The case of President Obama's missing oil tax


The case of President Obama's missing oil tax

By Carrie Budoff Brown
April 17, 2012


Candidate Barack Obama pushed it hard in 2008: a tax on Big Oil company profits that would flow back to families in $1,000 rebate checks.

President Barack Obama acts as if the idea never existed.

With gas prices at record highs during the campaign, Obama backed the so-called windfall profits tax as the top item of his energy agenda, arguing it was needed once oil tops $80 per barrel. He ran TV ads in 18 states touting the idea and slammed GOP rival John McCain for taking oil company contributions “instead of taxing their windfall profits to help drivers.”

But four years later, as oil sits well above the $80 marker for the second year in a row and Republicans hammer Obama on energy policy, the idea is about as popular in the West Wing as $4-per-gallon gas.

Obama dropped the plan soon after winning office, when the economic crisis depressed oil demand worldwide, and he hasn’t talked about it since then. His aides also declined to address it on the record.

The arc of the tax from campaign cornerstone to administration dustbin illustrates the speed at which election-year promises can evaporate once the realities of governing set in. And it highlights Obama’s difficulty matching his get-tough rhetoric on oil companies with results, particularly as the Senate lost its moderate core, Republican allies on the issue turned into opponents and longtime Democratic sponsors retired.

“This is a campaign pledge that disappeared in 2008 and never made it back into the mix,” said Ben Schreiber, a climate and energy tax analyst with Friends of the Earth. “The truth of the matter is the president hasn’t used his megaphone to promote it.”

Within a week of Election Day, Obama’s transition team dropped the tax from its website, according to the American Small Business League, which tracked the changes. An unnamed transition official quoted in news reports at the time said the reason was that the price of oil per barrel had dipped to about $40. The abrupt shift infuriated progressives, who felt he’d abandoned the tax entirely and dubbed it Obama’s first broken campaign promise.

Instead, Obama focused on eliminating tax incentives for oil and gas companies, which the administration included in each of its four budgets.

“Ending unwarranted subsidies for Big Oil, which represent billions in taxpayer dollars each year that could be used more effectively, is clearly more achievable, and so it makes sense for us to put our focus there,” an administration aide said.

A second administration aide said the White House decided that it had a better chance at persuading Congress to repeal the tax subsidies than enact the tax on oil and gas company profits.


“Right now, the biggest oil companies are raking in record profits — profits that go up every time folks pull up into a gas station,” Obama said last month. “But on top of these record profits, oil companies are also getting billions a year — billions a year in taxpayer subsidies. … Think about that. It’s like hitting the American people twice. You’re already paying a premium at the pump right now. And on top of that, Congress, up until this point, has thought it was a good idea to send billions of dollars more in tax dollars to the oil industry.”

But even that proposal stalled in the Senate last month, as Obama struggled to win over voters to his response to high gas prices. A Washington Post/ABC News Poll released last week found 62 percent of adults disapprove of his handling of the issue.

Elgie Holstein, a senior campaign adviser on energy policy in 2008 and co-director of Obama’s energy transition team, said he could not recall any discussions during the transition on dropping one proposal in favor of another.

But he said the main reasons for doing so were likely the gyrating oil prices that would have made it difficult to structure the tax, an economic crisis that shifted priorities and a recognition that targeting the oil subsidies made more sense from a policy standpoint.

“In the big picture this is really all about how things in the course of a campaign season can change dramatically, so by the time a new president is inaugurated, the scale of the problems he or she has to confront changes dramatically and so do the solutions,” said Holstein, now senior director of strategic planning for the Environmental Defense Fund.

But critics, and even some allies, of the president say the White House made more of a cold political calculation in abandoning the windfall profits tax.

The tax made it too easy for Republicans to tag Obama as a liberal in the mold of former President Jimmy Carter, who enacted a windfall profits tax that Congress repealed eight years later, after it failed to produce a windfall for the government.

“Maybe they took some classes and realized it didn’t work,” said Peter Van Doren, a scholar at the libertarian Cato Institute who has studied the issue.

Hiking taxes on oil company profits won support from 55 percent of adults nationwide in an ABC News/Planet Green/Stanford University poll in July 2008. But repealing the tax incentives for oil companies has earned higher marks from the public in various polls over the past year.


Seventy-seven percent of Americans said redirecting the oil tax incentives to fund investments in alternative fuels would either help a lot or somewhat help in addressing high gas prices, according to a March survey conducted by Hart Research for the liberal Center for American Progress. Sixty-three percent said the same about taxing oil company profits.

And then there is the congressional math. The House is now controlled by Republicans. In the Senate, of the 12 Republicans who supported procedural votes on bills to tax oil profits at some point over the past seven years, only four are still in office.

