Transparency

Manning Trial Delayed

by Chad Bouchard / Published January 10, 2013 in Transparency | Leave a comment

Trial was postponed for Army Pfc. Bradley Manning, charged with “aiding the enemy” for allegedly leaking classified documents to Wikileaks. / U.S. ARMY PHOTO

A military judge has put off the trial of Bradley Manning, the Army intelligence analyst accused of leaking thousands of classified documents to Wikileaks, for another three months, to allow defense and prosecution more time to read the leaked files and prepare their cases.

The trial had been set for March, but has now moved to June 3rd, with a plea hearing on February 26th. The move comes as Manning approaches his 1,000th day in jail since his arrest in May 2010, and just before a hearing next week on whether the case should be thrown out due to sluggish progress.

The announcement chaffed a handful of Manning supporters who attended the hearing.

The delay was “an indication that somebody doesn’t have their act together,” said Bill Wagner, a 74-year-old retired NASA employee, during a brief recess outside the courtroom. “It’s so unfair,” Wagner added.

Manning faces 22 charges, including “aiding the enemy” — which could mean life in prison if the court finds him guilty. [Full Article]

“Clean” Countries Do Dirty Business

by Chad Bouchard / Published December 6, 2012 in Transparency | Leave a comment

Huguette Labelle, chair of the board of Transparency International. / Photos by Chad Bouchard

Switzerland, Singapore, Luxembourg, the United States and the United Kingdom are seen as the 20 least corrupt nations on earth, according to an annual ranking of impressions about the integrity of nations released in Washington today.

But those same nations also top a separate and less savory ranking–of countries whose corporate and bank secrecy laws make them havens for tax evasion and money laundering by criminals, corporations and kleptocrats alike.

The conflicting snapshots highlight the involvement of wealthy nations in laundering and sheltering the fruits of graft from less developed parts of the world, where corruption consigns millions to poverty. [Full Article]

Romney on Board

by Lucy Komisar / Published January 19, 2012 in Transparency | 7 Comments

Supporters at a rally for Mitt Romney in South Carolina. / REUTERS

Mitt Romney, who makes his hands-on business experience a talking point in his campaign for the Republican presidential nomination, was a member of the board of directors and audit committee of a global company when it paid millions of dollars to settle charges of extracting kickbacks that cheated clients.

The company is Marriott International and the accusers were hotel owners who had hired Marriott to manage their properties under the Marriott name.

In recent weeks, Romney has come under fire for his role at Bain Capital, with critics faulting Bain for putting employees out of work when it bought up ailing companies and loading them with unsustainable debt—charges that Romney rejects.

But his actions as an independent director at Marriott in the late 1990s and again just two years ago open another window on the candidate’s record in business and leadership qualities.

[Full Article]

Avendra: Kicking Back on Kickbacks

by Lucy Komisar / Published January 19, 2012 in Transparency | 1 Comment

Property owners began taking a closer look at the purchasing practices of hotel chains following a landmark 1997 ruling against the Sheraton Washington Hotel over secret vendor rebates. Sheraton faced a $52 million judgment, most of it in punitive damages. Though an appeals court reduced the judgment to about $3.5 million, the case heightened the scrutiny of hotel chains.

The verdict also prompted measures by Marriott and other hotel chains to protect the flow of vendor rebates. Marriott joined forces with Hyatt to form a new firm, Avendra, that would act as a buying agent for the chains. The hotel chains insisted that Avendra was an independent entity, and thus had no obligations to property owners.

But here, too, behind-the-scenes ties raised questions about Avendra’s claims of independence from Marriott. Avendra opened in a Marriott building in 2001, and was staffed by employees from Marriott’s purchasing group; it eventually relocated off the Marriott campus. Dennis M. Baker, Avendra’s President and CEO, had worked for Marriott for thirteen years, and Joseph Ryan, Chairman of Avendra’s board, was Marriott’s Executive Vice President and General Counsel. Avendra acquired a large share of the business of the Marriott Distribution Services operation and began with Marriott holding a majority share of the ownership.

The hotel management companies set up Avendra as a buying club. They shared overhead costs, while Avendra funneled rebates to each member based on its purchases.

John C. Coffee Jr., a Columbia Law School professor and Director of the Columbia Center on Corporate Governance, said Marriott’s board would have been involved in approving the establishment of Avendra. He said, “I would have thought use of Avendra had to go to the board, because it is self-dealing. You’ve got your general counsel sitting there, with ownership interest. The board had to be advised of that. You were setting up an intermediary to give an appearance of greater legitimacy to these transactions.”

