By William K. Black

I wrote recently about Apple’s release ofinformation from its “audits” of its major suppliers. Apple constructed the release to deny thepublic information on the identity of the suppliers that defrauded andendangered the lives and health of their workers. I explained that criminologists classifythese as “anti-employee control frauds.” Control frauds occur when the persons who control a seemingly legitimateentity use it as a “weapon” to defraud. Anti-employee control frauds defraud the workers. Apple’s audit, and I explained why it was farfrom vigorous, showed endemic anti-employee control fraud by itssuppliers. Apple overwhelminglypurchases components from Asian suppliers that are criminal enterprises. The control frauds operate in fraud-friendlynations with non-Western managers selected for their willingness to cheat theworkers.

Apple creates a criminogenic environment in itssupplier selection process that leads it to, pervasively, hire criminalsuppliers. Honest manufacturers cannotcompete with firms that force their workers to work more than the maximum 60hour work week and fraudulently refuse to pay them for the extra time theywork. Firms that provide minimal safetyprotections also find it difficult to compete with fraudulent rivals. This is known as a “Gresham’s dynamic” inwhich bad ethics drives good ethics out of the workplace. The perverse dynamic is not limited toApple’s suppliers. Any honest Westernfirm that seeks to compete with Apple’s suppliers will be driven to slash itsworkers’ wages, benefits, working conditions, and pensions while increasingtheir workload. I call this the “Road toBangladesh” strategy.

I explained that the fact that Apple’s supplierskeep records proving that they are cheating their workers, even though theyknow that Apple will audit those records and their governments could do so demonstrates that they have no fear that their frauds will be sanctioned. Apple obviously does not stop dealing with suppliers it knows to be criminal enterprises that cheat their workers. I urge reporters to ask Apple how manycriminal and regulatory referrals it has made to the relevant governments aboutthe endemic anti-employee fraud it has documented among its suppliers. I am willing to bet that the number iscurrently zero.

Jon Stewart has shown pictures of one of the most infamous Apple suppliers’ workplace – Foxconn. The most unusual feature is the nets strung between the dormitorieswhere the workers live. The nets are there to reduce the suicides among the workers. Foxconn is so dehumanizing a place to work that suicide is a leading cause of deaths among the workers and workers protest the inhumane conditionsby threatening to engage in mass suicide.

It was certain that there would be push back on Apple’s suppliers, but it is revealing that it came in the New York Times on January 21, 2012 in an article entitled “How U.S.Lost Out on iPhone Work.”

I address one the article’s weaknesses, its discussion of Foxconn. The article is over 4,500 words, so its failure to discuss Foxconn’s anti-employee actions was not compelled by space constraints. Indeed, Foxconn’s anti-employee practices are of central importance tothe issue that the article purports to discuss – why Apple rarely employs U.S.suppliers based in the U.S. Instead, the article alludes to an illegal act by Foxconn, in tones of amazed praise, with no discussion of the illegality.

“Apple executives say that going overseas, at this point, is their only option. One former executive described how the company relied upon a Chinese factory to revamp iPhone manufacturing just weeks before the device was due on shelves. Apple had redesigned the iPhone’s screen at the last minute, forcing an assembly line overhaul. New screens began arriving at the plant near midnight.

A foreman immediately roused 8,000 workers inside the company’s dormitories, according to the executive. Each employee was given a biscuit and a cup of tea, guided to a workstation and within half an hour started a 12-hour shift fitting glass screens into beveled frames. Within 96 hours, the plant was producing over 10,000 iPhones a day.

“The speed and flexibility is breathtaking,” the executive said. “There’s no American plant that can match that.”

Ah yes, what “speed” and “flexibility.” Indeed, it could not be matched in the U.S. –or any other nation that enforced its laws. What the authors are describing was unlawful under Chinese law. The article eventually gets back to Foxconn.

To Apple executives, Foxconn City was further evidence that China could deliver workers — and diligence — that outpaced their American counterparts.

