Article of Interest

An excerpt from the NY Times Bestseller, Armed Madhouse – From Baghdad to New Orleans – Sordid Secrets and Strange Tales of a White House Gone Wild by Greg Palast.

Since the initial release of Armed Madhouse in June 2006, much has changed in America.

The Department of Homeland Security, after a five-year hunt for Osama, finally brought charges against … Greg Palast.

As America crawled toward the fifth anniversary of the September 11 attack, Homeland Security charged me and my US producer Matt Pascarella with violating the anti-terror laws.

On August 22, 2006, we were videotaping Katrina evacuees still held behind barbed wire in a trailer park encampment a hundred miles from New Orleans. It had been a year since the hurricane and 73,000 POW's (Prisoners of Dubya) were still in mobile home Gulags. I arranged a surreptitious visit with Pamela Lewis, one of the unwilling guests of George Bush's Guantanamo on wheels. She told me, “It's a prison set-up" -- except there are no home furloughs for these inmates because they no longer have homes.

You can't film there. FEMA is part of Homeland Security and its camps are off limits to cameras. We don't want Osama to know he can get a cramped Airstream by posing as a displaced Black person.

To give a sense of the full flavor and smell of Kamp Katrina, we wanted to show that this human parking lot, with kids and elderly, is close by Exxon Petroleum's Baton Rouge refinery. The neighborhood goes by the quaint sobriquet, "Cancer Alley."

So we filmed it. Uh, oh. The refinery, like the Indian casino parking lot in Chapter 1, is a CAVIP, "Critical Asset and Vulnerable Infrastructure Point." Apparently, you can't film a CAVIP.[1]

As to the bust: The positive side for me as a reporter was that I got to see Bush's terror-trackers in action. I should note that it took the Maxwell Smarts at Homeland Security a full two weeks to hunt us down. And we're on television.

Frankly, Matt and I were a bit scared that, given the charges, we wouldn't be allowed on a plane into New York for the September 11 commemoration. But what scared us more is that we were allowed on the plane.

Once I was traced, I had a bit of an other-worldly conversation with my would-be captors. Detective Frank Penantano of Homeland Security told me, "This is a 'Critical Infrastructure' … and they get nervous about unauthorized filming of their property."

Well, me too, Detective. In fact, I'm very nervous that extremely detailed satellite photos of this potential chemical blast-site can be downloaded from GoogleMap.com. [Illustration: insert small image of site from Google.]

Detective Penantano, in justifying our impending arrest, said, "If you remember, a lot of people were killed on 9/11."

Yes, I remember "a lot" of people were killed. So I have this suggestion, Detective -- and you can pass it on to Mr. Bush: Go find the people who killed them.

Before the Big Bust, we learned a little more about how New Orleans drowned. Given my line of work, I'm not shocked at much. Yet, this one got to me.

"By midnight on Monday the White House knew. Monday night I was at the state Emergency Operations Center and nobody was aware that the levees had breeched. Nobody."

The charges were so devastating -- the White House's withholding from the state police the information that the city was about to flood -- that from almost any source, I simply would have dismissed it. But this was not just any source. The whistleblower was Dr. Ivor van Heerden, deputy chief of the Louisiana State University Hurricane Studies Center, and the chief technician advising the state on saving lives during Katrina.

That Monday night, August 29, 2005, the sleepless crew at the state Emergency Operations Center, directing the response to Hurricane Katrina, were high-fiving it, relieved that Katrina had swung east of New Orleans, sparing the city from drowning.

They were wrong. The Army Corps, FEMA and White House knew for critical hours that the levees had begun to crack, but withheld the information for a day and night. The delay was deadly.

Van Heerden explained that levees don't collapse in a single bang. First, there's a small crack or two, a few feet wide, which take hours to burst open into visible floodways.

Had the state known New Orleans' bulwark was failing, they would have shifted resources to get out those left in the danger zone.

Van Heerden: "FEMA knew on 11 o'clock on Monday that the levees had breeched. At 2pm they flew over the 17^th Street Canal and took video of the breech.

Question: So the White House wouldn't tell you that the levees had breeched?

Van Heerden: I mean nobody knew. Well, the Corps of Engineers knew. FEMA knew. None of us knew.

