the U.S. Agency for International Development (along with billionaire George Soros’s Open Society Institute) funds the Organized Crime and Corruption Reporting Project, which targets governments that have fallen into U.S. disfavor and which are then undermined by reporting that hypes alleged ties to organized crime and corruption. The USAID/Soros-funded OCCRP also collaborates with Bellingcat.

Higgins has become a favorite, too, of the Atlantic Council, which has partnered with him for a report about Russian involvement in the Ukraine conflict, and he wins praise from the Soros-financed Human Rights Watch, which has lobbied for U.S. military intervention against the Assad government in Syria. (Like Higgins, Human Rights Watch pushed discredited theories about where Syrian sarin-gas attack originated.)

Yet, because Higgins’s claims dovetail so neatly with U.S. government propaganda and neoconservative narratives, he is treated like an oracle by credulous journalists, the Oracle of Leicester. For instance, Australia’s “60 Minutes” dispatched a crew to Higgins’s house to get the supposed coordinates for where the so-called “Buk getaway video” was filmed – another curious scene that appeared mysteriously on the Internet.

When “60 Minutes” got to the spot near Luhansk in eastern Ukraine where Higgins sent them, the location did not match up with the video. Although there were some billboards in the video and at the site in Luhansk, they were different shapes and all the other landmarks were off, too. Still, the Australian news crew pretended that it was at the right place, using some video sleight-of-hand to snooker the viewers.

However, when I published screen grabs of the getaway video and the Luhansk location, it was clear to anyone that the scenes didn’t match up.

A screen shot of the roadway where the suspected BUK missile battery passes after the shoot-down of Malaysia Airlines Flight 17 on July 17, 2014. (Image from Australian "60 Minutes" program)

Correspondent Michael Unsher of Australia's "60 Minutes" claims to have found the billboard visible in a video of a BUK missile launcher after the shoot-down of Malaysia Airlines Flight 17 on July 17, 2014. (Screen shot from Australia's "60 Minutes")

Yet, instead of simply admitting that they were in error, the “60 Minutes” host did a follow-up insulting me, asserting that he had gone to the place identified by Higgins and claiming that there was a utility pole in the video that looked something like a utility pole in Luhansk.

A screen shot from the so-called "getaway" video supposedly taken shortly after MH-17 was shot down showing the road that the suspected BUK anti-aircraft missile battery was taking.

A screen shot from Australia's "60 Minutes" update supposedly showing a utility pole in the "getaway" video and matching it up with a poll in an intersection of Luhansk in eastern Ukraine. However, not that the inset obscures the spot where a house appeared on the original video.

At this point, the Australian program went from committing an embarrassing error to engaging in journalistic fraud. Beyond the fact that utility poles tend to look alike, nothing else matched up and, indeed, the landmarks around the utility poles were markedly different, too. A house next to the pole in the video didn’t appear in the scene filmed by the Australian crew. [For details, see Consortiumnews.com’sA Reckless Stand-upper on MH-17.”]

An Enduring Aura

But Higgins’s aura was such that objective reality and logic no longer seemed to matter. That two utility poles looked somewhat alike when nothing else in a video matched up at all somehow proved you were at the right location simply because the Oracle of Leicester had sent you there.

I’ve known many excellent journalists who saw their careers ended because they were accused of minor slip-ups on difficult stories when they were clearly correct on the big picture. Think, for instance, of the harsh treatment meted out to Gary Webb on Nicaraguan Contra drug trafficking and Mary Mapes on George W. Bush’s shirking his National Guard duty. But different rules clearly apply if you make serious errors in line with U.S. propaganda. For example, think of virtually the entire mainstream news media buying into the false Iraq-WMD claims and facing almost no accountability at all.

The second set of rules apparently applies to Higgins and Bellingcat, who have the mainstream U.S. media on bended knee despite a record of journalistic misfeasance or malfeasance. In editorials about the Dutch Safety Board report last week , both The New York Times and The Washington Post hailed Bellingcat – as if they were recognizing that the old mainstream media had to rub shoulders with supposedly “new media” to have any credibility. It was a moment that would have made the CIA’s Lansdale and Raymond smile.

The Post’s neocon editorial writers, who have backed “regime change” in Iraq, Syria and other targeted countries, viewed the Dutch Safety Board report as vindicating the initial rush to judgment blaming the Russians and praised the work of Bellingcat – although the Dutch report pointedly did not say who was responsible or even where the fatal missile was launched.

“More forensic investigation will be necessary to identify precisely where the missile came from, but the safety board identified a 123-square-mile area mostly held by the separatists,” the Post wrote, although a different way of saying the same thing would be to note that the launch area identified by the report could suggest the firing by either Ukrainian forces or the rebels.

The Post did observe what has been one of my repeated complaints — that the Obama administration is withholding the U.S. intelligence evidence that Secretary of State John Kerry claimed three days after the shoot-down had identified the precise location of the launch.

Yet, the subsequent U.S. silence on that point has been the dog not barking. Why would the U.S. government, which has been trying to pin the shoot-down on the Russians, hide such crucial evidence – unless perhaps it doesn’t corroborate the desired anti-Putin propaganda theme?

Yet, the Post sought to turn this otherwise inexplicable U.S. silence into further condemnation of Putin, writing: “A Dutch criminal investigation is underway that may identify the individuals who ordered and carried out the shootdown. We hope the prosecutors will have access to precise data scooped up by U.S. technical means at the time of the shootdown, which made clear the responsibility of Russian-backed forces.”

So, the Post sees nothing suspicious about the U.S. government’s sudden reticence after its initial loud rush-to-judgment. Note also the Post’s lack of skepticism about what these “technical means” had scooped up. Though the U.S. government has refused to release this evidence – in effect, giving those responsible for the shoot-down a 15-month head start to get away and cover their tracks – the Post simply takes the official word that the Russians are responsible.

Then comes the praise for Bellingcat : “Already, outside investigations based on open sources and social media, such as by the citizen journalist group Bellingcat, have shown the Buk launcher was probably wheeled into Ukraine in June from the Russian 53rd Air Defense Brigade, based outside Kursk. The criminal probe should aim to determine whether Russian servicemen were operating the unit when it was fired or helping the separatists fire it.”

No Skepticism

Again, the Post shows little skepticism about this version of events, leaving only the question of whether Russian soldiers fired the missile themselves or helped the rebels fire it. But there are obvious problems with this narrative. If, indeed, the one, two or three Russian Buk batteries were rumbling around eastern Ukraine the month before the shoot-down, why did neither U.S. intelligence nor Ukrainian intelligence notice this?

And, we know from the Dutch report that the Ukrainians were insisting up until the shoot-down that the rebels had no surface-to-air missiles that could threaten commercial airliners at 33,000 feet. However, the Ukrainians did have Buk systems that they were positioning toward the east, presumably to defend against possible Russian air incursions.

On July 16, 2014, one day before MH-17 was hit, a Ukrainian Su-25 fighter-jet was shot down by what Ukrainian authorities said was an air-to-air missile, according to the Dutch report. Presumably the missile was fired by a Russian fighter patrolling the nearby border.

So, if the Ukrainians already believed that Russian warplanes were attacking along the border, it would make sense that Ukrainian air defense units would be on a hair-trigger about shooting down Russian jets entering or leaving Ukrainian airspace.

Even if you don’t want to believe what I was told about U.S. intelligence analysts suspecting that a rogue Ukrainian military operation targeted MH-17, doesn’t it make sense that an undisciplined Ukrainian anti-aircraft battery might have mistakenly identified MH-17 as a Russian military aircraft leaving Ukrainian airspace? The Ukrainians had the means and the opportunity and possibly a motive – after the shoot-down of the SU-25 just one day earlier.

