21 JUNE 2002: “THE NERVE”
BY STEVE AYLETT



ABOVE: MONOMAN

“The Nerve is  a 3 Issue
comic series being published in the UK, that will hopefully available worldwide.
The Nerve© is a truly original story by aclaimed UK writer Steve Aylett
. —Matthew
Petz

“Quay is a bookseller gaunt,
tired and worn out by the dreary customers who thrive on romance novels
and idealess stories. By headache Quay becomes the Nerve, a superhero whose
very strength is his pain – his own body a weapon. He is a migraine incarnate.

    The Nerve
and his companions Useless Floating Baby, the Spectacle, Blinder aka the
Gap, & Crisis Girl fight against dark forces conspiring to drive humanity
into zombie mediocrity; a beige age. The Nerve & Co must use their
abilities to overcome a swath of foes General Anaesthetic, the Segregator,
Dr Frail, The Passerby and the Nerve’s greatest threat Solace, in order
to thwart the sinister plotting of arch villain, LeBlank.”

20 JUNE 2002: KEEPING
THE POOR…POOR.

http://www.nytimes.com/2002/06/05/national/05CENS.html

Gains of 90’s Did Not Lift
All, Census Shows

By PETER T. KILBORN and
LYNETTE CLEMETSON

 

WASHINGTON, June 4 ˜ Despite
the surging economy of the 1990’s that brought

affluence to many Americans,
the poor remained entrenched, the Census Bureau

reported today. The bureau’s
statistics for the 50 states and the District of

Columbia show that 9.2 percent
of families were deemed poor in 2000, a slight

improvement from 10 percent
in 1989.

    Men’s
incomes fell in 26 states. Nationally, their median incomes ˜ meaning half

earned
less and half more ˜ fell 2.3 percent. Women’s incomes, while
73 percent

of men’s, rose 7 percent
over all and increased in every state except Alaska.

More women than ever went
to work.

    “Some
people thought you lost if you didn’t do as well as the next guy,” said

Martha Farnsworth Riche,
a demographer and former director of the Census Bureau.

“There’s
no doubt that we saw more inequality in the 1990’s, but people
won

across the board in a variety
of ways.”

    The data
released today provide the first national look from the 2000 census at

such demographic issues
as income, poverty, occupation, housing and the

percentage of foreign-born
people living in the United States. The data are

compiled from the 53-question
form that was distributed to about 19 million, or

about 1 in 6, of the country’s
households in the spring of 2000. Thus it picked

up none of the impact of
the recession that was beginning then.

    Expanding
upon figures from the initial 2000 census reports last year, the

bureau reported that more
than half the foreign-born population ˜ 52 percent ˜

came from Latin America,
an increase from 44 percent in the decade. Of the 281.4

million people the census
found in 2000, it said 31.1 million came from abroad,

11.3 million more than in
1990, an increase of 57 percent.

    This
increase in the immigrant population, which many state officials believe

was undercounted, surpassed
the century’s greatest wave of immigration, from

1900 to 1910, when the number
of foreign-born residents grew by 31 percent,

according to the Center
for Immigration Studies in Washington.

    Demographers
noted that for the first time in the 1990’s, immigrants moved far

beyond the big coastal cities
and Chicago and Denver and Houston, into the Great

Plains, the South and Appalachia.

    The foreign-born
population of Franklin County, Ala., grew from 0.19 percent to

5.55 percent, or from 79
people to 1,734. Dawson County, Neb., had 3,866 foreign

residents, or 16 percent
of the population, in 2000, up from 138 people in 1990.

    “These
numbers represent an enormous social experiment with very high stakes,”

said Steven A. Camarota,
director of research for the Center for Immigration

Studies, which advocates
stricter immigration control. “No country has ever

attempted to assimilate
and incorporate 31 million newcomers, and the experiment

is not over.”

    Other
analysts add, however, that immigrants helped propel the boom in the 90’s,

taking low-paid service
jobs and vital assignments in medicine and in technology

companies.

    Reynolds
Farley, demographer at the University of Michigan, said some of the

nation’s old, ailing cities
also had low growth of both industry and

immigration.

    Much
of the huge growth in immigration in Sun Belt states, including Nevada,

Arizona, Georgia, North
Carolina and Tennessee, was fueled by growth in domestic

migration. The flow of wealthy
individuals fleeing congested big cities created

the need for low-wage workers
to build homes, staff restaurants and hotels and

do other low-paid service
work. The result is a barbell economy of extreme haves

and have-nots, said William
Frey, a demographer with the Milken Institute, an

economic research group
in Santa Monica, Calif.

    Nevada,
for instance, had a 94 percent increase in the number of people with

professional and graduate
degrees, but also a 76 percent increase of people with

less than a ninth-grade
education, a number driven by new immigrants. “In the

short term these groups
complement one another,” Mr. Frey said. “But over the

long term there will need
to be significant investment at the local and state

level to bring these immigrants
and their children into the middle class.”

    The census
data also indicated that sprawl intruded upon the ways Americans

lived and worked. Commuters
spent an average of 25.5 minutes getting to work in

2000, about 3 minutes more
than in 1990. Fewer walked or took public

transportation. More chose
to avoid all commuting. In 2000, 3.3 million people

worked at home, 23 percent
more than at the beginning of the decade.

    The surging
economy was a boon to many.

    In 10
years, owners saw the value of their homes rise 17 percent, to a median

$119,600, after barely budging
in the 1980’s. But there were signs that new and

typically bigger houses
were becoming harder to hold. For 15.8 percent of

homeowners, mortgage and
maintenance costs exceeded 35 percent of household

income, an increase from
13.5 percent in 1990.

    “Americans
have more wealth, but they’re living in it,” Ms. Riche said. “With

less liquid wealth, there’s
less flexibility” to save money for retirement or

college tuitions.

    While
not all the same people were poor at the end of the decade as at the

start, the proportions of
the poor changed little. About 6.6 million families,

or 9.2 percent of all families,
qualified as poor in 1999, down from 10 percent

in 1989. In 1999, a family
of four was said to be living in poverty if its

income was less than $16,954.

    Poverty
from state to state and county to county varied widely. The Children’s

Fund, a liberal advocacy
organization, said the census showed that in nine

states and the District
of Columbia, one in five children was poor. “The goal is

to help families escape
poverty, not just escape from the welfare rolls,” said

Marian Wright Edelman, the
organization’s president.

    Poverty
among adults declined little, too, from 11.3 percent to 10.9 percent.

But with the overhaul of
the welfare system six years ago, many women with

children left the welfare
rolls for work.

    The poverty
rate among female-headed households with children younger than 18

fell from 42.3 percent to
34.3 percent. Poverty among the elderly also declined,

to 9.9 percent of people
older than 65 from 12.8 percent.

    Still,
American families realized some solid gains in the decade. After taking

inflation into account,
the bureau found that the median family income climbed

9.5 percent from 1989 to
1999, to $50,046.

19 JUNE 2002: WHAT APPEARS
LIKE AN ANGEL, STABS LIKE A DAGGER…

18 JUNE 2002: KHANATE
INVADES QUEBEC



 

 

17 JUNE 2002: HOW
CORRUPT IS THE BUSH ADMINISTRATION, AND WHAT IS THE FALLOUT? WORSE THAN
YOU COULD POSSIBLY IMAGINE.

Dark heart of the American dream

It’s the most polluted state
in the planet’s most powerful country. Ed Vulliamy

goes into George Bush’s
backyard to reveal how big oil got in bed with big

politics and the price paid
by the little people

Sunday June 16, 2002

The
Observer

There is a perverse beauty
to the landscape arraigned below the iron bridge

where Highway 255 strides
the Houston Ship Channel: great towers of light and

fire as far as the eye can
behold; sinewy steel piping, plumes of smoke and

flame twinkling into a Texas
twilight coloured by a shroud of pollution hanging

from the sky. The awesome
prepotency of this smokescape is no illusion, for this

is an epicentre of power,
oil capital of the Western world and the most

industrialised corner of
the United States. It is also the capital of a power

machine perfected in Texas,
elevated to rule the nation and now unchallenged

across the planet. A machine
that operates in perpetual motion – an equilibrium

of interests – between industry
and politics. LaNell Anderson, former Republican

voter, businesswoman and
real-estate broker who lived many years in this land of

smokestacks and smog, calls
it ‘vending-machine politics: you puts your money in

and you gets your product
out’.