Van Heerden said, "I went to the Governor's on Tuesday night and I said this, 'There's a lot more breeches than one.' They said, "Whatever you need, go find out.' I got in an airplane, I flew. I counted 28 breeches."

The White House has\d good reason, or at least political and financial reasons, to keep mum. A hurricane is an act of God, but catastrophic levee failure is an act of the Administration. Once the federal levees go, evacuation, rescue and those frightening words -- responsibility and compensation -- become Washington's. Van Heerden knew that "not an act of God, but catastrophic failure of the levee system" would mean that, at least, "these people must be compensated."

Not every flood victim in America gets the Katrina treatment. In 1992, storms wiped out 190 houses on the beach at West Hampton Dunes, home to film stars and celebrity speculators.

The federal government paid to completely rebuild the houses, which, hauled in four million cubic feet of sand to restore the tony beaches, and guaranteed the home's safety into the coming decades -- after which the "victim's" homes rose in value to an average $2 million each.

[illustration insert: West Hampton Dunes flooding victims' shelter; New Orleans' victims shelter. (Image of Dunes versus Kamp Katrina mobile homes.)]

But in New Orleans, instead of compensation, 73,000 have been sentenced to life in FEMA's trailer-parks in Louisiana. Even more are displaced to other states. I asked van Heeerden about the consequences of the White House's failures, the information about the levee being just one of a list.

But why did the levees fail at all if the hurricane missed the city? The professor showed me a computer model indicating the levees were a foot and a half too short -- the result of a technical error in the Army Corp of Engineer's calculation of sea level when the levees were built beginning in the 1930s.

And the Bush crew knew it. Long before Katrina struck, the White House staff had sought van Heerden's advice on coastal safety. So when the professor learned of the 18-inch error, he informed the White House directly. But this was advice they didn't want to hear. The President had already sent the levee repair crew, the Army Corp of Engineers, to Afghanistan and Iraq.

Eighteen inches may not seem like much, but the LSU computer models showed this was the difference between the levees holding and their system-wide collapse.

I had one last question for Van Heerden. In the last chapter, I noted that in 2004, a year before the flood, the Bush Administration had taken the extraordinary step of contracting out New Orleans' hurricane planning. What did the LSU experts know about this private contractor, "Innovative Emergency Management," IEM, that was handed the job of drafting an evacuation plan?

Van Heerden never heard of them until they were given the lucrative planning gig -- and I mentioned they couldn't seem to find the plan after the flood. (Maybe it got wet.)

But van Heerden suggested they may have had good reason to let their New Orleans evacuation proposal get lost. The plan was, he said, when a hurricane hit, everyone in the Crescent City would simply jump into their cars and get the hell out. It seems that the IEM/FEMA crew didn't remember that 127,000 people in the city didn't have cars. But Dr. LSU remembered. They'd drafted computerized maps locating these no-car people and knew how to get them out. Dr. van Heerden offered this life-saving information to FEMA. They wouldn't touch it. Then, a state official told the professor to shut up, back off -- IEM was upset with his meddling -- or there would be consequences for van Heerden's work. The official now works for IEM.

So I dropped in on IEM. In their office down the road from LSU, IEM's spokeswoman assured me that company CEO Madhu Beriwal had, "a lot of experience with evacuation" -- but couldn't name a single city Beriwal had developed a plan for before getting the FEMA contract for New Orleans.

I showed the IEM folk the long list of her donations to the Republican Party and asked if that was the experience that won the contract. A short-necked guy standing at her side, a self-descried "bioterrorism expert," suddenly put his hand over our camera lens and said, "We've called Security." I took that to mean the interview was over.

Had the interview not been cut short, I would have asked about those residents without cars. Stephen Smith is one. He lost his home; and his children now live in Baton Rouge while he works in Houston. Smith told me that on the fourth day after the flood, still stranded with starving families in the brutal heat on an Interstate 10 overpass, an elderly woman asked him to close her dead husband's eyes. He had collapsed, perishing from dehydration after giving his last bottle of water to his grandchildren.

Well, it won't happen again. The Bush Administration has hired a consulting firm to evaluate what went wrong with the failed evacuation plan. The contractor? A Baton Rouge company named, "Innovative Emergency Management," IEM.

