12/04/2012
McAfee says he's in Guatemala
(CNN) -- John McAfee, the Internet security pioneer, will seek asylum Wednesday in Guatemala, where he is now located after leaving Belize, his attorney said. Authorities in Belize want to question McAfee in the killing of a neighbor there and believe that he is still in their country. McAfee went to Guatemala for his safety and because it was the closest border for him to cross, said Telesforo Guerra, who is McAfee's attorney and a former attorney general of Guatemala. McAfee had nothing to do with the neighbor's killing and is being unfairly persecuted by authorities in Belize, Guerra told CNN en EspaƱol. "He had to come here because it was the closest and the most immediate place to protect his life from the persecution that the Belizean police initiated," Guerra said Tuesday. But authorities in Belize think McAfee is still in that country, said Raphael Martinez, spokesman for the Belize Police Department. He declined to disclose what information leads police to think that McAfee is still in Belize. "We're not even sure he's left Belize," Martinez told CNN. "He said a lot of things. The police feel he's still here in Belize. "It's difficult to pinpoint what he will say next or what he will do next. I still question his frame of mind," Martinez said. "I think the best thing is for him to come in and answer a couple of questions." McAfee remains "a person of interest," and Belize won't seek extradition of McAfee, Martinez said. Authorities aren't unfairly persecuting McAfee, and his attorney "should come to Belize and see what's happening here," Martinez said. Belize authorities want to talk to McAfee about the November 11 shooting death of American businessman Gregory Faull, 52, who was found dead in his home near San Pedro, on the Caribbean island of Ambergris Caye. Martinez saw CNN correspondent Martin Savidge's exclusive interview with McAfee on Monday, in which McAfee said he fears authorities in Belize. McAfee claimed that he refused to pay a bribe to a politician months earlier and that he has since been afraid for his life. Said Martinez about the CNN interview: "I think he really wants to make this into a great fiasco." McAfee is trying to use media, especially international outlets, "as pawns in his game for sympathy," Martinez said. "He's really gone out of his way to make the country look bad, and we just believe he should -- if he's innocent as he's saying he is -- he should bring in his lawyer, and let's get to the bottom of this and say what he needs to say and let's move on. "I'm sure he could be somebody who could direct the course of this investigation," Martinez said. On his website, McAfee commented about his relocation: "I apologize for all of the misdirections over the past few days. It was not easy to exit Belize and required many supporters in many countries. "I am in Guatemala and will be meeting with Guatemalan officials this morning. If all goes well, I will do a press conference tomorrow," McAfee said Tuesday. McAfee founded his namesake computer security software in 1987, initially running it out of his home in California. He sold his stake in McAfee Associates in 1994 and moved to Belize in 2008. The case began to unfold on November 9, when McAfee told police someone had poisoned four of his dogs. To put them out of their misery, he shot each in the head and buried them on his property, a former girlfriend said. Officials say the dogs' barking and aggressive behavior was a frequent source of friction between McAfee and Faull, a contractor who retired to Belize from Florida and lived next door. McAfee lived in the remote northern part of Ambergris Caye, an island 36 miles from the Belize mainland. Two days later, someone shot Faull in the head in his own living room. A 9 mm shell was found on the second step on the first floor, and Faull was found dead on the second floor. McAfee told CNN in the interview that he did not kill Faull and did not pay anybody to kill the man. He said he will not surrender to police for questioning, adding that his priority is to clear his name. Three people have been detained for questioning in the killing, police have said, and investigators are pursuing multiple leads. A 2009 story in the New York Times indicated that McAfee's fortune had plunged to $4 million from its $100 million peak, due largely to the real estate and stock market crashes that hit his investments. In February 2010, he started QuorumEx, which claims on its website to be trying to "reinvent the way modern medicine combats and disarms pathogenic bacteria." CNN's Joe Sterling and Jessica King contributed to this report. |
West Point cadet quits, cites 'criminal' behavior of officers
