Abby
Martin talks to Karen Hudes, former senior executive at the World Bank,
about her experience blowing the whistle on the high level corruption
within the international financial system and how her story was
censored.
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The World Bank: Rejecting “The Rule of Law”
“The
proverb, ‘What you don’t know can’t hurt you”, originated in 1576 as,
‘So long as I know it not, it hurteth mee not.’ But the opposite is
true. Unpleasant hidden truths do the most harm. The best way to fight
corruption is to expose it. Think of the World Bank as ENRON.” … Karen Hudes
by Karen Hudes (with
Jim Fetzer)
Karen Hudes
When, thanks to Mark Novitsky, a federal whistleblower,
I learned that Karen Hudes, who earned her J.D. at Yale, our most
distinguished School of Law, and an M.Phil. in economics at the
University of Amsterdam, which is also a formidable institution, had
been removed from her position as Senior Counsel for the World Bank
because of her efforts to expose corruption and reaffirm the rule of law
in the form of appropriate standards of accounting, I was dumbfounded.
What
initially appear to be obscure issues of international finance,
moreover, have the potential to sever ties between us and our NATO
allies and weaken the national security of the United States. The
stakes involved are therefore extremely high for every American citizen.
During the World Bank
and IMF Annual Meetings last October, with her encouragement, the
Development Committee informed President Jim Yong Kim of the need for “a
more open, transparent and accountable World Bank Group.” The reasons
that motivated that request included the following series of disturbing
developments:
The Crisis in Cyprus as a Mini-Model
The threat by EU bankers to loot savings accounts held in Cyprus has raised red flags all over the world.
As The New York Times (25 March 2013) has reported,
LIMASSOL,
CYPRUS — It is not just about rich Russians and Cypriot retirees. Also
vitally at stake in this island country’s banking crisis is Cyprus’s
credibility as a place for international companies to continue doing
business.
Take Avid Life Media, the Canadian-owned operator of
some of the world’s biggest online dating sites. Only a few weeks ago it
set up an office here as a base for its international operations,
attracted to Cyprus — as hundreds of other foreign businesses have been —
because of its reputation for financial stability, a low corporate tax
rate, a friendly banking environment and most of all, a strong rule of
law.
Now imagine that was the case for the most
important bank of all, which affects the world’s economy. Imagine that
bank accounts were being looted world-wide and you will begin to
appreciate the dimensions of the problem.
When
I discovered that Karen Hudes’ reinstatement, which was being supported
by the finance ministers of the nations of the world, was being blocked
by its recently appointed president, Jim Yong Kim, who was formerly
President of Dartmouth, I was further astonished, because I had
encountered Kim before. He had supported the publication for an article
by a member of the computer science faculty, Hany Farid, who claimed
that the backyard photographs used to convict Lee Harvey Oswald in the
public mind were authentic, which was profoundly disturbing.
Hany Farid and “the backyard photographs”
That
is a claim that others had long since proven false. Jack White, the
legendary JFK photo analyst, had testified to the House Select Committee
on Assassinations (HSCA) when it had reinvestigated the deaths of JFK
and of MLK in 1976-77 and had
pointed out a dozen features that disqualify them.
Oswald himself had told Capt. Will Fritz, the Dallas Homicide
detective who interrogated him, that the photo he was shown had his face
pasted on someone else’s body. Like other claims Oswald made at the
time, subsequent research has proven that he was right.
The chin
is not Lee Oswald’s chin, which was somewhat pointed, but a block chin;
there is an insert line between the chin and his lower lip; and the
finger tips of his right hand are cut off, for example. Even more
interestingly,
he realized that the two communist newspapers that Oswald was holding–
The Militant and
The Worker–had
known dimensions and could serve as an internal rule to determine the
height of the person who was holding them. Using that method, he was
able to establish that he was about 5’6″ tall, when Oswald was about
5’10″–which meant that either someone who was too short to be Oswald had
posed for the photos or that they had been introduced too large when
they were faked. Either way, they could not possibly be authentic.
When
I discovered that Hany Farid, who has a lab funded by the FBI, had
published the claim that he had proven them to be authentic by showing
that it was possible to replicate the shadow cast by the nose in one of
them, I knew he was perpetrating a fraud on the public, because (1)
there are four poses taken in different positions at different times,
where it would have been virtually impossible for the nose shadow to
remain constant from one to another; and (2) there are many other
indications of fakery besides the shadow cast by the nose that prove
fakery, where even if he had been right about the nose shadow, his
conclusion of authenticity would have been wrong. He was violating a
basic precept of science by not basing his reasoning upon all the
available relevant evidence
So I wrote to President Kim to explain
why Darmouth was committing a blunder in supporting Hany Farid’s claim,
which I substantiated with multiple lines of proof. Dartmouth stood
pat, however, and never took steps to correct the record, even though it
was a matter of immense public interest and concern. I published an
article about my experience with Kim in an article co-authored with Jim
Marrs in OpEdNews,
“The Dartmouth JFK-Photo Fiasco” (20 November 2009) and followed up by publishing my correspondence in
“Blowing the Whistle on Dartmouth: Hany Farid in the nation’s service” (26 January 2010), which I regarded as a professional obligation.