[1] I'm writing this on the ferry to the Indian casino -- Southold, New York's designated CAVIP. A sign on the gambling cruiser says, "Journalists must register before boarding." Why reporters should register, I'm not certain. It strikes me that they should require terrorists to register.

Here is one more excerpt from Greg Palast's book. I find it gripping, provocative, inspiring -- a modern Declaration of Independence, this book exposes the abuses of today's global Empire and calls on us to take action. Palast challenges us to replace a system he describes as "un-American" with one that will create a sane, equitable, and sustainable world for our children. This segment is about Ecuador -- a place I know well, and Palast's investigation exposes a story that must be told.

from "ARMED MADHOUSE: Who's Afraid of Osama Wolf?, China Floats Bush Sinks, the Scheme to Steal '08, No Child's Behind Left and other Dispatches from the Front Lines of the Class War"

In April 2005, I was in the Andes Mountains, standing on the Equator, when a condor flew over and dropped a document into my hand marked, “FOR OFFICIAL USE ONLY.”

There were other warnings. The document’s contents “may not be disclosed” without authorization of the World Bank. In light of the Bank’s concern, please do not look at the document at http://gregpalast.com/armedmadhouse/TheNetwork_5.tiff

In that part of the world that hangs down perilously from Texas, Latin America, Mother Nature has stocked these nations with a wealth of resources from gold to oil to cropland to hydropower, creating an El Dorado richer than any in the most extravagant dreams of the conquistadors. Yet 132 million South Americans live on less than $2 a day; and just a couple of years ago you could find schoolteachers in Buenos Aires hunting through garbage cans for dinner. Why? Because one resource was mined from their land until it was exhausted: capital.

I admit, I made up the bit about the condor. But I really did stand on the Equator (a goofy, but obligatory, tourist stop for travelers to Ecuador) reading through a confidential document slipped to me by unhappy employees of the World Bank.

At the Ciudad Centro del Mundo, the City at the Center of the World, loudspeakers on poles scratch out some Inca-cum-New Age music while underdressed kids squat in the dirt selling gum. These great-great-grandchildren of the Inca have no water except what they can carry in jugs up hills. The national treasury cannot afford the $5 million for vaccinations the United Nations says these children must have.

However, their parents have been hit with electric bills of $30 to $60 a month. The bills are based on a price per kilowatt-hour that is twice the average paid by consumers in the U.S. That’s one of the conditions dictated by the World Bank in the confidential agreement between Ecuador and the Bank. That’s quite a price to pay in a nation where only a minority of the population earns the “minimum” wage of $153 a month. That’s $153 a month U.S. money, and most items cost what they cost in the U.S. Try it out yourself for a month.

Why, in a nation so painfully poor, is the World Bank, an agency founded after World War II to help the helpless, requiring this nation to sock it to electricity customers? The answer: "Electro-dollars." Electric utilities are marvelous cash cows. The costly systems are built with consumer and government funds, then “privatized” at pennies on the dollar. Electricity, water, and gas customers are hostages to the monopoly. To avoid the companies charging ransom instead of a fair price, these “natural” monopolies as economists called them, used to be regulated worldwide. Prices were set to match costs plus a strictly limited profit. No more.

Here’s the secret condition set by the bank on Ecuador. If you want to see how the brave new globalization order works, forget code writers in India and iPods smaller than your pinky. This is what it’s all about:

"The Borrower’s [Ecuador’s] Electricity Council has issued tariffs [that means ‘set prices’]...at the longer marginal cost of electricity generation, transmission and distribution calculated using a methodology acceptable to the Bank."

Let me translate from the Techno-Croatian. Charging at “cost” sounds fine. But “cost” and “marginal cost” are two different animals, especially by the “methodology acceptable to the bank.” The cost of producing electricity is cheap in Ecuador—they have water falling right down the Andes for hydropower. But the “marginal cost” is based on the world price of oil and gas—way, way above actual costs. In effect, the Quechua families in Quito slums will be whacked with a light bill based on the price of oil set by OPEC.

The Bank also required Ecuador to raise prices on basic foods. What is behind such devastating cruelty—forcing Ecuadorians to choose between lights and food? Always ask, qui bono? who benefits?