    ‘We don’t
see ourselves as a dynasty,’ said George Bush Sr as his son launched

the election campaign that
won him the current presidency, raiding father’s

Rolodex to do so. ‘We don’t
feel entitled to anything.’ And yet at no point in

the past 50 years – the
half-century since 1952 which defines the modern age –

has there not been a Bush
in a governor’s mansion (in Texas or Florida), on

Capitol Hill or in the White
House – and usually more than one of those at a

time. The ‘vending machine’
is a single family whose tango with the powers which

illuminate this endless
horizon of light and flame is a dance around every

corner in the labyrinth
of Texan and now national – indeed global – politics.

‘Everything they learned
when they started out in west Texas,’ says Dr Neil

Carman, once a regulator
of pollution in the state, ‘they applied to the

governor’s mansion, the
nation and the world… Power in America is not so much

about George W Bush, it’s
about the people from Texas who put him there.’

    This
is the dynasty’s throne, the state whose highways are lined with the

spirited advice ‘Don’t Mess
With Texas’ (originally the slogan of an anti-litter

campaign). As if litter
would make much difference: Texas counts the worst

pollution record in the
US, top in the belching of toxic chemicals and

carcinogens into the air,
top in chemical spills, top in ozone pollution, top in

carbon-dioxide emissions,
top for mercury emission, top in clean-water

violations, top in the production
of hazardous waste. Houston overtook Los

Angeles for the coveted
title of ‘most polluted city’ in the early 90s.

    ‘You
are looking at the biggest oil refinery in the world,’ indicates LaNell

Anderson. She refers to
the edifice that is the 3,000-acre Exxon Mobil plant at

Baytown, near Houston, producer
of 507,800 barrels a day. Here begins a story of

both dynasty and destiny,
for it was on this spot in 1917 that the Bush family’s

oil connection was forged
– where the Humble Oil company, which struck black

gold in the Houston suburb
of that name, took root, later to be- come the Exxon

behemoth. Humble’s founder,
William Stamps Farish, went on to become president

of Standard Oil. His daughter
became a friend of George Bush Sr and his grandson

William Jr was taken in
‘almost like family’ (said Barbara Bush) while

campaigning for George Sr’s
entrée into Washington Senatorial politics in 1964.

Farish Jr claims to have
been the first man to whom Bush Sr confided his

ambition to be president
one day, and was last year named US Ambassador to

London.

    At first,
Anderson welcomed the benefits to a community of the 200 oil-related

industries relocated to
the Houston area by the time she and her second husband

set up home in a suburb
wedged between Exxon and the Lyondell chemical plant.

Neither she nor he had any
history of disease in their families. But in 1985,

her husband’s daughter gave
birth to a girl, Alyssa, with a rare liver disease –

she died aged six months.
In 1986, Anderson’s mother became ill and died of bone

cancer a year later. The
following year, Anderson and her sister were diagnosed

with rheumatoid arthritis,
as was a granddaughter in 1992, and an older sister

with Crohn’s disease. In
1991, her father died from emphysema; a year later the

mother of Alyssa gave birth
to a son immediately diagnosed with severe asthma.

Anderson connects the litany
of disease with mishaps by her industrial

neighbours. She paraphrases
their attitude thus: ‘If someone doesn’t like it,

they can sue us if they
can – and since we have more money than God, we will

win.’

    A thumbnail
sketch of politics and the environment in the United States today

depicts oil as the lifeblood
running through every vein of an administration

forging ahead with its energy
policy. The White House has just been forced to

disclose (after being faced
with a Congressional subpoena) that it drew up a

national energy plan based
on increased production without regard to the

environment or conservation,
having failed to consult with anyone other than its

friends among the producers
themselves, notably the disgraced Enron. This

despite the fact that an
energy crisis in California last summer caused most

analysts to draw the opposite
conclusion, stressing the need to curb a

gas-guzzling America.

    At the
hub of this turning wheel of influence is Vice President Dick Cheney,

fresh into office from his
post as chief executive of Halliburton, the world’s

second-largest oil-drilling
services company, where he netted a personal fortune

of $36m in the year before
leaving, with help from contacts accumulated while

serving under George Bush
Sr. Just last week, however, Halliburton joined Enron

in coming under investigation
by the Securities and Exchange Commission for the

same system of publishing
inflated revenues – ‘aggressive accounting’ – for

which Enron has become a
synonym for shame. These alleged misdeeds took place

during Cheney’s directorship.
The
company also faces a floodtide of civil

lawsuits over asbestosis_
unless a model can be found (as has been established

in Texas) to make such resort
to the law nigh impossible for anyone without

money.

    The entwinement
of the Bush dynasty with the energy barons of Texas has

apparently humble beginnings,
in the Lone Star State’s wild west, on the plains

around Midland and Odessa.
This is barren land across which dust devils fly and

trains rumble like iron
snakes. This is where George Bush Sr was sent by his

father, Senator Prescott
Bush, to a trainee job with the International Derrick

and Equipment Company, a
subsidiary of Dresser Industries, controlled by the

Bush family and selling
more oil rigs than anyone in the world. (Dresser later

became absorbed by Halliburton.)

    The world
first heard of Odessa on that fateful day in December 1998 when Bush

Jr was governor of Texas
and the sky turned black after an ‘upset’ at the

Huntsman chemical plant
literally on the wrong side of the railroad tracks it

shares with poor housing,
where Mexicans and blacks live. (An ‘upset’ is an

unplanned accident releasing
pollution, not part of the plant’s normal running

procedure, and which does
not count in its regulatory tally.) Lucia Llanez, who

lives in this tightly knit
community of bungalows between plant and railroad,

will never forget this one:
‘It was dark all over; cars on the Interstate

slowing down and putting
their lights on because they couldn’t see, though it

was day. There was a rumbling
like trains that rattled the windows, and people

were going to hospital for
watering eyes, allergies and problems breathing. The

cloud stayed two weeks.’

    The story
of Huntsman goes back to the days of Bush Sr’s arrival, when Odessa

was a town of what retired
fireman Don Dangerfield calls ‘wildcatters’. In the

40s, the US Air Force bombed
deep holes in the giant Permian oil basin in a

search for oil which then
attracted a stampede of speculators (including those

from Humble) who would,
recalls Dangerfield, ‘spend the nights in a hotel, the

End of the Golden West,
and gamble their lots in rooms so thick with cigar smoke

you could hardly see’. Among
them was a man he remembers well: John Sam

Shepherd, a former attorney
general of Texas and member of the White Citizens

Council – a political wing
of the Ku Klux Klan – disgraced by a land scandal and

come to seek his fortune
out West by setting up the El Paso Products company,

later Huntsman.

    George
Bush landed in this mayhem but quickly decamped 20 miles north to

Midland, where new millionaires
like him established a country club, a Harvard

and a Yale club, met at
the Petroleum Club and played golf on irrigated lawns.

