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Should Companies Have To Pay Taxes?

Reading companies’ annual reports to the Securities and Exchange Commission is a reliable cure for insomnia. Every so often, though, there is a significant revelation in the paperwork. Last year, one of the most important revelations came from Microsoft’s filings, which spotlighted how the tax code allows corporations to enjoy the benefits of American citizenship yet avoid paying U.S. taxes.

According to the SEC documents, the company is sitting on almost $29.6 billion it would owe in U.S. taxes if it repatriated the $92.9 billion of earnings it is keeping offshore. That amount of money represents a significant spike from prior years.

To put this in perspective, the levies the company would owe amount to almost the entire two-year operating budget of the company’s home state of Washington.

The disclosure in Microsoft’s SEC filing lands amid an intensifying debate over the fairness of U.S.-based multinational corporations using offshore subsidiaries to avoid paying American taxes. Such maneuvers — although often legal — threaten to significantly reduce U.S. corporate tax receipts during an era marked by government budget deficits.

Microsoft has not formally declared itself a subsidiary of a foreign company, so the firm has not technically engaged in the so-called “inversion” scheme that President Obama and Democrats have lately been criticizing. However, according to a 2012 U.S. Senate investigation, the company has in recent years used its offshore subsidiaries to substantially reduce its tax bills.

That probe uncovered details of how those subsidiaries are used. In its report, the Senate’s Permanent Subcommittee on Investigations noted that “despite the [company’s] research largely occurring in the United States and generating U.S. tax credits, profit rights to the intellectual property are largely located in foreign tax havens.” The report discovered that through those tax havens, “Microsoft was able to shift offshore nearly $21 billion (in a 3-year period), or almost half of its U.S. retail sales net revenue, saving up to $4.5 billion in taxes on goods sold in the United States, or just over $4 million in U.S. taxes each day.”

Microsoft, of course, is not alone. According to a report by Citizens for Tax Justice, “American Fortune 500 corporations are likely saving about $550 billion by holding nearly $2 trillion of ‘permanently reinvested’ profits offshore.” The report also found that “28 corporations reveal that they have paid an income tax rate of 10 percent or less to the governments of the countries where these profits are officially held, indicating that most of these profits are likely in offshore tax havens.”

In the political debate over taxes, conservatives often cite inversions and other games with offshore subsidiaries as proof that the U.S. corporate tax rate is too high in comparison to other industrialized countries. Yet, when all the existing tax deductions, write-offs and credits are factored in, America’s effective corporate tax rate is actually one of the industrialized world’s lowest.

With the U.S. tax code now permitting companies to use brazen tax avoidance schemes in true tax havens, the real question is more fundamental than what the proper corporate tax rate should be. Instead, the question is now whether corporations should have to pay any taxes on their profits at all?

The answer should be obvious. Companies enjoy huge benefits from operating in the United States — benefits like (among other things) intellectual property protection, government provided security (police, firefighting, etc.) and publicly financed infrastructure. Those services and assets cost money.

If the tax tricks employed by companies like Microsoft become the rationale to eliminate corporate taxes entirely, then America would allow companies to be exempt from paying their fair share of those costs. That would be a truly endless and unacceptable bailout — one given to executives and shareholders and paid for by the rest of us.

David Sirota is a senior writer at the International Business Times and the best-selling author of the books Hostile Takeover, The Uprising, and Back to Our Future. Email him at ds@davidsirota.com, follow him on Twitter @davidsirota or visit his website at www.davidsirota.com.

Photo: Oxfam International via Flickr

A Fight Over One Of America’s Most Important Waterways

Environmental groups and Democratic legislators are pressuring New York governor Andrew Cuomo to say that General Electric must continue cleaning up the massive pollution the company dumped into the Hudson River from 1947 to 1977. Cuomo’s own environmental officials say the pollution continues to cause “ongoing contamination,” and federal officials warn that GE’s plan to end its cleanup this fall could harm the effort to restore the river’s ecosystem.

But the Democratic governor — who has benefited from GE’s campaign cash — is declining to say whether he agrees.

In comments to reporters in Albany earlier this month, the governor said he thinks the company should “follow the law and the agreements that have been made.” Under the 2002 agreement in question, GE is planning to shut down its cleanup operations at the end of 2015 — which, environmental groups claim, will leave behind at least 35 percent of the carcinogenic polychlorinated biphenyls (PCBs) the company dumped into the river during the mid-20th century.

“I know there are claims for (GE) to do more above and beyond that,” Cuomo said of the request by legislators and environmental groups. But, he added, “I haven’t really looked into that.”

Conservation groups said that unless Cuomo takes action, the cleanup of one of the nation’s biggest environmental disasters will end prematurely, leaving carcinogenic PCBs in New York’s largest waterway.

“Governor Cuomo has a crucial role to play, given New York’s role as a trustee of the Hudson River natural resource, contaminated for decades by GE’s toxic chemicals,” said Ned Sullivan, who runs the environmental group Scenic Hudson. Sullivan served as an environmental official in the administration of Mario Cuomo, Andrew Cuomo’s father. “This is a legacy issue for Governor Cuomo. He will either use his authority and persuasive powers to push GE to perform a comprehensive cleanup, or he will leave the Hudson and upstate economy damaged for future generations.”

Democratic state Sen. Brad Hoylman — who wrote legislators’ letter to Cuomo asking him to support an ongoing cleanup — said the governor’s comments will not deter the campaign to force GE to continue the dredging.

“This doesn’t change the fact that GE has only completed 65 percent of its cleanup of the Hudson,” Hoylman told International Business Times. “I’ll continue to work with my colleagues, environmental groups and local communities to make sure GE finishes its cleanup of one of our state’s most treasured natural resources.”

GE has called its operations “one of the largest and most successful environmental cleanup projects ever undertaken in the United States.” But Margaret Byrne, an official at the U.S. Fish and Wildlife Service who is the agency’s assessment and restoration manager for the Hudson River, raised questions about GE’s plan to shut down its dredging operations.

Her agency recently released a report showing that groundwater in some upstate towns remains contaminated by GE’s chemicals. Without GE’s dewatering facility, she told IBTimes, “the additional removal of contaminated sediments would be less feasible.”

While Cuomo declines to offer a clear position on GE’s cleanup efforts, he has been outspoken in his support for the company, which has donated more than $400,000 to political groups backing the governor. In recent weeks, Cuomo has offered GE $50 million in taxpayer subsidies for a planned packaging facility in upstate New York. Those subsidies were not contingent on GE removing all PCBs from the Hudson River, which inspired criticism from some Democratic lawmakers in New York state.