Ecuador’s bondholders in Miami, for sure. But first and foremost, the privatized electric companies. Who are these guys? There’s Duke Energy (of the Carolinas), founded decades ago by cigarette magnate James Buchanan Duke, which owns 51.5% of “Electroquil,” which, in 2004, demanded $30 million in back payments from the public. Duke’s pathway into Ecuador’s pocketbooks was paved for them by the owners of “Emelec,” the Spanish acronym for its old name, American Foreign Power and Electric Corporation. It was taken over by one of Ecuador’s richest men, also the owner of one of Ecuador’s big banks whose assets, the deposits of half a million customers, just seemed to evaporate.

In 1999, that tycoon, Fernando Aspiazu, siphoned his Emelec shares out of his bank and dumped them into a Bahamas shell company to keep it out of government hands just before the police raided and seized the bank (and arrested Aspiazu, later jailed).

Aspiazu put a couple of front men in charge of selling the Emelec assets—now the government’s claimed property—and sought Uncle Sam’s political help. But Emelec was an Ecuadoran-Bahamian fugitive property by then, none of the business of the United States. So the Bahamas shell obtained U.S. corporate citizenship through a tried and true route: The company’s operators hired Henry Kissinger’s lobbying firm, Kissinger McLarty Associates. The “McLarty” in this power duo is Mack McLarty, former Clinton chief of staff. The concerns of the Bahamian Kissinger-Americans suddenly became a crucial foreign policy concern of the U.S. Secretary of State Madeleine Albright, who personally put the screws to the president of Ecuador to get Emelec’s complaints “resolved.”

In sum, the huge difference between electricity cost and price is a windfall for foreign owners, a windfall sucked right out of the Andes and sent straight to New York or to the Bahamas, or sometimes, simply pumped up the hill to the huge homes commanding the best views of Quito.

How that windfall is obtained is not always nice and rarely public. The World Bank, in its secret agreement with Ecuador, made sure the prices stayed sky high. Electro-dollars: one of the ways to squeeze dollar blood from the South American stone.

That was Margaret Thatcher’s formula. If you want to seize a nation’s economy, grab it by its light bulbs. She used the terminology of military conquest, “seize the commanding heights,” to describe the sale of public utility systems. “Privatize” and “deregulate” public services, starting with electricity, telephone and water systems, and the rest of the economy will soon be forced to adopt the free-market nostrums of “supply-side” economics. If the nation doesn’t come along willingly, the World Bank, holding the nation’s access to credit markets in its hands, will impose a “methodology” for pricing and privatization “acceptable to the Bank” and its stockholders.

The World Bank and IMF also required Ecuador to throw away its own currency and replace it with U.S. dollars. Those $60 electric bills, for example, must be paid by Quito residents in U.S. currency. As a result, Ecuador must borrow and pay interest on the U.S. dollar bills sitting in every Ecuadoran’s wallet.

When Ecuador’s currency was “dollarized,” the wealthy took their crisp new bills with Alexander Hamilton on them and sent them, literally, to Miami. Ecuador’s banks, like Mr. Aspiazu’s, with their dollar reserves missing and stashed in the USA, collapsed. The IMF demanded the nation’s treasury bail out the banks’ private shareholders. That added a huge new debt to be paid by all Ecuadorans.

But Ecuador can afford it. Ecuador is rich. The vast nation of only thirteen million citizens sits on a pool of oil worth a quarter trillion dollars. The solution is painfully obvious: Let Ecuadorans keep their oil wealth, at least enough to keep the lights on and pay for their children’s vaccines.

But that solution runs smack up against paragraph III-1 of the World Bank’s confidential plan, the “Structural Adjustment Program for Ecuador.”

New oil wealth from a new oil pipeline will be spent per World Bank orders as follows:

"...10% to social spending; 20% for contingencies...; and 70% to debt buybacks, not for regularly scheduled budgeted amortizations."

How generous: Ecuador gets to keep 10%. “Social spending” by the way, means schools and medicine. The codicil says the big bucks, 70% of its new oil wealth, will go to bondholders to buy back their bonds. (These payments are over and above interest payments.) Another 20% will go into an “oil stabilization fund”—that is, another reserve for the bondholders.

