David Rohde http://blogs.reuters.com/david-rohde Thu, 10 Nov 2016 20:48:33 +0000 en-US hourly 1 http://wordpress.org/?v=4.2.5 Empty American promises and the lives they can cost http://blogs.reuters.com/david-rohde/2016/03/25/empty-american-promises-and-the-lives-they-can-cost/ http://blogs.reuters.com/david-rohde/2016/03/25/empty-american-promises-and-the-lives-they-can-cost/#comments Fri, 25 Mar 2016 07:52:39 +0000 http://blogs.reuters.com/david-rohde/?p=3446 Stacks of unidentified corpses line the walls of an underground shelter at a Bosnian morgue in Tuzla March 28, 1997. The body bags contain victims found in mass graves and in wooded areas after the 1995 Srebrenica massacre. REUTERS

Stacks of unidentified corpses line the walls of an underground shelter at a Bosnian morgue in Tuzla March 28, 1997. The body bags contain victims found in mass graves and in wooded areas after the 1995 Srebrenica massacre. REUTERS

On Thursday, a 65-year-old man with a name that Americans struggle to pronounce was convicted of committing genocide 20 years ago in Bosnia. With bombs exploding in Brussels and a vituperative U.S. presidential campaign in full force, the court ruling might seems obscure.

But the story of Radovan Karadzic, a psychiatrist turned genocidal mini-state leader, provides lessons for Barack Obama, Hillary Clinton and Donald Trump. The moral of Karadzic’s story is simple for current and future American presidents: beware the empty threat.

Karadzic, with his long mane of hair and hawkish nose, was the public face and political leader of a hardline group of Bosnian Serbs following the collapse of Yugoslavia in the early 1990s. When I covered him during the final year of the war in Bosnia, he was known for his ability to evade questions.

When a shell landed in the middle of a teeming market in Sarajevo, killing scores of Bosnian Muslims, Karadzic insisted that the Bosnian Muslims had fired it themselves to garner sympathy. When Bosnian Serb snipers fired on unarmed women and children, he denied it as well.

“Children were sniped at while playing in front of their houses, walking with their parents or walking home from school,” Judge O-Gon Kwon said on Thursday, while reading the verdict of the International Criminal Tribunal for the former Yugoslavia against Karadzic.

The strange thing about covering Karadzic during the war was seeing him change. With each empty declaration from President Bill Clinton that Karadzic would be held accountable, the Bosnian Serbs seemed to grow more confident and defiant.

Over the course of the war, the Bosnian Serbs “ethnically cleansed” – or expelled – hundreds of thousands of Muslims from their territory. They took UN peacekeepers hostage. And in July 1995, they took the town of Srebrenica and executed every Bosnian Muslim man and boy they captured. All told, 8,000 perished.

Clinton’s unfulfilled threats, it seemed to me and other reporters at the time, had emboldened Karadzic and the mini-state’s military leader, General Ratko Mladic. And Srebrenica itself was, tragically, the physical embodiment of false promise.

With the support of the United States and its European allies, the United Nations had declared Srebrenica a “Safe Area” and stripped its Bosnian Muslims defenders of artillery and heavy weapons. But instead of posting several thousand, heavily armed UN peacekeepers to protect the town, several hundred Canadian and then Dutch peacekeepers arrived with white vehicles, blue helmets and a few machine guns.

When the Serbs attacked, Dutch defenses quickly collapsed and promised NATO air strikes never arrived. Karadzic and Mladic were left to do as they pleased.

“The accused was the sole person within the RS [Bosnian Serb government] with the power to intervene to prevent the Bosnian Muslim males from being killed,” Judge Kwon said as he declared Karadzic guilty of genocide in Srebrenica.

Twenty years after the mass killings, threats from current and future U.S. presidents seem to be equally unpersuasive. In a recent profile in the Atlantic, Obama boasted about the fact that he had not carried out his vow to bomb the forces of Bashar al-Assad if the Syrian leader used chemical weapons against his own people.

“I’m very proud,” Obama told the magazine.

Hillary Clinton, meanwhile, is promising American voters that she will unleash a merciless, multi-year onslaught against ISIS — without deploying large numbers of American ground troops.

“We are in it for the long haul and we will stand taller and stronger than they could possibly imagine,” Clinton vowed in a campaign speech in December.

And Donald Trump is threatening everyone. He vows to place tariffs on every good sold from China – as well as air conditioners that U.S. company Carrier manufactures in Mexico.

“We’re going to tax you,” Trump vowed in a presidential debate last month. “So stay where you are [in Mexico] or build in the United States.”

The lesson for U.S. presidents is that threats can come back to haunt. Clinton responded far more quickly to Serb attacks in Kosovo in 1999, but has said that Srebrenica was one of the greatest regrets of his presidency. It is a distant second with the genocide in Rwanda, where as many as one million perished after the UN failed to protect civilians there.

In hindsight, it is arguably better for American leaders to say nothing when they have no intention of taking actionIssuing hollow threats emboldens extremists. It does not cow them.

And most tragically, as the survivors of Srebrenica found out, empty threats from a U.S. president also victimize the innocent people who believe them. Today, thousands of women from Srebrenica are growing up without fathers, brothers and sons. Their crime? Believing the word of an American president.

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Special Report: Pentagon thwarts Obama’s effort to close Guantanamo http://blogs.reuters.com/david-rohde/2015/12/29/special-report-pentagon-thwarts-obamas-effort-to-close-guantanamo/ http://blogs.reuters.com/david-rohde/2015/12/29/special-report-pentagon-thwarts-obamas-effort-to-close-guantanamo/#comments Tue, 29 Dec 2015 07:14:07 +0000 http://blogs.reuters.com/david-rohde/?p=3434 Detainees are seen inside the Camp 6 detention facility at Guantanamo Bay U.S. Naval Base in Cuba in this May 31, 2009 file photo. REUTERS/Brennan Linsley/Pool/Files

Detainees are seen inside the Camp 6 detention facility at Guantanamo Bay U.S. Naval Base in Cuba in this May 31, 2009 file photo. REUTERS/Brennan Linsley/Pool/Files

 

 

 

 

 

 

 

 

 

WASHINGTON |

In September, U.S. State Department officials invited a foreign delegation to the Guantanamo Bay detention center to persuade the group to take detainee Tariq Ba Odah to their country. If they succeeded, the transfer would mark a small step toward realizing President Barack Obama’s goal of closing the prison before he leaves office.

The foreign officials told the administration they would first need to review Ba Odah’s medical records, according to U.S. officials with knowledge of the episode. The Yemeni has been on a hunger strike for seven years, dropping to 74 pounds from 148, and the foreign officials wanted to make sure they could care for him.

For the next six weeks, Pentagon officials declined to release the records, citing patient privacy concerns, according to the U.S. officials. The delegation, from a country administration officials declined to identify, canceled its visit. After the administration promised to deliver the records, the delegation traveled to Guantanamo and appeared set to take the prisoner off U.S. hands, the officials said. The Pentagon again withheld Ba Odah’s full medical file.

Today, nearly 14 years since he was placed in the prison and five years since he was cleared for release by U.S. military, intelligence and diplomatic officials, Ba Odah remains in Guantanamo.

In interviews with multiple current and former administration officials involved in the effort to close Guantanamo, Reuters found that the struggle over Ba Odah’s medical records was part of a pattern. Since Obama took office in 2009, these people said, Pentagon officials have been throwing up bureaucratic obstacles to thwart the president’s plan to close Guantanamo.

Negotiating prisoner releases with the Pentagon was like “punching a pillow,” said James Dobbins, the State Department special representative to Afghanistan and Pakistan from 2013 to 2014. Defense Department officials “would come to a meeting, they would not make a counter-argument,” he said. “And then nothing would happen.”

Pentagon delays, he said, resulted in four Afghan detainees spending an additional four years in Guantanamo after being approved for transfer.

In other cases, the transfers of six prisoners to Uruguay, five to Kazakhstan, one to Mauritania and one to Britain were delayed for months or years by Pentagon resistance or inaction, officials said.

To slow prisoner transfers, Pentagon officials have refused to provide photographs, complete medical records and other basic documentation to foreign governments willing to take detainees, administration officials said. They have made it increasingly difficult for foreign delegations to visit Guantanamo, limited the time foreign officials can interview detainees and barred delegations from spending the night at Guantanamo.

Partly as a result of the Pentagon’s maneuvers, it is increasingly doubtful that Obama will fulfill a pledge he made in the 2008 presidential election: to close the detention center at the U.S. Naval Base at Guantanamo Bay, Cuba. Obama criticized President George W. Bush for having set up the prison for foreigners seized in the “War on Terror” after the Sept. 11, 2001, attacks on the U.S., and then keeping them there for years without trial.

When Obama took office, the prison held 242 detainees, down from a peak of about 680 in 2003. Today, with little more than a year remaining in his presidency, it still holds 107 detainees.

Pentagon officials denied any intentional effort to slow transfers.

“No foreign government or U.S. department has ever notified the Department of Defense that transfer negotiations collapsed due to a lack of information or access provided by the Department of Defense,” said Pentagon spokesman Gary Ross, a U.S. Navy commander.

Myles Caggins, a White House spokesman, denied discord with the Pentagon. “We’re all committed to the same goal: safely and responsibly closing the detention facility,” Caggins said.

Former Secretary of Defense Chuck Hagel said in an interview that it was natural for the Pentagon to be cautious on transfers that could result in detainees rejoining the fight against U.S forces. “Look at where most of the casualties have come from — it’s the military,” Hagel said.

The Pentagon’s slow pace in approving transfers was a factor in President Obama’s decision to remove Hagel in February, former administration officials said. And in September, amid continuing Pentagon delays, President Obama upbraided Defense Secretary Ashton Carter in a one-on-one meeting, according to administration officials briefed on the encounter.

Since then, the Pentagon has been more cooperative. Administration officials said they expect to begin transferring at least 17 detainees to foreign countries in January.

Military officials, however, continue to make transfers more difficult and protracted than necessary, administration officials said. In particular, they cite General John F. Kelly, in charge of the U.S. Southern Command, which includes Guantanamo. They said that Kelly, whose son was killed fighting the Taliban in Afghanistan, opposes the president’s policy of closing Guantanamo, and that he and his command have created obstacles for visiting delegations.

Kelly denied that he or his command has limited delegation visits. “Our staff works closely with the members of Naval Station Guantanamo Bay and Joint Task Force Guantanamo to support the visits of all foreign delegations,” he said in a written statement, “and have never refused or curtailed one of these visits.”

Even if Obama manages to transfer all low-risk detainees to other countries, closing Guantanamo won’t be easy. Several dozen prisoners considered too dangerous to release would have to be imprisoned in the U.S., a step Republicans in Congress adamantly oppose because, they say, it would endanger American lives.