By Kari Huus, NBC News, NBC News Military Religious Freedom Foundation Blake Page, a senior at West Point, has announced he will leave the military academy to protest what he says is A West Point cadet publicly announced his decision to quit the prestigious military academy just months before graduating to protest what he sees as the illegal infusion of military procedures and events with fundamentalist Christian proselytizing. To call attention to his move, senior Blake Page wrote a scathing commentary on West Point, published Monday in the Huffington Post. "Countless officers here and throughout the military are guilty of blatantly violating the oaths they swore to defend the Constitution," wrote Page, who was slated to graduate in May. "These men and women are criminals, complicit in light of day defiance of the Uniform Code of Military Justice through unconstitutional proselytism, discrimination against the non-religious and establishing formal policies to reward, encourage and even at times require sectarian religious participation." A public affairs officer at West Point told NBC News he was seeking a response to the Page's commentary and his resignation, but had not arranged an interview or responded to the cadet's assertions by the time of publication. It was an unusual move, one that could come at a high price for Page, 25, who served in the Army prior to enrolling. He could be required to pay the Army some $200,000-$300,000 in "recoupment" costs for his time at West Point. "It's a very unusual move," said Elizabeth Hillman, professor of law at University of California Hastings College who specializes in military law. She said that while many cadets struggle with issues of conscience, few leave as a result. "Cadets will tell you it's very hard to leave," she said. "It's much harder to leave than to stay." "This kid just torched his career in the Army, and his degree at West Point," said Mikey Weinstein, founder of the Military Religious Freedom Foundation, which advocates for total separation of church and state. He likens Page's move to those of Rosa Parks in the civil rights movement and monks who light themselves on fire to protest Chinese policies in Tibet. "People should recognize courage when they see it." While at West Point, Page established a chapter of the Secular Students Alliance to support non-religious cadets at the institution. He has argued against prayer being included in mandatory events. He says he has faced persistent discrimination as a known atheist and has been told by his superiors that he will never be a good leader until he "fills the hole in his heart." His complaints have won some concessions, with the backing of the non-profit Military Religious Freedom Foundation — which provides legal aid and a channel to the media — and the support of Military Association of Atheists and Freethinkers. But Page says that even sympathetic military superiors are reluctant to take action on religious issue because of the sensitivity, and says that applications to leave campus on routine "rest and relaxation" outings were systematically denied him and his fellow secularists. "It's very clear that there is a considerable level of distaste for atheists here," he said. When he informed superiors of his plan to leave West Point, about a month ago, Page says generals appealed to him to work through official channels to bring change at the academy. "My motivation for resigning was first because I didn't want to be part of it, but also to motivate other people to stand up and be counted. Without something bold that gets attention, I don't see a way to inspire anybody to stand up and say 'I'm tired of this'," Page told NBC News. "And talking isn't working, it hasn't been working. I wanted to do something more." Long-held traditions are changing at West Point, as elsewhere in the military. Last week West Point held the first same-sex wedding in its chapel. Page has received a ream of comments congratulating and thanking him for the message he sent with his departure. But he also blow-back from some soldiers. One comment posted to his Facebook page by a fellow soldier lambasted him for "(doing his best) to drag (West Point) through the mud." "I wish you could just pack your bags, slink away, and fade into oblivion, but I guess that's not dramatic enough," the post said. Page said he is planning to write a book about his experiences. More content from NBCNews.com:
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Conservative recruiter is behind key racial lawsuits