“That’s because nothing like Foxconn City exists in the United States.

The facility has 230,000 employees, many working six days a week, often spending up to 12 hours a day at the plant. Over a quarter of Foxconn’s work force lives in company barracks and many workers earn less than $17 a day. When one Apple executive arrived during a shift change, his car was stuck in a river of employees streaming past. “The scale is unimaginable,” he said.

Foxconn employs nearly 300 guards to direct foot traffic so workers are not crushed in doorway bottlenecks. The facility’s central kitchen cooks an average of three tons of pork and 13 tons of rice a day. While factories are spotless, the air inside nearby teahouses is hazy with the smoke and stench of cigarettes.

“They could hire 3,000 people overnight,” said Jennifer Rigoni, who was Apple’s worldwide supply demand manager until 2010, but declined to discuss specifics of her work. “What U.S. plant can find 3,000 people overnight and convince them to live in dorms?”

Yes, “convince” them to live them in dorms complete with anti-suicide netting at no extra charge. Foxconn truly is convincing. It’s probably the pork and rice. Alternatively, it could be the fact that rural China is still extremely poor, the rule of law is a fiction in China, and it is a crime to start a real labor union. It could also be that the “300 guards” have broader duties than guiding traffic flow.

So, the workers had already generally worked a 12 hour shift and were then woken up at midnight to be ordered (unlawfully) to work another 12 hour shift. In case this is not obvious, some of the workers’ tasks are dangerous and exhaustion endangers their health and lives. Indeed, the facts are likely far worse than what I have just related. Apple’s refusal to identify the suppliers that violated the maximum work week rules and the suppliers that stole their workers’ overtime pay makes it impossible to say for sure how bad things are at Foxconn. Apple’s audits found that both forms of anti-employee control fraud were common among its suppliers. Given Foxconn’s problem with suicide one is entitled to demand that Apple identify what violations its audits found at Foxconn.

The article later comes back to the Foxconn tale fora third time to add this passage.

“Foxconn, in statements, declined to speak about specific clients.

“Any worker recruited by our firm is covered by a clear contract outlining terms and conditions and by Chinese government law that protects their rights,” the company wrote. Foxconn “takes our responsibility to our employees very seriously and we work hard to give our more than one million employees a safe and positive environment.”

The company disputed some details of the former Apple executive’s account, and wrote that a midnight shift, such as the one described, was impossible “because we have strict regulations regarding the working hours of our employees based on their designated shifts, and every employee has computerized timecards that would bar them from working at any facility at a time outside of their approved shift.” The company said that all shifts began at either 7 a.m. or 7 p.m., and that employees receive at least 12 hours’ notice of any schedule changes.

Foxconn employees, in interviews, have challenged those assertions.”

I doubt that the average reader could tell from the disjointed article that the actions that Apple’s officers ascribe to Foxconn were unlawful, but Foxconn obviously understood that such actions would be unlawful and fraudulent. Apple’s audit found that over 60% of its suppliers violated its policy limiting the workweekto 60 hours. That means that thesuppliers kept records that on their face demonstrated that they had violated(a) their contracts with their workers, (b) their contracts with Apple, and (c)Chinese law. If Foxconn keeps“computerized timecards” that prove that the unlawful and fraudulent actionsthat both Apple and its employees say it committed that would not make the action “impossible” – it would make it the norm for Apple’s suppliers. The fact, demonstrated by Apple’s audit, thatmost Apple suppliers maintain a papertrail proving that they engage in anti-employee control fraud proves that theyknow that can defraud their employees with impunity. Neither their governments nor Apple has established even such a minimal threat of sanctioning their violations that ithas become cost-effective for the suppliers to hide their frauds.

Consider another fact that the NYT article ignores. The Apple officers were describing an action by Foxconn that violated Apple’s standards, which it had imposed on Foxconn by contract. Apple’s corporate response – and the responseof the Apple officials that the authors interviewed about the incident – was togush with enthusiasm about Foxconn’s violation of Apple’s standards. What conclusion would Foxconn draw fromApple’s reaction as to the importance of not defrauding the workers or having them work in inhumane and exceptionally dangerous conditions?