Among the remaining group, the support has dissolved. Sen. Olympia Snowe (R-Maine) said in the “current economic climate,” she favors ending the tax subsidies rather than taxing oil company profits. A spokeswoman for Sen. Chuck Grassley (R-Iowa) said he only supported opening debate on the energy bill, not the tax itself. A spokesman for Sen. Susan Collins (R-Maine) could not say where she stood on the issue. A spokeswoman for Sen. John Thune (R-S.D.) could not be reached for comment.

The Democratic sponsors — Sen. Hillary Clinton of New York, Sen. Byron Dorgan of North Dakota and Sen. Chris Dodd of Connecticut — are gone, too.

The increasingly polarized Senate isn’t interested in repealing the tax subsidies, either. A bill to do so failed to advance last month on a 51-47 vote, short of the 60 votes needed to open debate.

If that bill can’t advance, then taxing the windfall profits stands no chance — which is why nobody is really expecting Obama to return to the proposal, even though the price of oil has been above that $80-per-barrel level that Obama identified in 2008 for five months. As of Monday, it was $102.

“No one is talking about it right now,” said Dan Weiss, director of climate strategy at the Center for American Progress.

That could change later in the month when the big five oil companies report their first-quarter profits, which could once again break records, Weiss said.

But even supporters of the proposal concede that prospects are dim. Not that they are happy about it.

“Barack Obama told the people of America that he would pass a windfall profits tax,” said Lloyd Chapman, president of the American Small Business League, which first drew attention to Obama’s shift away from the tax after his election. “Not doing so is one thing but to never explain why … is a staggering lack of integrity. Obama needs to do what he said he would do.”

Small Vendors Win Record Amount of Contracts: BGOV Barometer


Small Vendors Win Record Amount of Contracts: BGOV Barometer

By Nick Taborek
April 17, 2012

April 17 (Bloomberg) -- Small companies are winning a record share of business under the U.S. government¹s fastest- growing class of contracts.

The BGOV Barometer shows small businesses, generally those with less $7 million in annual revenue, received 24 percent of the $83.2 billion the government spent last year on so-called multiple-award contracts. That compares with 18 percent of $40.9 billion in fiscal 2006, according to the data compiled by Bloomberg. In total dollars, small-company contract revenue more than doubled in the five years to $19.7 billion from $7.38 billion.

Opportunities for small businesses have expanded as the federal government has more than doubled its spending on multiple-award contracts since 2006. The government favors such deals, under which many suppliers are picked in advance to compete against each other for orders, because they are faster and easier to administer than proceeding one contract at a time.

³Multiple-award contracts are a natural for small businesses,² said Dan Jacobs, chief executive officer of The Federal Market Group, a Warrenton, Virginia-based consulting company. ³They¹re quicker, they¹re more agile.²

The companies have succeeded with multiple-award deals even as the government has missed its goal of directing at least 23 percent of all prime, or direct, contract revenue to small businesses.

Federal agencies have failed to meet that target each year for at least the past decade, according to data compiled by Bloomberg. They awarded 21.8 percent of prime contracts to small businesses in fiscal 2011.

Small Business Ranks

The revenue from multiple-award contracts isn¹t being spread evenly among the ranks of small businesses.

In fiscal 2011, the top 10 percent of small companies received $14 billion under the contracts, or 71 percent of the total awarded to small firms, according to data compiled by Bloomberg. In fiscal 2006, by comparison, the top 10 percent received $4.97 billion, or 67 percent.

The number of small companies winning work under multiple- award contracts declined to 2,680 last fiscal year, from 2,733 the prior year, for the first year-over-year decline since at least 2007.

This analysis of small businesses¹ multiple-award agreements excluded ³schedule² contracts for basic supplies and services operated by the General Services Administration and the Veterans Administration. Spending on those contracts hasn¹t increased as quickly as spending on the non-schedule multiple- award contracts.

One issue is that some companies are being counted as small even though they¹ve been acquired by large firms, said Brian Reeder, a spokesman for the American Small Business League in Petaluma, California. That skews the data, he said.

A study by his organization found that of the top 100 contractors winning small business awards in fiscal 2011, 72 were large companies.

Mike Stamler, a spokesman for the U.S. Small Business Administration, declined to comment.