In a press conference earlier this month, Obama said he still hoped to strike a deal with Congress. He added, however, that he reserved the right to move the prisoners to the U.S. under his executive authority.

The Bush administration faced no political opposition on transfers and was able to move 532 detainees out of Guantanamo over six years, 35 percent of whom returned to the fight, according to U.S. intelligence estimates. The Obama administration has been able to transfer 131 detainees over seven years, 10 percent of whom have returned to the fight.

PRIORITY FROM THE START

Two days after Obama was sworn in as president in 2009, he signed an executive order mandating an immediate review of all 242 detainees then held in Guantanamo and requiring the closure of the detention center. A year later, a task force that included the Defense Department and U.S. intelligence agencies unanimously concluded that 156 detainees were low enough security threats to be transferred to foreign countries.

Members of Congress, meanwhile, seized on reports that transferred detainees had returned to the fight to demand that Guantanamo remain open.

Among those former detainees was Abdul Qayum Zakir, also known as “Mullah Zakir,” who hid his identity from Guantanamo interrogators and became the Taliban’s top military commander after his release. He was responsible for hundreds of American deaths after returning to Afghanistan, according to David Sedney, who served as deputy assistant secretary of defense for Afghanistan, Pakistan and Central Asia from 2009 to 2013.

In late 2010, Congress passed a law requiring the secretary of defense to personally certify to Congress that a released detainee “cannot engage or re-engage in any terrorist activity.”

Detainee transfers out of Guantanamo slowed to a trickle. In 2011 and 2012, only a handful were released under an exception to the new law that allowed court-ordered releases to bypass the newly legislated requirements. By January 2013, the outlook was so bleak that the State Department shuttered the office tasked with handling the closure of Guantanamo.

Michael Williams, the former State Department deputy envoy for closing Guantanamo, said that during that period, William Lietzau, deputy assistant secretary of defense for detainee policy, “was not supportive of a Guantanamo closure policy” and an obstacle to transfers inside the Pentagon.

Lietzau, who left his job in 2013, denied obstructing transfers. He said in many cases, delays resulted from his concerns about the ability of foreign countries to monitor transferred detainees. “You have guys who are cleared for transfer, but there is no way to get the assurances, so what do you do then?” Lietzau said.

In May 2013, President Obama unveiled a new push to close the prison. He appointed two new envoys, one at the Pentagon and one at the State Department, to oversee the prison’s closure. One of their top priorities was to transfer as many prisoners as possible to countries willing to take them.

The State Department then proposed that four low-risk Afghan detainees be transferred back to Afghanistan. The four men — Khi Ali Gul, Shawali Khan, Abdul Ghani and Mohammed Zahir — then ranged in age from their early 40s to their early 60s. All had been at Guantanamo for seven years but never formally charged with a crime, and all had been cleared for release by the interagency review board years earlier.

In the case of Gul, State Department officials argued that he was almost certainly innocent. “The consensus was that he had never had any contact with the insurgency or al Qaeda,” said Dobbins. “I can say with confidence we have captured, detained and released thousands of people who have done worse things than these four.”

U.S. officials had offered in secret peace talks with the Taliban in 2012 to swap the four Afghans for captured American soldier Bowe Bergdahl. Taliban negotiators said they didn’t want the four men because the four weren’t senior Taliban members.

Afterwards, State Department officials began referring to them as the “JV four” or “Junior Varsity four,” for their seeming lack of importance to Taliban fighters.

When the State Department added the four Afghans to a list of detainees prioritized for transfer in the summer of 2013, Defense Department officials resisted. At a meeting at the Pentagon, a mid-level Defense Department official said transferring the four “might be the president’s priority, but it’s not the Pentagon’s priority or the priority of the people in this building,” according to current and former administration officials present at the meeting.

With the White House’s backing, the State Department moved forward. By spring 2014, the four Afghans were about to be sent home. Then, General Joseph Dunford, commander of U.S. forces in Afghanistan at the time, sent a memo to the State Department warning that the release of the four detainees would endanger his troops in Afghanistan.

When State Department officials read Dunford’s memo, they realized he was citing intelligence about a different group of Afghans who were more senior Taliban. State Department officials pointed out the error, but it was too late. The transfer was halted.

Sedney, the former deputy defense secretary, said that there was broad resistance within the Pentagon to releasing the four Afghans because between 30 and 50 percent of the roughly 200 Afghan detainees repatriated by the Bush administration had rejoined the fight. The government of Afghan President Hamid Karzai often freed detainees as soon as they returned home, Sedney said.

The four men were finally flown back to Afghanistan on Dec. 20, 2014 — nearly five years after they were cleared for release. Since then, none have returned to the fight, according to U.S. intelligence officials.

Gul declined a request for an interview. Zahir, now in his early 60s and one of the three Afghans considered low-level Taliban, works as a guard at a school in Kabul. He said that the primary evidence against him — Taliban documents found in his home — were from his work as an administrator in the Intelligence Ministry when the Taliban ruled Afghanistan.

He said that when American soldiers flew him to Afghanistan for release, one spoke with him briefly before handing him over to Afghan officials. “The American soldier tapped on my shoulder and said, ‘I am sorry,’ ” Zahir said, adding: “I don’t know why they kept me there for 13 long years without proving my guilt or crime.”

VIDEO GAMES

Pentagon obstacles delayed and nearly derailed other transfers. In early 2014, Kazakhstan President Nursultan Nazarbayev offered to take as many as eight Guantanamo detainees. The Central Asian leader, eager for a counterweight to an increasingly assertive Russia, hoped to strengthen his relationship with Washington.

Kazakhstani officials asked to send a delegation to Guantanamo for three days to videotape interviews with prisoners before deciding which ones to accept. Kazakhstani psychologists and intelligence experts wanted to study the interviews for signs of deception.

According to multiple current and former administration officials, Pentagon officials forbade the delegation to videotape the interviews, nixed plans for a multiday visit, ordered detainee interviews shortened, and put new restrictive classifications on documents requested by the Kazakhstanis.

Senior commanders at Joint Task Force Guantanamo — the military unit responsible for administering the detention center — said the visiting Kazakhstanis would be allowed one hour with each prisoner and one day at the detention center.

Allowing taped interviews had been common practice with foreign delegations. This time, the Pentagon banned them on the grounds that the practice would violate the Geneva Conventions’ prohibition on using prisoners of war for “public curiosity.”

After two weeks of failed talks, the Kazakhstanis said they were canceling the visit and wouldn’t take any detainees. An alarmed White House intervened, ordering the Pentagon to compromise, according to current and former administration officials.

The Kazakhstanis would be allowed two hours with each detainee, the Pentagon said, and would be allowed to stay one night at Guantanamo. They said the Kazakhstanis would not be allowed to bring recording equipment with them. Instead, the U.S. military agreed to videotape the interviews and provide the Kazakhstanis with copies of the tapes. The Kazakhstanis visited the prison.

Six weeks later, the Kazakhstanis still hadn’t received the videos. “They were calling us every couple of days, saying, ‘Where are the videos?’ ” said an administration official.

The White House ordered the Pentagon to hand over the videos. The Pentagon complied, and sent the videos to the State Department, but with a new classified designation on it, “Secret/NOFORN,” which means it is illegal to share the material with a foreign country. Administration officials complained again. Days later, the video came back with a more lenient classification. The video was sent to the Kazakhstanis.

Two days later, the Kazakhstanis called Washington. The videos had been processed to look as if it had been shot through dimpled glass. For the Kazakhstanis, who wanted to scrutinize detainees’ body language and facial expressions, the videos were useless.

For a third time, White House officials intervened to force the Pentagon to compromise. Finally, in December, nearly a year after the process began, the five prisoners were transferred to Kazakhstan.

In private meetings, some Pentagon officials have been dismissive of Obama’s policy. After the president publicly pledged early this year to respond to a five-year-old British request for the repatriation of British detainee Shaker Aamer, a senior Pentagon official mocked that vow at an interagency meeting on transfers.

“We will prioritize him — right at the back of the line where he belongs,” the Pentagon official said, according to an administration official present at the meeting. A senior NSC official snapped back: “That’s not what the president meant.” Aamer was transferred to Britain in October.

In autumn this year, a foreign government was invited to Guantanamo to interview eight detainees for possible transfer — a process that can take several days. General Kelly’s command, which oversees Guantanamo, instituted a new policy, suddenly banning the delegation from spending the night at the detention center, according to administration officials. (Officials declined to identify countries involved in transfer negotiations out of concern that doing so would jeopardize the process.)

As a result, the delegation was forced to commute 90 minutes by plane each morning and afternoon from Miami, adding tens of thousands of dollars in government plane bills to U.S. taxpayers. In December, the country decided to take no detainees.

During another foreign delegation’s visit to Guantanamo in autumn, Kelly’s command further cut interview times with detainees, to as little as 45 minutes each, making it harder for foreign officials to assess potential transfers.

Ba Odah, the hunger-striking detainee, is now in his late 30s. Multiple members of the National Security Council have intervened to demand that the Pentagon turn over his complete medical file. The Pentagon has held firm, citing patient privacy concerns.

Ba Odah’s lawyer, Omar Farah, said the Pentagon’s justification is baseless.

“Invoking privacy concerns is a shameless, transparent excuse to mask [Pentagon] intransigence,” Farah said. “Mr. Ba Odah has provided his full, informed consent to the release of his medical records.”

(Edited by John Blanton)

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Special Report: Stock buybacks enrich the bosses even when business sags http://blogs.reuters.com/david-rohde/2015/12/10/special-report-stock-buybacks-enrich-the-bosses-even-when-business-sags/ http://blogs.reuters.com/david-rohde/2015/12/10/special-report-stock-buybacks-enrich-the-bosses-even-when-business-sags/#comments Thu, 10 Dec 2015 06:55:14 +0000 http://blogs.reuters.com/david-rohde/?p=3426 REUTERS/Eric Thayer

REUTERS/Eric Thayer

The Cannibalized Company: 

Part 2: Most major U.S. companies tie part of executive pay to earnings per share and other metrics to align the interests of management and shareholders. The trouble is, these numbers can be – and often are – influenced by buybacks and other maneuvers that have little to do with operating performance.

By Karen Brettell, David Gaffen and David Rohde

NEW YORK – When health insurer Humana Inc reported worse-than-expected quarterly earnings in late 2014 – including a 21 percent drop in net income – it softened the blow by immediately telling investors it would make a $500 million share repurchase.

In addition to soothing shareholders, the surprise buyback benefited the company’s senior executives. It added around two cents to the company’s annual earnings per share, allowing Humana to surpass its $7.50 EPS target by a single cent and unlocking higher pay for top managers under terms of the company’s compensation agreement.

Thanks to Humana hitting that target, Chief Executive Officer Bruce Broussard earned a $1.68 million bonus for 2014.