The NYT ombudsman has heaped derision on the concept, formerly known as journalism, that itsreporters should inform the reader that they have strong reason to doubt theveracity of a source’s statement. This may explain why the reporters felt there was no need to inform the reader thatthe quoted claim that Foxconn “takes our responsibility to our employees very seriously and we workhard to give our more than one million employees a safe and positiveenvironment” is demonstrated most graphically by its provision of anti-suicide netting in its dormitory complex.

Bill Black is the author of The Best Way to Rob a Bank is to Own One and an associate professor of economics and law at the University of Missouri-Kansas City. He spent years working on regulatory policy and fraud prevention as Executive Director of the Institute for Fraud Prevention, Litigation Director of the Federal Home Loan Bank Board and Deputy Director of the National Commission on Financial Institution Reform, Recovery and Enforcement, among other positions.

Bill writes a column for Benzinga every Monday. His other academic articles, congressional testimony, and musings about the financial crisis can be found at his Social Science Research Network author page and at the blog New Economic Perspectives.

Reposted from Bruce Krasting’s blog with his permission.

On Greece, I spoke with someone from Athens today. It’s not a pretty picture.

Issues related to subsistence have replaced the fervor for demonstrations. This may not last according to this resident.

The closing of stores and shops is escalating. Apparently, 20% of all retail establishments are shuttered. Nearly every block has one reminder of the ongoing depression in the economy.

The Greek Diaspora is in full swing. People are leaving the country, old and young alike. They are going to Europe, where the prospects of jobs stink, but not as badly at Greece.  They are also fleeing to America (family members in the US have been helping out), Australia (where some are welcome) and South America.

The talk is that the Greeks are becoming the new Palestinians. They leave their homes, as there is no future there, but all the time they wish they never left.

As the shops close and the people leave, the economy shrinks. My Greek friend is convinced that government revenues are collapsing as a result. Whatever estimates the Troika were looking at six-months ago are pure fantasy today. The country is imploding.

People are feeling hopeless, and the situation is getting worse. In this fellow’s opinion, there is not a chance in hell that Greece will avoid a default. Two years ago there was a general belief that Greece could manage through a crisis, and avoid defaulting and sustain the link to the Euro. That is no longer the case.

This friend understands that a transition from the Euro to the Drachma would cause huge additional pain. It would devalue the pensions of every citizen by at least 50%. He understands that a default would mean that Greece would be a debt pariah. In spite of this, he prefers that it would come sooner rather than later. He thinks this is the prevailing sentiment in the country. There is nothing desirable about this choice. It’s now just inevitable.
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The big Swiss cement company Holcim announced a charge to assets as a result of a write down of fixed assets. Here’s the headline and a look at Holcim’s stock performance. Note that the stock got clipped for a 1/3 of it value about 8 months ago.

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The large cement producers from France and Germany also had their stocks whacked at about the same time.

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Actually there is not much good news for the cement boys anywhere:

A question for readers: How big is China when it comes to cement? Keep in mind that the EU and the USA have GDPs of about $15T apiece. China is much smaller and has a GDP closer to $6T. Knowing that, what’s your guess on how China stacks up in the world of cement? I would have thought that China was as big as the US or EU. The economy is smaller, but they are building so much, my guess was about equal.

Wrong. wrong. wrong. I must admit, I was blown away by this:

China is 25 Xs larger than either the US or EU! When it comes to cement, forget the rest of the world and focus on what is happening in the country with a 54% market share.

China’s cement production has been on a tear for years. But it’s slowing down. The production for 2011 will come in at 1.88mm metric tones, an increase of only 6% over 2010 (the slowest in 15 years). The Cement Association of China is forecasting that 2012 total production will be “about the same as 2011”. We shall see. I saw this article on cement pricing in Sichuan province.