It
now appears to me that Kim may have been rewarded for his contribution
to the public deception about the death of JFK by being appointed to the
World Bank, just as Paul Wolfowitz appears to have been appointed by
George W. Bush for his contributions to 9/11 and the “war on terror”. I
have long believed that, in Washington, D.C., the bigger the liar, the
further you go. I now believe that, when it comes to acting contrary to
the public interest, the presidency of the World Bank may be another
sign of compliance with corruption, as the experiences of Karen Hudes
reflects. I regard us as kindred spirits insofar as “whistle blowing”
seems to be coursing through our veins.
Credit Ratings, NATO and Democracy: Too Big for Transparency?
by Karen Hudes
The
World Bank and its next door neighbor, the International Monetary Fund
(IMF), stand at the crossroads of the international financial system.
Both organizations are referred to as the “Bretton Woods” institutions,
named for the site in New Hampshire where the founding conference of 44
countries was held in 1944. The Bretton Woods institutions were created
to prevent the “beggar thy neighbor” policies responsible for World
Wars I and II.
The World Bank’s membership has now grown to 188
countries. The World Bank and IMF share a Board of Governors comprising
the Ministers of Finance of member countries. They each have resident
Boards of 24 Directors; seven Directors are appointed by 7 countries
with the largest economies and 17 Directors are appointed by groups or
“constituencies” of the remaining member countries.
Because of its
crucial role at the heart of the world’s financial system, problems at
the World Bank are going to have consequences for the world’s financial
system. I know “up close and personal” because I served as Senior
Counsel for the World Bank for 21 years. My qualifications included a
J.D. from Yale Law School and M.Phil. in economics from the University
of Amsterdam. I know the institution inside and out. And I have been
blowing the whistle on improper practices at the World Bank that
threaten the world’s fiscal integrity.
Reporting Corruption up the Chain of Command
I
worked in the Legal Department of the World Bank from 1986-2007. But
in 2007, I was fired in retaliation for reporting corruption at the
Bretton Woods institutions up the chain of command at the World Bank,
through the US Treasury Department, and to the US Congress. My report
was quite specific, namely: that the World Bank is out of compliance
with the law, because its financial statements to the holders of its
$135 billion in bonds, which are denominated in 52 currencies, are not
in accord with Generally Acceptable Accounting Principles and Auditing
Standards.
I never imagined how intractable the corruption at the
World Bank was. A reliable stakeholder analysis, based on game theory
modeling, shows that failure to adhere to the rule of law by the World
Bank will bring about a world-wide currency war that will make what we
lived through in 2008 pale by comparison. The stakeholder analysis
began predicting success in bringing the World Bank into compliance
after
the European Parliament invited me to testify on May 25, 2011. My testimony
included a chronology of the cover-up. President Kim has already prompted Germany
to repatriate the equivalent of $36 billion in gold.
As I told Sen. Harry Reid in 2008, “the greatest security risk to the
US is in alienating its partners by acting as a hegemon”.
The Failure of Press Coverage
One
reason it is so difficult to end the corrupt regime at the World Bank
is because there has been virtually no press coverage. It is possible
to conclude from this that democracy in the United States has been
weakened by the
reduction
in the number of corporations who own the bulk of US media outlets
(from 50 to 5 in less than twenty years.) Barclays Bank, JPMorgan Chase
& Co, The Goldman Sachs Group along with a few others use
interlocking corporate ownership to control 40 percent of total wealth
and 60 percent of global revenues.
This concentration of power
rests on disproportionate corporate investments of one percent of all
corporations. Theorists at the Swiss Federal Institute of Technology in
Zurich, using natural systems mathematical modeling and comprehensive
data on the actual corporate ownership of 43,000 transnational
corporations,
discovered this concentration of power. When
questions are raised about “who controls the world”, this one percent
looks like a very promising candidate. The crux of the matter is that
the corporations control the mass media and, through the mass media, control the politicians.
Although
there have been occasional articles about these issues, where some of
my commentaries about them have appeared in print, for the most part,
interest in these questions from the public has been few and far
between, where recent interviews with Deanna Spingola and with Jim
Fetzer, who are alternative media radio hosts, have been the
exception. Here are some links to our recent interviews:
- “Spingola Speaks” with Karen Hudes, 22 January 2013, HOUR 1
- “Spingola Speaks” with Karen Hudes, 22 January 2013, HOUR 2,
- “The Real Deal” with Karen Hudes, 6 March 2013, 1800-1930,
- “The Real Deal” with Karen Hudes, 20 March 2013, 1800-1830,
- “The Real Deal” with Karen Hudes, 21 March 2013, UPDATE,
- “The Real Deal” with Karen Hudes, 22 March 2013, 1800-1830,
[NOTE: Both interviews are followed by discussion with Mark Novitsky.]