“Before NY taxpayers fork over $50 million, GE needs to completely finish cleaning up their mess in the Hudson,” said Sen. Liz Krueger in a tweet.

Will Cuomo listen to the criticism? Or will he stand by as a corporate behemoth refuses to remove all of its pollution from the Hudson? The governor’s answer will help determine the future of one of America’s most important waterways.

David Sirota is a senior writer at the International Business Times and the best-selling author of the books Hostile Takeover, The Uprising, and Back to Our Future. Email him at ds@davidsirota.com, follow him on Twitter @davidsirota or visit his website at www.davidsirota.com.

Photo: Patty M. via Flickr

Prosecution Of White-Collar Crime Hits 20-Year Low

Just a few years after the financial crisis, a new report tells an important story: Federal prosecution of white-collar crime has hit a 20-year low.

The analysis by Syracuse University shows a more than 36 percent decline in such prosecutions since the middle of the Clinton administration, when the decline began. Landing amid calls from Democratic presidential candidates for more Wall Street prosecutions, the report notes that the projected number of prosecutions this year is 12 percent less than last year and 29 percent less than five years ago.

“The decline in federal white-collar crime prosecutions does not necessarily indicate there has been a decline in white-collar crime,” Syracuse researchers note. “Rather, it may reflect shifting enforcement policies by each of the administrations and the various agencies.”

Underscoring that assertion is a recent study by researchers at George Mason University tracking the increased use of special Justice Department agreements that allow corporations — and often their executives — to avoid being prosecuted. Before 2003, researchers found, the Justice Department offered almost no such deals. The researchers report that from 2007 to 2011, 44 percent of cases were resolved through the deals — known as deferred prosecution agreements and non-prosecution agreements.

In 2012, President Obama pledged to “hold Wall Street accountable” for financial misdeeds related to the financial crisis. But as financial industry donations flooded into Obama’s re-election campaign, his Justice Department officials promoted policies that critics say embodied a “too big to jail” doctrine for financial crime.

In a 2012 speech, for example, the head of the Justice Department’s criminal division, Lanny Breuer, said “collateral consequences of an indictment,” such as layoffs, losses for corporate shareholders and the health of an industry, factor into the Obama administration’s prosecutorial decisions.

“In reaching every charging decision, we must take into account the effect of an indictment on innocent employees and shareholders,” said Breuer.

Similarly, in 2013, Obama’s attorney general, Eric Holder, told congressional lawmakers that when it comes to banks, “I am concerned that the size of some of these institutions becomes so large that it does become difficult to prosecute them.” He said there is an “inhibiting impact” on the Obama Justice Department’s willingness to prosecute a bank when bringing a criminal charge “[would] have a negative impact on the national economy.”

Holder’s 2013 comments were foreshadowed by a 1999 memo he wrote as deputy attorney general during the Clinton administration. In it, Holder recommended that prosecutors consider “[c]ollateral consequences, including disproportionate harm to shareholders and employees not proven personally culpable” before attempting to convict corporations for wrongdoing.

In May, the House Financial Services Committee subpoenaed the Justice Department about the policy. A press release from committee chairman Jeb Hensarling (R-TX) asserted that the Obama administration was “stonewalling” in providing more details about “whether decisions are being made to prosecute or not prosecute financial institutions based upon their size.”

Prior to serving in the Obama Justice Department, both Breuer and Holder worked at white-collar defense firm Covington & Burling. Both of them went back to work for the firm again immediately after leaving their government posts.

For his part, Holder has recently defended the administration’s record of not prosecuting any individual financial executive involved in the financial crisis. He says the fines the administration has assessed against financial institutions were effective.

“People tend to undervalue what we did with the banks,” Holder told the Financial Times. “Given the nature of the penalties that were extracted, given the interactions that we had with people at the banks, with those attorneys who represented the banks, I think the cultures have changed.”

Left unexplained is how those cultures have supposedly changed when many of the same individuals who were involved in the financial crisis have managed to avoid any punishment.

David Sirota is a senior writer at the International Business Times and the best-selling author of the books Hostile Takeover, The Uprising, and Back to Our Future. Email him at ds@davidsirota.com, follow him on Twitter @davidsirota or visit his website at www.davidsirota.com.

Photo Credit: AFP/Stan Honda

Biden’s Bankruptcy Bill Could Complicate a Presidential Run

As Vice President Joe Biden reportedly mulls a bid for the U.S. presidency, his champions portray him as a credible alternative to Democratic Party frontrunner Hillary Clinton, who faces accusations that she is beholden to the financial industry. But a Biden campaign risks confronting the scorn of one of the party’s most influential progressives, Sen. Elizabeth Warren. Though Biden has reportedly sought her favor, Warren has historically disdained, charging him with acting as a tool of the credit card industry by limiting debt relief for people grappling with financial troubles.

As a Harvard law professor in 2002, Warren published a journal article excoriating Biden for playing a leading role in delivering legislation that made it more difficult for Americans to reduce debts through bankruptcy filings. As the senator from Delaware, Biden’s repeated push for the bill — signed into law by President George W. Bush in 2005 — amounted to “vigorous support of legislation that hurts women,” Warren declared. She said “the group that will be most affected by the changes in the bankruptcy legislation Senator Biden so forcefully supports will be women, particularly women heads of household who are supporting children.”

In a separate 2003 book she co-authored with her daughter, Warren said, “Senators like Joe Biden should not be allowed to sell out women in the morning and be heralded as their friend in the evening.”

Biden’s spokesman, Stephen Spector, said: “Throughout his career, the vice president has been a champion for middle-class families and has fought against powerful interests.”

Biden earlier this month met with Warren, a Wall Street critic who is well known among Democratic voters. The meeting was widely seen as an effort by Biden to try to convince the Massachusetts lawmaker to support his prospective White House bid.

Warren’s 2002 writings, however, may stymie that effort both because her criticism was specifically targeted at Biden and because the criticism revolved around an issue that cuts to the heart of Democratic voters’ concerns over the growing political power of the financial sector.

In Warren’s 2002 review of Biden, she said the senator of 36 years played a “crucial” role in passing the bankruptcy legislation over the objections of unions, consumer groups and women’s organizations. The bill was backed by major credit card companies, including MBNA, which is headquartered in Delaware and whose employees collectively became Biden’s top campaign contributor. The firm also hired Biden’s son, Hunter, as a consultant.

Spector, the vice president’s spokesperson, asserted that Biden shaped the bankruptcy bill to specifically help women, working “to make child support and alimony a priority in the bill by ensuring continuity of child care payments.”