--With assistance from Paul Murphy and Brian Friel in Washington. Editors: Stephanie Stoughton, Joe Winski

To contact the reporter on this story:

Nick Taborek in Washington at +1-202-654-7359 or

To contact the editor responsible for this story:

Stephanie Stoughton at +1-202-654-7375 or

GSA Scandal Underscores Need for Government Contracting Oversight

Press Release

GSA Scandal Underscores Need for Government Contracting Oversight

By American Small Business League
April 17, 2012

The American Small Business League (ASBL) is calling on Congress and federal watchdogs to investigate government contracting officers and federal agencies that repeatedly fail to follow procurement regulations. This follows a report from the General Services Administration Office of Inspector General that found the GSA awarded a contract earmarked for a small business to a large business.

The GSA awarded the contract to Royal Productions for “Audio Visual Services” at the GSA’s nowinfamous Las Vegas team building conference, the 2010 Western Regions Conference (WRC). A GSA OIG report, followed by the release of a series of videos of GSA employees at the WRC, has brought national attention to the unacceptable way the U.S. government spends taxpayer dollars.

The ASBL is requesting that the House Small Business Committee, the Senate Committee on Small Business and Entrepreneurship, the Department of Justice and the Government Accountability Office investigate why contracting officers and federal agencies continue to award contracts earmarked for small businesses to large companies.

During the past decade federal agencies have awarded federal small business contracts to companies such as Lockheed Martin, Raytheon, British Aerospace, Apple, Home Depot, Motorola, Xerox, Dell Computers and thousands of other large companies.

Since 2003, more than a dozen federal investigations have found that billions of dollars in federal small business contracts have been awarded to large companies. In October 2011, the Small Business Administration Office Inspector General released a report naming the issue of government agencies awarding small business contracts to large companies as the SBA’s #1 management challenge.

The U.S. government is the world’s largest buyer of goods and services, and small businesses are the nation’s engine of economic growth; according to U.S. Census Bureau data, small businesses create more than 90 percent of net new jobs. By failing to comply with procurement policies aimed at helping small businesses, federal agencies are doing severe damage to the U.S. economy.

“Federal spending is obviously out of control,” said ASBL President Lloyd Chapman. “And the diversion of federal small business contracts to large companies is a major problem for the economy. It is time for these abuses to end.”

Seven plead guilty in Navy contracting fraud


Seven plead guilty in Navy contracting fraud

By Greg Moran, Jeanette Steel
March 29, 2012

— Seven people, including four civilian employees at North Island Naval Air Station in Coronado, pleaded guilty Wednesday in federal court to participating in a bribery and fraud scheme that went on for seven years.

The U.S. Attorney’s Office said the four Navy employees netted more than $1 million in personal benefits, which came in the form of cash, store gift cards, expensive toys such as bicycles and model airplane engines and home remodeling projects that included new cabinetry.

“This was not $1 million worth of tchotchkes,” Assistant U.S. Attorney Robert Huie said. “This was liquid assets like cash, flat screen TVs and the like.”

Also pleading guilty were three defense contractors who hid the payments by submitting more than $6 million in bogus invoices to the Navy under existing contracts they had. The invoices contained a markup of 25 percent, prosecutors said.

That meant the Navy was unwittingly paying for the personal gifts to the North Island employees, plus a markup on the gifts to the defense contractors.

The Navy employees who pleaded guilty before U.S. Magistrate Judge Bernard Skomal were Donald Vangundy, 54, of Chula Vista; Kiet Luc, 53, of San Diego; David Lindsay, 57, of San Diego; and Brian Delaney, 55, of La Mesa.

All worked at the “E2/C2” aircraft program at the base’s Fleet Readiness Center.

The three defense contractors who entered pleas were Michael Graven, 43, of Carlsbad, owner of X & D Supply in Carlsbad; John Newman, 51, of Poway, a sales manager and former owner of a company in Poway that prosecutors identified only as “Company A”; and Paul Grubiss, 39, now of Wickliffe. Ohio, a former sales manager at a second Poway contractor that also was not identified.

The U.S. Attorney’s Office said the fraud led to the Navy paying Newman’s employer $3.31 million, X & D $2.26 million and Grubiss’ employer $1 million.

Authorities would not say why two of the companies were not named, though Huie said the investigation is ongoing.

All seven appeared before Skomal and answered basic questions about their guilty pleas, most in calm but subdued tones. They will remain free on $20,000 bond each until sentencing on July 2.

All pleaded guilty to conspiracy to commit wire fraud. Vangundy and Grubiss also pleaded guilty to conspiracy to commit bribery. Vangundy, Luc and Graven also pleaded guilty to filing false tax returns or aiding and assisting in filing a false return.

Lindsay and Delaney retired from their jobs, Vangundy resigned and the Navy is in the process of removing Luc, who was suspended, from federal service.

Delaney was the highest situated of the four, serving three or four levels below the center’s military commanding officer. In middle management, he was a deputy program manager and had worked there for 37 years.

