In recent years, America has seen the collapse of several major corporations in a seeming explosion of corruption and fraud. Worldcom, Global Crossing, Tyco, and, of course, Enron have become watchwords for corporate corruption, and capitalism as a white collar crime. Few people understand how these frauds were perpetrated and, more importantly, why. The leaders of these companies had already reached the pinnacles of their professions, and would have made sums unimaginable to most people if they had just run their businesses honestly and competently. Why did they throw it all away when the surety of eventually being caught and called to account seems, in hindsight, so obvious?
I can't really speak to the psychology of control fraud; I don't know that the psychology at its core is well understood, other than to posit elements of sociopathic behavior by the perpetrators. However, the methodology of white collar crime on the scale of these recent scandals is well documented and is known as control fraud. Control fraud occurs when conspirators are able to take control of an institution in order to exploit the trust and authority of the institution to convert its assets to personal use.
Control fraud relies upon holding off any accountability or scrutiny through a combination of bribery, deception, co-optation or subornation of the mechanisms of checks and balances either intrinsic and extrinsic to the corporation such as auditors, government regulators, the board of directors, and shareholders. The longer the charade of business as usual, or more often, fantastically better than usual, is able to be maintained, the more damage is done to the institution on which the control frauds are preying. If it goes on long enough, as in the case of Enron, there may be nothing left at the end but a smoking crater of debt and broken lives.
The recent wave of high-flying control frauds, who claimed to be rewriting the rules of business, while actually just laying down a thick smokescreen of lies and complex accounting to throw the market off the scent of their fraud, is by no means an aberrational chapter in business history. Control fraud has a rich and complex history stretching back as far as the legal fiction of the corporation itself. Many might recall the last great wave of control fraud in our own life-times: the S&L scandal.
The deregulation of the savings and loan industry and changes in regulatory requirements created a perfect environment for control fraud. The result was the insolvency of hundreds of S&L's a glut in commercial construction that took the construction industry more than a decade to recover from, and a staggering cost to tax-payers to make whole those whom control frauds had harmed.
Like the latest crop of high-fliers, the S&L frauds claimed to be rewriting the rules of finance in ways that the stodgy regulators, and even the traditional bankers in their industry, couldn't begin to comprehend. They were reporting profits at rates tens, hundreds, even thousands of times the rate the industry ever reported before. Politicians, especially those inclined to reflexively worship free markets, loved this example of free markets set free from stultifying regulation and championed and abetted the crimes of the control frauds. Most famously, Jim Wright, the powerful Democratic Speaker of House put his prestige behind the industries worst frauds, as did the "Keating Five", including Senator John McCain. These men went to bat for criminals, not because they were corrupt, but because they wanted to believe so badly. Unfortunately, it was all a lie. We would have saved billions of taxpayers’ dollars if the fraudsters had not been able to recruit political influence to protect them from regulators for so long.
Control frauds rely on abusing their relationships with other trusted institutions (such as auditors, industry interest groups, high profile figures from politics and business) to vouch for their claims and to ensure no one looks too closely at the fine print. They bank on willful ignorance, the desire to believe, greed, and the grandiose audacity of the fraudsters' claims.
What does this have to do with government? you might ask. I'm sure many of you can recognize certain patterns and modus operandi of the control fraud in the Bush Administration. When all is said and done, history will view the Bush Administration as the first modern American control fraud government. For a control fraud, there is no juicier target than the U.S. Government: unlimited credit, massive cash flow, highly complex, mostly internally regulated, and it even has its own army. Bonus!
A group of sharps, all with a history of a degree of control fraud (think about Cheney and Rumsfeld's fusion of governmental and corporate positions to lay the groundwork for privatizing swathes of our national defense infrastructure, and Bush's parlaying of a minor stake in a baseball team into millions of dollars and instant credibility with Texas voters, not to mention his ability to make his Texas Administration appear to have been sound though smoke and mirrors long enough to be a viable candidate for President), gained control of our Federal government under very questionable circumstances and proceeded to use it to their own ends at the expense of the public welfare and the nation's well-being.