Most publicly traded U.S. companies reward top managers for hitting performance targets, meant to tie the interests of managers and shareholders together. At many big companies, those interests are deemed to be best aligned by linking executive performance to earnings per share, along with measures derived from the company’s stock price.

But these metrics may not be solely a reflection of a company’s operating performance. They can be, and often are, influenced through stock repurchases. In addition to cutting the number of a company’s shares outstanding, and thus lifting EPS, buybacks also increase demand for the shares, usually providing a lift to the share price, which affects other performance markers.

As corporate America engages in an unprecedented buyback binge, soaring CEO pay tied to short-term performance measures like EPS is prompting criticism that executives are using stock repurchases to enrich themselves at the expense of long-term corporate health, capital investment and employment.

“We’ve accepted a definition of performance that is narrow and quite possibly inappropriate,” said Rosanna Landis Weaver, program manager of the executive compensation initiative at As You Sow, a Washington, D.C., nonprofit that promotes corporate responsibility. Pay for performance as it is often structured creates “very troublesome, problematic incentives that can potentially drive very short-term thinking.”

A Reuters analysis of the companies in the Standard & Poor’s 500 Index found that 255 of those companies reward executives in part by using EPS, while another 28 use other per-share metrics that can be influenced by share buybacks.

In addition, 303 also use total shareholder return, essentially a company’s share price appreciation plus dividends, and 169 companies use both EPS and total shareholder return to help determine pay.

EPS and share-price metrics underpin much of the compensation of some of the highest-paid CEOs, including those at Walt Disney Co, Viacom Inc, 21st Century Fox Inc, Target Corp and Cisco Systems Inc.

Fewer than 20 of the S&P 500 companies disclose in their proxies whether they exclude the impact of buybacks on per-share metrics that determine executive pay.

Humana would not say whether it adjusted targets to account for its buyback last year. In a statement to Reuters, the company said it sets annual per-share targets for executives that take into account the company’s “capital allocation strategy,” which includes buybacks, dividends, acquisitions and investments.

Experts said Humana would not have reached the target without the $500 million buyback. The company told analysts at the time of the repurchase announcement in November 2014 that it expected to report annual earnings per share of between $7.40 and $7.60 for the full year.

“Given the magnitude of the repurchase, the EPS would have been below $7.50 had it not been for the repurchase,” said Heitor Almeida, a professor of finance with the College of Business at the University of Illinois in Champaign.

As reported in the first article in this series, share buybacks by U.S. non-financial companies reached a record $520 billion in the most recent reporting year. A Reuters analysis of 3,300 non-financial companies found that together, buybacks and dividends have surpassed total capital expenditures and are more than double research and development spending.

Companies buy back their shares for various reasons. They do it when they believe their shares are undervalued, or to make use of cash or cheap debt financing when business conditions don’t justify capital or R&D spending. They also do it to meet the expectations of increasingly demanding investors.

Lately, the sheer volume of buybacks has prompted complaints among academics, politicians and investors that massive stock repurchases are stifling innovation and hurting U.S. competitiveness — and contributing to widening income inequality by rewarding executives with ever higher pay, often divorced from a company’s underlying performance.

“There’s been an over-focus on buybacks and raising EPS to hit share option targets, and we know that those are concentrated in the hands of the few, and that the few is in the top 1 percent,” said James Montier, a member of the asset allocation team at global investment firm GMO in London, which manages more than $100 billion in assets.

The introduction of performance targets has been a driver of surging executive pay, helping to widen the gap between the richest in America and the rest of the country. Median CEO pay among companies in the S&P 500 increased to a record $10.3 million last year, up from $8.6 million in 2010, according to data firm Equilar.

At those levels, CEOs last year were paid 303 times what workers in their industries earned, compared with a ratio of 59 times in 1989, according to the Economic Policy Institute, a Washington-based nonprofit.

SALARY AND A LOT MORE

Today, the bulk of CEO compensation comes from cash and stock awards, much of it tied to performance metrics. Last year, base salary accounted for just 8 percent of CEO pay for S&P 500 companies, while cash and stock incentives made up more than 45 percent, according to proxy advisory firm Institutional Shareholder Services.

Thomson Reuters Corp, owner of Reuters News, used EPS to determine half of the performance awards in the three-year pay cycle ended in 2014 for CEO Jim Smith and other executives. Smith last year took home $6.6 million in compensation. The company’s three-year performance awards going forward are based on both EPS and free cash flow per share. A company spokesman said Thomson Reuters does not adjust for the impact of stock buybacks on those metrics.

Share repurchases can make the difference in meeting preset targets, according to a Reuters review of corporate proxies.

At Xerox Corp, revenue, net income and spending on research and development all declined last year. But the printer and copier maker’s EPS target of $1.12 was unchanged from the prior year, and managers hit it exactly after $1.1 billion in share repurchases.

PRINTING MONEY: Buybacks helped Xerox Corp CEO Ursula Burns receive a bonus of $1.98 million last year, even though revenue, net income and research spending declined. REUTERS/Eduardo Munoz/Files

SMART PLAY: Video game company Activision Blizzard’s net income dropped last year, while CEO Robert Kotick received about $22 million in performance pay after the company hit targets for total shareholder return and EPS. REUTERS/Danny Moloshok/Files

Half of CEO Ursula Burns’s annual bonus target was predicated on hitting that EPS level; ultimately, she received a bonus of $1.98 million out of a possible $2.2 million. EPS is also a major determinant of even bigger bonuses for a three-year performance cycle ending this year.

Xerox repurchased $1.35 billion of its shares in the first three quarters of this year. The company declined to comment. Its proxy statement does not indicate whether it adjusts targets to account for buybacks.

Managers at information technology company EMC Corp hit their EPS target for 2014 of $1.90 with the help of $3.7 billion in share repurchases. Based on the share count before the buybacks, EPS last year would have been only $1.81, little changed from $1.80 a year earlier, according to a Reuters calculation.

The EPS target accounted for half of CEO Joseph Tucci’s annual $1.01 million bonus. It also is used to determine 45 percent of bonus share awards for the company’s future three-year targets.

EMC declined to comment. Its proxy statement does not address whether it makes adjustments to account for buybacks. It has bought back $3.11 billion in shares so far this year.

Buybacks can boost a company’s share price to benefit executives whose shares vest over a period of years. Activision Blizzard Inc, purveyor of “Guitar Hero,” “Call of Duty” and other well-known video games, signed Chief Executive Robert Kotick to a contract in 2012 that included $56 million in share awards that vest over time, depending in part on the share price and EPS.

Last year, Kotick ended up getting about $22 million in performance-based cash and stock awards, about the same as the prior year, even as net income dropped 17 percent. How? The stock rose substantially, meeting goals for total shareholder return and increasing the value of share awards.

Total shareholder return was helped by an $8.2 billion repurchase made in late 2013 – when the company and a group of investors led by Kotick and Activision Chairman Brian Kelly bought out a stake held by then-majority shareholder Vivendi. The company said the deal allowed Activision to operate with more flexibility.

The shares rose 33 percent from the date of the buyback announcement in July 2013 through the end of 2014. The share price has continued to rise this year, making the awards even more valuable.

Activision declined to comment.

In 1992, Congress changed the tax code to curb rising executive pay and encourage performance-based compensation. It didn’t work. Instead, the shift is widely blamed for soaring executive pay and a heavier emphasis on short-term results.

Companies started tying performance pay to “short-term metrics, and suddenly all the things we don’t want to happen start happening,” said Lynn Stout, a professor of corporate and business law at Cornell Law School in Ithaca, New York. “Despite 20 years of trying, we have still failed to come up with an objective performance metric that can’t be gamed.”

Shareholder expectations have changed, too. The individuals and other smaller, mostly passive investors who dominated equity markets during the postwar decades have given way to large institutional investors. These institutions tend to want higher returns, sooner, than their predecessors. Consider that the average time investors held a particular share has fallen from around eight years in 1960 to a year and a half now, according to New York Stock Exchange data.

“TOO EASY TO MANIPULATE”

Companies like to use EPS as a performance metric because it is the primary focus of financial analysts when assessing the value of a stock and of investors when evaluating their return on investment.

But “it is not an appropriate target, it’s too easy to manipulate,” said Almeida, the University of Illinois finance professor.

In 2011, Amgen Inc CEO Kevin Sharer oversaw $8.32 billion of buybacks, by far the largest in the pharmaceutical maker’s history. More than $5 billion of those repurchases came in the fourth quarter of the year.

Soon after, Amgen reported that net income was lower than it had been in the three preceding years. At the same time, the buybacks lifted EPS far above the target level that determined 30 percent of Sharer’s bonus, doubling the amount he earned for that portion of his $4.88 million annual bonus. Without the buyouts, EPS would have fallen below the target level.

Sharer left the company in May 2012 and is now on the faculty of Harvard Business School. He did not respond to requests for comment.

The Amgen board’s compensation committee removed EPS as a performance metric the next year. It opted, instead, to begin using net income, saying in a 2012 proxy statement that doing so would “align compensation with a measure that more directly correlates with the underlying performance of our operations.”

Members of Amgen’s 2011 compensation committee declined to comment.

Some companies, including software developer Citrix Systems Inc and kidney dialysis company DaVita Inc, say they avoid EPS in pay calculations because it is too vulnerable to manipulation.

Most companies that use per-share metrics for executive awards, however, say little about whether they adjust results to account for buybacks. A select few, including Johnson & Johnson, FedEx, Time Warner Inc and IBM, do disclose that they strip out the potential effect of buybacks on performance metrics.

FedEx, in its most recent filing, said it excluded the effect of buybacks because the positive effect on EPS “did not reflect core business performance.” Time Warner Inc said it adjusts for buybacks “so that payouts were not advantaged” if the media company repurchased more shares than it initially anticipated when setting performance goals.

Steve Pakela, managing partner at Pay Governance LLC in Pittsburgh, Pennsylvania, which advises more than 40 S&P 500 companies on executive pay, said some directors “believe you shouldn’t strip out the effect” because share buybacks may be the best use of capital.

In addition to EPS, there is total shareholder return, which typically comprises a company’s share price appreciation plus dividends over time. Total return, often used to compare performance among peer companies, has also become a popular performance measure for executive pay.

By providing a lift to a stock’s price, buybacks can increase total shareholder return to target levels, resulting in more stock awards for executives. And of course, the higher stock price lifts the value of company stock they already own.

“It can goose the price at time when the high price means they earn performance shares … even if the stock price later goes back down, they got their shares,” said Michael Dorff, a law professor at the Southwestern Law School in Los Angeles.

Exxon Corp, the largest repurchaser of shares over the past decade, has rejected shareholder proposals that it add three-year targets based on shareholder return to its compensation program. In its most recent proxy, the energy company said doing so could increase risk-taking and encourage underinvestment to achieve short-term results.