Joel Page / Reuters Edward Blum, director of the Project on Fair Representation, poses at his home in South Thomaston, Maine, on Nov. 9. By Joan Biskupic SOUTH THOMASTON, Maine - Sometime in the next few months, the U.S. Supreme Court will decide two cases that could fundamentally reshape the rules of race in America. In one, a young white woman named Abigail Fisher is suing the University of Texas over affirmative action in college admissions. In the other, an Alabama county wants to strike down a law that requires certain states to get federal permission to change election rules. If they win, the names Fisher and Shelby County, Ala., will instantly become synonymous with the elimination of longstanding minority-student preferences and voting-rights laws. But behind them is another name, belonging to a person who is neither a party to the litigation nor even a lawyer, but who is the reason these cases ever came to be. He is Edward Blum, a little-known 60-year-old former stockbroker. Working largely on his own, with the financial support of a handful of conservative donors, Blum sought out the plaintiffs in the Fisher and Shelby County cases, persuaded them to file suit, matched them with lawyers and secured funding to appeal the cases all the way to the high court. Abigail Fisher is the daughter of an old friend of Blum's - a man who happened to call when Blum was in the midst of a three-year search for a white college applicant who had been rejected despite solid scores. Blum eventually got Shelby County to file suit after trolling government websites and cold-calling a county official. Blum introduced Fisher's father and Shelby County officials to the same high-priced but politically sympathetic Washington lawyers, who agreed to work for a cut rate to be billed to Blum's backers. Neither Fisher nor Shelby County is paying to fight the cases that bear their names. Over the past 20 years, Blum has similarly launched at least a dozen lawsuits attacking race-based protections. In addition to the Fisher and Shelby County cases, two other Blum-backed cases reached the Supreme Court. One struck down majority-black and majority-Latino voting districts in Texas. The other prompted the court to suggest it might eliminate a major portion of the Voting Rights Act of 1965, which the conservative-majority bench may now be poised to do in the Shelby County case. A self-described former college liberal, Blum says that over time he came to believe that race-based policies violate the very principles of equality they were created to uphold. Affirmative action, he said, treats whites unfairly and stigmatizes minorities, and the rule that requires certain, mostly Southern, states to obtain special federal permission for electoral changes - Section 5 of the Voting Rights Act - unjustly punishes them for long-abandoned racist practices. "The original vision has been turned upside down," said Blum, whose Toyota minivan has license plates reading "1FRSTNE" - short for One First Street Northeast, the address of the U.S. Supreme Court in Washington, D.C. Jose Luis Magana / Reuters Students calling for diversity protest outside the U.S. Supreme Court in Washington, in this Oct. 10, 2012 file photo. In the next few months, the Court will decide two cases that could fundamentally reshape the rules of race in America. Operating from Maine The Project on Fair Representation, in turn, is fully financed by a tax-exempt charitable group called Donors Trust, which raises money from a variety of benefactors and directs them to conservative foundations and projects. According to Internal Revenue Service documents, Donors Trust spent about $1.2 million from 2006 to 2011, the most recent information available, on Project on Fair Representation activities. Gifts to charities such as Donors Trust are tax deductible; money given directly to a legal-defense fund that is not a charitable organization generally is not. Donors Trust, which also handles the administrative side of the Project on Fair Representation, said most of the project's expenses are for legal fees. Blum said he draws an average annual salary of $50,000, paid by Donors Trust from funds earmarked for his project. He said he and his wife, Lark, a retired insurance agent, also support themselves with income from savings, investments and Blum's part-time work as a municipal-bond analyst. Blum said contributors to his project so far this year have included the conservative Milwaukee, Wis.-based Lynde and Harry Bradley Foundation, which gave Donors Trust $100,000 to support Blum's group after Blum wrote them a pitch letter regarding the Fisher case and asking for support with costs. Bradley Foundation president and chief executive Michael Grebe confirmed the gift. Another is the Searle Freedom Trust, a foundation of the late drug-company scion Daniel C. Searle, which gave Donors Trust gifts totaling $597,500 from 2005 to 2010 designated for the Project on Fair Representation, Searle's IRS documents show. Kimberly Dennis, CEO of the Searle Freedom Trust, declined to comment on Blum's project. Blum and Whitney Ball, president of Donors Trust, declined to name other backers of the Project on Fair Representation. The practice of finding plaintiffs to tee up test cases at the Supreme Court is not new. Liberal groups such as the NAACP Legal Defense Fund and conservative groups such as the Institute for Justice have been doing it for decades. The