The Dutch Safety Board report is silent, too, on the question raised by Russian officials as to why the Ukrainians had turned on their radar used to guide Buk missiles in the days before MH-17 was shot down. That allegation is neither confirmed nor denied.

Regarding Bellingcat’s reliance on Internet-based photos to support its theories, there is the additional problem of Der Spiegel’s report last October revealing that the German intelligence agency, the BND, challenged some of the images provided by the Ukrainian government as “manipulated.” According to Der Spiegel, the BND blamed the rebels for firing the fateful Buk but said the missile battery came not from the Russians but from Ukrainian government stockpiles. [See Consortiumnews.com’sGermans Clear Russia in MH-17 Case.”]

However, a European source told me that the BND’s information was not as categorical as Der Spiegel reported. And, according to the Dutch report, the Ukrainian government reported that a Buk system that the rebels captured from a Ukrainian air base was not operational, a point where the rebels are in agreement. They also say they had no working Buks.

Yet, even without the BND’s warning, great caution should be shown when using evidence deposited often anonymously on the Internet. The idea of “crowd-sourcing” these investigations also raises the possibility that a skillful disinformationist could phony up a photograph and then direct an unwitting or collaborating reporter to the image.

Though I am no expert in the art of doctoring photographs, my journalism training has taught me to approach every possible flaw in the evidence skeptically. That’s especially true when some anonymous blogger directs you to an image or article whose bona fides cannot be established.

One of the strengths of old-fashioned journalism was that you could generally count on the professional integrity of the news agencies distributing photographs. Even then, however, there have been infamous cases of misrepresentations and hoaxes. Those possibilities multiply when images of dubious provenance pop up on the Internet.

In the case of MH-17, some photo analysts have raised specific questions about the authenticity of images used by Bellingcat and others among the “Russia-did-it” true-believers. We have already seen in the case of the “Buk-getaway video” how Higgins sent a reporting team from Australia’s “60 Minutes” halfway around the world to end up at the wrong spot (but then to use video fakery to deceive the viewers).

So, the chances of getting duped must be taken into account when dealing with unverifiable sources of information, a risk that rises exponentially when there’s also the possibility of clever intelligence operatives salting the Internet with disinformation. For the likes of psy-ops innovator Lansdale and propaganda specialist Raymond, the Internet would have been a devil’s playground.

Which is one more reason why President Barack Obama should release as much of the intelligence evidence as he can that pinpoints where the fateful MH-17 missile was fired and who fired it. [For more on this topic, see Consortiumnews.com’s “NYT Plays Games with MH-17 Tragedy.”]


Investigative reporter Robert Parry broke many of the Iran-Contra stories for The Associated Press and Newsweek in the 1980s. You can buy his latest book, America’s Stolen Narrative, either in print here or as an e-book (from Amazon and barnesandnoble.com).

October 21, 2015 Posted by | Deception, Mainstream Media, Warmongering | , , , , , , , , , , , , | 1 Comment

US Tax Dollars and Ukraine’s Finance Minister

By Robert Parry | Consortium News | October 3, 2015

The U.S. government is missing – or withholding – audit documents about the finances and possible accounting irregularities at a $150 million U.S.-taxpayer-financed investment fund when it was run by Ukraine’s Finance Minister Natalie Jaresko, who has become the face of “reform” for the U.S.-backed regime in Kiev and who now oversees billions of dollars in Western financial aid.

Before taking Ukrainian citizenship and becoming Finance Minister in December 2014, Jaresko was a former U.S. diplomat who served as chief executive officer of the Western NIS Enterprise Fund (WNISEF), which was created by Congress in the 1990s with $150 million and placed under the U.S. Agency for International Development (USAID) to help jumpstart an investment economy in Ukraine.

After Jaresko’s appointment as Finance Minister — and her resignation from WNISEF — I reviewed WNISEF’s available public records and detected a pattern of insider dealings and enrichment benefiting Jaresko and various colleagues. That prompted me in February to file a Freedom of Information Act request for USAID’s audits of the investment fund.

Though the relevant records were identified by June, USAID dragged its feet on releasing the 34 pages to me until Aug. 28 when the agency claimed nothing was being withheld, saying “all 34 pages are releasable in their entirety.”

However, when I examined the documents, it became clear that a number of pages were missing from the financial records, including a total of three years of “expense analysis” – in three-, six- and nine-month gaps – since 2007. Perhaps even more significant was a missing paragraph that apparently would have addressed an accounting irregularity found by KPMG auditors.

KPMG’s “Independent Auditors’ Report” for 2013 and 2014 states that “except as discussed in the third paragraph below, we conducted our audits in accordance with auditing standards generally accepted in the United States of America,” accountant-speak that suggests that “the third paragraph below” would reveal some WNISEF activity that did not comply with generally accepted accounting principles (or GAAP).

But three paragraphs below was only white space and there was no next page in what USAID released.

Based on the one page that was released for 2013-14, this most recent audit also lacked the approval language used in previous audits, in which KPMG wrote: “In our opinion, the consolidated financial statements … present fairly, in all material respects, the consolidated financial position of Western NIS Enterprise Fund and subsidiaries.” That language was not in the 2013-14 analysis, as released by USAID.

The KPMG report for 2013-14 does note that “The [audit] procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. … An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.”

That page then ends, “We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.” But the opinion is not there.

After I brought these discrepancies to the attention of USAID on Aug. 31, I was told on Sept. 15 that “we are in the process of locating documents to address your concern. We expect a response from the bureau and/or mission by Monday, September 28, 2015.”

After the Sept. 28 deadline passed, I contacted USAID again and was told on Oct. 2 that officials were “still working with the respective mission to obtain the missing documents.”

Yet, whether USAID’s failure to include the missing documents was just a bureaucratic foul-up or a willful attempt to shield Jaresko from criticism, the curious gaps add to the impression that the management of WNISEF fell short of the highest standards for efficiency and ethics.

A previous effort by Jaresko’s ex-husband Ihor Figlus to blow the whistle on what he considered improper business practices related to WNISEF was met by disinterest inside USAID, according to Figlus, and then led to Jaresko suing him in a Delaware court in 2012, using a confidentiality clause to silence Figlus and getting a court order to redact references to the abuses he was trying to expose.

Feeding at the Taxpayer Trough

Other public documents indicate that Jaresko and fellow WNISEF insiders enriched themselves through their association with the U.S.-taxpayer-financed investment fund. For instance, though Jaresko was limited to making $150,000 a year at WNISEF under the USAID grant agreement, she managed to earn more than that amount, reporting in 2004 that she was paid $383,259 along with $67,415 in expenses, according to WNISEF’s filing with the Internal Revenue Service.

Among the audit documents that I received under FOIA, the “Expense Analysis” for 2004 shows $1,282,782 being paid out as “Exit-based incentive expense-equity incentive plan” and another $478,195 being paid for “Exit-based incentive expense-financial participation rights.” That would suggest that Jaresko more than doubled her $150,000 salary by claiming bonuses from WNISEF’s investments (bought with U.S. taxpayers’ money) and sold during 2004.

Jaresko’s compensation for her work with WNISEF was removed from public disclosure altogether after she co-founded two related entities in 2006: Horizon Capital Associates (HCA) to manage WNISEF’s investments (and collect around $1 million a year in fees) and Emerging Europe Growth Fund (EEGF), a private entity to collaborate with WNISEF on investment deals.