The energy giant makes half of its annual executive bonus payments contingent on meeting longer-term EPS thresholds. Since 2005, the company has spent more than $200 billion on buybacks.

ADDITIONAL TWEAKS

While performance targets are specific, they aren’t necessarily fixed. Corporate boards often adjust them or how they are calculated in ways that lift executive pay.

Humana specifies EPS ranges to determine annual bonuses paid to its executives. For the past three years, buybacks of more than $500 million a year increased EPS. That wasn’t all, however. For each of those years, the board altered calculations in ways that also bumped EPS higher.

COVERED: Insurer Humana Inc. paid then-CEO Michael McCallister a bigger bonus than it otherwise would have after adjusting its EPS calculation. REUTERS/Shannon Stapleton/Files

SITTING PRETTY: Humana’s current CEO, Bruce Broussard (center right, in orange tie), received his target EPS-based bonus for 2014 after the company made an accelerated stock repurchase. REUTERS/Larry Downing/Files

For 2012, then-CEO Michael McCallister received a higher bonus than he otherwise would have — $1.63 million — after Humana’s board removed litigation expenses from its EPS calculation.

He was succeeded as CEO at the start of 2013 by Broussard. For that year, Broussard’s annual bonus was lifted into the maximum range, for a payment $2.44 million, after accounting for the cost of posting additional reserves against long-term insurance policies.

For 2014, Humana discounted from its EPS calculation losses from paying down some bonds, even as its overall debt levels increased. That adjustment brought the company just below its EPS target of $7.50.

The $500 million buyback the company announced late last year, part of its total $872 million in buybacks in 2014, was an accelerated share repurchase. In this sort of deal, a company buys all the stock from an investment bank in a single transaction. That allows it to book the reduction in shares outstanding immediately, and the bank then buys the shares on the open market over the ensuing months.

Humana’s accelerated share repurchase lifted EPS to $7.51, just above the target.

Susan Young, an associate professor of accounting and taxation at Fordham University in New York, said accelerated buybacks are commonly used to reach compensation targets. “I can’t think of a good reason for this form of repurchase,” she said, noting that the programs restrict a company’s flexibility to reduce or stop buybacks if shares become too expensive.

Roy Dunbar, a member of the Humana board’s compensation committee, declined to comment on Humana specifically. He said the benefit of accelerated repurchases is to, “in a controlled way, buy a significant slice of available shares early in the program,” before an announced buyback pushes up the share price and increases the cost to the company.

He also said an accelerated program allows shareholders to see immediate action, which is “important to signal a higher degree of confidence in something shareholders care a great deal about.”

In general, he said, “effective compensation committees are aware of impact of share repurchases on EPS, particularly when EPS is part of the equity compensation of management.”

In July, Aetna Inc announced that it would acquire Humana in a deal that at the time valued Humana at $37 billion. If Broussard leaves after the deal, he won’t go empty-handed.

Just before the Aetna deal was announced, Broussard’s compensation agreement was modified to accelerate equity awards and remove restrictions on exercising some stock options if he leaves or is terminated within two years of any acquisition, a regulatory filing shows.

At the end of last year, Broussard held unvested share awards valued at around $12.8 million, which have since increased in value as Humana’s share price has climbed 18 percent.

—————

The Cannibalized Company

By Karen Brettell, David Gaffen and David Rohde

Data: Karen Brettell and David Gaffen

Graphics: Christine Chan

Video: Kavitha Shastry

Edited by John Blanton

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Special Report: As stock buybacks reach historic levels, signs that corporate America is undermining itself http://blogs.reuters.com/david-rohde/2015/11/16/as-stock-buybacks-reach-historic-levels-signs-that-corporate-america-is-undermining-itself/ http://blogs.reuters.com/david-rohde/2015/11/16/as-stock-buybacks-reach-historic-levels-signs-that-corporate-america-is-undermining-itself/#comments Mon, 16 Nov 2015 21:38:43 +0000 http://blogs.reuters.com/david-rohde/?p=3414 COMPLEX LEGACY: During her tenure as Hewlett-Packard CEO, Carly Fiorina, now seeking the Republican presidential nomination, spent $14 billion on buybacks and nearly doubled the company’s registered patents, but had no big, innovative successes. REUTERS/Brian C. Frank

COMPLEX LEGACY: During her tenure as Hewlett-Packard CEO, Carly Fiorina, now seeking the Republican presidential nomination, spent $14 billion on buybacks and nearly doubled the company’s registered patents, but had no big, innovative successes. REUTERS/Brian C. Frank

The Cannibalized Company:

How the cult of shareholder value has reshaped corporate America

Part 1: Combined stock repurchases by U.S. public companies have reached record levels, a Reuters analysis finds, but as the recent history of such iconic businesses as Hewlett-Packard and IBM suggests, showering cash on shareholders may exact a long-term toll.

By Karen Brettell, David Gaffen and David Rohde

NEW YORK – When Carly Fiorina started at Hewlett-Packard Co in July 1999, one of her first acts as chief executive officer was to start buying back the company’s shares. By the time she was ousted in 2005, HP had snapped up $14 billion of its stock, more than its $12 billion in profits during that time.

Her successor, Mark Hurd, spent even more on buybacks during his five years in charge – $43 billion, compared to profits of $36 billion. Following him, Leo Apotheker bought back $10 billion in shares before his 11-month tenure ended in 2011.

The three CEOs, over the span of a dozen years, followed a strategy that has become the norm for many big companies during the past two decades: large stock buybacks to make use of cash, coupled with acquisitions to lift revenue.

All those buybacks put lots of money in the hands of shareholders. How well they served HP in the long term isn’t clear. HP hasn’t had a blockbuster product in years. It has been slow to make a mark in more profitable software and services businesses. In its core businesses, revenue and margins have been contracting.

HP’s troubles reflect rapid shifts in the global marketplace that pressure most large companies. But six years into the current expansion, a growing chorus of critics argues that the ability of HP and companies like it to respond to those shifts is being hindered by billions of dollars in buybacks. These financial maneuvers, they argue, cannibalize innovation, slow growth, worsen income inequality and harm U.S. competitiveness.

“HP was the poster child of an innovative enterprise that retained profits and reinvested in the productive capabilities of employees. Since 1999, however, it has been destroying itself by downsizing its labor force and distributing its profits to shareholders,” said William Lazonick, a professor of economics and director of the Center for Industrial Competitiveness at the University of Massachusetts-Lowell.

HP declined to comment for this article.

CEO Meg Whitman has just overseen one of the largest corporate breakups ever attempted, creating one company for the PC and printer business, called HP Inc, and one for the corporate hardware and services business, called HP Enterprise. Ultimately, HP’s turnaround efforts and restructuring will cost 80,000 jobs.

A Reuters analysis shows that many companies are barreling down the same road, spending on share repurchases at a far faster pace than they are investing in long-term growth through research and development and other forms of capital spending.

Almost 60 percent of the 3,297 publicly traded non-financial U.S. companies Reuters examined have bought back their shares since 2010. In fiscal 2014, spending on buybacks and dividends surpassed the companies’ combined net income for the first time outside of a recessionary period, and continued to climb for the 613 companies that have already reported for fiscal 2015.

In the most recent reporting year, share purchases reached a record $520 billion. Throw in the most recent year’s $365 billion in dividends, and the total amount returned to shareholders reaches $885 billion, more than the companies’ combined net income of $847 billion.

REUTERS

The analysis shows that spending on buybacks and dividends has surged relative to investment in the business. Among the 1,900 companies that have repurchased their shares since 2010, buybacks and dividends amounted to 113 percent of their capital spending, compared with 60 percent in 2000 and 38 percent in 1990.

And among the approximately 1,000 firms that buy back shares and report R&D spending, the proportion of net income spent on innovation has averaged less than 50 percent since 2009, increasing to 56 percent only in the most recent year as net income fell. It had been over 60 percent during the 1990s.

Share repurchases are part of what economists describe as the increasing “financialization” of the U.S. corporate sector, whereby investment in financial instruments increasingly crowds out other types of investment.

The phenomenon is the result of several converging forces: pressure from activist shareholders; executive compensation programs that tie pay to per-share earnings and share prices that buybacks can boost; increased global competition; and fear of making long-term bets on products and services that may not pay off.

It now pervades the thinking in the executive suites of some of the most legendary U.S. innovators.

IBM Corp has spent $125 billion on buybacks since 2005, and $32 billion on dividends, more than its $111 billion in capital spending and R&D during the same period. Pharmaceuticals maker Pfizer Inc spent $139 billion on buybacks and dividends in the past decade, compared to $82 billion on R&D and $18 billion in capital spending. 3M Co, creator of the Post-it Note and Scotch Tape, spent $48 billion on buybacks and dividends, compared to $16 billion on R&D and $14 billion in capital spending.

At Thomson Reuters Corp, owner of Reuters News, capital spending last year totaled $968 million, more than half of which went toward R&D, according to the company’s annual report. Buybacks and dividends for the year were more than double that figure, at a combined $2.05 billion. The company had 53,000 full-time employees last year, down from 60,500 in 2011. So far this year, capital spending is at $743 million, while buybacks and dividends total $2.02 billion.

“From a capital allocation perspective, we will always prioritize re-investments in our growth priorities over share buybacks,” said David Crundwell, senior vice president, corporate affairs, at Thomson Reuters.

“A SCARY SCENARIO”

In theory, buybacks add another way, on top of dividends, of sharing profits with shareholders. Because buybacks increase demand and reduce supply for a company’s shares, they tend to increase the share price, at least in the short-term, amplifying the positive effect. By decreasing the number of shares outstanding, they also increase earnings per share, even when total net income is flat.

Companies say buybacks are warranted when demand for their products and services isn’t enough to justify spending on R&D, or when they deem their shares to be undervalued, and therefore a better investment than new projects.

But if those buybacks come at the expense of innovation, short-term gains in shareholder wealth could harm long-term competitiveness. “The U.S. is behind on production of everything from flat-panel TVs to semiconductors and solar photovoltaic cells,” said Gary Pisano, a professor at Harvard Business School and author of “Producing Prosperity: Why America Needs a Manufacturing Renaissance.”

If U.S. companies continue to dole out their cash to investors, he said, economic investment “will go where it can be used well. If a company in Germany, India or Brazil has something to do with the money, it will flow there, as it should, and create growth and activity there, not in the United States. It’s a scary scenario.”

Even national security could be threatened as a shrinking defense budget has made it more difficult for contractors to justify research spending.

David Melcher, chief executive of the Aerospace Industries Association, said companies have turned to buybacks because of a dearth of new weapons programs and under pressure from Wall Street.