They utilize with a vengeance that greatest of all weapons of the control fraud - secrecy. Above all, this Administration withholds vital information that would tend to reveal or discredit their schemes and deceptions. This Administration is unprecedented in its zeal for secrecy, classifying as secret a much greater range and number of government documents than any before it. They run prisons in secret through the CIA. They secretly kidnap, then render to foreign jurisdictions persons for torture. They secretly began a program to monitor without warrants the international calls of American citizens. In all cases, the purpose of the secrecy is claimed to be operational security, when in fact, it is all for the purpose of keeping the shareholders, the American people, in the dark. This Administration even sued the Government Accounting Office to keep the list of attendees at the Vice President's energy planning group a secret. When the policy process is a secret, no one can tell if your policy is a fraud.
In a control fraud, knowledge is power. It can also be the death knell of the control fraud. So information is handled like a commodity, or like a weapon. This Administration is notorious for its message discipline, it's ability to manipulate the press through selective access and threats of discontinued access. This President and Vice President have had fewer public press conferences in which they could be questioned freely than any in modern history. They consistently appear only before pre-screened, ideologically compatible audiences at think tanks, industry groups, and military bases.
This Administration has also become quite Orwellian in their efforts to control information emerging from what were once professional and non-ideological government sources. They demand the right to edit final documents for public release, and even bully and bribe Executive branch officials into lying to Congress about the cost projections of key legislation. I have no doubt that if the entirety of this Administration's archives were to made public, they would be tarred and feathered and lynched in short order.
Control frauds seek to co-opt, undermine, and even bribe their organization's natural checks and balances. In the case of a corporation, the Board of Directors, government regulators, the company's own outside auditing firm, the financial press, institutional investors, and shareholders are the target of these efforts. In the Presidency, the targets of such efforts are the Congress and Judiciary primarily, but also the professional bureaucracy within the Executive, the media, and most importantly the voting public.
In Congress, this Administration's blindly enthusiastic supporters for several years precluded any over-sight and investigation of the Executive's actions, even when they were plainly illegal. The President treated the GOP majority in Congress like a Parliament, not a co-equal branch, using strict party discipline to rubber stamp decisions made in the White House to further their control fraud.
In the Judiciary, the Bush Administration sought enthusiastically to pack the federal judiciary with political partisan on whom they could rely to approve their frauds and reject any checks upon their authority. Fortunately, this was a task the Administration has so far failed at completing in the nation's highest court. Their most outrageous grab for power was stymied with the ‘gang of 14’ forestalled the possibility of the 'Nuclear Option' to remove the filibuster from judicial nominees. This last is an example of just how far a control fraud will go to wreck the apparatus of oversight and accountability in the system.
The assault on the judiciary extended well beyond the mechanics of the formal governmental system itself, however, and into the realm of public opinion and propaganda. We all recall the ‘Justice Sunday’ frenzy when the GOP gathered nationally for a 5 minutes of hate for the 'activist judges' who are ruining our nation, and incidentally, possibly providing some modicum of oversight which could impede the Bush control fraud. Any source of resistance to the Bush control fraud's policies brings swift and sure retribution. Whether it is labeling Iraq war critics the objective allies of terrorists, or whether it is outing a covert agent of the CIA working to control proliferation of WMD because her husband wrote a critical op-ed piece, this Administration has been merciless and unscrupulous, even felonious, in its efforts to destroy all opposition and criticism.
In all control frauds, the bureaucracy of the institution becomes packed with yes men, ideological hacks, and incompetent hangers-on, rather than professionals who have the ability and will to question or expose or question the fraud. Competence becomes dangerous and merit becomes a danger to the ongoing fraud. The Administration also follows this rule: throwing up incompetents like Michael Brown (the infamous Brownie of FEMA); mouth-pieces willing to say whatever the fraudsters want like Alberto Gonzales, Harriet Myers, and Condoleeza Rice; persons with obvious conflicts of interest like extractive industry lobbyist J. Stephen Grilles being put at the head of the Interior Department, and; completely inexperienced children placed in command of the reconstruction effort in Iraq solely because of their connection to a prominent ideological think tank. None of this is designed to do the business of government. It is solely to enable further control fraud on behalf of the conspiracy and their allies, and to prevent uncomfortable questions.