Midland was, recalls Gene
Collins, a member of the National Association for the

Advancement of Colored People
in Odessam ‘one of two towns in America with a

Rolls-Royce dealership and
more millionaires per head than anywhere’. This was

where Bush Sr built his
oil fortune, launched a political career on its

shoulders and raised his
son George W Bush in the art and language of power he

now feigns not to speak.
The story of how Bush Sr constructed his empire is well

known, as is that of how
his son George W was groomed to follow in his

footsteps. Less widely broadcast,
however, are the depths and intricacies of a

system the Bush family built
in bonding with the energy industry, as the

dynastic machine elevated
its methods from Odessa to the Senate, the governor’s

mansion in Austin, the oil
centres of Houston and Dallas, the White House and

thereafter the globe.

    Neil
Carman has a professorial air to him that belies the sharpness of the

surgical blade with which
he tries to operate on ‘Toxic Texas’. Originally a

plant biologist, he was
an investigator for the Texas Natural Resources

Conservation Commission
(TNRCC), responsible for issuing permits for agreed

levels of pollution and
enforcing environmental law. In 1989, he took on the

General Tire and Rubber
Company for ‘systematic violations’.

    The firm
hired a lobbyist, Larry Feldcamp, from the Baker Botts law firm whose

senior partner, James Baker
III, was secretary of state to then president George

Bush Sr and who later, as
an attorney, secured the delivery of the state of

Florida for Bush Jr during
last year’s election recounts. Baker Botts advertises

itself as a ‘full service
firm’, counting Shell, Mobil, Union Carbide, Huntsman,

Amoco on its books. The
other law firm indivisible from the energy lobby and the

Bush fiefdom is Vinson &
Elkins, which acts for both Enron and the Alcoa

aluminium giant, whose former
chief executive Paul O’Neill is now US Treasury

Secretary. Between these
law firms and the regulatory body supposed to face them

down, says Dr Carman, ‘there’s
a revolving door. Feldcamp’s place was taken

recently by the most active
attorney on the oil scene, Pamela Giblin – one of

the TNRCC’s first appointees.’

    Carman
resigned because ‘all they had to do was hire people like Feldcamp and

you were off the case. They
did not deny permits – they must have issued 50,000

permits for air pollution
during my time and refused only two, on occasions when

the public raised hell.
And they don’t revoke them – it’s not like drunk

driving: if you get caught,
they just keep reissuing. They used to refer to

these places as “industrial
areas”, as if that meant they were outside the law.

I called them “sacrifice
zones”.’

    There
is another problem, unique to Texas: the ‘grandfathering’ rule.

Grandfathering dates back
to the Texas Clean Air Act of 1971, exempting existing

installations from compliance
with new regulations. The idea was that they would

be modernised or become
obsolete and close. In the event, firms found that not

being obliged to spend on
pollution control gave them a competitive edge, and

nearly three decades later,
grandfathering accounted for more than 1,000 plants

and 35 per cent of all pollution
in Texas. Nevertheless, in the early 90s, the

TNRCC began to toughen its
stance in accordance with a more aggressive federal

approach to pollution by
the new Clinton administration. Then, in 1994, Texas

went to the polls to elect
a new governor – ‘And when Bush took over,’ says

Carman, ‘everything changed.’

    Two groups
based in Austin – Texans for Public Justice (TPJ) and Public Research

Works (PRW) – crunched the
statistics on the wave of money on which George W

Bush sailed into the governor’s
mansion. It was what Andrew Wheat of the TPJ

calls ‘something unheard
of in Texas or anywhere else: $42m on two campaigns’.

Grandfathered polluters
poured $10.2m into the campaign coffers between 1993 and

1998, led by what PRW calls
the ‘dirty 30’, including Exxon, Shell, Amoco, Enron

and the Alcoa aluminium
giant. Bush himself received $1.5m from 55 grandfathered

companies, led by Enron,
with a handsome $348,500 top-up from the man he calls

Kenny Boy – Kenneth Lay,
the company’s chief executive, currently under criminal

investigation.

    Wheat’s
analysis of the new governor’s ‘personal time’ shows a revolving door

for campaign donors and
the energy industry. Andrew Barrett, Bush’s in-house

environmental policy advisor,
began daily visits to the TNRCC in preparation for

the appointment of new commissioners:
Ralph Marquez, lobbyist for the Texas

Chemical Council and former
executive of the Monsanto chemical firm, and Barry

McBee, attorney with the
law firm Thompson & Knight, a major contributor to Bush

funds with a host of oil-industry
clients.

    Legislation
based on the notion of ‘self-regulation’ followed: a law enabling

companies to audit their
own pollution records provided they reported them, in

exchange for which there
would be absolute protection from public disclosure.

Big oil was delighted, as
a memo obtained by an environmentalist group, the

Texas SEED Coalition, illustrated:
a record of a gathering in June 1977 at Exxon

in Houston by 40 representatives
of the Texas oil and gas industries – written

by one of their number –
said ‘the “insiders” from oil and gas believe that the

governor’s office will persuade
the TNRCC to accept whatever program is

developed between the industry
group and the governor’s office’.

    It was
not until Bush became president that, in its 2001 state legislature,

Texas finally decided to
rein in the ‘grandfathered’ plants. A bill gave them

until 2007 to come into
line with federal law or shut down. Even then, there was

a legal challenge to the
TNRCC’s science from the Houston Business Partnership,

recently entrusted with
millions in federal money to clean up the Gulf

coastline. The partnership
is a high-octane chamber of commerce, throwing up a

few familiar names: Exxon,
Conoco, Enron, James Baker’s law firm Baker Botts –

and George Bush Sr.

    Most
important of all – and best hidden – was Bush’s programme for Tort Reform.

It was this that his father’s
advisor Karl Rove (dispatched to steer Bush’s

presidential campaign and
now the White House itself) insisted the new governor

make his hallmark, and this
is potentially the dynasty’s greatest gift to big

oil. Put simply, Tort Reform
means making it harder for citizens to sue

corporations. TPJ calculated
that business interests specifically isolating Tort

Reform on their political
agenda poured money into Bush’s gubernatorial

campaigns. Soon after being
elected governor, says Andrew Wheat, Bush declared

Tort Reform an ’emergency
issue’.

    This
meant appointing a judge to the Texas supreme court whom President Bush
is

tipped to bring aboard the
Supreme Court in Washington (to which, some say, he

owes his presidency). Alberto
Gonzalez wrote a decision soon after his

appointment to the Texas
court which made it all but impossible for citizens to

bring class actions. ‘The
result,’ says Shawn Isbell, a lawyer working on

environmental cases, ‘is
that it will simply be too expensive to bring cases

against the corporations.’

    Another
ruling, says Sandra McKenzie, the lawyer who fought a long and bitter

battle against the Formosa
Plastics firm, stipulates that ‘anyone trying to

prove a personal chemical
injury had to show that other people in a similar

situation had suffered the
same reaction, according to a study in a published

journal’. The new precedents,
says McKenzie, ‘changed the laws to establish a

no-compromise, “take no
prisoners” approach by the Bushes’.

    In 1989,
George Bush presented the Governor’s Award for Environ mental

Excellence to the Valero
chemical refining company. Foremost in the minds of the

proud executives at the
ceremony in Austin’s luxury Four Seasons Hotel was their

‘refinery of the future’
at Corpus Christi, on the Gulf, at the far end of the

coastal strip that runs
through Houston to the Louisiana border.

    Alfred
Williams gets a better view of the refinery of the future across the

freeway from the garden
of his mobile home than Governor Bush did from the Four

Seasons. He can smell it
better too – the inimitable stench on the muggy delta

air that signifies the cooking
up of cheap crude-oil ‘feed stock’ to produce its

chemical by-product and
treating the neighbourhood to a dose of sulphur dioxide.

    When
Williams, an ex-Vietnam Marine, moved here in 1972, ‘this was all

farmland’. He now delivers
an impassioned requiem for his garden, with its peach

trees dead or buckling over.
The light of a quicksilver moon catches the plume

of sulphur along what they
call Refinery Row.

    ‘I’m
in my golden years,’ he reflects. ‘But I can’t sell my house because no

bank will give a loan without
40 per cent down. And they won’t relocate me, as

I’d do if they offered.