“Their investment community and the analysts that cover them are all saying, ‘We want a better return and we want EPS to grow,’ ” Melcher said. “That’s not a sustainable long-term strategy unless all these companies are going to go private. … Even the Wall Street analyst crowd at some point will say, ‘When are you going to grow?’ ”

Among the largest U.S. defense contractors, Northrop Grumman Corp has spent more than $12 billion on share repurchases since 2010, even as revenue has declined in each of the past five years. Lockheed Martin’s revenue has been flat since 2010; it has spent almost $12 billion on buybacks in that time.

In recent months, as the 2016 election campaigns have gathered momentum, concern about the long-term effects of the buyback craze has crept into public discourse and caught the attention of politicians.

Democrat Senators Elizabeth Warren and Tammy Baldwin have called on the Securities and Exchange Commission to investigate buybacks as a potential form of market manipulation.

Democratic presidential candidate Hillary Clinton has made shifting companies’ short-term focus to the long term a key plank of her campaign. In July, she proposed increasing taxes on short-term investments and more rigorous disclosure of share repurchases and executive compensation. These moves, she said, will foster longer-term investment, innovation and higher pay for workers.

Fiorina, now a Republican presidential contender running on her record as a corporate executive, declined multiple requests for comment.

INVESTOR FAVORITE: Mark Hurd spent even more on buybacks than his predecessor while he also improved operating results, but managers said his cost-cutting disrupted product development. REUTERS/Stephen Lam

Hurd, now a co-chief executive at Oracle Corp, told Reuters that repurchases were an appropriate use of capital. “HP had plenty of cash to buy back as much stock as it wanted to,” he said in an interview. Operating cash flow during his tenure was $62 billion, a third more than he spent on buybacks. “It’s a good use of capital,” he said.

HP’s revenue and share price rose while Hurd was in charge. He said decisions about the size of stock buybacks and investment in R&D, which totaled $17 billion during his tenure, were not related.

A spokesman for Apotheker, Hurd’s successor, declined to comment.

Until 1982, companies were largely prohibited from buying their own shares. That year, as part of President Ronald Reagan’s broad moves to deregulate financial markets, the SEC eased its rules to allow companies to buy their own shares on the open market.

At the time, free-market reformers argued that corporate America had become fat and wasteful after decades of postwar growth, with no checks on how managers spent cash – or didn’t.

“The boards you had were managers themselves and their friends,” said Charles Elson, finance professor and director of the John L. Weinberg Center for Corporate Governance at the University of Delaware. “It was basically managerial power, unchecked.”

Over the years, however, a belief has taken hold that companies’ primary objective is to maximize shareholder value, even if that means paying out now through buybacks and dividends money that could be put toward long-term productive investments.

“Serving customers, creating innovative new products, employing workers, taking care of the environment … are NOT the objectives of firms,” Itzhak Ben-David, professor of finance at Ohio State University’s Fisher College of Business and a buyback proponent, wrote in an email response to questions from Reuters. “These are components in the process that have the goal of maximizing shareholders’ value.”

That goal has come to the fore in some high-profile cases of late as activist investors have demanded that executives share the wealth – or risk being unseated.

In March, General Motors Co acceded to a $5 billion share buyback to satisfy investor Harry Wilson. He had threatened a proxy fight if the auto maker didn’t distribute some of the $25 billion cash hoard it had built up after emerging from bankruptcy just a few years earlier.

DuPont early this year announced a $4 billion buyback program – on top of a $5 billion program announced a year earlier – to beat back activist investor Nelson Peltz’s Trian Fund Management, which was seeking four board seats to get its way. Even so, CEO Ellen Kullman stepped down in October after sales slowed and the stock slid.

In March, Qualcomm Inc, under pressure from hedge fund Jana Partners, agreed to boost its program to purchase $10 billion of its shares over the next 12 months; the company already had an existing $7.8 billion buyback program and a commitment to return three quarters of its free cash flow to shareholders. Still, the stock had been underperforming the S&P 500 for most of the past 10 years.

Jana wasn’t satisfied, and in July, Qualcomm announced it would shed nearly 5,000 workers, among other moves to cut costs. R&D spending, it said, would stay at around $4 billion a year.

Managers ignore shareholder demands at their own risk, especially when the share price is under pressure. “None of it is optional. If you ignore them, you go away,” said Russ Daniels, a technology and management executive who spent 15 years at Apple Inc and then 13 years at HP, where he was chief technology officer for enterprise services when he left in 2012. “It’s all just resource allocation. … The situation right now is there are a lot of investors who believe that they can make a better decision about how to apply that resource than the management of the business can.”

POLITICAL INTEREST: Democratic presidential candidate Hillary Clinton has recently decried companies’ focus on the short term and voiced support for measures to foster long-term growth and innovation. REUTERS/Jonathan Ernst

IBM Corp, once the grande dame of U.S. tech companies, spent $5.43 billion on R&D in the most recent year. It has been spending a lot more on buybacks.

For decades, the computer hardware, software and services company has linked executive pay in part to earnings per share, a metric that can be manipulated by share repurchases. Since 2007, IBM’s per-share earnings have surged 66 percent, though total net income has risen only 15 percent. (The company says in regulatory filings that it adjusts for the impact of buybacks on EPS when determining pay targets.)

IBM has been among the most explicit in its pursuit of higher per-share earnings through financial engineering. In 2007, in communications with shareholders, it laid out the first of its “road maps” for boosting EPS, this time to $10 a share by 2010. It would do so, under the plan, through equal emphasis on improved margins, acquisitions, revenue growth, and share repurchases. It easily met its expectations.

In 2010, then-CEO Sam Palmisano doubled down, pledging to boost earnings by more than 75 percent to $20 a share by 2015. This time, more than a third of that increase was expected to come from buybacks. Palmisano left in 2011, having received more than $87 million in compensation in his last three years at the company.

For a while, the plan worked. Shares surged to an all-time high of $215 in March 2013. But the company’s operating results have lagged.

Revenue has declined for the past three years. Earnings have fallen for the past two. The stock is down a third from its 2013 peak, while the S&P 500 has risen 34 percent. To rein in costs, IBM has cut jobs. It now employs 55,000 fewer workers than it did in 2012.

“Morale is not too good when you see these cuts,” said Tom Midgley, a 30-year veteran of IBM’s Poughkeepsie, New York, plant. In recent years, he said, his wage increases have shrunk, as has the company’s contribution to 401(k) retirement savings.

IBM spokesman Ian Colley said that the company’s results have been hurt by currency shifts and business divestitures. He said that the company continues to grow, and that its buybacks have not affected research, development and innovation efforts. “IBM prioritizes investment in the business,” he said, citing recent acquisitions in cloud and other areas.

WEALTH BENEFIT

Share repurchases have helped the stock market climb to records from the depths of the financial crisis. As a result, shareholders and corporate executives whose pay is linked to share prices are feeling a lot wealthier.

That wealth, some economists argue, has come at the expense of workers by cutting into the capital spending that supports long-term growth – and jobs. Further, because most most U.S. stock is held by the wealthiest Americans, workers haven’t benefited equally from rising share prices.

Thus, said Lazonick, the economics professor, maximizing shareholder value has “concentrated income at the top and has led to the disappearance of middle-class jobs. The U.S. economy is now twice as rich in real terms as it was 40 years ago, but most people feel poorer.”

Paul Bloom, who was an executive at IBM for 16 years, including chief technology officer for telecom research before leaving in 2013, is among the optimists who argue that venture capital and other alternative channels of R&D investment will take up some of the slack, supporting innovation and economic growth.

Now a consultant to venture capital firms, Bloom expects large companies to shift away from investing directly in R&D, focusing instead on acquiring startups and spinning off experimental projects that will be less constrained by bureaucracy and Wall Street demands. “You are going to see more and more corporate investing in the startups than you have in the past,” he said.

Many of the transformative breakthroughs of the past century – light bulbs, lasers, computers, aviation, and aerospace technologies – were based on innovations coming out of the labs of companies that could afford rich funding, like IBM, Apple, Xerox Corp and HP.

Some say a technological shift at companies like HP and IBM away from traditional manufacturing, which requires large investments in buildings and equipment, and toward data-based products is also changing the calculation of how much investment is needed in innovation.

“The way these companies spend dollars is different, the type of investment is hard to count. While you might think their spending is flat, I think it’s better utilized,” said Mark Dean, who worked in R&D for 34 years at IBM and was a member of the team that created the first personal computer in 1981. “Innovation is changing.”

THE HP WAY

For years, HP adhered to “the HP way,” a widely admired egalitarian corporate philosophy. Operating divisions were given broad autonomy to develop their businesses. Employees were encouraged to think creatively in a nurturing environment. R&D spending regularly topped 10 percent of revenue.

When Fiorina arrived in 1999, she upended that, implementing companywide layoffs, shifting jobs overseas and centralizing control.

Bill Mutell, a former HP senior vice president who joined from Compaq Computer Corp after HP paid $25 billion for it in 2001, spoke to Reuters at the suggestion of Fiorina’s presidential campaign. He said that changes she implemented were needed because the company had become sluggish at innovation. HP would “aim, aim, and aim, and there was never any implementation and execution,” he said.

Fiorina joined soon after the company had spun off what is now Agilent Technologies, the arm that housed much of the company’s high-tech expertise.

In R&D, she focused on winning patents as a measure of the effectiveness of spending. The number of HP-registered patents rose from 17,000 in 2002 to 30,000 when she left in 2005, according to regulatory filings.

Even so, all of those new patents failed to yield any enduringly successful innovations. R&D efforts were scattered, and some projects overlapped.

Fiorina’s compensation was linked in part to earnings per share when she joined in 1999. And from 2003, it was also linked to something called total shareholder return, a measure of performance, including stock-price appreciation plus dividends, that was then compared to returns for the S&P 500 Index.

Fiorina’s buybacks failed to stop HP’s share price slide after the dot-com bubble burst in 2000. Uneven earnings and concern about the Compaq acquisition whipsawed the share price during her tenure, helping lead to her ouster in 2005.

IN AND OUT: Leo Apotheker, Hurd’s successor at HP, presided over a disastrous acquisition and $10 billion in stock buybacks during his brief 11-month tenure as CEO. REUTERS/Stephen Lam

Hurd streamlined the company’s structure, which had ballooned after the Compaq acquisition. He slashed the number of research projects, from 6,800 to about 40, and cut costs across the company’s PC and printer divisions, focusing instead on building higher-margin software and services businesses.

Market share in each division grew. But in the PC and printer divisions, researchers said, new limits on spending disrupted project timelines. Some managers struggling to meet Hurd’s targets implemented spending freezes as the end of a quarter neared, halting procurement of supplies, according to former HP engineers.

“You can’t turn it on and off like a faucet, turn it off one quarter to make the quarterly results look good, then turn it back on next quarter and have great products coming out the other end,” said a former HP engineer.