In her 2002 article, though, Warren accused Biden of playing an especially pernicious role in pressing the legislation, harnessing his reputation as an advocate for the interests of working women to curry the support of interest groups that would otherwise have opposed the bill. His support for the bankruptcy legislation, she said, provided crucial political cover that enabled other lawmakers to support the measure and avoid criticism from women’s groups.

“He has shielded his colleagues on both sides of the aisle from being branded as anti-women for their support of this legislation,” Warren wrote. “Senator Biden can publicly support one very visible piece of legislation on behalf of women, satisfying his duty and assuring the loyal support of millions of women. He is then free to be a zealous advocate on behalf of one of his biggest contributors, the financial services industry, and still position himself as a champion for women.”

While some Democratic activists are pining for a Biden-Warren ticket, Warren’s writing suggests such a political marriage would be more than a bit complicated.

David Sirota is a senior writer at the International Business Times and the best-selling author of the books Hostile Takeover, The Uprising, and Back to Our Future. Email him at ds@davidsirota.com, follow him on Twitter @davidsirota or visit his website at www.davidsirota.com.

Photo: Vice President Joe Biden talks about rooting out corruption as he addresses a civil society forum during the U.S.-Africa Leaders Summit in Washington, August 4, 2014. REUTERS/Jonathan Ernst

Powerful Message From An Imperfect Messenger

Earlier this month, billionaire Charles Koch had a surprising message: In a speech to his fellow conservatives, he said politicians must end taxpayer-funded subsidies and preferential treatment for corporations.

Why is this surprising? Because the demand came from an industrialist whose company and corporate subsidiaries have raked in tens of millions of dollars’ worth of such subsidies.

The Koch-organized conference at a luxury resort in Southern California reportedly attracted roughly 450 conservative donors who have committed to spending nearly $900 million on the 2016 presidential election. The event included appearances by Republican presidential candidates such as former Florida Gov. Jeb Bush, Texas Sen. Ted Cruz, Wisconsin Gov. Scott Walker, and Florida Sen. Marco Rubio.

“Where I believe we need to start in reforming welfare is eliminating welfare for the wealthy,” said Koch, who, along with his brother David, is among the biggest financiers of conservative political causes. “This means stopping the subsidies, mandates and preferences for business that enrich the haves at the expense of the have nots.”

Yet, in the last 15 years, Koch’s firm Koch Industries and its subsidiaries have secured government subsidies worth more than $166 million, according to data compiled by the watchdog group Good Jobs First. The group says since 1990, Koch-owned properties have received 191 separate subsidies worth a total of $195 million.

Koch Industries and its subsidiaries, which are a privately held, are involved in everything from oil refining to manufacturing to high finance. In 2012, Charles Koch issued a similar jeremiad against government-sponsored subsidies for corporations. In a Wall Street Journal op-ed, he said, “We are on dangerous terrain when government picks winners and losers in the economy by subsidizing favored products and industries.” In his essay, he specifically derided tax credits — yet even after the op-ed, Koch-owned properties accepted more than $77 million worth of such taxpayer-funded preferences from governments, according to Good Jobs First.

Among the biggest subsidies received by Koch-owned companies was a $62 million Louisiana property tax abatement for Georgia Pacific — a paper and chemical conglomerate that was acquired by Koch Industries in 2005. Georgia Pacific also received a separate $11 million tax credit from Louisiana in 2014 to upgrade its facilities.

Since 2007, Good Jobs First says Koch Industries itself has received more than $20 million in subsidies through an Oklahoma program designed to incentivize investment and job creation. Oklahoma’s government website lists more than $28 million in such tax credits to the firm and its subsidiaries.

Koch, it should be noted, is not like other top executives of major corporations. His company is not publicly traded — it is privately held, with most of the company owned by him and his brother, David. That means the Kochs could reject subsidies and not have to justify the move to hordes of shareholders. Instead, though, they have accepted the government support, even as they fund conservative campaigns that deride the influence of government on the economy.

Of course, Koch’s speech certainly did identify a growing trend in America. As Big Business has used campaign cash to secure more control over politics, elected officials have been approving more and more taxpayer subsidies for corporations. Conservative opposition to those expenditures will no doubt be key to reining them in.

However, it is difficult to believe that the head of a company that has benefited from so much taxpayer support is really going to use his political power to end the largesse. In other words: The message may be compelling, but the messenger is not particularly credible.

David Sirota is a senior writer at the International Business Times and the best-selling author of the books Hostile Takeover, The Uprising, and Back to Our Future. Email him at ds@davidsirota.com, follow him on Twitter @davidsirota or visit his website at www.davidsirota.com.

Illustration: Caricature of Charles Koch (DonkeyHotey via Flickr)

Hillary Clinton Running Away From Her Free Trade Record

In her quest for the Democratic presidential nomination, Hillary Clinton has lately promoted herself as a populist defender of the middle class. To that end, she attempted to distance herself last week from a controversial 12-nation trade deal known as the Trans-Pacific Partnership, which would set the rules of commerce for roughly 40 percent of the world’s economy.

As with similar business-backed trade pacts, labor unions, environmental groups and public health organizations are warning that the deal could result in job losses, reduced environmental standards, higher prices for medicine and more power for corporations looking to overturn public interest laws. And so, in her quest for Democratic primary votes, Clinton is suddenly trying to cast herself as a critic of the initiative.

“I did not work on TPP,” she said after a meeting with leaders of labor unions who oppose the pact. “I advocated for a multinational trade agreement that would ‘be the gold standard.’ But that was the responsibility of the United States Trade Representative.”

The trouble, of course, is that Clinton’s declaration does not square with the facts.

CNN has reported that during her tenure as U.S. Secretary of State, Clinton publicly promoted the pact 45 separate times. At a congressional hearing in 2011, Clinton told lawmakers that “with respect to the TPP, although the State Department does not have the lead on this — it is the United States Trade Representative — we work closely with the USTR.” Additionally, secret State Department cables published by the website WikiLeaks show that her agency — including her top aides — were deeply involved in the diplomatic deliberations over the trade deal.

In a series of cables in late 2009 and 2010, State Department officials outlined their extensive discussions about the pact with government officials from New Zealand. At one point, State Department officials in that country requested an additional employee to specifically “allow the Economics Officer to focus on preparations for Trans-Pacific Partnership trade negotiations.”

Similarly, a September 2009 cable detailed Clinton’s Deputy Secretary of State, James Steinberg, specifically discussing the TPP with Vietnam’s Deputy Prime Minister. In a November 2009 cable, the U.S. embassy in Tokyo detailed TPP discussions between Japanese government officials and Robert Hormats, a former Goldman Sachs executive who was then serving as Clinton’s undersecretary of state. In a December 2009 cable, State Department officials in Hanoi reported that the U.S. Ambassador “hosted a dinner on December 21 for Trans-Pacific Partnership (TPP) Agreement country representatives.” The cable thanked the Clinton-run State Department for providing “regular updates” that “have been key to helping us answer the many TPP-related inquiries we receive.”