    ‘It started
with having to wipe residue from off of my car. Then the iron on my

rooftop here started to
get corroded, and the trees were dying. Sometimes I have

to come inside because my
eyes are burning.’

    Williams
filed a civil suit against Valero, steered by attorney Shawn Isbell.

The court in Corpus denied
Williams class action status in accordance with the

zeitgeist, but Isbell managed
to discover how the refinery of the future was so

poorly crafted that Valero
had (unsuccessfully) sued the companies which had

built it. She also found
out how the Texas system of overlooking ‘upsets’ works.

Since 1994, Valero had suffered
more than 480 ‘upsets’, but the TNRCC records

each set of emissions separately
– for example, Valero’s sulphur-dioxide

emissions for 1977 show
up on the commission’s website as 166.4 tons, while the

reality including ‘upsets’
is closer to 700 tons. Nevertheless, says Isbell,

‘I’ve seen the TNRCC go
harder after a pig farmer than I have after these kinds

of companies.’

    Williams
keeps a notebook by his phone to record the ‘upsets’ over the road. He

reports them to the TNRCC.
But, he says, ‘I call them rainbows: they are shut at

night and on the weekend
when the sulphur is released, and they only come when

the storm has come and gone.’

    Cornelius
Harmon is a cab driver in Corpus, and takes a drive along Refinery

Row, down a road he calls
the ‘buffer zone’. It divides a wasteland of former

housing – where those relocated
because of pollution by another plant, Koch,

once lived – from the mostly
black and Hispanic community of Hillcrest. ‘Are you

gonna tell me,’ posits Harmon,
‘that the hand of God Almighty drew a line down

this road and He says: “Over
yonder side is contaminated and this side is fit

for folks to live ?” And
what have we got here? Well, I’ll be doggone if it’s

not a school, with children
playing in the smell. The people who run these

things, they give our kids
a new pair of sneakers and go to church and think

they’re going to heaven.
But at the pearly gates, they’re going to find St Peter

in his Afro saying: “Whassup
cuz? Seems like you’re trying to get into the wrong

place.”‘

    Time
came for destiny to fulfil itself, for the son to stand for the high office

in Washington which the
Bush dynasty and its backers saw as having been usurped

by Bill Clinton. The story
of what carried George W Bush to the White House is

well known: the most ruthlessly
efficient campaigning machine ever assembled –

by Karl Rove – with all
the family’s best connections filling a treasure chest

that broke all records.
As they returned to number-crunching in Austin, Texans

for Public Justice and Public
Research Works found little to surprise them save

the machine’s speed and
efficacy. Within a month, Bush had raised hundreds of

thousands of dollars, with
Enron leading the field and two law firms giving

$146,900 – most prominently
Vinson and Elkins, attorneys to Enron and the Alcoa

aluminium giant, and James
Baker’s company, lawyers to the oil industry.

    When
Bush came to pick his cabinet, almost all pivotal positions went to Bush

Sr’s inner sanctum, apart
from the posts of commerce secretary (Don Evans,

longtime buddy of Bush Jr’s
and a fellow Midland oil man) and treasury secretary

(Paul O’Neill, currently
touring the globe with Bono of U2, and former chief

executive of Alcoa, the
world’s biggest producer of aluminium).

    Alcoa
held a stockholders meeting to send O’Neill off with a torrent of eulogies

and an annual pay packet
worth $36m, but three speakers spoiled the party. Two

were trade unionists from
O’Neill’s troubled plant at Ciudad Acuna in Mexico,

challenging the chief executive’s
claim that conditions at their factory were so

good ‘they can eat off the
floor’. The third was the soft-spoken Texan Ron

Giles, drawing attention
to the biggest of the state’s ‘grandfathered’ polluters

– the Alcoa smelting plant
at Rockdale. If the Rockdale plant were a single

state, it would count 40th
for pollution among the 50 in the union, belching

more than 100,000 tons of
toxins in 1997.

    The smokestacks
of the largest aluminium smelter in North America fit

incongruously into the pastoral
ranch land northeast of Austin. And they seem

especially odd as backdrop
to the 300-acre ranch where Wayne Brinkley’s family

has raised cattle since
the late 1800s, but over which hangs a stench wafting

across the moonscape of
Alcoa’s lignite mine.

    Brinkley
looks as much the Texan as President Bush in his boots and Stetson –

‘Only difference is,’ he
says, ‘I am one, and Bush is not.’ In his office is a

hog, stuffed and mounted,
and an awesome collection of vintage knives and

firearms. On his desk is
a survey by the independent Research Analysis

Consultations group showing
that concentrations of magnesium, calcium and

aluminium register ‘very
high’ around Brinkley’s barn, and sodium and titanium

over his fields. ‘My son
had cancer when he was just a young kid,’ he says in a

voice like sandpaper. ‘They
tried to buy us out. They keep offering various

deals saying I can’t talk
to anyone about this for 35 years, and then they

changed it to forever. But
why should I leave? My family’s been here 100 years;

they’ve been here 50. They
should do it by the book, and keep it clean for the

rest of us.’

    Alcoa
continues regardless, feted by Wall Street for ‘dazzling’ returns. But
in

the last light of a warm
evening, quiet rebellion stirs in the community room of

a little town called Elgin.
A group of local people, Neighbors for Neighbors,

have obtained records that
show Alcoa to be cheating, making improvements to its

production plant worth some
$45m without parallel investments in pollution

control. As a direct result
of the Neighbors’ exposé, the company was

investigated by a TNRCC
with no place to hide this time.

    Neighbors
for Neighbors, enjoying statewide coverage and acclaim for its pluck,

is itself suing the company.
Billie Woods, Neighbors’ president, says that Alcoa

has responded by pressing
ahead with its plans for a new lignite mine that would

carve up 15,000 acres of
farmland. The company has also made court applications

to enter and search the
homes of Neighbors activists. The request was denied,

but the matter moved the
usually conservative Daily Texan newspaper to demand:

‘Stop the Alcoa Gestapo!’

    Yesterday
Texas, today Washington, tomorrow the world. With Bush family business

back home in the US presidency,
it now moves, in the form of the father, to the

apex of global finance.
The Carlyle Group defines the next phase of power: a

Washington-based private
equity fund with a difference. It is headed by Frank

Carlucci, former CIA director
and defense secretary under Ronald Reagan and

lifelong friend of George
Bush Sr. Bush (also once director of the CIA) sits

next to Carlucci on the
board with a portfolio specialising in Asia and does not

hesitate to communicate
with his son on concerns of regional relevance to

Carlyle such as Afghanistan
or the Pacific Rim. Bush Jr was once chairman of a

Carlyle subsidiary making
in-flight food.

    On Carlucci’s
other flank is the ubiquitous James Baker III. Chairman of Carlyle

Europe is John Major. The
group’s new asset management is headed by Afsaneh

Beschloss, former treasurer
of the World Bank. Carlyle has grown quickly to be

worth some $12bn, specialising
in energy and defence, with particular attention

to the oil-producing Gulf
states. Among its most eager investors is Prince

Bandar, Saudi ambassador
to Washington and his father Prince Sultan, the

kingdom’s defence minister.
The group’s most spectacular recent coup was to reap

$400m in a stock sale of
its subsidiary United Defence Industries, maker of the

Crusader artillery system
which most military experts argued was redundant, but

which won $470m in development
money from the Pentagon and whose future in the

US arsenal still hangs in
the balance after a series of recent meetings between

Carlucci and Defence Secretary
Donald Rumsfeld. Within a month of 11 September

last year, Carlucci was
meeting with Rumsfeld and his deputy Paul Wolfowitz, and

10 days later offered an
assessment which exactly predicted the endless-war

scenario: ‘We as Americans,’
he said, ‘have to recognise that terrorism is more

or less a permanent situation.’