Engineers at HP who had previously created prototypes at U.S. facilities were also now relying on Asian manufacturing sites to build them. Travel to these regions was on occasion delayed due to spending pressures. Workers at the company’s labs were also moved off the more experimental projects and realigned to work on existing product lines.

In the interview, Hurd said he wasn’t aware of any spending freezes or project disruptions.

The changes he implemented led to sparkling results: From 2005 to 2010, net income rose 265 percent on a much smaller 45 percent increase in revenue. HP’s stock price more than doubled, from $20 to $50, during his tenure.

Thanks to hefty stock buybacks, earnings per share did even better, increasing 350 percent. HP increased share repurchases from $3.51 billion in 2005 to $7.78 billion in 2006, and again to more than $9 billion a year in four of the next five years. (Roughly 20 to 30 percent of annual repurchases offset dilution from employee stock-purchase plans.)

Hurd said improving revenue and market share during his term was always his first concern.

“The share price is the result that occurs if the company is performing well,” he said. “Short-term tricks to try to improve EPS, and eventually share prices, usually don’t work. … Going out and saying I’m going to cut a dividend, make a one-time buyback, these are sort of like parlor tricks, they aren’t sustainable.” He said he declined shareholder requests that ranged from increasing dividends to adopting a specific EPS plan like IBM’s “road map.”

Because he nearly always met per-share earnings and other targets, his pay mostly rose, too. In 2008, for example, it jumped to $42 million from $25 million the year before. (It fell in 2009 to $30 million when he failed to meet targets.)

Investors were impressed by the turnaround. Operating margins, which had dropped below 5 percent under Fiorina, rose as high as 9 percent under Hurd, and the share price soared 200 percent.

Hurd resigned in August 2010 amid a scandal involving his relationship to an HP contractor.

His successor, Leo Apotheker, spent just shy of a year at the helm, marked by his decision to buy software firm Autonomy for $11 billion in October 2011. A year later – after Apotheker left – HP said an investigation had uncovered accounting fraud at Autonomy before the purchase. It took a charge against earnings of nearly $9 billion.

CEO Whitman has attempted to strike a balance with HP’s plans to move into a growth mode from a turnaround effort. R&D spending rose slightly to $3.45 billion in 2014, the highest since 2008, even as revenue declined. At the same time, share repurchases rose to $2.7 billion, from $1.5 billion in 2013.

Post breakup, her immediate challenge is to build the higher-margin HP Enterprise. Both companies will continue with generous buyback programs. HP Enterprise said in September that it expects to give shareholders at least 50 percent of free cash flow next year through buybacks and dividends. HP Inc said it will give back 75 percent.

—————

The Cannibalized Company

By Karen Brettell, David Gaffen and David Rohde

Data: Karen Brettell

Graphics: Matthew Weber

Edited by John Blanton

 

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Special Report: How a 5-minute phone call put 9/11 trial on hold for more than a year http://blogs.reuters.com/david-rohde/2015/10/02/special-report-how-a-5-minute-phone-call-put-911-trial-on-hold-for-more-than-a-year/ http://blogs.reuters.com/david-rohde/2015/10/02/special-report-how-a-5-minute-phone-call-put-911-trial-on-hold-for-more-than-a-year/#comments Fri, 02 Oct 2015 07:57:25 +0000 http://blogs.reuters.com/david-rohde/?p=3403 In this 2009 file photo, reviewed by the U.S. military, an American flag fluttering in the wind is pictured through a broken window from inside an airplane hangar used for media activities at Camp Justice, the site of the U.S. war crimes tribunal compound, at Guantanamo Bay U.S. Naval Base, Cuba, July 16, 2009. REUTERS/Brennan Linsley/Pool/Files

In this 2009 file photo, reviewed by the U.S. military, an American flag fluttering in the wind is pictured through a broken window from inside an airplane hangar used for media activities at Camp Justice, the site of the U.S. war crimes tribunal compound, at Guantanamo Bay U.S. Naval Base, Cuba, July 16, 2009. REUTERS/Brennan Linsley/Pool/Files

In August 2013, one of five men accused of helping carry out the September 2001 terrorist attacks met with his defense lawyers in the U.S. detention center in Guantanamo Bay, Cuba.

Ramzi bin al Shibh, who military prosecutors say relayed money and messages to the 9/11 hijackers, asked his lawyers to send a message to his nephew in Yemen. After the meeting, the defense team’s translator went to another part of the U.S. Navy base, called Yemen from a landline and had a five-minute phone conversation with Bin al Shibh’s brother.

Defense lawyers say the translator conveyed an innocuous message from Bin al Shibh in which he urged his nephew to study hard in school. But two years on, that five-minute phone call, which has not been previously reported, continues to hinder the course of justice in the military commissions set up to prosecute people held at Guantanamo Bay as enemy combatants in the U.S. war on terror.

When they learned of the call in April 2014, U.S. officials feared that Bin al Shibh might have conveyed a coded message to al Qaeda operatives in Yemen. The Federal Bureau of Investigation launched a botched effort to turn a member of Bin al Shibh’s defense team into a confidential informant. Outraged defense lawyers then waged legal war on the FBI and military prosecutors, halting the trial of all five 9/11 defendants. The trial has yet to resume.

Experts said the call and the legal trench warfare it sparked is the latest example of how President Barack Obama’s effort to reform Guantanamo’s military commissions – by appointing experienced death penalty defense lawyers and other legal changes – has failed. The changes, Obama said at the time, would restore legitimacy to the commissions and make them, alongside terrorism trials in civilian courts, sources of swift and sure justice.

Instead, the experts said, the reforms inadvertently spawned legal paralysis and court proceedings that sometimes veer into farce.

“By any measure, the commissions have been a failure,” said David Cole, a Georgetown University law professor. “They’ve obtained almost no convictions other than a handful of guilty pleas, and many of the convictions have been overturned on appeal.”

Nine years after President George W. Bush created the commissions and six years after Obama reformed them, only eight defendants have been fully prosecuted. Three verdicts have been overturned. Most of the 36 detainees whom the Obama administration said it would prosecute have not been charged. Fourteen years after the crime, the trial of the 9/11 defendants remains years away.

The death penalty defense lawyers appointed as part of Obama’s reforms have blanketed military judges with pre-trial motions that challenge nearly every aspect of the 9/11 trial. A former defense team member who asked not to be identified called the proceedings a “fiasco.”

“It’s been in pre-trial motions for three years,” this person said. “You’ve got four years at least of motions waiting to be heard.”

U.S. Army General Mark Martins, a Harvard Law School graduate who was named chief prosecutor of the military commissions in 2011, defended the pace of the trials. In an interview and in public speeches, he argued that the military commissions are fair, lawful and protect the American public.

“Detention that is secure, humane and legitimate has assisted in protecting innocent peoples against al Qaeda,” he said in a speech in September.

But administration officials who have worked on Guantanamo for years privately concede that the commissions have ground to a halt.

“It’s a struggle,” said one official, who asked not to be identified. “If you look at the history and where we are today, obviously it’s a challenge.”

BREACH OR NO BREACH?

The call to Yemen immediately sparked division in the Bin al Shibh defense team, according to two people familiar with the matter. The rift reflected longstanding confusion and disagreement over security procedures at the trials. Some team members thought that relaying a message by phone to Yemen, an al Qaeda stronghold, was a breach of Guantanamo’s security protocols.

“We don’t know what type of code could have been in the [message],” said one of the people with knowledge of the matter. “We don’t know if he could have revealed some important information through it.”

Before the 2001 attacks, Bin al Shibh, a native of Yemen, shared an apartment in Hamburg, Germany, with hijacker Mohammad Atta and applied to receive flight training in the United States. After repeatedly being denied a U.S. visa, Bin al Shibh allegedly wired funds to plotters already inside the United States.

After he was captured in Pakistan in 2002, Bin al Shibh was held for four years at a U.S. Central Intelligence Agency detention center, or “black site,” before being moved to Guantanamo Bay. In 2008, military prosecutors charged Bin al Shibh with hijacking, terrorism and mass murder for his alleged role in the 9/11 attacks.

In a May 2009 announcement, Obama said he would reform, rather than abolish, the military commissions. Obama argued that rule changes, including barring statements made under harsh interrogation and making it more difficult to use hearsay as evidence, would make the commissions more credible.

Republicans welcomed the move. Legal experts predicted it would fail.

Ramzi Binalshibh in an undated photo released by the U.S. Government in 2002. REUTERS/

Ramzi Binalshibh in an undated photo released by the U.S. Government in 2002. REUTERS/

Eric Freedman, a Hofstra University law professor, said the reforms didn’t remove one of the military commissions’ core legal problems: Many of the terrorist activities with which some detainees were charged were civilian crimes, not war crimes. Under international law, military tribunals can try defendants only for war crimes.

“Conspiracy to blow up an airliner is a criminal offense,” not a war crime, Freedman said.

The 9/11 trial, in particular, has caused problems because each defendant faces the death penalty. David Nevin, chief defense lawyer for accused 9/11 mastermind Khalid Sheikh Mohammed, said death penalty defense lawyers would be negligent if they did not file repeated motions calling for the torture of their clients to be made public.

The U.S. Supreme Court has ruled that one of the most basic rights of capital defendants is the ability to cite mitigating factors before they are sentenced to death, Nevin said. “If there has to be this much secrecy, if there has to be this many restrictions on a lawyer’s ability to provide a defense,” Nevin said, “then you just can’t have a capital prosecution.”

Members of the Bin al Shibh defense team feared that if the call was a security breach, even an inadvertent one, they could be prosecuted for violating post-9/11 national security laws. New York defense lawyer Lynne Stewart was sentenced to 10 years in prison after a federal jury convicted her in 2005 of passing messages from a radical Egyptian cleric to his followers.

Members of the defense team asked the team’s chief lawyer, James Harrington, to report the call to Yemen to military officials, according to two people familiar with the matter. Harrington declined to do so because he did not believe that it violated security protocols.

In an interview, Harrington said the call was a routine personal statement from Bin al Shibh to his family. He also said that gaining the trust of Bin al Shibh and his family was his duty as a death penalty defense lawyer. “There was no effort to conceal anything that we did,” Harrington told Reuters. “The phone call was made from Guantanamo. We weren’t trying to hide anything.”

Guantanamo detainees are allowed to communicate with their families by written letter, phone call and sometimes video conference arranged by the International Committee of the Red Cross, according to Anna Nelson, a spokesperson for the group. She said all of those communications are monitored by U.S. military officials.

A Defense Department spokesman said: “All detainees have the ability to communicate with their families.” He declined to say whether lawyers can relay messages to their clients’ families. “If defense lawyers are contacting their clients’ families, they will be able to provide you those details,” he said.

Defense lawyers have argued for years that Guantanamo security protocols are excessive, confusing, and frequently change. They vehemently oppose the ability of court security officers to unilaterally cut off audio feed from the courtroom to journalists if they fear a lawyer or defendant is going to disclose classified information.