organizers typically play prominent roles - either as counsel, as public spokespeople or by filing amicus briefs. Jon Greenbaum, chief counsel at the Lawyers' Committee for Civil Rights Under Law, a not-for-profit liberal legal-defense fund that has represented parties on the opposite side of Blum-sponsored litigation, said it is rare that Blum's donors choose to remain anonymous. "There is an issue regarding the transparency of what's going on" when financial backers of high-stakes cases are not known to the public, he said. Blum and Donors Trust's Ball say the financing of Blum's work is similar to what is done for liberal causes, and say people have many reasons for seeking to give anonymously. The nation's colleges are currently allowed to consider a student's race in the admissions process, a procedure that is now being challenged in the Supreme Court. NBC's Pete Williams reports. Son of a shoe salesman He speaks in plain-Midwestern tones sprinkling his conversation with the Yiddish word emes (pronounced "EM-ess"), which means "truth." A 1973 graduate of the University of Texas, Blum said he started out as a Democrat, but by the early 1980s began reading the neoconservative "Commentary" magazine and changed his views. In 1984, he voted for Ronald Reagan. He soon became a successful stockbroker at Paine Webber in Houston. Then, in the early 1990s, came the "acorn that began all my activities," Blum said. After noticing that his heavily Democratic district had trouble fielding a Republican congressional candidate in 1990, Blum decided to enter the 1992 Republican primary. He won it, and in the general election faced an African-American incumbent Democrat. When Blum and Lark walked the district to shake hands with voters, he said, he had to carry a map because the borders zigged and zagged. "Multi-ethnic neighborhoods were split apart," he said. "Block by block. Blacks over here. Whites over here. Hispanics over here." Blum lost by a wide margin. At the time, court challenges were starting to mount over "majority minority" districts like his that had been gerrymandered to consolidate minorities and maximize their voting power. In 1993, the Supreme Court ruled that districts appearing to segregate voters by race, even if designed to help minorities, violate the Constitution's guarantee of equality. Blum decided to sue Texas officials, alleging the districts unlawfully segregated voters by race. He enlisted five local Republicans to join him, including Al Vera, then a high school government teacher, who became the lead plaintiff. Their complaint went to the Supreme Court. That 1996 case, Bush v. Vera, struck down two majority-black and one majority-Hispanic districts in Texas and ordered the boundaries redrawn. Now retired, Vera said Blum is "like a bulldog once he attaches onto an issue he believes in." Blum says he personally fronted about $100,000 of the legal fees in the case, which eventually rose to about $1 million. He initially retained regional lawyers, then sought out a large Washington firm whose top partners had served in Republican presidential administrations. Blum said he and the lawyers eventually recouped virtually all their money, as winners' legal fees are reimbursed in some civil-rights cases. Bert Rein, partner at the firm now known as Wiley Rein, said he doesn't recall specific fees but Blum's account sounds right. Blum went to court to watch oral arguments. He felt so vindicated that he decided to devote himself nearly full time to the fight against race-based laws and policies. "Seeing how the whole thing can be put back together with litigation," he said, changed his life. "It really is the emes." In 2000, Blum moved to Washington and began working with likeminded conservatives. He spent several years as a senior fellow with the Washington-based conservative Center for Equal Opportunity, and abruptly left in 2006 after a falling-out with Linda Chavez, the center's president. Neither Blum nor Chavez would discuss the circumstances. By his own admission, Blum operates best solo. "With partners, everyone wants to be the shiniest apple," he said. "Operating alone, I don't need to address that." Sensing an opportunity Following the Michigan decision, the University of Texas had instituted a modified version of an affirmative action program it had previously discontinued because a lower court in Texas had blocked it. The university guarantees admission to all state high-school graduates in the top 10 percent of their class, but under the new arrangement also allows in some minorities with lower scores in an effort to enhance diversity. Blum figured if he could find a white student who had been rejected with a record that exceeded the lower criteria used for some minority applicants, he might be able to persuade a majority of the nine justices on the Supreme Court that the practice was unconstitutional. Blum said