    ‘What’s
the secret?’ chided William Conway, a co-founder of the group. ‘I don’t

think we have any secrets.
We are a group of businessmen who have made a huge

amount of money for our
investors.‘ ‘I never bought into this conspiracy
theory

about
the Bush family, the energy companies or the Carlyle Group,’ says Michael

King,
seasoned political editor of the Austin Chronicle , who has observed the

phenomenon
for decades. ‘It is perfectly clear what they’re aiming at from what

they
do in public: managing the global economy to their own advantage, and doing

a
pretty good job of it.’

    On 11
September, while Al-Qaeda’s planes slammed into the World Trade Center
and

the Pentagon, the Carlyle
Group hosted a conference at a Washington hotel. Among

the guests of honour was
a valued investor: Shafig bin Laden, brother to Osama.

THANKS: COULTHART.

16 JUNE 2002: SENEGAL
2, SWEDEN 1 (OVERTIME)

15 JUNE 2002: THE COMING
OIL PRODUCTION PEAK…

——– Original Message
——–

Subject: Viridian Note 00316: 
Hubbert’s Peak

Date: 11 Jun 2002 23:34:02
-0000

From: Bruce Sterling <bruces@well.com>

(((I have  received
this elegantly composed rant

from Eric Hughes, 
who often favors us with his perorations.)))

Hubbert’s Peak, The Impending
World Oil Shortage

by Kenneth S. Deffeyes

Princeton University Press,
2001

Reviewed by Eric Hughes

One of my favorite Matt Groening
cartoons is near the

beginning of the Love is
Hell series, where he recommends,

next time you are think
about doing something shameless,

just consider “how long
you’re going to be dead”.  Below

that is a timeline, stretching
to infinity in both

directions, with a small
black dot in the middle labeled

“you are here.”

    The same
illustration might well have been captioned

“how long you’re not going
to be mining oil from the

ground.”

    This
last weekend I had the great pleasure of reading

*Hubbert’s Peak*, a book
on the global petroleum industry.

The author is a recently-retired
geologist who taught at

Princeton for thirty years,
worked in the oil industry

before that, and grew up
in the middle of Kansas oil

fields.  The man is
pure oil-intelligentsia, a category I

was not previously familiar
with.  The book contains a

wealth of detail, not exhaustive
and dry detail, but

selective and illuminating
detail.

    The purpose
of the book is to make and justify a

prediction about the year
of maximum world oil production.

His precedent is a 1956
prediction by M. King Hubbert (a

former colleague of his)
that U.S. oil production would

peak in the early 1970’s. 
The actual peak was 1970.

    Let’s
cut to the chase.  Deffeyes’s prediction is

2004.7, plus or minus a
couple of years.  As he says

immediately thereafter:
“There is nothing plausible that

could postpone the peak
to 2009.  Get used to it.”

   I’m not going
to summarize the argument; that’s the

content of the book. 
I will summarize, though, the

subject elements that lead
up to the argument: initial oil

formation, the geology of
its deposits, prospecting,

drilling and extraction,
and the statistics of oil fields

and their discovery. 
He then spends a couple of chapters

on Hubbert’s argument, and
another couple on the future.

It’s a relatively slender
book, only about 200 pages.

It’s plenty to make his
point, without overflowing into

boredom.

    One of
the delights of the book is the author’s sense

of humor.  At one point
in the text he presents a

particular way of doing
a graph that he’s proud of.  Fifty

pages later, in an endnote,
he makes the following

comment: “Here in the back
of the book, where my editor

isn’t likely to look, we
can derive the equation.”  This

combination of enthusiasm
and restraint in the exposition

is one of the charms of
the book.

    Another
appreciation I got from this book is the

difference in the dynamics
between oil and gas production.

They are intertwined in
terms of their discovery and

production techniques, but
their drilling and markets are

divergent.

    Oil is
found primarily in the “oil window” of 7,500

and 15,000 feet; gas is
found below those depths.  Both

are sources of combustion
energy, but they aren’t direct

replacements.  In order
to switch, capital has to be

invested, which takes a
while.  The oil peak really

matters, since it’s not
possible to immediately transition

to natural gas or any other
energy source.

    It is
easy to question individual assumptions and

intermediate conclusions
in the argument.  That’s not

really the point, though. 

The conclusion that Deffeyes

draws is both very narrow
and quite robust.  His only

point is to estimate the
year in which the most oil will

be taken from the ground
worldwide.  He is not making a

prediction about oil prices,
about how many years of oil

there are left, nor of any
number of other questions about

the dynamics.  What’s
interesting is that under many

variations of the model
and permutations of the

assumptions, the peak year
doesn’t really budge.

    The model
is robust against variations in reserve

estimates.  As recently
observed on this list, total

reserves depend a lot on
the prevailing oil price.  This

observation, though, doesn’t
change the estimate of the

peak year of production. 
Discoveries lead production by

about 11 years.  This
reflects the capital investment

cycle and the time needed
to get into production.

    
As oil prices rise, existing reserves come into

economic viability, but
still with a lag time, and that

lag time is longer because
many of these sources require

technology transfer in addition
to the capital spending.

As a result, there may well
be some local upswings in

production after the peak,
but total world production will

never reach its maximum
again.

   Along the lines
of other critiques, Thomas Gold’s idea

of deeply buried hydrocarbons
does not change this

prediction of the oil peak. 
First, Gold is speaking

primarily of methane, the
principal component of natural

gas.  Even the partial
replenishment referenced in

Viridian Note 00314 was
“very light oil and gas.”  The oil

window goes down only to
15,000 feet because below that,

it’s too hot for long-chain
hydrocarbons to be stable.  So

even if Gold is right about
oil and gas being produced by

microbes from raw organic
materials embedded in the earth,

that doesn’t change the
timing of the oil peak.  Deep

drilling for oil is poppycock;
deep  drilling gets you gas, not oil.

    This
is a science book, not an economic or political

tract.  Deffeyes makes
no political predictions, but he

does observe that political
disruption is inevitable.  The

U.S. oil crisis of the early
1970’s was precipitated by

the peak of U.S. oil production
in 1970.  Prior to that,

fluctuations in U.S. demand
could be satisfied by simply

pumping more American oil. 
After the American peak, the

excess demand could only
be met with overseas oil.  Once

OPEC realized this, there
was a “crisis”.

    The disruptions
that will happen after a world oil

peak will be even more interesting,
as in the curse about

“interesting times.” 
Excess demand is going to be met by

rationing; some will simply
have to go without.

Previously, demand could
be met by shifting the source of

supply.  This time
there is no more source of supply

anywhere.  The few
years after the peak will  be particularly

disruptive, since during
that time many  profound assumptions

about the way the world
works will be  proven wrong.

Bad investment decisions
will be revealed  in hindsight,

and one should expect an
orgy of finger-pointing.

    Deffeyes
mentions a potential flashpoint:  “You

guessed it; several islands
stick up in the middle of the

South China Sea, and the
drilling rights are claimed by

six different countries.” 
These, as I recall, are the

Spratly Islands.  The
claimants, just to give an idea of

the touchiness of the situation,
are China, Taiwan,

Vietnam, Malaysia, Brunei,
and the Philippines.  Control

of the islands is currently
divided between the six

disputants.

    After
a world oil peak, oil prices will go inevitably

upward for some years, continuously
increasing the stakes.

This is an unstable situation
that may well lead to war.

If this sounds alarmist,
it’s worth considering the Middle

East, the single largest
oil region in the world.  Ask

yourself if the U.S. would
have much political interest in

a Middle East without oil
fields.