The bonds are held by speculators who, in most cases, purchased them for twenty cents on the dollar. The IMF plan calls for expediting payment at five times what these speculators paid for the bonds, a swift, neat 500% return. Who are these guys collecting the windfall? Who is squeezing Ecuador by the bonds? The nation’s President says, “The tragedy is that we don’t know who owns the bonds.”

The greater tragedy is that, according to a U.N. official I spoke with, the bonds are held by the same crew in Miami that bled the nation’s banks dry.

The terms imposed by the IMF for new financing would make a loan shark blanch. Electricity prices would rise, as well as charges for cooking gas. And Ecuador would agree to open its delicate jungle areas to oil drilling by Chevron Oil, the company that named a tanker after a corporate board member, Condoleezza.

I had traveled to Quito to meet with the President, Alfredo Palacio, to discuss with him the confidential IMF terms. That was not easy. First, an aide to the President told me the U.S. State Department had warned Palacio against meeting with me. (It’s comforting to know that someone in the Bush Administration is reading my reports.)

Second, Palacio had taken office only days before, on April 20, when his predecessor disappeared out the back door of the Carondelet Palace to seek asylum in Brazil. Then-President Lucio Gutierrez was fleeing a crowd of one hundred thousand protesters, angry and hungry Quechua Indians from the hills, seeking his arrest.

“Sucio Lucio” (Dirty Lucio, a nickname I believe even his mother uses) had won election in 2002 promising to break away from the supposedly “voluntary” austerity plan imposed by the World Bank. Within a month of taking office, Gutierrez flew to Washington, held hands with George Bush (a photo now infamous in Quito) and received instruction from U.S. Treasury officials in the financial facts of life. Lucio returned to Quito, reneged on his campaign promises and acceded to every demand of the IMF to raise prices of basic necessities and cut services, from hospitals to schools. The public, after a dispirited three-year delay, revolted. Sucio fled and his Vice President, Palacio, was sworn in.

On April 25, 2005, when I arrived at the Presidential Palace, crowds were still there, chanting their suspicions that the new President would follow Sucio Lucio’s path.

But Palacio saw no reason to adopt the extreme free-market path to economic asphyxiation. At his inauguration, Palacio suggested that Ecuador might keep a little of its oil wealth for health and education needs.

That’s not what the Bush Administration wanted to hear. Secretary of State Condi Rice fired a diplomatic cruise missile, calling for new elections to get Palacio out of the way.

President Palacio seems an unlikely target of U.S. official assaults. He comes off like a cardiologist you’d meet at an AMA convention. That is, in fact, what he is: a heart doctor who practiced in the USA for a decade. Affiliated with no political party, he was brought into the government to build a national health program.

Palacio is soft-spoken, conservative in his views and pro-American—but his patient, his nation, is ill from diving into an extreme form of free-market globalization ordered by the World Bank.

He just wanted to keep a few petro-dollars for the vaccines and general welfare. “Sick people,” he told me, “are not going to produce anything.”

I showed him the World Bank confidential agreement signed by his predecessor. He was obviously familiar with the terms. “If we pay that amount of debt,” he told me, “we’re dead. We have to survive.”

He was quite certain that Condi Rice, the World Bank and the foreign bondholders would listen to simple medical logic. “If we die, who is going to pay them?” But they didn’t listen. Getting off the petro-dollar cycle, or at least slowing it down, is not so easy. Just by Palacio’s suggesting he might redirect some oil money, within weeks of Paul Wolfowitz taking over the World Bank, Ecuador was cut off by both the Bank and IMF. Ecuador’s bonds were facing a boycott.

Then, when hope seemed lost, in August 2005, a dark stranger rode into Ecuador, wrote a check for $200 million to buy up Ecuador’s bonds and restore the nation’s credit. The Stranger from Caracas also brought along two million barrels of crude oil, diesel fuel and naphtha to keep the nation moving. Then he rode on to Argentina with a check for nearly a billion dollars to bail out that nation’s bonds.

Who is this guy, a mini-IMF unto himself, breaking the cycle of ebb and flow?

The answer is in the chapter, "The Assassination of Hugo Chavez," in Palast's new book, ARMED MADHOUSE. www.GregPalast.com