he also wanted someone temperamentally suited to the long haul of litigation. He set up a Web address, utnotfair.org, which asked spurned University of Texas students to contact Blum and relate their experiences. He gave speeches to the Young Conservatives of Texas and similar groups, and hounded everyone he knew in the state. "I could bump into people in restaurants and bars that I knew from high school in Houston that had kids graduating from high school," he recalled. "And I was such a noodge: 'If she doesn't get in, I want to represent her.'" Susan Walsh / AP Abigail Fisher, the Texan involved in the University of Texas affirmative action case, and Blum walk outside the Supreme Court in Washington, on Oct. 10, 2012. He says he heard from many students, but after two and a half years, none still seemed right. Someone might have had strong grades, he said, but didn't seem like a person he could work with for a long period or "expose to the press." Then, in March 2008, Blum got a call from his old friend Richard Fisher. Blum had met Fisher, an accountant, through business even before Fisher's daughter Abigail, then 18, was born. The Blums and Fishers had socialized together over the years and Blum attended the wedding of Abigail's older sister. Fisher, also a Republican with what he says are strong conservative views, knew of his friend's search. Fisher told Blum that Abigail had just received a rejection notice from the University of Texas and was heartbroken. He described her scores, and the men agreed she might make a strong candidate to challenge the Texas admissions system. Blum said he told Fisher: "I want you to prepare Abby for being under a microscope." Abigail, a slight, strawberry blonde, said she told her father she was willing to lend her name and story to a court case, but she wanted to go about her life privately. "I assumed that whatever would come of it would take a really long time," Abigail said. "It would be for others." Blum told Richard Fisher he had financial backing and Fisher would not have to pay a cent in legal fees. Without Blum's access to funds, Fisher said, he would never have proceeded. Blum would not discuss the cost. But lawyers who argue regularly before the Supreme Court say constitutional challenges that start in district court and wind up at the high court could cost a total $2 million or more in legal fees. Blum retained the Wiley Rein firm again, and within a couple of weeks, the lawsuit now known as Fisher v. University of Texas at Austin was filed at the U.S. District Court in Austin. The lower court sided with the university in 2009, upholding its affirmative action plan. A panel of the Fifth Circuit Court of Appeals later agreed. Abigail, meanwhile, had enrolled at her second-choice school, Louisiana State University. A county in Alabama While surfing the Web one day, he saw on the Department of Justice's site that the agency had rejected a voting map in the city of Calera, at the southwestern tip of Shelby County in central Alabama. That new map dramatically enlarged one of the city's voting districts, diluting African-American voting strength. Blum picked up the phone and called the attorney for Calera and greater Shelby County, Frank "Butch" Ellis. The two men immediately clicked. Ellis said he had long been chafing under Section 5 and was intrigued by Blum's call. At the time, another Section 5 case that Blum was helping finance was already at the Supreme Court. That case, filed by the Northwest Austin Municipal Utility District #1, claimed the South had changed, and the requirement that federal permission was needed for election changes was an anachronism. Blum told Ellis that if the Texas utility case didn't strike down the rule, he thought the Shelby County situation might one day make a better case. When the Supreme Court in 2009 sidestepped the issue of Section 5's constitutionality and ruled on a narrower issue, Blum called Ellis again. Like the Fishers, Ellis was enticed by Blum's promise that the county's challenge would cost it nothing. Shelby County v. Holder was filed in April 2010, at the U.S. District Court in Washington. Last May, the U.S. Court of Appeals for the D.C. Circuit upheld the lower court's ruling against Shelby County, and in November, the Supreme Court agreed to hear the case. Bert Rein of the Wiley Rein firm, which Blum retained for both Shelby County and Fisher, declined to discuss its fees. When asked how much money he thought each case would cost, Blum said, "Low six figures." Plaintiff in pajamas Blum then stage-managed some publicity for Abigail, who previously had not appeared in public in connection with the lawsuit. He hired a small production company to make a YouTube video about the case, featuring critics of the university's program and Abigail. In it she said students had been accepted with lower grades and fewer activities than she had, and