   I have painted
a pessimistic picture of the medium-term

future.  The long-term
future, while not worked out, has

no such negative necessities. 
For one, there’s plenty of

oil left after the peak
of production; it’s just going to

get rarer and more expensive. 
The taps won’t all turn off

at once.  There is
plenty of time to develop a successor

energy infrastructure. 
Note that I didn’t say

“alternative energy infrastructure.” 
There won’t be

anything alternative about
the successor energy regime.

   Right now everything
is an alternative to oil.  Soon

these other sources will
become the main ball game.  I was

gratified to read about
the large remaining natural gas

reserves.  Reformation
of natural gas is the best

immediate source of fuel
hydrogen, and there’s plenty of

it.  Making the transition
to a hydrogen economy will

cost, but it will certainly
be possible.

    On balance,
I’d consider this book a Viridian must-

read.  It’s a wake-up
call, a particular Viridian

competence.  Every
important opinion needs enthusiasts as

promoters.  I’ll be
promoting the lesson of Hubbert’s

peak; please do likewise.

Eric Hughes

14 JUNE 02: YES, DR.
THOMPSON, IT HAS INDEED COME TO THIS.

From June
13 NEW YORK TIMES:

Rolling Stone, Struggling
for Readers, Names Briton as Editor

By DAVID CARR

Rolling Stone, a magazine
that all but defined the American countercultural

epoch, yesterday named a
British managing editor schooled in the racy ways of

contemporary English men’s
magazines. The appointment signals the end of Rolling

Stone’s history as a publisher
of epic narratives and literary journalism, in

part because the owner,
Jann Wenner, believes that today’s young reader has

little patience for long
articles.

    The new
editor, Ed Needham, comes from the English-owned FHM (For Him Magazine),

whose two-year-old American
version is the nation’s fastest-growing magazine.

Its circulation is now more
than a million, bigger than that of Esquire or GQ.

    Rolling
Stone, meanwhile, has struggled to keep its readers and advertisers. in

the face of competition
from magazines like Entertainment Weekly and the music

magazine Blender. Mr. Wenner
has decided on a gamble that his storied magazine ˜

which has published Tom
Wolfe and Hunter S. Thompson among others ˜ can be

reconfigured for a new kind
of reader. The current audience for Rolling Stone

has grown up on “Fear Factor,”
not “Fear and Loathing in Las Vegas.”

    And in
a world saturated with media choices, many editors have concluded that

the words in magazines are
often beside the point, as some of the more

successful publications
like Maxim communicate visually with funny charts,

outrageous photos and articles
that are increasingly little more than captions

on pictures. Mr. Wenner
seems to agree.

    “There
is so much media around,” said Mr. Wenner, who retains the title of

editor.
“Back when Rolling Stone was publishing these 7,000 word stories, there

was
no CNN, no Internet. And now you can travel instantaneously around the

globe,
and you don’t need these long stories to get up to speed.”

    “We cover
change, and we have to change in response to the times,” Mr. Wenner

added, saying that the fundamental
mission of the twice-a-month magazine would

not be altered, but the
execution would.

    While
he said he would not turn Rolling Stone into a a so-called laddie

magazine, Mr. Needham promised
that he would reintroduce the element of surprise

to the 35-year-old publication.
Mr. Needham emphasized that there would still be

feature articles, just that
they would be shorter and better illustrated.

    “All
the great media adventures of the 20th century have been visual,” said
Mr.

Needham, 37, who grew up
in Cambridge, England. “Television, movies, the

Internet, they’re all visual
mediums, and I don’t think people have time to
sit

down
and read. The gaps in people’s time keep getting smaller and
smaller, and

the competition is getting
more intense. It’s one of the facts of media life.”

    Another
editor recently hired by Mr. Wenner, Bonnie Fuller, is applying those

lessons to US Weekly. Ms.
Fuller’s celebrity magazine has become a circus of

photos, gossip and fashion
faux pas, and is finding early success on the

newsstand, according to
officials of Wenner Media.

    In April,
when Mr. Wenner dismissed Robert Love, who had been at the magazine

for 20 years and managing
editor for four and a half years, he made it clear

that he was looking for
a less wordy approach to help stem Rolling Stone’s

slide.

    Its ad
pages fell more than 25 percent from 1999 to 2001, hit hard by the

continuing flight of tobacco
ads from youth-oriented magazines. (Through the

first five months of this
year, however, it has rebounded slightly, by 2.4

percent.) Its circulation
has remained flat at about 1.25 million, but its

newsstand sales ˜ a barometer
of a magazine’s vitality with readers ˜ fell

nearly 10 percent in the
last half of 2002 compared with the period in 2001,

according to the Audit Bureau
of Circulations.

    Some
of those readers and advertisers have moved to magazines like Blender,

which has used short pieces,
provocative writing and humorous headlines and

captions to stand out in
a crowded marketplace with music magazines like Vibe

and Spin. The magazine,
which is owned by Dennis Publishing, which also produces

Maxim, promises advertisers
that it reaches 350,000 paying readers with each

issue. Beginning with its
August issue, Blender’s issues will increase from

every other month to 10
times a year.

    Rolling
Stone is also facing stepped-up competition from Time Inc.’s

Entertainment Weekly, which
recently initiated a monthly music supplement called

Listen2This.

    The issue
of reviving Rolling Stone is a critical one for the privately held

Wenner Media, which publishes
Men’s Journal in addition to Rolling Stone and Us

Weekly. The music magazine
has historically served as a cash machine to finance

Mr. Wenner’s other endeavors.
To fight a growing perception that Rolling Stone

could be the next Playboy
˜ a hugely successful magazine that has lost its

salience in a new cultural
context ˜ Mr. Wenner has decided to embrace changing

readership habits rather
than to outrun or ignore them.

    The magazine
has been graphically updated by its new art director, Andy Cowles,

who previously worked at
Q, a British music magazine. But it still has a

tendency to lavish attention
on aging rockers like Mick Jagger.

    Mr. Wenner
remains unapologetically involved in the editorial affairs of Rolling

Stone, although company
executives and editorial staffers say he has given wide

latitude to Ms. Fuller at
Us Weekly as she remakes the magazine into a

star-driven weekly for women.
Mr. Wenner said that Mr. Needham would be given

similar permissions to remake
the magazine he founded.

    “He has
great qualities. He has a demonstrated track record as a modern magazine

packager and those trumped
everything else,” Mr. Wenner said.

   
Reached in Colorado, Mr. Thompson, whose articles defined the early version
on

the
magazine, was among those surprised by Mr. Wenner’s hiring of Mr. Needham.

“It
seems as if he’s in dire straits. Has it really come to that?” he said.

    Others
think the choice of Mr. Needham makes sense.

    “It seems
when people are trying to develop media vehicles for young people,

they are going for the shorter
attention span,” said Lawrence Teherani-ami a

media director at Wieden
& Kennedy, an advertising agency that represents

companies like Nike. “I
don’t think there is anything inherently wrong with

that. I just hope that Rolling
Stone keeps its heritage of being the source of

great reporting on youth
culture.”

    Mr. Needham
studied American literature at Sussex University but came of age

professionally and personally
in the laddie magazine world of England. After

working as a freelancer,
he became deputy editor of the British FHM in 1996 and

editor in chief in 1997.
The owner of FHM, the British publisher EMAP, then

selected him to edit a new
American version of the magazine.

    Despite
Dennis Publishing’s having a three-year head start with Maxim, FHM has

rapidly found reader and
advertiser acceptance with the classic laddie

fundamentals of pictorials
of relatively obscure celebrities, jokes and

tutorials on how to be a
modern man.

    “The
overlap between FHM is pretty slender ˜ Britney Spears and Jennifer Lopez
˜

but I respect the magazine
enormously,” Mr. Needham said of Rolling Stone. “It’s

a magazine that is very
faithful to its traditions, perhaps to a fault, and

there has to be a bit more
crafting of the magazine to make it a success on a

very brutal newsstand.”