Since 2004 China’ GDP has doubled. So has its cement production. That’s not a coincidence. The forecast for unchanged production in 2012 is inconsistent with high growth in GDP. What does zero growth in cement production translate into Chinese economic growth? My guess is that 4% GDP would be a good result. That would be well below stall speed for China.

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The CBO sent a memo to the House and the Senate. It was reminder of all of the stopgap measures that are in place. The government is running on a series of continuing resolutions. How big a deal is this? Potentially, it’s a very big deal. The amount involved is $969B!

There are two lists. This first one looks at the spending for which the necessary enabling legislation has already expired:

This one is for those expenditures whose authorizations expire on or before September 30 of this year:

You might rightly ask, “What’s that big chunk of money being spent on?” The biggest chunk is the military (68%).  Even with partisan politics and an election year, the military will likely get its money without much of a fight. The CBO report spells out where the rest of the dough is being spent. (It runs 100 pages.) Some snippets:

 General Admininstration
 Unauthorized FY 2012 Appropriations: 11,519,966,000

United States Marshals service
Unauthorized FY 2012 Appropriations: 11,806,793,000

National Institutes of Health
Unauthorized FY 2012 Appropriations: 30,689,990,000

Western Hemisphere Drug Elimination 
Unauthorized FY 2012 Appropriations: 1,061,000,000

Operations of the Peace Corps
Unauthorized FY 2012 Appropriations: 375,000,000

Migration and refugee assistance
Unauthorized FY 2012 Appropriations: 1,639,000,000

Department of State diplomatic and consular programs
Unauthorized FY 2012 Appropriations: 8,275,386,000

Section 8 tenant-based housing assistance
Unauthorized FY 2012 Appropriations: 18,914,369,000

Low-income home energy assistance
Unauthorized FY 2012 Appropriations: 3,478,246,000

Noxious Weed Control and Eradication 
Unauthorized FY 2012 Appropriations: Not Available

Brown Tree Snake Control and Eradication 
Unauthorized FY 2012 Appropriations: Not Available

Assistance to trafficking victims in the United States
Unauthorized FY 2012 Appropriations: 9,794,000

Administration on Aging programs
Unauthorized FY 2012 Appropriations: 1,473,703,000

Bureau of Labor Statistics
Unauthorized FY 2012 Appropriations: 610,224,000

National Endowment for the Arts
Unauthorized FY 2012 Appropriations: 292,510,000

Pandemic and All-Hazards Preparedness Act
Unauthorized FY 2012 Appropriations: 62,700,000

Project Bioshield
FY 2012 Appropriations: Not Available

Strategic Petroleum Reserve
FY 2012 Appropriations: 192,704,000

National Highway Traffic Safety Administration
FY 2012 Appropriations Authorized 24,693,000,000

Federal Trade Commission operations:
Unauthorized FY 2012 Appropriations: 311,563,000

Centers for Disease Control programs regarding infertility and sexually transmitted diseases
Unauthorized FY 2012 Appropriations: 964,855,000

Corporation for Public Broadcasting
Unauthorized FY 2012 Appropriations: 445,000,000

Administrative expenses for Government National Mortgage Association guarantees of mortgage-backed securities
Unauthorized FY 2012 Appropriations: 19,500,000

Funds appropriated to the President for international assistance.
Unauthorized FY 2012 Appropriations: 16,462,253,000

Secretary of Health and Human Services refugee and entrant assistance programs
Unauthorized FY 2012 Appropriations: 769,789,000

Pacific Salmon Treaty 
Unauthorized FY 2012 Appropriations: 123,566,000

Nutria Eradication and Control Act
Unauthorized FY 2012 Appropriations: Not Available

Bureau of Land Management
Unauthorized FY 2012 Appropriations: 973,552,000

Paperwork Reduction Act of 1995
Unauthorized FY 2012 Appropriations: Not Available

Renewable energy research and development
Unauthorized FY 2012 Appropriations: 963,000,000