the "only other difference between us was the color of our skin." University officials say such differences arise from their interest in bringing together as diverse a group of qualified students as possible. They acknowledge that some minority applicants with lower scores than Fisher have been admitted. But they also say that a significant number of African-American and Hispanic applicants with scores identical or higher than hers have similarly been denied admission at the highly competitive campus. On the morning of Supreme Court oral arguments in October, Blum arranged a car and driver for himself, Abigail and her parents. When they arrived at the court building, they tried to avoid the protesters in the front, most of whom supported affirmative action and were carrying signs with messages such as "diversity works" and "expand opportunity." Blum and the Fishers headed for a rear door, but were turned away because it was only for employees. They eventually found the proper entrance and took seats in the rear of the courtroom. After the hearing, standing in front of the marble-columned building surrounded by her parents, lawyers and Blum, Abigail recited from memory a statement Blum had written for her. She thanked the Supreme Court for hearing her case and the lawyers for representing her. "I hope the court rules that a person's race and ethnicity should not be considered when applying to the University of Texas," she said. It did not occur to her to thank Blum, she said. He had not put that in the statement. More from Open Channel:
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Man held in NYC subway rider's death
NBC 4 New York A man questioned in the killing of a New York subway rider is seen at right. By Jonathan Dienst, Shimon Prokupecz and Tracie Strahan, NBCNewYork.com Police have a 30-year-old former deli worker in custody believed to be the suspect who pushed a subway rider off the platform and into the path of an oncoming train at 49th Street after an argument. NBC 4 New York obtained exclusive images of the man being questioned by authorities in the deadly push A law enforcement official told NBC 4 New York the man is suspected of pushing 58-year-old Ki-Suk Han off the platform at the N, Q, R station Monday afternoon. Han was hit by a southbound Q train and died. Witnesses told police the suspect was mumbling to himself before he and Han began arguing on the platform. A bystander recorded part of the fight between the two men and turned the video over to police, who released it to the public Monday night, and received several tips. The man who allegedly pushed Han is heard cursing and saying, in substance, "Leave me alone... stand in line, wait for the R train and that's it." Related: NY Post photo of death draws outrage He then pushed Han onto the tracks, police said. Han tried to climb back up onto the platform but died after getting trapped between the train and the platform's edge. A law enforcement official tells NBC 4 New York that co-workers from a nearby deli where the suspect works tipped off police that their colleague might be the subway pusher after they recognized his voice from video. Witness Patrick Gomez, who was in the station, says he heard a "thud that didn't sound normal" when the train pulled into the station. View more videos at: http://nbcnewyork.com. "People are just standing there in fear and shock, not really knowing what's going on," he said. "Some people started running out of the platform, others just stood there." Read more news on NBCNewYork.com He says police evacuated the platform within minutes. Subway pushes are unusual. Among the more high-profile was the January 1999 death of Kendra Webdale. A former mental patient admitted he shoved her to her death. Following that, the state Legislature passed Kendra's Law, which lets mental health authorities supervise patients who live outside institutions to make sure they are taking their medications and aren't a threat to safety. |
Paper ripped over eerie subway photo
(CNN) -- The man in the picture has his back to the camera. He's desperately clawing at a subway platform, looking right at the train that's bearing down on him as he stands on the tracks. It's a terrifying, heart-wrenching image, and it's generating a lot of criticism for the newspaper that used it on its front page -- the salty, sensational New York Post. Why didn't the photographer help? Why did the newspaper publish the photo? "NY Post should be ashamed of its misuse of humanity for its cover photo of a man about to be killed by a subway train," one person wrote on Twitter. "When does cruelty end." "Snuff porn," another user labeled it. A freelance photographer captured the image Monday after someone shoved the man, 58-year-old Ki-Suck Han, from a subway platform near Times Square. Seconds after photographer R. Umar Abbasi captured the images, the train fatally struck