13 JUNE 02: SIMPLY TSFAT!

“SIMPLY
TSFAT is three Breslev Chassidim, 2 Americans and one Israeli, 2 guitars
and one violin. Our aim is to spread the joy and inspiration of Breslev
Chassidim and to bring a breath of fresh air to you, from our home, the
mystical city of Tsfat, the home of the Kabala.

In New York, Philadelphia,
Montreal, Miami, San Diego, Portland, Guatemala and Costa Rica our audiences
have ranged from Jewish inmates at Federal Penitentiaries to 4000 people
at an Israel 2000 event at the Greek Theater in LA, from Chassidic children
in Cheder to Conservative congregants, from Israeli Army bases in the Golan
to skid row in Los Angeles (REALLY!) and old age homes too.

Our recordings “Fresh Air”
and „Be Happy‰ on tape or CD and are available in most fine Judaica stores
or through:

Sameach Music

1-888-3-SAMEACH or 718.479.4507

Fax: 718-479-4593

E-mail: SameachOne@aol.com

Have a SIMPLY TSFAT event
in your community and give yourselves a breath of fresh air!!”

12 JUNE 02: CORRUPTION,
2002 CORPORATE STYLE

From the 9 June 02 New
York Times:

Heads I Win, Tails I Win

By ROGER LOWENSTEIN

Every year, in an annual
rite of spring, SBC Communications discloses the

principles that it follows
in setting pay for its top executives.

    As with
all companies, this information is contained in the annual proxy

statement, and as is also
common, SBC purports to follow some basic credos of

American business.

    
A sprawling Baby Bell with headquarters in San Antonio, SBC says its aim
is to

attract and retain high-quality
executives, those who will ”enhance the

profitability” of SBC.
And its foremost principle in achieving this goal is to

”align the financial interests
of SBC’s executives with those of SBC and its

shareholders.”

    This
is an all-American notion, just as SBC is an all-American company. Though

not as well known as AT&T
and MCI, SBC provides the dial tone in the Southwest,

California, the Midwest
and Connecticut — that is, to one in three Americans.

SBC is typically American
in one other respect: somewhere along the way, its

stated compensation principles
became little more than platitudes.

    For the
purpose of examining a single C.E.O.’s compensation, I picked SBC for

its unspectacular qualities.
It is profitable and professionally managed, and

its C.E.O. is well regarded
in his industry. Like many C.E.O.’s, he pursued a

bold growth strategy for
much of the 90’s, had some good early years and more

recently gave back much
of his gains. In the last three years, his stock has

fallen 27 percent — more
than either the Standard & Poor’s 500 or the stocks of

his Baby Bell peers. But
the rate at which the boss was compensated kept

growing.

    SBC’s
chief executive is Edward E. Whitacre Jr. A 60-year-old, 6-foot-4 lifer
in

the Bell system, he was
hired by the old Southwestern Bell back in 1963 for a

job that included hammering
fences. He has been the boss since 1990 and now

rakes in an annual sum that
salaried executives a generation ago could scarcely

dream of. Last year, the
third year in a row in which SBC’s share price

declined, Whitacre received
the largest pay package of his career — one with a

present value of $82 million.

    SBC is
not, by present standards, a compensation horror story. Ed Whitacre’s

record bears little resemblance
to the catastrophes overseen by others in his

industry, like the lavishly
paid C.E.O.’s employed by Lucent, AT&T and WorldCom.

Nor did Whitacre preside
over an Enron-style scandal or pocket tens of millions

before taking his company
into bankruptcy, as Linda Wachner did at Warnaco.

    Whitacre
exemplifies how the system itself is shot through with hypocrisy. And

because his tenure is long,
his collected proxies offer a view of the system’s

gradual corruption. Over
his 12 years as C.E.O., while Whitacre reaped a

fortune, his stockholders
have done precisely average. Their return from

appreciation and dividends
is 11.5 percent a year — a notch below the S&P 500,

at 12.8 percent, and a sliver
higher than its peer companies.

    Executive
pay has been soaring for two decades, but over the last couple of

years, as many big companies
have seen their stock pummeled, the

pay-for-performance rationale
that was supposedly driving these packages has

been exposed as a fraud.
Moreover, as executive pay has grown ever more

dependent on share prices,
the incentive to manipulate earning reports and

thereby boost shares has
also increased.

    The superinflation
of executive wages began in the 1980’s. Following a dismal

decade for stocks, corporate
boards began focusing more on their share prices.

This was largely defensive:
low stock prices spawned a takeover wave. The best

defense against a T. Boone
Pickens or a Carl Icahn was to get your stock out of

their reach.

    ”Promoting
shareholder value” became watchwords of corporate America, as if

that hadn’t been the duty
of management all along. Boards wanted to make

executives think like entrepreneurs.
The model became Silicon Valley, where

companies motivated the
troops by liberally dispensing options (and where many

entrepreneurs became fabulously
wealthy). The beauty of options, to corporate

boards, is that they don’t
count against the income statement. They are like

Monopoly money. Of course,
the more you issue options, the more you dilute the

value of existing shares,
but in the bull market of the 1990s, this was neatly

obscured.

    Ed Whitacre’s
cash take, at first, was relatively stable — in 1992, he got $3.1

million; two years later,
$4.4 million. But as SBC grew, Whitacre was rewarded

with options that gave him
the chance to earn a small fortune over many years.

For instance, in 1994 Whitacre
received options entitling him to buy 161,739

shares, at the price prevailing
in 1994, over the next decade. So if, for

instance, the stock doubled,
Whitacre stood to make $6.6 million; if it tripled,

he would make $13 million.

    That
didn’t completely align his interests with those of cash-paying

shareholders, because Whitacre
had nothing to lose if the stock went down. Also,

a 10-year fixed-priced option
— the standard variety in corporate suites —

entails something of a freebie,
because even if Whitacre did only a mediocre

job, the stock was likely
to rise somewhat. (Even a portfolio of Treasury bonds,

vintage ’94, would have
nearly doubled.)

    So Whitacre’s
options would reward him not just for the part of the stock’s rise

that reflected superior
performance, but also for the part that reflected what

might be termed normal business
progress, or progress at the rate of risk-free

Treasury bonds.

    Meanwhile,
in industry circles, Whitacre was winning a name as a tough and

effective leader with an
L.B.J.-like aptitude for cajoling regulators. He was

especially renowned for
his skill at lobbying to keep long-distance companies

out of local services, a
monopoly. He also pushed SBC into sexy new terrain,

like wireless, long distance
and the Internet.

    Profiles
described Whitacre as hard-working, not given to publicity and

uninterested in corporate
frills. While he maintained a ranch near Marble Falls,

Whitacre wore business pinstripes
to work, not cowboy boots.

    He also
developed a strong interest in stock options. In 1994, SBC’s stock price

was virtually flat. But
the following year, Whitacre got a fresh — and

substantially larger —
batch of options. Though the shareholders received a

poor return, Whitacre was
granted a fresh start.

   
Now that he was getting huge annual grants, the arithmetic subtly changed.
To

become
rich, Whitacre merely had to raise the stock above its level of any

particular
year. Since stocks fluctuate, some of his grants would tend to be at

depressed
prices, meaning that his ”option” to get wealthy became a virtual

certainty.
The frequency of the awards thus undermined the principle of pay for

sustained
long-term performance. By turns, a system designed to motivate became

one
to simply enrich.

    In 1995,
SBC shares rose sharply; in 1996, they fell. And in the following year,

Whitacre got what was then
his biggest option grant ever, 345,000 shares. Those

1997 options didn’t merely
give Whitacre a fresh start; they handed him a golden

carrot for getting the stock
back to where it had been. They were paying him for

treading water.