Finally, and most importantly, the control fraud is designed to misappropriate to the greatest extend practicable the profits and assets of the target institution to the benefit of the conspirators. Detecting this aspect of a control fraud in a context of government is less linear than in a for-profit corporation.
Obviously, to stay in power in a democratic republic the control fraud has to have a much broader group of supporters than does even the largest corporate control fraud. Thus the control fraud has to provide economic and affective benefits to a substantial number of people. But some folks are more equal than others. Bush probably was not really joking at all when he told a room full of some of the world's wealthiest people that they were his base. Through unequal tax policies, changes in regulatory laws, changes in bankruptcy, and limits on industry liability, and many other subtle and not-so-subtle means, Bush has managed to significantly alter the division of the economic pie to favor the wealthiest among us; and the wealthy have certainly returned the favor by working and advocating and, most importantly, extolling his legitimacy and promoting the idea that he is a legitimate President, not a control fraud.
But where Bush really comes through is for that small number of companies who's competitive advantage is a close connection to core members of the Bush control fraud conspiracy and an ability to win and keep government contract, especially in defense-related missions. Bush was able to turn on a nearly unlimited spigot of money when he invaded Iraq without cause. Some $660 billion dollars have already been spent on that war and more is sure to come. A growing slice of that bonanza is landing in the pockets of such companies as Haliburton, Bechtel, Fluor, Blackwater, the Carlyle Group, and others who now gorge at this fabulous outpouring of patronage. Meanwhile, the deficit grows, the dollar sinks, our national interest is permanently damaged, our military is broken, our trade imbalance rages out of control - but none of that matters to the Bush control fraud. The business of the state is not the business of the Bush control fraud: this massive, back-breaking patronage which our grandchildren will be paying off, is the entire purpose of the control fraud.
Why did Bush take us to war on false premises and lies? Not because he believed those lies. Not because he wanted revenge. Not because he had an ideological or religious mission to make the Middle East safe for democracy. He did it for only one reason: the wealth and power that invasion would bring his co-conspirators.
The whole point of the Bush Presidency was to commit control fraud, he never intended to govern as we understand the concept. He had no mandate. No program. No goals as President. The government was turned over to a control fraud following the election of 2000 by the Supreme Court, and the goal of that criminal enterprise was to bleed as much out of the massive coffers and credit of the Federal Government of the United States as possible for their friends, allies, and himself. Geroge W. Bush’s goal as President was what the Proconsuls of the Roman Empire aspired to in the provinces they were awarded: to squeeze out every drop of profit possible.
The best way to do that in modern America was a war - preferably a long, sustained, grinding, quagmire of a war against a despised enemy that no one could doubt was hostile to us. A war in which unlimited amounts of cash could be dumped into single source and no bid contracts with little or no oversight and even worse accounting (remember that over $8 billion is said to have just disappeared in Iraq due to poor accounting and cash controls). If you are going to take over a government as a control fraud in a democratic society with an advanced legal system and a professional bureaucracy, there is really no other way to convert sufficient amounts of wealth to private use without being detected or questioned. Better to do the deed under cover of a wild and woolly foreign war, where the rules are made by the guy with the most guns, and massive incompetence and fraud can be passed off as the inevitable result of the fogs and fortunes of war.
So the question of why we are in Iraq, and why Bush is so loathe to leave it, even though it is an obvious failure, must be viewed in the context of the Bush Administration as a control fraud to make any sense. The longer Bush can keep America in Iraq, the longer the goal of the Bush control fraud is fulfilled. This isn't about what is best for America. This isn't about fighting terrorism. It isn't even about the Iraqis. It is about feeding the control fraud Bush created upon his invasion of Iraq. Bush will never withdraw, and the next GOP President (and possibly even a Democratic President) will continue the control fraud under the same terms unless stopped.
Only the forceful and uncompromising action of the Congress and the people of the United States can force an end to this criminal enterprise. Luckily for us, the American government cannot collapse, but there can be no doubt, the Bush control fraud will leave a figurative smoking crater of debt that makes Enron's look like a pothole. Unfortunately for all of us, unlike the financial lives left in ruins by Enron's collapse, Bush's control fraud has cost hundreds of thousands of Iraqis and Americans their actual lives and those of their loved ones. For that crime, Bush and his conspiracy should pay the ultimate price.
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