Ki. He died at a New York Hospital, leaving behind a wife and daughter. Police were continuing to look for the suspect in the case on Tuesday. Abbasi's image dominated the tabloid Post's cover on Tuesday. "Doomed," the headline read. "Pushed on the subway track, this man is about to die." In its story on the incident Tuesday, the Post reported Abbasi was waiting on the platform when he saw the man fall onto the tracks. He said he ran towards the oncoming train, firing his camera's flash to warn the driver. "I just started running, running, hoping that the driver could see my flash," the newspaper quoted him as saying. "In that moment, I just wanted to warn the train -- to try and save a life," the Post quoted him as saying. Some critics, however, questioned Abbasi's motives. One Twitter user questioned why someones first instinct would be not to help the man, but instead to "snap a photo of him about to die and sell it to the NY Post." Reached by CNN, Abbasi was adamant that he would talk to the network only for pay. The Post did not return a telephone call and two e-mails seeking comment. Media observers wondered Tuesday if the newspaper had gone too far this time. "Even if you accept that that photographer and other bystanders did everything they could to try to save the man, it's a separate question of what the Post should have done with that photo," Jeff Sonderman, a fellow at journalism think tank the Poyster Institute, wrote on the organization's website. "All journalists we've seen talking about it online concluded the Post was wrong to use the photo, especially on its front page." The Post is no stranger to walking up to the lines of journalistic ethics, and sometimes crossing them, with its pithy, often lurid, coverage of crime and other news in the Big Apple. "HEADLESS BODY IN TOPLESS BAR," the newspaper once famously shouted from its cover. The Post shot is hardly the first news photo to generate ethics concerns. An Agence France-Presse photo that won the 2012 Pulitzer Prize generated controversy for its depiction of a girl in Afghanistan crying amid a number of bloody bodies. Also this year, the New York Times published a graphic image showing blood streaming from the body of a victim following a fatal August shooting at the Empire State Building. At the time, Poynter quoted a Times spokeswoman as saying the image was "a newsworthy photograph that shows the result and impact of a public act of violence." CNN's Pauline Kim and Yon Pomrenze contributed to this report. |
Asia coal export boom brings no bonus for US taxpayers
A haul truck works a coal seam at a mine in the Powder River Basin in Wyoming in this undated photo. U.S. taxpayers are set to miss out on billions of dollars in royalty payments in coming years as a larger share of the black rock pulled from the coal-rich Powder River Basin in Wyoming and Montana is shipped to Asia. By Patrick Rucker WASHINGTON -- U.S. miners who are booking big profits on coal sales to Asia are enjoying an accounting windfall to boot. By valuing coal at low domestic prices rather than the much higher price fetched overseas, coal producers can dodge the larger royalty payout when mining federal land. The practice stands to pad the bottom line for the mining sector if Asian exports surge in coming years as the industry hopes, a Reuters investigation has found. Current and former regulators say their supervisory work has lagged the mining industry as it eyed markets across the Pacific. They say they will now give the royalty question a close look. "We are committed to collecting every dollar due," said Patrick Etchart, spokesman for the Office of Natural Resources Revenue, which collects federal royalties. At issue is the black rock pulled from the coal-rich Powder River Basin in Wyoming and Montana. Miners there say they abide by the letter of royalty rules that call for the government to get a 12.5 percent cut on coal sold under federal lease. The question is: At what point is that coal valued? Most Powder River Basin coal is sold domestically, where prices have been depressed by a glut of natural gas and regulations meant to curb pollution. But Asian economies rely on coal to sustain growth, so the ton worth about $13 near the Powder River Basin mines last year fetched roughly 10 times that in China. After deducting costs like shipping by sea and rail, that ton of Powder River Basin coal sold in China last year would have returned about $30 to the miners, several industry analysts estimate. Coal is loaded onto rail cars leaving a coal mine in the Powder River Basin. Luther Lu, director at China-based Fenwei Energy Consulting, said the figure was closer to half that, with miners up against other costs that would have cut into their margin. Whatever the take-home for miners, several royalty experts said, the taxpayer is due a share of the final sale price overseas. Powder River