    The other
way his pay changed was that his board began to grant significant

compensation aside from
options. In 1995, Whitacre got $4.9 million. In 1996, an

off year for SBC, he got
$6.6 million. In 1997, the total rocketed to $15.7

million. Including options,
the total for that year was $21 million. These sums

were distributed over seven
different categories: salary, bonus, ”other,”

restricted stock, options,
long-term incentive plan and ”all other.” This

seven-pocket approach served
two purposes. First, the dollars that Whitacre

received in any one category
were only a fraction of the total, minimizing the

appearance. Secondly, the
board determined the total for each category by

different yardsticks, as
if each were independent of the other. He would get

millions out of one pocket
for overall leadership, millions out of another for

directing some special event
like a merger and still more to ”retain” his

future services.

    In 1997,
for instance, Whitacre got $8.7 million as a ”special retention

grant.” The most curious
aspect of that award was that in 1998 Whitacre

received another retention
grant, this time of $12.5 million. He has received

comparable awards in every
year since, as if he were somehow both an

indispensable captain and
a notorious flight risk.

    Whitacre
also benefited from a permissive redundancy. Every year, he got a

”long-term incentive”
— in 1997 it was $2.2 million — rewarding him for the

rise in the stock over a
three-year stretch. This just duplicated the effect of

his options.

    In 1997
as well, the board awarded Whitacre a $3.3 million ”bonus,” largely

for his ”excellent leadership”
in fashioning a merger with Pacific Telesis

Group. This mimicked a national
trend of awarding bonus pay for work once

considered to be part of
the job. After all, if the Telesis merger turned out to

be a success, Whitacre would
presumably benefit via his stock options. And if

the merger was too new to
bear fruit for stockholders, why was the board

rewarding Whitacre ahead
of the people whose returns his were supposed to

reflect?

    His total
package, including the present value of options, soared to $29 million

in 1998 and $25 million
the following year. But in 2000, the board was forced to

admit that various officers,
including Whitacre, had failed to meet their yearly

targets. Accordingly, his
bonus was cut by 25 percent to a mere $4.5 million.

    Nonetheless,
Whitacre got a 32 percent hike in salary. The multipocket approach,

a staple of the consultants
who design packages for SBC and most other big

corporations, thus put the
lie to the appearance of risk; if Whitacre was

punished from one pocket,
he was promptly redeemed from another. Indeed, the

board doubled his options
award, raising the total compensation for 2000 to a

present value of $29 million.
The total kept on rising.

    Increasingly,
the board’s human resources committee, which deals with

compensation, cited metrics
related to SBC’s size or general reputation but not

necessarily to its profitability
or long-term stockholder returns. Though SBC’s

returns had outpaced those
of other Baby Bells in Whitacre’s early years, in the

last five years they were
20 percentage points lower. And that is the period

when Whitacre has gotten
the bulk of his pay. Boards typically take longevity

into account, and SBC is
no exception-almost as if the board felt it had to make

up for some suddenly felt
neglect when Whitacre was just cutting his teeth.

    In any
case, the proxy has found plenty on which to commend the C.E.O. — for

”transforming SBC from
a regional carrier to a national and global

competitor,” for meeting
”extraordinary challenges,” for becoming ”one of

the leading chief executive
officers in the United States.”

    The directors,
who earn $60,000 a year, no doubt believe this; they have been

close to Whitacre and have
been endorsing his pay for a long time. He has also

been endorsing theirs. Two
of SBC’s nominally independent directors — August A.

Busch III, chairman of Anheuser-Busch,
and Charles Knight of Emerson Electric —

run companies for which
Whitacre is a director. Most of the other 18 directors

have either served with
Whitacre for at least 10 years or were directors of

companies that Whitacre
acquired.

    Certainly
there was much to admire in Whitacre’s bold management. With the world

of telecommunications rocked
by technological change and regulatory upheaval,

Whitacre reckoned that to
sit still was to invite slow decimation. He followed

the Telesis merger by acquiring
Southern New England Telecommunications

Corporation in 1998 and
Ameritech, a giant rival, in 1999 — a blockbuster $62

billion combination.

    It is
not clear that the merger strategy was wrong or that a better strategy
was

at hand. But the telecom
industry was increasingly unattractive. Technology was

reducing the cost of service,
and rivals were snapping up slices of SBC’s former

monopoly. While SBC’s revenues
grew to $40 billion, the empire ranging from

Capetown to Hartford with
nearly 200,000 employees, most of its cash flow was

being consumed by reinvestment,
and its growth was starting to sputter.

    For the
last four years, SBC’s net income growth has been anemic. On closer

examination, the picture
was worse. Corporations with overfunded pension plans

are allowed to book some
of the excess as profit, even though the money never

reaches the shareholders.
In the late 1990’s, as the stock market boomed, SBC’s

plan, like many, became
overfunded, allowing SBC to pad its net income. In 2000,

this contributed $1.1 billion,
14 percent of its total. Then, in 2001, SBC’s

green eyeshades raised the
rate at which they assumed that the pension plan

would appreciate in the
future — by a full percentage point. Since the market

was then in meltdown, this
was a curious decision. In fact, according to a study

of 50 big pension plans
by Milliman USA, SBC raised its rate by more than any

other company (most didn’t
raise it at all). In real dollars, SBC’s plan lost

money last year. But since
its assumed rate of appreciation was higher, so was

the contribution to income.
Last year it equaled $1.45 billion — 20 percent of

SBC’s so-called bottom line.
In setting pay levels, SBC says the board

distinguished between telephone
revenue and pension plans. The stock market

presumably did not.

    SBC’s
proxies have repeatedly cited 1996, the year of the Telecommunications

Act, as the start of Whitacre’s
transformation. In 1996, SBC earned $1.73 a

share (split-adjusted).
Even if you accept SBC’s reported profit for 2001 at

face value, its per-share
earnings, adjusting for a stock split, have grown by

only 4 percent per annum
over that entire span.

    So how
did SBC’s board justify an $82 million package for 2001? The proxy cited

Whitacre’s ”solid financial
results,” as well as SBC’s strong balance sheet,

the ”extraordinarily challenging”
market conditions and Whitacre’s status as a

”leading” C.E.O., deserving
of a salary and bonus in the 75th percentile of

his peers.

    There
is nothing unusual in this. Most companies justify their pay levels

according to peer groups;
all believe their own C.E.O. deserves to be in the

upper echelon; and each
thus helps to ratchet up the scale for all. Until

recently, Verizon, a rival
Baby Bell, had two C.E.O.’s, each of whom received

$14 million last year in
addition to at least $14 million apiece in options

value. Whether SBC or Verizon
got more for the C.E.O. buck becomes a senseless

debate; indeed, at such
levels, all attempts to rationalize pay become

meaningless.

    After
reporting this article from public filings, I called SBC for comment. Jim

Ellis, the general counsel,
took strong exception to the idea that his boss is

overpaid. ”If he’s a poster
boy, it isn’t for abusing the system or being off

the reservation,” Ellis
maintained. SBC’s performance, he said, ranked in the

top third of a group of
20 companies examined by the board, yet his pay was less

than the median of that
group. Ellis added that Whitacre ”has done exceedingly

well in positioning the
company not just for growth periods but for down

periods.”

    The C.E.O.’s
most recent package included a Bunyan-size options grant of 3.6

million shares. That was
partly ”to assure his continued presence,” Ellis

said. The present value
of these options, according to the compensation

consultant Pearl Meyer &
Partners, is $61 million. In effect, the board turned

the stock’s decline to Whitacre’s
advantage,
since it chose a time when the

stock was down (and options
were cheap) to give him four times as many shares as

when the stock was at its
peak. Of course, Whitacre will have to turn the stock

around to cash in on the
award. But if he does, he will reap an immense fortune

— tens of millions of dollars
— merely for recapturing the ground that his

shareholders had already
lost.

 

Roger Lowenstein, the
author of ”When Genius Failed,” writes frequently for

the magazine and is working
on a book about the dot-com bubble.