Jaresko formed HCA and EEGF with two other WNISEF officers, Mark Iwashko and Lenna Koszarny. They also started a third firm, Horizon Capital Advisors, which “serves as a sub-advisor to the Investment Manager, HCA,” according to WNISEF’s IRS filing for 2006.

According to the FOIA-released expense analyses for 2004-06, the taxpayer-financed WNISEF spent $1,049,987 to establish EEGF as a privately owned investment fund for Jaresko and her colleagues. USAID apparently found nothing suspicious about these tangled business relationships despite the potential conflicts of interest involving Jaresko, the other WNISEF officers and their affiliated companies.

For instance, WNISEF’s 2012 annual report devoted two pages to “related party transactions,” including the management fees to Jaresko’s Horizon Capital ($1,037,603 in 2011 and $1,023,689 in 2012) and WNISEF’s co-investments in projects with the EEGF, where Jaresko was founding partner and chief executive officer. Jaresko’s Horizon Capital managed the investments of both WNISEF and EEGF.

From 2007 to 2011, WNISEF co-invested $4.25 million with EEGF in Kerameya LLC, a Ukrainian brick manufacturer, and WNISEF sold EEGF 15.63 percent of Moldova’s Fincombank for $5 million, the report said. It also listed extensive exchanges of personnel and equipment between WNISEF and Horizon Capital. But it’s difficult for an outsider to ascertain the relative merits of these insider deals — and the transactions apparently raised no red flags for USAID officials, nor during that time for KPMG auditors.

Bonuses, Bonuses

Regarding compensation, WNISEF’s 2013 filing with the IRS noted that the fund’s officers collected millions of dollars in more bonuses for closing out some investments at a profit even as the overall fund was losing money. According to the filing, WNISEF’s $150 million nest egg had shrunk by more than one-third to $94.5 million and likely has declined much more during the economic chaos that followed the U.S.-backed coup in February 2014.

But prior to the coup and the resulting civil war, Jaresko’s WNISEF was generously spreading money around to various insiders. For instance, the 2013 IRS filing reported that the taxpayer-financed fund paid out as “expenses” $7.7 million under a bonus program, including $4.6 million to “current officers,” without identifying who received the money although Jaresko was one of the “current officers.”

WNISEF’s filing made the point that the “long-term equity incentive plan” was “not compensation from Government Grant funds but a separately USAID-approved incentive plan funded from investment sales proceeds” – although those proceeds presumably would have gone into the depleted WNISEF pool if they had not been paid out as bonuses.

The filing also said the bonuses were paid regardless of whether the overall fund was making money, noting that this “compensation was not contingent on revenues or net earnings, but rather on a profitable exit of a portfolio company that exceeds the baseline value set by the board of directors and approved by USAID” – with Jaresko also serving as a director on the board responsible for setting those baseline values.

Another WNISEF director was Jeffrey C. Neal, former chairman of Merrill Lynch’s global investment banking and a co-founder of Horizon Capital, further suggesting how potentially incestuous these relationships may have become.

Though compensation for Jaresko and other officers was shifted outside public view after 2006 – as their pay was moved to the affiliated entities – the 2006 IRS filing says: “It should be noted that as long as HCA earns a management fee from WNISEF, HCA and HCAD [the two Horizon Capital entities] must ensure that a salary cap of $150,000 is adhered to for the proportion of salary attributable to WNISEF funds managed relative to aggregate funds under management.”

But that language would seem to permit compensation well above $150,000 if it could be tied to other managed funds, including EEGF, or come from the bonus incentive program. Such compensation for Jaresko and the other top officers was not reported on later IRS forms despite a line for earnings from “related organizations.” Apparently, Horizon Capital and EEGF were regarded as “unrelated organizations” for the purposes of reporting compensation.

The KPMG auditors also took a narrow view of compensation only confirming that no “salary” exceeded $150,000, apparently not looking at bonuses and other forms of compensation.

Neither AID officials nor Jaresko responded to specific questions about WNISEF’s possible conflicts of interest, how much money Jaresko made from her involvement with WNISEF and its connected companies, and whether she had fully complied with IRS reporting requirements.

Gagging an Ex-Husband

In 2012, when Jaresko’s ex-husband Figlus began talking about what he saw as improper loans that Jaresko had taken from Horizon Capital Associates to buy and expand her stake in EEGF, the privately held follow-on fund to WNISEF, Jaresko sent her lawyers to court to silence him and, according to his lawyer, bankrupt him.

The filings in Delaware’s Chancery Court are remarkable not only because Jaresko succeeded in getting the Court to gag her ex-husband through enforcement of a non-disclosure agreement but the Court agreed to redact nearly all the business details, even the confidentiality language at the center of the case.

Since Figlus had given some of his information to a Ukrainian journalist, Jaresko’s complaint also had the look of a leak investigation, tracking down Figlus’s contacts with the journalist and then using that evidence to secure the restraining order, which Figlus said not only prevented him from discussing business secrets but even talking about his more general concerns about Jaresko’s insider dealings.

The heavy redactions make it hard to fully understand Figlus’s concerns or to assess the size of Jaresko’s borrowing as she expanded her holdings in EEGF, but Figlus did assert that he saw his role as whistle-blowing about improper actions by Jaresko.

In a Oct. 31, 2012, filing, Figlus’s attorney wrote that “At all relevant times, Defendant [Figlus] acted in good faith and with justification, on matters of public interest, and particularly the inequitable conduct set forth herein where such inequitable conduct adversely affects … at least one other limited partner which is REDACTED, and specifically the inequitable conduct included, in addition to the other conduct cited herein, REDACTED.”

The defendant’s filing argued: “The Plaintiffs’ [Jaresko’s and her EEGF partners’] claims are barred, in whole or in part, by public policy, and particularly that a court in equity should not enjoin ‘whistle-blowing’ activities on matters of public interest, and particularly the inequitable conduct set forth herein.” But the details of that conduct were all redacted.

In a defense brief dated Dec. 17, 2012 [see Part One and Part Two], Figlus expanded on his argument that Jaresko’s attempts to have the court gag him amounted to a violation of his constitutional right of free speech:

“The obvious problem with the scope of their Motion is that Plaintiffs are asking the Court to enter an Order that prohibits Defendant Figlus from exercising his freedom of speech without even attempting to provide the Court with any Constitutional support or underpinning for such impairment of Figlus’ rights.

“Plaintiffs cannot do so, because such silencing of speech is Constitutionally impermissible, and would constitute a denial of basic principles of the Bill of Rights in both the United States and Delaware Constitutions. There can be no question that Plaintiffs are seeking a temporary injunction, which constitutes a prior restraint on speech. …

“The Court cannot, consistent with the Federal and State Constitutional guarantees of free speech, enjoin speech except in the most exceptional circumstances, and certainly not when Plaintiffs are seeking to prevent speech that is not even covered by the very contractual provision upon which they are relying. Moreover, the Court cannot prevent speech where the matter has at least some public interest REDACTED, except as limited to the very specific and exact language of the speaker’s contractual obligation.”