And they have accused military officials of placing listening devices in rooms where they meet their clients. The government’s obsession with secrecy, they contend, is driven by the CIA’s desire to conceal from the public the extent to which it tortured detainees.

Defense lawyers and commission officials cannot even agree on what the security procedures are. Lawyers for some of the five 9/11 defense teams have declined to sign a memorandum of understanding that they will abide by security protocols.

“It’s not clear what all the rules are,” said Nevin. “The government refuses to give us classification guidance.”

Government officials say the classification rules are clear. One of the Obama reforms, they point out, was to assign one full-time “security officer” to each defense team. Their sole job is to help defense team members determine which information is classified and which is not.

 A VISIT FROM THE FBI

At the time of the Bin al Shibh translator’s call to Yemen, the team had no security officer, according to the two people familiar with the matter. The team’s security officer had moved to another position, and a replacement had not been found.

After Harrington declined to report the call, the FBI learned of it from an individual whose name has not been made public. Based on that information, agents decided that one member of Bin al Shibh’s defense team may have committed “a federal crime and compromised national security,” according to court papers filed by government lawyers.

In April 2014, FBI agents approached a member of Bin al Shibh’s defense team on a Sunday after he returned home from church, according to court documents. The agents questioned him about the message, asked the team member not to discuss their visit and had him sign a non-disclosure agreement.

Several days later, the team member informed Harrington of the visit anyway, according to court filings. Harrington and other defense lawyers immediately filed an emergency motion to halt legal proceedings in the case.

In a combative court hearing at Guantanamo, Harrington called for an investigation of the FBI and accused the agency of trying to turn the member of Bin al Shibh’s defense team into a confidential informant.

“To say this is a chilling experience for all of us is a gross understatement,” Harrington told Col. James Pohl, the military judge who is overseeing the trial of the 9/11 defendants.

Pohl then ordered all U.S. government agencies to disclose any efforts to turn members of 9/11 defense teams into confidential informants.

When contacted by Reuters in September, Harrington initially said: “No letter from Mr. Bin al Shibh was ever sent to anybody in the Middle East.” When asked if a message had been communicated by other means, Harrington said the translator had made a phone call.

“Mr. Bin al Shibh wanted a letter sent to his brother in Yemen which encouraged his brother’s son, who was starting in a new school for him, to study hard,” Harrington said in an email. “In a telephone call with the brother about the entire family, our interpreter told him that Ramzi wished his son well in his school.” Harrington said he had instructed the translator to make the call.

The translator, who was a military contractor, was stripped of his security clearance in June 2014 and later fired, according to court documents. A military investigator said in a deposition that the translator admitted to her that he had committed a “security violation,” but said it was “inadvertent” and “attributed it to stress.”

The two people with knowledge of the matter said the translator, who has not been identified, did not appear to be an al Qaeda sympathizer. They said he seemed eager to carry out new tasks to secure his position on the defense team.

In February 2015, nearly a year after the FBI agents visited the house of the Bin al Shibh defense team member, Judge Pohl, the five defendants and their legal teams gathered in Guantanamo to resume pre-trial hearings. The hearing abruptly ended when several 9/11 defendants said the new translator assigned to Bin al Shibh’s defense team, who was also a military contractor, had worked on a CIA black site where they were held captive.

Defense lawyers requested that all 130 military personnel and civilians working for the defense teams be investigated for secret ties to the U.S. government. Military prosecutors denied any wrongdoing and blamed defense lawyers for failing to investigate the background of the translator.

The military judge, Col. Pohl, canceled the pre-trial hearings and ordered that the Bin al Shibh team be given yet another translator.

As for what was actually said during the five-minute call to Yemen, a government official who spoke on condition of anonymity said the conversation appears to have been innocuous.

“It turned out to be much ado about nothing,” he said.

(Edited by John Blanton)

 

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U.S. government blocks release of new CIA torture details http://blogs.reuters.com/david-rohde/2015/09/10/u-s-government-blocks-release-of-new-cia-torture-details/ http://blogs.reuters.com/david-rohde/2015/09/10/u-s-government-blocks-release-of-new-cia-torture-details/#comments Thu, 10 Sep 2015 16:30:14 +0000 http://blogs.reuters.com/david-rohde/?p=3397  

Joseph Margulies, who represents Abu Zubaydah, a prisoner who says he was tortured in CIA custody, speaks at a news conference in Warsaw on December 16, 2010. REUTERS/PETER ANDREWS

Joseph Margulies, who represents Abu Zubaydah, a prisoner who says he was tortured in CIA custody, speaks at a news conference in Warsaw on December 16, 2010.
REUTERS/PETER ANDREWS

NEW YORK | U.S. government officials have blocked the release of 116 pages of defense lawyers’ notes detailing the torture that Guantanamo Bay detainee Abu Zubaydah says he experienced in CIA custody, defense lawyers said on Thursday.

The treatment of Zubaydah, who lost one eye and was waterboarded 83 times in a single month while held by the CIA, according to government documents, has been the focus of speculation for years.

“We submitted 116 pages in 10 separate submissions,” Joe Margulies, Zubaydah’s lead defense lawyer, told Reuters. “The government declared all of it classified.”

Margulies and lawyers for other detainees said that the decision showed that the Obama administration plans to continue declaring detainees’ accounts of their own torture classified. A Central Intelligence Agency spokesperson declined to comment.

After the release of a U.S. Senate report on CIA torture in December, the government loosened its classification rules and released 27 pages of interview notes compiled by lawyers for detainee Majid Khan in which he described his torture.

Khan, a Guantanamo detainee turned government cooperating witness, said interrogators poured ice water on his genitals, twice videotaped him naked and repeatedly touched his “private parts” – none of which was described in the Senate report.

Khan said that guards, some of whom smelled of alcohol, also threatened to beat him with a hammer, baseball bats, sticks and leather belts.

“The CIA has apparently changed its mind about allowing detainees to talk about their torture,” said Wells Dixon, Khan’s lawyer.

CIA and White House officials opposed releasing the Senate report, but Senator Dianne Feinstein, who then chaired the Intelligence Committee, made public its 480-page executive summary.

A month after the report’s release, government lawyers said in a January 2015 court filing that the CIA had issued new classification rules that permitted the release of “general allegations of torture,” and “information regarding the conditions of confinement.”

But they said the names of CIA employees or contractors could not be released. Nor the locations of the secret “black” sites where detainees were held around the world after the Sept. 11, 2001 attacks.

Margulies said the 116 pages of notes he submitted for clearance were limited to Zubaydah’s description of his torture and did not include prohibited information.

Margulies said he followed “the rule to the letter” and accused the CIA of trying to “guarantee that Abu Zubaydah never discloses what was done to him.”

Zubaydah, a 44-year-old Saudi national, has been held in Guantanamo for nine years and not been charged with a crime.

(Reporting by David Rohde; Editing by Cynthia Osterman)

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U.S. military cancels hearing for September 11 suspects http://blogs.reuters.com/david-rohde/2015/08/16/u-s-military-cancels-hearing-for-september-11-suspects/ http://blogs.reuters.com/david-rohde/2015/08/16/u-s-military-cancels-hearing-for-september-11-suspects/#comments Sun, 16 Aug 2015 23:19:49 +0000 http://blogs.reuters.com/david-rohde/?p=3387 WASHINGTON | BY YEGANEH TORBATI AND DAVID ROHDE

Khalid Sheikh Mohammed, (R), the alleged mastermind of the September 11 attacks, speaks with his defense lawyer on the third day of pre-trial hearings in the 9/11 war crimes prosecution as depicted in this Pentagon-approved courtroom sketch at the U.S. Naval Base Guantanamo Bay, Cuba, October 17, 2012. REUTERS/Janet Hamlin

Khalid Sheikh Mohammed, (R), the alleged mastermind of the September 11 attacks, speaks with his defense lawyer on the third day of pre-trial hearings in the 9/11 war crimes prosecution as depicted in this Pentagon-approved courtroom sketch at the U.S. Naval Base Guantanamo Bay, Cuba, October 17, 2012. REUTERS/Janet Hamlin

The U.S. military has canceled a pretrial hearing for suspects in the Sept. 11, 2001 attacks, a military spokesman said on Sunday, in another setback for the government in its efforts to try the five men being held at Guantanamo.

A defense department spokesman said the hearing, originally scheduled for Aug. 24 to Sept. 4, was canceled by the military judge.

“The judge cited issues that remain unresolved with regard to a claimed defense counsel conflict of interest,” said Commander Gary Ross.

News of the cancellation was first reported by ABC News.

Defense attorneys for Khalid Sheikh Mohammed and four alleged co-conspirators raised concerns in 2014 that they were being spied on by the Federal Bureau of Investigation. They said that created a conflict of interest between them and their clients.

Judge James Pohl, an Army colonel, ruled in July that no conflict of interest arose for defense attorneys.

The allegations have further delayed a complex, slow-moving case, one of a number being held at the facility at the Guantanamo Naval base in Cuba, where suspects in the post-Sept. 11 “war against terrorism” are detained.

Critics of the military trials in Guantanamo have said the inability of the government to try the defendants more than a decade after their capture is one of the clearest signs of the failure of the process.

The five defendants, who were captured in 2002 and 2003, could be put to death if convicted of key roles in the Sept. 11 attacks, which killed about 3,000 people.

(Reporting by Yeganeh Torbati and David Rohde, editing by Larry King)

 

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U.S. will not release hunger-striking Guantanamo detainee http://blogs.reuters.com/david-rohde/2015/08/14/u-s-will-not-release-hunger-striking-guantanamo-detainee/ http://blogs.reuters.com/david-rohde/2015/08/14/u-s-will-not-release-hunger-striking-guantanamo-detainee/#comments Fri, 14 Aug 2015 23:16:15 +0000 http://blogs.reuters.com/david-rohde/?p=3378 BY JULIA EDWARDS AND DAVID ROHDE

Portraits of Yemeni inmates at Guantanamo Bay are held up by relatives during a protest to demand their release, outside the U.S. embassy in Sanaa April 1, 2013. REUTERS/Khaled Abdullah

Portraits of Yemeni inmates at Guantanamo Bay are held up by relatives during a protest to demand their release, outside the U.S. embassy in Sanaa April 1, 2013. REUTERS/Khaled Abdullah

U.S. Justice Department lawyers on Friday blocked a legal request that a Guantanamo Bay detainee who weighs just 74 lbs (33.5 kg) after an eight-year hunger strike be released for health reasons.

Lawyers for the 36-year-old Yemeni detainee Tariq Ba Odah, said the decision indicated that President Barack Obama is unable to control growing divisions in his administration and achieve his goal of closing the Guantanamo detention facility before he leaves office in 2017.