The Early Years of the World Bank
The
longest-serving General Counsel of the World Bank, Aaron Broches,
helped to write the charters of the World Bank and IMF at the Bretton
Woods conference in 1944. According to Broches, corruption intensified
during former Secretary of Defense Robert McNamara’s presidency of the
World Bank from 1968-81. In 2007, the Board fired another president
from the Pentagon, Paul Wolfowitz, after Wolfowitz gave a 35% salary
increase to his girlfriend at the World Bank, Shaha Riza.
The Europeans asked for an inquiry. The investigation headed by Paul Volcker, unfortunately,
did not address the corruption. The Europeans reacted by calling for an end to
the 66 years’ “Gentlemen’s Agreement”
that the US appoints the President of the World Bank and the Europeans
appoint the Managing Director of the IMF. Had the press reported my
warnings to the authorities about the corruption, the US could have
avoided substantial tarnish to its reputation and the loss of the
Gentlemen’s Agreement.
My efforts to expose and correct the
failure of the World Bank to adhere to standard accounting procedures
has been enduring. In 2005, for example, the Dutch Government asked the
Audit Committee to end a campaign of retaliation against me
for reporting to the Executive Board about an inaccurate evaluation on a
failed Banking Sector project in the Philippines. Then Senator Richard
Lugar (R-IN) and the Senate Committee on Foreign Relations have written
three letters to the World Bank on my behalf, asking for an end to the
ongoing cover-up.
My Efforts to Expose Corruption
In 2007,
I also met with Chris Armstrong in Senate Finance, Jayme Roth in
Senator Bayh’s office, and Nicole Willet in Senator Clinton’s office.
Senators Lugar, Leahy and Bayh began asking GAO to investigate the World
Bank in 2008,
and
the Audit Committee is requiring an independent audit of the World
Bank’s internal controls. The Audit Committee also referred my case to
the Bank’s Institutional Integrity Department (INT). INT, which reports
to the President of the World Bank, is used to intimidate staff. Paul
Volcker ignored INT’s sinister role and simply recommended that
whistleblower retaliation cases should be removed from INT’s mandate.
I
met with the Ministry of Foreign Affairs of the Dutch Government on 24
September 2007. The Dutch are not happy with the Volcker Report and the
ongoing cover-up. Moreover, previous Dutch Executive Directors, Herman
Wijffels and Ad Melkert, disclosed that ‘third parties’ attempted to
intimidate them and other members of the World Bank’s Board through
shocking invasions of their private lives. The US violation of
the safe-conduct normally accorded to diplomats is an egregious breach
of honor. Article VII, Section 8 of the World Bank’s Articles provides
immunities to Executive Directors, officers and staff.
Ben
Heineman (who was a member of the Volcker Panel) spoke at the Yale Law
School on October 5, 2007. On October 8, 2007, at the suggestion of
minority staff on the Senate Foreign Relations Committee, I contacted
Kenneth Peel at Treasury, to encourage the Bush Administration to end
the cover-up on the Philippines Banking Sector Reform Loan and restore
the rule of law to the Bank. But the upshot of my efforts to correct
improper procedures was to have me removed from my position as Senior
Counsel, which has had an intimidating effect.
The Crucial Year 2007
I
wrote to the Dean of the School of Law at Yale, Robert Post, on 14
October 2007 to express my appreciation for his offer of assistance in
exposing the scandal. I included an email that I had sent to
The Wall Street Journal
in an effort to correct the false impression it had conveyed about the
Volcker Panel report, but it was to no avail. Here is what I wrote him:
Dear Bret,
I
am a regular reader of your column, and wanted to set you straight
about my next-door neighbor, Suzanne Folsom, and her role as Director
of the World Bank’s Institutional Integrity Department. INT’s function
under Ms. Folsom is not as you described in your column today. Ms.
Folsom has continued to direct INT along the same lines as her
predecessor Maarten de Jong: as a “goon squad” that intimidates
any staff member who steps out of line and informs the Board of
Directors about what is actually happening at the World Bank.
Until
August 1, 2007 I was in-house counsel at the World Bank, and fulfilled
my ethical obligations to report to the Audit Committee about a cover-up
on a failed Banking project in the Philippines which resulted in the
corrupt take-over of the second largest Bank in the Philippines, a $493
million bail-out from Philippines Deposit Insurance Corporation when
depositors lost confidence in Philippines National Bank, the
cancellation of $200 million from the World Bank’s associated loan to
the Government of the Philippines, and the cancellation of $200 million
in financing from Japan.
Instead of defending me, INT attacked me
in a flawed report to the Audit Committee. I am not the only
whistleblower whom INT has attacked. The Senate is fully aware of this
scandal at the World Bank, which served as a poignant backdrop to Mr.
Wolfowitz’ forced departure. The Europeans are withdrawing
their funding from the World Bank in favor of the European Investment
Bank as a result of these severe governance issues. Relevant
documentation is attached to this email.
Because of AOL’s
limitation on the size of files that may be attached to emails, I will
forward other supporting documentation to you separately.
I sent
The Wall Street Journal a
set of the following, extremely important, documents, expecting that
the cover-up would end. I did not anticipate that a small elite group
who owned the press was stealing democracy from US citizens
by censoring what could be published by the media.
Read More here
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