A Redacted Narrative

Figlus also provided a narrative of events as he saw them as a limited partner in EEGF, saying he initially “believed everything she [Jaresko] was doing, you know, was proper.” Later, however, Figlus “learned that Jaresko began borrowing money from HCA REDACTED, but again relied on his spouse, and did not pay attention to the actual financial transactions…

“In early 2010, after Jaresko separated from Figlus, she presented Figlus with, and requested that he execute, a ‘Security Agreement,’ pledging the couple’s partnership interest to the repayment of the loans from HCA. This was Figlus first realization of the amount of loans that Jaresko had taken, and that the partnership interest was being funded through this means. … By late 2011, Jaresko had borrowed approximately REDACTED from HCA to both fund the partnership interest REDACTED. The loans were collateralized only by the EEFG partnership interest. …

“Figlus became increasingly concerned about the partnership and the loans that had been and continued to be given to the insiders to pay for their partnership interests, while excluding other limited partners. Although Figlus was not sophisticated in these matters, he considered that it was inappropriate that HCA was giving loans to insiders to fund their partnership interests, but to no other partners. …

“He talked to an individual at U.S. Agency for International Development (USAID) in Washington D.C., because the agency was effectively involved as a limited partner because of the agency’s funding and supervision over WNISEF, but the agency employee did not appear interested in pursuing the question.”

In the court proceedings, Jaresko’s lawyers mocked Figlus’s claims that he was acting as a whistle-blower, claiming that he was actually motivated by a desire “to harm his ex-wife” and had violated the terms of his non-disclosure agreement, which the lawyers convinced the court to exclude from the public record.

The plaintiffs’ brief [see Part One and Part Two] traced Figlus’s contacts with the Ukrainian reporter whose name is also redacted: “Figlus, having previously received an audit from the General Partner, provided it to REDACTED [the Ukrainian reporter] with full knowledge that the audit was non-public. Also on or about October 2, 2012, REDACTED [the reporter] contacted multiple Limited Partners, informed them that he possessed ‘documented proof’ of alleged impropriety by the General Partner and requested interviews concerning that alleged impropriety.”

The filing noted that on Oct. 3, 2012, the reporter told Figlus that Jaresko “called two REDACTED [his newspaper’s] editors last night crying, not me, for some reason.” (The Ukrainian story was never published.)

After the competing filings, Jaresko’s lawyers successfully secured a restraining order against Figlus from the Delaware Chancery Court and continued to pursue the case against him though his lawyer has asserted that his client would make no further effort to expose these financial dealings and was essentially broke.

On May 14, 2014, Figlus filed a complaint with the court claiming that he was being denied distributions from his joint interest in EEGF and saying he was told that it was because the holding was pledged as security against the loans taken out by Jaresko. But, on the same day, Jaresko’s lawyer, Richard P. Rollo, contradicted that assertion, saying information about Figlus’s distributions was being withheld because EEGF and Horizon Capital “faced significant business interruptions and difficulties given the political crisis in Ukraine.”

The filing suggested that the interlocking investments between EEGF and the U.S.-taxpayer-funded WNISEF were experiencing further trouble from the political instability and civil war sweeping across Ukraine.

A Face of Reform

By December 2014, Jaresko had resigned from her WNISEF-related positions, taken Ukrainian citizenship and started her new job as Ukraine’s Finance Minister. In an article about Jaresko’s appointment, John Helmer, a longtime foreign correspondent in Russia, disclosed the outlines of the court dispute with Figlus and identified the Ukrainian reporter as Mark Rachkevych of the Kyiv Post.

“It hasn’t been rare for American spouses to go into the asset management business in the former Soviet Union, and make profits underwritten by the US Government with information supplied from their US Government positions or contacts,” Helmer wrote. “It is exceptional for them to fall out over the loot.”

When I contacted George Pazuniak, Figlus’s lawyer, about Jaresko’s aggressive enforcement of the non-disclosure agreement, he told me that “at this point, it’s very difficult for me to say very much without having a detrimental effect on my client.” Pazuniak did say, however, that all the redactions were demanded by Jaresko’s lawyers.

I also sent detailed questions to USAID and to Jaresko via several of her associates. Those questions included how much of the $150 million in U.S. taxpayers’ money remained, why Jaresko reported no compensation from “related organizations,” whether she received any of the $4.6 million to WNISEF’s officers in bonuses in 2013, how much money she made in total from her association with WNISEF, what AID officials did in response to Figlus’s whistle-blower complaint, and whether Jaresko’s legal campaign to silence her ex-husband was appropriate given her current position and Ukraine’s history of secretive financial dealings.

USAID press officer Annette Y. Aulton got back to me with a response that was unresponsive to my specific questions. Rather than answering about the performance of WNISEF and Jaresko’s compensation, the response commented on the relative success of 10 “Enterprise Funds” that AID has sponsored in Eastern Europe and added:

“There is a twenty year history of oversight of WNISEF operations. Enterprise funds must undergo an annual independent financial audit, submit annual reports to USAID and the IRS, and USAID staff conduct field visits and semi-annual reviews. At the time Horizon Capital assumed management of WNISEF, USAID received disclosures from Natalie Jaresko regarding the change in management structure and at the time USAID found no impropriety during its review.”

One Jaresko associate, Tanya Bega, Horizon Capital’s investor relations manager, said she forwarded my questions to Jaresko, but Jaresko did not respond.

Despite questions about whether Jaresko improperly enriched herself at the expense of U.S. taxpayers and then used a Delaware court to prevent disclosure of possible abuses, Jaresko has been hailed by the U.S. mainstream media as the face of reform in the U.S.-backed Ukrainian regime that seized power in February 2014 after a violent coup overthrew democratically elected President Viktor Yanukovych.

For instance, last January, New York Times columnist Thomas L. Friedman cited Jaresko as an exemplar of the new Ukrainian leaders who “share our values” and deserve unqualified American support. Friedman uncritically quoted Jaresko’s speech to international financial leaders at Davos, Switzerland, in which she castigated Russian President Vladimir Putin:

“Putin fears a Ukraine that demands to live and wants to live and insists on living on European values — with a robust civil society and freedom of speech and religion [and] with a system of values the Ukrainian people have chosen and laid down their lives for.”

However, from the opaqueness of the WNISEF records and the gagging of her ex-husband, Jaresko has shown little regard for transparency or other democratic values. Similarly, USAID seems more intent on protecting Jaresko and the image of the Kiev regime than in protecting America tax dollars and ensuring that WNISEF’s investments were dedicated to improving the lot of Ukrainian citizens.


Investigative reporter Robert Parry broke many of the Iran-Contra stories for The Associated Press and Newsweek in the 1980s. You can buy his latest book, America’s Stolen Narrative, either in print here or as an e-book (from Amazon and barnesandnoble.com).

October 4, 2015 Posted by | Corruption, Deception | , , , , , , | 1 Comment

Ukraine Finance Minister’s American ‘Values’

By Robert Parry | Consortium News | February 18, 2015

Ukraine’s new Finance Minister Natalie Jaresko, who has become the face of reform for the U.S.-backed regime in Kiev and will be a key figure handling billions of dollars in Western financial aid, was at the center of insider deals and other questionable activities when she ran a $150 million U.S.-taxpayer-financed investment fund.

Prior to taking Ukrainian citizenship and becoming Finance Minister last December, Jaresko was a former U.S. diplomat who served as chief executive officer of the Western NIS Enterprise Fund (WNISEF), which was created by Congress in the 1990s and overseen by the U.S. Agency for International Development (U.S. AID) to help jumpstart an investment economy in Ukraine.

But Jaresko, who was limited to making $150,000 a year at WNISEF under the U.S. AID grant agreement, managed to earn more than that amount, reporting in 2004 that she was paid $383,259 along with $67,415 in expenses, according to WNISEF’s public filing with the Internal Revenue Service.

Later, Jaresko’s compensation was removed from public disclosure altogether after she co-founded two entities in 2006: Horizon Capital Associates (HCA) to manage WNISEF’s investments (and collect around $1 million a year in fees) and Emerging Europe Growth Fund (EEGF) to collaborate with WNISEF on investment deals.