Lindsay, a supervisor, worked under him and had been an employee for 38 years.

Vangundy was an engineering technician and 31-year worker. Luc worked on the aircraft floor for seven years and was the lowest-ranking member of the group.

U.S. Attorney Laura Duffy said the probe began from citizen complaints made following the high-profile indictment in 2009 of six people involved in a kickback and bribery scheme at the Space and Naval Systems Command in San Diego, known as SPAWAR.

In the wake of that scandal, the government set up a hotline for citizens to phone in tips about corruption. One call in August 2009 launched the investigation that led to the guilty pleas Wednesday, Huie said.

The tip line — (877) NO BRIBE, or (877) 662-7423 — still operates, Duffy said.

Vangundy supervised tool replacement and purchases for all Fleet Readiness Center programs, according to court documents.

According to the indictment, Lindsay got $20,000 in labor and appliances for a home remodeling project, and Delaney got $50,000 in labor and materials for his home remodel.

The investigation, dubbed “Country Store,” involved FBI, Internal Revenue Service and military investigators.

Fleet Readiness Center Southwest spokesman Michael Furlano said the Navy has put new controls in place to combat against future fraud at the center.

Any purchases have to go through an executive steering committee made up of the commanding officer, executive officer and senior management. Also, managers will get mandatory training on ethics, fiscal law, contracts and procurement fraud, Furlano said.

He said the Navy also is conducting an internal investigation of the center’s operations, which wasn’t possible during the U.S. attorney’s legal action.

Furlano called the situation unfortunate, especially as it involved such longtime employees.

“They took advantage of their positions. We have 4,200 employees at the command, and we’re talking about four that did wrong and in turn make the command look poor,” he said. “The vast majority of our people are dedicated, hard-working family people. Most of them are former military.”

The center performs maintenance on military aircraft. The workforce includes 3,200 civilians and about 1,000 uniformed service members.

Ex-DoD official sentenced in Ga. for bribery


Ex-DoD official sentenced in Ga. for bribery

By Greg Bluestein
Associated Press
March 28, 2012

ATLANTA — A Department of Defense official said Wednesday he long resisted the call of corruption while on assignment in Afghanistan before he finally relented and took a cash-stuffed backpack as a bribe. He was made to pay for his crime when a judge sentenced him to 20 months in prison as his family members wept quietly.

Desi Deandre Wade is an Army veteran who was the Defense Department’s top firefighting official in Afghanistan when he was arrested at an August conference in Atlanta moments after taking a bag crammed with $95,000 in cash. He pleaded guilty to taking the bribe to influence a contract, saying Wednesday he wanted to return home to Georgia with enough money to leave behind a three-year stint in Afghanistan.

“It was a one-time deal. I thought if I did that, I could walk away from Afghanistan,” Wade said in an emotional and occasionally rambling statement. “I had seen enough.”

Prosecutors urged the judge to make an example out of Wade for his behavior.

“He shook them down. It was money and greed that led to this,” said prosecutor Robert McBurney. “He stopped serving the country and started serving himself.”

Wade, who is 40, became the department’s Chief of Fire and Emergency Services in Afghanistan after years of working as a firefighter. He said he prevented millions of dollars in fire damage in that role, but that the job took a toll on him. While he was away, his relationship with his three children grew strained and he separated from his wife.

He also suffered from mental issues stemming from the stress of living and working in a war-torn nation. The trauma hit home when he saw a fellow firefighter die in a rocket attack, he said, and he eventually succumbed to the desire for quick cash.

“Those environments are ripe with corruption. It was as synonymous as the rocket attacks,” he said. “People were always saying, ‘Hey, can you help me?’ People have been offering bribes.”

Investigators first began to monitor him in July when they got a tip from an Afghanistan-based contractor. They say he received an initial $4,000 bribe in Afghanistan to influence a maintenance contract for a firm there, and later proposed steering a $4.5 million contract to the same company in exchange for a payoff. He told the contractor he’d feed him quotes from rivals to ensure him he would be the lowest bidder, prosecutors said.

The contractor and Wade arranged to meet at a hotel room in Atlanta during the Fire-Rescue International Conference, and after some bartering Wade agreed to take a $95,000 payment in exchange for his help, authorities said. Wade took about two steps outside the hotel room when he was swarmed by federal agents.

Wade was apologetic at the hearing and tried to make the best out of his bad situation. He said he was a “workaholic” who might never have returned to his family if he hadn’t landed in legal trouble.

“I truly apologize for hurting my family and myself,” he said. “It’s going to take a long time to recover, but I’m going to do it.”