Basin mining companies disagree and say that they are right to pay out royalties at the low domestic prices. "If you look at the regulations, we are not required to do a net-back," said Karla Kimrey, a spokeswoman for Cloud Peak Energy, referring to the return on Asian sales. The taxpayers' bite would be based on that number. The rules that govern Powder River Basin sales to Asia deserve a more rigorous review, and short royalty payments will not be tolerated, Etchart said. The royalties question will remain an important one as Asian coal exports look set to expand and the United States faces a fiscal crisis. "How do you justify paying royalties at anything less than the true value, particularly in these times of tight budgets?" said Autumn Hanna of the nonpartisan Taxpayers for Common Sense. $100 million short? Industry and publicly available data, though, indicate that taxpayers stand to lose out. Paying royalties calculated on the net-back formula for Asian exports from Wyoming and Montana rather than on the benchmark domestic price would have yielded around $40 million in additional revenue for the government last year alone, according to data from Goldman Sachs and other analysts, and figures from the U.S. Energy Information Administration. Extended to the last few years of increased Asian demand, that total could exceed $100 million in forgone royalties. The sum could balloon into billions of dollars if mining giants are allowed to ship 150 million tons of coal a year or more through the Pacific Northwest, as the industry wants. Of course, if the companies are more profitable because of lower royalty payments, they may well be paying more in corporate taxes, though some experts dispute the point. "A certain $1 collected on royalties is worth more than the unsure tax take," said Tom Sanzillo, a former deputy comptroller for New York state who has studied the economics of coal exports with the Institute for Energy Economics and Financial Analysis. For now, the debate over exports from the Powder River Basin is of limited scope: Less than 4 percent of the roughly 476 million tons of coal produced in Wyoming and Montana was exported last year, according to the EIA. Three-quarters of U.S. coal exports are bound for Europe or other non-Asian ports, much of that from private, not federal lands, in the Appalachian region. But Asian economies such as India and China cannot grow without abundant electricity, and that demand has opened a window for a U.S. coal sector long focused on delivering domestic power. 'Exports were not on the radar' Less than 5 percent of Cloud Peak coal was shipped to Asia last year, but that accounted for nearly 19 percent of total revenue, or about $290 million. A year earlier, Asian sales were only 3.4 percent of the total volume but 12 percent of revenue. Cloud Peak, Peabody Energy and Arch Coal all declined to explain how they book their Asia business, but a large share of Powder River Basin sales passes through traders. Sales to brokers and traders are allowed, but royalty rules assume that those buyers' economic interest is opposite to miners'. Sales to in-house or affiliated traders are due more scrutiny under the law. "We are familiar with the rules around both arms-length and non-arms-length transaction and fully comply with both," said Vic Svec, a Peabody Energy spokesman, referring to the principle that is supposed to guide such sales. Arch Coal declined to comment on their trading business, and Cloud Peak said it faces frequent audits from state and federal officials to make sure they follow the rules. "In my neighborhood, I don't stop at every block. I could. But that's not where the stop signs are," said Cloud Peak spokeswoman Karla Kimrey. "You can say you don't like the regulations, but we play by the rules." Former and current officials said the government has been slow to understand the power of foreign markets or protect the taxpayer's stake in those lucrative sales. "Exports were simply not on the radar," said Bob Abbey, who in May stepped down as head of the Bureau of Land Management, the agency that grants federal coal leases. A precedent in gas In the late 1970s, Marathon Oil Corp. used a similar accounting system to settle royalties on natural gas that was produced in Alaska but sold to Japan. A federal court eventually told Marathon to pay out royalties based on the overseas value. Officials leveled a $10 million fine against Marathon. Peter Appel, a former Justice Department attorney, said the case shows that officials expect taxpayers to get a taste of the true gains on exported fuel. "This ruling should give officials confidence to give a hard look at coal sales," said Appel, who prosecuted cases for the DOJ's Environment and Natural Resources Division and teaches at the University of Georgia School of Law. More from Open Channel:
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