Jaresko formed HCA and EEGF with two other WNISEF officers, Mark Iwashko and Lenna Koszarny. They also started a third firm, Horizon Capital Advisors, which “serves as a sub-advisor to the Investment Manager, HCA,” according to WNISEF’s IRS filing for 2006.

U.S. AID apparently found nothing suspicious about these tangled business relationships – and even allowed WNISEF to spend millions of dollars helping EEGF become a follow-on private investment firm – despite the potential conflicts of interest involving Jaresko, the other WNISEF officers and their affiliated companies.

For instance, WNISEF’s 2012 annual report devoted two pages to “related party transactions,” including the management fees to Jaresko’s Horizon Capital ($1,037,603 in 2011 and $1,023,689 in 2012) and WNISEF’s co-investments in projects with the EEGF, where Jaresko was founding partner and chief executive officer. Jaresko’s Horizon Capital managed the investments of both WNISEF and EEGF.

From 2007 to 2011, WNISEF co-invested $4.25 million with EEGF in Kerameya LLC, a Ukrainian brick manufacturer, and WNISEF sold EEGF 15.63 percent of Moldova’s Fincombank for $5 million, the report said. It also listed extensive exchanges of personnel and equipment between WNISEF and Horizon Capital. But it’s difficult for an outsider to ascertain the relative merits of these insider deals and the transactions apparently raised no red flags for U.S. AID officials.

Bonuses for Officers

Regarding compensation, WNISEF’s 2013 filing with the IRS noted that the fund’s officers collected millions of dollars in bonuses for closing out some investments at a profit even as the overall fund was losing money. According to the filing, WNISEF’s $150 million nest egg had shrunk by more than one-third to $94.5 million and likely has declined much more during the economic chaos that followed the U.S.-back coup in February 2014.

But prior to the coup and the resulting civil war, Jaresko’s WNISEF was generously spreading money around. For instance, the 2013 IRS filing reported that the taxpayer-financed fund paid out as “expenses” $7.7 million under a bonus program, including $4.6 million to “current officers,” without identifying who received the money.

The filing made the point that the “long-term equity incentive plan” was “not compensation from Government Grant funds but a separately USAID-approved incentive plan funded from investment sales proceeds” – although those proceeds presumably would have gone into the depleted WNISEF pool if they had not been paid out as bonuses.

The filing also said the bonuses were paid regardless of whether the overall fund was making money, noting that this “compensation was not contingent on revenues or net earnings, but rather on a profitable exit of a portfolio company that exceeds the baseline value set by the board of directors and approved by USAID” – with Jaresko also serving as a director on the board responsible for setting those baseline values.

Another WNISEF director was Jeffrey C. Neal, former chairman of Merrill Lynch’s global investment banking and a co-founder of Horizon Capital, further suggesting how potentially incestuous these relationships may have become.

Though compensation for Jaresko and other officers was shifted outside public view after 2006 – as their pay was moved to the affiliated entities – the 2006 IRS filing says: “It should be noted that as long as HCA earns a management fee from WNISEF, HCA and HCAD [the two Horizon Capital entities] must ensure that a salary cap of $150,000 is adhered to for the proportion of salary attributable to WNISEF funds managed relative to aggregate funds under management.”

But that language would seem to permit compensation well above $150,000 if it could be tied to other managed funds, including EEGF, or come from the incentive program. Such compensation for Jaresko and the other top officers was not reported on later IRS forms despite a line for earnings from “related organizations.” Apparently, Horizon Capital and EEGF were regarded as “unrelated organizations” for the purposes of reporting compensation.

Neither AID officials nor Jaresko responded to specific questions about WNISEF’s possible conflicts of interest, how much money Jaresko made from her involvement with WNISEF and its connected companies, and whether she had fully complied with IRS reporting requirements.

Shared Values?

Despite such ethical questions, Jaresko was cited by New York Times columnist Thomas L. Friedman as an exemplar of the new Ukrainian leaders who “share our values” and deserve unqualified American support. Friedman uncritically quoted Jaresko’s speech to international financial leaders at Davos, Switzerland, in which she castigated Russian President Vladimir Putin:

“Putin fears a Ukraine that demands to live and wants to live and insists on living on European values — with a robust civil society and freedom of speech and religion [and] with a system of values the Ukrainian people have chosen and laid down their lives for.”

However, Jaresko has shown little regard for transparency or other democratic values, such as the right of free speech when it comes to someone questioning her financial dealings. For instance, she has gone to great lengths to block her ex-husband Ihor Figlus from exposing what he regards as her questionable business ethics.

In 2012, when Figlus tried to blow the whistle on what he saw as improper loans that Jaresko had taken from Horizon Capital Associates to buy and expand her stake in EEGF, the privately held follow-on fund to WNISEF, Jaresko sent her lawyers to court to silence him and, according to his lawyer, bankrupt him.

The filings in Delaware’s Chancery Court are remarkable not only because Jaresko succeeded in getting the Court to gag her ex-husband through enforcement of a non-disclosure agreement but the Court agreed to redact nearly all the business details, even the confidentiality language at the center of the case.

Since Figlus had given some of his information to a Ukrainian journalist, the court complaint also had the look of a leak investigation, tracking down Figlus’s contacts with the journalist and then using that evidence to secure the restraining order, which Figlus said not only prevented him from discussing business secrets but even talking about his more general concerns about Jaresko’s insider dealings.

The heavy redactions make it hard to fully understand Figlus’s concerns or to assess the size of Jaresko’s borrowing as she expanded her holdings in EEGF, but Figlus did assert that he saw his role as whistle-blowing about improper actions by Jaresko.

In a Oct. 31, 2012, filing, Figlus’s attorney wrote that “At all relevant times, Defendant [Figlus] acted in good faith and with justification, on matters of public interest, and particularly the inequitable conduct set forth herein where such inequitable conduct adversely affects … at least one other limited partner which is REDACTED, and specifically the inequitable conduct included, in addition to the other conduct cited herein, REDACTED.”

The filing added: “The Plaintiffs’ [Jaresko’s and her EEGF partners’] claims are barred, in whole or in part, by public policy, and particularly that a court in equity should not enjoin ‘whistle-blowing’ activities on matters of public interest, and particularly the inequitable conduct set forth herein.” But the details of that conduct were all redacted.

Free Speech

In a defense brief dated Dec. 17, 2012 [see Part One and Part Two], Figlus expanded on his argument that Jaresko’s attempts to have the court gag him amounted to a violation of his constitutional right of free speech:

“The obvious problem with the scope of their Motion is that Plaintiffs are asking the Court to enter an Order that prohibits Defendant Figlus from exercising his freedom of speech without even attempting to provide the Court with any Constitutional support or underpinning for such impairment of Figlus’ rights.

“Plaintiffs cannot do so, because such silencing of speech is Constitutionally impermissible, and would constitute a denial of basic principles of the Bill of Rights in both the United States and Delaware Constitutions. There can be no question that Plaintiffs are seeking a temporary injunction, which constitutes a prior restraint on speech. …

“The Court cannot, consistent with the Federal and State Constitutional guarantees of free speech, enjoin speech except in the most exceptional circumstances, and certainly not when Plaintiffs are seeking to prevent speech that is not even covered by the very contractual provision upon which they are relying.

“Moreover, the Court cannot prevent speech where the matter has at least some public interest REDACTED, except as limited to the very specific and exact language of the speaker’s contractual obligation.”