Meanwhile, in a January 2010 cable, State Department embassy officials in Kuala Lumpur advised Deputy U.S. Trade Representative Demetrios Marantis on strategies to negotiate the TPP with the Malaysian government.

The involvement of the Clinton-led State Department in the TPP is hardly surprising: In June, CBS News reported that “a senior administration official told CBS News correspondent Julianna Goldman that Clinton was one of the biggest backers of TPP.” In a Bloomberg News interview that same month, President Obama’s National Security Adviser Susan Rice disputed the idea that Clinton was not involved in the TPP.

“She was integrally involved in all of the major initiatives of the first term of the administration,” said Rice, who served as U.S. Ambassador to the United Nations when Clinton was Secretary of State. “She was instrumental in formulating and implementing the rebalance to Asia, of which the Trans-Pacific Partnership is a part.”

Considering all the evidence, Clinton nonetheless pretending she had nothing to do with TPP is clearly a strategic calculation: She is betting that few voters will notice the gap between her rhetoric and her own record. It is certainly a cynical tactic. Time will tell if it is a politically shrewd one.

David Sirota is a senior writer at the International Business Times and the best-selling author of the books Hostile Takeover, The Uprising, and Back to Our Future. Email him at ds@davidsirota.com, follow him on Twitter @davidsirota or visit his website at www.davidsirota.com.

Photo: U.S. Democratic presidential candidate Hillary Clinton speaks at the Iowa Democratic Party’s Hall of Fame dinner in Cedar Rapids, Iowa, United States, July 17, 2015. REUTERS/Jim Young

Wisconsin’s Economic Cautionary Tale

The continuum of American politics is not a straight line — it is more like a circle. Travel farther out on the right and left, and ultimately the sides bend to a common position on an issue like taxpayer subsidies for big business. To many progressives, such expenditures are giveaways to the already wealthy. To many conservatives, they are a free-market-distorting waste of taxpayer resources. Both sides also often criticize the subsidies as an instrument of cronyism and corruption.

In recent years, taxpayer subsidies for corporations have become a huge expense: The New York Times estimates that states and cities now spend more than $80 billion a year on such so-called “incentives.” For the most part, this gravy train has not faced much pressure to slow down.

But now, as the 2016 presidential campaign intensifies, both the left and the right will have a prime opportunity to spotlight its critiques. That is because one of the most prominent Republican presidential candidates — Wisconsin governor Scott Walker — has made such subsidies a central part of his public policy agenda. Those subsidies have produced both high-profile scandals and lackluster economic results.

In 2011, Walker created the Wisconsin Economic Development Corporation to give businesses taxpayer loans and grants. Within a few years, state auditors published reports spotlighting “concerns with WEDC’s administration and oversight of its economic development programs and its financial management.” Specifically, auditors said “WEDC did not require grant and loan recipients to submit information showing that contractually required jobs were actually created or retained” and also noted that money was handed out “in ways that did not consistently comply” with state law.

Much of the cash flowed to Walker’s political allies. According to a new report by the left-leaning One Wisconsin Institute, 60 percent of the $1.14 billion given out by the WEDC went to firms connected to Walker’s campaign contributors — that includes more than $2.1 million those donors have given Walker’s election campaigns directly.

Had the taxpayer largesse significantly boosted Wisconsin’s economy, perhaps the financial management problems and the allegations of cronyism could be downplayed. But Wisconsin’s economy has suffered under Walker. As Bloomberg News reported, “Wisconsin ranked 33rd among U.S. states in economic health improvement during Walker’s first term” with the state only “a little more than half the 250,000 private-sector jobs that Walker promised during that time.”

Those results, though, have not deterred Walker: His most recent budget proposed to slash $300 million out of higher education funding and spend roughly the same amount to help finance a new arena for the Milwaukee Bucks. One of the members of the investor group that owns the NBA team is the national finance co-chairman of Walker’s presidential campaign. Walker pushed the subsidies despite a widely cited 2008 study by researchers at the University of Maryland and University of Alberta, which found the “overwhelming preponderance of evidence” shows “that no tangible economic benefits are generated by these heavily subsidized professional sports facilities.”

As Walker’s record faces intensifying scrutiny during his presidential campaign, his free-market rhetoric may conflict with his embrace of market-distorting subsidies for private businesses. Particularly in the Republican primary, conservative candidates and groups will have an opportunity to spotlight Wisconsin as an illustration of why they crusade against corporate welfare.

Walker, of course, may try to shift the blame for Wisconsin’s troubles — but the facts, stats and policies tell a clear and compelling story about why states cannot rely on subsidies as a tool of economic growth.

David Sirota is a senior writer at the International Business Times and the best-selling author of the books Hostile Takeover, The Uprising, and Back to Our Future. Email him at ds@davidsirota.com, follow him on Twitter @davidsirota or visit his website at www.davidsirota.com.

U.S. Republican presidential candidate Scott Walker speaks at a campaign stop in Haverhill, Iowa, United States, July 18, 2015. REUTERS/Jim Young   

More 2016 Candidates Embrace The Trump Zeitgeist

Since announcing his 2016 White House bid, Donald Trump has been the central focus of the campaign — by one estimate, he has garnered almost 40 percent of all election coverage on the network newscasts. Clearly, The Donald’s attempt to turn 1600 Pennsylvania Avenue into Trump White House has attracted so much attention because the candidate is seen as a Bulworthesque carnival barker who will say anything, no matter how hypocritical, factually unsubstantiated, or absurd.

Yet for all the hype he’s generated, Trump is not the only presidential hopeful willing to make utterly mind-boggling statements.

Take Hillary Clinton. Earlier this month, she said, “there can be no justification or tolerance for this kind of criminal behavior” that has been seen on Wall Street. She added that “while institutions have paid large fines and in some cases admitted guilt, too often it has seemed that the human beings responsible get off with limited consequences or none at all, even when they have already pocketed the gains.” Her campaign echoed the message with an email to supporters lauding Clinton for saying that “when Wall Street executives commit criminal wrongdoing, they deserve to face criminal prosecution.”

Clinton’s outrage sounds convincing at first — but then, audacity-wise, it starts to seem positively Trump-like when cross-referenced with campaign finance reports, foundation donations and speaking fees.