Appropriations for the Coast Guard
(1) Operation and maintenance 
Unauthorized FY 2012 Appropriations: 7,051,054,000
(2) Acquisition, construction, rebuilding, and improvement Unauthorized FY 2012 Appropriations: 1,403,924,000
(3) Retired Pay 
Unauthorized FY 2012 Appropriations: 1,400,700,000

Specialty crop research initiative
FY 2012 Appropriations Authorized 100,000,000

Food animal residue avoidance database program
FY 2012 Appropriations Authorized 2,500,000

National Sheep Industry Improvement Center
FY 2012 Appropriations Authorized 10,000,000

Block grants for energy efficiency
FY 2012 Appropriations Authorized 2,000,000,000

Central Intelligence Agency Retirement and Disability Fund
FY 2012 Appropriations Authorized 514,000,000

Have a look at the report. There are hundreds of line items for expenses. Something for everyone to hate.

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lane' class='bbc_url' title='External link' rel='nofollow external'>NPR link

Sales up 25%, quality survey results up, repaid 8 billion loan, now helping Fiat parent company.

Driven by the pre-ACA US healthcare system into bankruptcy, Chrysler handed off 255K retiree and their pensions to the govt pension board.

Reposted from Of Two Minds with author’s permission.

Ironically, perhaps, building a new sustainable future requires being fully exposed to what is considered “the source of our problems”: risk, threat and failure.

Risk and failure are necessary for adaptation, innovation and thus for success. Suppress or transfer risk and you’ve eliminated the possibility of sustainable success.

Obviously, Black Friday will be a failure.

Disposable household income is down. House values are down. Stock values are down. Net worth, at least by any honest measurement is down. Savings return no income, and have no prospect of doing so. Government employees are in some danger of losing their jobs and, unless they have cognitive problems, should know that their pensions will start later and return far less. Europe is about to fail. China has a trustworthiness factor of approximately zero. And then there’s the minor detail that the world is drowning in debt and there’s no prospect for growth, so there’s no hope for any of this to improve without a reset, and the politicians aren’t going to let that happen.

So we know Black Friday will fail. How will they spin it.

Some recent strategies have been:

1. Lie now, and revise the assessment later.
2. Confuse. Cite anything but actual sales volume. For example, breathlessly cite “increased traffic” or “more items purchased”.
3. Streeeeeetch. Instead of having Black Friday run from 5:00 a.m. to midnight, do it 24 hours. Or 36 or 48.
4. Accounting tricks. Change the numbers being compared and put a footnote somewhere. Either make last year’s numbers lower, or this year’s higher, or more likely, do both.
5. Eliminate the negative reporters; accentuate the positive reporters.

Whatever the approach, I’m sure the press release was written months ago.

There are really only three ways to cripple Wall Street’s democracy-killing concentration of wealth and power: take our money out of Wall Street and the TBTF banks, eliminate private money from elections and abolish Wall Street’s dealer, the Federal Reserve.

There are only three things–and only these three–that will cripple Wall Street’s democracy-killing concentration of wealth and power:

1. Transfer the 99%’s money out of Wall Street and the Too Big To Fail Banks

2. Remove campaign contributions from our democracy in a way that the corporate legalist lackeys in the Supreme Court cannot overturn, i.e. entirely publicly financed elections

3. Abolish Wall Street’s dealer, pusher and protector, the Federal Reserve.

My reasoning is very simple:

Everything else people want to see happen cannot happen if:

1) Wall Street and the SDI (systemically dangerous institutions) a.k.a. too big to fail banks, control most Americans’ financial assets and debts

2) The Federal Reserve exists to enable and protect the SDI’s wealth and power via Primary Dealers, the discount window and other pusher/dealer mechanisms

3) Wall Street and the other SDIs can use the billions of dollars they skim from our accounts, IRAs, 401Ks and pensions to buy political influence and protection from regulation and competition.

Therefore these are the necessary foundations of any real change.

http://www.oftwomind…genda10-11.html