Figlus also provided a narrative of events as he saw them as a limited partner in EEGF, saying he initially “believed everything she [Jaresko] was doing, you know, was proper.” Later, however, Figlus “learned that Jaresko began borrowing money from HCA REDACTED, but again relied on his spouse, and did not pay attention to the actual financial transactions…

“In early 2010, after Jaresko separated from Figlus, she presented Figlus with, and requested that he execute, a ‘Security Agreement,’ pledging the couple’s partnership interest to the repayment of the loans from HCA. This was Figlus first realization of the amount of loans that Jaresko had taken, and that the partnership interest was being funded through this means. … By late 2011, Jaresko had borrowed approximately REDACTED from HCA to both fund the partnership interest REDACTED. The loans were collateralized only by the EEFG partnership interest. …

“Figlus became increasingly concerned about the partnership and the loans that had been and continued to be given to the insiders to pay for their partnership interests, while excluding other limited partners. Although Figlus was not sophisticated in these matters, he considered that it was inappropriate that HCA was giving loans to insiders to fund their partnership interests, but to no other partners. …

“He talked to an individual at U.S. Agency for International Development (USAID) in Washington D.C., because the agency was effectively involved as a limited partner because of the agency’s funding and supervision over WNISEF, but the agency employee did not appear interested in pursuing the question.”

A Spousal Dispute

Meanwhile, Jaresko’s lawyers mocked Figlus’s claims that he was acting as a whistle-blower, claiming that he was actually motivated by a desire “to harm his ex-wife” and had violated the terms of his non-disclosure agreement, which the lawyers convinced the court to exclude from the public record.

The plaintiffs’ brief [see Part One and Part Two] traces Figlus’s contacts with the Ukrainian reporter whose name is also redacted:

“Figlus, having previously received an audit from the General Partner, provided it to REDACTED [the Ukrainian reporter] with full knowledge that the audit was non-public. Also on or about October 2, 2012, REDACTED [the reporter] contacted multiple Limited Partners, informed them that he possessed ‘documented proof’ of alleged impropriety by the General Partner and requested interviews concerning that alleged impropriety.”

The filing noted that on Oct. 3, 2012, the reporter told Figlus that Jaresko “called two REDACTED [his newspaper’s] editors last night crying, not me, for some reason.” (The Ukrainian story was never published.)

After the competing filings, Jaresko’s lawyers successfully secured a restraining order against Figlus from the Delaware Chancery Court and are continuing to pursue the case against him though his lawyer has asserted that his client will make no further effort to expose these financial dealings and is essentially broke.

On May 14, 2014, Figlus filed a complaint with the court claiming that he was being denied distributions from his joint interest in EEGF and saying he was told that it was because the holding was pledged as security against the loans taken out by Jaresko.

But, on the same day, Jaresko’s lawyer, Richard P. Rollo, contradicted that assertion, saying information about Figlus’s distributions was being withheld because EEGF and Horizon Capital “faced significant business interruptions and difficulties given the political crisis in Ukraine.”

The filing suggested that the interlocking investments between EEGF and the U.S.-taxpayer-funded WNISEF were experiencing further trouble from the political instability and civil war sweeping across Ukraine. By last December, Jaresko had resigned from her WNISEF-related positions, taken Ukrainian citizenship and started her new job as Ukraine’s Finance Minister.

In an article about Jaresko’s appointment, John Helmer, a longtime foreign correspondent in Russia, disclosed the outlines of the court dispute with Figlus and identified the Ukrainian reporter as Mark Rachkevych of the Kyiv Post.

“It hasn’t been rare for American spouses to go into the asset management business in the former Soviet Union, and make profits underwritten by the US Government with information supplied from their US Government positions or contacts,” Helmer wrote. “It is exceptional for them to fall out over the loot.”

Earlier this month, when I contacted George Pazuniak, Figlus’s lawyer, about Jaresko’s aggressive enforcement of the non-disclosure agreement, he told me that “at this point, it’s very difficult for me to say very much without having a detrimental effect on my client.” Pazuniak did say, however, that all the redactions were demanded by Jaresko’s lawyers.

Unresponsive Response

I also sent detailed questions to U.S. AID and to Jaresko via several of her associates. Those questions included how much of the $150 million in U.S. taxpayers’ money remained, why Jaresko reported no compensation from “related organizations,” whether she received any of the $4.6 million to WNISEF’s officers in bonuses in 2013, how much money she made in total from her association with WNISEF, what AID officials did in response Figlus’s complaint about possible wrongdoing, and whether Jaresko’s legal campaign to silence her ex-husband was appropriate given her current position and Ukraine’s history of secretive financial dealings.

U.S. AID press officer Annette Y. Aulton got back to me with a response that was unresponsive to my specific questions. Rather than answering about the performance of WNISEF and Jaresko’s compensation, the response commented on the relative success of 10 “Enterprise Funds” that AID has sponsored in Eastern Europe and added:

“There is a twenty year history of oversight of WNISEF operations. Enterprise funds must undergo an annual independent financial audit, submit annual reports to USAID and the IRS, and USAID staff conduct field visits and semi-annual reviews. At the time Horizon Capital assumed management of WNISEF, USAID received disclosures from Natalie Jaresko regarding the change in management structure and at the time USAID found no impropriety during its review.”

One Jaresko associate, Tanya Bega, Horizon Capital’s investor relations manager, said she forwarded my questions to Jaresko last week, but Jaresko did not respond.

Further showing how much Jaresko’s network is penetrating the new Ukrainian government, another associate, Estonian Jaanika Merilo, has been brought on to handle Ukraine’s foreign investments. Merilo’s Ukrainian Venture Capital and Private Equity Association (UVCA), which is committed to “representing interests of private equity investors to policymakers and improving the investment and business climate in Ukraine,” included Jaresko’s Horizon Capital as a founder.

In a way, given Jaresko’s background of parlaying U.S. taxpayer’s money into various insider investment deals, perhaps she does have the experience to handle the incoming $17.5 billion in aid from the International Monetary Fund.

But the question remains whether Jaresko’s is the right kind of experience – and whether the money will go to help the impoverished people of Ukraine or simply wind up lining the pockets of the well-heeled and the well-connected.

–With research by Chelsea Gilmour

~

Investigative reporter Robert Parry broke many of the Iran-Contra stories for The Associated Press and Newsweek in the 1980s. You can buy his latest book, America’s Stolen Narrative, either in print here or as an e-book (from Amazon and barnesandnoble.com).

February 19, 2015 Posted by | Corruption, Economics | , , , , , | Leave a comment

Cuba Détente

By ROBERT SANDELS and NELSON P. VALDÉS | CounterPunch | January 28, 2015

“I do not expect the changes I am announcing today to bring about a transformation of Cuban society overnight.”

— Barack Obama, Dec. 17, 2014

President Obama’s Dec. 17 statement announcing changes in U.S. Cuba policy was a mixture of historical truths and catch phrases drawn from the catalog of myths about Cuba and U.S. policy goals.

The first round of rule changes, announced by Jan. 16 by the Office of Foreign Assets Control (OFAC), was significant in the areas of trade and banking. At the same time, much of the language is drawn from the old justifications for regime change. (Let us put aside the hypocrisies in Obama’s speech such as the instruction — coming from a country where labor unions have been systematically destroyed — that “Cuban workers should be free to form unions.”)

In his speech, Obama reworked Einstein’s famous definition of insanity to support his partial abandonment of the half-century attempts to destroy the Cuban revolution. “I do not believe we can keep doing the same thing for over five decades and expect a different result,” said Obama. (If he means that the policy he has supported for six years is insane, what does that say about him?)