According to an Associated Press analysis, Clinton has already raked in more than $1.6 million worth of campaign contributions from donors in the same financial sector she is slamming on the campaign trail. Additionally, Clinton’s foundation took $5 million worth of donations from at least nine financial institutions that secured special deals to avoid prosecution — even as they admitted wrongdoing. The Clintons also accepted nearly $4 million in speaking fees from those firms since 2009.

Oh, and that anti-Wall Street email from Clinton’s campaign? It was authored by Clinton aide Gary Gensler, a onetime Goldman Sachs executive who later became a government official.

Then there is Jeb Bush. He recently trekked back to Tallahassee to deliver a speech portraying himself as a clean-government reformer. He asserted that before he became Florida governor, “lobbyists and legislators grew a little too comfortable in each other’s company” but he also insisted that he “refused to go along with that establishment” and “wasn’t a member of the club.”

Again, it sounds vaguely convincing, until the facts make the chutzpah involved seem positively Trump-ish.

A review of Bush’s own gubernatorial emails shows that he was very much a member of the club. He sought public policy counsel from lobbyists on everything from government contracts to medical malpractice legislation to state land purchases. Bush also approved a plan for corporate lobbyists to help his administration pass a bill exempting the state’s pension investments from Florida’s open records laws. And, of course, he is now raising presidential campaign money from lobbyists.

Bush’s speech, which bashed legislators who become lobbyists, was held at Florida State University — a school whose president had previously become a lobbyist after serving as Florida House Speaker. If all that wasn’t enough, emails show Bush’s event at FSU was arranged by the Florida Chamber of Commerce — a corporate lobbying group that has funneled cash to a political action committee backing Bush’s presidential campaign.

In these and so many other spectacles, the candidates appear to be assuming that voters will never know any context — they are assuming, in other words, that voters are goldfish who will forget their entire world every 15 minutes or so.

Trump may get all the attention for flamboyantly embodying such a cavalier attitude. However, the cynical view of the electorate — and the attendant say-absolutely-anything attitude — has now become the pervasive zeitgeist of the entire 2016 campaign.

David Sirota is a senior writer at the International Business Times and the best-selling author of the books Hostile Takeover, The Uprising, and Back to Our Future. Email him at ds@davidsirota.com, follow him on Twitter @davidsirota or visit his website at www.davidsirota.com.

Photo: Donald Trump speaks at the 42nd annual Conservative Political Action Conference (CPAC) Feb. 27, 2015 in National Harbor, MD. Conservative activists attended the annual political conference to discuss their agenda. (Olivier Douliery/Abaca Press/TNS)

Silicon Valley Emerges As A Political Force

When Jeb Bush visited Silicon Valley this week, the Republican candidate was visiting the heart of a Democratic state that few expect to be contested in the 2016 presidential election. But when it comes to the political money chase, the Northern California home of the world’s technology giants spreads the wealth to both parties — positioning the tech industry as one of the most powerful forces in American politics.

Since 2008, the Internet firms, software companies, computer manufacturers and data processors that comprise Silicon Valley have delivered more than $172 million worth of campaign contributions in federal elections, according to data compiled by the Center for Responsive Politics. That’s a nearly 40 percent increase over the prior 8 years. Counting only presidential election years, the increase is even more dramatic: The $109 million of Silicon Valley money pumped into the 2008 and 2012 elections represents a 61 percent increase from 2004 and 2000.

Out of the money given directly to candidates (as opposed to third party groups) since 2008, Democrats have received 62 percent of the contributions. But Republicans’ 37 percent in that same time was hardly pocket change — it translated into a whopping $55 million.

In a vacuum, these figures may seem unimportant. But in context, they are astounding. All of a sudden, Silicon Valley has surpassed many traditional political powerhouses as a source of campaign cash. Specifically, in the last election cycle, technology firms delivered more money to candidates for president and Congress than defense contractors, pharmaceutical manufacturers, the automotive industry and Hollywood.

“Silicon Valley woke up to the importance of influencing public policy,” said Stanford University’s Vivek Wadhwa.

In 2012, that influence was on display when Internet firms notched an unexpected victory over the Hollywood studios that were pushing legislation to hold Internet companies responsible for the illegal transmission of pirated movies and television shows. Despite the so-called Stop Online Piracy Act being backed by the powerful Motion Picture Association of America, the bill was defeated by tech firms’ furious lobbying campaign against the measure.

Of Silicon Valley’s ability to defeat Hollywood-backed legislation, MPAA chairman Chris Dodd said at the time: “It’s a watershed event, what happened.”

Of course, as Wadhwa notes, there is no single Silicon Valley public policy agenda. Tech firms, he asserts want “freedom from regulation and immigration,” but, he says, “there is no single ideology.”

That said, technology firms have forged a unified front on some hot-button issues, moving beyond immigration reform, corporate regulation and the online piracy bill.

In 2013, Silicon Valley giants such as Facebook, Apple, Google, and Mozilla pressed for limits on National Security Agency surveillance after disclosures by whistleblower Edward Snowden. A few years later, Congress reformed the Patriot Act to add restrictions on such surveillance.

Similarly, in March of this year, Silicon Valley won a victory when the Federal Communications Commission passed so-called “net neutrality” rules designed to prevent cable companies from charging different transmission rates to Internet content providers. Most recently, Apple, Google and Facebook wrote a letter to President Barack Obama declaring their opposition to any efforts to weaken encryption standards.

While the power shift toward Silicon Valley is significant, it should not be altogether surprising. Information technology is becoming ever more integral to American society. And the tech industry’s millionaires and billionaires are ready to take their place as political powerbrokers, in much the same way oil and railroad barons represented new political power more than a century ago.

The implications of that revolution are profound not just for campaign fundraising, but ultimately for a whole new generation of public policy.

David Sirota is a senior writer at the International Business Times and the best-selling author of the books Hostile Takeover, The Uprising, and Back to Our Future. Email him at ds@davidsirota.com, follow him on Twitter @davidsirota or visit his website at www.davidsirota.com.

Photo: Patrick Nouhailler via Flickr

How The Trans-Pacific Partnership Gives Corporations Special Legal Rights

In promoting a proposed trade pact covering 12 Pacific Rim nations, President Obama has cast the initiative as an instrument of equity. The Trans-Pacific Partnership would, in his words, “level the playing field” and “give our workers a fair shot.” But critics argue that within the hundreds of pages of esoteric provisions, the deal — like similar ones before it — includes a glaring double standard: It provides legal rights to corporations and investors that it does not extend to unions, public interest groups, and individuals.

Recently leaked drafts of the agreement show the pact includes the kind of Investor-State Dispute Settlement (ISDS) provisions written into most major trade deals passed since the North American Free Trade Agreement. Those provisions allow companies to use secretive international tribunals to sue sovereign governments for damages when those governments pass public-interest policies that threaten to cut into a corporation’s profits or seize a company’s property.