Ba Odah’s defense attorney, Omar Farah, said the filing, which was sealed, reflected the Obama White House’s inability to develop a coherent approach to transfer Ba Odah and 51 other detainees cleared for release.

“It is a transparent attempt to hide the fact that the Obama administration’s interagency process for closing Guantanamo is an incoherent mess,” said Farah, an attorney with the Center for Constitutional Rights.

“And it is plainly intended to conceal the inconsistency between the administration’s stated intention to close Guantanamo and the steps taken to transfer cleared men,” he added.

Amnesty International USA also condemned the decision.

A Justice Department representative said the filing was sealed because it contained medical information. The filing was not intended to slow the transfer of Ba Odah out of Guantanamo and a public version of the filing would be released, the representative said.

The Yemeni detainee has been force-fed by nasal tube since he stopped eating solid food in 2007. His weight loss over the last 18 months raised fears among his lawyers that he could die of starvation. Pentagon officials said he was receiving proper care.

U.S. intelligence and military officials cleared Ba Odah for release five years ago from the Guantanamo detention center, where 116 men are imprisoned on a U.S. Navy base in Cuba 14 years after the Sept. 11, 2001 attacks.

Ba Odah’s case created divisions within the administration. Officials from the Defense Department, which administers the center, called for government lawyers to oppose a habeas corpus petition Ba Odah’s lawyers filed in June requesting his release on health grounds.

Pentagon officials said transferring Ba Odah could create an incentive for future hunger strikes. State Department officials supported his release.

Lawyers for Ba Odah, who was captured by the Pakistani Army along the Afghan border and was accused of receiving weapons training in order to fight with the Taliban, said Obama could have instructed government lawyers not to oppose the habeas petition on Friday.

There are as many as a half dozen other habeas petitions that the government could choose not to contest.

They said Ba Odah was a test case for how the president could transfer more of the 52 detainees who have been cleared from release but remain in Guantanamo. Such releases avoid a congressionally mandated requirement that the Secretary of Defense personally sign a waiver approving each transfer.

The signed waiver requirement, and intense opposition to releases from top military commanders, has resulted in successive defense secretaries being slow to transfer detainees cleared for release.

Obama has said he is determined to close the camp, which has been condemned internationally because of the harsh treatment of detainees, but Republicans in Congress have passed laws preventing him from transferring any inmates to U.S. soil.

(Reporting by Julia Edwards and David Rohde in New York; Editing by David Storey and Lisa Shumaker)

 

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Detainees’ lawyers question Obama commitment to close Guantanamo http://blogs.reuters.com/david-rohde/2015/08/13/detainees-lawyers-question-obama-commitment-to-close-guantanamo/ http://blogs.reuters.com/david-rohde/2015/08/13/detainees-lawyers-question-obama-commitment-to-close-guantanamo/#comments Thu, 13 Aug 2015 05:33:35 +0000 http://blogs.reuters.com/david-rohde/?p=3362  

A Guantanamo detainee’s feet are shackled to the floor as he attends a “Life Skills” class inside the Camp 6 high-security detention facility at Guantanamo Bay U.S. Naval Base April 27, 2010. REUTERS/Michelle Shephard/Pool

Before midnight on Friday, President Barack Obama’s Justice Department is due to either block or accept a legal request to free a Guantanamo Bay prisoner who weighs 74 pounds (33.5 kg) after an eight-year hunger strike.

Lawyers for the detainee, Tariq Ba Odah, say the way the department decides will be the clearest indication yet of how serious Obama is about closing the detention center before he leaves office in January 2017.

They accuse the president of being unwilling to use all his executive powers to empty the camp and are skeptical of his commitment.

“There is this profound dissonance between what the administration is saying about its desire to close Guantanamo and what is it actually doing,” said Omar Farah, the detainee’s lawyer. “And it’s the administration’s actions that actually count.”

The 36-year-old Yemeni detainee has been force-fed by nasal tube since he stopped eating solid food in 2007. His weight loss over the last 18 months have raised fears among his lawyers that he could die of starvation. Pentagon officials said he is receiving proper care.

U.S. intelligence and military officials cleared him for release five years ago from the Guantanamo detention center, where 116 men are imprisoned on a U.S. Navy base 14 years after the Sept. 11, 2001 attacks.

Officials from the Defense Department, which administers the center, are calling on government lawyers to oppose a habeas corpus petition Ba Odah’s lawyers filed in June requesting his release on health grounds.

Pentagon officials say transferring him could create an incentive for future hunger strikes, according to senior U.S. officials. The State Department supports his release.

Lawyers for Ba Odah, who was captured by the Pakistani Army along the Afghan border and was accused of receiving weapons training in order to fight with the Taliban, say Obama could instruct government lawyers not to oppose the habeas petition on Friday. There are as many as a half dozen other habeas petitions that the government could choose not to contest, they said.

In December 2013, the Justice Department stood on the sidelines when a habeas corpus petition for an ill Sudanese prisoner at Guantanamo was filed, clearing the way for a judge to order his release.

Friday’s court filing is expected to show whether the White House, which has promised to send Congress a plan shortly to close the internationally condemned facility completely, will side with the Pentagon or the State Department in the dispute.

OBAMA AND EXECUTIVE POWERS

Lawyers for detainees and legal experts say the case is one of several examples of the president not using executive powers that could speed the transfer of 52 men cleared for release. U.S. government officials said last week that a dozen foreign countries have agreed to accept nearly half of the men.

“I think the president is not doing anywhere near what he could be doing at this point,” said David Glazier, a professor at Loyola Law School in Los Angeles who follows Guantanamo cases.

A senior administration official dismissed the criticism saying the resident’s “entire national security team is working together to fulfill the president’s steadfast commitment to closing the Guantanamo detention facility.”

The Ba Odah case shows how the president could reduce the ranks of detainees through court-ordered releases, according to lawyers for detainees. Such releases avoid a Congressionally-mandated requirement that the Secretary of Defense personally sign a waiver approving each transfer.

The signed waiver requirement, and intense opposition to releases from top military commanders, resulted in successive defense secretaries being slow to transfer detainees cleared for release.

Lawyers for detainees accused the administration of hypocrisy when government lawyers recently argued that the U.S. war in Afghanistan justified holding another Guantanamo detainee cleared for release. President Obama, they pointed out, has repeatedly declared that the U.S. war in Afghanistan is over.

Legal experts say the president could order a Periodic Review Board to determine more quickly whether a detainee’s release poses a risk. Since Obama created the board four years ago, it has reviewed the cases of only 19 prisoners. Another 50 detainees await being vetted under the process.

Glazier said reviews have actually slowed since former President George W. Bush’s second term, when they were often conducted annually.

Joseph Margulies, a Cornell University law professor who also represents a detainee, said he believed the administration’s actions reflect a decision by Obama that closing Guantanamo is not as important as other goals.

“I just think he is not willing to expend political capital to do it,” he said. “It’s not nearly as important to him as the Iran deal.”

(Reporting by David Rohde; Additional reporting by Matt Spetalnick and Julia Edwards; Editing by David Storey and Alan Crosby)

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U.S. steps up efforts to meet Obama goal to close Guantanamo prison http://blogs.reuters.com/david-rohde/2015/08/07/u-s-steps-up-efforts-to-meet-obama-goal-to-close-guantanamo-prison/ http://blogs.reuters.com/david-rohde/2015/08/07/u-s-steps-up-efforts-to-meet-obama-goal-to-close-guantanamo-prison/#comments Fri, 07 Aug 2015 08:03:05 +0000 http://blogs.reuters.com/david-rohde/?p=3358 WASHINGTON | BY MATT SPETALNICK AND DAVID ROHDE

 

The exterior of Camp Delta is seen at the U.S. Naval Base at Guantanamo Bay, March 6, 2013.  REUTERS/Bob Strong

The exterior of Camp Delta is seen at the U.S. Naval Base at Guantanamo Bay, March 6, 2013. REUTERS/Bob Strong

The United States has secured commitments from a dozen countries to accept nearly half of the 52 Guantanamo prisoners already cleared for transfer, U.S. officials said on Friday, as the Obama administration tries to accelerate efforts to close the military prison. But the moves will require the final signature of Defense Secretary Ash Carter, which could still delay the process, despite President Barack Obama’s push to empty the prison before he leaves office in 2017. With the White House drafting a broader plan to shut the facility, the office of the State Department’s Guantanamo envoy has finalized deals with several foreign governments and is in advanced negotiations with others, the senior officials told Reuters. They said the transfers from the prison at the U.S. Naval Base in Guantanamo Bay, Cuba, which has drawn international condemnation for the harsh treatment of foreign terrorism suspects held there, could take place by the end of the year, whittling down the current prisoner population of 116. Obama has faced opposition from congressional Republicans who passed laws blocking any move to transfer Guantanamo inmates to prisons in the United States. The White House says it is crafting a detailed proposal it will present to Congress soon for shutting the facility. The State Department is pushing ahead with one of the main thrusts of Obama’s strategy: sending home or resettling elsewhere as many as possible of the 52 prisoners who have been ruled safe for release. One official, speaking on condition of anonymity, said there were “political commitments at various stages” with U.S. allies and partners around the world. Some have accepted detainees before and others will be doing so for the first time. The main focus is on dozens of Yemenis no longer considered security risks. Washington has ruled out repatriating them because of the war in their homeland. PRESSURE ON PENTAGON Much will depend on how fast the Pentagon is willing to do its part, as well as how quickly inter-agency reviews unfold. The White House has pressured Carter to expedite approval of proposed transfers, essentially to act within 30 days on each case, a source close to the matter said. By law, the defense secretary has the final say on moving a prisoner and is responsible if he returns to militant activities. The slow pace under Carter’s predecessor, Chuck Hagel, led to a falling-out with Obama’s White House. Hagel resigned in November. So far this year, four Yemeni prisoners were sent to Oman and one to Estonia in January, and in June six Yemenis were flown to Oman. U.S. officials say they hope to ramp up the transfers under the new State Department envoy, Lee Wolosky, to help cut down the prison population to an “irreducible minimum.” Accelerated reviews are planned for those deemed “too dangerous to release” to see if any can be added to the transfer list. The plan being drafted will call for possibly dozens who remain to be moved to the United States and held in federal “Supermax” penitentiaries or military prisons, Obama’s counterterrorism adviser, Lisa Monaco, told a recent conference. This proposal would set up a major fight with Congress. White House spokesman Josh Earnest said work on the plan was continuing and that it would likely be presented to Congress after it returns from summer recess in early September. The prison was opened by President George W. Bush, after the Sept. 11, 2001 attacks to house suspected al Qaeda and Taliban members rounded up overseas. Obama has repeatedly pledged to close the facility, where most detainees have been held for more than a decade without trial. It now holds less than half of the number of prisoners it did when he took office in 2009. (Reporting By Matt Spetalnick; Editing by David Storey and Tom Brown)

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