Nowhere in the speech did Obama renounce the longstanding U.S. commitment to regime change in Cuba or even acknowledge that it ever existed. While implicitly recognizing that the use of sanctions to achieve political results had failed, he continues to pursue them in Korea, Russia and elsewhere. One day after making the Cuba speech, he signed a bill imposing sanctions on Venezuela alleging that the government of President Nicolas Maduro had violated the human rights of protestors during violent anti-government demonstrations last February. The demonstrations were led by right-wing representatives of the Venezuelan elite who have long been backed by the United States.

We should note that the phrase about doing the same thing for over five decades and expecting a different result is incorrect. True, five decades ago the  Eisenhower administration broke diplomatic relations with Cuba, but since then his 10 successors, who account for 14 presidential terms, tried a variety of other “things” besides cutting diplomatic relations. There were the commando raid things launched from U.S. territory by Cuban exiles burning cane fields and sugar mills and the CIA-trained underground blowing up movie theaters and shopping centers. Then of course, there was the Bay of Pigs invasion thing by an exile expeditionary force landing in a swamp. That was a really big thing. With that failure came Bobby Kennedy’s Operation Mongoose thing, which was expected to be a let’s-get- it-right-this-time do-over of the Bay of Pigs disaster.

Since the 1962 Missile Crisis, there have been endless “democracy promotion” things financed by CIA front organizations. There have been clandestine anti-Cuban shortwave things broadcast from all manner of conveyances — yachts, balloons, zeppelins, airplanes. Leaflets, books and pamphlets of every kind were surreptitiously sent to Cuba in tourist luggage, in diplomatic pouches, hidden in hollow trees and even dropped from airplanes. Then there were the hit-and-run attacks from speedboats shooting up Russian ships, Cuban fishing boats, coastal hotels and hamlets.

Alan Gross, pretending to bring computer equipment to synagogues in Cuba that didn’t need them, is only a recent and not the last example of the often ludicrous plotting of various U.S. government agencies. Currently, the U.S. Agency for International Development (USAID) is at the forefront of the regime-change program. Obama did not mention the Gross thing but revealed that he would have proposed détente earlier had Cuba not imprisoned him.

Obama has it backwards. It’s not the “thing” that needs to be changed but the desired “result.” His new policy direction does not promise to end imperial bullying or to accept Cuban independence and sovereignty. Why else would he say the new thing he has in mind “will promote our values through engagement”?

Making the crime fit the punishment

To justify the long hostility toward Cuba, the United States has created a Cuba that never existed; a tropical gulag of indiscriminate terror where hordes of political prisoners rot while a cartoon dictator recites hours of his political poetry to a captive audience.

It is not surprising that the external and domestic opponents of the Cuban government, whether or not they are paid by the United States or its European partners, do not have their own vision of what a post-Castro society would look like. They and Obama are bound by the official blueprint drawn up by Congress in the Helms-Burton law of 1996, which essentially calls for a non-Cuban Cuba.

What would happen to employment, housing, health care and education in the new Cuba of Washington and Miami invention? Why is it that regime change is couched in fuzzy terms like “freedom” devoid of any economic, social or cultural content? And why is it that Obama criticizes the old policy because it “failed to advance our interests” without acknowledging what those interests really are?

Nothing in Obama’s speech corrects the half-century assault on truth. Many of the media commentaries on the Obama speech recite from the fantasies concocted over the years to mask the insanity of the policy. Here is just a sampling:

-Seventy-five Cubans dissidents were arrested in April 2003 in what is called the Black Spring. Ever since then they have been referred to as political prisoners or freedom fighters.

Actually, they were tried and convicted in a Cuban court for operating as paid agents of the pretend dissident movement funded by the United States. Roger Noriega, former assistant secretary of state for Western Hemisphere Affairs, conspired with James Cason, then head of the U.S. Interest Section in Havana, to openly encourage local dissidents hoping that the Cuban government would kick Cason out and give George W. Bush an excuse for closing the Cuban Interest Section in Washington and worsening bilateral relations. The scheme is what got the 75 arrested.

Among the 75 were journalists, few of whom ever practiced journalism. There also were pretend independent librarians paid by the United States to pose as part of a pretend grassroots defiance of a pretend Cuban control of what people could read.

A report to the American Library Association in 2001 described how one of the “independent” libraries in Cuba “consisted of four or five dusty shelves of books.” A woman in one of these libraries said, “No books had ever been confiscated [and] that she was not being intimidated or threatened by the government as a result of having this collection….The woman receives many of her books as well as payment for her activities from the U.S. and Mexico but would not identify individual sources. She said she was asked to operate the library because she is a dissident.”

-Cuba always blocks U.S. efforts to improve relations.

The example often cited is the shooting down in 1996 of two private exile planes near the Cuban coast. But Fidel Castro did not plot with well-known terrorist José Basulto, founder of Brothers to the Rescue, to have him organize provocative flights over the Cuban capital; Basulto did that on his own. It was the shootdown that led to enactment of the Helms-Burton law, which now prevents Obama from lifting the blockade. So, was it Fidel Castro or Helms, Burton and Basulto who torpedoed some supposed improvement in bilateral relations?

– The Cuban Five were spies.

Nearly every news outlet continues to refer to the five Cuban agents imprisoned in 1998 as “spies.” (The last three were released as part of the Obama opening.)

Actually, they were Cuban agents who infiltrated Brothers to the Rescue and other counterrevolutionary groups in Florida and then alerted the FBI to their plans for attacks against Cuba from the United States in violation of U.S. law.

– Alan Gross, who, was released from prison on “humanitarian grounds” as part of the Obama opening, was unjustly imprisoned in Cuba.

Actually, he was a sub-contractor working under a USAID grant and sent on five trips to Cuba to set up clandestine electronic networks as part of the U.S. subversion obsession and therefore correctly imprisoned. People who do that sort of thing in the United States can be tried as unregistered agents of a foreign power and sent to prison, just like Alan Gross.

Where did all those doctors come from?

The president’s positive comment on Cuba’s contribution to fighting Ebola in Africa has been noted as one of the inducements for change. Good, but Obama needs to explore what Cuba’s worldwide medical missionary program says about the island.

Imagine what it would take for the mythical Cuba the United States created, with its tiny population of the impoverished and the oppressed, to produce such quantities of surplus doctors, nurses and medical technicians who are now working in 66 countries. If Obama could admit that his mythical Cuba could never have done that, he might start setting the historical record straight and maybe ask the Cubans to advise him on Obamacare.

Today Cuba has 75,000 physicians or one per 160 inhabitants. Approximately 132,000 medical/health professionals have provided medical and dental attention to poor people abroad. At present, there are over 50,000 medical workers and no less than 25,000 doctors working outside of Cuba. In 2013, the health sector had 322,627 health professionals and technicians – that is, 28.9 per 1000 inhabitants — 76,836 physicians and 14,964 dentists as well as 88,364 nurses.

All of these accomplishments at home and abroad have taken place while the U.S. government persisted in enticing doctors, nurses and other professionals to leave Cuba. Remember, it was the people of Cuba who, we are incessantly told, make only $20 a month, who paid for their education even as Cuba confronted relentless U.S. financial and economic obstruction. Does Obama intend to reimburse the Cubans?

The United States calls the maze of economic and commercial sanctions an embargo. (The Cubans, referencing international law, call it a blockade.) Obama cannot unilaterally put an end to this kind of warfare but must wait for Congress to act. While the executive branch has the constitutional power to define foreign policy, Bill Clinton signed the Helms-Burton bill transferring control of Cuba policy to Congress. This was the second time he relinquished executive power over Cuba policy. The first was in 1992 when, running against George H.W. Bush, he announced his support for the Torricelli Act, which severely tightened trade restrictions. Obama’s Democratic predecessor made it necessary for him to go before Congress in his recent State of the Union message and ask Republicans to give back his foreign policy powers.