But also like past trade deals, the TPP is not expected to allow unions and public-interest groups to bring their own suits in the same tribunals to compel governments to enforce labor, environmental, and human rights laws.

The discrepancy is a deliberate effort to make sure trade policy includes a “tilt toward giant corporations,” Sen. Elizabeth Warren (D-MA) said.

“If a Vietnamese company with U.S. operations wanted to challenge an increase in the U.S. minimum wage, it could use ISDS,” Warren wrote in a Washington Post op-ed in February. “But if an American labor union believed Vietnam was allowing Vietnamese companies to pay slave wages in violation of trade commitments, the union would have to make its case in the Vietnamese courts.”

The Obama administration argues that concerns from TPP opponents are exaggerated because to date the federal government has “never once lost an ISDS case.”

But those opponents counter by noting that those cases are on the rise across the globe. As the United Nations reported recently, ISDS cases “have proliferated in the past 10-15 years, with the overall number of known treaty-based arbitrations reaching 514.”

While trade deals include rhetoric saying the international tribunal process is not designed to undermine public interest policies, some of the cases brought by corporations have directly targeted those laws.

Philip Morris, for example, has filed suits against Australia and Uruguay, which require health warnings on tobacco products. In the ISDS process, Philip Morris is arguing that the requirements expropriate its property, deny the company fair treatment and unduly cut into its profits.

Similarly, a Swedish energy firm has used ISDS to target Germany’s restrictions on coal-fired and nuclear power plants, and Eli Lilly and Company is using the process to try to fight Canada’s efforts to limit drug patents and reduce the price of medicine. Most recently, Canadian Finance Minister Joe Oliver said bank regulations passed in the wake of the 2008 financial crisis could be a violation of trade provisions under NAFTA, raising the prospect of banks using the tribunal process to try to get the federal government to eliminate those regulations.

“Corporations under ISDS can bring cases without their national government’s permission, while unions and environmental groups in order to enforce the labor rights and environmental rights in these agreement have to get their government to bring the case,” said Damon Silvers, the AFL-CIO’s associate general counsel.

Government action has been rare. In 2014, the Government Accountability Office criticized “limited monitoring and enforcement” of trade deals’ protections for labor rights.

Opponents of the TPP say the new deal would do little to increase enforcement, and much to give companies special rights.

Sure, corporations may still be considered people under U.S. domestic law — but under American trade policy, they get far more rights than almost everyone else.

David Sirota is a senior writer at the International Business Times and the best-selling author of the books Hostile Takeover, The Uprising, and Back to Our Future. Email him at ds@davidsirota.com, follow him on Twitter @davidsirota or visit his website at www.davidsirota.com.

Photo: GlobalTradeWatch via Flickr

Jeb Bush’s Audacious Announcement

Presidential campaign announcement speeches typically rehash well-worn themes politicians have long championed. They rarely include shockers or attempts to wholly redefine a candidate. Not so for former Florida Gov. Jeb Bush — his announcement address at Miami Dade College this week was an extreme makeover that included passages that likely had America doing a double take.

To start, Bush slammed politicians for being too close to what he called Washington’s “swarms of lobbyists.” Yet, Bush has relied on that multibillion-dollar influence industry to bankroll his political campaigns.

The New York Times reports that during his campaigns for Florida governor, “Bush received at least $237,000 from hundreds of lobbyists, lawyers, political consultants and others in the capital.” In his presidential run, the Times also notes, he has already held “seven private fundraisers and meet-and-greets in the Washington area,” proof that “he seems to have mastered a skill that is crucial in this city: tapping into the money-raising clout of the K Street lobbyists.” The Washington Post followed up with a lengthy list of lobbyists now working to help Bush win the Republican presidential nomination.

Bush also slammed “pampered elites” and insisted he is “not just another member of the club.” Those lines, of course, came from the millionaire grandson of a senator, son of a president, and brother of another president. Later in the speech, in fact, Bush actually highlighted part of that biography, noting that he is “a guy who met his first president on the day he was born and his second on the day he was brought home from the hospital.”

Bush highlighted education, which he considers one of his signature causes when he was governor of Florida. But in his presidential campaign speech, he veered away from his own record, insisting he believes that “every school should have high standards, and the federal government should have nothing to do with setting them.” That declaration came from the same politician who has been an outspoken supporter of his brother’s No Child Left Behind Act, which included a host of controversial federal education mandates. Additionally, Bush has been a strong supporter of Common Core education standards, which have been pushed — and financially incentivized — by the federal government.

Then there was Bush’s criticism of President Obama. He said “it’s still a mystery to me why, in these violent times, the president a few months ago thought it relevant at a prayer breakfast to bring up the Crusades.” That seems straightforward, except that Bush did not mention similar concerns when his brother, George W. Bush, made headlines for using the term “crusade” to describe his invasions of Muslim countries.

Bush also criticized the Obama administration for having “failed to be the peacemakers” in international affairs. But, of course, Bush is the brother of a president who initiated two wars — including the longest in modern American history — and who was, in the estimation of some critics, responsible for helping create the Islamic State group. Bush has been a supporter of those policies, which few describe as “peacemaking.” And let’s remember: Bush’s support hasn’t been tepid. Indeed, he recently reiterated that he would have authorized the invasion of Iraq, and said of his brother’s war policies: “News flash to the world: If they’re trying to find places where there’s big space between me and my brother, this might not be one of those.”

Give Bush credit for one thing: He did not offer voters a run-of-the-mill speech. He delivered a tour de force of sheer audacity. The trouble is, it’s the kind of audacity that assumes America will never bother to consider even the most basic facts about Jeb Bush.

David Sirota is a senior writer at the International Business Times and the best-selling author of the books Hostile Takeover, The Uprising, and Back to Our Future. Email him at ds@davidsirota.com, follow him on Twitter @davidsirota or visit his website at www.davidsirota.com. 

Screenshot: C-SPAN/YouTube

Has America Changed Since Edward Snowden’s Disclosures?

Two years ago this month, a 29-year-old government contractor named Edward Snowden became the Daniel Ellsberg of his generation, delivering to journalists a tranche of secret documents shedding light on the government’s national security apparatus. But whereas Ellsberg released the Pentagon Papers detailing one specific military conflict in Southeast Asia, Snowden released details of the U.S. government’s sprawling surveillance machine that operates around the globe.

On the second anniversary of Snowden’s historic act of civil disobedience, it is worth reviewing what has changed — and what has not.