Avendra declined to comment for this article, but CEO Baker acknowledged to the Wall Street Journal in 2002 that rebates in excess of fees were returned to the founders. He said, “How the managers then deal with the owners depends on their individual contracts.” He told the Journal, “There are cases where some get [the rebates] back and some don’t.”

Rebate Culture Extended to Other Marriott Holdings

by Lucy Komisar / Published January 19, 2012 in Transparency | 5 Comments

The rebate culture ran deep in Marriott and continued in Sodexho Marriott, formed in 1998 by the merger of Marriott’s food service and facilities management business (Marriott Management Services) with the U.S. subsidiary of Sodexho (So-DEX-oh) Alliance, a worldwide food and management services company headquartered in France. Marriott shareholders owned 51% of Sodexho Marriott Services, Sodexho owned 49%.

The shared client base included U.S. schools and colleges, health care facilities, businesses, government agencies, the military and prisons. Marriott International distributed food and supplies to Sodexho Marriott and provided administrative and data processing services. Sodexho Marriott, listed on the New York Stock Exchange, claimed to be the largest provider of outsourced food and facilities management in North America.

Sodexho Marriott built its business model on confidential rebates, and guarded its price list with care. In a previously unreleased July 21, 2000 memo, Anthony Alibrio, president of the Healthcare Service Division, warned employees not to divulge prices to hospitals and other facilities seeking to do price comparisons, and underscored the company’s reliance on rebates.

“SODEXHO MARRIOTT PRICING IS CONFIDENTIAL” (emphasis in original), Alibrio wrote. “The manufacturer rebates and distributor rebates fund and support our entire Purchasing & Procurement Department and network.”

The document was provided to 100Reporters by two Boston-area whistleblowers who worked for Sodexho and objected to the secret rebate policy.

Romney summer home in Wolfeboro, New Hampshire. / REUTERS

Alibrio was talking about rebates from sales to hospitals and nursing homes. Unreported rebates from purchases for facilities whose patients get federal assistance violate U.S. Medicare/Medicaid rules. Jim Sheehan, until recently New York State Medicaid Inspector General, said in an interview that that the Medicare-Medicaid Anti-Kickback Act of 1987 mandates that no vendor can give “anything of value in whole or part in cash or kind in return for referral of service paid for by government.” A company providing services “can get a discount,” said Sheehan, “so long as it’s accurately reported on the cost report.” But “a secret rebate would not meet that standard.”

Romney was not on the board of this new company, which was separate and independent from Marriott International. However, since Marriott obtained food and supplies for Sodexho, it would inevitably have dealt with the rebate issue.

There were, in addition, close social and personal ties between senior executives at the two companies. Before going to Sodexho, Alibrio had worked for Marriott International for 28 years. Romney, Marriott and Alibrio all had vacation homes at Lake Winnipesaukee, NH. Alibrio is in Center Harbor, Romney in Wolfeboro and the Marriotts have a compound of homes on Tuftonboro Neck. Steve Bush, a local real estate agent who lives “around the corner” from the Marriotts, said in an email that Romney would travel by motorboat the three or four miles from his place in Wolfeboro to visit the Marriotts in Tuftonboro.

In addition to Alibrio, at least eight top Marriott executives had moved to the new company, including Charles D. O’Dell, president of Marriott Management Services who became president and chief executive officer of Sodexho Marriott Services and chairman of the board. Philippe Taillet, a consultant for Bain & Company 1986 to 1991 (when Romney ran Bain Capital, Bain’s private equity spin-off), became the new company’s senior vice president for strategic planning. And J.W. Marriott was a member of the Sodexho Marriott board.

Alibrio, who has retired, did not respond to requests for comment. Marriott also declined to comment.

In June 2001, Sodexho Alliance bought out its partner’s controlling share, and the U.S. company became known again as Sodexho, a subsidiary of Sodexho Alliance.

Marriott thus escaped unscathed when the New York Attorney General’s office later investigated the documented claims of the Boston-area whistleblowers, Jay and John Carciero. Former Sodexho employees, they were fired after they objected to the company policy of taking supplier kickbacks while billing clients full price. Jay worked for Sodexho/Sodexho Marriott from 1994 to 2006 and John for Sodexho from 2001 to 2007. In 2010, the New York Attorney General obtained a $20-million settlement from Sodexo (which had dropped the “h” from its name) for “illegal overcharges,” or rebates the company pocketed that legally should have been passed on to New York State school districts.

Its investigation into illegal rebates that may have been diverted from other state-supported institutions, including hospitals, is continuing.