New rules

Clearly, the old rules lacked consistency. For example, when OFAC travel and remittance rules affecting Cuban-Americas were relaxed in the past, the justification was always to promote democracy and to separate Cubans from dependence on their government. But, when the same rules were made more severe, as under George W. Bush, the justifications were the same.

OFAC’s new regulations will materially ease the sanctions. Some of the changes sound like attempts through administrative regulations, to overturn fundamental sanctions in the Helms-Burton law. These include new rules allowing direct interbank transfers with the U.S. banking system, the use of U.S.-issued credit and debit cards and the elimination of “cash and carry,” which was a burdensome requirement for Cuba in paying for imports in convertible currencies.

Nevertheless, other changes may conflict with old practices. For example, will the U.S. Treasury Department protect credit/debit card companies from lawsuits by U.S. nationals seeking compensation from the Cuban government? The logistics of these transactions remains to be clarified.

Travel to Cuba can now be insured by U.S. companies and U.S. airlines could fly to Cuba from any city if market demand is sufficient instead of from a few government-selected cities. The major airlines could then reduce the advantage that the smaller companies enjoyed until now.

The travel ban has been relaxed even as OFAC preserves the principle of controlling travel for political purposes. The 12 categories of allowable travel remain in place although now without requiring a written specific license and organized travel and tours will be opened to more players.

Still, restrictions remain. Those who will be able to travel more freely are prohibited by a watchful government from having fun. New categories of travel are authorized under the new rules, “provided that the traveler’s schedule of activities does not include free time or recreation in excess of that consistent with a full-time schedule.”

Picking winners for a Cuban market economy

Trade sanctions have always had the effect of indirectly “managing” the Cuba economy. The new rules can determine who gets to invest in or trade with Cuba and which Cuban sectors will receive the most benefit. The majority of U.S. firms will be left out of the great Cuban market economy as envisioned in Washington.

Until now only agricultural and some medical and educational materials could be sold to Cuba. The new regulations allow for an increase in the kinds of goods that Cuba can import from the United States such as construction and agricultural tools and machinery. However, these can only be sold to non-state sectors such as co-ops and private entrepreneurs. Thus, certain sectors of the U.S. corporate world will be given preferential treatment.

OFAC is also giving Cuban entrepreneurs in the private sector an advantage over the state, but the Obama administration also wants U.S. information technology corporations to invest in Cuba’s telecommunications infrastructure, which means selling services, software and equipment to the Cuban government.

Rules applied to the banking sector raise significant questions. Financial institutions will be allowed to open accounts in Cuban banks to simplify transactions that are authorized by the United States and Cuba. But will Cuban banks be allowed to do the same in the United States?

Are these U.S. banks going to open dollar accounts in Cuban banks? Are they going to be held liable for breaking the restrictions that the United States Treasury Department imposed on dozens of banks for doing the same thing? Less than 24 months, ago the Bank of Nova Scotia, Commerzbak, Credit Suisse and many others were charged with billions of dollars in fines. Will the new rules be retroactively applied or is this a case of sorry — bad timing?

Since 1962, any ship that called on a Cuban port was prohibited from entering a U.S. port for at least six months. Now, ships transporting food, medicine, medical equipment and other materials may, in case of some emergency in Cuba, go to Cuba and then enter any U.S. port without prejudice as can any other ship owned by the same company. But Cuba is still not permitted to use U.S. currency in international transactions or purchase of technologies that might have more than 10 percent of U.S. components.

Some U.S. companies shall not suffer

Obama appears to have come around to where former Secretary of State Henry Kissinger was in 1972 when he limited the scope of economic sanctions to protect the interests of selected U.S. corporations. In April of that year, Kissinger approved export licenses for three U.S. automakers with subsidiaries in Argentina permitting them to sell cars to Cuba. The State Department issued a statement that read in part, “Our policy toward Cuba is unchanged. We did not wish to see these U.S. companies suffer as a result of U.S. policy.”

Stifling trade and financial transactions in Cuba by withholding all the utilities of capitalism was inconsistent with promoting a free market, which is mentioned 13 times in Helms-Burton.

Do the new regulations show that Obama is rejecting the old insanity and striking out toward true respect for Cuban sovereignty? While there is symbolic importance in resuming formal diplomatic relations, there is nothing in normal diplomacy that prevents Obama from carrying on regime change schemes by other means. As he said Dec. 17, “we can do more to support the Cuban people and promote our values through engagement.”

Relaxing the restrictions on travel is fine but does anyone find Obama’s reasoning for doing so a little suspicious? “Nobody represents America’s values better,” said Obama, “than the American people, and I believe this contact will ultimately do more to empower the Cuban people.”

Obama wants to transfer information technology to Cuba. Good. He could also transfer to dissidents the supplies of military-grade microchips that Alan Gross was imprisoned for doing.

The day for celebration should be postponed until we see whether the true potential of Cuba’s social and political experiment can proceed unobstructed by an enraged superpower and whether the United States is ready to work with Cuba in bringing a more constructive future to both countries. Maybe by then Cuba can show the United States how to form labor unions.

Robert Sandels lives in Mexico and writes on Cuba and Mexico.

Nelson P. Valdés is Professor Emeritus, University of New Mexico. For more information on Cuba visit: http://www.cuba-l.com

January 30, 2015 Posted by | Economics, Progressive Hypocrite | , , , , , , , | Leave a comment

US Pays PR Firm to Create Anti-Cuban Multimedia Content

teleSUR | November 27, 2014

The U.S. government has signed a US$1.4-million-contract with a public relations company to produce “TV and radio programs designed specifically for audiences in Cuba,” according to the Office of Cuba Broadcasting’s press release that Tracey Eaton cited in her blog Along the Malecon.

The Los Angeles-based company, Canyon Communications, is a public relations firm that specializes in writing “corporate histories.” Founded by Jeff Kline, the company was offered the no-bid contract because of what government officials said was its “unique profile.”

The Office of Cuba Broadcasting (OCB), funded by the U.S. government through the presidentially appointed Broadcasting Board of Governors, runs Radio and Television Marti and has its headquarters in Miami, Florida.

In 2006, The New York Times revealed that OCB paid 10 journalists to work for Radio and TV Marti. The Miami Herald fired three of the journalists from El Nuevo Herald after learning they were receiving money from the Bush Administration.

The OCB’s interventions in Cuba have found their echo in more recent attempts by the U.S to use modern media to destabilize Cuba’s socialist system.

A scandal broke out in April when the U.S. was found to be engaged in “battle” with Cuba on the social media front. This latest onslaught was carried out under the guise of ZunZuneo, a social media platform targeted to Cuban users.

Funded by the U.S. Agency for International Development (USAID), ZunZuneo was intended to spark dissent against the Cuban government. In USAID’s own words, the project was designed to “renegotiate the balance of power between the state and society.”

ZunZuneo, set up with the help of high-tech contracting firms from Nicaragua and Costa Rica, eventually reached over 40,000 Cubans. The contractors, together with USAID, set up an equally elaborate scheme of front companies using Cayman Islands bank accounts to hide the venture from the Cuban government. New executive recruits were also not told about ZunZuneo’s ties to the U.S. government.

November 28, 2014 Posted by | Corruption, Deception | , , , , | Leave a comment