On the change side of the ledger, there is the politics of surveillance. For much of the early 2000s, politicians of both parties competed with one another to show who would be a bigger booster of the NSA’s operations, fearing that any focus on civil liberties risked their being branded soft on terrorism. Since Snowden, though, the political paradigm has dramatically shifted.

The most illustrative proof that came last month, when the U.S. Senate failed to muster enough votes to reauthorize the law that aims to allow the NSA to engage in mass surveillance. Kentucky Republican Sen. Rand Paul’s prominent role in that episode underscored the political shift — a decade after the GOP mastered the art of citing 9/11-themed arguments about terrorism to win elections, one of the party’s top presidential candidates proudly led the fight against one of the key legislative initiatives of the so-called war on terror.

There has also been a shift in public opinion, as evidenced by a new ACLU-sponsored poll showing that almost two thirds of American voters want Congress to curtail the NSA’s mass surveillance powers. The survey showed that majorities in both parties oppose renewing the old PATRIOT Act.

Monumental as those congressional and public opinion shifts are, though, far fewer changes are evident in the government’s executive branch.

For example, the Obama administration is celebrating the two-year anniversary of Snowden’s disclosures by intensifying its crackdown on government whistleblowers. After prosecuting more such whistleblowers than any previous administration, Obama’s appointees are specifically moving forward a rule that the nonpartisan Project On Government Oversight says would deny “federal employees in ‘sensitive’ positions the right to appeal a termination or demotion” when they expose wrongdoing. In practice, writes POGO’s Elizabeth Hempowicz, the rule would make “whistleblowers who hold these positions particularly vulnerable to retaliation.”

The Obama administration has also not stopped its selective enforcement of laws against those who mislead Congress or leak classified government information.

Take the issue of perjury. After prosecuting pitcher Roger Clemens for allegedly lying to Congress, the Obama administration has not similarly prosecuted National Intelligence Director James Clapper for insisting to Congress in 2013 that the government does not collect data on Americans. Clapper’s claim was wholly debunked by Snowden’s documents.

The Obama administration has also continued to promise to bring harsh charges against Snowden, even as the same administration has not brought similarly harsh charges against its own employees who give journalists classified information that makes the government look good.

For instance, a draft Inspector General report found that CIA Director Leon Panetta disclosed such information about the raid on Osama bin Laden’s compound. Similarly, former CIA director David Petraeus provided classified information to his biographer. Panetta was never charged, and Petraeus was let off with a misdemeanor.

Snowden, meanwhile, sits in exile — a fugitive for exposing his own government’s unprecedented system of surveillance. While Snowden’s critics say he should come back to the United States to air out his grievances in open court, journalist Glenn Greenwald notes: “He’s barred under the Espionage Act even from arguing that his leaks were justified; he wouldn’t be permitted to utter a word about that.”

Things have certainly changed in two years — but not yet so much that America’s government embraces those who blow the whistle.

David Sirota is a senior writer at the International Business Times and the best-selling author of the books Hostile Takeover, The Uprising and Back to Our Future. Email him at ds@davidsirota.com, follow him on Twitter @davidsirota or visit his website at www.davidsirota.com. Copyright 2015 Creators.com

Photo: Abode of Chaos via Flickr

Can Jeb Bush Be His ‘Own Man’?

Jeb Bush’s last name comes with advantages that are difficult to overstate. In a presidential race, he gets, among other things, instant name recognition and a built-in fundraising apparatus from his father and brother. Those assets alone explain why a man who hasn’t won an election in more than a decade is nonetheless considered a serious contender for his party’s presidential nomination.

And yet, a few months into the presidential race, Bush has not been able to turn “contender” into “frontrunner,” in part because he cannot seem to escape the legacy of the same last name that provides him so many privileges.

Bush’s struggle with the Bush legacy started in February, when the former Florida governor gave a speech declaring: “I love my father and my brother. I admire their service to the nation and the difficult decisions they had to make. But I am my own man.” There was no problem with the rhetoric, except for the fact that it was accompanied by Bush announcing his foreign policy advisors — 19 of 21 of which had formerly worked for his father or brother. A few months later, Jeb Bush said his brother was one of his top advisors on the Middle East.

George W. Bush’s policy in that region soon became a focus of inquiry on the campaign trail. In May, Fox News’ Megyn Kelly asked Jeb Bush: “Knowing what we know now, would you have authorized the [Iraq] invasion?”

Bush declared, “I would have” and insisted “so would almost everybody that was confronted with the intelligence they got” — somehow ignoring 133 House members and 23 senators who saw some of that intelligence and voted against the war. But that wasn’t the only thing Bush said: He went on to proudly assert that when it came to the decision to invade Iraq, “news flash to the world, if they’re trying to find places where there’s big space between me and my brother, this might not be one of those.”

Bush later tried to walk back his comments and distance himself from his brother’s Iraq policy, but the political damage had already been done. As conservative talk show host Laura Ingraham put it: “You can’t think going into Iraq now, as a sane human being, was the right thing to do. That’s like you have no ability to learn from past mistakes at all.”

This past week Bush faced another test of whether he could be “his own man” and honestly assess his brother’s legacy. In an appearance on CBS’s Face the Nation, he was asked by host Bob Schieffer to provide his views on the “successes and mistakes” of the George W. Bush administration. Jeb Bush said “the successes clearly are protecting the homeland” and he asserted that his brother “kept us safe.”

Of course, George W. Bush was president on Sept. 11, 2001 — a day that America was not “kept safe.” George W. Bush was also president in the months leading up to that catastrophic attack — the same months in which he was given a memo headlined “Bin Laden Determined to Strike In U.S.” And as MSNBC’s Steve Benen argues, even if you somehow pretend George W. Bush only became president on Sept.12, 2001, the whole “kept us safe” idea is questionable at best.

“Shortly after 9/11, for example, there were deadly anthrax attacks,” Benen wrote this week. “There were scores of terrorist attacks against U.S. troops in Iraq and Afghanistan. There was an increase in the number of terrorist attacks on U.S. diplomatic outposts around the world.”

Jeb Bush will no doubt have more opportunities to try to distinguish himself from his family members. If he can’t, though, even the enormous advantages that come with his last name might not be enough to carry him to victory.

David Sirota is a senior writer at the International Business Times and the best-selling author of the books Hostile Takeover, The Uprising, and Back to Our Future. Email him at ds@davidsirota.com, follow him on Twitter @davidsirota or visit his website at www.davidsirota.com. Copyright 2015 Creators.com

Photo: Former governor Jeb Bush of Florida speaking at the 2015 Conservative Political Action Conference (CPAC) in National Harbor, Maryland. (Gage Skidmore/Flickr)

Amtrak’s Spectrum Gap

In the public eye, the disaster on the rails last week in Philadelphia was not only tragic but also shocking. As a crowded Amtrak train approached a bend in the track, it was barreling along at more than 100 miles an hour — twice the mandated speed for that section. The resulting derailment killed eight people, highlighting grave deficiencies in Amtrak’s safety system.

But while Amtrak officials may have been devastated, they could not have been surprised: The accident confirmed clear vulnerabilities in the safety system, shortcomings that the rail company’s internal watchdog had been warning about for more than two years.

In a December 2012 report, Amtrak’s inspector general wrote that “formidable” and “significant challenges” were delaying deployment of a safety system known as Positive Train Control, which identifies cars that are traveling at excessive speeds and automatically slows their progress. Four years earlier, Congress had required that Amtrak and other American rail companies add the technology to their operations, but only a fraction of the rail systems were by then covered. Had the PTC technology been in place in Philadelphia, federal regulators say, the derailment might well have been prevented.

The inspector general’s 2012 report zeroed in on one missing element that was crucial to the broader deployment of the safety system: Amtrak had for years failed to acquire adequate rights to broadcast communications signals through the public airwaves. Without these so-called spectrum rights, Amtrak’s trains could not communicate with the electronic brains of the safety system, preventing its use along key stretches of track. This lack of spectrum had become the “most serious challenge” in the railroad’s efforts to deploy the safety equipment more broadly, Amtrak’s watchdog warned.

The failure to more quickly address this challenge seems like a story that the political world can oversimplify into a standard tale of cut-and-dry blame, featuring singular villains. But in this saga, many factors appear to have contributed to the disaster.

For one, there was a lack of adequate resources. Flush with profits, private freight companies had the cash to buy the spectrum they needed for their own PTC system. By contrast, Congress did not provide Amtrak with the same resources.

There was also a lack of political will. When public transportation officials begged Congress to pass a bill ordering the FCC to give the railroad unused spectrum for free rather than selling it to private telecommunications firms, lawmakers refused.

But some technology experts argue that Amtrak itself was also to blame for doggedly sticking to an outdated plan. They say that because communications technology has advanced so quickly, the railroad officials did not need to build a PTC system on exclusive spectrum — whose scarcity makes it difficult and expensive to obtain. Instead, they assert, new technologies would have allowed Amtrak to more quickly construct a system using shared spectrum, existing telecommunications infrastructure or even unlicensed frequencies that are used for things like in-home wi-fi.

“We have boatloads of fiber running alongside train tracks in the rights of way,” said Harold Feld, a senior vice president of the think tank Public Knowledge. “If I were architecting this system, I could deploy it tomorrow using unlicensed spectrum.” Amtrak’s “obsession with exclusive licensing kills,” he concluded.

How much each of these factors contributed to the catastrophe can certainly be debated. What is not debatable, however, is the existence of warning signs. The 2012 inspector general report proves they were there for all to see.

That, then, raises two pressing questions: Why were those warning signs not more urgently addressed? And will such warning signs be acted on in the future? America deserves answers.

David Sirota is a senior writer at the International Business Times and the best-selling author of the books Hostile Takeover, The Uprising, and Back to Our Future. Email him at ds@davidsirota.com, follow him on Twitter @davidsirota or visit his website at www.davidsirota.com. 

Photo: Loco Steve via Flickr

The Marijuana Economy Comes Out of the Shadows

The convention floor at Denver Airport’s Crowne Plaza on a recent afternoon could have been the trade show for any well-established industry — gray-haired execs in conservative suits mingling with office park dads in polos and fresh-out-of-college types in brand-emblazoned T-shirts. Only this is a new kind of business conference with a special Colorado theme: legal weed.

After Colorado voters legalized marijuana in 2012, more states and cities are considering a similar path for themselves. At the same time, the cannabis market is looking less like a music festival and more like a Silicon Valley confab — upscale, data-driven, and focused on investors.

Vendors and potential financiers at last month’s Marijuana Investor Summit here in the Mile High City say the current market for legal cannabis is more than $3 billion in the 23 states that have already legalized the drug for medicinal or recreational use. Expanding that market, they say, will require not just drug reform legislation, but also a consistent infusion of capital at a time when the marijuana economy still exists in a legal gray area — one where the drug is permitted in some states, but still outlawed at the federal level.

“It’s going to take time, but it’s a great opportunity,” said Chris Rentner of Akouba Credit, a Chicago small-business lender exploring the possibility of working with marijuana businesses. “For people that think everyone is a stoner lying on the sidewalk passed out, it’s going to take time for them to get comfortable with it. But there’s too much money in it. We just need to figure out the risk associated with it, but if we can find a way where it makes sense legally, then why wouldn’t we try to be in this market?”

If Akouba jumps into the marijuana market, the company would be trying to address one of the biggest obstacles to the industry’s growth: access to financial services. Because marijuana is still prohibited under federal law, cannabis grow houses and dispensaries have trouble finding traditional banking partners, leaving much of their business to be conducted in cash.

That not only presents a risk of robbery, it also can limit the industry’s access to the kinds of lending and accounting services that are typically involved in small business development.

Like Akouba, many of the 78 exhibitors and nearly 1,000 attendees at the conference are not in the business of actually harvesting cannabis. Instead, they aim to provide support services for cultivators and distributors.

“The majority of these companies aren’t actually touching the plant,” said John Downs of the Marijuana Investment Company. “There’s a green line: You are either in the ancillary and tertiary services, or you are digging in and growing.”

That term — “touching the plant” — is a term of art that distinguishes businesses that provide support services from those that actually grow cannabis. It’s not a minor semantic difference. “Touching the plant” can bring greater regulatory scrutiny and threats of federal action, thereby putting investors’ capital at risk.

That, though, may start to change. In January, the SEC for the first time allowed a company that deals with marijuana cultivation to sell shares of stock. Meanwhile, the legal situation is becoming clearer in Colorado.

Andreas Nilsson of iComply — a firm that helps marijuana business follow the law — says that while there remains political opposition to weed from leaders like Colorado Democratic Gov. John Hickenlooper, the state’s officials put together “very well-developed and clear” regulations and “decided to go in and create a system that is not designed to fail.”

Is it a perfect system? Hardly. But has the sky fallen, as drug warriors once predicted? No — and it probably will not in other states that follow Colorado’s lead.

David Sirota is a senior writer at the International Business Times and the best-selling author of the books Hostile Takeover, The Uprising, and Back to Our Future. Email him at ds@davidsirota.com, follow him on Twitter @davidsirota or visit his website at www.davidsirota.com. 

Photo: Brett Levin via Flickr